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Air Products Reports Fiscal Q4 EPS from Continuing Operations of $1.14

Oct 21, 2009

LEHIGH VALLEY, Pa., Oct. 21 /PRNewswire-FirstCall/ --

Access the Q4 earnings teleconference scheduled for 10:00 a.m. Eastern Daylight Savings Time on October 21 by calling (719) 325-4755 and entering passcode 2295468, or listen on the Web at www.airproducts.com/Invest/financialnews/Earnings_Releases/Teleconference.htm.

Highlights:

    --  Sales grew eight percent sequentially on volume growth in all businesses
    --  Signed three significant Tonnage contracts in the quarter
    --  Completed U.S. Healthcare business divestiture

    --  Fiscal 2010 outlook: 15 to 21 percent earnings growth on a continuing
        operations basis

Air Products (NYSE: APD) today reported income from continuing operations of $246 million, or diluted earnings per share (EPS) of $1.14, for its fiscal 2009 fourth quarter versus $273 million and $1.26, respectively, for the fourth quarter of fiscal 2008.

Fourth quarter revenues of $2,129 million declined 22 percent versus prior year. Lower energy and raw material cost pass-throughs and unfavorable currency impacted sales by 12 percent and three percent, respectively. Underlying sales declined seven percent on lower volumes in the Merchant Gases, and Electronic and Performance Materials segments, and lower pricing in Electronics and Performance Materials. Sequentially, sales were up eight percent, seven percent on an underlying basis. Operating income of $328 million declined 12 percent on lower volumes and unfavorable currency, partially offset by cost reduction actions. Sequentially, operating income increased seven percent, primarily on improved volumes.

The following discussion of 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.

For fiscal 2009, sales of $8,256 million declined 21 percent on lower volumes, lower energy and raw material cost pass-throughs and unfavorable currency. Underlying sales declined eight percent. Operating income of $1,185 million was down 22 percent, and diluted EPS of $4.06 declined 20 percent from the prior year.

John McGlade, chairman, president and chief executive officer, said, "The beginning of our fiscal 2009 coincided with the start of the global financial crisis, driving the recession that resulted in unprecedented declines in demand for our products worldwide. While this affected our fiscal year results, we were able to offset some of the decline with aggressive cost controls. Sequentially, we are seeing volume improvement in all our businesses, and our actions to move to a sustainable, low-cost structure have positioned us to capitalize on growth as our markets recover."

Fourth Quarter Segment Performance

    --  Merchant Gases sales of $932 million declined 15 percent from the prior
        year on weaker volumes across manufacturing end-markets globally and
        unfavorable currency, partially offset by favorable pricing.
        Sequentially, sales increased six percent on three percent higher
        volumes from improved demand in most geographies. Operating income of
        $166 million declined 16 percent from the prior year on lower volumes
        and unfavorable currency, partially offset by favorable pricing.

    --  Tonnage Gases sales of $640 million were down 32 percent from the prior
        year on lower energy and raw material cost pass-throughs. Sales and
        volumes were up 13 percent sequentially on stronger demand from
        chemical, refinery and steel customers. Operating income of $105 million
        decreased 22 percent from the prior year on lower operating efficiencies
        and unfavorable currency.

    --  Electronics and Performance Materials sales of $434 million declined 22
        percent, primarily on lower volumes and Electronics pricing. Operating
        income of $49 million increased 17 percent from the prior year as
        favorable cost performance offset volume declines and lower Electronics
        pricing. While year-on-year Electronics sales were down 27 percent,
        sales increased three percent sequentially due to improved customer
        operating rates. Performance Materials volumes improved nine percent
        sequentially, reflecting seasonal improvement and stronger Asia sales,
        but declined 10 percent from the prior year on weaker demand from
        coatings, autos, housing and other end markets.

    --  Equipment and Energy sales of $123 million declined three percent from
        the prior year. Operating income of $6 million decreased from the prior
        year on lower sales and higher Energy development costs.

Outlook

Looking forward, McGlade said, "We have implemented the difficult but necessary actions to take advantage of our strong global market positions. Additionally, we see significant future opportunities in the evolving energy, environment and emerging market sectors. We also continue to drive to a low-cost structure to enable us to grow faster than our competition. While the pace of the recovery is unknown, our people remain committed to achieving our margin, return and growth goals."

The company today announced initial guidance for fiscal year 2010 EPS in the range of $4.65 to $4.90 per share, representing year-over-year earnings growth on a continuing operations basis of 15 to 21 percent. For the first quarter of fiscal 2010 ending December 31, 2009, EPS is expected to be between $1.07 and $1.15 per share.

The company also announced that it expects capital spending in fiscal 2010 to be between $1.3 and $1.5 billion, approximately equal to fiscal 2009.

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 2009, Air Products had revenues of $8.3 billion, operations in over 40 countries, and 18,900 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, including earnings guidance. These forward-looking statements are based on management's reasonable expectations and assumptions as of the date of this press release. 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, longer than anticipated delay in global economic recovery; renewed 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; 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 and Form 10-Q for the quarter ended December 31, 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 is a reconciliation of reported GAAP
    results to non-GAAP measures.

    (Millions of dollars,                              YTD
    except for share data)         ------------------------------------------
                                                        Continuing Operations
                                                        ---------------------
                                   Operating Income     Income   Diluted EPS
                                   ------------------------------------------
    2009 GAAP                                $846.3     $639.9         $3.00
    2008 GAAP                               1,495.8    1,090.5          4.97
    ---------                               -------    -------          ----
    % Change GAAP                               (43)%      (41)%         (40)%
    =============                               ===        ===           ===

    2009 GAAP                                $846.3     $639.9         $3.00
    Global cost reduction plan                298.2      200.3           .94
    Customer bankruptcy and asset
     actions                                   32.1       21.0           .10
    Pension settlement                          8.0        5.0           .02
    ------------------                          ---        ---           ---
    2009 Non-GAAP Measure                  $1,184.6     $866.2         $4.06
    =====================                  ========     ======         =====

    2008 GAAP                              $1,495.8   $1,090.5         $4.97
    Pension settlement                         26.3       16.5           .08
    ------------------                         ----       ----           ---
    2008 Non-GAAP Measure                  $1,522.1   $1,107.0         $5.05
    =====================                  ========   ========         =====

    -------------------------                   ---        ---           ---
    % Change Non-GAAP Measure                   (22)%      (22)%         (20)%
    =========================                   ===        ===           ===

    2010 Forecast                                                $4.65-$4.90
    2009 GAAP                                                          $3.00
    ---------                                                          -----
    % Change GAAP                                                   55% - 63%
    =============                                                   ========

    2010 Forecast                                                $4.65-$4.90
    2009 Non-GAAP Measure                                              $4.06
    ---------------------                                              -----
    % Change  Non-GAAP Measure                                      15% - 21%
    ==========================                                      ========


                                         QTR
                                   Operating Income
                                   ----------------
    2009 Q4 GAAP                             $328.0
    2009 Q3 GAAP                              143.8
    ------------                              -----
    % Change GAAP                               128%
    =============                               ===

    2009 Q3 GAAP                             $143.8
    Global cost reduction plan                124.0
    Customer bankruptcy and asset
     actions                                   32.1
    Pension settlement                          8.0
    ------------------                          ---
    2009 Q3 Non-GAAP Measure                 $307.9
    ========================                 ======

    -------------------------                   ---
    % Change Non-GAAP Measure                     7%
    -------------------------                   ---



    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 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 2009 Actual    YTD 2010 Forecast
                                       ---------------    -----------------
    Capital expenditures - GAAP basis          $1,236     $1,000 to $1,200
    Capital lease expenditures                    239                  300
    --------------------------                    ---                  ---
    Capital Expenditures - Non-GAAP
     basis                                     $1,475     $1,300 to $1,500
    ===============================            ======     ================



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

                                      Three Months           Twelve Months
                                         Ended                   Ended
    (Millions of dollars,             30 September            30 September
     except for share data)         2009        2008        2009         2008
    ----------------------          ----        ----        ----         ----
    SALES                       $2,129.3    $2,714.7    $8,256.2    $10,414.5
    Cost of sales                1,545.0     2,026.8     6,042.1      7,693.1
    Selling and administrative     233.5       275.4       943.4      1,090.4
    Research and development        29.4        33.0       116.3        130.7
    Global cost reduction plan         -           -       298.2
    Customer bankruptcy                -           -        22.2            -
    Pension settlement               2.7         1.6        10.7         30.3
    Other (income) expense, net     (9.3)        4.8       (23.0)       (25.8)
    ---------------------------     ----         ---       -----        -----
    OPERATING INCOME               328.0       373.1       846.3      1,495.8
    Equity affiliates' income       32.2        30.8       112.2        145.0
    Interest expense                27.9        42.8       121.9        162.0
    ----------------                ----        ----       -----        -----
    INCOME FROM CONTINUING
     OPERATIONS BEFORE TAXES
     AND MINORITY INTEREST         332.3       361.1       836.6      1,478.8
    Income tax provision            86.3        82.9       185.3        365.3
    Minority interest in earnings
     of subsidiary companies           -         4.8        11.4         23.0
    -----------------------------    ---         ---        ----         ----
    INCOME FROM CONTINUING
     OPERATIONS                    246.0       273.4       639.9      1,090.5
    LOSS FROM DISCONTINUED
     OPERATIONS, net of tax         (2.1)      (11.8)       (8.6)      (180.8)
    NET INCOME                    $243.9      $261.6      $631.3       $909.7
    ==========                    ======      ======      ======       ======
    BASIC EARNINGS PER COMMON
     SHARE
      Income from continuing
       operations                  $1.17       $1.30       $3.05        $5.14
      Loss from discontinued
       operations                   (.01)       (.06)       (.04)        (.85)
      ----------------------        ----        ----        ----         ----
      Net Income                   $1.16       $1.24       $3.01        $4.29
      ----------                   -----       -----       -----        -----
    DILUTED EARNINGS PER COMMON
     SHARE
      Income from continuing
       operations                  $1.14       $1.26       $3.00        $4.97
      Loss from discontinued
       operations                   (.01)       (.05)       (.04)        (.82)
      ----------------------        ----        ----        ----         ----
      Net Income                   $1.13       $1.21       $2.96        $4.15
      ----------                   -----       -----       -----        -----
    WEIGHTED AVERAGE OF COMMON
     SHARES OUTSTANDING
     (in millions)                 210.6       210.6       209.9        212.2
    --------------------------     -----       -----       -----        -----
    WEIGHTED AVERAGE OF COMMON
     SHARES OUTSTANDING ASSUMING
     DILUTION (in millions)        215.7       216.9       213.5        219.2
    ----------------------------   -----       -----       -----        -----
    DIVIDENDS DECLARED PER
     COMMON SHARE - Cash            $.45        $.44       $1.79        $1.70
    ----------------------          ----        ----       -----        -----
    Other Data from Continuing
     Operations:
    Depreciation and amortization $225.5      $221.2      $840.3       $869.0
    Capital expenditures on a
     non-GAAP Basis (a)            433.1       406.7     1,474.9      1,355.0

    (a) See page 14 for reconciliation



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

                                                  30 September  30 September
    (Millions of dollars)                                 2009          2008
    --------------------                                  ----          ----
    ASSETS
    ------
    CURRENT ASSETS
    Cash and cash items                                 $488.2        $103.5
    Trade receivables, less allowances for
     doubtful accounts                                 1,363.2       1,575.2
    Inventories                                          509.6         503.7
    Contracts in progress, less progress
     billings                                            132.3         152.0
    Prepaid expenses                                     115.1         107.7
    Other receivables and current assets                 422.8         349.4
    Current assets of discontinued operations              5.0          56.6
    -----------------------------------------              ---          ----
    TOTAL CURRENT ASSETS                               3,036.2       2,848.1
    --------------------                               -------       -------
    INVESTMENT IN NET ASSETS OF AND ADVANCES TO
      EQUITY AFFILIATES                                  868.1         822.6
    PLANT AND EQUIPMENT, at cost                      15,751.3      14,988.6
    Less accumulated depreciation                      8,891.7       8,373.8
    -----------------------------                      -------       -------
    PLANT AND EQUIPMENT, net                           6,859.6       6,614.8
    ------------------------                           -------       -------
    GOODWILL                                             916.0         928.1
    INTANGIBLE ASSETS, net                               262.6         289.6
    NONCURRENT CAPITAL LEASE RECEIVABLES                 687.0         505.3
    OTHER NONCURRENT ASSETS                              450.0         504.1
    NONCURRENT ASSETS OF DISCONTINUED OPERATIONS             -          58.7
    --------------------------------------------           ---          ----
    TOTAL ASSETS                                     $13,079.5     $12,571.3
    ============                                     =========     =========

    LIABILITIES AND SHAREHOLDERS' EQUITY
    ------------------------------------
    CURRENT LIABILITIES
    Payables and accrued liabilities                  $1,608.2      $1,665.6
    Accrued income taxes                                  42.9          87.0
    Short-term borrowings                                333.8         419.3
    Current portion of long-term debt                    452.1          32.1
    Current liabilities of discontinued
     operations                                           14.4           8.0
    -----------------------------------                   ----           ---
    TOTAL CURRENT LIABILITIES                          2,451.4       2,212.0
    -------------------------                          -------       -------
    LONG-TERM DEBT                                     3,715.6       3,515.4
    DEFERRED INCOME & OTHER NONCURRENT
     LIABILITIES                                       1,574.2       1,049.2
    DEFERRED INCOME TAXES                                408.3         626.6
    NONCURRENT LIABILITIES OF DISCONTINUED
     OPERATIONS                                              -           1.2
    --------------------------------------                 ---           ---
    TOTAL LIABILITIES                                  8,149.5       7,404.4
    -----------------                                  -------       -------
    MINORITY INTEREST IN SUBSIDIARY COMPANIES            138.1         136.2
    -----------------------------------------            -----         -----
    TOTAL SHAREHOLDERS' EQUITY                         4,791.9       5,030.7
    --------------------------                         -------       -------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       $13,079.5     $12,571.3
    ==========================================       =========     =========



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

                                                         Twelve Months Ended
                                                            30 September
    (Millions of dollars)                                  2009        2008
    --------------------                                   ----        ----
    OPERATING ACTIVITIES
      Net income                                         $631.3      $909.7
      Adjustments to reconcile income to cash
       provided by operating activities:
        Depreciation and amortization                     840.3       869.0
        Impairment of assets of continuing operations      69.2           -
        Impairment of assets of discontinued
         operations                                        49.5       314.8
        Gain on sale of discontinued operations            (2.1)     (105.9)
        Deferred income taxes                             (37.0)       36.9
        Customer bankruptcy                                22.2           -
        Undistributed earnings of unconsolidated
         affiliates                                       (58.0)      (77.8)
        Loss on sale of assets and investments              3.6          .3
        Share-based compensation                           60.4        61.4
      Noncurrent capital lease receivables               (186.7)     (192.6)
       Other adjustments                                   (7.8)        2.9
      Working capital changes that provided (used)
       cash, excluding effects of acquisitions and
       divestitures:
        Trade receivables                                 159.0       (97.4)
        Inventories                                       (17.7)      (34.9)
        Contracts in progress                              12.5        95.2
        Other receivables                                 (11.9)     (120.6)
        Payables and accrued liabilities                 (282.8)       36.2
        Other working capital                              78.9       (17.6)
        ---------------------                              ----       -----
    CASH PROVIDED BY OPERATING ACTIVITIES (a)           1,322.9     1,679.6
    ----------------------------------------            -------     -------
    INVESTING ACTIVITIES
      Additions to plant and equipment                 (1,179.1)   (1,085.1)
      Acquisitions, less cash acquired                    (32.7)      (72.0)
      Investment in and advances to unconsolidated
       affiliates                                         (24.5)       (2.2)
      Proceeds from sale of assets and investments         57.9        19.6
      Proceeds from sale of discontinued operations        51.0       423.0
      Change in restricted cash                            87.0      (183.6)
      Other investing activities                              -       (19.5)
      --------------------------                            ---       -----
    CASH USED FOR INVESTING ACTIVITIES                 (1,040.4)     (919.8)
    ----------------------------------                 --------      ------
    FINANCING ACTIVITIES
      Long-term debt proceeds                             610.5       580.1
      Payments on long-term debt                          (82.9)      (95.7)
      Net decrease in commercial paper and
       short-term borrowings                             (122.7)     (178.9)
      Dividends paid to shareholders                     (373.3)     (349.3)
      Purchase of treasury stock                             --      (793.4)
      Proceeds from stock option exercises                 54.4        87.4
      Excess tax benefit from share-based
       compensation/other                                  15.5        51.3
      -----------------------------------                  ----        ----
    CASH PROVIDED BY (USED FOR) FINANCING
     ACTIVITIES                                           101.5      (698.5)
    -------------------------------------                 -----      ------
    Effect of Exchange Rate Changes on Cash                  .7         1.7
    ---------------------------------------                  --         ---
    Increase in Cash and Cash Items                       384.7        63.0
    Cash and Cash Items - Beginning of Year               103.5        40.5
    ---------------------------------------               -----        ----
    Cash and Cash Items - End of Period                  $488.2      $103.5
    ===================================                  ======      ======

    (a) Pension plan contributions                       $182.5      $234.0

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Millions of dollars)

1. GLOBAL COST REDUCTION PLAN

The 2009 results from continuing operations included a total charge of $298.2 ($200.3 after-tax, or $.94 per share) for the global cost reduction plan. In the first quarter 2009, the Company announced the 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 first quarter results included a charge of $174.2 ($116.1 after-tax, or $.55 per share). In the third quarter 2009, due to the continuing slow economic recovery, the Company committed to additional actions associated with its global cost reduction plan which resulted in a charge of $124.0 ($84.2 after-tax, or $.39 per share).

The total 2009 charge included $210.0 for severance and other benefits, including pension-related costs, associated with the elimination of approximately 2,550 positions from its 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, lowering its plant operating costs, and the closure of certain manufacturing facilities. The remainder of this charge, $88.2, was 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. This environmental liability resulted from a decision to sell a production facility.

The planned actions associated with the global cost reduction plan are expected to be substantially completed within one year of when the related charges were recognized.

2. 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.

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. In 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.

In the first quarter of 2009, 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 previously recognized impairment charges.

As a result of events which occurred during the second quarter of 2009, which increased the Company's ability to realize tax benefits associated with the impairment charges recorded in 2008, the Company recognized a one-time tax benefit of $16.7, or $.08 per share.

During the third quarter of 2009, the Company sold more than half of its remaining U.S. Healthcare business to OptionCare Enterprises, Inc., a subsidiary of Walgreen Co., and Landauer-Metropolitan, Inc. (LMI) for cash proceeds of $38.1. The Company recognized an after-tax gain of $.3 resulting from these sales combined with adjustments to the net realizable value of the remaining businesses.

During the fourth quarter of 2009, through a series of transactions with Rotech Healthcare, Inc. and with LMI, the Company sold its remaining U.S. Healthcare business for cash proceeds of $12.1. A net after-tax loss of $.7 was recognized. These transactions completed the disposal of the U.S. Healthcare business.

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


                                              Three Months   Twelve Months
                                                 Ended           Ended
                                               30 September   30 September
                                              2009    2008    2009     2008
                                              ----    ----    ----     ----
    Sales                                     $7.9   $52.7  $125.2   $239.8

    Loss before taxes                        $(2.3)  $(5.2)  $(5.5) $(350.6)
     Income tax benefit                        (.9)   (1.9)   (2.1)   (91.2)
     ------------------                        ---    ----    ----    -----
    Loss from operations of discontinued
     operations                              $(1.4)  $(3.3)  $(3.4) $(259.4)
     Loss on sale of businesses and
      impairment/write-down to estimated net
      realizable value, net of tax
     ---------------------------------------   (.7)   (8.7)   (5.5)    (8.7)
                                               ---    ----    ----     ----
    Loss from discontinued operations, net
     of tax                                  $(2.1) $(12.0)  $(8.9) $(268.1)
    ======================================   =====  ======   =====  =======

Polymer Emulsions Business

On 31 January 2008, the Company closed on the sale of its interest in its vinyl acetate ethylene (VAE) polymers joint ventures to Wacker Chemie AG, its long-time joint venture partner. As part of that agreement, the Company received Wacker Chemie AG's interest in the Elkton, Md. and Piedmont, S.C. production facilities. The Company recognized a gain on the sale of $89.5 ($57.7 after-tax).

On 30 June 2008, the Company sold its Elkton, Md. and Piedmont, S.C. production facilities and the related North American atmospheric emulsions and global pressure sensitive adhesives businesses to Ashland Inc. The Company recorded a gain of $30.5 ($18.5 after-tax) in connection with the sale, which included the recording of a retained environmental obligation associated with the Piedmont site. The sale of the Elkton and Piedmont facilities completed the disposal of the Company's Polymer Emulsions business.

The operating results of the Polymer Emulsions business have been classified as discontinued operations and are summarized below:


                                          Three Months    Twelve Months
                                             Ended            Ended
                                          30 September     30 September
                                         2009       2008  2009       2008
                                         ----       ----  ----       ----
    Sales                                  $-         $-    $-     $261.4

    Income before taxes                    $-        $.2    $-      $17.7
    Income tax provision                   --         .1    --        6.4
    --------------------                              --              ---
     Income from operations of
      discontinued operations              $-        $.1    $-      $11.3
    Gain on sale of business, net of
     tax                                    -          -    .3       76.2
    --------------------------------       --         --    --       ----
    Income from discontinued
      operations, net of tax               $-        $.1   $.3      $87.5
    ========================               ==        ===   ===      =====

3. CUSTOMER BANKRUPTCY AND ASSET ACTIONS

As a result of events which occurred during the third quarter of 2009, the Company recognized a $22.2 charge primarily for the write-off of certain receivables due to a customer bankruptcy. This customer, who principally receives product from the Tonnage Gases segment, began operating under Chapter 11 bankruptcy protection on 6 January 2009. Sales and operating income associated with this customer are not material to the Tonnage Gases segment's results. At 30 September 2009, the Company had remaining outstanding receivables with the customer of $16.3. At the present time, the Company does not expect to recognize additional charges related to this customer.

Additionally, during the third quarter of 2009, the Company recorded a charge of $9.9 for other asset actions which consisted of the closure of certain manufacturing facilities. This charge was reflected in cost of sales on the consolidated income statement. The customer bankruptcy charge combined with this asset write-down resulted in a total charge of $32.1 ($21.0 after-tax, or $.10 per share).

4. PENSION SETTLEMENT

The Company's supplemental pension plan provides for a lump sum benefit payment option at the time of retirement, or for corporate officers six months after the participant's retirement date. The Company recognizes pension settlements when payments exceed the sum of service and interest cost components of net periodic pension cost of the plan for the fiscal year. A settlement loss is recognized when the pension obligation is settled. Based on the timing of when cash payments were made, the Company recognized $2.7 and $10.7 ($6.7 after-tax, or $.03 per share) of settlement charges for the three and twelve months ended 30 September 2009, respectively. For the three and twelve months ended 30 September 2008, the Company recognized $1.6 and $30.3 ($18.9 after-tax, or $.09 per share) of settlement charges, respectively.

5. LOSS FROM PROPERTY DAMAGE

In the fourth quarter of 2008, a fire at the Company's Ulsan, Korea nitrogen trifluoride (NF3) production facility required the plant to be shut down. Other income (expense) for the three and twelve months ended 30 September 2008 included a net loss of $14.7 ($10.7 after-tax, or $.05 per share) related to property damage. The net book value of the damaged property was written off and a receivable was recorded for expected property damage insurance recoveries.

During fiscal 2009, the Company received the expected insurance recoveries for property damage of $3.7. Additionally, the Company recorded other income of $4.9 ($3.1 after-tax, or $.01 per share) comprised of $2.3 for the receipt of additional proceeds from a business interruption claim and a $2.6 adjustment to the book value of the damaged property.

6. HURRICANES

During the fourth quarter of 2008, Hurricanes Gustav and Ike reduced short-term demand from the U.S. Gulf Coast customers and drove temporary decreases in operational costs. The net impact on fourth quarter diluted earnings per share was $.05.

7. SUMMARY BY BUSINESS SEGMENT


                                           Three Months       Twelve Months
                                              Ended                Ended
                                           30 September        30 September
                                          2009      2008      2009       2008
                                          ----      ----      ----       ----
    Revenues from External Customers
      Merchant Gases                    $932.4  $1,095.0  $3,610.6   $4,192.7
      Tonnage Gases                      640.0     940.3   2,573.6    3,574.4
      Electronics and Performance
       Materials                         434.2     553.2   1,582.2    2,209.3
      Equipment and Energy               122.7     126.2     489.8      438.1
      --------------------               -----     -----     -----      -----
    Segment and Consolidated Totals   $2,129.3  $2,714.7  $8,256.2  $10,414.5
    -------------------------------   --------  --------  --------  ---------

    Operating Income
      Merchant Gases                    $165.7    $196.2    $661.2     $789.5
      Tonnage Gases                      105.2     134.9     399.6      482.6
      Electronics and Performance
       Materials                          49.1      41.9     101.6      245.9
      Equipment and Energy                 5.8      15.6      42.2       38.9
      --------------------                 ---      ----      ----       ----
    Segment Totals                      $325.8    $388.6  $1,204.6   $1,556.9
      Global cost reduction plan             -         -    (298.2)         -
      Customer bankruptcy and asset
       actions                               -         -     (32.1)         -
      Pension settlement                  (2.7)     (1.6)    (10.7)     (30.3)
      Other                                4.9     (13.9)    (17.3)     (30.8)
      -----                                ---     -----     -----      -----
    Consolidated Total                  $328.0    $373.1    $846.3   $1,495.8
    ------------------                  ------    ------    ------   --------


                                                  30 September   30 September
                                                          2009           2008
                                                          ----           ----
    Identifiable Assets (a)
      Merchant Gases                                  $4,917.0       $4,881.6
      Tonnage Gases                                    3,597.8        3,335.4
      Electronics and Performance Materials            2,249.5        2,341.0
      Equipment and Energy                               303.3          300.2
      --------------------                               -----          -----
    Segment Totals                                   $11,067.6      $10,858.2
      Other                                            1,138.8          775.2
      Discontinued Operations                              5.0          115.3
      -----------------------                              ---          -----
    Consolidated Total                               $12,211.4      $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 required to be accounted for as capital leases 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.

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


                                         Three Months        Twelve Months
                                            Ended                Ended
                                         30 September        30 September
    (Millions of dollars)               2009       2008     2009       2008
    --------------------                ----       ----     ----       ----
    Capital expenditures - GAAP
     basis                            $306.1     $364.1 $1,236.3   $1,159.3
    Capital lease expenditures         127.0       42.6    238.6      195.7
    --------------------------         -----       ----    -----      -----
    Capital expenditures - non-GAAP
     basis                            $433.1     $406.7 $1,474.9   $1,355.0
    -------------------------------   ------     ------ --------   --------

SOURCE Air Products

Media Inquiries, Robert Brown, +1-610-481-1192, brownrf@airproducts.com; Investors, Nelson Squires, +1-610-481-7461, squirenj@airproducts.com

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Investor Contact
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