Prior year results included a gain on the sale of the company's U.S. packaged gas business of $26 million after-tax, or $.12 per share, and a charge for a global cost reduction plan of $19 million after-tax, or $.09 per share.  

Quarter revenues were $1,578 million, up 20 percent from the prior year and 9 percent sequentially.  The effects of acquisitions, divestitures, currency and the pass-through effect of higher natural gas prices increased sales by 14 percent.  Without these factors, sales were up 6 percent over the prior year and 4 percent sequentially.  Higher gases volumes and improved chemical volumes and pricing accounted for the underlying revenue increase.  

Operating income of $179 million increased 16 percent from $155 million in the prior year, which included a $31 million charge for a global cost reduction plan.  Without this charge, operating income declined $7 million or 4 percent, as higher chemical raw material and energy costs were partially offset by higher volumes, favorable currency effects and acquisitions.  

Commenting on the quarter, John P. Jones, Air Products' chairman and chief executive officer, said, "Margins suffered this quarter due to higher raw material and energy costs and plant turnarounds.  Margin recovery is our main focus in the near-term.  However, we are encouraged by improved volumes in electronics, healthcare, CPI, Asia merchant gases and higher amines, and we continue to see benefits from our portfolio management actions, including the divestiture of our U.S. packaged gases business early last year and our entry into the U.S. homecare market in October." 

Industrial gas sales of $1,130 million increased 27 percent.  Of this increase, 19 percent is accounted for by higher natural gas pass through, currency and acquisitions.  Operating income of $153 million increased 25 percent from $123 million in the prior year, which included a $26 million charge for a global cost reduction plan.  Operating income was up $4 million or 3 percent without this charge.  Higher worldwide gases volumes, acquisitions and favorable currency effects drove this improvement.  

Sequentially, gases revenues increased 10 percent.  Of this increase, higher natural gas pass through, currency and acquisitions accounted for 7 percent.  Operating income was down 10 percent, as a decline in North American gases volumes and the impacts of higher CPI plant outages were partially offset by favorable acquisition and currency effects.  The first quarter also benefited from a favorable incentive compensation adjustment. 

Chemicals sales of $399 million increased 11 percent versus the prior year.  Operating income of $34 million declined 20 percent from $42 million, which included a charge of $5 million for a global cost reduction plan.  This decline was driven by higher feedstock costs and weaker performance polymers (emulsions) volumes, partially offset by favorable currency and stronger higher amines and performance products (polyurethane and epoxy additives) shipments. 

Sequentially, chemicals revenues increased 13 percent on higher volumes and improved pricing.  Operating income was up 2 percent, with improved volumes mainly in higher amines and performance solutions (surfactants) and favorable currency offsetting higher feedstock costs.  

Air Products' equipment segment sales were $50 million.  Operating income of $3 million was down $2 million versus the prior year on lower air separation and helium equipment activity. 

Regarding Air Products' outlook, Mr. Jones said, "The slowdown in demand across the basic manufacturing industries is affecting our North American merchant gas and performance polymers volumes, and significantly higher energy and raw material costs are impacting our chemicals segment and to a lesser extent, gases.  In addition, delays in new LNG heat exchanger orders and very low activity in air separation plants are reducing expectations for equipment segment profitability. Continued economic uncertainty is impacting near-term demand for our products and, as a result, we are revising our full year earnings outlook to a range of $2.23 to $2.37 per share, with third quarter earnings per share in the range of $.54 to $.58.  In this weak environment, we are continuing our portfolio management actions and are identifying ways to improve our cost structure.  Such actions could reduce our near-term outlook."

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