01—Abstract
Summary
Summary of the 10-K filed November 23, 2010. Cited figures are marked; the original filing is the authoritative source.
Air Products & Chemicals, Inc. (APD) reported strong financial performance for the fiscal year ending September 29, 2010, driven by a significant recovery in its Electronics and Performance Materials segment and new investments in Tonnage Gases.
Sales increased by 9%a, with underlying business growth of 8%, reflecting improved economic conditions and increased volumes. Operating income saw a substantial increase of 64% (or 25% on a non-GAAP basis), signaling effective cost management and operational efficiencies following global cost reduction plans. The company also increased its quarterly dividend, marking the 28th consecutive year of dividend growth.
A significant development during the year was the commencement of a tender offer to acquire Airgas, Inc., the largest U.S. distributor of industrial gases, valued at approximately $7.4 billionb. While the acquisition was pending at the time of filing, the company had incurred acquisition-related costs and secured committed financing. The company's outlook for 2011 was positive, anticipating continued economic recovery and growth in global manufacturing, particularly in Asia, with projections for volume growth to be the primary driver of earnings improvement.
02—Key points
Key Highlights
- Sales increased by 9% to $9.03 billion, with underlying business growth of 8%, primarily driven by the Electronics and Performance Materials and Tonnage Gases segments.
- Operating income surged by 64% to $1.39 billion (or 25% higher on a non-GAAP basis to $1.49 billion), reflecting improved volumes, cost reductions, and favorable currency movements.
- Income from continuing operations increased by 61% to $1.03 billion, with diluted EPS from continuing operations rising 58% to $4.74 (or 24% higher on a non-GAAP basis to $5.02).
- The company increased its quarterly dividend to $0.49 per share, marking its 28th consecutive year of dividend increases.
- A tender offer was commenced in February 2010 to acquire Airgas, Inc. for approximately $7.4 billion, representing a major strategic initiative.
- Capital expenditures totaled $1.13 billion on a GAAP basis, with projections for 2011 indicating increased investment, primarily in the Tonnage Gases segment.
- The company ended the fiscal year with a solid financial position, a debt-to-equity ratio of 42.0%, and maintained consistent access to commercial paper markets.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, Air Products & Chemicals, Inc. kept $0.12.
- Revenue$8.62B100.0%
- Cost of revenue−$6.09B70.7%
- Gross profit$2.52B29.3%
- Operating costs−$1.26B14.6%
- Operating income$1.27B14.7%
- Interest, other & tax−$238.6M2.8%
- Net income$1.03B11.9%
Where FY2010 revenue went
$8.62B- Cost of revenue: $6.29B, 73% of revenue
- Net income: $1.03B, 12% of revenue
- R&D: $114.7M, 1.3% of revenue
- SG&A: $886.6M, 10% of revenue
- Other operating costs: $58.2M, 0.7% of revenue
- Interest, other & tax: $238.6M, 2.8% of revenue
Kept 12% as net incomeNet income $1.03B · 12%R&D $114.7M · 1.3%Other operating costs $58.2M · 0.7%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed November 23, 2010Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $8.62B$8.26B | +4.4% |
| Cost of Revenue | $6.29B$6.04B | +4.1% |
| Gross Profit | $2.52B$2.21B | +14.0% |
| R&D Expenses | $114.70M$116.30M | −1.4% |
| SG&A Expenses | $886.60M$943.40M | −6.0% |
| Operating Income | $1.27B$846.30M | +49.8% |
| Interest Expense | $121.90M$121.90M | 0.0% |
| Net Income | $1.03B$631.30M | +63.0% |
| EPS (Basic) | $4.85$3.01 | +61.1% |
| EPS (Diluted) | $4.74$2.96 | +60.1% |
| Shares Outstanding (Basic) | 212.20M209.90M | +1.1% |
| Shares Outstanding (Diluted) | 217.10M213.50M | +1.7% |
05—Questions
Frequently Asked Questions
What was Air Products' overall financial performance in fiscal year 2010?
Air Products experienced a strong recovery in fiscal year 2010, with sales up 9% and operating income significantly improving by 64% (on a GAAP basis). This growth was driven by increased volumes across key segments like Electronics and Performance Materials and Tonnage Gases, benefiting from an improving economic environment. The company also executed well on cost reduction initiatives, leading to enhanced profitability.
What is the status and potential impact of the Airgas acquisition on Air Products?
In February 2010, Air Products launched a tender offer to acquire Airgas for approximately $7.4 billion. This represents a significant strategic move to enhance its U.S. packaged industrial gas distribution capabilities. The acquisition was pending at the time of filing, with the company having incurred acquisition-related costs and secured financing. If successful, the acquisition would increase debt levels and require integration efforts.
How did the different business segments perform in fiscal year 2010?
The Merchant Gases segment saw a modest 3% increase in revenue, with operating income up 10%. Tonnage Gases reported a 14% revenue increase and an 11% rise in operating income, driven by new plant start-ups and improved demand. The Electronics and Performance Materials segment showed a robust 20% revenue increase and more than doubled its operating income, indicating a strong recovery in the electronics sector. The Equipment and Energy segment experienced a slight revenue decline of 4%, but operating income increased significantly by 59% due to higher LNG activity and asset sales.
What are the key financial risks facing Air Products?
Key financial risks identified include the impact of overall economic conditions on demand, potential asset impairments due to market weakness, intense competition, fluctuations in raw material and energy costs (though often passed through), regulatory compliance, and currency fluctuations. The company is also exposed to interest rate risk and pension liabilities. The pending Airgas acquisition also introduces transaction costs, integration risks, and increased debt obligations.
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