10-QPeriod: Q1 FY2019

Air Products & Chemicals, Inc. Quarterly Report for Q1 Ended Dec 31, 2018

Filed January 25, 2019For Securities:APD

Summary

Air Products & Chemicals, Inc. (APD) reported solid financial results for the first quarter of fiscal year 2019, ending December 30, 2018. The company demonstrated strong operational performance with total sales remaining flat year-over-year at $2.22 billion, driven by a favorable mix of price increases and energy cost pass-throughs, which offset lower volumes and unfavorable currency impacts. Notably, income from continuing operations attributable to Air Products saw a significant increase of 123% to $347.5 million, or $1.57 per diluted share, reflecting improved operational efficiencies and favorable tax adjustments related to the U.S. Tax Cuts and Jobs Act. The company's performance was bolstered by growth in its Industrial Gases segments, particularly in the Americas and Asia. Adjusted EBITDA increased by 8% to $794.9 million, highlighting the underlying strength and operational leverage of the business. Despite a $29 million facility closure charge impacting reported operating income, the adjusted operating income saw a 5% increase, demonstrating resilient core business operations. APD's commitment to shareholder returns was evident through continued dividend payments and a substantial share repurchase authorization remaining. The company ended the quarter with a healthy liquidity position and maintained its financial flexibility.

Financial Highlights

56 data points
Beta

Revenue

$2.22B

29.3% Gross Margin

Net Income

$347.50M

15.6% Net Margin

EPS (Diluted)

$1.57

Total Assets

$19.14B

Cash & Equivalents

$2.92B

Free Cash Flow

$251.80M

Financial Statements
Beta
Revenue$2.22B
Cost of Revenue$1.54B
Gross Profit$651.00M
R&D Expenses$15.00M
SG&A Expenses$189.60M
Operating Income$455.00M
Interest Expense$37.30M
Net Income$347.50M
EPS (Basic)$1.58
EPS (Diluted)$1.57
Shares Outstanding (Basic)219.90M
Shares Outstanding (Diluted)221.00M

Key Highlights

  • 1Net income attributable to Air Products significantly increased by 123% to $347.5 million compared to $154.6 million in the prior year, driven by strong operational performance and favorable tax adjustments.
  • 2Diluted earnings per share (EPS) rose by 124% to $1.57 from $0.71 in the prior year's comparable period.
  • 3Sales remained stable at $2.22 billion, with underlying business growth offset by unfavorable volumes and currency impacts, while price increases and energy cost pass-throughs supported revenue.
  • 4Operating income decreased slightly by 1% to $455.0 million, impacted by a $29 million facility closure charge, but adjusted operating income grew by 5% to $484.0 million.
  • 5Adjusted EBITDA, a key profitability metric, increased by 8% to $794.9 million, indicating improved operational efficiency and profitability.
  • 6The company's balance sheet remains strong, with total equity increasing to $11.20 billion and a manageable debt-to-capitalization ratio of 25.2% as of December 31, 2018.
  • 7Air Products continues to return value to shareholders, declaring a quarterly dividend of $1.16 per share and maintaining a significant share repurchase authorization of $485.3 million remaining.

Frequently Asked Questions

Total sales for the first quarter of fiscal year 2019 were $2,224.0 million, which was effectively flat compared to $2,216.6 million in the same period last year. While underlying volumes were down, this was offset by price increases and higher energy and natural gas cost pass-throughs to customers. Unfavorable currency movements also impacted reported sales.

The substantial increase in net income attributable to Air Products (up 123% to $347.5 million) and diluted EPS (up 124% to $1.57) was largely driven by strong operational performance and, significantly, by favorable tax adjustments related to the U.S. Tax Cuts and Jobs Act. The company finalized its estimates for the tax impacts, which included a benefit from the lower corporate tax rate and adjustments to the deemed repatriation tax.

The Industrial Gases segments, particularly Americas and Asia, showed strong performance. While consolidated operating income saw a slight decrease of 1% due to a $29 million facility closure charge, adjusted operating income increased by 5% to $484.0 million. This indicates that the core business operations remained robust despite the one-time charge.

Air Products maintains a strong liquidity position with $2,923.3 million in cash and cash items as of December 31, 2018, and access to a $2,300.0 million revolving credit facility. The company continues to prioritize shareholder returns, evidenced by its declared quarterly dividend of $1.16 per share and a remaining share repurchase authorization of $485.3 million, demonstrating confidence in its financial health and future prospects.