To: Corporate Office Bonus Eligible Associates
From: Bill Rice
Date: April 1, 1999
Subject: Fiscal Year 2000 Bonus Plan
The Plan
How much can I earn? How does the plan actually work?
Based on your position, a bonus eligible associate has the opportunity to
earn a percentage of his or her annual base salary (called your "targeted
bonus opportunity"). This bonus is based upon the extent to which you and
Airgas achieve certain results by the end of the fiscal year. Depending on
the combined performance of these two, your bonus can be more or less than
your targeted bonus opportunity. Any bonus earned is paid annually and is
paid no later than 75 days following the end of the fiscal year.
The following sections explain the three bonus categories (Airgas
Consolidated Financials, "One Airgas," and Accountabilities). See Exhibit I
for additional administration information about the plan. If you have
questions after reading about the plan, please talk to your Manager.
Airgas Consolidated Financials
Overall Weighting - 55% of Your Bonus Opportunity
The factors measured under this portion of the incentive plan and their
weightings are:
Factor Weighting
Profit Before Taxes (PBT) 50%
Debt Repayment 25%
Gross Profit Dollar Growth 25%
How do I calculate my bonus under this portion of the incentive plan?
Airgas' actual PBT is taken as a percentage of planned PBT as stated in the
Fiscal Year 2000 Business Plan. This percentage is then multiplied by its
weighting of 50%. This is repeated for Debt Repayment, except that the
percentage is multiplied by its weighting of 25%.
For Gross Profit Dollar Growth, we will be looking at gross profit dollar
growth (improvement in gross profit from Fiscal Year 1999 to Fiscal Year
2000) as compared to planned growth. To do this, actual Gross Profit
Dollar Growth is divided by planned Gross Profit Dollar Growth to determine
the percentage achievement of planned Gross Profit Dollar Growth for Fiscal
Year 2000. This percentage is then multiplied by its weighting of 25%.
The following shows how the calculations are done:
For PBT, assume:
Actual FY '00 PBT = $84 million
Planned FY '00 PBT = $82 million
Actual PBT 84
- --------------------- = ------------- = 102% achievement
Planned PBT 82
102% achievement x 50% weighting = 51%
For Debt Repayment, assume:
Actual FY '00 Debt Repayment = $72 million
Planned FY '00 Debt Repayment = $75 million
Actual Debt Repayment 72
- ------------------------ = ------------ = 96% achievement
Planned Debt Repayment 75
96% achievement x 25% weighting = 24%
For Gross Profit (GP) Dollar Growth, assume:
Actual FY '99 Gross Profit = $719 million
Actual FY '00 Gross Profit = $745 million
Planned FY '00 Gross Profit = $750 million
Actual GP growth (745 - 719)
- --------------------- = -------------- = 84% achievement
Planned GP growth (750 - 719)
84% achievement x 25% weighting = 21%
After doing the calculations, the result from each of the factors is added
together. This sum (Achievement Percentage) is then compared against the
Bonus Potential as shown on Exhibit II. The Bonus Potential (from Exhibit
II) that corresponds to the Achievement Percentage is multiplied by 40%
(weighting for this category) of your targeted bonus opportunity to
determine the bonus to be paid.
Continuing with our above example, assume the associate has a targeted
bonus opportunity of $5,000:
51% + 24% + 21% = 96% Achievement Percentage
87% = Bonus Potential as shown on Exhibit II
55% x $5,000 x 87% = $2,393 (Bonus payment for this factor)
Remember, however, that there will be no payment made under this portion of
the bonus plan unless Airgas' Fiscal Year 2000 EPS exceeds that of Fiscal
Year 1999.
"One Airgas"
Overall Weighting - 10% of Your Bonus Opportunity
The factors measured under this portion of the incentive plan and their
weightings are:
Factor Weighting
Cost improvement plan achievement 50%
Gas sales growth 50%
How do I calculate my bonus under this portion of the incentive plan?
The calculations are similar to what was done for Gross Profit Dollar
Growth. For cost improvements, Airgas' actual improvement (i.e.,
reduction) in Operating Expenses (excluding depreciation and amortization)
as a percentage of Gross Profit is divided by the planned improvement in
Operating Expenses (excluding depreciation and amortization) as a
percentage of Gross Profit. This ratio is then multiplied by its weighting
of 50%. A similar calculation is done for gas sales growth with the result
multiplied by its weighting of 50%.
For cost improvement achievement plan assume:
Actual FY '99 Operating Expenses (OE) as a Percentage of Gross Profit = 72.63%
Actual FY'00 Operating Expenses as a Percentage of Gross Profit = 70.05%
Planned FY'00 Operating Expenses as a Percentage of Gross Profit = 70.00%
Actual OE improvement (72.63 - 70.05)
- ------------------------ = ----------------- = 98% achievement
Planned OE improvement (72.63 - 70.00)
98% achievement x 50% weighting = 49%
To calculate gas sales growth assume:
Actual Gas Sales FY '99 = $458 million
Actual Gas Sales FY '00 = $469 million
Planned Gas Sales FY '00 = $473 million
Actual Gas Sales growth (469 - 458)
- ------------------------- = -------------- = 73% achievement
Planned Gas Sales growth (473 - 458)
73% achievement x 50% weighting = 37%
After doing the calculations, the result from each of the factors is added
together. This sum (Achievement Percentage) is then compared against the
Bonus Potential as shown on Exhibit II. The Bonus Potential (from Exhibit
II) that corresponds to the Achievement Percentage is multiplied by 10%
(weighting for this category) of your targeted bonus opportunity to
determine the bonus to be paid.
Continuing with our above example, assume the associate has a targeted
bonus opportunity of $5,000:
49% + 37% = 86% Achievement Percentage
53% = Bonus Potential as shown on Exhibit II
10% x $5,000 x 53% = $265 (Bonus payment for this factor)
Accountabilities
Overall Weighting - 35% of Your Bonus Opportunity
Your manager will meet with you to develop a list of measurable objectives
that you and he or she agree are important to your personal development
needs and/or support our goal of becoming "One Airgas."
When discussing your accountabilities with your manager, you and your
manager will agree upon a weighting for each accountability. No
accountability can be given a weighting of less than 20%. The total of the
weightings must equal 100%. All accountabilities should be clearly
measurable and should represent "stretch" goals that are attainable yet
challenging.
Included as Exhibit III is an Accountabilities template. The template
includes the worksheet used to document your Accountabilities.
How do I calculate my bonus under this portion of the incentive plan?
Your manager will determine the degree to which you accomplished each of
your Accountabilities based on the measurement criteria established with
you at the beginning of the fiscal year. The maximum achievement
percentage is 100%. The extent to which you achieved/completed your first
Accountability is then multiplied by its weighting. This is repeated for
the remaining Accountabilities. The product (results) from each
Accountability is added together. This sum is then multiplied by 35% of
the associate's target bonus opportunity to determine the bonus earned
under this portion of the plan.
For example, assume an associate has been assigned the following
Accountabilities:
Accountability I: Develop a procedural manual for month-end
consolidation. This should be completed by December 30, 1999.
Weighting: 40%
Accountability II: Become proficient in Hyperion by February, 2000.
Weighting: 30%
Accountability III: By January 1, 2000, implement changes to quarter-end
close procedures so that quarter-end close is completed in one less day
without adding additional staff, increasing overtime or reducing accuracy.
Weighting: 30%
At the end of the year, assume the associate has achieved:
Accountability I = 100% x 40% (weighting) = 40%
Accountability II = 80% x 30% (weighting) = 24%
Accountability III = 100% x 30% (weighting) = 30%
40% + 24% + 30% = 94%
Assume, the associate has a target bonus opportunity of $5,000:
35% x $5,000 x 94% = $1,645 (Bonus payment for this factor)
How It All Works
To help you understand how the bonus payment will be calculated, the
examples shown above are summarized on Exhibit IV. If you have questions
after reviewing the examples, please talk to your Manager. He or she will
be happy to answer your questions.
EXHIBIT I
Administration
- - An associate must be hired by December 31 of the current fiscal year
(i.e., December 31, 1999) to be eligible to participate in this plan for
the current fiscal year. A new hire's bonus opportunity will be pro-rated
to reflect the number of months he or she was an associate of Airgas during
the current fiscal year.
- - An associate must be an active employee on March 31 (i.e., March 31,
2000) to be eligible for a bonus.
- - If an associate transfers from one Airgas company to another, his or
her bonus calculation is based on the pro-rated time spent with each
company. All calculations are done using year-end financial data.
Accountabilities must be established by each company and performance
measured against each group of accountabilities separately.
- - If an associate is promoted during the fiscal year, new
Accountabilities must be established to reflect the new position.
- - If an associate is moved from a bonus eligible position to a non-bonus
eligible position (or vice versa), the bonus calculation is pro-rated to
represent the time worked by the associate as a bonus eligible employee.
All calculations are done using year-end financial data.
- - Bonus calculations are based on an associate's annual salary as of the
last day of the fiscal year. However, if the associate is promoted (or
demoted and the associate has had a reduction in salary) during the fiscal
year, the calculation is done to reflect the pro-rated time spent in each
position. All calculations are done using year-end financial data.
- - If an associate is on a leave of absence at the end of the fiscal
year, he or she will be eligible for a bonus provided that he or she
returns to work as an active employee for at least one month within 13
weeks of the end of the fiscal year. Any bonus paid will be pro-rated
based upon the length of time an associate was an active employee during
the fiscal year. The calculation will be made using year-end financial
data. The bonus payment will be made in the next regularly scheduled
payroll cycle at the end of the associate's first month of employment
following his or her leave of absence.
- - If an associate is on a leave of absence during the fiscal year and
returns to active status during the year, he or she will be eligible for a
bonus. Any bonus paid will be pro-rated based upon the length of time an
associate was an active employee during the fiscal year. The calculation
will be made using year-end financial data.
- - The Airgas Consolidated Financials, Region/Company Financials, and
"One Airgas" categories cannot have an achievement greater than 120%.
Accountabilities (individually or as a group) cannot have an achievement
greater than 100%.
- - Eligibility for participation is determined by the function manager
(e.g., CFO; CIO; Senior Vice President, Legal and Corporate Development).
- - Participants may be given the opportunity to elect to receive their
bonus in stock, in lieu of cash. (If this option is made available at a
later date, participants will receive additional information.)
- - Nothing in this incentive plan changes an associate's at-will
employment status.
- - The Company reserves the right to modify or terminate this incentive
plan or any of its components at its discretion.
- - The Nominating and Compensation Committee, or its designate, is
responsible for the administration of this plan.
EXHIBIT II
Bonus Payout Schedule
This chart is used for all calculations except for the Accountabilities
portion of this plan. The achievement percentage is the weighted
achievement of each of the factors included in the applicable portion of
the plan (i.e., Airgas Consolidated Financials, "One Airgas," and
Region/Company Financials). Please note that no payment for the Airgas
Consolidated Financials portion of the plan will be made unless Fiscal Year
2000 EPS exceeds that of Fiscal Year 1999.
Achievement Bonus
Percentage Potential
70% 0%
71% 3%
72% 7%
73% 10%
74% 13%
75% 17%
76% 20%
77% 23%
78% 27%
79% 30%
80% 33%
81% 37%
82% 40%
83% 43%
84% 47%
85% 50%
86% 53%
87% 57%
88% 60%
89% 63%
90% 67%
91% 70%
92% 73%
93% 77%
Achievement Bonus
Percentage Potential
94% 80%
95% 83%
96% 87%
97% 90%
98% 93%
99% 97%
100% 100%
101% 103%
102% 105%
103% 108%
104% 110%
105% 113%
106% 116%
107% 118%
108% 121%
109% 123%
110% 126%
111% 129%
112% 131%
113% 134%
114% 136%
115% 139%
116% 142%
117% 144%
118% 147%
119% 149%
120% 152%
Exhibit III -- Fiscal Year 2000 Accountabilities
Associate: Title:
A. Airgas Consolidated Financial Goals (55%) FY 2000 Target Goal Percentage Results Achieved
Weighting
Achieve Airgas consolidated financial results
consistent with the FY 2000 business plan.
1. Profit Before Taxes (PBT). 50%
2. Debt repayment. 25%
3. Gross profit dollars. 25%
100% Weighted Achievement: Actual Bonus %:
B. "One Airgas" Goals (10%) FY 2000 Target Goal Percentage Results Achieved
Weighting
Achieve Airgas consolidated goals consistent
with the FY 2000 business plan
1. Cost improvement. 50%
2. Gas sales growth. 50%
100% Weighted Achievement: Actual Bonus %:
Signed: Dated: Approved:
Fiscal Year 2000 Accountabilities
Associate: Title:
C. Personal Accountabilities (35%). No accountability should be weighted less than 20%.
Accountabilities % % Results Achieved
Weighting Achieved
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Signed: Dated: Approved:
Exhibit IV
Corporate
3 Factor Bonus Worksheet
Location Corp Corporate Division
Calculation Period 3/31/00
Participant Bill Smith
Annual Base Salary
(End of year) $50,000
Bonus Participation Accountabilities
percentage 10% 94% Achievement
Bonus Potential $5,000
Weighted
AIRGAS FINANCIALS Achievement Weighting Achievement
PBT_No_Royalty
Actual PBT dollars over
Planned PBT dollars
(Actual PBT/Plan PBT)
Actual '00 Plan `00
$84,000 $82,000 102% 50% 51%
Debt Repayment
Actual debt repayment versus
Planned debt repayment
(Actual debt repayment / Plan debt repayment)
Actual '00 Plan `00
$72,000 $75,000 96% 25% 24%
Gross Profits
The increase in actual gross profit
dollar growth over the planned increase
in gross profit dollar growth
(Actual Gross Profit minus Last Year Actual Gross Profit)
/ (Plan Gross Profit minus Last Year Actual Gross Profit)
Actual '99 Actual '00 Plan `00
$719,000 $745,000 $750,000
$ 26,000 $ 31,000 84% 25% 21%
100% 96% -->87%
Calculation which equals Payout table
"ONE AIRGAS" Actual '99 Actual '00 Plan `00
Oper Exp $ 522,210 $ 521,872 $ 525,000
Gross Profit $ 719,000 $ 745,000 $ 750,000
Oper Exp as Pct
of Gross Profits 72.63% 70.05% 70.00%
Improvement 2.6% 2.6% 98.1% 50% 49%
Actual '99 Actual '00 Plan '00
$ 458,000 $ 469,000 $ 473,000
Gas Sales Growth $ 11,000 $ 15,000 73% 50% 37%
50% 86% -->53%
Calculation which equals Payout table
Potential Base Bonus
TOTAL BONUS Bonus Split Potential Achievement Bonus Payout
Airgas Financials 55% $ 2,750 87% $ 2,393
One Airgas 10% 500 53% 265
Accountability Rating 35% 1,750 94% 1,645
100% $ 5,000 86% $ 4,303
ASSOCIATE ACKNOWLEDGMENT
I acknowledge that I have received a copy of the Fiscal Year 2000 Bonus
Plan. I further acknowledge that I understand that any Fiscal Year 2000
bonus I may be eligible for will be determined by the provisions of this
bonus plan.
________________________________ ______________________
Associate Printed Name Date
________________________________ _______________________
Associate Signature Airgas Company