UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended March 31, 2007

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 1-9344

AIRGAS, INC.

(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 $0.01 per share		New York Stock Exchange

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

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES þ       NO o

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o       NO þ

     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 þ       NO o

     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. þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ       Accelerated filer o       Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).

YES o                 NO o

     The aggregate market value of the 70,399,724 shares of voting stock held by non-affiliates of the Registrant was approximately $2.5 billion computed by reference to the closing price of such stock on the New York Stock Exchange as of the last day of the registrant’s most recently completed second quarter, September 30, 2006. 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 May 22, 2007 was 79,053,572.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Company’s Proxy Statement for the Annual Meeting of Stockholders to be held August 7, 2007 have been incorporated by reference into Part III hereof.

 

 

AIRGAS, INC.

TABLE OF CONTENTS

ITEM NO.		PAGE
PART I
1. Business			3
1a. Risk Factors			11
1b. Unresolved Staff Comments			15
2. Properties			15
3. Legal Proceedings			15
4. Submission of Matters to a Vote of Security Holders			15
PART II
5. Market for the Company’s Common Equity and Related Stockholder Matters			16
6. Selected Financial Data			18
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
7a. Quantitative and Qualitative Disclosures About Market Risk			45
8. Financial Statements and Supplementary Data			48
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			48
9a. Controls and Procedures			48
9b. Other Information			49
PART III
10. Directors and Executive Officers of the Company			49
11. Executive Compensation			49
12. Security Ownership of Certain Beneficial Owners and Management			49
13. Certain Relationships and Related Transactions			49
14. Principal Accountant Fees and Services			49
PART IV
15. Exhibits and Financial Statement Schedules			50
Signatures			54
Packaged Gas Business Equity Purchase Agreement
STATEMENT RE: COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
Airgas, Inc. and Subsidiaries
Consent of KPMG LLP
CERTIFICATION
CERTIFICATION
CERTIFICATION
CERTIFICATION

PART I

ITEM 1. BUSINESS.

GENERAL

     Airgas, Inc. and subsidiaries (“Airgas” or the “Company”) became a publicly traded company in 1986. Since its inception, the Company has made over 350 acquisitions to become the largest U.S. distributor of industrial, medical, and specialty gases (delivered in “packaged” or cylinder form), and welding, safety and related products (“hardgoods”). Airgas is also the third-largest U.S. distributor of safety products, the largest U.S. producer of nitrous oxide and dry ice, the largest liquid carbon dioxide producer in the Southeast, and a leading distributor of process chemicals, refrigerants, and ammonia products. The Company markets these products to its diversified customer base through multiple sales channels including branch-based sales representatives, retail stores, strategic customer account programs, telesales, catalogs, e-business and independent distributors. Products reach customers through an integrated network of more than 11,500 employees and over 900 locations including production facilities, packaged gas fill plants, specialty gas labs, distribution centers, branches, and retail stores. The Company’s national scale and strong local presence offer a competitive edge to its diversified customer base. The Company’s consolidated sales were $3.20 billion, $2.83 billion, and $2.37 billion in fiscal years ending March 31, 2007, 2006, and 2005, respectively.

     The Company has two reporting segments, Distribution and All Other Operations. The Distribution segment primarily engages in the distribution of gases and hardgoods. All Other Operations consists of business units that produce gaseous products for sale to third parties and to the business units in the Distribution segment. On March 9, 2007, the Company acquired Linde AG’s divested U.S. bulk gas assets. The acquisition included eight air separation plants and related bulk gas business with about 300 employees. With the acquisition, the Company formed a new business unit, Airgas Merchant Gases, to manage production, distribution and administrative functions for the air separation plants. In connection with the transaction, most of the acquired bulk gas customers and related service equipment were transfered to existing Distribution business units. Airgas Merchant Gases will operate principally as an internal supplier to the business units in the Distribution business segment. The operations of Airgas Merchant Gases have been included in the All Other Operations business segment. The Company’s previously owned air separation plants, including three air separation units (“ASUs”) at the Company’s joint venture, National Welders Supply Company, Inc. (“National Welders”) are also reflected in the All Other Operations business segment. The Company also has one small ASU operated by a Distribution segment business unit in Hawaii. National Welders is reported in the All Other Operations segment. See Note 15 to the Company’s Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data” for a description of National Welders and its consolidation as a variable interest entity under Financial Accounting Standards Board Interpretation No. 46R, Consolidation of Variable Interest Entities, (“FIN 46R”).

     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”), and in Note 23 to the Company’s Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.” More detailed descriptions of the operating segments are as follows:

DISTRIBUTION

     The Distribution segment accounted for approximately 85% of consolidated sales in fiscal years 2007, 2006 and 2005 and reflects the distribution of industrial, medical and specialty gases, and hardgoods.

Principal Products and Services

     The Distribution segment’s principal products include industrial, medical and specialty gases sold in packaged and less than truck load bulk quantities. Business units in the Distribution segment also recognize rental revenue and distribute Hardgoods. Gas sales include nitrogen, oxygen, argon, helium, hydrogen, welding

and fuel gases, such as acetylene, propylene and propane, carbon dioxide, nitrous oxide, ultra high purity grades and special application blends. Rent is derived from gas cylinders, cryogenic liquid containers, bulk storage tanks, tube trailers and through the rental of welding and welding related equipment. Gas and rent represented approximately 52% of the Distribution segment’s sales in each of the fiscal years 2007, 2006 and 2005. Hardgoods consist of welding consumables and equipment, safety products, and maintenance, repair and operating (“MRO”) supplies. In each of the fiscal years 2007, 2006, and 2005, hardgoods sales represented approximately 48% of the Distribution segment’s sales (see Note 23 of the Company’s Consolidated Financial Statements for additional information regarding segment sales).

Principal Markets and Methods of Distribution

     The industry has three principal modes of gas distribution: on-site supply, bulk or merchant supply, and cylinder or packaged gas supply. Airgas’ market focus has been on the packaged gas segment of the market, which generally consists of customers who purchase gases in cylinders and in less than truck load bulk quantities. The Company believes the U.S. packaged gas market to be greater than $5 billion annually. Generally, packaged gas distributors also sell welding hardgoods. The Company believes the U.S. market for welding hardgoods to be greater than $5 billion annually. Packaged gases and welding hardgoods are generally delivered to customers on Company owned trucks, although third-party carriers are also used in the delivery of some welding and safety products and customers can purchase products at retail branch stores.

     Airgas is the largest distributor of packaged gases and welding hardgoods in the United States, with approximately 20% to 24% market share. The Company’s competitors in this market include local and regional independent distributors that serve more than half of the market through a fragmented distribution network and large distributors, such as Valley National Gases, Inc., and vertically integrated gas producers such as Praxair, Inc. (“Praxair”), Matheson Tri-Gas, Inc., Linde AG (“Linde”) and Liquid Air Corporation of America (“Air Liquide”), which serve the remaining market. Packaged gas distribution is a regional business because it is generally uneconomical to transport gas cylinders more than 50 to 100 miles. The regionalized nature of the business makes these markets highly competitive. Competition is generally based on reliable product delivery, product availability, quality, and price. The Company also sells safety equipment. The Company believes the U.S. market for safety equipment is greater than $6 billion annually, of which Airgas’ share is approximately 7%.

Customer Base

     The Company’s operations are predominantly in the United States. The customer base is diverse and sales are not dependent on a single or small group of customers. No single customer accounts for more than 0.5% of total net sales. The Company estimates the following industry segments account for the indicated percentages of its total net sales:

•		Industrial Manufacturing (29%)
•		Repair & Maintenance (26%)
•		Non-residential construction (12%)
•		Medical (7%)
•		Wholesale Trade (5%)
•		Food Products (6%)
•		Petrochemical (5%)
•		Utilities and Mining (2%)
•		Analytical (3%)
•		Transportation (2%)
•		Other (3%).

Suppliers

     In addition to the gas volumes supplied by the recently formed Airgas Merchant Gases, the Company purchases industrial, medical and specialty gases pursuant to requirement contracts from national and regional producers of industrial gases. The Company is a party to a long-term take-or-pay supply agreement, in effect through September 2017, under which Air Products and Chemicals, Inc. (“Air Products”) will supply at least 35% of the Company’s bulk nitrogen, oxygen and argon requirements, exclusive of the volumes produced by the Company and those purchased under the Linde supply agreements noted below. Additionally, the Company has commitments to purchase helium from Air Products under the terms of the take-or-pay supply agreement. The Company is committed to purchase approximately $50 million annually in bulk gases under the terms of the Air Products supply agreement. The Company and Linde, as successor to BOC, entered into reciprocal long-term supply agreements. The Company is the supplier for a substantial portion of Linde’s resale packaged gas needs. Linde will supply the Company with bulk nitrogen, oxygen, and argon through July 2019 under a take-or-pay supply agreement. Under a separate agreement, Linde will supply the Company with helium through 2016. The Linde agreements represent roughly $28 million in annual bulk gas purchases. The Company also participates in a long-term agreement with Praxair to swap production of bulk nitrogen, oxygen, and argon through 2014. The Praxair agreement represents approximately $7 million annually. The Air Products, Linde and Praxair supply agreements contain periodic price and volume adjustments based on certain economic indices and market analysis. Furthermore, the Company believes the minimum product purchases under the agreements are well within the Company’s normal product purchases.

     The Company believes that, if a long-term supply agreement with a major supplier of gases or other raw materials was terminated, it would look to utilize excess internal production capacity and to locate alternative sources of supply to meet customer requirements. The Company purchases hardgoods from major manufacturers and suppliers. For certain products, the Company has negotiated national purchasing arrangements. The Company believes that if an arrangement with any supplier of hardgoods was terminated, it would be able to arrange comparable alternative supply arrangements.

ALL OTHER OPERATIONS

     The All Other Operations segment consists of the Company’s Gas Operations Division, the newly formed Airgas Merchant Gases and the National Welders joint venture. The Gas Operations Division produces and distributes certain gas products, principally carbon dioxide, dry ice, nitrous oxide, anhydrous ammonia, and specialty gases. Airgas Merchant Gases produces oxygen, nitrogen, and argon, most of which is supplied to business units in the Distribution segment. National Welders is a producer and distributor of industrial, medical and specialty gases and hardgoods based in Charlotte, North Carolina.

Gas Operations Division

     The Gas Operations Division produces and distributes carbon dioxide and dry ice (solid form of carbon dioxide). Customers include food processors, food service businesses, pharmaceutical and biotech industries, wholesale trade and grocery outlets. Food and beverage applications account for approximately 70% of the market. The dry ice business generally experiences a higher level of sales during the warmer months. The Gas Operations Division also operates 7 national specialty gas labs and a specialty gas equipment center. These labs generally provide quality management and technical support to more than 50 regional labs operated by the Distribution segment. Specialty gas mixtures are predominantly used in research, which accounts for 40% of the market. Emissions monitoring, food, laser and environmental applications are also major uses of specialty gases. The Gas Operations Division is the largest manufacturer of nitrous oxide gas in North America. 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 electronics industries. Airgas Specialty Products is also a business unit in the Gas Operations Division. Airgas Specialty Products is a distributor of anhydrous and aqua ammonia, which are used for nitrogen oxide abatement in the utility industry. Ammonia is also used in metal finishing, water treatment, chemical processing and refrigeration. Airgas Specialty Products also integrated the

acquisition of CFC Refimax in January, 2007, adding reclamation and distribution of refrigerant gases to its product offering. Refrigerants are used in a wide variety of commercial and consumer freezing and cooling applications. In addition to ammonia and refrigerants, Airgas Specialty Products also distributes various process chemicals. The Gas Operations Division’s market focus includes bulk customers as well as sales to the Distribution segment. The Company estimates that United States market for carbon dioxide, specialty gases, nitrous oxide, anhydrous ammonia, refrigerants, and process chemicals totals more than $2 billion annually.

Airgas Merchant Gases

     On March 9, 2007, the Company acquired Linde’s divested U.S. bulk gas assets for $495 million in cash. The acquisition included eight air separation plants and related bulk gas business with about 300 employees. The acquired business produces and distributes oxygen, nitrogen and argon and generated $176 million in revenues during calendar year 2006. With the acquisition of these assets, the Company formed a new business unit, Airgas Merchant Gases, to manage production, distribution and administrative functions for seven of the air separation plants. One air separation plant was acquired by the Company’s National Welders joint venture. Most of the acquired bulk gas customers and related service equipment were transferred to existing Distribution business units. Airgas Merchant Gases principally operates as an internal supplier of bulk oxygen, nitrogen and argon to the business units in the Distribution business segment.

National Welders Supply Company, Inc.

     National Welders’ product requirements are principally met through its significant production capabilities consisting of four air separation plants, two acetylene plants and a specialty gas lab. One air separation plant was purchased in March 2007 in connection with the Company’s acquisition of Linde’s divested U.S. bulk gas assets. The joint venture employs over 970 associates and primarily delivers its products to customers using company owned trucks. It also distributes packaged gases and welding products through approximately 50 branch stores. The ownership interests in the joint venture consist of voting common stock and voting, redeemable preferred stock. The Company owns 100% of the joint venture’s common stock, which represents a 50% voting interest. The National Welders joint venture structure, which limits the Company’s control over the National Welders operations and cash flows, is the primary factor that led the Company to conclude that National Welders is most appropriately reflected in the All Other Operations segment.

Suppliers

     The companies in the All Other Operations segment have significant production capacity. Together, the Gas Operations Division, Airgas Merchant Gases and National Welders operate 13 air separation plants that produce oxygen, nitrogen and argon, which are sold to on-site customers, bulk customers and to the Distribution segment. The Gas Operations Division also operates 9 carbon dioxide production facilities. With 11 dry ice plants (converting liquid carbon dioxide into dry ice), the Gas Operations Division has the largest network of dry ice conversion plants in the United States. These internal sources of carbon dioxide are supplemented by long-term take-or-pay supply contracts. The 4 nitrous oxide production facilities operated by the Gas Operations Division supply both the Gas Operations Division and the Distribution segment. The raw materials utilized in nitrous oxide production are purchased under contracts with major manufacturers and suppliers. Airgas Specialty Products purchases ammonia from suppliers under agreements (annual purchase commitments of approximately $18 million), the largest of which requires a 180-day notice to terminate.

AIRGAS GROWTH STRATEGIES

     The Company’s primary objective is to maximize shareholder value by driving market-leading sales growth through core and strategic product offerings that leverage the company’s infrastructure and customer base, by pursuing acquisitions in the Company’s core business and in adjacent businesses, by providing outstanding customer service and by improving operational efficiencies. To meet this objective, the Company is focusing on:

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

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 compliance purposes during fiscal 2007 were not material.

INSURANCE

     The Company has established insurance programs to cover workers’ compensation, business automobile, and general liability claims. During Fiscal 2007, these programs had self-insured retention of $1 million per occurrence. During Fiscal 2006 and 2005, the Company’s self-insured retention was $500 thousand per occurrence with an additional aggregate retention of $2.2 million in Fiscal 2006 and $1.7 million in Fiscal 2005, for claims in excess of $500 thousand. For Fiscal 2008, the self-insured retention will remain $1 million per occurrence with no additional aggregate retention. The Company accrues estimated losses using actuarial methods and assumptions based on the Company’s historical loss experience.

     National Welders maintains a high deductible workers’ compensation program for employees in North and South Carolina. Approximately three-quarters of its employees are covered by this program. Workers’ compensation claims are self-insured up to $500 thousand per occurrence. Provisions for expected future claim payments are accrued based on estimates of the aggregate retention for claims incurred using historical experience. Workers compensation exposure for the remaining employees is managed through traditional premium based programs.

EMPLOYEES

     On March 31, 2007, the Company employed approximately 11,500 associates. National Welders employed over 970. Approximately 5% of the Company’s associates 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 over ten years.

PATENTS, TRADEMARKS AND LICENSES

     The Company holds the following Registered Trademarks: “Airgas,” “RADNOR,” “Gold Gas,” “SteelMIX,” “StainMIX,” “AluMIX,” “Outlook,” “Ny-Trous+,” “Powersource,” “Red-D-Arc,” “RED-D-ARC WELDERENTALS,” “SightSense,” “SoundSense,” “Walk-O2-Bout,” “Airgas Puritan Medical,” “AcuGrav,” and “Penguin Brand Dry Ice.” The Company also holds trademarks for “Gaspro,” “Freshblend,” “Aspen,” “Aspen Refrigerants,” “CO₂Direct,” “CO₂Direct Refreshingly Easy,” “CO₂Direct Rent Plus,” “GAIN,” “When You’re Ready To Weld,” and “Your Total Ammonia Solution” and a service mark for “You’ll find it with us.” 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)			57			Chairman of the Board, President and Chief Executive Officer
Michael L. Molinini			56			Executive Vice President and Chief Operating Officer
Robert M. McLaughlin			50			Senior Vice President and Chief Financial Officer
Robert A. Dougherty			49			Senior Vice President and Chief Information Officer
Patrick M. Visintainer			43			Senior Vice President — Sales
Dwight T. Wilson			51			Senior Vice President — Human Resources
Leslie J. Graff			46			Senior Vice President — Corporate Development
Max D. Hooper			47			Division President — West
B. Shaun Powers			55			Division President — East
Ted R. Schulte			56			Division President — Gas Operations
Dean A. Bertolino			38			Vice President, General Counsel and Secretary
Thomas M. Smyth			53			Vice President and Controller

     Mr. McCausland has been Chairman of the Board and Chief Executive Officer of the Company since May 1987. Mr. McCausland has also served as President from June 1986 to August 1988, from April 1993 to November 1995, from April 1997 to January 1999, and from January 2005 to present. Mr. McCausland also serves as a director of The Valspar Corporation, NiSource, Inc., the Fox Chase Cancer Center, the Independence Seaport Museum, the International Oxygen Manufacturers Association, Inc. and as a member of the Board of Trustees of the Eisenhower Exchange Fellowships, Inc.

     Mr. Molinini has been Executive Vice President and Chief Operating Officer since January 2005. Prior to that time, Mr. Molinini served as Senior Vice President — Hardgoods Operations from August 1999 to January 2005 and as Vice President — Airgas Direct Industrial from April 1997 to July 1999. Prior to joining Airgas, Mr. Molinini served as Vice President of Marketing of National Welders Supply Company, Inc. since 1991.

     Mr. McLaughlin has been Senior Vice President and Chief Financial Officer since October 2006 and served as the Vice President and Controller since joining Airgas in June 2001. Prior to joining Airgas, Mr. McLaughlin also served as Vice President Finance for Asbury Automotive Group from 1999 to 2001, and was a Vice President and held various senior financial positions at Unisource Worldwide, Inc. from 1992 to 1999.

     Mr. Dougherty has been Senior Vice President and Chief Information Officer since joining Airgas in January 2001. Prior to joining Airgas, Mr. Dougherty served as Vice President and Chief Information Officer from August 1998 to December 2000 and as Director of Information Systems from November 1993 to July 1998 of Subaru of America, Inc.

     Mr. Visintainer has been Senior Vice President — Sales since January 1999. Prior to that time, 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 field positions including National Sales Manager – Industrial/Specialty Gases and National Accounts Manager.

     Mr. Wilson was appointed Senior Vice President — Human Resources in January 2004. Prior to joining Airgas, Mr. Wilson served as Senior Vice President, Corporate Resources at DecisionOne Corporation from October 1995 to December 2003.

     Mr. Graff was appointed Senior Vice President – Corporate Development in August 2006. Prior to that, Mr. Graff held various positions since joining the Company in 1989, including Director of Corporate Finance, Director of Corporate Development, Assistant Vice President — Corporate Development, and Vice President – Corporate Development. He has directed the in-house acquisition department since 2001. Prior to joining Airgas, Mr. Graff served with KPMG Peat Marwick from 1983 to 1989.

     Mr. Hooper was appointed Division President West in December 2005. Prior to this role, Mr. Hooper had been President of Airgas West since 1996. Prior to joining Airgas, Mr. Hooper served for three years as General Manager and President of an independent distributor, Arizona Welding Equipment Company in Phoenix, AZ and nine years with BOC Gases in various sales and management roles. Mr. Hooper began his career with AG Pond Welding Supply in San Jose, CA in 1983.

     Mr. Powers has been Division President — East since joining Airgas in April 2001. Prior to joining Airgas, Mr. Powers served as Senior Vice President of Industrial Gases at AGA from October 1995 to March 2001. Mr. Powers has more than 25 years of experience in the industrial gas industry.

     Mr. Schulte has been Division President – Gas Operations since February 2003. Prior to that time, Mr. Schulte served as Senior Vice President – Gas Operations from August 2000 to January 2003, as Vice President – Gas Operations from November 1998 to July 2000 and as President of Airgas Carbonic from November 1997 to October 1998. Prior to joining Airgas, Mr. Schulte served as Senior Vice President of Energetic Solutions, the U.S. subsidiary of ICI Explosives, from June 1997 to October 1997, and as Vice President Industrial Gas Sales of Arcadian Corporation from 1992 through June 1997.

     Mr. Bertolino has been Vice President and General Counsel since December 2001, and Secretary since July 2002. Prior to joining Airgas, Mr. Bertolino served as Assistant General Counsel of The BOC Group, Inc. from 1999 to 2001 and as an Associate with the law firm of Brown & Wood, llp from 1994 to 1999.

     Mr. Smyth has been Vice President and Controller since November 2006. Prior to that, Mr. Smyth served as Director of Internal Audit since joining Airgas in February 2001 and became vice president in August 2004. Prior to joining Airgas, Mr. Smyth served in internal audit, controller and chief accounting roles for four years at Philadelphia Gas Works from 1997 to 2001. Prior to that, Mr. Smyth spent 12 years with Bell Atlantic, now Verizon, in a variety of internal audit and general management roles and in similar positions during eight years at Amtrak.

COMPANY INFORMATION

     The Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed with or furnished to the Securities and Exchange Commission (“SEC”) are available free of charge on the Company’s website (www.airgas.com) under the “Investors” section. The Company makes these documents available as soon as reasonably practicable after they are filed with or furnished to the SEC, but no later than the end of the day in which they are filed or furnished to the SEC.

Code of Ethics and Business Conduct

     The Company has adopted a Code of Ethics and Business Conduct applicable to its employees, officers and directors. The Code of Ethics and Business Conduct is available on the Company’s website, under “Company Information.” Amendments to and waivers from the Code of Ethics and Business Conduct will also be disclosed promptly on the website. In addition, stockholders may request a printed copy of the Code of Ethics and Business Conduct, free of charge, by contacting the Company’s Investor Relations department at:

Airgas, Inc.
Attention: Investor Relations
259 N. Radnor-Chester Rd.
Radnor, PA 19087-5283
Telephone: 610.902.6206

Corporate Governance Guidelines

     The Company has adopted Corporate Governance Guidelines as well as charters for its Audit Committee and Governance & Compensation Committee. These documents are available on the Company’s website, noted above. Stockholders may also request a copy of these documents, free of charge, by contacting the Company’s Investor Relations department at the address and phone number noted above.

Certifications

     The Certification of the Company’s Chief Executive Officer required by Section 303A.12(a) of The New York Stock Exchange Listed Company Manual relating to the Company’s compliance with The New York Stock Exchange’s Corporate Governance Listing Standards was submitted to The New York Stock Exchange on September 7, 2006. The Company delivered an interim written affirmation to the New York Stock Exchange on October 11, 2006 following a change in the membership of the Company’s Board of Directors.

     The Company also filed certifications of its Chairman and Chief Executive Officer and Senior Vice President and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to its annual report on Form 10-K for each of the years ended March 31, 2007, 2006 and 2005.

ITEM 1a. RISK FACTORS.

In addition to risk factors discussed elsewhere in this report, the Company believes the following, which have not been sequenced in any particular order, are the most significant risks related to our business that could cause actual results to differ materially from those contained in any forward looking statements.

We have significant debt and our debt service obligations are substantial, which could diminish our ability to raise additional capital and limit our ability to engage in certain transactions.

We have substantial amounts of outstanding indebtedness. As of March 31, 2007, we had total consolidated debt of approximately $1,350 million, of which $40 million matures within the next 12 months. We also participate in a trade receivables securitization agreement with three commercial banks to sell up to $285 million in qualified trade receivables. At March 31, 2007, the amount of outstanding trade receivables under the program was $264 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7.

Our substantial indebtedness could have significant negative consequences, including:

•

increasing our vulnerability to general adverse economic and industry conditions;

•

limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other purposes;

•

requiring the dedication of a significant portion of our expected cash flow from operations to service our indebtedness, thereby reducing the amount of our expected cash flow available for working capital, capital expenditures, acquisitions and other purposes;

•

limiting our flexibility in planning for, or reacting to, changes in our business and industry;

•

placing us at a possible competitive disadvantage relative to less leveraged competitors;

•

increasing the amount of our interest expense, because some of our borrowings are at variable rates of interest, which, if interest rates increase, would result in higher interest expense (at current debt levels and ratio of fixed to floating rate debt, we estimate that for every 25 basis point rise of LIBOR, annual interest expense would increase by $3 million); and

•

limiting, through the financial and other restrictive covenants in our indebtedness, among other things, our ability to borrow additional funds, dispose of assets or make investments.

Our ability to meet our expenses and debt obligations will depend on our future performance, which will be affected by financial, business, economic and other factors. We will not be able to control many of these factors, such as economic conditions, governmental regulation and the availability of fuel supplies. We cannot be certain that our earnings will be sufficient to allow us to pay the principal and interest on our debt and meet our other obligations. If we do not have enough money, we may be required to refinance all or part of our existing debt, sell assets, borrow more money or sell equity. We cannot assure you that we will be able to accomplish any of these alternatives on terms acceptable to us, if at all.

Despite currently expected levels of indebtedness, we and our subsidiaries will be able to incur substantially more debt, which would increase the risk associated with our significant debt levels.

We and our subsidiaries will be able to incur substantial additional indebtedness in the future. Although our credit facility and indentures governing our subordinated notes contain limitations on the incurrence of additional indebtedness, those limitations are subject to a number of qualifications and exceptions that, depending on the circumstances at the time, would allow us to incur a substantial amount of additional indebtedness. As of March 31, 2007, we had additional borrowing capacity of $538 million of which $477 million could be drawn under our bank credit facility. To the extent new debt and other obligations are added to our and our subsidiaries’ currently anticipated debt levels, the substantial risks described in the immediately preceding risk factor would increase.

Demand for our products is affected by general economic conditions and by the cyclical nature of many of the industries we serve, which can cause significant fluctuations in our sales and results.

Demand for our products is affected by general economic conditions. A decline in general economic or business conditions in the industries served by our customers can have a material adverse effect on our business. In addition, many of our customers are in businesses that are cyclical in nature, such as the industrial manufacturing, non-residential construction, petrochemical and transportation industries, which accounted for approximately 48% of our sales in fiscal 2007. Downturns in these industries, even during periods of strong general economic conditions, can adversely affect our sales and our financial results by affecting demand for and pricing of our products.

We may not be successful in generating market leading sales growth and in controlling expenses, which could limit our ability to achieve our expected growth.

Although one of our principal business strategies is to drive market leading sales growth, the achievement of this objective may be adversely affected by:

•

competition from independent distributors and vertically integrated gas producers on products and pricing;

•

changes in supply prices from gas producers and manufacturers of hardgoods; and

•

general economic conditions in the industrial markets which we serve.

In addition, we may not be able to adequately control expenses due to inflation and potentially higher costs of our distribution infrastructure.

Increases in product and energy costs could reduce our profitability.

The cost of industrial gases represented a significant percentage of our operating costs in fiscal 2007. Because the production of industrial gases requires significant amounts of electric energy, industrial gas prices have historically increased as the cost of electric energy increases. Recent price increases in oil and natural gas have resulted in electric energy surcharges. Energy prices may continue to rise and, as a result, increase the cost of industrial gases. In addition, a significant portion of our distribution costs is comprised of diesel fuel costs, which have increased significantly during the current year. While we have historically been able to pass increases in the cost of our supplies and operating expenses on to our customers, we cannot guarantee our ability to do so in the future.

Our financial results may be adversely affected by gas supply disruptions.

We are the largest U.S. distributor of industrial, medical and specialty gases in packaged form and have long-term supply contracts with the major gas producers. Additionally the acquisition of Linde’s divested U.S. bulk gas assets and the formation of Airgas Merchant Gases provided us with substantial production capacity. Both long-term supply contracts and our own production capacity mitigate supply disruptions to various degrees. However, natural disasters, plant shut downs, labor strikes, and other supply disruptions occur within our industry. Regional supply disruptions may create shortages of certain products. Consequently, we may not be able to obtain the products required to meet our customers’ demands or may incur significant cost to ship product from other regions of the country to meet customer requirements. Such additional costs may adversely

impact operating results in those regions until product sourcing can be restored. In the past, we successfully met customer demand by arranging for alternative supplies and transporting product into an affected region, but we can not guarantee that we will be as successful in arranging alternative product supplies or passing the additional transportation cost on to customers in the event of future supply disruptions.

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

We have historically expanded our business primarily through acquisitions. A part of our business strategy is to continue to grow through acquisitions that complement and expand our distribution network. During fiscal 2007, we completed 13 acquisitions. We are continuously evaluating acquisition opportunities, some of which are large and complex, and we are currently in various stages of due diligence or preliminary discussions with respect to a number of potential transactions. We cannot guarantee that we will continue to be able to identify acquisition candidates, or that we will be able to complete acquisitions on terms acceptable to us. In addition, there is no assurance that we will be able to obtain financing on terms acceptable to us for future acquisitions and, in any event, such financing may be restricted by the terms of our credit facility or indentures related to our senior subordinated notes.

We may not be successful in integrating our past and future acquisitions and achieving intended benefits and synergies.

The process of integrating acquired operations into our operations and achieving targeted synergies may result in unexpected operating difficulties and may require significant financial and other resources that would otherwise be available for the ongoing development or expansion of the existing operations. Additionally, the failure to achieve targeted synergies or planned operating results could require us to recognize an impairment charge related to goodwill associated with an acquisition. Acquisitions involve numerous risks, including:

•

difficulty with the assimilation of acquired operations, information systems and products;

•

failure to achieve targeted synergies;

•

inability to retain key employees, customers and business relationships of acquired companies; and

•

diversion of the attention and resources of our management team.

Additionally, the acquired company may not have an internal control structure appropriate for a larger public company resulting in a need for significant remediation.

Acquisitions may have a material adverse effect on our business if we are required to assume debt and other liabilities of the acquired business.

We may be required to incur additional debt in order to consummate acquisitions in the future, which may be substantial. In addition, acquisitions may result in the assumption of the outstanding indebtedness of the acquired company, as well as the incurrence of contingent liabilities and other expenses. All of the foregoing could materially adversely affect our financial condition and operating results.

We depend on our key personnel to manage our business effectively and they may be difficult to replace.

Our performance substantially depends on the efforts and abilities of our senior management team, including our Chairman and Chief Executive Officer, and other executive officers and key employees. Furthermore, much of our competitive advantage is based on the expertise, experience and know-how of our key personnel regarding our distribution infrastructure, systems and products. The loss of key employees could have a negative effect on our business, revenues, results of operations and financial condition.

We are subject to litigation risk as a result of the nature of our business, which may have a material adverse effect on our business.

From time to time, we are involved in lawsuits that arise from our business transactions. Litigation may, for example, relate to product liability claims, contractual disputes, or employment maters. The defense and ultimate outcome of lawsuits against us may result in higher operating expenses. Those higher operating expenses could have a material adverse effect on our business, results of operations or financial condition.

We have established insurance programs with significant deductibles and maximum coverage limits which could result in the recognition of significant losses.

We maintain insurance coverage for workers compensation, auto and general liability claims with significant per claim deductibles and in some policy years aggregate per claim retentions above those deductibles. In the past, we have incurred significant workers compensation, auto, and general liability losses. Such losses could result in not achieving profitability goals. Additionally, claims in excess of our insurance limits could have a material adverse effect on our financial condition, results of operation or liquidity.

Catastrophic events may disrupt our business and adversely affect our operating results.

Although our operations are widely distributed across the U.S., a catastrophic event such as a fire or explosion at one of the Company’s fill plants or natural disasters, such as hurricanes, tornados and earthquakes, could result in significant property losses, employee injuries and third-party damage claims. Additionally, such events may severely impact our regional customer base and supply sources resulting in lost revenues, higher product costs, and increased bad debts.

Our financial statements reflect the operating results of our joint venture, National Welders, over which we have limited control and any disagreement with National Welders could potentially adversely affect the business and operations of the joint venture.

Financial Accounting Standards Board Interpretation No. 46R, Consolidation of Variable Interest Entities, (“FIN 46R”) requires us to consolidate our joint venture, National Welders. The joint venture agreement, entered into in 1996, limits our control over National Welders’ operations and cash flows. National Welders is also a private company and is not subject to the internal control reporting requirements of the Sarbanes-Oxley Act. Should the management of National Welders fail to maintain an appropriate control environment, our financial results may be adversely impacted by the joint venture’s mismanagement of risk exposures, potential errors in financial reporting, incomplete due diligence on acquisitions, the misappropriation of assets at the joint venture, and/or poor operational performance.

In the event National Welders does not observe its venture obligations, it is possible that it would not be able to operate in accordance with it’s agreed upon plans. We run the risk of encountering differences of opinion or having difficulty reaching agreement with respect to certain business issues.

We are subject to environmental, health and safety regulations which could subject us to liability and we will have ongoing environmental costs.

We are subject to laws and regulations relating to the protection of the environment and natural resources. These include, among other things, the management of hazardous substances and wastes, air emissions and water discharges. Violations of some of these laws can result in substantial penalties, temporary or permanent plant closures and criminal convictions. Moreover, the nature of our existing and historical operations exposes us to the risk of liabilities to third parties. These potential claims include property damage, personal injuries and cleanup obligations. See “Item 1 Business— Regulatory and Environmental Matters” above.

We operate in a highly competitive environment and such competition could negatively impact us.

The U.S. industrial gas industry is comprised of a small number of major producers. Additionally, there are hundreds of smaller, local distributors, some of whom operate on a low-cost basis, primarily in the packaged gas segment. Some of our competitors may have greater financial resources than we do. If we are unable to compete effectively with our competitors, we will suffer lower revenue and a loss of market share.

Although the current trend is for increasing prices, the industrial gas industry has experienced periods of falling prices, and if such a trend were to return, we could experience reduced revenues and/or cash flows.

Previously, our major competitors and us have had to reduce prices in order to maintain our market share. Although prices are now increasing, in part due to increased energy and raw materials prices, we cannot guarantee that the prices of our products will not fall in the future, which could adversely affect our revenues and cash flows, or that we will be able to maintain current levels of profitability.

ITEM 1b. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

     The principal executive offices of the Company are located in leased space in Radnor, Pennsylvania.

     The Company’s Distribution segment operates a network of multiple use facilities consisting of over 700 branches, more than 300 cylinder fill plants, including more than 50 regional gas laboratories, approximately 20 acetylene plants and one small ASU, as well as 6 regional distribution centers, various customer call centers, buying centers and administrative offices. The Distribution segment conducts business in 48 states. The Company owns approximately 37% of these facilities. The remaining facilities are primarily leased from third parties. A limited number of facilities are leased from employees and are on terms consistent with commercial rental rates prevailing in the surrounding rental market.

     The Company’s All Other Operations segment consists of businesses, located throughout the United States, which operate multiple use facilities consisting of approximately 100 branch locations, 9 liquid carbon dioxide and 11 dry ice production facilities, 13 air separation plants, 7 national specialty gas laboratories and a specialty gas equipment center, and 4 nitrous oxide production facilities. The Company owns 47% of these facilities. The remaining facilities are leased from third parties.

     During fiscal 2007, the Company’s production facilities operated at approximately 80% to 85% of capacity based on an average daily production period of 16 hours. If required, additional shifts could be run to expand production capacity.

     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.

     The Company is involved in various legal and regulatory proceedings that have arisen in the ordinary course of its business and have not been fully 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.

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

     No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended March 31, 2007.

PART II

ITEM 5. MARKET FOR THE COMPANY’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

     The Company’s 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 and cash dividends per share for the period from April 1, 2005 to March 31, 2007:

										Dividends Per
		High				Low				Share
Fiscal 2007
First Quarter		$	41.41			$	33.79			$	0.070
Second Quarter			38.12				34.11				0.070
Third Quarter			42.91				36.05				0.070
Fourth Quarter			42.72				39.31				0.070
Fiscal 2006
First Quarter		$	25.00			$	21.58			$	0.060
Second Quarter			29.75				24.73				0.060
Third Quarter			33.44				27.30				0.060
Fourth Quarter			39.58				31.83				0.060

     The closing sale price of the Company’s common stock as reported by the New York Stock Exchange on May 22, 2007, was $42.67 per share. As of May 25, 2007, there were approximately 15,000 stockholders of record of the Company’s common stock.

     On May 8, 2007, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.09 per share payable June 29, 2007 to stockholders of record as of June 15, 2007. Future dividend declarations and associated amounts paid will depend upon the Company’s earnings, financial condition, loan covenants, capital requirements and other factors deemed relevant by management and the Company’s Board of Directors.

Stock Repurchase Plan

     Due to certain contemplated acquisitions, in July 2006, the Company suspended its three-year share repurchase plan that it initiated in November 2005. No shares of Company common stock were purchased during fiscal year 2007. Since inception, 195,400 shares have been repurchased under the plan and $137.2 million of the original $150 million authorization remains available. The Company continues to focus on using its cash flow for investing in growth opportunities, including future acquisitions, paying down debt and growing its dividend.

Equity Compensation Plan Information

     The following table sets forth information as of March 31, 2007 with respect to the shares of the Company’s common stock that may be issued upon the exercise of options, warrants and rights under the Company’s equity compensation plans which were approved by the stockholders.

(a)

(b)

(c)

Number of securities

remaining available for

Number of securities to be

Weighted-average

future issuance under equity

issued upon exercise of

exercise price of

compensation plans

outstanding options,

outstanding options,

(excluding securities

Plan Category

warrants and rights

warrants and rights

reflected in column (a))

Equity compensation plans approved by

102,755

30.86

1,710,603

ESPP shares (2)

security holders(1)

6,882,974

$

19.12

4,510,969

Stock Option Plans

Equity compensation plans not approved by security holders

—

—

—

Total:

6,985,729

$

19.29

6,221,572

(2)		The Amended and Restated 2003 Employee Stock Purchase Plan (“ESPP”) was approved by the Company’s stockholders in August 2006. The ESPP encourages and assist employees in acquiring an equity interest in the Company by allowing eligible employees to purchase common stock at a discount.

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 and notes thereto included in Item 8 herein.

		Years Ended March 31,
(In thousands, except per share amounts):		2007(1)				2006(2)(7)				2005(3)(7)				2004(4)(7)				2003(5)(7)
Operating Results:
Net sales		$	3,205,051			$	2,829,610			$	2,367,782			$	1,855,360			$	1,745,891
Depreciation and amortization			147,343				127,542				111,078				87,447				79,279
Special charges (recoveries), net			—				—				—				(776	)			2,694
Operating income			341,452				268,758				202,454				168,544				156,336
Interest expense, net			60,180				53,812				51,245				42,357				46,374
Discount on securitization of trade receivables			13,630				9,371				4,711				3,264				3,326
Loss on debt extinguishment			12,099				—				—				—				—
Other income, net			1,601				2,462				1,129				1,472				2,132
Income taxes			99,883				77,866				54,261				47,659				41,571
Minority interest in earnings of consolidated affiliate			(2,845	)			(2,656	)			(1,808	)			(452	)			—
Equity in earnings of unconsolidated affiliate			—				—				—				4,365				2,684
Income from continuing operations			154,416				127,515				91,558				80,649				69,881
Income (loss) from discontinued operations, net of tax			—				(1,424	)			464				(457	)			(1,776	)
Cumulative effect of a change in accounting principle, net of tax			—				(2,540	)			—				—				—
Net earnings		$	154,416			$	123,551			$	92,022			$	80,192			$	68,105
NET EARNINGS (LOSS) PER COMMON SHARE
BASIC
Earnings from continuing operations		$	1.98			$	1.66			$	1.22			$	1.11			$	0.99
Earnings (loss) from discontinued operations			—				(0.02	)			0.01				(0.01	)			(0.02	)
Cumulative effect of a change in accounting principle			—				(0.03	)			—				—				—
Net earnings per share		$	1.98			$	1.61			$	1.23			$	1.10			$	0.97
DILUTED
Earnings from continuing operations		$	1.92			$	1.62			$	1.19			$	1.08			$	0.96
Earnings (loss) from discontinued operations			—				(0.02	)			0.01				(0.01	)			(0.02	)
Cumulative effect of a change in accounting principle			—				(0.03	)			—				—				—
Net earnings per share		$	1.92			$	1.57			$	1.20			$	1.07			$	0.94
Dividends per common share declared and paid (6)		$	0.28			$	0.24			$	0.18			$	0.16			$	—
Balance Sheet Data at March 31:
Working capital		$	121,543			$	(17,138	)		$	132,969			$	88,826			$	66,027
Total assets			3,333,457				2,474,412				2,291,863				1,960,606				1,726,004
Current portion of long-term debt			40,296				131,901				6,948				6,140				2,229
Long-term debt			1,309,719				635,726				801,635				682,698				658,031
Deferred income tax liability, net			373,246				327,818				282,186				253,529				207,069
Other non-current liabilities			39,963				30,864				24,391				28,756				33,657
Minority interest in affiliate			57,191				57,191				36,191				36,191				—
Stockholders’ equity			1,125,382				947,159				814,172				691,901				596,933
Capital expenditures for years ended March 31,			243,583				214,193				167,977				93,749				67,969

AIRGAS, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7.

RESULTS OF OPERATIONS: 2007 COMPARED TO 2006

OVERVIEW

     Airgas, Inc. (the “Company”) had net sales for the fiscal year ended March 31, 2007 (“fiscal 2007” or “current year”) of $3.20 billion compared to $2.83 billion for the fiscal year ended March 31, 2006 (“fiscal 2006” or “prior year”). Net sales increased by 13% driven by strong same-store sales growth and the impact of acquisitions. Same-store sales growth contributed 8% to the increase in total sales. Same-store sales growth was driven equally by pricing initiatives and higher sales volumes. Price increases were initiated in response to rising product, operating and distribution costs. Higher sales volumes resulted from the continued strength of the industrial economy, the non-residential construction environment, and the continued success of the Company’s growth initiatives. Acquisitions continue to be an important component of the Company’s growth contributing 5% to the overall increase in net sales. Operating income margin expanded 120 basis points in the current year to 10.7% compared to 9.5% in the prior year reflecting continued operating leverage. Solid sales growth and operating expense discipline resulted in income from continuing operations of $154.4 million or $1.92 per diluted share, compared to $127.5 million, or $1.62 per diluted share in fiscal 2006.

Accounting Change

     Effective April 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123R, Share-Based Payment, (“SFAS 123R”) using the modified prospective method. The new standard requires the Company to estimate the value of stock options issued to employees, including options to purchase shares under its Employee Stock Purchase Plan, and recognize stock-based compensation expense over the period in which the options vest. Prior to the adoption of SFAS 123R, the Company used the intrinsic value method outlined in Accounting Principles Board Opinion No. 25 to account for stock-based compensation. For the fiscal year ended March 31, 2007, the Company recognized stock-based compensation expense of $15.4 million ($10.9 million after tax) or $0.13 per diluted share. Since the Company adopted SFAS 123R using the modified prospective method, no stock-based compensation expense was reflected in earnings prior to April 1, 2006.

Financing

     Effective July 25, 2006, the Company amended and restated its senior credit facility with a syndicate of lenders. Subject to compliance with certain covenants, the $1.6 billion senior unsecured credit facility (the “Credit Facility”) permits the Company to borrow up to $966 million under a U.S. dollar revolving credit line, up to C$40 million (U.S. $34 million) under a Canadian dollar revolving credit line and up to $600 million under two or more term loans. The Company used borrowings under the term loan provision of the Credit Facility to finance the $100 million maturity of its 7.75% medium-term notes on September 15, 2006 and the remaining $500 million for the Linde bulk gas acquisition that closed on March 9, 2007. The Credit Facility matures on July 25, 2011.

     On October 27, 2006, the Company redeemed its $225 million 9.125% senior subordinated notes due October 1, 2011 (the “Notes”) at a premium of 104.563% of the principal amount with borrowing under the Company’s Credit Facility. In conjunction with the redemption of the Notes, the Company recognized a charge on the early extinguishment of debt of $12.1 million ($7.9 million after tax), or approximately $0.10 per diluted share. The charge related to the redemption premium and the write-off of unamortized debt issuance costs.

Acquisitions

     During fiscal 2007, the Company completed 13 acquisitions with combined annual sales of approximately $336 million. The largest of these acquisitions include the September 2006 purchase of Houston, Texas-based Aeriform Corporation, a distributor of industrial gases and related hardgoods. Aeriform, with 29 locations and 240 employees in Texas, Louisiana, Oklahoma and Kansas, generated annual revenue of $65 million. In November 2006, the Company purchased the Union Industrial Gas Group, a distributor of industrial gases and related hardgoods. The Union Industrial Gas Group, with 14 locations and 100 employees in New Mexico, Texas and Louisiana, had annual revenue of $38 million. In January 2007, the Company purchased CFC Refimax, a leading full-service refrigerant supplier and reclamation company. CFC Refimax, based in Atlanta, Georgia with 50 employees, generated annual revenue of $19 million. In March 2007, the Company acquired Linde’s divested U.S. bulk gas assets. The Linde bulk gas business, consisting of eight air separation units (ASUs) and 300 employees, produced annual revenue of $176 million for the year ended December 31, 2006.

     With the acquisition of the Linde bulk gas business, the Company formed a new business unit, Airgas Merchant Gases, to manage production, distribution and administrative functions for seven of the air separation plants. One air separation plant and its aligned sales was transferred to the Company’s National Welders joint venture. In connection with the transaction, most of the acquired bulk gas customers and related service equipment was transfered to existing Distribution business units. Airgas Merchant Gases principally operates as an internal supplier of bulk oxygen, nitrogen and argon to the business units in the Distribution business segment.

Pending Acquisition

     On March 29, 2007, the Company announced a definitive agreement to acquire, for $310 million in cash, a significant part of the U.S. packaged gas business of Linde AG. The operations to be acquired include branches, warehouses, packaged gas fill plants, and other operations involved in distributing packaged industrial and specialty gases and related hardgoods. The business includes 130 locations in 18 states, with more than 1,400 employees, which generated $346 million in revenues in the year ended December 31, 2006. Approximately 50 percent of the revenue was from gas sales and cylinder rent, with the remainder from sales of welding equipment and supplies. The acquisition will be financed under the Company’s Credit Facility.

Looking Forward

     The Company anticipates that fiscal 2008 will be another productive year. The Company expects further expansion of the industrial economy during fiscal 2008 and estimates fiscal 2008 net earnings to be between $2.33 to $2.41 per diluted share. For the first quarter of fiscal 2008, the Company estimates that it will earn between $0.52 to $0.54 per diluted share. The estimate of fiscal 2008 net earnings anticipates a supportive sales environment and continued success of pricing actions designed to offset rising costs. The annual earnings guidance does not reflect anticipated earnings from the pending acquisition of Linde’s U.S. packaged gas business. In accordance with the Company’s standard practice, the earnings guidance, noted above, does not reflect any impact from acquisitions that have not closed at the time the guidance is issued. However, the acquired Linde business, net of integration costs, is expected to be slightly accretive in the first twelve months of operation.

INCOME STATEMENT COMMENTARY

Net Sales

     Net sales increased 13% in fiscal 2007 compared to fiscal 2006 driven by strong same-store sales growth of 8% and acquisition growth of 5%. Same-store sales growth reflected pricing initiatives, volume growth, and strategic product sales gains, driven by the continued strength of the industrial production, energy and non-residential construction markets served by the Company. The Company estimates same-store sales based on a comparison of current period sales to prior period sales, adjusted for acquisitions and divestitures. The pro-forma adjustments consist of adding acquired sales to, or subtracting sales of divested operations from, sales reported in the prior period. The table below reflects actual sales and does not include the pro-forma adjustments used in calculating the same-store sales metric. The intercompany eliminations represent sales from All Other Operations to the Distribution segment.

Net Sales

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

     The Distribution segment’s principal products include industrial, medical and specialty gases; cylinder and equipment rental; and hardgoods. Industrial, medical and specialty gases are distributed in cylinders and bulk containers. Equipment rental fees are generally charged on cylinders, cryogenic liquid containers, bulk and micro-bulk tanks, tube trailers and welding equipment. Hardgoods consist of welding consumables and equipment, safety products, and maintenance, repair and operating (“MRO”) supplies.

     Distribution segment sales increased 12% compared to the prior year driven by same-store sales growth of $200 million (8%) and sales contributed by both current and prior year acquisitions of $96 million. The increase in Distribution same-store sales resulted from higher hardgoods sales of $82 million (8%) and gas and rent sales growth of $105 million (8%). Broad demand from industrial, energy infrastructure and non-residential construction sectors helped the Company’s core gas and welding hardgoods business. Several of the Company’s business units reported double-digit growth. Sales growth was also driven by double digit growth of strategic products sales. Strategic products are identified by the Company as those expected to grow at a faster rate than the overall industrial economy and include safety products, medical, specialty, and bulk gases, as well as carbon dioxide products, such as dry ice. Accordingly, the Company has initiatives focused on promoting these products. Approximately 75% of the Distribution segment’s $96 million sales growth contributed by acquisitions was the result of current year acquisitions. Current year acquisitions attributable to the Distribution segment historically generated annual revenue of approximately $300 million. The largest of the current year acquisitions closed in the second half of the fiscal year, with the Linde bulk gas acquisition closing in March 2007. Fiscal 2007 acquisitions are expected to contribute more than $200 million to the Distribution segment’s sales growth in fiscal 2008. Additionally as noted in the overview section above, the pending acquisition of a significant part of the U.S. packaged gas business of Linde, with annual revenues of $346 million, approximately $50 million of which will be acquired by the Company’s joint venture National Welders (which is accounted for in the All Other Operations segment), should also be a significant contributor to fiscal 2008 sales growth.

     The Distribution segment’s gas and rent same-store sales of 8% reflects both price increases and volume growth. The impact of price increases reflects pricing actions implemented in June 2006 and November 2005. Sales of industrial gases during the current year remained strong reflecting demand from the Company’s core industrial markets. Sales of strategic gas products increased 11% in the current

year driven by bulk, medical and specialty gas sales gains. Bulk gas sales volumes were up related to growth in micro-bulk and the signing of new bulk customer contracts. Medical gas sales growth was attributable to higher demand from the hospital sector as well as success of the Walk-O2-Bout™ medical cylinder program. Rental revenues benefited from the Company’s rental welder business that generated 33% same-store sales growth in the current year. The rebuilding effort in the Gulf Coast area, power plant construction projects and the strong non-residential construction market contributed to the increase in demand for welding machines, gases and consumables.

     Hardgoods same-store sales growth reflects continued volume and pricing gains. The Company’s successful Radnor^® private label brand of products generated sales growth of 11% in the current year, reaching a total of $128 million. Same-store sales of safety products increased 10% reflecting the success of the telemarketing operations (telesales) and effective cross-selling of safety products to new and existing customers.

     The All Other Operations segment consists of the Company’s Gas Operations Division, Airgas Merchant Gases and the National Welders joint venture. The Gas Operations Division produces and distributes certain gas products, principally carbon dioxide, dry ice, nitrous oxide, specialty gases, anhydrous ammonia and related supplies, services and equipment. Airgas Merchant Gases was formed with the acquisition of the Linde bulk gas business to manage production, distribution and administrative functions for the acquired air separation plants. National Welders is a producer and distributor of industrial, medical and specialty gases and hardgoods based in Charlotte, North Carolina. All Other Operations’ sales increased $86 million (17%) compared to the prior year resulting from same-store sales growth and acquisitions. Same-store sales growth of 8% was driven by continued sales gains of National Welders and growth in carbon dioxide products. Sales of dry ice and liquid carbon dioxide were strong contributors to sales growth in the current year reflecting success in the food processing and industrial carbon dioxide markets and the Company’s nationwide network of Penguin dry ice retail locations. Sales growth from acquisitions primarily reflects a prior year acquisition of a packaged gas distributor by National Welders. Current year acquisitions reflected in the All Other Operations business segment include CFC Refimax, and the Linde bulk gas business. Current year acquisitions did not significantly impact the current years’ sales growth as they closed in the fourth quarter. However, the fiscal 2007 acquisitions are expected to have a significant impact on the All Other Operations sales growth in fiscal 2008. The most significant contributor to the All Other Operations sales growth will be Airgas Merchant Gases. However, Airgas Merchant Gases will principally be a wholesale supplier to the business units in the Distribution business segment. Therefore, the sales of Airgas Merchant Gases to the Distrubution segment will be eliminated when preparing the consolidated financial statements of the Company. Third-party sales from the fiscal 2007 acquisitions are expected to contribute approximately $55 million to fiscal 2008 sales growth. As noted above, upon closing the pending acquisition of a significant part of the U.S. packaged gas business of Linde, operations with approximately $50 million in annual revenue would be acquired by the Company’s National Welders joint venture, also contributing to the fiscal 2008 sales growth.

Gross Profits

     Gross profits do not reflect depreciation expense and distribution costs. As disclosed in Note 1 to the Consolidated Financial Statements, the Company reflects distribution costs as elements of Selling, Distribution and Administrative Expenses and recognizes depreciation on all its property, plant and equipment on the income statement line item “Depreciation.” Other companies may report certain or all of these costs as elements of their Cost of Products Sold, and as such the Company’s gross profits discussed below may not be comparable to those of other entities.

     Gross profits increased 15% principally from sales growth and acquisitions. The gross margin in the current period was 51.1% compared to 50.5% in the prior year period.

Gross Profit

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

     The Distribution segment’s gross profits increased $164 million (14%) compared to the prior year. The Distribution segment’s gross margin was 49.6% versus 48.9% in the prior year. The increase in the gross margin of 70 basis points reflected the impact of price increases as well as a favorable shift in product mix toward and within gas and rent. Gas and rent as a percentage of the Distribution segment’s sales was 52.0% in the current year as compared to 51.7% in the prior year.

     The All Other Operations segment’s gross profits increased $46 million (18%) primarily from strong sales growth at National Welders and sales volume growth of carbon dioxide products. The segment’s gross margin increased 30 basis points to 52.0% versus 51.7% in the prior year period driven by improvement in pricing and margin expansion particularly with respect to the anhydrous ammonia product line acquired in June 2005.

Operating Expenses

     Selling, distribution and administrative expenses (“SD&A”) consist of labor and overhead associated with the purchasing, marketing and distribution of the Company’s products, as well as costs associated with a variety of administrative functions such as legal, treasury, accounting, tax and facility-related expenses.

     As a percentage of net sales, SD&A expense decreased 50 basis points to 35.9% compared to 36.4% in the prior year reflecting improved cost leverage and effective cost management. The decrease in SD&A expense as a percentage of sales occurred despite $15.4 million or approximately 50 basis points of stock based compensation expense in the current year (as described in the Overview section above). There was no stock-based compensation expense in the prior year. SD&A expenses increased $118 million (11%) primarily from higher variable expenses associated with the growth in sales volumes and the operating costs of acquired businesses. Acquisitions contributed estimated incremental SD&A expenses of approximately $30 million in the current year. The increase in SD&A expense attributable to factors other than stock based compensation and acquisitions was approximately $72 million or an increase of 7% primarily attributable to salaries and wages and distribution-related expenses The increase in salaries and wages reflected increased operational headcounts and overtime to fill cylinders, deliver products and operate facilities to meet increased customer demand. The increase in distribution expenses was attributable to higher fuel and vehicle repair and maintenance costs, which were up approximately $12 million versus the prior year. Higher fuel costs were directly related to the rise in diesel fuel prices over the past year and the increase in miles driven to support related sales growth . Operating expenses in the prior year include $2.2 million associated with hurricanes Katrina and Rita.

     Depreciation expense of $139 million increased $16 million (13%) compared to the prior year. Acquired businesses contributed depreciation expense of approximately $3.3 million. The remainder of the increase primarily reflects the current and prior year’s capital investments in revenue generating assets to support customer demand, primarily cylinders, bulk tanks and rental welders, as well as the addition of new fill plants and branch stores. Amortization expense of $8.5 million was $3.4 million higher than the prior year period driven by the amortization of customer lists and non-compete agreements associated with acquisitions.

Operating Income

     Operating income increased 27% in the current year driven by higher sales levels and margin improvement. Improved cost leverage on sales growth was the primary contributor to a 120 basis point increase in the operating income margin to 10.7% compared to 9.5% in the prior year.

Operating Income

(In thousands)		2007				2006				Increase
Distribution		$	266,708			$	208,466			$	58,242				28	%
All Other Operations			74,744				60,292				14,452				24	%
		$	341,452			$	268,758			$	72,694				27	%

     Operating income in the Distribution segment increased 28% in the current year. The Distribution segment’s operating margin increased 120 basis points to 9.9% compared to 8.7% in the prior year. The significant margin improvement was driven by continued operating profit leverage on sales growth and effective management of costs and pricing.

     Operating income in the All Other Operations segment increased 24% compared to the prior year. The segment’s operating income margin of 12.9% was 70 basis points higher than 12.2% in the prior year. The increases in operating income and operating margin were driven by the strong business momentum of National Welders and the improved anhydrous ammonia business.

     The acquired Linde bulk gas business is expected to improve the Company’s consolidated fiscal 2008 operating income and operating margin. The newly formed Airgas Merchant Gases, accounted for in the All Other Operations segment, will principally act as an internal wholesale supplier to the Distribution segment business units. The business units in the Distribution segment will manage the customer relationships and bill the new bulk gas customers. Since the end customer is served by the Distribution segment companies, the improved operating margin will principally be reflected in the Distribution business segment.

Interest Expense and Discount on Securitization of Trade Receivables

     Interest expense, net, and the discount on securitization of trade receivables totaled $74 million representing an increase of 17% compared to the prior year. The increase primarily resulted from higher average debt levels associated with acquisitions, a larger securitization program and higher weighted-average interest rates related to the Company’s variable rate debt instruments, partially offset by the current year refinancing of higher fixed rate debt.

     In July 2006, the Company amended and restated its senior credit facility with a syndicate of lenders. The Credit Facility expanded the Company’s borrowing capacity, subject to compliance with certain covenants, to $1.6 billion principally at an effective interest rate of LIBOR plus 75 basis points. The Company used the Credit Facility to refinance the $100 million maturity of its 7.75% medium-term notes on September 15, 2006. Additionally, on October 27, 2006, the Company used the Credit Facility to redeem its $225 million 9.125% senior subordinated notes. Based on current interest rates under the revolving credit facility, interest savings from these refinancings are estimated to be $700 thousand per month.

     The Company participates in a securitization agreement with three commercial banks to sell up to $285 million of qualifying trade receivables. The amount of outstanding receivables under the agreement was $264 million at March 31, 2007 versus $244 million at March 31, 2006. Net proceeds from the sale of trade receivables were used to reduce borrowings under the Company’s revolving credit facilities. The discount on the securitization of trade receivables represents the difference between the carrying value of the receivables and the proceeds from their sale. The amount of the discount varies on a monthly basis depending on the amount of receivables sold and market rates.

     As discussed in “Liquidity and Capital Resources” and in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” the Company manages its exposure to interest rate risk through participation in interest rate swap agreements. Including the effect of the interest rate swap agreements and the trade receivables securitization, the Company’s ratio of fixed to variable rate debt at March 31, 2007 was 21% fixed to 79% variable. A majority of the Company’s variable rate debt is based on a spread over the London Interbank Offered Rate (“LIBOR”). Based on the Company’s fixed to variable interest rate ratio, for every 25 basis point increase in LIBOR, the Company estimates that its annual interest expense would increase approximately $3 million.

Loss on Debt Extinguishment

     On October 27, 2006, the Company redeemed its $225 million 9.125% senior subordinated notes at a premium of 104.563% with borrowings under the Company’s revolving credit facility. In conjunction with the redemption, the Company recognized a third quarter charge on the early extinguishment of debt of $12.1 million ($7.9 million after tax) or approximately $0.10 per diluted share. The charge related to the redemption premium and the write-off of unamortized debt issuance costs.

Income Tax Expense

     The effective income tax rate was 38.8% of pre-tax earnings in the current year compared to 37.4% in the prior year. The effective income tax rate in the current year reflects a one-time tax benefit associated with changes in state income tax law in Texas. Additionally, the current year’s tax rate reflects the limited deductibility of stock-based compensation associated with the Company’s Employee Stock Purchase Plan and the absence of state tax benefits associated with the loss on the extinguishment of debt. The lower tax rate in fiscal 2006 reflected favorable changes in valuation allowances associated with state tax net operating loss carryforwards and a favorable adjustment to previously recorded tax liabilities. The Company expects the overall effective tax rate for fiscal 2008 to range from 39% to 39.5% of pre-tax earnings.

Income from Continuing Operations

     Income from continuing operations in the current year was $154 million, or $1.92 per diluted share, which reflects an after tax loss of $7.9 million from the early extinguishment of debt, or $0.10 per diluted share, stock-based compensation expense of $10.9 million after tax, or $0.13 per diluted share, and $1.8 million, or $0.02 per diluted share, one-time tax benefit associated with changes in state income tax law. Income from continuing operations in the prior period was $128 million, or $1.62 per diluted share. Stock-based compensation expense was not recognized in the prior year.

Income (loss) from Discontinued Operations

     In December 2005, the Company divested its business unit Rutland Tool & Supply Co., Inc. (“Rutland Tool”). Consequently, the operating results of Rutland Tool for fiscal 2006 and fiscal 2005 are reflected as discontinued operations. For fiscal 2006, the loss from discontinued operations, net of tax, was $1.4 million, which principally represented a loss on the sale of the business.

Cumulative Effect of a Change in Accounting Principle

     Effective March 31, 2006, the Company adopted Financial Accounting Standards Board Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143, (“FIN 47”), and recorded a $2.5 million after-tax charge ($0.03 per diluted share) as a cumulative effect of a change in accounting principle. The ongoing annual expense resulting from the adoption of FIN 47 is not material.

Net Earnings

     Net earnings were $154.4 million, or $1.92 per diluted share, compared to $123.6 million, or $1.57 per diluted share, in the prior year.

     Pursuant to a joint venture agreement between the Company and the holders of the preferred stock of National Welders, until June 30, 2009, the preferred stockholders have the option to exchange their 3.2 million shares of National Welders voting redeemable preferred stock either for cash at a price of $17.78 per share or to tender them to the joint venture in exchange for approximately 2.3 million shares of Airgas common stock. If Airgas common stock has a market value of $24.45 per share, the stock and cash redemption options are equivalent. The weighted shares used in the fiscal 2007 and 2006 diluted earnings per share calculations include the assumed conversion of National Welders’ preferred stock to Airgas common stock. Also see Note 4 to the Consolidated Financial Statements under Item 8.

RESULTS OF OPERATIONS: 2006 COMPARED TO 2005

OVERVIEW

     The Company had net sales for fiscal year ended March 31, 2006 (“fiscal 2006”) of $2.83 billion compared to $2.37 billion for fiscal year ended March 31, 2005 (“fiscal 2005”). Net sales increased by 20% driven by strong same-store sales growth and the impact of acquisitions. Same-store sales growth contributed 11% to the increase in total sales. Acquisitions contributed 9% to the overall increase in net sales. The operating income margin expanded 90 basis points in fiscal 2006 to 9.5% compared to 8.6% in fiscal 2005 reflecting improving cost leverage. Solid sales growth and operating expense discipline resulted in income from continuing operations of $127.5 million, or $1.62 per diluted share, compared to $91.6 million, or $1.19 per diluted share, in fiscal 2005, a 36% increase.

Accounting Change

     Effective March 31, 2006, the Company adopted Financial Accounting Standard Board Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143, (“FIN 47”), and recorded a $2.5 million after-tax charge ($0.03 per diluted share) as a cumulative effect of a change in accounting principle. The ongoing annual expense resulting from the adoption of FIN 47 is not material.

Discontinued Operations

     On December 1, 2005, the Company divested its subsidiary, Rutland Tool. Rutland Tool distributed metalworking tools, machine tools and MRO supplies from seven locations and had approximately 180 employees. Rutland Tool generated annual sales of approximately $50 million and an insignificant amount of operating income. As a result of the divestiture, the Company reflected fiscal 2006 and fiscal 2005 operating results of Rutland Tool as “discontinued operations.” The fiscal 2006 loss from discontinued operations, net of tax, was $1.4 million, or $0.02 per diluted share, which principally represented a loss on the sale of the business. Proceeds from the divestiture were approximately $15 million. The operating results of Rutland Tool were previously reflected in the Distribution business segment.

Acquisitions

     During fiscal 2006, the Company completed 13 acquisitions (including three businesses acquired by the Company’s joint venture, National Welders) with combined annual sales of approximately $141 million. The largest of these acquisitions included the June 2005 purchase of the Industrial Products Division of LaRoche Industries, Inc. (“LaRoche”). LaRoche was a leading distributor of anhydrous ammonia in the U.S. with annual sales of approximately $65 million. The LaRoche operations were incorporated into a new business unit, “Airgas Specialty Products,” that was added to the All Other Operations business segment.

INCOME STATEMENT COMMENTARY

Net Sales

     Net sales increased 20% in fiscal 2006 compared to fiscal 2005 driven primarily by strong same-store sales growth of 11% and acquisitions. The Company estimates same-store sales based on a comparison of current period sales to prior period sales, adjusted for acquisitions and divestitures. The pro-forma adjustments consist of adding acquired sales to, or subtracting sales of divested operations from, sales reported in the prior period. The table below reflects actual sales and does not include the pro-forma adjustments used in calculating the same-store sales metric. The intercompany eliminations represent sales from All Other Operations to the Distribution segment.

Net Sales

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

     Distribution segment sales increased 18% compared to fiscal 2005 driven by same-store sales growth of $245 million (11%) and sales contributed by both fiscal 2006 and fiscal 2005 acquisitions of $116 million. Incremental sales from acquisitions were driven by nine fiscal 2006 acquisitions and the impact of a full year of operations of the July 2004 acquisition of the packaged gas business of The BOC Group, Inc. (“BOC”). Same-store sales growth was driven approximately equally by pricing initiatives and higher sales volumes. Price increases were initiated in response to rising product, operating and distribution costs as well as other factors. Higher sales volumes resulted from the continued strength of the industrial economy and the continued success of the Company’s growth initiatives. Same-store sales growth of hardgoods was 13%, and gas and rent was 10%, with a majority of the Company’s business units reporting double-digit growth. Sales growth in the Gulf Coast and southwestern portions of the U.S. was particularly strong reflecting post-hurricane demand for equipment, safety products and welding machines. Sales growth was also driven by sales of strategic products. Strategic products were identified by the Company as those expected to grow at a faster rate than the overall industrial economy and include safety products, medical, specialty, and bulk gases, as well as carbon dioxide products, such as dry ice.

     The Distribution segment’s same-store sales growth for gas and rent of 10% was driven by price increases and volume growth. Broad pricing actions were initiated in March 2005 and November 2005 in response to rising product and delivery costs. Sales growth was achieved across nearly all major product lines, including the largest product line, industrial gases (e.g., nitrogen, oxygen, argon, acetylene, etc.). Sales of strategic products, particularly related to bulk, medical and specialty gases, also helped drive the growth in gas and rent same-store sales. Sales of bulk, medical, and specialty gases generated combined same-store sales growth of 12%. Same-store sales growth was also helped by a 31% increase in welding equipment rentals.

     The increase in Distribution same-store sales from hardgoods of $131 million (13%) is attributable to strong volume gains in sales of safety and Radnor private label products. Same-store sales of safety products grew 17% in fiscal 2006 benefiting from excellent execution in cross-selling and in our telesales operation, the strong industrial economy and reconstruction efforts along the Gulf Coast. Radnor products grew 26% reflecting the rollout of new products and expansion of the Company’s branch-store core stocking program to acquired locations. Same-store sales of hardgoods also benefited from pricing actions taken during fiscal 2006 to offset rising product costs.

     In fiscal 2006 and fiscal 2005, the All Other Operations segment consisted of the Company’s Gas Operations Division and its National Welders joint venture. The Gas Operations Division produces and distributes certain gas products, principally carbon dioxide, dry ice, nitrous oxide and specialty gases. Beginning in June 2005, the division also began distributing anhydrous ammonia and related supplies, services and equipment. National Welders is a producer and distributor of industrial, medical and specialty gases and hardgoods based in Charlotte, North Carolina. All Other Operations’ sales, net of intercompany eliminations, increased $101 million compared to fiscal 2005. The acquisition of the anhydrous ammonia business from LaRoche and the subsequent formation of Airgas Specialty Products in June 2005 contributed sales of $67 million in fiscal 2006. Same-store sales growth was primarily attributable to National Welders and pricing actions taken by Airgas Specialty Products. Sales of liquid carbon dioxide and dry ice also increased modestly.

Gross Profits

     Gross profits increased 17% resulting from higher sales volumes, acquisitions and price increases. The gross profit margin decreased 90 basis points to 50.5% in fiscal 2006 compared to 51.4% in fiscal 2005. The decrease in the gross profit margin reflects the acquisition and subsequent growth of the lower margin anhydrous ammonia product line and a shift in sales mix.

Gross Profit

(In thousands)		2006				2005				Increase
Distribution		$	1,172,503			$	1,004,828			$	167,675				17	%
All Other Operations			255,129				211,172				43,957				21	%
		$	1,427,632			$	1,216,000			$	211,632				17	%

     The Distribution segment’s gross profits increased $168 million (17%) compared to fiscal 2005. Distribution’s gross profit margin of 48.9% decreased 50 basis points from 49.4% in fiscal 2005. The lower gross profit margin reflects a shift in gas sales mix, including the impact of higher sales growth of lower margin bulk gases, as well as higher same-store sales growth of lower margin hardgoods. The Distribution segment’s sales consisted of 51.7% gas and rent compared to 51.9% in fiscal 2005. Pricing actions taken by the Company in fiscal 2006 helped to mitigate the impact of rising product costs.

     The All Other Operations segment’s gross profits increased $44 million primarily from strong sales at National Welders and the addition of the anhydrous ammonia business in fiscal 2006. Although the gross profit dollars for the segment increased, the gross profit margin declined by 310 basis points to 51.7% from 54.8% in fiscal 2005. The gross profit margin decline reflects the acquisition of the anhydrous ammonia product line, which carries a lower margin than other products in this segment, and competitive pressures in the market for dry ice.

Operating Expenses

     As a percentage of net sales, SD&A expenses decreased 170 basis points to 36.4% compared to 38.1% in fiscal 2005 resulting from improved cost leverage. SD&A expenses increased $129 million (14%) primarily from operating costs of acquired businesses and higher variable expenses associated with the growth in sales volumes. As compared with fiscal 2005, acquisitions contributed an estimated additional $62 million to SD&A expenses. The SD&A expenses contributed by fiscal 2006 acquisitions reflect acquisition integration costs that were $1.9 million in fiscal 2006. Fiscal 2005 SD&A expenses reflect a total of $6.4 million of costs associated with integrating the BOC acquisition as well as employee separation costs. The balance of the increase in SD&A expenses is primarily attributable to higher labor costs, distribution-related expenses, selling expenses and approximately $2.2 million of incremental costs resulting from hurricanes Katrina and Rita. The increase in labor costs reflected costs to fill cylinders and operate facilities to meet increased demand for products as well as normal wage inflation. The increase in distribution expenses is attributable to higher fuel costs and vehicle repair and maintenance expenses. Higher fuel costs were directly related to the rise in diesel fuel prices and the increase in miles driven to support the higher sales volumes. The increase in selling expenses is attributable to higher sales levels.

     Depreciation expense of $122 million increased $17 million (16%) compared to $105 million in fiscal 2005. Fiscal 2006 and fiscal 2005 acquisitions contributed depreciation expense of approximately $8 million. The remainder of the increase primarily reflects fiscal 2006’s and fiscal 2005’s capital expenditures to support growth, including purchases of cylinders, bulk tanks and rental welders. Amortization expense of $5 million in fiscal 2006 was consistent with fiscal 2005.

Operating Income

     Operating income increased 33% in fiscal 2006 compared to fiscal 2005 driven by higher sales levels. Cost leverage and the improved operations of the BOC business acquired in fiscal 2005 contributed to a 90 basis point increase in the operating income margin to 9.5% compared to 8.6% in fiscal 2005.

Operating Income

(In thousands)		2006				2005				Increase
Distribution		$	208,466			$	157,239			$	51,227				33	%
All Other Operations			60,292				45,215				15,077				33	%
		$	268,758			$	202,454			$	66,304				33	%

     Operating income in the Distribution segment increased 33% in fiscal 2006. The Distribution segment’s operating income margin increased 100 basis points to 8.7% compared to 7.7% in fiscal 2005. The increase in the operating income margin reflects the lower operating expenses as a percentage of net sales, described above. Fiscal 2005 was negatively impacted by integration costs and initial lower margins of the business acquired from BOC.

     Operating income in the All Other Operations segment increased 33% resulting primarily from the strong business momentum of National Welders as well as the acquisition of the anhydrous ammonia business from LaRoche. The segment’s operating income margin increased 50 basis points to 12.2% in fiscal 2006 compared to 11.7% in fiscal 2005. The higher operating income margin principally relates to lower operating expenses as a percentage of net sales, partially offset by the lower operating margin of the anhydrous ammonia business.

Interest Expense and Discount on Securitization of Trade Receivables

     Interest expense, net, and the discount on securitization of trade receivables totaled $63 million representing an increase of 13% compared to fiscal 2005. The increase in interest expense primarily resulted from higher debt levels associated with acquisitions and higher weighted-average interest rates.

     The Company participates in a securitization agreement with commercial banks to sell qualifying trade receivables. The amount of outstanding receivables under the agreement was $244 million and $190 million at March 31, 2006 and 2005, respectively. Net proceeds from the sale of trade receivables were used to reduce borrowings under the Company’s revolving credit facilities. The discount on the securitization of trade receivables represents the difference between the carrying value of the receivables and the proceeds from their sale. The amount of the discount varies on a monthly basis depending on the amount of receivables sold and market rates.

     As discussed in “Liquidity and Capital Resources” and in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” the Company manages its exposure to interest rate risk through participation in interest rate swap agreements. Including the effect of the interest rate swap agreements and the trade receivables securitization, the Company’s ratio of fixed to variable rate debt at March 31, 2006 was 53% fixed to 47% variable.

Income Tax Expense

     The effective income tax rate was 37.4% of pre-tax earnings compared to 36.8% in fiscal 2005. The lower tax rate in fiscal 2005 resulted from favorable changes in valuation allowances associated with state tax net operating loss carryforwards and the realization of federal and state tax credits.

Income from Continuing Operations

     Income from continuing operations was $127.5 million, or $1.62 per diluted share, compared to $91.6 million, or $1.19 per diluted share in fiscal 2005.

Income (loss) from Discontinued Operations

     As a result of the divestiture of Rutland Tool in December 2005, the Company reflected fiscal 2006 and fiscal 2005 operating results of Rutland Tool as “discontinued operations.” The fiscal 2006 loss from discontinued operations, net of tax, was $1.4 million, or $0.02 per diluted share, which principally represented a loss on the sale of the business. Proceeds from the divestiture were approximately $15 million. In fiscal 2005, income from discontinued operations was $464 thousand. The operating results of Rutland Tool were previously reflected in the Distribution business segment.

Cumulative Effect of a Change in Accounting Principle

     In conjunction with the adoption of FIN 47 on March 31, 2006, the Company recorded an after-tax charge of $2.5 million as a cumulative effect of a change in accounting principle. The ongoing annual expense resulting from the adoption of FIN 47 is not material.

Net Earnings

     Net earnings were $123.6 million, or $1.57 per diluted share, compared to $92 million, or $1.20 per diluted share, in fiscal 2005.

     Pursuant to a joint venture agreement between the Company and the holders of the preferred stock of National Welders, until June 30, 2009, the preferred stockholders have the option to exchange their 3.2 million shares of National Welders voting redeemable preferred stock either for cash at a price of $17.78 per share or to tender them to the joint venture in exchange for approximately 2.3 million shares of Airgas common stock. If Airgas common stock has a market value of $24.45 per share, the stock and cash redemption options are equivalent. The weighted shares used in the fiscal 2006 diluted earnings per share calculation include the assumed conversion of National Welders’ preferred stock to Airgas common stock. In fiscal 2005, the conversion of National Welders preferred stock to Airgas common stock was anti-dilutive. Also see Note 4 to the Consolidated Financial Statements under Item 8.

LIQUIDITY AND CAPITAL RESOURCES

Fiscal 2007 Cash Flows

     Net cash provided by operating activities was $318 million in fiscal 2007 compared to $352 million in fiscal 2006. Net earnings adjusted for non-cash items provided cash of $384 million versus $304 million in the prior year. Working capital resulted in a use of cash of $86 million versus a use of $8 million in the prior year. The use of cash for working capital in fiscal 2007 principally reflects a higher level of trade receivables associated with sales growth, a higher level of income tax payments, and the timing of payments to vendors. The Company also increased the amount of receivables sold under its trade receivables securitization program providing cash of $20 million in the current year versus $54 million in the prior year. Cash flows of National Welders, in excess of a management fee paid by National Welders to the Company, are not available to the Company. Cash provided by operating activities in the current year included $34 million of cash provided by National Welders versus $23 million in the prior year. Consolidated cash flows provided by operating activities were used to fund investing activities, such as capital expenditures and acquisitions.

     Net cash used in investing activities in fiscal 2007 totaled $923 million and primarily consisted of cash used for acquisitions and capital expenditures. Cash of $688 million was paid in the current year for 13 acquisitions, including the acquisition of Linde’s bulk gas business, and holdback settlements. Capital expenditures were $244 million in the current period (including $18 million at National Welders). Capital expenditures reflect investments to support the Company’s sales growth initiatives. For example, investments in rental welders by the Company’s Red-D-Arc subsidiary supported its fiscal 2007 same-store sales growth of 33%. The Company has also continued to invest in its core business through purchasing cylinders and bulk tanks. Other significant investments included a new carbon dioxide plant and fill plant expansions. The Company expects that fiscal 2008 capital expenditures will approximate 7% of net sales.

     Financing activities provided net cash of $596 million primarily from net borrowings under the Company’s Credit Facility. The additional borrowing was principally used to fund acquisitions. Other sources of cash effectively offset the use of cash within financing activities.

Dividends

     During fiscal 2007, 2006 and 2005, the Company paid its stockholders regular quarterly cash dividends of $0.07, $0.06 and $0.045 per share, respectively. On May 8, 2007, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.09 per share, which is payable on June 29, 2007 to stockholders of record as of June 15, 2007. Future dividend declarations and associated amounts paid will depend upon the Company’s earnings, financial condition, loan covenants, capital requirements and other factors deemed relevant by management and the Company’s Board of Directors.

Stock Repurchase Plan

     Due to certain contemplated acquisitions, in July 2006, the Company suspended the three-year share repurchase plan that it initiated in November 2005. No shares of Company common stock were repurchased during fiscal 2007. Since inception, 195,400 shares have been repurchased under the plan and $137.2 million of the original $150 million authorization remains available. The Company continues to focus on using its cash flow for investing in growth opportunities, including future acquisitions, paying down debt and growing its dividend.

Financial Instruments

Debt Refinancing

     Effective July 25, 2006, the Company amended and restated its senior credit facility with a syndicate of lenders. Subject to compliance with certain covenants, the $1.6 billion senior unsecured credit facility (the “Credit Facility”) permits the Company to borrow up to $966 million under a U.S. dollar revolving credit line, up to C$40 million (U.S. $34 million) under a Canadian dollar revolving credit line and up to $600 million under two or more term loans. The Company used borrowings under the term loan provision of the Credit Facility to finance the $100 million maturity of its 7.75% medium-term notes on September 15, 2006. The remaining $500 million term loan was used to finance the previously announced Linde bulk gas acquisition that closed on March 9, 2007. The Credit Facility will mature on July 25, 2011.

     As of March 31, 2007, the Company had approximately $1,067 million of borrowings under the Credit Facility: $471 million under the U.S. dollar revolver, C$22 million (U.S. $18 million) under the Canadian dollar revolver and a $578 million under the term loan. The term loans are repayable in quarterly installments of $22.5 million between March 31, 2007 and June 30, 2010. The quarterly installments then increase to $71.2 million from September 30, 2010 to June 30, 2011. The Company also had letters of credit of $34 million outstanding under the Credit Facility. The U.S. dollar borrowings and the term loans bear interest at LIBOR plus 75 basis points and the Canadian dollar borrowings bear interest at the Canadian Bankers’ Acceptance Rate plus 75 basis points. As of March 31, 2007, the effective interest rates on the U.S. dollar borrowings, the term loans and the Canadian dollar borrowings were 6.09%, 6.10%and 5.20%, respectively.

     The Company’s domestic subsidiaries, exclusive of a bankruptcy remote special purpose entity (the “domestic guarantors”), guarantee the U.S. and Canadian borrowings. The Canadian borrowings are also guaranteed by the Company’s foreign subsidiaries. The guarantees are full and unconditional and are made on a joint and several basis. The Company has pledged 100% of the stock of its domestic subsidiaries and 65% of the stock of its foreign subsidiaries as surety for its obligations under the Credit Facility. The Credit Facility provides for the release of the guarantees and collateral if the Company attains an investment grade credit rating and a similar release on all other debt.

Total Borrowing Capacity and Acquisition Financing

     At March 31, 2007, approximately $461 million remained unused under the U.S. dollar revolving credit line and approximately C$18 million (U.S. $16 million) remained unused under the Canadian dollar revolving credit line. As of March 31, 2007, the financial covenants of the Credit Facility permitted the Company increase its total borrowings under the Credit Facility or through other debt instruments by approximately $538 million. The Credit Facility contains customary events of default, including nonpayment and breach of covenants. In the event of default, repayment of borrowings under the Credit Facility may be accelerated.

     The Company continues to look for acquisition candidates. The financial covenant calculations of the Credit Facility include the pro forma results of acquired businesses. Therefore, total borrowing capacity is not reduced dollar-for-dollar with acquisition financing. The Company intends to finance the pending acquisition (purchase price of $310 million) of the U.S. packaged gas business of Linde AG with borrowings under the revolving credit line of the Credit Facility. A portion of the business to be acquired will be sold by the Company to National Welders. National Welders will secure financing necessary to acquire their portion of the business.

     The Company believes that it could obtain financing on reasonable terms if its requirements exceed amounts available under the Credit Facility. The terms of any future financing arrangements depend on market conditions and the Company’s financial position at that time.

Money Market Loan

     The Company has an agreement with a financial institution that provides access to short term advances not to exceed $30 million for a maximum term of three months. The agreement expires on November 30, 2007, but may be extended subject to renewal provisions contained in the agreement. The amount, term and interest rate of an advance are established through mutual agreement with the financial institution when the Company requests such an advance. At March 31, 2007, the Company had an outstanding advance under the agreement of $30 million for a term of 90 days bearing interest at 5.75%.

Senior Subordinated Notes

     At March 31, 2007, the Company had $150 million of senior subordinated notes (the “2004 Notes”) outstanding with a maturity date of July 15, 2014. The 2004 Notes bear interest at a fixed annual rate of 6.25%, payable semi-annually on January 15 and July 15 of each year. The 2004 Notes have an optional redemption provision, which permits the Company, at its option, to call the 2004 Notes at scheduled dates and prices. The first scheduled optional redemption date is July 15, 2009 at a price of 103.125% of the principal amount.

     The 2004 Notes contain covenants that could restrict the payment of dividends, the repurchase of common stock, the issuance of preferred stock, and the incurrence of additional indebtedness and liens. The 2004 Notes are fully and unconditionally guaranteed jointly and severally, on a subordinated basis, by each of the wholly owned domestic guarantors under the Credit Facility. The stock of the Company’s domestic subsidiaries is also pledged to the note holders on a subordinated basis.

     On October 27, 2006, the Company redeemed its $225 million 9.125% senior subordinated notes in full at a premium of 104.563% of the principal amount with proceeds from the Company’s revolving credit line. In conjunction with the redemption of the Notes, the Company recognized a charge on the early extinguishment of debt of approximately $12.1 million ($7.9 million after tax) in October 2006. The charge related to the redemption premium and the write-off of unamortized debt issuance costs.

Acquisition and Other Notes

     The Company’s long-term debt also included acquisition and other notes principally consisting of notes issued to sellers of businesses acquired and are repayable in periodic installments. At March 31, 2007, acquisition and other notes totaled approximately $17 million with interest rates ranging from 4% to 8.5%.

Financial Instruments of the National Welders Joint Venture

     Pursuant to the requirements of the FASB’s Financial Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities, (“FIN 46R”), the Company’s Consolidated Balance Sheets at March 31, 2007 and 2006 include the financial obligations of National Welders. National Welders’ financial obligations are non-recourse to the Company, meaning that the creditors of National Welders do not have a claim on the assets of Airgas, Inc.

     The National Welders Credit Agreement (the “NWS Credit Agreement”) provides for a revolving credit line of $100 million, a Term Loan A of $26 million, a Term Loan B of $21 million, and a Term Loan C of $9 million. At March 31, 2007, National Welders had borrowings under its revolving credit line of $73 million and under Term Loan A of $12 million. There were no amounts outstanding under Term loans B or C at March 31, 2007. National Welders also had $681 thousand in acquisition notes and other debt obligations.

     The NWS revolving credit borrowings mature in August 2009. Term Loan A is repayable in monthly amounts of $254 thousand plus accrued interest with a lump-sum payment of the outstanding balance at maturity in March 2011. The variable interest rate on the revolving credit line and Term Loan A ranges from LIBOR plus 70 to 145 basis points varying with National Welders’ leverage ratio. At March 31, 2007, the effective interest rate for the revolving credit line and Term Loan A was 6.02%. The NWS Credit Agreement also contains certain covenants which, among other things, subject National Welders to minimum net worth requirements, limit the ability of National Welders to incur and guarantee new indebtedness, and limit its capital expenditures, ownership changes, merger and acquisition activity, and the payment of dividends. National Welders had additional borrowing capacity under the NWS Credit Agreement of approximately $27 million at March 31, 2007. Term Loans B and C were previously repaid and provide no additional borrowing capacity.

     As of March 31, 2007, the revolving credit line and Term Loan A are secured by certain current assets, principally trade receivables and inventory, totaling $38 million, non-current assets, principally equipment, totaling $119 million, and Airgas common stock with a market value of $39 million classified as treasury stock and carried at cost of $370 thousand.

Trade Receivables Securitization

     The Company participates in a securitization agreement with three commercial banks to sell up to $285 million of qualifying trade receivables. The agreement expires in March 2010, but may be renewed subject to provisions contained in the agreement. During fiscal 2007, the Company sold, net of its retained interest, $2.70 billion of trade receivables and remitted to bank conduits, pursuant to a servicing agreement, $2.68 billion in collections on those receivables. The net proceeds were used to reduce borrowings under the Company’s revolving credit facilities. The amount of outstanding receivables under the agreement was $264 million at March 31, 2007 and $244 million at March 31, 2006.

Interest Rate Swap Agreements

     The Company manages its exposure to changes in market interest rates. At March 31, 2007, the Company had six fixed interest rate swap agreements with an aggregate notional amount of $150 million. These swaps effectively convert $150 million of variable interest rate debt associated with the Company’s Credit Facility to fixed rate debt. At March 31, 2007, two swap agreements with a total notional amount of $50 million required the Company to make fixed interest payments based on a weighted average effective rate of 4.15% and receive variable interest payments from its counterparties based on a weighted average variable rate of 5.32%. The four other swap agreements with a total notional amount of $100 million required the Company to make fixed interest payments based on a weighted average effective rate of 5.39% and receive variable interest payments from its counterparties based on a weighted average variable rate of 5.35%. The remaining terms of each of these swap agreements are between 15 months to 26 months. The Company monitors its positions and the credit ratings of its counterparties and does not anticipate non-performance by the counterparties.

     National Welders was a party to one interest rate swap agreement with a major financial institution with a notional principal amount of $27 million. National Welders is required to make fixed interest payments of 5.36% and receive variable interest payments from its counterparty based on one month LIBOR, which was 5.36% at March 31, 2007. The remaining term of the swap agreement is 26 months.

     Including the effect of the interest rate swap agreements, the debt of National Welders, and the trade receivables securitization, the Company’s ratio of fixed to variable rate debt at March 31, 2007 was 21% fixed to 79% variable. A majority of the Company’s variable rate debt is based on a spread over LIBOR. Based on the Company’s fixed to variable interest rate ratio, for every 25 basis point increase in LIBOR, the Company estimates that its annual interest expense would increase approximately $3 million.

OTHER

Critical Accounting Estimates

     The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires management to make judgments, assumptions and estimates that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Note 1 to the Consolidated Financial Statements included under Item 8, “Financial Statements and Supplementary Data” describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Estimates are used for, but not limited to, determining the net carrying value of trade receivables, inventories, goodwill, other intangible assets and business insurance reserves. Uncertainties about future events make these estimates susceptible to change. Management evaluates these estimates regularly and believes they are the best estimates, appropriately made, given the known facts and circumstances. For the three years ended March 31, 2007, there were no material changes in the valuation methods or assumptions used by management. However, actual results could differ from these estimates under different assumptions and circumstances. The Company believes the following accounting estimates are critical due to the subjectivity and judgment necessary to account for these matters, their susceptibility to change and the potential impact that different assumptions could have on operating performance.

Trade Receivables

     The Company maintains an allowance for doubtful accounts, which includes sales returns, sales allowances, and bad debts. The allowance adjusts the carrying value of trade receivables to fair value based on estimates of accounts that will not ultimately be collected. An allowance for doubtful accounts is generally established as trade receivables age beyond their due date. As past due balances age, higher valuation allowances are established lowering the net carrying value of receivables. The amount of valuation allowance established for each past due period reflects the Company’s historical collections experience and current economic conditions and trends. The Company also establishes valuation allowances for specific problem accounts and bankruptcies. The amounts ultimately collected on past due trade receivables are subject to numerous factors including general economic conditions, the condition of the receivable portfolio assumed in acquisitions, the financial condition of individual customers, and the terms of reorganization for accounts emerging from bankruptcy. Changes in these conditions impact the Company’s collection experience and may result in the recognition of higher or lower valuation allowances. Management evaluates the allowance for doubtful accounts monthly. The Company has a low concentration of credit risk due to its broad and diversified customer base across multiple industries and geographic locations, and its relatively low average order size. No individual customer accounts for more than 0.5% of the Company’s annual sales. Historically, the Company’s sales returns, sales allowances, and bad debts have been in the range of 1.4% to 1.7% of sales.

Inventories

     The Company’s inventories are stated at the lower of cost or market. The majority of the products the Company carries in inventory have long shelf lives and are not subject to technological obsolescence. The Company writes its inventory down to its estimated market value when it believes the market value is below cost. The Company estimates its ability to recover the costs of items in inventory by product type based on its age, the rate at which that product line is turning in inventory, its physical condition as well as assumptions about future demand and market conditions. The ability of the Company to recover its cost for products in inventory can be affected by factors such as future customer demand, general market conditions and the relationship with significant suppliers. Management evaluates the recoverability of its inventory at least quarterly. In aggregate, inventory turns approximately four times per year.

Goodwill and Other Intangible Assets

     The Company accounts for goodwill and other intangible assets in accordance with SFAS 142, Goodwill and Other Intangible Assets. Under SFAS 142, goodwill and other intangible assets with indefinite useful lives are not amortized, but are instead tested for impairment at least annually. The Company has elected to perform its annual tests for indications of goodwill impairment as of October 31 of each year or whenever indicators of impairment exist. Goodwill impairment is recognized when the carrying value of a reporting unit exceeds its “implied fair value.” Implied fair value is estimated based on a discounted cash flow analysis for each reporting unit. The discounted cash flow analysis requires estimates, assumptions and judgments about future events. The Company’s analysis uses internally generated budgets and long-range forecasts, which are the same budgets and forecasts used for managing operations, awarding management bonuses and seeking alternative or additional financing. The Company’s discounted cash flow analysis uses the assumptions in these budgets and forecasts about sales trends, inflation, working capital needs, and forecasted capital expenditures along with an estimate of the reporting unit’s terminal value (the value of the reporting unit at the end of the forecast period) to determine the implied fair value of each reporting unit. The Company’s assumptions about working capital needs and capital expenditures are based on historical experience. Terminal values reflect an assumed perpetual growth rate consistent with long-term expectations for inflation. The discount rate used to determine the present value of the estimated future cash flows is a risk adjusted rate consistent with the weighted average cost of capital of peer group companies for a term equal to the forecast period.

     The Company believes the assumptions used in its discounted cash flow analysis are appropriate and result in reasonable estimates of the implied fair value of each reporting unit. However, the Company may not meet its sales growth and profitability targets, working capital needs and capital expenditures may be higher than forecast, changes in credit markets may result in changes to the Company’s discount rate and general business conditions may result in changes to the Company’s terminal value assumptions for its reporting units. Based on the October 31, 2006 assessment, the Company does not expect that such changes would result in the recognition of goodwill impairment in the Company’s reporting units.

Business Insurance Reserves

     The Company has established insurance programs to cover workers’ compensation, business automobile, and general liability claims. During fiscal 2007, these programs had self-insured retention of $1 million per occurrence. During fiscal 2006 and 2005, the Company’s self-insured retention was $500 thousand per occurrence with an additional aggregate retention of $2.2 million in fiscal 2006 and $1.7 million in fiscal 2005, for claims in excess of $500 thousand. For fiscal 2008, the self-insured retention will remain $1 million per occurrence with no additional aggregate retention. The Company reserves for its self-insured retention based on individual claim evaluations performed by a qualified third-party administrator. The third-party administrator establishes loss estimates for known claims based on the current facts and circumstances. These known claims are then “developed,” through actuarial computations, to reflect the expected ultimate loss for the known claims, as well as incurred but not reported claims. Actuarial computations use the Company’s specific loss history, payment patterns, insurance coverage, plus industry trends and other factors to estimate the required reserve for all open claims by policy year and loss type. Reserves for the Company’s self-insurance retention are evaluated monthly. Semi-annually, the Company obtains a third-party actuarial report to validate that the computations and assumptions used are consistent with actuarial standards. Certain assumptions used in the actuarial computations are susceptible to change. Loss development factors are influenced by items such as medical inflation, changes in workers’ compensation laws, and changes in the Company’s loss payment patterns, all of which can have a significant influence on the estimated ultimate loss related to the Company’s self-insured retention. Accordingly, the ultimate resolution of open claims may be for amounts more or less than the reserve balances. The Company’s operations are spread across a significant number of locations, which helps to mitigate the potential impact of any given event that could give rise to an insurance-related loss. Over the last three years, business insurance expense has generally been in the range of 0.8% to 0.9% of sales.

Contractual Obligations and Off-Balance Sheet Arrangements

     The following table presents the Company’s contractual obligations and off-balance sheet arrangements as of March 31, 2007:

											Payments Due by Period
(In thousands)						Less than 1												More than 5
Contractual and Off-Balance Sheet Obligations		Total				Year				1 to 3 Years				3 to 5 Years				Years
Obligations reflected on the March 31, 2007 Balance Sheet:
Long-term debt (1)		$	1,350,015			$	40,296			$	268,753			$	889,186			$	151,780
Estimated interest payments on long-term debt (2)			313,849				80,624				137,900				85,225				9,675
Estimated payments (receipts) on interest rate swap agreements (3)			(1,200	)			(500	)			(700	)			—				—
Off-balance sheet obligations as of March 31, 2007:
Operating leases (4)			212,889				59,757				90,817				49,546				12,769
Trade receivables securitization (5)			264,400				—				264,400				—				—
Estimated discount on securitization (6)			44,814				14,938				29,876				—				—
Letters of credit (7)			34,426				34,426				—				—				—
Purchase obligations:
Liquid bulk gas supply agreements (8)			808,021				89,015				165,716				158,750				394,540
Liquid carbon dioxide supply agreements (9)			180,072				15,981				23,700				17,851				122,540
Ammonia supply agreements (10)			87,557				18,469				34,544				34,544				—
Other purchase commitments (11)			43,996				17,121				11,562				7,983				7,330
Construction commitments (12)			64,974				44,810				20,164				—				—
Total		$	3,403,813			$	413,483			$	1,046,732			$	1,163,710			$	698,634

New Accounting Pronouncements

     In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments – an amendment of FASB Statements No. 133 and 140. SFAS 155 addresses the application of SFAS 133 to beneficial interests in securitized financial assets. SFAS 155 is effective for fiscal years beginning after September 15, 2006. The Company is currently evaluating the requirements of SFAS 155 and has not yet determined the impact on its consolidated financial statements.

     In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets – an amendment of FASB Statement No. 140. SFAS 156 requires that an entity recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a service contract under certain situations. SFAS 156 is effective for fiscal years beginning after September 15, 2006. The Company is currently evaluating the requirements of SFAS 156 and has not yet determined the impact on its consolidated financial statements.

     In June 2006, the FASB issued EITF No. 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement. EITF 06-3 requires companies to disclose the presentation of any tax assessed by a governmental authority that is directly imposed on a revenue-producing transaction between a seller and a customer (e.g. sales and use tax) as either gross or net in the accounting principles included in the notes to the financial statements. EITF 06-3 is effective for annual reporting periods beginning after December 15, 2006. The Company will disclose its policy when EITF 06-3 is adopted.

     In June 2006, the FASB issued Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes. FIN 48 prescribes detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions in an enterprise’s financial statements. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Tax positions must meet a more-likely-than-not recognition threshold at the effective date in order to be recognized upon the adoption of FIN 48 and in subsequent periods. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006 and the provisions of FIN 48 will be applied to all tax positions accounted for under FASB Statement No. 109, Accounting for Income Taxes, upon initial adoption. The cumulative effect of applying the provisions of FIN 48 will be reported as an adjustment to the opening balance of retained earnings in the period of adoption. The Company has not completed its final assessment of the impact of FIN 48, but adoption is not expected to have a significant impact on the consolidated financial statements.

     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This standard defines fair value, establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America, and expands disclosure about fair value measurements. SFAS 157 applies to the fair value requirements as applicable in other accounting standards that require or permit fair value measurements. Accordingly, this statement does not require any new fair value measurement. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The Company is currently evaluating the requirements of SFAS 157 and has not yet determined the impact on the consolidated financial statements.

     In February of 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities-Including an amendment of FASB Statement No. 115. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The Company is currently evaluating the requirements of SFAS 159 and has not yet determined the impact on its consolidated financial statements.

Forward-looking Statements

     This report contains statements that are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, statements regarding: the closing of the pending acquisition of Linde’s U.S. packaged gas business and the related financing of the acquisition under the Company’s revolving credit facility; the Company’s belief that fiscal 2008 will be another productive year; the expansion of the industrial economy in fiscal 2008; the Company’s estimate of net earnings of $2.33 to $2.41 per diluted share; and $0.52 to $0.54 per diluted share for fiscal 2008 and the first quarter of fiscal 2008, respectively; a supportive sales environment in fiscal 2008 and continued success of pricing actions designed to offset rising costs; the Company’s expectation that Linde’s packaged gas business will be a significant contributor to fiscal 2008 sales growth and will be slightly accretive to earnings in the first twelve months of operation; the expectation that fiscal 2007 acquisitions will contribute more than $200 million to the Distribution segments sales growth in fiscal 2008; the expectation that the Linde bulk gas business will improve the Company’s consolidated fiscal 2008 operating income and operating margin; the expectation that the fiscal 2007 acquisitions will contribute approximately $55 million to the fiscal 2008 sales growth in the All Other Operations segment; the expectation that the most significant contributor to the All Other Operations sales growth in fiscal 2008 will be Airgas Merchant Gases; the expectation that third-party sales from the fiscal 2007 acquisitions of CFC Refimax and the portion of the Linde bulk gas business transferred and the Linde U.S. packaged business to be transferred, to National Welders will contribute to fiscal 2008 sales growth in the All Other Operations segment; the expectation that fiscal 2008 operating income and the operating income margin will improve, principally in the Distribution segment; the expectation that Airgas Merchant Gases will have a lower operating income margin than the other businesses in the All Other Operations segment; interest savings from the fiscal 2007 refinancings; the ability of the Company to manage its exposure to interest rate risk through participation in interest rate swap agreements; the Company’s estimate that for every 25 basis point increase in LIBOR, annual interest expense will increase approximately $3 million; the expectation that the overall effective tax rate for fiscal 2008 will range from 39% to 39.5% of pre-tax earnings; the expectation that fiscal 2008 capital expenditures will be approximately 7% of net sales; the ongoing annual expense resulting from the adoption of FIN 47 will not be material; the future payment of dividends; the continued use of cash flow for investing in growth opportunities, future acquisitions, paying down debt and growing the dividend; the Company’s ability to identify acquisition opportunities and expand its business; the ability of National Welders to secure the necessary financing to acquire their portion of Linde’s packaged gas business; the Company’s belief that it could obtain financing at reasonable terms in excess of amounts available under its Credit Facility; the performance of counterparties under interest rate swap agreements; the Company’s low concentration of credit risk associated with its customers; the reasonableness and accuracy of estimates of the implied fair value of the Company’s reporting units; the Company’s belief that future goodwill impairment would not result from changes in the assumptions utilized in the annual impairment analysis; the estimated ultimate loss related to the Company’s self-insured retention; the estimate of future interest and principal payments for financial instruments contained in “Contractual Obligations and Off-Balance Sheet Arrangements”; the Company’s estimates of purchase commitments associated with product supply agreements and the belief that the minimum product purchases under the agreements are within the Company’s normal product purchases; and the Company’s cost estimates and in-service dates associated with the construction of certain air separation plants.

     These forward-looking statements involve risks and uncertainties. Factors that could cause actual results to differ materially from those predicted in any forward-looking statement include, but are not limited to: the inability to close the acquisition of Linde’s U.S. packaged gas business; dilution to earnings from Linde’s packaged gas business or Linde’s bulk gas business; the impact on sales growth, operating income and operating income margin that differs from the Company’s estimates resulting from, among other things, the loss of customers, integration problems and higher than expected expenses; the inability of National Welders to obtain additional financing due to debt covenants, credit risk, and other factors, that prevent it from purchasing its portion of the Linde packaged gas business; an economic downturn (including adverse changes in the specific markets for the Company’s products); higher or lower interest savings from the fiscal 2007 refinancings versus the Company’s estimates due to higher interest rates and/or a change in the Company’s credit rating higher or lower capital expenditures versus the Company’s estimate resulting from available cash flow, the completion of capital projects, and other factors; adverse customer response to the Company’s products and/or the inability to

identify products that will grow at a faster rate than the overall economy; the identification of new asset retirement obligations and/or the valuation of asset retirement obligations in future periods and the effect on the materiality of FIN 47 to the financial statements; the inability to identify acquisition candidates and consummate and successfully integrate acquisitions; rising product costs and the inability to pass those costs on to customers and the impact on gross profit margin; customer acceptance of price increases; the inability to obtain alternate supply sources of hardgoods products; higher than estimated interest expense resulting from increases in LIBOR and/or changes in the Company’s credit rating; the inability to obtain alternative supply sources to adequately meet customer demand and the effect on customer relationships; the Company’s inability to control operating expenses and the potential impact of higher operating expenses in future periods; adverse changes in customer buying patterns; disruption to the Company’s business from integration problems associated with acquisitions; a lack of available cash flow necessary to pay future dividends; changes in the Company’s debt levels and/or credit rating which prevent the Company from arranging additional financing; the inability to manage interest rate exposure; defaults by counterparties under interest rate swap agreements; the effects of competition from independent distributors and vertically integrated gas producers on products, pricing and sales growth; future goodwill impairment due to changes in assumptions used in the annual impairment analysis; changes in actuarial assumptions and their impact on the ultimate loss related to the Company’s self-insured retention; changes in customer demand and the impact on the Company’s ability to meet minimum purchases under take-or-pay supply agreements; 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 manages its exposure to changes in market interest rates. The interest rate exposure arises primarily from the interest payment terms of the Company’s borrowing agreements. Interest rate swap agreements are used to adjust the interest rate risk exposures that are inherent in its portfolio of funding sources. The Company has not, and will not establish any interest risk positions for purposes other than managing the risk associated with its portfolio of funding sources. The Company maintains the ratio of fixed to variable rate debt within parameters established by management under policies approved by the Board of Directors. Including the effect of interest rate swap agreements on the Company’s debt and off-balance sheet financing agreements, the Company’s ratio of fixed to variable rate debt was 21% to 79% at March 31, 2007. The ratio includes the effect of the fixed and variable rate debt of National Welders. 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 position and the credit ratings of its counterparties, thereby minimizing the risk of non-performance by the counterparties.

     The table below summarizes the Company’s market risks associated with long-term debt obligations, interest rate swaps and LIBOR-based agreements as of March 31, 2007. For long-term debt obligations, the table presents cash flows related to payments of principal and interest by fiscal year of maturity. For interest rate swaps and LIBOR-based agreements, the table presents the notional amounts underlying the agreements 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.

		Fiscal year of Maturity
																														Fair
(In millions)		2008				2009				2010				2011				2012				Thereafter				Total				Value
Fixed Rate Debt
Acquisition and other notes		$	6			$	5			$	4			$	—			$	—			$	2			$	17			$	17
Interest expense		$	0.9			$	0.6			$	0.3			$	0.1			$	0.1			$	0.2			$	2.2
Average interest rate			5.59	%			5.65	%			5.32	%			5.32	%			4.99	%			4.99	%
Senior subordinated notes due 2014		$	—			$	—			$	—			$	—			$	—			$	150			$	150			$	146
Interest expense		$	9			$	9			$	9			$	9			$	9			$	19			$	64
Interest rate			6.25	%			6.25	%			6.25	%			6.25	%			6.25	%			6.25	%
National Welders:
Acquisition and other notes		$	0.7			$	—			$	—			$	—			$	—			$	—			$	0.7			$	.07
Interest expense		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Interest rate			7.00	%

		Fiscal year of Maturity
																														Fair
(In millions)		2008				2009				2010				2011				2012				Thereafter				Total				Value
Variable Rate Debt
Revolving credit facilities		$	—			$	—			$	—			$	—			$	489			$	—			$	489			$	489
Interest expense		$	30			$	30			$	30			$	30			$	10			$	—			$	130
Interest rate (a)			6.06	%			6.06	%			6.06	%			6.06	%			6.06	%
Term loan		$	—			$	90			$	90			$	236			$	162			$	—			$	578			$	578
Interest expense		$	34			$	28			$	23			$	15			$	2			$	—			$	102
Interest rate (a)			6.10	%			6.10	%			6.10	%			6.10	%			6.10	%
Money market loans		$	30			$	—			$	—			$	—			$	—			$	—			$	30			$	30
Interest expense		$	1.2			$	—			$	—			$	—			$	—			$	—			$	1.2
Interest rate (a)			5.75	%
National Welders:
Revolving credit facility		$	—			$	—			$	73			$	—			$	—			$	—			$	73			$	73
Interest expense		$	4.4			$	4.4			$	1.8			$	—			$	—			$	—			$	10.6
Interest rate (a)			6.02	%			6.02	%			6.02	%
Term loan A		$	3			$	3			$	3			$	3			$	—			$	—			$	12			$	12
Interest expense		$	0.7			$	0.6			$	0.4			$	0.3			$	—			$	—			$	2.0
Interest rate (a)			6.02	%			6.02	%			6.02	%			6.02	%

		Fiscal year of Maturity
																														Fair
(In millions)		2008				2009				2010				2011				2012				Thereafter				Total				Value
Interest Rate Swaps:
6 Swaps (Receive Variable)/Pay Fixed
Notional amounts		$	—			$	100			$	50			$	—			$	—			$	—			$	150			$	(.04	)
Swap payments/(receipts)		$	(0.5	)		$	(0.6	)		$	(0.1	)		$	—			$	—			$	—			$	(1.2	)
$100 million notional amount
Variable Receive rate = 5.35%
Weighted average pay rate = 5.39%
$50 million notional amount
Variable Receive rate = 5.32%
Weighted average pay rate = 4.15%
National Welders:
1 Swap (Receive Variable)/Pay Fixed
Notional amounts		$	—			$	—			$	27			$	—			$	—			$	—			$	27			$	—
Variable Receive rate = 5.35%		$	—			$	—			$	—			$	—			$	—			$	—			$	—
Weighted average pay rate = 5.36%
Other Off-Balance Sheet
LIBOR-based agreements:
Trade receivable securitization (b)		$	—			$	—			$	264			$	—			$	—			$	—			$	264			$	264
Discount on securitization		$	15			$	15			$	15			$	—			$	—			$	—			$	45

Limitations of the tabular presentation

     As the table incorporates only those interest rate risk exposures that exist as of March 31, 2007, it does not consider those exposures or positions that could arise after that date. 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, debt levels and the Company’s credit rating.

Foreign Currency Rate Risk

     Canadian subsidiaries of the Company are funded with local currency debt. The Company does not otherwise 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 financial position and 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-60 of the report.

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

     None.

ITEM 9A. CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures

     The Company carried out an assessment, under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of March 31, 2007. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that as of such date, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported in the periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Management’s Report on Internal Control over Financial Reporting

     The Company’s management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in the Exchange Act Rule 13a-15(f). The management conducted an assessment of the Company’s internal control over financial reporting based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework. Based on this assessment, management concluded that, as of March 31, 2007, the Company’s internal controls over financial reporting were effective. (See Management’s Report on Internal Control Over Financial Reporting preceding the Consolidated Financial Statements under Item 8, herein). Management’s assessment, however, does not extend to the Company’s consolidated affiliate, National Welders Supply Company, Inc. (“National Welders”), which contributed approximately 7% of consolidated net sales and 9% of consolidated assets. The system of internal control over financial reporting of National Welders, which has been consolidated by the Company since the December 31, 2003 adoption of FIN 46R, Consolidation of Variable Interest Entities, is the responsibility of National Welders’ management. Although the Company does receive audited financial statements for National Welders, the joint venture agreement does not permit the Company to dictate, modify or assess the effectiveness of the internal controls of National Welders.

     The Company acquired the U.S. bulk gas business of Linde on March 9, 2007 and management excluded Linde’s internal control over financial reporting from its assessment of the effectiveness of the Company’s internal control over financial reporting as of March 31, 2007. The Company’s consolidated financial statements included approximately $ 10 million in net sales and $495 million in net assets, associated with the U.S. bulk gas business of Linde as of and for the year ended March 31, 2007.

     Accordingly, management’s assessment of internal control has been limited to the system of internal control of Airgas, Inc. and its subsidiaries. Management’s assessment of the effectiveness of the Company’s internal controls over financial reporting, as of March 31, 2007, has been audited by KPMG LLP, an Independent Registered Public Accounting Firm, as stated in their report, which is included herein.

(c) Changes in Internal Control

     There were no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter ended March 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

     The biographical information of the Company’s directors appearing in the definitive Proxy Statement relating to the Company’s 2007 Annual Meeting of Stockholders (“Proxy Statement”) 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 called for by this Item is set in the Company’s Proxy Statement and such information 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 and such information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information required by this Item is set forth in the Proxy Statement under the section “Certain Relationships and Related Transactions” and such information is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES.

     The information required by this Item is set forth in the Proxy Statement under the section “Proposal to Ratify Accountants” and such information is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1) and (2):

     The response to this portion of Item 15 is submitted as a separate section of this report beginning on page F-1. All other schedules have been omitted as inapplicable, or are not required, or because the required information is included in the Consolidated Financial Statements or notes thereto.

(b) Index to Exhibits and Exhibits filed as a part of this report.

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 August 2, 1999. (Incorporated by reference to Exhibit 3 to the Company’s September 30, 1999 Quarterly Report on Form 10-Q).
4.1		Tenth Amended and Restated Credit Agreement dated as of July 30, 2001 among Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A. as U.S. Agent and Canadian Imperial Bank of Commerce as Canadian Agent. (Incorporated by reference to Exhibit 4.1 to the Company’s June 30, 2001 Quarterly Report on Form 10-Q).
4.2		First Amendment, dated December 31, 2001, to the Tenth Amended and Restated Credit Agreement dated as of July 30, 2001 among Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A. as U.S. Agent and Canadian Imperial Bank of Commerce as Canadian Agent. (Incorporated by reference to Exhibit 4.1 to the Company’s December 31, 2001 Quarterly Report on Form 10-Q).
4.3		Second Amendment, dated August 20, 2002, to the Tenth Amended and Restated Credit Agreement dated as of July 30, 2001 among Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A. as U.S. Agent and Canadian Imperial Bank of Commerce as Canadian Agent. (Incorporated by reference to Exhibit 4.3 to the Company’s March 31, 2003 Report on Form 10-K).
4.4		Third Amendment, dated May 2, 2003, to the Tenth Amended and Restated Credit Agreement dated as of July 30, 2001 among Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A. as U.S. Agent and Canadian Imperial Bank of Commerce as Canadian Agent. (Incorporated by reference to Exhibit 4.4 to the Company’s March 31, 2003 Report on Form 10-K).
4.5		Fourth Amendment, dated February 6, 2004, to the Tenth Amended and Restated Credit Agreement dated as of July 30, 2001 among Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A. as U.S. Agent and Canadian Imperial Bank of Commerce as Canadian Agent. (Incorporated by reference to Exhibit 4 to the Company’s December 31, 2003 Quarterly Report on Form 10-Q).

Exhibit No.		Description
4.6		The Eleventh Amended and Restated Credit Agreement, dated as of January 14, 2005, among Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A., as U.S. Administration Agent and The Bank of Nova Scotia as Canadian Agent. (Incorporated by reference to Exhibit 4.1 to the Company’s December 31, 2004 Quarterly Report on Form 10-Q).
4.7		The Twelfth Amended and Restated Credit Agreement, dated as of July 25, 2006, among Airgas, Inc., Airgas Canada, Inc., Red-D-Arc Limited, Bank of America, N.A., as U.S. Administration Agent and The Bank of Nova Scotia as Canadian Agent. (Incorporated by reference to Exhibit 4 to the Company’s September 30, 2006 Quarterly Report on Form 10-Q).
4.8		Indenture dated as of August 1, 1996 of Airgas, Inc. to Bank of New York, Trustee. (Incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-4 No. 333-23651 dated March 20, 1997).
4.9		Form of Airgas, Inc. Medium-Term Note. (Incorporated by reference to Exhibit 4(f) to the Company’s Registration Statement on Form S-4 No. 333-08113 dated July 15, 1996).
4.10		Indenture, dated as of July 30, 2001, among Airgas, Inc., the subsidiary guarantors of Airgas, Inc. and The Bank of New York, as Trustee, related to the 9.125% Senior Subordinated Notes due 2011 (including exhibits). (Incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-4 No. 333-68722 dated August 30, 2001 and as amended September 14, 2001).
4.11		Exchange and Registration Rights Agreement, dated as of July 30, 2001, among Airgas, Inc., the subsidiary guarantors of Airgas, Inc. and the initial purchasers of the 9.125% Senior Subordinated Notes due 2011. (Incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-4 No. 333-68722 dated August 30, 2001 and as amended September 14, 2001).
4.12		Indenture, dated as of March 8, 2004, among Airgas, Inc., the subsidiary guarantors of Airgas, Inc. and The Bank of New York, as Trustee, relating to the 6.25% Senior Subordinated Notes due 2014. (Incorporated by reference to Exhibit 4.14 to the Company’s Registration Statement on Form S-4 No. 333-114499 dated April 15, 2004).
4.13		Exchange and Registration Rights Agreement, dated as of March 8, 2004, among Airgas, Inc., the subsidiary guarantors of Airgas, Inc. and the initial purchasers of the 6.25% Senior Subordinated Notes due 2014. (Incorporated by reference to Exhibit 4.15 to the Company’s Registration Statement on Form S-4 No. 333-114499 dated April 15, 2004).
		There are no other instruments with respect to long-term debt of the Company that involve indebtedness or securities authorized thereunder exceeding 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to file a copy of any instrument or agreement defining the rights of holders of long-term debt of the Company upon request of the Securities and Exchange Commission.
4.14		Rights Agreement, dated as of May 8, 2007, between Airgas, Inc. and The Bank of New York, as Rights Agent, which includes as Exhibits thereto the Form of Certificate of Designation, the Form of Right Certificate and the Summary of Rights attached thereto as Exhibits A, B and C, respectively. (Incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed on May 10, 2007).

Exhibit No.		Description
*10.1		Amended and Restated 1984 Stock Option Plan, as amended effective May 22, 1995. (Incorporated by reference to Exhibit 10.1 to the Company’s September 30, 1995 Quarterly Report on Form 10-Q).
*10.2		1989 Non-Qualified Stock Option Plan for Directors (Non-Employees) as amended through August 7, 1995. (Incorporated by reference to Exhibit 10.2 to the Company’s September 30, 1995 Quarterly Report on Form 10-Q).
*10.3		Amended and Restated 2003 Employee Stock Purchase Plan dated June 21, 2006, and approved by the Company’s stockholders on August 9, 2006. (Incorporated by reference to the Definitive Proxy statement on Form DEF14A dated June 30, 2006).
*10.4		Joint Venture Agreement dated June 28, 1996 between Airgas, Inc. and National Welders Supply Company, Inc. and J.A. Turner, III, and Linerieux B. Turner and Molo Limited Partnership, Turner (1996) Limited partnership, Charitable Remainder Unitrust for James A. Turner, Jr. and Foundation for the Carolinas. (Incorporated by reference to Exhibit 2.1 to the Company’s June 28, 1996 Report on Form 8-K).
*10.5		Letter dated July 24, 1992 between Airgas, Inc. (on behalf of the Nominating and Compensation Committee) and Peter McCausland regarding the severance agreement between the Company and Peter McCausland. (Incorporated by reference to Exhibit 10.9 to the Company’s March 31, 1997 Report on Form 10-K).
*10.6		1997 Stock Option Plan, as amended through May 7, 2002, and approved by the Company’s stockholders on July 31, 2002. (Incorporated by reference to Exhibit 10.1 to the Company’s June 30, 2002 Quarterly Report on Form 10-Q).
*10.7		1997 Directors’ Stock Option Plan as amended on May 25, 2004, and approved by the Company’s stockholders on August 4, 2004. (Incorporated by reference to the Definitive Proxy statement on Form DEF14A dated June 28, 2004).
*10.8		2006 Equity Incentive Plan dated June 21, 2006, and approved by the Company’s stockholders on August 9, 2006. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated August 9, 2006).
*10.9		Airgas, Inc. Deferred Compensation Plan dated December 17, 2001. (Incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S-8 No. 333-75258 dated December 17, 2001).
*10.10		Airgas, Inc. Deferred Comp Plan II dated May 23, 2006. (Incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S-8 No. 333-136463 dated August 9, 2006).
*10.11		Change of Control Agreement between Airgas, Inc. and Peter McCausland dated March 17, 1999. (Incorporated by reference to Exhibit 10.12 to the Company’s March 31, 2005 Form 10-K). Seven other Executive Officers are parties to substantially identical agreements.

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

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: May 29, 2007

     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,		May 29, 2007
(Peter McCausland)		President and Chief Executive Officer
/s/ Robert M. McLaughlin		Senior Vice President and Chief Financial Officer		May 29, 2007
(Robert M. McLaughlin)		(Principal Financial Officer)
/s/ Thomas M. Smyth		Vice President and Controller		May 29, 2007
(Thomas M. Smyth)		(Principal Accounting Officer)
/s/ William O. Albertini		Director		May 29, 2007
(William O. Albertini)
/s/ W. Thacher Brown		Director		May 29, 2007
(W. Thacher Brown)
/s/ James W. Hovey		Director		May 29, 2007
(James W. Hovey)

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

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: May 29, 2007

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