AIR PRODUCTS & CHEMICALS, INC. 
By LEHIGH VALLEY, Pa., April 23, 2014 /PRNewswire/ --
Second Quarter Highlights
-- EPS of $1.32 within guidance despite adverse weather impacts
-- Latest world-scale hydrogen plant onstream in U.S. Gulf Coast
-- World-class high purity nitrogen plant onstream in Tainan Science
Industrial Park, Taiwan
-- 32(nd) consecutive year of dividend increases - up 8.5 percent
Air Products (NYSE: APD) today reported results for the quarter ended March 31, 2014. Net income of $284 million and diluted earnings per share (EPS) of $1.32, were down two percent and four percent, respectively, compared with results for the second quarter of 2013.
Second quarter sales of $2,582 million increased four percent versus prior year driven by higher energy pass-through and stronger underlying volumes in Merchant Gases, and Electronics and Performance Materials. Excluding the exit from the Polyurethane Intermediates Business (PUI), underlying sales improved two percent versus prior year and were down one percent sequentially.
Operating income of $385 million decreased one percent versus prior year. Strong results in Electronics and Performance Materials, and Equipment and Energy, were more than offset by Merchant Gases and Tonnage Gases, which were impacted by adverse weather and planned outages, respectively. Operating margin of 14.9 percent was down 80 basis points, with the positive impact from higher volumes more than offset by higher costs, including weather impacts, and the dilutive effect of higher energy pass-through.
Commenting on the quarter, John McGlade, chairman, president and chief executive officer, said, "In the second quarter, Air Products delivered higher underlying volumes. We also executed well on our planned maintenance outages, and managed the additional challenge of adverse weather, the costs of which we are committed to recover in the second half of the year. We remain confident in the prospects for the business and, accordingly, we raised our quarterly dividend for the 32(nd) consecutive year."
Second Quarter Results by Business Segment:
-- Merchant Gases sales of $1,040 million increased four percent versus
prior year, primarily on higher volumes in U.S./Canada, Asia and Latin
America, partially offset by lower helium volumes due to continued
global supply constraints. Operating income of $143 million was down 15
percent versus prior year and operating margin of 13.8% was down 300
basis points, primarily due to higher costs, including weather-related
impacts in U.S./Canada.
-- Tonnage Gases sales of $840 million increased four percent versus prior
year, as higher energy pass-through more than offset lower volumes due
to planned customer outages, and the impact of the PUI business exit.
Operating income of $112 million was down nine percent versus prior year
primarily due to planned higher maintenance costs and the PUI exit.
-- Electronics and Performance Materials sales of $592 million increased
eight percent versus prior year driven by nine percent higher volumes.
Electronics sales improved six percent primarily due to higher sales of
delivery systems. Performance Materials sales increased 10 percent
versus prior year with growth across all product lines and all major
regions. Operating income of $107 million increased 38 percent and
operating margin improved by 400 basis points versus prior year on cost
actions and the strong volumes.
-- Equipment and Energy sales of $110 million decreased 11 percent versus
prior year, while operating income of $23 million increased 11 percent
versus prior year driven largely by strong LNG project activity. The
sales backlog of $338 million increased three percent.
Outlook
Air Products expects third quarter EPS from continuing operations to be between $1.42 and $1.47 per share. The company's guidance for continuing operations for fiscal 2014 is a range of $5.70 to $5.85 per share, from $5.70 to $5.90 previously. Capital expenditure forecast for the current fiscal year is unchanged at approximately $2.0 billion*.
Looking ahead, McGlade said, "Air Products' momentum will continue to increase as we load assets, win new business and bring projects on-stream. Going forward, we remain focused on continuing to increase productivity and generate benefits from further price and cost actions. We are confident in our ability to deliver strong earnings growth in the second half of this year."
*Reported on a non-GAAP basis. Reconciliation to the GAAP measure can be found at the end of this release.
Access the Q2 earnings teleconference scheduled for 10:00 a.m. Eastern Daylight Time on April 23 by calling 719-325-4756 and entering passcode 5636921, or access event details on our website.
About Air Products
Air Products (NYSE:APD) provides atmospheric, process and specialty gases; performance materials; equipment; and technology. For over 70 years, the company has enabled customers to become more productive, energy efficient and sustainable. Recognized as one of the world's most innovative companies by both Thomson Reuters and Forbes magazine, more than 21,000 employees in over 50 countries supply effective solutions to the energy, environment and emerging markets. These include semiconductor materials, refinery hydrogen, coal gasification, natural gas liquefaction, and advanced coatings and adhesives. In fiscal 2013, Air Products had sales of $10.2 billion. For more information, visit www.airproducts.com.
Note: This release contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings guidance and business outlook. These forward-looking statements are based on management's reasonable expectations and assumptions as of the date of this release. Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors not anticipated by management, including, without limitation, weakening or reversal of global or regional economic recovery; future financial and operating performance of major customers; unanticipated contract terminations or customer cancellations or postponement of projects and sales; the impact of competitive products and pricing; unexpected changes in raw material supply and markets including helium; the impact of price fluctuations in natural gas; unanticipated asset impairments or losses; the ability to recover increased energy and raw material costs, including weather related costs, from customers; costs and outcomes of litigation or regulatory investigations; the impact of management and organizational changes, including pension settlement and other associated costs; the success of productivity programs; the timing, impact, and other uncertainties of future acquisitions or divestitures; significant fluctuations in interest rates and foreign currencies from that currently anticipated; political risks, including the risks of unanticipated government actions that may result in project delays, cancellations or expropriations; the impact of changes in environmental, tax or other legislation and regulatory activities in jurisdictions in which the Company and its affiliates operate; the impact on the effective tax rate of changes in the mix of earnings among our U.S. and international operations; and other risk factors described in the Company's Form 10K for its fiscal year ended September 30, 2013. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this release to reflect any change in the Company's assumptions, beliefs or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.
* The presentation of non-GAAP measures is intended to enhance the usefulness of financial information by providing measures which our management uses internally to evaluate our baseline performance on a comparable basis. Presented below are reconciliations of the reported GAAP results to the non-GAAP measures.
Capital Expenditures
We utilize a non-GAAP measure in the computation of capital expenditures and include spending associated with facilities accounted for as capital leases. Certain contracts associated with facilities that are built to provide product to a specific customer are required to be accounted for as leases and such spending is reflected as a use of cash within cash provided by operating activities, if the arrangement qualifies as a capital lease.
The presentation of this non-GAAP measure is intended to enhance the usefulness of information by providing a measure which our management uses internally to evaluate and manage our expenditures.
Below is a reconciliation of capital expenditures on a GAAP basis to a non-GAAP measure.
Three Months Six Months
Ended Ended
31 March 31 March
(Millions of
dollars) 2014 2013 2014 2013
------------ ---- ---- ---- ----
Capital
expenditures
-GAAP basis $411.1 $350.3 $802.2 $707.3
Capital lease
expenditures 51.0 55.3 99.1 126.7
---- ---- ---- -----
Capital
expenditures
- Non-GAAP
basis $462.1 $405.6 $901.3 $834.0
------------- ------ ------ ------ ------
FY2014 Forecast
---------------
Capital expenditures -GAAP
basis $ 1,800-1,900
Capital lease expenditures 100-200
Capital expenditures - Non-
GAAP basis $ 1,900-2,100
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three Months
Ended Six Months Ended
31 March 31 March
(Millions of dollars, except for share data) 2014 2013 2014 2013
------------------------------------------- ---- ---- ---- ----
Sales $2,581.9 $2,484.2 $5,127.4 $5,046.6
Cost of sales 1,917.6 1,813.6 3,783.5 3,713.7
Selling and administrative 263.4 266.6 544.3 534.8
Research and development 33.2 32.3 66.7 65.6
Other income (expense), net 17.0 18.0 37.4 29.6
--------------------------- ---- ---- ---- ----
Operating Income 384.7 389.7 770.3 762.1
Equity affiliates' income 30.4 39.8 68.6 81.2
Interest expense 31.5 35.2 64.8 71.0
---------------- ---- ---- ---- ----
Income from Continuing Operations before Taxes 383.6 394.3 774.1 772.3
Income tax provision 92.1 95.8 186.6 188.0
-------------------- ---- ---- ----- -----
Income from Continuing Operations 291.5 298.5 587.5 584.3
Income from Discontinued Operations, net of tax - 1.1 3.1 2.5
----------------------------------------------- --- --- --- ---
Net Income 291.5 299.6 590.6 586.8
Less: Net Income Attributable to Noncontrolling
Interests 8.0 9.2 16.9 18.1
----------------------------------------------- --- --- ---- ----
Net Income Attributable to Air Products $283.5 $290.4 $573.7 $568.7
======================================= ====== ====== ====== ======
Net Income Attributable to Air Products
Income from continuing operations $283.5 $289.3 $570.6 $566.2
Income from discontinued operations - 1.1 3.1 2.5
----------------------------------- --- --- --- ---
Net Income Attributable to Air Products $283.5 $290.4 $573.7 $568.7
--------------------------------------- ------ ------ ------ ------
Basic Earnings Per Common Share Attributable to
Air Products
Income from continuing operations $1.33 $1.38 $2.69 $2.71
Income from discontinued operations - .01 .01 .01
----------------------------------- --- --- --- ---
Net Income Attributable to Air Products $1.33 $1.39 $2.70 $2.72
--------------------------------------- ----- ----- ----- -----
Diluted Earnings Per Common Share Attributable to
Air Products
Income from continuing operations $1.32 $1.37 $2.66 $2.67
Income from discontinued operations - .01 .01 .01
----------------------------------- --- --- --- ---
Net Income Attributable to Air Products $1.32 $1.38 $2.67 $2.68
--------------------------------------- ----- ----- ----- -----
Weighted Average Common Shares -Basic (in
millions) 212.4 208.4 212.1 209.2
----------------------------------------- ----- ----- ----- -----
Weighted Average Common Shares -Diluted (in
millions) 214.9 211.0 214.6 211.8
------------------------------------------- ----- ----- ----- -----
Dividends Declared Per Common Share - Cash $.77 $.71 $1.48 $1.35
------------------------------------------ ---- ---- ----- -----
Other Data from Continuing Operations
Depreciation and amortization $229.1 $226.2 $463.3 $444.7
Capital expenditures on a Non-GAAP basis 462.1 405.6 901.3 834.0
(see page 4 for reconciliation)
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
31 March 30
September
(Millions of dollars) 2014 2013
-------------------- ---- ----
Assets
------
Current Assets
Cash and cash items $356.9 $450.4
Trade receivables, net 1,613.7 1,544.3
Inventories 665.3 706.1
Contracts in progress, less progress billings 134.7 182.3
Prepaid expenses 98.1 121.1
Other receivables and current assets 431.2 432.4
Current assets of discontinued operations - 2.5
----------------------------------------- --- ---
Total Current Assets 3,299.9 3,439.1
-------------------- ------- -------
Investment in net assets of and advances to equity affiliates 1,230.5 1,195.5
Plant and equipment, at cost 19,952.9 19,529.9
Less: accumulated depreciation 10,640.6 10,555.9
------------------------------ -------- --------
Plant and equipment, net 9,312.3 8,974.0
------------------------ ------- -------
Goodwill 1,614.0 1,653.8
Intangible assets, net 674.1 717.3
Noncurrent capital lease receivables 1,439.6 1,476.9
Other noncurrent assets 392.6 393.5
Total Noncurrent Assets 14,663.1 14,411.0
----------------------- -------- --------
Total Assets $17,963.0 $17,850.1
============ ======= =========
Liabilities and Equity
----------------------
Current Liabilities
Payables and accrued liabilities $1,859.8 $1,944.9
Accrued income taxes 76.6 63.0
Short-term borrowings 1,061.5 709.9
Current portion of long-term debt 112.4 507.4
Current liabilities of discontinued operations - 2.4
---------------------------------------------- --- ---
Total Current Liabilities 3,110.3 3,227.6
------------------------- ------- -------
Long-term debt 4,993.2 5,056.3
Other noncurrent liabilities 1,161.6 1,164.3
Deferred income taxes 826.5 827.2
Total Noncurrent Liabilities 6,981.3 7,047.8
---------------------------- ------- -------
Total Liabilities 10,091.6 10,275.4
----------------- -------- --------
Redeemable Noncontrolling Interest 343.6 375.8
Air Products Shareholders' Equity 7,370.9 7,042.1
Noncontrolling Interests 156.9 156.8
------------------------ ----- -----
Total Equity 7,527.8 7,198.9
------------ ------- -------
Total Liabilities and Equity $17,963.0 $17,850.1
============================ ======= =========
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
31 March
(Millions of
dollars) 2014 2013
------------ ---- ----
Operating
Activities
Net Income $590.6 $586.8
Less: Net income
attributable to
noncontrolling
interests 16.9 18.1
---------------- ---- ----
Net income
attributable to
Air Products 573.7 568.7
Income from
discontinued
operations (3.1) (2.5)
---- ----
Income from
continuing
operations
attributable to
Air Products 570.6 566.2
Adjustments to
reconcile income
to cash provided
by operating
activities:
Depreciation
and
amortization 463.3 444.7
Deferred
income
taxes 36.4 32.8
Undistributed
earnings of
unconsolidated
affiliates (19.2) (26.3)
Share-based
compensation 23.4 22.4
Noncurrent
capital
lease
receivables 1.1 (123.2)
Other
adjustments 75.0 (146.0)
Working capital
changes that
provided (used)
cash, excluding
effects of
acquisitions and
divestitures:
Trade
receivables (82.0) 17.8
Inventories 33.6 53.1
Contracts in
progress,
less
progress
billings 17.6 (41.4)
Other
receivables (3.7) (55.7)
Payables and
accrued
liabilities (130.0) (150.3)
Other
working
capital 38.6 4.1
Cash Provided by
Operating
Activities 1,024.7 598.2
---------------- ------- -----
Investing
Activities
Additions to
plant and
equipment (802.2) (707.3)
Proceeds from
sale of assets
and investments 11.2 6.4
Other investing
activities (.4) (1.3)
--- ----
Cash Used for
Investing
Activities (791.4) (702.2)
------------- ------ ------
Financing
Activities
Long-term debt
proceeds 39.2 504.0
Payments on long-
term debt (491.2) (392.0)
Net increase in
commercial paper
and short-term
borrowings 370.9 604.4
Dividends paid to
shareholders (300.2) (268.9)
Purchase of
treasury shares - (461.6)
Proceeds from
stock option
exercises 57.7 62.7
Excess tax
benefit from
share-based
compensation 12.6 14.3
Other financing
activities (26.7) (20.2)
----- -----
Cash (Used for)
Provided by
Financing
Activities (337.7) 42.7
------------- ------ ----
Discontinued
Operations
Cash provided by
operating
activities .7 9.8
Cash provided by
(used for)
investing
activities 9.8 (.9)
Cash provided by
financing
activities - -
--- ---
Cash Provided by
Discontinued
Operations 10.5 8.9
---------------- ---- ---
Effect of
Exchange Rate
Changes on Cash .4 (.4)
---------------- --- ---
Decrease in Cash
and Cash Items (93.5) (52.8)
Cash and Cash
Items -
Beginning of
Year 450.4 454.4
----- -----
Cash and Cash
Items - End
of Period $356.9 $401.6
============= ====== ======
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY BUSINESS SEGMENTS
(Unaudited)
Three Months
Ended Six Months Ended
31 March 31 March
(Millions of
dollars) 2014 2013 2014 2013
------------ ---- ---- ---- ----
Sales to External
Customers
Merchant Gases $1,040.1 $1,003.2 $2,087.8 $2,012.3
Tonnage Gases 839.9 808.5 1,648.0 1,706.9
Electronics and Performance Materials 591.7 548.8 1,170.8 1,097.8
Equipment and Energy 110.2 123.7 220.8 229.6
-------------------- ----- ----- ----- -----
Segment and
Consolidated
Totals $2,581.9 $2,484.2 $5,127.4 $5,046.6
============= ====== ====== ====== ======
Operating Income
Merchant Gases $143.4 $168.1 $312.6 $339.1
Tonnage Gases 112.2 123.2 229.8 261.3
Electronics and Performance Materials 107.1 77.5 190.6 138.8
Equipment and Energy 22.9 20.6 43.4 29.0
-------------------- ---- ---- ---- ----
Segment Total $385.6 $389.4 $776.4 $768.2
Other (.9) .3 (6.1) (6.1)
----- --- --- ---- ----
Consolidated
Total $384.7 $389.7 $770.3 $762.1
============ ====== ====== ====== ======
31 March 30
September
(Millions of
dollars) 2014 2013
------------ ---- ----
Identifiable
Assets (A)
Merchant Gases $6,682.3 $6,729.9
Tonnage Gases 5,473.3 5,397.0
Electronics and
Performance Materials 2,870.7 2,859.4
Equipment and Energy 846.5 675.2
-------------------- ----- -----
Segment Total $15,872.8 $15,661.5
Other 859.7 990.6
Discontinued operations - 2.5
----------------------- --- ---
Consolidated
Total $16,732.5 $16,654.6
============ ========= =======
(A) Identifiable assets
are equal to total
assets less investment
in net assets of and
advances to equity
affiliates.
SOURCE Air Products
