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News ReleaseAir Products Reports Fiscal 2011 Fourth Quarter EPS up 12 Percent* to $1.51

October 21, 2011 Lehigh Valley, Pa.

Fourth Quarter Highlights

  • Sales of $2.6 billion up 11%
  • EPS of $1.51 up 12%*
  • Awarded significant Tonnage contracts in the U.S. Gulf Coast and China
  • Agreement with new equity affiliate partner in Saudi Arabia

Full Year Highlights

  • Sales of $10.1 billion up 12%
  • EPS of $5.73 up 14%*
  • Capital spending of $1.6 billion up 22%*
  • $649 million in share repurchases completed and new $1 billion authorization
  • Dividend increased for 29th consecutive year

Air Products (NYSE: APD) today reported net income of $325 million, or diluted earnings per share (EPS) of $1.51, for its fiscal 2011 fourth quarter versus $294 million* and $1.35*, respectively, for the fourth quarter of fiscal 2010.

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

Fourth quarter revenues of $2,611 million increased 11 percent versus prior year and one percent sequentially. Underlying revenues were up six percent and two percent respectively. Operating income of $425 million rose six percent versus prior year and two percent sequentially on improved volumes.

For fiscal 2011, sales of $10,082 million increased 12 percent, primarily driven by a nine percent volume increase. Operating income of $1,671 million was up 13 percent and diluted EPS of $5.73 increased 14 percent from the prior year.

Commenting on the results, John McGlade, chairman, president and CEO said, “This quarter’s improvements were driven by growth in emerging markets and strong performance in our Tonnage Gases business. Overall economic activity for this quarter continued at the slower underlying growth rate we saw last quarter.”

Reflecting on the year, McGlade said, “We achieved another solid year of key project wins, double digit sales and earnings growth despite a slowing global economy in the second half of 2011. More importantly, we saw strong gains in operating cash flow and we improved our most important measure, return on capital, by 80 basis points to 13.3% for the year.”

Fourth Quarter Segment Performance

  • Merchant Gases sales of $1,045 million increased 10 percent from the prior year on higher volumes in Asia and U.S./Canada. Sequentially, sales increased two percent, on three percent volume growth. Operating income of $192 million improved four percent from the prior year on better volumes and positive pricing in Asia and U.S./Canada. This was partially offset by higher costs and lower Healthcare pricing in Europe.
  • Tonnage Gases sales of $883 million were up 17 percent from the prior year on 11 percent volume growth, primarily driven by new projects. Sales were up two percent sequentially. Operating income of $152 million was up 30 percent from the prior year, based on higher volumes, lower costs and gains related to contract modifications.
  • Electronics and Performance Materials sales of $587 million increased 12 percent from the prior year, primarily on higher Electronics volumes and Performance Materials pricing. Sequentially, sales decreased three percent on lower Performance Materials volumes due to slowdowns in key markets including housing, construction and autos. Operating income of $92 million was up nine percent on higher Electronics volumes and improved pricing in Performance Materials.
  • Equipment and Energy sales of $96 million and operating income of $12 million were down 25 percent and 43 percent respectively versus the prior year, due to lower LNG and air separation unit activity. Sequential sales were up 21 percent on higher air separation unit activity. The sales backlog versus prior year is up 22 percent based on several new large orders.

Outlook

Looking ahead, McGlade said, “While the near-term economic outlook is for continued slow growth and is clouded by global economic and policy uncertainties, we are well positioned with a large backlog of projects backed by signed customer contracts. We are confident that the prospects for industrial gases and Air Products, in particular, remain bright and we remain committed to achieving our 2015 goals for growth, margin and, most importantly, return on capital.”

The company today announced initial guidance for fiscal year 2012 EPS in the range of $5.90 to $6.30 per share, representing year-over-year earnings growth of three to ten percent. For the first quarter of fiscal 2012 ending December 31, 2011, EPS is expected to be between $1.31 and $1.39 per share.

The company also announced that it expects capital spending in fiscal 2012 to be between $1.9 and $2.2 billion.

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. In fiscal 2011, Air Products had revenues of $10.1 billion, operations in over 40 countries, and 18,900 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, including earnings guidance, projections and targets. These forward-looking statements are based on management’s reasonable expectations and assumptions as of the date of this release. Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors not anticipated by management, including, without limitation, renewed deterioration in global economic and business conditions, including weakening demand for the Company's products and inability to maintain pricing; future financial and operating performance of major customers and industries served by the Company; unanticipated contract terminations or customer cancellations or postponement of projects and sales; the success of commercial negotiations; asset impairments due to economic conditions or specific product or customer events; the impact of competitive products and pricing; interruption in ordinary sources of supply of raw materials; the Company’s ability to recover energy and raw material costs from customers ; the Company’s ability to maintain and improve cost efficiency of operations; costs and outcomes of litigation or regulatory activities; successful development and market acceptance of new products and applications, the ability to attract, hire and retain qualified personnel in all regions of the world where the Company operates; the success of cost reduction and productivity programs; the timing, impact, and other uncertainties of future acquisitions, divestitures and restructuring activities; significant fluctuations in interest rates and foreign currencies from that currently anticipated; the continued availability of capital funding sources in all of the Company's foreign operations; the impact of environmental, healthcare, tax or other legislation and regulations in jurisdictions in which the Company and its affiliates operate; the impact of new or changed financial accounting guidance; the timing and rate at which tax credits can be utilized and other risk factors described in the Company’s Form 10K for its fiscal year ended September 30, 2010. 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 our management uses internally to evaluate our baseline performance on a comparable basis. Presented below are reconciliations of the reported GAAP results to non-GAAP measures. Income from continuing operations and diluted EPS data are attributable to Air Products.

Consolidated Results

  Continuing Operations
  Q4
Operating
Income
Q4
Income
Q4
Diluted
EPS
YTD
Operating
Income
YTD
Diluted
EPS
2011 GAAP $425.3 $324.8 $1.51 $1,622.2 $5.59
2010 GAAP 367.0 272.1 1.25 1,389.0 4.74
% Change GAAP 16% 19% 21% 17% 18%
2011 GAAP       $1,622.2 $5.59
Net loss on Airgas transaction
(YTD tax impact $16.9) (a)
      48.5 .14
2011 Non-GAAP Measure       $1,670.7 $5.73
2010 GAAP $367.0 272.1 $1.25 $1,389.0 4.74
Net loss on Airgas transaction
(Q4 tax impact $12.9, YTD tax impact $35.9) (b) 34.7 21.8 .10 96.0 .28
2010 Non-GAAP Measure $401.7 $293.9 $1.35 $1,485.0 $5.02
% Change Non-GAAP 6% 11% 12% 13% 14%
  Q1 2012 YTD 2012
2012 Guidance $1.31-$1.39

$5.90-$6.30

2011 GAAP  

$5.59

% Change   6%-13%
% Change Non-GAAP Measure   3% -10%
  1. Based on statutory tax rate of 36.57%, including impact of tax rate adjustment for 2010 and first quarter 2011 costs.
  2. Based on statutory tax rate of 37.4%.

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 our quarterly effective tax rate. On a non-GAAP basis, operating income and taxes have been adjusted for the impact of the net loss on Airgas transaction. Total capital consists of total debt and total equity.

  2011 2010 Basis Point
Change
Earnings after-tax GAAP $1,340.0 $1,146.8
Five-quarter average total capital 10,317.2 9,636.4
ROCE GAAP 13.0% 11.9% 110
  2011 2010 Basis Point
Change
Earnings after-tax Non-GAAP $1,370.9 $1,205.6  
Five-quarter average total capital 10,317.2 9,636.4  
ROCE Non-GAAP 13.3% 12.5% 80

Capital Expenditures

We utilize a non-GAAP measure in the computation of capital expenditures and include spending associated with facilities accounted for as capital leases. Certain facilities that are built to provide product to a specific customer are required to be accounted for as capital leases and such spending is reflected as a use of cash within cash provided by operating activities.

  YTD
(Millions of dollars) 2011
Capital expenditures — GAAP basis $1,408.3
Capital lease expenditures 173.5
Capital expenditures — Non-GAAP basis $1,581.8
  2012 Forecast
Capital expenditures — GAAP Measure $1,600 to $1,800
Capital lease expenditures 300 to 400
Capital Expenditures — Non-GAAP Measure $1,900 to $2,200

View entire earnings release with all financial tables

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