Business Context and Reporting Period
This Form 8-K, dated December 7, 1999, reports a restatement of segment disclosures for Air Products & Chemicals, Inc. for fiscal years 1999, 1998, and 1997. The restatement aligns with the adoption of SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information," effective for the fiscal year ended September 30, 1999. The Company reorganized its reporting structure to reflect how management assesses performance and allocates resources.
Key Financial Metrics (Fiscal Year 1999)
Financial data is presented in millions of dollars for the fiscal year ended September 30, 1999.
| Metric | Value |
|---|---|
| Total Revenue from External Customers | $5,020.1 |
| Consolidated Operating Income | $724.7 |
| Operating Income (Excluding Special Items) | $769.2 |
| Consolidated Income Before Taxes | $669.0 |
| Total Segment Assets | $7,848.0 |
| Total Assets (Including Corporate) | $8,235.5 |
| Interest Expense | $159.1 |
| Depreciation and Amortization | $540.0 |
Segment Breakdown (1999 Revenue):
- Gases: $2,996.4 million
- Chemicals: $1,657.4 million
- Equipment: $366.3 million
- Other: $0.0 million
Material Changes and Restatement Details
The filing details significant changes in segment classification and expense allocation compared to prior periods:
- Segment Realignment: The Gases segment now includes power generation and flue gas treatment businesses, which were previously reported in the Equipment and Services segment. The "Other" segment now only consists of divested businesses (American Ref-Fuel and landfill gas recovery).
- Expense Allocation: Unallocated corporate expenses previously reported in the "Corporate and Other" segment are now allocated to operating business segments. Conversely, corporate long-range research activity is now managed centrally and serves as the primary reconciling item between segment and consolidated operating income.
- Impact on Operating Income: The reallocation of corporate expenses to segments resulted in a decrease in reported segment operating income, while the removal of these expenses from the unallocated category reduced unallocated corporate expenses.
- Special Items: Fiscal 1999 included charges for a global cost reduction program ($16.3 million in Gases, $1.9 million in Equipment, $1.6 million in Chemicals) and a $10.3 million charge for a chemicals facility closure in Q2.
Outlook, Risks, and Unusual Items
The filing does not provide forward-looking guidance or specific risk factors beyond the context of the accounting restatement. However, it highlights several unusual items and gains included in the reconciliation of income:
- Gain on Wacker Formation: A $34.9 million gain related to the formation of a polymer venture was recorded in 1999.
- BOC Acquisition: Income related to the BOC acquisition ($7.0 million) and fair value of currency options are noted as reconciling items.
- Divestitures: The "Other" segment reflects businesses divested during fiscal year 1997, indicating a strategic shift away from environmental and energy systems.
Key Facts for Investor Verification
- Verify the impact of the SFAS 131 adoption on year-over-year comparability of segment operating margins.
- Confirm the specific allocation methodology for corporate research and development expenses now excluded from segment operating income.
- Review the $34.9 million gain on the polymer venture formation to understand its one-time nature versus recurring profitability.
- Assess the performance of the Gases segment, which now includes power generation, as it represents the majority of revenue (approx. 60%).
- Monitor the "Other" segment, which currently shows zero revenue, to ensure no residual liabilities from divested businesses remain unaddressed.