LEHIGH VALLEY, Pa.,
April 21, 2011 /PRNewswire/ --
Access the Q2 earnings teleconference scheduled for
10:00 a.m. Eastern Time on
April 21 by calling
719-457-2607 and entering passcode 9627835, or
listen on the Web at:
www.airproducts.com/Invest/financialnews/Earnings_Releases/Teleconference.htm.
Highlights
- Sales of $2.5 billion, up 11%
versus prior year
- Operating margin hits 17% target, up 80 basis points versus
prior year*
- Raised dividend 18%; Completed $350
million share repurchase
- Full year guidance increased to $5.65 to
$5.75 per share
Air Products (NYSE: APD) today reported net income of
$309 million, or diluted earnings per
share (EPS) of $1.41, for its fiscal
second quarter ended March 31, 2011.
This result excludes a net after-tax cost of $4 million, or $0.02 per share, associated with the now expired
tender offer for the outstanding shares of Airgas, Inc.
The discussion of second quarter results and guidance in this
release is based on non-GAAP comparisons. A reconciliation can be
found at the end of this release.*
Second quarter revenues of $2,501
million grew 11 percent versus prior year, primarily on
higher volumes in the Electronics and Performance Materials,
Merchant Gases and Tonnage Gases segments. Sequential sales were up
five percent. Operating income of $425
million improved 17 percent versus prior year and five
percent sequentially on increased volumes. Operating margin
improved 80 basis points to 17 percent.
"For the quarter, we had strong growth with double-digit
increases in both sales and earnings. This performance, along with
our 18 percent dividend increase and $350
million share repurchase, reflects the strength of our
business and our belief that shareholders should benefit directly
from the improved operating performance of their company," said
John McGlade, chairman, president
and chief executive officer.
Second Quarter Segment Performance
- Merchant Gases sales of $1,013
million increased 10 percent versus the prior year on
improved volumes, especially in the Asia region. Operating income of $185 million rose four percent from the prior
year with increased volumes being offset by higher operating,
maintenance and distribution costs, and lower pricing in our
European healthcare business.
- Tonnage Gases sales of $799
million increased six percent. Volumes were up 10 percent,
primarily on improved hydrogen volumes to refining customers.
Operating income of $121 million rose
13 percent from the prior year on higher new plant volumes and
increased operating efficiencies.
- Electronics and Performance Materials sales of
$576 million increased 28 percent
driven by strong volumes and higher pricing. Record operating
income of $92 million was up 61
percent on significantly improved volumes. Operating margin of 15.9
percent was up 330 basis points versus prior year and 280 basis
points sequentially.
- Equipment and Energy sales of $114 million were down five percent on lower air
separation unit sales. Operating income of $23 million increased 24 percent from the prior
year on higher LNG activity.
Outlook
Looking ahead, McGlade said, "We are committed to improving our
operating performance by driving increased productivity to the
bottom line. This, along with continued growth in our key markets
will allow us to build on this quarter's strong results."
He said, "Looking at the second half of our fiscal year, we
expect to deliver on our goals of double digit earnings growth,
improved return on capital and a 17 percent margin. We are also
raising our full year guidance to $5.65 to
$5.75 per share."
Air Products now expects third quarter EPS to be between
$1.42 and $1.47 per share.
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. In fiscal 2010, Air Products had revenues of
$9 billion, operations in over 40
countries, and 18,300 employees around the globe. 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 earnings guidance,
projections and targets. These forward-looking statements are based
on management's reasonable expectations and assumptions as of the
date this release is issued 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 not anticipated by management,
including, without limitation, slowing of global economic recovery;
renewed deterioration in economic and business conditions;
weakening demand for the Company's products; future financial and
operating performance of major customers and industries served by
the Company; unanticipated contract terminations or customer
cancellations or postponement of projects and sales; the success of
commercial negotiations; asset impairments due to economic
conditions or specific product or customer events; 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; successful
development and market acceptance of new products and applications,
the ability to attract, hire and retain qualified personnel in all
regions of the world where the Company operates; consequences of
acts of war or terrorism impacting the
United States and other markets; the effects of a natural
disaster; the success of cost reduction and productivity programs
and achieving anticipated acquisition synergies; the timing,
impact, and other uncertainties of future acquisitions or
divestitures; significant fluctuations in interest rates and
foreign currencies from that currently anticipated; the continued
availability of capital funding sources in all of the Company's
foreign operations; the impact of environmental, healthcare, tax or
other legislation and regulations in jurisdictions in which the
Company and its affiliates operate; the impact of new or changed
financial accounting guidance; the timing and rate at which tax
credits can be utilized and other risk factors described in the
Company's Form 10K for its fiscal year ended September 30, 2010. The Company disclaims any
obligation or undertaking to disseminate any updates or revisions
to any forward-looking statements contained in this document 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
our management uses internally to evaluate our baseline performance
on a comparable basis. Presented below are reconciliations of
the reported GAAP results to the non-GAAP measures.
CONSOLIDATED
RESULTS
|
|
|
Q2
|
|
2011 Q2 vs. 2010
Q2
|
Operating
Income
|
Operating
Margin
|
Net
Income
|
Diluted
EPS
|
|
2011 GAAP
|
$419.5
|
16.8%
|
$304.3
|
$1.39
|
|
2010 GAAP
|
340.6
|
15.1%
|
252.0
|
1.16
|
|
Change GAAP
|
23%
|
170bp
|
21%
|
20%
|
|
|
|
|
|
|
|
2011 GAAP
|
$419.5
|
16.8%
|
$304.3
|
$1.39
|
|
Net loss on
Airgas transaction (Tax impact $.6)
|
5.0
|
0.2%
|
4.4
|
.02
|
|
2011 Non-GAAP Measure
|
$424.5
|
17.0%
|
$308.7
|
$1.41
|
|
|
|
|
|
|
|
2010 GAAP
|
$340.6
|
15.1%
|
$252.0
|
$1.16
|
|
Net loss on
Airgas transaction
(Tax impact
$8.8)
|
23.4
|
1.1%
|
14.6
|
.07
|
|
2010 Non-GAAP Measure
|
$364.0
|
16.2%
|
$266.6
|
$1.23
|
|
|
|
|
|
|
|
Change Non-GAAP
Measure
|
17%
|
80bp
|
16%
|
15%
|
|
|
|
|
|
|
|
2011 Q2 vs. 2011
Q1
|
Operating
Income
|
|
|
|
|
2011 Q2 GAAP
|
$419.5
|
|
|
|
|
2011 Q1 GAAP
|
$360.6
|
|
|
|
|
Change GAAP
|
16%
|
|
|
|
|
|
|
|
|
|
|
2011 Q2 Non-GAAP
Measure
|
$424.5
|
|
|
|
|
|
|
|
|
|
|
2011 Q1 GAAP
|
$360.6
|
|
|
|
|
Net loss on Airgas
transaction
|
43.5
|
|
|
|
|
2011 Q1 Non-GAAP
Measure
|
$404.1
|
|
|
|
|
|
|
|
|
|
|
Change Non-GAAP
Measure
|
5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q3
2011
|
Full year
2011
|
|
2011 Guidance (a)
|
|
|
$1.42-$1.47
|
$5.65-$5.75
|
|
(a) Guidance excludes the
impact of net loss on Airgas transaction
|
|
|
|
|
|
|
AIR PRODUCTS
AND CHEMICALS, INC. and Subsidiaries
|
|
CONSOLIDATED
INCOME STATEMENTS
|
|
(Unaudited)
|
|
|
|
|
Three
Months
Ended
31 March
|
Six
Months
Ended
31 March
|
|
(Millions of dollars, except for
share data)
|
2011
|
2010
|
2011
|
2010
|
|
Sales
|
$2,501.3
|
$2,249.0
|
$4,893.0
|
$4,422.5
|
|
Cost of sales
|
1,802.5
|
1,628.7
|
3,523.0
|
3,197.3
|
|
Selling and
administrative
|
259.4
|
240.4
|
504.0
|
484.5
|
|
Research and
development
|
27.9
|
26.3
|
57.1
|
53.5
|
|
Net loss on Airgas
transaction
|
5.0
|
23.4
|
48.5
|
23.4
|
|
Other income, net
|
13.0
|
10.4
|
19.7
|
21.8
|
|
Operating Income
|
419.5
|
340.6
|
780.1
|
685.6
|
|
Equity affiliates'
income
|
31.7
|
32.2
|
59.5
|
59.1
|
|
Interest expense
|
29.4
|
29.5
|
60.4
|
61.1
|
|
Income before
Taxes
|
421.8
|
343.3
|
779.2
|
683.6
|
|
Income tax
provision
|
110.3
|
84.9
|
191.8
|
168.4
|
|
Net Income
|
311.5
|
258.4
|
587.4
|
515.2
|
|
Less: Net
Income Attributable to Noncontrolling Interests
|
7.2
|
6.4
|
14.5
|
11.4
|
|
Net Income Attributable to Air
Products
|
$304.3
|
$252.0
|
$572.9
|
$503.8
|
|
|
|
|
|
|
|
Basic
Earnings per Common Share Attributable to Air
Products
|
$1.42
|
$1.19
|
$2.68
|
$2.38
|
|
Diluted
Earnings per Common Share Attributable to Air
Products
|
$1.39
|
$1.16
|
$2.62
|
$2.32
|
|
Weighted Average of Common
Shares Outstanding (in millions)
|
213.8
|
212.1
|
214.0
|
211.9
|
|
Weighted Average of Common
Shares Outstanding Assuming Dilution (in
millions)
|
218.8
|
216.9
|
219.0
|
217.0
|
|
Dividends
Declared per Common Share – Cash
|
$.58
|
$.49
|
$1.07
|
$.94
|
|
Other Data from
Operations:
|
|
|
|
|
|
Depreciation and
amortization
|
$217.5
|
$217.3
|
$435.1
|
$434.4
|
|
Capital expenditures on a
non-GAAP Basis
|
383.9
|
354.0
|
752.9
|
699.2
|
|
(see reconciliation at end of
announcement)
|
|
|
|
|
|
|
AIR PRODUCTS
AND CHEMICALS, INC. and Subsidiaries
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
(Unaudited)
|
|
|
|
(Millions of dollars)
|
31
March
2011
|
30
September
2010
|
|
Assets
|
|
|
|
Current Assets
|
|
|
|
Cash and cash items
|
$270.3
|
$374.3
|
|
Trade receivables, less
allowances for doubtful accounts
|
1,606.1
|
1,481.9
|
|
Inventories
|
597.2
|
571.6
|
|
Contracts in progress, less
progress billings
|
123.0
|
163.6
|
|
Prepaid expenses
|
112.6
|
70.3
|
|
Other receivables and current
assets
|
267.3
|
372.1
|
|
Total Current
Assets
|
2,976.5
|
3,033.8
|
|
Investment
in Net Assets of and Advances to Equity Affiliates
|
979.3
|
912.8
|
|
Plant and Equipment,
at cost
|
17,119.8
|
16,309.7
|
|
Less: Accumulated
depreciation
|
9,758.0
|
9,258.4
|
|
Plant and
Equipment, net
|
7,361.8
|
7,051.3
|
|
Goodwill
|
945.6
|
914.6
|
|
Intangible Assets,
net
|
288.7
|
285.7
|
|
Noncurrent Capital Lease
Receivables
|
882.4
|
770.4
|
|
Other Noncurrent
Assets
|
386.4
|
537.3
|
|
Total Assets
|
$13,820.7
|
$13,505.9
|
|
|
|
|
|
Liabilities and
Equity
|
|
|
|
Current
Liabilities
|
|
|
|
Payables and accrued
liabilities
|
$1,460.8
|
$1,702.0
|
|
Accrued income taxes
|
66.4
|
73.6
|
|
Short-term
borrowings
|
662.1
|
286.0
|
|
Current
portion of long-term debt
|
22.0
|
182.5
|
|
Total
Current Liabilities
|
2,211.3
|
2,244.1
|
|
Long-Term
Debt
|
3,711.8
|
3,659.8
|
|
Other
Noncurrent Liabilities
|
1,492.2
|
1,569.3
|
|
Deferred
Income Taxes
|
406.2
|
335.1
|
|
Total
Liabilities
|
7,821.5
|
7,808.3
|
|
Total Air
Products Shareholders' Equity
|
5,825.2
|
5,546.9
|
|
Noncontrolling
Interests
|
174.0
|
150.7
|
|
Total
Equity
|
5,999.2
|
5,697.6
|
|
Total
Liabilities and Equity
|
$13,820.7
|
$ 13,505.9
|
|
|
|
|
|
|
AIR PRODUCTS
AND CHEMICALS, INC. and Subsidiaries
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
|
Six Months
Ended
31 March
|
|
(Millions of dollars)
|
2011
|
2010
|
|
Operating
Activities
|
|
|
|
Net Income
|
$587.4
|
$515.2
|
|
Less: Net income
attributable to noncontrolling interests
|
14.5
|
11.4
|
|
Net income attributable to
Air Products
|
$572.9
|
$503.8
|
|
Adjustments to reconcile
income to cash provided by operating activities:
|
|
|
|
Depreciation and
amortization
|
435.1
|
434.4
|
|
Deferred income
taxes
|
62.1
|
133.2
|
|
Undistributed earnings of
unconsolidated affiliates
|
(7.7)
|
(29.6)
|
|
Gain on sale of assets and
investments
|
(6.1)
|
(1.4)
|
|
Share-based
compensation
|
21.9
|
22.7
|
|
Noncurrent capital lease
receivables
|
(98.4)
|
(71.0)
|
|
Net loss on Airgas
transaction
|
48.5
|
23.4
|
|
Payment of
acquisition-related costs
|
(153.8)
|
(2.4)
|
|
Other
adjustments
|
51.7
|
39.0
|
|
Working
capital changes that provided (used) cash, excluding effects of
acquisitions and divestitures:
|
|
|
|
Trade
receivables
|
(82.0)
|
(129.9)
|
|
Inventories
|
(15.2)
|
(3.9)
|
|
Contracts in
progress
|
42.6
|
17.3
|
|
Other
receivables
|
11.0
|
(10.9)
|
|
Payables and accrued
liabilities
|
(233.9)
|
(332.4)
|
|
Other working
capital
|
(22.0)
|
(49.6)
|
|
Cash Provided by Operating
Activities
|
626.7
|
542.7
|
|
Investing
Activities
|
|
|
|
Additions to plant and
equipment
|
(612.7)
|
(516.9)
|
|
Acquisitions, less cash
acquired
|
—
|
(34.9)
|
|
Investment in and advances
to unconsolidated affiliates
|
(24.2)
|
(4.5)
|
|
Investment in Airgas
stock
|
—
|
(69.6)
|
|
Proceeds from sale of
Airgas stock
|
94.7
|
—
|
|
Proceeds from sale of
assets and investments
|
51.3
|
22.0
|
|
Change in restricted
cash
|
10.4
|
25.2
|
|
Cash Used
for Investing Activities
|
(480.5)
|
(578.7)
|
|
Financing
Activities
|
|
|
|
Long-term debt
proceeds
|
43.0
|
67.4
|
|
Payments on long-term
debt
|
(172.1)
|
(83.0)
|
|
Net increase (decrease) in
commercial paper and short-term borrowings
|
341.3
|
(55.6)
|
|
Dividends paid to
shareholders
|
(210.1)
|
(190.5)
|
|
Purchase of treasury
stock
|
(350.0)
|
—
|
|
Proceeds from stock option
exercises
|
72.6
|
35.4
|
|
Excess tax benefit from
share-based compensation
|
18.6
|
9.7
|
|
Other financing
activities
|
.8
|
(2.5)
|
|
Cash Used for Financing
Activities
|
(255.9)
|
(219.1)
|
|
|
|
|
|
|
AIR PRODUCTS
AND CHEMICALS, INC. and Subsidiaries
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS (CONTINUED)
|
|
(Unaudited)
|
|
|
|
|
Six Months
Ended
31 March
|
|
(Millions of dollars)
|
2011
|
2010
|
|
Effect of Exchange Rate Changes
on Cash
|
5.7
|
(2.2)
|
|
Decrease in Cash and Cash
Items
|
(104.0)
|
(257.3)
|
|
Cash and Cash Items – Beginning
of Year
|
374.3
|
488.2
|
|
Cash and Cash Items – End of
Period
|
$270.3
|
$230.9
|
|
|
|
|
|
Supplemental Cash Flow
Information
|
|
|
|
Pension plan
contributions
|
$221.4
|
$337.7
|
|
Significant noncash
transaction:
|
|
|
|
Short-term borrowings
associated with SAGA acquisition
|
—
|
60.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AIR PRODUCTS
AND CHEMICALS, INC. and Subsidiaries
|
|
SUMMARY BY
BUSINESS SEGMENTS
|
|
(Unaudited)
|
|
|
|
|
|
|
Three Months
Ended
31 March
|
Six Months
Ended
31 March
|
|
(Millions of dollars)
|
2011
|
2010
|
2011
|
2010
|
|
Revenues from External
Customers
|
|
|
|
|
|
Merchant Gases
|
$1,012.7
|
$921.7
|
$2,000.5
|
$1,855.3
|
|
Tonnage Gases
|
799.2
|
756.7
|
1,565.2
|
1,454.6
|
|
Electronics and
Performance Materials
|
575.9
|
451.2
|
1,101.9
|
884.6
|
|
Equipment and
Energy
|
113.5
|
119.4
|
225.4
|
228.0
|
|
Segment and Consolidated
Totals
|
$2,501.3
|
$2,249.0
|
$4,893.0
|
$4,422.5
|
|
|
|
|
|
|
|
Operating Income
|
|
|
|
|
|
Merchant Gases
|
$185.1
|
$178.1
|
$385.5
|
$367.7
|
|
Tonnage Gases
|
120.9
|
107.2
|
236.5
|
207.4
|
|
Electronics and
Performance Materials
|
91.6
|
57.0
|
160.6
|
105.4
|
|
Equipment and
Energy
|
22.5
|
18.2
|
42.7
|
26.0
|
|
Segment Totals
|
$420.1
|
$360.5
|
$825.3
|
$706.5
|
|
Net loss on Airgas
transaction
|
(5.0)
|
(23.4)
|
(48.5)
|
(23.4)
|
|
Other
|
4.4
|
3.5
|
3.3
|
2.5
|
|
Consolidated
Totals
|
$419.5
|
$340.6
|
$780.1
|
$685.6
|
|
|
|
|
|
|
|
(Millions of dollars)
|
|
|
31 March
2011
|
30 September
2010
|
|
|
|
|
Identifiable Assets
(a)
|
|
|
|
|
|
Merchant Gases
|
|
|
$5,241.9
|
$5,075.3
|
|
Tonnage Gases
|
|
|
4,186.3
|
3,876.4
|
|
Electronics and
Performance Materials
|
|
|
2,382.7
|
2,275.8
|
|
Equipment and
Energy
|
|
|
315.7
|
341.3
|
|
Segment Totals
|
|
|
$12,126.6
|
$11,568.8
|
|
Other
|
|
|
714.8
|
1,024.3
|
|
Consolidated
Totals
|
|
|
$12,841.4
|
$12,593.1
|
|
|
|
|
|
|
|
(a) Identifiable assets are
equal to total assets less investment in net assets and
advances to equity
affiliates.
|
|
|
|
|
|
|
AIR PRODUCTS AND CHEMICALS, INC. and
Subsidiaries
|
|
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
|
|
(Unaudited)
|
|
|
|
(Millions of dollars, unless
otherwise indicated)
|
|
|
AIRGAS TRANSACTION
In February 2010, we commenced a
tender offer to acquire all the outstanding common stock of Airgas,
Inc. (Airgas), including the associated preferred stock purchase
rights, for $60.00 per share in cash,
less any required withholding tax. The offer was subject to certain
terms and conditions set forth in the Offer to Purchase dated
11 February 2010, as amended,
including Airgas' redemption of the preferred stock purchase rights
or such rights otherwise being inapplicable to our purchase of
Airgas stock. Airgas, a Delaware
company, is the largest U.S. distributor of industrial, medical,
and specialty gases, and hard goods. On 9
December 2010, we increased the value of our tender offer to
$70.00 per share. At this price, the
total value of the transaction would have been approximately
$7.8 billion, including $6.1 billion of equity and $1.7 billion of assumed debt. Based on a decision
by the Delaware Chancery Court to
uphold the decision of Airgas' board of directors to retain the
preferred stock purchase rights, we withdrew our offer on
15 February 2011.
In connection with the tender offer, we had secured committed
financing in the form of a $6.7
billion term loan credit facility. On 3 February 2011, we entered into an amended and
restated credit agreement providing for an amended $6.7 billion term loan credit facility with a
maturity date of 4 June 2011. No
additional underwriting fees were incurred in relation to the
amended agreement. On 16 February
2011, in connection with the termination of the offer to
purchase all outstanding shares of common stock of Airgas, the
credit facility was terminated. No early termination penalties were
incurred and all fees previously accrued and due under the credit
facility were paid as of the date of termination.
Prior to the tender offer, we purchased approximately 1.5
million shares of Airgas stock for a total cost of $69.6. This amount was recorded as an
available-for-sale investment within other noncurrent assets on the
consolidated balance sheet. On 16 February
2011, we sold the 1.5 million shares of Airgas stock for
total proceeds of $94.7 and
recognized a gain of $25.1
($15.9 after-tax, or $.07 per share).
For the three and six months ended 31
March 2011, a net loss of $5.0
($4.4 after-tax, or $.02 per share) and $48.5 ($31.6
after-tax, or $.14 per share),
respectively, was recognized related to this transaction. These
amounts are reflected separately on the consolidated income
statement within "Net loss on Airgas transaction" and include
amortization of the fees related to the term loan credit facility,
the gain on the sale of Airgas stock and other acquisition-related
costs. For the six months ended 31 March
2011 and 2010, cash payments for the acquisition-related
costs were $153.8 and $2.4, respectively. These payments are classified
as operating activities on the consolidated statements of cash
flows.
RECONCILIATION
|
|
NON-GAAP MEASURE
|
|
|
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 within cash provided by operating
activities. The presentation of this non-GAAP measure is intended
to enhance the usefulness of information by providing a measure
which our management uses internally to evaluate and manage our
expenditures.
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
|
|
(Millions of dollars)
|
2011
|
2010
|
2011
|
2010
|
|
Capital expenditures – GAAP
basis
|
$330.0
|
$315.2
|
$636.9
|
$616.9
|
|
Capital lease
expenditures
|
53.9
|
38.8
|
116.0
|
82.3
|
|
Capital expenditures – non-GAAP
basis
|
$383.9
|
$354.0
|
$752.9
|
$699.2
|
|
|
|
|
|
|
|
|
SOURCE Air Products