Access the Q1 earnings teleconference today at 10:00 a.m. EST by
calling (719) 325-4826 and entering passcode 8101417, or listen on
the Web at:
www.airproducts.com/Invest/financialnews/EarningsReleases.htm.
LEHIGH VALLEY, Pa., Jan. 23 /PRNewswire-FirstCall/ -- Air Products
(NYSE:APD) today reported net income of $264 million, or diluted
earnings per share (EPS) of $1.19, for its fiscal first quarter
ended December 31, 2007. Net income increased 15 percent, and
diluted EPS increased 16 percent compared with the prior year.
These results include $0.03 of discontinued operations related to a
previously announced definitive agreement to divest Air Products'
interest in its polymers joint ventures to Wacker Chemie AG and the
completed sale of the company's High Purity Process Chemicals
(HPPC) business to KMG Chemicals during the quarter. On a
continuing operations basis, net income increased 16 percent, and
diluted EPS increased 17 percent. First quarter revenues of $2,474
million were up nine percent from the prior year on higher volumes,
improved pricing across most segments, and a weaker dollar.
Operating income of $372 million was up 17 percent versus the prior
year. John McGlade, president and chief executive officer, said,
"Our fiscal year is off to a great start, thanks to the dedication
and commitment of our 22,000 employees worldwide. We delivered
double-digit earnings growth and significant margin improvement
during the quarter. This strong performance reflects the continued
emphasis we have placed on delivering profitable growth through our
global focus and relentless drive for productivity." First Quarter
Segment Performance -- Merchant Gases sales of $897 million were up
21 percent and operating income of $175 million increased 26
percent over the prior year on higher volumes, improved pricing, a
weaker dollar and productivity. Margins increased to 19.6 percent,
up 80 basis points versus the prior year. -- Tonnage Gases sales of
$791 million were up 15 percent and operating income of $111
million increased 16 percent over the prior year. Revenues
increased from higher volumes, increased natural gas costs and a
weaker dollar. The operating income increases were driven by higher
volumes, improved plant efficiencies and asset sales. These were
partially offset by planned maintenance costs for a number of plant
outages and higher bidding expenses related to the significant
growth opportunities in this segment. -- Electronics and
Performance Materials sales of $514 million were up six percent and
operating income of $66 million increased 33 percent over the prior
year on improved volumes. Electronics sales were driven by higher
specialty materials and bulk gas volumes, while Performance
Materials volume gains were driven by demand for surfactants and
specialty additives used in environmentally friendly formulations.
Margins increased significantly to 12.8 percent, a 260 basis point
improvement over the prior year, reflecting the impact of
restructuring actions in Electronics and increased sales of
formulated products in Performance Materials. -- Equipment and
Energy sales of $100 million and operating income of $9 million
decreased from the prior year, as expected. The company received
one new LNG heat exchanger order during the quarter. -- Healthcare
sales of $171 million were up 10 percent and operating income of
$14 million increased 45 percent over the prior year, driven by
volume growth and lower costs in Europe. Outlook McGlade said,
"Economic activity through the first quarter of this year is
tracking in line with our expectations. Looking forward, we expect
high bidding activity and solid demand from our customers, who rely
on our products and services to improve energy efficiency, plant
productivity, product quality and environmental performance. "We
believe the actions we have taken over the past few years have
transformed us into a high performing company that is positioned to
produce strong results in a slowing economic environment. Our focus
on growth markets and geographies, productivity and streamlined
operations, combined with a robust backlog of projects, should
allow us to consistently deliver higher growth and higher returns
in both the short and long-term. "We are now expecting 15 to 19
percent* year-on-year earnings growth and, therefore, are raising
our guidance." The EPS guidance provided at the end of fiscal 2007
was $4.80 to $5.00, which included $0.17 of income for polymers for
the full year and a $0.07 charge for pension settlements. Excluding
these items, the underlying guidance was $4.70 to $4.90. On the
same basis, the company is now forecasting a range of $4.85 to
$5.00 for the year and $1.17 to $1.21 for the fiscal second
quarter. Annual Meeting of Shareholders Air Products will host its
Annual Meeting of Shareholders on Thursday, January 24, 2008 at
2:00 p.m. EST. Access the audio Webcast at:
http://www.airproducts.com/Invest/shareholdersvcs/annualmeeting_materials.htm.
Air Products (NYSE:APD) serves customers in industrial, energy,
technology and healthcare markets worldwide with a unique portfolio
of atmospheric gases, process and specialty gases, performance
materials, and equipment and services. Founded in 1940, Air
Products has built leading positions in key growth markets such as
semiconductor materials, refinery hydrogen, home healthcare
services, natural gas liquefaction, and advanced coatings and
adhesives. The company is recognized for its innovative culture,
operational excellence and commitment to safety and the
environment. Air Products has annual revenues of $10 billion,
operations in over 40 countries, and 22,000 employees around the
globe. For more information, visit http://www.airproducts.com/.
***NOTE: This release contains "forward-looking statements" within
the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements are based on
management's reasonable expectations and assumptions as of the date
of this presentation regarding important risk factors. Actual
performance and financial results may differ materially from
projections and estimates expressed in the forward-looking
statements because of many factors, including, without limitation,
overall economic and business conditions different than those
currently anticipated; future financial and operating performance
of major customers and industries served by Air Products; the
impact of competitive products and pricing; interruption in
ordinary sources of supply of raw materials; the ability to recover
unanticipated increased energy and raw material costs from
customers; costs and outcomes of litigation or regulatory
activities; consequences of acts of war or terrorism impacting the
United States' and other markets; the effects of a pandemic or
epidemic or a natural disaster; charges related to portfolio
management and cost reduction actions; the success of implementing
cost reduction programs and achieving anticipated acquisition
synergies; the timing, impact and other uncertainties of future
acquisitions or divestitures; unanticipated contract terminations
or customer cancellation or postponement of sales; significant
fluctuations in interest rates and foreign currencies from that
currently anticipated; the impact of new or changed tax and other
legislation and regulations in jurisdictions in which Air Products
and its affiliates operate; the impact of new or changed financial
accounting standards; and the timing and rate at which tax credits
can be utilized. The company disclaims any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statements contained in this presentation 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. The
presentation of non-GAAP measures is intended to enhance the
usefulness of financial information by providing measures which the
Company's management uses internally to evaluate the Company's
baseline performance. Presented below is a reconciliation of
reported GAAP results to non-GAAP measures. CONSOLIDATED RESULTS
Continuing Operations Diluted EPS Q2 YTD 2007 GAAP $4.50 Gain on
contract settlement (.11) Global cost reduction plan .04 Pension
settlement .03 Donation/sale of cost investment (.09) Tax audit
settlements/adjustments (.17) 2007 Non-GAAP Measure $4.20 2008
Forecast GAAP $1.09-$1.13 $4.76-$4.91 Pension settlement .08 .09
2008 Forecast Non-GAAP $1.17-$1.21 $4.85-$5.00 2008 Forecast GAAP
$4.76-$4.91 2007 GAAP $4.50 % Change GAAP 6%-9% 2008 Forecast
Non-GAAP $4.85-$5.00 2007 Non-GAAP $4.20 % Change Non-GAAP 15%-19%
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries CONSOLIDATED
INCOME STATEMENTS (Unaudited) (Millions of dollars, except for
share data) Three Months Ended 31 December 2007 2006 SALES $2,473.6
$2,267.8 COSTS AND EXPENSES Cost of sales 1,788.5 1,649.7 Selling
and administrative 296.8 275.4 Research and development 30.3 32.1
Pension settlement 1.4 -- Other (income) expense, net (15.4) (6.8)
OPERATING INCOME 372.0 317.4 Equity affiliates' income 25.3 27.3
Interest expense 41.0 39.1 INCOME FROM CONTINUING OPERATIONS BEFORE
TAXES AND MINORITY INTEREST 356.3 305.6 Income tax provision 93.2
79.5 Minority interest in earnings of subsidiary companies 6.1 5.1
INCOME FROM CONTINUING OPERATIONS 257.0 221.0 INCOME FROM
DISCONTINUED OPERATIONS, net of tax 6.7 9.3 NET INCOME $263.7
$230.3 BASIC EARNINGS PER COMMON SHARE Income from continuing
operations $1.20 $1.02 Income from discontinued operations 0.03
0.04 Net Income $1.23 $1.06 DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations $1.16 $0.99 Income from
discontinued operations 0.03 0.04 Net Income $1.19 $1.03 WEIGHTED
AVERAGE OF COMMON SHARES OUTSTANDING (in millions) 214.8 216.7
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING ASSUMING DILUTION (in
millions) 222.3 223.4 DIVIDENDS DECLARED PER COMMON SHARE - Cash
$.38 $.34 Other Data from Continuing Operations: Capital
Expenditures $273.3 $234.2 Depreciation and Amortization $218.0
$192.1 AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries CONDENSED
CONSOLIDATED BALANCE SHEETS (Unaudited) (Millions of dollars) 31
December 30 September 2007 2007 ASSETS CURRENT ASSETS Cash and cash
items $96.5 $40.5 Trade receivables, less allowances for doubtful
accounts 1,667.5 1,578.5 Inventories and contracts in progress
732.2 746.2 Prepaid expenses 61.3 108.2 Other receivables and
current assets 197.8 240.1 Current assets of discontinued
operations 108.5 144.9 TOTAL CURRENT ASSETS 2,863.8 2,858.4
INVESTMENTS IN NET ASSETS OF AND ADVANCES TO EQUITY AFFILIATES
791.6 778.1 PLANT AND EQUIPMENT, at cost 14,910.2 14,600.3 Less
accumulated depreciation 8,209.9 7,996.6 PLANT AND EQUIPMENT, net
6,700.3 6,603.7 GOODWILL 1,236.6 1,199.9 INTANGIBLE ASSETS, net
282.4 276.2 OTHER NONCURRENT ASSETS 867.0 638.6 NONCURRENT ASSETS
OF DISCONTINUED OPERATIONS 272.6 304.6 TOTAL ASSETS $13,014.3
$12,659.5 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES
Payables and accrued liabilities $1,502.3 $1,550.9 Accrued income
taxes 103.6 108.6 Short-term borrowings and current portion of
long-term debt 559.8 694.4 Current liabilities of discontinued
operations 58.9 68.8 TOTAL CURRENT LIABILITIES 2,224.6 2,422.7
LONG-TERM DEBT 3,415.6 2,976.5 DEFERRED INCOME & OTHER
NONCURRENT LIABILITIES 842.7 872.0 DEFERRED INCOME TAXES 735.3
705.6 NONCURRENT LIABILITIES OF DISCONTINUED OPERATIONS 9.6 9.8
TOTAL LIABILITIES 7,227.8 6,986.6 Minority interest in subsidiary
companies 99.3 92.9 Minority interest of discontinued operations
84.2 84.4 TOTAL MINORITY INTEREST 183.5 177.3 TOTAL SHAREHOLDERS'
EQUITY 5,603.0 5,495.6 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$13,014.3 $12,659.5 AIR PRODUCTS AND CHEMICALS, INC. and
Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Millions of dollars) Three Months Ended 31 December 2007 2006
OPERATING ACTIVITIES FROM CONTINUING OPERATIONS Net Income $263.7
$230.3 Income from discontinued operations, net of tax (6.7) (9.3)
Income from Continuing Operations 257.0 221.0 Adjustments to
reconcile income to cash provided by operating activities:
Depreciation and amortization 218.0 192.1 Deferred income taxes
20.8 15.3 Undistributed earnings of unconsolidated affiliates (7.2)
(13.8) Gain on sale of assets and investments (6.2) (0.3)
Share-based compensation 17.1 16.6 Noncurrent capital lease
receivables (47.7) (47.0) Other (30.1) (21.1) Working capital
changes that provided (used) cash, excluding effects of
acquisitions and divestitures: Trade receivables (77.4) (36.6)
Inventories (27.3) (16.0) Contracts in progress 47.0 52.5 Prepaid
expenses 47.0 6.1 Payables and accrued liabilities (85.9) (224.9)
Other 42.9 6.5 CASH PROVIDED BY OPERATING ACTIVITIES (a) 368.0
150.4 INVESTING ACTIVITIES FROM CONTINUING OPERATIONS Additions to
plant and equipment (b) (271.2) (232.1) Acquisitions, less cash
acquired (1.4) -- Investment in and advances to unconsolidated
affiliates -- (1.5) Proceeds from sale of assets and investments
9.0 12.5 Proceeds from insurance settlements -- 14.9 Change in
restricted cash (135.7) -- Other (.8) (.4) CASH USED FOR INVESTING
ACTIVITIES (400.1) (206.6) FINANCING ACTIVITIES FROM CONTINUING
OPERATIONS Long-term debt proceeds 160.5 53.8 Payments on long-term
debt (41.6) (36.2) Net increase in commercial paper and short-term
borrowings 120.1 226.2 Dividends paid to shareholders (81.9) (73.9)
Purchase of Treasury Stock (189.7) (133.5) Proceeds from stock
option exercises 33.0 37.0 Excess tax benefit from share-based
compensation/other 21.5 6.7 CASH PROVIDED BY FINANCING ACTIVITIES
21.9 80.1 AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) (Unaudited)
(Millions of dollars) Three Months Ended 31 December 2007 2006
DISCONTINUED OPERATIONS Cash (used for) provided by operating
activities (1.3) 9.0 Cash provided by (used for) investing
activities 65.8 (6.2) Cash used for financing activities -- -- CASH
PROVIDED BY DISCONTINUED OPERATIONS 64.5 2.8 Effect of Exchange
Rate Changes on Cash 1.7 (.4) Increase in Cash and Cash Items 56.0
26.3 Cash and Cash Items - Beginning of Year 40.5 31.0 Cash and
Cash Items - End of Period $96.5 $57.3 (a) Pension plan
contributions in 2008 and 2007 were $69.8 and $239.9, respectively.
(b) Excludes capital lease additions in 2008 and 2007 of $.7 and
$.6, respectively. AIR PRODUCTS AND CHEMICALS, INC. and
Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Millions of dollars) 1. NEW ACCOUNTING STANDARD The Company
adopted Financial Accounting Standards Board (FASB) Interpretation
No. 48, "Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109," (FIN No. 48) on 1
October 2007. Upon adoption, the Company recognized a $25.5
increase to its liability for uncertain tax positions. This
increase was recorded as an adjustment to beginning retained
earnings for $13.7 and goodwill for $11.8. 2. DISCONTINUED
OPERATIONS The High Purity Process Chemicals (HPPC) business and
the Polymer Emulsions business have been accounted for as
discontinued operations. The results of operations and cash flows
of these businesses have been removed from the results of
continuing operations for all periods presented. The balance sheet
items of discontinued operations have been reclassified and are
segregated in the consolidated balance sheets. HPPC Business In
September 2007, the Company's Board of Directors approved the sale
of its HPPC business, which had previously been reported as part of
the Electronics and Performance Materials operating segment. The
Company's HPPC business consisted of the development, manufacture,
and supply of high-purity process chemicals used in the fabrication
of integrated circuits in the United States and Europe. The Company
wrote down the assets of the HPPC business to net realizable value
as of 30 September 2007, resulting in a loss of $15.3 ($9.3
after-tax, or $.04 per share) in the fourth quarter of 2007. In
October 2007, the Company executed an agreement of sale with KMG
Chemicals, Inc. The sale closed on 31 December 2007 for cash
proceeds of $69.3 and included manufacturing facilities in the
United States and Europe. Certain receivables and inventories will
be sold to KMG Chemicals, Inc. subsequent to 31 December 2007. In
the first quarter of 2008, this business generated sales of $22.9
and income, net of tax, of $.2. Also, the Company recorded an
additional loss of $.5 ($.3 after-tax) on the sale of the business.
Polymer Emulsions Business The Company announced it was exploring
the sale of its Polymer Emulsions business in 2006 as part of the
Company's ongoing portfolio management activities. In November
2007, the Company's Board of Directors granted the Company the
authority to sell this business to its partner based on achieving
certain contractual terms and conditions. On 11 December 2007, the
Company announced it had signed a definitive agreement to sell its
interest in its vinyl acetate ethylene (VAE) polymers joint
ventures to Wacker Chemie AG, its long-time joint venture partner.
As part of the agreement, the Company will receive Wacker Chemie
AG's interest in the Elkton, Md., and Piedmont, S.C., production
facilities and their related businesses plus cash considerations of
$265. The sale, which is subject to regulatory approvals and
customary closing conditions, is expected to close in the second
quarter of fiscal year 2008. The Company anticipates a gain on the
sale of the Polymer Emulsions business in the range of $65 to $85
($42 to $55 after-tax). In the first quarter of 2008, this business
generated sales of $151.2 and income, net of tax, of $6.8. The sale
consists of the global VAE polymers operations including production
facilities located in Calvert City, Ky.; South Brunswick, N.J.;
Cologne, Germany; and Ulsan, Korea; and commercial and research
capabilities in Allentown, Pa., and Burghausen, Germany. The
business produces VAE for use in adhesives, paints and coatings,
paper and carpet applications. Upon completion of the sale, the
Company will assume full ownership of the Elkton and Piedmont
plants and related North American atmospheric emulsions and global
pressure sensitive adhesives business. The Company intends to sell
these businesses. 3. PENSION SETTLEMENT A number of senior managers
and others who were eligible for supplemental pension plan benefits
retired in fiscal year 2007. The Company's supplemental pension
plan provides for a lump sum benefit payment option at the time of
retirement, or for corporate officers six months after the
participant's retirement date. If payments exceed the sum of
service and interest cost components of net periodic pension cost
of the plan for the fiscal year, settlement accounting is triggered
under pension accounting rules. However, a settlement loss may not
be recognized until the time the pension obligation is settled. The
Company recognized $10.3 for settlement losses in the fourth
quarter of 2007 and an additional $1.4 in the first quarter of
2008, based on cash payments made. The Company expects to recognize
an additional $25 to $30 for settlement losses in 2008, primarily
in the second quarter. This additional charge pertains to 2007 and
announced 2008 retirements. The actual amount of the settlement
loss will be based upon current pension assumptions (e.g. discount
rate) at the time cash payments are made to settle the obligations.
4. SHARE REPURCHASE PROGRAM On 20 September 2007, the Board of
Directors authorized the repurchase of up to $1,000 of the
Company's outstanding common stock. This action was in addition to
an existing $1,500 share repurchase authorization which was
announced in March 2006. As of 30 September 2007, the Company had
purchased 5.0 million of its outstanding shares at a cost of
$1,063.4 under these two authorizations. During the first quarter
of fiscal year 2008, the Company purchased 2.0 million of its
outstanding shares at a cost of $189.8. The Company will continue
to purchase shares under these authorizations at its discretion
while maintaining sufficient funds for investing in its businesses
and growth opportunities. 5. BUSINESS SEGMENTS Previously, the
Company reported results for the Chemicals segment, which consisted
of the Polymer Emulsions business and the Polyurethane
Intermediates (PUI) business. Beginning with the first quarter of
2008, the Polymer Emulsions business has been accounted for as
discontinued operations as discussed in Note 2. Also beginning with
the first quarter of 2008, the PUI business is reported as part of
the Tonnage Gases segment and prior period information has been
restated to reflect this business reorganization. AIR PRODUCTS AND
CHEMICALS, INC. and Subsidiaries SUMMARY BY BUSINESS SEGMENTS
(Unaudited) (Millions of dollars) Three Months Ended 31 December
2007 2006 Revenues from external customers Merchant Gases $897.0
$740.0 Tonnage Gases 791.1 689.5 Electronics and Performance
Materials 514.3 486.9 Equipment and Energy 100.3 195.6 Healthcare
170.9 155.8 Segment and Consolidated Totals $2,473.6 $2,267.8
Operating income Merchant Gases $175.4 $139.2 Tonnage Gases 111.1
95.4 Electronics and Performance Materials 66.0 49.8 Equipment and
Energy 9.3 26.8 Healthcare 13.6 9.4 Segment Totals 375.4 320.6
Other (3.4) (3.2) Consolidated Totals $372.0 $317.4 (Millions of
dollars) 31 December 30 September 2007 2007 Identifiable assets (a)
Merchant Gases $4,175.6 $3,984.4 Tonnage Gases 3,391.4 3,328.4
Electronics and Performance Materials 2,425.0 2,435.3 Equipment and
Energy 376.2 362.6 Healthcare 938.1 918.9 Segment Totals 11,306.3
11,029.6 Other 535.3 402.3 Discontinued operations 305.1 381.6
Consolidated Totals $12,146.7 $11,813.5 (a) Identifiable assets are
equal to total assets less investments in and advances to equity
affiliates. DATASOURCE: Air Products CONTACT: Media, Katie
McDonald, +1-610-481-3673, , or Investors, Nelson Squires,
+1-610-481-7461, , both of Air Products Web site:
http://www.airproducts.com/
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