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News ReleaseAir Products Reports Fiscal Q4 EPS from Continuing Operations of $1.26

October 22, 2008 Lehigh Valley, Pa.

Highlights:

  • Fiscal 2008 fourth quarter sales increased 14 percent over the prior year to $2.7 billion.
  • Fiscal 2008 fourth quarter earnings per share (EPS) from continuing operations grew 10 percent on an adjusted basis.
  • Fiscal 2008 marked the fifth consecutive year of double-digit growth.
  • The company has announced two long-term supply contracts with ExxonMobil to supply hydrogen for their Baton Rouge, Louisiana and Baytown, Texas refineries.

Air Products today reported net income of $262 million, or diluted earnings per share (EPS) of $1.21, for its fiscal 2008 fourth quarter versus $293 million and $1.31, respectively, for the fourth quarter of fiscal 2007.

Fiscal 2007 fourth quarter results included a gain on a polyurethane intermediates contract settlement of $.11 per share, a tax benefit on the charitable donation and gain on sale of an investment of $.09 per share, a charge for a supplemental pension plan of $.03 per share, a charge for a global cost reduction plan of $.04 per share, and a tax benefit from audit settlements and adjustments of $.05 per share. With these items excluded, income and EPS from continuing operations were $256 million and $1.15, respectively.

Excluding these five items from income from continuing operations in 2007, 2008 fiscal fourth quarter income from continuing operations of $273 million increased seven percent and diluted EPS of $1.26 increased 10 percent.

The following discussion of fourth quarter and full year results in this release is based on non-GAAP comparisons. A reconciliation can be found at the end of this release.

Fourth quarter revenues of $2,715 million were up 14 percent from the prior year on higher volumes and better pricing in Merchant Gases and Performance Materials, favorable currency, and higher natural gas and raw material cost pass-through. Operating income of $373 million was up three percent. Included in operating income was a $.05 per share loss related to a fire at the company’s nitrogen trifluoride (NF3) facility in Korea, and a $.05 per share unfavorable impact from the recent Gulf Coast hurricanes.

For fiscal 2008, sales of $10,415 million were up 14 percent and income from continuing operations of $1,107 million was up 16 percent over the prior year. Operating income of $1,522 was up 12 percent, and diluted EPS of $5.05 was up 18 percent over the prior year.

John McGlade, chairman, president and chief executive officer, said, “Overall, 2008 represented another year of strong performance for the company, with 14 percent sales growth, 18 percent EPS growth and a 50 basis point improvement in ROCE to 13 percent, while continuing to drive improvements in our portfolio. However, weaker demand in Electronics and softer-than-expected volumes in Europe impacted our fourth quarter results.”

Fourth Quarter Segment Performance

  • Merchant Gases sales of $1,095 million were up 15 percent and operating income of $196 million increased 12 percent over the prior year on strong pricing, favorable currency and improved volumes.
  • Tonnage Gases sales of $940 million were up 21 percent on higher natural gas cost pass-through. Hurricane impacts reduced sales by six percent in the quarter. Operating income of $135 million increased 14 percent over the prior year on lower maintenance and better operating efficiency.
  • Electronics and Performance Materials sales of $553 million were up six percent. Operating income of $42 million declined 31 percent over the prior year. Electronics sales were impacted by the global slowdown in both semiconductor foundry and liquid crystal display (LCD) manufacturing and the fire sustained at the company’s NF3 plant in Korea. Performance Materials sales increased due to growth in Asia and higher prices.
  • Equipment and Energy sales of $126 million were up two percent as higher air separation unit sales were offset by declines in liquefied natural gas (LNG) heat exchanger sales. Operating income of $16 million decreased 12 percent over the prior year on lower LNG heat exchanger activity.

Outlook

Looking forward, McGlade said, “Despite the unprecedented volatility in the global economy, we remain committed to our long-term goals to improve our margins and returns, and capture the substantial growth opportunities that exist in our markets. We currently project our capital spending to be $1.6 to $1.8 billion in 2009, up from $1.4 billion in 2008. Our project backlog is at an all-time high, and we announced this week two new agreements to supply hydrogen to ExxonMobil at their Baton Rouge and Baytown refineries. Our strong, predictable cash flow, coupled with our solid, well-managed balance sheet, allows us to finance the growth next year and continue to grow our capital spending in the future.”

McGlade went on to say, “In the short term, we are very focused on controlling costs and are taking many actions to minimize discretionary spending. We also are pursuing cost reductions by capitalizing on our SAP investment to continue driving down SG&A and transaction costs. We are increasing the energy efficiency at our plants, lowering maintenance costs, and reducing distribution expense per unit of product delivered. Although we are likely to see a much weaker global economy in 2009, we remain committed to delivering consistent, strong earnings growth along with improved margins and returns throughout the economic cycle.”

The company today announced initial guidance for fiscal year 2009 EPS in the range of $5.10 to $5.35 per share, representing year-over-year earnings growth on a continuing operations basis of one to six percent. For the first quarter of fiscal 2009 ending December 31, 2008, EPS is expected to be between $1.15 and $1.21 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. Air Products has annual revenues of $10 billion, operations in over 40 countries, and 22,000 employees around the globe. For more information, visit www.airproducts.com.

NOTE: The information above contains “forward-looking statements” based on management’s reasonable expectations and assumptions as of the date of this document. Events or results described in forward-looking statements may be influenced by many factors not anticipated by management, including without limitation, deterioration in economic and business conditions; future financial and operating performance of major customers and industries served by the Company; unanticipated contract terminations or customer cancellation or postponement of projects or sales; the impact of competitive products and pricing; interruption in ordinary sources of supply of raw materials; the ability to attract, hire and retain qualified personnel in all regions of the world where the Company operates; significant fluctuations in interest rates and foreign currencies; the continued availability of capital funding sources in all of the Company’s foreign operations; the impact of new or changed environmental, healthcare, tax or other legislation and regulations in jurisdictions in which the Company and its affiliates operate; and other risk factors described in the Company’s Quarterly Report on Form 10Q for the quarter ended December 31, 2007. The Company disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this document 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.

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 are reconciliations of reported GAAP results to non-GAAP measures.

Consolidated Results

  Q4 YTD
    Continuing
Operations
  Continuing
Operations
Millions of Dollars Operating
Income
Income Diluted
EPS
Operating
Income
Income Diluted
EPS
2008 GAAP $373.1 $273.4 $1.26 $1,495.8 $1,090.5 $4.97
2007 GAAP 380.4 295.6 1.32 1,375.6 1,019.6 4.57
% Change GAAP (2%) (8%) (5%) 9% 7% 9%
2008 GAAP $373.1 $273.4 $1.26 $1,495.8 $1,090.5 $4.97
Pension settlement -- -- -- 26.3 16.5 .08
2008 Non-GAAP Measure $373.1 $273.4 $1.26 $1,522.1 $1,107.0 $5.05
2007 GAAP $380.4 $295.6 $1.32 $1,375.6 $1,019.6 $4.57
Gain on contract settlement (36.8) (23.6) (.11) (36.8) (23.6) (.11)
Global cost reduction plan 13.7 8.8 .04 13.7 8.8 .04
Pension settlement 10.3 6.4 .03 10.3 6.4 .03
Donation/sale of cost investment (5.0) (19.8) (.09) (5.0) (19.8) (.09)
Tax audit settlements/adjustments -- (11.3) (.05) -- (38.8) (.17)
2007 Non-GAAP Measure $362.6 $256.1 $1.15 $1,357.8 $952.6 $4.27
% Change Non-GAAP Measure 3% 7% 10% 12% 16% 18%
2009 Forecast           $5.10-$5.35
2008 GAAP           $4.97
% Change GAAP           3%-8%
2009 Forecast           $5.10-$5.35
2008 Non-GAAP Measure           $5.05
% Change Non-GAAP           1%-6%

Merchant Gases
2008 GAAP $196.2
2007 GAAP 179.6
% Change GAAP 9%
2007 GAAP $179.6
Donation/sale of cost investment (5.0)
2007 Non-GAAP Measure $174.6
% Change Non-GAAP 12%
Tonnage Gases
2008 GAAP $134.9
2007 GAAP 155.0
% Change GAAP (13%)
2007 GAAP $155.0
Gain on contract settlement (36.8)
2007 Non-GAAP Measure $118.2
% Change Non-GAAP 14%

Return on Capital Employed (ROCE)

ROCE is calculated as earnings after tax divided by five-quarter average total capital. Earnings after tax is defined as operating income and equity affiliates’ income, after tax at the Company’s effective tax rate. On a non-GAAP basis, operating income and taxes have been adjusted for the disclosed items detailed in the consolidated results table above. Total capital consists of total debt, shareholders’ equity, and minority interest.

Millions of Dollars FY07 FY08
  GAAP Non-
GAAP
GAAP Non-
GAAP
Q1 $256.1 $256.1 $296.6 $296.6
Q2 250.7 250.7 292.1 308.4
Q3 320.9 289.4 330.2 330.2
Q4 335.0 292.2 309.8 309.8
Earnings After Tax $1,162.7 $1,088.4 $1,228.7 $1,245.0
Five-Quarter Average Total Capital $8,690.5 $8,690.5 $9,560.4 $9,560.4
ROCE 13.4% 12.5% 12.9% 13.0%
Basis Point Change FY08 vs. FY07
GAAP
Non-GAAP
-50
+50
     

Capital Expenditures

The Company utilizes a non-GAAP measure in the computation of capital expenditures when adjusting for spending associated with facilities accounted for as capital leases. Certain facilities which are built to service a specific customer are accounted for as capital leases in accordance with EITF No. 01-08, “Determining Whether an Arrangement Contains a Lease,” and such spending is reflected as a use of cash within cash provided by operating activities.

 

Billions of Dollars YTD
2008
Actual
YTD
2009
Forecast
Capital Expenditures - GAAP basis $1.2 $1.3 to $1.5
Capital lease expenditures under EITF No. 01-08 .2 .3
Capital Expenditures – Non-GAAP basis $1.4 $1.6 to $1.8

View entire earnings release with all financial tables. (82 KB)

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Contact Information

  • Press Contact
    Katie McDonald
    610-481-3673
    Air Products and Chemicals, Inc.
    7201 Hamilton Boulevard
    Allentown, PA 18195-1501
    USA
    (610) 481-6642
  • Investor Contact
    Simon Moore
    (610) 481-7461
    Air Products and Chemicals, Inc.
    7201 Hamilton Boulevard
    Allentown, PA 18195-1501
    USA
    (610) 481-2729
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