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Airgas Reports Fiscal Third Quarter Earnings

“The SAP implementation is on-schedule, with only one region remaining to convert to the new system,” said Airgas Chief Executive Officer Michael L. Molinini. “To ensure the long-term success of this initiative, we expect to incur slightly higher than anticipated SAP-related expenses in our fourth quarter and to continue to incur some SAP-related costs during the first half of fiscal 2014 for post-conversion support and training. Our expectation that we will achieve our projected $75 to $125 million in run-rate operating income benefits by the end of calendar 2013, however, remains unchanged. These SAP milestones and the growth initiatives we presented at our analyst meeting in December, which support our fiscal 2016 financial goals, all make for a bright future for this company.”

Third quarter sales were $1.21 billion, an increase of 5% over the prior year. Organic sales in the quarter were up 4% over the prior year, with gas and rent up 6% and hardgoods down 1%. Organic sales in the Distribution business segment were up 2% over the prior year, with gas and rent up 5% and hardgoods down 1%.

Operating margin was 12.2% for the third quarter and included 90 basis points of impact from SAP implementation costs and depreciation expense. Prior year operating margin was 11.4% and included 110 basis points of impact from SAP implementation costs and depreciation expense. Adjusted operating margin* was 12.1% and 11.8% in the current and prior year quarters, respectively.

Return on capital* was 12.4% for the twelve months ended December 31, 2012, an increase of 10 basis points over the prior year.

Year-to-date free cash flow* through the third quarter was $219 million, an increase of 25% over the prior year, and adjusted cash from operations* was $451 million, an increase of 8% over the prior year. During the third quarter, the Company repurchased 2.47 million shares on the open market for $222 million, reflecting an average price of $89.93 per share. The impact of share repurchases on weighted average diluted shares outstanding was largely offset by stock option exercises in the quarter.

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