What changed in this filing

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Item 1. Business

2021-11-18 compared with 2020-11-19 · 68 added, 42 removed, 124 unchanged (47% of the section changed)

Air Products and Chemicals, Inc., a Delaware corporation originally founded in 1940, serves customers globally with a unique portfolio of products, services, and solutions that include atmospheric gases, process and specialty gases, equipment, and services.

Focused on serving energy, environment and emerging markets, we provide essential industrial gases, related equipment, and applications expertise to customers in dozens of industries, including refining, chemicals, metals, electronics, manufacturing, and food and beverage.

We are the world’s largest supplier of hydrogen and have built leading positions in growth markets such as helium and liquefied natural gas ("LNG") process technology and equipment.

We also develop, engineer, build, own and operate some of the world’s largest industrial gas projects, including gasification projects that sustainably convert abundant natural resources into syngas for the production of high-value power, fuels and chemicals, carbon capture projects, and world-scale carbon-free hydrogen projects supporting global transportation and the energy transition.

We develop, engineer, build, own, and operate some of the world’s largest industrial gas projects, including gasification projects that sustainably convert abundant natural resources into syngas for the production of high-value power, fuels, and chemicals and are developing carbon capture projects and world-scale low carbon and carbon-free hydrogen projects that will support global transportation and energy transition away from fossil fuels.

As used in this report, unless the context indicates otherwise, the terms “we,” “our,” “us,” the “Company,” "Air Products," or “registrant” include controlled subsidiaries, affiliates, and predecessors of Air Products and our controlled subsidiaries and affiliates.

Except as otherwise noted, the description of our business below reflects our continuing operations.

Refer to Note 5, Discontinued Operations , to the consolidated financial statements for activity associated with discontinued operations.

During the fiscal year ended 30 September 2021 (“fiscal year 2021”), we reported our continuing operations in five reporting segments under which we managed our operations, assessed performance, and reported earnings:

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and Corporate and other.

Except as otherwise noted, the description of our business below reflects our continuing operations.

Refer to Note 6, Discontinued Operations , to the consolidated financial statements for activity associated with discontinued operations.

The discussion that follows is based on those operations.

Refer to Note 23, Business Segment and Geographic Information , to the consolidated financial statements for additional details on our reportable business segments.

On 4 November 2021, we announced the reorganization of our industrial gases segments effective 1 October 2021.

Refer to Note 24, Subsequent Events , for additional information.

Industrial Gases Business

Our Industrial Gases business produces atmospheric gases, such as oxygen, nitrogen, and argon, process gases, such as hydrogen, helium, carbon dioxide (CO 2 ), carbon monoxide, and syngas, and specialty gases.

Our Industrial Gases business produces atmospheric gases, such as oxygen, nitrogen, and argon;

process gases, such as hydrogen, helium, carbon dioxide (CO 2 ), carbon monoxide, and syngas;

and specialty gases.

Atmospheric gases are produced through various air separation processes, of which cryogenic is the most prevalent.

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Hydrogen is produced by purifying byproduct sources obtained from the chemical and petrochemical industries.

and helium is produced as a byproduct of gases extracted from underground reservoirs, primarily natural gas, but also CO 2 purified before resale.

Helium is produced as a byproduct of gases extracted from underground reservoirs, primarily natural gas, but also CO 2 purified before resale.

The Industrial Gases business also develops, builds, and operates equipment for the production or processing of gases, such as air separation units and non-cryogenic generators.

Our Industrial Gases business is organized and operated regionally.

The regional Industrial Gases segments (Americas, EMEA, and Asia) supply gases and related equipment in the relevant region to diversified customers in many industries, including those in refining, chemical, gasification, metals, electronics, manufacturing, and food and beverage.

Hydrogen is used by refiners to facilitate the conversion of heavy crude feedstock and lower the sulfur content of gasoline and diesel fuels as well as in the developing mobility markets.

The regional Industrial Gases segments supply gases, related equipment, and applications in the relevant region to diversified customers in many industries, including those in refining, chemicals, metals, electronics, manufacturing, and food and beverage.

Hydrogen is used by refiners to facilitate the conversion of heavy crude feedstock and lower the sulfur content of gasoline and diesel fuels, as well as in the developing hydrogen-for-mobility markets.

We have hydrogen fueling stations that support commercial markets in California and Japan as well as demonstration projects in Europe, Saudi Arabia, and other parts of Asia.

The chemicals industry uses hydrogen, oxygen, nitrogen, carbon monoxide, and syngas as feedstocks in the production of many basic chemicals.

The energy production industry uses nitrogen injection for enhanced recovery of oil and natural gas and oxygen for gasification.

Oxygen is used in combustion and industrial heating applications, including in the gasification, steel, certain nonferrous metals, glass, and cement industries.

Nitrogen applications are used in food processing for freezing and preserving flavor and nitrogen for inerting is used in various fields, including the metals, chemical, and semiconductor industries.

Oxygen is used in combustion and industrial heating applications, including in the steel, certain nonferrous metals, glass, and cement industries.

Nitrogen applications are used in food processing for freezing and preserving flavor, and nitrogen is used for inerting in various fields, including the metals, chemical, and semiconductor industries.

Helium is used in laboratories and healthcare for cooling and in other industries for pressurizing, purging, and lifting.

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Helium, however, is generally sourced globally, at long distances from point of sale.

As a result, we maintain an inventory of helium stored in our fleet of ISO containers as well as the U.S.

As a result, we maintain an inventory of helium stored in our fleet of ISO containers as well as at the U.S.

Bureau of Land Management underground storage facility in Amarillo, Texas.

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In the United States, our packaged gas business sells products (principally helium) only for the electronics and magnetic resonance imaging industries.

• On-Site Gases — Large quantities of hydrogen, nitrogen, oxygen, carbon monoxide, and syngas (a mixture of hydrogen and carbon monoxide) are provided to customers, principally in the energy production and refining, chemical, gasification, and metals industries worldwide, that require large volumes of gases and have relatively constant demand.

Gases are produced at large facilities located adjacent to customers’ facilities or by pipeline systems from centrally located production facilities and are generally governed by 15- to 20- year contracts.

We also deliver small quantities of product through small on-site plants (cryogenic or non-cryogenic generators), typically either via a 10- to 15- year sale of gas contract or through the sale of the equipment to the customer.

• On-Site Gases —Large quantities of hydrogen, nitrogen, oxygen, carbon monoxide, and syngas (a mixture of hydrogen and carbon monoxide) are provided to customers, principally in the energy production and refining, chemical, and metals industries worldwide, that require large volumes of gases and have relatively constant demand.

Gases are produced and supplied by large facilities we construct or acquire on or near the customers’ facilities or by pipeline systems from centrally located production facilities.

These sale of gas contracts are generally governed by 15- to 20-year contracts.

We also deliver smaller quantities of product through small on-site plants (cryogenic or non-cryogenic generators), typically via a 10- to 15-year sale of gas contract.

Electricity is the largest cost component in the production of atmospheric gases.

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Bureau of Land Management's helium reserve.

The regional Industrial Gases segments also include our share of the results of several joint ventures accounted for by the equity method, which are reported in our financial statements as income from equity affiliates.

The regional Industrial Gases segments also include our share of the results of several joint ventures accounted for by the equity method, which we report in our financial statements as income from equity affiliates.

The largest of these joint ventures operate in China, India, Italy, Mexico, Saudi Arabia, South Africa, and Thailand.

Each of the regional Industrial Gases segments competes against three global industrial gas companies:

Air Liquide S.A., Messer and Linde plc (the successor to Praxair, Inc.

and Linde AG, pursuant to a combination that became effective on 31 October 2018), as well as regional competitors.

Air Liquide S.A., Messer, and Linde plc, as well as regional competitors.

Competition in Industrial Gases is based primarily on price, reliability of supply, and the development of industrial gas applications.

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We design and manufacture equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction, and liquid helium and liquid hydrogen transport and storage.

The Industrial Gases – Global segment includes activity related to the sale of cryogenic and gas processing equipment for air separation.

The Industrial Gases – Global segment includes activity primarily related to the sale of cryogenic and gas processing equipment for air separation.

The equipment is sold worldwide to customers in a variety of industries, including chemical and petrochemical manufacturing, oil and gas recovery and processing, and steel and primary metals processing.

The Corporate and other segment includes three global equipment businesses:

The Corporate and other segment includes:

our LNG equipment business, our Gardner Cryogenics business fabricating helium and hydrogen transport and storage containers, and our Rotoflow business, which manufactures turboexpanders and other precision rotating equipment.

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Equipment is produced at our manufacturing sites with certain components being procured from subcontractors and vendors.

Competition in the equipment business is based primarily on technological performance, service, technical know-how, price, and performance guarantees.

Competition in the equipment business is based primarily on plant efficiency, service, technical know-how and price, as well as schedule and plant performance guarantees.

Sale of equipment constituted approximately 8%, 6%, and 4% of consolidated sales in fiscal years 2021, 2020, and 2019, respectively.

The backlog of equipment orders was approximately $1.6 billion on 30 September 2020 (as compared to a total backlog of approximately $0.9 billion on 30 September 2019).

We estimate that approximately 50% of the total equipment sales backlog as of 30 September 2020 will be recognized as revenue during fiscal year 2021, dependent on execution schedules of the relevant projects.

Our backlog of equipment orders was approximately $1.3 billion on 30 September 2021 (as compared to a total backlog of approximately $1.6 billion on 30 September 2020).

We estimate that approximately half of the total equipment sales backlog as of 30 September 2021 will be recognized as revenue during fiscal year 2022, dependent on execution schedules of the relevant projects.

International Operations

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six countries in the Middle East (including Saudi Arabia), and three African countries.

We also own less-than-controlling interests in entities operating in Europe, Asia, Latin America, the Middle East, and Africa (including China, Germany, India, Italy, Mexico, Oman, Saudi Arabia, South Africa, and Thailand).

We also own less-than-controlling interests in entities operating in Europe, Asia, Latin America, the Middle East, and Africa (including China, India, Italy, Mexico, Oman, Saudi Arabia, South Africa, and Thailand).

Financial information about our foreign operations and investments is included in Note 7, Summarized Financial Information of Equity Affiliates ;

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We pursue a market-oriented approach to technology development through research and development, engineering, and commercial development processes.

It conducts research and development principally in its laboratories located in the United States (Trexlertown, Pennsylvania), the United Kingdom (Basingstoke and Carrington), Spain (Barcelona), China (Shanghai), and Saudi Arabia (Dhahran).

We conduct research and development principally in our laboratories located in the United States (Trexlertown, Pennsylvania), the United Kingdom (Basingstoke and Carrington), Spain (Barcelona), China (Shanghai), and Saudi Arabia (Dhahran).

We also fund and cooperate in research and development programs conducted by a number of major universities and undertake research work funded by others, including the United States government.

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Environmental Regulation

We are subject to various environmental laws and regulations in the countries in which we have operations.

Compliance with these laws and regulations results in higher capital expenditures and costs.

We are subject to various environmental laws, regulations, and public policies in the countries in which we have operations.

Compliance with these measures often results in higher capital expenditures and costs.

In the normal course of business, we are involved in legal proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA," the federal Superfund law);

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Some of our operations are within jurisdictions that have or are developing regulatory regimes governing emissions of greenhouse gases (“GHG”), including CO 2 .

These include existing coverage under the European Union Emission Trading System, the California cap and trade scheme, China’s Emission Trading Scheme and its nation-wide expansion, and South Korea’s Emission Trading Scheme.

In the Netherlands, a CO 2 emissions tax will come into force on 1 January 2021.

In Canada, Alberta’s Technology Innovation and Emission Reduction (“TIER”) System went into effect 1 January 2020.

In Ontario, Environment & Climate Change Canada’s ("ECCC”) Output Based Pricing System (“OBPS”) is currently in effect, however, on 20 September 2020, ECCC granted approval of Ontario’s GHG Emissions Performance Standards program, which will be used in lieu of adherence to the OBPS, with the effective date to be determined.

These include existing coverage under the European Union Emission Trading System, the California Cap-and-Trade Program, China’s Emission Trading Scheme and its nation-wide expansion, and South Korea’s Emission Trading Scheme.

In the Netherlands, a CO 2 emissions tax was enacted on 1 January 2021.

In Canada, Alberta’s Technology Innovation and Emission Reduction System went into effect 1 January 2020.

In Ontario, Environment & Climate Change Canada’s Output Based Pricing System (“OBPS”) is currently in effect, however, effective 1 January 2022, Ontario’s GHG Emissions Performance Standards program will be used in lieu of adherence to the OBPS.

In addition, the U.S.

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Capital expenditures to control pollution are estimated to be approximately $8 million in both fiscal years 2022 and 2023.

For additional information regarding environmental matters, refer to Item 7, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Environmental Matters ” and Note 17, Commitments and Contingencies , to the consolidated financial statements.

For additional information regarding environmental matters, refer to Note 16, Commitments and Contingencies , to the consolidated financial statements.

We believe our employees are our most valuable asset and are critical to our success as an organization.

Our goal is to be the safest, most diverse and most profitable industrial gas company in the world, providing excellent service to our customers.

Integral to our success is the continued development of our 4S culture (Safety, Speed, Simplicity and Self-Confidence) and creating a work environment where all employees feel that they belong and matter.

Integral to our success is the continued development of our 4S culture (Safety, Speed, Simplicity and Self-Confidence) and creating a work environment where our employees feel that they belong and matter.

Our talent related initiatives, including employee recruitment and development, diversity and inclusion and compensation and benefit programs, are focused on building and retaining the world-class and talented staff that is needed to meet our goals.

On 30 September 2020 we had approximately 19,275 employees, of whom approximately 19,000 were full-time and of whom approximately 14,150 were located outside the United States.

We have collective bargaining agreements with unions at certain locations that expire on various dates over the next four years.

On 30 September 2021, we had approximately 20,875 employees, of whom approximately 20,625 were full-time and approximately 15,575 were located outside the United States.

We have collective bargaining agreements with unions and works councils at certain locations that expire on various dates over the next four years.

We consider relations with our employees to be good.

Our 2021 Sustainability Report details our growth strategy and the role our most valuable asset and our competitive advantage, our employees, play in achieving our goals.

Rooted in our framework of Grow- Conserve- Care, our higher purpose is to bring people together to collaborate and innovate solutions to the world’s most significant energy and environmental sustainability challenges.

Our 2021 Sustainability Report details how we care for our employees.

Safety is fundamental to who we are as a company.

Safety is a shared value, and our employees’ commitment to safety is demonstrated in many ways every day.

Safety is a critical component of everything we do, everywhere in the world.

Our goal is to be the safest industrial gas company in the world.

Diversity, Inclusion, and Belonging

Our 2021 Sustainability Report sets forth our announced goals to further increase the percentage of women and U.S.

minorities in professional and managerial roles and the recruitment and talent development strategies we have in place to ensure we meet these goals.

Since the publication of our 2021 Sustainability Report, we have announced goals to further increase the percentage of women and U.S.

minorities in professional and managerial roles.

By 2025, we aim to achieve at least 28 percent female representation in the professional and managerial population globally.

Due to significant increase of our U.S.

minority representation, our new 2025 diversity goal is to achieve at least 30 percent U.S.

minority representation in professional and managerial roles.

We established these targets following analysis of our global employee representation metrics and future talent needs, as well as assessing industry benchmarks and peer companies.

As detailed in our 2021 Sustainability Report, in order to create a diverse workplace, individuals must be compensated fairly and equitably.

A work environment where employees know they belong and matter includes fair and equitable pay.

Our pay practices apply equally to all employees irrespective of gender, race, religion, disability, age, or any other form of personal difference.

We strive to pay competitively in local markets where we do business and compete for talent.

We benchmark our compensation to ensure that we are keeping pace with the market to provide competitive pay and benefits.

A gender pay equity analysis completed by a third-party in 2020 resulted in no significant adverse findings for minorities in the U.S.

and for females globally.

We value the contributions of our employees, particularly in the face of the challenges posed by the COVID-19 pandemic.

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We have not laid off any of our employees or reduced their salaries due to COVID-19.

In October 2020, we announced goals to further increase the percentage of women and U.S.

minorities in professional and managerial roles.

By 2025, we aim to achieve at least 28 percent female representation in the professional and managerial population globally, and at least 20 percent minority representation in that same population in the United States.

These measures are increases from 25 and 17 percent representation (2020 baseline), respectively.

We established these new targets following analysis of our global employee representation metrics and future talent needs, as well as assessing industry benchmarks and peer companies.

Our businesses are not subject to seasonal fluctuations to any material extent.

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Name Age Office

Scott Crocco 56 Executive Vice President and Chief Financial Officer (became Executive Vice President and Chief Financial Officer in 2016;

Senior Vice President and Chief Financial Officer in 2013;

and Vice President and Corporate Controller in 2008).

Seifi Ghasemi 77 Chairman, President, and Chief Executive Officer (became Chairman, President and Chief Executive Officer in 2014 and previously served as Chairman and Chief Executive Officer of Rockwood Holdings, Inc.

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from 2007 to 2017.

Serhan 59 Executive Vice President and Chief Operating Officer (Executive Vice President since December 2016 and Chief Operating Officer since May 2020).

Schaeffer 42 Senior Vice President and Chief Financial Officer (became Senior Vice President and Chief Financial Officer in August 2021).

Schaeffer joined the Company in 2016 and most recently served as Vice President, Finance – GEMTE, Americas, Middle East, and India from 2020 to 2021 and previously served as Vice President, Chief Audit Executive from 2016 to 2020.

Serhan 60 Chief Operating Officer (Executive Vice President since December 2016 and Chief Operating Officer since May 2020).

Serhan served as President, Global HyCO, from 2014 to 2016 for Praxair Inc.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business