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News ReleaseStrong Growth Drives Air Products Second Quarter EPS Up 19% to $.89

April 26, 2006 Lehigh Valley, Pa.

Air Products (NYSE:APD) today reported net income of $204 million or diluted earnings per share (EPS) of $.89 for its second fiscal quarter ended March 31, 2006. Net income increased 16 percent and diluted EPS was up 19 percent compared with the prior year.

Second quarter earnings comparisons are affected by the adoption of Statement of Financial Accounting Standards No. 123R and expensing of stock options as of October 1, 2005. On a comparable basis (including stock compensation expenses), net income increased 21 percent and diluted EPS increased 24 percent. A reconciliation can be found at the end of this release. The following discussion of second quarter results is on a comparable basis.

Revenues of $2,317 million were up 16 percent over the prior year on strong volume growth in Gases and Equipment. Operating income of $295 million was up 22 percent from the prior year, primarily on improved results in all segments driven by strong sales in Gases and Equipment and improved pricing in Chemicals.

John P. Jones, chairman and chief executive officer, said, "Strong growth in the second quarter again delivered a double digit earnings increase and improved return on capital. During the quarter, we announced repositioning plans for our Chemicals Group. Consistent with those plans, we completed the sale of our Geismar Polyurethane Intermediates facility and the acquisition of Tomah3 Products to strengthen our Performance Materials growth platform. Actions like these, coupled with our improving performance, are transforming Air Products to a higher growth, less cyclical and more focused company."

Gases segment sales of $1,644 million were up 16 percent over the prior year on higher volumes in Electronics, EPI and global merchant gases. Operating income of $229 million increased 15 percent from the prior year on strong volumes, particularly in Electronics, improved pricing in North America, and gains from hurricane insurance recovery. The net hurricane impact was positive to operating income in the quarter by $15 million or $.04 per share. These improvements were partially offset by higher costs associated with the start-up of the new United Kingdom Home Oxygen Service contract and flat sales and higher costs in the U.S. Homecare business.

Chemicals segment sales of $493 million declined slightly over the prior year, principally due to lower volumes in Polyurethane Intermediates from customer shutdowns. However, Chemicals operating income of $50 million was up 18 percent over the prior year, driven by improved pricing to recover higher raw material, energy and natural gas costs.

Equipment segment revenues of $180 million rose substantially over the prior year. Higher air separation equipment sales in addition to LNG activity drove this increase. Operating income of $24 million was up significantly, driven by continued high LNG heat exchanger activity. The Equipment backlog at the end of the quarter was $596 million.

Outlook
Looking forward, Mr. Jones said, "We have seen strong volume growth in the first half of 2006 and are encouraged by the momentum we see in our businesses. With a great backlog of projects driving top-line growth, continued loading of our asset base, and improved productivity and aggressive cost management, we are well on our way to delivering our fourth consecutive year of double digit top-line growth while meeting our commitment to improve our return on capital."

For the third quarter, the company expects earnings per share between $.88 and $.92. For the full year the company raised its earning guidance to a range of $3.40 to $3.50 per share.

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 and is listed in the Dow Jones Sustainability and FTSE4Good Indices. The company has annual revenues of $8.1 billion, operations in over 30 countries, and over 20,000 employees around the globe. For more information, visit www.airproducts.com.

NOTE: This release contains "forward-looking statements" within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's reasonable expectations and assumptions as of the date of this release regarding important risk factors. Actual performance and financial results may differ materially from those expressed in the forward-looking statements because of many factors, including those specifically referenced as future events or outcomes that the company anticipates as well as, among other things, overall economic and business conditions different than those currently anticipated and demand for Air Products' goods and services during that time; 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; uninsured litigation judgments or settlements; changes in government regulations; consequences of acts of war or terrorism impacting the United States' and other markets; charges related to currently undetermined portfolio management and cost reduction actions; the success of implementing cost reduction programs; the timing, impact, ability to complete and other uncertainties of future acquisitions or divestitures or unanticipated contract terminations; 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; the recovery of insurance proceeds; the impact of new financial accounting standards; and the timing and rate at which tax credits can be utilized. The company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this release to reflect any change in the company's assumptions, beliefs or expectations or any change in events, conditions or circumstances upon which any such forward-looking statements are based.

Reconciliation
Effective 1 October 2005, the company adopted SFAS No. 123R and began expensing the grant-date fair value of employee stock options. Prior year results have not been restated.

This press release contains non-GAAP measures, which adjust prior year results to include the pro forma impact of expensing employee stock options based on previous footnote disclosures required by SFAS No. 123. See the discussion under Share-Based Compensation in the Notes to the consolidated financial statements. The presentation of these non-GAAP measures is intended to enhance the usefulness of financial information by providing measures which the company's management uses internally to evaluate the company's baseline performance.

  FY06 Q2
GAAP
FY05 Q2
GAAP
% Change FY05
Pro forma
Stock
Option
Expense
FY05 Q2
Non-GAAP
Measure
% Change
Non-GAAP
Measure
Operating Income
Gases $228.7 $206.8 11% $7.7 $199.1 15%
Chemicals 50.4 45.0 12% 2.4 42.6 18%
Equipment 24.3 7.9 208% .4 7.5 224%
Corporate (8.8) (7.5) (17%) .4 (7.9) (11%)
Consolidated $294.6 $252.2 17% $10.9 $241.3 22%
Net Income $204.0 $175.3 16% $6.8 $168.5 21%
Diluted EPS $ .89 $ .75 19% $.03 $ .72 24%

Please review the attached financial tables, including the Summary of Consolidated Financial Information:

AIR PRODUCTS AND CHEMICALS, INC.
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
  Three Months Ended
31 March
Six Months Ended
31 March
(Millions of dollars, except for share data) 2006 2005 2006 2005
Sales $2,317.2 $2,003.3 $4,415.8 $3,994.3
Net Income $204.0 $175.3 $384.7 $342.1
Basic Earnings Per Share $.92 $.77 $1.73 $1.51
Diluted Earnings Per Share $.89 $.75 $1.69 $1.47
Capital Expenditures $662.7 $227.1 $946.4 $493.9
Depreciation and Amortization $189.0 $177.1 $375.3 $356

View entire earnings release with all financial tables. (59 K)

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Contact Information

  • Investor Contact
    Simon Moore
    (610) 481-7461
    Air Products and Chemicals, Inc.
    7201 Hamilton Boulevard
    Allentown, PA 18195-1501
    USA
    (610) 481-2729
  • Press Contact
    George Noon
    (610) 481-1990
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