1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended 31 December 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission file number 1-4534
AIR PRODUCTS AND CHEMICALS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware 23-1274455
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(State of Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
7201 Hamilton Boulevard, Allentown, Pennsylvania 18195-1501
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 610-481-4911
Indicate by check x whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at 6 February 1998
- -------------------------- ---------------------------------
Common Stock, $1 par value 117,684,621
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AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
Part I. Financial Information
Consolidated Balance Sheets -
31 December 1997 and 30 September 1997 .............................................. 3
Consolidated Income -
Three Months Ended 31 December 1997 and 1996 ........................................ 4
Consolidated Cash Flows -
Three Months Ended 31 December 1997 and 1996 ........................................ 5
Notes to Consolidated Financial Statements ............................................. 6
Management's Discussion and Analysis ................................................... 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K .............................................. 14
Signatures ............................................................................. 15
REMARKS:
The consolidated financial statements of Air Products and Chemicals, Inc. and
its subsidiaries (the "Company" or "Registrant") included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of the Company, the
accompanying statements reflect all adjustments necessary to present fairly the
financial position, results of operations and cash flows for those periods
indicated, and contain adequate disclosure to make the information presented not
misleading. Such adjustments are of a normal, recurring nature unless otherwise
disclosed in the notes to consolidated financial statements. However, the
results for the periods indicated herein reflect certain adjustments, such as
the valuation of inventories on the LIFO cost basis, which can only be finally
determined on an annual basis. It is suggested that these consolidated condensed
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's latest annual report on Form 10-K.
Results of operations for any three month period are not necessarily indicative
of the results of operations for a full year.
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3
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Millions of dollars, except per share)
31 December 1997 30 September 1997
---------------- -----------------
ASSETS
CURRENT ASSETS
Cash and cash items .................................... $ 85.9 $ 52.5
Trade receivables, less allowances for doubtful accounts 860.8 879.6
Inventories ............................................ 406.0 386.5
Contracts in progress, less progress billings .......... 93.9 121.3
Other current assets ................................... 229.1 184.4
-------- --------
TOTAL CURRENT ASSETS ................................... 1,675.7 1,624.3
-------- --------
INVESTMENTS ............................................ 328.6 576.8
-------- --------
PLANT AND EQUIPMENT, at cost ........................... 8,847.7 8,727.3
Less - Accumulated depreciation ...................... 4,372.5 4,286.1
-------- --------
PLANT AND EQUIPMENT, net ............................... 4,475.2 4,441.2
-------- --------
GOODWILL ............................................... 258.7 248.6
-------- --------
OTHER NONCURRENT ASSETS ................................ 336.3 353.2
-------- --------
TOTAL ASSETS ........................................... $7,074.5 $7,244.1
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables, trade and other .............................. $ 612.9 $ 616.6
Accrued liabilities .................................... 239.4 315.7
Accrued income taxes ................................... 195.4 15.9
Short-term borrowings .................................. 64.8 100.9
Current portion of long-term debt ...................... 47.8 75.5
-------- --------
TOTAL CURRENT LIABILITIES .............................. 1,160.3 1,124.6
-------- --------
LONG-TERM DEBT ......................................... 2,234.7 2,291.7
-------- --------
DEFERRED INCOME AND OTHER NONCURRENT
LIABILITIES .......................................... 467.8 449.7
-------- --------
DEFERRED INCOME TAXES .................................. 616.3 730.0
-------- --------
TOTAL LIABILITIES ...................................... 4,479.1 4,596.0
-------- --------
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share ................... 124.7 124.7
Capital in excess of par value ......................... 452.1 453.0
Retained earnings ...................................... 3,118.3 2,990.2
Unrealized gain on investments ......................... 4.5 6.9
Cumulative translation adjustments ..................... (218.9) (186.1)
Treasury stock, at cost ................................ (442.0) (297.3)
Shares in trust ........................................ (443.3) (443.3)
-------- --------
TOTAL SHAREHOLDERS' EQUITY ............................. 2,595.4 2,648.1
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ............. $7,074.5 $7,244.1
======== ========
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AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME
(Millions of dollars, except per share)
Three Months Ended
31 December
----------------------------
1997 1996
---------- ----------
SALES AND OTHER INCOME
Sales $ 1,234.8 $ 1,120.9
Other income (expense), net (5.3) 9.4
---------- ----------
1,229.5 1,130.3
---------- ----------
COSTS AND EXPENSES
Cost of sales 720.7 692.7
Selling, distribution and administrative 269.9 241.5
Research and development 26.3 26.7
---------- ----------
OPERATING INCOME 212.6 169.4
Income from equity affiliates, net
of related expenses 5.7 18.7
Gain on Ref-Fuel Sale and Contract
Settlement 75.2 --
Interest expense 40.2 39.9
---------- ----------
INCOME BEFORE TAXES 253.3 148.2
Income taxes 92.8 48.3
---------- ----------
NET INCOME $ 160.5 $ 99.9
========== ==========
BASIC EARNINGS PER COMMON SHARE $ 1.47 $ .91
---------- ----------
DILUTED EARNINGS PER COMMON SHARE $ 1.44 $ .89
---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES (in millions) 109.1 110.3
---------- ----------
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES (in millions) 111.4 112.5
---------- ----------
DIVIDENDS DECLARED PER COMMON SHARE - Cash $ .30 $ .275
---------- ----------
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AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED CASH FLOWS
(Millions of dollars)
Three Months Ended
31 December
------------------------
1997 1996
------- -------
OPERATING ACTIVITIES
Net Income $ 160.5 $ 99.9
Adjustments to reconcile income to cash provided by operating activities:
Depreciation 117.6 108.1
Deferred income taxes 17.5 15.1
Ref-Fuel divestiture deferred income taxes (80.3) --
Impairment loss -- 9.3
Undistributed (earnings) of unconsolidated affiliates 34.0 (14.5)
Gain on sale of assets and investments (82.9) (10.2)
Other 30.2 29.3
Working capital changes that provided (used) cash, net of effects of
acquisitions:
Trade receivables 53.6 (50.8)
Other receivables (17.4) 50.9
Inventories and contracts in progress 6.0 (54.0)
Payables, trade and other (4.4) 82.1
Accrued liabilities (86.2) (53.1)
Accrued income taxes 151.8 29.3
Other (20.6) (12.3)
Cash provided by (used for) discontinued operations (3.2) --
------- -------
CASH PROVIDED BY OPERATING ACTIVITIES 276.2 229.1
------- -------
INVESTING ACTIVITIES
Additions to plant and equipment (154.9) (303.0)
Acquisitions, less cash acquired (16.6) (292.2)
Investment in and advances to unconsolidated affiliates (4.5) (20.1)
Proceeds from sale of assets and investments 248.3 36.4
Other (.9) 4.6
------- -------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES 71.4 (574.3)
------- -------
FINANCING ACTIVITIES
Long-term debt proceeds 2.0 325.5
Payments on long-term debt (43.5) (2.9)
Net increase (decrease) in commercial paper (65.5) 193.0
Net increase (decrease) in other short-term borrowings (24.6) 6.1
Dividends paid to shareholders (33.0) (30.2)
Purchase of Treasury Stock (150.0) (75.0)
Other 1.4 9.6
------- -------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (313.2) 426.1
------- -------
Effect of Exchange Rate Changes on Cash (1.0) 1.1
------- -------
Increase in Cash and Cash Items 33.4 82.0
Cash and Cash Items - Beginning of Year 52.5 78.7
------- -------
Cash and Cash Items - End of Period $ 85.9 $ 160.7
======= =======
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AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On 1 October 1997, the Company adopted Statement of Position 96-1,
"Environmental Remediation Liabilities." This statement had minimal impact on
the financial statements.
Effective 31 December 1997, the Company adopted SFAS No. 128, "Earnings Per
Share" and SFAS No. 129 "Disclosure of Information about Capital Structure."
SFAS No. 129 does not change the currently reported disclosures, while SFAS No.
128 establishes new accounting and disclosure for earnings per share (EPS). The
following table sets forth the computation of basic and diluted earnings per
share:
(Millions, except per share)
Three months ended 31 December 1997 1996
------------------------
Numerator for basic EPS
and diluted EPS-net income $ 160.5 $ 99.9
Denominator for basic EPS
- -weighted average shares 109.1 110.3
Effect of diluted securities:
Employee stock options 1.9 1.8
Other award plans 0.4 0.4
------------------------
2.3 2.2
Denominator for diluted EPS
- -weighted average shares and
assumed conversions 111.4 112.5
=========================
Basic EPS $ 1.47 $ .91
=========================
Diluted EPS $ 1.44 $ .89
=========================
Options on 2.6 million shares of common stock were not included in computing
diluted EPS because their effects were antidilutive. The potential dilutive
effect of these options can not be estimated based on current information.
In December 1997, the Company sold its 50% interest in American Ref-Fuel
Company, its former waste-to-energy joint venture with Browning-Ferris
Industries, Inc.(BFI), to a limited liability company (LCC) formed by Duke
Energy Power Services and United American Energy Corporation. This transaction
provides for the sale of Air Products' interest in American Ref-Fuel's five
waste-to-energy facilities for $237 million, and the assumption of various
parental support agreements by Duke Energy Capital Corporation, the parent
company of Duke Energy Power Services. The income statement for the three months
ended 31 December 1997 includes a gain of $62.6 million from this sale, ($35.1
million after tax or $.32 per share.) Air Products retained a limited
partnership interest in one project which is undergoing a power agreement
restructuring. The restructuring is expected to be completed within the calendar
year. Fiscal 1997 results included equity affiliates' income related to American
Ref-Fuel of $21.4 million before taxes of which $2.3, $.8, $9.6 and $8.7 million
was included in the first through fourth quarters respectively.
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The results for the three months ended 31 December 1997 also include a gain of
$12.6 million from a cogeneration project contract settlement ($7.6 million
after tax or $.07 per share.)
The Company completed the sale of the landfill gas recovery business, GSF Energy
Inc., during the three months ended 31 December 1996. A gain of $9.5 million
($5.9 million after tax, or $.05 per share) was recorded.
During the three months ended 31 December 1996, an impairment loss of $9.3
million ($6.0 million after tax, or $.05 per share) was recorded in the
chemicals segment. The write-down was related to production assets in the
performance chemicals division and the related goodwill.
On 22 October 1996, the Company obtained control of Carburos Metalicos S.A.
(Carburos). In October 1996, the Company increased its ownership percentage in
Carburos from 47.6% to 96.7% of the outstanding shares in Carburos. The results
for the three months ended 31 December 1996 contained approximately six weeks of
consolidated operating results for Carburos. Previously, the Company accounted
for its investment using the equity method.
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AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
FIRST QUARTER FISCAL 1998 VS. FIRST QUARTER FISCAL 1997
-------------------------------------------------------
RESULTS OF OPERATIONS
CONSOLIDATED
Sales in the first quarter of fiscal 1998 were a record $1,234.8 million, 10%
higher than in the same quarter of the prior year while operating income,
another record, was up $43.2 million, or 26%, to $212.6 million. Profits of
equity affiliates decreased $13.0 million to $5.7 million for the three months
ended 31 December 1997. Net income was $160.5 million, or $1.47 basic earnings
per share, compared to net income of $99.9 million, or $.91 basic earnings per
share, in the year-ago quarter. The current quarter included two special items:
an after-tax gain of $35.1 million, or $.32 per share from the sale of the
Company's 50% interest in American Ref-Fuel Company and a gain of $7.6 million,
or $.07 per share from a cogeneration project contract settlement. Excluding
these special items, net income was $118 million, or $1.08 basic earnings per
share.
These record results were achieved in spite of unfavorable foreign currency
impacts. In this quarter, foreign exchange and currency translation losses
reduced net income growth by $19 million or $.17 per share. Foreign exchange
losses for the quarter resulted in a net income loss of $13 million or $.12 per
share versus a $1 million net income gain or $.01 per share in last year's first
quarter. These foreign exchange losses are principally associated with the
Company's gases segment Asian equity affiliates. A stronger U.S. dollar versus
most of the world's currencies resulted in a reduction of net income of $5
million or $.04 per share when the operating results of the Company's foreign
operations were translated to U.S. dollars using this quarter's rates compared
to the rates of the prior year quarter. This impact was principally in the
Company's European gases and chemicals businesses.
Record consolidated sales were achieved, in spite of a 2% unfavorable currency
related impact. Strong volume growth in the United States and Europe coupled
with a full quarter of Carburos consolidation also produced record sales results
in the gases segment. Broad-based volume gains in the chemicals businesses,
likewise produced record sales. Due to several large equipment bookings in the
first quarter of the prior year, the equipment segment sales declined.
Strong underlying volume growth in gases and chemicals, a favorable product mix
in equipment, overall continuing productivity gains and outstanding chemicals
manufacturing performance produced most of the record operating income growth. A
full quarter of consolidated Carburos results accounted for about a fifth of the
operating income growth.
Equity affiliates' income declined principally due to the impacts of currency
and unfavorable business conditions in the gases Asian affiliate results. About
a third of the decline is due to a full quarter of Carburos consolidation versus
half a quarter in the prior year.
INDUSTRIAL GASES - Sales increased 18% to $727.0 million in the first quarter of
fiscal 1998 while operating income increased 24% to $147.2 million. Strong
volume gains in worldwide merchant and tonnage gases combined with a full
quarter of consolidated Carburos results accounted for record sales. Unfavorable
currency effects, primarily European, decreased
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year-to-year sales growth by approximately 3%. Excluding the Carburos
consolidation and weaker currency effects, there was strong sales growth
exceeding 15%. There was no discernible price movement for worldwide merchant
gases. Merchant gases volumes grew 11% and 8% in the United States and Europe
respectively, consistent with broad end-use market growth and new business
signings. Tonnage gases volume growth in the United States was 10%. In Europe,
tonnage volumes grew 20% over the prior year as investments continued to load,
as well as the impact of prior year outages. Operating income growth was driven
by the volume impact on both tonnage and merchant systems. Operating margin
increased .9% from the prior year.
Equity affiliates' income for the first quarter of fiscal 1998 decreased to $.4
million compared to $12.0 million in the prior year. This decrease was due
primarily to unfavorable foreign exchange effects in Asia and the movement of
Carburos to consolidated results for the entire quarter of the current year. The
prior period results included approximately seven weeks of Carburos in equity
affiliates' income.
CHEMICALS- Record sales in the first quarter of fiscal 1998 of $380.9 million
increased $34.7 million or 10%. Operating income increased $23.9 million to
$68.4 million. The results of the prior year were reduced $9.3 million due to
the impairment loss in the polyurethane release agents business. Excluding this
prior year loss, fiscal 1998 operating income grew 27%. This substantial growth
resulted from broad-based volume growth, favorable product mix, continued
productivity gains and exceptional manufacturing plant performance. The
broad-based volume gains were led by the growth in both polymers and amines.
Amines grew 23% with good base business growth, a major customer's order pattern
relative to the prior year, and contributions from prior year acquisitions.
Additional international acquisitions and ventures have been announced in the
polymers and amines businesses. The current year operating margin of 18% is
substantially higher than the prior year margin of 15.5%, excluding the
impairment loss. The current year margin is above the normalized trend line. The
Asian currency impact on exports combined with margin pressure created by
potential higher Asian imports is a significant uncertainty.
EQUIPMENT AND SERVICES - Sales decreased to $126.9 million from the unusually
high level in the year-ago quarter as the prior year's results included the
initial sales booking for several large projects. Operating income was up $7.0
million to $12.6 million due to a favorable project mix. Sales backlog for the
equipment product line declined to $277 million at 31 December 1997. This
backlog compares to $310 million at 30 September 1997 and $431 million at 31
December 1996. The backlog's downward trend is reflective of the cyclical nature
of this business.
Equity affiliates' income for the first quarter of fiscal 1998 increased $.9
million to $4.4 million. The improved results reflect improved operating
performance at the power generation facilities.
CORPORATE AND OTHER - Sales declined to zero in the first quarter of 1998 due to
the sale of the landfill gas recovery business in the first quarter of the prior
year. Operating income declined $16.6 million to a loss of $15.6 million. Prior
year results include a gain of $9.5 million related to the sale of the landfill
gas recovery business, GSF Energy Inc. Excluding this gain, operating income
decreased $7.1 million due primarily to unfavorable foreign exchange impacts.
Equity affiliates' income for the first quarter of fiscal 1998 decreased to $.9
million due to the sale of the Company's 50% interest in American Ref-Fuel
Company.
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INTEREST
Interest expense of $40.2 million is approximately at the level of the prior
fiscal year first quarter. The average debt balance, capitalized interest, and
interest rates are essentially unchanged.
INCOME TAXES
The consolidated effective tax rate on income was 36.6%. Excluding the tax rate
impact on the gain from the sale of the American Ref-Fuel Company and the gain
on the cogeneration power contract settlement, the effective tax rate is 33.9%.
This rate is 1.3% higher than the prior year because of lower gases equity
affiliates' income which is reported on a net of tax basis.
ACCOUNTING CHANGES
On 1 October 1997, the Company adopted Statement of Position 96-1,
"Environmental Remediation Liabilities." This statement had minimal impact on
the financial statements.
Effective 31 December 1997, the Company adopted SFAS No. 128, "Earnings Per
Share" and SFAS No. 129 "Disclosure of Information about Capital Structure."
SFAS No. 129 does not change the currently reported disclosures, while SFAS No.
128 establishes new accounting and disclosure for earnings per share.
The FASB issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information," in
June of 1997. These standards establish new disclosures for comprehensive income
and segments and will be effective for fiscal 1999. New disclosures will include
a comprehensive income number, operating segments in accordance with internal
management structure, and geographic sales by destination rather than source.
As of 1 January 1998, the Company will cease applying highly inflationary
accounting to operations in Brazil. For operations that used the U.S. dollar for
translation, due to hyper-inflationary conditions, the functional currency will
be the Brazilian Real. No material effects on the financial statements result
from this change.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures during the first three months of fiscal 1998 totaled $186.9
million compared to $617.4 million in the corresponding period of the prior
year. Additions to plant and equipment decreased from $303.0 million during the
first three months of fiscal 1997 to $154.9 million during the current period.
Prior year numbers included the acquisition of an additional 49.1% of the
outstanding shares of Carburos at a cost of $288.4 million. Investments in
unconsolidated affiliates were $4.5 million during the first three months of
fiscal 1998 versus $20.1 million last year. Capital expenditures are expected to
be approximately $1.2 billion in fiscal 1998. It is anticipated that these
expenditures will be funded with cash from operations supplemented with proceeds
from financing activities.
Cash provided by operating activities during the first three months of fiscal
1998 ($276.2 million) combined with proceeds from the sale of assets and
investments ($248.3 million) were used largely for capital expenditures ($186.9
million), purchase of common stock for treasury ($150.0 million), debt
repayments ($133.6 million) and cash dividends ($33.0 million). Cash and cash
items increased $33.4 million from $52.5 million at the beginning of the fiscal
year to $85.9 million at 31 December 1997. The net decrease in commercial paper
was $65.5 million.
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Total debt at 31 December 1997 and 30 September 1997, expressed as a percentage
of the sum of total debt and shareholders' equity, was 47% and 48%,
respectively. Total debt decreased from $2,468.1 million at 30 September 1997 to
$2,347.3 million at 31 December 1997.
There was $69.5 million of commercial paper outstanding at 31 December 1997. The
Company's revolving credit commitments amounted to $600.0 million at 31 December
1997 with funding available in 13 currencies. No borrowings were outstanding
under these commitments. Additional commitments totaling $86.4 million are
maintained by the Company's foreign subsidiaries, of which $2.8 million was
utilized at 31 December 1997.
At 31 December 1997, the Company had unutilized shelf registrations for $425.0
million of debt securities. Subsequent to 31 December 1997, the Company issued
$50.0 million in notes due in 2010, with a coupon rate of 6.24%.
The Company enters into interest rate swap agreements to change the
fixed/variable interest rate mix of the debt portfolio in order to maintain the
percentage of fixed and variable rate debt within certain parameters set by
management. In accordance with these parameters, the agreements are used to
reduce interest rate risks and costs inherent in the Company's debt portfolio.
Accordingly, the Company enters into agreements to both effectively convert
variable-rate debt to fixed-rate debt and to effectively convert fixed-rate debt
to variable-rate debt, which is principally indexed to LIBOR rates. The Company
has also entered into interest rate swap contracts to effectively convert the
stated variable rates to interest rates based on LIBOR. The fair value gain
(loss) on the variable to variable swaps is equally offset by a fair value loss
(gain) on the related debt agreements.
The notional principal and fair value of interest rate swap agreements at 31
December 1997 and 30 September 1997 were as follows:
(Millions of dollars)
31 December 1997 30 September 1997
------------------------------------- ----------------------------------
Notional Fair Value Notional Fair Value
Amount Gain (Loss) Amount Gain (Loss)
------------------------------------- ----------------------------------
Fixed to Variable $511.0 $14.6 $461.0 $9.6
Variable to Variable 60.0 71.9 60.0 68.9
------------------------------------- ----------------------------------
Total $571.0 $86.5 $521.0 $78.5
===================================== ==================================
A $34.6 million gain has been recognized in the financial statements related to
the above agreements.
The Company is also party to interest rate and currency swap contracts. These
contracts effectively convert the currency denomination of a debt instrument
into another currency in which the Company has a net equity position while
changing the interest rate characteristics of the instrument. The notional
principal of interest rate and currency swap agreements outstanding at 31
December 1997 was $419.3 million. The fair value of the agreements was a gain of
$17.4 million, of which a $40.9 million gain related to the currency component
was recognized in the financial statements. The remaining $23.5 million loss was
related to the interest component and has not been recognized in the financial
statements. This loss reflects that current interest rates are generally lower
than the interest rates paid under the interest rate and currency swap
agreements. As of 30 September 1997 interest rate and currency swap agreements
were outstanding with a notional principal amount and fair value of $354.1
million and a gain of $7.2 million, respectively.
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The estimated fair value of the Company's long-term debt, including current
portion, as of 31 December 1997 is $2,494.6 million compared to a book value of
$2,282.5 million.
During the first quarter of fiscal 1998, 1.9 million shares of the Company's
outstanding common stock were repurchased at a cost of $150.0 million. Under the
current program, the Company has repurchased 5.6 million shares at a cost of
$385.3 million to date. The remainder of the program will be dependent upon
ongoing capital investment requirements.
FINANCIAL INSTRUMENTS
There has been no material change in the net financial instrument position or
sensitivity to market risk since the disclosure in the annual report.
FORWARD-LOOKING STATEMENTS
The forward-looking statements contained in this document are based on current
expectations regarding important risk factors. Actual results may differ
materially from those expressed. Important risk factors and uncertainties
include the impact of worldwide economic growth, pricing, and other factors
resulting from fluctuations in interest rates and foreign currencies, the impact
of competitive products and pricing, continued success of productivity programs,
and the impact of tax and other legislation and other regulations in the
jurisdictions in which the Company and its affiliates operate.
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AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
RESTATED EARNINGS PER SHARE AMOUNTS
Effective 31 December 1997, the Company adopted SFAS No. 128, "Earnings Per
Share." This standard establishes new accounting and disclosure for EPS. The EPS
amounts for fiscal years 1997 and 1996 have been restated to conform to SFAS No.
128 requirements. The following table summarizes the restatement for each
quarter and the years ended 30 September 1997 and 1996:
(Millions of dollars, except per share) First Second Third Fourth Total
- --------------------------------------------------------------------------------------------------------------------
30 SEPTEMBER 1997
Numerator for basic EPS
and diluted EPS-net income $ 99.9 $ 106.0 $ 116.0 $ 107.4 $ 429.3
Denominator for basic EPS
- -weighted average shares 110.3 109.9 109.9 109.9 110.0
Effect of dilutive securities:
Employee stock options 1.8 1.9 1.9 2.1 2.0
Other award plans 0.4 0.5 0.5 0.6 0.5
-----------------------------------------------------------------------
2.2 2.4 2.4 2.7 2.5
Denominator for diluted EPS
- -weighted average shares
and assumed conversions 112.5 112.3 112.3 112.6 112.5
=======================================================================
Basic EPS $ .91 $ .96 $ 1.06 $ .98 $ 3.90
=======================================================================
Diluted EPS $ .89 $ .94 $ 1.03 $ .95 $ 3.82
=======================================================================
30 SEPTEMBER 1996
Numerator for basic EPS
and diluted EPS-net income $ 89.0 $ 135.3 $ 98.0 $ 94.1 $ 416.4
Denominator for basic EPS
- -weighted average shares 111.8 111.9 112.0 111.3 111.7
Effect of dilutive securities:
Employee stock options 1.4 1.4 1.5 1.3 1.4
Other award plans 0.5 0.4 0.4 0.4 0.4
-----------------------------------------------------------------------
1.9 1.8 1.9 1.7 1.8
Denominator for diluted EPS
- -weighted average shares
and assumed conversions 113.7 113.7 113.9 113.0 113.5
=======================================================================
Basic EPS $ .80 $ 1.21 $ .88 $ .85 $ 3.73
=======================================================================
Diluted EPS $ .78 $ 1.19 $ .86 $ .83 $ 3.67
=======================================================================
Note: Each quarter is calculated as a discrete period; the sum of the four
quarters may not equal the calculated full-year amount.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a)(12) Computation of Ratios of Earnings to Fixed Charges.
(a)(27)(i) Financial Data Schedule for the three months ended 31
December 1997, which is submitted electronically to
the Securities and Exchange Commission for
information only, and not filed.
(a)(27)(ii)(iii)(iv) Restated Financial Data Schedules pursuant to Item
601(c)(2)(iii) of Regulation S-K, which are submitted
electronically to the Securities and Exchange
Commission for information only, and not filed.
(b) Current Reports on Form 8-K dated 13 October 1997 and
23 October 1997 were filed by the registrant during
the quarter ended 31 December 1997 in which Item 5 of
such form was reported.
14
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Air Products and Chemicals, Inc.
(Registrant)
Date: February 12, 1998 By: /s/ A. H. Kaplan
----------------------------------
A. H. Kaplan
Senior Vice President - Finance
(Chief Financial Officer)
15
16
INDEX TO EXHIBITS
(a)(12) Computation of Ratios of Earnings to Fixed Charges.
(a)(27)(i) Financial Data Schedule for the three months ended 31
December 1997, which is submitted electronically to the
Securities and Exchange Commission for information
only, and not filed.
(a)(27)(ii)(iii)(iv) Restated Financial Data Schedules pursuant to Item
601(c)(2)(iii) of Regulation S-K, which are submitted
electronically to the Securities and Exchange
Commission for information only, and not filed.
(b) Current Reports on Form 8-K dated 13 October 1997 and 23
October 1997 were filed by the registrant during the
quarter ended 31 December 1997 in which Item 5 of such
form was reported.
1
Exhibit (a)(12)
AIR PRODUCTS AND CHEMICALS, INC., AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Unaudited)
Three
Months
Ended
Year Ended 30 September 31
------------------------------------------------------------------- December
1993 1994 1995 1996 1997 1997
------- ------- ------- ------- ------- -------
EARNINGS: (Millions of dollars)
Income before extraordinary item and
the cumulative effect of accounting
changes: $ 200.9 $ 233.5 $ 368.2 $ 416.4 $ 429.3 $ 160.5
Add (deduct):
Provision for income taxes 103.0 95.2 186.2 195.5 203.4 93.6
Fixed charges, excluding capitalized
interest 127.3 127.1 148.8 184.0 233.0 57.8
Capitalized interest amortized during
the period 7.7 8.0 9.1 9.4 8.3 2.0
Undistributed earnings of less-than-
fifty-percent-owned affiliates (8.1) (2.8) (25.4) (40.6) (31.1) (2.4)
------- ------- ------- ------- ------- -------
Earnings, as adjusted $ 430.8 $ 461.0 $ 686.9 $ 764.7 $ 842.9 $ 311.5
======= ======= ======= ======= ======= =======
FIXED CHARGES:
Interest on indebtedness, including
capital lease obligations $ 118.6 $ 118.2 $ 139.4 $ 171.7 $ 217.8 $ 54.0
Capitalized interest 6.3 9.7 18.5 20.0 20.9 4.7
Amortization of debt discount premium
and expense 0.7 0.8 0.2 1.5 1.8 0.5
Portion of rents under operating leases
representative of the interest factor 8.0 8.1 9.2 10.8 13.4 3.3
------- ------- ------- ------- ------- -------
Fixed charges $ 133.6 $ 136.8 $ 167.3 $ 204.0 $ 253.9 $ 62.5
======= ======= ======= ======= ======= =======
RATIO OF EARNINGS TO FIXED CHARGES: 3.2 3.4 4.1 3.7 3.3 5.0
======= ======= ======= ======= ======= =======
5
1,000,000
U.S. DOLLARS
3-MOS
SEP-30-1998
OCT-01-1997
DEC-31-1997
1
86
0
842
19
406
1,676
8,848
4,372
7,074
1,160
2,235
0
0
125
2,470
7,074
1,235
1,235
721
721
26
2
40
253
93
160
0
0
0
160
1.47
1.44
5
1,000,000
U.S. DOLLARS
YEAR 9-MOS 6-MOS 3-MOS
SEP-30-1997 SEP-30-1997 SEP-30-1997 SEP-30-1997
OCT-01-1996 OCT-01-1996 OCT-1-1996 OCT-01-1996
SEP-30-1997 JUN-30-1997 MAR-31-1997 DEC-31-1996
1 1 1 1
53 71 112 161
0 0 0 0
895 858 829 833
15 16 15 16
386 401 398 405
1,624 1,653 1,664 1,720
8,727 8,628 8,537 8,578
4,286 4,243 4,168 4,186
4,441 4,385 4,369 7,317
1,125 1,310 1,386 1,589
2,292 2,213 2,212 2,102
0 0 0 0
0 0 0 0
125 125 125 125
2,523 2,485 2,433 2,454
7,244 7,226 7,214 7,317
4,638 3,424 2,274 1,121
4,638 3,424 2,274 1,121
2,772 2,042 1,379 693
2,772 2,042 1,379 693
114 83 55 27
6 5 2 1
161 122 82 40
630 474 303 148
201 152 97 48
429 322 206 100
0 0 0 0
0 0 0 0
0 0 0 0
429 322 206 100
3.90 2.92 1.87 .91
3.82 2.86 1.83 .89
5
1,000,000
US DOLLARS
YEAR 9-MOS 6-MOS 3-MOS
SEP-30-1996 SEP-30-1996 SEP-30-1996 SEP-30-1996
OCT-01-1995 OCT-01-1995 OCT-01-1995 OCT-01-1995
SEP-30-1996 JUN-30-1996 MAR-31-1996 DEC-31-1995
1 1 1 1
79 91 82 95
0 0 0 0
683 690 664 642
13 14 15 14
371 392 383 371
1,375 1,433 1,372 1,356
8,103 7,909 7,691 7,501
4,144 4,056 3,982 3,926
6,522 6,472 6,224 6,034
1,263 1,139 1,268 1,333
1,739 1,850 1,495 1,314
0 0 0 0
0 0 0 0
125 125 125 125
2,449 2,464 2,428 2,320
6,522 6,472 6,224 6,034
4,008 2,957 1,960 947
4,008 2,957 1,960 947
2,408 1,763 1,169 560
2,408 1,763 1,169 560
114 84 56 27
5 4 3 1
129 94 60 29
609 475 333 131
193 153 109 42
416 322 224 89
0 0 0 0
0 0 0 0
0 0 0 0
416 322 224 89
3.73 2.88 2.01 .80
3.67 2.83 1.97 .78
5
1,000,000
U.S. DOLLARS
YEAR
SEP-30-1995
OCT-01-1994
SEP-30-1995
1
87
0
639
14
335
1,332
7,350
3,848
5,816
1,311
1,194
0
0
125
2,273
5,816
3,865
3,865
2,317
2,317
103
8
100
553
185
368
0
0
0
368
3.29
3.24
