News Release
Air Products Reports Fiscal 2009 First Quarter Earnings
Access the Q1 earnings teleconference scheduled for
LEHIGH VALLEY, Pa.,
Excluding the impact of these items, income was
First quarter revenues of
First Quarter Segment Performance -- Merchant Gases sales of$925 million declined eight percent due to currency. Operating income of$171 million declined 15 percent from the prior year, as strong pricing was offset by weaker volumes across all regions and unfavorable currency impacts. -- Tonnage Gases sales of$744 million were down six percent and operating income of$109 million decreased two percent from the prior year on unfavorable currency impacts and lower volumes from weakness in steel and chemicals end markets. Hydrogen volumes were higher despite unfavorable hurricane impacts. -- Electronics and Performance Materials sales of$407 million declined 21 percent. Operating income of$25 million declined 63 percent from the prior year. Electronics manufacturing declined significantly on falling consumer demand. Performance Materials volumes dropped on lower demand from coatings, autos, housing and other end markets. -- Equipment and Energy sales of$120 million were up 19 percent on higher air separation unit sales. Operating income of$7 million decreased 25 percent from the prior year on lower LNG heat exchanger activity.
Outlook
McGlade said, "While the global economic environment is poor, we continue to build and maintain our strong positions, taking the necessary near-term actions to deliver improvement and growth in the future. We have a good backlog of projects and opportunities in front of us. Our solid balance sheet and access to capital will enable us to take advantage of these opportunities."
The company expects second quarter EPS from continuing operations to be
between
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 over
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
*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 Q1 YTD Continuing Continuing Operations Operations Operating Income Diluted Diluted Income EPS EPS Millions of Dollars 2009 GAAP $114.1 $90.0 $.42 2008 GAAP 380.4 262.3 1.18 % Change GAAP (70)% (66)% (64)% 2009 GAAP $114.1 $90.0 $.42 Global Cost Reduction Plan 174.2 116.1 .55 2009 Non-GAAP Measure $288.3 $206.1 $.97 % Change Non-GAAP Measure (24)% (21)% (18)% 2009 Forecast GAAP $3.45-$3.75 Global Cost Reduction Plan $.55 2009 Forecast Non-GAAP Measure $4.00-$4.30 AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries CONSOLIDATED INCOME STATEMENTS (Unaudited) (Millions of dollars, except for share data) Three Months Ended 31 December 2008 2007 SALES $2,195.3 $2,407.4 Cost of sales 1,629.7 1,753.6 Selling and administrative 247.0 258.5 Research and development 33.2 30.3 Global cost reduction plan 174.2 -- Pension settlement -- 1.4 Other (income) expense, net (2.9) (16.8) OPERATING INCOME 114.1 380.4 Equity affiliates' income 24.5 25.3 Interest expense 36.5 40.8 INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND MINORITY INTEREST 102.1 364.9 Income tax provision 7.1 96.5 Minority interest in earnings of subsidiary companies 5.0 6.1 INCOME FROM CONTINUING OPERATIONS 90.0 262.3 INCOME (LOSS) FROM DISCONTINUED OPERATIONS, Net of tax (21.4) 1.4 NET INCOME $68.6 $263.7 BASIC EARNINGS PER COMMON SHARE Income from continuing operations $.43 $1.22 Income (loss) from discontinued operations (.10) .01 Net Income $.33 $1.23 DILUTED EARNINGS PER COMMON SHARE Income from continuing operations $.42 $1.18 Income (loss) from discontinued operations (.10) .01 Net Income $.32 $1.19 WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING (in millions) 209.4 214.8 WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING ASSUMING DILUTION (in millions) 212.1 222.3 DIVIDENDS DECLARED PER COMMON SHARE - Cash $.44 $.38 Other Data from Continuing Operations: Depreciation and amortization $200.6 $211.0 Capital expenditures on a non-GAAP Basis (a) 332.9 323.7 (a) See RECONCILIATION NON-GAAP MEASURE for reconciliation AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Millions of dollars) 31 December 30 September 2008 2008 ASSETS CURRENT ASSETS Cash and cash items $118.5 $103.5 Trade receivables, less allowances for doubtful accounts 1,416.4 1,575.2 Inventories and contracts in progress 665.1 655.7 Prepaid expenses 115.8 107.7 Other receivables and current assets 468.6 349.4 Current assets of discontinued operations 49.0 56.6 TOTAL CURRENT ASSETS INVESTMENTS IN NET ASSETS OF AND ADVANCES TO EQUITY AFFILIATES 763.3 822.6 PLANT AND EQUIPMENT, at cost 14,783.7 14,988.6 Less accumulated depreciation 8,324.7 8,373.8 PLANT AND EQUIPMENT, net 6,459.0 6,614.8 GOODWILL 866.0 928.1 INTANGIBLE ASSETS, net 243.9 289.6 NONCURRENT CAPITAL LEASE RECEIVABLES 519.0 505.3 OTHER NONCURRENT ASSETS 558.6 504.1 NONCURRENT ASSETS OF DISCONTINUED OPERATIONS 10.4 58.7 TOTAL ASSETS $12,253.6 $12,571.3 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Payables and accrued liabilities $1,578.6 $1,665.6 Accrued income taxes 60.9 87.0 Short-term borrowings and current portion of long-term debt 574.0 451.4 Current liabilities of discontinued operations 8.4 8.0 TOTAL CURRENT LIABILITIES 2,221.9 2,212.0 LONG-TERM DEBT 3,595.2 3,515.4 DEFERRED INCOME & OTHER NONCURRENT LIABILITIES 966.2 1,049.2 DEFERRED INCOME TAXES 605.3 626.6 NONCURRENT LIABILITIES OF DISCONTINUED OPERATIONS 1.0 1.2 TOTAL LIABILITIES 7,389.6 7,404.4 MINORITY INTEREST IN SUBSIDIARY COMPANIES 137.9 136.2 TOTAL SHAREHOLDERS' EQUITY 4,726.1 5,030.7 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $12,253.6 $12,571.3 AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Millions of dollars) Three Months Ended 31 December 2008 2007 OPERATING ACTIVITIES Net Income $68.6 $263.7 Adjustments to reconcile income to cash provided by operating activities: Depreciation and amortization 200.6 211.0 Impairment of assets 32.1 -- Loss on sale of discontinued operations -- .4 Impairment of assets of discontinued operations 48.7 -- Deferred income taxes (.6) 20.8 Undistributed earnings of unconsolidated affiliates (10.9) (7.2) Loss (gain) on sale of assets and investments 1.9 (6.2) Share-based compensation 17.5 17.1 Noncurrent capital lease receivables (37.0) (47.8) Pension and other postretirement costs 20.0 29.2 Other (25.6) (57.2) Working capital changes that provided (used) cash, excluding effects of acquisitions and divestitures: Trade receivables 101.7 (69.5) Inventories (53.7) (29.3) Contracts in progress (6.6) 47.0 Other receivables (74.2) 43.2 Payables and accrued liabilities (42.9) (93.1) Other (40.4) 44.6 CASH PROVIDED BY OPERATING ACTIVITIES (a) 199.2 366.7 INVESTING ACTIVITIES Additions to plant and equipment (291.7) (268.6) Acquisitions, less cash acquired (1.6) (.2) Investment in and advances to unconsolidated affiliates (.1) -- Proceeds from sale of assets and investments 18.9 8.8 Proceeds from sale of discontinued operations .9 69.3 Change in restricted cash (31.7) (135.7) Other -- (7.9) CASH USED FOR INVESTING ACTIVITIES (305.3) (334.3) FINANCING ACTIVITIES Long-term debt proceeds 109.0 160.3 Payments on long-term debt (41.4) (41.2) Net increase in commercial paper and short-term borrowings 145.7 120.1 Dividends paid to shareholders (92.1) (81.9) Purchase of Treasury Stock -- (189.7) Proceeds from stock option exercises 1.1 33.0 Excess tax benefit from share-based compensation/other .6 21.3 CASH PROVIDED BY FINANCING ACTIVITIES 122.9 21.9 AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Unaudited) (Millions of dollars) Three Months Ended 31 December 2008 2007 Effect of Exchange Rate Changes on Cash (1.8) 1.7 Increase in Cash and Cash Items $15.0 $56.0 Cash and Cash Items - Beginning of Year 103.5 40.5 Cash and Cash Items - End of Period Pension plan contributions $42.6 $69.8 AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Millions of dollars) 1. NEW ACCOUNTING STANDARDS Effective1 October 2008 , the Company adopted Statement of Financial Accounting Standard (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 Staff Position No. 157-2 delayed the adoption of SFAS No. 157 for other nonfinancial assets and liabilities until1 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. The Company adopted the early measurement date change of SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans," for its U.K. andBelgium pension plans as of1 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 ended30 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. 2. GLOBAL COST REDUCTION PLAN During the first quarter ended31 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 costs. The Company will eliminate approximately 1,400 positions, or about seven percent of the Company's 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. The planned actions are expected to be substantially completed within the next twelve months. 3. DISCONTINUED OPERATIONS TheU.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. The balance sheet items of discontinued operations have been reclassified and are segregated in the consolidated balance sheets. For additional historical information on these discontinued operations, refer to the Company's 2008 annual report on Form 10-K.U.S. Healthcare InJuly 2008 , the Board of Directors authorized management to pursue the sale of theU.S. Healthcare business. During fiscal year 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 theU.S. Healthcare business. The Company anticipates selling this business in fiscal 2009 and is in active discussions with potential buyers. InDecember 2008 , 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 theU.S. Healthcare business. Also, a tax benefit of$8.8 , or$.04 per share, was recorded to revise the estimated tax benefit related to the impairment charges. Additional charges may be recorded in future periods dependent upon the timing and method of ultimate disposition. The operating results of theU.S. Healthcare business have been classified as discontinued operations and are summarized below: Three Months Ended 31 December 2008 2007 Sales $48.2 $66.2 Income (loss) before taxes $1.1 $(8.5) Income tax provision (benefit) .4 (3.2) Income (loss) from operations of discontinued operations $.7 $(5.3) Impairment/write-down to estimated net realizable value, net of tax (22.1) -- Income (loss) from discontinued operations, net of tax $(21.4) $(5.3) Polymer Emulsions Business In the first quarter of fiscal year 2008, the Polymer Emulsions business generated sales of$151.2 and income, net of tax, of$6.8 . The Company completed the sale of its Polymer Emulsions business in fiscal year 2008. HPPC Business In the first quarter of fiscal year 2008, the HPPC business generated sales of $22.9 and income, net of tax, of $.2. The Company closed on the sale of its HPPC business on31 December 2007 . 4. CUSTOMER BANKRUPTCY On6 January 2009 , a major customer of the Company began operating under Chapter 11 bankruptcy protection. This customer receives product principally from the Tonnage Gases segment. At 31 December 2008, the Company had outstanding net trade receivables with the customer of$35.7 . At this time, the Company is not able to reasonably estimate its exposure related to this customer, if any. As such, the Company did not recognize any charges associated with this bankruptcy as of31 December 2008 . AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries SUMMARY BY BUSINESS SEGMENTS (Unaudited) (Millions of dollars) Three Months Ended 31 December 2008 2007 Revenues from external customers Merchant Gases $925.2 $1,001.7 Tonnage Gases 744.0 791.1 Electronics and Performance Materials 406.6 514.3 Equipment and Energy 119.5 100.3 Segment and Consolidated Totals $2,195.3 $2,407.4 Operating income Merchant Gases $170.5 $199.8 Tonnage Gases 108.8 111.1 Electronics and Performance Materials 24.6 66.0 Equipment and Energy 7.0 9.3 Segment Totals 310.9 386.2 Global cost reduction plan (174.2) -- Pension settlement -- (1.4) Other (22.6) (4.4) Consolidated Totals $114.1 $380.4 (Millions of dollars) 31 December 30 September 2008 2008 Identifiable assets (a) Merchant Gases $4,647.7 $4,881.6 Tonnage Gases 3,270.5 3,335.4 Electronics and Performance Materials 2,220.4 2,341.0 Equipment and Energy 324.3 300.2 Segment Totals 10,462.9 10,858.2 Other 968.0 775.2 Discontinued operations 59.4 115.3 Consolidated Totals $11,490.3 $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. Presented below is a reconciliation of capital expenditures on a GAAP basis to a non-GAAP measure. Three Months Ended 31 December 2008 2007 Capital expenditures - GAAP basis $293.4 $268.8 Capital lease expenditures under EITF No. 01-08 39.5 54.9 Capital Expenditures - non-GAAP basis $332.9 $323.7
SOURCE Air Products -0-01/21/2009 /CONTACT: Media Inquiries:Katie McDonald , +1-610-481-3673, mcdonace@airproducts.com; Investor Inquiries:Nelson Squires , +1-610-481-7461, squirenj@airproducts.com, both of Air Products/ /Web Site: http://www.airproducts.com / (APD) CO: Air Products ST:Pennsylvania IN: CHM SU: ERN CCA ERP PR -- PH60695 -- 449501/21/2009 06:00 EST http://www.prnewswire.com