| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
Delaware
(State or Other Jurisdiction of Incorporation or Organization) |
23-1274455
(I.R.S. Employer Identification No.) |
|
|
7201 Hamilton Boulevard, Allentown, Pennsylvania
(Address of Principal Executive Offices) |
18195-1501
(Zip Code) |
| Large accelerated filer þ | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
| Class | Outstanding at 26 January 2009 | |
| Common Stock, $1 par value | 209,653,292 |
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| EX-10.1: FORM OF AWARD AGREEMENT UNDER THE LONG-TERM INCENTIVE PLAN | ||||||||
| EX-12: COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES | ||||||||
| EX-31.1: CERTIFICATION | ||||||||
| EX-31.2: CERTIFICATION | ||||||||
| EX-32: CERTIFICATION | ||||||||
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
CONSOLIDATED BALANCE SHEETS
(Unaudited)
Table of Contents
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
Three Months Ended
31 December
2008
2007
$
2,195.3
$
2,407.4
1,629.7
1,753.6
247.0
258.5
33.2
30.3
174.2
—
—
1.4
(2.9
)
(16.8
)
114.1
380.4
24.5
25.3
36.5
40.8
102.1
364.9
7.1
96.5
5.0
6.1
90.0
262.3
(21.4
)
1.4
$
68.6
$
263.7
$
.43
$
1.22
(.10
)
.01
$
.33
$
1.23
$
.42
$
1.18
(.10
)
.01
$
.32
$
1.19
209.4
214.8
ASSUMING DILUTION (in millions)
212.1
222.3
$
.44
$
.38
Table of Contents
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS
(Unaudited)
Three Months Ended
31 December
2008
2007
$
68.6
$
263.7
(1.1
)
(1.7
)
$(.6) and $(2.0)
(2.5
)
(4.8
)
(321.0
)
55.6
2.8
10.9
(321.8
)
60.0
$
(253.2
)
$
323.7
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
31 December
2008
2007
$
68.6
$
263.7
200.6
211.0
32.1
—
48.7
—
(.6
)
20.8
(10.9
)
(7.2
)
1.9
(6.2
)
17.5
17.1
(37.0
)
(47.8
)
20.0
29.2
(25.6
)
(56.8
)
101.7
(69.5
)
(53.7
)
(29.3
)
(6.6
)
47.0
(74.2
)
43.2
(42.9
)
(93.1
)
(40.4
)
44.6
199.2
366.7
(291.7
)
(268.6
)
(1.6
)
(.2
)
(.1
)
—
18.9
8.8
.9
69.3
(31.7
)
(135.7
)
—
(7.9
)
(305.3
)
(334.3
)
109.0
160.3
(41.4
)
(41.2
)
145.7
120.1
(92.1
)
(81.9
)
—
(189.7
)
1.1
33.0
.6
21.3
122.9
21.9
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)
Three Months Ended
31 December
2008
2007
(1.8
)
1.7
15.0
56.0
103.5
40.5
$
118.5
$
96.5
$42.6
$
69.8
Table of Contents
SUMMARY BY BUSINESS SEGMENTS
(Unaudited)
Three Months Ended
31 December
2008
2007
$
925.2
$
1,001.7
744.0
791.1
406.6
514.3
119.5
100.3
$
2,195.3
$
2,407.4
$
170.5
$
199.8
108.8
111.1
24.6
66.0
7.0
9.3
310.9
386.2
(174.2
)
—
—
(1.4
)
(22.6
)
(4.4
)
$
114.1
$
380.4
31 December
30 September
2008
2008
$
4,647.7
$
4,881.6
3,270.5
3,335.4
2,220.4
2,341.0
324.3
300.2
10,462.9
10,858.2
968.0
775.2
59.4
115.3
$
11,490.3
$
11,748.7
Table of Contents
SUMMARY BY GEOGRAPHIC REGIONS
(Unaudited)
Three Months Ended
31 December
2008
2007
$
1,110.5
$
1,146.6
717.4
807.5
325.6
403.9
41.8
49.4
$
2,195.3
$
2,407.4
Table of Contents
Table of Contents
Asset
Severance and Other
Impairments/
Benefits
Other Costs
Total
$
84.5
$
6.7
$
91.2
11.1
—
11.1
21.7
47.2
68.9
2.7
.3
3.0
$
120.0
$
54.2
$
174.2
Asset
Severance and Other
Impairments/
Benefits
Other Costs
Total
$
120.0
$
54.2
$
174.2
—
(16.0
)
(16.0
)
(14.6
)
(32.1
)
(46.7
)
(2.5
)
—
(2.5
)
$
102.9
$
6.1
$
109.0
Table of Contents
Three Months Ended
31 December
2008
2007
$
48.2
$
66.2
$
1.1
$
(8.5
)
.4
(3.2
)
$
.7
$
(5.3
)
(22.1
)
—
$
(21.4
)
$
(5.3
)
31 December 2008
30 September 2008
$
40.9
$
47.7
5.9
7.2
1.8
1.4
.4
.2
$
49.0
$
56.5
$
10.4
$
58.7
$
10.4
$
58.7
$
7.6
$
6.8
.8
1.0
$
8.4
$
7.8
$
1.0
$
1.2
$
1.0
$
1.2
1 October 2009.
Table of Contents
•
Level 1 — Quoted prices (unadjusted) in active markets for identical assets or
liabilities.
•
Level 2 — Inputs that are observable for the asset or liability, either directly or
indirectly through market corroboration, for substantially the full term of the asset or
liability.
•
Level 3 — Inputs that are unobservable for the asset or liability based on the Company’s
own assumptions (about the assumptions market participants would use in pricing the asset
or liability).
31 December 2008
Total
Level 1
Level 2
Level 3
$
14.5
$
—
$
14.5
$
—
8.4
—
8.4
—
.6
—
.6
—
135.7
—
135.7
—
17.7
—
17.7
—
13.9
13.9
—
—
$
131.6
$
—
$
131.6
$
—
18.2
—
18.2
—
(1)
The fair value of the Company’s interest rate swap agreements and foreign exchange contracts
are based on estimates using standard pricing models that take into account the present value of
future cash flows as of the balance sheet date. The computation of the fair values of these
instruments is generally performed by the Company. These standard pricing models utilize inputs
which are derived from or corroborated by observable market data such as interest rate yield curves
and currency spot and forward rates. In addition, on an ongoing basis, the Company randomly tests
a subset of its valuations against valuations received from the counterparty to the transaction to
validate the accuracy of its standard pricing models. The fair value of commodity swaps is based
on current market price as provided by the financial institutions with which the commodity swaps
have been executed. Counterparties to these derivative contracts are highly rated financial
institutions none of which experienced significant downgrades since 30 September 2008 that could
reduce the receivable amount collectible.
(2)
The fair value of other investments in publicly traded companies is based on quoted market
prices from the New York and Tokyo stock exchanges.
Currency
30 September
Acquisition and
Translation and
31 December
2008
Adjustments
Other
2008
$
626.5
$
—
$
(53.5
)
$
573.0
18.0
—
(2.4
)
15.6
283.6
(.9
)
(5.3
)
277.4
$
928.1
$
(.9
)
$
(61.2
)
$
866.0
Table of Contents
Three Months Ended
31 December
2008
2007
$
90.0
$
262.3
(21.4
)
1.4
$
68.6
$
263.7
209.4
214.8
1.7
6.3
1.0
1.2
2.7
7.5
212.1
222.3
$
.43
$
1.22
(.10
)
.01
$
.33
$
1.23
$
.42
$
1.18
(.10
)
.01
$
.32
$
1.19
Table of Contents
31 December 2008 and 2007 were as follows:
Three Months Ended 31 December
2008
2007
2008
2007
Pension Benefits
Other Benefits
$
15.1
$
19.6
$
1.5
$
1.5
45.8
45.7
1.4
1.4
(49.0
)
(52.1
)
—
—
1.0
.8
(.3
)
(.3
)
3.8
9.9
.4
.4
—
1.4
—
—
.2
—
—
—
.1
.9
—
—
$
17.0
$
26.2
$
3.0
$
3.0
Table of Contents
•
Declining business conditions around the world have unfavorably impacted the Company’s
businesses. In response to these market conditions, the Company announced a global cost
reduction plan to lower its cost structure and better align its businesses. The results
from continuing operations included a charge of $174 ($116 after-tax, or $.55 per share)
for this plan.
•
Sales of $2,195 declined 9% from lower volumes and unfavorable currency impacts. Volumes
declined primarily in the Electronics and Performance Materials segment reflecting the weak
market conditions. Volumes were also lower in Merchant Gases; however, the decrease was
offset by higher pricing.
•
Operating income of $114 decreased $266. Operating income declined principally from
lower volumes, unfavorable currency impacts, and the global cost reduction charge.
Improved pricing in the Merchant Gases segment partially offset this decline.
•
Income from continuing operations of $90 declined $172 and diluted earnings per
share from continuing operations of $.42 declined $.76. A summary table of changes
in diluted earnings per share is presented below.
Table of Contents
•
Income from discontinued operations declined $22.8, or $.11 per share. The
Company recorded an impairment charge of $49 ($31 after-tax, or $.15 per share),
reflecting a revision in the estimated net realizable value of the U.S. Healthcare
business.
•
For a discussion of the challenges, risks, and opportunities on which management is
focused, refer to the update to the Company’s 2009 Outlook
provided on page 22.
Three Months Ended
31 December
Increase
2008
2007
(Decrease)
$
.32
$
1.19
$
(.87
)
(.10
)
.01
(.11
)
$
.42
$
1.18
$
(.76
)
(.25
)
.05
.03
(.13
)
(.55
)
(.85
)
.01
.03
.05
.09
$
(.76
)
Table of Contents
Three Months
Ended 31 December
2008
2007
% Change
$
2,195.3
$
2,407.4
(9
)%
114.1
380.4
(70
)%
24.5
25.3
(3
)%
% Change from
Prior Year
(8
)%
3
%
(5
)%
1
%
(9
)%
•
Underlying business operating income declined $49, primarily as a result of lower volumes
in the Electronics and Performance Materials and Merchant Gases segments. Weakening consumer
confidence, as a result of the deterioration in the global economy, significantly impacted
customers’ operating rates across many of the Company’s end markets. The volume declines were
partially offset by price increases in the Merchant Gases segment as well as reduced costs due
to cost reduction actions.
•
Unfavorable currency impacts lowered operating income by $39, reflecting the strengthening
of the U.S. dollar against key European and Asian currencies.
•
The global cost reduction plan charge in the first quarter of 2009 reduced operating income
by $174.
Table of Contents
Three Months
Ended 31 December
2008
2007
$
41.7
$
47.0
5.2
6.2
$
36.5
$
40.8
Table of Contents
Three Months
Ended 31 December
2008
2007
% Change
$
925.2
$
1,001.7
(8
)%
170.5
199.8
(15
)%
22.0
25.2
(13
)%
% Change from
Prior Year
(6
)%
6
%
(8
)%
(8
)%
Three Months
Ended 31 December
2008
2007
% Change
$
744.0
$
791.1
(6
)%
108.8
111.1
(2
)%
Table of Contents
% Change from
Prior Year
(2
)%
(2
)%
(4
)%
2
%
(6
)%
Three Months
Ended 31 December
2008
2007
% Change
$
406.6
$
514.3
(21
)%
24.6
66.0
(63
)%
% Change from
Prior Year
(20
)%
1
%
(2
)%
(21
)%
Three Months
Ended 31 December
2008
2007
% Change
$
119.5
$
100.3
19
%
7.0
9.3
(25
)%
Table of Contents
Three Months
Ended 31 December
2008
2007
$
(22.6
)
$
(4.4
)
Table of Contents
•
A $171.2 positive cash flow variance due to lower trade receivables as a result of
reduced sales and increased collections.
•
A $117.4 negative cash flow variance from the increase in other receivables,
principally tax and derivative receivables.
•
An $85.0 negative cash flow variance from other working capital accounts due
principally to a reduction in accrued taxes in 2009 and the receipt of a $35.0 tax
refund in the prior year.
•
A $53.6 negative cash flow variance from contracts in progress as the prior year
reflected an increase in cash due to a reduction in contracts in progress from
lower equipment activity.
•
A $50.2 positive cash flow variance due to a lower use of cash for payables and
accrued liabilities. The positive variance was due principally to a
$109.0
increase in accrued liabilities resulting from the global cost reduction plan.
This positive variance was somewhat offset by a decline in payables as a result of
lower operating activity and timing of payments.
Three Months Ended
31 December
2008
2007
$
291.7
$
268.6
1.6
.2
.1
—
$
293.4
$
268.8
39.5
54.9
$
332.9
$
323.7
(a)
The Company utilizes a non-GAAP measure in the computation of capital expenditures and
includes spending associated with facilities accounted for as capital leases. Certain facilities
that are built to service a specific customer are accounted for as capital leases in accordance
with EITF No. 01-08, “Determining Whether an Arrangement Contains a Lease,” and such spending is
reflected as a use of cash within cash provided by operating activities. The presentation of this
non-GAAP measure is intended to enhance the usefulness of information by providing a measure which
the Company’s management uses internally to evaluate and manage the Company’s capital expenditures.
Table of Contents
Table of Contents
Form 10-K. Information
concerning the Company’s implementation and impact of new accounting standards issued by the
Financial Accounting Standards Board (FASB) is included in Note 2 to the Consolidated Financial
Statements. There have been no changes in accounting policy in the current period that had a
material impact on the Company’s financial condition, change in financial condition, liquidity or
results of operations.
Table of Contents
Table of Contents
27
3.1
Amended and Restated By-Laws of the Company. (Filed as Exhibit 3 to the Company’s Form 8-K
Report dated 24 November 2008 and incorporated by reference.)
10.1
Form of Award Agreement under the Long-Term Incentive Plan of the Company, used for FY2009
Awards to Executive Officers.
12.
Computation of Ratios of Earnings to Fixed Charges.
31.1.
Certification by the Principal Executive Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2.
Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.
Certification by the Principal Executive Officer and Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
Table of Contents
28
Air Products and Chemicals, Inc.
(Registrant)
Date: 30 January 2009
By:
/s/ Paul E. Huck
Paul E. Huck
Senior Vice President and Chief Financial Officer
Table of Contents
29
3.1
Amended and Restated By-Laws of the Company. (Filed as Exhibit 3 to the Company’s Form 8-K
Report dated 24 November 2008 and incorporated by reference.)
10.1
Form of Award Agreement under the Long-Term Incentive Plan of the Company, used for FY2009
Awards to Executive Officers.
12.
Computation of Ratios of Earnings to Fixed Charges.
31.1.
Certification by the Principal Executive Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2.
Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) or Rule
15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.
Certification by the Principal Executive Officer and Principal Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| • | A Nonstatutory Stock Option to purchase «Stock_Option» shares of Common Stock at a purchase price of $66.90 per share, which is the 1 October 2008 closing sale price of a share of Common Stock, valued at $<SO Value>; and | |
| • | An award of «RSU» 4-Year Restricted Shares of Company Common Stock issued to you as of 2 October 2008 valued at $<RS Value>; and | |
| • | «Perf_Share» Deferred Stock Units with a three year performance period valued at $<PS Value>, each Unit (a “ Performance Share ”) being equivalent in value to one share of Common Stock. Please note the performance share Earnout Schedule which is part of this Awards Agreement will be sent to you in a separate communication after finalization by the Management Development and Compensation Committee of the Company’s Board of Directors (the “Committee”). The Schedule will display how the growth and return measures will define payout opportunities. |
|
AIR PRODUCTS AND CHEMICALS, INC.
|
||||
| By: | ||||
| 1. | As described in the foregoing grant letter, you are hereby granted FY2009 Awards consisting of Stock Options (“Options”), Restricted Shares of Company Common Stock (“Restricted Shares”), and Deferred Stock Units to be called “Performance Shares” under the Air Products and Chemicals, Inc. Long-Term Incentive Plan (the “Plan”). The Options are “Nonstatutory Stock Options” as described in Section 6 of the Plan. The Restricted Shares are described in Section 8 of the Plan. The Deferred Stock Units are described in Section 9 of the Plan. The Management Development and Compensation Committee of the Company’s Board of Directors has approved these Awards subject to the applicable provisions of the Plan and the terms of this Agreement, and contingent upon your execution of this Agreement. Except as noted herein, all capitalized terms used in this Agreement have the meaning ascribed to them in the Plan. A copy of the Plan is available from the Corporate Secretary’s Office of the Company, 7201 Hamilton Boulevard, Allentown, PA 18195-1501. | |
| 2. | Each Option entitles you to purchase one share of Company Common Stock (“Share”) at a purchase price of $66.90 (the “Grant Price”) as described below. You can first purchase Shares as follows: (i) up to one-third of the Shares may be purchased on or after 1 October 2009 and (ii) up to an additional one-third of such Shares may be purchased on or after 1 October 2010 and 2011, respectively. The Options are granted as of 1 October 2008 and will continue for a period of ten (10) years from such grant date and will expire and no longer be exercisable after 1 October 2018. | |
| 3. | You may purchase Shares covered by an Option by providing to the Company’s agent, Fidelity Stock Plan Services, LLC (“Fidelity”), notice of exercise of the Option in a form designated by Fidelity and the Grant Price of the Shares. Payment of the Grant Price and applicable taxes may be made in cash or by providing an irrevocable exercise notice coupled with irrevocable instructions to Fidelity to simultaneously sell the Shares and deliver to the Company on the settlement date the portion of the proceeds representing the Grant Price and any taxes to be withheld. Payment of the Grant Price may also be made by delivery or attestation of ownership of other Shares of Common Stock owned by you, in which case the number of Shares acquired in the exercise will be reduced by an amount equal in value to the amount of any taxes required to be withheld and by any Shares attested. | |
| 4. | Your Options terminate as of the close of business on the last day of your employment with the Company and all its Subsidiaries, unless your employment ends due to your death, Disability or Retirement on or after 30 September 2009. Upon your, death, Disability or Retirement on or after 30 September 2009, any unexercisable portion of the Options will be extended for the remaining term of the award (that is, will become exercisable) as if you have continued to be an active employee of the Company or a Subsidiary. Notwithstanding the above, if your employment with the Company or a Subsidiary is involuntarily terminated by the Company on or after 30 September 2009 due to action necessitated by business conditions, including, but not limited to, job eliminations, workforce reductions, divestitures of facilities, assets or businesses, sale by the Company of a Subsidiary or plant closing, your exercisable Options will not be |
| terminated but will continue to be exercisable in accordance with their terms for six months following your last day of employment with the Company or a Subsidiary. | ||
| 5. | In the event of a Change in Control, the Options become exercisable on the later of the Change in Control or the first date more than six months from grant. In the event of any other change in the outstanding shares of the Common Stock of the Company or the occurrence of certain other awards described in Section 12 of the Plan, an equitable adjustment shall be made in the number or kind of Shares or the Grant Price for Shares covered by your Options. | |
| 6. | Options are nonassignable and nontransferable except to your Designated Beneficiary, by will or the laws of descent and distribution, or by gift to family members or to trusts of which only family members are beneficiaries. Transfers by gift can be made only after the Option has become exercisable and subject to such administrative procedures and to such restrictions and conditions as the officers of the Company shall determine to be consistent with the purposes of the Plan and the interests of the Company and/or to be necessary or appropriate for compliance with all applicable tax and other legal requirements. Subject to the foregoing, you may transfer Options by gift only by delivering to the Company at its principal offices in Allentown, Pennsylvania, written notice of the intent to transfer the Options on forms to be provided by the Company. | |
| 7. | The Restricted Shares shall be issued to you, contingent upon your execution of this Agreement, as of 2 October 2008. Upon issuance of the Restricted Shares, you shall have all the rights of a shareholder with respect to the Restricted Shares, including the right to vote such Restricted Shares and receive all dividends or other distributions paid with respect to the Restricted Shares, subject to the restrictions contained in Paragraph 8 below. In the event of any change in the outstanding shares of Common Stock of the Company or the occurrence of certain other events described in Section 12 of the Plan, an equitable adjustment of the number of Restricted Shares covered by this Agreement shall be made consistent with the impact of such change or event upon the rights of the Company’s other shareholders, and any additional Shares of Common Stock issued to you as a result of such adjustment shall be Restricted Shares subject to this Agreement, including, without limitation, the restrictions contained in Paragraph 8. | |
| 8. | The “Restriction Period” with respect to the Restricted Shares shall be the period beginning 2 October 2008 and ending on the earliest of 1 October 2012; your death, Disability or Retirement on or after 30 September 2009, or a Change in Control of the Company. During the Restriction Period, the Restricted Shares may not be sold, assigned, transferred, encumbered, or otherwise disposed of by you; provided however, that such Restricted Shares may be used to pay the Grant Price by attestation upon your exercise of Stock Options, with the stipulation that the Restricted Shares attested will remain subject to the restrictions of this Paragraph 8 and the terms of this Agreement. If your employment by the Company and all its Subsidiaries is terminated for any reason prior to 30 September 2009, or for any reason other than death, Disability or Retirement prior to 1 October 2012, the Restricted Shares shall be forfeited in their entirety; provided that, in the event of a Change in Control of the Company, your rights to the Restricted Shares shall become immediately transferable and nonforfeitable. At the end of the Restriction Period, all nonforfeited Restricted Shares shall become transferable and otherwise be regular Shares. | |
| 9. | At the end of the Restriction Period, and, if earlier, upon your election to include the value of the Restricted Shares in your federal taxable income pursuant to Internal Revenue Code Section 83(b), payment of taxes required to be withheld by the Company must be made. When taxation occurs at the end of the Restriction Period, applicable taxes will be withheld by reducing |
| the number of the Restricted Shares issued to you by an amount equal in market value to the taxes required to be withheld. In the event you make a Section 83(b) election, applicable taxes must be paid in cash to the Company at the time the election is filed with the Internal Revenue Service. | ||
| 10. | In the event your employment is terminated due to your death on or after 30 September 2009, the Restricted Shares shall be transferred free of restriction, reduced by any applicable taxes, to your Designated Beneficiary or, if none, to your legal representative. | |
| 11. | The Performance Shares granted to you are associated with a three year performance cycle ending 30 September 2011. The final version of the performance share payout schedule will be sent to you in a separate communication. The schedule will display how the growth and return measures will define payout opportunities. Subject to the forfeiture conditions contained in Paragraph 12, each earned Performance Share will entitle you to receive, at the end of the Deferral Period (as defined below), one Share. | |
| 12. | The Deferral Period will begin on the date of this Agreement and will end on 1 October 2011. If your employment by the Company and all its affiliates is terminated for any reason prior to 30 September 2009, all your Performance Shares will be automatically forfeited in their entirety. If your employment by the Company and all its affiliates terminates on or after 30 September 2009, but during the Deferral Period, other than due to death, Disability or Retirement, you will forfeit all of your Performance Shares. If your employment by the Company and all its affiliates is terminated on or after 30 September 2009, but during the Deferral Period, due to death, Disability or Retirement, you will forfeit a pro-rata portion of your earned Performance Shares which portion in each case shall be based on the number of full months you worked following 30 September 2008. | |
| 13. | Performance Shares earned and not forfeited shall be paid, reduced by the number of Shares equal in market value to any applicable taxes, as soon as administratively practical after the end of the Deferral Period, in Shares. No cash dividends or other amounts shall be payable with respect to the Performance Shares during the Deferral Period. At the end of the Deferral Period, for each earned and nonforfeited Performance Share, the Company will also pay to you a cash payment equal to the dividends which would have been paid on a Share during the Deferral Period (“Dividend Equivalents”), net of applicable taxes. | |
| 14. | If your employment by the Company or a Subsidiary terminates during the Deferral Period due to death, payment in respect of earned Performance Shares that are not forfeited and of related Dividend Equivalents shall be made, as soon as practical after the Deferral Period, to your Designated Beneficiary or, if none, your legal representative, net of applicable taxes. | |
| 15. | In the event of any change in the outstanding Shares of Common Stock of the Company or the occurrence of certain other events as described in Section 12 of the Plan, an equitable adjustment of the number of Performance Shares covered by this Agreement shall be made as provided in the Plan. | |
| 16. | Notwithstanding anything to the contrary above, any Performance Shares earned or paid and any related Dividend Equivalents paid to you may be rescinded within three years of their payment in the event: the earning of such Performance Shares is predicated upon the achievement of financial results that are subsequently the subject of a restatement; the Committee determines in its sole discretion that you engaged in misconduct that caused or partially caused the need for the restatement; and the Performance Shares would not have been earned or a lesser amount of |
| Performance Shares would have been earned based upon the restated financial results. In the event of any such rescission, you shall pay to the Company the amount of any gain realized or payment received as a result of any rescinded payment, in such manner and on such terms as may be required, and the Company shall be entitled to set off against the amount of any such gain or payment any amount owed to you by the Company or any Subsidiary. | ||
| 17. | In the event the Company determines, in its sole discretion, that you have engaged in a “Prohibited Activity” (as defined below), at any time during your employment, or within one year after termination of your employment from the Company or any Subsidiary, the Company may forfeit, cancel, modify, rescind, suspend, withhold, or otherwise limit or restrict any unexpired, unpaid, unexercised, or deferred Awards outstanding under this Agreement, and any exercise, payment, or delivery of an Award or Shares pursuant to an Award may be rescinded within six months after such exercise, payment, or delivery. In the event of any such rescission, you shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, payment, or delivery, in such manner and on such terms as may be required, and the Company shall be entitled to set off against the amount of any such gain or payment any amount owed to you by the Company or any Subsidiary. |
| (a) | Nondisparagement — making any statement, written or verbal, in any forum or media, or taking any action in disparagement of the Company or any Subsidiary or affiliate thereof (hereinafter, the “Company”), including but not limited to negative references to the Company or its products, services, corporate policies, current or former officers or employees, customers, suppliers, or business partners or associates; | ||
| (b) | No Publicity — publishing any opinion, fact, or material, delivering any lecture or address, participating in the making of any film, radio broadcast, or television transmission; or communicating with any representative of the media relating to confidential matters regarding the business or affairs of the Company which you were involved with during your employment; | ||
| (c) | Nondisclosure of Trade Secrets — failure to hold in confidence all Trade Secrets of the Company that came into your knowledge during your employment by the Company, or disclosing, publishing, or making use of at any time such Trade Secrets, where the term “Trade Secret” means any technical or nontechnical data, formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers, or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; | ||
| (d) | Nondisclosure of Confidential Information — failure to hold in confidence all Confidential Information of the Company that came into your knowledge during your employment by the Company, or disclosing, publishing, or making use of such Confidential Information, where the term “Confidential Information” means any data or information, other than Trade Secrets, that is valuable to the Company and not generally known to the public or to competitors of the Company; |
| (e) | Return of Materials — your failure, in the event of your termination of employment for any reason, promptly to deliver to the Company all memoranda, notes, records, manuals, or other documents, including all electronic or other copies of such materials and all documentation prepared or produced in connection therewith, containing Trade Secrets or Confidential Information regarding the Company’s business, whether made or compiled by you or furnished to you by virtue of your employment with the Company; or your failure promptly to deliver to the Company all vehicles, computers, credit cards, telephones, handheld electronic devices, office equipment, and other property furnished to you by virtue of your employment with the Company; | ||
| (f) | Noncompete and Nonsolicitation — rendering services for any organization as an employee, officer, director, consultant, advisor, agent, broker, independent contractor, principal, or partner, or engaging directly or indirectly in any business which, in the sole judgment of the Company, is or becomes competitive with the Company during the one (1) year period following the termination of your employment; or directly or indirectly soliciting any customer, supplier, contractor, employee, agent, or consultant of the Company with whom you had contact during the last two years of your employment with the Company or became aware of through your employment with the Company, to cease doing business with, or to terminate their employment or business relationship with, the Company; or | ||
| (g) | Violation of Company Policies — violating any written policies of the Company applicable to you, including, without limitation, the Company’s insider trading policy. |
| The provisions of this Section 17 are in addition to, and shall not supersede, the terms of your Employee Patent and Confidential Information Agreement entered at the time you were employed by the Company. | ||
| You expressly acknowledge and affirm that the foregoing provisions of this Section 17 are material and important terms of this Agreement and that your agreement to be bound by the terms of this Section 17 is a condition precedent to your FY2009 Awards. | ||
| 18. | All determinations regarding the interpretation, construction, enforcement, waiver, or modification of this Agreement and/or the Plan shall be made in the Company’s sole discretion or, in the case of Executive Officer Awards, by the Committee in its sole discretion and shall be final and binding on you and the Company. Determinations made under this Agreement and the Plan need not be uniform and may be made selectively among individuals, whether or not such individuals are similarly situated. | |
| 19. | If any of the terms of this Agreement in the opinion of the Company conflict or are inconsistent with any applicable law or regulation of any governmental agency having jurisdiction, the Company reserves the right to modify this Agreement to be consistent with applicable laws or regulations. | |
| 20. | You understand and acknowledge that the Company holds certain personal information about you, including but not limited to your name, home address, telephone number, date of birth, social security number, salary, nationality, job title, and details of all Shares awarded, cancelled, vested, unvested, or outstanding (the “personal data”). Certain personal data may also constitute “sensitive personal data” within the meaning of applicable local law. Such data include but are not limited to the information provided above and any changes thereto and other appropriate personal and financial data about you. You hereby provide explicit consent to the Company and any Subsidiary to process any such personal data and sensitive personal data. You also hereby |
| provide explicit consent to the Company and any Subsidiary to transfer any such personal data and sensitive personal data outside the country in which you are employed, and to the United States. The legal persons for whom such personal data are intended are the Company and any third party providing services to the Company in connection with the administration of the Plan. | ||
| 21. | By accepting this award, you acknowledge having received and read the Plan Prospectus, and you consent to receiving information and materials in connection with this Award or any subsequent awards under the Company’s long-term performance plans, including without limitation any prospectuses and plan documents, by any means of electronic delivery available now and/or in the future (including without limitation by e-mail, by Website access, and/or by facsimile), such consent to remain in effect unless and until revoked in writing by you. This Agreement and the Plan, which is incorporated herein by reference, constitute the entire agreement between you and the Company regarding the terms and conditions of this Award. | |
| 22. | You submit to the exclusive jurisdiction and venue of the federal or state courts of the Commonwealth of Pennsylvania to resolve all issues that may arise out of or relate to and all determinations made under this Agreement. This Agreement shall be governed by the laws of the Commonwealth of Pennsylvania, without regard to conflicts or choice of law rules or principles. | |
| 23. | If any court of competent jurisdiction finds any provision of this Agreement, or portion thereof, to be unenforceable, that provision shall be enforced to the maximum extent permissible so as to effect the intent of the parties, and the remainder of this Agreement shall continue in full force and effect. | |
| 24. | Neither your FY2009 Awards, this Award Agreement, nor the Plan constitute a contract of employment; nor do they guarantee your continued employment for any period required for all or any of your Options to vest or become exercisable. |
| EPS Growth | Payout | |
| -10% | 0% | |
| 0% | 35% | |
| 4% | 50% | |
| 7% | 80% | |
| 9% | 100% | |
| 10% | 120% | |
| 11% | 130% | |
| 13% | 160% | |
| 15% | 180% | |
| 16% | 200% |
|
ROCE Spread
(ROCE over Cost of Capital) |
Payout | |
| < 0% | 0% | |
| 0% | 50% | |
| +1% | 75% | |
| +2% | 100% | |
| +3% | 150% | |
| +4% | 200% |
| Three | ||||||||||||||||||||||||
| Months | ||||||||||||||||||||||||
| Ended | ||||||||||||||||||||||||
| Year Ended 30 September | 31 Dec | |||||||||||||||||||||||
| 2004 | 2005 | 2006 | 2007 | 2008 | 2008 | |||||||||||||||||||
|
Earnings:
|
||||||||||||||||||||||||
|
Income from continuing operations
(1)
|
$ | 574.9 | $ | 659.0 | $ | 734.1 | $ | 1,019.6 | $ | 1,090.5 | $ | 90.0 | ||||||||||||
|
|
||||||||||||||||||||||||
|
Add (deduct):
|
||||||||||||||||||||||||
|
Provision for income taxes
|
209.3 | 235.7 | 271.9 | 289.0 | 381.7 | 10.3 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Fixed charges, excluding capitalized interest
|
144.0 | 139.1 | 146.7 | 190.9 | 188.8 | 44.3 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Capitalized interest amortized during the
period
|
7.0 | 6.1 | 6.5 | 6.4 | 6.6 | 1.9 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Undistributed earnings of
less-than-fifty-percent-owned affiliates
|
(28.7 | ) | (29.2 | ) | (29.2 | ) | (61.2 | ) | (72.7 | ) | (7.8 | ) | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Earnings, as adjusted
|
$ | 906.5 | $ | 1,010.7 | $ | 1,130.0 | $ | 1,444.7 | $ | 1,594.9 | $ | 138.7 | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Fixed Charges:
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Interest on indebtedness, including capital lease
obligations
|
$ | 123.0 | $ | 113.0 | $ | 119.8 | $ | 163.7 | $ | 164.4 | $ | 37.0 | ||||||||||||
|
|
||||||||||||||||||||||||
|
Capitalized interest
|
7.9 | 14.9 | 18.8 | 14.6 | 27.3 | 6.2 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Amortization of debt discount premium and expense
|
1.4 | 4.1 | 4.8 | 4.1 | 4.0 | 1.3 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Portion of rents under operating leases
representative of the interest factor
|
19.6 | 22.0 | 22.1 | 23.1 | 20.4 | 6.0 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Fixed charges
|
$ | 151.9 | $ | 154.0 | $ | 165.5 | $ | 205.5 | $ | 216.1 | $ | 50.5 | ||||||||||||
|
|
||||||||||||||||||||||||
|
|
||||||||||||||||||||||||
|
Ratio of Earnings to Fixed Charges
(2):
|
6.0 | 6.6 | 6.8 | 7.0 | 7.4 | 2.7 | ||||||||||||||||||
|
|
||||||||||||||||||||||||
| (1) | During the first quarter ended 31 December 2008, income from continuing operations included a charge of $174.2 for the global cost reduction plan. | |
| (2) | The ratio of earnings to fixed charges is determined by dividing earnings, which includes income from continuing operations before taxes, undistributed earnings of less-than-fifty-percent-owned affiliates, and fixed charges, by fixed charges. Fixed charges consist of interest on all indebtedness plus that portion of operating lease rentals representative of the interest factor (deemed to be 21% of operating lease rentals). |
| 1. | I have reviewed this quarterly report on Form 10-Q of Air Products and Chemicals, Inc.; | ||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s |
|
|
/s/ John E. McGlade | |||
|
|
||||
|
|
John E. McGlade | |||
|
|
President and Chief Executive Officer |
| 1. | I have reviewed this quarterly report on Form 10-Q of Air Products and Chemicals, Inc.; | ||
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s |
|
|
/s/ Paul E. Huck | |||
|
|
||||
|
|
Paul E. Huck | |||
|
|
Senior Vice President and Chief Financial Officer |
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and | ||
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
Dated: 30 January 2009
|
/s/ John E. McGlade | |
|
|
||
|
|
John E. McGlade | |
|
|
Chief Executive Officer | |
|
|
||
|
|
/s/ Paul E. Huck | |
|
|
||
|
|
Paul E. Huck | |
|
|
Chief Financial Officer |