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News ReleaseAir Products Reports Fiscal 2015 Second Quarter EPS Up 17 Percent*

April 30, 2015 Lehigh Valley, Pa.

  • EPS of $1.55*, up 17 percent* versus prior year on a non-GAAP diluted basis
  • Adjusted EBITDA margin of 29.4* percent up 440* basis points versus prior year
  • Continued strong performance despite currency headwinds
  • Organization focused on five-point plan and delivering results
  • Awarded contract with Saudi Aramco for the world’s largest industrial gas complex
  • EPS of $1.33 versus prior year of $1.32 on a GAAP diluted basis

Air Products (NYSE: APD) today reported net income of $336 million*, up 19 percent* versus prior year, and diluted earnings per share (EPS) of $1.55*, up 17 percent* versus prior year for its fiscal second quarter ended March 31, 2015.

On a GAAP basis, net income and diluted EPS from continuing operations were $290 million and $1.33, respectively, for the quarter.

*The results and guidance in this release, unless otherwise indicated, are based on non-GAAP continuing operations. A reconciliation of GAAP to non-GAAP results can be found at the end of this release.

Second quarter sales of $2,415 million decreased six percent versus prior year, as underlying sales growth of five percent was more than offset by unfavorable currency and lower energy pass-through. Volumes increased four percent, primarily in Industrial Gases–Asia and Materials Technologies, and pricing was up one percent. Sequentially, sales declined six percent on unfavorable currency and lower energy pass-through.

Operating income of $442 million increased 15 percent versus prior year, and operating margin of 18.3 percent improved 340 basis points. Adjusted EBITDA of $709 million increased 10 percent over prior year, and EBITDA margin of 29.4 percent improved 440 basis points, reflecting strong operating leverage.

Commenting on the quarter, Seifi Ghasemi, chairman, president and chief executive officer, said, “I am, once again, very proud of the Air Products team, whose hard work and focus on our five-point plan have enabled us to deliver these strong results, even in the face of significant currency headwinds. Despite economic uncertainty, we remain laser focused on the things we can control and are maintaining our full-year guidance.”

Second Quarter Results by Business Segment:

  • Industrial Gases – Americas sales of $890 million decreased 14 percent versus prior year on 13 percent lower energy pass-through and three percent unfavorable currency. Underlying sales were up two percent, primarily on higher North America liquid bulk and hydrogen volumes. Despite energy and currency headwinds, operating income of $182 million increased seven percent on improved cost performance and higher volumes and pricing. Operating margin of 20.4 percent improved 400 basis points over prior year. Adjusted EBITDA of $300 million increased seven percent, and EBITDA margin of 33.7 percent improved 640 basis points over prior year. Sequentially, operating income decreased 14 percent as the benefit of restructuring actions was more than offset by the impact from currency, lower volumes and energy pass-through.
  • Industrial Gases – Europe, Middle East, and Africa (EMEA) sales of $449 million declined 17 percent versus last year on 15 percent unfavorable currency. Underlying sales were flat, as higher pricing offset lower volumes. Operating income of $71 million decreased 19 percent and adjusted EBITDA of $127 million decreased 17 percent versus prior year, primarily on the significant unfavorable currency impact.
  • Industrial Gases – Asia sales of $393 million increased seven percent versus prior year despite the negative impact of currency and energy pass-through. Volumes increased 15 percent, primarily on strong volume growth from new plants. Operating income of $85 million increased 19 percent, and operating margin of 21.6 percent improved 210 basis points over prior year due to higher volumes from the new plants and favorable cost performance. Adjusted EBITDA of $144 million increased 14 percent, and EBITDA margin of 36.7 percent improved 200 basis points over prior year. Sequentially, operating income decreased six percent on higher costs, unfavorable currency and lower pricing.
  • Materials Technologies sales of $533 million increased seven percent over the prior year. Underlying sales were up 11 percent on nine percent higher volume growth and two percent positive pricing. Electronics Materials sales were up 16 percent on strong volume growth in all business units and positive price. Performance Materials sales declined one percent from the prior year as four percent underlying sales growth was offset by currency impacts. Operating income of $124 million increased 32 percent, and operating margin of 23.3 percent improved 450 basis points versus prior year, primarily due to higher volumes and pricing. Adjusted EBITDA of $148 million increased 27 percent, and EBITDA margin of 27.8 percent improved 440 basis points over prior year.

Non-GAAP results for the company exclude a pre-tax charge of $55.4 million, or $0.18 per share, for business restructuring and cost reduction actions, and a pre-tax pension settlement charge of $12.6 million, or $0.04 per share.

Outlook

Air Products now expects capital expenditures for fiscal year 2015 of about $1.7 billion, at the low-end of its previous forecast.

Looking ahead, Air Products expects third quarter EPS from continuing operations to be between $1.55 and $1.60 per share. For the full fiscal year, the Company is maintaining its guidance from continuing operations of $6.35 to $6.55 per share, which at the midpoint, represents a 12 percent increase over fiscal 2014.

Access the Q2 earnings teleconference scheduled for 10:00 a.m. Eastern Time on April 30 by calling 877-719-9801 (domestic) or 719-325-4818 (international) and entering passcode 5572123, or access the Event Details page on Air Products’ Investor Relations web site.

About Air Products
Air Products (NYSE:APD) is a leading industrial gases company. For nearly 75 years, the Company has provided atmospheric, process and specialty gases, and related equipment to manufacturing markets, including metals, food and beverage, refining and petrochemical, and natural gas liquefaction. Air Products’ Materials Technologies segment serves the semiconductor, polyurethanes, cleaning and coatings, and adhesives industries. Over 20,000 employees in 50 countries are working to make Air Products the world’s safest and best performing industrial gases company, providing sustainable offerings and excellent service to all customers. In fiscal 2014, Air Products had sales of $10.4 billion and was ranked number 276 on the Fortune 500 annual list of public companies. For more information, visit www.airproducts.com.  

NOTE: This release contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings guidance and business outlook. These forward-looking statements are based on management's reasonable expectations and assumptions as of the date of this release. Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors not anticipated by management, including, without limitation, global or regional economic conditions and supply and demand dynamics in market segments into which the Company sells; significant fluctuations in interest rates and foreign currencies from that currently anticipated; future financial and operating performance of major customers; unanticipated contract terminations or customer cancellations or postponement of projects and sales; the impact of competitive products and pricing; ability to protect and enforce the Company's intellectual property rights; unexpected changes in raw material supply and markets; the impact of price fluctuations in natural gas and disruptions in markets and the economy due to oil price volatility; the ability to recover increased energy and raw material costs from customers; costs and outcomes of litigation or regulatory investigations; the impact of management and organizational changes; the success of productivity and cost reduction programs; the timing, impact, and other uncertainties of future acquisitions or divestitures; political risks, including the risks of unanticipated government actions; acts of war or terrorism; the impact of changes in environmental, tax or other legislation and regulatory activities in jurisdictions in which the Company and its affiliates operate; and other risk factors described in the Company's Form 10-K for its fiscal year ended September 30, 2014. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this release to reflect any change in the Company's assumptions, beliefs or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.

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

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

The discussion of second quarter and year-to-date results includes comparisons to non-GAAP financial measures, including Adjusted EBITDA and non GAAP Capital Expenditures. The presentation of non-GAAP measures is intended to enhance the usefulness of financial information by providing measures which management uses internally to evaluate our operating performance and manage our capital expenditures.

We use non-GAAP measures to assess our operating performance by excluding certain disclosed items that we believe are not representative of our underlying business. We believe non-GAAP financial measures provide investors with meaningful information to understand our underlying operating results and to analyze financial and business trends. Non-GAAP financial measures, including Adjusted EBITDA, should not be viewed in isolation, are not a substitute for GAAP measures, and have limitations which include but are not limited to:

  • Our measure excludes certain disclosed items, which we do not consider to be representative of underlying business operations. However, these disclosed items represent costs (benefits) to the Company.
  • Though not business operating costs, interest expense and income tax provision represent ongoing costs of the Company.
  • Depreciation, amortization, and impairment charges represent the wear and tear and/or reduction in value of the plant, equipment, and intangible assets which permit us to manufacture and/or market our products.
  • Other companies may define non-GAAP measures differently than we do, limiting their usefulness as comparative measures.

A reader may find any one or all of these items important in evaluating our performance. Management compensates for the limitations of using non-GAAP financial measures by using them only to supplement our GAAP results to provide a more complete understanding of the factors and trends affecting our business. In evaluating these financial measures, the reader should be aware that we may incur expenses similar to those eliminated in this presentation in the future.

CONSOLIDATED RESULTS

  Continuing Operations
  Q2 YTD
2015 Q2 vs. 2014 Q2 Operating
Income
Operating
Margin
Net
Income
Diluted
EPS
Operating
Income
Operating
Margin
Net
Income
Diluted
EPS
2015 Q2 GAAP  $374.4  15.5% $290.0  $1.33 $804.4  16.2% $614.6  $2.83

2014 Q2 GAAP

 384.7  14.9% 283.5  1.32 770.3  15.0% 570.6  2.66
Change GAAP $(10.3)  60bp $6.5  $.01 $34.1  120bp $44.0  $.17
% Change GAAP (3)%

 

 2%  1%  4%

 

 8%  6%
2015 Q2 GAAP  $374.4  15.5%  $290.0  $1.33  $804.4  16.2%  $614.6  $2.83
Business restructuring and cost reduction actions (tax impact $17.2 and $27.9)  55.4  2.3%  38.2  .18  87.8  1.7%  59.9  .27
Pension settlement loss (tax impact $4.7)  12.6  .5%  7.9  .04  12.6  .3%  7.9  .04
Gain on previously held equity interest (tax impact $6.7) (17.9) (.4)% (11.2) (.05)
2015 Q2 Non-GAAP Measure  $442.4  18.3%  $336.1  $1.55  $886.9  17.8%  $671.2  $3.09
2014 Q2 GAAP $384.7  14.9%  $283.5  $1.32  $770.3  15.0%  $570.6  $2.66
2014 Q2 Non-GAAP Measure $384.7  14.9% $ 283.5  $1.32  $770.3  15.0%  $570.6  $2.66
Change Non-GAAP Measure $57.7  340bp $52.6  $.23 $116.6  280bp $100.6  $.43
% Change Non-GAAP Measure  15%

 

 19%  17%  15%

 

 18%  16%

 

  QTD
2015 Q2 vs. 2015 Q1 Operating
Income
Operating
Margin
Net
Income
Diluted
EPS
2015 Q2 GAAP $374.4 15.5% $290.0 $1.33
2015 Q1 GAAP 430.0 16.8% 324.6 1.50
Change GAAP $(55.6) (130bp) $(34.6) $(.17)
% Change GAAP (13)%

 

(11)% (11)%
2015 Q2 GAAP $374.4 15.5% $290.0 $1.33
Business restructuring and cost reduction actions (tax impact $17.2) 55.4 2.3% 38.2 .18
Pension settlement loss (tax impact $4.7) 12.6 .5% 7.9 .04
2015 Q2 Non-GAAP Measure $442.4 18.3% $336.1 $1.55
2015 Q1 GAAP $430.0 16.8% $324.6 $1.50
Business restructuring and cost reduction actions (tax impact $10.7) 32.4 1.3% 21.7 .10
Gain on previously held equity interest (tax impact $6.7) (17.9) (.7)% (11.2) (.05)
2015 Q1 Non-GAAP Measure $444.5 17.4% $335.1 $1.55
Change Non-GAAP Measure $(2.1) 90bp $1.0 $—
% Change Non-GAAP Measure —%

 

—% —%

 

ADJUSTED EBITDA

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

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

2015 Q1 Q2 Q3 Q4 Q2 YTD
Total
Income from Continuing Operations(A) $337.5 296.9

 

 

$634.4
Add: Interest expense 29.1 23.4

 

 

52.5
Add: Income tax provision 106.5 87.1

 

 

193.6
Add: Depreciation and amortization 235.5 233.3

 

 

468.8
Add: Business restructuring and cost reduction actions 32.4 55.4

 

 

87.8
Add: Pension settlement loss 12.6

 

 

12.6
Less: Gain on previously held equity interest 17.9

 

 

17.9
Adjusted EBITDA $723.1 708.7

 

 

$1,431.8
2014 Q1 Q2 Q3 Q4 Q2 YTD
Total
Income from Continuing Operations(A) $296.0 $291.5 $323.5 $77.5 $587.5
Add: Interest expense 33.3 31.5 31.3 29.0 64.8
Add: Income tax provision 94.5 92.1 102.1 77.3(B) 186.6
Add: Depreciation and amortization 234.2 229.1 239.0 254.6 463.3
Add: Business restructuring and cost reduction actions 12.7
Add: Pension settlement loss 5.5
Add: Goodwill and intangible asset impairment charge 310.1
Adjusted EBITDA $658.0 $644.2 $695.9 $766.7 $1,302.2

(A)Includes net income attributable to noncontrolling interests.
(B)Includes an income tax benefit of $51.6 from the favorable impact of a tax election in a non-U.S. subsidiary partially offset by $20.6 of income tax expense from Chilean tax reform.

2015 vs. 2014

 

 

 

 

 

Adjusted EBITDA change $65.1 $64.5

 

 

$129.6
Adjusted EBITDA % change 10% 10%

 

 

10%
2015 Q2 vs. 2015 Q1

 

 

 

 

 

Adjusted EBITDA change

 

$(14.4)

 

 

 

Adjusted EBITDA % change

 

(2)%

 

 

 

 

Below is a reconciliation of segment Operating Income to Adjusted EBITDA:

  Industrial
Gases–
Americas
Industrial
Gases–
EMEA
Industrial
Gases–
Asia
Industrial
Gases–
Global
Materials
Technologies
Energy
from
Waste
Corporate
and other
Segment
Total
Three Months Ended 31 March 2015  
 
 
 
 
 
 
 
Operating income (loss) $182.0 $71.0 $84.7 $(7.9) $124.2 $(2.8) $(8.8) $442.4
Add: Depreciation and amortization 103.3 47.6 50.3 5.5 23.3 3.3 233.3
Add: Equity affiliates' income (loss) 15.1 8.0 9.4 (.2) .7 33.0
Adjusted EBITDA $300.4 $126.6 $144.4 $(2.6) $148.2 $(2.8) $(5.5) $708.7
Adjusted EBITDA margin 33.7% 28.2% 36.7%

 

27.8%

 

 

29.4%
Three Months Ended 31 March 2014  
 
 
 
 
 
 
 
Operating income (loss) $169.6 $87.5 $71.2 $(14.6) $93.8 $(3.5) $(19.3) $384.7
Add: Depreciation and amortization 99.4 55.0 48.1 1.6 22.7 2.3 229.1
Add: Equity affiliates' income 12.6 9.3 7.6 .3 .6 30.4
Adjusted EBITDA $281.6 $151.8 $126.9 $(12.7) $117.1 $(3.5) $(17.0) $644.2
Adjusted EBITDA margin 27.3% 28.0% 34.7%

 

23.4%

 

 

25.0%
Adjusted EBITDA change $18.8 $(25.2) $17.5 $10.1 $31.1 $.7 $11.5 $64.5
Adjusted EBITDA % change 7% (17)% 14% 80% 27% 20% 68% 10%
Adjusted EBITDA margin change 640bp 20bp 200bp

 

440bp

 

 

440bp
Six Months Ended 31 March 2015  
 
 
 
 
 
 
 
Operating income (loss) $393.2 $152.3 $175.2 $(25.8) $228.8 $(5.3) $(31.5) $886.9
Add: Depreciation and amortization 206.9 98.7 99.9 9.8 47.3 6.2 468.8
Add: Equity affiliates' income 32.3 18.3 24.0 .2 1.3 76.1
Adjusted EBITDA $632.4 $269.3 $299.1 $(15.8) $277.4 $(5.3) $(25.3) $1,431.8
Adjusted EBITDA margin 33.4% 28.4% 37.8%

 

26.2%

 

 

28.8%
Six Months Ended 31 March 2014  
 
 
 
 
 
 
 
Operating income (loss) $354.1 $172.7 $153.9 $(24.9) $158.1 $(6.4) $(37.2) $770.3
Add: Depreciation and amortization 203.4 109.9 94.5 3.3 47.2 5.0 463.3
Add: Equity affiliates' income 30.2 19.0 17.2 1.0 1.2 68.6
Adjusted EBITDA $587.7 $301.6 $265.6 $(20.6) $206.5 $(6.4) $(32.2) $1,302.2
Adjusted EBITDA margin 29.7% 27.6% 34.9%

 

21.1%

 

 

25.4%
Adjusted EBITDA change $44.7 $(32.3) $33.5 $4.8 $70.9 $1.1 $6.9 $129.6
Adjusted EBITDA % change 8% (11)% 13% 23% 34% 17% 21% 10%
Adjusted EBITDA margin change 370bp 80bp 290bp

 

510bp

 

 

340bp

 

CAPITAL EXPENDITURES

We utilize a non-GAAP measure in the computation of capital expenditures and include spending associated with facilities accounted for as capital leases and purchases of noncontrolling interests. 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, if the arrangement qualifies as a capital lease. Additionally, the purchase of noncontrolling interests in a subsidiary is accounted for as an equity transaction and is reflected as a financing activity in the statement of cash flows.

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

 

2015
2014
2015
2014
Capital expenditures – GAAP basis $383.0 $411.1 $852.1 $802.2
Capital lease expenditures 15.3 51.0 47.2 99.1
Purchase of noncontrolling interests in a subsidiary .5
Capital expenditures – Non-GAAP basis $398.3 $462.1 $899.3 $901.8

 

 

 

 

FY2015
Forecast
Capital expenditures – GAAP basis

 

 

 

$1,650-1,700
Capital lease expenditures  

 

 

50-100
Capital expenditures – Non-GAAP basis

 

 

 
$1,700-1,800

OUTLOOK

Guidance provided is on a non-GAAP basis, which excludes the impact of items that are non-operational in nature.

 

Diluted EPS
2014 Non-GAAP $5.78
2015 Non-GAAP Outlook 6.35-6.55
Change Non-GAAP $.57-.77
% Change Non-GAAP 10%-13%

 

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Contact Information

  • Press Contact
    Katie McDonald
    610-481-3673
    Air Products and Chemicals, Inc.
    7201 Hamilton Boulevard
    Allentown, PA 18195-1501
    USA
    (610) 481-6642
  • Investor Contact
    Simon Moore
    (610) 481-7461
    Air Products and Chemicals, Inc.
    7201 Hamilton Boulevard
    Allentown, PA 18195-1501
    USA
    (610) 481-2729
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