UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| ¨ | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| x | Soliciting Material Pursuant to §240.14a-12 |
Airgas, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. |
| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
| ¨ | Fee paid previously with preliminary materials. |
| ¨ | Check box if any part of the fee is offset as provided by Exchange Act Rule 240.0-11 and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| (1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
 It’s
All About Value It’s All About Value
July 21, 2010
July 21, 2010 |
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FORWARD-LOOKING
STATEMENTS
This
presentation
contains
statements
that
are
forward
looking.
Forward-looking
statements
include
the
statements
identified
as
forward-
looking
in
the
Company’s
press
release
announcing
its
quarterly
earnings,
as
well
as
any
statement
that
is
not
based
on
historical
fact,
including
statements
containing
the
words
“believes,”
“may,”
“plans,”
“will,”
“could,”
“should,”
“estimates,”
“continues,”
“anticipates,”
“intends,”
“expects”
and
similar
expressions.
All
forward-looking
statements
are
based
on
current
expectations
regarding
important
risk
factors
and
should
not
be
regarded
as
a
representation
by
us
or
any
other
person
that
the
results
expressed
therein
will
be
achieved.
Airgas
assumes
no
obligation
to
revise
or
update
any
forward-looking
statements
for
any
reason,
except
as
required
by
law.
Important
factors
that
could
cause
actual
results
to
differ
materially
from
those
contained
in
any
forward-looking
statement
include
the
factors
identified
in
the
Company’s
press
release
announcing
its
quarterly
earnings,
as
well
as
other
factors
described
in
the
Company’s
reports,
including
its
March
31,
2010
Form
10-K,
subsequent
Forms
10-Q,
and
other
forms
filed
by
the
Company
with
the
Securities
and
Exchange
Commission.
The
Company
notes
that
forward-looking
statements
made
in
connection
with
a
tender
offer
are
not
subject
to
the
safe
harbors
created
by
the
Private
Securities
Litigation
Reform
Act
of
1995.
The
Company
is
not
waiving
any
other
defenses
that
may
be
available
under
applicable
law.
ADDITIONAL INFORMATION
ADDITIONAL INFORMATION
This
presentation
does
not
constitute
an
offer
to
buy
or
solicitation
of
an
offer
to
sell
any
securities.
In
response
to
the
tender
offer
commenced
by
Air
Products
Distribution,
Inc.,
a
wholly
owned
subsidiary
of
Air
Products
and
Chemicals,
Inc.,
Airgas
has
filed
a
solicitation/recommendation
statement
on
Schedule
14D-9
with
the
U.S.
Securities
and
Exchange
Commission
(“SEC”).
INVESTORS
AND
SECURITY
HOLDERS
OF
AIRGAS
ARE
URGED
TO
READ
THESE
AND
OTHER
DOCUMENTS
FILED
WITH
THE
SEC
CAREFULLY
IN
THEIR
ENTIRETY
BECAUSE
THEY
CONTAIN
IMPORTANT
INFORMATION.
Investors
and
security
holders
may
obtain
free
copies
of
these
documents
and
other
documents
filed
with
the
SEC
by
Airgas
through
the
web
site
maintained
by
the
SEC
at
http://www.sec.gov.
Also,
materials
related
to
Air
Products’
Unsolicited
Proposals
are
available
in
the
“Investor
Information”
section
of
the
Company’s
website
at
www.airgas.com,
or
through
the
following
web
address:
http://investor.shareholder.com/arg/airgascontent.cfm.
In
addition,
Airgas
filed
a
preliminary
proxy
statement
for
the
2010
Annual
Meeting
with
the
SEC
on
July
8,
2010,
and
Airgas
will
file
a
definitive
proxy
statement
in
advance
of
the
2010
Annual
Meeting.
Any
definitive
proxy
statement
will
be
mailed
to
stockholders
of
Airgas.
INVESTORS
AND
SECURITY
HOLDERS
OF
AIRGAS
ARE
URGED
TO
READ
THESE
AND
OTHER
DOCUMENTS
FILED
WITH
THE
SEC
CAREFULLY
IN
THEIR
ENTIRETY
WHEN
THEY
BECOME
AVAILABLE
BECAUSE
THEY
WILL
CONTAIN
IMPORTANT
INFORMATION.
Investors
and
security
holders
will
be
able
to
obtain
free
copies
of
these
documents
(when
available)
and
other
documents
filed
with
the
SEC
by
Airgas
through
the
web
site
maintained
by
the
SEC
at
http://www.sec.gov.
CERTAIN INFORMATION REGARDING PARTICIPANTS
CERTAIN INFORMATION REGARDING PARTICIPANTS
Airgas
and
certain
of
its
directors
and
executive
officers
may
be
deemed
to
be
participants
under
the
rules
of
the
SEC.
Security
holders
may
obtain
information
regarding
the
names,
affiliations
and
interests
of
Airgas’
directors
and
executive
officers
in
Airgas’
Annual
Report
on
Form
10-K
for
the
year
ended
March
31,
2010,
which
was
filed
with
the
SEC
on
May
27,
2010,
its
proxy
statement
for
the
2009
Annual
Meeting,
which
was
filed
with
the
SEC
on
July
13,
2009
and
its
preliminary
proxy
statement
for
the
2010
Annual
Meeting,
which
was
filed
with
the
SEC
on
July
8,
2010.
To
the
extent
holdings
of
Airgas
securities
have
changed
since
the
amounts
printed
in
the
proxy
statement
for
the
2009
Annual
Meeting,
such
changes
have
been
or
will
be
reflected
on
Statements
of
Change
in
Ownership
on
Form
4
filed
with
the
SEC.
These
documents
can
be
obtained
free
of
charge
from
the
sources
indicated
above.
Additional
information
regarding
the
interests
of
these
participants
in
any
proxy
solicitation
and
a
description
of
their
direct
and
indirect
interests,
by
security
holdings
or
otherwise,
will
also
be
included
in
any
proxy
statement
and
other
relevant
materials
to
be
filed
with
the
SEC
if
and
when
they
become
available. |
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Airgas Has Consistently Created
Airgas Has Consistently Created
Shareholder Value…
Shareholder Value…
Absolute Total Shareholder Return
Since Airgas’
IPO (a)
4,201%
Total Shareholder Return CAGR
Since Airgas’
IPO (a)
18%
Total Shareholder Return Since January 1, 1987
Ranking in S&P 500 (b)
#26 highest out of 500
Officer and Director Stock Beneficial Ownership (c)
11.9%
Officer and Director Stock Beneficial Ownership
Ranking in S&P 500
#28 highest out of 500
Note:
Market
data
measured
through
market
close
on
February
4,
2010,
prior
to
date
of
announcement
of
the
Air
Products
offer.
(a)
Split-adjusted,
since
Airgas’
IPO
in
1986.
Total
Shareholder
Return
calculated
as
share
price
plus
dividends
reinvested.
(b)
Excludes
current
S&P
500
constituents
which
were
not
public
at
January
1,
1987.
(c)
Includes
all
options
and
other
rights
to
acquire
shares
exercisable
on
or
within
60
days
of
May
31,
2010. |
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•
Airgas’
management has a proven track record of exceptional
shareholder value creation
•
The
Airgas
Board
unanimously
believes
that
Air
Products’
offer
grossly
undervalues Airgas
•
We believe strongly that Airgas will generate more value for
stockholders by executing its strategic plan than by pursuing Air
Products’
proposed transaction
–
FY Q1 2011 announced results demonstrate the strength of our earnings
growth, underpinned by an economic recovery that is just beginning
•
In
addition,
Airgas
has
significant
“scarcity
value”
as
the
largest
independent packaged gas business in the world
3
3
We believe that Airgas is poised to deliver significant value driven by a
material recovery in our earnings through 2012
Our Board Believes That Air Products’
Our Board Believes That Air Products’
Offer
Offer
Would Deprive You of Full Value
Would Deprive You of Full Value |
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4
4
4
•
Unfolding macro-economic recovery underpins our Same-Store Sales
(“SSS”) growth of ~7% per
year –
Comparable to SSS growth in the prior recovery period
•
As SSS increase, the operating leverage inherent in Airgas business
model has historically translated to a higher EBITDA margin on every
dollar of incremental revenue, and we expect this to continue
•
Business mix is focused on higher-margin activities
–
e.g.
Gas
&
Rent
now
comprises
65%
of
total
sales
versus
55%
1
in
the
prior
recovery period
•
Margin
expansion
is
expected
to
be
further
enhanced
by
continued
focus
on operating efficiencies
•
Investment of nearly $2.5 billion in capex
and acquisitions in the last
three years is not yet fully reflected in current performance
4
4
Why We Expect a Clear Path to EPS of
Why We Expect a Clear Path to EPS of
$4.20+ by CY 2012…
$4.20+ by CY 2012…
1
CY2002. |
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What Happened in the Last Recovery?
What Happened in the Last Recovery?
* See attached reconciliations of non-GAAP measures.
Note: “CAGR”
= Compound Annual Growth Rate.
18% CAGR |
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6
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6
Source: Airgas Management and Wall Street research.
* See attached reconciliations of non-GAAP measures.
Recovery is Demonstrated in Our 1Q
Recovery is Demonstrated in Our 1Q
FY2011 Earnings
FY2011 Earnings
Airgas’
earnings recovery is clearly underway and reinforces our confidence
in our CY2012 EPS goal of $4.20+
We have exceeded the high end of
our guidance and consensus
estimates by 15%
and
Q1 2010 by 26%
Strong operating momentum
is reflected in our 7+%
raise in
guidance
1Q11 has resulted in the highest
EBITDA margin in ARG
history and is
already
within our
CY’12 Goals
1Q FY2011 –
Adj. EPS*
FY2011 –
Adj. EPS*
EBITDA Margin*
Announced
First Fiscal Quarter
Revised Guidance
Actual 1QF11
CY12 Goal |
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7
7
7
7
7
7
7
7
•
Five key factors drive our earnings goal of $4.20+ in CY 2012
I.
Expected recovery of Same-Store Sales growth
II.
Demonstrated operating leverage in the business model
III.
Continued focus on cutting operating costs
IV.
Maintaining higher margin business mix
V.
Realization of anticipated returns on capital investments made in
recent years
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7
Expected Earnings Growth and Strong Cash
Expected Earnings Growth and Strong Cash
Flow are Projected to Underpin Our
Flow are Projected to Underpin Our
Shareholder Value Creation
Shareholder Value Creation |
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8
8
8
8
8
8
8
8
I. Our Projections Assume SSS Growth
I. Our Projections Assume SSS Growth
Comparable to the Last Expansion
Comparable to the Last Expansion
8
8
Calendar Year Same-Store Sales Growth Rate
Note: Represents calendar year ended December 31. 2010 Non-Tech
Industrial Production Growth Rate and ISM Index represent year-to-date data through June.
¹
The ISM Purchasing Managers’
Index is a measure of the overall economic health of the manufacturing sector; a
value above or below 50 represents an expansion or a contraction,
respectively. 2010-2012 Avg:
~7% Airgas Calendar Year
Sales 2003-2005 Avg: 6%
(2)%
0 %
8 %
11 %
10 %
7 %
6 %
(16)%
30.0
40.0
50.0
60.0
70.0
(20)%
(10)%
0 %
10 %
20 %
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011E
2012E
-
Non-Tech IP Growth Rate
ISM Index¹
$1.8
$1.8
$2.2
$2.7
$3.1
$3.8
$4.4
$3.9
$5.2+
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
2002
2003
2004
2005
2006
2007
2008
2009
2012E |
 14%
24%
23%
19%
0 %
10 %
20 %
30 %
2003-2005 Avg
2006
2007
2008
2009
2010-2012 Avg
9
9
9
9
9
9
9
9
9
9
9
9
9
9
II. SSS Growth Drives Substantial EBITDA*
II. SSS Growth Drives Substantial EBITDA*
Growth Due to Operating Leverage
Growth Due to Operating Leverage
Calendar Year Same-Store Sales Growth Rate
Operating Leverage Drives Improved Fall Through
1
(Change in EBITDA* / Change in Sales)
* See attached reconciliations of non-GAAP measures.
1
Fall through has been adjusted for special items.
2
Not meaningful due to negative change in sales in 2009.
Not
Meaningful ²
22+%
~7%
6 %
10 %
7 %
6 %
(16)%
(20)%
(10)%
0 %
10 %
20 %
2003-2005 Avg
2006
2007
2008
2009
2010-2012 Avg |
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10
10
10
10
10
10
10
10
10
III. Operating Leverage Expected to be
III. Operating Leverage Expected to be
Further Enhanced by Ongoing Cost Savings
Further Enhanced by Ongoing Cost Savings
•
Achieved original goal of aggregate $25M annual run-rate cost savings
–
Target announced in September 2007
–
Achieved three quarters ahead of schedule in December 2009
•
In December 2009, we announced incremental savings target of $30M to be
achieved by CY 2012
–
Logistics, plant studies and cylinder testing drive savings
•
Cost savings after 2012 expected to be further enhanced by realization of SAP
benefits
Actual Savings
Through CY09
CY10
CY11
CY12
Expected
Cumulative Savings
Through CY12
Routing logistics
$7M+
$5M
$6M
$7M
$25M+
Cylinder testing
$6M+
$2M
$2M
$1M
$11M+
Freight
$5M+
$1M
$1M
$1M
$8M+
Plant studies
$3M+
$2M
$1M
$1M
$7M+
Fuel
$2M+
-
-
-
$2M+
Indirect spend
$2M
-
-
-
$2M+
Total
$25M+
$10M
$10M
$10M
$55M+
Expected Incremental Savings CY10-CY12 |
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11
11
11
11
11
IV. Business Mix Improvement Produces
IV. Business Mix Improvement Produces
Higher Margins
Higher Margins
Gas/Rent
Gas/Rent
55%
55%
Hardgoods
Hardgoods
45%
45%
Last Recession
1
CY 2009
CY 2009
CY 2012E
CY 2012E
•
Gas/Rent
%
of
Sales:
Significantly
higher
margins
than
Hardgoods
•
RADNOR
Private
Label
%
of
Hardgoods
Sales:
Gross
margins
1.5-2.0x
comparable
OEM
products
•
Atmospheric
Gas
Production
%
of
Total
Atmospheric
Gas
Consumption:
Improves
sourcing
position
to
achieve
lowest
landed
cost
and
higher
margins
Gas/Rent
Gas/Rent
65%
65%
Hardgoods
Hardgoods
35%
35%
Gas/Rent
Gas/Rent
65%
65%
Hardgoods
Hardgoods
35%
35%
Sales
$1.7B
$3.9B
$5.2B+
RADNOR Private Label
(% of Hardgoods
Sales)
~7%
~12%
12-15%
Atmospheric Gas Production
(% Total Atmos. Consumption)
10%
60%+
65%+
EBITDA Margin*
14%
17%
18.0-18.5%
1
CY2002.
* See attached reconciliations of non-GAAP measures.
|
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V. Substantial Investments Since Last Cycle
V. Substantial Investments Since Last Cycle
Should Generate Higher Margins
Should Generate Higher Margins
•
Distribution Footprint:
established national distribution platform, leveraging customer
density, enabling service of large multi-location customers
•
Production Capacity:
increased ASU production capacity has enhanced our sourcing
position
to
achieve
the
lowest
landed
product
cost
1
1
Landed
product
cost
is
the
full
cost
of
a
product
from
sourcing
up
until
the
point
of
sale.
*
See
attached
reconciliations
of
non-GAAP
measures.
Last
Recession
CY‘02
CY’09
Goals
CY’12
Cylinders (in millions)
5+
10+
Bulk Tanks
6,000+
13,500+
Locations
~800
~1,100
ASU Production Capacity (liquid tons per day)
475
6,700
ASU Capacity Utilization
~87%
~70%
Revenue per Employee (in thousands)
$200
$279
Adjusted EBITDA Margin*
13.6%
17.3%
18%-18.5%
Adjusted EPS*
$0.94
$2.67
$4.20+
Substantial
Investments
Operational
Efficiency |
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13
13
13
13
13
Source: Airgas Management.
* See attached reconciliations of non-GAAP measures.
First Quarter Fiscal 2011 Already Within the
First Quarter Fiscal 2011 Already Within the
Range of Our CY 2012 EBITDA Margin Goal
Range of Our CY 2012 EBITDA Margin Goal
EBITDA Margin |
 14
14
14
14
14
14
Source: Airgas Management.
* See attached reconciliations of non-GAAP measures.
On Track To Achieve CY 2012 EPS Goal
On Track To Achieve CY 2012 EPS Goal
•
1H CY2010 Adjusted EPS* increased +13% vs. 1H CY2009
•
1Q FY2011 Adjusted EPS* increased +26% vs. 1Q FY2010
$ 3.30 to
$ 3.15
$ 3.05 to
$ 2.95
18-23% Increase
16% CAGR |
 15
15
15
15
15
15
* See attached reconciliations of non-GAAP measures.
Note: “CAGR”
= Compound Annual Growth Rate.
As a Result, We Expect EPS Growth
As a Result, We Expect EPS Growth
Consistent with Past Recoveries
Consistent with Past Recoveries
$2.20
$2.60
$3.00
$3.40
$3.80
$4.20
$4.60
Dec
-09
Dec
-10
Dec
-11
Dec
-12
Calendar Year
EPS 2009
-2012
$0.80
$0.90
$1.00
$1.10
$1.20
$1.30
$1.40
$1.50
$1.60
Dec
-02
Dec
-03
Dec
-04
Dec
-05
Calendar Year Adjusted
EPS* 2002
-2005
$4.20+
(CY12 Goal)
$2.67*
$1.53
$0.94
16% CAGR
18% CAGR
2
Adj. EPS*
EPS
FY11
Guidance*
(Updated)
$3.30
$3.15
2 |
 16
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16
16
16
16
16
16
16
16
16
16
16
* See attached reconciliations of non-GAAP measures.
Case 1: FY05
(Goals Published May 2001 Analyst Meeting)
Case 2: FY08
(Goals Published November 2004 Analyst Meeting)
Case 3: CY08
(Goals Represent CY08 Component of FY11 Goals
Published September 2007 Analyst Meeting)
We Have a Track Record of Meeting or
We Have a Track Record of Meeting or
Beating Our “Mid-Term”
Beating Our “Mid-Term”
Goals
Goals
Performing well toward FY11 goals
prior to recession
$3.0B
$315M
10-11%
11-12%
$4.0B
$476M
11.9%
13.2%
Sales
Op. Profit
Op. Margin
ROC*
FY08 Goals
FY08 Results
$4.3B
$541M
12.1%-
12.6%
13.2%-
13.7%
$4.4B
$541M
12.2%
13.5%
Sales
Op. Profit
Op. Margin
ROC*
CY08 Goals
CY08 Results
$2.0B
$200M
10.0%
10.0%
$2.4B
$209M
8.8%
10.3%
Sales
Op. Profit*
Op. Margin*
ROC*
FY05 Goals
FY05 Results |
 17
17
17
17
17
17
17
17
17
17
Note: Further benefits expected to be realized from ongoing SAP
implementation. In Addition, Returns from Significant Recent
In Addition, Returns from Significant Recent
Investments Yet to be Fully Realized...
Investments Yet to be Fully Realized...
($ in millions)
Total Capital Deployed
Since January 1, 2007
ASUs (Carrollton, New Carlisle)
$ 80
SAP Implementation to Date
62
CO2 Plants
25
Plant Upgrades / Consolidation
100
Other Capital Expenditures
344
Total Capital Expenditures
$ 990
Linde Bulk Assets
$ 495
Linde Packaged Gas Assets
310
Other Acquisitions
563
Total Acquisitions
$ 1,368
Total Capital Deployed
$ 2,358
Capital
Expenditures
Acquisitions
Total Capital
Deployed
Cylinders & Bulk Tanks
379 |
 18
18
18
18
18
18
Note: Dollars in millions.
*See attached reconciliations of non-GAAP measures.
Air Products’
Initial Proposal
...While Airgas Has Continued to Repay Debt
...While Airgas Has Continued to Repay Debt
and Build Value for Shareholders
and Build Value for Shareholders |
 19
19
19
19
19
19
19
19
19
19
19
19
19
19
The Industrial Gas Sector has Steadily
The Industrial Gas Sector has Steadily
Consolidated…
Consolidated…
Major Industrial Gas Players in 2000
Company
AGA
Air Liquide
Air Products
Airgas
The BOC Group
Hede Nielsen
Japan Air Gases
Linde
Linweld
Messer Griesheim
Nippon Sanso
Praxair
Taiyo Toyo Sanso
Valley National Gases
Company
Enterprise Value ($bn)
Air Liquide
$38
Praxair
31
Linde
28
Air Products
19
Airgas
7
Taiyo Nippon Sanso
6
Major Industrial Gas Players in 2010
Source: Bloomberg market data as of July 16, 2010, public filings.
|
 20
20
20
20
20
20
20
20
20
20
Airgas is the Only Remaining Independent
Airgas is the Only Remaining Independent
Packaged Gas Company of Scale in the World
Packaged Gas Company of Scale in the World
$12B+ U.S. Packaged Gases &
Welding Hardgoods Market
$12B+ U.S. Packaged Gases &
Welding Hardgoods Market
~900
Independents
50%
~900
Independents
50%
Airgas
25%
Airgas
25%
Praxair PDI
Matheson Tri-Gas
Air Liquide
Linde
Packaged Gases
$6.5B+
Packaged Gases
$6.5B+
Welding Hardgoods
$5.5B+
Welding Hardgoods
$5.5B+
•
Air Liquide
•
Air Products
•
Linde
•
Praxair
•
Air Liquide
•
Linde
•
Praxair
•
Taiyo Nippon Sanso
•
Regional Competitors
•
Independents
•
Air Liquide
•
Linde
•
Praxair
•
Taiyo Nippon Sanso
•
Regional Competitors
•
Independents
Safety PPE
$6B+
Other MRO
$50B+
Pipeline & bulk
~$10B |
 21
21
21
21
21
21
21
21
•
As an independent company, Airgas has demonstrated a strong track
record of earnings growth and stock price appreciation
–
Strongly positioned to grow leading share in packaged gas
–
Also strongly positioned to grow share in bulk gases
•
As a result, we believe that Airgas is well positioned to continue to
deliver shareholder value
–
Delivering robust SSS growth
–
Continuing to deliver operating efficiencies
–
Proven history of successful acquisition integration
•
The Airgas Board understands the unique strategic value of the
company
Airgas Represents
Airgas Represents
Significant Strategic Value
Significant Strategic Value |
 22
22
22
22
22
22
22
22
22
22
Source: Bloomberg consensus estimates as of July 16, 2010.
¹
Data indexed to January 2006.
Timing Matters: U.S. Economic Recovery is
Timing Matters: U.S. Economic Recovery is
Just Beginning
Just Beginning |
 23
23
23
23
23
23
23
23
•
Air Products’
proposal would amend Airgas’
bylaws to require Airgas to hold
future Annual Meetings in January
–
Requires Airgas to accelerate its 2011 meeting to elect directors on January
18, 2011 (and all subsequent meetings in January of each year)
•
We believe that implementation of Air Products’
proposals would prevent Airgas’
shareholders from benefiting from the Company’s earnings recovery and
resulting value creation
Full text of the Schedule TO text that was subsequently deleted:
“Given that the economy is just beginning to emerge from recession, Air
Products concluded that the timing is ideal because the combined company
would be able to take full advantage of the substantial growth potential, world-class competencies and
synergies unique to this transaction.”
-
Air Products Schedule TO dated February 11, 2010 (deleted in Schedule 14A dated
June 16, 2010) “Given that the economy is just beginning to
“Given that the economy is just beginning to
emerge from recession, Air Products concluded
emerge from recession, Air Products concluded
that the timing is ideal...”
that the timing is ideal...” |
 24
24
24
24
1
Average
change
in
share
price
of
Praxair,
Air
Liquide,
and
Linde
between
February
5,
2010,
the
date
Air
Products’
$60
proposal
was
made
public,
and
July
8,
2010,
the
date
of
Air
Products’
offer
of
$63.50.
Share
price
changes
denominated
in
the
local
currencies.
2
Based
on
consensus
1Q
FY2011
EPS
estimate
of
$0.72
and
actual
adjusted
EPS
of
$0.83.
...But Air Products’
...But Air Products’
Proposals Haven’t Even
Proposals Haven’t Even
Kept Pace With the Growth in Peer Equity
Kept Pace With the Growth in Peer Equity
Values
Values |
 25
25
25
25
25
25
25
25
•
Peter McCausland
–
Chairman and CEO of Airgas since 1987
–
Airgas Director since 1986 IPO
–
Beneficial ownership of ARG nearly 8.6 million shares*
–
4,201%
Total
Shareholder
Return
since
joining
the
Airgas
Board
1
•
W. Thacher
Brown
–
Chairman, President and a director of 1838 Investment Advisors LLC from 1988 until
retirement in 2004
–
Airgas Director since August 7, 1989
–
Beneficial ownership of ARG nearly 192,000 shares*
–
1,409%
Total
Shareholder
Return
since
joining
the
Airgas
Board
1
•
Richard C. Ill
–
President, CEO, and a director of Triumph Group (NYSE: TGI) since 1993
–
Airgas Director since August 4, 2004
–
Beneficial ownership of ARG 48,500 shares*
–
110%
Total
Shareholder
Return
since
joining
the
Airgas
Board
1
* Source: 2010 proxy statement.
1
Total Shareholder Returns are calculated as share price plus dividends reinvested,
measured through the market close on February 4, 2010, prior to date of
announcement of the Air Products offer. Returns are split-adjusted and are
measured since the later of the director’s start date on Airgas Board or IPO.
Airgas’
Airgas’
Nominees are Keenly Aware of Their
Nominees are Keenly Aware of Their
Fiduciary Duties
Fiduciary Duties
Eight of our Board members are independent and our Board has significant
equity ownership, which we believe closely aligns the existing Airgas Board
with Airgas’
shareholders’
interests |
 26
26
26
26
26
26
26
26
We Believe Air Products’
We Believe Air Products’
Proposals Would
Proposals Would
Facilitate Its Grossly Inadequate Offer
Facilitate Its Grossly Inadequate Offer
•
While Air Products' nominees may not be controlled by Air Products, we believe
their views could be colored by their relationship with Air Products
•
To consider strategies
other than the Air Products offer, we believe it would be in
the best interests of our stockholders if our directors are not associated in any
way with Air Products
•
If you vote for Air Products’
bylaw proposals, you could reduce Airgas’
ability to
create stockholder value and determine strategic direction
Vote your WHITE proxy card FOR the Airgas Nominees and
AGAINST the proposed bylaw amendments |
 Appendix
Appendix |
 28
28
28
28
28
28
28
28
The Company believes the above Adjusted Operating Income and Adjusted Operating
Margin computations help investors assess the Company’s operating
performance
without
the
impact
of
acquisition
integration
costs.
Non-GAAP
numbers
should
be
read
in
conjunction
with
GAAP
financial
measures,
as
non-
GAAP
metrics are merely a supplement to, and not a replacement for, GAAP financial
measures. It should be noted as well that our Adjusted Operating
Income and Adjusted Operating Margin computations may be different from the
Adjusted Operating Income and Adjusted Operating Margin computations
provided by other companies.
Reconciliation: Adjusted Operating Income and
Reconciliation: Adjusted Operating Income and
Adjusted Operating Margin
Adjusted Operating Margin
Fiscal Year Ended
March 31, 2005
Sales
2,367,782
$
Operating Income
202,454
Adjustment:
Acquisition integration costs
6,400
Adjusted Operating Income
208,854
$
Adjusting Operating Margin
8.8% |
 29
29
29
29
29
29
29
29
The Company believes this return on capital computation helps investors assess how
effectively the Company uses the capital invested in its operations. Our
management uses return on capital as one of the metrics for determining employee
compensation. Non-GAAP numbers should be read in conjunction with
GAAP financial measures, as non-GAAP metrics are merely a supplement to, and
not a replacement for, GAAP financial measures. It should be noted as
well that our return on capital computation information may be different from the
return on capital computations provided by other companies. Reconciliation:
Return on Capital Reconciliation: Return on Capital
Calendar Year
(In thousands)
2005
2008
2008
Operating Income - Trailing Four Quarters
210,454
$
476,146
$
541,422
$
Five Quarter Average of Total Assets
2,134,362
$
3,708,389
$
4,122,411
$
Five Quarter Average of Securitized Trade Receivables
183,300
310,880
360,000
Five Quarter Average of Current Liabilities (exclusive of debt)
(274,035)
(421,589)
(459,362)
Five Quarter Average Capital Employed
2,043,627
$
3,597,680
$
4,023,049
$
Return on Capital
10.3%
13.2%
13.5%
Fiscal Year Ended March 31, |
 30
30
30
30
30
30
30
30
The
Company
believes
the
above
adjusted
EBITDA
margin
computations
help
investors
assess
the
Company’s
operating
performance
without
the
impact
of
depreciation
and
amortization
and
charges
associated
with
the
Company’s
withdrawal
from
multi-employer
pension
plans,
costs
related
to
Air
Products’
unsolicited
takeover
attempt,
significant
legal
settlements
and
restructuring
charges.
Non-GAAP
numbers
should
be
read
in
conjunction
with
GAAP
financial
measures,
as
non-GAAP
metrics
are
merely
a
supplement
to,
and
not
a
replacement
for,
GAAP
financial
measures.
It
should
be
noted
as
well
that
our
Adjusted
EBITDA
metric
may
be
different
from
similar
metrics
provided
by
other
companies.
Reconciliation: Adjusted EBITDA Margin
Reconciliation: Adjusted EBITDA Margin
Three Months Ended
Six Months Ended
Low
High
2009
2002
June 30, 2010
June 30, 2010
Sales
5,200,000
$
5,200,000
$
3,886,671
$
1,714,527
$
1,052,656
$
2,035,964
$
Operating Income
648,000
$
675,000
$
432,221
$
142,442
$
122,751
$
204,634
$
Adjustments:
Depreciation & Amortization
286,000
286,000
231,518
79,294
60,467
121,440
Costs related to unsolicited takeover attempt
-
-
-
-
3,787
27,222
Multi-employer pension plan withdrawal charges
-
-
6,650
-
3,204
3,204
Legal Settlement
-
-
-
8,500
-
-
Restructuring charges
-
-
-
2,700
-
-
Other
-
-
400
-
-
-
Adjusted EBITDA
934,000
$
961,000
$
670,790
$
232,936
$
190,209
$
356,500
$
Adjusted EBITDA Margin
18.0%
18.5%
17.3%
13.6%
18.1%
17.5%
Calendar Year
2012 Target |
 31
31
31
31
31
31
31
31
The
Company
believes
that
using
adjusted
EBITDA
in
its
Percentage
of
Adjusted
EBITDA
Fall
Through
metric
provide
investors
meaningful
insight
into
the
Company's
trend
of
the
increase
in
Adjusted
EBITDA
for
every
dollar
of
increased
sales
without
the
impact
of
costs
related
to
the
unsolicited
takeover
attempt,
multi-employer
pension
plan
withdrawal
charges,
restructuring
charges,
fire
losses,
costs
of
integration
for
significant
acquisitions,
employee
separation
costs
and
hurricane
losses
.
Non-GAAP
numbers
should
be
read
in
conjunction
with
GAAP
financial
measures,
as
non-GAAP
metrics
are
merely
a
supplement
to,
and
not
a
replacement
for,
GAAP
financial
measures.
It
should
be
noted
as
well
that
our
Percentage
of
Adjusted
EBITDA
Fall
Through
metric
may
be
different
from
similar
metrics
provided
by
other
companies.
Reconciliation: Adjusted EBITDA Fall Through
Reconciliation: Adjusted EBITDA Fall Through
Average
Average
(in thousands)
2003 to 2005
2006
2007
2008
2010E to 2012E
Sales
2,246,184
$
3,098,086
$
3,792,509
$
4,456,256
$
4,700,000
$
Change in sales
337,518
$
371,006
$
694,423
$
663,747
$
435,000
$
Operating Income
201,877
$
322,300
$
437,733
$
541,422
$
565,000
$
Adjustments:
Depreciation & Amortization
104,021
142,021
179,545
211,885
264,283
Costs related to unsolicited takeover attempt
-
-
-
-
9,074
Multi-employer pension plan withdrawal charge
-
-
-
-
1,068
Restructuring charge (recovery)
(267)
-
-
-
-
Fire Losses
933
-
-
-
-
Acquisition integration costs
1,600
-
10,100
-
-
Employee seperation
costs
533
-
-
-
-
Hurricane losses
733
-
-
-
-
Adjusted EBITDA
309,431
$
464,321
$
627,378
$
753,307
$
839,425
$
Change in adjusted EBITDA
47,869
$
87,777
$
163,057
$
125,929
$
97,000
$
Percentage adjusted EBITDA fall through
14%
24%
23%
19%
22%
Calendar Year |
 32
32
32
32
32
32
32
32
The Company believes that adjusted earnings per diluted share above provide
investors meaningful insight into the Company's earnings trend without the
impact of debt extinguishment charges, multi-employer pension plan withdrawal
charges, the settlement of material litigation, restructuring charges, insurance
gains,
fire
losses,
the
costs
of
the
BOC
acquisition
integration,
employee
separation
costs,
hurricane
losses
and
losses
from
discontinued
operations.
Non-
GAAP numbers should be read in conjunction with GAAP financial measures, as
non-GAAP metrics are merely a supplement to, and not a replacement for,
GAAP financial measures.
It should be noted as well that our adjusted earnings per diluted share metric may
be different from adjusted earnings per diluted share metrics provided by
other companies. Reconciliation: Adjusted Earnings Per Share
Reconciliation: Adjusted Earnings Per Share
Three Months Ended
Low
High
June 30, 2010
2009
2005
2004
2003
2002
Earnings per diluted share
3.08
$
3.23
$
0.76
$
2.55
$
1.48
$
1.18
$
1.04
$
0.82
$
Adjustments:
Costs related to unsolicited takeover attempt
0.03
0.03
0.03
-
-
-
-
-
Debt extinguishment charges
0.02
0.02
0.02
0.07
-
-
-
-
Multi-employer pension plan withdrawal charges
0.02
0.02
0.02
0.05
-
-
-
-
Legal Settlement
-
-
-
-
-
-
-
0.08
Restructuring charge (recovery)
-
-
-
-
-
(0.01)
-
0.03
Insurance gain
-
-
-
-
-
-
(0.02)
-
Fire Losses
-
-
-
-
-
-
0.02
-
Acquisition integration costs
-
-
-
-
0.01
0.03
-
-
Employee separation costs
-
-
-
-
0.01
-
-
-
Hurricane losses
-
-
-
-
0.02
-
-
-
Losses from discontinued operations
-
-
-
-
0.01
-
0.01
0.01
Adjusted earnings per diluted share
3.15
$
3.30
$
0.83
$
2.67
$
1.53
$
1.20
$
1.05
$
0.94
$
Calendar Year
(Updated Guidance)
Fiscal Year Ending March 31, 2011 |
 33
33
33
33
33
33
33
33
The Company uses adjusted debt to provide investors with a more meaningful measure
of the Company's debt obligations be adjusting for funds received
under
the
trade
receivable
securitization
program.
The
Company
believes
that
using
adjusted
EBITDA
provide
investors
meaningful
insight
into
the
Company's performance trend without the impact of costs related to the unsolicited
takeover attempt, and multi-employer pension plan withdrawal
charges.
Non-GAAP numbers should be read in conjunction with GAAP financial measures,
as non-GAAP metrics are merely a supplement to, and not a replacement
for, GAAP financial measures. Reconciliation: Adjusted Debt & EBITDA
Reconciliation: Adjusted Debt & EBITDA
Reconciliation of Adjusted debt:
June 30,
December
June 30,
December
June 30,
December
June 30,
(In thousands)
2007
2007
2008
2008
2009
2009
2010
Current portion of long-term debt
41,773
$
40,554
$
43,458
$
10,227
$
11,033
$
10,103
$
9,589
$
Long-term debt, excluding current portion
1,598,004
1,493,901
1,537,696
1,810,181
1,675,194
1,604,070
1,711,630
Net debt
1,639,776
1,534,455
1,581,154
1,820,408
1,686,227
1,614,173
1,721,219
Securitization of trade receivables
285,000
360,000
360,000
360,000
295,500
267,900
-
Adjusted debt
1,924,776
$
1,894,455
$
1,941,154
$
2,180,408
$
1,981,727
$
1,882,073
$
1,721,219
$
Three Months
Three Months
Three Months
Three Months
Three Months
Three Months
Three Months
Reconciliation of Adjusted EBITDA:
ended
ended
ended
ended
ended
ended
ended
June 30,
December
June 30,
December
June 30,
December
June 30,
(In thousands)
2007
2007
2008
2008
2009
2009
2010
Operating Income
111,037
$
118,329
$
134,856
$
130,522
$
107,910
$
99,988
$
122,751
$
Adjustments:
Depreciation & Amortization
44,472
48,072
53,502
54,740
56,400
59,454
60,467
Costs related to unsolicited takeover attempt
3,787
Multi-employer pension plan withdrawal charge
4,950
3,204
Adjusted EBITDA
155,509
$
166,401
$
188,359
$
185,262
$
164,310
$
164,392
$
190,209
$
|