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Air Products Reports Fiscal 2009 First Quarter Earnings

Jan 21, 2009

Access the Q1 earnings teleconference scheduled for 10:00 a.m. Eastern Time on January 21 by calling (719) 325-4810 and entering passcode 1645128, or listen on the Web at: www.airproducts.com/Invest/financialnews/Earnings_Releases/Teleconference.htm.

LEHIGH VALLEY, Pa., Jan. 21 /PRNewswire-FirstCall/ -- Air Products (NYSE: APD) today reported net income of $69 million, or diluted earnings per share (EPS) of $0.32, for its fiscal first quarter ended December 31, 2008. This includes a $0.55 per share charge for the previously announced global cost reduction plan and a $0.10 per share loss from discontinued operations.

Excluding the impact of these items, income was $206 million and diluted EPS was $0.97, down 21 and 18 percent, respectively, compared with the prior year. The discussion of first quarter results in this release is based on non-GAAP comparisons. It excludes the impacts of the above items. A reconciliation can be found at the end of this release.*

First quarter revenues of $2,195 million declined nine percent and operating income of $288 million was down 24 percent from the prior year on weaker volumes, primarily in the Electronics and Performance Materials and Merchant Gases segments, and unfavorable currency.

John McGlade, chairman, president and chief executive officer, said, "Over the quarter, we saw further deterioration in business conditions, resulting in one of the weakest economic environments we've ever seen. It was evident that the shocks to the global economy have shattered consumer confidence, which has significantly impacted customers' operating rates across most of our end markets. In response, we continue to take aggressive actions to reduce our costs and drive to a lower cost structure."

    First Quarter Segment Performance

    --  Merchant Gases sales of $925 million declined eight percent due to
        currency.  Operating income of $171 million declined 15 percent from
        the prior year, as strong pricing was offset by weaker volumes across
        all regions and unfavorable currency impacts.

    --  Tonnage Gases sales of $744 million were down six percent and
        operating income of $109 million decreased two percent from the prior
        year on unfavorable currency impacts and lower volumes from weakness
        in steel and chemicals end markets.  Hydrogen volumes were higher
        despite unfavorable hurricane impacts.

    --  Electronics and Performance Materials sales of $407 million declined
        21 percent.  Operating income of $25 million declined 63 percent from
        the prior year.  Electronics manufacturing declined significantly on
        falling consumer demand.  Performance Materials volumes dropped on
        lower demand from coatings, autos, housing and other end markets.

    --  Equipment and Energy sales of $120 million were up 19 percent on
        higher air separation unit sales.  Operating income of $7 million
        decreased 25 percent from the prior year on lower LNG heat exchanger
        activity.

Outlook

McGlade said, "While the global economic environment is poor, we continue to build and maintain our strong positions, taking the necessary near-term actions to deliver improvement and growth in the future. We have a good backlog of projects and opportunities in front of us. Our solid balance sheet and access to capital will enable us to take advantage of these opportunities."

The company expects second quarter EPS from continuing operations to be between $0.80 and $0.90 per share and full year EPS from continuing operations to be between $4.00 and $4.30 per share.

Annual Meeting of Shareholders

Air Products will host its Annual Meeting of Shareholders on Thursday, January 22, 2009 at 2:00 p.m. ET. Access the audio Webcast at: www.airproducts.com/Invest/shareholdersvcs/annualmeeting_materials.htm.

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 over $10 billion, operations in more than 40 countries, and 21,000 employees around the globe. For more information, visit www.airproducts.com.

NOTE: The information above 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 document 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, continuing deterioration in economic and business conditions; weakening demand for the company's products, 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; 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 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 current 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; 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 from that currently anticipated; 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; the impact of new or changed financial accounting standards; and 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, 2008. 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                   Q1                         YTD
                                                                   Continuing
                                            Continuing Operations  Operations
                                Operating  Income         Diluted   Diluted
                                 Income                     EPS       EPS
    Millions of Dollars
    2009 GAAP                    $114.1    $90.0           $.42
    2008 GAAP                     380.4    262.3           1.18
    % Change GAAP                   (70)%    (66)%          (64)%

    2009 GAAP                    $114.1    $90.0           $.42
    Global Cost Reduction Plan    174.2    116.1            .55
    2009 Non-GAAP Measure        $288.3   $206.1           $.97

    % Change Non-GAAP Measure       (24)%    (21)%          (18)%


    2009 Forecast GAAP                                            $3.45-$3.75
    Global Cost Reduction Plan                                           $.55
    2009 Forecast Non-GAAP
     Measure                                                      $4.00-$4.30



                  AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
                           CONSOLIDATED INCOME STATEMENTS
                                    (Unaudited)

    (Millions of dollars, except for share data)

                                                          Three Months Ended
                                                             31 December
                                                           2008         2007
    SALES                                              $2,195.3     $2,407.4
    Cost of sales                                       1,629.7      1,753.6
    Selling and administrative                            247.0        258.5
    Research and development                               33.2         30.3
    Global cost reduction plan                            174.2           --
    Pension settlement                                       --          1.4
    Other (income) expense, net                            (2.9)       (16.8)
    OPERATING INCOME                                      114.1        380.4
    Equity affiliates' income                              24.5         25.3
    Interest expense                                       36.5         40.8
    INCOME FROM CONTINUING OPERATIONS BEFORE
     TAXES AND MINORITY INTEREST                          102.1        364.9
    Income tax provision                                    7.1         96.5
    Minority interest in earnings of subsidiary
     companies                                              5.0          6.1
    INCOME FROM CONTINUING OPERATIONS                      90.0        262.3
    INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
     Net of tax                                           (21.4)         1.4
    NET INCOME                                            $68.6       $263.7
    BASIC EARNINGS PER COMMON SHARE
      Income from continuing operations                    $.43        $1.22
      Income (loss) from discontinued operations           (.10)         .01
      Net Income                                           $.33        $1.23
    DILUTED EARNINGS PER COMMON SHARE
      Income from continuing operations                    $.42        $1.18
      Income (loss) from discontinued operations           (.10)         .01
      Net Income                                           $.32        $1.19
    WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING
     (in millions)                                        209.4        214.8
    WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING
     ASSUMING DILUTION (in millions)                      212.1        222.3
    DIVIDENDS DECLARED PER COMMON SHARE - Cash             $.44         $.38

    Other Data from Continuing Operations:
      Depreciation and amortization                      $200.6       $211.0
      Capital expenditures on a non-GAAP Basis (a)        332.9        323.7

    (a) See RECONCILIATION NON-GAAP MEASURE for reconciliation



                 AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
                        CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)

    (Millions of dollars)

                                                   31 December   30 September
                                                         2008          2008
    ASSETS
    CURRENT ASSETS
    Cash and cash items                                $118.5        $103.5
    Trade receivables, less allowances for
     doubtful accounts                                1,416.4       1,575.2
    Inventories and contracts in progress               665.1         655.7
    Prepaid expenses                                    115.8         107.7
    Other receivables and current assets                468.6         349.4
    Current assets of discontinued operations            49.0          56.6
    TOTAL CURRENT ASSETS INVESTMENTS IN NET
     ASSETS OF AND ADVANCES TO EQUITY AFFILIATES        763.3         822.6
    PLANT AND EQUIPMENT, at cost                     14,783.7      14,988.6
    Less accumulated depreciation                     8,324.7       8,373.8
    PLANT AND EQUIPMENT, net                          6,459.0       6,614.8
    GOODWILL                                            866.0         928.1
    INTANGIBLE ASSETS, net                              243.9         289.6
    NONCURRENT CAPITAL LEASE RECEIVABLES                519.0         505.3
    OTHER NONCURRENT ASSETS                             558.6         504.1
    NONCURRENT ASSETS OF DISCONTINUED OPERATIONS         10.4          58.7
    TOTAL ASSETS                                    $12,253.6     $12,571.3
    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
    Payables and accrued liabilities                 $1,578.6      $1,665.6
    Accrued income taxes                                 60.9          87.0
    Short-term borrowings and current portion
     of long-term debt                                  574.0         451.4
    Current liabilities of discontinued
     operations                                           8.4           8.0
    TOTAL CURRENT LIABILITIES                         2,221.9       2,212.0
    LONG-TERM DEBT                                    3,595.2       3,515.4
    DEFERRED INCOME & OTHER NONCURRENT
     LIABILITIES                                        966.2       1,049.2
    DEFERRED INCOME TAXES                               605.3         626.6
    NONCURRENT LIABILITIES OF DISCONTINUED
     OPERATIONS                                           1.0           1.2
    TOTAL LIABILITIES                                 7,389.6       7,404.4
    MINORITY INTEREST IN SUBSIDIARY COMPANIES           137.9         136.2
    TOTAL SHAREHOLDERS' EQUITY                        4,726.1       5,030.7
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $12,253.6     $12,571.3




                  AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (Unaudited)

    (Millions of dollars)

                                                         Three Months Ended
                                                            31 December
                                                         2008           2007
    OPERATING ACTIVITIES
      Net Income                                        $68.6         $263.7
      Adjustments to reconcile income to cash
       provided by operating activities:
        Depreciation and amortization                   200.6          211.0
        Impairment of assets                             32.1             --
        Loss on sale of discontinued operations            --             .4
        Impairment of assets of discontinued operations  48.7             --
        Deferred income taxes                             (.6)          20.8
        Undistributed earnings of unconsolidated
         affiliates                                     (10.9)          (7.2)
        Loss (gain) on sale of assets and investments     1.9           (6.2)
        Share-based compensation                         17.5           17.1
        Noncurrent capital lease receivables            (37.0)         (47.8)
        Pension and other postretirement costs           20.0           29.2
        Other                                           (25.6)         (57.2)
      Working capital changes that provided (used)
       cash, excluding effects of acquisitions and
       divestitures:
        Trade receivables                               101.7          (69.5)
        Inventories                                     (53.7)         (29.3)
        Contracts in progress                            (6.6)          47.0
        Other receivables                               (74.2)          43.2
        Payables and accrued liabilities                (42.9)         (93.1)
        Other                                           (40.4)          44.6
    CASH PROVIDED BY OPERATING ACTIVITIES (a)           199.2          366.7
    INVESTING ACTIVITIES
      Additions to plant and equipment                 (291.7)        (268.6)
      Acquisitions, less cash acquired                   (1.6)           (.2)
      Investment in and advances to unconsolidated
       affiliates                                         (.1)            --
      Proceeds from sale of assets and investments       18.9            8.8
      Proceeds from sale of discontinued operations        .9           69.3
      Change in restricted cash                         (31.7)        (135.7)
      Other                                                --           (7.9)
    CASH USED FOR INVESTING ACTIVITIES                 (305.3)        (334.3)
    FINANCING ACTIVITIES
      Long-term debt proceeds                           109.0          160.3
      Payments on long-term debt                        (41.4)         (41.2)
      Net increase in commercial paper and short-term
       borrowings                                       145.7          120.1
      Dividends paid to shareholders                    (92.1)         (81.9)
      Purchase of Treasury Stock                           --         (189.7)
      Proceeds from stock option exercises                1.1           33.0
      Excess tax benefit from share-based
       compensation/other                                  .6           21.3
     CASH PROVIDED BY FINANCING ACTIVITIES              122.9           21.9



                AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                  (Unaudited)

    (Millions of dollars)

                                                          Three Months Ended
                                                              31 December
                                                          2008           2007
    Effect of Exchange Rate Changes on Cash               (1.8)           1.7
    Increase in Cash and Cash Items                      $15.0          $56.0
    Cash and Cash Items - Beginning of Year              103.5           40.5
    Cash and Cash Items - End of Period

    Pension plan contributions                           $42.6          $69.8



                  AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


    (Millions of dollars)
    1. NEW ACCOUNTING STANDARDS
    Effective 1 October 2008, the Company adopted Statement of Financial
    Accounting Standard (SFAS) No. 157, "Fair Value Measurements," for
    financial assets and liabilities and any other assets and liabilities
    that are recognized and disclosed at fair value on a recurring basis.
    This Statement defines fair value, establishes a method for measuring
    fair value, and requires additional disclosures about fair value
    measurements.  Financial Accounting Standards Board Staff Position
    No. 157-2 delayed the adoption of SFAS No. 157 for other nonfinancial
    assets and liabilities until 1 October 2009 for the Company.  The
    adoption of SFAS No. 157 did not impact the Company's financial
    statements for assets and liabilities measured at fair value on a
    recurring basis.

    The Company adopted the early measurement date change of SFAS No. 158,
    "Employers' Accounting for Defined Benefit Pension and Other
    Postretirement Plans," for its U.K. and Belgium pension plans as of
    1 October 2008.  SFAS No. 158 required the Company to change the
    measurement date for these plans from 30 June to 30 September (end of
    fiscal year).  As a result of this change, pension expense and actuarial
    gains/losses for the three-month period ended 30 September 2008 were
    recognized as adjustments to retained earnings and Accumulated Other
    Comprehensive Income (AOCI), respectively.  The after-tax charge to
    retained earnings was $8.1.  AOCI was credited $35.8 for net actuarial
    gains on an after-tax basis.  These adjustments only affected the
    balance sheet.

    2. GLOBAL COST REDUCTION PLAN
    During the first quarter ended 31 December 2008, the Company announced a
    global cost reduction plan designed to lower its cost structure and
    better align its businesses to reflect rapidly declining economic
    conditions around the world.  The results from continuing operations
    included a charge of $174.2 ($116.1 after-tax, or $.55 per share) for
    this plan.  This charge included $120.0 for severance and pension costs.
    The Company will eliminate approximately 1,400 positions, or about seven
    percent of the Company's global workforce.  The reductions are targeted
    at reducing overhead and infrastructure costs, reducing and refocusing
    elements of the Company's technology and business development spending,
    and lowering its plant operating costs.  The remainder of the charge,
    $54.2, is for business exits and asset management actions.  Assets held
    for sale were written down to net realizable value and an environmental
    liability of $16.0 was recognized.  The planned actions are expected to
    be substantially completed within the next twelve months.

    3.  DISCONTINUED OPERATIONS
    The U.S. Healthcare business, Polymer Emulsions business, and the High
    Purity Process Chemicals (HPPC) business have been accounted for as
    discontinued operations.  The results of operations of these businesses
    have been removed from the results of continuing operations for all
    periods presented.  The balance sheet items of discontinued operations
    have been reclassified and are segregated in the consolidated balance
    sheets.

    For additional historical information on these discontinued operations,
    refer to the Company's 2008 annual report on Form 10-K.

    U.S. Healthcare
    In July 2008, the Board of Directors authorized management to pursue the
    sale of the U.S. Healthcare business.  During fiscal year 2008, the
    Company recorded a total charge of $329.2 ($246.2 after-tax, or $1.12
    per share) related to the impairment/write-down of the net carrying
    value of the U.S. Healthcare business. The Company anticipates selling
    this business in fiscal 2009 and is in active discussions with
    potential buyers.

    In December 2008, based on additional facts, the Company recorded an
    impairment charge of $48.7 ($30.9 after-tax, or $.15 per share)
    reflecting a revision in the estimated net realizable value of the U.S.
    Healthcare business.  Also, a tax benefit of $8.8, or $.04 per share,
    was recorded to revise the estimated tax benefit related to the
    impairment charges.

    Additional charges may be recorded in future periods dependent upon the
    timing and method of ultimate disposition.

    The operating results of the U.S. Healthcare business have been
    classified as discontinued operations and are summarized below:


                                                      Three Months Ended
                                                         31 December
                                                      2008         2007
    Sales                                            $48.2        $66.2

    Income (loss) before taxes                        $1.1        $(8.5)
    Income tax provision (benefit)                      .4         (3.2)
    Income (loss) from operations of discontinued
     operations                                        $.7        $(5.3)
    Impairment/write-down to estimated net
     realizable value, net of tax                    (22.1)          --
    Income (loss) from discontinued operations,
     net of tax                                     $(21.4)       $(5.3)


    Polymer Emulsions Business
    In the first quarter of fiscal year 2008, the Polymer Emulsions business
    generated sales of $151.2 and income, net of tax, of $6.8.  The Company
    completed the sale of its Polymer Emulsions business in fiscal year 2008.

    HPPC Business
    In the first quarter of fiscal year 2008, the HPPC business generated
    sales of $22.9 and income, net of tax, of $.2.   The Company closed on the
    sale of its HPPC business on 31 December 2007.

    4.  CUSTOMER BANKRUPTCY
    On 6 January 2009, a major customer of the Company began operating under
    Chapter 11 bankruptcy protection.  This customer receives product
    principally from the Tonnage Gases segment.   At 31 December 2008, the
    Company had outstanding net trade receivables with the customer of
    $35.7. At this time, the Company is not able to reasonably estimate its
    exposure related to this customer, if any.  As such, the Company did not
    recognize any charges associated with this bankruptcy as of 31 December
    2008.


                    AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
                              SUMMARY BY BUSINESS SEGMENTS
                                       (Unaudited)

    (Millions of dollars)

                                                Three Months Ended
                                                    31 December
                                                 2008          2007
    Revenues from external customers
      Merchant Gases                           $925.2      $1,001.7
      Tonnage Gases                             744.0         791.1
      Electronics and Performance
       Materials                                406.6         514.3
      Equipment and Energy                      119.5         100.3
    Segment and Consolidated Totals          $2,195.3      $2,407.4

    Operating income
      Merchant Gases                           $170.5        $199.8
      Tonnage Gases                             108.8         111.1
      Electronics and Performance
       Materials                                 24.6          66.0
      Equipment and Energy                        7.0           9.3
    Segment Totals                              310.9         386.2
      Global cost reduction plan               (174.2)           --
      Pension settlement                           --          (1.4)
      Other                                     (22.6)         (4.4)
    Consolidated Totals                        $114.1        $380.4


    (Millions of dollars)
                                           31 December   30 September
                                                 2008          2008
    Identifiable assets (a)
      Merchant Gases                         $4,647.7      $4,881.6
      Tonnage Gases                           3,270.5       3,335.4
      Electronics and Performance
       Materials                              2,220.4       2,341.0
      Equipment and Energy                      324.3         300.2
    Segment Totals                           10,462.9      10,858.2
      Other                                     968.0         775.2
      Discontinued operations                    59.4         115.3
    Consolidated Totals                     $11,490.3     $11,748.7

    (a) Identifiable assets are equal to total assets less investments in
        and advances to equity affiliates.


                                  RECONCILIATION
                                 NON-GAAP MEASURE

    The Company utilizes a non-GAAP measure in the computation of capital
    expenditures and includes spending associated with facilities accounted
    for as capital leases.  Certain facilities that 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.  The presentation of this non-GAAP measure is
    intended to enhance the usefulness of information by providing a measure
    which the Company's management uses internally to evaluate and manage
    the Company's capital expenditures.

    Presented below is a reconciliation of capital expenditures on a GAAP
    basis to a non-GAAP measure.


                                                      Three Months Ended
                                                         31 December
                                                      2008        2007
    Capital expenditures - GAAP basis               $293.4      $268.8
    Capital lease expenditures under EITF No. 01-08   39.5        54.9
    Capital Expenditures - non-GAAP basis           $332.9      $323.7

SOURCE  Air Products
    -0-                           01/21/2009
    /CONTACT:  Media Inquiries: Katie McDonald, +1-610-481-3673,
mcdonace@airproducts.com; Investor Inquiries: Nelson Squires, +1-610-481-7461,
squirenj@airproducts.com, both of Air Products/
    /Web Site:  http://www.airproducts.com /
    (APD)

CO:  Air Products
ST:  Pennsylvania
IN:  CHM
SU:  ERN CCA ERP

PR
-- PH60695 --
4495 01/21/200906:00 ESThttp://www.prnewswire.com

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