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AIR PRODUCTS REPORTS FIRST QUARTER EPS
OF 58 CENTS
LEHIGH VALLEY, Pa. (January 21, 2004) - Air Products
(NYSE:APD) today reported net income of $132 million or
diluted earnings per share (EPS) of $.58 for its first fiscal
quarter ended December 31, 2003. Net income increased
five percent and diluted EPS was up $.02 compared with the
prior year, which included a charge of $3 million or $.02
per share for the cumulative effect of an accounting change*.
Sequentially, EPS was unchanged.
Quarter revenues of $1,685 million were up 16 percent from
the prior year on higher volumes in Gases and Chemicals,
acquisitions and favorable currency effects. Sequentially,
revenues increased three percent, driven by acquisitions
and favorable currency effects. Operating income of
$199 million was up two percent from the prior year and
up six percent sequentially.
EPS was unchanged from the prior year excluding the accounting
change*. Higher volumes, favorable currency effects
and a lower effective tax rate were offset by lower electronics
prices, customer outages, higher pension and other costs,
and favorable adjustments in the prior year related to incentive
compensation and past divestitures of equity affiliates.
John P. Jones, Air Products' chairman
and chief executive officer, said, "We had solid performance
in the first quarter. Our strategies and portfolio
management actions are working, and we are encouraged by
the progress we are seeing in many of our businesses."
Gases segment sales of $1,204 million increased 17 percent
over the prior year on higher volumes in the company's Electronics,
Energy and Process Industries, and Healthcare businesses,
favorable currency effects, and acquisitions. Operating
income of $182 million increased nine percent, as positive
volume, currency and acquisition effects were partially
offset by higher costs.
Sequentially, Gases revenues increased five percent, due
to higher volumes, acquisitions and favorable currency effects,
partially offset by lower natural gas costs contractually
passed through to customers. Operating income increased
by one percent on higher volumes.
Chemicals segment sales of $410 million increased 16 percent
versus the prior year on higher volumes across most of the
company's Intermediates and Performance Materials businesses,
as well as favorable currency effects. Operating income
of $25 million declined 26 percent, as customer outages
and higher raw material, energy and pension costs more than
offset positive volume and currency effects.
Sequentially, Chemicals revenues decreased two percent
and operating income declined 17 percent on anticipated
seasonally lower sales in several Performance Materials
businesses, and Intermediates customer outages.
Equipment segment revenues of $71 million increased six
percent over the prior year on improved air separation unit
sales. Operating income declined on lower liquefied
natural gas (LNG) heat exchanger activity. Air Products
received a new LNG heat exchanger order at the end of the
first quarter.
Looking forward, Mr. Jones said, "We are reaffirming our
EPS guidance range of $2.35 to $2.65 for the year.
Assuming the positive momentum we saw in the first quarter
continues, we are more comfortable we can achieve the mid
to upper end of this range. However, we remain cautious
about higher raw material costs, economic growth in Europe,
and the timing of equipment orders. We expect fiscal
second quarter EPS in the range of $.58 to $.62."
Mr. Jones added that Air Products will
continue to drive portfolio management and cost reduction
actions similar to prior years and noted upfront costs associated
with such actions could reduce Air Products' earnings outlook
for the current fiscal year.
Air Products will host its Annual Meeting of Shareholders
on Thursday, January 22, 2004 at 2:00 p.m. ET. Access
the audio Webcast at www.airproducts.com.
Air Products (NYSE:APD) serves
customers in technology, energy, healthcare and industrial
markets worldwide with a unique portfolio of products, services
and solutions, providing atmospheric gases, process and
specialty gases, performance materials and chemical intermediates. Founded
in 1940, Air Products has built leading positions in key
growth markets such as semiconductor materials, refinery
hydrogen, home healthcare services, natural gas liquefaction,
and advanced coatings and adhesives. The company is
recognized for its innovative culture, operational excellence
and commitment to safety and the environment. With
annual revenues of $6.3 billion and operations in over 30
countries, the company's 18,500 employees build lasting
relationships with their customers and communities based
on understanding, integrity and passion. For more information,
visit www.airproducts.com.
NOTE: The forward-looking statements
contained in this presentation are based on current expectations
regarding important risk factors. Actual results may
differ materially from those expressed. Factors that
might cause forward-looking statements to differ materially
from actual results include, among other things, overall
economic and business conditions different than those currently
anticipated and demand for Air Products' goods and services;
competitive factors in the industries in which it competes;
interruption in ordinary sources of supply; the ability
to recover unanticipated increased energy and raw material
costs from customers; spikes in the pricing of natural gas;
changes in government regulations; consequences of acts
of war or terrorism impacting the United States' and other
markets; charges related to currently unplanned portfolio
management and cost reduction actions; the success of implementing
cost reduction programs; the timing, impact and other uncertainties
of future acquisitions or divestitures; significant fluctuations
in interest rates and foreign currencies from that currently
anticipated; the impact of tax and other legislation and
regulations in jurisdictions in which Air Products and its
affiliates operate; and the timing and rate at which tax
credits can be utilized.
Please review the attached financial tables, including
the Summary of Consolidated Financial Information:
AIR PRODUCTS AND CHEMICALS, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
(Millions of dollars, except per share)
| |
Three
Months Ended
31 December |
| |
2003 |
2002 |
| Sales |
$1,684.9 |
$1,447.0 |
| Income Before Cumulative Effect of Accounting
Change |
$131.8 |
$128.7 |
| Cumulative Effect of Accounting Change |
-- |
(2.9) |
| Net Income |
$131.8 |
$125.8 |
| Basic Earnings Per Share: |
| Income Before Cumulative Effect of Accounting
Change |
$.59 |
$.59 |
| Cumulative Effect of Accounting Change |
-- |
(.02) |
| Net Income |
$.59 |
$.57 |
| Diluted Earnings Per Share: |
| Income Before Cumulative Effect of Accounting
Change |
$.58 |
$.58 |
| Cumulative Effect of Accounting Change |
-- |
(.02) |
| Net Income |
$.58 |
$.56 |
| Capital Expenditures |
$181.1 |
$351.4 |
| Depreciation |
$170.4 |
$156.0 |
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
(Millions of dollars, except per share)
| |
Three Months
Ended
31 December |
| |
2003 |
2002 |
| SALES |
$1,684.9 |
$1,447.0 |
| COSTS AND EXPENSES |
| Cost of sales |
1,230.2 |
1,033.0 |
| Selling and administrative |
231.4 |
193.3 |
| Research and development |
30.0 |
30.0 |
| Other (income) expense, net |
(5.5) |
(3.3) |
| OPERATING INCOME |
198.8 |
194.0 |
| Equity affiliates' income |
19.6 |
28.3 |
| Interest expense |
30.9 |
31.7 |
| INCOME BEFORE TAXES AND MINORITY INTEREST |
187.5 |
190.6 |
| Income taxes |
51.3 |
55.1 |
| Minority interest (a) |
4.4 |
6.8 |
| INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE |
131.8 |
128.7 |
| Cumulative effect of accounting change |
-- |
(2.9) |
| NET INCOME |
$131.8 |
$125.8 |
| BASIC EARNINGS PER
COMMON SHARE |
| Income before cumulative effect of accounting
change |
$.59 |
$.59 |
| Cumulative effect of accounting change |
-- |
(.02) |
| Net Income |
$.59 |
$.57 |
| DILUTED EARNINGS PER
COMMON SHARE |
| Income before cumulative effect of accounting
change |
$.58 |
$.58 |
| Cumulative effect of accounting change |
-- |
(.02) |
| Net Income |
$.58 |
$.56 |
| WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING
(in millions) |
221.9 |
218.8 |
| WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING
ASSUMING DILUTION (in millions) |
227.0 |
223.0 |
| DIVIDENDS DECLARED PER COMMON SHARE -
Cash |
$.23 |
$.21 |
- Minority interest primarily includes before-tax
amounts
|
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of dollars)
| |
31 December |
| ASSETS |
2003 |
2002 |
| CURRENT ASSETS |
| Cash and cash items |
$92.9 |
$104.8 |
| Trade receivables, less allowances for
doubtful accounts |
1,260.4 |
1,031.3 |
| Inventories and contracts in progress |
547.5 |
484.8 |
| Other current assets |
313.9 |
213.6 |
| TOTAL CURRENT ASSETS |
2,214.7 |
1,834.5 |
| INVESTMENTS IN NET ASSETS OF AND ADVANCES
TO EQUITY AFFILIATES |
585.0 |
499.7 |
| PLANT AND EQUIPMENT, at cost |
12,045.3 |
11,160.1 |
| Less - Accumulated depreciation |
6,324.2 |
5,681.5 |
| PLANT AND EQUIPMENT, net |
5,721.1 |
5,478.6 |
| GOODWILL |
778.5 |
557.0 |
| INTANGIBLE ASSETS, net |
103.1 |
84.2 |
| OTHER NONCURRENT ASSETS |
384.2 |
221.9 |
| TOTAL ASSETS |
$9,786.6 |
$8,675.9 |
| LIABILITIES AND SHAREHOLDERS'
EQUITY |
| CURRENT LIABILITIES |
| Payables and accrued liabilities |
$1,146.2 |
$790.0 |
| Accrued income taxes |
96.5 |
116.7 |
| Short-term borrowings and current portion
of long-term debt |
198.7 |
375.5 |
| TOTAL CURRENT LIABILITIES |
1,441.4 |
1,282.2 |
| LONG-TERM DEBT |
2,373.7 |
2,027.3 |
| DEFERRED INCOME & OTHER NONCURRENT
LIABILITIES |
1,079.4 |
866.3 |
| DEFERRED INCOME TAXES |
713.8 |
705.4 |
| TOTAL LIABILITIES |
5,608.3 |
4,881.2 |
| MINORITY INTERESTS IN SUBSIDIARY COMPANIES |
195.8 |
192.8 |
| TOTAL SHAREHOLDERS' EQUITY |
3,982.5 |
3,601.9 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$9,786.6 |
$8,675.9 |
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Millions of dollars)
| |
Three Months Ended
31 December |
| |
2003 |
2002 |
| OPERATING ACTIVITIES |
| Net Income |
$131.8 |
$125.8 |
| Adjustments to reconcile
income to cash provided by operating activities: |
| Depreciation |
170.4 |
156.0 |
| Deferred income taxes |
23.0 |
(4.8) |
| Undistributed earnings of unconsolidated
affiliates |
(12.0) |
(2.3) |
| (Gain) loss on sale of assets and investments |
(1.2) |
2.1 |
| Other |
23.5 |
7.3 |
| Subtotal |
335.5 |
284.1 |
| Working capital changes
that provided (used) cash, excluding effects of acquisitions
and divestitures: |
| Trade receivables |
(32.8) |
8.3 |
| Inventories and contracts in progress |
(4.0) |
(11.8) |
| Payables and accrued liabilities |
(8.1) |
(68.5) |
| Other |
(84.9) |
51.1 |
| CASH PROVIDED BY OPERATING ACTIVITIES
|
205.7 |
263.2 |
| INVESTING ACTIVITIES |
| Additions to plant and equipment (a) |
(152.3) |
(166.9) |
| Investment in and advances to unconsolidated
affiliates |
(2.2) |
(1.4) |
| Acquisitions, less cash acquired |
(25.9) |
(182.2) |
| Proceeds from sale of assets and investments |
7.6 |
9.2 |
| Other |
.6 |
3.0 |
| CASH USED FOR INVESTING ACTIVITIES |
(172.2) |
(338.3) |
| FINANCING ACTIVITIES |
| Long-term debt proceeds |
146.7 |
44.2 |
| Payments on long-term debt |
(97.5) |
(20.6) |
| Net decrease in commercial paper and short-term
borrowings |
(73.0) |
(67.4) |
| Dividends paid to shareholders |
(50.9) |
(45.9) |
| Issuance of stock for options and award
plans |
54.1 |
11.1 |
| CASH USED FOR FINANCING ACTIVITIES |
(20.6) |
(78.6) |
| Effect of Exchange Rate Changes on Cash |
3.8 |
4.8 |
| Increase (decrease) in Cash and Cash Items |
16.7 |
(148.9) |
| Cash and Cash Items - Beginning of Period |
76.2 |
253.7 |
| Cash and Cash Items - End of Period |
$92.9 |
$104.8 |
- (a) Excludes capital lease additions of $.7 and
$.9 for the three months ended 31 December 2003
and 2002, respectively.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars, except per share)
Reclassification
The company changed its reporting to now include overhead
expenses incurred by the company related to equity affiliates
in selling and administrative expense. Previously, these
expenses related to equity affiliates were reported in the
income statement line item for equity affiliates' income,
net of related expenses. Equity affiliates' income now includes
the company's proportionate share of earnings of the affiliates
and the gain or loss on the sale of investments in equity
affiliates.
This reclassification impacts the Gases segment. The income
statements of the prior periods were adjusted to reflect
this reclassification. The impact on consolidated equity
affiliates' income and selling and administrative expense
for each of the last five years is summarized below.
|
2003 |
2002 |
2001 |
2000 |
1999 |
| Equity Affiliates'
Income |
| As Reported |
$84.4 |
$76.2 |
$81.2 |
$87.6 |
$61.5 |
| Expenses Related to Equity Affiliates |
10.0 |
13.8 |
11.9 |
12.4 |
23.6 |
| Reclassified |
$94.4 |
$90.0 |
$93.1 |
$100.0 |
$85.1 |
| Selling and Administrative |
| As Reported |
$832.6 |
$704.3 |
$698.7 |
$689.3 |
$672.8 |
| Expenses Related to Equity Affiliates |
10.0 |
13.8 |
11.9 |
12.4 |
23.6 |
| Reclassified |
$842.6 |
$718.1 |
$710.6 |
$701.7 |
$696.4 |
This reclassification for each of the fiscal 2003 quarters
is as follows: first quarter-$2.5; second quarter-$2.7;
third quarter-$2.7; and fourth quarter-$2.1.
Financing Activities
At 30 September 2003, the company's committed lines of credit
totaled $600, maturing in January 2005. During the first
quarter of 2004, the company replaced these commitments
with a new $700 multicurrency revolving credit facility,
maturing in December 2008.
On 9 January 2004, the company filed a form S-3 Registration
Statement with the U.S. Securities and Exchange Commission.
When declared effective, the shelf registration will enable
the company to issue up to $1 billion of debt and equity
securities. The proceeds will be used for general corporate
purposes.
Incentive Compensation Costs
Operating income for the three months ended 31 December
2002 included a favorable adjustment of $8 for lower than
anticipated payments of fiscal year 2002 incentive compensation
costs.
Equity Affiliates' Income
Income from equity affiliates for the three months ended
31 December 2002 included $14 for adjustments related to
divestitures recorded in prior periods. $8 is included in
Other equity affiliates and $6 is included in Gases equity
affiliates.
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY BUSINESS SEGMENTS
(Unaudited)
Business segment information is
shown below:
| (Millions of dollars)
| Three Months Ended
31 December |
| |
2003 |
2002 |
| Revenues from external
customers |
| Gases |
$1,203.5 |
$1,025.8 |
| Chemicals |
410.1 |
353.8 |
| Equipment |
71.3 |
67.4 |
| Segment Totals |
1,684.9 |
1,447.0 |
| Consolidated Totals |
$1,684.9 |
$1,447.0 |
| Operating income |
| Gases |
$182.3 |
$168.0 |
| Chemicals |
24.5 |
33.1 |
| Equipment |
(.3) |
4.1 |
| Segment Totals |
206.5 |
205.2 |
| Corporate research and development and other income
(expense) |
(7.7) |
(11.2) |
| Consolidated Totals |
$198.8 |
$194.0 |
| Equity affiliates'
income |
| Gases |
$17.7 |
$17.2 |
| Chemicals |
1.9 |
2.5 |
| Equipment |
-- |
.3 |
| Segment Totals |
19.6 |
20.0 |
| Other |
-- |
8.3 |
| Consolidated Totals |
$19.6 |
$28.3 |
| (Millions of dollars) |
31
December |
| |
2003 |
2002 |
| Identifiable assets
(a) |
| Gases |
$7,362.6 |
$6,424.1 |
| Chemicals |
1,417.7 |
1,406.7 |
| Equipment |
166.7 |
169.1 |
| Segment Totals |
8,947.0 |
7,999.9 |
| Corporate assets |
254.6 |
176.3 |
| Consolidated Totals |
$9,201.6 |
$8,176.2 |
- (a) Identifiable assets are equal to total assets
less investments in equity affiliates.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY GEOGRAPHIC REGIONS
(Unaudited)
(Millions of dollars)
| |
Three Months Ended
31 December |
| |
2003 |
2002 |
| Revenues from external
customers |
| United States |
$943.2 |
$819.9 |
| Canada |
19.6 |
27.2 |
| Total North
America |
962.8 |
847.1 |
| United Kingdom |
147.4 |
116.8 |
| Spain |
105.0 |
84.4 |
| Other Europe |
254.3 |
206.4 |
| Total Europe |
506.7 |
407.6 |
| Asia |
171.8 |
160.4 |
| Latin America |
43.6 |
31.8 |
| All Other |
-- |
.1 |
| Total |
$1,684.9 |
$1,447.0 |
Note:
Geographic information is based on country of origin. The
Other Europe segment operates principally in Belgium, France,
Germany and the Netherlands. The Asia segment operates principally
in China, Japan, Korea and Taiwan.
EDITOR'S NOTE:
*On October 1, 2002, Air Products adopted Statement
of Financial Accounting Standards (SFAS) No. 143, requiring
that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred.
It applies to certain of Air Products' on-site agreements,
for example, where the company has an obligation to remove
its equipment upon expiration of a customer contract.
An after-tax transition charge of $2.9 million was recorded
as the cumulative effect of the accounting change.
The ongoing expense on an annual basis resulting from the
initial adoption of SFAS No. 143 is negligible (approximately
$1 million).
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