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, 2006 or

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

For the transition period from                      to                     

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. o

     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

     The aggregate market value of the 68,905,400 shares of voting stock held by non-affiliates of the Registrant was approximately $2 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, 2005. For purposes of this calculation, only executive officers and directors were deemed to be affiliates.

     The number of shares of common stock outstanding as of June 9, 2006 was 77,646,701.

DOCUMENTS INCORPORATED BY REFERENCE

     The Company’s Proxy Statement for the Annual Meeting of Stockholders to be held August 9, 2006 is partially incorporated by reference into Part III. Those portions of the Proxy Statement included in response to Item 402(k) and Item 402(l) of Regulation S-K are not incorporated by reference into Part III.

 

 

AIRGAS, INC.

TABLE OF CONTENTS

ITEM NO.		PAGE
PART I
1. Business			3
1a. Risk Factors			9
1b. Unresolved Staff Comments			13
2. Properties			13
3. Legal Proceedings			14
4. Submission of Matters to a Vote of Security Holders			14
PART II
5. Market for the Company’s Common Equity and Related Stockholder Matters			15
6. Selected Financial Data			18
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			20
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
Statement re: computation of earnings per share
Statement re: computation of the ratio of earnings to fixed charges
Subsidiaries of the Company
Consent of Independent Registered Public Accounting Firm
Certification of Peter McCausland, pursuant to Section 302
Certification of Roger F. Millay, pursuant to Section 302
Certification of Peter McCausland, pursuant to 18 U.S.C. Section 1350
Certification of Roger F. Millay, pursuant to 18 U.S.C. Section 1350

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 330 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 the largest producer of nitrous oxide in the United States, a producer and leading supplier of dry ice and the largest supplier of liquid carbon dioxide in the Southeastern United States. The Company is also a leading distributor of process chemicals, refrigerants and ammonia. 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 over 900 locations including production facilities, packaged gas fill plants, specialty gas labs, distribution centers, branches, and retail stores. In December 2005, the Company sold its subsidiary, Rutland Tool & Supply Co (“Rutland Tool”), which had been reflected in the Distribution segment. As a result of the sale, the Company reclassified the operating results of Rutland Tool to reflect them as “Discontinued Operations” in all periods presented. The Company’s consolidated sales were $2.83 billion, $2.37 billion, and $1.86 billion in fiscal years 2006, 2005, and 2004, respectively.

     The Company has two operating segments, Distribution and All Other Operations. The Distribution segment primarily engages in the distribution of packaged gases and hardgoods. All Other Operations consists of business units that principally produce and distribute carbon dioxide, dry ice, nitrous oxide, specialty gases and anhydrous ammonia. The Company’s joint venture, National Welders Supply Company, Inc. (“National Welders”) is also reported in the All Other Operations segment. See note 16 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 24 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 accounts for approximately 85% of consolidated sales in fiscal 2006 and reflects the distribution of industrial, medical and specialty gases, and hardgoods.

Principal Products and Services

     The Distribution segment’s principal products and services include packaged and small bulk gases, gas cylinder and welding equipment rental, and hardgoods. Gas sales include industrial, medical and specialty gases such as: nitrogen, oxygen, argon, helium, acetylene, carbon dioxide, nitrous oxide, hydrogen, welding gases, ultra high purity grades and special application blends. Rent is derived from gas cylinders, cryogenic liquid containers, bulk storage tanks, tube trailers and through the rental of welding and welding related equipment. Gas and rent represented approximately 52%, 52%, and 53% of the Distribution segment’s sales in each of the fiscal years 2006, 2005 and 2004, respectively. Hardgoods consist of welding consumables and equipment, safety products, and maintenance, repair and operating (“MRO”) supplies. In each of the fiscal years 2006, 2005, and 2004, hardgoods sales represented approximately 48%, 48%, and 47% of the Distribution

segment’s sales, respectively (see Note 24 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 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 truckload bulk quantities. The Company believes the U.S. packaged gas market to be approximately $4.5 billion annually. Generally, packaged gas distributors also sell welding hardgoods. The Company believes the U.S. market for welding hardgoods to be approximately $4.5 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 pick up products at branch stores.

     Airgas is the largest distributor of packaged gases and welding hardgoods in the United States, with approximately a 20% market share. The Company’s competitors in this market include independent distributors that serve approximately 57% 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”), Liquid Air Corporation of America (“Air Liquide”), and Linde, which serve the remaining 23% of the market. Packaged gas distribution is a regional business because it is generally uneconomical to transport gas cylinders more than 150 miles. The regionalized nature of the business makes these markets highly competitive. Competition is generally based on price, reliable product delivery, product availability and product quality. The Company also sells safety equipment. The Company believes the U.S. market for safety equipment is approximately $5.6 billion, 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 (28%);

•

Repair & Maintenance (27%);

•

Construction (10%);

•

Medical (7%);

•

Wholesale Trade (6%);

•

Food Products (6%);

•

Petrochemical (5%);

•

Utilities and Mining (3%);

•

Analytical (3%);

•

Transportation (2%)

•

Other (3%).

Suppliers

     The Company purchases industrial, medical and specialty gases pursuant to requirements contracts from national and regional producers of industrial gases. In February 2002, the Company entered into a 15-year take-or-pay supply agreement under which Air Products and Chemicals, Inc. (“Air Products”) supplies at least 35% of the Company’s bulk nitrogen, oxygen and argon requirements, exclusive of the volumes purchased under the BOC supply agreements noted below. Additionally, the Company has commitments to purchase helium from

Air Products under the terms of the supply agreement. The Company is committed to purchase approximately $47 million in annual bulk gases under the terms of the Air Products supply agreements. With the BOC acquisition in July 2004, the Company and BOC entered into reciprocal long-term supply agreements. The Company is the supplier for a substantial portion of BOC’s resale packaged gas needs. BOC supplies the Company, under a 15-year take-or-pay supply agreement, with bulk nitrogen, oxygen, argon and helium. The BOC agreement represents approximately 85% of the liquid bulk gas volumes transferred to the Company in the acquisition or roughly $7 million in annual bulk gas purchases. Prior to the acquisition, the Company purchased oxygen, nitrogen, argon and helium under an agreement with BOC which expires in February 2007. Minimum purchases through February 2007 under the pre-acquisition supply agreement are approximately $19 million. Both the Air Products and BOC supply agreements contain market pricing subject to certain economic indices and market analysis. 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 contractual arrangement with any supplier of gases or other raw materials was terminated, it would be able to locate alternative sources of supply without disruption of service. 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 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 began distributing anhydrous ammonia and related supplies, services and equipment. National Welders Supply Company, Inc. (“National Welders”) is a producer and distributor of industrial, medical and specialty gases 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 services, 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 approximately 50 regional labs operated by the Distribution segment. Specialty gas mixtures are predominantly used in research, which accounts for 40% of the market. 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. In June 2005, Airgas Specialty Products was added to the Gas Operations Division through the acquisition of the Industrial Products Division of LaRoche Industries. 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. 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 and anhydrous ammonia total more than $1 billion annually.

National Welders Supply Company, Inc.

     National Welders’ product requirements are principally met through its significant production capabilities consisting of three air separation plants, two acetylene plants and a specialty gas lab. The joint venture employs

over 900 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 and National Welders operate five air separation plants that produce oxygen, nitrogen and argon which are sold to on-site customers and to the Distribution segment. The Gas Operations Division also operates 8 carbon dioxide production facilities. With 12 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 $10 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 and improving operational efficiencies by leveraging its national distribution infrastructure. To meet this objective, the Company is focusing on:

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

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 2006 were not material.

INSURANCE

     The Company has established insurance programs to cover workers’ compensation, business automobile, and general liability claims. During fiscal year 2006, these programs had self-insured retention of $500 thousand per occurrence and an additional annual aggregate retention for the next $2.2 million of claims in excess of $500 thousand. For fiscal year 2007, the self-insured retention has been raised to $1 million per occurrence with no additional aggregate retention. The Company’s exposure to loss under the fiscal 2006 and fiscal 2007 programs are actuarially equivalent. 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 $300 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, 2006, the Company employed approximately 10,300 associates. National Welders employed over 900. 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,“and “Airgas Puritan Medical”. The Company also holds trademarks for “AcuGrav,” “Gaspro” and “Freshblend” 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)			56			Chairman of the Board, President and Chief Executive Officer
Michael L. Molinini			55			Executive Vice President and Chief Operating Officer
Roger F. Millay			48			Senior Vice President and Chief Financial Officer
Robert A. Dougherty			48			Senior Vice President and Chief Information Officer
Patrick M. Visintainer			42			Senior Vice President - Sales
Dwight T. Wilson			50			Senior Vice President - Human Resources
Michael E. Rohde			59			Senior Vice President - Distribution Operations
Max D. Hooper			46			Division President - West
B. Shaun Powers			54			Division President - East
Ted R. Schulte			55			Division President - Gas Operations
Dean A. Bertolino			37			Vice President, General Counsel and Secretary
Robert M. McLaughlin			49			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 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. Millay has been Senior Vice President and Chief Financial Officer since November 1999. Prior to joining Airgas, Mr. Millay served as Senior Vice President and Chief Financial Officer of Transport International Pool, a division of General Electric Capital Corporation, from May 1995 to October 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. Rohde was appointed Senior Vice President-Distribution Operations in April 2005. Prior to this role, Mr. Rohde served as President of Airgas South from 2001 until 2005. Prior to that, Mr. Rohde was the President of Airgas Southwest since joining the company in 1999. Prior to joining Airgas, Mr. Rohde was Senior Vice President, Packaged and Specialty Gases at Tri-Gas and, before that, Senior Vice President, Packaged Gases at MG Industries. Mr. Rohde began his career in the packaged gas industry in 1977.

     Mr. Hooper was appointed Division President of the West Division 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. McLaughlin has been Vice President and Controller since joining Airgas in June 2001. Prior to joining Airgas, Mr. McLaughlin 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.

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 6, 2005.

     The Company also filed certifications of its Chief Executive Officer 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, 2006, 2005 and 2004.

     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, 2006, we had total consolidated debt of approximately $768 million, of which $132 million matures within the next 12 months. We also participate in a trade receivables securitization agreement with two commercial banks to sell up to $250 million in qualified trade receivables. At March 31, 2006, the amount of outstanding trade receivables under the program was $244 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;

•

making it more difficult to satisfy our obligations with respect to our debt;

•

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

•

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

•

increasing the amount of our interest expense, because some of our borrowings are at variable rates of interest, which, if interest rates increase, would result in higher interest expense (at current debt levels and ratio of fixed to floating rate debt, we estimate that for every 25 basis point rise of LIBOR, interest expense would increase by $1.2 million); and

•

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

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, 2006, we had additional availability under our bank credit facility of approximately $237 million. We can arrange to borrow, in addition to our credit facility, up to $269 million. 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 the industries many of our customers are in, 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, construction, petrochemical and transportation industries, which accounted for approximately 45% of our sales in fiscal 2006. 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 2006. 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 assure you that we will be able to continue to do so in the future. Our ability to pass on increases in our costs is dependent on market conditions. So, raising prices could result in a loss of sales volume, which could significantly reduce our profitability.

Our financial results may be adversely affected by gas supply disruptions.
We are the largest distributor of industrial, medical and specialty gases and have long term supply contracts with the major gas producers to mitigate supply disruptions. However, natural disasters, plant shut downs 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. During fiscal 2006, hurricanes Katrina and Rita damaged the production facilities of a major gas supplier to the gulf coast region. Although we successfully met customer demand by arranging for alternative supplies and transporting product into the region, we can not assure you 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 2006, we completed 13 acquisitions. We are continuously evaluating acquisition opportunities, some of which are large and complex, and consolidation possibilities, and we are currently in various stages of due diligence or preliminary discussions with respect to a number of potential transactions. We cannot assure you 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 planed operating results could require us to recognize an impairment charge related to goodwill associated with the 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 position, results of operation or liquidity.

Catastrophic events may disrupt our business and adversely affect our operating results.
Although our operations are relatively disbursed 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. As a result of hurricanes Katrina and Rita, we incurred $2.2 million through March 31, 2006 principally in property losses.

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, 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 they would not be able to operate in accordance with their 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 we 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 assure you 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 approximately 675 branches, 300 cylinder fill plants, including nearly 50 regional gas laboratories and 20

acetylene manufacturing facilities, 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 35% 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, 8 liquid carbon dioxide and 12 dry ice production facilities, 5 air separation plants, 7 national specialty gas laboratories, and 4 nitrous oxide production facilities. The Company owns 51% of these facilities. The remaining facilities are leased from third parties.

     During fiscal 2006, the Company’s production facilities operated at approximately 84% of capacity based on an average daily production shift 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, 2006.

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 (the “common stock”) is listed on the New York Stock Exchange (ticker symbol: ARG). The following table sets forth, for each quarter during the last two fiscal years, the high and low closing price per share for the common stock as reported by the New York Stock Exchange and cash dividends per share for the period from April 1, 2005 to March 31, 2006:

										Dividend Per
		High				Low				Share
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
Fiscal 2005
First Quarter		$	23.91			$	20.83			$	0.045
Second Quarter			24.20				21.10				0.045
Third Quarter			27.05				23.61				0.045
Fourth Quarter			26.96				23.28				0.045

     The closing sale price of the Company’s common stock as reported by the New York Stock Exchange on June 9, 2006, was $35.86 per share. As of June 2, 2006, there were approximately 19,000 stockholders of record of the Company’s common stock.

     At the end of each quarter during fiscal 2006 and 2005, the Company paid its stockholders regular quarterly cash dividends of $0.06 and $0.045 per share, respectively. In addition, on May 23, 2006, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.07 per share payable June 30, 2006 to stockholders of record as of June 15, 2006. Future dividend declarations and associated amounts paid will depend upon the Company’s earnings, financial condition, loan covenants, capital requirements and other factors deemed relevant by management and the Company’s Board of Directors.

Stock Repurchase Plan

     On November 15, 2005, the Company announced that its Board of Directors approved a share repurchase plan (the “Plan”). Under the terms of the Plan, the Company is authorized to repurchase up to $150 million of its common stock over a three-year period. Prior to the end of the three-year period, the Plan may be discontinued or suspended at any time by the Company. During the three months ended March 31, 2006, the Company repurchased the following shares:

														Maximum Dollar
										Total Number				Value of Shares
										of Shares Purchased				that May Yet Be
		Total Number				Average Price Paid				as Part of Publicly				Purchased Under the
Period		of Shares Purchased				Per Share				Announced Plan				Plan
1/1/06-1/31/06			—				—				—				—
2/1/06-2/28/06			—				—				—				—
3/1/06-3/31/06			195,400			$	36.86				195,400			$	137,229,335
Total			195,400			$	36.86				195,400			$	137,229,335

Equity Compensation Plan Information

     The following table sets forth information as of March 31, 2006 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 1997 Stock Option Plan, the 1997 Directors’ Stock Option Plan (the “Directors’ Plan”), the Amended and Restated 1984 Stock Option Plan, the 1989 Non-Qualified Stock Option Plan for Directors and the 2003 Employee Stock Purchase Plan (“ESSP”), 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 security holders(1)(2)

6,993,818

$

16.36

243,874 2,272,012

ESPP shares (3) Stock Option Plans

Equity compensation plans not approved by security holders

—

—

—

Total:

6,993,818

$

16.36

2,515,886

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

AIRGAS, INC. AND SUBSIDIARIES

MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7.

RESULTS OF OPERATIONS: 2006 COMPARED TO 2005

OVERVIEW

     Airgas, Inc. (the “Company”) had net sales for the fiscal year ended March 31, 2006 (“fiscal 2006”) of $2.83 billion compared to $2.37 billion in the prior year (“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. 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. Accordingly, the Company has initiatives focused on promoting these products. Acquisitions continue to be an important component of the Company’s growth contributing 9% to the overall increase in net sales. The operating income margin expanded 90 basis points in the current year to 9.5% compared to 8.6% in the prior year reflecting improving cost leverage. Solid sales growth and operating expense discipline resulted in a 36% increase in earnings per diluted share from continuing operations in the current year versus the prior year.

     On December 1, 2005, the Company divested its subsidiary, Rutland Tool & Supply Co., Inc. (“Rutland Tool”). Rutland Tool distributed metalworking tools, machine tools and MRO supplies from seven locations and had approximately 180 employees. Proceeds of the sale were approximately $15 million. As a result of the divestiture, the Company reflected the operating results of Rutland Tool as “discontinued operations” and recognized an after-tax loss on the sale of $1.9 million, or $0.02 per diluted share, in the current year. All periods included in this report have been restated to present Rutland Tool as discontinued operations. Rutland Tool generated annual sales of approximately $50 million and an insignificant amount of operating income. The operating results of Rutland Tool were previously reflected in the Distribution business segment.

     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 anticipated to be material.

     Fiscal 2006 net earnings from continuing operations were $127.5 million or $1.62 per diluted share, compared to $91.6 million, or $1.19 per diluted share in fiscal 2005. Fiscal 2006 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. The net earnings in fiscal 2006 were affected by the following:

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

     Fiscal 2005 results were affected by acquisition integration costs related to the BOC acquisition and employee separation costs totaling $6.4 million ($4 million after tax), or $0.05 per diluted share.

     During fiscal 2006, the Company completed 13 acquisitions (including three businesses acquired by National Welders Supply Company, Inc. — “National Welders”) with combined annual sales of approximately $141 million. The aggregate purchase price paid for the 13 acquisitions and various holdback settlements was approximately $153 million. The largest of these acquisitions included the June 2005 purchase of the Industrial Products Division of LaRoche Industries, Inc. (“LaRoche”). LaRoche is 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 has been added to the All Other Operations business segment. The Company continues to look for additional acquisition opportunities to strengthen and expand its business.

     Looking forward, the Company anticipates that fiscal 2007 will be another productive year. The Company anticipates further expansion of the industrial economy during fiscal 2007 and estimates that fiscal 2007 net earnings will be approximately $1.76 to $1.84 per diluted share, including the impact of about $0.11 of stock-based compensation expense from the adoption of FASB Statement No. 123 (revised 2004), Share-Based Payment, effective April 1, 2006. Additionally, in the first quarter of fiscal 2007, the Company estimates that it will earn $0.42 to $0.44 per diluted share. The estimate of fiscal 2007 net earnings anticipates a supportive sales environment and continued success of pricing actions designed to offset rising costs. Actual fiscal 2007 net earnings may be impacted by a number of factors including continued improvement in the industrial economy, customer acceptance of price increases, the sales mix of gas and rent versus hardgoods, and the interest rate environment, among other factors. Acquisitions in fiscal 2007 could also continue to be an important component of the Company’s growth. In addition, the Company set certain long-term financial goals for fiscal 2008, including achieving annual sales of $3.3 billion and operating margins of 10%-11% of sales.

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.

(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	%

     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 18% compared to the prior year driven by same-store sales growth of $245 million (11%) and sales contributed by both current and prior year acquisitions of $116 million. Incremental sales from acquisitions were driven by nine current year 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”). The increase in Distribution same-store sales resulted from higher hardgoods sales of $131 million (13%) and gas and rent sales growth of $114 million (10%). In the current year, strong volume gains in sales of safety and Radnor private label products helped drive the growth in hardgoods same-store sales. Same-store sales of safety products grew 17% in the current year 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 the current period to offset rising product costs.

     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 All Other Operations segment consists 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 based in

Charlotte, North Carolina. All Other Operations’ sales, net of intercompany eliminations, increased $101 million compared to the prior year. 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 the current year. 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 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.” Some companies may report certain or all of these costs as elements of their Cost of Products Sold. Consequently, gross profits discussed below may not be comparable to those of other entities.

     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 the current year compared to 51.4% in the prior year. 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.

(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 the prior year. Distribution’s gross profit margin of 48.9% decreased 50 basis points from 49.4% in the prior year. 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 segments sales consisted of 51.7% gas and rent compared to 51.9% in the prior year. Pricing actions taken by the Company in the current year 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 the current year. 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 the prior year. 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

     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 expenses decreased 170 basis points to 36.4% compared to 38.1% in the prior year 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 the prior year, acquisitions contributed an estimated additional $62 million to SD&A expenses. The SD&A expenses contributed by the current year acquisitions reflect acquisition integration costs that were $1.9 million in the current

year. The prior year 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 over the past year 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 the prior year. Current and prior year acquisitions contributed depreciation expense of approximately $8 million. The remainder of the increase primarily reflects the current and prior year’s capital expenditures to support growth, including purchases of cylinders, bulk tanks and rental welders. Amortization expense of $5 million in the current year was consistent with the prior year.

Operating Income

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

(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 the current year. The Distribution segment’s operating income margin increased 100 basis points to 8.7% compared to 7.7% in the prior year. The increase in the operating income margin reflects the lower operating expenses as a percentage of net sales, described above. The prior year 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 the current year compared to 11.7% in the prior year. 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 the prior year. 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 two commercial banks to sell up to $250 million of 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. 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 outstanding variable rate debt and credit rating at March 31, 2006, for every 25 basis point increase in LIBOR, the Company estimates its annual interest expense would increase approximately $1.2 million.

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 the prior year.

Income (loss) from Discontinued Operations

     As a result of the divestiture of Rutland Tool in December 2005, the operating results of Rutland Tool have been classified as discontinued operations in all periods presented. In fiscal 2006, the Company recorded an after tax loss of $1.4 million, or $0.02 per diluted share, from discontinued operations. The after tax loss included a $1.9 million loss on the sale of Rutland Tool and net income from operations of $476 thousand. In fiscal 2005, income from discontinued operations was $464 thousand.

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 anticipated to be material.

Net Earnings

     Net earnings in were $123.6 million, or $1.57 per diluted share, compared to $92 million, or $1.20 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 2006 diluted earnings per share calculation include the assumed conversion of National Welders’ preferred stock to Airgas common stock. In fiscal 2005 and 2004, the conversion of National Welders preferred stock to Airgas

common stock was anti-dilutive. Also see Note 5 to the Consolidated Financial Statements under Item 8.

RESULTS OF OPERATIONS: 2005 COMPARED TO 2004

OVERVIEW

     The Company’s operating results for fiscal year ended March 31, 2005 (“fiscal 2005”) and fiscal year ended March 31, 2004 (“fiscal 2004”) have been restated to reflect the reclassification of the operating results of Rutland Tool as discontinued operations. The Company’s net sales for the fiscal 2005 were $2.37 billion compared to $1.86 billion in the prior year. Sales growth of $512 million was driven by acquisitions, same-store sales growth and the consolidation of National Welders. The Company estimated that acquisitions contributed sales of approximately $197 million during fiscal 2005, the largest of which was the acquisition of the U.S. packaged gas business of The BOC Group, Inc. (“BOC”). Same-store sales growth of 9% contributed sales of approximately $187 million reflecting the rebounding economy and strength in industrial markets served by the Company. The consolidation of National Welders, effective December 31, 2003 (fiscal 2004), contributed incremental sales of $128 million in fiscal 2005.

     Fiscal 2005 net earnings were $92 million, or $1.20 per diluted share, compared to $80 million, or $1.07 per diluted share, in fiscal 2004. As discussed in the “Income Statement Commentary” below, fiscal 2005 results were affected by integration costs related to the BOC acquisition and employee separation costs totaling $6.4 million ($4 million after tax), or $0.05 per diluted share.

     Fiscal 2004 results were affected by the following:

	§		insurance-related losses of $2.8 million ($1.7 million after tax), or $0.02 per diluted share, representing the Company’s self-insurance retention associated with fire-related losses;
	§		a $1.7 million after-tax, or $0.02 per diluted share, non-recurring insurance gain recognized by National Welders; and
	§		a special charge recovery of $776 thousand ($480 thousand after tax), or $0.01 per diluted share, reflecting lower estimates of the ultimate cost of prior years’ restructuring activities.

     During fiscal 2005, the Company completed 16 acquisitions (including two businesses acquired by National Welders) with combined annual sales of approximately $260 million. The largest of the acquisitions was that of the U.S. packaged gas business of BOC, which closed on July 30, 2004. The Company acquired the BOC assets for approximately $175 million cash, plus a contingent purchase price adjustment to be paid in November 2005. The contingent purchase price ultimately paid to BOC of $20 million was determined based on the Company achieving certain financial targets that were set forth in the asset purchase agreement as well as other factors associated with the transaction. The transaction was financed through borrowings on the Company’s U.S. revolving credit facility. The acquired operations were predominately included in the Distribution segment.

     The Company had strong same-store sales and earnings growth in fiscal 2005, which benefited from continued success of the Company’s strategic product sales initiatives related to medical, bulk, specialty gases and safety products. Sales of hardgoods were especially strong during the year with significant gains related to safety products and traditional welding products, such as welding wire, rods, torches and other welding accessories. During the third fiscal quarter and into the fourth quarter, the Company experienced pressure on gross profit margins and rising operating expenses. These cost pressures factored into the Company’s decision to raise prices on a number of its product lines in March 2005.

     Effective December 31, 2003, the Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 46R, Consolidation of Variable Interest Entities, with respect to its joint venture with National Welders and consolidated this formerly unconsolidated affiliate. Beginning January 1, 2004 and for the year ended March 31, 2005, National Welders’ operating results were reflected broadly across the income

statement in the “All Other Operations” business segment with minority interest expense representing the preferred stockholders’ proportionate share of the joint venture’s operating results. For the nine months ended December 31, 2003, the Company’s portion of National Welders’ net earnings was reflected as “Equity in Earnings of Unconsolidated Affiliate.” Net earnings were not impacted by the consolidation of National Welders. See Note 16 to the Consolidated Financial Statements included under Item 8. “Financial Statements and Supplementary Data” for the effect of the consolidation of National Welders on the Consolidated Financial Statements.

INCOME STATEMENT COMMENTARY

Net Sales

     Net sales increased 28% in fiscal 2005 compared to fiscal 2004 driven primarily by acquisitions, strong same-store sales growth of 9% and the consolidation of National Welders. 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.

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

     Distribution segment sales increased $373 million (22%) compared to the prior year driven by acquisitions (principally the BOC acquisition) and growth in same-store sales. The BOC acquisition and other smaller acquisitions contributed estimated incremental sales of $192 million in fiscal 2005. Distribution same-store sales growth of $180 million (10%) resulted from hardgoods sales gains of $121 million (14%) and gas and rent sales growth of $59 million (6%). Hardgoods sales growth resulted from price and volume gains consistent with the solid industrial recovery across many of the markets served by the Company. For example, same-store sales of welding wire and welding accessories (e.g. welding machines, torches) increased by approximately $40 million and $25 million, respectively. The costs of welding wire and accessories were significantly impacted by rising steel prices in fiscal 2005. The Company successfully passed through the higher costs to its customers. Same-store sales of safety products increased approximately $40 million and were positively impacted by the Company’s strategy of cross-selling safety products to its broad base of customers. Radnor private label sales growth of 36% was also indicative of the success of the Company’s branch store core stocking program. The Company’s core stocking program ensures that each branch store is stocked with the most commonly demanded hardgoods products.

     Fiscal 2005 gas and rent same-store sales growth was driven by these products as well as the strengthened industrial economy. Medical gas and rent grew 5% to $169 million in fiscal 2005 driven by the strength of the Airgas Puritan Medical business model, which includes a far reaching network of locations, superior customer service and innovative programs, such as the Walk-O₂-BoutÔ medical cylinder program utilized by hospitals and the home healthcare market. Same-store sales of specialty gases increased 4% to $157 million in fiscal 2005. Bulk gas and rent revenues grew 10% to over $120 million reflecting higher volumes. Growth in industrial gases (e.g. oxygen, nitrogen, argon, etc.) were also solid contributors. Rental revenue was also favorably impacted by a 7% increase in welding equipment rentals and sales associated with the Company’s rental welder fleet.

     The All Other Operations segment consists of producers and distributors of gas products, principally of dry ice, carbon dioxide, nitrous oxide and specialty gases. The segment also includes the Company’s National Welders joint venture, which was consolidated effective December 31, 2003. All Other Operations’ sales, net of intercompany sales eliminations, increased $140 million, principally from the consolidation of National Welders and same-store sales growth. National Welders contributed sales of $167 million in fiscal 2005 versus $39 million in the prior year (fourth quarter only). Had National Welders been consolidated for all of fiscal 2004, it would have contributed sales of $147 million. Same-store sales growth was principally the result of higher sales volumes of liquid carbon dioxide and dry ice and industrial gas volume gains at National Welders. Dry ice sales volume gains were dampened by pricing pressure in this competitive market.

Gross Profits

     Gross profits increased 25% resulting from higher sales volumes generated by acquisitions, same-store sales growth and the consolidation of National Welders. Although the gross profit dollars were higher, the gross profit margin decreased 100 basis points to 51.4% in fiscal 2005 compared to 52.4% in fiscal 2004. The decline in the gross profit margin was partially due to lower gas margins experienced during the second half of fiscal 2005 resulting from lower margins of the acquired BOC business and higher sales of lower margin bulk gases. The pressure on margins factored into the Company’s decision to raise prices on a number of its product lines in March 2005. Related to hardgoods products, the entire industry has been impacted by the rapidly rising price of steel, a primary component of welding wire and rods. However, the gross profit margin on hardgoods was relatively consistent with the prior year as the product cost increases were effectively passed through to customers.

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

     The Distribution segment’s gross profits increased $162 million (19%) compared to the prior year driven by acquisitions and same-store sales growth. The Distribution segment’s gross profit margin of 49.4% in fiscal 2005 decreased 130 basis points from 50.7% in fiscal 2004. The lower gross profit margin resulted from the higher same-store sales growth rates for hardgoods versus gas and rent. Hardgoods carry a lower gross profit margin than gas and rent and helped drive the decline in the gross profit margin. The Distribution segment’s sales consisted of 51.9% gas and rent compared to 53.1% in fiscal 2004. The gross profit margin was also impacted by lower margins from the acquired BOC business and higher sales of lower margin bulk gases. Higher cylinder maintenance and freight-in costs associated with sales growth also contributed to the lower gross profit margin.

     All Other Operations’ gross profits increased $81 million (63%) compared to the prior year primarily reflecting the consolidation of National Welders. National Welders contributed $70 million to the increase in gross profits. The remainder of the increase in gross profits reflects higher sales volumes of liquid carbon dioxide and dry ice. The All Other Operations’ gross profit margin was relatively consistent compared to the prior year.

Operating Expenses

     SD&A expenses increased $185 million (26%) compared to the prior year principally from the consolidation of National Welders and costs contributed by acquisitions. A full year of expenses related to National Welders contributed $65 million in SD&A expenses versus $16 million for the fourth quarter in the prior year. Acquisitions contributed an estimated $86 million in SD&A expenses. The remainder of the increase resulted from higher labor, utility and distribution-related expenses. Labor and utility expense increases reflected costs to fill cylinders and operate facilities to meet increased demand for products. The increase in distribution-related expenses of approximately $8 million was primarily driven by higher fuel, repair and maintenance costs. The increase in fuel costs was directly related to higher oil prices during fiscal 2005. Fiscal 2005 also included costs of $6.4 million associated with the integration of the BOC business into the Company’s operations and employee separation costs. Acquisition integration expenses were not significant during fiscal 2004. During fiscal 2004, the Company sustained fire-related losses of $2.8 million at certain of its plants. As a percentage of sales, SD&A expenses decreased 60 basis points to 38.1% versus 38.6% in the prior year driven by higher sales volumes and improving cost leverage.

     Depreciation expense of $106 million in fiscal 2005 increased $24 million (29%) compared to $82 million in fiscal 2004. National Welders contributed $9 million in additional depreciation expense and acquisitions contributed approximately $8 million. The remainder of the increase primarily reflects the current and prior year’s capital investments in revenue producing assets, including medical cylinders and bulk tanks. The Company’s lease buyout program to purchase long-lived assets subject to high cost leases also contributed to the increase in depreciation expense in fiscal 2005. Amortization expense in fiscal 2005 of $5.5 million was consistent with the prior year.

Operating Income

     Operating income increased 20% in fiscal 2005 compared to fiscal 2004 driven by higher sales and the consolidation of National Welders. The operating income margin decreased 50 basis points to 8.6% from 9.1% in the prior year.

(In thousands)		2005				2004				Increase
Distribution		$	157,239			$	137,213			$	20,026				15	%
All Other Operations			45,215				31,331				13,884				44	%
		$	202,454			$	168,544			$	33,910				20	%

     The Distribution segment’s operating income margin of 7.7% in fiscal 2005 decreased 60 basis points compared to 8.3% in the prior year. BOC integration costs and employee separation costs contributed 30 basis points to the decline in the operating income margin. The decrease in the operating income margin also reflected the lower gross profit margin, described above.

     The All Other Operations segment’s operating income margin decreased 160 basis points to 11.7% from 13.3% in fiscal 2004. The decrease in the operating income margin primarily resulted from the consolidation of National Welders, which carries a lower operating income margin compared to the other businesses in the All Other Operations segment. Had National Welders been consolidated for all of fiscal 2004, the comparable operating income margin would have been 11.5%.

Interest Expense and Discount on Securitization of Trade Receivables

     Interest expense, net, and the discount on securitization of trade receivables totaled $56 million representing an increase of $10 million (22%) compared to the prior fiscal year. The increase in interest expense primarily resulted from higher debt levels associated with acquisitions, principally the BOC acquisition. The increase in interest expense was also driven by higher weighted-average interest rates. The consolidation of National Welders contributed $2 million to the increase in interest expense.

Income Tax Expense

     The effective income tax rate was 36.8% of pre-tax earnings in fiscal 2005 compared to 38.3% in fiscal 2004. 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.

Minority Interest and Equity Earnings of Unconsolidated Affiliate

     Minority interest expense represents the portion of National Welders’ earnings applicable to the preferred stockholders of National Welders. Minority interest expense in fiscal 2005 represents a full year of expense versus one quarter in fiscal 2004, reflecting the December 31, 2003 consolidation of National Welders.

     Equity in earnings of unconsolidated affiliate in fiscal 2004 of $4.4 million represents the Company’s portion of National Welders’ net earnings through the date of consolidation. National Welders’ earnings

included a $1.7 million after-tax life insurance gain in which National Welders was the named beneficiary. Prior to the date that the Company entered into the joint venture agreement with National Welders, the founders of National Welders had obtained life insurance policies on key personnel in which National Welders was the named beneficiary.

Income from Continuing Operations

     Income from continuing operations was $91.6 million in fiscal 2005, or $1.19 per diluted share, compared to $80.6 million in fiscal 2004, or $1.08 per diluted share.

Income (loss) from Discontinued Operations

     Discontinued operations (Rutland Tool) contributed income of $464 thousand in fiscal 2005 versus a net loss of $457 thousand in fiscal 2004.

Net Earnings

     Net earnings in fiscal 2005 were $92 million, or $1.20 per diluted share, compared to $80 million, or $1.07 per diluted share, in fiscal 2004.

LIQUIDITY AND CAPITAL RESOURCES

Fiscal 2006 Cash Flows

     Net cash provided by operating activities increased to $362 million in fiscal 2006 compared to $222 million in fiscal 2005. Net earnings adjusted for non-cash items provided cash of $315 million versus $246 million in the prior year. The Company also increased the level of receivables sold under its trade receivables securitization program providing cash of $54 million in the current year versus $27 million in the prior year. Improved management of working capital resulted in a use of cash of $7 million in the current year versus $51 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 $23 million of cash provided by National Welders, which was consistent with $20 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 totaled $345 million during the current year and primarily consisted of cash used for capital expenditures and acquisitions. Capital expenditures were $214 million in the current period (including $21 million at National Welders) of which $87 million relates to spending for cylinders, bulk tanks and rental welding machines. These capital expenditures reflect investments to support the Company’s sales growth initiatives. Cash of $153 million was paid in the current year for 13 acquisitions and holdback settlement payments, primarily related to $20 million paid for the BOC contingent purchase price. Cash of approximately $15 million was received from the divestiture of Rutland Tool.

     Financing activities used net cash of $15 million. Uses of cash included net debt repayments of $38 million, treasury stock purchases of $13 million and dividend payments of $18 million. Sources of cash included proceeds from stock option exercises of $20 million and, as described below, cash of $21 million was provided by National Welders’ minority stockholders’ note prepayment, the proceeds of which were used to repay National Welders’ Term Loan B.

     In June 2005, National Welders entered into an agreement with its preferred stockholders under which the preferred stockholders prepaid their $21 million note receivable to National Welders. National Welders used the proceeds from the prepayment of the preferred stockholders’ note to pay-off its $21 million Term Loan B, which had been collateralized by the preferred stockholders’ note. In connection with the note prepayment, National Welders terminated an interest rate swap agreement that converted the variable rate Term Loan B to a fixed interest rate. The preferred stockholders reimbursed National Welders $700 thousand for the fee to terminate the interest rate swap agreement. Also see Note 20 to the Consolidated Financial Statements.

Dividends

     At the end of each quarter during fiscal 2006, 2005 and 2004, the Company paid its stockholders regular quarterly cash dividends of $0.06, $0.045 and $0.04 per share, respectively. On May 23, 2006, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.07 per share, which is payable on June 30, 2006 to stockholders of record as of June 15, 2006. Future dividend declarations and associated amounts paid will depend upon the Company’s earnings, financial condition, loan covenants, capital requirements and other factors deemed relevant by management and the Company’s Board of Directors.

Stock Repurchase Plan

     In November 2005, the Company announced that its Board of Directors approved a stock repurchase plan. The stock repurchase plan authorizes the Company to repurchase up to $150 million of its common stock over a three year period. During fiscal 2006, the Company repurchased 370 thousand shares for cash of $12.8 million.

Financial Instruments

Senior Credit Agreement

     The Company has unsecured senior credit facilities with a syndicate of lenders under a credit agreement (the “Credit Agreement”) that provides a U.S. dollar revolving credit line of $308 million, a Canadian credit line of $50 million (U.S. $42 million) and a term loan. The Credit Agreement has a maturity date of January 14, 2010. As of March 31, 2006, the Company had revolving credit borrowings of $92 million bearing an effective interest rate of 5.74%, and Canadian borrowings of $24 million (U.S. $20 million) bearing an effective interest rate of 4.79%. Outstanding borrowings under the term loan at March 31, 2006 were $81 million bearing an effective interest rate of 5.93%. The U.S. dollar borrowings bear interest at LIBOR plus 95 basis points and the Canadian dollar borrowings bear interest at the Canadian Bankers’ Acceptance Rate plus 95 basis points. As of March 31, 2006, the Company also had commitments under letters of credit of $35 million, of which $1 million was supported by the Credit Agreement and $34 million was supported by an arrangement with another financial institution.

     Under the Credit Agreement, the Company’s domestic subsidiaries guarantee the U.S. borrowings and Canadian borrowings, and the Company’s foreign subsidiaries also guarantee the Canadian borrowings. 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 agreement. The Credit Agreement provides for the release of the guarantees and collateral if the Company attains an investment grade credit rating and maintains such rating for two consecutive quarters.

Money Market Loans

     In January 2006, the Company received an advance of $25 million under an agreement with a financial institution. The agreement, which expires on October 31, 2006, provides the Company with access to short term advances not to exceed $25 million for a maximum term of 90 days. 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, 2006, the Company had an outstanding advance of $25 million, due April 3, 2006 bearing interest at an annual rate of 5.26%. The advance was reflected in the “current portion of long-term debt” in the Consolidated Balance Sheet. On April 3, 2006, the advance was refinanced with a new advance in the amount of $25 million for a term of 84 days bearing interest at 5.58%.

Medium-Term Notes

     At March 31, 2006, the Company had $100 million of medium-term notes due September 2006 bearing interest at a fixed rate of 7.75%. The medium-term notes have been presented in the current portion of long-term debt. It is the Company’s intention to refinance the notes upon maturity with borrowings under its senior credit agreement. The medium-term notes are fully and unconditionally guaranteed on a joint and several basis by each of the wholly owned domestic guarantors under the revolving credit facilities. The Company has pledged the stock of its domestic guarantors for the benefit of the note holders.

Senior Subordinated Notes

     At March 31, 2006, 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 103.1% of the principal amount.

     At March 31, 2006, the Company also had $225 million of senior subordinated notes (the “2001 Notes”) outstanding with a maturity date of October 1, 2011. The 2001 Notes bear interest at a fixed annual rate of 9.125%, payable semi-annually on April 1 and October 1 of each year. The 2001 notes also have an optional redemption provision, which permits the Company, at its option, to call the 2001 Notes at scheduled dates and prices. The first scheduled optional redemption date is October 1, 2006 at a price of 104.6% of the principal amount. The Company may exercise the call provision during fiscal 2007 or thereafter depending on capital market conditions and other factors. If the call provision is exercised, the Company estimates that it would recognize a pre-tax charge of $12 million and annual interest expense savings of $4 million based on effective interest rates at March 31, 2006.

     The 2004 Notes and 2001 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 and 2001 Notes are fully and unconditionally guaranteed jointly and severally, on a subordinated basis, by each of the wholly owned domestic guarantors under the revolving credit facilities. The stock of the Company’s domestic subsidiaries is also pledged to the note holders on a subordinated basis.

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, 2006, acquisition and other notes totaled approximately $3 million with interest rates ranging from 5% to 8.5%.

Total Borrowing Capacity

     As of March 31, 2006, the Company had additional availability under its Credit Agreement of approximately $237 million, limited by the size of the facility. Some of the Company’s financial instruments (principally the Credit Agreement and the Senior Subordinated Notes) contain covenants requiring the Company to maintain certain leverage and coverage ratios. These covenants serve to limit the total amount of debt that the Company may incur. Based on limitations imposed by these financial covenants, the Company may incur up to an additional $506 million of debt at March 31, 2006, including the $237 million noted above. Should the Company’s financing requirements exceed amounts available under the Credit Agreement, the Company believes that it could obtain these funds on reasonable terms. The terms of any future financing arrangements depend on market conditions and the Company’s financial position at that time.

     The Company continues to look for acquisition candidates. The Company’s financial instruments require that covenant calculations include the pro forma results of acquired businesses. Therefore, borrowing capacity is not reduced dollar-for-dollar with acquisition financing.

Financial Instruments of the National Welders Joint Venture

     Pursuant to the requirements of 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, 2006 and 2005 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.

     National Welders has a credit agreement (the “NWS Credit Agreement”) that provides for a revolving credit line and several term loans. At March 31, 2006, National Welders had borrowings under its revolving credit line of $51 million, under Term Loan A of $15 million, and under Term Loan C of $1.6 million. The revolving credit line provides funding up to $74 million and matures in August 2008. Term Loan A is repayable in monthly amounts of $254 thousand with a lump-sum payment of the outstanding balance at maturity in June 2007. Term loan B was repaid in its entirety in June 2005 with the proceeds from the minority stockholders’ prepayment of its notes due to National Welders (see Note 20 to the Consolidated Financial Statements). Term Loan C matures in September 2006. The NWS Credit Agreement contains certain covenants which, among other things, limit the ability of National Welders to incur and guarantee new indebtedness, subject National Welders to minimum net worth requirements, and limit its capital expenditures, ownership changes, merger and acquisition activity, and the payment of dividends.

     The variable interest rate applicable to Term Loan A and the revolving credit line range from LIBOR plus 70 to 145 basis points based on National Welders’ leverage ratio. At March 31, 2006 and 2005, the effective interest rate for Term Loan A and the revolving credit line was 5.70% and 4.85%, respectively. Term Loan C bears a fixed interest rate of 7%. Based on restrictions related to certain leverage ratios, National Welders had additional borrowing capacity under its Credit Agreement of approximately $24 million at March 31, 2006.

     As of March 31, 2006, Term Loan A and the revolving credit line are secured by certain current assets, principally trade receivables and inventory, totaling $31 million, non-current assets, principally equipment, totaling $92 million, and Airgas common stock with a market value of $37 million classified as treasury stock and carried at cost of $370 thousand. Term Loan C is secured by a production facility, which had a net book value of approximately $22 million at March 31, 2006.

Trade Receivables Securitization

     The Company participates in a securitization agreement with two commercial banks to sell up to $250 million of qualifying trade receivables. The agreement expires in February 2008, but may be renewed subject to provisions contained in the agreement. During the twelve months ended March 31, 2006, the Company sold, net of its retained interest, $2.41 billion of trade receivables and remitted to bank conduits, pursuant to a servicing agreement, $2.36 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 $244 million at March 31, 2006 and $190 million at March 31, 2005.

Interest Rate Swap Agreements

     The Company manages its exposure to changes in market interest rates. At March 31, 2006, the Company was party to two interest rate swap agreements. The swap agreements are with major financial institutions and aggregate $50 million in notional principal amount. These swap agreements require the Company to make fixed interest payments based on an average effective rate of 4.15% and receive

variable interest payments from its counterparties based on one-month LIBOR, which was 4.70% at March 31, 2006. The remaining term of each of these swap agreements is 3.1 years. The Company monitors its positions and the credit ratings of its counterparties and does not anticipate non-performance by the counterparties.

     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 interest rates was approximately 53% fixed to 47% variable at March 31, 2006. A majority of the Company’s variable rate debt is based on a spread over the LIBOR. Based on the Company’s fixed to variable interest rate ratio at March 31, 2006, for every 25 basis point increase in LIBOR, the Company estimates that its annual interest expense would increase approximately $1.2 million.

OTHER

Critical Accounting Estimates

     The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States 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, 2006, 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 encompasses all elements of dilution such as 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 exiting 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 at least 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 accounts receivable write-offs have generally been in the range of 0.3% to 0.6% 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 has long shelf lives and is 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, 2005 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 years 2006 and 2005, these programs had self-insured retention of $500 thousand per occurrence and an additional annual aggregate retention for the next $2.2 million and $1.7 million, respectively, of claims in excess of $500 thousand. For fiscal year 2007, the self-insured retention has been raised to $1 million per occurrence with no additional aggregate retention. The Company’s exposure to loss under the fiscal 2006 and fiscal 2007 programs are actuarially equivalent. 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. Historically, business insurance expense has generally been in the range of 0.8% to 1.2% 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, 2006:

(In thousands)						Payments Due by Period
Contractual and Off-Balance Sheet						Less than 1												More than 5
Obligations		Total				Year				1 to 3 Years				3 to 5 Years				Years
Obligations reflected on the March 31, 2006 Balance Sheet:
Long-term debt (1)		$	767,627			$	131,901			$	64,664			$	194,453			$	376,609
Estimated interest payments on long-term debt (2)			241,595				49,852				81,136				65,736				44,871
Estimated payments (receipts) on interest rate swap agreements (3)			(963	)			(275	)			(550	)			(138	)			—
Off-balance sheet obligations as of March 31, 2006:
Operating leases (4)			189,367				55,825				79,892				41,532				12,118
Trade receivables securitization (5)			244,200				—				244,200				—				—
Estimated discount on securitization (6)			23,870				12,454				11,416				—				—
Letters of credit (7)			34,752				34,752				—				—				—
Purchase obligations:
Liquid bulk gas supply agreements (8)			666,834				80,588				112,659				109,485				364,102
Liquid carbon dioxide supply agreements (9)			160,632				13,260				18,416				15,456				113,500
Ammonia supply agreements (10)			9,956				9,956				—				—				—
Other purchase commitments (11)			16,078				15,661				278				139				—
Total		$	2,353,948			$	403,974			$	612,111			$	426,663			$	911,200

New Accounting Pronouncements

     In December 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment, (“SFAS 123R”), as an amendment to SFAS 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and its related implementation guidance. SFAS 123R requires that grants of employee stock options, including options to purchase shares under employee stock purchase plans, be recognized as compensation expense based on their fair values. SFAS 123R is effective for annual periods beginning after December 15, 2005. Accordingly, the Company will adopt SFAS 123R effective April 1, 2006 using the “modified prospective” method in which compensation cost is recognized from the date of adoption forward for both new awards and the portion of any previously granted awards that vest after the date of adoption. Prior periods are not restated under the modified prospective method of adoption. The Company will continue to utilize the Black-Scholes option pricing model to estimate the value of stock-based awards. The Company has evaluated the impact of adoption of SFAS 123R on its results of operations and financial position. The estimated impact of adopting SFAS 123R in fiscal 2007 is expected to reduce diluted earnings per share by about $0.11. See Note 15 to the Consolidated Financial Statements for the pro forma effect on net earnings and earnings per share as if the Company had applied the fair value recognition provisions of SFAS 123 to stock-based compensation in fiscal 2006, 2005 and 2004.

     In November 2004, the FASB issued SFAS 151, Inventory Costs, as an amendment to the guidance provided on Inventory Pricing in FASB Accounting Research Bulletin 43. SFAS 151, which the Company is required to adopt as of April 1, 2006, clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material. The statement requires that if the costs associated with the actual level of spoilage or production defects are greater than the normal range of spoilage or defects, the excess costs should be charged to current period expense. Since the Company performs limited manufacturing, the adoption of SFAS 151 will not have a material impact on its results of operations, financial position or liquidity.

     In December 2004, the FASB issued SFAS 153, Exchanges of Nonmonetary Assets, as an amendment to APB Opinion 29, Accounting for Nonmonetary Transactions. SFAS 153 requires nonmonetary exchanges to be accounted for at fair value, recognizing any gains or losses, if the fair value is determinable within reasonable limits and the transaction has commercial substance. The Company is required to adopt SFAS 153 as of April 1, 2006. The adoption of SFAS 153 will not have a material impact on the Company’s consolidated results of operations and financial position.

     On June 1, 2005, the FASB issued SFAS 154, Accounting Changes and Error Corrections, which requires retrospective application to prior periods’ financial statements of voluntary changes in accounting principle, unless it is impracticable. SFAS 154 replaces APB Opinion No. 20’s requirement to recognize most voluntary changes in accounting principle by including the cumulative effect of changing to the new accounting principle in net income of the period of the change. The statement is effective for accounting changes and corrections of errors made in fiscal years for the Company beginning April 1, 2006.

     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 impact that the adoption of SFAS 155 will have on its results of operations, financial position or liquidity.

     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 impact that the adoption of SFAS 156 will have on its results of operations, financial position or liquidity.

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 identification of products that will grow at a faster rate than the overall economy; the Company’s belief that the ongoing annual expense resulting from the adoption of FIN 47 is not anticipated to be material; the Company’s ability to identify acquisition opportunities and expand its business; the expectation that fiscal 2007 will be another productive year; further expansion of the industrial economy in fiscal 2007; the Company’s estimate of fiscal 2007 net earnings of $1.76 to $1.84 per diluted share; the Company’s estimate that net earnings in its fiscal 2007 first quarter will be $0.42 to $0.44 per diluted share; the Company’s estimate of fiscal 2007 stock-based compensation expense of $0.11 per diluted share; the continued success of pricing actions designed to offset rising costs; fiscal 2008 financial goals of annual sales of $3.3 billion and operating margins of 10% to 11% of sales; the Company’s estimate that for every 25 basis point increase in LIBOR, annual interest expense will increase approximately $1.2 million; the future payment of dividends; the repurchase of $150 million of the Company’s common stock over a three-year period; the Company’s estimate that it would recognize a pre-tax charge of $12 million and annual interest savings of $4 million resulting from the exercise of the call provision on the 2001 Notes; the Company’s belief that it could obtain financing at reasonable terms in excess of amounts available under its Credit Agreement; the ability to manage exposure to changes in market interest rates; the performance of counterparties under interest rate swap agreements; 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 be unlikely despite 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 belief that the minimum product purchases under its liquid bulk gas and carbon dioxide supply agreements are within the Company’s normal product purchases; the Company’s estimates of purchase commitments associated with product supply agreements; and the Company’s belief that, if a contractual arrangement with any supplier of gases, raw materials or hardgoods was terminated, it would be able to locate alternative sources of supply without disruption of service.

     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: 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; the inability to identify acquisition candidates and consummate acquisitions; an economic downturn (including adverse changes in the specific markets for the Company’s products); actual earnings in the first quarter of fiscal 2007 and/or in fiscal 2007 falling outside the Company’s range of estimates; more or less stock-based compensation expense in fiscal 2007 resulting from changes in Black-Scholes computations and input variables or changes in expected option grants; rising product costs and the inability to pass those costs on to customers and the impact on gross profit margin; the inability of the Company to attain its fiscal 2008 financial goals; 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; the inability to take delivery of minimum product purchases under the liquid bulk gas and liquid carbon dioxide supply agreements; 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 or repurchase common stock; changes in the Company’s debt levels and/or credit rating which prevent the Company from arranging additional financing; actual charges and interest savings that vary from those estimated by the Company related to exercising the call provision of the 2001 Notes; 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 53% to 47% at March 31, 2006. 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, 2006. 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)		2007				2008				2009				2010				2011				Thereafter				Total				Value
Fixed Rate Debt
Medium-term notes		$	100			$	—			$	—			$	—			$	—			$	—			$	100			$	101
Interest expense		$	4			$	—			$	—			$	—			$	—			$	—			$	4
Average interest rate			7.75	%
Acquisition and other notes		$	—			$	1			$	—			$	2			$	—			$	—			$	3			$	3
Interest expense		$	0.1			$	0.1			$	0.1			$	0.1			$	—			$	—			$	0.4
Average interest rate			5.62	%			5.89	%			5.65	%			5.94	%
Senior subordinated notes due 2011		$	—			$	—			$	—			$	—			$	—			$	225			$	225			$	238
Interest expense		$	21			$	21			$	21			$	21			$	21			$	10			$	115
Interest rate			9.125	%			9.125	%			9.125	%			9.125	%			9.125	%			9.125	%
Senior subordinated notes due 2014		$	—			$	—			$	—			$	—			$	—			$	150			$	150			$	148
Interest expense		$	9			$	9			$	9			$	9			$	9			$	34			$	79
Interest rate			6.25	%			6.25	%			6.25	%			6.25	%			6.25	%			6.25	%
National Welders:
Term loan C		$	2			$	—			$	—			$	—			$	—			$	—			$	2			$	2
Interest expense		$	0.1			$	—			$	—			$	—			$	—			$	—			$	0.1
Interest rate			7.00	%

		Fiscal year of Maturity
																														Fair
(In millions)		2007				2008				2009				2010				2011				Thereafter				Total				Value
Variable Rate Debt
Revolving credit facilities		$	—			$	—			$	—			$	112			$	—			$	—			$	112			$	112
Interest expense		$	6			$	6			$	6			$	5			$	—			$	—			$	23
Interest rate (a)			5.57	%			5.57	%			5.57	%			5.57	%
Term loan		$	15			$	15			$	21			$	30			$	—			$	—			$	81			$	81
Interest expense		$	4			$	4			$	3			$	1			$	—			$	—			$	12
Interest rate (a)			5.93	%			5.93	%			5.93	%			5.93	%
Money market loans		$	25			$	—			$	—			$	—			$	—			$	—			$	25			$	25
Interest expense		$	0.8			$	—			$	—			$	—			$	—			$	—			$	0.8
Interest rate (a)			5.26	%
National Welders:
Revolving credit facility		$	—			$	—			$	51			$	—			$	—			$	—			$	51			$	51
Interest expense		$	2.9			$	2.9			$	1.2			$	—			$	—			$	—			$	7.0
Interest rate (a)			5.70	%			5.70	%			5.70	%
Term loan A		$	3			$	12			$	—			$	—			$	—			$	—			$	15			$	15
Interest expense		$	0.8			$	0.7			$	—			$	—			$	—			$	—			$	1.5
Interest rate (a)			5.70	%			5.70	%

		Fiscal year of Maturity
																														Fair
(In millions)		2007				2008				2009				2010				2011				Thereafter				Total				Value
Interest Rate Swaps:
US $ denominated Swaps:
2 Swaps Receive Variable/Pay Fixed
Notional amounts		$	—			$	—			$	—			$	50			$	—			$	—			$	50			$	(1.4	)
Swap payments/(receipts)		$	(0.3	)		$	(0.3	)		$	(0.3	)		$	(0.1	)		$	—			$	—			$	(1.0	)
Variable Receive rate = 4.70% (1-month LIBOR)
Weighted average pay rate = 4.15%
Other Off-Balance Sheet
LIBOR-based agreements:
Trade receivable securitization (b)		$	—			$	244			$	—			$	—			$	—			$	—			$	244				244
Discount on securitization		$	12			$	11			$	—			$	—			$	—			$	—			$	23

Limitations of the tabular presentation

     As the table incorporates only those interest rate risk exposures that exist as of March 31, 2006, 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-58 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, 2006. 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 disclose.

(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, 2006, 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 11% 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 46, 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. 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, 2006, 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, 2006 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 Proxy Statement relating to the Company’s 2006 Annual Meeting of Stockholders is incorporated herein by reference. Biographical information relating to the Company’s executive officers set forth in Item 1 of Part I of this Form 10-K Report is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

     The information under “Board of Directors and Committees,” “Executive Compensation” and “Certain Transactions” appearing in the Proxy Statement relating to the Company’s 2006 Annual Meeting of Stockholders is incorporated herein by reference.

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

     The information required by this Item is set forth in the section headed “Security Ownership” appearing in the Company’s Proxy Statement relating to the Company’s 2006 Annual Meeting of Stockholders 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 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		Indenture dated as of August 1, 1996 of Airgas, Inc. to Bank of New York, Trustee. (Incorporated by reference to Exhibit 4.5 to the Company’s Registration Statement on Form S-4 No. 333-23651 dated March 20, 1997).
4.8		Form of Airgas, Inc. Medium-Term Note (Fixed Rate). (Incorporated by reference to Exhibit 4.6 to the Company’s Registration Statement on Form S-4 No. 333-23651 dated March 20, 1997).
4.9		Form of Airgas, Inc. Medium-Term Note (Floating Rate). (Incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-4 No. 333-23651 dated March 20, 1997).
4.10		Indenture, dated as of July 30, 2001, among Airgas, Inc., the subsidiary guarantors of Airgas, Inc. and The Bank of New York, as Trustee, related to the 9.125% Senior Subordinated Notes due 2011 (including exhibits). (Incorporated by reference to Exhibit 4.7 to the Company’s Registration Statement on Form S-4 No. 333-68722 dated August 30, 2001 and as amended September 14, 2001).
4.11		Exchange and Registration Rights Agreement, dated as of July 30, 2001, among Airgas, Inc., the subsidiary guarantors of Airgas, Inc. and the initial purchasers of the 9.125% Senior Subordinated Notes due 2011. (Incorporated by reference to Exhibit 4.8 to the Company’s Registration Statement on Form S-4 No. 333-68722 dated August 30, 2001 and as amended September 14, 2001).
4.12		Indenture, dated as of March 8, 2004, among Airgas, Inc., the subsidiary guarantors of Airgas, Inc. and The Bank of New York, as Trustee, relating to the 6.25% Senior Subordinated Notes due 2014. (Incorporated by reference to Exhibit 4.14 to the Company’s Registration Statement on Form S-4 No. 333-114499 dated April 15, 2004).
4.13		Exchange and Registration Rights Agreement, dated as of March 8, 2004, among Airgas, Inc., the subsidiary guarantors of Airgas, Inc. and the initial purchasers of the 6.25% Senior Subordinated Notes due 2014. (Incorporated by reference to Exhibit 4.15 to the Company’s Registration Statement on Form S-4 No. 333-114499 dated April 15, 2004).
		There are no other instruments with respect to long-term debt of the Company that involve indebtedness or securities authorized thereunder exceeding 10 percent of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to file a copy of any instrument or agreement defining the rights of holders of long-term debt of the Company upon request of the Securities and Exchange Commission.
4.14		Rights Agreement, dated as of April 1, 1997, between Airgas, Inc. and The Bank of New York, N.A., as Rights Agent, which includes as Exhibit B thereto the Form of Right Certificate. (Incorporated by reference to Exhibit 1.1 to the Company’s Form 8-A filed on April 28, 1997).

Exhibit No.		Description
4.15		First Amendment, dated November 12, 1998, to the Rights Agreement dated as of April 1, 1997, between Airgas, Inc. and The Bank of New York. (Incorporated by reference to Exhibit 4 to the Company’s December 31, 1998 Quarterly Report on Form 10-Q).
*10.1		Amended and Restated 1984 Stock Option Plan, as amended effective May 22, 1995. (Incorporated by reference to Exhibit 10.1 to the Company’s September 30, 1995 Quarterly Report on Form 10-Q).
*10.2		1989 Non-Qualified Stock Option Plan for Directors (Non-Employees) as amended through August 7, 1995. (Incorporated by reference to Exhibit 10.2 to the Company’s September 30, 1995 Quarterly Report on Form 10-Q).
*10.3		2001 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S-8 No. 333-69214 dated September 10, 2001).
*10.4		2003 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S-8 No. 333-107872 dated August 12, 2003).
*10.5		Joint Venture Agreement dated June 28, 1996 between Airgas, Inc. and National Welders Supply Company, Inc. and J.A. Turner, III, and Linerieux B. Turner and Molo Limited Partnership, Turner (1996) Limited partnership, Charitable Remainder Unitrust for James A. Turner, Jr. and Foundation for the Carolinas. (Incorporated by reference to Exhibit 2.1 to the Company’s June 28, 1996 Report on Form 8-K).
*10.6		Letter dated July 24, 1992 between Airgas, Inc. (on behalf of the Nominating and Compensation Committee) and Peter McCausland regarding the severance agreement between the Company and Peter McCausland. (Incorporated by reference to Exhibit 10.9 to the Company’s March 31, 1997 Report on Form 10-K).
*10.7		1997 Stock Option Plan, as amended through May 7, 2002, and approved by the Company’s stockholders on July 31, 2002. (Incorporated by reference to Exhibit 10.1 to the Company’s June 30, 2002 Quarterly Report on Form 10-Q).
*10.8		1997 Directors’ Stock Option Plan as amended on May 25, 2004, and approved by the Company’s stockholders on August 4, 2004. (Incorporated by reference to the Definitive Proxy statement on Form DEF14A dated June 28, 2004).
*10.9		Employee Benefits Trust Agreement, dated March 30, 1999, between Airgas, Inc. and First Union National Bank, as Trustee, which includes as Exhibit 1 thereto the Common Stock Purchase Agreement, dated March 30, 1999, between Airgas, Inc. and First Union National Bank, as Trustee, and Exhibit 2 thereto the Promissory Note, dated March 31, 1999, between Airgas, Inc. and First Union National Bank, as Trustee. (Incorporated by reference to Exhibit 10.12 to the Company’s March 31, 1999 Report on Form 10-K).
*10.10		Employee Benefits Trust Amendment Letter, dated March 7, 2000, between Airgas, Inc. and First Union National Bank, as Trustee. (Incorporated by reference to Exhibit 10.13 to the Company’s March 31, 2000 Report on Form 10-K).

Exhibit No.		Description
*10.11		Airgas, Inc. Deferred Compensation Plan dated December 17, 2001. (Incorporated by reference to Exhibit 4 to the Company’s Registration Statement on Form S-8 No. 333-75258 dated December 17, 2001).
*10.12		Change of Control Agreement between Airgas, Inc. and Peter McCausland dated March 17, 1999. (Incorporated by reference to Exhibit 10.12 to the Company’s March 31, 2005 Form 10-K). Nine other Executive Officers are parties to substantially identical agreements.
*10.13		Separation Agreement and General Release of All Claims between Airgas, Inc. and Glenn M. Fischer effective as of January 14, 2005. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 13, 2005).
*10.14		Airgas, Inc. 2004 Executive Bonus Plan. (Incorporated by reference to Exhibit 10.14 to the Company’s March 31, 2005 Form 10-K).
11		Statement re: computation of earnings per share.
12		Statement re: computation of the ratio of earnings to fixed charges.
21		Subsidiaries of the Company.
23		Consent of Independent Registered Public Accounting Firm.
31.1		Certification of Peter McCausland as Chairman and Chief Executive Officer of Airgas, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Roger F. Millay as Senior Vice President and Chief Financial Officer of Airgas, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Peter McCausland as Chairman and Chief Executive Officer of Airgas, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Roger F. Millay as Senior Vice President and Chief Financial Officer of Airgas, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

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

Dated: June 14, 2006

		Airgas, Inc. (Registrant)
		By:		/s/ Peter McCausland
				Peter McCausland
				Chairman, President and Chief Executive Officer

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

Signature		Title		Date
/s/ Peter McCausland		Director, Chairman of the Board,		June 14, 2006
		President and Chief Executive Officer
(Peter McCausland)
/s/ Roger F. Millay		Senior Vice President and		June 14, 2006
		Chief Financial Officer
(Roger F. Millay)		(Principal Financial Officer)
/s/ Robert M. McLaughlin		Vice President and Controller		June 14, 2006
		(Principal Accounting Officer)
(Robert M. McLaughlin)
/s/ William O. Albertini		Director		June 14, 2006
(William O. Albertini)
/s/ W. Thacher Brown		Director		June 14, 2006
(W. Thacher Brown)
/s/ James W. Hovey		Director		June 14, 2006
(James W. Hovey)

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