10-QPeriod: Q2 FY2015

Air Products & Chemicals, Inc. Quarterly Report for Q2 Ended Mar 31, 2015

Filed April 30, 2015For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported its financial results for the fiscal second quarter and first six months ended March 31, 2015. For the quarter, net income attributable to Air Products increased slightly year-over-year to $290.0 million, or $1.33 per diluted share. However, a closer look reveals that the company incurred significant charges related to business restructuring and cost reduction actions, as well as a pension settlement loss, which masked underlying operational improvements. For the six-month period, net income attributable to Air Products saw a more robust increase to $614.6 million, or $2.83 per diluted share. The company highlighted growth in underlying sales driven by higher volumes in its Industrial Gases – Asia and Materials Technologies segments. Despite currency headwinds and lower energy cost pass-throughs, strong operational performance, particularly in the Americas and Asia industrial gas segments, contributed positively to results. Investors should note the ongoing impact of restructuring charges and the company's continued commitment to returning capital to shareholders through dividend increases.

Financial Highlights

53 data points
Beta

Revenue

$2.41B

29.7% Gross Margin

Net Income

$290.00M

12.0% Net Margin

EPS (Diluted)

$1.33

Total Assets

$17.49B

Cash & Equivalents

$195.70M

Free Cash Flow

$318.50M

Financial Statements
Beta
Revenue$2.41B
Cost of Revenue$1.70B
Gross Profit$716.30M
R&D Expenses$35.80M
SG&A Expenses$240.30M
Operating Income$376.90M
Interest Expense$23.40M
Net Income$290.00M
EPS (Basic)$1.35
EPS (Diluted)$1.33
Shares Outstanding (Basic)214.90M
Shares Outstanding (Diluted)217.40M

Key Highlights

  • 1Net income attributable to Air Products for the second quarter of 2015 was $290.0 million ($1.33 per diluted share), a slight increase from $283.5 million ($1.32 per diluted share) in the prior year.
  • 2For the first six months of fiscal 2015, net income attributable to Air Products was $614.6 million ($2.83 per diluted share), up from $573.7 million ($2.70 per diluted share) in the prior year.
  • 3Sales for the second quarter decreased by 6% to $2,414.5 million, impacted by unfavorable currency translation and lower energy cost pass-through, despite a 5% increase in underlying sales.
  • 4The company incurred $55.4 million in business restructuring and cost reduction charges in the second quarter, and $87.8 million for the six-month period, impacting reported operating income.
  • 5A pension settlement loss of $12.6 million was recognized in the second quarter, contributing to the reported increase in expenses.
  • 6The company demonstrated strong growth in its Industrial Gases – Asia segment, with underlying sales up 12% for the quarter.
  • 7Air Products increased its quarterly dividend by 5% to $0.81 per share, marking the 33rd consecutive year of dividend increases.

Frequently Asked Questions

The primary drivers for the 6% decrease in sales to $2,414.5 million were an unfavorable currency impact of 5% and a 6% reduction due to lower energy contractual pass-through to customers. These factors more than offset a 5% increase in underlying sales, which was driven by higher volumes and pricing, particularly in the Industrial Gases – Asia and Materials Technologies segments.

The company reported significant charges for business restructuring and cost reduction actions, totaling $55.4 million in the second quarter and $87.8 million for the first six months. Additionally, a pension settlement loss of $12.6 million was recognized in the second quarter. These charges reduced reported operating income and net income, though management views them as not indicative of underlying business trends. Excluding these items, the company's non-GAAP operating income and net income showed stronger year-over-year growth.

The Industrial Gases – Asia segment showed robust performance with underlying sales up 12% in the second quarter, driven by new plants and a large on-site project in China, despite some pricing pressure. The Industrial Gases – Americas segment reported underlying sales growth of 2% for the quarter, with modest volume increases in North America and flat volumes in Latin America. Operating income and margins improved in both segments on a GAAP basis due to higher volumes and pricing.

Air Products maintained a strong financial position with cash flow from operations meeting liquidity needs. The company demonstrated its commitment to shareholders by increasing its quarterly dividend by 5% to $0.81 per share, marking its 33rd consecutive annual increase. The company also had $485.3 million remaining under its previously authorized share repurchase program.