APD Air Products and Chemicals Inc

LEHIGH VALLEY, Pa., Jan. 29, 2015 /PRNewswire/ --

• Non-GAAP diluted EPS of $1.55*, up 16 percent* versus prior year and above guidance range
• Adjusted EBITDA up 10 percent* versus prior year
• Strong performance driven by lower costs and improvement in volumes and price
• New organizational structure in place and delivering results
• GAAP EPS of $1.50 versus prior year of $1.34

Air Products (NYSE:APD) today reported net income of $335 million*, up 17 percent* versus prior year, and diluted earnings per share (EPS) of $1.55*, up 16 percent* versus prior year, on a non-GAAP continuing operations basis for its fiscal first quarter ended December 31, 2014.

On a GAAP basis, net income and diluted EPS from continuing operations were $325 million and $1.50, respectively, for the quarter.

*The results and guidance in this release, unless otherwise indicated, are based on non-GAAP continuing operations. A reconciliation of GAAP to non-GAAP results can be found at the end of this release.

First quarter sales of $2,561 million increased one percent versus prior year, as higher volumes and pricing were largely offset by unfavorable currency impacts and the exit from the Polyurethane Intermediates Business (PUI). Excluding these impacts, underlying sales increased five percent on four percent higher volumes with strength across most of the segments. Sequentially, sales declined four percent on lower seasonal volumes and unfavorable currency impacts.

Operating income of $445 million increased 15 percent versus prior year as higher volumes, favorable cost performance, and stronger pricing more than offset unfavorable currency impacts. Operating margin of 17.4 percent improved 230 basis points. Adjusted EBITDA of $723 million increased 10 percent, and EBITDA margin of 28.2 percent improved 240 basis points over prior year. Sequentially, operating income declined six percent, mainly due to lower seasonal volumes and unfavorable currency impacts.

Commenting on the quarter, Seifi Ghasemi, chairman, president and chief executive officer, said, "We started fiscal 2015 strong, delivering double-digit EBITDA and earnings growth. These results clearly demonstrate our people's focus on safety, cost, and serving our customers in the new organization. Despite economic uncertainty, we are greatly encouraged by these results, and the team is focused on the actions we can control to deliver on our commitments."

First Quarter Results by Business Segment:

• Industrial Gases – Americas sales of $1,003 million increased six percent versus prior year, primarily on higher North America volumes and stronger pricing. Sequentially, underlying sales declined one percent, primarily due to seasonality in North America. Operating income of $211 million increased 14 percent, and operating margin of 21.1 percent improved 160 basis points over prior year on higher North America volumes, pricing, and favorable cost performance. Adjusted EBITDA of $332 million increased eight percent, and EBITDA margin of 33.1 percent improved 70 basis points over prior year.
  
• Industrial Gases – Europe, Middle East, and Africa (EMEA) sales of $501 million declined nine percent versus last year, primarily on a seven percent unfavorable currency impact. Underlying sales were flat, with modest liquid bulk volume growth offset by weaker packaged gases. Operating income of $81 million and adjusted EBITDA of $143 million were both down five percent versus prior year, primarily due to the unfavorable currency impact. Operating margin of 16.2 percent improved 70 basis points, and EBITDA margin of 28.5 percent improved 130 basis points over prior year.
  
• Industrial Gases – Asia sales of $399 million increased one percent versus prior year. Volumes increased six percent, primarily from new plants coming onstream, partially offset by lower energy pass-through and currency. Operating income of $91 million increased nine percent, and operating margin of 22.7 percent improved 180 basis points over prior year due to higher volumes and favorable cost performance. Adjusted EBITDA of $155 million increased 12 percent, and EBITDA margin of 38.8 percent improved 370 basis points over prior year.
• Materials Technologies sales of $524 million increased nine percent versus prior year on 11 percent higher volumes. Electronics Materials sales were up 13 percent and Performance Materials sales increased six percent over prior year on volume growth in all business units.  Sequentially, sales decreased seven percent on Performance Materials volume seasonality and strong prior quarter equipment sales in Electronics. Operating income of $105 million increased 63 percent, and operating margin of 20 percent improved 660 basis points versus prior year, primarily due to higher volumes and favorable cost performance. Adjusted EBITDA of $129 million increased 45 percent, and EBITDA margin of 24.7 percent improved 610 basis points over prior year.

Non-GAAP results for the company exclude a pre-tax charge of $32.4 million, or $0.10 per share, for business restructuring and cost reduction actions, and a pre-tax gain of $17.9 million, or $0.05 per share, on the revaluing of a previously held equity interest.

Outlook

The capital expenditure forecast for the fiscal year 2015 remains between $1.7 billion and $1.9 billion.

Looking ahead, Air Products expects second quarter EPS from continuing operations to be between $1.50 and $1.55 per share, and guidance for continuing operations for fiscal 2015 of $6.35 to $6.55 per share.

Access the Q1 earnings teleconference scheduled for 10:00 a.m. Eastern Time on January 29 by calling 719-325-4837 and entering pass code 8508729, or access the Event Details page on Air Products' Investor Relations web site.

About Air Products
Air Products (NYSE:APD) is a leading industrial gases company. For nearly 75 years, the company has provided atmospheric, process and specialty gases, and related equipment to manufacturing markets, including metals, food and beverage, refining and petrochemical, and natural gas liquefaction. Air Products' Materials Technologies segment serves the semiconductor, polyurethanes, cleaning and coatings, and adhesives industries. Over 20,000 employees in 50 countries are working to make Air Products the world's safest and best performing industrial gases company, providing sustainable offerings and excellent service to all customers. In fiscal 2014, Air Products had sales of $10.4 billion and was ranked number 276 on the Fortune 500 annual list of public companies. For more information, visit www.airproducts.com.

NOTE: This release contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about earnings guidance and business outlook. These forward-looking statements are based on management's reasonable expectations and assumptions as of the date of this release. Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors not anticipated by management, including, without limitation, weakening or reversal of global or regional economic recovery; significant fluctuations in interest rates and foreign currencies from that currently anticipated; future financial and operating performance of major customers; unanticipated contract terminations or customer cancellations or postponement of projects and sales; the impact of competitive products and pricing; unexpected changes in raw material supply and markets; the impact of price fluctuations in natural gas and disruptions in markets and the economy due to oil price volatility; unanticipated asset impairments or losses; the ability to recover increased energy and raw material costs from customers; costs and outcomes of litigation or regulatory investigations; the impact of management and organizational changes, including pension settlement and other associated costs; the success of productivity programs; the timing, impact, and other uncertainties of future acquisitions or divestitures; political risks, including the risks of unanticipated government actions that may result in project delays, cancellations or expropriations; the impact of changes in environmental, tax or other legislation and regulatory activities in jurisdictions in which the Company and its affiliates operate; the impact on the effective tax rate of changes in the mix of earnings among our U.S. and international operations; and other risk factors described in the Company's Form 10-K for its fiscal year ended September 30, 2014. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this release to reflect any change in the Company's assumptions, beliefs or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.

* Presented below are reconciliations of the reported GAAP results to the non-GAAP measures.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Millions of dollars unless otherwise indicated, except for share data)

The discussion of first quarter results includes comparisons to non-GAAP financial measures, including Adjusted EBITDA and non‑GAAP Capital Expenditures. The presentation of non-GAAP measures is intended to enhance the usefulness of financial information by providing measures which our management uses internally to evaluate our operating performance and manage our capital expenditures. Definitions of non‑GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures.

ADJUSTED EBITDA

We define Adjusted EBITDA as income from continuing operations (including noncontrolling interests) excluding certain disclosed items, which the Company does not believe to be indicative of ongoing business trends, plus interest expense, income tax provision, and depreciation and amortization expense. We believe Adjusted EBITDA is a useful operational metric.

Below is a reconciliation from Income from Continuing Operations to Adjusted EBITDA.

Below is a reconciliation from segment Operating Income to Adjusted EBITDA:

CAPITAL EXPENDITURES

We utilize a non-GAAP measure in the computation of capital expenditures and include spending associated with facilities accounted for as capital leases and purchases of noncontrolling interests. Certain contracts associated with facilities that are built to provide product to a specific customer are required to be accounted for as leases and such spending is reflected as a use of cash within cash provided by operating activities, if the arrangement qualifies as a capital lease. Additionally, the purchase of noncontrolling interests in a subsidiary is accounted for as an equity transaction and is reflected as a financing activity in the statement of cash flows.

Below is a reconciliation of capital expenditures on a GAAP basis to a non-GAAP measure.