UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
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 October 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 (Commission file number) (IRS Identification
of incorporation) 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 REPORTS FOURTH QUARTER OPERATING EPS OF 60 CENTS
-------------------------------------------------------------
LEHIGH VALLEY, Pa. (October 22, 2001) - Air Products and Chemicals, Inc.
(NYSE:APD) today reported net income from operations of $133 million, or diluted
earnings per share of 60 cents, for the September quarter. Diluted earnings per
share declined six percent compared with prior year earnings per share of 64
cents, excluding special items in both quarters. Net income from operations
declined five percent compared with prior year earnings of $139 million,
primarily due to continued weakness in the global electronics market and U.S.
manufacturing. Revenues of $1.4 billion declined six percent.
Commenting on the quarter, Air Products Chairman and Chief Executive Officer
John P. Jones said, "In this challenging economic environment, Air Products
produced solid results, implemented several strategic steps, and took some
difficult but decisive actions. Divesting our interest in two cogeneration
facilities is consistent with our commitment to focus resources on our strategic
growth businesses. We restructured other businesses, making targeted staff
reductions and writing down some underperforming assets. To take advantage of
the lower interest rate environment, we also repurchased a portion of our debt.
These actions will make Air Products more competitive going forward."
The following discussion excludes special items noted in the footnotes to the
financial statements.
Industrial gas sales of $925 million declined two percent. Operating income
declined nine percent compared with the prior year, principally due to the
slowdown in the electronics market. Results for electronics were affected by a
sharp reduction in customers' global silicon wafer processing due to soft demand
and excess inventories.
Operating results for the global Chemicals and Processing Industries (CPI)
Division improved on higher sales of HYCO (hydrogen, carbon monoxide, and
syngas-a mix of hydrogen and carbon monoxide). Increased merchant volumes,
including helium provided to
2
the MRI market, led to better Asian results, while our European business
continued to perform well across the board. Results for North American Gases
improved despite lower volumes.
Chemicals' sales of $365 million declined due to the divestiture of the
polyvinyl alcohol business and the slower economy. Operating income improved 15
percent compared with prior year on lower raw material costs, including natural
gas. The group's operating income continued to show sequential improvement.
For fiscal 2001, Air Products' sales of $5.7 billion were up five percent
compared with the prior year. Income from operations declined two percent to
$519 million. Earnings per share from operations were $2.37, compared with last
year's $2.46 per share on a diluted basis.
Commenting on the year, Mr. Jones said, "Air Products faced many challenges this
year. We managed through a number of difficult issues caused by the declining
economy without losing sight of our long-term strategies. We maintained our
return on capital by focusing on raw material cost recovery, controlling
overhead and production costs, reducing capital spending, and strengthening our
balance sheet. Our leadership positions and the breadth of our portfolio have
allowed us to perform relatively well during these difficult economic times and,
more importantly, will enable us to thrive in the economic growth that will
inevitably follow."
Mr. Jones concluded by saying, "Air Products begins fiscal 2002 at a time of
great uncertainty in global markets. World events are affecting consumer
confidence, and will likely extend the current global economic downturn. We
anticipate the downturn will lead to lower earnings in the first half of our
fiscal year, with our earnings improving in the second half as the economy
rebounds. Under this scenario, we expect flat volumes and operating earnings per
share of $2.35 - $2.45 in fiscal 2002."
**NOTE: The fiscal 2002 earnings outlook reflects an estimated five cents per
share benefit from the adoption of a new accounting standard for goodwill.
***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
3
expressed. Factors that might cause forward-looking statements to differ
materially from actual results include, among other things, overall economic and
business conditions, including the success of the world economy strengthening in
the second half of the fiscal year; demand and timing of the placing of orders
for the goods and services of Air Products, including the success of recovery in
the Air Products' markets in the electronics industry in the second half of the
fiscal year; competitive factors in the industries in which it competes; the
ability to recover increased energy and raw material costs from customers;
spikes in the pricing of natural gas; changes in government regulations;
consequences of acts of terrorism impacting the United States' and other
markets; the success of implementing cost reduction programs; the timing, impact
and other uncertainties of future acquisitions or divestitures; significant
fluctuations in interest rates and foreign currencies; the impact of tax and
other legislation and regulations in jurisdictions in which Air Products and its
affiliates operate; and the timing and rate at which tax credits can be
utilized.
Financial tables follow:
4
AIR PRODUCTS AND CHEMICALS, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
(Millions of dollars, except per share)
--------------------------------------------------------------------------------------------------------------------
Three Months Ended Twelve Months Ended
30 September 30 September
2001 2000 2001 2000
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Sales $1,361.7 $1,449.1 $5,717.2 $5,467.1
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Net Income:
As reported $103.1 $218.5 $465.6 $124.2
Exclusive of extraordinary and special $133.1(a) $139.4(c) $519.3(b) $532.6(d)
items
--------------------------------------------------------------------------------------------------------------------
Basic Earnings Per Share:
As reported $.48 $1.02 $2.17 $.58
Exclusive of extraordinary and special $.62 $.65 $2.42 $2.50
items
--------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share:
As reported $.47 $1.01 $2.12 $.57
Exclusive of extraordinary and special $.60(a) $.64(c) $2.37(b) $2.46(d)
items
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Operating Return on Net Assets 11.1% 11.1%
Capital Expenditures $806.3 $973.0
Depreciation $139.4 $149.0 $573.0 $575.7
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(a) Excludes an after-tax charge of $47.3 million, or $.21 per share, for a
global cost reduction plan, an after-tax loss of $47.3 million, or $.21 per
share, on the early extinguishment of debt, and an after-tax gain of $64.6
million, or $.29 per share, on the divestiture of interest in cogeneration
facilities.
(b) Excludes an after-tax charge of $67.3 million, or $.31 per share, for a
global cost reduction plan, an after-tax charge of $3.7 million, or $.02
per share, for costs related to a litigation settlement, an after-tax loss
of $47.3 million, or $.21 per share, on the early extinguishment of debt,
and an after-tax gain of $64.6 million, or $.29 per share, on the
divestiture of interest in cogeneration facilities.
(c) Excludes an after-tax gain of $79.1 million, or $.37 per share, on the sale
of the polyvinyl alcohol business.
(d) Excludes an after-tax gain of $79.1 million, or $.37 per share, on the sale
of the polyvinyl alcohol business, an after-tax charge of $456.5 million,
or $2.12 per share, for costs related to the BOC transaction, an after-tax
charge of $35.0 million, or $.16 per share, for a global cost reduction
plan, and an after-tax gain of $4.0 million, or $.02 per share, on the sale
of packaged gas facilities.
5
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED INCOME
(Unaudited)
(Millions of dollars, except per share)
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Three Months Ended Twelve Months Ended
30 September 30 September
2001 2000 2001 2000
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SALES AND OTHER INCOME
Sales $1,361.7 $1,449.1 $5,717.2 $5,467.1
Other income (expense), net (6.9) 19.0 5.5 28.4
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1,354.8 1,468.1 5,722.7 5,495.5
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COSTS AND EXPENSES
Cost of sales 968.5 1,029.2 4,102.7 3,825.6
Selling and administrative 215.8 177.5 752.1 714.7
Research and development 32.2 32.1 122.5 124.4
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OPERATING INCOME 138.3 229.3 745.4 830.8
Income from equity affiliates, net of related 21.6 25.6 81.2 87.6
expenses
Gain on divestiture of interest in 101.6 -- 101.6 --
cogeneration facilities
Loss on currency hedges related to BOC -- -- -- 730.4
transaction and expenses
Gain on sale of polyvinyl alcohol -- 126.8 -- 126.8
business
Interest expense 43.8 55.7 191.2 196.7
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INCOME BEFORE TAXES AND MINORITY 217.7 326.0 737.0 118.1
INTEREST
Income taxes (benefits) 66.9 106.5 219.0 (13.7)
Minority interest (a) .4 1.0 5.1 7.6
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INCOME BEFORE EXTRAORDINARY ITEM 150.4 218.5 512.9 124.2
Extraordinary item - loss on early retirement of 47.3 -- 47.3 --
debt, net of income tax benefit of $28.5
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NET INCOME $103.1 $218.5 $465.6 $124.2
====================================================================================================================
BASIC EARNINGS PER COMMON SHARE:
Income before extraordinary item $.70 $1.02 $2.39 $.58
Extraordinary item (.22) -- (.22) --
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NET INCOME $.48 $1.02 $2.17 $.58
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6
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Three Months Ended Twelve Months Ended
30 September 30 September
2001 2000 2001 2000
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DILUTED EARNINGS PER COMMON
SHARE:
Income before extraordinary item $.68 $1.01 $2.33 $.57
Extraordinary item (.21) -- (.21) --
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NET INCOME $.47 $1.01 $2.12 $.57
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WEIGHTED AVERAGE NUMBER OF 215.5 213.8 214.8 213.4
COMMON SHARES (in millions)
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WEIGHTED AVERAGE NUMBER OF 220.0 217.2 219.3 216.2
COMMON AND COMMON
EQUIVALENT SHARES (in millions) (b)
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DIVIDENDS DECLARED PER COMMON $.20 $.19 $.78 $.74
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.
7
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of dollars)
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30 September
ASSETS 2001 2000
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CURRENT ASSETS
Cash and cash items $66.2 $94.1
Trade receivables, less allowances for 913.6 982.7
doubtful accounts
Inventories and contracts in progress 478.4 482.2
Other current assets 226.6 246.0
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TOTAL CURRENT ASSETS 1,684.8 1,805.0
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INVESTMENTS IN NET ASSETS OF AND ADVANCES TO 499.5 466.6
EQUITY AFFILIATES
PLANT AND EQUIPMENT, at cost 10,226.5 10,310.9
Less - Accumulated depreciation 5,108.0 5,054.2
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PLANT AND EQUIPMENT, net 5,118.5 5,256.7
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GOODWILL AND OTHER NONCURRENT ASSETS 771.6 742.2
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TOTAL ASSETS $8,074.4 $8,270.5
=================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES
Payables, trade and other $512.2 $578.4
Accrued liabilities 341.6 357.2
Accrued income taxes 48.4 10.0
Short-term borrowings 255.7 249.7
Current portion of long-term debt 194.5 179.5
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TOTAL CURRENT LIABILITIES 1,352.4 1,374.8
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LONG-TERM DEBT 2,027.5 2,615.8
DEFERRED INCOME & OTHER NONCURRENT LIABILITIES 677.1 561.3
DEFERRED INCOME TAXES 784.1 781.8
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TOTAL LIABILITIES 4,841.1 5,333.7
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MINORITY INTERESTS IN SUBSIDIARY COMPANIES 118.0 115.5
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TOTAL SHAREHOLDERS' EQUITY 3,115.3 2,821.3
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $8,074.4 $8,270.5
=================================================================================================================
8
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONDENSED CONSOLIDATED CASH FLOWS
(Unaudited)
(Millions of dollars)
--------------------------------------------------------------------------------------------------------------------------------
Twelve Months Ended
30 September
2001 2000
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OPERATING ACTIVITIES
Income before Extraordinary Item $512.9 $124.2
Adjustments to reconcile income to cash provided by operating activities:
Depreciation 573.0 575.7
Deferred income taxes 39.0 (5.5)
Loss on BOC transaction -- 706.1
Undistributed earnings of unconsolidated affiliates (46.2) (49.9)
(Gain) on sale of assets and investments (104.7) (138.6)
Other 36.5 100.8
Working capital changes that provided (used) cash, net of effects of
acquisitions
Trade receivables 63.7 (158.5)
Inventories and contracts in progress 2.6 (57.4)
Payables, trade and other (75.6) 92.1
Other 82.8 (15.0)
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CASH PROVIDED BY OPERATING ACTIVITIES 1,084.0 1,174.0
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INVESTING ACTIVITIES
Additions to plant and equipment (a) (708.3) (767.7)
Acquisitions, less cash acquired (b) (59.2) (170.4)
Investment in and advances to unconsolidated affiliates (38.3) (5.6)
BOC transaction costs -- (665.8)
Proceeds from sale of assets and investments 497.0 381.8
Other 31.1 .1
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CASH USED FOR INVESTING ACTIVITIES (277.7) (1,227.6)
--------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Long-term debt proceeds 121.0 820.9
Payments on long-term debt (796.6) (418.0)
Net (decrease) increase in commercial paper and short-term borrowings 8.0 (182.1)
Purchase of treasury stock (87.3) --
Dividends paid to shareholders (165.2) (155.7)
Other 87.2 15.0
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CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (832.9) 80.1
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Effect of Exchange Rate Changes on Cash (1.3) 6.0
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Increase in Cash and Cash Items (27.9) 32.5
Cash and Cash Items - Beginning of Year 94.1 61.6
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Cash and Cash Items - End of Period $66.2 $94.1
================================================================================================================================
(a) Excludes capital lease additions of $.5 million and $4.9 million in fiscal
2001 and 2000, respectively.
(b) Excludes $24.4 million of long-term debt assumed in acquisitions in fiscal
2000.
9
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
All per share amounts are calculated on a diluted earnings per share basis.
In August 2001, the company retired $459.6 million principal amount of various
medium term notes - series D, E, and F as well as $81.5 million of the 8.75%
debenture for an aggregate principle retirement of $541.1 million. The results
for the three and twelve months ended 30 September 2001 included an
extraordinary loss of $47.3 million ($.21 per share) as a result of the early
retirement of debt, consisting principally of retirement premiums, net of a tax
benefit of $28.5 million.
The results for the three months ended 30 September 2001 included a charge of
$78.3 million ($47.3 million after-tax, or $.21 per share) for a global cost
reduction plan. This charge includes $57.2 million for severance benefits and
pension plan settlements, and $21.1 million for asset impairments and related
restructuring charges. The company will eliminate 359 positions. The
restructuring charges included in cost of sales, selling and administrative,
research and development, and other expense were $12.5 million, $44.0 million,
$.7 million, and $21.1 million, respectively.
In September 2001, the company sold and leased back certain U.S. cryogenic
manufacturing equipment for $301.9 million. This operating lease has a five-year
term with purchase and renewal options.
The results for the twelve months ended 30 September 2001 included a charge of
$109.2 million ($67.3 million after-tax, or $.31 per share) for a global cost
reduction plan. This charge includes $79.6 million for severance benefits and
pension plan settlements, and $29.6 million for asset impairments and related
restructuring charges. The company will eliminate 670 positions. The
restructuring charges included in cost of sales, selling and administrative,
research and development, and other expense were $26.9 million, $53.4 million,
$.7 million, and $28.2 million, respectively. The results for the twelve months
ended 30 September 2001, also included a charge of $6.0 million ($3.7 million
after-tax, or $.02 per share) related to a litigation settlement.
The results for the three and twelve months ended 30 September 2001 included a
gain of $101.6 million ($64.6 million after-tax, or $.29 per share) related to
the sale of the fifty percent interest in two cogeneration facilities located in
Cambria County, Pennsylvania and Orlando, Florida.
Income from equity affiliates, exclusive of the gain on divestiture and net of
related expenses, contributed $.09 and $.11 to diluted earnings per share for
the three months ended 30 September 2001 and 2000, respectively. Income from
equity affiliates exclusive of the gain on divestiture and net of related
expenses, contributed $.34 and $.37 to diluted earnings per share for the twelve
months ended 30 September 2001 and 2000, respectively.
The company, The BOC Group plc (BOC) and L'Air Liquide S.A. (Air Liquide) of
France announced in July 1999 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. The results for the twelve months ended 30 September 2000 included
a charge of $730.4 million ($456.5 million after-tax, or $2.12 per share) for
costs related to the BOC transaction. These costs consisted primarily of charges
recorded on purchased option and forward exchange contracts entered into to
hedge the currency exposure of the BOC transaction.
10
The company had a net tax benefit for the fiscal year ended 30 September 2000.
The net benefit resulted from the loss on the BOC transaction, as well as tax
credits and adjustments. Excluding the impact of the BOC transaction and other
special items, the fiscal 2000 effective tax rate was 30.2%, after minority
interest of $7.6 million. The effective tax rate for fiscal 2001, excluding
special items, was 30.0%, after minority interest of $5.1 million.
The results for the twelve months ended 30 September 2000 included a charge of
$55.4 million ($35.0 million after-tax, or $.16 per share) for the global cost
reduction plan and a gain of $6.3 million ($4.0 million after-tax, or $.02 per
share) related to the sale of packaged gas facilities. The restructuring charges
included in cost of sales, selling and administrative, research and development,
and other expenses were $20.6 million, $25.4 million, $1.9 million, and $7.5
million, respectively.
The results for the three and twelve months ended 30 September 2000 included a
gain of $126.8 million ($79.1 million after-tax, or $.37 per share) on the sale
of the polyvinyl alcohol business to Celanese AG, for $326 million.
11
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 Twelve Months Ended
30 September 30 September
2001 2000 2001 2000
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Revenues from external customers
Gases $924.7 $948.0 $3,944.0 $3,465.5
Equipment 72.5 59.4 250.4 228.8
Chemicals 364.5 441.7 1,522.8 1,772.8
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Segment Totals 1,361.7 1,449.1 5,717.2 5,467.1
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Consolidated Totals $1,361.7 $1,449.1 $5,717.2 $5,467.1
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Operating income
Gases $131.5 $191.5 $654.9 $673.1
Equipment 2.7 6.7 10.0 9.9
Chemicals 17.1 35.7 112.3 182.1
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Segment Totals 151.3 233.9 777.2 865.1
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Corporate research and development and (13.0) (4.6) (31.8) (34.3)
other income/(expense)
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Consolidated Totals $138.3 $229.3 $745.4 $830.8
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Operating income (excluding special items)
Gases $174.3(a) $191.5 $724.0(b) $698.8(d)(e)
Equipment 4.7(a) 6.7 12.0(b) 16.8(d)
Chemicals 41.1(a) 35.7 140.9(b) 197.7(d)
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Segment Totals 220.1 233.9 876.9 913.3
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Corporate research and development and (3.5)(a) (4.6) (16.3)(b)(c) (33.4)(d)
other income/(expense)
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Consolidated Totals $216.6 $229.3 $860.6 $879.9
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Equity affiliates' income
Gases $18.6 $21.0 $71.7 $73.6
Equipment .7 .2 2.0 2.0
Chemicals 2.3 3.8 7.5 12.5
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Segment Totals 21.6 25.0 81.2 88.1
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Other -- .6 -- (.5)
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Consolidated Totals $21.6 $25.6 $81.2 $87.6
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12
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(Millions of dollars) 30 September
2001 2000
-------------------------------------------------------------------------------------------------------------------------------
Total assets
Gases $6,320.9 $6,236.0
Equipment 188.7 236.6
Chemicals 1,436.2 1,505.2
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Segment Totals 7,945.8 7,977.8
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Corporate assets 128.6 292.7
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Consolidated Totals $8,074.4 $8,270.5
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Twelve Months Ended
30 September
2001 2000
-------------------------------------------------------------------------------------------------------------------------------
ORONA(f)
Gases 12.3% 12.1%
Equipment 5.5% 7.1%
Chemicals 9.8% 12.3%
-------------------------------------------------------------------------------------------------------------------------------
Segment Totals 11.6% 12.1%
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Consolidated Totals 11.1% 11.1%
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(a) The results for the three months ended 30 September 2001 exclude a cost
reduction charge in gases ($42.8 million), equipment ($2.0 million),
chemicals ($24.0 million), and corporate ($9.5 million).
(b) The results for the twelve months ended 30 September 2001 exclude a cost
reduction charge in gases ($69.1 million), equipment ($2.0 million),
chemicals ($28.6 million), and corporate ($9.5 million).
(c) The results for the twelve months ended 30 September 2001 exclude a
litigation settlement charge of $6.0 million.
(d) The results for the twelve months ended 30 September 2000 exclude a cost
reduction charge in gases ($32.0 million), equipment ($6.9 million),
chemicals ($15.6 million), and corporate ($.9 million).
(e) The results for the twelve months ended 30 September 2000 exclude a gain on
the sale of packaged gas facilities of $6.3 million.
(f) 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. The ORONA
calculation excludes all special items impacting operating income.
13
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY GEOGRAPHIC REGIONS
(Unaudited)
(Millions of dollars)
--------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Twelve Months Ended
30 September 30 September
2001 2000 2001 2000
--------------------------------------------------------------------------------------------------------------------------------
Revenues from external customers
United States $890.2 $973.0 $3,824.7 $3,628.8
--------------------------------------------------------------------------------------------------------------------------------
United Kingdom 115.1 115.9 440.1 483.8
Spain 72.4 69.5 295.1 300.7
Other Europe 143.0 142.1 581.9 559.8
--------------------------------------------------------------------------------------------------------------------------------
Total Europe 330.5 327.5 1,317.1 1,344.3
--------------------------------------------------------------------------------------------------------------------------------
Canada/Latin America 60.3 66.8 243.5 240.6
Asia 80.6 81.8 331.6 253.1
All Other .1 -- .3 .3
--------------------------------------------------------------------------------------------------------------------------------
Total $1,361.7 $1,449.1 $5,717.2 $5,467.1
--------------------------------------------------------------------------------------------------------------------------------
Note: Geographic information is based on country of origin. The other Europe
segment operates principally in France, Germany, Netherlands, and Belgium.
Media Inquiries:
Lisa Walsh, tel: (610) 481-5784; e-mail: walshla@apci.com
----------------
Investor Inquiries:
Alexander W. Masetti, tel: (610) 481-7461; e-mail: masettaw@apci.com.
------------------
14
Item 9. Regulation FD Disclosure
--------------------------------
The Q4 earnings teleconference following the earnings release which started at
11:00 a.m. EDST on October 22, 2001 can be accessed by listening on the
Company's web site at http://www.airproducts.com/fin/quarterly.htm. Recordings
of the earnings teleconference and copies of the slides used will continue to be
available at the above web address until midnight on October 31, 2001.
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)
Dated: 23 October 2001 By: /s/Leo J. Daley
--------------------------------------
Leo J. Daley
Vice President - Finance and Controller
(Chief Financial Officer)
16