Airgas (ARG)

Q3 2011 Earnings Call

January 21, 2011 11:30 am ET


Michael Molinini - Chief Operating Officer and Executive Vice President

Peter McCausland - Chief Executive Officer, President, Director and Member of Executive Committee

R. Worley - Vice President of Communications & Investor Relations

Robert McLaughlin - Chief Financial Officer and Senior Vice President


Brian Maguire

Mark Gulley - Soleil Securities Group, Inc.

David Begleiter - Deutsche Bank AG

Michael Sison - KeyBanc Capital Markets Inc.

Ryan Merkel - William Blair & Company L.L.C.

Michael Harrison - First Analysis

David Manthey - Robert W. Baird & Co. Incorporated

Kevin McCarthy

Thomas Hayes - Piper Jaffray Companies

Laurence Alexander - Jefferies & Company, Inc.



Good morning and welcome to the Airgas Third Quarter 2011 Earnings Conference Call. [Operator Instructions] For opening remarks and introductions, I will now turn the call over to Vice President of Communications and Investor Relations, Jay Worley. Please go ahead, sir.

R. Worley

Good morning, and thank you for attending our third quarter earnings teleconference. Joining me today are Peter McCausland, CEO; Mike Molinini, Executive Vice President and COO; and Bob McLaughlin, Senior Vice President and CFO. Our earnings press release was made public this morning and is available on our website as are the teleconference slides. To follow along, please go to, click on the Investors shortcut at the top of the screen, then go to the Earnings Calls and Events page. During the course of our presentation, we will make reference to certain non-GAAP financial measures. Please note that unless specified otherwise, metrics referred to in today's discussion will be adjusted for the unusual items identified in our earnings materials. Reconciliations to the most comparable GAAP measures can be found in our earnings release, in the slide presentation and on our website. This teleconference will contain forward-looking statements based on current expectations regarding important risk factors, which are identified in the earnings release and our slide presentation. Actual results may differ materially from these statements, so we ask that you please note our Safe Harbor language. We also ask that you note the additional information provided on Slide 1 of the presentation.

We'll take questions after concluding our prepared remarks as time permits. Given our full agenda, we ask that you keep your questions focused on earnings results and business fundamentals. And now I'll turn the call over to Peter to begin our review.

Peter McCausland

Thanks, Jay. Good morning, and thank you all for joining us. Our strong third quarter results serve to reinforce the message we have expressed for some time now, that Airgas shareholders are just beginning to reap significant benefits as the economy recovers from a recession. We have proven year after year our ability to create real shareholder value, and we think this quarter is another indication of a very bright future. Before reviewing our earnings results, I'd like to briefly address the Air Products unsolicited offer. On December 9, Air Products announced a revised tender offer to acquire all outstanding shares of Airgas at $70 per share, which it characterized as its best and final offer. On December 13, we announced that the nine independent directors of the Airgas board had unanimously selected Crédit Suisse as the third independent financial adviser to the Airgas board. In evaluating the offer with its independent financial and legal advisers, the board considered the factors later described in our amended scheduled 14D-9, including improvements in the company's business, in the market performance of our business sector and in the operating and economic environment. On December 22, we announced that our board had unanimously rejected the Air Products' offer as clearly inadequate and affirmed the view that the value of Airgas and its sale at this time is at least $78 per share. Each of the three independent financial advisers provided the board with an opinion that the price offered by Air Products was inadequate. To sum it up, that's 10 out of 10 directors and three out of three investment banks. There have been many important developments since the date of the initial Air Products public offer, including improvements in the U.S. economy, improved performance by our company and other companies in our industry and expansion in the market multiples of other companies in our industry. As we have described in our prior filings, these factors all support our view that the Air Products' offer represents a small premium to what we believe would be our undisturbed trading range, certainly not enough to earn control of the largest packaged gas company in the world, with growth opportunities and a track record of performance like ours. We strongly recommend that Airgas stockholders not tender their shares into the Air Products' revised offer.

Since Air Products commenced its tender offer, we have delivered excellent results and economic conditions have continued to improve. We have reduced our adjusted debt by $255 million since Air Products approached us with a $62 offer in December 2009, and we have delivered a tremendous increase in earnings. We are now in the early stages of economic recovery, with significant potential for sales growth in front of us. Our strategy through the downturn was to position Airgas to emerge from the recession as an even stronger company and our results demonstrate our success. Next week, the Delaware Chancery Court will hold a hearing related to the validity of Airgas' shareholders rights plan, an important element of our corporate governance structure that protects stockholders from an inadequate offer to acquire the company. We expect a ruling from the court on this matter at the end of this month or early next month.

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