AIR PRODUCTS & CHEMICALS, INC.
First Quarter 2023 in Summary 31
First Quarter 2023 Results of Operations 33
Reconciliations of Non-GAAP Financial Measures 38
Liquidity and Capital Resources 43
Pension Benefits 47
Critical Accounting Policies and Estimates 48
As used in the discussion that follows, unless the context indicates otherwise,
the terms "we," "our," "us," the "Company," "Air Products," or "registrant"
include controlled subsidiaries and affiliates of Air Products. This discussion
should be read in conjunction with the interim consolidated financial statements
and the accompanying notes contained in this Quarterly Report on Form
10-Q. Unless otherwise stated, financial information is presented in millions of
U.S. Dollars, except for per share data. Except for net income, which includes
the results of discontinued operations, when applicable, financial information
is presented on a continuing operations basis.
Comparisons of our results of operations and liquidity and capital resources are
for the first quarter of fiscal year 2023 versus ("vs.") the first quarter of
fiscal year 2022. The disclosures provided in this Quarterly Report on Form 10-Q
are complementary to those made in our Annual Report on Form 10-K for the fiscal
year ended 30 September 2022 (the " 2022 Form 10-K "), which was filed with
the SEC on 22 November 2022 .
The financial measures discussed below are presented in accordance with U.S.
generally accepted accounting principles ("GAAP"), except as noted. We present
certain financial measures on an "adjusted" or "non-GAAP" basis because we
believe such measures, when viewed together with financial results computed in
accordance with GAAP, provide a more complete understanding of the factors and
trends affecting our historical financial performance. For each non-GAAP
financial measure, including adjusted diluted earnings per share ("EPS"),
adjusted EBITDA, adjusted EBITDA margin, adjusted effective tax rate, and
capital expenditures, we present a reconciliation to the most directly
comparable financial measure calculated in accordance with GAAP. These
reconciliations and explanations regarding the use of non-GAAP measures are
presented under the "Reconciliations of Non-GAAP Financial Measures" section
beginning on page 38 .
For information concerning activity with our related parties, refer to Note 16, Supplemental Information, to the consolidated financial statements.
About Air Products
Air Products and Chemicals, Inc. , aDelaware corporation originally founded in 1940, has built a reputation for its innovative culture, operational excellence, and commitment to safety and the environment. Our passionate, talented, and committed employees are from diverse backgrounds, but are driven by our higher purpose to create innovative solutions that benefit the environment, enhance sustainability, and address the challenges facing customers, communities, and the world. As of30 September 2022 , we had approximately 21,900 employees, of which over 90% were working full-time and 75% were located outsidethe United States . For information on our product, service, and solution offerings, refer to our 2022 Form 10-K . We manage our operations, assess performance, and report earnings under five reportable segments:Americas ,Asia ,Europe ,Middle East andIndia , and Corporate and other. This Management's Discussion and Analysis discusses our results based on these operations. 30
--------------------------------------------------------------------------------
Table of Contents
FIRST QUARTER 2023 VS. FIRST QUARTER 2022FIRST QUARTER 2023 IN SUMMARY
•Sales of$3,174.7 increased 6%, or$180.5 , due to higher pricing of 7%, higher energy cost pass-through to customers of 3%, and higher volumes of 2%, partially offset by an unfavorable impact from currency of 6% due to the strengthening of theU.S. Dollar. •Operating income of$652.0 increased 25%, or$129.0 , as our pricing actions and higher volumes overcame the unfavorable impact from currency and higher costs. Operating margin of 20.5% increased 300 basis points ("bp"), primarily due to higher pricing, partially offset by unfavorable costs. •Equity affiliates' income of$110.0 decreased 26%, or$37.8 , primarily due to a prior year benefit associated with the sale of air separation units by theJazan Gas Project Company joint venture. •Net income of$583.8 increased 6%, or$34.2 , primarily due to higher pricing and volumes, partially offset by unfavorable currency, lower equity affiliates' income, and higher costs. Net income margin of 18.4% was flat versus the prior year.
•Adjusted EBITDA of
•Diluted EPS of$2.57 increased 2%, or$0.05 per share, and adjusted diluted EPS of$2.64 increased 6%, or$0.16 per share. A summary table of changes in diluted EPS is presented below. 31
--------------------------------------------------------------------------------
Table of Contents
Changes in Diluted EPS Attributable to Air Products
The per share impacts presented in the tables below were calculated
independently and may not sum to the total change in diluted EPS due to
rounding.
Three Months Ended
31 December Increase
2022 2021 (Decrease)
Diluted EPS $2.57 $2.52 $0.05
Operating Impacts
Underlying business
Volume $0.03
Price, net of variable costs 0.71
Other costs (0.11)
Currency (0.15)
Total operating impacts $0.48
Other Impacts
Equity affiliates' income ($0.14 )
Interest expense (0.04)Other non-operating income/expense, net, excluding discrete item below
0.03
Non-service pension benefit/cost, net (0.11)
Change in effective tax rate (0.07)
Noncontrolling interests (0.10)
Total other impacts ($0.43 )
Total change in diluted EPS $0.05
% Change from prior year 2 %
Upon completion of the first phase of the Jazan gasification and power project
in the first quarter of fiscal year 2022, we recognized a net benefit from the
recognition of previously deferred profits, net of other project finalization
costs, related to the Jazan Gas Project Company joint venture within "Equity
affiliates' income." Our non-controlling partner's share of the project
finalization costs favorably impacted EPS within "Noncontrolling interests."
Diluted earnings per share for the first quarter of fiscal year 2022 reflects a
total net benefit from this event of approximately $0.20 per share.
The table below summarizes the diluted per share impact of our non-GAAP adjustments for the first quarter of fiscal years 2023 and 2022:
Three Months Ended
31 December Increase
2022 2021 (Decrease)
Diluted EPS $2.57 $2.52 $0.05 Non-service pension (benefit) cost, net 0.07 (0.04) 0.11
Adjusted Diluted EPS$2.64 $2.48 $0.16 32
--------------------------------------------------------------------------------
Table of Contents
FIRST QUARTER 2023 RESULTS OF OPERATIONS
Discussion of Consolidated Results
Three Months Ended
31 December Changes
2022 2021 $ %/bp
GAAP Measures
Sales $3,174.7 $2,994.2 $180.5 6 %
Operating income 652.0 523.0 129.0 25 %
Operating margin 20.5 % 17.5 % 300 bp
Equity affiliates' income $110.0 $147.8 ($37.8 ) (26 %)
Net income 583.8 549.6 34.2 6 %
Net income margin 18.4 % 18.4 % - bp
Non-GAAP Measures
Adjusted EBITDA $1,083.5 $1,003.1 $80.4 8 %
Adjusted EBITDA margin 34.1 % 33.5 % 60 bp
Sales
The table below summarizes the major factors that impacted consolidated sales
for the periods presented:
Volume 2 %
Price 7 %
Energy cost pass-through to customers 3 %
Currency (6 %)
Total consolidated sales change 6 %
Sales of $3,174.7 increased 6%, or $180.5 , due to positive pricing of 7%, higher
energy cost pass-through to customers of 3%, and higher volumes of 2%, partially
offset by an unfavorable currency impact of 6%. The pricing improvement was
primarily attributable to our merchant businesses in the Americas and Europe
segments. Higher contractual energy cost pass-through to our on-site customers
was driven by our Europe segment, which continues to be impacted by historically
heightened energy costs throughout the region. The volume improvement was
primarily driven by higher demand for merchant products as well as our on-site
business, partially offset by lower sale of equipment project activity. Currency
was unfavorable as the U.S. Dollar strengthened against most major currencies.
Cost of Sales and Gross Margin
Cost of sales of$2,272.3 increased 2%, or$48.7 , due to higher energy cost pass-through to customers of$75 , higher costs associated with sales volumes of$55 , and unfavorable other costs of$56 , partially offset by favorable currency impacts of$137 . The unfavorable other cost impact was driven by power for our merchant business, inflation, and higher planned maintenance. Gross margin of 28.4% increased 270 bp from 25.7% in the prior year, primarily due to the positive impact of our pricing actions, partially offset by the unfavorable costs.
Selling and Administrative Expense
Selling and administrative expense of$234.4 increased 1%, or$1.6 , primarily due to inflation and increased headcount to support our growth strategy, partially offset by a favorable currency impact from the strengthening of theU.S. Dollar. Selling and administrative expense as a percentage of sales decreased to 7.4% from 7.8% in the prior year.
Research and Development Expense
Research and development expense of$24.4 increased 5%, or$1.1 . Research and development expense as a percentage of sales of 0.8% was flat versus the prior year. 33
--------------------------------------------------------------------------------
Table of Contents
Other Income (Expense), Net
Other income of
Operating Income and Operating Margin
Operating income of$652.0 increased 25%, or$129.0 , as positive pricing, net of power and fuel costs, of$191 and higher volumes of$8 were partially offset by an unfavorable currency impact of$40 and higher costs of$30 . Costs were higher primarily due to labor inflation and higher planned maintenance.
Operating margin of 20.5% increased 300 bp from 17.5% in the prior year, primarily due to higher pricing, partially offset by unfavorable costs.
Equity Affiliates' Income
Equity affiliates' income of$110.0 decreased 26%, or$37.8 , primarily due to the prior year recognition of the remaining deferred profit associated with air separation units previously sold toJazan Gas Project Company , net of other project finalization costs, as well as a lower contribution from ourMexico affiliate. These impacts were partially offset by contributions from theJazan Integrated Gasification and Power Company ("JIGPC") joint venture, which began contributing to our results in theMiddle East andIndia segment in lateOctober 2021 . We expect the contribution from JIGPC to grow in future periods as a result of the second phase of the asset purchase associated with the Jazan gasification and power project, which was completed inJanuary 2023 . We expect final commissioning items to be completed later this calendar year. Interest Expense Three Months Ended 31 December 2022 2021 Interest incurred$56.3 $41.0 Less: Capitalized interest 15.1 10.5 Interest expense$41.2 $30.5 Interest incurred increased 37%, or$15.3 , driven by a higher average interest rate on variable-rate instruments in our debt portfolio. Capitalized interest increased 44%, or$4.6 , due to a higher carrying value of projects under construction.
Other Non-Operating Income (Expense), Net
Other non-operating expense was$0.6 versus income of$22.6 in the prior year. The decrease of$23.2 was primarily attributable to higher non-service pension costs, which were driven by higher interest cost and lower expected returns on plan assets for theU.S. salaried pension plan and theU.K. pension plan. This impact was partially offset by higher interest income on cash and cash items due to higher interest rates.
Net Income and Net Income Margin
Net income of$583.8 increased 6%, or$34.2 , primarily due to higher pricing, net of power and fuel costs, and higher volumes, partially offset by unfavorable currency, lower equity affiliates' income, and higher costs driven by inflation, higher planned maintenance, and higher non-service pension costs. Additionally, the effective tax rate was higher in fiscal year 2023 as further discussed below. Net income margin of 18.4% was flat.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA of$1,083.5 increased 8%, or$80.4 , primarily due to higher pricing, net of power and fuel costs, and higher volumes, partially offset by unfavorable currency, lower equity affiliates' income, and higher costs driven by inflation and higher planned maintenance. Adjusted EBITDA margin of 34.1% increased 60 bp from 33.5% in the prior year. 34
--------------------------------------------------------------------------------
Table of Contents
Effective Tax Rate
The effective tax rate equals the income tax provision divided by income before taxes. Equity affiliates' income is primarily included net of income taxes within income before taxes on our consolidated income statements.
Our effective tax rate was 18.9% and 17.1% for the three months ended
Many of our share-based compensation grants vest in December. Accordingly, the tax benefits from these awards typically have a larger impact on our first quarter effective tax rate compared to other periods.
Our adjusted effective tax rate was 19.1% and 17.0% for the three months ended
Discussion of Results by Business Segment
Americas Three Months Ended 31 December Changes 2022 2021 $ %/bp Sales$1,384.2 $1,224.1 $160.1 13 % Operating income 343.0 267.2 75.8 28 % Operating margin 24.8 % 21.8 % 300 bp Equity affiliates' income$16.4 $34.2 ($17.8 ) (52 %) Adjusted EBITDA 515.4 456.7 58.7 13 % Adjusted EBITDA margin 37.2 % 37.3 % (10) bp The table below summarizes the major factors that impacted sales in theAmericas segment for the periods presented: Volume 6 % Price 9 % Energy cost pass-through to customers (1 %) Currency (1 %) Total Americas sales change 13 % Sales of$1,384.2 increased 13%, or$160.1 , due to higher pricing of 9% and higher volumes of 6%, partially offset by lower energy cost pass-through to customers of 1% and an unfavorable currency impact of 1%. We successfully recovered higher energy costs in our merchant business through continued focus on pricing actions. The volume improvement was driven by better merchant demand as well as our on-site business. Operating income of$343.0 increased 28%, or$75.8 , primarily from positive pricing, net of power and fuel costs, of$92 and favorable volumes of$13 , partially offset by higher costs of$26 . Higher costs were driven by higher planned maintenance and inflation. Operating margin of 24.8% increased 300 bp from 21.8% in the prior year primary due to the pricing improvement, which was partially offset by the impact of higher costs.
Equity affiliates' income of
35
--------------------------------------------------------------------------------
Table of Contents
Asia
Three Months Ended
31 December Changes
2022 2021 $ %/bp
Sales $777.8 $780.4 ($2.6 ) - %
Operating income 235.9 221.1 14.8 7 %
Operating margin 30.3 % 28.3 % 200 bp
Equity affiliates' income $7.4 $6.6 $0.8 12 %
Adjusted EBITDA 345.2 338.5 6.7 2 %
Adjusted EBITDA margin 44.4 % 43.4 % 100 bp
The table below summarizes the major factors that impacted sales in the
Volume 7 % Price 1 % Energy cost pass-through to customers 2 % Currency (10 %) TotalAsia sales change - % Sales of$777.8 were flat versus the prior year as higher volumes of 7%, higher energy cost pass-through to customers of 2%, and positive pricing of 1% were offset by an unfavorable impact from currency of 10%. Volumes improved overall despite COVID-19 impacts in certain parts ofChina . The results of our on-site business include positive volume contributions from several traditional industrial gas plants that were brought onstream across the region. The unfavorable currency impact was primarily attributable to the strengthening of theU.S. Dollar against the Chinese Renminbi and the South Korean Won. Operating income of$235.9 increased 7%, or$14.8 , due to higher volumes of$24 , positive pricing, net of power and fuel costs, of$9 , and lower costs of$5 , partially offset by an unfavorable currency impact of$23 . Operating margin of 30.3% increased 200 bp from 28.3% in the prior year due to the volume improvement and positive pricing.
Equity affiliates' income of
36--------------------------------------------------------------------------------
Table of Contents
Europe
Three Months Ended
31 December Changes
2022 2021 $ %/bp
Sales $791.9 $744.2 $47.7 6 %
Operating income 145.8 99.2 46.6 47 %
Operating margin 18.4 % 13.3 % 510 bp
Equity affiliates' income $17.7 $13.9 $3.8 27 %
Adjusted EBITDA 207.8 162.9 44.9 28 %
Adjusted EBITDA margin 26.2 % 21.9 % 430 bp
The table below summarizes the major factors that impacted sales in the
Volume (6 %) Price 14 % Energy cost pass-through to customers 9 % Currency (11 %) TotalEurope sales change 6 % Sales of$791.9 increased 6%, or$47.7 , due to higher pricing of 14% and higher energy cost pass-through to customers of 9%, partially offset by an unfavorable impact from currency of 11% and lower volumes of 6%. Price improved due to continued focus on recovering higher energy costs in our merchant business. Higher energy costs driven by natural gas prices in our on-site business were contractually passed through to customers. The volume decline was primarily attributable to lower demand for hydrogen and merchant products. Additionally, sales in this region were negatively impacted by the strengthening of theU.S. Dollar against the Euro and the British Pound Sterling. Operating income of$145.8 increased 47%, or$46.6 , as higher pricing, net of power and fuel costs, of$89 was partially offset by lower volumes of$23 , an unfavorable currency impact of$12 , and higher costs of$7 . Operating margin of 18.4% increased 510 bp from 13.3% in the prior year primarily due to the pricing improvement, partially offset by the impact of lower volumes and higher costs.
Equity affiliates' income of
37--------------------------------------------------------------------------------
Table of ContentsMiddle East andIndia Three Months Ended 31 December Changes 2022 2021 $ % Sales$41.4 $23.7 $17.7 75 % Operating income 6.7 4.8 1.9 40 % Equity affiliates' income 64.1 92.3 (28.2) (31 %) Adjusted EBITDA 77.4 103.2 (25.8) (25 %) Sales of$41.4 increased 75%, or$17.7 , and operating income of$6.7 increased 40%, or$1.9 , primarily driven by a small acquisition completed inJanuary 2022 . The positive profit impact from the acquisition was partially offset by higher costs for planned maintenance activities. Despite higher equity affiliates' income attributable to the JIGPC joint venture, which contributed for the full quarter in fiscal year 2023, equity affiliates' income of$64.1 decreased 31%, or$28.2 , due to a net benefit recognized in fiscal year 2022 for the remaining deferred profit associated with air separation units previously sold toJazan Gas Project Company , net of other project finalization costs. We expect the contribution from JIGPC to grow in future periods as a result of the second phase of the asset purchase associated with the Jazan gasification and power project, which was completed inJanuary 2023 . We expect final commissioning items to be completed later this calendar year. Corporate and other Three Months Ended 31 December Changes 2022 2021 $ % Sales$179.4 $221.8 ($42.4 ) (19 %) Operating loss (79.4) (69.3) (10.1) (15 %) Adjusted EBITDA (62.3) (58.2) (4.1) (7 %) Sales of$179.4 decreased 19%, or$42.4 , and operating loss of$79.4 increased 15%, or$10.1 , primarily due to lower project activity in our sale of equipment business. Our Corporate and other segment also incurs costs to provide corporate support functions and global management activities that benefit all segments, which have increased due to efforts to support our growth strategy.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Millions of
We present certain financial measures, other than in accordance withU.S. generally accepted accounting principles ("GAAP"), on an "adjusted" or "non-GAAP" basis. On a consolidated basis, these measures include adjusted diluted earnings per share ("EPS"), adjusted EBITDA, adjusted EBITDA margin, the adjusted effective tax rate, and capital expenditures. On a segment basis, these measures include adjusted EBITDA and adjusted EBITDA margin. In addition to these measures, we also present certain supplemental non-GAAP financial measures to help the reader understand the impact that certain disclosed items, or "non-GAAP adjustments," have on the calculation of our adjusted diluted EPS. For each non-GAAP financial measure, we present a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. In many cases, non-GAAP financial measures are determined by adjusting the most directly comparable GAAP measure to exclude non-GAAP adjustments 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 as further discussed below. Additionally, we have previously excluded certain expenses associated with cost reduction actions, impairment charges, and gains on disclosed transactions. The reader should be aware that we may recognize similar losses or gains in the future. 38
--------------------------------------------------------------------------------
Table of Contents
When applicable, 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. We provide these non-GAAP financial measures 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 these measures, when viewed together with financial results computed in accordance with GAAP, provide 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 these measures in isolation or as a substitute for the most directly comparable measures calculated in accordance with GAAP. Readers should also consider the limitations associated with these non-GAAP financial measures, including the potential lack of comparability of these measures from one company to another. NON-GAAP ADJUSTMENTS
Non-Service Pension (Benefit)/Cost, Net
Effective beginning in the first quarter of fiscal year 2023, our adjusted EPS and the adjusted effective tax rate exclude the impact of non-service related components of net periodic benefit/cost for our defined benefit pension plans. The prior year non-GAAP financial measures presented below have been recast accordingly to conform to the fiscal year 2023 presentation. 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. The net impact of non-service related components is reflected within "Other non-operating income (expense), net" on our consolidated income statements. 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 recent changes to the allocation of our pension plan assets associated with de-risking as well 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.
ADJUSTED DILUTED EPS
The table below provides a reconciliation to the most directly comparable GAAP
measure for each of the major components used to calculate adjusted diluted EPS
from continuing operations, which we view as a key performance metric. 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 diluted EPS and total adjusted diluted EPS due to rounding.
Three Months Ended 31 December
Other
Equity Non-Operating Net Income
Operating Affiliates' Income/Expense, Income Tax Attributable to Diluted
Q1 2023 vs. Q1 2022 Income Income net Provision Air Products EPS
2023 GAAP $652.0 $110.0 ($0.6 ) $136.4 $572.2 $2.57
2022 GAAP 523.0 147.8 22.6 113.3 560.4 2.52
$ Change GAAP $0.05
% Change GAAP 2 %
2023 GAAP $652.0 $110.0 ($0.6 ) $136.4 $572.2 $2.57
Non-service pension (benefit) cost, net - - 19.5 4.9 14.6 0.07
2023 Non-GAAP ("Adjusted") $652.0 $110.0 $18.9 $141.3 $586.8 $2.64
2022 GAAP $523.0 $147.8 $22.6 $113.3 $560.4 $2.52
Non-service pension (benefit) cost, net - - (12.0) (2.9) (9.1) (0.04)
2022 Non-GAAP ("Adjusted") $523.0 $147.8 $10.6 $110.4 $551.3 $2.48
$ Change Non-GAAP $0.16
% Change Non-GAAP 6 %
39
--------------------------------------------------------------------------------
Table of Contents
ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
We define adjusted EBITDA as net income less income from discontinued
operations, net of tax, and excluding non-GAAP adjustments, which we do not
believe to be indicative of underlying business trends, before interest expense,
other non-operating income (expense), net, income tax provision, and
depreciation and amortization expense. Adjusted EBITDA and adjusted EBITDA
margin provide useful metrics for management to assess operating performance.
Margins are calculated independently for each period by dividing each line item
by consolidated sales for the respective period and may not sum to total margin
due to rounding.
The table below presents consolidated sales and a reconciliation of net income
on a GAAP basis to adjusted EBITDA and net income margin on a GAAP basis to
adjusted EBITDA margin:
Three Months Ended
31 December
2022 2021
$ Margin $ Margin
Sales $3,174.7 $2,994.2
Net income and net income margin $583.8 18.4 % $549.6 18.4 %
Add: Interest expense 41.2 1.3 % 30.5 1.0 %
Less: Other non-operating income (expense), net (0.6) - % 22.6 0.8 %
Add: Income tax provision 136.4 4.3 % 113.3 3.8 %
Add: Depreciation and amortization 321.5 10.1 % 332.3 11.1 %
Adjusted EBITDA and adjusted EBITDA margin $1,083.5 34.1 % $1,003.1 33.5 %
Change GAAP
Net income $ change $34.2
Net income % change 6%
Net income margin change - bp
Change Non-GAAP
Adjusted EBITDA $ change $80.4
Adjusted EBITDA % change 8%
Adjusted EBITDA margin change 60 bp
40
--------------------------------------------------------------------------------
Table of Contents
The tables below present sales and a reconciliation of operating income and
operating margin by segment to adjusted EBITDA and adjusted EBITDA margin for
the three months ended
Americas Changes vs. Three Months Ended 31 December Prior Year 2022 2021 $ %/bp Sales$1,384.2 $1,224.1 $160.1 13 % Operating income$343.0 $267.2 $75.8 28 % Operating margin 24.8 % 21.8 % 300 bp Reconciliation of GAAP to Non-GAAP: Operating income$343.0
Add: Depreciation and amortization 156.0
155.3
Add: Equity affiliates' income 16.4 34.2 Adjusted EBITDA$515.4 $456.7 $58.7 13 % Adjusted EBITDA margin 37.2 % 37.3 % (10) bp Asia Changes vs. Three Months Ended 31 December Prior Year 2022 2021 $ %/bp Sales$777.8 $780.4 ($2.6 ) - % Operating income$235.9 $221.1 $14.8 7 % Operating margin 30.3 % 28.3 % 200 bp Reconciliation of GAAP to Non-GAAP: Operating income$235.9
Add: Depreciation and amortization 101.9
110.8
Add: Equity affiliates' income 7.4 6.6 Adjusted EBITDA$345.2 $338.5 $6.7 2 % Adjusted EBITDA margin 44.4 % 43.4 % 100 bp Europe Changes vs. Three Months Ended 31 December Prior Year 2022 2021 $ %/bp Sales$791.9 $744.2 $47.7 6 % Operating income$145.8 $99.2 $46.6 47 % Operating margin 18.4 % 13.3 % 510 bp Reconciliation of GAAP to Non-GAAP: Operating income$145.8
Add: Depreciation and amortization 44.3
49.8
Add: Equity affiliates' income 17.7 13.9 Adjusted EBITDA$207.8 $162.9 $44.9 28 % Adjusted EBITDA margin 26.2 % 21.9 % 430 bp 41
--------------------------------------------------------------------------------
Table of ContentsMiddle East andIndia Changes vs. Three Months Ended 31 December Prior Year 2022 2021 $ %/bp Sales$41.4 $23.7 $17.7 75 % Operating income$6.7 $4.8 $1.9 40 % Reconciliation of GAAP to Non-GAAP: Operating income$6.7
Add: Depreciation and amortization 6.6
6.1
Add: Equity affiliates' income 64.1 92.3 Adjusted EBITDA$77.4 $103.2 ($25.8 ) (25 %) Corporate and other Changes vs. Three Months Ended 31 December Prior Year 2022 2021 $ %/bp Sales$179.4 $221.8 ($42.4 ) (19 %) Operating loss ($79.4 ) ($69.3 ) ($10.1 ) (15 %) Reconciliation of GAAP to Non-GAAP: Operating loss ($79.4 )
(
Add: Depreciation and amortization 12.7
10.3
Add: Equity affiliates' income 4.4 0.8 Adjusted EBITDA ($62.3 ) ($58.2 ) ($4.1 ) (7 %) ADJUSTED EFFECTIVE TAX RATE The effective tax rate equals the income tax provision divided by income before taxes. We calculate our adjusted effective tax rate by adjusting the numerator and denominator to exclude the tax and before tax impacts of our non-GAAP adjustments, respectively. The table below presents a reconciliation of the GAAP effective tax rate to our adjusted effective tax rate: Three Months Ended 31 December 2022 2021 Income tax provision$136.4 $113.3 Income before taxes 720.2 662.9 Effective tax rate 18.9 % 17.1 % Income tax provision$136.4 $113.3 Non-service pension tax impact 4.9 (2.9) Adjusted income tax provision$141.3 $110.4 Income before taxes$720.2 $662.9 Non-service pension (benefit) cost, net 19.5 (12.0) Adjusted income before taxes$739.7 $650.9 Adjusted effective tax rate 19.1 % 17.0 % 42
--------------------------------------------------------------------------------
Table of Contents
CAPITAL EXPENDITURES
We define capital expenditures as cash flows for additions to plant and
equipment, including long-term deposits, acquisitions (less cash acquired), and
investment in and advances to unconsolidated affiliates. A reconciliation of
cash used for investing activities to our reported capital expenditures is
provided below:
Three Months Ended
31 December
2022 2021
Cash used for investing activities $256.2 $1,719.1
Proceeds from sale of assets and investments 4.0 1.1
Purchases of investments (19.2) (727.4)
Proceeds from investments 591.5 1,331.9
Other investing activities 1.7 6.4
Capital expenditures $834.2 $2,331.1 LIQUIDITY AND CAPITAL RESOURCES
Our cash balance and cash flows from operations are our primary sources of liquidity and are generally sufficient to meet our liquidity needs. In addition, we have the flexibility to access capital through a variety of financing activities, including accessing the capital markets, drawing upon our credit facility, or alternatively, accessing the commercial paper markets. At this time, we have not utilized, nor do we expect to access, our credit facility for additional liquidity. As of31 December 2022 , we had$1,516.3 of foreign cash and cash items compared to total cash and cash items of$3,131.0 . We do not expect that a significant portion of the earnings of our foreign subsidiaries and affiliates will be subject toU.S. income tax upon repatriation to theU.S. Depending on the country in which the subsidiaries and affiliates reside, the repatriation of these earnings may be subject to foreign withholding and other taxes. However, since we have significant current investment plans outside theU.S. , it is our intent to permanently reinvest the majority of our foreign cash and cash items that would be subject to additional taxes outside theU.S.
© Edgar Online, source
