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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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) 23 October 1997
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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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<CAPTION>
<S> <C> <C>
Delaware 1-4534 23-1274455
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(State of other jurisdiction (Commission (IRS Identification
of incorporation) file number) number)
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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.
The Registrant reported net income of $107 million, or 98 cents per
share, for the quarter ended September 30, 1997, compared to last year's
$94 million, or 85 cents per share, a per-share increase of 15 percent.
These results include the impact of currency translation effects, which
reduced earnings per share by 9 cents in the quarter. Sales of $1.2
billion were up 16 percent versus $1.1 billion last year.
In reviewing the quarter, Air Products Chairman H. A. Wagner said,
"We finished fiscal 1997 on a strong note, with both our gases and
chemicals businesses demonstrating broad-based volume momentum. The
improvement in our European industrial gas volumes is especially
encouraging as we enter the new year. Equally noteworthy, the results for
the quarter were achieved through strong sales growth and productivity
improvements, which overcame the effect of weaker foreign currencies."
Industrial gas sales for the quarter were up 19 percent while
operating income rose 29 percent. The inclusion of Carburos Metalicos
accounted for approximately half of both gains. Merchant volumes were
strong in the U.S. and Europe, and plant and pipeline loading reached
record levels, principally for the chemicals processing and refinery
industry. Gas equity affiliate income was down for the quarter, reflecting
the consolidation of Carburos Metalicos, and the impact of the baht's
devaluation on the Company's operations in Thailand.
Overcoming the impact of currency on its exports, Chemicals reported
record sales for the quarter, up 5 percent. Operating income increased 12
percent, driven by strong volume gains, continued productivity, and
reduced plant turnarounds versus prior year.
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Equipment and Services continued to deliver strong results, with
operating income about equal to last year, and higher sales due to product
mix.
For fiscal 1997, the Registrant reported record net income of $429
million, or $3.90 per share, versus $416 million, or $3.73 per share, for
the same period last year. Excluding an after-tax gain of $41 million, or
36 cents per share, in the prior fiscal year, earnings per share increased
16 percent and return on equity increased to 16.6 percent versus 15.0
percent in the prior year. These results include the impact of currency
translation effects, which reduced earnings per share by 19 cents for the
year. Sales of $4.6 billion were also a record, up 16 percent over the
prior year.
Commenting on the year, Mr. Wagner said, "We entered 1997 saying we
would refocus on our core gases and chemicals businesses, and make
complementary changes in our financial strategies and management
compensation programs. In 1997, we delivered on those commitments. We sold
our landfill gas recovery business, have an agreement to sell our equity
interest in our American Ref-Fuel waste-to-energy joint venture, and have
redirected our environmental and energy systems resources to support our
industrial gases business. We made excellent progress in loading our new
plants and pipeline systems here and abroad, and completed the integration
of Spain's leading industrial gas company, Carburos Metalicos, which has
been accretive since day one. New business signings are up and our work
process benefits are hitting the bottom line. Our chemicals business also
generated strong volume and productivity gains over the past year. In the
financial area, we restructured our balance sheet to reduce our cost of
capital, and continued our stock buy-back program. Our bottom line
reflects a year of significant achievement, with sales and earnings at
record levels, and a substantial recovery in our overall industrial gas
margins. "
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Mr. Wagner concluded, "Despite the anticipated sale of American
Ref-Fuel, which contributed 13 cents to earnings per share in 1997, we
expect to achieve our long-term earnings per share growth target of 12
percent in 1998. Worldwide volume momentum and further productivity gains
in our gases and chemicals businesses are positive factors, but will be
somewhat mitigated by the stronger U.S. dollar. Based on our backlog of
high-quality projects, we should see even better operating performance
from our Equipment and Services segment as well. We stand ready to deliver
excellent results going into the next millennium through a combination of
aggressive top-line growth and continuous improvement in everything we
do."
NOTE: The forward-looking statements contained in this document are based
on current expectations regarding important risk factors. Actual results
may differ materially from those expressed. Important risk factors and
uncertainties include the impact of worldwide economic growth, pricing,
and other factors resulting from fluctuations in foreign currencies, the
impact of competitive products and pricing, the timing of the American
Ref-Fuel divestiture, continued success of productivity programs, and the
impact of tax and other legislation and other regulations in the
jurisdictions in which the Company and its affiliates operate.
Unaudited financial tables which may be adjusted as a result of the
annual audit follow:
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AIR PRODUCTS AND CHEMICALS, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
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(In millions, except earnings per share)
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Three Months Ended Twelve Months Ended
30 September 30 September
1997 1996 1997 1996
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Sales $ 1,213.5 $ 1,050.4 $ 4,637.8 $ 4,007.7
Net Income $ 107.4 $ 94.1 $ 429.3(a) $ 416.4(b)
Earnings Per Share $ .98 $ .85 $ 3.90(a) $ 3.73(b)
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(a) Includes an after-tax gain of $5.9 million, or $.05 per share from the sale
of the landfill gas business and an after-tax impairment loss of $6.0 million,
or $.05 per share.
(b) Includes an after-tax gain of $41 million, or $.36 per share, from the
settlement with Bankers Trust Company over losses reported in fiscal 1994
associated with leveraged interest rate swap contracts.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED INCOME
(Unaudited)
(In millions, except per share)
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<CAPTION>
Three Months Ended Twelve Months Ended
30 September 30 September
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
SALES AND OTHER INCOME
Sales $1,213.5 $1,050.4 $4,637.8 $4,007.7
Other income 2.7 9.1 23.2 25.7
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1,216.2 1,059.5 4,661.0 4,033.4
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COSTS AND EXPENSES
Cost of sales 729.2 644.5 2,771.6 2,408.1
Selling, distribution and
administrative 277.3 241.0 1,050.3 919.9
Research and development 30.6 30.3 113.7 114.1
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OPERATING INCOME 179.1 143.7 725.4 591.3
Income from equity affiliates,
net of related expenses 16.8 26.5 66.3 80.7
Gain on settlement of leveraged
interest rate swaps -- -- -- 66.8
Interest expense 39.5 35.5 161.3 129.2
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INCOME BEFORE TAXES 156.4 134.7 630.4 609.6
Income taxes 49.0 40.6 201.1 193.2
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NET INCOME $ 107.4 $ 94.1 $ 429.3 $ 416.4
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MONTHLY AVERAGE OF
COMMON SHARES OUTSTANDING -- -- 110.0 111.7
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EARNINGS PER COMMON SHARE $ .98 $ .85 $ 3.90 $ 3.73
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DIVIDENDS DECLARED PER
COMMON SHARE - Cash $ .30 $ .275 $ 1.1 $ 1.07
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except per share)
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<CAPTION>
30 Sept. 30 Sept.
ASSETS 1997 1996
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CURRENT ASSETS
Cash and cash items $ 52.5 $ 78.7
Trade receivables, less allowances for
doubtful accounts 879.6 670.0
Inventories 386.5 371.1
Contracts in progress, less progress billings 121.3 115.2
Other current assets 184.4 139.7
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TOTAL CURRENT ASSETS 1,624.3 1,374.7
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INVESTMENTS 576.8 833.6
PLANT AND EQUIPMENT, at cost 8,733.1 8,102.6
Less - Accumulated depreciation 4,292.0 4,144.1
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PLANT AND EQUIPMENT, net 4,441.1 3,958.5
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GOODWILL 248.6 83.5
OTHER NONCURRENT ASSETS 356.3 272.1
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TOTAL ASSETS $7,247.1 $6,522.4
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES
Payables, trade and other $ 616.5 $ 526.4
Accrued liabilities 315.6 241.1
Accrued income taxes 15.9 39.7
Short-term borrowings 100.9 423.2
Current portion of long-term debt 80.0 33.1
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TOTAL CURRENT LIABILITIES 1,128.9 1,263.5
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LONG-TERM DEBT 2,287.2 1,738.6
DEFERRED INCOME & OTHER NONCURRENT LIABILITIES 453.0 363.5
DEFERRED INCOME TAXES 729.8 582.2
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TOTAL LIABILITIES 4,598.9 3,947.8
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SHAREHOLDERS' EQUITY
Common stock, par value $1 per share 124.7 124.7
Capital in excess of par value 453.0 461.2
Retained earnings 2,990.2 2,687.2
Unrealized gain on investments 6.9 40.4
Cumulative translation adjustments (186.0) (70.2)
Treasury Stock, at cost (297.3) (211.2)
Shares in trust (443.3) (457.5)
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TOTAL SHAREHOLDERS' EQUITY 2,648.2 2,574.6
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,247.1 $6,522.4
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The segment results for 1996 have been restated. The business to be
divested(American Ref-Fuel)and the landfill gas business sold in November
are included in the Corporate/Other segment, while the continuing businesses
from the Environmental/Energy segment(power generation and Pure Air(TM)),
are now included in the Equipment/Services segment.
On 22 October 1996, the Company obtained control of Carburos Metalicos
S.A.(Carburos). Carburos is a leading supplier of industrial gases in Spain.
In October 1996, the Company increased its ownership percentage in Carburos
from 47.6% to 96.7% of the outstanding shares in Carburos. This transaction
was accounted for as a step acquisition purchase and the results for the
twelve months ended 30 September 1997 include the consolidated operating
results for Carburos since mid-November 1996. Previously, the Company
accounted for its investment using the equity method. The Company has
recorded a total of $212.2 million as cumulative goodwill related to the
shares acquired over the last three years. The goodwill will be amortized on
a straight-line basis over forty years.
The Company completed the sale of the landfill gas recovery business, GSF
Energy Inc., during the three months ended 31 December 1996. The gain on
sale was included in the other income line of the income statement.
During the three months ended 31 December 1996, an impairment loss was
recorded in the chemicals segment. The write-down was related to production
assets in the performance chemicals division and the related goodwill. The
impairment loss was calculated based on an offer to purchase these assets
and was included in the other income line of the income statement. The sale
of the impaired assets occurred in February 1997.
In April 1996, the Company announced its plan to divest its joint venture
interest in a waste-to-energy business. In October 1997, the Company entered
into an agreement in principle to sell this interest. The transaction is
expected to close in December 1997.
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AIR PRODUCTS AND CHEMICALS, INC.
OPERATING RESULTS
(Unaudited)
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<CAPTION>
SUMMARY BY BUSINESS SEGMENTS
(In millions)
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Three Months Ended Twelve Months Ended
30 September 30 September
1997 1996 1997 1996
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Sales:
Industrial Gases $ 703.6 $ 590.2 $2,673.9 $2,310.5
Chemicals 377.1 360.1 1,448.1 1,362.3
Equipment/Services 132.8 94.6 514.6 314.6
Corporate/Other -- 5.5 1.2 20.3
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CONSOLIDATED $1,213.5 $1,050.4 $4,637.8 $4,007.7
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Operating Income:
Industrial Gases $ 130.8 $ 101.2 $ 515.2 $ 406.7
Chemicals 46.6 41.5 204.2 197.5
Equipment/Services 13.4 13.7 37.5 32.7
Corporate/Other (11.7) (12.7) (31.5) (45.6)
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CONSOLIDATED $ 179.1 $ 143.7 $ 725.4 $ 591.3
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Equity Affiliates' Income:
Industrial Gases $ 4.5 $ 12.8 $ 28.5 $ 44.0
Chemicals -- 0.2 .4 .3
Equipment/Services 3.7 2.4 13.9 8.5
Corporate/Other 8.6 11.1 23.5 27.9
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CONSOLIDATED $ 16.8 $ 26.5 $ 66.3 $ 80.7
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AIR PRODUCTS AND CHEMICALS, INC.
OPERATING RESULTS
(Unaudited)
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<CAPTION>
SUMMARY BY GEOGRAPHIC REGIONS
(In millions)
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Three Months Ended Twelve Months Ended
30 September 30 September
1997 1996 1997 1996
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Sales:
United States $ 861.8 $ 793.9 $3,269.7 $3,017.1
Europe 298.7 213.8 1,178.3 832.1
Canada/Latin America 48.1 36.5 171.7 142.7
Other 4.9 6.2 18.1 15.8
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CONSOLIDATED $1,213.5 $1,050.4 $4,637.8 $4,007.7
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Operating Income:
United States $ 126.9 $ 109.0 $ 554.3 $ 460.8
Europe 46.0 29.5 150.8 115.5
Canada/Latin America 6.4 4.4 20.9 14.5
Other (.2) .8 (.6) .5
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CONSOLIDATED $ 179.1 $ 143.7 $ 725.4 $ 591.3
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Equity Affiliates' Income:
United States $ 12.3 $ 14.0 $ 36.5 $ 35.5
Europe 2.6 6.4 13.9 24.0
Canada/Latin America 3.3 1.5 11.2 7.9
Other (1.4) 4.6 4.7 13.3
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CONSOLIDATED $ 16.8 $ 26.5 $ 66.3 $ 80.7
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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 October 1997 By: /s/ Arnold H. Kaplan
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Arnold H. Kaplan
Senior Vice President - Finance
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