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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) 21 October 1994
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Air Products and Chemicals, Inc.
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(Exact name of registrant as specified in charter)
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Delaware 1-4534 23-1274455
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(State of other jurisdiction of incorporation) (Commission file number) (IRS Identification number)
7201 Hamilton Boulevard, Allentown, Pennsylvania 18195-1501
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code (215/610)-481-4911
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Item 5. Other Events.
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The Registrant reported record net income of $79 million, or 70 cents
per share, for the fourth quarter ended September 30, 1994. These results
represent a per-share increase of 35 percent over last year's income of $60
million, or 52 cents per share, which excludes charges for workforce reduction
costs, selected asset write-downs, and a nonoperating item. Sales in the
current quarter, also a record, rose 9 percent to $931 million versus last
year.
The following discussion of segment results excludes charges for
workforce reduction and asset writedowns taken in last year's fourth quarter.
The industrial gas business set records as sales for the quarter
increased 13 percent and operating income rose 16 percent. Strong worldwide
merchant and on-site gas volumes were a major factor in the quarter's results.
European profits improved significantly due to the volume increases and the
impact of a cost reduction program. In the United States, merchant gas prices
were slightly lower compared to last year, but were flat on a consecutive
quarter basis.
The chemicals business also had a strong quarter as sales were up 15
percent and operating income increased 24 percent compared to last year.
Volumes increased across several major product lines. The company's core
chemical businesses performed well, but were adversely affected by planned
shutdowns to manage inventories at both polyvinyl alcohol facilities. Results
also benefited significantly from higher ammonia and methanol prices.
Profits in the environmental and energy systems business were up
versus the year-ago quarter, reflecting continued strong operations at all
major facilities.
The Equipment and Technology segment reported significantly lower
sales due to decreased levels of business activity. A one-time project payment
accounted for the slight increase in profits.
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For fiscal 1994, Air Products reported income before the cumulative
effect of required accounting changes of $234 million, or $2.06 per share,
compared with $201 million, or $1.76 per share, last year. Excluding
nonoperating items in both years, earnings rose 17 percent based on 1994 income
of $308 million, or $2.71 per share, compared with $264 million, or $2.32 per
share, last year. As a result, return on equity increased from 12.6 percent to
14.4 percent, excluding the nonoperating items. Sales of $3.5 billion were up
5 percent from 1993.
Nonoperating items in 1994 included an after-tax charge of $75
million, or 66 cents per share, for a loss on certain interest rate and foreign
currency derivative contracts that were terminated or closed during the year.
In 1993, nonoperating items totaled $63 million, or 56 cents per share,
including an after-tax charge of $76 million, or 67 cents per share, for
workforce reduction costs and selected asset write-downs.
Financial tables follow:
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AIR PRODUCTS AND CHEMICALS, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
(In millions, except earnings per share)
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<CAPTION>
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Three Months Ended 30 September 1994 1993
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Sales $931.0 $855.5
Net Income 79.1 (14.2)(c)
Earnings Per Share .70 (.13)(c)
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Twelve Months Ended 30 September 1994 1993
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Sales $3,485.3 $3,327.7
Income Before Cumulative Effect
of Accounting Changes 233.5 (a) 200.9 (d)
Cumulative Effect of Accounting
Changes 14.3 (b) --
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Net Income 247.8 200.9
Earnings Per Share
Income Before Cumulative Effect
of Accounting Changes 2.06 (a) 1.76 (d)
Cumulative Effect of Accounting
Changes .12 (b) --
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Net Income 2.18 1.76
Average Shares Outstanding 113.6 113.9
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(a) Includes an after-tax charge of $75.1 million, or $.66 per share, for
a loss on certain derivative contracts that were terminated or closed
during 1994; an after-tax charge of $7.1 million, or $.06 per share,
for the outsourcing of the distribution function in the United
Kingdom; a tax benefit of $5.4 million, or $.05 per share, resulting
from changes in certain state income tax regulations; and an after-tax
benefit of $2.3 million, or $.02 per share, from the favorable tax
treatment, net of expense, of the charitable contribution of the
remaining shares of a stock investment in an insurance company.
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(b) The company adopted Statement of Financial Accounting Standard (SFAS)
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," SFAS No. 109, "Accounting for Income Taxes," and SFAS No.
112, "Employers' Accounting for Postemployment Benefits," on 1 October
1993 and recognized the cumulative effect of these accounting changes.
(c) Includes an after-tax charge of $76.1 million, or $.67 per share, for
costs associated with reducing the workforce by 7 to 10 percent over a
two-year period and for selected asset write-downs. Also includes an
after-tax gain of $2.3 million, or $.02 per share, from the partial
sale of a stock investment in an insurance company.
(d) Includes an after-tax charge of $76.1 million, or $.67 per share, for
workforce reduction-related costs and selected asset write-downs.
Also includes an after-tax gain of $13.0 million, or $.11 per share,
from an insurance settlement related to a chemicals facility; the sale
of a business venture; and the sale of stock options and partial sale
of a stock investment in an insurance company.
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AIR PRODUCTS AND CHEMICALS, INC.
OPERATING RESULTS
(Unaudited)
SUMMARY BY BUSINESS SEGMENTS
(In millions)
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<CAPTION>
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Three Months Ended Twelve Months Ended
30 September 30 September
1994 1993 1994 1993
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Sales:
Industrial Gases $524.5 $463.8 $1,968.1 $1,813.7
Chemicals 315.9 275.4 1,182.2 1,092.1
Environmental/Energy 16.4 16.5 67.1 82.5
Equipment/Technology 74.2 99.8 267.9 339.4
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CONSOLIDATED 931.0 855.5 3,485.3 3,327.7
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Operating Income (Loss)
before Workforce Reduction
and Asset Write-downs:
Industrial Gases 101.9 88.2 380.6 362.1
Chemicals 36.7 29.6 147.9 131.1
Environmental/Energy 1.3 .3 5.6 (2.2)
Equipment/Technology 4.1 1.3 11.5 33.6
Corporate and Other (12.6) (10.2) (59.5) (35.3)
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CONSOLIDATED 131.4 109.2 486.1 489.3
Operating Income (Loss):
Industrial Gases 101.9 34.8 380.6 308.7
Chemicals 36.7 (5.0) 147.9 96.5
Environmental/Energy 1.3 (23.0) 5.6 (25.5)
Equipment/Technology 4.1 (5.4) 11.5 26.9
Corporate and Other (12.6) (12.2) (59.5) (37.3)
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CONSOLIDATED 131.4 (10.8) 486.1 369.3
Equity Affiliates' Income:
Industrial Gases 1.5 (1.5) 4.1 .1
Chemicals .1 .4 .2 .5
Environmental/Energy 5.5 5.0 24.2 12.2
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CONSOLIDATED 7.1 3.9 28.5 12.8
Loss on leveraged interest
rate swaps -- -- 107.7 --
Interest Expense 22.2 20.0 81.6 81.3
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INCOME BEFORE TAXES 116.3 (26.9) 325.3 300.8
Income Taxes (Benefit) 37.2 (12.7) 91.8 99.9
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INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGES 79.1 (14.2) 233.5 200.9
Cumulative Effect of
Accounting Changes, Net
of Income Taxes -- -- 14.3 --
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NET INCOME (LOSS) $ 79.1 $(14.2) $ 247.8 $ 200.9
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During 1994 the company terminated three highly leveraged interest rate swap
contracts and closed two other such agreements; terminated two agreements which
hedged currency risk; and terminated a number of smaller interest rate hedge
agreements.
For the twelve months ended 30 September 1994, the loss associated with these
contracts totaled $121.6 million ($75.1 million after tax). This loss is
included in the statement of operating results as follows: $107.7 million loss
on leveraged interest rate swaps; $12.2 million foreign exchange loss included
in corporate and other; and $1.7 million interest expense.
For the twelve months ended 30 September 1994, industrial gases results are
reduced by a charge of $10.7 million ($7.1 million after tax) for the
outsourcing of the distribution function in the United Kingdom. In addition,
corporate and other includes an expense of $2.3 million for the charitable
contribution of the remaining shares of a stock investment in an insurance
company. The tax benefit associated with this contribution, based on fair
value of the investment, was $4.6 million. For the twelve months ended 30
September 1994, income taxes includes a benefit of $5.4 million resulting from
changes in certain state income tax regulations.
Effective 1 October 1993, the company adopted and recognized the cumulative
effect of the following accounting standards: SFAS 106- Postretirement
Benefits ($31.3 million charge); SFAS 109-Income Taxes ($55.9 million gain);
and SFAS 112-Postemployment Benefits ($10.3 million charge). The impact of
these accounting changes on income for the three and twelve months ended 30
September 1994, exclusive of the cumulative effect and changes in certain state
income tax regulations, is not material.
Fiscal 1993 operating income of the industrial gases segment and corporate and
other have been restated to reflect the current year presentation of Brazilian
conversion gains related to U.S. dollar denominated investments. For the three
months ended 30 September 1993, operating income of the industrial gases
segment was reduced by $4.4 million with a corresponding increase in corporate
and other. For the twelve months ended 30 September 1993, this
reclassification totaled $12.3 million.
For the three months ended 30 September 1993, corporate and other operating
income before workforce reduction and asset write-downs includes a gain of $3.9
million ($2.3 million after tax) from the partial sale of a stock investment in
an insurance company.
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For the twelve months ended 30 September 1993, chemicals' operating income
before workforce reduction and asset write-downs includes a gain of $3.6
million ($2.2 million after tax) from an insurance settlement and equipment and
technology's operating income before workforce reduction and asset write-downs
includes a gain of $3.9 million ($2.4 million after tax) from the sale of a
business venture. In addition, corporate and other includes a gain of $13.5
million ($8.4 million after tax) from the sale of stock options and partial
sale of a stock investment in an insurance company.
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AIR PRODUCTS AND CHEMICALS, INC.
OPERATING RESULTS
(Unaudited)
SUMMARY BY GEOGRAPHIC LOCATIONS
(In millions)
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Three Months Ended Twelve Months Ended
30 September 30 September
1994 1993 1994 1993
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Sales:
United States $704.7 $631.0 $2,632.3 $2,490.2
Europe 196.8 197.4 734.4 735.3
Canada/Latin America 29.5 27.1 118.6 102.2
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CONSOLIDATED $931.0 $855.5 $3,485.3 $3,327.7
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Operating Income (Loss)
before Workforce Reduction
and Asset Write-downs:
United States $ 94.1 $ 86.6 $380.7 $395.1
Europe 29.2 21.4 87.8 88.3
Canada/Latin America 8.1 .9 17.6 5.6
Other -- .3 -- .3
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CONSOLIDATED $131.4 $109.2 $486.1 $489.3
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Operating Income (Loss):
United States $ 94.1 $ (1.2) $380.7 $307.3
Europe 29.2 (10.0) 87.8 56.9
Canada/Latin America 8.1 .2 17.6 4.9
Other -- .2 -- .2
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CONSOLIDATED $131.4 $(10.8) $486.1 $369.3
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For the twelve months ended 30 September 1994, operating income of the United
States includes a loss of $12.2 million from the termination of two agreements
which hedged currency risk and an expense of $2.3 million for the charitable
contribution of the remaining shares of a stock investment in an insurance
company. For this same period, operating income of Europe includes a charge of
$10.7 million related to the outsourcing of the distribution function in the
United Kingdom.
For the three months ended 30 September 1993, operating income before workforce
reduction and asset write-downs of the United States includes a gain of $3.9
million from the partial sale of a stock investment in an insurance company.
For the twelve months ended 30 September 1993, operating income before
workforce reduction and asset write-downs of the United States includes a gain
of $21.0 million from an insurance settlement related to a chemicals facility;
the sale of a business venture; and the sale of stock options and partial sale
of a stock investment in an insurance company.
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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: October 24, 1994 By: /s/ Gerald A. White
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Gerald A. White
Senior Vice President - Finance
