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Wednesday,
May 6, 2009
(Cont'd from
above)...
Jim (cont'd):
Jim:
Mr. McCausland,
welcome back to Mad
Money...
Peter:
Thank you, Jim,
and Boo-Yah... This
is my 9th visit...
can you believe
it?...
Jim:
I believe it,
because you've made
money consistently
for people, and my
bad because I was
more concerned with
inhaling helium, and
sounding like a
total clown, rather
than being a clown
by telling people to
stay away from your
stock the last
time... How are you
able to make so much
money in what is
considered to be the
worst downturn since
the Great
Depression?...
Peter:
Well, I think
we... of course, our
earnings were down
for the quarter,
compared to last
year... but we had a
record year, and I
think we reacted
very, very
quickly... we've
taken $45 million of
cost out... we have
a very diverse
customer base... we
have a very steady
stream of rental
income on cylinders
and tanks, and that
holds up very well
in a recession, and
also, when business
turns down, working
capital shrinks,
capex (i.e., their
capital
expenditures)
shrinks, and we
generate a
tremendous amount of
free cash flow...
Jim:
But I would
have thought, and
was worried... you
made a series of
acquisitions... 14 I
believe... where I
thought that, when
things got bad, you
might have looked
like you overpaid.
You didn't overpay
did you?...
Peter:
Well, no...
And we're pretty
disciplined when it
comes to
acquisitions. We've
made more than 400
of them in our
history, and
consider it a core
competency. We are
very concerned about
overpaying, and
we're pretty strict
about... you know,
when other people
are bidding against
us, we maintain our
discipline.
Jim:
Now, I need to
get... Just think
outside of your
company, but
industrial America,
I am surprised,
reported... we just
finished a reporting
period... pretty
amazing numbers. You
mentioned that one
of things you saw
was you acted fast.
Is this different
from other
turndowns? And we
spoke about other
turndowns... where I
think that somebody
might have thought
that your company
would lose money in
this environment,
not make money...
Peter:
Well, I think
we're way behind the
"losing money" stage
of our growth, and I
think though that
this downturn is
definitely
different, because
we have had a severe
credit contraction.
So what we've seen
in addition to the
normal downturn in
business, focused
mainly in
manufacturing, but
also across the
board... we've seen
this tremendous
tightening of the
purse strings by
every kind of
business, be it a
hospital or a
doctor's office or a
manufacturer.
Jim:
When I read
over your conference
call, something is
different from what
some of my other
companies are
seeing... Other
companies are seeing
a very good April.
You talk in the
conference call,
saying that the
fourth-quarter trend
of low sales volume
has continued in
April, with few
signs of near term
recovery. A lot of
people say that
April was a strong
month... we've got
some good employment
data even, that I
expect to see for
April... You're just
not seeing a pickup?
Peter:
Not really,
and most of our
business is
coincident with the
economy, and we
missed... we had to
revise our guidance
a few months ago,
and we don't like to
do that... and,
until we see more
evidence of a
sustained pickup,
we're not going to
be shouting from the
highest hills. And,
you know, a lot of
companies have been
talking about a
pickup in April, but
they also have said
they're not giving
out any guidance.
We've given out
guidance for the
full year next year,
so we need to be
cautious.
Jim:
Right. Now one
of the things that I
thought was
interesting that you
said was that people
are hunkering down,
and they don't want
to sell, but you're
actually still in
the acquisition
mode?
Peter:
We're
definitely in the
acquisition mode. We
have plenty of
availability under
our lines of credit
to make
acquisitions, but
you know, when times
are tough, a lot of
the acquisition
opportunities dry
up. These are good
businesses, in our
core that is, the
industrial gas
business... they
generate good cash
flow... and usually,
people can wait for
a recovery, and sell
off at higher
numbers. So the
activity level is
somewhat depressed,
but we're still
pursuing a couple of
dozen
acquisitions... and
we always say we're
going to acquire
$150 million a year,
and we use that as a
placeholder... You
know, for the last
four years, our
average has been two
or three times that.
I don't really know
what we'll acquire
this year, but I
wouldn't be
surprised if we
ended up with 10
acquisitions with
$100 million, or
maybe $200 million,
depending on what
they are.
Jim:
That will give
you some growth.
Peter McCausland, I
should have listened
to you... you were
on the show the last
time. You said that
a lot of people
didn't understand
your business model,
that a lot of people
didn't understand
that you were able
to make more money
than people thought.
I doubted you. I was
wrong. Good job on
the quarter, sir.
Peter:
Thank you
Jim... appreciate
it.
Jim:
Peter
McCausland, chairman
and CEO of
Airgas Inc. (ARG)...
▼ ▼
▼ ▼
▼
 The
Bottom Line!:
The man was on eight
times before this.
Why did I doubt him?
I get concerned and
I get nervous too.
He taught me to
steel myself on this
one, and did I
listen? No. I'm not
going to make that
same mistake. He's
got a game plan. I
think he's sticking
with it. I'm
sticking with him.
[verbatim recap]
[end of segment]
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