10-QPeriod: Q2 FY2016

Air Products & Chemicals, Inc. Quarterly Report for Q2 Ended Mar 31, 2016

Filed April 28, 2016For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported a net loss of $473.3 million for the three months ended March 31, 2016, a significant shift from the net income of $290.0 million in the prior year period. This loss was primarily driven by a substantial charge related to the discontinuation of its Energy-from-Waste (EfW) business, amounting to $846.6 million after tax. Excluding this significant item, income from continuing operations was robust, increasing by 30% to $379.8 million, with diluted earnings per share from continuing operations rising to $1.74 from $1.34 year-over-year. The company also demonstrated its commitment to shareholder returns by increasing its quarterly dividend by 6% to $0.86 per share, marking the 34th consecutive annual increase. Despite the reported net loss, the underlying operational performance appears strong, with solid growth in operating income and Adjusted EBITDA driven by cost management initiatives and favorable pricing.

Financial Highlights

54 data points
Beta

Revenue

$1.78B

31.8% Gross Margin

Net Income

-$473.30M

-26.6% Net Margin

EPS (Diluted)

$-2.17

Total Assets

$16.81B

Cash & Equivalents

$286.70M

Free Cash Flow

$269.20M

Financial Statements
Beta
Revenue$1.78B
Cost of Revenue$1.21B
Gross Profit$564.40M
R&D Expenses$18.20M
SG&A Expenses$167.80M
Operating Income$371.60M
Interest Expense$25.70M
Net Income-$473.30M
EPS (Basic)$-2.19
EPS (Diluted)$-2.17
Shares Outstanding (Basic)216.10M
Shares Outstanding (Diluted)217.90M

Key Highlights

  • 1Reported a net loss of $473.3 million for the quarter, largely due to an $846.6 million after-tax charge from exiting the Energy-from-Waste (EfW) business.
  • 2Income from continuing operations increased by 30% to $379.8 million, with diluted EPS from continuing operations rising to $1.74 from $1.34.
  • 3Quarterly dividend increased by 6% to $0.86 per share, reflecting a 34-year streak of consecutive annual dividend increases.
  • 4Operating income increased by 36% to $513.3 million, and operating margin expanded significantly by 700 basis points.
  • 5Adjusted EBITDA grew by 12% to $796.5 million, with Adjusted EBITDA margin improving by 560 basis points, indicating strong operational efficiency.
  • 6Sales decreased by 6% to $2,271.2 million, primarily due to unfavorable currency impacts (3%) and lower energy contractual pass-through (3%).
  • 7The company announced plans to separate its Materials Technologies business into an independent publicly traded company (Versum Materials).

Frequently Asked Questions

The primary driver of the net loss of $473.3 million for the three months ended March 31, 2016, was a substantial after-tax charge of $846.6 million related to the company's decision to exit its Energy-from-Waste (EfW) business. This charge includes write-downs of assets and liabilities for plant disposition.

Excluding the impact of the EfW business exit and other one-time items, the company demonstrated strong operational performance. Income from continuing operations grew 30% year-over-year, and operating income saw a 36% increase, highlighting the underlying strength and efficiency of its core industrial gases operations, supported by cost reduction efforts.

The company continued its commitment to shareholder returns by increasing its quarterly dividend by 6% to $0.86 per share. This marks the 34th consecutive year of annual dividend increases, signaling management's confidence in the company's financial stability and future cash flow generation.

Air Products announced plans to spin off its Materials Technologies business into a new, independent publicly traded company named Versum Materials. This strategic move aims to allow both businesses to focus on their respective core strategies and enhance shareholder value. The separation is expected to be completed in fiscal year 2016, subject to market conditions and board approval.