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UNITED STATES
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) 22 April 1997
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Air Products and Chemicals, Inc.
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(Exact name of registrant as specified in charter)
Delaware 1-4534 23-1274455
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(State of other jurisdiction (Commission file number) (IRS Identification
of incorporation) number)
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 record sales and income from operations for the
second quarter ended March 31, 1997. Earnings per share increased 13 percent, on
income from operations of $106 million, or 96 cents per share, versus $94
million, or 85 cents per share in the year ago quarter. Sales of $1.2 billion
were up 14 percent from last year. These results include the operations of
Carburos Metalicos on a fully consolidated basis for the entire quarter, but
exclude an after-tax gain in the prior year quarter of $41 million, or 36 cents
per share, from the settlement of certain derivative-related claims.
Industrial gas sales for the quarter rose 13 percent and operating
income increased 26 percent, including Carburos Metalicos. The tonnage gas
business posted solid volume gains in both the U.S. and Europe, principally from
increased loading on our hydrogen facilities for the chemical and refinery
industries. Productivity improvements in the U.S. more than offset continued
economic softness in northern Europe. Gas equity affiliate results, excluding
Carburos Metalicos, were slightly higher than last year.
In chemicals, second quarter operating income was slightly higher than
last year's results on a 5 percent increase in sales. Modest volume gains across
most businesses offset a slight decline in operating margin.
The equipment and services segment reported significantly higher sales
and operating income for the period. These results reflected a high level of
activity, and the business ended the quarter with a near-record backlog of high
quality projects.
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The corporate and other segment included a one-time gain on the sale of
an equity investment. This gain was offset by costs associated with refinancing
the debt of an equity affiliate, and unfavorable foreign exchange.
The quarter's results also reflected higher interest expense for new
capital investments brought onstream and the Carburos Metalicos acquisition.
For the first half of fiscal 1997, Air Products reported income of $206
million, or $1.87 per share, versus $183 million, or $1.65 per share, up 13
percent on an operating basis. Sales rose 16 percent to $2.3 billion. These
results exclude the 1996 gain from the settlement for certain derivative losses
reported in fiscal year 1994.
Financial tables follow:
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AIR PRODUCTS AND CHEMICALS, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
<TABLE>
<CAPTION>
(In millions, except earnings per share)
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Three Months Ended Six Months Ended
31 March 31 March
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Sales $1,153.1 $1,012.5 $ 2,274.0 $ 1,960.0
Net Income $ 106.0 $ 135.3(a) $ 205.9(b) $ 224.3(a)
Earnings Per
Share $ .96 $ 1.21(a) $ 1.87(b) $ 2.01(a)
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</TABLE>
(a)Included 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.
(b)Included 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.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED INCOME
<TABLE>
<CAPTION>
(In millions, except per share)
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Three Months Ended Six Months Ended
31 March 31 March
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
SALES AND OTHER INCOME
Sales $1,153.1 $1,012.5 $2,274.0 $1,960.0
Other income 10.4 4.1 19.8 7.9
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1,163.5 1,016.6 2,293.8 1,967.9
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COSTS AND EXPENSES
Cost of sales 686.3 609.7 1,379.0 1,169.1
Selling, distribution and
administrative 264.7 230.8 506.2 450.9
Research and development 28.5 28.1 55.2 55.7
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OPERATING INCOME 184.0 148.0 353.4 292.2
Income from equity affiliates,
net of related expenses 13.5 18.0 32.2 33.8
Gain on settlement of leveraged
interest rate swaps -- 66.8 -- 66.8
Interest expense 42.5 31.2 82.4 59.9
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INCOME BEFORE TAXES 155.0 201.6 303.2 332.9
Income taxes 49.0 66.3 97.3 108.6
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NET INCOME $ 106.0 $ 135.3 $ 205.9 $ 224.3
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MONTHLY AVERAGE OF
COMMON SHARES OUTSTANDING -- -- 110.2 111.8
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EARNINGS PER COMMON SHARE $ .96 $ 1.21 $ 1.87 $ 2.01
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DIVIDENDS DECLARED PER
COMMON SHARE - Cash $ .28 $ .26 $ .55 $ .52
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</TABLE>
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In millions, except per share)
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31 March 31 March
ASSETS 1997 1996
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<S> <C> <C>
CURRENT ASSETS
Cash and cash items $ 111.8 $ 82.2
Trade receivables, less allowances for
doubtful accounts 814.0 649.1
Inventories 398.0 383.2
Contracts in progress, less progress billings 167.5 114.1
Other current assets 173.1 143.7
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TOTAL CURRENT ASSETS 1,664.4 1,372.3
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INVESTMENTS 596.8 794.9
PLANT AND EQUIPMENT, at cost 8,537.3 7,691.4
Less - Accumulated depreciation 4,167.8 3,982.5
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PLANT AND EQUIPMENT, net 4,369.5 3,708.9
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GOODWILL 265.8 80.3
OTHER NONCURRENT ASSETS 317.9 268.0
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TOTAL ASSETS $7,214.4 $6,224.4
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LIABILITIES AND SHAREHOLDERS' EQUITY
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CURRENT LIABILITIES
Payables, trade and other $ 607.4 $ 491.0
Accrued liabilities 275.4 234.6
Accrued income taxes 50.7 94.4
Short-term borrowings 395.5 423.2
Current portion of long-term debt 57.3 25.0
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TOTAL CURRENT LIABILITIES 1,386.3 1,268.2
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LONG-TERM DEBT 2,211.6 1,495.0
DEFERRED INCOME & OTHER NONCURRENT LIABILITIES 403.7 397.7
DEFERRED INCOME TAXES 655.2 510.4
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TOTAL LIABILITIES 4,656.8 3,671.3
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SHAREHOLDERS' EQUITY
Common stock, par value $1 per share 124.7 124.7
Capital in excess of par value 454.6 463.4
Retained earnings 2,832.5 2,556.2
Unrealized gain on investments 15.6 40.5
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Cumulative translation adjustments (142.3) (47.8)
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Treasury Stock, at cost (275.4) (126.4)
Shares in trust (452.1) (457.5)
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TOTAL SHAREHOLDERS' EQUITY 2,557.6 2,553.1
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,214.4 $6,224.4
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</TABLE>
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
On 22 October 1996, the company obtained control of Carburos Metalicos S.A.
(Carburos). Carburos is a leading supplier of industrial gases in Spain. The
company now owns 96.7% of the outstanding shares in Carburos. This transaction
was accounted for as a step acquisition purchase and the results for the six
months ended 31 March 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, which will be amortized on a straight-line basis
over forty years.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY BUSINESS SEGMENTS
<TABLE>
<CAPTION>
(In millions)
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Three Months Ended Six Months Ended
31 March 31 March
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Sales:
Industrial Gases $ 671.0 $ 591.5 $1,285.5 $1,142.4
Chemicals 358.5 340.0 704.7 649.7
Equipment/Services 123.6 76.3 282.6 158.2
Corporate/Other -- 4.7 1.2 9.7
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CONSOLIDATED $1,153.1 $1,012.5 $2,274.0 $1,960.0
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Operating Income:
Industrial Gases $ 125.5 $ 99.6 $ 243.8 $ 203.3
Chemicals 53.4 52.7 97.9 100.8
Equipment/Services 10.5 7.0 16.1 11.6
Corporate/Other (5.4)(a) (11.3) (4.4)(a) (23.5)
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CONSOLIDATED $ 184.0 $ 148.0 $ 353.4 $ 292.2
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Equity Affiliates' Income:
Industrial Gases $ 8.5 $ 9.9 $ 20.5 $ 19.1
Chemicals 0.1 0.1 0.2 (0.1)
Equipment/Services 3.5 2.3 7.0 4.3
Corporate/Other 1.4 (b) 5.7 4.5 (b) 10.5
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CONSOLIDATED $ 13.5 $ 18.0 $ 32.2 $ 33.8
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</TABLE>
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.
(a) In January 1997, the company sold 2.1 million shares of a cost basis
investment. The partial sale of the company's investment resulted in a gain of
$7.3 million ($4.5 million after-tax or, $.04 per share) and was recorded in the
Corporate/Other segment.
(b) During the three months ended 31 March 1997, American Ref-Fuel (50% owned
partnership) refinanced its Hempstead Bond offerings to lower the effective
interest rate. This transaction resulted in a charge to the Corporate/Other
segment of $4.8 million ($2.8 million after-tax, or $.03 per share).
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
SUMMARY BY GEOGRAPHIC REGIONS
<TABLE>
<CAPTION>
(In millions)
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Three Months Ended Six Months Ended
31 March 31 March
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Sales:
United States $ 806.4 $ 762.8 $1,598.5 $1,462.5
Europe 305.2 214.7 590.9 426.6
Canada/Latin America 38.6 33.8 78.2 68.7
Other 2.9 1.2 6.4 2.2
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CONSOLIDATED $1,153.1 $1,012.5 $2,274.0 $1,960.0
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Operating Income:
United States $ 140.4 $ 119.1 $ 284.6 $ 228.1
Europe 39.5 25.0 59.6 58.7
Canada/Latin America 4.2 3.8 9.6 5.3
Other (0.1) 0.1 (0.4) 0.1
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CONSOLIDATED $ 184.0 $ 148.0 $ 353.4 $ 292.2
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Equity Affiliates' Income:
United States $ 4.8 $ 7.4 $ 11.0 $ 13.7
Europe 1.9 5.2 9.0 10.9
Canada/Latin America 2.7 2.6 5.4 3.9
Other 4.1 2.8 6.8 5.3
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CONSOLIDATED $ 13.5 $ 18.0 $ 32.2 $ 33.8
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</TABLE>
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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: 22 April 1997 By: /s/ Arnold H. Kaplan
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Arnold H. Kaplan
Vice President - Finance
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