UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) 22 January 2001
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Air Products and Chemicals, Inc.
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(Exact name of registrant as specified in charter)
Delaware 1-4534 23-1274455
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(State of other jurisdiction of incorporation) (Commission file number) (IRS Identification number)
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
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Item 5. Other Events.
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AIR PRODUCTS' NET INCOME FROM OPERATIONS UP 12 PERCENT
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Strong Sales to CPI, Electronics and Asia Continue
The Q1 earnings teleconference scheduled for 11:15 a.m. EST on January 22 was
accessed by calling 312-470-0009 and entering passcode 7711, or by listening on
the web at http://www.airproducts.com/fin/quarterly.htm. Recordings of the
earnings teleconference will continue to be available at the above web address
until January 31, 2001.
LEHIGH VALLEY, Pa. (January 22, 2001) - Air Products and Chemicals, Inc.
(NYSE:APD) today reported its net income from operations increased 12 percent
compared with the prior year for its first fiscal quarter ended December 31,
2000. The company reported net income from operations of $136 million, or
diluted earnings per share of 62 cents, compared with $121 million, or 56 cents
per share, in the prior year excluding the prior year's disclosed special items.
Sales of $1.4 billion were up 14 percent compared with the first quarter of 2000
on broad-based growth in industrial gas sales, particularly in the company's key
markets--the chemical and processing industries (CPI), electronics and Asia.
Commenting on the quarter, Air Products chairman and chief executive officer
John P. Jones said, "Our people and our strategy continue to differentiate us
from the competition. The Air Products team, through their hard work, innovation
and customer focus, drove impressive gains in both our top line and bottom line
results. Shifting our portfolio to higher-growth markets and regions and to more
value-added sectors also has enabled us to improve our earnings in a slowing
economy."
Industrial gas sales increased 27 percent, while gases operating income was up
25 percent. The worldwide gases operating margin of 19.3 percent was impacted by
higher natural gas prices and unfavorable currency.
CPI performed well due to higher HyCO (hydrogen, carbon monoxide, and syngas, a
mix of hydrogen and carbon monoxide) volumes in both North America and Europe.
The electronics division's sales of premier specialty gases, high purity
specialty chemicals and equipment again grew by more than 50 percent, with
demand outstripping supply for certain specialty gases such as nitrogen
trifluoride (NF3). The company recently completed an expansion of its NF3
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manufacturing facility that will increase production by more than 40 percent
effective February 1, 2001.
Asian sales of industrial and specialty gases continued to grow at rates in
excess of 60 percent. Better loading, combined with the consolidation of the
company's Korean gas affiliate, Korea Industrial Gases, resulted in
significantly better Asian results compared with the prior year. European gases
also delivered solid results despite a challenging currency environment.
Chemicals sales declined nine percent compared with last year, primarily due to
the divestiture of the polyvinyl alcohol business. Ongoing productivity and
price increases were more than offset by higher raw material costs, dramatic
increases in energy costs, and unfavorable currency impacts. As a result,
operating income fell significantly compared with the prior year.
Corporate and other expenses of $2 million were $8 million lower compared with
prior year primarily due to a foreign exchange gain this quarter versus a loss
last year.
Mr. Jones concluded: "This quarter, we faced yet another round of relentless
increases in energy and raw material costs, but our people delivered solid
performance once again. While we're confident in our ability to continue
delivering, and while fundamentals in our strategic gases markets remain
positive, significant increases in the cost of natural gas and a slower global
economy have caused us to be more cautious with our 2001 outlook. We expect
earnings in our second quarter to be between 58 cents and 62 cents per share.
Starting in the third quarter, we expect prices for natural gas and other raw
materials to begin easing, resulting in stronger third and fourth quarter
results. Together, these factors lead us to anticipate earnings growth for
fiscal year 2001 of about 6-8 percent."
***NOTE: The forward-looking statements contained in this release are based on
current expectations regarding important risk factors. Actual results may differ
materially from those expressed. Factors that might cause forward-looking
statements to differ materially from actual results include, among other things,
overall economic and business conditions; demand for the goods and services of
Air Products; competitive factors in the industries in which it competes;
whether prices of natural gas and other raw materials fall in the second half of
fiscal 2001; the ability to recover increased energy and raw material costs from
customers; the availability of utilities, particularly in California, to provide
electrical power; changes in government regulation;
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success of implementing cost reduction programs; the timing, impact and other
uncertainties of future acquisitions or divestitures; fluctuations in interest
rates and foreign currencies; the impact of tax and other legislation and
regulations in the jurisdictions in which Air Products and its affiliates
operate; and the timing and rate at which tax credits can be utilized.
Financial tables follow:
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AIR PRODUCTS AND CHEMICALS, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
(Millions of dollars, except per share)
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Three Months Ended
31 December
2000 1999
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Sales $1,441.3 $1,264.4
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Net Income:
As reported $135.6 $50.6
Exclusive of special items $135.6 $121.2(a)
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Basic Earnings Per Share:
As reported $.63 $.24
Exclusive of special items $.63 $.57
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Diluted Earnings Per Share:
As reported $.62 $.23
Exclusive of special items $.62 $.56(a)
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Operating Return on Net 11.5% 10.0%
Assets(b)
Capital Expenditures $163.4 $404.8
Depreciation $148.4 $131.7
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(a) Excludes an after-tax charge of $70.6 million, or $.33 per share, for costs
related to the BOC transaction. This amount consists primarily of
accounting charges recorded on purchased option and forward exchange
contracts entered into to hedge the currency exposure of the BOC
transaction.
(b) Operating return on net assets (ORONA) is calculated as the rolling four
quarter sum of operating income divided by the rolling five quarter average
of total assets less investments in equity affiliates.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED INCOME
(Unaudited)
(Millions of dollars, except per share)
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Three Months Ended
31 December
2000 1999
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SALES AND OTHER INCOME
Sales $1,441.3 $1,264.4
Other income, net 13.3 6.8
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1,454.6 1,271.2
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COSTS AND EXPENSES
Cost of sales 1,025.1 877.1
Selling and administrative 173.5 167.8
Research and development 28.5 30.1
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OPERATING INCOME 227.5 196.2
Income from equity affiliates, net of 20.9 20.3
related expenses
Loss on currency hedges related to -- 113.2
BOC transaction and expenses
Interest expense 48.4 41.3
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INCOME BEFORE TAXES AND 200.0 62.0
MINORITY INTEREST
Income taxes 61.7 9.1
Minority interest(a) 2.7 2.3
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NET INCOME $135.6 $50.6
=======================================================================================================
BASIC EARNINGS PER $.63 $.24
COMMON SHARE
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DILUTED EARNINGS PER $.62 $.23
COMMON SHARE
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WEIGHTED AVERAGE 214.4 213.2
NUMBER OF COMMON
SHARES (in millions)
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WEIGHTED AVERAGE 217.9 215.5
NUMBER OF COMMON AND
COMMON EQUIVALENT
SHARES (in millions) (b)
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DIVIDENDS DECLARED PER $.19 $.18
COMMON SHARE - Cash
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(a) Minority interest primarily includes before-tax amounts.
(b) The dilution of earnings per common share is due mainly to the impact of
unexercised stock options.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of dollars)
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31 December
ASSETS 2000 1999
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CURRENT ASSETS
Cash and cash items $85.3 $79.5
Trade receivables, less allowances for 1,058.3 921.5
doubtful accounts
Inventories and contracts in progress 502.6 526.4
Other current assets 186.5 335.7
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TOTAL CURRENT ASSETS 1,832.7 1,863.1
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INVESTMENTS IN NET ASSETS OF AND ADVANCES 491.0 492.5
TO EQUITY AFFILIATES
PLANT AND EQUIPMENT, at cost 10,470.8 10,381.5
Less - Accumulated depreciation 5,219.4 5,055.5
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PLANT AND EQUIPMENT, net 5,251.4 5,326.0
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GOODWILL AND OTHER NONCURRENT ASSETS 726.2 833.3
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TOTAL ASSETS $8,301.3 $8,514.9
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LIABILITIES AND SHAREHOLDER'S EQUITY
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CURRENT LIABILITIES
Payables, trade and other $581.4 $554.8
Accrued liabilities 341.3 494.5
Accrued income taxes 54.2 61.5
Short-term borrowings 137.8 763.7
Current portion of long-term debt 170.7 321.0
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TOTAL CURRENT LIABILITIES 1,285.4 2,195.5
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LONG-TERM DEBT 2,655.3 2,010.3
DEFERRED INCOME & OTHER NONCURRENT 569.0 505.8
LIABILITIES
DEFERRED INCOME TAXES 765.2 745.7
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TOTAL LIABILITIES 5,274.9 5,457.3
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MINORITY INTERESTS IN SUBSIDIARY COMPANIES 117.5 128.3
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TOTAL SHAREHOLDERS' EQUITY 2,908.9 2,929.3
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $8,301.3 $8,514.9
==================================================================================================
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONDENSED CONSOLIDATED CASH FLOWS
(Unaudited)
(Millions of dollars)
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Three Months Ended
31 December
2000 1999
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OPERATING ACTIVITIES
Net Income $135.6 $50.6
Adjustments to reconcile income to cash provided by
operating activities:
Depreciation 148.4 131.7
Deferred income taxes (4.8) 3.2
Loss on BOC transaction -- 109.3
Undistributed earnings of unconsolidated affiliates (4.9) (13.2)
(Gain) on sale of assets and investments (1.3) (4.4)
Other 15.7 (10.2)
Working capital changes that provided (used) cash, net of
effects of acquisitions
Trade receivables (69.8) (27.9)
Inventories and contracts in progress (18.1) (20.5)
Payables, trade and other (1.3) 43.8
Other 84.4 (13.6)
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CASH PROVIDED BY OPERATING ACTIVITIES 283.9 248.8
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INVESTING ACTIVITIES
Additions to plant and equipment (a) (138.0) (194.4)
Acquisitions, less cash acquired (b) -- (162.7)
Investment in and advances to unconsolidated affiliates (16.9) (16.0)
Proceeds from sale of assets and investments 18.6 16.1
Other 12.1 (13.7)
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CASH USED FOR INVESTING ACTIVITIES (124.2) (370.7)
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FINANCING ACTIVITIES
Long-term debt proceeds 3.9 4.2
Payments on long-term debt (26.0) (161.6)
Net (decrease) increase in commercial paper and short-term (103.9) 335.3
borrowings
Dividends paid to shareholders (40.7) (38.4)
Other 5.1 .3
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CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (161.6) 139.8
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Effect of Exchange Rate Changes on Cash (6.9) --
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Increase in Cash and Cash Items (8.8) 17.9
Cash and Cash Items - Beginning of Year 94.1 61.6
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Cash and Cash Items - End of Period $85.3 $79.5
==================================================================================================================
(a) Excludes capital lease additions of $8.5 million and $7.5 million in fiscal
2001 and 2000, respectively.
(b) Excludes $24.2 of long-term debt assumed in acquisitions in fiscal 2000.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
In July 1999, the company, The BOC Group plc (BOC) and L'Air Liquide S.A. (Air
Liquide) of France announced that they had agreed to the terms of a recommended
offer for the share capital of BOC. In May 2000, the company and Air Liquide
announced that the Federal Trade Commission had indicated it would not approve
the offer by 12 May 2000, the date on which the period for satisfying the
preconditions to the offer would expire, and the offer was not extended beyond
12 May 2000. As a result, certain costs and financing fees that had been
deferred were expensed in the third quarter of fiscal 2000.
The results for the three months ended 31 December 1999 include a charge of
$113.2 million ($70.6 million after-tax, or $.33 per share) for costs related to
the BOC transaction. Of this amount, $109.3 million ($68.2 million after-tax, or
$.32 per share) of accounting charges were recorded on purchased currency option
and forward exchange contracts entered into to hedge the currency exposure of
the BOC transaction.
Income from equity affiliates reflects the company's share of income on an
after-tax basis for certain equity investments and on a before-tax basis for
other equity investments, such as partnerships. The company's share of income
from equity investments reported on an after-tax basis was $15.6 million and
$17.3 million for the three months ended 31 December 2000 and 1999,
respectively.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY BUSINESS SEGMENTS
(Unaudited)
Business segment information is shown below:
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(Millions of dollars) Three Months Ended
31 December
2000 1999
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Revenues from external customers
Gases $992.2 $780.6
Equipment 55.8 50.6
Chemicals 393.3 433.2
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Segment Totals 1,441.3 1,264.4
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Consolidated Totals $1,441.3 $1,264.4
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Operating income
Gases $191.4 $153.3
Equipment 1.1 1.2
Chemicals 37.0 51.6
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Segment Totals 229.5 206.1
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Corporate research and (2.0) (9.9)
development and other
income/(expense)
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Consolidated Totals $227.5 $196.2
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Equity affiliates' income
Gases $18.7 $16.4
Equipment .7 .3
Chemicals 1.5 3.6
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Segment Totals 20.9 20.3
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Consolidated Totals $20.9 $20.3
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Total assets
Gases $6,409.8 $6,203.8
Equipment 233.0 252.7
Chemicals 1,537.6 1,689.5
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Segment Totals 8,180.4 8,146.0
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Corporate assets 120.9 368.9
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Consolidated Totals $8,301.3 $8,514.9
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ORONA
Gases 12.6% 10.5%
Equipment 7.2% 4.9%
Chemicals 11.8% 12.5%
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Segment Totals 12.3% 10.8%
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Consolidated Totals 11.5% 10.0%
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY GEOGRAPHIC REGIONS
(Unaudited)
(Millions of dollars)
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Three Months Ended
31 December
2000 1999
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Revenues from external customers
United States $969.8 $839.2
United Kingdom 102.8 121.1
Spain 69.8 76.8
Other Europe 141.2 140.8
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Total Europe 313.8 338.7
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Canada/Latin America 65.9 58.4
Asia 91.7 28.0
All Other .1 .1
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Total $1,441.3 $1,264.4
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Note: Geographic information is based on country of origin. The other Europe
segment operates principally in France, Germany, Netherlands, and Belgium.
Media Inquiries:
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Lisa Walsh, tel: (610) 481-5784; e-mail: walshla@apci.com.
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Investor Inquiries:
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Alexander W. Masetti, tel: (610) 481-7461; e-mail: masettaw@apci.com.
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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.
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(Registrant)
Dated: 22 January 2001 By: /s/ Leo J. Daley
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Leo J. Daley
Vice President - Finance and Controller
(Chief Financial Officer)
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