Quarter revenues of $1,685 million were up 16 percent from the prior year on higher volumes in Gases and Chemicals, acquisitions and favorable currency effects. Sequentially, revenues increased three percent, driven by acquisitions and favorable currency effects. Operating income of $199 million was up two percent from the prior year and up six percent sequentially.
EPS was unchanged from the prior year excluding the accounting change*. Higher volumes, favorable currency effects and a lower effective tax rate were offset by lower electronics prices, customer outages, higher pension and other costs, and favorable adjustments in the prior year related to incentive compensation and past divestitures of equity affiliates.
John P. Jones, Air Products' chairman and chief executive officer, said, "We had solid performance in the first quarter. Our strategies and portfolio management actions are working, and we are encouraged by the progress we are seeing in many of our businesses."
Gases segment sales of $1,204 million increased 17 percent over the prior year on higher volumes in the company's Electronics, Energy and Process Industries, and Healthcare businesses, favorable currency effects, and acquisitions. Operating income of $182 million increased nine percent, as positive volume, currency and acquisition effects were partially offset by higher costs.
Sequentially, Gases revenues increased five percent, due to higher volumes, acquisitions and favorable currency effects, partially offset by lower natural gas costs contractually passed through to customers. Operating income increased by one percent on higher volumes.
Chemicals segment sales of $410 million increased 16 percent versus the prior year on higher volumes across most of the company's Intermediates and Performance Materials businesses, as well as favorable currency effects. Operating income of $25 million declined 26 percent, as customer outages and higher raw material, energy and pension costs more than offset positive volume and currency effects.
Sequentially, Chemicals revenues decreased two percent and operating income declined 17 percent on anticipated seasonally lower sales in several Performance Materials businesses, and Intermediates customer outages.
Equipment segment revenues of $71 million increased six percent over the prior year on improved air separation unit sales. Operating income declined on lower liquefied natural gas (LNG) heat exchanger activity. Air Products received a new LNG heat exchanger order at the end of the first quarter.
Looking forward, Mr. Jones said, "We are reaffirming our EPS guidance range of $2.35 to $2.65 for the year. Assuming the positive momentum we saw in the first quarter continues, we are more comfortable we can achieve the mid to upper end of this range. However, we remain cautious about higher raw material costs, economic growth in Europe, and the timing of equipment orders. We expect fiscal second quarter EPS in the range of $.58 to $.62."
Mr. Jones added that Air Products will continue to drive portfolio management and cost reduction actions similar to prior years and noted upfront costs associated with such actions could reduce Air Products' earnings outlook for the current fiscal year.
Air Products will host its Annual Meeting of Shareholders on Thursday, January 22, 2004 at 2:00 p.m. ET. Access the audio Webcast at www.airproducts.com.
Air Products (NYSE:APD) serves customers in technology, energy, healthcare and industrial markets worldwide with a unique portfolio of products, services and solutions, providing atmospheric gases, process and specialty gases, performance materials and chemical intermediates. Founded in 1940, Air Products has built leading positions in key growth markets such as semiconductor materials, refinery hydrogen, home healthcare services, natural gas liquefaction, and advanced coatings and adhesives. The company is recognized for its innovative culture, operational excellence and commitment to safety and the environment. With annual revenues of $6.3 billion and operations in over 30 countries, the company's 18,500 employees build lasting relationships with their customers and communities based on understanding, integrity and passion. For more information, visit www.airproducts.com. NOTE: The forward-looking statements contained in this presentation are based on current expectations regarding important risk factors. Actual results may differ materially from those expressed. Factors that might cause forward-looking statements to differ materially from actual results include, among other things, overall economic and business conditions different than those currently anticipated and demand for Air Products' goods and services; competitive factors in the industries in which it competes; interruption in ordinary sources of supply; the ability to recover unanticipated increased energy and raw material costs from customers; spikes in the pricing of natural gas; changes in government regulations; consequences of acts of war or terrorism impacting the United States' and other markets; charges related to currently unplanned portfolio management and cost reduction actions; the success of implementing cost reduction programs; the timing, impact and other uncertainties of future acquisitions or divestitures; significant fluctuations in interest rates and foreign currencies from that currently anticipated; the impact of tax and other legislation and regulations in jurisdictions in which Air Products and its affiliates operate; and the timing and rate at which tax credits can be utilized.
*On October 1, 2002, Air Products adopted Statement of Financial Accounting Standards (SFAS) No. 143, requiring that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred. It applies to certain of Air Products' on-site agreements, for example, where the company has an obligation to remove its equipment upon expiration of a customer contract. An after-tax transition charge of $2.9 million was recorded as the cumulative effect of the accounting change. The ongoing expense on an annual basis resulting from the initial adoption of SFAS No. 143 is negligible (approximately $1 million).
Please review the attached financial tables, including the Summary of Consolidated Financial Information:
Air Products (NYSE:APD) today reported net income of $132 million or diluted earnings per share (EPS) of $.58 for its first fiscal quarter ended December 31, 2003. Net income increased five percent and diluted EPS was up $.02 compared with the prior year, which included a charge of $3 million or $.02 per share for the cumulative effect of an accounting change*. Sequentially, EPS was unchanged.