News Release
Air Products Reports Fiscal 2009 Second Quarter Earnings
Access the Q2 earnings teleconference scheduled for
LEHIGH VALLEY, Pa.,
Second quarter revenues of
Second Quarter Segment Performance
-- Merchant Gases sales of $870 million declined 14 percent on
unfavorable currency, weaker volumes across end-markets globally,
and the impact of extended customer outages, partially offset by
continued strong pricing. Operating income of $156 million
declined 17 percent from the prior year on unfavorable currency
and weaker volumes, partially offset by strong pricing and cost
reduction.
-- Tonnage Gases sales of $625 million were down 28 percent,
principally on lower natural gas and raw material cost
pass-through and a stronger dollar, and to a lesser extent, weaker
volumes, particularly in steel and chemical end-markets.
Operating income of $98 million decreased 12 percent from the
prior year on weaker volumes and unfavorable currency.
Electronics and Performance Materials sales of $332 million
declined 41 percent and the segment saw an $11 million operating
loss, driven by significantly lower volumes in Electronics due to
further declines in semiconductor and liquid crystal display
manufacturing. While Performance Materials volumes were impacted
by pronounced weakness in coatings, autos and housing end-markets,
the business remained profitable in the quarter.
-- Equipment and Energy sales of $128 million were up 22 percent on
higher air separation unit activity. Operating income of $16
million increased 63 percent from the prior year on favorable cost
performance.
Outlook
McGlade said, "In this economic environment, visibility is limited, and the business climate remains weak. We expect to see some seasonal volume pick up in Merchant Gases and Performance Materials, and a modest improvement in Electronics in the second half of our fiscal year. Our continued discipline and cost reduction actions will also further benefit earnings. Despite the challenging environment, we continue to pursue profitable growth opportunities serving energy, environmental and emerging markets."
Air Products now expects third quarter EPS from continuing operations to
be between
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 had fiscal 2008 revenues of
NOTE: The information above 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 document 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, continuing
deterioration in economic and business conditions; weakening demand for the
Company's products, future financial and operating performance of major
customers and industries served by the Company; unanticipated contract
terminations or customer cancellations or postponement of projects and sales;
asset impairments due to economic conditions or specific product or customer
events; 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
operates; significant fluctuations in interest rates and foreign
currencies from that currently anticipated; the continued availability of
capital funding sources in all of the Company's foreign operations; the impact
of new or changed environmental, healthcare, tax or other legislation and
regulations in jurisdictions in which the Company and its affiliates operate;
the impact of new or changed financial accounting standards; and the timing
and rate at which tax credits can be utilized and other risk factors described
in the Company's Form 10K for its fiscal year ended
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 are reconciliations of reported GAAP results to non-GAAP measures.
CONSOLIDATED RESULTS
Continuing Operations
Q2 Q2 Q3 YTD
Operating Q2 Diluted Diluted Diluted
Income Income EPS EPS EPS
Millions of Dollars
2009 GAAP $260.4 $189.3 $.89
2008 GAAP 348.6 259.8 1.18
% Change GAAP (25)% (27)% (25)%
2008 GAAP $348.6 $259.8 $1.18
Pension settlement 26.3 16.5 .08
2008 Non-GAAP Measure $374.9 $276.3 $1.26
% Change Non-GAAP
Measure (31)% (31)% (29)%
2009 Forecast GAAP $.93-$1.02* $3.30-$3.50*
Global Cost
Reduction Plan -
Q1 charge -- $.55
2009 Forecast
Non-GAAP Measure $.93-$1.02 $3.85-$4.05
*This forecast excludes potential charges for future cost reduction plans
and pension settlements.
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) 2009 2008 2009 2008
SALES $1,955.4 $2,542.7 $4,150.7 $4,950.1
Cost of sales 1,439.9 1,871.6 3,069.6 3,625.2
Selling and administrative 230.6 272.1 477.6 530.6
Research and development 29.6 34.3 62.8 64.6
Global cost reduction plan -- -- 174.2 --
Pension settlement -- 26.3 -- 27.7
Other income, net 5.1 10.2 8.0 27.0
OPERATING INCOME 260.4 348.6 374.5 729.0
Equity affiliates' income 27.0 42.4 51.5 67.7
Interest expense 30.0 38.9 66.5 79.7
INCOME FROM CONTINUING
OPERATIONS BEFORE TAXES
AND MINORITY INTEREST 257.4 352.1 359.5 717.0
Income tax provision 66.5 87.8 73.6 184.3
Minority interest in
earnings of subsidiary
companies 1.6 4.5 6.6 10.6
INCOME FROM CONTINUING
OPERATIONS 189.3 259.8 279.3 522.1
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS,
net of tax 16.3 54.5 (5.1) 55.9
NET INCOME $205.6 $314.3 $274.2 $578.0
BASIC EARNINGS PER COMMON
SHARE
Income from continuing
operations $.90 $1.22 $1.33 $2.45
Income (loss) from
discontinued operations .08 .26 (.02) .26
Net Income $.98 $1.48 $1.31 $2.71
DILUTED EARNINGS PER COMMON
SHARE
Income from continuing
operations $.89 $1.18 $1.32 $2.37
Income (loss) from
discontinued operations .08 .25 (.03) .25
Net Income $.97 $1.43 $1.29 $2.62
WEIGHTED AVERAGE OF COMMON
SHARES OUTSTANDING (in
millions) 209.6 212.3 209.5 213.6
WEIGHTED AVERAGE OF COMMON
SHARES OUTSTANDING
ASSUMING DILUTION
(in millions) 212.3 219.2 212.2 220.8
DIVIDENDS DECLARED PER
COMMON SHARE - Cash $.45 $.44 $.89 $.82
Other Data from Continuing
Operations:
Depreciation and
amortization $197.1 $217.1 $397.7 $428.1
Capital expenditures on a
non-GAAP Basis (a) 352.8 315.6 685.7 639.3
(a) See page 13 for reconciliation.
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
31 March 30 September
(Millions of dollars) 2009 2008
ASSETS
CURRENT ASSETS
Cash and cash items $79.7 $103.5
Trade receivables, less allowances
for doubtful accounts 1,272.2 1,575.2
Inventories and contracts in progress 630.3 655.7
Prepaid expenses 172.2 107.7
Other receivables and current assets 396.6 349.4
Current assets of discontinued
operations 45.4 56.6
TOTAL CURRENT ASSETS 2,596.4 2,848.1
INVESTMENT IN NET ASSETS OF AND
ADVANCES TO EQUITY AFFILIATES 756.5 822.6
PLANT AND EQUIPMENT, at cost 14,645.4 14,988.6
Less accumulated depreciation 8,235.3 8,373.8
PLANT AND EQUIPMENT, net 6,410.1 6,614.8
GOODWILL 811.2 928.1
INTANGIBLE ASSETS, net 215.0 289.6
NONCURRENT CAPITAL LEASE RECEIVABLES 527.1 505.3
OTHER NONCURRENT ASSETS 550.3 504.1
NONCURRENT ASSETS OF DISCONTINUED
OPERATIONS 12.3 58.7
TOTAL ASSETS $11,878.9 $12,571.3
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables and accrued liabilities $1,307.1 $1,665.6
Accrued income taxes 34.2 87.0
Short-term borrowings and current
portion of long-term debt 645.8 451.4
Current liabilities of discontinued
operations 9.2 8.0
TOTAL CURRENT LIABILITIES 1,996.3 2,212.0
LONG-TERM DEBT 3,456.6 3,515.4
DEFERRED INCOME & OTHER NONCURRENT
LIABILITIES 952.8 1,049.2
DEFERRED INCOME TAXES 707.6 626.6
NONCURRENT LIABILITIES OF
DISCONTINUED OPERATIONS .8 1.2
TOTAL LIABILITIES 7,114.1 7,404.4
MINORITY INTEREST IN SUBSIDIARY
COMPANIES 126.7 136.2
TOTAL SHAREHOLDERS' EQUITY 4,638.1 5,030.7
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $11,878.9 $12,571.3
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
31 March
(Millions of dollars) 2009 2008
OPERATING ACTIVITIES
Net income $274.2 $578.0
Adjustments to reconcile income to cash
provided by operating activities:
Depreciation and amortization 397.7 428.1
Impairment of long-lived assets 32.1 --
Impairment of long-lived assets of
discontinued operations 48.7 --
Gain on sale of discontinued operations -- (88.9)
Deferred income taxes 41.8 34.6
Undistributed earnings of unconsolidated
affiliates (35.0) (42.6)
Loss on sale of assets and investments 6.6 .9
Share-based compensation 30.1 33.0
Noncurrent capital lease receivables (52.9) (118.5)
Pension and other postretirement costs 52.2 82.8
Other adjustments (85.3) (89.1)
Working capital changes that provided (used)
cash, excluding effects of acquisitions and
divestitures:
Trade receivables 166.3 (153.3)
Inventories (41.7) (36.6)
Contracts in progress 11.0 75.9
Other receivables (17.7) 10.2
Payables and accrued liabilities (257.6) (100.2)
Other working capital (116.8) 16.8
CASH PROVIDED BY OPERATING ACTIVITIES (a) 453.7 631.1
INVESTING ACTIVITIES
Additions to plant and equipment (615.8) (522.2)
Acquisitions, less cash acquired (1.6) (.6)
Investment in and advances to unconsolidated
affiliates (.1) --
Proceeds from sale of assets and investments 25.0 14.2
Proceeds from sale of discontinued operations .9 327.5
Change in restricted cash 40.7 (132.3)
Other investing activities -- (18.6)
CASH USED FOR INVESTING ACTIVITIES (550.9) (332.0)
FINANCING ACTIVITIES
Long-term debt proceeds 114.3 461.1
Payments on long-term debt (44.2) (93.9)
Net increase in commercial paper and
short-term borrowings 183.2 84.9
Dividends paid to shareholders (184.3) (163.4)
Purchase of treasury stock -- (560.2)
Proceeds from stock option exercises 6.8 41.8
Excess tax benefit from share-based
compensation/other 2.2 25.5
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES 78.0 (204.2)
Effect of Exchange Rate Changes on Cash (4.6) 3.4
Increase (Decrease) in Cash and Cash Items (23.8) 98.3
Cash and Cash Items - Beginning of Year 103.5 40.5
Cash and Cash Items - End of Period $79.7 $138.8
(a) Pension plan contributions $153.5 $118.3
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars)
1. NEW ACCOUNTING STANDARDS
Effective 1 January 2009 , the Company adopted Statement of Financial
Accounting Standard (SFAS) No. 161, "Disclosures about Derivative
Instruments and Hedging Activities - an amendment of FASB Statement No.
133." SFAS No. 161 requires enhanced disclosures about how and why an
entity uses derivative instruments; how derivative instruments and related
hedged items are accounted for; and how they affect an entity's
financial position, financial performance, and cash flows. This
Statement only requires additional disclosure and did not have an impact
on the Company's consolidated financial statements. The disclosures
will be included in the Company's Form 10-Q filing.
The Company adopted the measurement date change of SFAS No. 158,
"Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans," for its U.K. and Belgium pension plans as of
1 October 2008 . SFAS No. 158 required the Company to change the
measurement date for these plans from 30 June to 30 September (end of
fiscal year). As a result of this change, pension expense and actuarial
gains/losses for the three-month period ended 30 September 2008 were
recognized as adjustments to retained earnings and Accumulated Other
Comprehensive Income (AOCI), respectively. The after-tax charge to
retained earnings was $8.1 . AOCI was credited $35.8 for net actuarial
gains on an after-tax basis. These adjustments only affected the
balance sheet.
Effective 1 October 2008 , the Company adopted SFAS No. 157, "Fair Value
Measurements," for financial assets and liabilities and any other assets
and liabilities that are recognized and disclosed at fair value on a
recurring basis. This Statement defines fair value, establishes a method
for measuring fair value, and requires additional disclosures about fair
value measurements. Financial Accounting Standards Board (FASB) Staff
Position No. 157-2 delayed the adoption of SFAS No. 157 for other
nonfinancial assets and liabilities until 1 October 2009 for the Company.
The adoption of SFAS No. 157 did not impact the Company's financial
statements for assets and liabilities measured at fair value on a
recurring basis.
2. GLOBAL COST REDUCTION PLAN
During the first quarter ended 31 December 2008 , the Company announced a
global cost reduction plan designed to lower its cost structure and
better align its businesses to reflect rapidly declining economic
conditions around the world. The results from continuing operations
included a charge of $174.2 ($116.1 after-tax, or $.55 per share) for
this plan. This charge included $120.0 for severance and pension-related
costs. The Company will eliminate approximately 1,400 positions, or
about seven percent of its global workforce. The reductions are targeted
at reducing overhead and infrastructure costs, reducing and refocusing
elements of the Company's technology and business development spending,
and lowering its plant operating costs. The remainder of the charge,
$54.2 , is for business exits and asset management actions. Assets held
for sale were written down to net realizable value and an environmental
liability of $16.0 was recognized. This environmental liability results
from a decision to sell a production facility. The planned actions are
expected to be substantially completed by the end of the first quarter of
fiscal year 2010.
3. DISCONTINUED OPERATIONS
The U.S. Healthcare business, Polymer Emulsions business, and the High
Purity Process Chemicals (HPPC) business have been accounted for as
discontinued operations. The results of operations of these businesses
have been removed from the results of continuing operations for all
periods presented.
For additional historical information on these discontinued operations,
refer to the Company's 2008 annual report on Form 10-K.
U.S. Healthcare
In July 2008 , the Board of Directors authorized management to pursue the
sale of the U.S. Healthcare business. In 2008, the Company recorded a
total charge of $329.2 ($246.2 after-tax, or $1.12 per share) related to
the impairment/write-down of the net carrying value of the U.S.
Healthcare business. In April 2009 , the Company signed a contract to
divest approximately half of its remaining U.S. Healthcare business and
expects to conclude the sale of the remaining portions of this business
in 2009.
In the first quarter of 2009, based on additional facts, the Company
recorded an impairment charge of $48.7 ($30.9 after-tax, or $.15 per
share) reflecting a revision in the estimated net realizable value of
the U.S. Healthcare business. Also, a tax benefit of $8.8 , or $.04 per
share, was recorded to revise the estimated tax benefit related to
previously recognized impairment charges.
As a result of events occurring during the second quarter of 2009, which
increased the Company's ability to realize tax benefits associated with
the impairment charges recorded in 2008, the Company recognized a
one-time tax benefit of $16.7 , or $.08 per share.
Additional charges may be recorded in future periods dependent upon the
timing and method of ultimate disposition.
The operating results of the U.S. Healthcare business have been
classified as discontinued operations and are summarized below:
Three Months Six Months
Ended Ended
31 March 31 March
2009 2008 2009 2008
Sales $43.9 $62.6 $92.1 $128.8
Income (loss) before taxes $(1.0) $(10.6) $.1 $(19.1)
Income tax provision (benefit) (.4) (4.0) -- (7.2)
Income (loss) from operations of
discontinued operations $(.6) $(6.6) $.1 $(11.9)
Impairment/write-down to estimated net
realizable
value, net of tax 16.9 -- (5.2) --
Income (loss) from discontinued
operations, net of tax $16.3 $(6.6) $(5.1) $(11.9)
Polymer Emulsions Business
On 31 January 2008 , the Company sold its Polymers Emulsions business
to Wacker Chemie AG , its long-time joint venture partner. As part of
the agreement, the Company received Wacker Chemie AG's interest in the
Elkton, Md. and Piedmont, S.C. production facilities and their related
businesses plus cash proceeds of $258.2 . The Company recognized a gain
on the sale of $89.5 ($57.7 after-tax).
In the second quarter of 2008, the Polymer Emulsions business generated
sales of $78.8 and income from operations, net of tax, of $3.3 . For the
six months ended 31 March 2008 , sales were $230.0 and income from
operations, net of tax, was $10.1 .
HPPC Business
In the first quarter of 2008, the HPPC business generated sales of $22.9
and income from operations, net of tax, of $.2 . The Company closed on
the sale of its HPPC business on 31 December 2007 .
4. CUSTOMER BANKRUPTCY
On 6 January 2009 , a customer of the Company began operating under
Chapter 11 bankruptcy protection. This company receives product
principally from the Tonnage Gases segment. At 31 March 2009 , the
Company had outstanding net receivables with the customer of $37.3 .
Sales and operating income associated with this customer are not material
to the Tonnage Gases segment's results. At the present time, the Company
does not expect any material charges related to long-term assets
associated with this customer bankruptcy.
5. PENSION SETTLEMENT
A number of corporate officers and others who were eligible for
supplemental pension plan benefits retired in fiscal years 2007 and
2008. 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. The Company
recognizes pension settlements when payments exceed the sum of service
and interest cost components of net periodic pension cost of the plan
for the fiscal year. A settlement loss is recognized when the pension
obligation is settled. Based on the timing of when cash payments were
made, the Company recognized $26.3 and $27.7 in the three and six months
ended 31 March 2008 , respectively. The Company expects to recognize
settlement charges in the second half of 2009.
6. SHARE REPURCHASE PROGRAM
On 20 September 2007 , the Board of Directors authorized the repurchase
of up to $1,000 of the Company's outstanding common stock. During the
six months ended 31 March 2009 , the Company did not purchase any shares
under this authorization. At 31 March 2009 , $649.2 in share repurchase
authorization remains.
7. SUMMARY BY BUSINESS SEGMENT
Three Months Ended Six Months Ended
31 March 31 March
(Millions of dollars) 2009 2008 2009 2008
Revenues from External Customers
Merchant Gases $870.4 $1,008.7 $1,795.6 $2,010.4
Tonnage Gases 624.6 867.2 1,368.6 1,658.3
Electronics and Performance
Materials 332.2 562.1 738.8 1,076.4
Equipment and Energy 128.2 104.7 247.7 205.0
Segment and Consolidated Totals $1,955.4 $2,542.7 $4,150.7 $4,950.1
Operating Income
Merchant Gases $156.2 $189.2 $326.7 $389.0
Tonnage Gases 98.0 111.1 206.8 222.2
Electronics and Performance
Materials (11.1) 67.6 13.5 133.6
Equipment and Energy 16.3 10.0 23.3 19.3
Segment Totals $259.4 $377.9 $570.3 $764.1
Global cost reduction plan -- -- (174.2) --
Pension settlement -- (26.3) -- (27.7)
Other 1.0 (3.0) (21.6) (7.4)
Consolidated Totals $260.4 $348.6 $374.5 $729.0
31 March 30 September
(Millions of dollars) 2009 2008
Identifiable Assets (a)
Merchant Gases $4,518.4 $4,881.6
Tonnage Gases 3,266.0 3,335.4
Electronics and Performance Materials 2,109.8 2,341.0
Equipment and Energy 301.7 300.2
Segment Totals 10,195.9 10,858.2
Other 868.8 775.2
Discontinued Operations 57.7 115.3
Consolidated Totals $11,122.4 $11,748.7
(a) Identifiable assets are equal to total assets less investments in
and advances to equity affiliates.
RECONCILIATION
NON-GAAP MEASURE
The Company utilizes a non-GAAP measure in the computation of capital
expenditures and includes spending associated with facilities accounted
for as capital leases. Certain facilities that are built to service a
specific customer are accounted for as capital leases in accordance with
EITF No. 01-08, "Determining Whether an Arrangement Contains a Lease,"
and such spending is reflected as a use of cash within cash provided by
operating activities. The presentation of this non-GAAP measure is
intended to enhance the usefulness of information by providing a measure
which the Company's management uses internally to evaluate and manage
the Company's capital 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) 2009 2008 2009 2008
Capital expenditures - GAAP basis $324.1 $254.0 $617.5 $522.8
Capital lease expenditures under EITF
No. 01-08 28.7 61.6 68.2 116.5
Capital expenditures - non-GAAP basis $352.8 $315.6 $685.7 $639.3
SOURCE Air Products
-0- 04/22/2009
/CONTACT: Media Inquiries: Katie McDonald , +1-610-481-3673,
mcdonace@airproducts.com; Investor Inquiries: Nelson Squires , +1-610-481-7461,
squirenj@airproducts.com/
/Web Site: http://www.airproducts.com /
(APD)
CO: Air Products
ST: Pennsylvania
IN: CHM
SU: ERN ERP CCA
PR
-- PH02991 --
6791 04/22/2009 06:00 EDT http://www.prnewswire.com