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) 26 January 1999
----------------
<TABLE>
<CAPTION>
Air Products and Chemicals, Inc.
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(Exact name of registrant as specified in charter)
<S> <C> <C>
Delaware 1-4534 23-1274455
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(State of other jurisdiction of incorporation) (Commission file number) (IRS Identification number)
7201 Hamilton Boulevard, Allentown, Pennsylvania 18195-1501
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (610) 481-4911
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<PAGE>
Item 5. Other Events.
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Additional financial information for the quarter ended 31 December 1998
and the affect of reclassification of certain expense items for prior periods
follow:
2
<PAGE>
AIR PRODUCTS AND CHEMICALS, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
<TABLE>
<CAPTION>
(Millions of dollars, except per share)
- -------------------------------------------------------------------------------
Three Months Ended
31 December
1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Sales $1,274.6 $1,234.8
Net Income $ 126.4(a) $ 160.5(b)
Basic Earnings Per Share $ .60(a) $ .74(b)(c)
Diluted Earnings Per Share $ .59(a) $ .72(b)(c)
- -------------------------------------------------------------------------------
Operating Return on Net Assets(d) 12.0% 11.5%
Capital Expenditures(e) $ 245.4(f) $ 186.9
Depreciation $ 127.8 $ 117.6
- -------------------------------------------------------------------------------
</TABLE>
(a) Includes an after-tax gain of $21.4 million, or $.10 per share related to
the formation of Air Products Polymers and an after-tax charge of
$12.9 million or $.06 per share related to a global cost reduction plan.
Excluding the impact of these special items, net income was
$117.9 million, basic earnings per share was $.56 and diluted earnings per
share was $.55.
(b) Includes an after-tax gain of $35.1 million, or $.16 per share from the
sale of the Company's 50% interest in American Ref-Fuel Company and a gain
of $7.6 million, or $.03 per share from a cogeneration project contract
settlement. Excluding the impact of these special items, net income was
$118.0 million, basic earnings per share was $.54 and diluted earnings per
share was $.53.
(c) The earnings per share amounts for the prior year have been restated to
reflect a two-for-one stock split during the third quarter of fiscal 1998.
(d) Operating return on net assets (ORONA) is calculated as the rolling four
quarter sum of operating income divided by the rolling five quarter average
of total assets less investments in equity affiliates. The ORONA
calculation for the three months ended 31 December 1998 excludes
$20.3 million in charges related to a global cost reduction plan.
(e) Capital expenditures include additions to plant and equipment, investments
in and advances to unconsolidated affiliates, acquisitions, and capital
lease additions.
(f) Excludes the Company's contribution of $121.4 million of assets to the Air
Products Polymers venture.
3
<PAGE>
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME
(Unaudited)
<TABLE>
<CAPTION>
(Millions of dollars, except per share)
- --------------------------------------------------------------------------------
Three Months Ended
31 December
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
SALES AND OTHER INCOME
Sales $1,274.6 $1,234.8
Other income(expense),net 4.9 (4.9)(a)
- --------------------------------------------------------------------------------
1,279.5 1,229.9
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COSTS AND EXPENSES
Cost of sales 875.6 831.0(b)
Selling and
administrative 183.2 159.6(b)
Research and development 31.7 26.3
- --------------------------------------------------------------------------------
OPERATING INCOME 189.0 213.0
Income from equity affiliates,
net of related expenses 9.8 5.7
Gain on American Ref-Fuel Sale
and contract settlements -- 75.2
Net gain on formation of
polymer venture 31.2 --
Interest expense 40.4 40.2
- --------------------------------------------------------------------------------
INCOME BEFORE TAXES
AND MINORITY INTEREST 189.6 253.7
Income taxes 59.9 92.8
Minority interest 3.3 .4 (a)
- --------------------------------------------------------------------------------
NET INCOME $ 126.4 $ 160.5
================================================================================
BASIC EARNINGS PER COMMON SHARE $.60 $.74
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DILUTED EARNINGS PER COMMON SHARE $.59 $.72
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WEIGHTED AVERAGE NUMBER OF
COMMON SHARES (in millions) 211.4 218.1
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WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES (in millions)(c) 215.4 222.6
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DIVIDENDS DECLARED PER
COMMON SHARE - Cash $.17 $.15
- --------------------------------------------------------------------------------
</TABLE>
(a) The results for the three months ended 31 December 1997 have been restated
to reflect the current year presentation of minority interest in a separate
line item between income taxes and net income.
(b) The results for the three months ended 31 December 1997 have been restated
to reflect the current year presentation of distribution expense in cost of
sales.
(c) The dilution of earnings per common share is due mainly to the impact of
unexercised stock options.
4
<PAGE>
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(Millions of dollars)
- --------------------------------------------------------------------------------
31 December 31 December
ASSETS 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash items $ 57.8 $ 85.9
Trade receivables, less allowances for
doubtful accounts 886.1 860.8
Inventories 452.1 406.0
Contracts in progress, less progress billings 136.6 93.9
Other current assets 129.2 229.1
- --------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,661.8 1,675.7
- --------------------------------------------------------------------------------
INVESTMENTS IN NET ASSETS OF AND ADVANCES TO
EQUITY AFFILIATES 440.8 311.3
OTHER INVESTMENTS AND ADVANCES 24.5 17.3
PLANT AND EQUIPMENT, at cost 9,687.2 8,847.7
Less - Accumulated depreciation 4,793.5 4,372.5
- --------------------------------------------------------------------------------
PLANT AND EQUIPMENT, net 4,893.7 4,475.2
- --------------------------------------------------------------------------------
GOODWILL 346.4 258.7
OTHER NONCURRENT ASSETS 351.7 336.3
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TOTAL ASSETS $7,718.9 $7,074.5
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
CURRENT LIABILITIES
Payables, trade and other $ 480.4 $ 612.9
Accrued liabilities 269.6 239.4
Accrued income taxes 54.3 195.4
Short-term borrowings 252.7 64.8
Current portion of long-term debt 310.1 47.8
- --------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 1,367.1 1,160.3
- --------------------------------------------------------------------------------
LONG-TERM DEBT 2,123.2 2,234.7
DEFERRED INCOME & OTHER NONCURRENT LIABILITIES 605.2 450.5
DEFERRED INCOME TAXES 733.9 616.3
- --------------------------------------------------------------------------------
TOTAL LIABILITIES 4,829.4 4,461.8
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MINORITY INTERESTS IN SUBSIDIARY COMPANIES 117.0 17.3
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SHAREHOLDERS' EQUITY
Common stock, par value $1 per share 249.5 124.7
Capital in excess of par value 331.1 452.1
Retained earnings 3,490.5 3,118.3
Accumulated other comprehensive income (203.3) (214.4)
Treasury Stock, at cost (681.7) (442.0)
Shares in trust (413.6) (443.3)
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TOTAL SHAREHOLDERS' EQUITY 2,772.5 2,595.4
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,718.9 $7,074.5
================================================================================
</TABLE>
5
<PAGE>
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
(Millions of dollars)
- --------------------------------------------------------------------------------
Three Months Ended
31 December
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
NET INCOME $ 126.4 $ 160.5
- --------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME, net of tax
Foreign currency translation adjustments 24.3 (32.8)
Unrealized gains on investments:
Unrealized holding gains arising
during the period 3.9 (2.4)
Less: reclassification adjustment
for gains included in net income -- --
- --------------------------------------------------------------------------------
Net unrealized gains on investments 3.9 (2.4)
- --------------------------------------------------------------------------------
TOTAL OTHER COMPREHENSIVE INCOME 28.2 (35.2)
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COMPREHENSIVE INCOME $ 154.6 $ 125.3
================================================================================
</TABLE>
6
<PAGE>
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
CONSOLIDATED CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
(Millions of dollars)
----------------------------------------------------------------------------------------------------------------------
Three Months Ended
31 December
1998 1997
----------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C>
Net Income $126.4 $160.5
Adjustments to reconcile income to cash provided by operating activities:
Depreciation 127.8 117.6
Deferred income taxes 21.4 17.5
Ref-Fuel divestiture deferred income taxes -- (80.3)
Gain on formation of polymer venture (31.2) --
Undistributed (earnings) of unconsolidated affiliates 6.7 34.0
(Gain) loss on sale of assets and investments .5 (82.9)
Other 58.5 30.2
Working capital changes that provided (used) cash, net of effects of
acquisitions:
Trade receivables 6.7 53.6
Other receivables 45.5 (17.4)
Inventories and contracts in progress (47.5) 6.0
Payables, trade and other 2.1 (4.4)
Accrued liabilities (73.5) (86.2)
Accrued income taxes 23.7 151.8
Other 6.0 (20.6)
Cash provided by (used for) discontinued operations -- (3.2)
------------------------------------------------------------------------------ ----------------- ------------------
CASH PROVIDED BY OPERATING ACTIVITIES 273.1 276.2
------------------------------------------------------------------------------ ----------------- ------------------
INVESTING ACTIVITIES
Additions to plant and equipment (189.5) (154.9)
Acquisitions, less cash acquired (4.6) (16.6)
Investment in and advances to unconsolidated affiliates (50.4) (4.5)
Proceeds from sale of assets and investments 17.3 248.3
Other 14.7 (.9)
------------------------------------------------------------------------------ ----------------- ------------------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES (212.5) 71.4
------------------------------------------------------------------------------ ----------------- ------------------
FINANCING ACTIVITIES
Long-term debt proceeds .8 2.0
Payments on long-term debt 4.2 (43.5)
Net increase (decrease) in commercial paper (16.1) (65.5)
Net increase (decrease) in other short-term borrowings (1.2) (24.6)
Dividends paid to shareholders (36.0) (33.0)
Purchase of Treasury Stock (24.6) (150.0)
Other 7.6 1.4
------------------------------------------------------------------------------ ----------------- ------------------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES (65.3) (313.2)
------------------------------------------------------------------------------ ----------------- ------------------
Effect of Exchange Rate Changes on Cash 1.0 (1.0)
Increase in Cash and Cash Items (3.7) 33.4
Cash and Cash Items - Beginning of Year 61.5 52.5
============================================================================== ================= ==================
Cash and Cash Items - End of Period $57.8 $ 85.9
============================================================================== ================= ==================
</TABLE>
7
<PAGE>
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The results for the three months ended 31 December 1998 include a net gain of
$31.2 million ($21.4 million after-tax or $.10 per share) related to the
formation of Air Products Polymers (a 65% majority owned venture with Wacker
Chemicals). The gain is a result of using fair value to value the assets
acquired to form the venture. The gain was partially offset by costs related to
an emulsions facility shutdown not included in the joint venture and for costs
related to indemnities provided by Air Products to the venture.
On 21 December 1998, the Company committed to a global cost reduction plan. The
plan results in a staffing reduction of approximately 200 employees in the areas
of manufacturing, distribution, and overhead. The plan will be completed by
31 December 1999. $20.3 million ($12.9 million after-tax or $.06 per share)
related to employee termination benefits was charged to expense in the fiscal
quarter of which $4.8 has been incurred and the balance is included in accrued
liabilities. The charges to cost of sales, selling and administrative and
research and development were $9.9 million, $9.3 million and $1.1 million
respectively.
In December 1997, the Company sold its 50% interest in American Ref-Fuel
Company, its former waste-to-energy joint venture with Browning-Ferris
Industries, Inc.(BFI), to Duke Energy Power Services and United American Energy
Corporation. This transaction provided for the sale of Air Products' interest in
American Ref-Fuel's five waste-to-energy facilities for $237 million, and the
assumption of various parental support agreements by Duke Energy Capital
Corporation, the parent company of Duke Energy Power Services. The income
statement for the three months ended 31 December 1997 includes a gain of
$62.6 million from this sale, ($35.1 million after-tax or $.16 per share).
The results for the three months ended 31 December 1997 also include a gain of
$12.6 million from a cogeneration project contract settlement($7.6 million
after-tax or $.03 per share).
8
<PAGE>
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
SUMMARY BY BUSINESS SEGMENTS
(Unaudited)
<TABLE>
<CAPTION>
(Millions of dollars)
- --------------------------------------------------------------------------------
Three Months Ended
31 December
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
Industrial Gases $ 740.8 $ 727.0
Chemicals 401.8 380.9
Equipment/Services 132.0 126.9
Corporate/Other -- --
- --------------------------------------------------------------------------------
CONSOLIDATED $1,274.6 $1,234.8
- --------------------------------------------------------------------------------
Operating Income:
Industrial Gases $ 122.2 (a) $ 147.2
Chemicals 52.6 (a) 68.4
Equipment/Services 28.8 (a) 12.6
Corporate/Other (14.6)(a) (15.2)(b)
- --------------------------------------------------------------------------------
CONSOLIDATED $ 189.0 $ 213.0
- --------------------------------------------------------------------------------
Equity Affiliates' Income:
Industrial Gases $ 6.1 $ .4
Chemicals 2.1 --
Equipment/Services 1.1 4.4
Corporate/Other .5 .9
- --------------------------------------------------------------------------------
CONSOLIDATED $ 9.8 $ 5.7
- --------------------------------------------------------------------------------
Operating Return on Net Assets:
Industrial Gases 11.3% 11.4%
Chemicals 16.2 18.1
Equipment/Services 32.7 11.3
Corporate/Other N/A N/A
- --------------------------------------------------------------------------------
CONSOLIDATED 12.0% 11.5%
- --------------------------------------------------------------------------------
</TABLE>
(a) The results for the three months ended 31 December 1998 include the cost
reduction charge in Industrial Gases ($16.3 million), Chemicals
($1.6 million), Equipment/Services ($1.9 million), and Corporate/Other
($.5 million).
(b) The results for the three months ended 31 December 1997 have been restated
to reflect the current year presentation of minority interest in a separate
line item between income taxes and net income.
9
<PAGE>
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
SUMMARY BY GEOGRAPHIC REGIONS
(Unaudited)
<TABLE>
<CAPTION>
(Millions of dollars)
- --------------------------------------------------------------------------------
Three Months Ended
31 December
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Sales:
United States $ 807.9 $ 876.0
Europe 399.3 299.4
Canada/Latin America 58.0 51.3
Other 9.4 8.1
- --------------------------------------------------------------------------------
CONSOLIDATED $1,274.6 $1,234.8
- --------------------------------------------------------------------------------
Operating Income:
United States $ 143.3(a) $ 169.2 (b)
Europe 41.0(a) 41.2 (b)
Canada/Latin America 5.4 3.5
Other (.7) (.9)(b)
- --------------------------------------------------------------------------------
CONSOLIDATED $ 189.0 $ 213.0
- --------------------------------------------------------------------------------
Equity Affiliates' Income:
United States $ 1.9 $ 5.5
Europe 2.9 2.7
Canada/Latin America 4.5 2.9
Other .5 (5.4)
- --------------------------------------------------------------------------------
CONSOLIDATED $ 9.8 $ 5.7
- --------------------------------------------------------------------------------
</TABLE>
(a) The results for the three months ended 31 December 1998 include the cost
reduction charge in the United States ($10.5 million) and Europe ($9.8
million).
(b) The results for the three months ended 31 December 1997 have been restated
to reflect the current year presentation of minority interest in a
separate line item between income taxes and net income.
10
<PAGE>
AIR PRODUCTS AND CHEMICALS, INC. AND SUBSIDIARIES
Restatement of Cost of Sales and Selling Administration
Beginning with the fiscal quarter ending 31 December 1998, the Company is
reporting distribution expense as part of "Cost of sales." Distribution expense
was previously reported as part of "Selling, distribution, and administrative."
The following table discloses the impact of this change for the fiscal quarters
of 1998 and 1997 and fiscal years 1996 through 1988.
Fiscal Years 1998 and 1997 by Quarter
<TABLE>
<CAPTION>
(In millions)
Fiscal Year 1998 Fiscal Year 1997
Reported Restated Reported Restated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cost of sales:
Quarter 1 $ 720.7 $ 831.0 $ 692.7 $ 791.4
Quarter 2 701.9 816.1 686.3 793.8
Quarter 3 708.7 824.1 663.4 771.1
Quarter 4 725.2 845.6 729.2 839.1
- --------------------------------------------------------------------------------
Total $2,856.5 $3,316.8 $2,771.6 $3,195.4
- --------------------------------------------------------------------------------
Selling and administrative:
Quarter 1 $ 269.9 $ 159.6 $ 241.5 $ 142.8
Quarter 2 277.3 163.1 264.7 157.2
Quarter 3 287.4 172.0 266.8 159.1
Quarter 4 285.7 165.3 278.3 168.4
- --------------------------------------------------------------------------------
Total $1,120.3 $ 660.0 $1,051.3 627.5
- --------------------------------------------------------------------------------
</TABLE>
Fiscal Years 1996 through 1988
<TABLE>
<CAPTION>
Selling and
Cost of sales administrative
Reported Restated Reported Restated
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fiscal Year 1996 $ 2,408 $ 2,780 $ 920 $ 548
Fiscal Year 1995 $ 2,317 $ 2,678 $ 869 $ 508
Fiscal Year 1994 $ 2,112 $ 2,455 $ 789 $ 446
Fiscal Year 1993 $ 2,030 $ 2,340 $ 744 $ 434
Fiscal Year 1992 $ 1,937 $ 2,233 $ 724 $ 428
Fiscal Year 1991 $ 1,755 $ 2,030 $ 686 $ 411
Fiscal Year 1990 $ 1,775 $ 2,042 $ 659 $ 392
Fiscal Year 1989 $ 1,601 $ 1,843 $ 610 $ 368
Fiscal Year 1988 $ 1,452 $ 1,666 $ 545 $ 331
</TABLE>
11
<PAGE>
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)
Dated: 26 January 1999 By: /s/ Leo J. Daley
----------------------------------------
Leo J. Daley
Vice President - Finance
(Chief Financial Officer)
