LEHIGH VALLEY, Pa.,
July 23, 2020 /PRNewswire/ --
Q3 FY20 (comparisons versus prior year):
- GAAP EPS of $2.01, down nine
percent, including an estimated $0.35-$0.40 negative impact from COVID-19; GAAP
net income of $457 million, down nine
percent; and GAAP net income margin of 22.1 percent, down 40 basis
points
- Adjusted EPS* of $2.01, down
seven percent, including an estimated $0.35-$0.40
negative impact from COVID-19; adjusted EBITDA margin* of 42.7
percent, up 260 basis points
Q3 FY20 Highlights
- Continued execution of the Company's strategy amid COVID-19,
providing financial security for employees, reliable supply of
critical products and services to customers, and winning new
opportunities for world-scale projects
- Announced ground-breaking $7
billion NEOM project — including ~$3.7 billion total investment by Air Products —
that will lead the way in transforming the world's use of energy
and position Air Products as the leading supplier of carbon-free
hydrogen for buses and trucks by 2025
- Announced ~$2 billion investment
to build, own and operate a world-scale coal-to-methanol production
facility in Indonesia by 2024, providing methanol to
Bakrie and Ithaca under a long-term onsite business model
arrangement
- Operating from a continued position of financial strength,
executed successful US$3.8 billion
and €1.0 billion (~US$5
billion) debt offerings, supporting significant
opportunities for investment in high-return industrial gas projects
and repayment of maturing debt
#Earnings per share is calculated and
presented on a diluted basis from continuing operations and
attributable to Air Products.
*Certain results in this release, including in the highlights
above, include references to non-GAAP financial measures on both a
consolidated, continuing operations basis and a segment basis.
Additional information regarding these measures and a
reconciliation of GAAP to non-GAAP historical results can be found
below.
For its fiscal 2020 third quarter, Air Products (NYSE:APD) today
reported GAAP EPS from continuing operations of $2.01, down nine percent, which includes an
estimated $0.35-$0.40 per share
negative impact from COVID-19. GAAP net income of $457 million was down nine percent, primarily
reflecting the negative impacts from COVID-19 and a prior year gain
on an exchange of equity affiliates, partially offset by pricing
actions, LNG project execution, and a prior year charge for cost
reduction actions. GAAP net income margin of 22.1 percent was down
40 basis points, also reflecting favorable energy pass-through.
For the quarter, on a non-GAAP basis, adjusted EPS from
continuing operations of $2.01 was
down seven percent versus prior year, including the estimated
$0.35-$0.40 per share negative impact from
COVID-19. Adjusted EBITDA of $881
million was down one percent, reflecting business stability,
pricing actions and LNG project execution, with adjusted EBITDA
margin of 42.7 percent up 260 basis points, also reflecting
favorable energy pass-through.
Third quarter sales of $2.1
billion decreased seven percent from the prior year due to
four percent lower energy pass-through, three percent lower
volumes, and two percent unfavorable currency, which were partially
offset by two percent higher pricing. The estimated COVID-19 impact
on sales was nine percent, primarily due to volume impacts in the
Americas and Europe merchant
businesses. The impact was partially offset by positive volume
contributions from new plants and LNG activities.
Commenting on the results, Air Products' Chairman, President and
Chief Executive Officer Seifi
Ghasemi said, "As the world continues to navigate
challenging conditions related to COVID-19, I am very proud of the
Air Products team who have demonstrated their true character and
commitment in keeping our plants running and our customers supplied
with essential products. Meanwhile our onsite business—which
represents more than half of our sales—remains stable, and we
continued to execute on our growth strategy, announcing two new
megaprojects in Saudi Arabia and
Indonesia which together represent
planned Air Products investment of approximately $5.7 billion."
Fiscal Third Quarter Results by Business
Segment (comparisons versus prior year)
- Industrial Gases - Americas sales of $850 million decreased 11 percent from the prior
year. This was due to six percent lower energy pass-through; five
percent lower volumes, mainly due to lower merchant demand impacts
from COVID-19; and two percent unfavorable currency, which
were partially offset by two percent higher pricing. Operating
income of $248 million decreased five
percent, primarily due to the lower volumes. Operating margin of
29.2 percent increased 180 basis points, with about a 150-basis
point improvement due to lower energy cost pass-through. Adjusted
EBITDA of $411 million was flat.
Adjusted EBITDA margin of 48.4 percent increased 550 basis points,
with about a 250-basis point improvement due to lower energy cost
pass-through.
- Industrial Gases - EMEA sales of $430 million decreased 13 percent from the
prior year. This was due to seven percent lower volumes, primarily
due to lower merchant demand impacts from COVID-19; six percent
lower energy pass-through; and three percent unfavorable currency,
which were partially offset by three percent higher pricing.
Operating income of $105 million
decreased 15 percent, primarily due to the lower volumes.
Operating margin of 24.5 percent decreased 40 basis points, with
about a 120-basis point improvement due to lower energy cost
pass-through. Adjusted EBITDA of $170
million decreased 11 percent, primarily due to the lower
volumes. Adjusted EBITDA margin of 39.5 percent increased 110
basis points, with about a 200-basis point improvement due to lower
energy pass-through.
- Industrial Gases - Asia sales of $652 million decreased four percent, driven in
part by three percent unfavorable currency. Volumes decreased three
percent, as COVID-19 impacts and planned maintenance outages were
only partially offset by new plants that were brought onstream.
Pricing increased two percent, with positive pricing across most
major product lines. Operating income of $222 million decreased four percent, and
operating margin of 34.0 percent decreased 10 basis points.
Adjusted EBITDA of $327 million
decreased two percent, and adjusted EBITDA margin of 50.1 percent
increased 90 basis points.
Ghasemi added, "Significant uncertainty in the global economy
remains, and the COVID-19 recovery is showing mixed results around
the world. Despite these challenges, we have shown that with our
stable business model, financial position, significant growth
opportunities and the total commitment of our people, we can and
will continue creating value for shareholders over the long term,
growing our dividend and investing in world-scale,
sustainability-focused projects."
New Accounting Guidance
Effective October 1, 2019, Air
Products adopted accounting standards pertaining to leases and
hedging activities. In accordance with the new lease guidance, we
recorded lease liabilities and right-of-use assets on our
consolidated balance sheets for operating leases where we are the
lessee. In adopting the new hedging guidance, we presented the
impacts of excluded components from our cash flow hedges on
intercompany loans in other non-operating income (expense),
net. In the prior year, these impacts were included in
interest expense. The adoption of these accounting standards did
not have a significant impact on the Company's net income.
Earnings Teleconference
Access the Q3 earnings teleconference scheduled for 10:00 a.m. Eastern Time on July 23, 2020 by
calling 323-794-2093 and entering passcode 3757796, or access the
Event Details page on Air Products' Investor Relations website.
About Air Products
Air Products (NYSE:APD) is a world-leading industrial gases
company in operation for nearly 80 years. Focused on serving
energy, environment and emerging markets, the Company provides
essential industrial gases, related equipment and applications
expertise to customers in dozens of industries, including refining,
chemical, metals, electronics, manufacturing, and food and
beverage. Air Products is also the global leader in the supply of
liquefied natural gas process technology and equipment. The Company
develops, engineers, builds, owns and operates some of the world's
largest industrial gas projects, including gasification projects
that sustainably convert abundant natural resources into syngas for
the production of high-value power, fuels and chemicals.
The Company had fiscal 2019 sales of $8.9
billion from operations in 50 countries and has a current
market capitalization of over $60
billion. More than 17,000 passionate, talented and committed
employees from diverse 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 or follow us on
LinkedIn, Twitter, Facebook or Instagram.
Cautionary Note Regarding Forward-Looking Statements: 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 expectations and assumptions
as of the date of this release and are not guarantees of future
performance. While forward-looking statements are made in good
faith and based on assumptions, expectations and projections that
management believes are reasonable based on currently available
information, 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: the duration and impacts of the novel
coronavirus ("COVID-19") global pandemic and efforts to contain its
transmission, including the effect of these factors on our
business, our customers, economic conditions and markets generally;
changes in global or regional economic conditions, supply and
demand dynamics in market segments we serve, or in the financial
markets that may affect the availability and terms on which we may
obtain financing; risks associated with having extensive
international operations, including political risks, risks
associated with unanticipated government actions and risks of
investing in developing markets; project delays, contract
terminations or customer cancellations or postponement of projects
and sales; future financial and operating performance of major
customers and joint venture partners; our ability to develop,
implement, and operate new technologies; our ability to execute the
projects in our backlog; our ability to develop and operate large
scale and technically complex projects, including gasification
projects; tariffs, economic sanctions and regulatory activities in
jurisdictions in which we and our affiliates and joint ventures
operate; the impact of environmental, tax or other legislation, as
well as regulations affecting our business and related compliance
requirements, including legislation or regulations related to
global climate change; changes in tax rates and other changes in
tax law; the timing, impact and other uncertainties relating to
acquisitions and divestitures, including our ability to integrate
acquisitions and separate divested businesses, respectively; risks
relating to cybersecurity incidents, including risks from the
interruption, failure or compromise of our information systems;
catastrophic events, such as natural disasters, public health
crises, acts of war, or terrorism; the impact on our
business and customers of price fluctuations in oil and natural gas
and disruptions in markets and the economy due to oil and natural
gas price volatility; costs and outcomes of legal or regulatory
proceedings and investigations; asset impairments due to economic
conditions or specific events; significant fluctuations in interest
rates and foreign currency exchange rates from those currently
anticipated; damage to facilities, pipelines or delivery systems,
including those we own or operate for third parties; availability
and cost of raw materials; the success of productivity and
operational improvement programs; and other risk factors described
in the Company's Form 10-K for its fiscal year ended September 30, 2019 and Quarterly Report on Form
10-Q for the period ended June 30,
2020. Except as required by law, the Company disclaims any
obligation or undertaking to update or revise any forward-looking
statements contained herein to reflect any change in the
assumptions, beliefs, or expectations or any change in events,
conditions, or circumstances upon which any such forward-looking
statements are based.
AIR PRODUCTS AND
CHEMICALS, INC. and Subsidiaries
CONSOLIDATED
INCOME STATEMENTS
(Unaudited)
|
|
|
|
Three Months Ended
|
Nine Months
Ended
|
|
30 June
|
30 June
|
(Millions of dollars,
except for share and per share data)
|
2020
|
2019
|
2020
|
2019
|
Sales
|
$2,065.2
|
|
$2,224.0
|
|
$6,536.2
|
|
$6,635.7
|
|
Cost of
sales
|
1,344.9
|
|
1,466.0
|
|
4,291.6
|
|
4,484.7
|
|
Facility
closure
|
—
|
|
—
|
|
—
|
|
29.0
|
|
Selling and
administrative
|
176.9
|
|
188.5
|
|
580.3
|
|
568.1
|
|
Research and
development
|
19.9
|
|
18.1
|
|
56.8
|
|
50.0
|
|
Cost reduction
actions
|
—
|
|
25.5
|
|
—
|
|
25.5
|
|
Gain on exchange of
equity affiliate investments
|
—
|
|
29.1
|
|
—
|
|
29.1
|
|
Company headquarters
relocation income (expense)
|
—
|
|
—
|
|
33.8
|
|
—
|
|
Other income
(expense), net
|
15.7
|
|
14.7
|
|
36.1
|
|
33.7
|
|
Operating
Income
|
539.2
|
|
569.7
|
|
1,677.4
|
|
1,541.2
|
|
Equity affiliates'
income
|
51.2
|
|
56.4
|
|
197.6
|
|
155.5
|
|
Interest
expense
|
32.1
|
|
34.2
|
|
70.1
|
|
106.9
|
|
Other non-operating
income (expense), net
|
8.1
|
|
17.6
|
|
24.3
|
|
49.8
|
|
Income From
Continuing Operations Before Taxes
|
566.4
|
|
609.5
|
|
1,829.2
|
|
1,639.6
|
|
Income tax
provision
|
109.3
|
|
109.3
|
|
378.5
|
|
348.9
|
|
Income From
Continuing Operations
|
457.1
|
|
500.2
|
|
1,450.7
|
|
1,290.7
|
|
Loss from
discontinued operations, net of tax
|
—
|
|
—
|
|
(14.3)
|
|
—
|
|
Net
Income
|
457.1
|
|
500.2
|
|
1,436.4
|
|
1,290.7
|
|
Net income
attributable to noncontrolling interests of continuing
operations
|
10.6
|
|
12.2
|
|
36.5
|
|
33.9
|
|
Net Income
Attributable to Air Products
|
$446.5
|
|
$488.0
|
|
$1,399.9
|
|
$1,256.8
|
|
|
|
|
|
|
Net Income
Attributable to Air Products
|
|
|
|
|
Net income from
continuing operations
|
$446.5
|
|
$488.0
|
|
$1,414.2
|
|
$1,256.8
|
|
Net loss from
discontinued operations
|
—
|
|
—
|
|
(14.3)
|
|
—
|
|
Net Income
Attributable to Air Products
|
$446.5
|
|
$488.0
|
|
$1,399.9
|
|
$1,256.8
|
|
|
|
|
|
|
Basic Earnings Per
Common Share Attributable to Air Products*
|
|
|
|
|
Basic earnings per
share from continuing operations
|
$2.02
|
|
$2.21
|
|
$6.40
|
|
$5.71
|
|
Basic earnings per
share from discontinued operations
|
—
|
|
—
|
|
(0.06)
|
|
—
|
|
Basic Earnings Per
Common Share Attributable to Air Products
|
$2.02
|
|
$2.21
|
|
$6.33
|
|
$5.71
|
|
Diluted Earnings
Per Common Share Attributable to Air Products*
|
|
|
|
|
Diluted earnings per
share from continuing operations
|
$2.01
|
|
$2.20
|
|
$6.36
|
|
$5.68
|
|
Diluted earnings per
share from discontinued operations
|
—
|
|
—
|
|
(0.06)
|
|
—
|
|
Diluted Earnings
Per Common Share Attributable to Air Products
|
$2.01
|
|
$2.20
|
|
$6.30
|
|
$5.68
|
|
|
|
|
|
|
Weighted Average
Common Shares – Basic (in millions)
|
221.2
|
|
220.6
|
|
221.1
|
|
220.2
|
|
Weighted Average
Common Shares – Diluted (in millions)
|
222.4
|
|
221.9
|
|
222.3
|
|
221.4
|
|
|
*Earnings per share
("EPS") is calculated independently for each component and may not
sum to total EPS due to rounding.
|
AIR PRODUCTS AND
CHEMICALS, INC. and Subsidiaries
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
|
|
|
|
30 June
|
30
September
|
(Millions of
dollars)
|
2020
|
2019
|
Assets
|
|
|
Current
Assets
|
|
|
Cash and cash
items
|
$3,921.4
|
|
$2,248.7
|
|
Short-term
investments
|
2,515.7
|
|
166.0
|
|
Trade receivables,
net
|
1,409.7
|
|
1,260.2
|
|
Inventories
|
410.9
|
|
388.3
|
|
Prepaid
expenses
|
185.9
|
|
77.4
|
|
Other receivables and
current assets
|
562.9
|
|
477.7
|
|
Total Current
Assets
|
9,006.5
|
|
4,618.3
|
|
Investment in net
assets of and advances to equity affiliates
|
1,346.1
|
|
1,276.2
|
|
Plant and equipment,
at cost
|
24,198.0
|
|
22,333.7
|
|
Less: accumulated
depreciation
|
12,729.1
|
|
11,996.1
|
|
Plant and equipment,
net
|
11,468.9
|
|
10,337.6
|
|
Goodwill,
net
|
799.3
|
|
797.1
|
|
Intangible assets,
net
|
380.9
|
|
419.5
|
|
Noncurrent lease
receivables
|
820.6
|
|
890.0
|
|
Other noncurrent
assets
|
959.8
|
|
604.1
|
|
Total Noncurrent
Assets
|
15,775.6
|
|
14,324.5
|
|
Total
Assets
|
$24,782.1
|
|
$18,942.8
|
|
Liabilities and
Equity
|
|
|
Current
Liabilities
|
|
|
Payables and accrued
liabilities
|
$1,668.5
|
|
$1,635.7
|
|
Accrued income
taxes
|
83.6
|
|
86.6
|
|
Short-term
borrowings
|
14.3
|
|
58.2
|
|
Current portion of
long-term debt
|
824.6
|
|
40.4
|
|
Total Current
Liabilities
|
2,591.0
|
|
1,820.9
|
|
Long-term
debt
|
7,073.2
|
|
2,907.3
|
|
Long-term debt –
related party
|
285.6
|
|
320.1
|
|
Other noncurrent
liabilities
|
1,866.9
|
|
1,712.4
|
|
Deferred income
taxes
|
942.0
|
|
793.8
|
|
Total Noncurrent
Liabilities
|
10,167.7
|
|
5,733.6
|
|
Total
Liabilities
|
12,758.7
|
|
7,554.5
|
|
Air Products
Shareholders' Equity
|
11,659.3
|
|
11,053.6
|
|
Noncontrolling
Interests
|
364.1
|
|
334.7
|
|
Total
Equity
|
12,023.4
|
|
11,388.3
|
|
Total Liabilities
and Equity
|
$24,782.1
|
|
$18,942.8
|
|
AIR PRODUCTS AND
CHEMICALS, INC. and Subsidiaries
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
Nine Months
Ended
|
|
30 June
|
(Millions of
dollars)
|
2020
|
2019
|
Operating
Activities
|
|
|
Net income
|
$1,436.4
|
|
$1,290.7
|
|
Less: Net income
attributable to noncontrolling interests of continuing
operations
|
36.5
|
|
33.9
|
|
Net income
attributable to Air Products
|
1,399.9
|
|
1,256.8
|
|
Loss from
discontinued operations
|
14.3
|
|
—
|
|
Income from
continuing operations attributable to Air Products
|
1,414.2
|
|
1,256.8
|
|
Adjustments to
reconcile income to cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
874.5
|
|
789.2
|
|
Deferred income
taxes
|
160.0
|
|
37.8
|
|
Tax reform
repatriation
|
—
|
|
49.4
|
|
Facility
closure
|
—
|
|
29.0
|
|
Undistributed
(earnings) losses of unconsolidated affiliates
|
(111.0)
|
|
(56.9)
|
|
Gain on sale of assets
and investments
|
(36.9)
|
|
(17.5)
|
|
Share-based
compensation
|
39.4
|
|
31.0
|
|
Noncurrent lease
receivables
|
69.1
|
|
71.7
|
|
Other
adjustments
|
107.6
|
|
(0.7)
|
|
Working capital
changes that provided (used) cash, excluding effects of
acquisitions:
|
|
|
Trade
receivables
|
(106.2)
|
|
(139.5)
|
|
Inventories
|
(25.3)
|
|
(13.5)
|
|
Other
receivables
|
(23.2)
|
|
70.6
|
|
Payables and accrued
liabilities
|
(184.7)
|
|
(94.8)
|
|
Other working
capital
|
(164.3)
|
|
(9.2)
|
|
Cash Provided by
Operating Activities
|
2,013.2
|
|
2,003.4
|
|
Investing
Activities
|
|
|
Additions to plant
and equipment, including long-term deposits
|
(2,045.2)
|
|
(1,507.6)
|
|
Acquisitions, less
cash acquired
|
—
|
|
(107.0)
|
|
Investment in and
advances to unconsolidated affiliates
|
(24.4)
|
|
(15.7)
|
|
Proceeds from sale of
assets and investments
|
74.3
|
|
8.8
|
|
Purchases of
investments
|
(2,515.5)
|
|
(5.3)
|
|
Proceeds from
investments
|
177.0
|
|
190.5
|
|
Other investing
activities
|
2.9
|
|
0.8
|
|
Cash Used for
Investing Activities
|
(4,330.9)
|
|
(1,435.5)
|
|
Financing
Activities
|
|
|
Long-term debt
proceeds
|
4,895.7
|
|
—
|
|
Payments on long-term
debt
|
(3.4)
|
|
(5.4)
|
|
Net decrease in
commercial paper and short-term borrowings
|
(48.0)
|
|
37.7
|
|
Dividends paid to
shareholders
|
(807.6)
|
|
(738.4)
|
|
Proceeds from stock
option exercises
|
23.2
|
|
63.3
|
|
Other financing
activities
|
(54.4)
|
|
(18.0)
|
|
Cash Provided by
(Used for) Financing Activities
|
4,005.5
|
|
(660.8)
|
|
Effect of Exchange
Rate Changes on Cash
|
(15.1)
|
|
(1.6)
|
|
Increase (Decrease)
in Cash and Cash Items
|
1,672.7
|
|
(94.5)
|
|
Cash and Cash items -
Beginning of Year
|
2,248.7
|
|
2,791.3
|
|
Cash and Cash
items - End of Period
|
$3,921.4
|
|
$2,696.8
|
|
Supplemental Cash
Flow Information
|
|
|
Cash paid for taxes
(net of refunds)
|
$329.6
|
|
$250.8
|
|
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
|
Total
|
|
Three Months Ended
30 June 2020
|
|
|
|
|
|
|
|
Sales
|
$849.9
|
|
$429.7
|
|
$651.9
|
|
$77.6
|
|
$56.1
|
|
$2,065.2
|
|
|
Operating income
(loss)
|
248.3
|
|
105.1
|
|
221.9
|
|
(13.4)
|
|
(22.7)
|
|
539.2
|
|
(A)
|
Depreciation and
amortization
|
142.8
|
|
47.3
|
|
92.9
|
|
2.3
|
|
5.3
|
|
290.6
|
|
|
Equity affiliates'
income
|
19.9
|
|
17.4
|
|
11.7
|
|
2.2
|
|
—
|
|
51.2
|
|
(A)
|
Three Months Ended
30 June 2019
|
|
|
|
|
|
|
|
Sales
|
$955.3
|
|
$494.6
|
|
$679.4
|
|
$57.9
|
|
$36.8
|
|
$2,224.0
|
|
|
Operating income
(loss)
|
262.2
|
|
123.4
|
|
231.4
|
|
(9.6)
|
|
(41.3)
|
|
566.1
|
|
(A)
|
Depreciation and
amortization
|
126.3
|
|
47.8
|
|
87.9
|
|
2.2
|
|
4.9
|
|
269.1
|
|
|
Equity affiliates'
income
|
21.7
|
|
18.8
|
|
14.9
|
|
1.0
|
|
—
|
|
56.4
|
|
(A)
|
|
|
|
|
|
|
|
|
|
Industrial
Gases –
Americas
|
Industrial
Gases –
EMEA
|
Industrial
Gases –
Asia
|
Industrial
Gases –
Global
|
Corporate
and other
|
Total
|
|
Nine Months Ended
30 June 2020
|
|
|
|
|
|
|
|
Sales
|
$2,718.5
|
|
$1,421.1
|
|
$2,002.8
|
|
$249.5
|
|
$144.3
|
|
$6,536.2
|
|
|
Operating income
(loss)
|
773.5
|
|
350.2
|
|
659.5
|
|
(29.6)
|
|
(110.0)
|
|
1,643.6
|
|
(A)
|
Depreciation and
amortization
|
410.1
|
|
143.3
|
|
298.6
|
|
7.1
|
|
15.4
|
|
874.5
|
|
|
Equity affiliates'
income
|
62.1
|
|
50.2
|
|
42.4
|
|
9.1
|
|
—
|
|
163.8
|
|
(A)
|
Nine Months Ended
30 June 2019
|
|
|
|
|
|
|
|
Sales
|
$2,936.2
|
|
$1,513.2
|
|
$1,931.6
|
|
$179.9
|
|
$74.8
|
|
$6,635.7
|
|
|
Operating income
(loss)
|
737.0
|
|
351.5
|
|
632.9
|
|
(17.9)
|
|
(136.9)
|
|
1,566.6
|
|
(A)
|
Depreciation and
amortization
|
376.8
|
|
140.4
|
|
252.7
|
|
6.3
|
|
13.0
|
|
789.2
|
|
|
Equity affiliates'
income
|
62.1
|
|
45.8
|
|
44.9
|
|
2.7
|
|
—
|
|
155.5
|
|
(A)
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
|
|
|
|
|
|
30 June
2020
|
$6,562.9
|
|
$3,537.8
|
|
$6,678.2
|
|
$381.8
|
|
$7,621.4
|
|
$24,782.1
|
|
|
30 September
2019
|
5,832.2
|
|
3,250.8
|
|
6,240.6
|
|
325.7
|
|
3,293.5
|
|
18,942.8
|
|
|
|
(A)
Refer to the Reconciliations to Consolidated Results section
below.
|
Reconciliations to
Consolidated Results
|
|
The table below
reconciles total operating income in the table above to
consolidated operating income as reflected on our consolidated
income statements:
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
30 June
|
30 June
|
Operating
Income
|
2020
|
2019
|
2020
|
2019
|
Total
|
$539.2
|
|
$566.1
|
|
$1,643.6
|
|
$1,566.6
|
|
Facility
closure
|
—
|
|
—
|
|
—
|
|
(29.0)
|
|
Cost reduction
actions
|
—
|
|
(25.5)
|
|
—
|
|
(25.5)
|
|
Gain on exchange of
equity affiliate investments
|
—
|
|
29.1
|
|
—
|
|
29.1
|
|
Company headquarters
relocation income (expense)
|
—
|
|
—
|
|
33.8
|
|
—
|
|
Consolidated
Operating Income
|
$539.2
|
|
$569.7
|
|
$1,677.4
|
|
$1,541.2
|
|
|
The table below
reconciles total equity affiliates' income in the table above to
consolidated equity affiliates' income as reflected on our
consolidated income statements:
|
|
|
Three Months
Ended
|
Nine Months
Ended
|
|
30 June
|
30 June
|
Equity Affiliates'
Income
|
2020
|
2019
|
2020
|
2019
|
Total
|
$51.2
|
|
$56.4
|
|
$163.8
|
|
$155.5
|
|
India Finance Act
2020
|
—
|
|
—
|
|
33.8
|
|
—
|
|
Consolidated
Equity Affiliates' Income
|
$51.2
|
|
$56.4
|
|
$197.6
|
|
$155.5
|
|
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Millions of dollars unless otherwise indicated, except for per
share data)
The Company presents certain financial measures, other than in
accordance with U.S. generally accepted accounting principles
("GAAP"), on an "adjusted" or "non-GAAP" basis. On a consolidated
basis, these measures include adjusted diluted earnings per share
("EPS"), adjusted EBITDA, adjusted EBITDA margin, and adjusted
effective tax rate. On a segment basis, these measures include
adjusted EBITDA and adjusted EBITDA margin. In addition to these
measures, which are presented above, we also include certain
supplemental non-GAAP financial measures that are presented below
to help the reader understand the impact that our non-GAAP
adjustments have on the calculation of our adjusted diluted EPS.
For each non-GAAP financial measure, we present below a
reconciliation to the most directly comparable financial measure
calculated in accordance with GAAP.
The Company's non-GAAP measures are not meant to be considered
in isolation or as a substitute for the most directly comparable
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 financial results computed in accordance with GAAP,
provide a more complete understanding of the factors and trends
affecting the Company's historical financial performance and
projected future results.
In many cases, non-GAAP measures are determined by adjusting the
most directly comparable GAAP measure to exclude certain disclosed
items, or "non-GAAP adjustments," that the Company believes are not
representative of underlying business performance. For example, the
Company previously excluded certain expenses associated with cost
reduction actions, impairment charges, and gains on disclosed
transactions. The reader should be aware that the Company may
recognize similar losses or gains in the future. Readers 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.
The tax impact on our pre-tax non-GAAP adjustments reflects the
expected current and deferred income tax impact of our non-GAAP
adjustments. These tax impacts are primarily driven by the
statutory tax rate of the various relevant jurisdictions and the
taxability of the adjustments in those jurisdictions.
NON-GAAP ADJUSTMENTS
There were no non-GAAP adjustments in the third quarter of
fiscal year 2020. The non-GAAP adjustments for the nine months
ended 30 June 2020 are detailed
below. For information related to non-GAAP adjustments in the third
quarter and first nine months of fiscal year 2019, refer to Exhibit
99.1 to the Company's Current Report on Form 8-K dated 25 July
2019.
Company Headquarters Relocation
Income (Expense)
During the second quarter of fiscal year
2020, we sold property at our current corporate headquarters
located in Trexlertown,
Pennsylvania, for net proceeds of $44.1. The sale was completed in anticipation of
relocating our U.S. headquarters and resulted in a gain of
$33.8 ($25.6 after-tax, or $0.12 per share). This gain is reflected on our
consolidated income statements as "Company headquarters relocation
income (expense)" for the nine months ended 30 June 2020 and has been excluded from the
results of the Corporate and other segment.
India Finance Act 2020
On 27 March 2020, the Indian
government passed Finance Act 2020 (the "India Finance Act"), which
amended rules regarding the taxation of dividends declared and
distributed by Indian companies. Under the India Finance Act,
future dividends declared or distributed by an Indian company are
no longer subject to dividend distribution tax. Instead, the
non-resident recipient will be subject to a withholding tax.
As a result of the India Finance
Act, we recorded a net benefit of $13.5 ($0.06 per
share) in March 2020 related to our
equity affiliate investment in INOX Air Products Private Limited
("INOX"). This included a benefit of $33.8 for our share of accumulated dividend
distribution taxes released with respect to INOX. This benefit is
reflected within "Equity affiliates' income" on our consolidated
income statements and has been excluded from the results of our
Industrial Gases – Asia segment.
In addition, our income tax provision reflects an expense of
$20.3 for estimated withholding taxes
that we may incur on future dividends.
Discontinued Operations
During the second quarter of fiscal year 2020, we completed an
updated review of the environmental remediation status at the Pace
facility. This review resulted in recognition of an expense of
$19.0 ($14.3 after-tax, or $0.06 per share) as a component of loss from
discontinued operations.
ADJUSTED DILUTED EPS
The table below provides a reconciliation to the most directly
comparable GAAP measure for each of the major components used to
calculate adjusted diluted EPS from continuing operations, which
the Company views as a key performance metric. We believe it is
important for the reader to understand the per share impact of our
non-GAAP adjustments as management does not consider these impacts
when evaluating underlying business performance. The per share
impact for each non-GAAP adjustment was calculated independently
and may not sum to total adjusted diluted EPS due to rounding.
|
Continuing
Operations
|
|
Three Months Ended 30
June
|
Q3 2020 vs. Q3
2019
|
Operating
Income
|
Equity
Affiliates'
Income
|
Income Tax
Provision
|
Net
Income
Attributable
to Air
Products
|
Diluted
EPS
|
2020 GAAP
|
$539.2
|
|
$51.2
|
|
$109.3
|
|
$446.5
|
|
$2.01
|
|
2019 GAAP
|
569.7
|
|
56.4
|
|
109.3
|
|
488.0
|
|
2.20
|
|
Change
GAAP
|
|
|
|
($41.5)
|
|
($0.19)
|
|
% Change
GAAP
|
|
|
|
(9)
|
%
|
(9)
|
%
|
2020 GAAP
|
$539.2
|
|
$51.2
|
|
$109.3
|
|
$446.5
|
|
$2.01
|
|
2020 Non-GAAP Measure
("Adjusted")(A)
|
$539.2
|
|
$51.2
|
|
$109.3
|
|
$446.5
|
|
$2.01
|
|
|
|
|
|
|
|
2019 GAAP
|
$569.7
|
|
$56.4
|
|
$109.3
|
|
$488.0
|
|
$2.20
|
|
Cost reduction
actions
|
25.5
|
|
—
|
|
6.7
|
|
18.8
|
|
0.08
|
|
Gain on exchange of
equity affiliate investments
|
(29.1)
|
|
—
|
|
—
|
|
(29.1)
|
|
(0.13)
|
|
Tax reform
repatriation
|
—
|
|
—
|
|
(3.2)
|
|
3.2
|
|
0.02
|
|
2019 Non-GAAP Measure
("Adjusted")
|
$566.1
|
|
$56.4
|
|
$112.8
|
|
$480.9
|
|
$2.17
|
|
Change Non-GAAP
Measure ("Adjusted")
|
|
|
|
($34.4)
|
|
($0.16)
|
|
% Change Non-GAAP
Measure ("Adjusted")
|
|
|
|
(7)
|
%
|
(7)
|
%
|
|
|
(A)
|
There were no
non-GAAP adjustments to arrive at adjusted diluted EPS for the
three months ended 30 June 2020.
|
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
We define adjusted EBITDA as net income less income (loss) from
discontinued operations, net of tax, and excluding non-GAAP
adjustments, 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, and
depreciation and amortization expense. Adjusted EBITDA and adjusted
EBITDA margin provide useful metrics for management to assess
operating performance. Margins are calculated independently for
each period by dividing each line item by consolidated sales for
the respective period and may not sum to total margin due to
rounding.
Below is a presentation of consolidated sales and a
reconciliation of net income on a GAAP basis to adjusted EBITDA and
net income margin on a GAAP basis to adjusted EBITDA margin:
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q3 YTD
Total
|
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
$2,254.7
|
|
|
|
$2,216.3
|
|
|
|
$2,065.2
|
|
|
|
|
|
|
$6,536.2
|
|
|
2019
|
|
2,224.0
|
|
|
|
2,187.7
|
|
|
|
2,224.0
|
|
|
|
2,283.2
|
|
|
|
6,635.7
|
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q3 YTD
Total
|
|
2020
|
$
|
Margin
|
|
$
|
Margin
|
|
$
|
Margin
|
|
$
|
Margin
|
|
$
|
Margin
|
|
Net income and net
income margin
|
$488.9
|
|
21.7
|
%
|
|
$490.4
|
|
22.1
|
%
|
|
$457.1
|
|
22.1
|
%
|
|
|
|
|
$1,436.4
|
|
22.0
|
%
|
|
Less: Loss from
discontinued operations, net of tax
|
—
|
|
—
|
%
|
|
(14.3)
|
|
(0.6)
|
%
|
|
—
|
|
—
|
%
|
|
|
|
|
(14.3)
|
|
(0.2)
|
%
|
|
Add: Interest
expense
|
18.7
|
|
0.8
|
%
|
|
19.3
|
|
0.9
|
%
|
|
32.1
|
|
1.6
|
%
|
|
|
|
|
70.1
|
|
1.1
|
%
|
|
Less: Other
non-operating income (expense), net
|
9.1
|
|
0.4
|
%
|
|
7.1
|
|
0.3
|
%
|
|
8.1
|
|
0.4
|
%
|
|
|
|
|
24.3
|
|
0.4
|
%
|
|
Add: Income tax
provision
|
120.7
|
|
5.4
|
%
|
|
148.5
|
|
6.7
|
%
|
|
109.3
|
|
5.3
|
%
|
|
|
|
|
378.5
|
|
5.8
|
%
|
|
Add: Depreciation and
amortization
|
289.2
|
|
12.8
|
%
|
|
294.7
|
|
13.3
|
%
|
|
290.6
|
|
14.1
|
%
|
|
|
|
|
874.5
|
|
13.4
|
%
|
|
Less: Company
headquarters relocation income (expense)
|
—
|
|
—
|
%
|
|
33.8
|
|
1.5
|
%
|
|
—
|
|
—
|
%
|
|
|
|
|
33.8
|
|
0.5
|
%
|
|
Less: India Finance
Act 2020 - equity affiliate income impact
|
—
|
|
—
|
%
|
|
33.8
|
|
1.5
|
%
|
|
—
|
|
—
|
%
|
|
|
|
|
33.8
|
|
0.5
|
%
|
|
Adjusted EBITDA
and adjusted EBITDA margin
|
$908.4
|
|
40.3
|
%
|
|
$892.5
|
|
40.3
|
%
|
|
$881.0
|
|
42.7
|
%
|
|
|
|
|
$2,681.9
|
|
41.0
|
%
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q3 YTD
Total
|
|
2019
|
$
|
Margin
|
|
$
|
Margin
|
|
$
|
Margin
|
|
$
|
Margin
|
|
$
|
Margin
|
|
Net income and net
income margin
|
$357.0
|
|
16.0
|
%
|
|
$433.5
|
|
19.8
|
%
|
|
$500.2
|
|
22.5
|
%
|
|
$518.7
|
|
22.7
|
%
|
|
$1,290.7
|
|
19.5
|
%
|
|
Add: Interest
expense
|
37.3
|
|
1.7
|
%
|
|
35.4
|
|
1.6
|
%
|
|
34.2
|
|
1.5
|
%
|
|
30.1
|
|
1.3
|
%
|
|
106.9
|
|
1.6
|
%
|
|
Less: Other
non-operating income (expense), net
|
18.5
|
|
0.8
|
%
|
|
13.7
|
|
0.6
|
%
|
|
17.6
|
|
0.8
|
%
|
|
16.9
|
|
0.7
|
%
|
|
49.8
|
|
0.8
|
%
|
|
Add: Income tax
provision
|
132.1
|
|
5.9
|
%
|
|
107.5
|
|
4.9
|
%
|
|
109.3
|
|
4.9
|
%
|
|
131.2
|
|
5.7
|
%
|
|
348.9
|
|
5.3
|
%
|
|
Add: Depreciation and
amortization
|
258.0
|
|
11.6
|
%
|
|
262.1
|
|
12.0
|
%
|
|
269.1
|
|
12.1
|
%
|
|
293.6
|
|
12.9
|
%
|
|
789.2
|
|
11.9
|
%
|
|
Add: Facility
closure
|
29.0
|
|
1.3
|
%
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
29.0
|
|
0.4
|
%
|
|
Add: Cost reduction
actions
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
25.5
|
|
1.2
|
%
|
|
—
|
|
—
|
%
|
|
25.5
|
|
0.4
|
%
|
|
Less: Gain on
exchange of equity affiliate investments
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
29.1
|
|
1.3
|
%
|
|
—
|
|
—
|
%
|
|
29.1
|
|
0.4
|
%
|
|
Adjusted EBITDA
and adjusted EBITDA margin
|
$794.9
|
|
35.7
|
%
|
|
$824.8
|
|
37.7
|
%
|
|
$891.6
|
|
40.1
|
%
|
|
$956.7
|
|
41.9
|
%
|
|
$2,511.3
|
|
37.8
|
%
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
|
|
Q3 YTD
Total
|
2020 vs.
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income $
change
|
|
$131.9
|
|
|
|
$56.9
|
|
|
|
($43.1)
|
|
|
|
|
|
|
$145.7
|
|
Net income %
change
|
|
37
|
%
|
|
|
13
|
%
|
|
|
(9)
|
%
|
|
|
|
|
|
11
|
%
|
Net income margin
change
|
|
570
|
bp
|
|
|
230
|
bp
|
|
|
(40)
|
bp
|
|
|
|
|
|
250
|
bp
|
Change
Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA $
change
|
|
$113.5
|
|
|
|
$67.7
|
|
|
|
($10.6)
|
|
|
|
|
|
|
$170.6
|
|
Adjusted EBITDA %
change
|
|
14
|
%
|
|
|
8
|
%
|
|
|
(1)
|
%
|
|
|
|
|
|
7
|
%
|
Adjusted EBITDA margin
change
|
|
460
|
bp
|
|
|
260
|
bp
|
|
|
260
|
bp
|
|
|
|
|
|
320
|
bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below is a reconciliation of operating income and operating
margin by segment to adjusted EBITDA and adjusted EBITDA margin by
segment for the three months ended 30 June
2020 and 2019:
|
Industrial
Gases–
Americas
|
Industrial
Gases–
EMEA
|
Industrial
Gases–
Asia
|
Industrial
Gases–
Global
|
Corporate
and other
|
Total
|
|
|
GAAP
MEASURES
|
|
|
|
|
|
|
|
|
Three Months Ended
30 June 2020
|
|
|
|
|
|
|
|
Operating income
(loss)
|
$248.3
|
|
$105.1
|
|
$221.9
|
|
($13.4)
|
|
($22.7)
|
|
$539.2
|
|
(A)
|
|
Operating
margin
|
29.2
|
%
|
24.5
|
%
|
34.0
|
%
|
|
|
|
|
|
Three Months Ended
30 June 2019
|
|
|
|
|
|
|
|
Operating income
(loss)
|
$262.2
|
|
$123.4
|
|
$231.4
|
|
($9.6)
|
|
($41.3)
|
|
$566.1
|
|
(A)
|
|
Operating
margin
|
27.4
|
%
|
24.9
|
%
|
34.1
|
%
|
|
|
|
|
|
Operating loss $
change
|
($13.9)
|
|
($18.3)
|
|
($9.5)
|
|
|
|
|
|
|
Operating loss %
change
|
(5)
|
%
|
(15)
|
%
|
(4)
|
%
|
|
|
|
|
|
Operating margin
change
|
180
|
bp
|
(40)
|
bp
|
(10)
|
bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-GAAP
MEASURES
|
|
|
|
|
|
|
|
Three Months Ended
30 June 2020
|
|
|
|
|
|
|
|
Operating income
(loss)
|
$248.3
|
|
$105.1
|
|
$221.9
|
|
($13.4)
|
|
($22.7)
|
|
$539.2
|
|
(A)
|
|
Add: Depreciation and
amortization
|
142.8
|
|
47.3
|
|
92.9
|
|
2.3
|
|
5.3
|
|
290.6
|
|
|
|
Add: Equity
affiliates' income
|
19.9
|
|
17.4
|
|
11.7
|
|
2.2
|
|
—
|
|
51.2
|
|
|
|
Adjusted
EBITDA
|
$411.0
|
|
$169.8
|
|
$326.5
|
|
($8.9)
|
|
($17.4)
|
|
$881.0
|
|
|
|
Adjusted EBITDA
margin
|
48.4
|
%
|
39.5
|
%
|
50.1
|
%
|
|
|
|
|
|
Three Months Ended
30 June 2019
|
|
|
|
|
|
|
|
Operating income
(loss)
|
$262.2
|
|
$123.4
|
|
$231.4
|
|
($9.6)
|
|
($41.3)
|
|
$566.1
|
|
(A)
|
|
Add: Depreciation and
amortization
|
126.3
|
|
47.8
|
|
87.9
|
|
2.2
|
|
4.9
|
|
269.1
|
|
|
|
Add: Equity
affiliates' income
|
21.7
|
|
18.8
|
|
14.9
|
|
1.0
|
|
—
|
|
56.4
|
|
|
|
Adjusted
EBITDA
|
$410.2
|
|
$190.0
|
|
$334.2
|
|
($6.4)
|
|
($36.4)
|
|
$891.6
|
|
|
|
Adjusted EBITDA
margin
|
42.9
|
%
|
38.4
|
%
|
49.2
|
%
|
|
|
|
|
|
Adjusted EBITDA $
change
|
$0.8
|
|
($20.2)
|
|
($7.7)
|
|
|
|
|
|
|
Adjusted EBITDA %
change
|
—
|
%
|
(11)
|
%
|
(2)
|
%
|
|
|
|
|
|
Adjusted EBITDA
margin change
|
550
|
bp
|
110
|
bp
|
90
|
bp
|
|
|
|
|
|
|
|
(A)
|
The table below
reconciles operating income as reflected on our consolidated income
statements to total operating income in the table above:
|
|
|
|
Three Months
Ended
|
|
|
30 June
|
|
Operating
Income
|
2020
|
2019
|
|
Consolidated
operating income
|
$539.2
|
|
$569.7
|
|
|
Cost reduction
actions
|
—
|
|
25.5
|
|
|
Gain on exchange of
equity affiliate investments
|
—
|
|
(29.1)
|
|
|
Total
|
$539.2
|
|
$566.1
|
|
|
ADJUSTED EFFECTIVE TAX RATE
The tax impact of our pre-tax non-GAAP adjustments reflects the
expected current and deferred income tax expense associated with
each adjustment and is primarily dependent upon the statutory tax
rate of the various relevant jurisdictions and the taxability of
the adjustments in those jurisdictions.
|
Three Months
Ended
30 June
|
|
2020
|
2019
|
Income Tax
Provision
|
$109.3
|
|
$109.3
|
|
Income From
Continuing Operations Before Taxes
|
$566.4
|
|
$609.5
|
|
Effective Tax
Rate
|
19.3
|
%
|
17.9
|
%
|
Income Tax
Provision
|
$109.3
|
|
$109.3
|
|
Cost reduction
actions
|
—
|
|
6.7
|
|
Tax reform
repatriation
|
—
|
|
(3.2)
|
|
Adjusted Income Tax
Provision
|
$109.3
|
|
$112.8
|
|
Income From
Continuing Operations Before Taxes
|
$566.4
|
|
$609.5
|
|
Cost reduction
actions
|
—
|
|
25.5
|
|
Gain on exchange of
equity affiliate investments
|
—
|
|
(29.1)
|
|
Adjusted Income From
Continuing Operations Before Taxes
|
$566.4
|
|
$605.9
|
|
Adjusted Effective
Tax Rate
|
19.3
|
%
|
18.6
|
%
|
View original
content:http://www.prnewswire.com/news-releases/air-products-reports-fiscal-2020-third-quarter-gaap-eps-and-adjusted-eps-of-2-01--301098646.html
SOURCE Air Products