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News ReleaseAir Products Reports Fiscal Q4 Financial Results

October 19, 2012 Lehigh Valley, Pa.

Fourth Quarter Summary

  • Sales of $2.6 billion up 4% versus prior year
  • EPS up one percent to $1.42* on non-GAAP continuing operations
  • First quarter of Indura operating results
  • Exiting polyurethane intermediates business and restructuring photovoltaic business
  • Awarded two new oxygen contracts for coal gasification in China
  • Announced energy-for-waste investment in the UK

Full Year Summary

  • Sales of $9.6 billion down 1%
  • EPS of $5.40* up 1%
  • Record capital spending of $2.8* billion
  • Dividend increased for 30th consecutive year

 
Air Products (NYSE:APD) today reported net income of $305 million* and diluted earnings per share (EPS) of $1.42* on a non-GAAP, continuing operations basis, for its fiscal fourth quarter ended September 30, 2012. This excludes: an after-tax impairment charge of $127 million, or $0.59 per share, for the restructuring of our photovoltaic business; an after-tax charge of $35 million, or $0.16 per share, for exiting the polyurethane intermediates business; and an after-tax charge of $6 million, or $0.03 per share, to write-down assets following a customer bankruptcy and mill shutdown.

On a GAAP basis, net income and diluted EPS from continuing operations were $137 million and $0.64, respectively, for the quarter.

The discussion of fourth quarter results and guidance in this release is based on non-GAAP continuing operations. A reconciliation to GAAP results can be found at the end of this release.*

Fourth Quarter Financial Results

Fourth quarter revenues of $2,606 million increased four percent versus prior year. On an underlying basis, sales were up four percent on higher volumes in the Tonnage Gases, Equipment and Energy, and Electronics and Performance Materials segments. Acquisitions contributed six percent, which was offset by lower energy pass-through and a stronger dollar. Operating income of $408 million was up three percent versus prior year. Operating margin of 15.7 percent was down 10 basis points.

Sequential sales grew 11 percent, with underlying sales up three percent on higher volumes in the Tonnage Gases, Equipment and Energy, and Electronics and Performance Materials segments. Acquisitions contributed six percent. Operating income grew three percent sequentially.

For fiscal 2012, sales of $9,612 million decreased one percent, with base volume growth and acquisitions more than offset by lower energy pass-through and a stronger dollar. Operating income of $1,534 million was down one percent and diluted EPS of $5.40 increased one percent from the prior year.

Commenting on the fiscal year, John McGlade, chairman, president and chief executive officer, said, “The fourth quarter was a continuation of the economic trends that we have seen throughout the year, with global manufacturing growth continuing to slow. This has led to weak volumes in 2012, which we have been able to offset with increased productivity and cost reductions.

“During this past year we made a number of portfolio moves, including selling our European homecare business, purchasing Indura to enhance our Latin American position; buying the other half of our DA NanoMaterials joint venture; and taking a 25% stake in AHG, the largest industrial gases company in Saudi Arabia. In this most recent quarter, we continued our efforts to further position ourselves for the future by exiting our polyurethane intermediates business and restructuring our photovoltaic businesses.”

  • Merchant Gases sales of $1,017 million increased eight percent on the prior year primarily due to the Indura acquisition, which was partially offset by a stronger dollar. Underlying sales decreased three percent, with positive pricing more than offset by weaker volumes. Operating income of $161 million declined five percent versus prior year. Sequential sales increased 16%, again due to Indura, with modest volume gains offset by a stronger dollar. Sequential operating income declined two percent.
  • Tonnage Gases sales of $846 million decreased four percent versus the prior year, with higher base business and new project volumes more than offset by lower energy pass-through and a stronger dollar. Operating income of $141 million was down seven percent versus prior year, with volume growth and lower operating costs offset by less income from polyurethane intermediates and favorable prior year contract modifications. Sequential sales increased 10 percent, driven by higher volumes and higher energy pass-through. Sequential operating income was up five percent, with higher volumes more than offsetting lower income from polyurethane intermediates.
  • Electronics and Performance Materials sales of $617 million were up five percent versus prior year, with the DA NanoMaterials acquisition contributing four percent. Underlying volumes were four percent higher and more than offset lower pricing and a stronger dollar. Operating income of $85 million was down seven percent versus prior year, with higher volumes and improved productivity offset by higher inventory costs. Sequential sales were up two percent on higher volumes and operating income decreased six percent, again due to the inventory impact.
  • Equipment and Energy sales of $126 million and operating income of $18 million increased 32 percent and 54 percent respectively, due to higher sales from large air separation units and better cost performance. Sequentially, sales increased 33 percent on higher ASU and LNG activity and operating income was up 81 percent on higher LNG activity. The sales backlog is up 35 percent versus prior year on continued LNG project orders.

Outlook

Looking ahead, McGlade said, “We are starting our 2013 fiscal year with weak economic momentum worldwide. Our focus will be on taking actions in the areas that we believe can have the greatest impact on improving margins and returns. They include loading our Merchant assets, executing our new Tonnage investments on time and on budget; continuing to make improvements in our Electronics and Performance Materials segment and achieving even better productivity.”

The company today announced initial guidance for fiscal year 2013 EPS in the range of $5.65 to $5.85 per share. For the first quarter of fiscal 2013 ending December 31, 2012, EPS is expected to be between $1.26 and $1.31 per share.

The company also announced that it expects capital spending in fiscal year 2013 to be between $2.0 and $2.2 billion.

Access the Q4 earnings teleconference scheduled for 10:00 a.m. Eastern Time on October 19 by calling 719-325-2388 and entering pass code 4469565, or listen on the Web at:
http://investors.airproducts.com/phoenix.zhtml?c=92444&p=teleconference  

About Air Products
Air Products (NYSE:APD) provides atmospheric, process and specialty gases; performance materials; equipment; and technology. For over 70 years, the company has enabled customers to become more productive, energy efficient and sustainable. More than 20,000 employees in over 50 countries supply innovative solutions to the energy, environment and emerging markets. These include semiconductor materials, refinery hydrogen, coal gasification, natural gas liquefaction, and advanced coatings and adhesives. In fiscal 2012, Air Products had sales approaching $10 billion. 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, projections, targets 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, deterioration in global or regional economic and business conditions; weakening demand for the Company’s products and services; future financial and operating performance of major customers; unanticipated contract terminations or customer cancellations or postponement of projects and sales; the success of commercial negotiations; asset impairments or losses due to a decline in profitability of or demand for certain of the Company’s products or businesses, or specific product or customer events; the impact of competitive products and pricing; interruption in ordinary sources of supply of raw materials; the ability to recover unanticipated increased energy and raw material costs from customers; costs and outcomes of litigation or regulatory activities; successful development and market acceptance of new products and applications; the ability to attract, hire and retain qualified personnel in all regions of the world where the Company operates; the success of productivity programs; the success and impact of restructuring and cost reduction initiatives; achieving anticipated acquisition synergies; the timing, impact, and other uncertainties of future acquisitions or divestitures; significant fluctuations in interest rates and foreign currencies from that currently anticipated; the continued availability of capital funding sources for all of the Company's foreign operations; the impact of environmental, tax or other legislation and regulations in jurisdictions in which the Company and its affiliates operate; the impact of new or changed financial accounting guidance; the impact on the effective tax rate of changes in the mix of earnings among our U.S. and international operations; and other risk factors described in the Company's Form 10K for its fiscal year ended September 30, 2011. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this document to reflect any change in the Company's assumptions, beliefs or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.

* The presentation of non-GAAP measures is intended to enhance the usefulness of financial information by providing measures which our management uses internally to evaluate our baseline performance on a comparable basis. Presented below are reconciliations of the reported GAAP results to the non-GAAP measures.

Consolidated Results
Continuing Operations
  Q4 YTD
  Operating
Income
Operating
Margin
Income Diluted
EPS
Operating
Income
Diluted
EPS
2012 GAAP $157.9 6.1% $137.1 $.64 $1,282.4 $4.66
2011 GAAP 395.4 15.8% 304.2 1.41 1,508.1 5.22
Change GAAP $(237.5) (970bp) $(167.1) $(.77) $(225.7) $(.56)
% Change GAAP (60)%   (55)% (55)% (15)% (11)%
2012 GAAP $157.9 6.1% $137.1 $.64 $1,282.4 $4.66
PV market actions (tax impact $59.0)(a) 186.0 7.1% 127.0 .59 186.0 .59
Cost reduction plan (tax impact $26.2)(b) 86.8 .28
PUI business actions (tax impact $19.8)(c) 54.6 2.1% 34.8 .16 54.6 .16
Customer bankruptcy (tax impact $3.7)(d) 9.8 .4% 6.1 .03 9.8 .03
Gain on previously held equity interest (tax impact $31.3)(e) (85.9) (.25)
Q1 Spanish tax settlement .20
Q2 Spanish tax ruling (.27)
2012 Non-GAAP Measure $408.3 15.7% $305.0 $1.42 $1,533.7 $5.40
2011 GAAP $395.4 15.8% $304.2 $1.41 $1,508.1 $5.22
Net loss on Airgas transaction (tax impact $16.9)(f) 48.5 .14
2011 Non-GAAP Measure $395.4 15.8% $304.2 $1.41 $1,556.6 $5.36
Change Non-GAAP Measure $12.9 (10bp) $.8 $.01 $(22.9) $.04
% Change Non-GAAP Measure 3%   –% 1% (1)% 1%
2012 Q4 vs. 2012 Q3 Operating
Income
         
2012 Q4 GAAP $157.9          
2012 Q3 GAAP 482.8          
Change GAAP $(324.9)          
% Change GAAP (67)%          
2012 Q3 GAAP $482.8          
Gain on previously held equity interest (tax impact $31.3) (e) (85.9)          
2012 Q3 Non-GAAP Measure $396.9          
Change Non-GAAP Measure $11.4          
% Change Non-GAAP Measure 3%          
(a) Based on average statutory tax rate of 31.7%
(b) Based on average statutory tax rate of 30.2%
(c) Based on average statutory tax rate of 36.3%
(d) Based on average statutory tax rate of 37.6%
(e) Based on average statutory tax rate of 36.4%
(f) Based on statutory tax rate of 36.57%, including impact of tax rate adjustment for 2010 and first quarter 2011 costs


Electronics and Performance Materials
2012 Q4 vs. 2012 Q3 Operating
Income
2012 Q4 GAAP $85.3
2012 Q3 GAAP 176.7
Change in GAAP $(91.4)
% Change GAAP (52)%
2012 Q4 GAAP $85.3
2012 Q4 Non-GAAP Measure $85.3
2012 Q3 GAAP $176.7
Gain on previously held equity interest (85.9)
2012 Q3 Non-GAAP Measure $90.8
Change Non-GAAP Measure $(5.5)
% Change Non-GAAP Measure (6)%

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. 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 will be reflected as a financing activity in the statement of cash flows.

  FY 2012 2013 Forecast
Capital expenditures – GAAP basis $2,559.8 $1,750–1,850
Capital lease expenditures 212.2 250–350
Purchase of noncontrolling interest 6.3
Capital expenditures – Non-GAAP basis $2,778.3 $2,000–2,200

View entire earnings release with all financial tables
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Contact Information

  • Press Contact
    George Noon
    (610) 481-1990
  • 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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