Skip to content
AnalystLens

Air Products & Chemicals, Inc. Annual Report, Year Ended Sep 30, 2005

Filing Date
Filed November 22, 2005
Period End
September 30, 2005
Security
APD
In the record · 2016–202610-K1010-Q338-K123

APD filed 10 annual reports (10-K), 33 quarterly reports (10-Q) and 123 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Jan ’17Jan ’17
  2. FY2018 annual report10-K · Nov ’18Nov ’18
  3. Leadership change8-K · Sep ’21Sep ’21
  4. Leadership change8-K · Aug ’25Aug ’25

01—Abstract

Summary

Summary of the 10-K filed November 22, 2005. Cited figures are marked; the original filing is the authoritative source.

Air Products and Chemicals (APD) delivered a strong fiscal 2005 (year ended 30 September 2005), with sales rising 10% to $8.14 billiona, operating income up 14% to $1.00 billion, and net income climbing 18% to $711.7 million, or $3.08 diluted EPS versus $2.64 in 2004.

Growth was driven mainly by higher Gases volumes (notably electronics, Asian liquid bulk and on-site hydrogen), successful Chemicals price recovery against higher raw material costs, and a rebound in Equipment sales on LNG heat exchanger activity. Return on sales improved to 8.7% and return on average equity to 15.3%. The company also returned capital aggressively, repurchasing $500 millionb of stock (8.3 million shares) and raising the quarterly dividend 10% to $0.32.

The outlook has some mixed signals. Management forecasts further EPS growth in 2006, with Equipment operating income expected to rise significantly on a record backlog of $652 millionc, but Chemicals profits are guided slightly below 2005 because of the termination of a major polyurethane intermediates contract and a customer shutdown. Hurricanes Katrina and Rita hit the Gulf Coast, reducing operating income by roughly $20 million, and the New Orleans complex is expected to be substantially restored by year-end.

Pension expense is projected to rise about $38 milliond in 2006 on a lower discount rate, and stock option expensing under SFAS 123R will reduce diluted EPS by about $0.13 in 2006. Electronics specialty gas pricing continues to decline, and the company carries about $2.5 billion of total debt, with a debt-to-capital ratio of 34.5%.

For investors, the key takeaways are solid cash generation (operating cash flow of $1.38 billion, up 27%), continued capital investment of about $1.04 billion, and a balance sheet rated A/A2. The main watch points are the Chemicals segment's profitability, pension funding needs (about $155 million expected in 2006), and exposure to energy and raw material price volatility.

02—Key points

Key Highlights

  1. Sales rose 10% to $8,143.5 million and operating income rose 14% to $1,002.5 million, driven mainly by Gases volume growth and favorable currency effects.
  2. Diluted EPS was $3.08, up from $2.64 (+17%), and net income rose to $711.7 million from $604.1 million.
  3. Operating cash flow increased 27% to $1,375.8 million; capital expenditures were $1,042.8 million, funded from operations.
  4. Share repurchases of $500 million (8.3 million shares) were completed in 2005, and the quarterly dividend was raised 10% to $0.32 per share.
  5. The Chemicals segment faces headwinds in 2006 from the termination of a major polyurethane intermediates contract and a customer shutdown, with segment profits guided slightly below 2005.
  6. Equipment segment order backlog reached a record $652 million at year-end 2005 (up from $297 million), supporting significantly higher 2006 operating income.
  7. Hurricanes Katrina, Rita and Dennis reduced operating income by approximately $20 million, and the damaged New Orleans facility is expected to return to substantial operations by the end of 2005.

03—Questions

Frequently Asked Questions

  1. How did Air Products perform financially in fiscal 2005?

    Sales grew 10% to $8.14 billion, operating income grew 14% to $1.00 billion, and net income grew 18% to $711.7 million. Diluted EPS was $3.08, compared with $2.64 in 2004. Return on sales rose to 8.7% and return on average shareholders' equity to 15.3%.

  2. What are the main growth drivers behind the 2005 results?

    Gases volume growth was the main driver, especially in electronics, Asian liquid bulk (LOX/LIN volumes up 22%), and on-site hydrogen for refiners. The Chemicals segment recovered higher raw material costs through price increases, and Equipment sales rose on LNG heat exchanger activity. Acquisitions of U.S. homecare businesses and a weaker U.S. dollar also contributed.

  3. What risks and headwinds should investors watch for in 2006?

    Key risks include the loss of a major polyurethane intermediates contract, which will significantly reduce that product line's profitability; continued pricing pressure in electronics specialty materials; volatile natural gas and raw material costs; and higher pension expense, which is projected to rise about $38 million. Stock option expensing under SFAS 123R will reduce 2006 diluted EPS by about $0.13. The company also has a $86 million loan exposure to a sulfuric acid supplier that emerged from bankruptcy.

  4. How is the company managing its balance sheet and capital returns?

    Total debt was about $2.5 billion, equal to 34.5% of total capitalization, and the company is rated A/A2 by S&P and Moody's. It repurchased $500 million of stock and raised its dividend 10%, while still funding about $1.04 billion of capital spending from operating cash flow. Management expects 2006 capital expenditures of $1.2 to $1.3 billion, including a $297 million purchase of leased cryogenic vessel equipment.

04—Continue

← View all 10-K filings