01—Abstract
Summary
Summary of the 10-K filed November 24, 2015. Cited figures are marked; the original filing is the authoritative source.
Air Products & Chemicals, Inc. (APD) reported fiscal year 2015 results reflecting significant strategic progress, including a reorganization into seven reporting segments and the announcement of plans to spin off its Materials Technologies business by September 2016.
Despite a 5% decline in sales to $9.9 billiona, primarily due to unfavorable currency impacts and lower energy cost pass-throughs, the company demonstrated strong operational improvement. Operating income increased 28% on a GAAP basis, driven by higher volumes, improved pricing, and cost reductions from restructuring efforts. Adjusted EBITDA grew 8%, highlighting the company's focus on core industrial gases operations.
APD also continued its commitment to shareholder returns by increasing its quarterly dividend by 5%b, marking the 33rd consecutive year of dividend increases. Looking ahead to fiscal year 2016, APD anticipates modest economic growth and lower LNG results.
The company's strategic priority remains on controlling costs, improving cash flow, and driving earnings growth through project execution and operational efficiencies. The planned separation of the Materials Technologies business is a key event expected to occur by September 2016, subject to customary conditions and approvals, which is intended to be tax-free to shareholders.
02—Key points
Key Highlights
- Sales declined 5% year-over-year to $9.9 billion, impacted by a 5% unfavorable currency impact and a 3% reduction from lower energy cost pass-throughs, although underlying sales grew 3% due to volume and price improvements.
- Operating income on a GAAP basis surged 28% to $1.7 billion, with operating margin expanding by 450 basis points to 17.2%, driven by cost reduction actions and improved operational performance.
- Adjusted EBITDA increased by 8% to $3.0 billion, reflecting strong operational leverage and cost management.
- Income from continuing operations and diluted EPS from continuing operations (GAAP) increased by 29% and 28%, respectively, demonstrating improved profitability.
- The company announced its intention to spin off its Materials Technologies business by September 2016, a strategic move to sharpen focus on its core industrial gases business.
- Quarterly dividend was increased by 5% to $0.81 per share, marking the 33rd consecutive year of dividend increases, signaling confidence in future performance and commitment to shareholder returns.
- Capital expenditures on a GAAP basis were $1.65 billion, with non-GAAP capital expenditures at $2.03 billion, reflecting investments in new projects and facilities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Air Products & Chemicals, Inc. kept $0.16.
- Revenue$7.82B100.0%
- Cost of revenue−$4.87B62.2%
- Gross profit$2.96B37.8%
- Operating costs−$1.72B22.0%
- Operating income$1.23B15.8%
- Interest, other & tax$44.7M0.6%
- Net income$1.28B16.3%
Where FY2015 revenue went
$7.82B- Cost of revenue: $5.60B, 72% of revenue
- Operating income: $1.23B, 16% of revenue
- R&D: $76.4M, 1.0% of revenue
- SG&A: $773.0M, 9.9% of revenue
- Other operating costs: $143.5M, 1.8% of revenue
Kept 16% as operating incomeR&D $76.4M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed November 24, 2015Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $7.82B$10.44B | −25.0% |
| Cost of Revenue | $5.60B$7.63B | −26.6% |
| Gross Profit | $2.96B$2.80B | +5.4% |
| R&D Expenses | $76.40M$139.80M | −45.4% |
| SG&A Expenses | $773.00M$1.05B | −26.7% |
| Operating Income | $1.23B$1.34B | −7.9% |
| Interest Expense | $102.80M$125.10M | −17.8% |
| Net Income | $1.28B$991.70M | +28.9% |
| EPS (Basic) | $5.95$4.66 | +27.7% |
| EPS (Diluted) | $5.88$4.61 | +27.5% |
| Shares Outstanding (Basic) | 214.90M212.70M | +1.0% |
| Shares Outstanding (Diluted) | 217.30M215.20M | +1.0% |
05—Questions
Frequently Asked Questions
What is the company's strategy regarding its Materials Technologies segment?
Air Products & Chemicals, Inc. announced in September 2015 its plan to spin off its Materials Technologies business into a standalone, publicly traded corporation. This strategic move is intended to allow the company to focus more intently on its core industrial gases business. The spin-off was targeted for completion by September 2016 and was intended to be tax-free to shareholders.
How did currency fluctuations impact the company's financial results in fiscal year 2015?
Currency fluctuations had a significant unfavorable impact on Air Products' financial results in fiscal year 2015. Sales were negatively affected by 5% due to unfavorable currency impacts. The company's management noted that while underlying business performance was strong, the strengthening U.S. dollar against other major currencies led to lower reported revenues.
What were the key drivers of the increase in operating income and profitability?
The substantial increase in operating income and profitability in fiscal year 2015 was driven by a combination of factors. These included higher volumes, particularly in the Industrial Gases – Asia segment, improved pricing across several segments, and significant benefits from cost reduction actions and restructuring efforts. These positive operational drivers helped to offset unfavorable currency impacts and lower energy cost pass-throughs.
What is the company's outlook for fiscal year 2016?
For fiscal year 2016, Air Products anticipated modest overall economic growth, which could limit opportunities for underlying sales growth. The company expected lower results from its LNG business due to customer investment delays. Key strategic priorities included bringing new projects online, realizing full-year benefits from cost reduction actions initiated in 2015, and continuing operational improvements. The spin-off of the Materials Technologies segment was also a significant anticipated event for fiscal year 2016.
06—Continue