January 23, 2013 Lehigh Valley, Pa.

First Quarter Summary
  • Sales of $2.6 billion up 10 percent versus prior year
  • EPS up three* percent to $1.30 versus prior year
  • Good volumes in Tonnage Gases and new wins from Gulf Coast Connection Pipeline
  • $462 million share repurchase

Air Products (NYSE:APD) today reported net income of $277 million and diluted earnings per share (EPS) of $1.30, on a continuing operations basis, for its fiscal first quarter ended December 31, 2012, both up three* percent versus the prior year.

The discussion of first quarter results and guidance in this release is based on non-GAAP continuing operations. A reconciliation to GAAP results can be found on page four of this release.*

First quarter revenues of $2,562 million increased 10 percent versus prior year, with underlying sales up four percent on improved volumes in Tonnage Gases. Acquisitions contributed six percent. Operating income of $372 million was up five percent versus prior year. Operating margin of 14.5 percent was down 70 basis points versus prior year, driven by an inventory accounting revaluation and the Indura acquisition.

Sequential sales declined two percent, with underlying sales down four percent and seasonally lower volumes in the Merchant Gases, and Electronics and Performance Materials segments. Operating income decreased nine percent sequentially.

Commenting on the first quarter, John McGlade, chairman, president and chief executive officer, said, "Globally, economic growth underperformed our expectations for the quarter. We delivered higher volumes in Tonnage Gases, and Equipment and Energy. However, both Merchant Gases and Electronics volumes declined. Our operating performance was encouraging and we are seeing improvements from our cost and restructuring actions. It's a positive start that we expect to improve upon through the year. We also repurchased 5.7 million shares during the quarter."

  • Merchant Gases sales of $1,009 million increased 14 percent versus the prior year due to the Indura acquisition. Underlying sales declined one percent, with positive pricing in all regions more than offset by lower volumes in Europe. Operating income of $171 million increased three percent versus prior year due largely to Indura and positive pricing, partially offset by lower volumes. Sequential sales decreased one percent, with positive pricing and a weaker dollar offset by seasonally lower volumes. Sequential operating income increased six percent due to improved productivity and prior quarter Indura acquisition costs.
  • Tonnage Gases sales of $898 million increased 11 percent versus the prior year, on strong base loading and new plant volumes. Operating income of $138 million was up 24 percent versus prior year, driven by the volume growth and lower maintenance spending. Sequential sales increased six percent driven primarily by new plant volumes and higher energy pass-thru. Sequential operating income was down two percent, primarily from the previously announced decision to exit the PUI business.
  • Electronics and Performance Materials sales of $549 million were up three percent versus prior year primarily due to the DA NanoMaterials acquisition. Underlying sales were down one percent, as volume growth in Performance Materials was more than offset by lower Electronics volumes. Operating income of $61 million was down 22 percent versus prior year due largely to inventory accounting revaluation. Sequential sales declined 11 percent and sequential operating income declined 28 percent respectively on lower volumes and higher costs.
  • Equipment and Energy sales of $106 million increased 19 percent versus prior year, due to higher large ASU and LNG equipment sales. Operating income of eight million dollars increased 15 percent versus prior year due to the higher equipment sales. Sequentially, sales decreased 16 percent and operating income decreased 53 percent due mostly to reduced ASU project activity. The sales backlog is up 25 percent versus prior year on LNG sales.
Outlook

Looking ahead, McGlade said, "Global economic growth is expected to be modest at best so we will continue to take actions to improve our performance. Solid execution, cost control, price improvement and volume growth are our priorities. Our strong project backlog and our significant leverage in existing assets position us well for the future."

Air Products is updating its guidance for fiscal 2013 of EPS in the range of $5.70 to $5.90 per share. For the second quarter of fiscal 2013 ending March 31, 2013, EPS is expected to be between $1.34 and $1.39 per share.

Access the Q1 earnings teleconference scheduled for 10:00 a.m. Eastern Time on January 23 by calling 719-325-4787 and entering pass code 3708364, or access event details on our website.

About Air Products
Air Products (NYSE:APD) provides atmospheric, process and specialty gases; performance materials; equipment; and technology. For over 70 years, the company has enabled customers to become more productive, energy efficient and sustainable. More than 20,000 employees in over 50 countries supply innovative solutions to the energy, environment and emerging markets. These include semiconductor materials, refinery hydrogen, coal gasification, natural gas liquefaction, and advanced coatings and adhesives. In fiscal 2012, Air Products had sales approaching $10 billion. For more information, visit http://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 statements about earnings guidance, projections, targets and business outlook. 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, deterioration in global or regional economic and business conditions; weakening demand for the Company's products and services; future financial and operating performance of major customers; unanticipated contract terminations or customer cancellations or postponement of projects and sales; the success of commercial negotiations; asset impairments or losses due to a decline in profitability of or demand for certain of the Company's products or businesses, or specific product or customer events; 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; 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 productivity programs; the success and impact of restructuring and cost reduction initiatives; achieving anticipated acquisition synergies; the timing, impact, and other uncertainties of future acquisitions or divestitures; significant fluctuations in interest rates and foreign currencies from that currently anticipated; the continued availability of capital funding sources for all of the Company's foreign operations; the impact of environmental, 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 impact on the effective tax rate of changes in the mix of earnings among our U.S. and international operations; and other risk factors described in the Company's Form 10K for its fiscal year ended September 30, 2012. 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 the non-GAAP measures.

Consolidated Results
Continuing Operations
2013 Q1 vs 2012 Q1 Net
Income 		Diluted
EPS
2013 GAAP $276.9  $1.30 
2012 GAAP 225.9  1.06 
Change GAAP $51.0  $.24 
% Change GAAP 23% 23%
2013 GAAP $276.9  $1.30 
2013 Non-GAAP Measure $276.9  $1.30 
2012 GAAP $225.9  $1.06 
Spanish tax settlement 43.8  .20 
2012 Non-GAAP Measure $269.7  $1.26 
Change Non-GAAP Measure $7.2  $.04 
% Change Non-GAAP Measure 3% 3%
2013 Q1 vs 2012 Q4 Operating Income
2013 Q1 GAAP $372.4 
2012 Q4 GAAP 157.9 
Change GAAP $214.5 
% Change GAAP 136%
2013 Q1 GAAP $372.4 
2013 Q1 Non-GAAP Measure $372.4 
2012 Q4 GAAP $157.9 
PV market actions 186.0 
PUI business actions 54.6 
Customer bankruptcy 9.8 
2012 Q4 Non-GAAP Measure $408.3 
Change Non-GAAP Measure $(35.9)
% Change Non-GAAP Measure (9)%
FY 2013
2013 Guidance $5.70-$5.90

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.

FY 2013 2013 Forecast
Capital expenditures - GAAP basis $357.0  $1,650-1,750
Capital lease expenditures 71.4  250-350
Capital expenditures - Non-GAAP basis $428.4  $1,900-2,100

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