Access the Q1 earnings teleconference today at 10:00 a.m. EST by calling (719) 325-4826 and entering passcode 8101417, or listen on the Web at: www.airproducts.com/Invest/financialnews/EarningsReleases.htm.
LEHIGH VALLEY, Pa.,
These results include
First quarter revenues of
John McGlade, president and chief executive officer, said, 'Our fiscal year is off to a great start, thanks to the dedication and commitment of our 22,000 employees worldwide. We delivered double-digit earnings growth and significant margin improvement during the quarter. This strong performance reflects the continued emphasis we have placed on delivering profitable growth through our global focus and relentless drive for productivity.'
First Quarter Segment Performance
-- Merchant Gases sales of $897 million were up 21 percent and operating
income of $175 million increased 26 percent over the prior year on
higher volumes, improved pricing, a weaker dollar and productivity.
Margins increased to 19.6 percent, up 80 basis points versus the prior
year.
-- Tonnage Gases sales of $791 million were up 15 percent and operating
income of $111 million increased 16 percent over the prior year.
Revenues increased from higher volumes, increased natural gas costs and
a weaker dollar. The operating income increases were driven by higher
volumes, improved plant efficiencies and asset sales. These were
partially offset by planned maintenance costs for a number of plant
outages and higher bidding expenses related to the significant growth
opportunities in this segment.
-- Electronics and Performance Materials sales of $514 million were up six
percent and operating income of $66 million increased 33 percent over
the prior year on improved volumes. Electronics sales were driven by
higher specialty materials and bulk gas volumes, while Performance
Materials volume gains were driven by demand for surfactants and
specialty additives used in environmentally friendly formulations.
Margins increased significantly to 12.8 percent, a 260 basis point
improvement over the prior year, reflecting the impact of restructuring
actions in Electronics and increased sales of formulated products in
Performance Materials.
-- Equipment and Energy sales of $100 million and operating income of $9
million decreased from the prior year, as expected. The company
received one new LNG heat exchanger order during the quarter.
-- Healthcare sales of $171 million were up 10 percent and operating
income of $14 million increased 45 percent over the prior year, driven
by volume growth and lower costs in Europe.
Outlook
McGlade said, 'Economic activity through the first quarter of this year is tracking in line with our expectations. Looking forward, we expect high bidding activity and solid demand from our customers, who rely on our products and services to improve energy efficiency, plant productivity, product quality and environmental performance.
'We believe the actions we have taken over the past few years have transformed us into a high performing company that is positioned to produce strong results in a slowing economic environment. Our focus on growth markets and geographies, productivity and streamlined operations, combined with a robust backlog of projects, should allow us to consistently deliver higher growth and higher returns in both the short and long-term.
'We are now expecting 15 to 19 percent* year-on-year earnings growth and, therefore, are raising our guidance.'
The EPS guidance provided at the end of fiscal 2007 was
Annual Meeting of Shareholders
Air Products will host its Annual Meeting of Shareholders on
Air Products (NYSE: APD) serves customers in industrial, energy,
technology and healthcare markets worldwide with a unique portfolio of
atmospheric gases, process and specialty gases, performance materials, and
equipment and services. Founded in 1940, Air Products has built leading
positions in key growth markets such as semiconductor materials, refinery
hydrogen, home healthcare services, natural gas liquefaction, and advanced
coatings and adhesives. The company is recognized for its innovative culture,
operational excellence and commitment to safety and the environment. Air
Products has annual revenues of
***NOTE: This release contains 'forward-looking statements' within the
safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on management's reasonable
expectations and assumptions as of the date of this presentation regarding
important risk factors. Actual performance and financial results may differ
materially from projections and estimates expressed in the forward-looking
statements because of many factors, including, without limitation, overall
economic and business conditions different than those currently anticipated;
future financial and operating performance of major customers and industries
served by Air Products; the impact of competitive products and pricing;
interruption in ordinary sources of supply of raw materials; the ability to
recover unanticipated increased energy and raw material costs from customers;
costs and outcomes of litigation or regulatory activities; consequences of
acts of war or terrorism impacting the
The presentation of non-GAAP measures is intended to enhance the usefulness of financial information by providing measures which the Company's management uses internally to evaluate the Company's baseline performance. Presented below is a reconciliation of reported GAAP results to non-GAAP measures.
CONSOLIDATED RESULTS Continuing Operations
Diluted EPS
Q2 YTD
2007 GAAP $4.50
Gain on contract settlement (.11)
Global cost reduction plan .04
Pension settlement .03
Donation/sale of cost investment (.09)
Tax audit settlements/adjustments (.17)
2007 Non-GAAP Measure $4.20
2008 Forecast GAAP $1.09-$1.13 $4.76-$4.91
Pension settlement .08 .09
2008 Forecast Non-GAAP $1.17-$1.21 $4.85-$5.00
2008 Forecast GAAP $4.76-$4.91
2007 GAAP $4.50
% Change GAAP 6%-9%
2008 Forecast Non-GAAP $4.85-$5.00
2007 Non-GAAP $4.20
% Change Non-GAAP 15%-19%
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
(Millions of dollars, except for share data)
Three Months Ended
31 December
2007 2006
SALES $2,473.6 $2,267.8
COSTS AND EXPENSES
Cost of sales 1,788.5 1,649.7
Selling and administrative 296.8 275.4
Research and development 30.3 32.1
Pension settlement 1.4 --
Other (income) expense, net (15.4) (6.8)
OPERATING INCOME 372.0 317.4
Equity affiliates' income 25.3 27.3
Interest expense 41.0 39.1
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES
AND MINORITY INTEREST 356.3 305.6
Income tax provision 93.2 79.5
Minority interest in earnings of subsidiary
companies 6.1 5.1
INCOME FROM CONTINUING OPERATIONS 257.0 221.0
INCOME FROM DISCONTINUED OPERATIONS, net of tax 6.7 9.3
NET INCOME $263.7 $230.3
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations $1.20 $1.02
Income from discontinued operations 0.03 0.04
Net Income $1.23 $1.06
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $1.16 $0.99
Income from discontinued operations 0.03 0.04
Net Income $1.19 $1.03
WEIGHTED AVERAGE OF COMMON
SHARES OUTSTANDING (in millions) 214.8 216.7
WEIGHTED AVERAGE OF COMMON
SHARES OUTSTANDING ASSUMING
DILUTION (in millions) 222.3 223.4
DIVIDENDS DECLARED PER
COMMON SHARE - Cash $.38 $.34
Other Data from Continuing Operations:
Capital Expenditures $273.3 $234.2
Depreciation and Amortization $218.0 $192.1
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of dollars)
31 December 30 September
2007 2007
ASSETS
CURRENT ASSETS
Cash and cash items $96.5 $40.5
Trade receivables, less allowances for
doubtful accounts 1,667.5 1,578.5
Inventories and contracts in progress 732.2 746.2
Prepaid expenses 61.3 108.2
Other receivables and current assets 197.8 240.1
Current assets of discontinued operations 108.5 144.9
TOTAL CURRENT ASSETS 2,863.8 2,858.4
INVESTMENTS IN NET ASSETS OF AND ADVANCES
TO EQUITY AFFILIATES 791.6 778.1
PLANT AND EQUIPMENT, at cost 14,910.2 14,600.3
Less accumulated depreciation 8,209.9 7,996.6
PLANT AND EQUIPMENT, net 6,700.3 6,603.7
GOODWILL 1,236.6 1,199.9
INTANGIBLE ASSETS, net 282.4 276.2
OTHER NONCURRENT ASSETS 867.0 638.6
NONCURRENT ASSETS OF DISCONTINUED OPERATIONS 272.6 304.6
TOTAL ASSETS $13,014.3 $12,659.5
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables and accrued liabilities $1,502.3 $1,550.9
Accrued income taxes 103.6 108.6
Short-term borrowings and current portion
of long-term debt 559.8 694.4
Current liabilities of discontinued operations 58.9 68.8
TOTAL CURRENT LIABILITIES 2,224.6 2,422.7
LONG-TERM DEBT 3,415.6 2,976.5
DEFERRED INCOME & OTHER NONCURRENT LIABILITIES 842.7 872.0
DEFERRED INCOME TAXES 735.3 705.6
NONCURRENT LIABILITIES OF DISCONTINUED
OPERATIONS 9.6 9.8
TOTAL LIABILITIES 7,227.8 6,986.6
Minority interest in subsidiary companies 99.3 92.9
Minority interest of discontinued operations 84.2 84.4
TOTAL MINORITY INTEREST 183.5 177.3
TOTAL SHAREHOLDERS' EQUITY 5,603.0 5,495.6
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,014.3 $12,659.5
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions of dollars)
Three Months Ended
31 December
2007 2006
OPERATING ACTIVITIES FROM CONTINUING OPERATIONS
Net Income $263.7 $230.3
Income from discontinued operations,
net of tax (6.7) (9.3)
Income from Continuing Operations 257.0 221.0
Adjustments to reconcile income to cash provided
by operating activities:
Depreciation and amortization 218.0 192.1
Deferred income taxes 20.8 15.3
Undistributed earnings of unconsolidated
affiliates (7.2) (13.8)
Gain on sale of assets and investments (6.2) (0.3)
Share-based compensation 17.1 16.6
Noncurrent capital lease receivables (47.7) (47.0)
Other (30.1) (21.1)
Working capital changes that provided (used)
cash, excluding effects of acquisitions and
divestitures:
Trade receivables (77.4) (36.6)
Inventories (27.3) (16.0)
Contracts in progress 47.0 52.5
Prepaid expenses 47.0 6.1
Payables and accrued liabilities (85.9) (224.9)
Other 42.9 6.5
CASH PROVIDED BY OPERATING ACTIVITIES (a) 368.0 150.4
INVESTING ACTIVITIES FROM CONTINUING OPERATIONS
Additions to plant and equipment (b) (271.2) (232.1)
Acquisitions, less cash acquired (1.4) --
Investment in and advances to unconsolidated
affiliates -- (1.5)
Proceeds from sale of assets and investments 9.0 12.5
Proceeds from insurance settlements -- 14.9
Change in restricted cash (135.7) --
Other (.8) (.4)
CASH USED FOR INVESTING ACTIVITIES (400.1) (206.6)
FINANCING ACTIVITIES FROM CONTINUING OPERATIONS
Long-term debt proceeds 160.5 53.8
Payments on long-term debt (41.6) (36.2)
Net increase in commercial paper and short-term
borrowings 120.1 226.2
Dividends paid to shareholders (81.9) (73.9)
Purchase of Treasury Stock (189.7) (133.5)
Proceeds from stock option exercises 33.0 37.0
Excess tax benefit from share-based
compensation/other 21.5 6.7
CASH PROVIDED BY FINANCING ACTIVITIES 21.9 80.1
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
(Millions of dollars)
Three Months Ended
31 December
2007 2006
DISCONTINUED OPERATIONS
Cash (used for) provided by operating activities (1.3) 9.0
Cash provided by (used for) investing activities 65.8 (6.2)
Cash used for financing activities -- --
CASH PROVIDED BY DISCONTINUED OPERATIONS 64.5 2.8
Effect of Exchange Rate Changes on Cash 1.7 (.4)
Increase in Cash and Cash Items 56.0 26.3
Cash and Cash Items - Beginning of Year 40.5 31.0
Cash and Cash Items - End of Period $96.5 $57.3
(a) Pension plan contributions in 2008 and 2007 were $69.8 and $239.9,
respectively.
(b) Excludes capital lease additions in 2008 and 2007 of $.7 and $.6,
respectively.
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars)
1. NEW ACCOUNTING STANDARD
The Company adopted Financial Accounting Standards Board (FASB)
Interpretation No. 48, 'Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109,' (FIN No. 48) on
2. DISCONTINUED OPERATIONS
The High Purity Process Chemicals (HPPC) business and the Polymer Emulsions business have been accounted for as discontinued operations. The results of operations and cash flows of these businesses have been removed from the results of continuing operations for all periods presented. The balance sheet items of discontinued operations have been reclassified and are segregated in the consolidated balance sheets.
HPPC Business
In
Polymer Emulsions Business
The Company announced it was exploring the sale of its Polymer Emulsions
business in 2006 as part of the Company's ongoing portfolio management
activities. In
In the first quarter of 2008, this business generated sales of
The sale consists of the global VAE polymers operations including
production facilities located in Calvert City, Ky.; South Brunswick, N.J.;
Upon completion of the sale, the Company will assume full ownership of the Elkton and Piedmont plants and related North American atmospheric emulsions and global pressure sensitive adhesives business. The Company intends to sell these businesses.
3. PENSION SETTLEMENT
A number of senior managers and others who were eligible for supplemental
pension plan benefits retired in fiscal year 2007. The Company's supplemental
pension plan provides for a lump sum benefit payment option at the time of
retirement, or for corporate officers six months after the participant's
retirement date. If payments exceed the sum of service and interest cost
components of net periodic pension cost of the plan for the fiscal year,
settlement accounting is triggered under pension accounting rules. However, a
settlement loss may not be recognized until the time the pension obligation is
settled. The Company recognized
4. SHARE REPURCHASE PROGRAM
On
5. BUSINESS SEGMENTS
Previously, the Company reported results for the Chemicals segment, which consisted of the Polymer Emulsions business and the Polyurethane Intermediates (PUI) business. Beginning with the first quarter of 2008, the Polymer Emulsions business has been accounted for as discontinued operations as discussed in Note 2. Also beginning with the first quarter of 2008, the PUI business is reported as part of the Tonnage Gases segment and prior period information has been restated to reflect this business reorganization.
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY BUSINESS SEGMENTS
(Unaudited)
(Millions of dollars)
Three Months Ended
31 December
2007 2006
Revenues from external customers
Merchant Gases $897.0 $740.0
Tonnage Gases 791.1 689.5
Electronics and Performance Materials 514.3 486.9
Equipment and Energy 100.3 195.6
Healthcare 170.9 155.8
Segment and Consolidated Totals $2,473.6 $2,267.8
Operating income
Merchant Gases $175.4 $139.2
Tonnage Gases 111.1 95.4
Electronics and Performance Materials 66.0 49.8
Equipment and Energy 9.3 26.8
Healthcare 13.6 9.4
Segment Totals 375.4 320.6
Other (3.4) (3.2)
Consolidated Totals $372.0 $317.4
(Millions of dollars)
31 December 30 September
2007 2007
Identifiable assets (a)
Merchant Gases $4,175.6 $3,984.4
Tonnage Gases 3,391.4 3,328.4
Electronics and Performance Materials 2,425.0 2,435.3
Equipment and Energy 376.2 362.6
Healthcare 938.1 918.9
Segment Totals 11,306.3 11,029.6
Other 535.3 402.3
Discontinued operations 305.1 381.6
Consolidated Totals $12,146.7 $11,813.5
(a) Identifiable assets are equal to total assets less investments in and
advances to equity affiliates.
SOURCE Air Products