SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
AIRGAS, INC.
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(Name of Registrant as Specified In Its Charter)
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(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)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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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):
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4. Proposed maximum aggregate value transaction:
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5. Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
1. Amount previously paid:
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2. Form, Schedule or Registration Statement No.:
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<PAGE>
[AIRGAS LOGO]
Radnor Court
259 North Radnor-Chester Road, Suite 100
Radnor, Pennsylvania 19087-5283
June 30, 2000
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held on Thursday, August 3, 2000, at 2:00 p.m., Eastern Daylight Time, at the
Company's offices at 259 North Radnor-Chester Road, Radnor, Pennsylvania 19087.
The accompanying Notice of Meeting and Proxy Statement describe the
matters to be acted upon during the Annual Meeting. You are welcome to present
your views on these items and other subjects related to the Company's
operations. Your participation in the activities of the Company is important,
regardless of the number of shares you hold.
To ensure that your shares are represented at the Annual Meeting, whether
or not you are able to attend, please complete the enclosed proxy and return it
to us in the postage-paid envelope.
I hope you will attend the Annual Meeting.
Sincerely,
/s/ Peter McCausland
Peter McCausland
Chairman and Chief Executive Officer
<PAGE>
AIRGAS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 3, 2000
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TO THE STOCKHOLDERS:
The Annual Meeting of the Stockholders of Airgas, Inc. (the "Company"), a
Delaware corporation, will be held on Thursday, August 3, 2000, at 2:00 p.m.,
Eastern Daylight Time, at the Company's offices at 259 North Radnor-Chester
Road, Radnor, Pennsylvania 19087, for the following purposes:
1. To elect three Directors of the Company.
2. To vote upon a proposal to ratify the selection of KPMG LLP as the
Company's independent auditors for the fiscal year ending March 31,
2001.
3. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Stockholders of record at the close of business on June 9, 2000, are
entitled to notice of, and to vote at, the Annual Meeting and any adjournments
thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person, but whether or not you plan to attend, please promptly sign, date and
mail the enclosed proxy in the return envelope. Returning your proxy does not
deprive you of the right to attend the Annual Meeting and vote your shares in
person.
By Order of the Board of Directors,
/s/ Todd R. Craun
Todd R. Craun, Esq.
Secretary
Radnor, Pennsylvania
June 30, 2000
The Company's Annual Report for the year ended March 31, 2000, accompanies
this notice, but is not incorporated as part of the proxy statement and is not
to be regarded as part of the proxy solicitation material.
<PAGE>
AIRGAS, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies at the direction of the Board of Directors of Airgas, Inc. (the
"Company") for use at the Annual Meeting of Stockholders to be held on August 3,
2000.
Stockholders of record at the close of business on June 9, 2000, will be
entitled to vote at the Annual Meeting. At the close of business on June 9,
2000, 72,807,857 shares of the Company's $0.01 par value common stock ("Common
Stock") were outstanding and entitled to vote. A stockholder is entitled to one
vote for each share of Common Stock held by such stockholder. This Proxy
Statement and the enclosed form of proxy are being mailed to the Company's
stockholders on or about June 30, 2000.
Shares represented by a proxy in the accompanying form, unless previously
revoked, will be voted at the Meeting if the proxy is returned to the Company
properly executed and in sufficient time to permit the necessary examination and
tabulation before a vote is taken. A proxy may be revoked at any time prior to
its exercise by giving written notice to the Secretary of the Company, by giving
a later dated proxy, or by voting in person at the meeting. Mere attendance at
the Annual Meeting will not revoke the proxy. Any specific instructions
indicated on your proxy will be followed. Unless contrary instructions are
given, your proxy will be voted FOR each of the proposals described in this
Proxy Statement and in the discretion of the proxy holders on such other
business as may properly come before the Annual Meeting.
Abstentions are counted as shares present for purposes of determining the
presence or absence of a quorum for the transaction of business. Brokers holding
shares for beneficial owners must vote their shares according to the specific
instructions they receive from the owners. If specific instructions are not
received, brokers may vote these shares at their discretion, except if they are
precluded from exercising their voting discretion on certain proposals pursuant
to the rules of the New York Stock Exchange. In such a case, the broker may not
vote on the proposal absent specific voting instructions. This results in what
is known as a "broker non-vote." A broker non-vote has the effect of a negative
vote when a majority of the shares issued and outstanding is required for
approval of the proposal. A broker non-vote has the effect of reducing the
number of required affirmative votes when a majority of the shares present and
entitled to vote or a majority of the votes cast is required for approval of the
proposal. The election of each nominee for director (Proposal 1) requires a
plurality of votes cast. Brokers have discretionary authority to vote on this
proposal. Ratification of the selection of the auditors (Proposal 2) requires
the approval of a majority of the outstanding shares of Common Stock represented
and entitled to vote at the meeting. Brokers are not precluded from voting on
Proposal 2, and therefore abstentions and broker non-votes will have the same
effect as a vote against the proposal. The New York Stock Exchange determines
whether brokers have discretionary authority to vote on a given proposal.
<PAGE>
The cost of proxy solicitation, including the cost of reimbursing banks
and brokers for forwarding proxies and proxy statements to beneficial owners of
the Common Stock, will be paid by the Company. Proxies will be solicited without
extra compensation by certain officers and regular employees of the Company by
mail and, if found to be necessary, by telephone and personal interviews. The
Company has also retained Corporation Investor Communications, Inc. to assist in
the solicitation of proxies at an anticipated fee of $5,000.
ELECTION OF DIRECTORS
The Bylaws of the Company presently provide that the Board of Directors
shall designate the number of directors constituting the Board of Directors,
which shall be no less than seven and no more than thirteen members. Currently,
that number has been fixed by the Board of Directors at nine. The Board of
Directors consists of three classes, with directors of one class to be elected
each year, for terms extending to the annual meeting of stockholders held in the
third year following the year of their election. The three directors whose terms
expire at the 2000 Annual Meeting have been nominated to serve for a term
expiring at the 2003 Annual Meeting.
The names and biographical summaries of the three persons who have been
nominated to stand for election at the 2000 Annual Meeting and the remaining
directors whose terms are continuing until the 2001 or 2002 Annual Meetings
appear below. Paula A. Sneed and David M. Stout were appointed to the Board in
August 1999, and James W. Hovey was appointed to the Board in October 1999. Of
the continuing directors, W. Thacher Brown, Frank B. Foster, III and Peter
McCausland were elected by the stockholders at the 1998 Annual Meeting and John
A. H. Shober, Lee M. Thomas and Robert L. Yohe were elected by the stockholders
at the 1999 Annual Meeting.
All nominees have indicated that they are willing and able to serve as
directors if elected. In the event that any nominee should become unavailable,
the proxy will be voted for the election of any substitute nominee designated by
the Board of Directors or its Governance and Compensation Committee.
The Board of Directors recommends that you vote FOR the election of Ms.
Sneed, Mr. Hovey and Mr. Stout.
Set forth below is certain information regarding the three nominees for
election at the Annual Meeting and the remaining six directors whose terms are
continuing until the 2001 and 2002 Annual Meetings.
Nominees For Election for Terms Expiring at the 2003 Annual Meeting:
Paula A. Sneed Ms. Sneed, age 52, has been the Executive Vice President
of Kraft Foods, Inc., an international food business,
and President of its E-Commerce Division, since
September 1999. Ms. Sneed is also a member of Kraft's
Operating Committee. She was Senior Vice President,
Marketing Services and Chief Marketing Officer of Kraft
Foods, Inc., an international food business, from
January 1995 until September 1999, where her
responsibilities include media and advertising services,
marketing information systems and corporate and consumer
promotions. Ms. Sneed joined General Foods Corporation
(which merged with Kraft
2
<PAGE>
Foods) in 1977, and has served in various executive
positions since 1986. Ms. Sneed also serves as a
director of Hercules, Inc., and is member of the Board
of Westchester/Fairfield Inroads and the Board of
Visitors of Howard University School of Business. Ms.
Sneed has been a director of the Company since August
1999.
James W. Hovey Mr. Hovey, age 54, is President of The Fox Companies, a
diversified real estate development firm, which he
joined in 1972, where he has been responsible for the
development of numerous housing units and office
buildings, and of a sports arena. In conjunction with
The Fox Companies, Mr. Hovey is also currently involved
in several start-up business ventures, including sales
forecasting software and fitness and health care. Mr.
Hovey also serves as an overseer of the Graduate School
of the University of Pennsylvania, a director of the
National Association of Industrial and Office
Properties, a member of the Advisory Board of the
Wharton School Real Estate Center, a trustee of
Eisenhower Exchange Fellowships, Inc., and a trustee of
the World Affairs Council in Philadelphia. Mr. Hovey has
been a director of the Company since October 1999.
David M. Stout Mr. Stout, age 46, has been President,
Pharmaceuticals-North America, for SmithKline Beecham
since 1998. Prior to that, he served as Senior Vice
President and Director, Sales and Marketing-U.S., for
SmithKline Beecham from October 1996 until 1998. Mr.
Stout was President of Schering Laboratories, a division
of Schering-Plough Corporation, from 1994 until 1996. He
held various executive and sales and marketing positions
with Schering-Plough from 1979, when he joined the
company, until 1994. Mr. Stout serves as a member of the
Board of Trustees of Magee Rehabilitation Hospital and
the Board of Trustees of Western Maryland College, and
is a member of the Pharmaceutical Marketing Professional
Advisory Board of Saint Joseph's University. Mr. Stout
has been a director of the Company since October 1999.
Directors Serving for Terms Expiring at the 2001 Annual Meeting:
W. Thacher Brown Mr. Brown, age 52, has been the Chairman, President and
a director of 1838 Investment Advisors, Inc., an
investment management company, since July 1988,
President of 1838 Investment Advisors Funds since 1995,
President of MBIA Asset Management since 1998 and Chief
Investment Officer of MBIA Insurance Company since 1999.
He is a director of the 1838 Bond Debenture Trading Fund
Inc., the 1838 Investment Advisors Funds and The
Harleysville Mutual Insurance Company, and was a Senior
Vice President and a director of Drexel Burnham Lambert
Incorporated for more than four years prior to 1988. Mr.
Brown has been a director of the Company since 1989.
3
<PAGE>
Frank B. Foster, III Mr. Foster, age 66, has been Chairman of DBH Associates,
a venture capital/consulting firm, since 1987. He was
President and CEO of Diamond-Bathurst Inc., a
publicly-held manufacturer of glass containers, from
1975 until he founded DBH. He also serves as a director
of Contour Packaging, FinCom Corporation, 1838
Investment Advisors Funds and OAO Technology Solutions,
Inc. Mr. Foster has been a director of the Company since
1986.
Peter McCausland Mr. McCausland, age 50, has been a director of the
Company since June 1986, the Chairman of the Board and
Chief Executive Officer of the Company since May 1987,
President from June 1986 to August 1988, from April 1,
1993 to November 30, 1995 and from April 1, 1997 to
January 1999. Mr. McCausland serves as a director of
Hercules, Inc. and as a member of the Board of Trustees
of Eisenhower Exchange Fellowships, Inc.
Directors Serving for Terms Expiring at the 2002 Annual Meeting:
John A.H. Shober Mr. Shober, age 67, is a private investor and corporate
director. He has been a director of Penn Virginia
Corporation, a natural resources company, since 1978,
Vice Chairman of the Board of Directors from 1992 to
1996, and President and Chief Executive Officer from
1989 to 1992. Mr. Shober also serves as Vice Chairman of
the Board of Directors of MIBRAG mbH and a director of
Anker Coal Group, Inc., C&D Technologies, Inc., Ensign
Bickford Industries, Inc., First Reserve Corporation,
Hercules, Inc., and is a member of the Board of Trustees
of Eisenhower Exchange Fellowships, Inc. Mr. Shober has
served as a director of the Company since 1990.
Lee M. Thomas Mr. Thomas, age 56, is the Executive Vice
President-Paper and Chemicals of Georgia-Pacific
Corporation. Mr. Thomas has held this and other senior
executive positions within Georgia-Pacific Corporation
since 1993. Prior to that, he was Chairman and Chief
Executive Officer of Law Companies Environmental Group
Inc. and has held numerous federal and state government
positions, including with the U.S. Environmental
Protection Agency, the Federal Emergency Management
Agency and the Office of the Governor of South Carolina.
Mr. Thomas also serves as a member of the Board of
Directors of Research Atlanta. Mr. Thomas has served as
a director of the Company since August 1998.
Robert L. Yohe Mr. Yohe, age 64, is an independent investor, corporate
director and advisor. He was Vice Chairman of Olin
Corporation and a member of its Board of Directors until
1994. Mr. Yohe is a Director of Calgon Carbon
Corporation, LaRoche Industries Inc., Marsulex Inc. and
The Middleby Corporation. He also is a trustee of
Lafayette College. Mr. Yohe has served as a director of
the Company since 1994.
4
<PAGE>
Board of Directors and Committees
The Board of Directors held six meetings during the year ended March 31,
2000. The average attendance by directors at these meetings was 93 percent. No
incumbent director attended less than 75 percent of the aggregate Board and
Committee meetings they were scheduled to attend.
The standing committees of the Board of Directors are an Executive
Committee, a Governance and Compensation Committee and an Audit Committee. The
Governance and Compensation Committee and the Audit Committee each held four
meetings during the year ended March 31, 2000.
The members of the Executive Committee are Messrs. McCausland, Brown and
Foster. As authorized by Delaware law and the Company's Bylaws, the Executive
Committee may exercise all of the powers of the Board of Directors when the
Board is not in session, except that it may not elect directors or appoint
officers, amend the Bylaws, declare dividends, appoint members of the Executive
Committee, approve the acquisition of substantially all the assets or capital
stock of a corporation or business entity which has annual sales in excess of
20% of the annual sales of the Company or take any other action which may only
be taken by the Board.
The members of the Governance and Compensation Committee are Messrs.
Brown, Thomas, and Yohe. Its responsibilities include the review of compensation
practices and corporate benefit plans of the Company, and the review and
recommendation of prospective officers and Board members. The Governance and
Compensation Committee or the Board of Directors will consider written
recommendations for nominees for directors which are submitted in accordance
with the Company's Bylaws. Under the Bylaws, stockholders are entitled to
nominate persons for election as directors only if, among other things, written
notice has been given, in the case of an annual meeting, not earlier than 120
days and not later than 90 days prior to the anniversary of the preceding year's
annual meeting. The notice must set forth information about the proposed nominee
and the consent of the nominee, among other things.
The members of the Audit Committee are Messrs. Foster, Shober and Hovey.
The Audit Committee and the Board have ultimate authority and responsibility to
select, evaluate and, when appropriate, replace the Company's independent
auditors. The Audit Committee recommends for approval by the Board of Directors
and ratification by the stockholders an independent firm of certified public
accountants whose duty it is to audit the financial statements of the Company
for the fiscal year in which they are appointed. The Audit Committee monitors
the activities of the Company's internal and external auditors, including the
audit scope, the external audit fees, auditor independence matters and the
extent to which the independent auditors may be retained to perform advisory
services. The Audit Committee also reviews the results of the internal and
external audit work to assess the adequacy and appropriateness of the company's
financial and accounting controls. The Audit Committee reviews changes in
accounting standards that impact the financial statements and discusses with
management major events, including legal matters and tax audits, that may have
significant financial impact or are the subject of discussions with the
independent auditors. The composition of the Audit Committee and the attributes
of its members, and the responsibilities of the Audit Committee as reflected in
its charter as revised in May 2000, are intended to be in accord with Securities
and Exchange Commission rules and New York Stock Exchange listing requirements
adopted in December 1999 with regard to corporate audit committees.
5
<PAGE>
Compensation of Directors
Directors who are not employees of the Company are paid an annual retainer
of $12,000 plus a fee of $1,500 for each Board or Committee meeting attended,
and are entitled to participate in the 1997 Directors' Stock Option Plan (the
"Directors' Plan").
In order to closely align the interests of directors with those of
stockholders, a majority of the directors' compensation is in the form of stock
options. The number of options granted is determined annually by the Governance
and Compensation Committee. The exercise price of each option is equal to the
fair market value on the date of grant, is exercisable immediately and has a
term of 10 years. On July 30, 1999, each Board member was granted 6,250 options
with a $12.25 exercise price. Board members who were appointed during fiscal
2000 to fill vacancies were each granted options to acquire 6,250 shares with an
exercise price of $12.25.
The Chairmen of the Audit Committee and the Governance and Compensation
Committee also receive an additional $3,000 annual retainer. Directors are also
reimbursed for their travel expenses for attendance at Board and Committee
meetings.
Filings Under Section 16(a)
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of the securities with the Securities and
Exchange Commission and the New York Stock Exchange. Such persons are also
required to furnish the Company with copies of all Section 16(a) forms they
file. The Company knows of no greater than ten percent stockholders, other than
one person who is an officer and director.
Based solely on its review of the copies of the forms received by it with
respect to the 2000 fiscal year, or written representations from certain
reporting persons that no Forms 5 were required, the Company believes that all
of its officers and directors complied with all filing requirements applicable
to them.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation paid during the fiscal years ended March 31, 2000, 1999 and 1998 to
the Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers based on salary and bonus earned during
the 2000 fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------- ---------------------------------------------------
Securities All Other
Name and Principal Fiscal Other Annual Restricted Underlying LTIP Compensation
Position Year Salary($) Bonus($) Compensation Stock Awards Options(#) Payouts ($)(1)
-------- ---- --------- -------- ------------ ------------ ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter McCausland 2000 550,000 100,000 (1) None 130,000 None 5,530 (2)
Chairman and 1999 550,000 -0- None 130,000 None 4,778
Chief Executive Officer 1998 550,000 497,750 None 130,000 None 5,070
William A. Rice, Jr 2000 300,000 52,500 (1) None 50,000 None 6,946 (4)
President and Chief 1999 225,000 60,356 None 85,000 None 6,861
Operating Officer (3) 1998 175,000 112,788 None 25,000 None 7,136
Ted R. Schulte 2000 216,420 75,260 (1) None 21,000 None 4,503 (6)
Vice President- 1999 184,120 89,270 None 16,500 None 4,458
Gas Operations (5) 1998 68,105 41,395 None 0 None 145
Samuel H. Goldstein 2000 190,000 43,510 (1) None 21,000 None 7,012 (8)
Senior Vice President- 1999 180,000 45,000 None 27,500 None 6,376
Information Services 1998 170,000 61,540 None 10,000 None 4,861
and Chief Information
Officer (7)
Alfred B. Crichton 2000 180,000 44,105 (1) None 26,000 None 7,308 (10)
Division President- 1999 170,000 28,050 None 35,000 None 6,766
West (9) 1998 156,000 88,842 None 25,000 None 6,846
</TABLE>
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(1) Amount does not exceed the lesser of $50,000 or 10% of total salary
and bonus.
(2) Consists of $5,368 of employer matching contributions and additional
discretionary contributions based on the profitability of the
Company under the Company's 401(k) Plan, and the value of life
insurance premiums of $162 paid for the benefit of Mr. McCausland.
(3) Mr. Rice served as Group President - Airgas Direct Industrial from
March 1997 until January 1999, and has been President and Chief
Operating Officer since January 1999.
(4) Consists of $6,784 of employer matching contributions and additional
discretionary contributions based on the profitability of the
Company under the Company's 401(k) Plan and the value of life
insurance premiums of $162 paid for the benefit of Mr. Rice.
(5) Mr. Schulte has served as Vice President - Gas Operations since
November 1998.
(6) Consists of $4,341 of employer matching contributions and additional
discretionary contributions based on the profitability of the
Company under the Company's 401(k) Plan and the value of life
insurance premiums of $162 paid for the benefit of Mr. Schulte.
(7) Mr. Goldstein has served as Senior Vice President-Information
Services and Chief Information Officer since January 1999, and
served as Vice President-Information Services and Chief Information
Officer from September 1996 until December 1998.
7
<PAGE>
(8) Consists of $6,850 of employer matching contributions and additional
discretionary contributions based on the profitability of the
Company under the Company's 401(k) Plan and the value of life
insurance premiums of $162 paid for the benefit of Mr. Goldstein.
(9) Mr. Crichton has been Division President-West since February 1993.
(10) Consists of $7,146 of employer matching contributions and additional
discretionary contributions based on the profitability of the
Company under the Company's 401(k) Plan and the value of life
insurance premiums of $162 paid for the benefit of Mr. Crichton.
Option Grants During Fiscal Year 2000
The following table provides information related to options granted to the
named executive officers during fiscal year 2000. The Company does not have any
outstanding stock appreciation rights.
<TABLE>
<CAPTION>
Potential Realization Value at Assumed
Annual Rates of Stock Price Appreciation
Individual Grants for Option Term (1)
-------------------------------------------------------------------------------- -----------------------------------------
No. of
Securities % of Total
Underlying Options
Options Granted to
Granted Employees in Exercise Expiration
Name (#)(2) Fiscal Year Price ($/Sh) Date 0%($)(3) 5%($)(3) 10%($)(3)
------------------- ---------- ------------ ------------ ------------ -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Peter McCausland 130,000 11.5% $11.50 May 18, 2009 $0 $940,197 $2,382,645
William A. Rice, Jr 50,000 4.4 11.50 May 18, 2009 0 361,614 916,402
Ted R. Schulte 21,000 1.9 11.50 May 18, 2009 0 151,878 384,889
Samuel H. Goldstein 21,000 1.9 11.50 May 18, 2009 0 151,878 384,889
Alfred B. Crichton 26,000 2.3 11.50 May 18, 2009 0 188,039 476,529
</TABLE>
----------
(1) These amounts, based on assumed appreciation rates of 0%, 5% and 10%
prescribed by the Securities and Exchange Commission rules, are not
intended to forecast possible future appreciation, if any, of the
Company's stock price.
(2) Represents options to acquire shares of Common Stock, which become
exercisable in four equal annual installments beginning on the date
of their grant.
(3) No gain to the optionees is possible without an increase in stock
price, which will benefit all stockholders. If the named executive
officers realize the appreciated values based on the 5% and 10%
appreciation rates set forth in the table, total stockholder value
will have appreciated by approximately $527 million and $1.3
billion, respectively, and the value of the named executive
officers' appreciation will be approximately 0.3% of the total
stockholders' appreciation. Potential stock price appreciation to
all stockholders is calculated based on a total of 72.8 million
shares of Common Stock outstanding and entitled to vote on June 9,
2000 and a price of $11.50 per share, the weighted average exercise
price of options granted in fiscal year 2000 referred to in the
table above.
8
<PAGE>
Aggregated Option Exercises During Fiscal Year 2000
and Fiscal Year-End Option Values
The following table provides information related to employee options
exercised by the named executive officers during fiscal year 2000 and the number
and value of such options held at fiscal year-end.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End(#) at Fiscal Year-End($)(2)
Shares Acquired Value ------------------------- -------------------------
Name on Exercise (#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
------------------- --------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter McCausland 241,867 $1,734,186 885,369 292,500 $2,992,862 -0-
William A. Rice, Jr -0- -0- 143,150 131,250 38,720 -0-
Ted R. Schulte -0- -0- 4,125 33,375 -0- -0-
Samuel H. Goldstein -0- -0- 19,375 49,125 -0- -0-
Alfred B. Crichton 4,000 17,440 195,850 69,750 210,960 -0-
</TABLE>
----------
(1) Represents the difference between the option exercise price and the
market value on the date of exercise.
(2) Value based on the closing price of $8.31 per share on March 31,
2000, less the option exercise price.
Termination of Employment and Change of Control Arrangements
The Company has entered into "change-of-control" agreements
("Change-of-Control Agreements") with Mr. McCausland, Mr. Rice, Mr. Schulte, Mr.
Goldstein, Mr. Crichton, and other key management personnel. The terms of the
agreements are consistent with similar agreements used in other major U.S.
public corporations and provide salary and benefit continuation if the executive
is terminated upon a change-of-control. A change-of-control is defined to
include events in which a party (other than Mr. McCausland) acquires 20% or more
of the combined voting power of the Company's then outstanding securities; or in
which Mr. McCausland, together with all affiliates and associates, acquires 30%
or more of the combined voting power of the Company's then outstanding
securities. Under the Change-of-Control Agreements, following the executive's
termination, he or she would be entitled to a lump sum payment equal to one to
three times (depending upon the executive) the executive's annual base salary at
the time of termination plus the executive's potential bonus amount for the
fiscal year in which the change-of-control occurred. The executive's health and
welfare benefits would also continue for two or three years, depending upon the
executive, and the executive would be vested in all stock options and restricted
stock. The cash and non-cash amounts payable under the Change-of-Control
Agreements and under any other arrangements with the Company are limited to the
maximum amount permitted without the imposition of an excise tax under the
Internal Revenue Code. Generally, this would limit an executive's benefits to
2.99 times the executive's average annual compensation for the preceding five
years.
9
<PAGE>
Subject to the above limitation of 2.99 times average annual compensation,
in addition to Mr. McCausland's right to payment of two times his annual salary
and bonus under his Change-of-Control Agreement, under an arrangement entered
into in 1992, in the event of the termination of Mr. McCausland's employment for
any reason including a change of control, Mr. McCausland is entitled to a
payment equal to two times his annual salary, the continuation of health
insurance and other employee benefits for a three-year period and automatic
vesting of all of his stock options. Generally, the limitation under Mr.
McCausland's Change-of-Control Agreement would reduce the amount payable under
his 1992 arrangement to the extent that the aggregate benefits under the
Change-of-Control Agreement and the 1992 arrangement exceed 2.99 times his
average annual compensation for the preceding five years.
GOVERNANCE AND COMPENSATION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Governance and Compensation Committee of the Board of Directors has
furnished the following report on executive compensation. Under the supervision
of the Governance and Compensation Committee, the Company has developed and
implemented compensation policies, plans and programs. The Committee is composed
of three independent, non-employee directors. Following review and approval by
the Governance and Compensation Committee, all issues pertaining to executive
compensation (other than the granting of stock options or restricted stock
awards under the Company's stock option plans and the establishment of
performance goals under the Company's Management Bonus Plan) are submitted to
the full Board of Directors for approval.
Since its inception, the Company has maintained the philosophy that
compensation of its entire management team, including executive officer level
positions through operating management positions at the Company's operating
subsidiaries, should be directly and materially linked to operating performance.
To achieve this linkage, compensation is heavily weighted towards bonuses paid
on the basis of performance and to the award of stock options to a relatively
broad level of operating management.
Compensation Principles
The foundation of the management compensation program is based on beliefs
and guiding principles designed to align compensation with business strategy,
Company values and management initiatives. The program:
o Rewards executives for long-term strategic management and the
enhancement of shareholder value through the award of stock options
as a significant percentage of total compensation.
o Integrates compensation programs with both the Company's annual and
longer-term strategic planning and measurement processes.
o Provides flexibility in order to maximize local autonomy, which the
Company views as an important element of its success.
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Executive Compensation Program
The total compensation program consists of both cash and equity based
compensation. The annual compensation consists of a base salary and an annual
bonus under the Company's Management Bonus Plan. Incentive compensation is
closely tied to corporate and individual performance in a manner that encourages
a continuing focus on building profitability and shareholder value.
Periodically, the Committee determines the salary ranges for executive officers
upon review of salary ranges in companies comparable in size in terms of annual
sales and capitalization. The comparison group includes companies in the
specialty chemicals industry plus distribution companies and fast growth
companies outside of the Company's industrial classification. The Committee
included companies outside of the Company's industry in the comparison group
because it believes that the Company is similar in certain respects to such
companies. Actual salary changes are based upon individual and Company-wide
performance and generally are comparable to the median salary levels paid at
companies in the comparison group. The individual's performance is measured
against specific management objectives, such as pre-tax profits, operating cash
flow, debt repayment, safety targets, programs for training and development of
personnel and sales and marketing programs.
However, there is the opportunity to earn significantly higher total
compensation through incentive bonus and stock option programs. The bonus and
stock option components are "at risk," meaning that the ultimate value of the
compensation depends on such factors as Company financial performance,
individual performance and stock price. This at risk portion of the Company's
executive compensation ranges from approximately 45% to 65% of total
compensation, which represents a higher portion of total compensation than for
most of the companies in the comparison group. The Committee approves the
participation of key executives in the Management Bonus Plan. Awards for
executive officers vary with a combination of the Company's achievement of cash
flow and earnings goals and are then adjusted up or down for the executive's
achievement of specified objectives and individual job performance. The
objectives that the Committee considers are the same as those used to determine
salary. The Committee relies on these quantitative and qualitative measures and
it uses subjective judgment and discretion in light of these measures and the
Company's compensation principles described above to determine base salaries and
bonuses.
Long-term incentives are provided through the grant of stock options. The
Committee reviews and approves the participation of executive officers of the
Company and its subsidiaries under the Company's stock option plan. The
Committee has the authority to determine the individuals to whom stock options
are awarded, the terms of the options and the number of shares subject to each
option. The size of option grants are based upon position level. The Committee
determines the percentage of total compensation which is to consist of the value
of stock options for each position level and divides that value by the estimated
value of the options, using the Black-Scholes method. During fiscal 2000, the
value of options granted was generally between 30% and 55% of an executive
officer's total compensation. Through grants of stock options, the objective of
aligning executive officers' long-range interests with those of the stockholders
are met by providing the executive officers with the opportunity to build a
meaningful stake in the Company. As with the determination of base salaries and
bonuses, the Committee relies on quantitative and qualitative measures,
exercising subjective judgment and discretion in view of these measures and the
Company's general policies. Executive officers may also participate in the
Company's 401(k) Plan, which includes Company matching contributions and
discretionary contributions based on the Company's profitability, and the
Company's Employee Stock Purchase Plan, which permits eligible employees to
purchase shares of the Company's Common Stock at a 15% discount
11
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from the market price.
Chief Executive Officer Compensation
The Governance and Compensation Committee reviewed the Chief Executive
Officer's compensation for fiscal year 2000 and determined that his base salary
would remain the same as it had been in fiscal year 1999. This base salary
approximates the median level of chief executive officers of the comparison
group of companies and is consistent with the Company's objective of paying a
higher level of compensation through its at risk bonus and stock option
programs. A fiscal year 2000 bonus of $100,000 was awarded to the Chief
Executive Officer. This was the result of the Company achieving certain of the
objective performance targets of pre-tax earnings, gross profit growth, and debt
repayment (exclusive of acquisition related debt and certain special charges) as
set forth in the Management Bonus Plan, and certain other operating objectives.
In determining the number of shares to be awarded as stock options, the
Committee considered the executive compensation paid by the comparison group of
companies and the Chief Executive Officer's performance.
Deductibility
The Company intends, to the extent reasonably practicable, to minimize the
non-deductibility, under the Internal Revenue Code (the "Code"), of compensation
paid to its executive officers while maintaining the flexibility of its
compensation programs to attract and retain highly qualified executives in a
competitive environment.
Governance and Compensation Committee
W. Thacher Brown, Chairman
Lee M. Thomas
Robert L. Yohe
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STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Below is a graph comparing the yearly change in the cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return of the S&P MidCap 400 Index and the S&P MidCap 400 Chemicals Index for
the period of five years commencing April 1, 1995 and ended March 31, 2000.
The Company has approved the use of the S&P MidCap 400 Index and the S&P
MidCap 400 Chemicals Index for purposes of this performance comparison because
they include companies of similar size to that of the Company.
--------------------------------------------------------------------------------
Airgas, Inc.
Comparison of Five Year Cumulative Total Return
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[The following data was taken from a line graph]
Dollars
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March 31 1995 1996 1997 1998 1999 2000
--------------------------------------------------------------------------------
Airgas 100 150.00 127.36 130.19 63.21 62.73
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S&P MidCap 400 Chemicals 100 135.34 112.26 148.04 77.81 79.55
--------------------------------------------------------------------------------
S&P MidCap 400 100 128.49 142.14 211.83 212.77 293.81
--------------------------------------------------------------------------------
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The graph above assumes that $100 was invested on April 1, 1995, in
Airgas, Inc. Common Stock, the S&P MidCap 400 Chemical Index, and
the S&P MidCap 400 Index.
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13
<PAGE>
CERTAIN TRANSACTIONS
The Company leases office space from William A. Rice, Jr., the Company's
President and Chief Operating Officer. The lease has a term of five years ending
in fiscal 2002, with a five-year renewal option. During fiscal 2000, the Company
paid rent of $80,904 under the lease. The Company believes that the terms of the
lease are no less favorable than could have been obtained in arms-length
transactions with unaffiliated third parties.
SECURITY OWNERSHIP
The following table sets forth certain information, according to
information supplied to the Company regarding the number and percentage of
shares of the Company's Common Stock beneficially owned on March 31, 2000 (i) by
each person who is the beneficial owner of more than 5% of the Common Stock;
(ii) by each director and nominee for director; (iii) by each executive officer
named in the Summary Compensation Table; and (iv) by all directors and executive
officers of the Company as a group. Unless otherwise indicated, the stockholders
listed possess sole voting and investment power with respect to the shares
listed.
Amount and Nature of Percentage of
Name of Beneficial Owner Beneficial Ownership(1) Shares Outstanding
------------------------ ----------------------- ------------------
Peter McCausland
612 East Gravers Lane
Wyndmoor, PA ...................... 10,753,111 (2)(3)(5) 15.7%
Bonnie F. McCausland
612 East Gravers Lane
Wyndmoor, PA ...................... 7,721,024 (2)(4) 11.4%
W. Thacher Brown .................. 126,750 (2)(6) *
Frank B. Foster, III .............. 60,350 (2) *
John A. H. Shober ................. 76,750 (2) *
Lee M. Thomas ..................... 14,250 (2) *
Robert L. Yohe .................... 40,750 (2) *
Paula A. Sneed .................... 6,250 (2) *
David M. Stout .................... 6,250 (2) *
James W. Hovey .................... 38,750 (2) *
Samuel H. Goldstein ............... 35,125 (2) *
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<PAGE>
William A. Rice, Jr ............... 273,774 (2)(5) *
Ted R. Schulte .................... 13,699 (2)(5) *
Alfred B. Crichton ................ 235,272 (2)(5) *
Pacific Financial Research
9601 Wilshire Blvd, Suite 800
Beverly Hills, CA 90210 ........... 5,861,500 (7) 8.7%
All directors and executive officers
as a group (18 persons) .......... 12,483,999 (2)(3)(4)(5)(6) 17.7%
----------
* Less than 1% of the outstanding Common Stock
(1) Includes all options and other rights to acquire shares exercisable on or
within 60 days of March 31, 2000.
(2) Includes the following number of shares of Common Stock which may be
acquired by certain directors, executive officers and five percent
stockholders through the exercise of options which were exercisable as of
March 31, 2000 or became exercisable within 60 days of that date: Mr.
McCausland, 1,381,133 shares; Mrs. McCausland, 398,264 shares held for the
benefit of her children; Mr. Brown, 46,750 shares; Mr. Foster, 46,750
shares; Mr. Shober, 54,750 shares; Mr. Thomas, 12,250 shares; Mr. Yohe,
30,750 shares; Ms. Sneed, 6,250 shares; Mr. Stout, 6,250 shares; Mr.
Hovey, 6,250 shares; Mr. Goldstein, 32,125 shares; Mr. Rice, 162,850
shares; Mr. Schulte, 11,000 shares; Mr. Crichton, 206,250 shares; and all
directors and executive officers as a group, 3,527,784 shares.
(3) Investment and/or voting power with respect to 7,694,561 of such shares
are shared with, or under the control of, Mr. McCausland's spouse, Bonnie
McCausland, and other members of Mr. McCausland's immediate family, 24,963
shares are held by a charitable foundation of which Mr. McCausland is an
officer and director and 2,000,000 shares are held by a grantor retained
annuity trust of which Mr. McCausland is the trustee and the annuitant.
(4) Investment and/or voting power with respect to 7,694,561 shares are shared
with, or under the control of, Mrs. McCausland's spouse, Peter McCausland,
and other members of Mrs. McCausland's immediate family, and 24,963 shares
are held by a charitable foundation of which Mrs. McCausland is an officer
and director.
(5) Includes the following shares of Common Stock held under Airgas' 401(k)
Plan as of March 31, 2000: Mr. McCausland, 36,618 shares; Mr. Rice, 30,284
shares; Mr. Schulte, 564 shares; Mr. Crichton, 9,059 shares; and all
executive officers as a group, 80,679 shares.
(6) Includes 8,000 shares owned by members of Mr. Brown's immediate family.
(7) Pacific Financial Research, an investment adviser, filed a Schedule 13G
dated February 11, 2000, upon which the Company has relied in making this
disclosure. Pacific Financial Research has sole voting and dispositive
power as to 5,861,500 shares.
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PROPOSAL TO RATIFY ACCOUNTANTS
The Board of Directors has selected the firm of KPMG LLP as its
independent auditors to audit the financial statements of the Company for the
fiscal year ending March 31, 2001. The Board of Directors has proposed that the
stockholders ratify the selection of KPMG LLP. This firm audited the Company's
financial statements for the fiscal year ended March 31, 2000. Representatives
of KPMG LLP are expected to attend the Annual Meeting, will have the opportunity
to make a statement if they desire to do so, and are expected to be available to
respond to appropriate questions.
The Board of Directors recommends that you vote FOR ratification of KPMG
LLP as independent auditors.
STOCKHOLDERS' PROPOSALS FOR
NEXT ANNUAL MEETING
Under the rules of the Securities and Exchange Commission, if a
stockholder wants to submit a proposal for inclusion in the Proxy Statement for
presentation at the 2001 Annual Meeting, the proposal must be received by the
Company, attention: Mr. Todd R. Craun, Secretary, at the principal offices of
the Company, by March 4, 2001.
For any proposal, including a nomination for election to the Board of
Directors, that is not submitted for inclusion in next year's Proxy Statement,
but is instead sought to be presented directly at the 2001 Annual Meeting, the
Company's Bylaws require, and the Securities and Exchange Commission rules
permit, that the proposal be received at the Company's principal executive
offices not earlier than April 4, 2001 and not later than May 4, 2001. However,
if the date of the Annual Meeting is more than 30 days before or more than 60
days after August 2, 2001, the notice must be received not earlier than 120 days
before the Annual Meeting and not later than the later of 90 days before the
Annual Meeting or the 10th day following public announcement of the date of the
meeting. The Bylaws also provide that the notice must contain certain
information regarding the proposal and the nomination.
16
<PAGE>
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AIRGAS, INC.
P R O X Y
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY
FOR THE ANNUAL MEETING OF STOCKHOLDERS, AUGUST 3, 2000
The undersigned holder of Common Stock of Airgas, Inc. hereby appoints
Peter McCausland, Todd R. Craun and Roger F. Millay, and each of them, proxies,
with powers of substitution in each, to vote on behalf of the undersigned at the
Annual Meeting of Stockholders to be held at 2:00 p.m. on Thursday, August 3,
2000, in the Company's offices at 259 North Radnor-Chester Road, Radnor,
Pennsylvania, and at all adjournments thereof, according to the number of shares
which the undersigned would be entitled to vote if then personally present, and
in their discretion upon such other business as may come before the Meeting.
SHARES WILL BE VOTED AS INSTRUCTED, BUT IF NO INSTRUCTION IS GIVEN, SHARES
WILL BE VOTED FOR ALL THE NOMINEES FOR DIRECTOR NAMED IN THE PROXY STATEMENT,
FOR THE PROPOSAL DESCRIBED IN THE PROXY STATEMENT AND WITH DISCRETIONARY
AUTHORITY ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
The undersigned acknowledges receipt with this proxy of a copy of the
Notice of Annual Meeting of Stockholders and the Proxy Statement of the Board of
Directors.
(Continued, and to be signed, on the other side)
AIRGAS, INC.
P.O. BOX 11491
NEW YORK, N.Y. 10203-0491
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1. Election of FOR all nominees WITHHOLD AUTHORITY to vote
Directors listed below |_| for all nominees listed below. |_|
*EXCEPTIONS |_|
Nominees: Paula A. Sneed, James W. Hovey, David M. Stout
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions ____________________________________________________________________
2. Ratify the selection of KPMG LLP as independent auditors.
FOR |_| AGAINST |_| ABSTAIN |_|
3. In their discretion, upon such other matters as may properly come before the
Meeting.
Change of Address or
Comments Mark Here |_|
NOTE: Please sign exactly as name(s) appears hereon. Executors, administrators,
trustees, etc. should give full title as such.
DATE: ____________________________________________________________________, 2000
________________________________________________________________________________
Signature
________________________________________________________________________________
Signature
Votes must be indicated
(x) in Black or Blue ink. |X|
PLEASE SIGN AND RETURN PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
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