UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) 22 January 2002
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Air Products and Chemicals, Inc.
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(Exact name of registrant as specified in charter)
Delaware 1-4534 23-1274455
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(State of other jurisdiction (Commission file number) (IRS Identification
of incorporation) number)
7201 Hamilton Boulevard, Allentown, Pennsylvania 18195-1501
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 481-4911
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Item 5. Other Events.
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This Currnet Report on Form 8-K/A is filed as an amendment to the Current
Report on Form 8-K filed by Air Products and Chemicals, Inc. on January 22,
2002, when an earlier Form 8-K dated October 22, 2001 was filed inadvertently.
AIR PRODUCTS REPORTS FIRST QUARTER
OPERATING EPS OF 52 CENTS
The Q1 earnings teleconference scheduled for 11:00 a.m. EST on January 22 was
accessed by calling 415-228-4734 and entering passcode 7711, or by listening on
the web at http://www.airproducts.com/fin/quarterly.asp. Recordings of the
earnings teleconference will continue to be available at the above web address
until January 31, 2002.
LEHIGH VALLEY, Pa. (January 22, 2002) - Air Products and Chemicals, Inc.
(NYSE:APD) today reported net income from operations of $114 million, or diluted
earnings per share of 52 cents, for its first fiscal quarter ended December 31,
2001. Net income from operations and diluted earnings per share were each down
16% compared with prior year results.
Revenues of $1.3 billion declined 11%. Sales were lower due to continued
weakness in the global electronics market and in U.S. manufacturing, which led
to lower volumes in most gas and chemical product lines.
Reported earnings per share are in line with guidance provided last quarter.
Commenting on the quarter, Air Products Chairman and Chief Executive Officer
John P. Jones said, "We anticipated a slow start to the year, and our operating
results are consistent with that. While volumes remain soft, we continue
improving our business fundamentals through capital discipline, cost reduction,
margin expansion and portfolio management. For example, this month we announced
an agreement to sell the majority of our U.S. packaged gas business, subject to
regulatory approval. I am confident we are well positioned to capitalize on the
pending economic recovery as a result of these actions to reinforce our growth
businesses and refine our portfolio."
Industrial gas sales of $904 million declined 12%. Operating income declined 21%
compared with the prior year. Results for electronics continued to be affected
by a sharp reduction in customers' global silicon wafer processing due to soft
demand. Chemicals and Processing Industries (CPI) results declined due to
planned customer outages and associated plant maintenance turnaround expenses.
In North America, margin expansion from liquid bulk pricing actions and lower
energy costs more than offset softer volumes across most businesses. Asian
operating results improved on increased loading. In Europe, better merchant
pricing and strong packaged gas and medical sales more than offset merchant
liquid bulk volume declines.
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Equity affiliate results declined, mainly due to the divestiture of two
cogeneration facilities in the fourth quarter of fiscal 2001.
Chemicals' sales of $349 million declined 11%, primarily due to the slower
economy. Operating income improved 9% due to improved margins. Raw material,
energy and overhead costs were lower.
Regarding Air Products' outlook, Mr. Jones said, "Visibility going forward
continues to be a challenge, and we have not yet seen signs of recovery. Based
on less favorable assumptions on the timing and pace of economic recovery, we
believe operating earnings per share this year will be close to the lower end of
our previous guidance of $2.35-$2.45, with second quarter operating earnings
about equal to first quarter earnings. In response to this uncertain economic
environment, we will continue doing all we can to aggressively reduce our costs,
increase our margins, and refine our portfolio."
Mr. Jones concluded by saying, "If, as we originally anticipated, the economy
recovers in the second half of our fiscal year, we have significant operating
leverage across many of our growth and core businesses that should drive our
earnings above the lower end of the range. Given our leadership positions in
historically fast-growing markets and regions like electronics, CPI, Asia, and
performance chemicals, I remain optimistic about Air Products' prospects. Our
company will emerge from this slowdown stronger and more efficient than ever."
Air Products' guidance range includes a seven cents per share benefit from the
adoption of the new accounting standard for goodwill, up from a preliminary
estimate of five cents, and excludes the pending packaged gas business sale,
which the company expects to be earnings neutral in its first full year
following deal closure.
Air Products will hold its annual meeting of shareholders on Thursday, January
24, 2002 2:00 p.m., at Cedar Crest College in Allentown, Pennsylvania. The
meeting can be listened to on the web at:
www.airproducts.com/fin/annualmeeting.asp
**NOTE: Fiscal first quarter earnings reflect a two cent per share benefit, and
the fiscal 2002 earnings outlook reflects seven cents per share benefit from the
adoption of a new accounting standard for goodwill.
***NOTE: The forward-looking statements contained in this release 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, including the success of the world
economy significantly strengthening in the second half of the fiscal year;
demand and timing of the placing of orders for the goods and services of Air
Products, including the success of recovery in the Air Products' markets in the
electronics industry in the second half of the fiscal year; competitive factors
in the industries in which it competes; the ability to recover
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increased energy and raw material costs from customers; spikes in the pricing of
natural gas; changes in government regulations; consequences of acts of
terrorism impacting the United States' and other markets; 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; 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, below:
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AIR PRODUCTS AND CHEMICALS, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
(Millions of dollars, except per share)
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Three Months Ended
31 December
2001 2000
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Sales $1,316.5 $1,475.8
Net Income $ 113.7 $ 135.6
Basic Earnings Per Share $ .53 $ .63
Diluted Earnings Per Share $ .52 $ .62
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Operating Return on Net Assets 10.6% 11.5%
Capital Expenditures $ 199.4 $ 163.4
Depreciation $ 139.3 $ 148.4
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED INCOME
(Unaudited)
(Millions of dollars, except per share)
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Three Months Ended
31 December
2001 2000
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SALES $1,316.5 $1,475.8
COSTS AND EXPENSES
Cost of sales 937.1 1,059.6
Selling and administrative 169.3 173.5
Research and development 30.4 28.5
Other (income) expense, net (4.5) (13.3)
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OPERATING INCOME 184.2 227.5
Income from equity affiliates, net of 18.4 20.9
related expenses
Interest expense 35.1 48.4
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INCOME BEFORE TAXES AND MINORITY INTEREST 167.5 200.0
Income taxes 48.8 61.7
Minority interest(a) 5.0 2.7
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NET INCOME $ 113.7 $ 135.6
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BASIC EARNINGS PER COMMON SHARE $ .53 $ .63
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DILUTED EARNINGS PER COMMON SHARE $ .52 $ .62
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES (in 215.7 214.4
millions)
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WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON 220.6 217.9
EQUIVALENT SHARES (in millions) (b)
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DIVIDENDS DECLARED PER COMMON SHARE - Cash $ .20 $ .19
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(a) Minority interest primarily includes before-tax amounts.
(b) The dilution of earnings per common share is due mainly to the impact of
unexercised stock options.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Millions of dollars)
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31 December
ASSETS 2001 2000
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CURRENT ASSETS
Cash and cash items $ 68.3 $ 85.3
Trade receivables, less allowances for 867.4 1,058.3
doubtful accounts
Inventories and contracts in progress 485.5 502.6
Other current assets 207.4 186.5
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TOTAL CURRENT ASSETS 1,628.6 1,832.7
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INVESTMENTS IN NET ASSETS OF AND ADVANCES TO 516.9 491.0
EQUITY AFFILIATES
PLANT AND EQUIPMENT, at cost 10,324.9 10,470.8
Less - Accumulated depreciation 5,210.2 5,219.4
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PLANT AND EQUIPMENT, net 5,114.7 5,251.4
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GOODWILL 380.7 355.9
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OTHER NONCURRENT ASSETS 398.0 370.3
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TOTAL ASSETS $ 8,038.9 $ 8,301.3
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES
Payables, trade and other $ 463.6 $ 581.4
Accrued liabilities 301.1 341.3
Accrued income taxes 67.6 54.2
Short-term borrowings 249.9 137.8
Current portion of long-term debt 165.2 170.7
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TOTAL CURRENT LIABILITIES 1,247.4 1,285.4
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LONG-TERM DEBT 1,989.5 2,655.3
DEFERRED INCOME & OTHER NONCURRENT LIABILITIES 714.8 569.0
DEFERRED INCOME TAXES 795.7 765.2
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TOTAL LIABILITIES 4,747.4 5,274.9
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MINORITY INTERESTS IN SUBSIDIARY COMPANIES 120.9 117.5
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TOTAL SHAREHOLDERS' EQUITY 3,170.6 2,908.9
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,038.9 $ 8,301.3
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONDENSED CONSOLIDATED CASH FLOWS
(Unaudited)
(Millions of dollars)
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Three Months Ended
31 December
2001 2000
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OPERATING ACTIVITIES
Net Income $113.7 $135.6
Adjustments to reconcile income to cash provided by operating
activities:
Depreciation 139.3 148.4
Deferred income taxes 13.1 (4.8)
Undistributed earnings of unconsolidated affiliates (12.1) (4.9)
Loss (Gain) on sale of assets and investments .2 (1.3)
Other 32.1 15.7
Working capital changes that provided (used) cash, excluding
effects of acquisitions and divestitures:
Trade receivables 36.6 (69.8)
Inventories and contracts in progress (9.4) (18.1)
Payables, trade and other (45.2) (1.3)
Other 5.5 84.4
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CASH PROVIDED BY OPERATING ACTIVITIES 273.8 283.9
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INVESTING ACTIVITIES
Additions to plant and equipment (a) (178.0) (138.0)
Investment in and advances to unconsolidated affiliates (20.9) (16.9)
Proceeds from sale of assets and investments 16.5 18.6
Other (9.3) 12.1
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CASH USED FOR INVESTING ACTIVITIES (191.7) (124.2)
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FINANCING ACTIVITIES
Long-term debt proceeds 3.5 3.9
Payments on long-term debt (47.3) (26.0)
Net decrease in commercial paper and short-term borrowings (3.4) (103.9)
Dividends paid to shareholders (43.1) (40.7)
Issuance of stock for options and award plans 12.3 5.1
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CASH USED FOR FINANCING ACTIVITIES (78.0) (161.6)
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Effect of Exchange Rate Changes on Cash (2.0) (6.9)
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Increase (Decrease) in Cash and Cash Items 2.1 (8.8)
Cash and Cash Items - Beginning of Year 66.2 94.1
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Cash and Cash Items - End of Period $ 68.3 $ 85.3
======================================================================================================
(a) Excludes capital lease additions of $.5 in 2002 and $8.5 in 2001.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars, except per share)
The company changed its reporting of demurrage/cylinder income to include it in
revenues. Previously, it was included as an offset to cost of sales. The
consolidated income statements of the prior periods have been adjusted to
reflect this reclassification. The impact on 2001 and 2000 is to increase both
consolidated and gases segment sales and cost of sales by $140.3 and $142.5,
respectively. The impact on the gases segment for each quarter of 2001 and 2000
is provided below:
GASES SEGMENT Q1 Q2 Q3 Q4 Total
-- -- -- -- -----
2001
Sales
As reported 992.2 1,043.2 983.9 924.7 3,944.0
Reclassified 1,026.7 1,079.3 1,018.7 959.6 4,084.3
Operating margin % excluding special items
As reported 19.3 17.6 17.8 18.8 18.4
Reclassified 18.6 17.0 17.2 18.2 17.7
2000
Sales
As reported 780.6 842.1 894.8 948.0 3,465.5
Reclassified 816.2 878.4 929.9 983.5 3,608.0
Operating margin % excluding special items
As reported 19.6 19.6 21.2 20.2 20.2
Reclassified 18.8 18.8 20.4 19.5 19.4
The company adopted Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets" on 1 October 2001. As required by SFAS
142, the company is currently performing an impairment test on goodwill as of 1
October 2001. This test will be performed on an annual basis and whenever events
or circumstances occur indicating that goodwill may be impaired. As of 1 October
2001 the company is no longer amortizing goodwill, including goodwill associated
with investments in equity affiliates. Goodwill amortization in 2001 was $14.8
on an after-tax basis, or $.07 per share. Goodwill amortization for the three
months ended 31 December 2000 was $3.8 on an after-tax basis, or $.02 per share.
Income from equity affiliates contributed $.07 and $.09 to diluted earnings per
share for the three months ended 31 December 2001 and 2000, respectively.
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In January 2002, the company announced an agreement to sell the majority of its
U.S. packaged gas business, excluding the electronic gases and magnetic
resonance imaging related helium operations, to Airgas, Inc. (Airgas). The
agreement is subject to regulatory approval. The agreement would include
approximately 100 facilities in 30 states associated with the filling and
distribution of cylinders, liquid dewars, tube trailers, and other containers of
industrial gases and non-electronic specialty gases, and the retail selling of
welding hardgoods, including customer service centers, warehouses, and other
related assets. The assets to be sold generated $223 in revenues in 2001, and
employ approximately 1,100 people. The company also agreed to sell packaged gas
operations in the Carolinas and in Southern Virginia to National Welders Supply
Company, Inc., a joint venture between Airgas and the Turner family of
Charlotte, N.C. These operations include nine sites, which generated $17 in
revenues in 2001 and employ 100 people. The proceeds from these transactions are
expected to be $254.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY BUSINESS SEGMENTS
(Unaudited)
Business segment information is shown below:
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(Millions of dollars) Three Months Ended
31 December
2001 2000
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Revenues from external customers
Gases $904.1 $1,026.7
Chemicals 349.0 393.3
Equipment 63.4 55.8
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Segment Totals 1,316.5 1,475.8
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Consolidated Totals $1,316.5 $1,475.8
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Operating income
Gases $152.0 $191.4
Chemicals 40.5 37.0
Equipment 0.9 1.1
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Segment Totals 193.4 229.5
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Corporate research and development and other income/(expense) (9.2) (2.0)
Consolidated Totals $184.2 $227.5
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Equity affiliates' income
Gases $15.8 $18.7
Chemicals 2.3 1.5
Equipment .3 .7
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Segment Totals 18.4 20.9
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Consolidated Totals $18.4 $20.9
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Identifiable assets (a)
Gases $5,793.5 $5,977.9
Chemicals 1,379.5 1,482.0
Equipment 197.9 229.8
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Segment Totals 7,370.9 7,689.7
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Corporate assets 151.1 120.6
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Consolidated Totals $7,522.0 $7,810.3
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ORONA (a)
Gases 11.6% 12.6%
Chemicals 10.2% 11.8%
Equipment 5.6% 7.2%
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Segment Totals 11.2% 12.3%
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Consolidated Totals 10.6% 11.5%
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(a) Operating return on net assets (ORONA) is calculated as the rolling four
quarter sum of operating income divided by the rolling five quarter average
of total assets less investments in equity affiliates (identifiable assets).
The ORONA calculation excludes all special items impacting operating income.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY GEOGRAPHIC REGIONS
(Unaudited)
(Millions of dollars)
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Three Months Ended
31 December
Revenues from external customers 2001 2000
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United States $ 837.9 $ 981.2
Canada 25.0 29.5
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Total North America 862.9 1,010.7
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United Kingdom 110.9 112.4
Spain 81.2 74.3
Other Europe 151.9 147.6
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Total Europe 344.0 334.3
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Asia 82.9 92.6
Latin America 26.6 38.1
All Other .1 .1
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Total $1,316.5 $1,475.8
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Note: Geographic information is based on country of origin. The other Europe
segment operates principally in France, Germany, Netherlands, and Belgium.
# # #
Media Inquiries:
Lisa A. Walsh, tel: (610) 481-5784; e-mail: walshla@apci.com.
Investor Inquiries:
Alexander W. Masetti, tel: (610) 481-7461; e-mail: masettaw@apci.com.
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Item 9. Regulation FD Disclosure
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The Q1 earnings teleconference following the earnings release which started at
11:00 a.m. EST on January 22, 2002 can be accessed by listening on the Company's
web site at http://www.airproducts.com/fin/quarterly.asp. Recordings of the
earnings teleconference and copies of the slides used will continue to be
available at the above web address until midnight on January 31, 2002.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Air Products and Chemicals, Inc.
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(Registrant)
Dated: 23 January 2002 By: /s/Leo J. Daley
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Leo J. Daley
Vice President - Finance and Controller
(Chief Financial Officer)
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