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News ReleaseAir Products Achieves Record Third Quarter Revenues and Earnings; Raises Full-Year EPS Guidance

July 25, 2007 Lehigh Valley, Pa.

Air Products (NYSE:APD) today reported record net income of $285 million, or diluted earnings per share (EPS) of $1.28, for its third fiscal quarter ended June 30, 2007. Included in these results was a favorable tax adjustment of $27 million, or $.12 per share. On a continuing operations basis, net income increased $78 million, or 38 percent, and diluted EPS was up $.38, or 42 percent, compared with the prior year.

Record third quarter revenue of $2,595 million was up 16 percent from the prior year on higher volumes and pricing in the Merchant segment and strong volumes in the Tonnage and Electronics and Performance Materials segments. Operating income of $365 million was up 25 percent versus the prior year.

John Jones, chairman and chief executive officer, said, "We again exceeded expectations with record performance this quarter. Sales were at their highest ever, as demand for our gases and materials across core manufacturing, energy and electronics markets remained strong. We also saw continued benefit from the strategic investments we've made in growth businesses and regions, including closing on our acquisition in Poland. Most importantly, our people's focus on growth and productivity again delivered outstanding improvement in our drive to increase return on capital."

Individual Business Segment Performance

Air Products' fiscal 2007 third quarter results for its six segments were:

  • Merchant Gases sales of $817 million were up 17 percent and operating income of $147 million increased 22 percent over the prior year on pricing improvement in all regions and continued volume growth.
  • Tonnage Gases sales of $695 million were up 27 percent and operating income of $111 million increased 30 percent over the prior year, driven by volume growth from new plants, improved loading and increased production efficiencies.
  • Electronics and Performance Materials sales of $552 million were up 13 percent and operating income of $63 million increased 28 percent over the prior year on higher volumes. Electronics sales were driven by significantly higher equipment sales and tonnage revenue from new investments, while Performance Materials sales increased from volume growth across all product lines.
  • Equipment and Energy sales of $134 million were down three percent from the prior year, largely due to lower liquefied natural gas heat exchanger activity. Operating income of $16 million increased seven percent compared to the prior year.
  • Healthcare sales of $159 million were up six percent and operating income of $9 million declined two percent, as volume growth and lower costs in Europe were offset by weaker U.S. performance.
  • Chemicals sales of $238 million were up seven percent and operating income of $21 million was up 40 percent on improved polymers and polyurethane intermediates volumes.

Outlook

Looking forward, Jones said, "All of the work our people have done to transform Air Products— reducing cyclicality, capitalizing on our strong business positions, driving productivity and relentlessly increasing our return on capital—continues to pay off. With strong market demand and a robust project backlog across our Merchant, Tonnage and Electronics and Performance Materials businesses around the world, we expect a strong close to a great fiscal 2007."

The company is raising its fiscal 2007 full-year EPS guidance to a range of $4.30 to $4.35 per share*, representing 23 to 24 percent* year-on-year earnings growth, excluding this quarter's favorable tax adjustment of $.12 per share.

Air Products (NYSE:APD) serves customers in industrial, energy, technology and healthcare markets worldwide with a unique portfolio of atmospheric gases, process and specialty gases, performance materials, and equipment and services. 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 $9 billion, operations in over 40 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 presentation regarding important risk factors. Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors, including, without limitation, overall economic and business conditions different than those currently anticipated; future financial and operating performance of major customers and industries served by Air Products; the impact of competitive products and pricing; interruption in ordinary sources of supply of raw materials; the ability to recover unanticipated increased energy and raw material costs from customers; costs and outcomes of litigation or regulatory activities; consequences of acts of war or terrorism impacting the United States' and other markets; the effects of a pandemic or epidemic or a natural disaster; charges related to portfolio management and cost reduction actions; the success of implementing cost reduction programs and achieving anticipated acquisition synergies; the timing, impact 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 new or changed tax and other legislation and regulations in jurisdictions in which Air Products and its affiliates operate; the impact of new or changed 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 presentation 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.

*This press release contains non-GAAP measures which adjust prior year results to exclude the impact of the 2006 global cost reduction plan and adjust current year results to exclude the favorable tax adjustment, customer contract termination, and pension plan settlement loss. The presentation of 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. Presented below is a reconciliation of reported results to non-GAAP measures.

  YTD Diluted EPS-Continuing Operations
FY07 Forecast GAAP $4.47-$4.54
FY06 GAAP $3.29
% Change GAAP 36%-38%
FY07 Forecast GAAP $4.47-$4.54
Favorable tax adjustment (.12)
Customer contract termination (.08-.10)
Pension plan settlement loss .03
FY07 Non-GAAP Measure $4.30-$4.35
FY06 GAAP $3.29
Global Cost Reduction Plan .21
FY06 Non-GAAP Measure $3.50
FY07 Forecast Non-GAAP $4.30-$4.35
FY06 Non-GAAP Measure $3.50
% Change Non-GAAP 23%-24%

View entire earnings release with all financial tables. (62 KB)

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