LEHIGH VALLEY, Pa.,
July 25, 2019 /PRNewswire/ --
Q3 FY19 (all from continuing operations; comparisons
versus prior year):
- GAAP EPS of $2.20 and GAAP net
income of $488 million, both up 13
percent
- Record adjusted EPS of $2.17*, up
11 percent; adjusted EPS up 14 percent on a constant currency
basis
- Record adjusted EBITDA margin of 40.1 percent*, up 380 basis
points
Highlights
- Completed asset buyback: two air separation units from Jinmei
Huayu in Shanxi Province,
China
- Korea wins: awarded contracts to supply MEMC Korea's new 300mm
silicon wafer fab in Cheonan and POSCO Chemical's new cathode
material manufacturing complex in Gwangyang
Guidance
- Fiscal 2019 full-year adjusted EPS guidance in the range of
$8.20 to $8.25* per share, up more than 10 percent* over
prior year at midpoint; fiscal 2019 fourth quarter adjusted EPS
guidance of $2.26 to $2.31 per share*, up 13 to 16 percent* over
fiscal 2018 fourth quarter
- Expected fiscal year 2019 capital spending in the range of
$2.4 to $2.5
billion
*The results and guidance in this release, including in the
highlights above, include references to non-GAAP continuing
operations measures and are identified by the word "adjusted"
preceding the measure. A reconciliation of GAAP to non-GAAP results
can be found below.
Air Products (NYSE: APD) reported GAAP net income from
continuing operations of $488 million
and GAAP diluted EPS from continuing operations of $2.20 for its fiscal third quarter ended
June 30, 2019. These results include
several disclosed items which total to a $0.03 EPS benefit.
On a non-GAAP basis, quarterly adjusted net income from
continuing operations of $481 million
and record adjusted diluted EPS from continuing operations of
$2.17 increased 12 and 11 percent,
respectively, over the prior year. On a constant currency basis,
diluted adjusted EPS from continuing operations increased 14
percent.
Third quarter sales of $2.2
billion decreased two percent, as four percent higher
pricing and two percent higher volumes were more than offset by
four percent unfavorable currency; three percent from a contract
modification to a tolling agreement in India, which impacts sales but not profits;
and one percent lower energy cost pass-through. Excluding the Jazan
sale of equipment project, volumes grew four percent due to new
plants and base business growth. Pricing improved in all three
regions.
Record adjusted EBITDA of $892
million increased nine percent over the prior year.
Sequentially, adjusted EBITDA increased eight percent on strong
performance in all regions, particularly driven by the Lunar New
Year recovery in Asia. Record
adjusted EBITDA margin of 40.1 percent increased 380 basis points
over the prior year.
Commenting on the results, Seifi
Ghasemi, chairman, president and chief executive officer,
said, "The committed team at Air Products continues to execute on
our well-defined short- and long-term strategy. Our adjusted EPS of
$2.17 was the highest ever and 11
percent higher than last year. Our adjusted EBITDA margin of 40
percent was also a record high and 1,500 basis points higher than
five years ago when we set our goal to be the best industrial gas
company in the world. I want to thank all of our employees around
the world who work hard every day to deliver these results."
Third Quarter Results by Business Segment
- Industrial Gases – Americas sales of $955 million increased one percent over the prior
year, as four percent higher pricing was partially offset by two
percent unfavorable currency and one percent lower energy
pass-through. Underlying volumes grew one percent, but were offset
by a contact termination that occurred in the third quarter of the
prior year. Record adjusted EBITDA of $410
million increased seven percent and adjusted EBITDA margin
of 42.9 percent increased 270 basis points from the prior year,
primarily driven by higher pricing.
- Industrial Gases – EMEA sales of $495 million decreased 12 percent from prior
year. Strong pricing contributed four percent, and volumes
increased two percent over the prior year. These results were
offset by five percent unfavorable currency, two percent lower
energy pass-through, and an 11 percent decrease from the
India contract modification.
Adjusted EBITDA of $190 million
increased two percent over the prior year; on a constant currency
basis, adjusted EBITDA increased seven percent. Adjusted EBITDA
margin of 38.4 percent increased 520 basis points over the prior
year; excluding the impact of the India contract modification, adjusted EBITDA
margin was up approximately 100 basis points.
- Industrial Gases – Asia
sales of $679 million increased nine
percent over the prior year. Volumes increased 10 percent, driven
primarily by new projects, mainly the Lu'An gasification project.
Pricing increased five percent, with strength across all major
product lines and countries. Unfavorable currency had a negative
six percent impact. Record adjusted EBITDA of $334 million increased 24 percent, and record
adjusted EBITDA margin of 49.2 percent increased 590 basis points
over the prior year on strong volumes, pricing and productivity.
Sequentially, volumes and adjusted EBITDA improved eight and 12
percent, respectively, on the strong Lunar New Year recovery and
new plant start-ups.
Outlook
Ghasemi said, "We remain very optimistic about the future of Air
Products. We are confident our strategy differentiates us and gives
us the capability to continue growing earnings per share by more
than 10 percent per year over the long term. We have demonstrated
this over the past five years, with adjusted EPS growth averaging
13 percent annually."
Air Products expects full-year fiscal 2019 adjusted EPS guidance
in the range of $8.20 to $8.25 per share, up more than 10 percent over
prior year at midpoint. For the fiscal 2019 fourth quarter, Air
Products expects adjusted EPS of $2.26 to $2.31 per share, up 13 to 16 percent over
the fiscal 2018 fourth quarter.
Air Products expects capital expenditures in the range of
$2.4 to $2.5
billion for full-year fiscal 2019.
Effective October 1, 2018, Air
Products adopted the new revenue recognition standard, which had no
material impact on the company's financial statements. Management
has provided adjusted EPS on a continuing operations basis. While
Air Products might have additional impacts from the U.S. Tax Cuts
and Jobs Act adopted in late 2017, or incur additional costs for
items such as cost reduction actions and pension settlements in
future periods, it is not possible, without unreasonable efforts,
to identify the amount or significance of these events or the
potential for other transactions that may impact future GAAP EPS or
the effective tax rate. Management does not believe these items to
be representative of underlying business performance. Management is
unable to reconcile, without unreasonable effort, the Company's
forecasted range of adjusted EPS to a comparable GAAP range.
Earnings Teleconference
Access the Q3 earnings teleconference scheduled for
10:00 a.m. Eastern Time on
July 25, 2019 by calling 323-794-2575
and entering passcode 7887361, 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 over 75 years. The Company provides
industrial gases and related equipment to dozens of industries,
including refining, chemical, metals, electronics, manufacturing,
and food and beverage. Air Products is also the world's leading
supplier of liquefied natural gas process technology and
equipment.
The Company had fiscal 2018 sales of $8.9 billion from
operations in 50 countries and has a current market capitalization
of about $50 billion. Approximately
16,000 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.
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, 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: changes in global or
regional economic conditions, supply and demand dynamics in market
segments we serve, or in the financial markets; 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; 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 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 of price fluctuations in natural gas and
disruptions in markets and the economy due to oil 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, 2018. 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.
* 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 per share data)
The Company has presented certain financial measures on a
non-GAAP ("adjusted") basis. Accordingly, reconciliations to the
most directly comparable financial measures calculated in
accordance with U.S. Generally Accepted Accounting Principles
(GAAP) are provided on the pages that follow.
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 the
transactions. 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.
CONSOLIDATED RESULTS
|
Continuing
Operations
|
|
Three Months Ended 30
June
|
Q3 2019 vs. Q3
2018
|
Operating
Income
|
Operating
Margin(A)
|
Equity
Affiliates'
Income
|
Income Tax
Provision
|
Net
Income
|
Diluted
EPS
|
2019 GAAP
|
$569.7
|
|
25.6
|
%
|
$56.4
|
|
$109.3
|
|
$488.0
|
|
$2.20
|
|
2018 GAAP
|
515.8
|
|
22.8
|
%
|
58.1
|
|
107.1
|
|
430.7
|
|
1.95
|
|
Change
GAAP
|
$53.9
|
|
280
|
bp
|
($1.7)
|
|
$2.2
|
|
$57.3
|
|
$.25
|
|
% Change
GAAP
|
10
|
%
|
|
(3)
|
%
|
2
|
%
|
13
|
%
|
13
|
%
|
2019 GAAP
|
$569.7
|
|
25.6
|
%
|
$56.4
|
|
$109.3
|
|
$488.0
|
|
$2.20
|
|
Cost reduction
actions
|
25.5
|
|
1.2
|
%
|
—
|
|
6.7
|
|
18.8
|
|
.08
|
|
Gain on exchange of
equity affiliate investments
|
(29.1)
|
|
(1.3)
|
%
|
—
|
|
—
|
|
(29.1)
|
|
(.13)
|
|
Tax reform
repatriation
|
—
|
|
—
|
%
|
—
|
|
(3.2)
|
|
3.2
|
|
.02
|
|
2019 Non-GAAP
Measure
|
$566.1
|
|
25.5
|
%
|
$56.4
|
|
$112.8
|
|
$480.9
|
|
$2.17
|
|
2018 GAAP
|
$515.8
|
|
22.8
|
%
|
$58.1
|
|
$107.1
|
|
$430.7
|
|
$1.95
|
|
2018 Non-GAAP
Measure
|
$515.8
|
|
22.8
|
%
|
$58.1
|
|
$107.1
|
|
$430.7
|
|
$1.95
|
|
Change Non-GAAP
Measure
|
$50.3
|
|
270
|
bp
|
($1.7)
|
|
$5.7
|
|
$50.2
|
|
$.22
|
|
% Change Non-GAAP
Measure
|
10
|
%
|
|
(3)
|
%
|
5
|
%
|
12
|
%
|
11
|
%
|
The table below reflects what our third quarter adjusted diluted
EPS would have been on a constant currency basis. We calculate this
non-GAAP measure by adjusting our GAAP diluted EPS for our
disclosed items as well as prior period average exchange rates. We
believe this measure reflects the underlying adjusted EPS growth
rate versus the prior year.
|
|
|
|
|
|
Three Months
Ended
|
|
|
|
30 June
|
|
|
|
2019
|
|
2018
|
Change
|
% Change
|
GAAP Diluted
EPS
|
$2.20
|
|
$1.95
|
|
|
|
Cost reduction
actions
|
.08
|
|
—
|
|
|
|
Gain on exchange of
equity affiliate investments
|
(.13)
|
|
|
|
|
Tax reform
repatriation
|
.02
|
|
—
|
|
|
|
Adjusted Diluted
EPS
|
$2.17
|
|
$1.95
|
|
$.22
|
|
11
|
%
|
Currency
adjustment
|
.05
|
|
|
|
|
Adjusted Diluted EPS
– Constant Currency Basis
|
$2.22
|
|
$1.95
|
|
$.27
|
|
14
|
%
|
|
Continuing
Operations
|
|
Nine Months Ended 30
June
|
2019 vs.
2018
|
Operating
Income
|
Operating
Margin(A)
|
Equity
Affiliates'
Income
|
Income Tax
Provision
|
Net
Income
|
Diluted
EPS
|
2019 GAAP
|
$1,541.2
|
|
23.2
|
%
|
$155.5
|
|
$348.9
|
|
$1,256.8
|
|
$5.68
|
|
2018 GAAP
|
1,431.9
|
|
21.6
|
%
|
115.6
|
|
455.1
|
|
1,002.7
|
|
4.54
|
|
Change
GAAP
|
$109.3
|
|
160
|
bp
|
$39.9
|
|
($106.2)
|
|
$254.1
|
|
$1.14
|
|
% Change
GAAP
|
8
|
%
|
|
35
|
%
|
(23)
|
%
|
25
|
%
|
25
|
%
|
2019 GAAP
|
$1,541.2
|
|
23.2
|
%
|
$155.5
|
|
$348.9
|
|
$1,256.8
|
|
$5.68
|
|
Facility
closure
|
29.0
|
|
.4
|
%
|
—
|
|
6.9
|
|
22.1
|
|
.10
|
|
Cost reduction
actions
|
25.5
|
|
.4
|
%
|
—
|
|
6.7
|
|
18.8
|
|
.08
|
|
Gain on exchange of
equity affiliate investments
|
(29.1)
|
|
(.4)
|
%
|
—
|
|
—
|
|
(29.1)
|
|
(.13)
|
|
Pension settlement
loss(B)
|
—
|
|
—
|
%
|
—
|
|
1.2
|
|
3.8
|
|
.02
|
|
Tax reform
repatriation
|
—
|
|
—
|
%
|
—
|
|
12.4
|
|
(12.4)
|
|
(.06)
|
|
Tax reform adjustment
related to deemed
foreign dividends
|
—
|
|
—
|
%
|
—
|
|
(56.2)
|
|
56.2
|
|
.25
|
|
2019 Non-GAAP
Measure
|
$1,566.6
|
|
23.6
|
%
|
$155.5
|
|
$319.9
|
|
$1,316.2
|
|
$5.94
|
|
2018 GAAP
|
$1,431.9
|
|
21.6
|
%
|
$115.6
|
|
$455.1
|
|
$1,002.7
|
|
$4.54
|
|
Tax reform
repatriation
|
—
|
|
—
|
%
|
32.5
|
|
(420.5)
|
|
453.0
|
|
2.06
|
|
Tax reform rate
change and other
|
—
|
|
—
|
%
|
—
|
|
214.0
|
|
(214.0)
|
|
(.97)
|
|
Tax
restructuring
|
—
|
|
—
|
%
|
—
|
|
38.8
|
|
(38.8)
|
|
(.18)
|
|
2018 Non-GAAP
Measure
|
$1,431.9
|
|
21.6
|
%
|
$148.1
|
|
$287.4
|
|
$1,202.9
|
|
$5.45
|
|
Change Non-GAAP
Measure
|
$134.7
|
|
200
|
bp
|
$7.4
|
|
$32.5
|
|
$113.3
|
|
$.49
|
|
% Change Non-GAAP
Measure
|
9
|
%
|
|
5
|
%
|
11
|
%
|
9
|
%
|
9
|
%
|
(A)
|
Operating margin is
calculated by dividing operating income by sales.
|
(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 nine months ended 30 June 2019. Refer to Note 3,
Pension Settlement Loss, to the consolidated financial statements
for additional information.
|
Below is a reconciliation of consolidated operating income to
segment total operating income:
|
Three Months
Ended
|
Nine Months
Ended
|
|
30 June
|
30 June
|
Operating
Income
|
2019
|
2018
|
2019
|
2018
|
Consolidated
total
|
$569.7
|
|
$515.8
|
|
$1,541.2
|
|
$1,431.9
|
|
Facility
closure
|
—
|
|
—
|
|
29.0
|
|
—
|
|
Cost reduction
actions
|
25.5
|
|
—
|
|
25.5
|
|
—
|
|
Gain on exchange of
equity affiliate investments
|
(29.1)
|
|
—
|
|
(29.1)
|
|
—
|
|
Segment
total
|
$566.1
|
|
$515.8
|
|
$1,566.6
|
|
$1,431.9
|
|
Below is a reconciliation of consolidated equity affiliates'
income to segment total equity affiliates' income:
|
Three Months
Ended
|
Nine Months
Ended
|
|
30 June
|
30 June
|
Equity Affiliates'
Income
|
2019
|
2018
|
2019
|
2018
|
Consolidated
total
|
$56.4
|
|
$58.1
|
|
$155.5
|
|
$115.6
|
|
Tax reform
repatriation - equity method investment
|
—
|
|
—
|
|
—
|
|
32.5
|
|
Segment
total
|
$56.4
|
|
$58.1
|
|
$155.5
|
|
$148.1
|
|
ADJUSTED EBITDA
We define Adjusted EBITDA as income from continuing operations
(including noncontrolling interests) 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 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:
2019
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q3 YTD
Total
|
Income From
Continuing Operations(A)
|
|
$357.0
|
|
|
$433.5
|
|
|
$500.2
|
|
|
|
|
$1,290.7
|
|
Add: Interest
expense
|
|
37.3
|
|
|
35.4
|
|
|
34.2
|
|
|
|
|
106.9
|
|
Less: Other
non-operating income (expense), net
|
|
18.5
|
|
|
13.7
|
|
|
17.6
|
|
|
|
|
49.8
|
|
Add: Income tax
provision
|
|
132.1
|
|
|
107.5
|
|
|
109.3
|
|
|
|
|
348.9
|
|
Add: Depreciation and
amortization
|
|
258.0
|
|
|
262.1
|
|
|
269.1
|
|
|
|
|
789.2
|
|
Add: Facility
closure
|
|
29.0
|
|
|
—
|
|
|
—
|
|
|
|
|
29.0
|
|
Add: Cost reduction
actions
|
|
—
|
|
|
—
|
|
|
25.5
|
|
|
|
|
25.5
|
|
Less: Gain on
exchange of equity affiliate investments
|
|
—
|
|
|
—
|
|
|
29.1
|
|
|
|
|
29.1
|
|
Adjusted
EBITDA
|
|
$794.9
|
|
|
$824.8
|
|
|
$891.6
|
|
|
|
|
$2,511.3
|
|
Adjusted EBITDA
margin
|
|
35.7
|
%
|
|
37.7
|
%
|
|
40.1
|
%
|
|
|
|
37.8
|
%
|
2018
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Q3 YTD
Total
|
Income From
Continuing Operations(A)
|
|
$162.7
|
|
|
$423.6
|
|
|
$444.7
|
|
|
$459.7
|
|
|
$1,031.0
|
|
Add: Interest
expense
|
|
29.8
|
|
|
30.4
|
|
|
34.9
|
|
|
35.4
|
|
|
95.1
|
|
Less: Other
non-operating income (expense), net
|
|
9.8
|
|
|
11.1
|
|
|
12.8
|
|
|
(28.6)
|
|
|
33.7
|
|
Add: Income tax
provision
|
|
291.8
|
|
|
56.2
|
|
|
107.1
|
|
|
69.2
|
|
|
455.1
|
|
Add: Depreciation and
amortization
|
|
227.9
|
|
|
240.0
|
|
|
245.6
|
|
|
257.2
|
|
|
713.5
|
|
Less: Change in
inventory valuation method
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24.1
|
|
|
—
|
|
Add: Tax reform
repatriation - equity method investment
|
|
32.5
|
|
|
—
|
|
|
—
|
|
|
(4.0)
|
|
|
32.5
|
|
Adjusted
EBITDA
|
|
$734.9
|
|
|
$739.1
|
|
|
$819.5
|
|
|
$822.0
|
|
|
$2,293.5
|
|
Adjusted EBITDA
margin
|
|
33.2
|
%
|
|
34.3
|
%
|
|
36.3
|
%
|
|
35.8
|
%
|
|
34.6
|
%
|
(A)
|
Includes net income
attributable to noncontrolling interests.
|
|
|
2019 vs.
2018
|
|
Q1
|
|
Q2
|
|
Q3
|
|
|
|
Q3 YTD
Total
|
Change
GAAP
|
|
|
|
|
|
|
|
|
|
|
Income from
continuing operations change
|
|
$194.3
|
|
|
$9.9
|
|
|
$55.5
|
|
|
|
|
$259.7
|
|
Income from
continuing operations % change
|
|
119
|
%
|
|
2
|
%
|
|
12
|
%
|
|
|
|
25
|
%
|
Change
Non-GAAP
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
change
|
|
$60.0
|
|
|
$85.7
|
|
|
$72.1
|
|
|
|
|
$217.8
|
|
Adjusted EBITDA %
change
|
|
8
|
%
|
|
12
|
%
|
|
9
|
%
|
|
|
|
9
|
%
|
Adjusted EBITDA
margin change
|
|
250
|
bp
|
|
340
|
bp
|
|
380
|
bp
|
|
|
|
320
|
bp
|
Below is a reconciliation of segment operating income to
adjusted EBITDA:
|
Industrial
Gases–
Americas
|
Industrial
Gases–
EMEA
|
Industrial
Gases–
Asia
|
Industrial
Gases–
Global
|
Corporate
and other
|
Segment
Total
|
GAAP
MEASURE
|
|
|
|
|
|
|
Three Months Ended
30 June 2019
|
|
|
|
|
|
|
Operating income
(loss)
|
$262.2
|
|
$123.4
|
|
$231.4
|
|
($9.6)
|
|
($41.3)
|
|
$566.1
|
|
Operating
margin
|
27.4
|
%
|
24.9
|
%
|
34.1
|
%
|
|
|
25.5
|
%
|
Three Months Ended
30 June 2018
|
|
|
|
|
|
|
Operating income
(loss)
|
$237.1
|
|
$118.8
|
|
$185.5
|
|
$19.8
|
|
($45.4)
|
|
$515.8
|
|
Operating
margin
|
25.0
|
%
|
21.2
|
%
|
29.7
|
%
|
|
|
22.8
|
%
|
Operating income
(loss) change
|
$25.1
|
|
$4.6
|
|
$45.9
|
|
($29.4)
|
|
$4.1
|
|
$50.3
|
|
Operating income
(loss) % change
|
11
|
%
|
4
|
%
|
25
|
%
|
(148)
|
%
|
9
|
%
|
10
|
%
|
Operating margin
change
|
240
|
bp
|
370
|
bp
|
440
|
bp
|
|
|
270
|
bp
|
NON-GAAP MEASURE
|
|
|
|
|
|
|
Three Months Ended
30 June 2019
|
|
|
|
|
|
|
Operating income
(loss)
|
$262.2
|
|
$123.4
|
|
$231.4
|
|
($9.6)
|
|
($41.3)
|
|
$566.1
|
|
Add: Depreciation and
amortization
|
126.3
|
|
47.8
|
|
87.9
|
|
2.2
|
|
4.9
|
|
269.1
|
|
Add: Equity
affiliates' income
|
21.7
|
|
18.8
|
|
14.9
|
|
1.0
|
|
—
|
|
56.4
|
|
Adjusted
EBITDA
|
$410.2
|
|
$190.0
|
|
$334.2
|
|
($6.4)
|
|
($36.4)
|
|
$891.6
|
|
Adjusted EBITDA
margin
|
42.9
|
%
|
38.4
|
%
|
49.2
|
%
|
|
|
40.1
|
%
|
Three Months Ended
30 June 2018
|
|
|
|
|
|
|
Operating income
(loss)
|
$237.1
|
|
$118.8
|
|
$185.5
|
|
$19.8
|
|
($45.4)
|
|
$515.8
|
|
Add: Depreciation and
amortization
|
120.5
|
|
49.8
|
|
69.5
|
|
2.3
|
|
3.5
|
|
245.6
|
|
Add: Equity
affiliates' income
|
24.1
|
|
17.5
|
|
15.1
|
|
1.4
|
|
—
|
|
58.1
|
|
Adjusted
EBITDA
|
$381.7
|
|
$186.1
|
|
$270.1
|
|
$23.5
|
|
($41.9)
|
|
$819.5
|
|
Adjusted EBITDA
margin
|
40.2
|
%
|
33.2
|
%
|
43.3
|
%
|
|
|
36.3
|
%
|
Adjusted EBITDA
change
|
$28.5
|
|
$3.9
|
|
$64.1
|
|
($29.9)
|
|
$5.5
|
|
$72.1
|
|
Adjusted EBITDA %
change
|
7
|
%
|
2
|
%
|
24
|
%
|
(127)
|
%
|
13
|
%
|
9
|
%
|
Adjusted EBITDA
margin change
|
270
|
bp
|
520
|
bp
|
590
|
bp
|
|
|
380
|
bp
|
|
Industrial
Gases–
Americas
|
Industrial
Gases–
EMEA
|
Industrial
Gases–
Asia
|
Industrial
Gases–
Global
|
Corporate
and other
|
Segment
Total
|
GAAP
MEASURE
|
|
|
|
|
|
|
Nine Months Ended
30 June 2019
|
|
|
|
|
|
|
Operating income
(loss)
|
$737.0
|
|
$351.5
|
|
$632.9
|
|
($17.9)
|
|
($136.9)
|
|
$1,566.6
|
|
Operating
margin
|
25.1
|
%
|
23.2
|
%
|
32.8
|
%
|
|
|
23.6
|
%
|
Nine Months Ended
30 June 2018
|
|
|
|
|
|
|
Operating income
(loss)
|
$676.6
|
|
$340.0
|
|
$509.7
|
|
$41.4
|
|
($135.8)
|
|
$1,431.9
|
|
Operating
margin
|
24.4
|
%
|
20.7
|
%
|
27.9
|
%
|
|
|
21.6
|
%
|
Operating income
(loss) change
|
$60.4
|
|
$11.5
|
|
$123.2
|
|
($59.3)
|
|
($1.1)
|
|
$134.7
|
|
Operating income
(loss) % change
|
9
|
%
|
3
|
%
|
24
|
%
|
(143)
|
%
|
(1)
|
%
|
9
|
%
|
Operating margin
change
|
70
|
bp
|
250
|
bp
|
490
|
bp
|
|
|
200
|
bp
|
NON-GAAP MEASURE
|
|
|
|
|
|
|
Nine Months Ended
30 June 2019
|
|
|
|
|
|
|
Operating income
(loss)
|
$737.0
|
|
$351.5
|
|
$632.9
|
|
($17.9)
|
|
($136.9)
|
|
$1,566.6
|
|
Add: Depreciation and
amortization
|
376.8
|
|
140.4
|
|
252.7
|
|
6.3
|
|
13.0
|
|
789.2
|
|
Add: Equity
affiliates' income
|
62.1
|
|
45.8
|
|
44.9
|
|
2.7
|
|
—
|
|
155.5
|
|
Adjusted
EBITDA
|
$1,175.9
|
|
$537.7
|
|
$930.5
|
|
($8.9)
|
|
($123.9)
|
|
$2,511.3
|
|
Adjusted EBITDA
margin
|
40.0
|
%
|
35.5
|
%
|
48.2
|
%
|
|
|
37.8
|
%
|
Nine Months Ended
30 June 2018
|
|
|
|
|
|
|
Operating income
(loss)
|
$676.6
|
|
$340.0
|
|
$509.7
|
|
$41.4
|
|
($135.8)
|
|
$1,431.9
|
|
Add: Depreciation and
amortization
|
360.6
|
|
149.6
|
|
188.9
|
|
5.8
|
|
8.6
|
|
713.5
|
|
Add: Equity
affiliates' income
|
59.6
|
|
41.7
|
|
44.7
|
|
2.1
|
|
—
|
|
148.1
|
|
Adjusted
EBITDA
|
$1,096.8
|
|
$531.3
|
|
$743.3
|
|
$49.3
|
|
($127.2)
|
|
$2,293.5
|
|
Adjusted EBITDA
margin
|
39.6
|
%
|
32.4
|
%
|
40.7
|
%
|
|
|
34.6
|
%
|
Adjusted EBITDA
change
|
$79.1
|
|
$6.4
|
|
$187.2
|
|
($58.2)
|
|
$3.3
|
|
$217.8
|
|
Adjusted EBITDA %
change
|
7
|
%
|
1
|
%
|
25
|
%
|
(118)
|
%
|
3
|
%
|
9
|
%
|
Adjusted EBITDA
margin change
|
40
|
bp
|
310
|
bp
|
750
|
bp
|
|
|
320
|
bp
|
INCOME TAXES
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. For additional discussion
on the impacts of our non-GAAP tax adjustments, including those
resulting from the U.S. Tax Cuts and Jobs Act, refer to Note 4,
Income Taxes, to the consolidated financial statements.
|
Effective Tax
Rate
|
|
Three Months
Ended
30 June
|
|
Nine Months Ended
30 June
|
|
2019
|
2018
|
|
2019
|
2018
|
Income Tax
Provision—GAAP
|
$109.3
|
|
$107.1
|
|
|
$348.9
|
|
$455.1
|
|
Income From
Continuing Operations Before Taxes—GAAP
|
$609.5
|
|
$551.8
|
|
|
$1,639.6
|
|
$1,486.1
|
|
Effective Tax
Rate—GAAP
|
17.9
|
%
|
19.4
|
%
|
|
21.3
|
%
|
30.6
|
%
|
Income Tax
Provision—GAAP
|
$109.3
|
|
$107.1
|
|
|
$348.9
|
|
$455.1
|
|
Facility
closure
|
—
|
|
—
|
|
|
6.9
|
|
—
|
|
Cost reduction
actions
|
6.7
|
|
—
|
|
|
6.7
|
|
—
|
|
Pension settlement
loss
|
—
|
|
—
|
|
|
1.2
|
|
—
|
|
Tax reform
repatriation
|
(3.2)
|
|
—
|
|
|
12.4
|
|
(420.5)
|
|
Tax reform adjustment
related to deemed foreign dividends
|
—
|
|
—
|
|
|
(56.2)
|
|
—
|
|
Tax reform rate
change and other
|
—
|
|
—
|
|
|
—
|
|
214.0
|
|
Tax
restructuring
|
—
|
|
—
|
|
|
—
|
|
38.8
|
|
Income Tax
Provision—Non-GAAP Measure
|
$112.8
|
|
$107.1
|
|
|
$319.9
|
|
$287.4
|
|
Income From
Continuing Operations Before Taxes—GAAP
|
$609.5
|
|
$551.8
|
|
|
$1,639.6
|
|
$1,486.1
|
|
Facility
closure
|
—
|
|
—
|
|
|
29.0
|
|
—
|
|
Cost reduction
actions
|
25.5
|
|
—
|
|
|
25.5
|
|
—
|
|
Gain on exchange of
equity affiliate investments
|
(29.1)
|
|
—
|
|
|
(29.1)
|
|
—
|
|
Pension settlement
loss
|
—
|
|
—
|
|
|
5.0
|
|
—
|
|
Tax reform
repatriation - equity method investment
|
—
|
|
—
|
|
|
—
|
|
32.5
|
|
Income From
Continuing Operations Before Taxes—Non-GAAP Measure
|
$605.9
|
|
$551.8
|
|
|
$1,670.0
|
|
$1,518.6
|
|
Effective Tax
Rate—Non-GAAP Measure
|
18.6
|
%
|
19.4
|
%
|
|
19.2
|
%
|
18.9
|
%
|
CAPITAL EXPENDITURES
We define capital expenditures as cash flows for additions to
plant and equipment, acquisitions (less cash acquired), and
investment in and advances to unconsolidated affiliates. The
components of our capital expenditures are detailed in the table
below:
|
Three Months
Ended
|
Nine Months
Ended
|
|
30 June
|
30 June
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Additions to plant
and equipment
|
$544.1
|
|
$585.6
|
|
$1,507.6
|
|
$1,158.1
|
|
Acquisitions, less
cash acquired
|
.7
|
|
48.8
|
|
107.0
|
|
320.2
|
|
Investment in and
advances to unconsolidated affiliates
|
14.3
|
|
—
|
|
15.7
|
|
—
|
|
Capital
expenditures
|
$559.1
|
|
$634.4
|
|
$1,630.3
|
|
$1,478.3
|
|
We expect capital expenditures for fiscal year 2019 to be
approximately $2,400 to $2,500.
RETURN ON CAPITAL EMPLOYED (ROCE)
Return on capital employed (ROCE) is calculated on a continuing
operations basis as earnings after-tax divided by five-quarter
average total capital. Earnings after-tax is calculated based on
trailing four quarters and is defined as the sum of net income from
continuing operations attributable to Air Products, interest
expense, after-tax, at our effective quarterly tax rate, and net
income attributable to noncontrolling interests. This non-GAAP
measure has been adjusted for the impact of the non-GAAP
adjustments detailed below. Total capital consists of total debt
and total equity less total assets of discontinued operations.
|
2019
|
|
2018
|
|
2017
|
|
Q3
|
Q2
|
Q1
|
|
Q4
|
Q3
|
Q2
|
Q1
|
|
Q4
|
Q3
|
Net income from
continuing
operations attributable to Air
Products
|
$
|
488.0
|
|
$
|
421.3
|
|
$
|
347.5
|
|
|
$
|
452.9
|
|
$
|
430.7
|
|
$
|
416.4
|
|
$
|
155.6
|
|
|
$
|
474.2
|
|
|
Interest
expense
|
34.2
|
|
35.4
|
|
37.3
|
|
|
35.4
|
|
34.9
|
|
30.4
|
|
29.8
|
|
|
30.8
|
|
|
Interest expense tax
impact
|
(6.1)
|
|
(7.0)
|
|
(10.1)
|
|
|
(4.6)
|
|
(6.8)
|
|
(3.6)
|
|
(19.1)
|
|
|
.1
|
|
|
Interest expense,
after-tax
|
28.1
|
|
28.4
|
|
27.2
|
|
|
30.8
|
|
28.1
|
|
26.8
|
|
10.7
|
|
|
30.9
|
|
|
Net income
attributable to
noncontrolling interests of
continuing operations
|
12.2
|
|
12.2
|
|
9.5
|
|
|
6.8
|
|
14.0
|
|
7.2
|
|
7.1
|
|
|
6.3
|
|
|
Earnings
After-Tax—GAAP
|
$
|
528.3
|
|
$
|
461.9
|
|
$
|
384.2
|
|
|
$
|
490.5
|
|
$
|
472.8
|
|
$
|
450.4
|
|
$
|
173.4
|
|
|
$
|
511.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
adjustments, after-tax
|
Change in inventory
valuation
method
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
(17.5)
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Facility
closure
|
—
|
|
—
|
|
22.1
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
Cost reduction
actions
|
18.8
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
30.9
|
|
|
Gain on exchange of
equity
affiliate investments
|
(29.1)
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
Gain on land
sale
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(7.6)
|
|
|
Pension settlement
loss
|
—
|
|
3.8
|
|
—
|
|
|
33.2
|
|
—
|
|
—
|
|
—
|
|
|
.6
|
|
|
Tax reform
repatriation
|
3.2
|
|
—
|
|
(15.6)
|
|
|
24.1
|
|
—
|
|
—
|
|
453.0
|
|
|
—
|
|
|
Tax reform adjustment
related to
deemed foreign dividends
|
—
|
|
—
|
|
56.2
|
|
|
(56.2)
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
|
Tax reform rate
change and other
|
—
|
|
—
|
|
—
|
|
|
2.2
|
|
—
|
|
—
|
|
(214.0)
|
|
|
—
|
|
|
Tax
restructuring
|
—
|
|
—
|
|
—
|
|
|
3.1
|
|
—
|
|
(38.8)
|
|
—
|
|
|
—
|
|
|
Tax election
benefit
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
(111.4)
|
|
|
Earnings
After-Tax—Non‑GAAP
|
$
|
521.2
|
|
$
|
465.7
|
|
$
|
446.9
|
|
|
$
|
479.4
|
|
$
|
472.8
|
|
$
|
411.6
|
|
$
|
412.4
|
|
|
$
|
423.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Capital
|
|
|
|
|
|
|
|
|
|
|
|
Short-term
borrowings
|
$
|
79.9
|
|
$
|
54.1
|
|
$
|
23.0
|
|
|
$
|
54.3
|
|
$
|
90.4
|
|
$
|
112.5
|
|
$
|
87.1
|
|
|
$
|
144.0
|
|
$
|
143.4
|
|
Current portion of
long-term debt
|
466.5
|
|
434.5
|
|
430.3
|
|
|
406.6
|
|
5.0
|
|
11.6
|
|
11.3
|
|
|
416.4
|
|
416.0
|
|
Long-term
debt
|
2,951.7
|
|
2,933.0
|
|
2,954.4
|
|
|
2,967.4
|
|
3,377.1
|
|
3,442.4
|
|
3,414.9
|
|
|
3,402.4
|
|
3,366.6
|
|
Long-term debt –
related party
|
321.6
|
|
369.2
|
|
360.2
|
|
|
384.3
|
|
398.7
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
Total Debt
|
3,819.7
|
|
3,790.8
|
|
3,767.9
|
|
|
3,812.6
|
|
3,871.2
|
|
3,566.5
|
|
3,513.3
|
|
|
3,962.8
|
|
3,926.0
|
|
Total
Equity
|
11,726.6
|
|
11,503.4
|
|
11,203.4
|
|
|
11,176.3
|
|
10,810.0
|
|
10,693.2
|
|
10,321.2
|
|
|
10,185.5
|
|
9,509.9
|
|
Assets of
discontinued operations
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
(10.2)
|
|
|
(10.2)
|
|
(9.8)
|
|
Total
Capital
|
$
|
15,546.3
|
|
$
|
15,294.2
|
|
$
|
14,971.3
|
|
|
$
|
14,988.9
|
|
$
|
14,681.2
|
|
$
|
14,259.7
|
|
$
|
13,824.3
|
|
|
$
|
14,138.1
|
|
$
|
13,426.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
After-Tax—GAAP
|
$
|
1,864.9
|
|
|
|
|
|
$
|
1,608.0
|
|
|
|
|
|
|
Five-quarter average
total capital
|
15,096.4
|
|
|
|
|
|
14,065.9
|
|
|
|
|
|
|
ROCE—GAAP
items
|
12.4
|
%
|
|
|
|
|
11.4
|
%
|
|
|
|
|
|
Change GAAP-based
Measure
|
100
|
bp
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
After-Tax—Non-GAAP
|
$
|
1,913.2
|
|
|
|
|
|
$
|
1,720.7
|
|
|
|
|
|
|
Five-quarter average
total capital
|
15,096.4
|
|
|
|
|
|
14,065.9
|
|
|
|
|
|
|
ROCE—Non-GAAP
items
|
12.7
|
%
|
|
|
|
|
12.2
|
%
|
|
|
|
|
|
Change Non-GAAP-based
Measure
|
50
|
bp
|
|
|
|
|
|
|
|
|
|
|
OUTLOOK
Guidance provided is on a non-GAAP continuing operations basis,
which excludes the impact of certain disclosed items that we
believe are not representative of our underlying business
performance. While we might incur additional costs for items such
as cost reduction actions, impairment charges, and gains on
disclosed items in future periods, it is not possible, without
unreasonable efforts, to identify the amount or significance of
these events or the potential for other transactions that may
impact future GAAP EPS. Accordingly, management is unable to
reconcile, without unreasonable effort, the Company's forecasted
range of adjusted EPS on a continuing operations basis to a
comparable GAAP range.
|
|
Diluted
EPS
|
|
|
Q4
|
|
|
|
Full Year
|
|
|
2018 GAAP
|
|
$2.05
|
|
|
$6.59
|
|
Change in inventory
valuation method
|
|
(.08)
|
|
|
(.08)
|
|
Pension settlement
loss
|
|
.15
|
|
|
.15
|
|
Tax reform
repatriation
|
|
.11
|
|
|
2.16
|
|
Tax reform adjustment
related to deemed foreign dividends
|
|
(.25)
|
|
|
(.25)
|
|
Tax reform rate
change and other
|
|
.01
|
|
|
(.96)
|
|
Tax
restructuring
|
|
.01
|
|
|
(.16)
|
|
2018 Non-GAAP
Measure
|
|
$2.00
|
|
|
$7.45
|
|
2019 Non-GAAP
Outlook
|
|
2.26–2.31
|
|
|
8.20–8.25
|
|
Change
Non-GAAP
|
|
.26–.31
|
|
|
.75–.80
|
|
% Change
Non-GAAP
|
|
13%–16%
|
|
|
10%–11%
|
|
AIR PRODUCTS AND
CHEMICALS, INC. and Subsidiaries
|
CONSOLIDATED
INCOME STATEMENTS
|
(Unaudited)
|
|
|
Three Months Ended
|
Nine Months
Ended
|
|
30 June
|
30 June
|
(Millions of dollars,
except for share and per share data)
|
2019
|
2018
|
2019
|
2018
|
Sales
|
$2,224.0
|
|
$2,259.0
|
|
$6,635.7
|
|
$6,631.3
|
|
Cost of
sales
|
1,466.0
|
|
1,545.4
|
|
4,484.7
|
|
4,623.7
|
|
Facility
closure
|
—
|
|
—
|
|
29.0
|
|
—
|
|
Selling and
administrative
|
188.5
|
|
188.6
|
|
568.1
|
|
574.8
|
|
Research and
development
|
18.1
|
|
15.0
|
|
50.0
|
|
44.1
|
|
Cost reduction
actions
|
25.5
|
|
—
|
|
25.5
|
|
—
|
|
Gain on exchange of
equity affiliate investments
|
29.1
|
|
—
|
|
29.1
|
|
—
|
|
Other income
(expense), net
|
14.7
|
|
5.8
|
|
33.7
|
|
43.2
|
|
Operating
Income
|
569.7
|
|
515.8
|
|
1,541.2
|
|
1,431.9
|
|
Equity affiliates'
income
|
56.4
|
|
58.1
|
|
155.5
|
|
115.6
|
|
Interest
expense
|
34.2
|
|
34.9
|
|
106.9
|
|
95.1
|
|
Other non-operating
income (expense), net
|
17.6
|
|
12.8
|
|
49.8
|
|
33.7
|
|
Income From
Continuing Operations Before Taxes
|
609.5
|
|
551.8
|
|
1,639.6
|
|
1,486.1
|
|
Income tax
provision
|
109.3
|
|
107.1
|
|
348.9
|
|
455.1
|
|
Income From
Continuing Operations
|
500.2
|
|
444.7
|
|
1,290.7
|
|
1,031.0
|
|
Income From
Discontinued Operations, net of tax
|
—
|
|
43.2
|
|
—
|
|
42.2
|
|
Net
Income
|
500.2
|
|
487.9
|
|
1,290.7
|
|
1,073.2
|
|
Net Income
Attributable to Noncontrolling Interests of
Continuing Operations
|
12.2
|
|
14.0
|
|
33.9
|
|
28.3
|
|
Net Income
Attributable to Air Products
|
$488.0
|
|
$473.9
|
|
$1,256.8
|
|
$1,044.9
|
|
Net Income
Attributable to Air Products
|
|
|
|
|
Income from
continuing operations
|
$488.0
|
|
$430.7
|
|
$1,256.8
|
|
$1,002.7
|
|
Income from
discontinued operations
|
—
|
|
43.2
|
|
—
|
|
42.2
|
|
Net Income
Attributable to Air Products
|
$488.0
|
|
$473.9
|
|
$1,256.8
|
|
$1,044.9
|
|
Basic Earnings Per
Common Share Attributable to Air Products
|
|
|
|
|
Income from
continuing operations
|
$2.21
|
|
$1.96
|
|
$5.71
|
|
$4.57
|
|
Income from
discontinued operations
|
—
|
|
.20
|
|
—
|
|
.19
|
|
Net Income
Attributable to Air Products
|
$2.21
|
|
$2.16
|
|
$5.71
|
|
$4.76
|
|
Diluted Earnings
Per Common Share Attributable to Air Products
|
|
|
|
|
Income from
continuing operations
|
$2.20
|
|
$1.95
|
|
$5.68
|
|
$4.54
|
|
Income from
discontinued operations
|
—
|
|
.20
|
|
—
|
|
.19
|
|
Net Income
Attributable to Air Products
|
$2.20
|
|
$2.15
|
|
$5.68
|
|
$4.73
|
|
Weighted Average
Common Shares – Basic (in millions)
|
220.6
|
|
219.5
|
|
220.2
|
|
219.3
|
|
Weighted Average
Common Shares – Diluted (in millions)
|
221.9
|
|
220.9
|
|
221.4
|
|
220.7
|
|
Other Data from
Continuing Operations
|
|
|
|
|
Depreciation and
amortization
|
$269.1
|
|
$245.6
|
|
$789.2
|
|
$713.5
|
|
Capital expenditures
– Refer to page 10
|
$559.1
|
|
$634.4
|
|
$1,630.3
|
|
$1,478.3
|
|
AIR PRODUCTS AND
CHEMICALS, INC. and Subsidiaries
|
CONSOLIDATED
BALANCE SHEETS
|
(Unaudited)
|
|
|
30 June
|
30
September
|
(Millions of
dollars)
|
2019
|
2018
|
Assets
|
|
|
Current
Assets
|
|
|
Cash and cash
items
|
$2,696.8
|
|
$2,791.3
|
|
Short-term
investments
|
—
|
|
184.7
|
|
Trade receivables,
net
|
1,340.7
|
|
1,207.2
|
|
Inventories
|
408.3
|
|
396.1
|
|
Prepaid
expenses
|
97.2
|
|
129.6
|
|
Other receivables and
current assets
|
372.2
|
|
373.3
|
|
Total Current
Assets
|
4,915.2
|
|
5,082.2
|
|
Investment in net
assets of and advances to equity affiliates
|
1,290.4
|
|
1,277.2
|
|
Plant and equipment,
at cost
|
22,425.6
|
|
21,490.2
|
|
Less: accumulated
depreciation
|
11,998.0
|
|
11,566.5
|
|
Plant and equipment,
net
|
10,427.6
|
|
9,923.7
|
|
Goodwill,
net
|
820.4
|
|
788.9
|
|
Intangible assets,
net
|
441.1
|
|
438.5
|
|
Noncurrent capital
lease receivables
|
938.4
|
|
1,013.3
|
|
Other noncurrent
assets
|
698.8
|
|
654.5
|
|
Total Noncurrent
Assets
|
14,616.7
|
|
14,096.1
|
|
Total
Assets
|
$19,531.9
|
|
$19,178.3
|
|
Liabilities and
Equity
|
|
|
Current
Liabilities
|
|
|
Payables and accrued
liabilities
|
$1,543.2
|
|
$1,817.8
|
|
Accrued income
taxes
|
65.6
|
|
59.6
|
|
Short-term
borrowings
|
79.9
|
|
54.3
|
|
Current portion of
long-term debt
|
466.5
|
|
406.6
|
|
Total Current
Liabilities
|
2,155.2
|
|
2,338.3
|
|
Long-term
debt
|
2,951.7
|
|
2,967.4
|
|
Long-term debt –
related party
|
321.6
|
|
384.3
|
|
Other noncurrent
liabilities
|
1,553.6
|
|
1,536.9
|
|
Deferred income
taxes
|
823.2
|
|
775.1
|
|
Total Noncurrent
Liabilities
|
5,650.1
|
|
5,663.7
|
|
Total
Liabilities
|
7,805.3
|
|
8,002.0
|
|
Air Products
Shareholders' Equity
|
11,386.1
|
|
10,857.5
|
|
Noncontrolling
Interests
|
340.5
|
|
318.8
|
|
Total
Equity
|
11,726.6
|
|
11,176.3
|
|
Total Liabilities
and Equity
|
$19,531.9
|
|
$19,178.3
|
|
AIR PRODUCTS AND
CHEMICALS, INC. and Subsidiaries
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Unaudited)
|
|
|
Nine Months
Ended
|
|
30 June
|
(Millions of
dollars)
|
2019
|
2018
|
Operating
Activities
|
|
|
Net income
|
$1,290.7
|
|
$1,073.2
|
|
Less: Net income
attributable to noncontrolling interests of continuing
operations
|
33.9
|
|
28.3
|
|
Net income
attributable to Air Products
|
1,256.8
|
|
1,044.9
|
|
Income from
discontinued operations
|
—
|
|
(42.2)
|
|
Income from
continuing operations attributable to Air Products
|
1,256.8
|
|
1,002.7
|
|
Adjustments to
reconcile income to cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
789.2
|
|
713.5
|
|
Deferred income
taxes
|
37.8
|
|
(86.9)
|
|
Tax reform
repatriation
|
49.4
|
|
310.3
|
|
Facility
closure
|
29.0
|
|
—
|
|
Undistributed
earnings of unconsolidated affiliates
|
(56.9)
|
|
(34.8)
|
|
Gain on sale of
assets and investments
|
(17.5)
|
|
(5.2)
|
|
Share-based
compensation
|
31.0
|
|
30.4
|
|
Noncurrent capital
lease receivables
|
71.7
|
|
73.7
|
|
Other
adjustments
|
(.7)
|
|
(23.2)
|
|
Working capital
changes that provided (used) cash, excluding effects of
acquisitions:
|
|
|
Trade
receivables
|
(139.5)
|
|
(50.5)
|
|
Inventories
|
(13.5)
|
|
16.0
|
|
Other
receivables
|
70.6
|
|
85.5
|
|
Payables and accrued
liabilities
|
(94.8)
|
|
(164.9)
|
|
Other working
capital
|
(9.2)
|
|
(10.4)
|
|
Cash Provided by
Operating Activities
|
2,003.4
|
|
1,856.2
|
|
Investing
Activities
|
|
|
Additions to plant
and equipment
|
(1,507.6)
|
|
(1,158.1)
|
|
Acquisitions, less
cash acquired
|
(107.0)
|
|
(320.2)
|
|
Investment in and
advances to unconsolidated affiliates
|
(15.7)
|
|
—
|
|
Proceeds from sale of
assets and investments
|
8.8
|
|
45.8
|
|
Purchases of
investments
|
(5.3)
|
|
(349.8)
|
|
Proceeds from
investments
|
190.5
|
|
745.2
|
|
Other investing
activities
|
.8
|
|
5.3
|
|
Cash Used for
Investing Activities
|
(1,435.5)
|
|
(1,031.8)
|
|
Financing
Activities
|
|
|
Long-term debt
proceeds
|
—
|
|
.5
|
|
Payments on long-term
debt
|
(5.4)
|
|
(418.2)
|
|
Net increase
(decrease) in commercial paper and short-term borrowings
|
37.7
|
|
(46.1)
|
|
Dividends paid to
shareholders
|
(738.4)
|
|
(656.6)
|
|
Proceeds from stock
option exercises
|
63.3
|
|
58.2
|
|
Other financing
activities
|
(18.0)
|
|
(35.6)
|
|
Cash Used for
Financing Activities
|
(660.8)
|
|
(1,097.8)
|
|
Discontinued
Operations
|
|
|
Cash used for
operating activities
|
—
|
|
(12.8)
|
|
Cash provided by
investing activities
|
—
|
|
18.6
|
|
Cash provided by
financing activities
|
—
|
|
—
|
|
Cash Provided by
Discontinued Operations
|
—
|
|
5.8
|
|
Effect of Exchange
Rate Changes on Cash
|
(1.6)
|
|
(19.5)
|
|
Decrease in Cash and
Cash Items
|
(94.5)
|
|
(287.1)
|
|
Cash and Cash items -
Beginning of Year
|
2,791.3
|
|
3,273.6
|
|
Cash and Cash
items - End of Period
|
$2,696.8
|
|
$2,986.5
|
|
Supplemental Cash
Flow Information
|
|
|
Cash paid for taxes
(net of refunds) - Continuing operations
|
$250.8
|
|
$311.6
|
|
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
|
Segment
Total
|
Three Months Ended
30 June 2019
|
|
|
|
|
|
|
Sales
|
$955.3
|
|
$494.6
|
|
$679.4
|
|
$57.9
|
|
$36.8
|
|
$2,224.0
|
|
Operating income
(loss)
|
262.2
|
|
123.4
|
|
231.4
|
|
(9.6)
|
|
(41.3)
|
|
566.1
|
|
Depreciation and
amortization
|
126.3
|
|
47.8
|
|
87.9
|
|
2.2
|
|
4.9
|
|
269.1
|
|
Equity affiliates'
income
|
21.7
|
|
18.8
|
|
14.9
|
|
1.0
|
|
—
|
|
56.4
|
|
Three Months Ended
30 June 2018
|
|
|
|
|
|
|
Sales
|
$948.7
|
|
$561.1
|
|
$623.8
|
|
$101.1
|
|
$24.3
|
|
$2,259.0
|
|
Operating income
(loss)
|
237.1
|
|
118.8
|
|
185.5
|
|
19.8
|
|
(45.4)
|
|
515.8
|
|
Depreciation and
amortization
|
120.5
|
|
49.8
|
|
69.5
|
|
2.3
|
|
3.5
|
|
245.6
|
|
Equity affiliates'
income
|
24.1
|
|
17.5
|
|
15.1
|
|
1.4
|
|
—
|
|
58.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
Gases –
Americas
|
Industrial
Gases –
EMEA
|
Industrial
Gases –
Asia
|
Industrial
Gases –
Global
|
Corporate
and other
|
Segment
Total
|
Nine Months Ended
30 June 2019
|
|
|
|
|
|
|
Sales
|
$2,936.2
|
|
$1,513.2
|
|
$1,931.6
|
|
$179.9
|
|
$74.8
|
|
$6,635.7
|
|
Operating income
(loss)
|
737.0
|
|
351.5
|
|
632.9
|
|
(17.9)
|
|
(136.9)
|
|
1,566.6
|
|
Depreciation and
amortization
|
376.8
|
|
140.4
|
|
252.7
|
|
6.3
|
|
13.0
|
|
789.2
|
|
Equity affiliates'
income
|
62.1
|
|
45.8
|
|
44.9
|
|
2.7
|
|
—
|
|
155.5
|
|
Nine Months Ended
30 June 2018
|
|
|
|
|
|
|
Sales
|
$2,771.7
|
|
$1,638.6
|
|
$1,825.0
|
|
$335.8
|
|
$60.2
|
|
$6,631.3
|
|
Operating income
(loss)
|
676.6
|
|
340.0
|
|
509.7
|
|
41.4
|
|
(135.8)
|
|
1,431.9
|
|
Depreciation and
amortization
|
360.6
|
|
149.6
|
|
188.9
|
|
5.8
|
|
8.6
|
|
713.5
|
|
Equity affiliates'
income
|
59.6
|
|
41.7
|
|
44.7
|
|
2.1
|
|
—
|
|
148.1
|
|
Total
Assets
|
|
|
|
|
|
|
30 June
2019
|
$5,896.6
|
|
$3,399.7
|
|
$6,357.6
|
|
$284.3
|
|
$3,593.7
|
|
$19,531.9
|
|
30 September
2018
|
5,904.0
|
|
3,280.4
|
|
5,899.5
|
|
240.1
|
|
3,854.3
|
|
19,178.3
|
|
Below is a reconciliation of segment total operating income to
consolidated operating income:
|
Three Months
Ended
|
Nine Months
Ended
|
|
30 June
|
30 June
|
Operating
Income
|
2019
|
2018
|
2019
|
2018
|
Segment
total
|
$566.1
|
|
$515.8
|
|
$1,566.6
|
|
$1,431.9
|
|
Facility
closure
|
—
|
|
—
|
|
(29.0)
|
|
—
|
|
Cost reduction
actions
|
(25.5)
|
|
—
|
|
(25.5)
|
|
—
|
|
Gain on exchange of
equity affiliate investments
|
29.1
|
|
—
|
|
29.1
|
|
—
|
|
Consolidated
Total
|
$569.7
|
|
$515.8
|
|
$1,541.2
|
|
$1,431.9
|
|
Below is a reconciliation of segment total equity affiliates'
income to consolidated equity affiliates' income:
|
Three Months
Ended
|
Nine Months
Ended
|
|
30 June
|
30 June
|
Equity Affiliates'
Income
|
2019
|
2018
|
2019
|
2018
|
Segment
total
|
$56.4
|
|
$58.1
|
|
$155.5
|
|
$148.1
|
|
Tax reform
repatriation - equity method investment
|
—
|
|
—
|
|
—
|
|
(32.5)
|
|
Consolidated
Total
|
$56.4
|
|
$58.1
|
|
$155.5
|
|
$115.6
|
|
AIR PRODUCTS AND CHEMICALS, INC. and
Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(Unaudited)
(Millions of dollars, unless otherwise indicated)
1. COST REDUCTION ACTIONS
During the third quarter of fiscal year 2019, we recognized an
expense of $25.5 ($18.8 after-tax, or $.08 per share) for severance and other benefits
associated with the elimination or planned elimination of
approximately 300 positions. These actions are expected to
drive cost synergies primarily within the Industrial Gases – EMEA
and the Industrial Gases – Americas segments. The expense has been
reflected as "Cost reduction actions" on the consolidated income
statements and was excluded from segment operating income for the
three and nine months ended 30 June
2019.
2. GAIN ON EXCHANGE OF EQUITY AFFILIATE INVESTMENTS
On 1 May 2019, we closed on a transaction involving two
50%-owned industrial gas joint ventures in China that we accounted for as equity method
investments in our Industrial Gases – Asia segment. As part of the transaction, we
acquired our joint venture partner's 50% interest in WuXi Hi-Tech
Gas Co., Ltd. ("WuXi") in exchange for our 50% interest in
High-Tech Gases (Beijing) Co.,
Ltd. ("High-Tech Gases"). The exchange resulted in a net gain of
$29.1 ($.13 per share), of which $15.0 resulted from the revaluation of our
previously held equity interest in WuXi to its acquisition date
fair value and $14.1 resulted from
the disposition of our interest in High-Tech Gases. The net gain
has been reflected as "Gain on exchange of equity affiliate
investments" on our consolidated income statements and was excluded
from segment operating income for the three and nine months ended
30 June 2019. There were no tax
impacts on the exchange.
The acquisition of the remaining interest in WuXi was accounted
for as a business combination. The results of this business have
been consolidated within our Industrial Gases – Asia segment
as of the acquisition date. The consolidated results subsequent to
the acquisition were not material.
3. PENSION SETTLEMENT LOSS
Our consolidated income statements for the nine months
30 June 2019 include a pension
settlement loss of $5.0 ($3.8 after-tax,
or $.02 per share). This expense was recorded
during the second quarter to accelerate recognition of a portion of
actuarial losses deferred in accumulated other comprehensive loss
associated with the U.S. Supplementary Pension Plan. The loss
is reflected on our consolidated income statements within "Other
non-operating income (expense), net."
4. INCOME TAXES
U.S. Tax Cuts and Jobs Act
The United States enacted the
U.S. Tax Cuts and Jobs Act (the "Tax Act") on 22 December 2017. This legislation significantly
changed existing U.S. tax laws, including a reduction in the
federal corporate income tax rate from 35% to 21%, a deemed
repatriation tax on unremitted foreign earnings, as well as other
changes.
We filed our 2018 federal income tax return in June 2019, which required an adjustment to our
initial calculation of the deemed repatriation tax. Our income tax
provision for the three months ended 30 June
2019 includes a discrete net income tax expense of
$3.2 ($.02 per share) resulting from this adjustment.
Our income tax provision for the nine months ended 30 June 2019 includes a net expense of
$43.8 ($.19 per share). This included the reversal of a
$56.2 benefit recorded in the fourth
quarter of fiscal year 2018 related to the U.S. taxation of deemed
foreign dividends and a benefit of $12.4 to reduce the total expected costs of the
deemed repatriation tax.
While our accounting for the provisions of the Tax Act is not
provisional, further adjustments to the deemed repatriation tax
could result from future adjustments to state tax return filing
positions, U.S. or foreign tax examinations of the years impacted
by the calculation, or from the issuance of additional federal or
state guidance.
5. FACILITY CLOSURE
In December 2018, one of our
customers was subject to a government enforced shutdown due to
environmental reasons. As a result, we recognized a charge of
$29.0 ($22.1 after-tax, or $.10 per share) during the first quarter of
fiscal year 2019 primarily related to the write-off of onsite
assets. This charge is reflected as "Facility closure" on our
consolidated income statements for the nine months ended
30 June 2019 and has been excluded
from segment results. Annual sales and operating income associated
with this customer prior to the facility closure were not material
to the Industrial Gases – Asia
segment. We do not expect to recognize additional charges related
to this shutdown.
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SOURCE Air Products