10-QPeriod: Q1 FY2010

Air Products & Chemicals, Inc. Quarterly Report for Q1 Ended Dec 31, 2009

Filed January 26, 2010For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported its financial results for the quarter ended December 31, 2009. The company demonstrated a significant rebound in profitability compared to the prior year, driven by a substantial increase in operating income. This improvement was largely attributed to the absence of a significant global cost reduction charge that impacted the prior year's results, coupled with underlying business growth and favorable currency movements. Key financial metrics show a notable recovery. Sales saw a slight year-over-year decline, primarily due to lower energy and raw material cost pass-throughs, but underlying volume increases in key segments like Tonnage Gases and Electronics & Performance Materials provided a positive offset. The company's strategic focus on cost improvements and operational efficiencies is evident in the operating income figures. Investors should note the company's continued investment in capital expenditures, though cash flow from operations experienced a decrease due to changes in working capital, particularly higher pension contributions.

Financial Highlights

52 data points
Beta

Revenue

$2.17B

27.8% Gross Margin

Net Income

$251.80M

11.6% Net Margin

EPS (Diluted)

$1.16

Total Assets

$12.91B

Cash & Equivalents

$323.00M

Free Cash Flow

-$94.90M

Financial Statements
Beta
Revenue$2.17B
Cost of Revenue$1.57B
Gross Profit$604.90M
R&D Expenses$27.20M
SG&A Expenses$244.10M
Operating Income$345.00M
Interest Expense$31.60M
Net Income$251.80M
EPS (Basic)$1.19
EPS (Diluted)$1.16
Shares Outstanding (Basic)211.70M
Shares Outstanding (Diluted)217.00M

Key Highlights

  • 1Net income attributable to Air Products surged to $251.8 million, a substantial increase from $68.6 million in the prior year quarter.
  • 2Diluted earnings per share from continuing operations rose significantly to $1.16, up from $0.42 in the same period last year.
  • 3Operating income saw a remarkable increase of 202% to $345.0 million, primarily due to the lapping of a $174.2 million global cost reduction charge in the prior year.
  • 4Sales decreased by 1% to $2,173.5 million, impacted by lower energy and raw material cost pass-throughs, but underlying sales grew by 2% driven by volume increases.
  • 5The company repurchased $649.2 million worth of common stock under its authorized program, indicating a commitment to returning value to shareholders.
  • 6Cash provided by operating activities decreased to $193.9 million from $199.2 million, largely due to unfavorable changes in working capital, particularly higher pension contributions.
  • 7Capital expenditures remained robust, with additions to plant and equipment totaling $288.8 million.

Frequently Asked Questions

The primary driver of the significant increase in net income and earnings per share was the absence of a $174.2 million global cost reduction charge that impacted the prior year's first quarter results. This, combined with underlying volume growth in segments like Tonnage Gases and Electronics & Performance Materials, and favorable currency movements, led to a substantial year-over-year improvement.

Sales decreased by 1% overall, largely due to lower energy and raw material cost pass-throughs. However, underlying sales grew by 2%. The Merchant Gases segment saw a 1% increase driven by favorable currency, despite a 5% volume decline in North America and Europe. Tonnage Gases experienced an 11% volume increase, partially offsetting a 21% reduction from cost pass-throughs. Electronics and Performance Materials sales grew 7% driven by strong volume increases, while Equipment and Energy sales declined 9% due to lower project activity.

The company expects cost savings of approximately $155 million for 2010 from its global cost reduction plan, with annualized savings projected to reach $180 million beyond 2010, primarily related to personnel costs. Most actions associated with the 2009 charges were completed, with remaining items expected to be finished in the second quarter of 2010.

Cash provided by operating activities decreased by 3% to $193.9 million. This was mainly due to unfavorable changes in working capital totaling $273.9 million. A significant contributing factor was higher pension contributions in the current year ($255.7 million) compared to the prior year ($42.6 million).