Air Products Reports Strong Fiscal 2018 Second Quarter Results; GAAP EPS Up 36 Percent and Adjusted EPS Up 20 Percent over Pr...

Date : 04/26/2018 @ 6:00AM
Source : PR Newswire (US)
Stock : Air Products And Chemicals, Inc. (APD)
Quote : 166.88  -0.83 (-0.49%) @ 3:57PM

Air Products Reports Strong Fiscal 2018 Second Quarter Results; GAAP EPS Up 36 Percent and Adjusted EPS Up 20 Percent over Pr...

Air Products (NYSE:APD)
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LEHIGH VALLEY, Pa., April 26, 2018 /PRNewswire/ --

Q2 FY18 (all from continuing operations):

  • GAAP EPS of $1.89, up 36 percent from the prior year; GAAP net income of $416 million
  • Adjusted EPS of $1.71*, up 20 percent versus prior year
  • Adjusted EBITDA margin of 34.3 percent*, up 140 basis points versus prior year

Highlights

  • Expect to close on $1.3 billion Lu'An syngas supply joint venture in fiscal 2018 third quarter, onstream in phases
  • Awarded industrial gases supply to Samsung Electronics' second 3D V-NAND Fab in Western China
  • Signed agreement to purchase largest carbon dioxide business in Continental Europe, ACP Europe SA  

Guidance

  • Increased fiscal 2018 adjusted EPS guidance to $7.25 to $7.40 per share, now up 15 to 17 percent over prior year. This increase is due in part to the expected contribution from the Lu'An project. Fiscal 2018 third quarter adjusted EPS guidance of $1.80 to $1.85 per share, up nine to 12 percent over fiscal 2017 third quarter.
  • Including the Lu'An project, expected fiscal year 2018 capital spending of $1.8 to $2.0 billion

*The results and guidance in this release, including in the highlights above, include references to non-GAAP continuing operations measures. These exclude discontinued operations and are identified by the word "adjusted" preceding the measure. A reconciliation of GAAP to non-GAAP results can be found below.

Air Products (NYSE: APD) today reported GAAP net income from continuing operations of $416 million and GAAP diluted earnings per share (EPS) from continuing operations of $1.89, up 37 and 36 percent, respectively from the prior year, for its fiscal second quarter ended March 31, 2018. These results include an income tax benefit of $0.18 EPS due to the restructuring of select foreign subsidiaries.

For the quarter, on a non-GAAP basis, adjusted net income from continuing operations of $378 million and diluted adjusted EPS from continuing operations of $1.71 both increased 20 percent over prior year.

Second quarter sales of $2.2 billion increased nine percent from the prior year on four percent higher volumes and five percent favorable currency. Volumes were higher in all three Industrial Gas regions, partially offset by lower activity from the Jazan project in Saudi Arabia. Pricing increased one percent, driven primarily by the China merchant business.

For the quarter, adjusted EBITDA of $739 million increased 13 percent over the prior year, driven by the higher volumes, positive pricing and favorable currency. Adjusted EBITDA margin of 34.3 percent increased 140 basis points over the prior year, primarily on the higher volumes.

Commenting on the results, Seifi Ghasemi, chairman, president and chief executive officer, said, "Our talented and committed Air Products team delivered another strong quarter, further improving safety performance and financial results. Adjusted EPS of $1.71 increased 20 percent over prior year, our 16th consecutive quarter of year-on-year adjusted EPS growth. We also continued to generate a significant amount of investable cash. Adjusted EBITDA margin of 34.3 percent shows our people are continuing to focus on delivering strong operating performance while successfully winning new growth opportunities," he said.

Second Quarter Results by Business Segment

  • Industrial Gases – Americas sales of $913 million increased three percent over prior year, driven by higher hydrogen and merchant gases volumes. Adjusted EBITDA of $362 million increased three percent over the prior year, primarily driven by the higher volumes.
                                                
  • Industrial Gases – EMEA sales of $562 million increased 36 percent over prior year, driven by 20 percent higher volumes, 15 percent favorable currency and one percent favorable pricing. The higher volumes were primarily from the new hydrogen plant in India; merchant volumes also contributed positively. Adjusted EBITDA of $179 million increased 29 percent over the prior year on the higher volumes, pricing and currency. Adjusted EBITDA margin of 31.8 percent decreased 160 basis points from the prior year; excluding the India plant, which has comparatively high natural gas costs, adjusted EBITDA margin was up slightly compared to prior year.
                                                
  • Industrial Gases – Asia sales of $558 million increased 28 percent over prior year, driven by 17 percent higher volumes from new plants and base business growth, eight percent favorable currency, and three percent higher pricing. Adjusted EBITDA of $227 million increased 30 percent on the strong volumes, favorable currency and higher pricing.

Outlook

Ghasemi said, "Our team's performance continues to have us operating from a position of great strength. Air Products people around the world are working hard, every day, to drive our safety, productivity and operational performance higher. In addition, our very strong balance sheet and cash flow position mean we have the capability to invest at least $13 billion over the next five years in many growth opportunities we see, including acquisitions, asset buybacks and large projects. Our absolute focus on these two areas -- delivering operational excellence and strategically deploying capital for growth -- are our playbook for continuing to create value for our customers and shareholders."

Increasing guidance for fiscal 2018, Air Products now expects full-year adjusted EPS of $7.25 to $7.40 per share, up 15 to 17 percent over prior year. For the fiscal 2018 third quarter, Air Products expects adjusted EPS of $1.80 to $1.85 per share, up nine to 12 percent over the fiscal 2017 third quarter.

Including the Lu'An project, the capital expenditure forecast for fiscal year 2018 now is expected to be in the range of $1.8 to $2.0 billion on a GAAP and non-GAAP basis.

Management has provided adjusted EPS and adjusted tax rate guidance on a continuing operations basis. While Air Products might have additional impacts from the U.S. Tax Cuts and Jobs Act adopted in late 2017, or incur additional costs for items such as cost reduction actions and pension settlements in future periods, it is not possible, without unreasonable efforts, to identify the amount or significance of these events or the potential for other transactions that may impact future GAAP EPS or the effective tax rate. Management does not believe these items to be representative of underlying business performance. Accordingly, management is unable to reconcile, without unreasonable effort, the Company's forecasted range of adjusted EPS or the impact of the adjusted tax rate to a comparable GAAP range.

Earnings Teleconference

Access the Q2 earnings teleconference scheduled for 10:00 a.m. Eastern Time on April 26 by calling (323) 794-2551 and entering passcode 6702758, or access the Event Details page on Air Products' Investor Relations web site.

About Air Products

Air Products (NYSE:APD) is a world-leading Industrial Gases company in operation for over 75 years. The Company's core industrial gases business provides atmospheric and process gases and related equipment to manufacturing markets, including refining and petrochemical, metals, electronics, and food and beverage. Air Products is also the world's leading supplier of liquefied natural gas process technology and equipment.

The Company had fiscal 2017 sales of $8.2 billion from continuing operations in 50 countries and has a current market capitalization of about $35 billion. Approximately 15,000 passionate, talented and committed employees from a diversity of backgrounds are driven by Air Products' higher purpose to create innovative solutions that benefit the environment, enhance sustainability and address the challenges facing customers, communities, and the world. For more information, visit www.airproducts.com.

NOTE: This release contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings guidance, business outlook and investment opportunities. These forward-looking statements are based on management's reasonable expectations and assumptions as of the date this release is furnished. Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors not anticipated by management, including, without limitation, global or regional economic conditions and supply and demand dynamics in market segments into which the Company sells; political risks, including the risks of unanticipated government actions; acts of war or terrorism; significant fluctuations in interest rates and foreign currencies from that currently anticipated; future financial and operating performance of major customers; unanticipated contract terminations or customer cancellations or postponement of projects and sales; our ability to execute the projects in our backlog; asset impairments due to economic conditions or specific events; the impact of price fluctuations in natural gas and disruptions in markets and the economy due to oil price volatility; costs and outcomes of litigation or regulatory investigations; the success of productivity and operational improvement programs; the timing, impact, and other uncertainties of future acquisitions or divestitures, including reputational impacts; the Company's ability to implement and operate with new technologies; the impact of changes in environmental, tax or other legislation, economic sanctions and regulatory activities in jurisdictions in which the Company and its affiliates operate; and other risk factors described in the Company's Form 10-K for its fiscal year ended September 30, 2017. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this release to reflect any change in the Company's assumptions, beliefs or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.

* Presented below are reconciliations of the reported GAAP results to the non-GAAP measures.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Millions of dollars unless otherwise indicated, except for per share data)

The Company has presented certain financial measures on a non-GAAP ("adjusted") basis and has provided a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. These financial measures are not meant to be considered in isolation or as a substitute for the most directly comparable financial measure calculated in accordance with GAAP. The Company believes these non-GAAP measures provide investors, potential investors, securities analysts, and others with useful information to evaluate the performance of the business because such measures, when viewed together with our financial results computed in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our historical financial performance and projected future results.

In many cases, our non-GAAP measures are determined by adjusting the most directly comparable GAAP financial measure to exclude certain disclosed items ("non-GAAP adjustments") that we believe are not representative of the underlying business performance. For example, Air Products restructured the Company to focus on its core Industrial Gases business. This had resulted in significant cost reduction and asset actions that we believe were important for investors to understand separately from the performance of the underlying business. The reader should be aware that we may incur similar expenses in the future. The tax impact on our pre-tax non-GAAP adjustments reflects the expected current and deferred income tax expense impact of the transactions and is impacted primarily by the statutory tax rate of the various relevant jurisdictions and the taxability of the adjustments in those jurisdictions. Investors should also consider the limitations associated with these non-GAAP measures, including the potential lack of comparability of these measures from one company to another.

During the first quarter of fiscal year 2018, we adopted accounting guidance on the presentation of net periodic pension and postretirement benefit cost. Certain prior year information has been reclassified to conform to the fiscal year 2018 presentation. Refer to Note 2, New Accounting Guidance, to the consolidated financial statements for additional information.

CONSOLIDATED RESULTS



Continuing Operations


Three Months Ended 31 March

Q2 2018 vs. Q2 2017

Operating
Income

Operating
Margin(A)

Equity
Affiliates'
Income

Income Tax
Provision

Net
Income

Diluted
EPS

2018 GAAP

$455.4


21.1

%

$43.7


$56.2


$416.4


$1.89


2017 GAAP

395.6


20.0

%

34.2


94.5


304.4


1.39


Change GAAP

$59.8


110

bp

$9.5


($38.3)


$112.0


$.50


% Change GAAP

15

%


28

%

(41)

%

37

%

36

%

2018 GAAP

$455.4


21.1

%

$43.7


$56.2


$416.4


$1.89


Tax restructuring benefit


%


38.8


(38.8)


(.18)


2018 Non-GAAP Measure

$455.4


21.1

%

$43.7


$95.0


$377.6


$1.71


2017 GAAP

$395.6


20.0

%

$34.2


$94.5


$304.4


$1.39


Cost reduction and asset actions

10.3


.5

%


3.1


7.2


.03


Pension settlement loss


%


1.5


2.6


.01


2017 Non-GAAP Measure

$405.9


20.5

%

$34.2


$99.1


$314.2


$1.43


Change Non-GAAP Measure

$49.5


60

bp

$9.5


($4.1)


$63.4


$.28


% Change Non-GAAP Measure

12

%


28

%

(4)

%

20

%

20

%

 









Continuing Operations


Six Months Ended 31 March

2018 vs. 2017

Operating

Income

Operating

Margin(A)

Equity
Affiliates'
Income

Income Tax
Provision

Net

Income

Diluted

EPS

2018 GAAP

$916.1


21.0

%

$57.5


$348.0


$572.0


$2.59


2017 GAAP

723.9


18.7

%

72.2


172.9


556.0


2.53


Change GAAP

$192.2


230

bp

($14.7)


$175.1


$16.0


$.06


% Change GAAP

27

%


(20)

%

101

%

3

%

2

%

2018 GAAP

$916.1


21.0

%

$57.5


$348.0


$572.0


$2.59


Tax reform repatriation


%

32.5


(420.5)


453.0


2.06


Tax reform rate change and other


%


214.0


(214.0)


(.97)


Tax restructuring benefit


%


38.8


(38.8)


(.18)


2018 Non-GAAP Measure

$916.1


21.0

%

$90.0


$180.3


$772.2


$3.50


2017 GAAP

$723.9


18.7

%

$72.2


$172.9


$556.0


$2.53


Business separation costs

32.5


.8

%


3.7


26.5


.12


Tax costs associated with business separation


%


(2.7)


2.7


.01


Cost reduction and asset actions

60.3


1.6

%


11.9


48.4


.23


Pension settlement loss


%


1.5


2.6


.01


2017 Non-GAAP Measure

$816.7


21.1

%

$72.2


$187.3


$636.2


$2.90


Change Non-GAAP Measure

$99.4


(10

)bp

$17.8


($7.0)


$136.0


$.60


% Change Non-GAAP Measure

12

%


25

%

(4)

%

21

%

21

%



(A)

Operating margin is calculated by dividing operating income by sales.

ADJUSTED EBITDA

We define Adjusted EBITDA as income from continuing operations (including noncontrolling interests) excluding certain disclosed items, which the Company does not believe to be indicative of underlying business trends, before interest expense, other non‑operating income (expense), net, income tax provision (benefit), and depreciation and amortization expense. Adjusted EBITDA provides a useful metric for management to assess operating performance.

Below is a reconciliation of Income from Continuing Operations on a GAAP basis to Adjusted EBITDA:

2018


Q1


Q2


Q3


Q4


Q2 YTD
Total

Income from Continuing Operations(A)


$162.7



$423.6







$586.3


Add: Interest expense


29.8



30.4







60.2


Less: Other non-operating income (expense), net


9.8



11.1







20.9


Add: Income tax provision


291.8



56.2







348.0


Add: Depreciation and amortization


227.9



240.0







467.9


Add: Tax reform repatriation - equity method investment


32.5









32.5


Adjusted EBITDA


$734.9



$739.1







$1,474.0













2017


Q1


Q2


Q3


Q4


Q2 YTD
Total

Income from Continuing Operations(A)


$258.2



$310.1



$106.4



$480.5



$568.3


Add: Interest expense


29.5



30.5



29.8



30.8



60.0


Less: Other non-operating income (expense), net


(.2)



5.3



3.7



7.8



5.1


Add: Income tax provision (benefit)


78.4



94.5



89.3



(1.3)



172.9


Add: Depreciation and amortization


206.1



211.8



216.9



231.0



417.9


Add: Business separation costs


32.5









32.5


Add: Cost reduction and asset actions


50.0



10.3



42.7



48.4



60.3


Add: Goodwill and intangible asset impairment charge






162.1






Less: Gain on land sale








12.2




Add: Equity method investment impairment charge






79.5






Adjusted EBITDA


$654.9



$651.9



$723.0



$769.4



$1,306.8




(A)

Includes net income attributable to noncontrolling interests.

 

2018 vs. 2017


Q1


Q2






Q2 YTD
Total

Change GAAP











Income from continuing operations change


($95.5)



$113.5







$18.0


Income from continuing operations % change


(37)

%


37

%






3

%

Change Non-GAAP











Adjusted EBITDA change


$80.0



$87.2







$167.2


Adjusted EBITDA % change


12

%


13

%






13

%

Below is a reconciliation of segment operating income to Adjusted EBITDA:


Industrial
Gases–
Americas

Industrial
Gases–
EMEA

Industrial
Gases–
Asia

Industrial
Gases–
Global

Corporate
and other

Segment
Total

GAAP MEASURE







Three Months Ended 31 March 2018







Operating income (loss)

$222.3


$116.7


$148.7


$12.1


($44.4)


$455.4


Operating margin

24.3

%

20.8

%

26.7

%



21.1

%

Three Months Ended 31 March 2017







Operating income (loss)

$223.2


$88.6


$112.3


$22.7


($40.9)


$405.9


Operating margin

25.1

%

21.4

%

25.8

%



20.5

%

Operating income (loss) change

($.9)


$28.1


$36.4


($10.6)


($3.5)


$49.5


Operating income (loss) % change

%

32

%

32

%

(47)

%

(9)

%

12

%

Operating margin change

(80)

 bp

(60)

bp

90

bp



60

bp








NON-GAAP MEASURE







Three Months Ended 31 March 2018







Operating income (loss)

$222.3


$116.7


$148.7


$12.1


($44.4)


$455.4


Add: Depreciation and amortization

122.3


50.7


62.6


1.9


2.5


240.0


Add: Equity affiliates' income

16.9


11.1


15.4


.3



43.7


Adjusted EBITDA

$361.5


$178.5


$226.7


$14.3


($41.9)


$739.1


Adjusted EBITDA margin

39.6

%

31.8

%

40.7

%



34.3

%

Three Months Ended 31 March 2017







Operating income (loss)

$223.2


$88.6


$112.3


$22.7


($40.9)


$405.9


Add: Depreciation and amortization

116.0


41.6


49.3


1.7


3.2


211.8


Add: Equity affiliates' income

13.0


8.3


12.9




34.2


Adjusted EBITDA

$352.2


$138.5


$174.5


$24.4


($37.7)


$651.9


Adjusted EBITDA margin

39.6

%

33.4

%

40.0

%



32.9

%

Adjusted EBITDA change

$9.3


$40.0


$52.2


($10.1)


($4.2)


$87.2


Adjusted EBITDA % change

3

%

29

%

30

%

(41)

%

(11)

%

13

%

Adjusted EBITDA margin change

bp

(160)

 bp

70

bp



140

bp

 









Industrial
Gases–
Americas

Industrial
Gases–
EMEA

Industrial
Gases–
Asia

Industrial
Gases–
Global

Corporate
and other

Segment
Total

GAAP MEASURE







Six Months Ended 31 March 2018







Operating income (loss)

$439.5


$221.2


$324.2


$21.6


($90.4)


$916.1


Operating margin

24.1

%

20.5

%

27.0

%



21.0

%

Six Months Ended 31 March 2017







Operating income (loss)

$446.5


$178.6


$230.7


$30.9


($70.0)


$816.7


Operating margin

25.5

%

21.9

%

26.4

%



21.1

%

Operating income (loss) change

($7.0)


$42.6


$93.5


($9.3)


($20.4)


$99.4


Operating income (loss) % change

(2)

%

24

%

41

%

(30)

%

(29)

%

12

%

Operating margin change

(140)

bp

(140)

bp

60

bp



(10)

 bp








NON-GAAP MEASURE







Six Months Ended 31 March 2018







Operating income (loss)

$439.5


$221.2


$324.2


$21.6


($90.4)


$916.1


Add: Depreciation and amortization

240.1


99.8


119.4


3.5


5.1


467.9


Add: Equity affiliates' income

35.5


24.2


29.6


.7



90.0


Adjusted EBITDA

$715.1


$345.2


$473.2


$25.8


($85.3)


$1,474.0


Adjusted EBITDA margin

39.2

%

32.0

%

39.4

%



33.7

%

Six Months Ended 31 March 2017







Operating income (loss)

$446.5


$178.6


$230.7


$30.9


($70.0)


$816.7


Add: Depreciation and amortization

227.8


83.8


96.0


3.7


6.6


417.9


Add: Equity affiliates' income

27.7


17.8


26.4


.3



72.2


Adjusted EBITDA

$702.0


$280.2


$353.1


$34.9


($63.4)


$1,306.8


Adjusted EBITDA margin

40.0

%

34.4

%

40.4

%



33.8

%

Adjusted EBITDA change

$13.1


$65.0


$120.1


($9.1)


($21.9)


$167.2


Adjusted EBITDA % change

2

%

23

%

34

%

(26)

%

(35)

%

13

%

Adjusted EBITDA margin change

(80)

 bp

(240)

 bp

(100)

bp



(10)

 bp

Below is a reconciliation of segment total operating income to consolidated operating income:


Three Months Ended

Six Months Ended


31 March

31 March

Operating Income

2018

2017

2018

2017

Segment total

$455.4


$405.9


$916.1


$816.7


Business separation costs




(32.5)


Cost reduction and asset actions


(10.3)



(60.3)


Consolidated Total

$455.4


$395.6


$916.1


$723.9


Below is a reconciliation of segment total equity affiliates' income to consolidated equity affiliates' income:


Three Months Ended

Six Months Ended


31 March

31 March

Equity Affiliates' Income

2018

2017

2018

2017

Segment total

$43.7


$34.2


$90.0


$72.2


Tax reform repatriation - equity method investment



(32.5)



Consolidated Total

$43.7


$34.2


$57.5


$72.2



INCOME TAXES

The tax impact on our pre-tax non-GAAP adjustments reflects the expected current and deferred income tax expense impact of the transactions and is impacted primarily by the statutory tax rate of the various relevant jurisdictions and the taxability of the adjustments in those jurisdictions. For additional discussion on the fiscal year 2018 non-GAAP tax adjustments, including the impact of the U.S. Tax Cuts and Jobs Act, refer to Note 1, Income Taxes, to the consolidated financial statements.


Effective Tax Rate


Three Months Ended
31 March


Six Months Ended
31 March


2018

2017


2018

2017

Income Tax Provision—GAAP

$56.2


$94.5



$348.0


$172.9


Income From Continuing Operations Before Taxes—GAAP

$479.8


$404.6



$934.3


$741.2


Effective Tax Rate—GAAP

11.7

%

23.4

%


37.2

%

23.3

%

Income Tax Provision—GAAP

$56.2


$94.5



$348.0


$172.9


Business separation costs





3.7


Tax costs associated with business separation





(2.7)


Cost reduction and asset actions


3.1




11.9


Pension settlement loss


1.5




1.5


Tax reform repatriation




(420.5)



Tax reform rate change and other




214.0



Tax restructuring benefit

38.8




38.8



Income Tax Provision—Non-GAAP Measure

$95.0


$99.1



$180.3


$187.3


Income From Continuing Operations Before Taxes—GAAP

$479.8


$404.6



$934.3


$741.2


Business separation costs





30.2


Cost reduction and asset actions


10.3




60.3


Pension settlement loss


4.1




4.1


Tax reform repatriation - equity method investment




32.5



Income From Continuing Operations Before Taxes—Non-GAAP Measure

$479.8


$419.0



$966.8


$835.8


Effective Tax Rate—Non-GAAP Measure

19.8

%

23.7

%


18.6

%

22.4

%


CAPITAL EXPENDITURES

We utilize a non-GAAP measure in the computation of capital expenditures and include spending associated with facilities accounted for as capital leases. Certain contracts associated with facilities that are built to provide product to a specific customer are required to be accounted for as leases, and such spending is reflected as a use of cash in the consolidated statements of cash flows within "Cash Provided by Operating Activities" if the arrangement qualifies as a capital lease.

Below is a reconciliation of capital expenditures on a GAAP basis to a non-GAAP measure:


Three Months Ended
31 March

Six Months Ended
31 March


2018

2017

2018

2017

Capital expenditures for continuing operations—GAAP basis

$350.2


$293.1


$843.9


$541.1


Capital lease expenditures

5.9


1.8


12.3


5.8


Capital expenditures—Non-GAAP basis

$356.1


$294.9


$856.2


$546.9


We expect capital expenditures for fiscal year 2018 to be approximately $1,800 to $2,000 on a GAAP and non-GAAP basis.


RETURN ON CAPITAL EMPLOYED (ROCE)

Return on capital employed (ROCE) is calculated on a continuing operations basis as earnings after-tax divided by five-quarter average total capital. Earnings after-tax is calculated based on trailing four quarters and is defined as the sum of net income from continuing operations attributable to Air Products, interest expense, after-tax, at our effective quarterly tax rate, and net income attributable to noncontrolling interests. This non-GAAP measure has been adjusted for the impact of the disclosed items detailed below. Total capital consists of total debt and total equity less noncontrolling interests and total assets of discontinued operations.


2018


2017


2016


Q2

Q1


Q4

Q3

Q2

Q1


Q4

Q3

Q2

Net income from continuing
operations attributable to Air
Products

$

416.4


$

155.6



$

474.2


$

104.2


$

304.4


$

251.6



$

289.4


$

250.3



Interest expense

30.4


29.8



30.8


29.8


30.5


29.5



32.2


35.1



Interest expense tax impact

(3.6)


(19.1)



.1


(13.6)


(7.1)


(6.9)



(8.0)


(12.7)



     Interest expense, after-tax

26.8


10.7



30.9


16.2


23.4


22.6



24.2


22.4



Net income attributable to
noncontrolling interests of
continuing operations

7.2


7.1



6.3


2.2


5.7


6.6



5.0


5.4



Earnings After-Tax—GAAP

$

450.4


$

173.4



$

511.4


$

122.6


$

333.5


$

280.8



$

318.6


$

278.1















Disclosed items, after-tax












Business separation costs

$


$



$


$


$


$

26.5



$

19.3


$

6.5



Tax (benefit) costs associated with
business separation





(8.2)



2.7



4.1


47.7



Cost reduction and asset actions




30.9


30.0


7.2


41.2



7.2


8.7



Pension settlement loss




.6


3.4


2.6




1.4


.6



Goodwill and intangible asset
impairment charge





154.1








Gain on land sale




(7.6)









Equity method investment
impairment charge





79.5








Loss on extinguishment of debt









4.3




Tax election benefit




(111.4)









Tax reform repatriation


453.0











Tax reform rate change and other


(214.0)











Tax restructuring benefit

(38.8)












Earnings After-Tax—NonGAAP

$

411.6


$

412.4



$

423.9


$

381.4


$

343.3


$

351.2



$

354.9


$

341.6















Total Capital












Short-term borrowings

$

112.5


$

87.1



$

144.0


$

143.4


$

122.3


$

156.1



$

935.8


$

1,043.0


$

1,478.5


Current portion of long-term debt

11.6


11.3



416.4


416.0


420.5


873.3



365.4


714.9


763.6


Long-term debt

3,442.4


3,414.9



3,402.4


3,366.6


3,300.4


3,289.0



3,909.7


3,908.1


3,556.9


     Total Debt

3,566.5


3,513.3



3,962.8


3,926.0


3,843.2


4,318.4



5,210.9


5,666.0


5,799.0


Total Equity

10,693.2


10,321.2



10,185.5


9,509.9


9,420.2


7,261.1



7,213.4


7,180.2


7,053.1


Noncontrolling interests of
discontinued operations









(33.9)


(32.9)


(33.0)


Assets of discontinued operations


(10.2)



(10.2)


(9.8)


(9.8)


(860.2)



(1,968.5)


(1,762.0)


(1,707.1)


Total Capital

$

14,259.7


$

13,824.3



$

14,138.1


$

13,426.1


$

13,253.6


$

10,719.3



$

10,421.9


$

11,051.3


$

11,112.0














Earnings After Tax—GAAP

$

1,257.8






$

1,211.0







Five-quarter average total capital

13,780.4






11,311.6







ROCE—GAAP items

9.1

%





10.7

%






Change GAAP-based Measure

(160)

bp























Earnings After Tax—Non-GAAP

$

1,629.3






$

1,391.0







Five-quarter average total capital

13,780.4






11,311.6







ROCE—Non-GAAP items

11.8

%





12.3

%






Change Non-GAAP-based Measure

(50)

bp












OUTLOOK

Guidance provided is on a non-GAAP continuing operations basis, which excludes the impact of certain items that we believe are not representative of our underlying business performance. While we might incur additional costs for items such as cost reduction actions and pension settlements in future periods, it is not possible, without unreasonable efforts, to identify the amount or significance of these events or the potential for other transactions that may impact future GAAP EPS. Accordingly, management is unable to reconcile, without unreasonable effort, the Company's forecasted range of adjusted EPS on a continuing operations basis to a comparable GAAP range.



Diluted EPS



Q3


Full Year

2017 GAAP


$.47


$5.16

Business separation costs



.12

Tax benefit associated with business separation


(.04)


(.02)

Cost reduction and asset actions


.14


.49

Pension settlement loss


.02


.03

Goodwill and intangible asset impairment charge


.70


.70

Gain on land sale



(.03)

Equity method investment impairment charge


.36


.36

Tax election benefit



(.50)

2017 Non-GAAP Measure


$1.65


$6.31

2018 Non-GAAP Outlook


1.80–1.85


7.25–7.40

Change Non-GAAP


.15–.20


.94–1.09

% Change Non-GAAP


9%–12%


15%–17%


 

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

CONSOLIDATED INCOME STATEMENTS

(Unaudited)



Three Months Ended

Six Months Ended


31 March

31 March

(Millions of dollars, except for share and per share data)

2018

2017

2018

2017

Sales

$2,155.7


$1,980.1


$4,372.3


$3,862.6


Cost of sales

1,506.5


1,403.8


3,078.3


2,720.5


Selling and administrative

194.6


177.6


386.2


342.3


Research and development

14.5


14.8


29.1


29.8


Business separation costs




32.5


Cost reduction and asset actions


10.3



60.3


Other income (expense), net

15.3


22.0


37.4


46.7


Operating Income

455.4


395.6


916.1


723.9


Equity affiliates' income

43.7


34.2


57.5


72.2


Interest expense

30.4


30.5


60.2


60.0


Other non-operating income (expense), net

11.1


5.3


20.9


5.1


Income From Continuing Operations Before Taxes

479.8


404.6


934.3


741.2


Income tax provision

56.2


94.5


348.0


172.9


Income From Continuing Operations

423.6


310.1


586.3


568.3


Income (Loss) From Discontinued Operations, net of tax


1,825.6


(1.0)


1,873.8


Net Income

423.6


2,135.7


585.3


2,442.1


Net Income Attributable to Noncontrolling Interests of Continuing
Operations

7.2


5.7


14.3


12.3


Net Income Attributable to Air Products

$416.4


$2,130.0


$571.0


$2,429.8


Net Income Attributable to Air Products





Income from continuing operations

$416.4


$304.4


$572.0


$556.0


Income (Loss) from discontinued operations


1,825.6


(1.0)


1,873.8


Net Income Attributable to Air Products

$416.4


$2,130.0


$571.0


$2,429.8


Basic Earnings Per Common Share Attributable to Air Products





Income from continuing operations

$1.90


$1.40


$2.61


$2.55


Income from discontinued operations


8.38



8.61


Net Income Attributable to Air Products

$1.90


$9.78


$2.61


$11.16


Diluted Earnings Per Common Share Attributable to Air Products





Income from continuing operations

$1.89


$1.39


$2.59


$2.53


Income from discontinued operations


8.31



8.53


Net Income Attributable to Air Products

$1.89


$9.70


$2.59


$11.06


Weighted Average Common Shares – Basic (in millions)

219.4


217.9


219.2


217.8


Weighted Average Common Shares – Diluted (in millions)

220.8


219.7


220.7


219.6


Dividends Declared Per Common Share – Cash

$1.10


$.95


$2.05


$1.81


Other Data from Continuing Operations





Depreciation and amortization

$240.0


$211.8


$467.9


$417.9


Capital expenditures – Refer to page 10

$356.1


$294.9


$856.2


$546.9



 

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)



31 March

30 September

(Millions of dollars)

2018

2017

Assets



Current Assets



Cash and cash items

$3,066.9


$3,273.6


Short-term investments

137.0


404.0


Trade receivables, net

1,252.3


1,174.0


Inventories

339.9


335.4


Contracts in progress, less progress billings

98.5


84.8


Prepaid expenses

131.2


191.4


Other receivables and current assets

370.5


403.3


Current assets of discontinued operations


10.2


Total Current Assets

5,396.3


5,876.7


Investment in net assets of and advances to equity affiliates

1,305.6


1,286.9


Plant and equipment, at cost

20,522.5


19,547.8


Less: accumulated depreciation

11,704.8


11,107.6


Plant and equipment, net

8,817.7


8,440.2


Goodwill, net

815.0


721.5


Intangible assets, net

444.4


368.3


Noncurrent capital lease receivables

1,128.5


1,131.8


Other noncurrent assets

603.6


641.8


Total Noncurrent Assets

13,114.8


12,590.5


Total Assets

$18,511.1


$18,467.2


Liabilities and Equity



Current Liabilities



Payables and accrued liabilities

$1,551.6


$1,814.3


Accrued income taxes

76.6


98.6


Short-term borrowings

112.5


144.0


Current portion of long-term debt

11.6


416.4


Current liabilities of discontinued operations


15.7


Total Current Liabilities

1,752.3


2,489.0


Long-term debt

3,442.4


3,402.4


Other noncurrent liabilities

1,923.5


1,611.9


Deferred income taxes

699.7


778.4


Total Noncurrent Liabilities

6,065.6


5,792.7


Total Liabilities

7,817.9


8,281.7


Air Products Shareholders' Equity

10,580.8


10,086.2


Noncontrolling Interests

112.4


99.3


Total Equity

10,693.2


10,185.5


Total Liabilities and Equity

$18,511.1


$18,467.2



 

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)



Six Months Ended


31 March

(Millions of dollars)

2018

2017

Operating Activities



Net income

$585.3


$2,442.1


Less: Net income attributable to noncontrolling interests of continuing operations

14.3


12.3


Net income attributable to Air Products

571.0


2,429.8


(Income) Loss from discontinued operations

1.0


(1,873.8)


Income from continuing operations attributable to Air Products

572.0


556.0


Adjustments to reconcile income to cash provided by operating activities:



Depreciation and amortization

467.9


417.9


Deferred income taxes

(94.4)


(68.6)


Tax reform repatriation

310.3



Undistributed earnings of unconsolidated affiliates

3.1


(31.5)


Gain on sale of assets and investments

(2.4)


(6.5)


Share-based compensation

22.5


18.5


Noncurrent capital lease receivables

47.2


45.4


Write-down of long-lived assets associated with cost reduction actions


45.7


Other adjustments

44.7


34.0


Working capital changes that provided (used) cash, excluding effects of acquisitions and divestitures:



Trade receivables

(30.2)


(53.8)


Inventories

5.5


20.7


Contracts in progress, less progress billings

(12.2)


(5.0)


Other receivables

23.2


118.4


Payables and accrued liabilities

(260.4)


(178.6)


Other working capital

13.3


(51.4)


Cash Provided by Operating Activities

1,110.1


861.2


Investing Activities



Additions to plant and equipment

(572.5)


(532.2)


Acquisitions, less cash acquired

(271.4)



Investment in and advances to unconsolidated affiliates


(8.9)


Proceeds from sale of assets and investments

34.4


13.5


Purchases of investments

(345.7)


(1,823.2)


Proceeds from investments

612.9


400.0


Other investing activities

(2.6)


(1.6)


Cash Used for Investing Activities

(544.9)


(1,952.4)


Financing Activities



Long-term debt proceeds

.5


1.3


Payments on long-term debt

(409.2)


(469.7)


Net decrease in commercial paper and short-term borrowings

(22.4)


(816.6)


Dividends paid to shareholders

(415.5)


(374.0)


Proceeds from stock option exercises

52.7


19.9


Other financing activities

(21.7)


(22.7)


Cash Used for Financing Activities

(815.6)


(1,661.8)


Discontinued Operations



Cash used for operating activities

(3.1)


(520.8)


Cash provided by investing activities

18.6


3,750.6


Cash provided by financing activities


69.5


Cash Provided by Discontinued Operations

15.5


3,299.3


Effect of Exchange Rate Changes on Cash

28.2


(7.8)


(Decrease) Increase in Cash and Cash Items

(206.7)


538.5


Cash and Cash items - Beginning of Year

3,273.6


1,330.8


Cash and Cash items - End of Period

$3,066.9


$1,869.3


Supplemental Cash Flow Information



Cash paid for taxes (net of refunds) - Continuing operations

$153.7


$275.0



 

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

SUMMARY BY BUSINESS SEGMENTS

(Unaudited)


(Millions of dollars)

Industrial

Gases –

Americas

Industrial

Gases –

EMEA

Industrial

Gases –

Asia

Industrial

Gases –

Global

Corporate

and other

Segment

Total

Three Months Ended 31 March 2018







Sales

$913.2


$561.6


$557.6


$101.7


$21.6


$2,155.7


Operating income (loss)

222.3


116.7


148.7


12.1


(44.4)


455.4


Depreciation and amortization

122.3


50.7


62.6


1.9


2.5


240.0


Equity affiliates' income

16.9


11.1


15.4


.3



43.7


Three Months Ended 31 March 2017







Sales

$890.1


$414.2


$435.9


$216.5


$23.4


$1,980.1


Operating income (loss)

223.2


88.6


112.3


22.7


(40.9)


405.9


Depreciation and amortization

116.0


41.6


49.3


1.7


3.2


211.8


Equity affiliates' income

13.0


8.3


12.9




34.2

















Industrial
Gases –
Americas

Industrial
Gases –
EMEA

Industrial
Gases –
Asia

Industrial
Gases –
Global

Corporate
and other

Segment
Total

Six Months Ended 31 March 2018







Sales

$1,823.0


$1,077.5


$1,201.2


$234.7


$35.9


$4,372.3


Operating income (loss)

439.5


221.2


324.2


21.6


(90.4)


916.1


Depreciation and amortization

240.1


99.8


119.4


3.5


5.1


467.9


Equity affiliates' income

35.5


24.2


29.6


.7



90.0


Six Months Ended 31 March 2017







Sales

$1,754.0


$813.9


$874.2


$364.4


$56.1


$3,862.6


Operating income (loss)

446.5


178.6


230.7


30.9


(70.0)


816.7


Depreciation and amortization

227.8


83.8


96.0


3.7


6.6


417.9


Equity affiliates' income

27.7


17.8


26.4


.3



72.2


Total Assets







31 March 2018

$5,915.0


$3,475.5


$4,779.1


$252.5


$4,089.0


$18,511.1


30 September 2017

5,840.8


3,276.1


4,412.1


279.6


4,648.4


18,457.0


Below is a reconciliation of segment total operating income to consolidated operating income:


Three Months Ended

Six Months Ended


31 March

31 March

Operating Income

2018

2017

2018

2017

Segment total

$455.4


$405.9


$916.1


$816.7


Business separation costs




(32.5)


Cost reduction and asset actions


(10.3)



(60.3)


Consolidated Total

$455.4


$395.6


$916.1


$723.9


Below is a reconciliation of segment total equity affiliates' income to consolidated equity affiliates' income:


Three Months Ended

Six Months Ended


31 March

31 March

Equity Affiliates' Income

2018

2017

2018

2017

Segment total

$43.7


$34.2


$90.0


$72.2


Tax reform repatriation - equity method investment



(32.5)



Consolidated Total

$43.7


$34.2


$57.5


$72.2


Below is a reconciliation of segment total assets to consolidated total assets:


31 March

30 September

Total Assets

2018

2017

Segment total

$18,511.1


$18,457.0


Discontinued operations


10.2


Consolidated Total

$18,511.1


$18,467.2



AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(Millions of dollars, unless otherwise indicated)

1. INCOME TAXES

Tax Restructuring Benefit

In the second quarter of 2018, we recognized a $38.8 tax benefit and a decrease in net deferred tax liabilities resulting from the restructuring of foreign subsidiaries.

U.S. Tax Cuts and Jobs Act

On 22 December 2017, the United States enacted the U.S. Tax Cuts and Jobs Act ("the Tax Act") which significantly changed existing U.S. tax laws, including a reduction in the federal corporate income tax rate from 35% to 21%, a deemed repatriation tax on unremitted foreign earnings, as well as other changes. As a result of the Tax Act, our consolidated income statements for the six months ended 31 March 2018 reflect a net expense of $239.0 for the impacts recorded during the first quarter of fiscal year 2018. This includes an expense of $453.0 for the cost of the deemed repatriation tax and adjustments to the future cost of repatriation from foreign investments. This expense impacted our income tax provision by $420.5 and equity affiliate income by $32.5 for future costs of repatriation that will be borne by an equity affiliate. In addition, the income tax provision was benefited by $214.0 primarily from the re-measurement of our net U.S. deferred tax liabilities at the lower corporate tax rate.

We are reporting the impacts of the Tax Act provisionally based upon reasonable estimates. The impacts are not yet finalized as they are dependent on factors and analysis not yet known or fully completed, including but not limited to, the final cash balances for fiscal year 2018, further book to U.S. tax adjustments for the earnings of foreign entities, the issuance of additional guidance, as well as our ongoing analysis of the Tax Act.

As a fiscal year-end taxpayer, certain provisions of the Tax Act become effective in our fiscal year 2018 while other provisions do not become effective until fiscal year 2019. The corporate tax rate reduction is effective as of 1 January 2018 and, accordingly, reduces our 2018 fiscal year U.S. federal statutory rate to a blended rate of approximately 24.5%.

2. NEW ACCOUNTING GUIDANCE

Presentation of Net Periodic Pension and Postretirement Benefit Cost

During the first quarter of fiscal year 2018, we adopted accounting guidance on the presentation of net periodic pension and postretirement benefit cost. Prior to adoption, all net periodic benefit costs were presented within operating costs, primarily within "Cost of sales" and "Selling and administrative." As a result of adoption, non-service costs (e.g., interest cost, expected return on plan assets, amortization of actuarial gains/losses, settlements) are now presented in our consolidated income statements outside of operating income in "Other non-operating income (expense), net." Prior period information has been reclassified to conform to the fiscal year 2018 presentation. The line item classification changes required by the new guidance did not impact the Company's pre-tax earnings or net income; however, "Operating income" and "Other non-operating income (expense), net" changed by immaterial offsetting amounts.

Cision View original content:http://www.prnewswire.com/news-releases/air-products-reports-strong-fiscal-2018-second-quarter-results-gaap-eps-up-36-percent-and-adjusted-eps-up-20-percent-over-prior-year-300637109.html

SOURCE Air Products

Copyright 2018 PR Newswire

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