July 26, 2006 Lehigh Valley, Pa.
Air Products (NYSE:APD) today reported net income of $210 million or diluted earnings per share (EPS) of $.92 for its third fiscal quarter ended June 30, 2006. Net income increased 10 percent and diluted EPS was up 12 percent compared with the prior year.
Third 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 14 percent and diluted EPS increased 16 percent. A reconciliation can be found at the end of this release. The following discussion of third quarter results is on a comparable basis.
Revenues of $2,320 million were up 12 percent and operating income of $298 million was up 18 percent over the prior year on strong Gases volumes and higher Equipment activity.
John P. Jones, chairman and chief executive officer, said, "We produced record earnings and sales this quarter and continued to improve our return on capital. This performance was powered by strong volumes across our global energy and process industries (EPI), electronics, and merchant gas businesses, demonstrating the strength of our business and market positions to continue to deliver profitable growth and higher returns.”
Strong volumes drove record Gases segment sales of $1,689 million up 14 percent and operating income of $241 million up 19 percent over the prior year. EPI reflected the positive impact of five new hydrogen plants which have come onstream in fiscal 2006. Electronics gases and specialty materials continued to grow, with solid demand from semiconductor and flat panel markets. The global merchant gas business also saw volume growth in all regions of the world with improved recovery of energy costs in North America.
Chemicals segment sales of $480 million were flat with the prior year, as better pricing offset weaker volumes. Chemicals operating income of $42 million was down 10 percent on lower volumes, principally due to two customer shutdowns in the company's polyurethane intermediates business over the past year.
Equipment segment revenues of $150 million rose 28 percent over the prior year and operating income of $26 million was up significantly, driven by high LNG heat exchanger and large air separation activity. The company's $623 million backlog remains strong, with one new LNG heat exchanger order signed in the quarter. Air Products also won a new contract to supply two large air separation units for one of the world's largest gas-to-liquids (GTL) projects in Nigeria.
Looking forward, Mr. Jones said, "For the third consecutive year, we are on track to deliver double-digit sales growth, double-digit earnings growth, and improved return on capital. This performance is a real tribute to our employees who are transforming Air Products into a higher growth, less cyclical and higher return company.”
Air Products raised its full-year EPS estimate to between $3.49 and $3.53 per share, an 18-20 percent improvement over the prior year. This guidance excludes any impact related to ongoing Chemicals portfolio and business simplification actions.
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.
Effective 1 October 2005, the company adopted SFAS No. 123R, which requires companies to expense 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. Stock options have been accounted for as equity instruments. See the discussion under Share-Based Payments 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.
View entire earnings release with all financial tables. (58 K)