LEHIGH VALLEY, Pa.,
April 23, 2020 /PRNewswire/ --
Q2 FY20 (comparisons versus prior year):
- GAAP EPS of $2.21, including an
estimated $0.06 to $0.08 negative impact from COVID-19, up 16
percent; GAAP net income, including discontinued operations, of
$490 million, up 13 percent; and GAAP
net income margin of 22.1 percent, up 230 basis points
- Adjusted EPS* of $2.04, including
an estimated $0.06 to $0.08 negative impact from COVID-19, up six
percent; adjusted EBITDA margin* of 40.3 percent, up 260 basis
points
Q2 FY20 Highlights
- Safely maintained plant operations and business continuity,
provided essential products to customers, mobilized to meet urgent
needs for medical oxygen, and continued to pursue and win new
on-site opportunities during the COVID-19 pandemic
- Stable onsite business; Asia
merchant volumes were impacted by COVID-19 but have since
recovered; limited Americas and EMEA merchant volume impact during
Q2
- Secure financial position with robust cash flow, $2.2 billion cash on hand and modest net debt* of
$1.1 billion as of March 31, 2020
- Announced and closed on purchase of five operating hydrogen
plants in the U.S. and began long-term hydrogen supply to PBF
Energy
- Signed agreement to provide proprietary liquefied natural gas
(LNG) technology, equipment and related process license and
advisory services to the first onshore LNG project in the Republic
of Mozambique
#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.
These measures exclude the impacts of the gain on the sale of
property at our current corporate headquarters and impacts from the
India Finance Act of 2020. Additional information regarding these
measures and a reconciliation of GAAP to non-GAAP historical
results can be found below.
Air Products' (NYSE:APD) Chairman, President and Chief Executive
Officer, Seifi Ghasemi, today
expressed solidarity in the world's collective fight against
COVID-19 and thanked the global Air Products team for playing a
critical role and making a real difference in people's lives.
He noted that Air Products is considered an essential business
by governments around the world and expressed his pride in the Air
Products team's efforts to keep plants running and provide
essential industrial gases for critical needs, including medical
oxygen.
"The true character of an individual, or a company, is revealed
during times of crisis. The world is certainly going through a
crisis - something none of us has experienced in our lifetime,"
Ghasemi said. "I am very proud of our people's tireless efforts to
maintain business continuity, keep our plants running safely,
reliably serve our customers, and care for our communities during
this especially challenging time.
"Their hard work enabled us to deliver the fiscal second quarter
results that we are reporting today. Meanwhile, Air Products
remains in a secure financial position with a strong balance sheet
and resilient business model, particularly our onsite business,
which represents more than half of our sales and continues to drive
our growth. Our strategy to create shareholder value has not
changed – we continue to invest in high return project
opportunities and are committed to increasing the dividend as we
move forward."
For its fiscal 2020 second quarter, Air Products reported GAAP
EPS from continuing operations of $2.21, up 16 percent, which includes an estimated
$0.06 to $0.08 per share negative impact from COVID-19;
GAAP net income of $490 million, up
13 percent, which was driven primarily by higher pricing and
volumes in all three regions, as well as a gain on the sale of
property at the company's current corporate headquarters and
impacts from the India Finance Act of 2020; and GAAP net income
margin of 22.1 percent, which was up 230 basis points, each versus
prior year.
For the quarter, on a non-GAAP basis, adjusted EPS from
continuing operations of $2.04 was up
six percent, which includes an estimated $0.06 to $0.08 per
share negative impact from COVID-19; adjusted EBITDA of
$893 million was up eight percent,
primarily driven by higher volumes and pricing in all three
regions; and adjusted EBITDA margin of 40.3 percent was up 260
basis points, each versus prior year.
Second quarter sales of $2.2
billion increased one percent over prior year on six percent
volume growth and two percent higher pricing, partially offset by
five percent lower energy pass-through and two percent unfavorable
currency. Volume growth was primarily driven by base business
growth, new plants, acquisitions, and a short-term contract in
Asia, which were partially offset
by an approximately one percent negative volume impact due to
COVID-19. The negative COVID-19 impact was primarily due to
Asia merchant volumes, which
declined by about 25 percent for approximately six weeks following
the Lunar New Year holiday before recovering in late March.
Americas and EMEA merchant volumes declined modestly during the
last week of March but only had a negligible impact on the
quarter's results. Air Products did not see an impact on its onsite
business from COVID-19 during its fiscal second quarter.
Fiscal Second Quarter Results by Business
Segment (comparisons versus prior year)
- Industrial Gases - Americas sales of $932 million decreased six percent, as three
percent higher pricing and two percent higher volumes were more
than offset by nine percent lower energy pass-through and two
percent unfavorable currency. The higher volumes were primarily
driven by strong hydrogen refinery demand in the U.S. Gulf Coast
and Canada. Operating income of
$268 million increased five percent,
primarily driven by price and volume, and operating margin of 28.7
percent increased 290 basis points, with about 250 basis points of
the margin improvement due to lower energy cost pass-through.
Adjusted EBITDA of $425 million
increased seven percent, primarily driven by price and volume, and
adjusted EBITDA margin of 45.6 percent increased 540 basis points,
with about 350 basis points of the margin improvement due to lower
energy cost pass-through.
- Industrial Gases - EMEA sales of $493 million were flat with the prior year.
Volumes increased four percent—primarily due to new projects and an
acquisition, with solid refinery hydrogen demand—and higher pricing
contributed three percent, offset by four percent lower energy
pass-through and three percent unfavorable currency. Operating
income of $125 million increased two
percent, primarily driven by higher pricing, and operating margin
of 25.3 percent increased 50 basis points. Adjusted EBITDA of
$186 million increased two percent,
primarily driven by higher pricing, and adjusted EBITDA margin of
37.7 percent increased 90 basis points.
- Industrial Gases - Asia
sales of $658 million increased five
percent. Volumes increased six percent, driven by new plants and a
short-term contract, which more than offset the negative four
percent impact from COVID-19 on merchant volumes. Pricing increased
two percent, while currency had a negative three percent impact.
Operating income of $209 million
increased five percent, primarily on improved pricing, and
operating margin of 31.8 percent declined 10 basis points. Adjusted
EBITDA of $327 million increased 10
percent on improved volumes and pricing, and adjusted EBITDA margin
of 49.7 percent increased 200 basis points.
Outlook
Ghasemi said, "It is encouraging to see some improvement in the
number of COVID cases and a flattening of the curve in certain
areas around the world; however, significant economic uncertainty
remains. Despite this, our strong financial position and robust
business model will allow us to continue to execute our strategy to
create long-term shareholder value through capital deployment and
successful execution of the projects in our backlog. Our dividend
growth remains a top priority. Most importantly, we will not let up
our efforts to protect our people's health and safety and take care
of their welfare – they are what make the continued success of Air
Products possible."
Air Products expects declines in Americas and EMEA merchant
volumes to continue and be more significant in its fiscal third
quarter and potentially longer depending on the duration and
impacts of the COVID-19 pandemic.
Given the significant uncertainty that remains regarding the
duration of the crisis, the pace of recovery and the negative
impact on the global economy from the rapidly evolving COVID-19
pandemic, Air Products is not providing Q3 FY20 EPS guidance. In
addition, in light of current conditions, Air Products also
believes it is prudent to withdraw its FY20 EPS and capital
expenditure guidance; the Company advises its investors that such
guidance should no longer be relied upon. Air Products is not
providing new FY20 guidance at this time.
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 Q2 earnings teleconference scheduled for 10:00 a.m. Eastern Time on April 23, 2020 by calling 323-794-2551 and
entering passcode 1932129, 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 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 about $50
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, or 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, 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. 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
|
Six Months
Ended
|
|
31 March
|
31 March
|
(Millions of dollars,
except for share and per share data)
|
2020
|
2019
|
2020
|
2019
|
Sales
|
$2,216.3
|
|
$2,187.7
|
|
$4,471.0
|
|
$4,411.7
|
|
Cost of
sales
|
1,460.1
|
|
1,474.7
|
|
2,946.7
|
|
3,018.7
|
|
Facility
closure
|
—
|
|
—
|
|
—
|
|
29.0
|
|
Selling and
administrative
|
201.7
|
|
190.0
|
|
403.4
|
|
379.6
|
|
Research and
development
|
19.2
|
|
16.9
|
|
36.9
|
|
31.9
|
|
Company headquarters
relocation income (expense)
|
33.8
|
|
—
|
|
33.8
|
|
—
|
|
Other income
(expense), net
|
8.1
|
|
10.4
|
|
20.4
|
|
19.0
|
|
Operating
Income
|
577.2
|
|
516.5
|
|
1,138.2
|
|
971.5
|
|
Equity affiliates'
income
|
88.2
|
|
46.2
|
|
146.4
|
|
99.1
|
|
Interest
expense
|
19.3
|
|
35.4
|
|
38.0
|
|
72.7
|
|
Other non-operating
income (expense), net
|
7.1
|
|
13.7
|
|
16.2
|
|
32.2
|
|
Income From
Continuing Operations Before Taxes
|
653.2
|
|
541.0
|
|
1,262.8
|
|
1,030.1
|
|
Income tax
provision
|
148.5
|
|
107.5
|
|
269.2
|
|
239.6
|
|
Income From
Continuing Operations
|
504.7
|
|
433.5
|
|
993.6
|
|
790.5
|
|
Loss from
discontinued operations, net of tax
|
(14.3)
|
|
—
|
|
(14.3)
|
|
—
|
|
Net
Income
|
490.4
|
|
433.5
|
|
979.3
|
|
790.5
|
|
Net income
attributable to noncontrolling interests of continuing
operations
|
12.6
|
|
12.2
|
|
25.9
|
|
21.7
|
|
Net Income
Attributable to Air Products
|
$477.8
|
|
$421.3
|
|
$953.4
|
|
$768.8
|
|
Net Income
Attributable to Air Products
|
|
|
|
|
Net income from
continuing operations
|
$492.1
|
|
$421.3
|
|
$967.7
|
|
$768.8
|
|
Net loss from
discontinued operations
|
(14.3)
|
|
—
|
|
(14.3)
|
|
—
|
|
Net Income
Attributable to Air Products
|
$477.8
|
|
$421.3
|
|
$953.4
|
|
$768.8
|
|
Basic Earnings Per
Common Share Attributable to Air Products*
|
|
|
|
|
Basic earnings per
share from continuing operations
|
$2.22
|
|
$1.91
|
|
$4.38
|
|
$3.49
|
|
Basic earnings per
share from discontinued operations
|
(0.06)
|
|
—
|
|
(0.06)
|
|
—
|
|
Basic Earnings Per
Common Share Attributable to Air Products
|
$2.16
|
|
$1.91
|
|
$4.31
|
|
$3.49
|
|
Diluted Earnings
Per Common Share Attributable to Air Products*
|
|
|
|
|
Diluted earnings per
share from continuing operations
|
$2.21
|
|
$1.90
|
|
$4.36
|
|
$3.48
|
|
Diluted earnings per
share from discontinued operations
|
(0.06)
|
|
—
|
|
(0.06)
|
|
—
|
|
Diluted Earnings
Per Common Share Attributable to Air Products
|
$2.15
|
|
$1.90
|
|
$4.29
|
|
$3.48
|
|
Weighted Average
Common Shares – Basic (in millions)
|
221.2
|
|
220.2
|
|
221.0
|
|
220.0
|
|
Weighted Average
Common Shares – Diluted (in millions)
|
222.3
|
|
221.4
|
|
222.2
|
|
221.2
|
|
|
*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)
|
|
|
31 March
|
30
September
|
(Millions of
dollars)
|
2020
|
2019
|
Assets
|
|
|
Current
Assets
|
|
|
Cash and cash
items
|
$2,220.1
|
|
$2,248.7
|
|
Short-term
investments
|
—
|
|
166.0
|
|
Trade receivables,
net
|
1,399.4
|
|
1,260.2
|
|
Inventories
|
399.7
|
|
388.3
|
|
Prepaid
expenses
|
129.6
|
|
77.4
|
|
Other receivables and
current assets
|
539.7
|
|
477.7
|
|
Total Current
Assets
|
4,688.5
|
|
4,618.3
|
|
Investment in net
assets of and advances to equity affiliates
|
1,314.6
|
|
1,276.2
|
|
Plant and equipment,
at cost
|
23,005.2
|
|
22,333.7
|
|
Less: accumulated
depreciation
|
12,381.5
|
|
11,996.1
|
|
Plant and equipment,
net
|
10,623.7
|
|
10,337.6
|
|
Goodwill,
net
|
785.3
|
|
797.1
|
|
Intangible assets,
net
|
377.9
|
|
419.5
|
|
Noncurrent lease
receivables
|
840.8
|
|
890.0
|
|
Other noncurrent
assets
|
870.4
|
|
604.1
|
|
Total Noncurrent
Assets
|
14,812.7
|
|
14,324.5
|
|
Total
Assets
|
$19,501.2
|
|
$18,942.8
|
|
Liabilities and
Equity
|
|
|
Current
Liabilities
|
|
|
Payables and accrued
liabilities
|
$1,649.1
|
|
$1,635.7
|
|
Accrued income
taxes
|
90.4
|
|
86.6
|
|
Short-term
borrowings
|
29.0
|
|
58.2
|
|
Current portion of
long-term debt
|
38.4
|
|
40.4
|
|
Total Current
Liabilities
|
1,806.9
|
|
1,820.9
|
|
Long-term
debt
|
2,922.1
|
|
2,907.3
|
|
Long-term debt –
related party
|
323.1
|
|
320.1
|
|
Other noncurrent
liabilities
|
1,881.0
|
|
1,712.4
|
|
Deferred income
taxes
|
844.4
|
|
793.8
|
|
Total Noncurrent
Liabilities
|
5,970.6
|
|
5,733.6
|
|
Total
Liabilities
|
7,777.5
|
|
7,554.5
|
|
Air Products
Shareholders' Equity
|
11,371.9
|
|
11,053.6
|
|
Noncontrolling
Interests
|
351.8
|
|
334.7
|
|
Total
Equity
|
11,723.7
|
|
11,388.3
|
|
Total Liabilities
and Equity
|
$19,501.2
|
|
$18,942.8
|
|
AIR PRODUCTS AND
CHEMICALS, INC. and Subsidiaries CONSOLIDATED STATEMENTS
OF CASH FLOWS (Unaudited)
|
|
|
Six Months
Ended
|
|
31 March
|
(Millions of
dollars)
|
2020
|
2019
|
Operating
Activities
|
|
|
Net income
|
$979.3
|
|
$790.5
|
|
Less: Net income
attributable to noncontrolling interests of continuing
operations
|
25.9
|
|
21.7
|
|
Net income
attributable to Air Products
|
953.4
|
|
768.8
|
|
Loss from
discontinued operations
|
14.3
|
|
—
|
|
Income from
continuing operations attributable to Air Products
|
967.7
|
|
768.8
|
|
Adjustments to
reconcile income to cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
583.9
|
|
520.1
|
|
Deferred income
taxes
|
55.0
|
|
27.5
|
|
Tax reform
repatriation
|
—
|
|
46.2
|
|
Facility
closure
|
—
|
|
29.0
|
|
Undistributed
(earnings) losses of unconsolidated affiliates
|
(101.6)
|
|
(27.2)
|
|
Gain on sale of
assets and investments
|
(40.5)
|
|
(2.3)
|
|
Share-based
compensation
|
26.9
|
|
21.2
|
|
Noncurrent lease
receivables
|
47.1
|
|
47.6
|
|
Other
adjustments
|
54.0
|
|
(3.5)
|
|
Working capital
changes that provided (used) cash, excluding effects of
acquisitions:
|
|
|
Trade
receivables
|
(111.9)
|
|
(55.4)
|
|
Inventories
|
(16.5)
|
|
(14.2)
|
|
Other
receivables
|
(0.7)
|
|
49.6
|
|
Payables and accrued
liabilities
|
(111.8)
|
|
(125.5)
|
|
Other working
capital
|
(113.1)
|
|
3.9
|
|
Cash Provided by
Operating Activities
|
1,238.5
|
|
1,285.8
|
|
Investing
Activities
|
|
|
Additions to plant
and equipment
|
(930.6)
|
|
(963.5)
|
|
Acquisitions, less
cash acquired
|
—
|
|
(106.3)
|
|
Investment in and
advances to unconsolidated affiliates
|
(22.7)
|
|
(1.4)
|
|
Proceeds from sale of
assets and investments
|
68.0
|
|
3.8
|
|
Purchases of
investments
|
—
|
|
(5.3)
|
|
Proceeds from
investments
|
177.0
|
|
187.9
|
|
Other investing
activities
|
1.9
|
|
2.7
|
|
Cash Used for
Investing Activities
|
(706.4)
|
|
(882.1)
|
|
Financing
Activities
|
|
|
Payments on long-term
debt
|
(3.4)
|
|
(2.7)
|
|
Net decrease in
commercial paper and short-term borrowings
|
(33.3)
|
|
(6.6)
|
|
Dividends paid to
shareholders
|
(511.7)
|
|
(483.1)
|
|
Proceeds from stock
option exercises
|
20.2
|
|
45.4
|
|
Other financing
activities
|
(9.6)
|
|
(12.8)
|
|
Cash Used for
Financing Activities
|
(537.8)
|
|
(459.8)
|
|
Effect of Exchange
Rate Changes on Cash
|
(22.9)
|
|
0.7
|
|
Decrease in cash and
cash items
|
(28.6)
|
|
(55.4)
|
|
Cash and Cash items -
Beginning of Year
|
2,248.7
|
|
2,791.3
|
|
Cash and Cash
items - End of Period
|
$2,220.1
|
|
$2,735.9
|
|
Supplemental Cash
Flow Information
|
|
|
Cash paid for taxes
(net of refunds)
|
$253.5
|
|
$165.6
|
|
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
31 March 2020
|
|
|
|
|
|
|
|
Sales
|
$932.4
|
|
$492.7
|
|
$658.1
|
|
$79.3
|
|
$53.8
|
|
$2,216.3
|
|
|
Operating income
(loss)
|
268.0
|
|
124.6
|
|
209.1
|
|
(19.8)
|
|
(38.5)
|
|
543.4
|
|
(A)
|
Depreciation and
amortization
|
135.5
|
|
47.6
|
|
104.1
|
|
2.4
|
|
5.1
|
|
294.7
|
|
|
Equity affiliates'
income
|
21.6
|
|
13.5
|
|
13.8
|
|
5.5
|
|
—
|
|
54.4
|
|
(A)
|
Three Months Ended
31 March 2019
|
|
|
|
|
|
|
|
Sales
|
$991.7
|
|
$494.4
|
|
$625.4
|
|
$53.8
|
|
$22.4
|
|
$2,187.7
|
|
|
Operating income
(loss)
|
255.6
|
|
122.5
|
|
199.7
|
|
(12.2)
|
|
(49.1)
|
|
516.5
|
|
(A)
|
Depreciation and
amortization
|
124.9
|
|
46.3
|
|
84.9
|
|
2.0
|
|
4.0
|
|
262.1
|
|
|
Equity affiliates'
income
|
17.8
|
|
13.3
|
|
13.8
|
|
1.3
|
|
—
|
|
46.2
|
|
(A)
|
|
|
|
|
|
|
|
|
|
Industrial
Gases –
Americas
|
Industrial
Gases –
EMEA
|
Industrial
Gases –
Asia
|
Industrial
Gases –
Global
|
Corporate
and other
|
Total
|
|
Six Months Ended
31 March 2020
|
|
|
|
|
|
|
|
Sales
|
$1,868.6
|
|
$991.4
|
|
$1,350.9
|
|
$171.9
|
|
$88.2
|
|
$4,471.0
|
|
|
Operating income
(loss)
|
525.2
|
|
245.1
|
|
437.6
|
|
(16.2)
|
|
(87.3)
|
|
1,104.4
|
|
(A)
|
Depreciation and
amortization
|
267.3
|
|
96.0
|
|
205.7
|
|
4.8
|
|
10.1
|
|
583.9
|
|
|
Equity affiliates'
income
|
42.2
|
|
32.8
|
|
30.7
|
|
6.9
|
|
—
|
|
112.6
|
|
(A)
|
Six Months Ended
31 March 2019
|
|
|
|
|
|
|
|
Sales
|
$1,980.9
|
|
$1,018.6
|
|
$1,252.2
|
|
$122.0
|
|
$38.0
|
|
$4,411.7
|
|
|
Operating income
(loss)
|
474.8
|
|
228.1
|
|
401.5
|
|
(8.3)
|
|
(95.6)
|
|
1,000.5
|
|
(A)
|
Depreciation and
amortization
|
250.5
|
|
92.6
|
|
164.8
|
|
4.1
|
|
8.1
|
|
520.1
|
|
|
Equity affiliates'
income
|
40.4
|
|
27.0
|
|
30.0
|
|
1.7
|
|
—
|
|
99.1
|
|
(A)
|
Total
Assets
|
|
|
|
|
|
|
|
31 March
2020
|
$5,933.7
|
|
$3,378.8
|
|
$6,489.7
|
|
$438.1
|
|
$3,260.9
|
|
$19,501.2
|
|
|
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
|
Six Months
Ended
|
|
31 March
|
31 March
|
Operating
Income
|
2020
|
2019
|
2020
|
2019
|
Total
|
$543.4
|
|
$516.5
|
|
$1,104.4
|
|
$1,000.5
|
|
Facility
closure
|
—
|
|
—
|
|
—
|
|
(29.0)
|
|
Company headquarters
relocation income (expense)
|
33.8
|
|
—
|
|
33.8
|
|
—
|
|
Consolidated
Operating Income
|
$577.2
|
|
$516.5
|
|
$1,138.2
|
|
$971.5
|
|
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
|
Six Months
Ended
|
|
31 March
|
31 March
|
Equity Affiliates'
Income
|
2020
|
2019
|
2020
|
2019
|
Total
|
$54.4
|
|
$46.2
|
|
$112.6
|
|
$99.1
|
|
India Finance Act
2020
|
33.8
|
|
—
|
|
33.8
|
|
—
|
|
Consolidated
Equity Affiliates' Income
|
$88.2
|
|
$46.2
|
|
$146.4
|
|
$99.1
|
|
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.
The fiscal year 2020 non-GAAP adjustments are detailed below.
For information related to non-GAAP adjustments in the second
quarter of fiscal year 2019, refer to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated 24 April 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 three and six months ended 31 March 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.
|
Continuing
Operations
|
|
Three Months Ended 31
March
|
Q2 2020 vs. Q2
2019
|
Operating
Income
|
Equity
Affiliates'
Income
|
Income Tax
Provision
|
Net
Income
Attributable
to Air
Products
|
Diluted
EPS(A)
|
2020 GAAP
|
$577.2
|
|
$88.2
|
|
$148.5
|
|
$492.1
|
|
$2.21
|
|
2019 GAAP
|
516.5
|
|
46.2
|
|
107.5
|
|
421.3
|
|
1.90
|
|
Change
GAAP
|
|
|
|
$70.8
|
|
$0.31
|
|
% Change
GAAP
|
|
|
|
17
|
%
|
16
|
%
|
2020 GAAP
|
$577.2
|
|
$88.2
|
|
$148.5
|
|
$492.1
|
|
$2.21
|
|
Company headquarters
relocation (income) expense
|
(33.8)
|
|
—
|
|
(8.2)
|
|
(25.6)
|
|
(0.12)
|
|
India Finance Act
2020
|
—
|
|
(33.8)
|
|
(20.3)
|
|
(13.5)
|
|
(0.06)
|
|
2020 Non-GAAP Measure
("Adjusted")
|
$543.4
|
|
$54.4
|
|
$120.0
|
|
$453.0
|
|
$2.04
|
|
2019 GAAP
|
$516.5
|
|
$46.2
|
|
$107.5
|
|
$421.3
|
|
$1.90
|
|
Pension settlement
loss(B)
|
—
|
|
—
|
|
1.2
|
|
3.8
|
|
0.02
|
|
2019 Non-GAAP Measure
("Adjusted")
|
$516.5
|
|
$46.2
|
|
$108.7
|
|
$425.1
|
|
$1.92
|
|
Change Non-GAAP
Measure ("Adjusted")
|
|
|
|
$27.9
|
|
$0.12
|
|
% Change Non-GAAP
Measure ("Adjusted")
|
|
|
|
7
|
%
|
6
|
%
|
|
|
(A)
|
The per share impact
for each of our non-GAAP adjustments was calculated independently
and may not sum to total adjusted diluted EPS due to
rounding.
|
(B)
|
Reflected on the
consolidated income statements within "Other non-operating income
(expense), net." Fiscal year 2019 includes a before-tax impact
of $5.0 for the three months ended 31 March
2019.
|
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
We define adjusted EBITDA as net income less income (loss) from
discontinued operations, net of tax, and excluding certain 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
|
|
Q2 YTD
Total
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
$2,254.7
|
|
|
|
$2,216.3
|
|
|
|
|
|
|
|
|
|
$4,471.0
|
|
2019
|
|
2,224.0
|
|
|
|
2,187.7
|
|
|
|
2,224.0
|
|
|
|
2,283.2
|
|
|
|
4,411.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q2 YTD
Total
|
2020
|
$
|
Margin
|
|
$
|
Margin
|
|
$
|
Margin
|
|
$
|
Margin
|
|
$
|
Margin
|
Net income and net
income margin
|
$488.9
|
|
21.7
|
%
|
|
$490.4
|
|
22.1
|
%
|
|
|
|
|
|
|
|
$979.3
|
|
21.9
|
%
|
Less: Loss from
discontinued operations,
net of tax
|
—
|
|
—
|
%
|
|
(14.3)
|
|
(0.6)
|
%
|
|
|
|
|
|
|
|
(14.3)
|
|
(0.3)
|
%
|
Add: Interest
expense
|
18.7
|
|
0.8
|
%
|
|
19.3
|
|
0.9
|
%
|
|
|
|
|
|
|
|
38.0
|
|
0.9
|
%
|
Less: Other
non-operating income
(expense), net
|
9.1
|
|
0.4
|
%
|
|
7.1
|
|
0.3
|
%
|
|
|
|
|
|
|
|
16.2
|
|
0.4
|
%
|
Add: Income tax
provision
|
120.7
|
|
5.4
|
%
|
|
148.5
|
|
6.7
|
%
|
|
|
|
|
|
|
|
269.2
|
|
6.0
|
%
|
Add: Depreciation and
amortization
|
289.2
|
|
12.8
|
%
|
|
294.7
|
|
13.3
|
%
|
|
|
|
|
|
|
|
583.9
|
|
13.1
|
%
|
Less: Company
headquarters relocation
income (expense)
|
—
|
|
—
|
%
|
|
33.8
|
|
1.5
|
%
|
|
|
|
|
|
|
|
33.8
|
|
0.8
|
%
|
Less: India Finance
Act 2020 - equity
affiliate income impact
|
—
|
|
—
|
%
|
|
33.8
|
|
1.5
|
%
|
|
|
|
|
|
|
|
33.8
|
|
0.8
|
%
|
Adjusted EBITDA
and adjusted
EBITDA margin
|
$908.4
|
|
40.3
|
%
|
|
$892.5
|
|
40.3
|
%
|
|
|
|
|
|
|
|
$1,800.9
|
|
40.3
|
%
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q2 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
|
%
|
|
$790.5
|
|
17.9
|
%
|
Add: Interest
expense
|
37.3
|
|
1.7
|
%
|
|
35.4
|
|
1.6
|
%
|
|
34.2
|
|
1.5
|
%
|
|
30.1
|
|
1.3
|
%
|
|
72.7
|
|
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
|
%
|
|
32.2
|
|
0.7
|
%
|
Add: Income tax
provision
|
132.1
|
|
5.9
|
%
|
|
107.5
|
|
4.9
|
%
|
|
109.3
|
|
4.9
|
%
|
|
131.2
|
|
5.7
|
%
|
|
239.6
|
|
5.4
|
%
|
Add: Depreciation and
amortization
|
258.0
|
|
11.6
|
%
|
|
262.1
|
|
12.0
|
%
|
|
269.1
|
|
12.1
|
%
|
|
293.6
|
|
12.9
|
%
|
|
520.1
|
|
11.8
|
%
|
Add: Facility
closure
|
29.0
|
|
1.3
|
%
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
29.0
|
|
0.7
|
%
|
Add: Cost reduction
actions
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
25.5
|
|
1.2
|
%
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
Less: Gain on
exchange of equity affiliate
investments
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
|
29.1
|
|
1.3
|
%
|
|
—
|
|
—
|
%
|
|
—
|
|
—
|
%
|
Adjusted EBITDA
and adjusted
EBITDA margin
|
$794.9
|
|
35.7
|
%
|
|
$824.8
|
|
37.7
|
%
|
|
$891.6
|
|
40.1
|
%
|
|
$956.7
|
|
41.9
|
%
|
|
$1,619.7
|
|
36.7
|
%
|
|
Q1
|
|
Q2
|
|
|
|
|
|
Q2 YTD
Total
|
2020 vs.
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income $
change
|
|
$131.9
|
|
|
|
$56.9
|
|
|
|
|
|
|
|
|
|
$188.8
|
|
Net income %
change
|
|
37
|
%
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
24
|
%
|
Net income margin
change
|
|
570
|
bp
|
|
|
230
|
bp
|
|
|
|
|
|
|
|
|
400
|
bp
|
Change
Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA $
change
|
|
$113.5
|
|
|
|
$67.7
|
|
|
|
|
|
|
|
|
|
$181.2
|
|
Adjusted EBITDA %
change
|
|
14
|
%
|
|
|
8
|
%
|
|
|
|
|
|
|
|
|
11
|
%
|
Adjusted EBITDA
margin change
|
|
460
|
bp
|
|
|
260
|
bp
|
|
|
|
|
|
|
|
|
360
|
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 31 March
2020 and 2019:
|
Industrial
Gases–
Americas
|
Industrial
Gases–
EMEA
|
Industrial
Gases–
Asia
|
Industrial
Gases–
Global
|
Corporate
and other
|
Total
|
|
GAAP
MEASURES
|
|
|
|
|
|
|
|
Three Months Ended
31 March 2020
|
|
|
|
|
|
|
Operating income
(loss)
|
$268.0
|
|
$124.6
|
|
$209.1
|
|
($19.8)
|
|
($38.5)
|
|
$543.4
|
|
(A)
|
Operating
margin
|
28.7
|
%
|
25.3
|
%
|
31.8
|
%
|
|
|
|
|
Three Months Ended
31 March 2019
|
|
|
|
|
|
|
Operating income
(loss)
|
$255.6
|
|
$122.5
|
|
$199.7
|
|
($12.2)
|
|
($49.1)
|
|
$516.5
|
|
(A)
|
Operating
margin
|
25.8
|
%
|
24.8
|
%
|
31.9
|
%
|
|
|
|
|
Operating income $
change
|
$12.4
|
|
$2.1
|
|
$9.4
|
|
|
|
|
|
Operating income %
change
|
5
|
%
|
2
|
%
|
5
|
%
|
|
|
|
|
Operating margin
change
|
290
|
bp
|
50
|
bp
|
(10)
|
bp
|
|
|
|
|
NON-GAAP
MEASURES
|
|
|
|
|
|
|
|
Three Months Ended
31 March 2020
|
|
|
|
|
|
|
Operating income
(loss)
|
$268.0
|
|
$124.6
|
|
$209.1
|
|
($19.8)
|
|
($38.5)
|
|
$543.4
|
|
(A)
|
Add: Depreciation and
amortization
|
135.5
|
|
47.6
|
|
104.1
|
|
2.4
|
|
5.1
|
|
294.7
|
|
|
Add: Equity
affiliates' income
|
21.6
|
|
13.5
|
|
13.8
|
|
5.5
|
|
—
|
|
54.4
|
|
(B)
|
Adjusted
EBITDA
|
$425.1
|
|
$185.7
|
|
$327.0
|
|
($11.9)
|
|
($33.4)
|
|
$892.5
|
|
|
Adjusted EBITDA
margin
|
45.6
|
%
|
37.7
|
%
|
49.7
|
%
|
|
|
|
|
Three Months Ended
31 March 2019
|
|
|
|
|
|
|
Operating income
(loss)
|
$255.6
|
|
$122.5
|
|
$199.7
|
|
($12.2)
|
|
($49.1)
|
|
$516.5
|
|
(A)
|
Add: Depreciation and
amortization
|
124.9
|
|
46.3
|
|
84.9
|
|
2.0
|
|
4.0
|
|
262.1
|
|
|
Add: Equity
affiliates' income
|
17.8
|
|
13.3
|
|
13.8
|
|
1.3
|
|
—
|
|
46.2
|
|
(B)
|
Adjusted
EBITDA
|
$398.3
|
|
$182.1
|
|
$298.4
|
|
($8.9)
|
|
($45.1)
|
|
$824.8
|
|
|
Adjusted EBITDA
margin
|
40.2
|
%
|
36.8
|
%
|
47.7
|
%
|
|
|
|
|
Adjusted EBITDA $
change
|
$26.8
|
|
$3.6
|
|
$28.6
|
|
|
|
|
|
Adjusted EBITDA %
change
|
7
|
%
|
2
|
%
|
10
|
%
|
|
|
|
|
Adjusted EBITDA
margin change
|
540
|
bp
|
90
|
bp
|
200
|
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
|
|
|
31 March
|
|
Operating
Income
|
2020
|
2019
|
|
Consolidated
operating income
|
$577.2
|
|
$516.5
|
|
|
Company headquarters
relocation (income) expense
|
(33.8)
|
|
—
|
|
|
Total
|
$543.4
|
|
$516.5
|
|
|
(B) The table below reconciles equity
affiliates' income as reflected on our consolidated income
statements to total equity affiliates' income in the table
above:
|
Three Months
Ended
|
|
|
31 March
|
|
Equity Affiliates'
Income
|
2020
|
2019
|
|
Consolidated equity
affiliates' income
|
$88.2
|
|
$46.2
|
|
|
India Finance Act
2020
|
(33.8)
|
|
—
|
|
|
Total
|
$54.4
|
|
$46.2
|
|
|
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
31 March
|
|
2020
|
2019
|
Income Tax
Provision
|
$148.5
|
|
$107.5
|
|
Income From
Continuing Operations Before Taxes
|
$653.2
|
|
$541.0
|
|
Effective Tax
Rate
|
22.7
|
%
|
19.9
|
%
|
Income Tax
Provision
|
$148.5
|
|
$107.5
|
|
Company headquarters
relocation
|
(8.2)
|
|
—
|
|
India Finance Act
2020
|
(20.3)
|
|
—
|
|
Pension settlement
loss
|
—
|
|
1.2
|
|
Adjusted Income Tax
Provision
|
$120.0
|
|
$108.7
|
|
Income From
Continuing Operations Before Taxes
|
$653.2
|
|
$541.0
|
|
Company headquarters
relocation (income) expense
|
(33.8)
|
|
—
|
|
India Finance Act
2020 - equity affiliate income impact
|
(33.8)
|
|
—
|
|
Pension settlement
loss
|
—
|
|
5.0
|
|
Adjusted Income From
Continuing Operations Before Taxes
|
$585.6
|
|
$546.0
|
|
Adjusted Effective
Tax Rate
|
20.5
|
%
|
19.9
|
%
|
NET DEBT
We define net debt as total debt, which includes short-term
borrowings, the current portion of long-term debt, and long-term
debt, less cash and cash items. A reconciliation of total debt to
our reported net debt is provided below:
|
31 March
|
|
2020
|
Short-term
borrowings
|
$29.0
|
|
Current portion of
long-term debt
|
38.4
|
|
Long-term
debt
|
2,922.1
|
|
Long-term debt –
related party
|
323.1
|
|
Total
Debt
|
3,312.6
|
|
Less: Cash and cash
items
|
2,220.1
|
|
Net
Debt
|
$1,092.5
|
|
View original
content:http://www.prnewswire.com/news-releases/air-products-reports-fiscal-2020-second-quarter-gaap-eps-of-2-21--up-16-percent-and-adjusted-eps-of-2-04--up-six-percent-301045899.html
SOURCE Air Products