To Our Shareholders,

At Airgas, the details matter. We generated over $5 billion in sales this past year in large part because we pay attention to the millions of small details and decisions that have to be handled exactly right, time after time, for us to keep growing.

That might sound counterintuitive, because it stands to reason that you need to think big to become big. And there's truth in that. In fact, Airgas has gotten this far because, in addition to sweating the details, we aren't afraid to dream big, set challenging goals and then go after them.

But we haven't lost sight of another truth—that the success of Airgas happens at the local level, one customer at a time. So in fiscal 2014, after several years of concentrating on our large-scale SAP conversion, it was time to turn our focus back to the basics of our business: getting closer to customers and strengthening the Airgas entrepreneurial spirit that makes us the company of choice —as both a supplier and an employer—in our industry.

For the past decade, Airgas' regional operating structure has remained pretty much the same—a dozen regional companies, each divided into smaller areas, with managers to oversee the branches and operations in their respective areas. That set-up worked well when we were a $2 billion or even $3 billion company. But with over $5 billion in annual sales, more than 16,000 associates, 900 branches and 1 million customers, many of our regions and areas had more than doubled in size. Our success had created too much distance between our local leadership teams and their customers.

That is changing. In fiscal 2014, we reduced the sizes of three of our largest regions and created three new regions to enhance our operating model in which customer engagement decisions are made as close to the customer as possible. We introduced and are continuing to roll out a new district manager position within all of our areas nationwide, designed to get even closer to our customers, support our local service model and bring additional focus to our sales and customer service efforts. The district manager model has been in place for many years at one of our top-performing regions. This model creates smaller, more closely aligned sales and operations teams covering narrow geographic markets, reporting to a district manager who owns responsibility for the sales, margins, and expenses within the district. Today, we are nearing the completion of this structural enhancement and have nearly 200 district managers in place. We have also refined our gainsharing program to align more closely with district-level goals, promoting optimal utilization of resources across the branches within each district.

We're also well down the road in building out our sales channels so that we're connecting with customers in the ways that work best for them. A customer might interact face to face with an Airgas account manager or a product, process or industry specialist at the customer's location, on the phone with an Airgas Total Access representative, in one of our stores with a knowledgeable branch associate, or online using our robust new e-business platform. In many cases, it will be a combination of several of these integrated channels. Offering multiple sales channels for our over 1 million customers to choose from is one of the key ways we are leveraging our now fully integrated distribution platform to strengthen our industry-leading position.

To advance this strategy, in fiscal 2014 we named Andy Cichocki as President of Airgas USA, LLC. In more than 25 years at Airgas, Andy has been a key contributor and vital leader in just about every facet of our growing business. In his new role, he oversees our distribution group, which includes four Divisions, 15 distribution regions, four Business Support Centers, our cylinder gases and hardgoods support infrastructures, Red-D-Arc Welderentals, Airgas Total Access, and our e-Business channel—all under one umbrella to enable a more seamless interface with our customers nationwide.

We are positioning our people closer to the front lines and bringing to our customers the strongest array of tools ever found in the Airgas toolbox. With SAP now in place, customers who interact with us through any sales channel—in person, on the phone or online—will have access to the same real-time data about products, pricing, order history, delivery status, and much more. These new developments in our structure, sales channels and SAP capabilities become even more powerful because they are supported by our broad product and service offering, available in over 1,100 locations across the country and operated by the best people in the industry.

For years, we've been focused on driving growth through improved infrastructure and product and service offerings. While that will continue, our growth strategy going forward includes a much greater focus on developing our associates. This is an important shift in mindset for Airgas. In fiscal 2014, we named Pam Claypool as Senior Vice President of Human Resources to lead this new organizational approach. Having worked in our field organization, Pam understands what our associates need to be successful day-in and day-out within our people-driven industry.

Our efforts in this area are well under way. The district manager position creates an exciting new step on the Airgas career path for our associates and incoming recruits. In our experience, the best way to learn to run a business is to have full ownership of that business' profit and loss statement, and we are committed to making sure our best and brightest future leaders get that opportunity as early in their careers as possible through the new district manager model. We're supporting the development of Airgas associates at all levels through continued enhancement of our course offerings on Airgas University, our online training platform. In fiscal 2014, we added almost 50 new courses, bringing the total number of courses offered to associates on Airgas University to well over 500. Airgas associates logged more than 250,000 hours of training and development through Airgas University in fiscal 2014 on subjects ranging from safety and operations to customer service and business administration.

And we will continue to focus on talent acquisition and training and development as we go forward.

Airgas really is a business of people. In fiscal 2014, we made a lot of important structural changes in how we engage with customers and develop our associates. When I look at the road ahead, I see growth and success accelerating all because the best-trained team in the industry is doing what it does best— paying attention to the millions of small details and decisions that have to be handled exactly right, time after time, for us to keep growing.

Michael L. Molinini
President & Chief Executive Officer
July 2014