Discontinued Operations

9 Months Ended

Jun. 30, 2017

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

3. DISCONTINUED OPERATIONS

The divisions comprising the former Materials Technologies segment and the former Energy-from-Waste segment have been accounted for as discontinued operations. The results of operations of these businesses have been removed from the results of continuing operations for all periods presented. The assets and liabilities of the discontinued operations have been reclassified and are segregated in the consolidated balance sheets.

Materials Technologies

On 16 September 2015, we announced plans to separate our Materials Technologies segment, which contained two divisions, the Electronic Materials Division (EMD) and the Performance Materials Division (PMD). As further discussed below, we completed the separation of EMD through the spin-off of Versum Materials, Inc. (Versum) on 1 October 2016. In addition, we completed the sale of PMD to Evonik Industries AG (Evonik) on 3 January 2017. As a result, these divisions are reflected in our consolidated financial statements as discontinued operations for all periods presented.

Spin-off of Electronic Materials

On 1 October 2016 (the distribution date), Air Products completed the spin-off of Versum into a separate and independent public company by way of a distribution to Air Products’ stockholders of all of the then issued and outstanding shares of common stock of Versum on the basis of one share of Versum common stock for every two shares of Air Products’ common stock held as of the close of business on 21 September 2016 (the record date for the distribution). Fractional shares of Versum common stock were not distributed to Air Products' common stockholders. Air Products’ stockholders received cash in lieu of fractional shares. As a result of the distribution, Versum is now an independent public company, and its common stock is listed under the symbol “VSM” on the New York Stock Exchange.

In connection with the spin-off, we entered into various agreements necessary to effect the spin-off and to govern the ongoing relationships between Air Products and Versum after the separation, including a transition services agreement by which we provide certain transition services to Versum, generally for no longer than 12 to 24 months from the spin-off date of 1 October 2016. Seifi Ghasemi, chairman, president and chief executive officer of Air Products, is serving as non-executive chairman of the Versum Board of Directors.

Sale of Performance Materials

On 3 January 2017, we completed the sale of PMD to Evonik for $3.8 billion in cash subject to customary post-closing adjustments, including working capital. A gain of $2,870 ($1,833 after-tax, or $8.34 per share) was recognized on the sale in the second quarter of fiscal year 2017. In connection with the sale, we entered into a transition services agreement by which we provide certain transition services to Evonik for no longer than 12 months from the date of sale of 3 January 2017.

Energy-from-Waste

On 29 March 2016, the Board of Directors approved the Company’s exit of its Energy-from-Waste (EfW) business. As a result, efforts to start up and operate the two EfW projects located in Tees Valley, United Kingdom, were discontinued. Since that time, the EfW segment has been presented as a discontinued operation. During the second quarter of fiscal year 2016, a loss of $945.7 ($846.6 after-tax) was recorded to write down plant assets to their estimated net realizable value and record a liability for plant disposition and other costs. Income tax benefits related only to one of the projects as the other did not qualify for a local tax deduction.

During the first quarter of fiscal year 2017, we determined that it is unlikely for a buyer to assume the remaining assets and contract obligations, including land lease obligations. As a result, we recorded an additional loss of $59.3 ($47.1 after-tax) in results of discontinued operations, of which $53.0 was recorded primarily for land lease obligations and $6.3 was recorded to update our estimate of the net realizable value of the plant assets as of 31 December 2016. There have been no changes to our estimates during the third quarter of fiscal year 2017. We may incur additional exit costs in future periods related to other outstanding commitments.

The following table summarizes the carrying amount of the accrual for our actions to dispose of the EfW business at 30 June 2017:

	Asset Actions			Contract Actions/Other			Total
Loss on disposal of business	$	913.5		$	32.2		$	945.7
Noncash expenses	(913.5		)	—			(913.5		)
Cash expenditures	—			(18.6		)	(18.6		)
Currency translation adjustment	—			(1.4		)	(1.4		)
30 September 2016	$	—		$	12.2		$	12.2
Loss on disposal of business	6.3			53.0			59.3
Noncash expenses	(6.3		)	—			(6.3		)
Amount reflected in other noncurrent liabilities	—			(61.5		)	(61.5		)
Cash expenditures	—			(1.4		)	(1.4		)
Currency translation adjustments	—			3.4			3.4
30 June 2017	$	—		$	5.7		$	5.7

The loss on disposal was recorded as a component of discontinued operations. The amount reflected in other noncurrent liabilities relates to land lease obligations and is recorded in continuing operations. The remaining accrual is reflected in current liabilities of discontinued operations.

The following tables detail the businesses and major line items that comprise income from discontinued operations, net of tax, on the consolidated income statements for the three and nine months ended 30 June 2017:

	Three Months Ended
	30 June 2017
	Total Discontinued
	Operations(A)
Cost of sales	$	2.3
Selling and administrative	.3
Other income (expense), net	(.8		)
Loss Before Taxes	(3.4		)
Income tax provision	(1.1		)
Loss from Discontinued Operations, net of tax	$	(2.3	)

^(A)  Activity primarily relates to EfW.

	Nine Months Ended
	30 June 2017
							Total
	Performance			Energy-			Discontinued
	Materials			from-Waste(A)			Operations
Sales	$	254.8		$	—		$	254.8
Cost of sales	182.3			11.9			194.2
Selling and administrative	22.5			.5			23.0
Research and development	5.1			—			5.1
Other income (expense), net	.3			(.9		)	(.6		)
Operating Income (Loss)	45.2			(13.3		)	31.9
Equity affiliates’ income	.3			—			.3
Income (Loss) Before Taxes	45.5			(13.3		)	32.2
Income tax provision(B)	(50.8		)	(3.1		)	(53.9		)
Income (Loss) From Operations of Discontinued Operations, net of tax	96.3			(10.2		)	86.1
Gain (Loss) on Disposal, net of tax(C)	1,832.5			(47.1		)	1,785.4
Income (Loss) from Discontinued Operations, net of tax	$	1,928.8		$	(57.3	)	$	1,871.5

^(A)  The loss from operations of discontinued operations for EfW primarily relates to land lease obligations, administrative costs, and costs incurred for ongoing project exit activities.

^(B)  As a result of the expected gain on sale of PMD, we released valuation allowances related to capital loss and net operating loss carryforwards during the first quarter of 2017 that favorably impacted our income tax provision within discontinued operations by approximately $66.

^(C)  After-tax gain on sale of $1,832.5 includes expense for income tax reserves for uncertain tax positions of $26.1 gross ($19.1 net) in various jurisdictions.

The following tables detail the businesses and major line items that comprise income from discontinued operations, net of tax, on the consolidated income statements for the three and nine months ended 30 June 2016:

	Three Months Ended
	30 June 2016
										Total
	Electronic			Performance			Energy-			Discontinued
	Materials			Materials			from-Waste(A)			Operations
Sales	$	240.0		$	279.9		$	—		$	519.9
Cost of sales	130.9			188.2			17.6			336.7
Selling and administrative	22.8			20.7			.7			44.2
Research and development	10.6			4.9			.1			15.6
Other income (expense), net	(.8		)	(.6		)	8.2			6.8
Operating Income (Loss)	74.9			65.5			(10.2		)	130.2
Equity affiliates’ income	—			.5			—			.5
Income (Loss) Before Taxes(B)	74.9			66.0			(10.2		)	130.7
Income tax provision	16.8			16.8			(1.3		)	32.3
Income (Loss) from Operations of Discontinued Operations, net of tax	58.1			49.2			(8.9		)	98.4
Net Income Attributable to Noncontrolling Interests of Discontinued Operations	1.9			—			—			1.9
Net Income (Loss) From Discontinued Operations, net of tax	$	56.2		$	49.2		$	(8.9	)	$	96.5

	Nine Months Ended
	30 June 2016
								Total
	Electronic		Performance		Energy-			Discontinued
	Materials		Materials		from-Waste(A)			Operations
Sales	$	713.3	$	789.9	$	—		$	1,503.2
Cost of sales	385.8		539.1		22.9			947.8
Selling and administrative	61.2		59.2		2.3			122.7
Research and development	30.2		14.8		.8			45.8
Other income (expense), net	4.2		3.1		(5.5		)	1.8
Operating Income (Loss)	240.3		179.9		(31.5		)	388.7
Equity affiliates’ income	.2		.9		—			1.1
Income (Loss) Before Taxes(B)	240.5		180.8		(31.5		)	389.8
Income tax provision	58.4		53.7		(1.9		)	110.2
Income (Loss) From Operations of Discontinued Operations	182.1		127.1		(29.6		)	279.6
Loss on Disposal, net of tax	—		—		(846.6		)	(846.6		)
Income (Loss) from Operations of Discontinued Operations, net of tax	182.1		127.1		(876.2		)	(567.0		)
Net Income Attributable to Noncontrolling Interests of Discontinued Operations	6.0		—		—			6.0
Net Income (Loss) From Discontinued Operations, net of tax	$	176.1	$	127.1	$	(876.2	)	$	(573.0	)

^(A)  The loss from operations of discontinued operations for EfW primarily relates to project suspension costs, land lease obligations, and administrative costs.

^(B)  For the three and nine months ended 30 June 2016, income before taxes from operations of discontinued operations attributable to Air Products was $128.3 and $382.4, respectively.

The following table details the major line items that comprise total assets and total liabilities of discontinued operations on the consolidated balance sheets as of 30 June 2017:

	30 June 2017
					Total
	Performance		Energy-		Discontinued
	Materials		from-Waste		Operations
Assets
Current Assets
Plant and equipment, net	$	—	$	9.8	$	9.8
Total Current Assets	—		9.8		9.8
Total Assets	$	—	$	9.8	$	9.8
Liabilities
Current Liabilities
Payables and accrued liabilities (A)	$	10.4	$	6.1	$	16.5
Total Current Liabilities	10.4		6.1		16.5
Total Liabilities	$	10.4	$	6.1	$	16.5

^(A)  Includes reserves associated with disposition of businesses.

The following table details the major line items that comprise total assets and total liabilities of discontinued operations on the consolidated balance sheets as of 30 September 2016:

	30 September 2016
							Total
	Electronic		Performance		Energy-		Discontinued
	Materials		Materials		from-Waste		Operations
Assets
Current Assets
Cash and cash items	$	170.6	$	37.5	$	—	$	208.1
Trade receivables, net	134.7		159.0		—		293.7
Inventories	138.1		226.8		—		364.9
Plant and equipment, net	—		—		18.2		18.2
Other receivables and current assets	34.5		5.6		1.2		41.3
Total Current Assets	477.9		428.9		19.4		926.2
Plant and equipment, net	296.5		296.5		—		593.0
Goodwill, net	180.0		125.0		—		305.0
Intangible assets, net	75.1		25.0		—		100.1
Other noncurrent assets	37.5		6.7		—		44.2
Total Noncurrent Assets	589.1		453.2		—		1,042.3
Total Assets	$	1,067.0	$	882.1	$	19.4	$	1,968.5
Liabilities
Current Liabilities
Payables and accrued liabilities	$	85.8	$	72.5	$	19.0	$	177.3
Accrued income taxes	22.7		6.0		—		28.7
Current portion of long-term debt	5.8		—		—		5.8
Total Current Liabilities	114.3		78.5		19.0		211.8
Long-term debt	981.8		—		—		981.8
Deferred income taxes	50.3		6.4		—		56.7
Other noncurrent liabilities	47.4		9.6		—		57.0
Total Noncurrent Liabilities	1,079.5		16.0		—		1,095.5
Total Liabilities	$	1,193.8	$	94.5	$	19.0	$	1,307.3