Media Inquiries:
Katie McDonald, tel: (610) 481-3673; email: mcdonace@airproducts.com
Investor Inquiries:
Eric Guter,
tel: 1-610-481-1872; e-mail: guterej@airproducts.com
Mun Shieh, tel:
1-610-481-2951; e-mail: shiehmh@airproducts.com
ADJUSTED EARNINGS PER SHARE
(Millions of U.S. Dollars
unless otherwise indicated, except for per share data)
We view adjusted earnings per share (“EPS”) as a key performance metric and provide
this non-GAAP financial measure to allow investors, potential investors, securities analysts, and others to evaluate the performance of our business in the same manner as our management. We believe this
measure, when viewed together with financial results computed in accordance with U.S. generally accepted accounting principles (“GAAP”), provides a more complete understanding of the factors and trends affecting our historical financial
performance and projected future results. However, we caution readers not to consider this measure in isolation or as a substitute for EPS presented in accordance with GAAP. Readers should also consider the limitations associated with this non-GAAP financial measure, including the potential lack of comparability of this measure from one company to another.
We calculate adjusted EPS by adjusting GAAP EPS to exclude certain items that we believe are not representative of our underlying business performance. For
example, we exclude the impact of the non-service components of net periodic benefit/cost for our defined benefit pension plans. Non-service related components are
recurring, non-operating items that include interest cost, expected returns on plan assets, prior service cost amortization, actuarial loss amortization, as well as special termination benefits, curtailments,
and settlements. Adjusting for the impact of non-service pension components provides management and users of our financial statements with a more accurate representation of our underlying business performance
because these components are driven by factors that are unrelated to our operations, such as volatility in equity and debt markets. Further, non-service related components are not indicative of our defined
benefit plans’ future contribution needs due to the funded status of the plans. Additionally, during the first quarter of fiscal year 2025, we excluded costs associated with our response to actions of activist shareholders, which are not
associated with the ongoing operation of our business and are difficult to predict in future periods. We may also exclude certain expenses associated with cost reduction actions and impairment charges as well as gains on disclosed transactions. The
reader should be aware that we may recognize similar losses or gains in the future.
The tax impact of our pre-tax
non-GAAP adjustments reflects the expected current and deferred income tax impact of our non-GAAP adjustments. These tax impacts are primarily driven by the statutory
tax rate of the various relevant jurisdictions and the taxability of the adjustments in those jurisdictions.
NON-GAAP ADJUSTMENTS
In addition to the recurring impact of non-service related components of our defined benefit pension plan, our
preliminary first quarter adjusted EPS is adjusted for the items described below.
Shareholder Activism Costs
During the first quarter of fiscal year 2025, we incurred costs of $29.9 ($21.9 after tax, or $0.10 per share) in connection with our response to a proxy
contest led by activist shareholder, Mantle Ridge L.P. These costs include legal and other professional service fees as well as incremental proxy solicitation costs related to the 2025 Annual Meeting of Shareholders.
De-designation of Cash Flow Hedges
During the third quarter of fiscal year 2024, we discontinued cash flow hedge accounting for certain interest rate swaps designed to hedge long-term variable
rate debt facilities during the construction period of the NEOM Green Hydrogen Project. These swaps are held by NEOM Green Hydrogen Company, a consolidated joint venture accounted for under the variable interest model, of which Air Products owns a one-third interest. We expect the affected swaps to remain de-designated until outstanding borrowings from the available project financing are commensurate with the notional
value of the instruments, at which time these instruments may re-qualify for cash flow hedge accounting. As a result of the de-designation, we recognized an unrealized
gain of $38.8 ($10.3 attributable to Air Products after tax, or $0.05 per share) during the first quarter of fiscal year 2025. The amount of the unrealized gain attributable to our noncontrolling partners was $25.2.
We expect to recognize changes to the fair value of the impacted instruments through earnings in future periods until they
re-qualify for cash flow hedge accounting. It is not possible to predict the significance of adjustments in future periods given potential interest rate volatility.
RECONCILIATION OF ADJUSTED EPS
The table below
reconciles adjusted EPS to GAAP EPS, the most directly comparable GAAP measure. In periods that we have non-GAAP adjustments, we believe it is important for the reader to understand the per share impact of
each such adjustment because management does not consider these impacts when evaluating underlying business performance. Per share impacts are calculated independently and may not sum to total EPS and total adjusted EPS due to rounding.