<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended 31 March 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------- -----------
Commission file number 1-4534
AIR PRODUCTS AND CHEMICALS, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 23-1274455
- --------------------------------------------------------------------------------
(State of Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
7201 Hamilton Boulevard, Allentown, Pennsylvania 18195-1501
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 610-481-4911
--------------
Indicate by check x whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at 7 May 1996
-------------------------- ----------------------------
Common Stock, $1 par value 122,029,974
<PAGE> 2
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Consolidated Balance Sheets -
31 March 1996 and 30 September 1995 ........................... 3
Consolidated Income -
Three Months and Six Months Ended 31 March 1996 and 1995 ...... 4
Consolidated Cash Flows -
Six Months Ended 31 March 1996 and 1995 ....................... 5
Notes to Consolidated Financial Statements ....................... 6
Management's Discussion and Analysis ............................. 7
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security-Holders ..... 13
Item 6. Exhibits and Reports on Form 8-K ........................ 15
Signatures ....................................................... 16
</TABLE>
REMARKS:
The consolidated financial statements of Air Products and Chemicals, Inc. and
its subsidiaries (the "Company" or "Registrant") included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. In the opinion of the Company, the
accompanying statements reflect all adjustments necessary to present fairly the
financial position, results of operations and cash flows for those periods
indicated, and contain adequate disclosure to make the information presented not
misleading. Such adjustments are of a normal, recurring nature unless otherwise
disclosed in the notes to consolidated financial statements. However, the
results for the periods indicated herein reflect certain adjustments, such as
the valuation of inventories on the LIFO cost basis, which can only be finally
determined on an annual basis. It is suggested that these consolidated condensed
financial statements be read in conjunction with the financial statements and
notes thereto included in the Company's latest annual report on Form 10-K and
report on Form 10-Q for the quarter ended 31 December 1995.
Results of operations for any three or six month periods are not necessarily
indicative of the results of operations for a full year.
2
<PAGE> 3
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions, except per share)
<TABLE>
<CAPTION>
31 March 30 September
ASSETS 1996 1995
------ -------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash items $ 82 $ 87
Trade receivables, less allowances for doubtful accounts 649 625
Inventories 383 335
Contracts in progress, less progress billings 114 123
Other current assets 144 162
------- -------
TOTAL CURRENT ASSETS 1,372 1,332
------- -------
INVESTMENTS 795 657
------- -------
PLANT AND EQUIPMENT, at cost 7,691 7,350
Less - Accumulated depreciation 3,982 3,848
------- -------
PLANT AND EQUIPMENT, net 3,709 3,502
------- -------
GOODWILL 80 81
------- -------
OTHER NONCURRENT ASSETS 268 244
------- -------
TOTAL ASSETS $ 6,224 $ 5,816
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables, trade and other $ 491 $ 519
Accrued liabilities 235 249
Accrued income taxes 94 56
Short-term borrowings 423 314
Current portion of long-term debt 25 173
------- -------
TOTAL CURRENT LIABILITIES 1,268 1,311
------- -------
LONG-TERM DEBT 1,495 1,194
------- -------
DEFERRED INCOME AND OTHER NONCURRENT LIABILITIES 398 435
------- -------
DEFERRED INCOME TAXES 510 478
------- -------
TOTAL LIABILITIES 3,671 3,418
------- -------
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share 125 125
Capital in excess of par value 463 465
Retained earnings 2,556 2,388
Unrealized gain on investments 41 41
Cumulative translation adjustments (48) (24)
Treasury stock, at cost (126) (139)
Shares in trust (458) (458)
------- -------
TOTAL SHAREHOLDERS' EQUITY 2,553 2,398
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,224 $ 5,816
======= =======
</TABLE>
3
<PAGE> 4
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME
(In millions, except per share)
<TABLE>
<CAPTION>
Three Months Six Months Ended
Ended 31 March 31 March
------------------ ------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
SALES AND OTHER INCOME
Sales $1,013 $ 983 $1,960 $1,904
Other income, net 4 1 8 --
------ ------ ------ ------
1,017 984 1,968 1,904
------ ------ ------ ------
COSTS AND EXPENSES
Cost of sales 609 591 1,169 1,135
Selling, distribution, and administrative 231 215 451 421
Research and development 29 26 56 50
------ ------ ------ ------
OPERATING INCOME 148 152 292 298
Income from equity affiliates, net of related expenses 18 8 34 17
Gain on settlement of leveraged interest rate swaps 67 -- 67 --
Interest expense 31 26 60 50
------ ------ ------ ------
INCOME BEFORE TAXES 202 134 333 265
Income taxes 67 46 109 90
------ ------ ------ ------
NET INCOME $ 135 $ 88 $ 224 $ 175
====== ====== ====== ======
MONTHLY AVERAGE OF COMMON SHARES OUTSTANDING -- -- 112 112
------ ------ ------ ------
EARNINGS PER COMMON SHARE $ 1.21 $ .79 $ 2.01 $ 1.56
====== ====== ====== ======
DIVIDENDS DECLARED PER COMMON SHARE - Cash $ .26 $ .25 $ .52 $ .49
------ ------ ------ ------
</TABLE>
4
<PAGE> 5
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Six Months Ended
31 March
-----------------
1996 1995
----- -----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 224 $ 175
Adjustments to reconcile income to cash provided by operating activities:
Depreciation 200 183
Termination of liabilities for leveraged interest rate swaps (62) --
Deferred income taxes 34 27
Other (4) 12
Working capital changes that provided (used) cash:
Trade receivables (30) (59)
Inventories and contracts in progress (41) (11)
Payables, trade and other (26) (15)
Accrued income taxes 41 15
Other (12) (2)
Other 3 (15)
----- -----
CASH PROVIDED BY OPERATING ACTIVITIES 327 310
----- -----
INVESTING ACTIVITIES
Additions to plant and equipment* (444) (384)
Investment in and advances to unconsolidated affiliates (134) (22)
Acquisitions, less cash acquired (4) --
Proceeds from sale of assets and investments 38 8
Other (7) (1)
----- -----
CASH USED FOR INVESTING ACTIVITIES (551) (399)
----- -----
FINANCING ACTIVITIES
Long-term debt proceeds 160 181
Payments on long-term debt (54) (13)
Net increase in commercial paper 134 16
Net increase in other short-term borrowings 28 19
Issuance of Treasury Stock for stock options 4 7
Dividends paid to shareholders (58) (55)
Purchase of Treasury Stock -- (95)
Other 5 19
----- -----
CASH PROVIDED BY FINANCING ACTIVITIES 219 79
----- -----
Effect of Exchange Rate Changes on Cash -- 4
----- -----
Decrease in Cash and Cash Items (5) (6)
Cash and Cash Items - Beginning of Year 87 100
----- -----
Cash and Cash Items - End of Period $ 82 $ 94
----- -----
</TABLE>
*Excludes capital leases of $3 million and $2 million for the six months ended
31 March 1996 and 1995, respectively.
5
<PAGE> 6
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the second quarter of 1996, the Company reached a $67 million settlement
with Bankers Trust Company over $107 million in losses the Company reported in
fiscal 1994 associated with leveraged interest rate swap contracts. The
settlement included the termination of two previously closed contracts with
Bankers Trust. Prior to the settlement there was an outstanding liability of $62
million associated with these closed contracts. The results for the three and
six months ended 31 March 1996 included a gain of $67 million ($41 million after
tax, or $.36 per share) from the settlement.
In April 1996, the Company announced its plan to divest its joint venture
interest in a waste-to-energy business and commence a share repurchase program
designed to acquire approximately 10 percent of its 112 million shares
outstanding for financial reporting purposes.
6
<PAGE> 7
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
SECOND QUARTER FISCAL 1996 VS. SECOND QUARTER FISCAL 1995
-------------------------------------------------------------
RESULTS OF OPERATIONS
CONSOLIDATED
Sales in the second quarter of fiscal 1996 of $1,013 million were 3% higher than
in the same quarter of last year while operating income was down $4 million, or
3%, to $148 million. Equity affiliates' income increased $10 million to $18
million for the three months ended 31 March 1996. During the second quarter of
fiscal 1996, the Company recognized a gain from the derivatives settlement with
Bankers Trust Company of $67 million ($41 million after tax, or $.36 per share).
Reflecting this gain, net income was $135 million, or $1.21 per share, compared
to net income of $88 million, or $.79 per share, in the year-ago quarter.
Excluding the effect of this settlement, net income for the second quarter of
fiscal 1996 would have been $94 million, or $.85 per share.
Industrial gases' operating income declined due primarily to lower margins. This
was offset by the strong performance of European, Mexican, and Asian equity
affiliates. Chemicals' operating income remained constant as broad-based margin
improvement was offset by lower ammonia and methanol results. The equipment and
services segment profits improved significantly.
SEGMENT ANALYSIS
INDUSTRIAL GASES - Sales of $591 million in the second quarter of fiscal 1996
increased 8% due primarily to higher shipments of domestic merchant gases,
especially hydrogen and argon. Domestic on-site business continued to show
strong sales increases in hydrogen pipeline volumes, a direct result of new
investment. Sales in Europe were up slightly reflecting volume growth in
specialty gas and cylinders. The rate of worldwide merchant volume growth
continued at the slower pace demonstrated in the first quarter. Merchant selling
prices were up in the United States but declined in Europe from a year-ago
quarter. European currency effects did not have a material impact on sales.
Operating income declined 9% to $100 million reflecting lower margins. Lower
margins were due to higher worldwide overhead costs associated with new business
initiatives, higher depreciation expense caused by increased investment, lower
than anticipated volume growth, and a number of unfavorable contract changes and
expirations. European currency effects did not have a material effect on
operating income.
Equity affiliates' income for the second quarter of fiscal 1996 was $10 million
compared to $2 million in the prior year. Strong operating performances from
joint ventures in Spain, Mexico, and Asia contributed to these higher results.
Current year results reflected an increased ownership position in the Spanish
affiliate, while the prior year results included a loss related to the peso
devaluation in the Mexican investment.
7
<PAGE> 8
CHEMICALS - Sales in the second quarter of fiscal 1996 decreased $11 million to
$340 million while operating income was comparable to the prior year at $53
million. A portion of the ammonia capacity was shut down in the second quarter
of fiscal 1995 and converted to hydrogen production. This portion of ammonia
capacity contributed $10 million to trade sales and $4 million to operating
income in the second quarter of fiscal 1995. Excluding the prior year
contribution from this ammonia capacity, sales were comparable and operating
income was up $4 million. Selling prices were higher in several major product
lines while overall volumes declined. The increase in operating income was due
principally to broad-based margin improvement. Partially offsetting these gains
were lower volumes in the polymers product lines and lower methanol selling
prices. The decline in volumes was mainly due to reduced export demand.
ENVIRONMENTAL AND ENERGY - Sales of $16 million decreased $1 million from the
prior year while operating income remained at the break-even level.
Equity affiliates' income for the second quarter of fiscal 1996 increased $2
million to $8 million. These higher results reflected the settlement of a power
contract dispute in the cogeneration business.
In April 1996, the Company announced its intention to sell its 50% interest in
American Ref-Fuel, its waste-to-energy joint venture with Browning-Ferris
Industries, Inc. This joint venture contributed $6 million to equity
affiliates' income in the second quarter of fiscal 1996.
EQUIPMENT AND SERVICES - Sales of $66 million decreased $3 million from the
level of the prior year while operating income increased $8 million to $5
million. The improved profitability reflects a more profitable project mix and
improved project performance.
CORPORATE AND OTHER - The net expense was $10 million compared to $8 million in
the second quarter of the prior year. Corporate expenses increased due primarily
to higher corporate general and administrative costs.
GAIN ON SETTLEMENT OF LEVERAGED INTEREST RATE SWAPS
The results for the three months ended 31 March 1996 included a gain of $67
million ($41 million after tax, or $.36 per share) from the settlement with
Bankers Trust Company over losses reported in fiscal 1994 associated with
leveraged interest rate swap contracts.
INTEREST
Interest expense was $31 million compared to $26 million in the second quarter
of fiscal 1995. The increase in expense was due primarily to a higher level of
debt outstanding, partially offset by lower interest rates.
INCOME TAXES
Excluding the gain on settlement of leveraged interest rate swaps, the effective
tax rate on income was 30% for the quarter ended 31 March 1996. The effective
tax rate on income for the quarter ended 31 March 1995 was 34%. The decrease in
the effective tax rate from 34% to 30% was due to higher equity affiliates'
income and favorable tax adjustments.
8
<PAGE> 9
SIX MONTHS FISCAL 1996 VS. SIX MONTHS FISCAL 1995
-----------------------------------------------------
RESULTS OF OPERATIONS
CONSOLIDATED
Sales in the first six months of fiscal 1996 of $1,960 million were 3% higher
than in the comparable period of the prior year while operating income was down
$6 million, or 2%, to $292 million. Equity affiliates' income increased $17
million to $34 million for the six months ended 31 March 1996. During the second
quarter of fiscal 1996, the Company recognized a gain from the derivatives
settlement with Bankers Trust Company of $67 million ($41 million after tax, or
$.36 per share). Reflecting this gain, net income was $224 million, or $2.01 per
share, for the first six months of fiscal 1996 compared to net income of $175
million, or $1.56 per share, for the comparable period last year. Excluding the
effect of this settlement, net income for the first six months of fiscal 1996
would have been $183 million, or $1.65 per share.
Industrial gases' operating income declined due primarily to lower margins. This
was offset by the strong performance of European, Mexican, and Asian equity
affiliates. Chemicals' operating income remained constant as broad-based margin
improvement was offset by lower ammonia and methanol results. The equipment and
services segment profits improved significantly.
SEGMENT ANALYSIS
INDUSTRIAL GASES - Sales of $1,142 million in the first six months of fiscal
1996 increased 7% due primarily to higher worldwide shipments of merchant and
tonnage gases. However, the rate of volume growth has slowed from previous
periods. European currency effects contributed almost 1% to the sales growth.
Merchant selling prices were up in the United States but declined in Europe from
the prior year.
Operating income declined 7% to $203 million, reflecting lower margins. Lower
margins were due to higher worldwide overhead costs associated with new business
initiatives, higher depreciation expense caused by increased investment, lower
U.S. liquid oxygen and nitrogen volumes, unfavorable contract changes and
expirations, and tonnage customer outages. European currency effects increased
operating income almost 1%.
Equity affiliates' income for the first six months of fiscal 1996 was $19
million compared to $4 million in the prior year. Strong operating performances
from joint ventures in Spain, Mexico, and Asia contributed to these higher
results . Current year results reflected an increased ownership position in the
Spanish affiliate, while the prior year results included a loss related to the
peso devaluation in the Mexican investment.
CHEMICALS - Sales in the first six months of fiscal 1996 decreased $25 million
to $650 million while operating income was comparable to the prior year at $102
million. A portion of the ammonia capacity was shut down in the second quarter
of fiscal 1995 and converted to hydrogen production. This portion of ammonia
capacity contributed $25 million to trade sales and $12 million to operating
income in the first six months of fiscal 1995. Excluding the prior year
contribution from this ammonia capacity, sales were comparable and operating
income was up $12 million. Selling prices were higher in several major product
lines while overall volumes declined. The increase in operating income was due
principally to broad-based margin improvement. Partially offsetting these gains
were lower volumes in the polymers division and lower methanol selling prices.
The decline in volumes was mainly due to reduced export demand.
9
<PAGE> 10
ENVIRONMENTAL AND ENERGY - Sales of $30 million decreased $1 million from the
first six months of fiscal 1996 while operating income declined slightly to a
loss of $1 million.
Equity affiliates' income for the first half of fiscal 1996 increased $2 million
to $15 million. These higher results reflected the settlement of a power
contract dispute in the cogeneration business.
In April 1996, the Company announced its intention to sell its 50% interest in
American Ref-Fuel, its waste-to-energy joint venture with Browning-Ferris
Industries, Inc. This joint venture contributed $10 million to equity
affiliates' income in the first six months of fiscal 1996.
EQUIPMENT AND SERVICES - Sales of $138 million increased $11 million from the
level of the prior year while operating income increased $13 million to $9
million. This year's results reflected a more profitable project mix, a higher
level of activity, and improved project performance. Sales backlog for the
equipment product line improved to $358 million at 31 March 1996 compared to
$198 million at 30 September 1995, due to new orders for natural gas
liquefaction equipment and European equipment contracts.
CORPORATE AND OTHER - The net expense was $21 million compared to $19 million in
the first six months of the prior year. Corporate expenses increased due
primarily to higher corporate general and administrative costs.
GAIN ON SETTLEMENT OF LEVERAGED INTEREST RATE SWAPS
The results for the six months ended 31 March 1996 included a gain of $67
million ($41 million after tax, or $.36 per share) from the settlement with
Bankers Trust Company over losses reported in fiscal 1994 associated with
leveraged interest rate swap contracts.
INTEREST
Interest expense was $60 million compared to $50 million in the first six months
of fiscal 1995. The increase in expense was due primarily to a higher level of
debt outstanding, partially offset by lower interest rates.
INCOME TAXES
Excluding the gain on settlement of leveraged interest rate swaps, the effective
tax rate on income was 31% for the six months ended 31 March 1996. The effective
tax rate on income for the six months ended 31 March 1995 was 34%. The decrease
in the effective tax rate from 34% to 31% was due to higher equity affiliates'
income and favorable tax adjustments.
LIQUIDITY AND CAPITAL RESOURCES
The Company's senior debt was rated A+ by Standard & Poor's Corporation (S&P)
and A1 by Moody's Investors Service Inc. (Moody's) at 30 September 1995. The
Company's commercial paper was rated A-1 by S&P and P-1 by Moody's at 30
September 1995. In April 1996, the Company announced its plan to repurchase
approximately 10% of its outstanding shares. This share repurchase program will
be financed through increased borrowings and proceeds from the sale of the
investment in American Ref-Fuel. Subsequent to this announcement, the Company's
senior debt rating was reduced to A by S&P and A2 by Moody's. The commercial
paper rating remains at A-1/P-1.
10
<PAGE> 11
Capital expenditures during the first six months of fiscal 1996 totaled $585
million compared to $408 million in the corresponding period of the prior year.
Additions to plant and equipment increased from $384 million during the first
half of 1995 to $444 million during the current period mainly due to additions
for the industrial gas business. Investments in unconsolidated affiliates were
$134 million during the first six months of fiscal 1996 versus $22 million last
year. During the first quarter of fiscal 1996, the Company acquired an
additional 21.5% of the outstanding shares of a Spanish affiliate at a cost of
$120 million. Capital expenditures for plant and equipment and investment in
unconsolidated affiliates for all of fiscal 1996 are expected to be
approximately $1.2 billion, reflecting a higher level of spending on plant and
equipment in support of growth in the worldwide industrial gases business.
Cash provided by operating activities during the first six months of fiscal 1996
($327 million) combined with cash provided from debt financing ($322 million)
and proceeds from the sale of assets and investments ($38 million) were used
largely for capital expenditures ($585 million), long-term debt repayments ($54
million), and cash dividends ($58 million). Cash and cash items decreased $5
million from $87 million at the beginning of the fiscal year to $82 million at
31 March 1996.
Total debt at 31 March 1996 and 30 September 1995, expressed as a percentage of
the sum of total debt and shareholders' equity, was 43% and 41%, respectively.
Total debt increased from $1,681 million at 30 September 1995 to $1,943 million
at 31 March 1996. During the first quarter of fiscal 1996, the Company issued
$125 million of 6.6% medium-term notes due in fiscal 2008 to finance the
acquisition of additional shares in a Spanish affiliate. In the second quarter
of fiscal 1996, the Company issued $31 million of 6.25% medium-term notes due in
fiscal 2011. During the first six months of fiscal 1996, the net increase in
commercial paper was $134 million.
There was $462 million of commercial paper outstanding at 31 March 1996. In
January 1996, the Company entered into a $600 million committed, multi-currency,
syndicated credit facility, which was unutilized at 31 March 1996. Additional
commitments totaling $16 million are maintained by the Company's foreign
subsidiaries, of which $3 million was utilized at 31 March 1996.
At 31 March 1996 the Company had an unutilized shelf registration for $214
million of medium-term notes. Subsequent to 31 March 1996, a portion of this
shelf registration was utilized when the Company issued $125 million of
7-1/4% medium-term notes due 2016.
Interest rate swap agreements are used to reduce interest rate risks and costs
inherent in the Company's debt portfolio. The Company enters into these
agreements to change the fixed/variable interest rate mix of the debt portfolio
to reduce the Company's aggregate risk to movements in interest rates.
Accordingly, the Company enters into agreements to effectively convert
variable-rate debt to fixed-rate debt to reduce the Company's risk of incurring
higher interest costs due to rising interest rates. The Company will also enter
into agreements to effectively convert its fixed-rate debt to variable-rate debt
which is principally indexed to LIBOR rates to reduce interest costs in periods
of falling interest rates. The Company has also entered into interest rate swap
contracts to effectively convert the stated variable interest rates on $60
million of medium-term notes to an average variable interest rate slightly above
the three-month U.S. dollar LIBOR rate.
11
<PAGE> 12
The notional principal and fair value of interest rate swap agreements at 31
March 1996 and 30 September 1995 were as follows:
(millions of dollars)
<TABLE>
<CAPTION>
31 March 1996 30 September 1995
----------------------- -----------------------
Notional Fair Value Notional Fair Value
Amount Gain (Loss) Amount Gain (Loss)
----------------------- -----------------------
<S> <C> <C> <C> <C>
Fixed to Variable $160 $ 1 $313 $ (6)
Variable to Fixed 53 (1) 105 (4)
Variable to Variable 60 21 70 11
----------------------- -----------------------
Total $273 $ 21 $488 $ 1
======================= =======================
</TABLE>
The Company is also party to interest rate and currency swap contracts. These
contracts effectively convert the currency denomination of a debt instrument
into another currency in which the Company has a net equity position while
changing the interest rate characteristics of the instrument. The notional
principal of interest rate and currency swap agreements outstanding at 31 March
1996 was $270 million. The fair value of the agreements was a loss of $10
million, of which $6 million has not been recognized in the financial
statements. As of 30 September 1995 interest rate and currency swap agreements
were outstanding with a notional principal amount and fair value of $86 million
and a loss of $11 million, respectively. During the first quarter of fiscal
1996, the Company entered into interest rate and currency swap agreements to
effectively convert $120 million of the $125 million of 6.6% medium-term notes
into Spanish peseta liabilities with maturities of three to ten years. In the
second quarter of fiscal 1996, the Company entered into forward starting
interest rate and currency swap agreements which will, in October 1996,
effectively convert $64 million of U.S. dollar liabilities into Spanish peseta
liabilities with maturities of three to five years.
The estimated fair value of the Company's long-term debt, including current
portion, as of 31 March 1996 was $1,601 million compared to a book value of
$1,520 million. As of 30 September 1995, the estimated fair value was $1,454 as
compared to a book value of $1,367.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) The Annual Meeting of Shareholders of the registrant was held
on 25 January 1996.
(c) The following matters were voted on at the Annual Meeting:
(1) Election of Directors
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NUMBER OF VOTES CAST
NAME OF DIRECTOR
------------------------------------------------------------------------------
AGAINST
OR BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R. CIZIK 100,621,233 1,049,802 0 0
- ----------------------------------------------------------------------------------------------------------------
R. M. DAVIS 100,336,823 1,334,212 0 0
- ----------------------------------------------------------------------------------------------------------------
T. R. LAUTENBACH 100,558,049 1,112,986 0 0
- ----------------------------------------------------------------------------------------------------------------
R. F. M. LUBBERS 100,562,962 1,108,073 0 0
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(2) Ratification of the appointment of Arthur Andersen
LLP of Philadelphia, Pennsylvania, as independent
certified public accountants for the registrant for
the fiscal year ending 30 September 1996.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF VOTES CAST
- -------------------------------------------------------------------------------------------------------------
AGAINST
OR BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
100,843,008 445,923 382,104 0
- -------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE> 14
(3) Approval to amend the Company's Restated Certificate
of Incorporation to increase the number of shares of
common stock authorized to be issued from 150,000,000
shares to 300,000,000 shares.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF VOTES CAST
- -------------------------------------------------------------------------------------------------------------
AGAINST
OR BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
90,944,987 9,341,042 1,385,006 0
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(4) Approval of 1997 Amendments to the Company's 1990
Long-Term Incentive Plan.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF VOTES CAST
- -------------------------------------------------------------------------------------------------------------
AGAINST
OR BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
81,420,627 18,036,928 2,213,480 0
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(5) Approval of IRC Section 162(m) Amendments to the
Company's 1990 Long-Term Incentive Plan.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF VOTES CAST
- -------------------------------------------------------------------------------------------------------------
AGAINST
OR BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
94,807,777 4,613,558 2,249,700 0
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(6) Approval of IRC Section 162(m) Annual Incentive Plan
Terms.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF VOTES CAST
- -------------------------------------------------------------------------------------------------------------
AGAINST
OR BROKER
FOR WITHHELD ABSTENTIONS NON-VOTES
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
95,422,369 4,070,115 2,178,551 0
- -------------------------------------------------------------------------------------------------------------
</TABLE>
14
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a)(12) Computation of Ratios of Earnings to Fixed Charges.
(a)(27) Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only,
and not filed.
(b) A Current Report on Form 8-K dated 24 January 1996 was filed by
the registrant during the quarter ended 31 March 1996 in which
Item 5 of such form was reported.
15
<PAGE> 16
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.
--------------------------------
(Registrant)
Date: May 14, 1996 By: /s/ A. H. Kaplan
-----------------------------------
A. H. Kaplan
Vice President - Finance
(Chief Financial Officer)
<PAGE> 17
INDEX TO EXHIBITS
(a)(12) Computation of Ratios of Earnings to Fixed Charges.
(a)(27) Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only, and not filed.
<PAGE> 1
Exhibit (a)(12)
AIR PRODUCTS AND CHEMICALS, INC., AND SUBSIDIARIES
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
Year Ended 30 September 31 March
----------------------------------------------------------------- ---------------
1991 1992 1993 1994 1995 1996
------------ ------------ ------------ ------------ --------- ---------------
EARNINGS: (Millions of dollars)
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary item and the
cumulative effect of accounting changes: $249 $277 $201 $234 $368 $224
Add (deduct):
Provision for income taxes 114 131 103 95 186 109
Fixed charges, excluding capitalized
interest 122 133 127 127 148 85
Capitalized interest amortized during
the period 7 8 8 8 9 4
Undistributed earnings of less-than-
fifty-percent-owned affiliates (9) (13) (8) (3) (25) (17)
------------ ------------ ------------ ------------ --------- ---------------
Earnings, as adjusted $483 $536 $431 $461 $686 $405
------------ ------------ ------------ ------------ --------- ---------------
------------ ------------ ------------ ------------ --------- ---------------
FIXED CHARGES:
Interest on indebtedness, including capital
lease obligations $113 $125 $118 $118 $139 $ 79
Capitalized interest 29 4 6 10 18 10
Amortization of debt discount premium and
expense 2 1 1 1 -- 1
Portion of rents under operating leases
representative of the interest factor 7 7 8 8 9 5
------------ ------------ ------------ ------------ --------- ---------------
Fixed charges $151 $137 $133 $137 $166 $ 95
------------ ------------ ------------ ------------ --------- ---------------
------------ ------------ ------------ ------------ --------- ---------------
RATIO OF EARNINGS TO FIXED CHARGES: 3.2 3.9 3.2 3.4 4.1 4.3
------------ ------------ ------------ ------------ --------- ---------------
------------ ------------ ------------ ------------ --------- ---------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM
10-Q.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 82
<SECURITIES> 0
<RECEIVABLES> 664
<ALLOWANCES> 15
<INVENTORY> 383
<CURRENT-ASSETS> 1,372
<PP&E> 7,691
<DEPRECIATION> 3,982
<TOTAL-ASSETS> 6,224
<CURRENT-LIABILITIES> 1,268
<BONDS> 1,495
0
0
<COMMON> 125
<OTHER-SE> 2,428
<TOTAL-LIABILITY-AND-EQUITY> 6,224
<SALES> 1,960
<TOTAL-REVENUES> 1,960
<CGS> 1,169
<TOTAL-COSTS> 1,169
<OTHER-EXPENSES> 56
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 60
<INCOME-PRETAX> 333
<INCOME-TAX> 109
<INCOME-CONTINUING> 224
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 224
<EPS-PRIMARY> 2.01
<EPS-DILUTED> 2.01
</TABLE>
