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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) 11 May 1994
Air Products and Chemicals, Inc.
(Exact name of registrant as specified in charter)
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Delaware 1-4534 23-1274455
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(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification no.)
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 215-481-4911
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Item 5. Other Events.
The Registrant announced today that it will take an after-tax charge
of $60 million to reflect the adoption of mark-to-market accounting for
certain interest rate swap contracts that the company entered into during the
first fiscal quarter of its debt management program.
This action follows an extensive review the company conducted of its
interest rate swap contracts, including five that contain leverage features.
As part of this review and in consultation with the company's auditors, Arthur
Andersen & Co., Air Products has concluded that mark-to-market accounting is
more consistent with the nature of these five contracts. Air Products will
continue to utilize hedge accounting for its other interest rate swap
contracts.
The $60 million after-tax charge will reduce reported net income of
$73 million, or 65 cents per share to $13 million, or 12 cents per share, for
the quarter ended March 31, 1994. The loss being recognized for accounting
purposes is the present value of the future cash flows associated with these
swap transactions and is based on the interest rate environment at the end of
the quarter.
Gerald A. White, Air Products' Chief Financial Officer, stated "Air
Products has successfully used interest rate swap contracts for a number of
years to manage the risk profile and reduce the interest cost of its $1.3
billion debt portfolio. While the contracts that resulted in the charge
against earnings were sensitive to significant interest rate movements, these
contracts were not undertaken for speculative purposes. Going
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forward, we will manage these swaps to minimize future cash and earnings
impact. However, in the near term, we do expect mark-to-market earnings gains
or losses."
Air Products Chairman H.A. Wagner stated, "Five leveraged interest rate
swap contracts were executed, each unacceptable and inconsistent with our
conservative approach to managing our debt portfolio. Our financial management
policies have not changed, and we have taken the necessary actions to ensure
that similar transactions will not be repeated. As we have done for decades,
we will continue to expand the value of our company by taking prudent risks
related to the technical, commercial, and financial aspects of our company's
businesses. Our financial position remains strong, and the outlook for
continued growth is unimpaired and solid."
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Air Products and Chemicals, Inc.
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(Registrant)
Dated: May 11, 1994 By: /s/ Gerald A. White
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Gerald A. White
Senior Vice President - Finance
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