<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 30 June 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)
<TABLE>
<CAPTION>
Delaware 23-1274455
<S> <C>
(State of Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
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.
<TABLE>
<CAPTION>
Class Outstanding at 7 August 1996
- -------------------------- ---------------------------------
<S> <C>
Common Stock, $1 par value 121,530,768
</TABLE>
<PAGE> 2
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
Part I. Financial Information
Consolidated Balance Sheets -
30 June 1996 and 30 September 1995 ............................ 3
Consolidated Income -
Three Months and Nine Months Ended 30 June 1996 and 1995 ...... 4
Consolidated Cash Flows -
Nine Months Ended 30 June 1996 and 1995 ....................... 5
Notes to Consolidated Financial Statements ....................... 6
Management's Discussion and Analysis ............................. 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K ........................ 13
Signatures ....................................................... 14
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 quarters ended 31 December 1995 and 31 March 1996.
Results of operations for any three or nine 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>
30 June 30 September
ASSETS 1996 1995
------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash items $ 91 $ 87
Trade receivables, less allowances for doubtful accounts 676 625
Inventories 392 335
Contracts in progress, less progress billings 114 123
Other current assets 160 162
------ ------
TOTAL CURRENT ASSETS 1,433 1,332
------ ------
INVESTMENTS 835 657
------ ------
PLANT AND EQUIPMENT, at cost 7,909 7,350
Less - Accumulated depreciation 4,056 3,848
------ ------
PLANT AND EQUIPMENT, net 3,853 3,502
------ ------
GOODWILL 80 81
------ ------
OTHER NONCURRENT ASSETS 271 244
------ ------
TOTAL ASSETS $6,472 $5,816
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables, trade and other $ 579 $ 519
Accrued liabilities 224 249
Accrued income taxes 62 56
Short-term borrowings 249 314
Current portion of long-term debt 25 173
------ ------
TOTAL CURRENT LIABILITIES 1,139 1,311
------ ------
LONG-TERM DEBT 1,850 1,194
------ ------
DEFERRED INCOME AND OTHER NONCURRENT LIABILITIES 357 435
------ ------
DEFERRED INCOME TAXES 537 478
------ ------
TOTAL LIABILITIES 3,883 3,418
------ ------
SHAREHOLDERS' EQUITY
Common stock, par value $1 per share 125 125
Capital in excess of par value 462 465
Retained earnings 2,624 2,388
Unrealized gain on investments 42 41
Cumulative translation adjustments (68) (24)
Treasury stock, at cost (138) (139)
Shares in trust (458) (458)
------ ------
TOTAL SHAREHOLDERS' EQUITY 2,589 2,398
------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,472 $5,816
====== ======
</TABLE>
3
<PAGE> 4
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME
(In millions, except per share)
<TABLE>
<CAPTION>
Three Months Ended 30 June Nine Months Ended 30 June
-------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES AND OTHER INCOME
Sales $ 997 $ 982 $2,957 $2,886
Other income, net 9 17 17 17
------ ------ ------ ------
1,006 999 2,974 2,903
------ ------ ------ ------
COSTS AND EXPENSES
Cost of sales 594 595 1,763 1,730
Selling, distribution, and administrative 228 217 679 638
Research and development 28 26 84 76
------ ------ ------ ------
OPERATING INCOME 156 161 448 459
Income from equity affiliates, net of related expenses
20 16 54 33
Gain on settlement of leveraged interest rate swaps
-- -- 67 --
Interest expense 34 25 94 75
------ ------ ------ ------
INCOME BEFORE TAXES 142 152 475 417
Income taxes 44 52 153 142
------ ------ ------ ------
NET INCOME $ 98 $ 100 $ 322 $ 275
====== ====== ====== ======
MONTHLY AVERAGE OF COMMON
SHARES OUTSTANDING -- -- 112 112
------ ------ ------ ------
EARNINGS PER COMMON SHARE $ .87 $ .89 $ 2.88 $ 2.45
------ ------ ------ ------
DIVIDENDS DECLARED PER
COMMON SHARE - Cash $ .27 $ .26 $ .79 $ .75
------ ------ ------ ------
</TABLE>
4
<PAGE> 5
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED CASH FLOWS
(In millions)
<TABLE>
<CAPTION>
Nine Months Ended
30 June
--------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 322 $ 275
Adjustments to reconcile income to cash provided by operating activities:
Depreciation 303 276
Termination of liabilities for leveraged interest rate swaps (62) --
Contributions to pension plans (46) (3)
Deferred income taxes 58 42
Other 8 (8)
Working capital changes that provided (used) cash:
Trade receivables (60) (54)
Inventories and contracts in progress (51) (33)
Payables, trade and other 64 57
Accrued income taxes 12 25
Other (24) (21)
----- -----
CASH PROVIDED BY OPERATING ACTIVITIES 524 556
----- -----
INVESTING ACTIVITIES
Additions to plant and equipment* (706) (679)
Investment in and advances to unconsolidated affiliates (187) (26)
Acquisitions, less cash acquired (4) (34)
Termination/Closure of leveraged interest rate swaps -- (4)
Proceeds from sale of assets and investments 32 20
Other (5) 4
----- -----
CASH USED FOR INVESTING ACTIVITIES (870) (719)
----- -----
FINANCING ACTIVITIES
Long-term debt proceeds 554 331
Payments on long-term debt (56) (136)
Net increase(decrease) in commercial paper (66) 142
Net increase in other short-term borrowings 16 6
Issuance of Treasury Stock for stock options 10 15
Dividends paid to shareholders (89) (84)
Purchase of Common Stock for Treasury (23) (119)
Other 5 26
----- -----
CASH PROVIDED BY FINANCING ACTIVITIES 351 181
----- -----
Effect of Exchange Rate Changes on Cash (1) 4
----- -----
Increase in Cash and Cash Items 4 22
Cash and Cash Items - Beginning of Year 87 100
----- -----
Cash and Cash Items - End of Period $ 91 $ 122
===== =====
</TABLE>
*Excludes capital leases of $4 million and $3 million for the nine months ended
30 June 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 nine months
ended 30 June 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.
The three and nine months ended 30 June 1995 included a gain of $11 million ($6
million after tax, or $.06 per share) from the sale of an industrial gas plant.
6
<PAGE> 7
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
THIRD QUARTER FISCAL 1996 VS. THIRD QUARTER FISCAL 1995
RESULTS OF OPERATIONS
CONSOLIDATED
Sales in the third quarter of fiscal 1996 of $997 million were 2% higher than in
the same quarter of last year while operating income was down $5 million, or 3%,
to $156 million. During the third quarter of 1995, results included a gain of
$11 million ($6 million after tax, or $.06 per share) from the sale of an
industrial gas plant. Excluding the effect of this gain, operating income was up
$6 million or 4%. Equity affiliates' income increased $4 million to $20 million
for the three months ended 30 June 1996. Net income was $98 million, or $.87 per
share, compared to reported net income of $100 million, or $.89 per share, in
the year-ago quarter. Excluding the special item, net income for the third
quarter of fiscal 1995 was $94 million, or $.83 per share.
Industrial gases' operating income declined due primarily to lower margins.
Broad-based margin improvement resulted in higher chemicals' operating income.
The environmental and energy segment reflected higher profits due to better
operations and a project buy-out. Profits of the equipment and services segment
improved significantly.
SEGMENT ANALYSIS
INDUSTRIAL GASES - Sales of $578 million in the third quarter of fiscal 1996
increased 6% due primarily to higher shipments of domestic merchant and on-site
gases. Domestic on-site business demonstrated very strong sales increases in
hydrogen pipeline volumes, a direct result of new business investment. The rate
of merchant volume growth was up in the United States. Domestic merchant prices
rose slightly despite lower prices in liquid product lines. Competitive
pressures and slower economic conditions in Northern Europe lowered merchant
selling prices and volumes. Unfavorable European currency effects decreased
sales by 2%.
Operating income declined by $17 million to $102 million. Prior year results
included a gain of $11 million from a plant sale. Excluding this gain, operating
income declined $6 million or 6%. Lower margins were due to higher worldwide
overhead costs associated with new business initiatives, higher depreciation
expense caused by increased investment, softer business conditions in Northern
Europe, and the impact of unfavorable contract changes and expirations. European
currency effects contributed almost 2% to the 6% decline in operating income.
Equity affiliates' income for the third quarter of fiscal 1996 was $12 million
compared to $9 million in the prior year. Strong operating performances from
joint ventures in Asia and Mexico contributed to these higher results. Current
year results reflected an increased ownership position in the Spanish affiliate.
7
<PAGE> 8
CHEMICALS - Sales in the third quarter of fiscal 1996 were comparable at $352
million while operating income increased $5 million or 11% to $55 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 polymer
volumes was mainly due to reduced export demand.
ENVIRONMENTAL AND ENERGY - Sales improved $2 million from the prior year to $13
million. Prior year sales of operating services were lower due to a power
curtailment and planned major maintenance outage. Operating income increased by
$5 million to $3 million due to better operations and a project buy-out.
Equity affiliates' income for the third quarter of fiscal 1996 increased $1
million to $8 million.
EQUIPMENT AND SERVICES - Sales of $54 million decreased $23 million from the
unusually high level of the prior year while operating income increased to $4
million from a break-even level. This increase reflects a more profitable
project mix and improved project performance.
CORPORATE AND OTHER - The net expense was $8 million compared to $6 million in
the third quarter of the prior year. Corporate expenses increased due primarily
to higher corporate general and administrative costs.
INTEREST
Interest expense was $34 million compared to $25 million in the third quarter of
fiscal 1995. The increase in expense was due to a higher level of debt
outstanding and lower capitalized interest. This increase was partially offset
by lower interest rates.
INCOME TAXES
The effective tax rate on income was 31% for the quarter ended 30 June 1996 as
compared to 34% for the quarter ended 30 June 1995. The decrease in the
effective tax rate from 34% to 31% was due to higher equity affiliates' income
and lower state taxes.
NINE MONTHS FISCAL 1996 VS. NINE MONTHS FISCAL 1995
RESULTS OF OPERATIONS
CONSOLIDATED
Sales in the first nine months of fiscal 1996 of $2,957 million were 2% higher
than in the comparable period of the prior year while operating income was down
$11 million, or 2%, to $448 million. Equity affiliates' income increased $21
million to $54 million for the nine months ended 30 June 1996.
The earnings for the first nine months of fiscal 1996 and 1995 included special
items. 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). Results in fiscal 1995 included a gain of
$11 million from the sale of an industrial gas plant ($6 million after tax, or
$.06 per share).
8
<PAGE> 9
Results for the nine months ended 30 June 1996 and 1995, both as reported and
excluding these special items, were:
(in millions, except per share)
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
30 June 1996 30 June 1995
- ---------------------------------- ----------------------------------------- -----------------------------------------
Excluding Excluding
Reported Special Items Reported Special Items
-------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Operating Income $ 448 $ 448 $ 459 $ 448
Net Income 322 281 275 269
Earnings Per Share 2.88 2.52 2.45 2.39
</TABLE>
Excluding these special items, operating income remained constant at $448
million. Industrial gases' operating income declined primarily due to lower
margins. This was offset by the strong performance of Spanish, Asian, and
Mexican equity affiliates. Chemicals' operating income improved 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 $1,720 million in the first nine months of fiscal
1996 increased 7% due primarily to higher domestic volumes of merchant and
on-site gases. Domestic on-site business demonstrated very strong sales
increases in hydrogen pipeline volumes, a direct result of new investment.
European sales were flat with the prior year as business conditions continued to
weaken in Northern Europe. European currency effects did not have a material
impact on sales.
Operating income declined by $33 million to $305 million. Prior year results
included a gain of $11 million from a plant sale. Excluding this gain, operating
income declined $22 million or 7%, reflecting lower margins. Lower margins were
due to higher worldwide overhead costs associated with new business initiatives,
higher depreciation expense caused by increased investment, weakening business
conditions in Northern Europe, and unfavorable contract changes and expirations.
European currency effects did not have a material effect on operating income.
Equity affiliates' income for the first nine months of fiscal 1996 was $31
million compared to $13 million in the prior year. Strong operating performances
from joint ventures in Spain, Asia, and Mexico 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 nine months of fiscal 1996 decreased $25 million
to $1,002 million while operating income increased $5 million to $157 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 $17
million or 12%. 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 polymer volumes was mainly due to reduced export demand.
9
<PAGE> 10
ENVIRONMENTAL AND ENERGY - Sales of $43 million increased $1 million from the
first nine months of fiscal 1996 while operating income was $2 million compared
to a loss of $2 million last year. The improved profitability was due primarily
to a project buy-out.
Equity affiliates' income for the first nine months of fiscal 1996 increased $3
million to $23 million.
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 $17 million to equity
affiliates' income in the first nine months of fiscal 1996.
EQUIPMENT AND SERVICES - Sales of $192 million decreased $12 million from the
level of the prior year while operating income increased $17 million to $13
million. This year's results reflected a more profitable project mix and
improved project performance. Sales backlog for the equipment product line
improved to $351 million at 30 June 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 $29 million compared to $25 million in
the first nine 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 nine months ended 30 June 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 $94 million compared to $75 million in the first nine
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
Including the gain on settlement of leveraged interest rate swaps, the effective
tax rate on income was 32% for the nine months ended 30 June 1996. Excluding
this gain, the effective tax rate on income for the nine months ended 30 June
1996 was 31% as compared to 34% in the prior year. 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 proceeds from the sale of the investment in American
Ref-Fuel and increased borrowings. 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 nine months of fiscal 1996 totaled $901
million compared to $742 million in the corresponding period of the prior year.
Additions to plant and equipment increased from $679 million during the first
nine months of 1995 to $706 million during the current period mainly due to
additions for the industrial gases business. Investments in unconsolidated
affiliates were $187 million during the first nine months of fiscal 1996 versus
$26 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. The majority of the remaining increase in investments in
unconsolidated affiliates for the first nine months of fiscal 1996 was in
support of the environmental and energy segment. 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. It is anticipated these expenditures will be funded with cash
from operations supplemented with proceeds from financing activities.
Cash provided by operating activities during the first nine months of fiscal
1996 ($524 million) combined with cash provided from debt financing ($570
million) and proceeds from the sale of assets and investments ($32 million) were
used largely for capital expenditures ($901 million), debt repayments ($122
million), purchase of common stock for treasury ($23 million), and cash
dividends ($89 million). Cash and cash items increased $4 million from $87
million at the beginning of the fiscal year to $91 million at 30 June 1996.
During the first nine months of fiscal 1996, cash provided by operating
activities was reduced $46 million by contributions to pension plans. The net
decrease in commercial paper was $66 million.
Total debt at 30 June 1996 and 30 September 1995, expressed as a percentage of
the sum of total debt and shareholders' equity, was 45% and 41%, respectively.
Total debt increased from $1,681 million at 30 September 1995 to $2,124 million
at 30 June 1996. During the first quarter of fiscal 1996, the Company issued
$125 million of 6.6% notes due in fiscal 2008 to finance the acquisition of
additional shares in a Spanish affiliate. In the second quarter, the Company
issued $31 million of 6.25% notes due in fiscal 2011. In the third quarter, the
Company issued $100 million of 7.34% debentures due in 2026, with a one-time put
option exercisable by the investor after 12 years. In the third quarter, the
Company also issued $100 million of 7.80% debentures due in 2026, $50 million of
7.56% notes due in 2026, and $125 million of 7.25% notes due 2016.
There was $262 million of commercial paper outstanding at 30 June 1996. In
January 1996, the Company entered into a $600 million committed, multi-currency,
syndicated credit facility, which was unutilized at 30 June 1996. Additional
commitments totaling $16 million are maintained by the Company's foreign
subsidiaries, of which $3 million was utilized at 30 June 1996. At 30 June 1996
the Company had unutilized shelf registrations for $639 million of debt
securities.
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
11
<PAGE> 12
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.
The notional principal and fair value of interest rate swap agreements at 30
June 1996 and 30 September 1995 were as follows:
(millions of dollars)
<TABLE>
<CAPTION>
30 June 1996 30 September 1995
------------------------------ ------------------------------
Notional Fair Value Notional Fair Value
Amount Gain (Loss) Amount Gain (Loss)
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Fixed to Variable $161 $-- $313 $(6)
Variable to Fixed 54 (1) 105 (4)
Variable to Variable 60 25 70 11
---- --- ---- ---
Total $275 $24 $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 30 June
1996 was $301 million. The fair value of the agreements was a loss of $13
million, of which a $2 million gain related to the currency component was
recognized in the financial statements. The remaining $15 million loss was
related to the interest component and 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. In the third quarter of fiscal 1996, the Company entered into a forward
starting interest rate and currency swap agreement which will, in October 1996,
effectively convert $31 million of U.S. dollar liabilities into Spanish peseta
liabilities with a maturity of seven years.
The estimated fair value of the Company's long-term debt, including current
portion, as of 30 June 1996 was $1,937 million compared to a book value of
$1,875 million. As of 30 September 1995, the estimated fair value was $1,454
million as compared to a book value of $1,367 million.
During the third quarter of fiscal 1996, the company bought back .4 million
shares of its common stock as part of a program to purchase approximately 10
percent of its 112 million shares outstanding for financial reporting purposes.
12
<PAGE> 13
PART II. OTHER INFORMATION
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) Current Reports on Form 8-K dated 11 April 1996 and 23
April 1996 were filed by the registrant during the quarter
ended 30 June 1996 in which Item 5 of such forms were
reported.
13
<PAGE> 14
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: August 12, 1996 By: /s/ A. H. Kaplan
---------------------
A. H. Kaplan
Vice President - Finance
(Chief Financial Officer)
14
<PAGE> 15
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
To
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended 30 June 1996
Commission File No. 1-4534
AIR PRODUCTS AND CHEMICALS, INC.
(Exact name of registrant as specified in its charter)
<PAGE> 16
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>
Nine Months
Ended
Year Ended 30 September 30 June
------------------------------------------------------------ -----------
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
EARNINGS: (Millions of dollars)
Income before extraordinary item and
the cumulative effect of accounting
changes: $249 $277 $201 $234 $368 $322
Add (deduct):
Provision for income taxes 114 131 103 95 186 154
Fixed charges, excluding capitalized
interest 122 133 127 127 148 131
Capitalized interest amortized during the
period 7 8 8 8 9 6
Undistributed earnings of
less-than-fifty-percent-owned affiliates (9) (13) (8) (3) (25) (27)
---- ---- ---- ---- ---- ----
Earnings, as adjusted $483 $536 $431 $461 $686 $586
==== ==== ==== ==== ==== ====
FIXED CHARGES:
Interest on indebtedness, including capital lease
obligations $113 $125 $118 $118 $139 $122
Capitalized interest 29 4 6 10 18 14
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 8
---- ---- ---- ---- ---- ----
Fixed charges $151 $137 $133 $137 $166 $145
==== ==== ==== ==== ==== ====
RATIO OF EARNINGS TO FIXED CHARGES: 3.2 3.9 3.2 3.4 4.1 4.0
==== ==== ==== ==== ==== ====
</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
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 91
<SECURITIES> 0
<RECEIVABLES> 690
<ALLOWANCES> 14
<INVENTORY> 392
<CURRENT-ASSETS> 1,433
<PP&E> 7,909
<DEPRECIATION> 4,056
<TOTAL-ASSETS> 6,472
<CURRENT-LIABILITIES> 1,139
<BONDS> 1,850
0
0
<COMMON> 125
<OTHER-SE> 2,464
<TOTAL-LIABILITY-AND-EQUITY> 6,472
<SALES> 2,957
<TOTAL-REVENUES> 2,957
<CGS> 1,763
<TOTAL-COSTS> 1,763
<OTHER-EXPENSES> 84
<LOSS-PROVISION> 4
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> 475
<INCOME-TAX> 153
<INCOME-CONTINUING> 322
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 322
<EPS-PRIMARY> 2.88
<EPS-DILUTED> 2.88
</TABLE>
