What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-11-16 compared with 2022-11-22 · 361 added, 443 removed, 493 unchanged (62% of the section changed)

9 unchanged sentences

These forward-looking statements are based on management’s expectations and assumptions as of the date of this Annual Report on Form 10-K and are not guarantees of future performance.

Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors not anticipated by management, including, without limitation, those described in " Forward-Looking Statements" and Item 1A, Risk Factors , of this Annual Report.

Our Management's Discussion and Analysis should be read in conjunction with the consolidated financial statements and the accompanying notes contained in this Annual Report.

Unless otherwise stated, financial information is presented in millions of dollars, except for per share data.

This discussion should be read in conjunction with the consolidated financial statements and the accompanying notes contained in this Annual Report on Form 10-K.

Unless otherwise stated, financial information is presented in millions of U.S.

Dollars, except for per share data.

Except for net income, which includes the results of discontinued operations, financial information is presented on a continuing operations basis.

3 unchanged sentences

For each non-GAAP financial measure, including adjusted diluted earnings per share ("EPS"), adjusted EBITDA, adjusted EBITDA margin, adjusted effective tax rate, and capital expenditures, we present a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP.

These reconciliations and explanations regarding the use of non-GAAP measures are presented under the heading “ Reconciliations of Non-GAAP Financial Measures ” beginning on page 35 .

Comparisons included within the "Results of Operations" section below are for fiscal years 2022 versus ("vs.") 2021 and 2021 vs.

We have updated our segment information to reflect the reorganization of our reporting segments effective 1 October 2021.

We provide reconciliations for any adjusted measures discussed within the "Reconciliations of Non-GAAP Financial Measures" section.

Comparisons for all other sections within this Management’s Discussion and Analysis are for fiscal years 2022 vs.

2021, while fiscal year 2021 vs.

2020 comparisons are available within Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of our Annual Report on Form 10-K for the fiscal year ended 30 September 2021, which was filed with the SEC on 18 November 2021.

These reconciliations and explanations regarding the use of non-GAAP measures are presented under the “ Reconciliations of Non-GAAP Financial Measures ” section beginning on page 33 .

Comparisons included in the discussion that follows are for fiscal year 2023 versus ("vs.") fiscal year 2022.

A discussion of changes from fiscal year 2021 to fiscal year 2022 and other financial information related to fiscal year 2021 is available in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations , of our Annual Report on Form 10-K for the fiscal year ended 30 September 2022, which was filed with the SEC on 22 November 2022.

For information concerning activity with our related parties, refer to Note 24, Supplemental Information , to the consolidated financial statements.

Russia's Invasion of Ukraine

In the fourth quarter of fiscal year 2022, we recorded a noncash charge of $73.7 ($61.0 after tax, or $0.27 per share) associated with the divestiture of our small industrial gas business in Russia, which generated annual sales of less than $25 in our Europe segment.

During the second quarter of fiscal year 2022, we suspended construction of a plant in Ukraine.

Our ability to complete the project and recover the carrying value of the assets, which was approximately $45 as of 30 September 2022, could be impacted by future events.

Annual sales generated from our business in Ukraine were less than $5 in our Europe segment.

Table of Conte n t s

BUSINESS OVERVIEW

Air Products and Chemicals, Inc., a Delaware corporation originally founded in 1940, has built a reputation for its innovative culture, operational excellence, and commitment to safety and the environment.

Our passionate, talented, and committed employees are from diverse backgrounds, but are driven by our higher purpose to create innovative solutions that benefit the environment, enhance sustainability, and address the challenges facing customers, communities, and the world.

We offer a unique portfolio of products, services, and solutions that include atmospheric gases, process and specialty gases, equipment, and related services.

Focused on energy, environmental, and emerging markets, we serve customers in dozens of industries, including refining, chemicals, metals, electronics, manufacturing, medical, and food.

Our gases, equipment, and applications expertise enable our customers to improve their sustainability performance by increasing productivity, producing better quality products, reducing energy use, and lowering emissions.

We also develop, engineer, build, own, and operate some of the world's largest industrial gas and carbon-capture projects, supplying clean hydrogen that will support global transportation, industrial markets, and the broader energy transition away from fossil fuels.

We have built leading positions in several growth markets, such as hydrogen, helium, and liquefied natural gas ("LNG") process technology and equipment, and provide turbomachinery, membrane systems, and cryogenic containers globally.

With operations in over 50 countries, in fiscal year 2022 we had sales of $12.7 billion and assets of $27.2 billion.

During the fiscal year ended 30 September 2022, we managed our operations, assessed performance, and reported earnings under the following five reporting segments:

• Middle East and India;

• Corporate and other

This Management’s Discussion and Analysis discusses our results based on these operations.

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

Founded in 1940, Air Products and Chemicals, Inc.

is a world-leading industrial gases company that has built a reputation for its innovative culture, operational excellence, and commitment to safety and the environment.

Approximately 23,000 passionate, talented, and committed employees from diverse backgrounds together are driven by Air Products’ higher purpose to create innovative solutions that benefit the environment, enhance sustainability, and reimagine what is possible to address the challenges facing customers, communities, and the world.

Our products and services enable our customers to improve their environmental performance, product quality, and productivity.

Our core business provides essential gases, related equipment, and applications expertise to customers in dozens of industries, including refining, chemicals, metals, electronics, manufacturing, medical, and food.

We also develop, engineer, build, own, and operate some of the world’s largest clean hydrogen projects that will support the transition to low- and zero-carbon energy in the heavy-duty transportation and industrial sectors.

Additionally, we are the world leader in the supply of LNG process technology and equipment and provide turbomachinery, membrane systems, and cryogenic containers globally.

For additional information on our product and service offerings, including production, distribution, and end use, refer to Item 1, Business , of this Annual Report on Form 10-K.

Air Products conducts business in approximately 50 countries and regions throughout the world.

Our industrial gases business is organized and operated regionally in the Americas, Asia, Europe, and Middle East and India segments and generates the majority of our sales via our on-site and merchant supply modes.

Approximately half our total revenue is generated through the on-site supply mode, which is governed by contracts that are generally long-term in nature with provisions that allow us to pass through changes in energy costs to our customers.

Our Corporate and other segment includes the results of our sale of equipment businesses, costs for corporate support functions and global management activities, and other income and expenses not directly associated with the regional segments, such as foreign exchange gains and losses.

For additional information regarding our supply modes and business segments, refer to Note 6, Revenue Recognition , and Note 25, Business Segment and Geographic Information , to the consolidated financial statements.

2023 IN SUMMARY

Our fiscal year 2022 results demonstrate our employees' commitment to excellence and service to our customers as our earnings grew despite economic headwinds.

Our on-site business continued to provide stable cash flow due to the structure of our contracts, which generally contain fixed monthly charges and/or minimum purchase requirements.

These contracts also protected us from energy price fluctuations, particularly in Europe, due to pass-through provisions that allow us to recover the cost of energy.

Our merchant business also successfully implemented pricing actions to recover higher costs, including soaring energy prices, in our three largest regional segments and across most major product lines.

We also made progress on our growth strategy, including completion of an initial investment in the Jazan Integrated Gasification and Power Company ("JIGPC") joint venture.

JIGPC acquired the first phase of assets for the gasification and power project and began contributing to our results through equity affiliates' income in late October 2021.

We shared the cash flows generated during fiscal year 2022 with our investors by increasing the quarterly dividend on our common stock to $1.62 per share, representing an 8% increase, or $0.12 per share, from the previous dividend of $1.50 per share.

This is the 40 th consecutive year that we have increased our quarterly dividend.

In fiscal year 2023, we achieved earnings growth through pricing discipline in our merchant business as well as improved on-site volumes, including higher demand for hydrogen, despite inflation, higher maintenance activities, and higher costs to support our long-term strategy.

Due to the structure of our contracts, which generally contain fixed monthly charges and/or minimum purchase requirements, our on-site business generates stable cash flow and consistently contributes about half our total sales, regardless of the economic environment.

We also recognized higher income from our equity affiliates due to the contribution of the second phase of the Jazan gasification and power project and positive results from other unconsolidated joint ventures across the regions.

Additionally, we successfully secured capital to fund low- and zero-carbon hydrogen growth projects.

In March, we issued our inaugural green bonds in concurrent $600 and €700 million debt offerings, making Air Products the first U.S.

chemical company to qualify green and blue hydrogen projects as an eligible expenditure category.

Additionally, in May, our NEOM Green Hydrogen Company joint venture completed financial close on the world’s largest green hydrogen-based ammonia production facility, securing $6.1 billion of non-recourse financing from local, regional, and international banks and financial institutions.

This funding is an important strategic milestone that will allow us to continue executing projects that will accelerate the energy transition while creating long-term value for our shareholders.

In addition to investing in high return projects, we believe creating shareholder value includes paying quarterly cash dividends on our common stock, which we have increased for 41 consecutive years.

In fiscal year 2023, we increased our dividend to $1.75 per share, representing an 8% increase, or $0.13 per share, from the previous dividend of $1.62 per share.

Table of Conte n t s

Fiscal Year 2023 Highlights

• Sales of $12,698.6 increased 23%, or $2,375.6, due to higher energy cost pass-through to customers of 13%, higher volumes of 8%, and higher pricing of 6%, partially offset by unfavorable currency of 4% due to the strengthening of the U.S.

Volume growth was driven by recovery in hydrogen, new assets, better merchant demand, and higher sale of equipment project activity.

In our merchant business, we successfully implemented pricing actions across the regional segments, particularly in Europe, to offset unprecedented power and fuel costs.

• Operating income of $2,338.8 increased 3%, or $57.4, as our pricing actions and higher volumes overcame unfavorable costs, including the loss on the divestiture of our Russia business, and currency.

Operating margin of 18.4% decreased 370 basis points (bp) from the prior year, primarily due to higher energy cost pass-through to customers and unfavorable costs.

• Equity affiliates' income of $481.5 increased 64%, or $187.4, driven by the JIGPC joint venture.

JIGPC began contributing to our results in the Middle East and India segment in late October 2021.

• Net income of $2,266.5 increased 7%, or $151.6, primarily due to higher pricing, net of power and fuel costs, higher volumes, and higher equity affiliates' income driven by JIGPC, partially offset by higher costs.

Net income margin of 17.8% decreased 270 bp, primarily due to higher energy cost pass-through to customers, as unfavorable costs offset the impact of higher equity affiliates' income.

• Adjusted EBITDA of $4,247.0 increased 9%, or $363.8, while adjusted EBITDA margin of 33.4% decreased 420 bp.

• Sales of $12.6 billion decreased 1%, or $98.6, as lower energy cost pass-through to customers of 6% and unfavorable currency of 3% were mostly offset by higher pricing of 5% and higher volumes of 3%.

• Operating income of $2.5 billion increased 7%, or $155.8, as our pricing actions and higher volumes were partially offset by higher costs and unfavorable currency.

Additionally, we recorded higher charges for business and asset actions in fiscal year 2023 compared to fiscal year 2022.

Operating margin of 19.8% increased 140 basis points ("bp") from 18.4% in the prior year, which included a positive impact from lower energy cost pass-through to customers in 2023.

• Equity affiliates' income of $604.3 increased 26%, or $122.8, primarily due to a higher contribution from the Jazan Integrated Gasification and Power Company ("JIGPC") joint venture, which completed the second phase of the asset purchase associated with the Jazan gasification and power project in January 2023, as well as higher income from our affiliates in Italy and Mexico.

The prior year included recognition of the remaining deferred profit associated with air separation units previously sold to Jazan Gas Project Company, which was partially offset by an impairment charge related to two small affiliates in our Asia segment.

• Net income of $2.3 billion increased 3%, or $72.1, primarily due to favorable pricing, net of power and fuel costs, partially offset by a charge for business and asset actions, higher non-service pension costs, and higher other costs.

Net income margin of 18.6% increased 80 bp from 17.8% in the prior year, which included a positive impact from lower energy cost pass-through.

• Adjusted EBITDA of $4.7 billion increased 11%, or $454.8, and adjusted EBITDA margin of 37.3% increased 390 bp from 33.4% in the prior year.

• Diluted EPS of $10.30 increased 2%, or $0.22 per share, and adjusted diluted EPS of $11.51 increased 12%, or $1.26 per share.

A summary table of changes in diluted EPS is presented below.

Table of Conte n t s

Changes in Diluted EPS Attributable to Air Products

The per share impacts presented in the table below were calculated independently and do not sum to the total change in diluted EPS due to rounding.

The per share impacts presented in the table below were calculated independently and may not sum to the total change in diluted EPS due to rounding.

Fiscal Year Ended 30 September 2023 2022 Increase (Decrease)

2 unchanged sentences

Diluted EPS From Continuing Operations $10.30 $10.08 $0.22

% Change from prior year

Operating Impacts

3 unchanged sentences

Currency (0.29)

Facility closure 0.08

Business and asset actions (0.65)

Gain on exchange with joint venture partner (0.12)

Total Operating Impacts $0.56

Other Impacts

Equity affiliates' income, excluding item below $0.74

Equity affiliates' income $0.40

Equity method investment impairment charge 0.05

Interest expense (0.18)

Other non-operating income/expense, net (0.04)

Change in effective tax rate, excluding discrete item below 0.09

Tax election benefit and other (0.05)

Other non-operating income/expense, net, excluding discrete item below 0.11

Non-service pension cost/benefit, net (0.44)

Change in effective tax rate (0.12)

Noncontrolling interests (0.15)

Weighted average diluted shares (0.01)

Total Other Impacts ($0.34)

1 unchanged sentence

% Change from prior year 2 %

The table below summarizes the diluted per share impact of our non-GAAP adjustments in fiscal years 2023 and 2022:

Fiscal Year Ended 30 September 2023 2022 Increase (Decrease)

Diluted EPS From Continuing Operations $10.30 $10.08 $0.22

Facility closure — 0.08 (0.08)

Business and asset actions 0.92 0.27 0.65

Gain on exchange with joint venture partner — (0.12) 0.12

Equity method investment impairment charge — 0.05 (0.05)

Tax election benefit and other — (0.05) 0.05

Non-service pension cost (benefit), net 0.29 (0.15) 0.44

Adjusted Diluted EPS From Continuing Operations $11.51 $10.25 $1.26

% Change from prior year 12 %

Table of Conte n t s

The guidance below should be read in conjunction with the Forward-Looking Statements of this Annual Report on Form 10-K.

We are committed to efficiently operating and deploying capital to grow our core industrial gases business.

While global economic challenges are likely to continue in fiscal year 2023, we remain focused on pricing actions to recover higher energy costs in our merchant business, pursuing additional volume opportunities, and closely monitoring our costs.

We expect our onsite business model, which has contractual protection from energy cost fluctuations, to continue providing stable cash flow.

This business consistently generates approximately half our total company sales.

Further, we expect several new projects to contribute to our results in 2023, including the second phase of JIGPC's gasification and power project that we expect to commence in the second quarter.

Sustainability is our growth strategy at Air Products, and we have the financial capacity to support our zero- and low-carbon hydrogen projects.

We believe there will be additional opportunities for clean hydrogen and carbon capture technologies, which are further supported by the U.S.

Inflation Reduction Act of 2022 that was enacted in August.

We anticipate benefits from tax incentives for carbon sequestration and clean hydrogen production in future years once our new projects in these areas come on-stream in the U.S.

We continue to evaluate the impact this act could have on our business.

The first pillar of our two-pillar growth strategy is our core industrial gas business, which is supported by a consistent stream of revenue due to the structure of our on-site contracts.

We expect new on-site projects, including the natural gas-to-syngas processing facility in Uzbekistan, as well as several new LNG sale of equipment projects to contribute to our results in 2024.

To mitigate the impact of ongoing inflationary pressures, we are focused on actions we can control, such as maintaining pricing discipline in our merchant business.

Additionally, we expect to see cost improvement in certain areas of our organization as a result of strategic business actions taken earlier in 2023.

The second pillar of our strategy is our blue and green hydrogen projects, many of which are already under execution.

We anticipate benefits from tax incentives created by the U.S.

Inflation Reduction Act of 2022 for carbon sequestration and clean hydrogen production in future years once our projects in these areas come on-stream, such as our blue hydrogen and blue ammonia clean energy complex in Louisiana.

We are also gaining support from foreign regulators for our projects outside the U.S., including the recently announced blue hydrogen project in the Netherlands.

We believe the infrastructure readiness we are preparing now will continue to be a competitive advantage for Air Products, allowing us to create sustainable growth opportunities that deliver value to our shareholders, customers, employees, and communities around the world.

RESULTS OF OPERATIONS

DISCUSSION OF CONSOLIDATED RESULTS

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Fiscal Year Ended 30 September 2023 2022 $ %/bp

GAAP Measures

1 unchanged sentence

Operating income 2,494.6 2,338.8 155.8 7 %

Operating margin 18.4 % 22.1 % 25.3 % (370) bp (320) bp

Operating margin 19.8 % 18.4 % 140 bp

Equity affiliates’ income $604.3 $481.5 $122.8 26 %

Net income 2,338.6 2,266.5 72.1 3 %

Net income margin 17.8 % 20.5 % 21.8 % (270) bp (130) bp

Net income margin 18.6 % 17.8 % 80 bp

Non-GAAP Measures

Adjusted EBITDA $4,701.8 $4,247.0 $454.8 11 %

Adjusted EBITDA margin 33.4 % 37.6 % 40.9 % (420) bp (330) bp

Volume 8 % 5 %

Price 6 % 2 %

Adjusted EBITDA margin 37.3 % 33.4 % 390 bp

The table below summarizes the major factors that impacted consolidated sales for the periods presented:

Energy cost pass-through to customers (6 %)

1 unchanged sentence

Total Consolidated Sales Change (1 %)

Sales of $12,698.6 increased 23%, or $2,375.6, due to higher energy cost pass-through to customers of 13%, higher volumes of 8%, and positive pricing of 6%, partially offset by unfavorable currency impacts of 4%.

Energy costs were significantly higher versus the prior year, particularly in Europe and the Americas.

Contractual provisions associated with our on-site business, which generates approximately half our total company sales, allow us to pass the higher energy costs through to our customers.

Volume growth was driven by recovery in hydrogen, new assets, better merchant demand, and higher sale of equipment project activity.

Continued focus on pricing actions in our merchant businesses, including those intended to recover escalating power and fuel costs, resulted in price improvement in our three largest segments.

Currency was unfavorable as the U.S.

Dollar strengthened against most major currencies.

Sales of $10,323.0 increased 17%, or $1,466.7, due to higher energy cost pass-through to customers of 6%, higher volumes of 5%, favorable currency impacts of 4%, and positive pricing of 2%.

We experienced significantly higher energy costs in the second half of fiscal year 2021, particularly in North America and Europe, which were passed to our on-site customers.

Positive volumes from new assets, our sale of equipment businesses, and merchant demand recovery from COVID-19 were partially offset by reduced contributions from our gasification joint venture with Lu'An Clean Energy Company.

Favorable currency was driven by the appreciation of the British Pound Sterling, Chinese Renminbi, Euro, and South Korean Won against the U.S.

Continued focus on pricing actions, including energy cost recovery, in our merchant businesses resulted in price improvement in the Americas, Asia, and Europe segments.

Sales of $12.6 billion decreased 1%, or $98.6, as lower energy cost pass-through to customers of 6% and unfavorable currency of 3% were mostly offset by higher pricing of 5% and higher volumes of 3%.

Lower natural gas prices in the Americas and Europe segments drove the lower energy cost pass-through to our on-site customers.

Unfavorable currency was primarily attributable to strengthening of the U.S.

Dollar against the Chinese Renminbi.

Pricing actions in our merchant business improved sales across each of our regional segments, while the volume improvement was primarily attributable to our on-site business in the Americas and Asia segments.

Table of Conte n t s

Cost of Sales and Gross Margin

Cost of sales of $9,338.5 increased 30%, or $2,129.2, from total cost of sales of $7,209.3 in the prior year, which included a charge of $23.2 for a facility closure as discussed below.

The increase was due to higher energy cost pass-through to customers of $1,263, unfavorable costs of $617, and higher costs associated with sales volumes of $575, partially offset by favorable currency impacts of $302.

The unfavorable cost impact was driven by power for our merchant business, higher planned maintenance, inflation, and supply chain challenges.

Additionally, we also incurred higher costs to support long-term growth, such as costs for resources needed to bring projects on-stream as well as costs for a helium storage cavern to support reliable helium supply to our customers globally.

Gross margin of 26.5% decreased 370 bp from 30.2% in the prior year, primarily due to the unfavorable costs and higher energy cost pass-through to customers, partially offset by the positive impact of our pricing actions.

Total cost of sales of $7,209.3, including the facility closure discussed below, increased 23%, or $1,351.2.

The increase from the prior year was primarily due to higher energy cost pass-through to customers of $479, higher costs associated with sales volumes of $433, unfavorable currency impacts of $233, and higher costs, including power and other cost inflation, of $183.

Gross margin of 30.2% decreased 370 bp from 33.9% in the prior year, primarily due to higher energy cost pass-through to customers, higher costs, and a reduced contribution from our Lu'An joint venture, partially offset by the positive impact of our pricing actions.

Facility Closure

During the second quarter of fiscal year 2021, we recorded a charge of $23.2 ($17.4 after-tax, or $0.08 per share) primarily for a noncash write-down of assets associated with a contract termination in the Americas segment.

This charge is reflected as "Facility closure" on our consolidated income statements for the fiscal year ended 30 September 2021 and was not recorded in segment results.

Selling and Administrative

Selling and administrative expense of $900.6 increased 9%, or $72.2, primarily due to higher incentive compensation, depreciation expense associated with our new global headquarters, inflation, and increased headcount to support our growth strategy, partially offset by a favorable currency impact from the strengthening of the U.S.

Selling and administrative expense as a percentage of sales decreased to 7.1% from 8.0% in the prior year.

Selling and administrative expense of $828.4 increased 7%, or $52.5, primarily due to higher spending for business development resources to support our growth strategy and unfavorable currency impacts.

Selling and administrative expense as a percentage of sales decreased to 8.0% in fiscal year 2021 from 8.8% in fiscal year 2020.

Research and Development

Research and development expense of $102.9 increased 10%, or $9.4.

Research and development expense as a percentage of sales decreased to 0.8% from 0.9% in the prior year.

Cost of sales of $8.8 billion decreased 5%, or $505.5, due to lower energy cost pass-through to customers of $791 and a favorable impact from currency of $213, partially offset by higher costs associated with sales volumes of $311 and unfavorable other costs of $188.

The unfavorable costs were driven by inflation, project development activities, and planned maintenance.

Gross margin of 29.9% increased 340 bp from 26.5% in the prior year primarily due to favorable pricing and lower energy cost pass-through to customers, partially offset by the impact of higher costs.

The favorable impact from lower energy cost pass-through to customers was about 200 bp.

Selling and Administrative Expense

Selling and administrative expense of $957.0 increased 6%, or $56.4, primarily due to higher employee compensation, inflation, and additional costs to support growth, partially offset by a favorable impact from currency.

Selling and administrative expense as a percentage of sales increased to 7.6% from 7.1% in the prior year.

Research and Development Expense

Research and development expense of $105.6 increased 3%, or $2.7.

Research and development expense as a percentage of sales of 0.9% was flat versus fiscal year 2020.

Research and development expense as a percentage of sales of 0.8% was flat versus the prior year.

Business and Asset Actions

During the fourth quarter of fiscal year 2022, we divested our small industrial gas business in Russia due to Russia's invasion of Ukraine.

In fiscal year 2023, we recorded a charge of $244.6 ($204.9 attributable to Air Products after tax, or $0.92 per share) for strategic actions intended to optimize costs and focus resources on our growth projects.

Of the expense, $217.6 resulted from noncash charges to write off assets associated with exited projects that were previously under construction.

The remaining expense included $27.0 for severance and other benefits associated with position eliminations and restructuring of certain organizations globally.

Refer to Note 4, Business and Asset Actions , for additional information.

In fiscal year 2022, we divested our small industrial gas business in Russia due to Russia's invasion of Ukraine.

As a result, we recorded a noncash charge of $73.7 ($61.0 after tax, or $0.27 per share), which included transaction costs and cumulative currency translation losses.

This charge is reflected as "Business and asset actions" on our consolidated income statement for the fiscal year ended 30 September 2022 and was not recorded in segment results.

Gain On Exchange With Joint Venture Partner

In the second quarter of fiscal year 2021, we recognized a gain of $36.8 ($27.3 after-tax, or $0.12 per share) on an exchange with the Tyczka Group, a former joint venture partner.

As part of the exchange, we separated our 50/50 joint venture in Germany into two separate businesses so each party could acquire a portion of the business on a 100% basis.

The gain included $12.7 from the revaluation of our previously held equity interest in the portion of the business that we retained and $24.1 from the sale of our interest in the remaining business.

The gain is reflected as "Gain on exchange with joint venture partner" on our consolidated income statements for the fiscal year ended 30 September 2021 and was not recorded in segment results.

Refer to Note 3, Acquisitions , to the consolidated financial statements for additional information.

Company Headquarters Relocation Income

In 2020, we sold property at our former corporate headquarters located in Trexlertown, Pennsylvania.

We received net proceeds of $44.1 and recorded a gain of $33.8 ($25.6 after-tax, or $0.12 per share), which is reflected on our consolidated income statements as "Company headquarters relocation income (expense)" for the fiscal year ended 30 September 2020.

The gain was not recorded in segment results.

Other Income (Expense), Net

Other income of $55.9 increased 6%, or $3.1, as higher income from the sale of assets in fiscal year 2022 was partially offset by a prior year settlement of a supply contract.

Other income of $52.8 decreased 19%, or $12.6.

Fiscal year 2020 was favorably impacted by an adjustment for a benefit plan liability due to a change in plan terms.

This impact was partially offset by the settlement of a supply contract in fiscal year 2021.

Other income of $34.8 decreased 38%, or $21.1, primarily due to lower income from the sale of assets and fees charged to our equity affiliates for use of patents and technology as well as an unfavorable foreign exchange impact.

Operating Income and Margin

Operating income of $2,338.8 increased 3%, or $57.4, as positive pricing, net of power and fuel costs, of $222 and higher volumes of $218 were partially offset by higher costs of $229 and an unfavorable currency impact of $66.

Higher costs were primarily attributable to operating and distribution costs driven by higher planned maintenance and various external factors, including inflation and supply chain challenges, as well as higher incentive compensation.

Additionally, we incurred higher costs in the current year to support long-term growth, such as costs for resources needed to bring projects on-stream.

In fiscal year 2022, we also recorded a charge of $74 for business and asset actions associated with the divestiture of our Russia business.

The prior year included a gain of $37 on an exchange with a joint venture partner and a charge of $23 associated with a facility closure.

Operating margin of 18.4% decreased 370 bp from 22.1% in the prior year, primarily due to higher energy cost pass-through to customers and unfavorable costs.

Operating income of $2,281.4 increased 2%, or $43.8, as favorable currency of $96, positive pricing, net of power and fuel costs, of $95, and a gain on an exchange with a joint venture partner of $37 were partially offset by higher operating costs of $127 and a facility closure of $23.

Additionally, fiscal year 2020 included income of $34 associated with our company headquarters relocation.

Despite higher sales volumes, the volume impact on operating income was minimal due to a reduced contribution from our Lu'An joint venture in fiscal year 2021.

Unfavorable operating costs were driven by the addition of resources to support our growth strategy and higher planned maintenance activities.

Operating margin of 22.1% decreased 320 bp from 25.3% in fiscal year 2020, primarily due to the higher operating costs, higher energy cost pass-through to customers and the reduced contribution from our Lu'An joint venture, partially offset by positive pricing.

The positive impact from a gain on an exchange with a joint venture partner in 2021 was offset by income in fiscal year 2020 associated with the company headquarters relocation.

Operating income of $2.5 billion increased 7%, or $155.8.

Positive pricing, net of power and fuel costs, of $649 and higher volumes of $58 were partially offset by higher costs of $302 and an unfavorable currency impact of $78.

The higher costs were driven by inflation, planned maintenance, and incentive compensation, as well as project development and other costs related to the execution of our growth strategy.

Additionally, as discussed above, we recorded higher charges for business and asset actions in fiscal year 2023 compared to fiscal year 2022.

Operating margin of 19.8% increased 140 bp from 18.4% in the prior year, primarily due to the impact of pricing as well as lower energy cost pass-through to customers, which positively impacted margin by about 100 basis points, partially offset by higher charges for business and asset actions and higher other costs.

Equity Affiliates’ Income

Equity affiliates' income of $481.5 increased 64%, or $187.4, driven by the JIGPC joint venture, which began contributing to our results in the Middle East and India segment in late October 2021.

In the first quarter, we also recognized the remaining deferred profit associated with air separation units previously sold to Jazan Gas Project Company, net of other project finalization costs.

These factors were partially offset by an impairment charge of $14.8 ($11.1 after tax, or $0.05 per share) related to two small affiliates in the Asia segment and lower contributions from several affiliates in our regional segments.

Equity affiliates' income of $604.3 increased 26%, or $122.8, primarily due to a higher contribution from the JIGPC joint venture, which completed the second phase of the asset purchase associated with the Jazan gasification and power project in January 2023, as well as higher income from our affiliates in Italy and Mexico.

Additionally, the prior year included an impairment charge of $14.8 ($11.1 after tax, or $0.05 per share) related to two small affiliates in the Asia segment.

These impacts were partially offset by the prior year recognition of the remaining deferred profit associated with air separation units previously sold to Jazan Gas Project Company, net of other project finalization costs.

For additional information on our equity affiliates, refer to Note 9, Equity Affiliates , to the consolidated financial statements.

Equity affiliates' income of $294.1 increased 11%, or $29.3.

Higher income from affiliates in the regional segments was partially offset by a benefit of $33.8 in fiscal year 2020 from the enactment of the India Finance Act 2020.

Refer to Note 21, Income Taxes , to the consolidated financial statements for additional information.

Table of Conte n t s

Interest Expense

3 unchanged sentences

Interest expense $177.5 $128.0

Interest incurred decreased 1%, or $1.1, as the impacts of a lower debt balance and currency were mostly offset by a higher average interest rate on the debt portfolio.

Capitalized interest increased 45%, or $12.7, due to a higher carrying value of projects under construction.

Interest incurred increased 36%, or $44.9, driven by a higher debt balance due to the issuance of U.S.

Dollar- and Euro-denominated fixed-rate notes in the third quarter of fiscal year 2020.

Interest incurred increased 73%, or $123.9, driven by a higher average interest rate on variable-rate instruments in our debt portfolio as well as a higher debt balance, which is largely attributable to the U.S.

Dollar- and Euro-denominated fixed-rate notes issued in March 2023 under our new Green Finance Framework as well as borrowings on our foreign credit facilities.

Capitalized interest increased $74.4 due to a higher carrying value of projects under construction.

Other Non-Operating Income (Expense), Net

Other non-operating income of $62.4 decreased 15%, or $11.3.

Non-service pension income decreased $38 primarily due to lower expected returns on plan assets for the U.S.

Other non-operating expense was $39.0 versus income of $62.4 in the prior year primarily due to higher non-service pension costs in 2023, which were driven by higher interest cost and lower expected returns on plan assets for the U.S.

salaried pension plan and the U.K.

pension plan.

This impact was partially offset by higher interest income on cash and cash items due to higher interest rates and lower expense for excluded components of cash flow hedges of intercompany loans.

Other non-operating income of $73.7 increased $43.0.

We recorded higher non-service pension income in 2021 due to lower interest costs and higher total assets, primarily for our U.S.

pension plans.

Fiscal year 2021 also included favorable currency impacts.

These factors were partially offset by lower interest income on cash and cash items due to lower interest rates.

This impact was partially offset by higher interest income on cash and cash items due to higher interest rates.

Discontinued Operations

In fiscal year 2022, income from discontinued operations, net of tax, was $12.6 ($0.06 per share).

This primarily resulted from a net tax benefit recorded in the fourth quarter upon release of tax liabilities for uncertain tax positions associated with our former Performance Materials Division ("PMD") for which the statute of limitations expired.

In fiscal year 2021, income from discontinued operations, net of tax, was $70.3 ($0.32 per share).

This included net tax benefits of $60.0 recorded for the release of tax reserves for uncertain tax positions, of which $51.8 ($0.23 per share) was recorded in the fourth quarter for liabilities associated with the 2017 sale of PMD and $8.2 was recorded in the third quarter for liabilities associated with our former Energy-from-Waste business.

Additionally, we recorded a tax benefit from discontinued operations of $10.3 in the first quarter, primarily from the settlement of a state tax appeal related to the gain on the sale of PMD.

In fiscal year 2020, loss from discontinued operations, net of tax, was $14.3 ($0.06 per share).

This resulted from a pre-tax loss of $19.0 recorded in the second quarter to increase our existing liability for retained environmental obligations associated with the sale of our former Amines business in September 2006.

Refer to the Pace discussion within Note 16, Commitments and Contingencies , for additional information.

Income from discontinued operations, net of tax, was $7.4 ($0.03 per share) and $12.6 ($0.06 per share) in fiscal years 2023 and 2022, respectively.

This primarily resulted from the release of unrecognized tax benefits on uncertain tax positions taken with respect to the sale of our former Performance Materials Division for which the statute of limitations expired.

Net Income and Net Income Margin

Net income of $2,266.5 increased 7%, or $151.6, primarily due to higher pricing, net of power and fuel costs, higher volumes, and higher equity affiliates' income driven by JIGPC, partially offset by higher costs, including charges for business and asset actions and the equity affiliate impairment, and unfavorable currency due to the strengthening of the U.S.

Additionally, the prior year included higher net income from discontinued operations.

Net income margin of 17.8% decreased 270 bp from 20.5% in the prior year primarily due to higher energy cost pass-through to customers as the impact of higher equity affiliates' income was offset by unfavorable costs.

Higher energy cost pass-through to customers accounted for approximately 200 bp of the decline.

Net income of $2,114.9 increased 10%, or $183.8.

As discussed above, fiscal year 2021 included higher net income from discontinued operations.

On a continuing operations basis, the increase was driven by positive pricing, net of power and fuel costs, favorable currency impacts, higher equity affiliates' income, and a gain on an exchange with a joint venture partner, partially offset by unfavorable operating costs and a loss from a facility closure.

Additionally, less net income was attributable to noncontrolling interests, including our Lu'An joint venture partner.

Fiscal year 2020 also included income associated with the company headquarters relocation and a net benefit from the India Finance Act 2020.

Net income margin of 20.5% decreased 130 bp from 21.8% in the prior year, primarily due to higher energy and natural gas cost pass-through to customers, which decreased margin by approximately 100 bp, and unfavorable net operating costs, partially offset by the impact from our pricing actions.

Net income of $2.3 billion increased 3%, or $72.1, primarily due to favorable pricing, net of power and fuel costs, partially offset by the charge for business and asset actions, higher non-service pension costs, and higher other costs.

Net income margin of 18.6% increased 80 bp from 17.8% in the prior year due to the factors noted above as well as lower energy cost pass-through to customers, which positively impacted margin by about 100 bp.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA of $4,247.0 increased 9%, or $363.8, primarily due to higher volumes, higher pricing, net of power and fuel costs, and higher equity affiliates' income, partially offset by higher costs and unfavorable currency.

Adjusted EBITDA margin of 33.4% decreased 420 bp from 37.6% in the prior year primarily due to higher energy cost pass-through to customers as the impact of higher equity affiliates' income was offset by unfavorable costs.

Higher energy cost pass-through to customers accounted for approximately 400 bp of the decline.

Adjusted EBITDA of $3,883.2 increased 7%, or $263.4, primarily due to favorable currency impacts, positive pricing, net of power and fuel costs, and higher equity affiliates' income, partially offset by unfavorable operating costs.

Adjusted EBITDA margin of 37.6% decreased 330 bp from 40.9% in the prior year, primarily due to higher energy and natural gas cost pass-through to customers, which decreased margin by approximately 200 bp, and the unfavorable net operating costs.

Adjusted EBITDA of $4.7 billion increased 11%, or $454.8, primarily due to higher pricing, net of power and fuel costs, partially offset by higher costs.

Adjusted EBITDA margin of 37.3% increased 390 bp from 33.4% in the prior year due to the factors noted above as well as lower energy cost pass-through to customers, which positively impacted margin by about 200 bp.

Effective Tax Rate

2 unchanged sentences

Our effective tax rate was 19.1% and 18.2% for the fiscal years ended 30 September 2023 and 2022, respectively.

The current year reflects a favorable effective tax rate impact from higher equity affiliates' income, which is primarily presented net of income taxes within income from continuing operations on our consolidated income statements.

The higher equity affiliates' income was driven by the JIGPC joint venture, which began contributing to our results in late October 2021.

The prior year included a tax benefit of $21.5 from the release of tax reserves established for uncertain tax positions.

This included a benefit of $12.2 ($0.05 per share) for the release of reserves established in 2017 for a tax election related to a non-U.S.

subsidiary and other previously disclosed items ("tax election benefit and other").

Our adjusted effective tax rate was 18.2% and 18.9% for the fiscal years ended 30 September 2022 and 2021, respectively.

Our effective tax rate was 18.5% and 19.7% for the fiscal years ended 30 September 2021 and 2020, respectively.

The fiscal year 2021 rate was lower primarily due to income tax benefits of $21.5 recorded upon expiration of the statute of limitations for tax reserves previously established for uncertain tax positions taken in prior years.

This included a benefit of $12.2 ($0.05 per share) for release of reserves established in 2017 for a tax election related to a non-U.S.

subsidiary and other previously disclosed items ("tax election benefit and other").

Additionally, the fiscal year 2020 effective tax rate reflected the unfavorable impact of India Finance Act 2020, which resulted in additional net income of $13.5 ($0.06 per share).

This included an increase to equity affiliates' income of $33.8, partially offset by an increase to our income tax provision of $20.3 for changes in the future tax costs of repatriated earnings.

Our adjusted effective tax rate was 18.9% and 19.1% for the fiscal years ended 30 September 2021 and 2020, respectively.

During fiscal year 2023, we recorded a charge for business and asset actions of $244.6 ($204.9 attributable to Air Products after tax).

Refer to Note 4, Business and Asset Actions , to the consolidated financial statements for additional information.

The charge included certain losses for which we could not recognize an income tax benefit and were subject to a valuation allowance of $36.0.

Partially offsetting the valuation allowance cost was a $15.9 income tax benefit from a tax election related to a non-U.S.

Our effective tax rate for the current year was higher due to lower excess tax benefits on share-based compensation and the discrete tax impact of our business and asset actions discussed above.

In addition, certain recurring income tax benefits had less of an impact on our effective tax rate in the current year as they did not increase in proportion to the increase in income.

Our current rate is also higher due to nonrecurring benefits in several foreign jurisdictions due to the impact of tax rate changes and productivity credit claims in the prior year.

Our adjusted effective tax rate, which does not include the impact of our business and asset actions discussed above, was 18.9% and 18.1% for the fiscal years ended 30 September 2023 and 2022, respectively.

Table of Conte n t s

DISCUSSION OF RESULTS BY BUSINESS SEGMENT

Prior year segment information presented below has been updated to reflect the reorganization of our reporting segments effective 1 October 2021.

The reorganization included the separation of our former Industrial Gases – EMEA (Europe, Middle East, and Africa) segment into two separate reporting segments:

(1) Europe and (2) Middle East and India.

The results of an affiliate formerly reflected in the Asia segment are now reported in the Middle East and India segment.

Additionally, the results of our Industrial Gases – Global operating segment are reflected in the Corporate and other segment.

The reorganization did not impact the Americas segment.

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Fiscal Year Ended 30 September 2023 2022 $ %/bp

Sales $5,369.3 $5,368.9 $0.4 —%

Operating income 1,439.7 1,174.4 265.3 23%

Operating margin 21.9 % 25.6 % 27.9 % (370) bp (230) bp

Operating margin 26.8 % 21.9 % 490 bp

Equity affiliates’ income $109.2 $98.2 $11.0 11%

Adjusted EBITDA 2,198.2 1,902.1 296.1 16%

Adjusted EBITDA margin 35.4 % 42.9 % 45.6 % (750) bp (270) bp

Adjusted EBITDA margin 40.9 % 35.4 % 550 bp

The table below summarizes the major factors that impacted sales in the Americas segment for the periods presented:

Volume 8 % — %

Price 6 % 4 %

Energy cost pass-through to customers (11 %)

1 unchanged sentence

Total Americas Sales Change — %

2021 (Americas)

Sales of $5,368.9 increased 29%, or $1,201.3, due to higher energy cost pass-through to customers of 16%, higher volumes of 8%, and positive pricing of 6%, partially offset by an unfavorable currency impact of 1%.

Significantly higher energy costs increased contractual cost pass-through to our on-site customers.

In our merchant business, we successfully implemented pricing actions across all major product lines.

The volume improvement was driven by a recovery in hydrogen and better demand for merchant products in North America.

The unfavorable currency impact was primarily attributable to the strengthening of the U.S.

Dollar against the Chilean Peso.

Operating income of $1,174.4 increased 10%, or $108.9, primarily from pricing, net of power and fuel costs, of $146 and favorable volumes of $68, partially offset by higher costs of $100.

Higher costs were driven by supply chain challenges, including driver shortages that continue to impact the industry broadly, inflation, higher planned maintenance, and higher incentive compensation.

Operating margin of 21.9% decreased 370 bp from 25.6% in the prior year, as higher energy cost pass-through to customers and higher costs were only partially offset by higher pricing.

The higher energy cost pass-through to customers accounted for approximately 300 bp of the decline.

Equity affiliates’ income of $98.2 decreased 13%, or $14.3, driven by our Mexico affiliate.

2020 (Americas)

Sales of $4,167.6 increased 15%, or $536.9, due to higher energy cost pass-through to customers of 11% and positive pricing of 4%, as volumes and currency were flat versus the prior year.

Energy cost pass-through to customers was higher in fiscal year 2021 primarily due to natural gas prices, which rose significantly in the second quarter and remained elevated throughout the year.

The pricing improvement was attributable to continued focus on pricing actions in our merchant business.

Volumes were flat as positive contributions from new assets, including hydrogen assets we acquired in April 2020, were offset by lower hydrogen and merchant demand.

Operating income of $1,065.5 increased 5%, or $53.1, due to higher pricing, net of power and fuel costs, of $79 and favorable currency of $10, partially offset by higher operating costs, including planned maintenance, of $36.

Operating margin of 25.6% decreased 230 bp from 27.9% in 2020 primarily due to higher energy cost pass-through to customers, which negatively impacted margin by approximately 250 bp, and higher operating costs, partially offset by the impact of our pricing actions.

Equity affiliates’ income of $112.5 increased 33%, or $28.2, driven by higher income from our Mexico affiliate.

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Sales of $5.4 billion were flat as higher volumes of 6% and higher pricing of 6% were offset by lower energy cost pass-through to customers of 11% and an unfavorable currency impact of 1%.

The volume improvement was primarily attributable to our on-site business, including better demand for hydrogen.

Additionally, we recovered higher costs in our merchant business through continued focus on pricing actions.

Energy cost pass-through to our on-site customers was lower due to lower natural gas prices.

Operating income of $1.4 billion increased 23%, or $265.3, due to positive pricing, net of power and fuel costs, of $306 and favorable volumes of $78, partially offset by higher costs of $112 and an unfavorable currency impact of $7.

Higher costs were driven by inflation, planned maintenance, and higher incentive compensation.

Operating margin of 26.8% increased 490 bp from 21.9% in the prior year primarily due to favorable pricing and lower energy cost pass-through to customers, partially offset by higher costs.

The favorable impact from lower energy cost pass-through to customers was about 250 bp.

Equity affiliates’ income of $109.2 increased 11%, or $11.0, driven by an affiliate in Mexico.

Table of Conte n t s

Fiscal Year Ended 30 September 2023 2022 $ %/bp

Sales $3,216.1 $3,143.3 $72.8 2%

Operating income 906.5 898.3 8.2 1%

Operating margin 28.6 % 28.7 % 32.0 % (10) bp (330) bp

Operating margin 28.2 % 28.6 % (40 bp)

Equity affiliates’ income $29.7 $22.1 $7.6 34%

Adjusted EBITDA 1,369.7 1,356.9 12.8 1%

Adjusted EBITDA margin 43.2 % 45.1 % 47.9 % (190) bp (280) bp

Adjusted EBITDA margin 42.6 % 43.2 % (60 bp)

The table below summarizes the major factors that impacted sales in the Asia segment for the periods presented:

Volume 7 % — %

Price 3 % 1 %

Energy cost pass-through to customers 2 %

1 unchanged sentence

Total Asia Sales Change 2 %

Sales of $3,143.3 increased 8%, or $222.5, due to higher volumes of 7%, positive pricing of 3%, and higher energy cost pass-through to customers of 1%, partially offset by unfavorable currency impacts of 3%.

Volumes improved overall despite COVID-19 restrictions in certain parts of China and included contributions from several traditional industrial gas plants that were brought on-stream in our on-site business across the region.

Pricing improved across all key countries and most major merchant product lines.

Sales of $3.2 billion increased 2%, or $72.8, due to higher volumes of 3%, positive pricing of 3%, and higher energy cost pass-through to customers of 2%, partially offset by unfavorable currency impacts of 6%.

Positive volume contributions from several new traditional industrial gas plants in our on-site business were partially offset by weak economic growth in China and lower activity in the electronics manufacturing industry.

Higher power costs across the region were recovered by our merchant pricing actions.

In our on-site business, the higher power costs increased energy cost pass-through to our customers.

The unfavorable currency impact was primarily attributable to the strengthening of the U.S.

Dollar against the Chinese Renminbi and the South Korean Won.

Operating income of $898.3 increased 7%, or $60.0, as higher volumes of $104 and positive pricing, net of power and fuel costs, of $22 were partially offset by higher operating costs of $43 and an unfavorable currency impact of $23.

Higher costs were driven by higher distribution and product sourcing costs, including those related to supply chain inefficiencies, inflation, higher incentive compensation, and resources needed to support new project start-ups.

Operating margin of 28.6% decreased 10 bp from 28.7% in the prior year as the positive impact of our volume growth was mostly offset by the higher costs.

Equity affiliates’ income of $22.1 decreased 38%, or $13.8, driven by an affiliate in Thailand.

Sales of $2,920.8 increased 8%, or $204.3, due to favorable currency of 7% and positive pricing of 1%, as both volumes and energy cost pass-through to customers were flat versus 2020.

Positive volume contributions from our base merchant business and new plants were offset by a reduced contribution from our Lu'An joint venture.

The favorable currency impact was primarily attributable to the appreciation of the Chinese Renminbi and South Korean Won against the U.S.

Operating income of $838.3 decreased 4%, or $32.0, primarily due to unfavorable volume mix of $62 and higher operating costs, including inflation and product sourcing costs, of $32, partially offset by favorable currency of $59.

Operating margin of 28.7% decreased 330 bp from 32.0% in the prior year primarily due to a reduced contribution from our Lu'An joint venture.

Equity affiliates’ income of $35.9 increased 12%, or $3.8.

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Dollar against the Chinese Renminbi.

Operating income of $906.5 increased 1%, or $8.2, due to positive pricing, net of power and fuel costs, of $59 and higher volumes of $31, partially offset by an unfavorable currency impact of $56 and higher costs of $26.

The higher costs were driven by project development, higher planned maintenance, and inflation.

Operating margin of 28.2% decreased 40 bp from 28.6% in the prior year as higher costs were partially offset by our pricing actions.

Equity affiliates’ income of $29.7 increased 34%, or $7.6, driven by an affiliate in Thailand.

Table of Conte n t s

Fiscal Year Ended 30 September 2023 2022 $ %/bp

Sales $2,963.1 $3,086.1 ($123.0) (4%)

Operating income 663.4 503.4 160.0 32%

Operating margin 16.3 % 22.6 % 24.6 % (630) bp (200) bp

Operating margin 22.4 % 16.3 % 610 bp

Equity affiliates’ income $102.5 $78.2 $24.3 31%

Adjusted EBITDA 962.1 776.8 185.3 24%

Adjusted EBITDA margin 25.2 % 34.0 % 37.0 % (880) bp (300) bp

Adjusted EBITDA margin 32.5 % 25.2 % 730 bp

The table below summarizes the major factors that impacted sales in the Europe segment for the periods presented:

Volume 1 % 11 %

Price 15 % 3 %

Energy cost pass-through to customers (9 %)

1 unchanged sentence

Total Europe Sales Change (4 %)

2021 (Europe)

Sales of $3,086.1 increased 32%, or $740.5, due to higher energy cost pass-through to customers of 27%, higher pricing of 15%, and higher volumes of 1%, partially offset by an unfavorable currency impact of 11%.

Significantly higher energy costs across the region increased contractual cost pass-through to our on-site customers.

In our merchant business, we successfully implemented pricing actions in all major product lines.

While we experienced better demand for merchant products, volumes were relatively flat due to lower hydrogen demand.

Additionally, sales in this region were negatively impacted by the strengthening of the U.S.

Sales of $3.0 billion decreased 4%, or $123.0, due to lower energy cost pass-through to customers of 9% and an unfavorable currency impact of 2%, partially offset by higher pricing of 7%.

Energy cost pass-through to our on-site customers was lower, reflecting lower natural gas prices across the region.

Currency negatively impacted sales due to the strengthening of the U.S.

Dollar against the Euro and the British Pound Sterling.

Operating income of $503.4 decreased 5%, or $26.0, due to unfavorable currency impacts of $37, higher costs of $31, and unfavorable volume mix of $19, partially offset by higher pricing, net of power and fuel costs, of $61.

Higher costs were primarily attributable to inflation and distribution and sourcing costs.

Operating margin of 16.3% decreased 630 bp from 22.6% in the prior year primarily due to higher energy cost pass-through to customers, which accounted for approximately 450 bp of the margin decline, and higher costs.

The pricing improvement was attributable to our merchant business.

Volumes were flat as improvement in hydrogen in our on-site business was offset by lower demand for merchant products.

Operating income of $663.4 increased 32%, or $160.0, as higher pricing, net of power and fuel costs, of $275 was partially offset by higher costs of $100 driven by inflation, higher incentive compensation, and planned maintenance, unfavorable business mix of $8, and an unfavorable currency impact of $7.

Operating margin of 22.4% increased 610 bp from 16.3% in the prior year due to the factors noted above as well as lower energy cost pass-through to customers, which positively impacted margin by about 100 bp.

Equity affiliates’ income of $102.5 increased 31%, or $24.3, driven by an affiliate in Italy.

2020 (Europe)

Sales of $2,345.6 increased 27%, or $498.6, due to higher volumes of 11%, favorable currency impacts of 7%, higher energy cost pass-through to customers of 6%, and positive pricing of 3%.

The volume improvement was driven by our base merchant business and new assets, including those from a business in Israel that we acquired in the fourth quarter of 2020.

While our liquid bulk business largely recovered from COVID-19 in fiscal year 2021, demand for packaged gases and hydrogen continued to be lower than pre-pandemic levels.

Favorable currency impacts were primarily attributable to the appreciation of the British Pound Sterling and Euro against the U.S.

Energy cost pass-through to customers was higher primarily in the second half of the year as we had experienced significantly higher natural gas and electricity costs in Europe.

The pricing improvement was primarily attributable to our merchant business.

Operating income of $529.4 increased 16%, or $74.6, due to higher volumes of $47, favorable currency impacts of $31, and positive pricing, net of power and fuel costs, of $13, partially offset by unfavorable costs of $16.

Operating margin of 22.6% decreased 200 bp from 24.6% in the prior year, primarily due to impacts from higher energy cost pass-through to customers, which negatively impacted margin by approximately 100 bp, and unfavorable operating costs.

Equity affiliates’ income of $62.8 increased 21%, or $11.0, primarily due to higher income from affiliates in Italy and South Africa.

Table of Conte n t s

Middle East and India

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Fiscal Year Ended 30 September 2023 2022 $ %

Sales $162.5 $129.5 $33.0 25 %

2 unchanged sentences

Adjusted EBITDA 394.2 341.9 52.3 15 %

2021 (Middle East and India)

Sales of $129.5 increased 30%, or $30.2, primarily due to a new plant in India and a small acquisition.

Operating income of $21.1 decreased 25%, or $6.9, due to unfavorable volume mix and higher costs.

Equity affiliates' income of $293.9 increased $217.5 primarily from the JIGPC joint venture, which began contributing to our results in late October 2021, as well as recognition of the remaining deferred profit associated with air separation units previously sold to Jazan Gas Project Company, net of other project finalization costs, in the first quarter.

2020 (Middle East and India)

Sales of $99.3 increased 25%, or $20.0, and operating income of $28.0 increased 51%, or $9.5, primarily due to a new plant in India.

Equity affiliates’ income of $76.4 increased 47%, or $24.5, primarily due to higher income from an affiliate in India.

Sales of $162.5 increased 25%, or $33.0, driven by higher merchant volumes.

Despite higher sales, operating income of $16.9 decreased 20%, or $4.2, primarily due to higher costs for business development and planned maintenance.

Equity affiliates' income of $349.8 increased 19%, or $55.9.

In January 2023, we made an additional investment in the JIGPC joint venture, which completed the second phase of the asset purchase associated with the Jazan gasification and power project.

The resulting higher contribution from JIGPC was partially offset by a prior year net benefit recognized for the remaining deferred profit associated with air separation units previously sold to Jazan Gas Project Company, net of other project finalization costs.

Corporate and other

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Fiscal Year Ended 30 September 2023 2022 $ %

Sales $889.0 $970.8 ($81.8) (8 %)

1 unchanged sentence

Adjusted EBITDA (222.4) (130.7) (91.7) (70 %)

2021 (Corporate and other)

Sales of $970.8 increased 23%, or $181.1, and operating loss of $184.7 decreased 4%, or $8.7, as the current year included higher sale of equipment project activity related to air separation equipment, completion of liquefaction equipment for an LNG project, as well as distribution equipment.

2020 (Corporate and other)

Sales of $789.7 increased 36%, or $206.9, primarily due to higher project activity in our sale of equipment and turbo machinery equipment and services businesses.

Despite higher sales, operating loss of $193.4 increased 27%, or $41.2, as higher project costs, product development spending, and corporate support costs were only partially offset by higher sale of equipment activity and a favorable settlement of a supply contract.

Sales of $889.0 decreased 8%, or $81.8, and operating loss of $287.3 increased $102.6, primarily due to lower contributions from our sale of equipment businesses.

Our Corporate and other segment also incurs costs to provide corporate support functions and global management activities that benefit all segments, which have increased to support our growth strategy.

Table of Conte n t s

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

(Millions of dollars unless otherwise indicated, except for per share data)

(Millions of U.S.

Dollars unless otherwise indicated, except for per share data)

We present certain financial measures, other than in accordance with U.S.

generally accepted accounting principles ("GAAP"), on an "adjusted" or "non-GAAP" basis.

On a consolidated basis, these measures include adjusted diluted earnings per share ("EPS"), adjusted EBITDA, adjusted EBITDA margin, adjusted effective tax rate, and capital expenditures.

On a consolidated basis, these measures include adjusted diluted earnings per share ("EPS"), adjusted EBITDA, adjusted EBITDA margin, the adjusted effective tax rate, and capital expenditures.

On a segment basis, these measures include adjusted EBITDA and adjusted EBITDA margin.

1 unchanged sentence

For each non-GAAP financial measure, we present a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP.

In many cases, non-GAAP financial measures are determined by adjusting the most directly comparable GAAP measure to exclude certain items that we believe are not representative of our underlying business performance, or "non-GAAP adjustments." For example, we previously excluded certain expenses associated with cost reduction actions, impairment charges, and gains on disclosed transactions.

In many cases, non-GAAP financial measures are determined by adjusting the most directly comparable GAAP measure to exclude non-GAAP adjustments that we believe are not representative of our underlying business performance.

For example, we exclude the impact of the non-service components of net periodic benefit/cost for our defined benefit pension plans as further discussed below.

Additionally, we may exclude certain expenses associated with cost reduction actions, impairment charges, and gains on disclosed transactions.

The reader should be aware that we may recognize similar losses or gains in the future.

5 unchanged sentences

Readers should also consider the limitations associated with these non-GAAP financial measures, including the potential lack of comparability of these measures from one company to another.

NON-GAAP ADJUSTMENT FOR NON-SERVICE PENSION COST (BENEFIT), NET

Our adjusted EPS and the adjusted effective tax rate exclude the impact of non-service related components of net periodic benefit/cost for our defined benefit pension plans.

The prior year non-GAAP financial measures presented above and reconciled below have been recast accordingly to conform to the fiscal year 2023 presentation.

Non-service related components are recurring, non-operating items that include interest cost, expected returns on plan assets, prior service cost amortization, actuarial loss amortization, as well as special termination benefits, curtailments, and settlements.

The net impact of non-service related components is reflected within “Other non-operating income (expense), net” on our consolidated income statements.

Adjusting for the impact of non-service pension components provides management and users of our financial statements with a more accurate representation of our underlying business performance because these components are driven by factors that are unrelated to our operations, such as recent changes to the allocation of our pension plan assets associated with de-risking as well as volatility in equity and debt markets.

Further, non-service related components are not indicative of our defined benefit plans’ future contribution needs due to the funded status of the plans.

Table of Conte n t s

ADJUSTED DILUTED EPS

2 unchanged sentences

Per share impacts are calculated independently and may not sum to total diluted EPS and total adjusted diluted EPS due to rounding.

Fiscal Year Ended 30 September Operating Income Equity Affiliates' Income Income Tax Provision Net Income Attributable to Air Products Diluted EPS

2022 Operating Income Equity Affiliates' Income Other Non-Operating Income/Expense, Net Income Tax Provision Net Income Attributable to Air Products Diluted EPS

2023 GAAP $2,494.6 $604.3 ($39.0) $551.2 $2,292.8 $10.30

3 unchanged sentences

2023 GAAP $2,494.6 $604.3 ($39.0) $551.2 $2,292.8 $10.30

Business and asset actions 73.7 — 12.7 61.0 0.27

Equity method investment impairment charge — 14.8 3.7 11.1 0.05

2022 Non-GAAP ("Adjusted")

Business and asset actions (A)

244.6 — — 34.7 204.9 0.92

2021 GAAP $2,281.4 $294.1 $462.8 $2,028.8 $9.12

Facility closure 23.2 — 5.8 17.4 0.08

Gain on exchange with joint venture partner (36.8) — (9.5) (27.3) (0.12)

Tax election benefit and other — — 12.2 (12.2) (0.05)

2021 Non-GAAP ("Adjusted")

Non-service pension cost, net

— — 86.8 21.6 65.2 0.29

Change Non-GAAP ("Adjusted") $1.39

% Change Non-GAAP ("Adjusted") 15 %

Fiscal Year Ended 30 September Operating

Income Equity Affiliates' Income Income Tax Provision Net Income Attributable to Air Products Diluted EPS

2021 GAAP $2,281.4 $294.1 $462.8 $2,028.8 $9.12

2020 GAAP 2,237.6 264.8 478.4 1,901.0 8.55

Change GAAP $0.57

% Change GAAP 7 %

2021 GAAP $2,281.4 $294.1 $462.8 $2,028.8 $9.12

Facility closure 23.2 — 5.8 17.4 0.08

Gain on exchange with joint venture partner (36.8) — (9.5) (27.3) (0.12)

Tax election benefit and other — — 12.2 (12.2) (0.05)

2023 Non-GAAP ("Adjusted")

$2,739.2 $604.3 $47.8 $607.5 $2,562.9 $11.51

2022 GAAP $2,338.8 $481.5 $62.4 $500.8 $2,243.5 $10.08

Company headquarters relocation (income) expense (33.8) — (8.2) (25.6) (0.12)

India Finance Act 2020 — (33.8) (20.3) (13.5) (0.06)

Business and asset actions

73.7 — — 12.7 61.0 0.27

Equity method investment impairment charge — 14.8 — 3.7 11.1 0.05

Non-service pension benefit, net

— — (44.7) (10.8) (33.9) (0.15)

2022 Non-GAAP ("Adjusted")

$2,412.5 $496.3 $17.7 $506.4 $2,281.7 $10.25

$ Change Non-GAAP ("Adjusted")

% Change Non-GAAP ("Adjusted") 12 %

(A ) Charge includes $5.0 attributable to noncontrolling interests.

Table of Conte n t s

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN

We define adjusted EBITDA as net income less income (loss) from discontinued operations, net of tax, and excluding certain items that we do not believe are indicative of underlying business trends, before interest expense, other non-operating income (expense), net, income tax provision, and depreciation and amortization expense.

We define adjusted EBITDA as net income less income from discontinued operations, net of tax, and excluding non-GAAP adjustments, which we do not believe to be indicative of underlying business trends, before interest expense, other non-operating income (expense), net, income tax provision, and depreciation and amortization expense.

Adjusted EBITDA and adjusted EBITDA margin provide useful metrics for management to assess operating performance.

1 unchanged sentence

The tables below present consolidated sales and a reconciliation of net income on a GAAP basis to adjusted EBITDA and net income margin on a GAAP basis to adjusted EBITDA margin:

Fiscal Year Ended 30 September

2022 2021 2020

$ Margin $ Margin $ Margin

$ Margin $ Margin

Sales $12,600.0 $12,698.6

Net income and net income margin $2,338.6 18.6 % $2,266.5 17.8 %

Income (Loss) from discontinued operations, net of tax 12.6 0.1 % 70.3 0.7 % (14.3) (0.2 %)

Income from discontinued operations, net of tax

7.4 0.1 % 12.6 0.1 %

Interest expense 177.5 1.4 % 128.0 1.0 %

2 unchanged sentences

Depreciation and amortization 1,358.3 10.8 % 1,338.2 10.5 %

Facility closure — — % 23.2 0.2 % — — %

Business and asset actions 244.6 1.9 % 73.7 0.6 %

Gain on exchange with joint venture partner — — % 36.8 0.4 % — — %

Company headquarters relocation income (expense) — — % — — % 33.8 0.4 %

India Finance Act 2020 – equity affiliate income impact — — % — — % 33.8 0.4 %

Equity method investment impairment charge — — % 14.8 0.1 %

2 unchanged sentences

Net income % change 3%

Net income margin change (270) bp (130) bp

Net income margin change 80 bp

Change Non-GAAP

1 unchanged sentence

Adjusted EBITDA % change 11%

Adjusted EBITDA margin change (420) bp (330) bp

The tables below present sales and a reconciliation of operating income and operating margin to adjusted EBITDA and adjusted EBITDA margin for each of our reporting segments for the fiscal years ended 30 September:

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Adjusted EBITDA margin change 390 bp

Table of Conte n t s

The tables below present sales and a reconciliation of operating income and operating margin by segment to adjusted EBITDA and adjusted EBITDA margin by segment for the fiscal years ended 30 September 2023 and 2022:

Fiscal Year Ended 30 September 2023 2022 $ %/bp

Sales $5,369.3 $5,368.9 $0.4 — %

Operating income $1,439.7 $1,174.4 $265.3 23 %

Operating margin 21.9 % 25.6 % 27.9 % (370) bp (230) bp

Operating margin 26.8 % 21.9 % 490 bp

Reconciliation of GAAP to Non-GAAP:

3 unchanged sentences

Adjusted EBITDA $2,198.2 $1,902.1 $296.1 16 %

Adjusted EBITDA margin 35.4 % 42.9 % 45.6 % (750) bp (270) bp

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Adjusted EBITDA margin 40.9 % 35.4 % 550 bp

Fiscal Year Ended 30 September 2023 2022 $ %/bp

Sales $3,216.1 $3,143.3 $72.8 2 %

Operating income $906.5 $898.3 $8.2 1 %

Operating margin 28.6 % 28.7 % 32.0 % (10) bp (330) bp

Operating margin 28.2 % 28.6 % (40) bp

Reconciliation of GAAP to Non-GAAP:

3 unchanged sentences

Adjusted EBITDA $1,369.7 $1,356.9 $12.8 1 %

Adjusted EBITDA margin 43.2 % 45.1 % 47.9 % (190) bp (280) bp

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Adjusted EBITDA margin 42.6 % 43.2 % (60) bp

Fiscal Year Ended 30 September 2023 2022 $ %/bp

Sales $2,963.1 $3,086.1 ($123.0) (4 %)

Operating income $663.4 $503.4 $160.0 32 %

Operating margin 16.3 % 22.6 % 24.6 % (630) bp (200) bp

Operating margin 22.4 % 16.3 % 610 bp

Reconciliation of GAAP to Non-GAAP:

3 unchanged sentences

Adjusted EBITDA $962.1 $776.8 $185.3 24 %

Adjusted EBITDA margin 25.2 % 34.0 % 37.0 % (880) bp (300) bp

Adjusted EBITDA margin 32.5 % 25.2 % 730 bp

Table of Conte n t s

Middle East and India

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Fiscal Year Ended 30 September 2023 2022 $ %/bp

Sales $162.5 $129.5 $33.0 25 %

4 unchanged sentences

Equity affiliates' income 349.8 293.9

Adjusted EBITDA $341.9 $129.7 $90.4 $212.2 164 bp $39.3 43 %

Adjusted EBITDA $394.2 $341.9 $52.3 15 %

Corporate and other

Fiscal Year Ended 30 September 2022 vs.

2022 2021 2020 $ %/bp $ %/bp

Fiscal Year Ended 30 September 2023 2022 $ %/bp

Sales $889.0 $970.8 ($81.8) (8 %)

1 unchanged sentence

Reconciliation of GAAP to Non-GAAP:

Operating income ($184.7) ($193.4) ($152.2)

Operating loss

($287.3) ($184.7)

Depreciation and amortization 51.8 50.1

Equity affiliates' income 13.1 3.9

Adjusted EBITDA ($130.7) ($151.7) ($111.1) $21.0 14 bp ($40.6) (37 %)

Adjusted EBITDA ($222.4) ($130.7) ($91.7) (70 %)

Table of Conte n t s

ADJUSTED EFFECTIVE TAX RATE

The effective tax rate equals the income tax provision divided by income from continuing operations before taxes.

We calculate our adjusted effective tax rate by adjusting the numerator and denominator to exclude the tax and before tax impacts of our non-GAAP adjustments, respectively.

The table below presents a reconciliation of the GAAP effective tax rate to our adjusted effective tax rate:

Fiscal Year Ended 30 September 2023 2022

3 unchanged sentences

Income tax provision

Facility closure — 5.8 —

$551.2 $500.8

Business and asset actions 34.7 12.7

Gain on exchange with joint venture partner — (9.5) —

Company headquarters relocation — — (8.2)

India Finance Act 2020 — — (20.3)

Equity method investment impairment charge — 3.7

Tax election benefit and other — 12.2 —

Non-service pension tax impact 21.6 (10.8)

Adjusted income tax provision $607.5 $506.4

Income from continuing operations before taxes

Facility closure — 23.2 —

$2,882.4 $2,754.7

Business and asset actions 244.6 73.7

Gain on exchange with joint venture partner — (36.8) —

Company headquarters relocation (income) expense — — (33.8)

India Finance Act 2020 – equity affiliate income impact — — (33.8)

Equity method investment impairment charge — 14.8

Non-service pension cost (benefit), net 86.8 (44.7)

Adjusted income from continuing operations before taxes $3,213.8 $2,798.5

1 unchanged sentence

CAPITAL EXPENDITURES

We define capital expenditures as cash flows for additions to plant and equipment, including long-term deposits, acquisitions (less cash acquired), and investment in and advances to unconsolidated affiliates.

Capital expenditures is a non-GAAP financial measure that we define as the sum of cash flows for additions to plant and equipment, including long-term deposits, acquisitions (less cash acquired), investment in and advances to unconsolidated affiliates, and investment in financing receivables on our consolidated statements of cash flows.

Additionally, we adjust additions to plant and equipment to exclude NEOM Green Hydrogen Company (“NGHC”) expenditures funded by the joint venture's non-recourse project financing as well as our partners’ equity contributions to arrive at a measure that we believe is more representative of our investment activities.

Substantially all the funding we provide to NGHC is limited for use by the venture for capital expenditures.

A reconciliation of cash used for investing activities to our reported capital expenditures is provided below:

1 unchanged sentence

Cash used for investing activities

$5,916.4 $3,857.2

Proceeds from sale of assets and investments 25.4 46.2

2 unchanged sentences

Other investing activities 4.8 7.0

NGHC expenditures not funded by Air Products' equity (A)

Capital expenditures $5,224.4 $4,650.0

(A) Reflects the portion of "Additions to plant and equipment, including long-term deposits" that is associated with NGHC, less our approximate cash investment in the joint venture.

Table of Conte n t s

LIQUIDITY AND CAPITAL RESOURCES

Our cash balance and cash flows from operations are our primary sources of liquidity and are generally sufficient to meet our liquidity needs.

In addition, we have the flexibility to access capital through a variety of financing activities, including accessing the capital markets, drawing upon our credit facility, or alternatively, accessing the commercial paper markets.

At this time, we have not utilized, nor do we expect to access, our credit facility for additional liquidity.

We believe we have sufficient cash, cash flows from operations, and funding sources to meet our liquidity needs.

As further discussed in the "Cash Flows From Financing Activities" section below, we have the ability to raise capital through a variety of financing activities, including accessing capital or commercial paper markets or drawing upon our credit facilities.

As of 30 September 2023, we had $1,497.1 of foreign cash and cash items compared to total cash and cash items of $1,617.0.

9 unchanged sentences

Deferred income taxes (24.7) 32.3

Facility closure — 23.2

Business and asset actions 244.6 73.7

Undistributed earnings of equity method investments

(261.2) (214.7)

Gain on sale of assets and investments (15.8) (24.1)

2 unchanged sentences

Other adjustments (103.0) (304.9)

Changes in working capital accounts (115.8) 16.7

Working capital changes that provided (used) cash, excluding effects of acquisitions:

Trade receivables 130.7 (475.2)

Inventories (129.4) (94.3)

Other receivables (93.8) (1.8)

Payables and accrued liabilities (213.3) 532.5

Other working capital (119.0) (77.0)

Cash Provided by Operating Activities $3,205.7 $3,170.6

For the fiscal year ended 30 September 2022, cash provided by operating activities was $3,170.6.

Undistributed earnings of equity method investments reflects activity from the JIGPC joint venture, which began contributing to our results in late October 2021.

We received cash distributions of approximately $155 from this joint venture during the fiscal year.

In fiscal year 2023, cash provided by operating activities was $3,205.7.

Business and asset actions of $244.6 included noncash charges to write off assets related to our exit from certain projects previously under construction as well as an expense for severance and other benefits.

Refer to Note 4, Business and Asset Actions , to the consolidated financial statements for additional information.

The impacts associated with our operating leases are reflected within "Other adjustments," which included a lump-sum payment of $209 for a land lease associated with the NGHC joint venture.

Working capital accounts resulted in a net use of cash of $424.8.

The use of cash of $213.3 within payables and accrued liabilities primarily resulted from lower prices for the purchase of natural gas, a decrease in value of derivatives that hedge intercompany loans, and payments for incentive compensation under the fiscal year 2022 plan.

Inventories resulted in a use of cash of $129.4 primarily due to additional packaged gases inventory, including helium.

The use of cash of $119.0 within other working capital was primarily driven by the timing of income tax payments.

The source of cash of $130.7 from trade receivables was primarily attributable to collection of higher natural gas costs contractually passed through to on-site customers in fiscal year 2023.

Table of Conte n t s

In fiscal year 2022, cash provided by operating activities was $3,170.6.

Undistributed earnings of equity method investments of $214.7 reflects activity from the JIGPC joint venture, which began contributing to our results in late October 2021.

We received cash distributions of approximately $155 from this joint venture during fiscal year 2022.

Other adjustments of $304.9 included adjustments for noncash currency impacts of intercompany balances, deferred costs associated with new projects, contributions to pension plans, and payments made for leasing activities.

The working capital accounts were a use of cash of $115.8, primarily driven by a use of cash of $475.2 from trade receivables, less allowances, $94.3 from inventory and $77.0 from other working capital, partially offset by a source of cash of $532.5 from payables and accrued liabilities.

The use of cash within trade receivables includes the impacts of higher natural gas costs contractually passed through to customers and higher underlying sales.

The source of cash within payables and accrued liabilities primarily resulted from higher natural gas costs and customer advances for sale of equipment projects.

The use of cash within other working capital primarily relates to contract fulfillment costs and the timing of income tax payments.

For the fiscal year ended 30 September 2021, cash provided by operating activities was $3,335.2.

Other adjustments of $116.7 included pension plan contributions of $44.6 and pension income of $38.9 that did not have a cash impact.

The working capital accounts were a source of cash of $16.7, primarily driven by a $187.9 source of cash from payables and accrued liabilities, partially offset by a $130.5 use of cash from trade receivables, less allowances.

The source of cash within payables and accrued liabilities primarily resulted from higher natural gas costs, which also drove the use of cash within trade receivables as we contractually passed through these higher costs to customers.

Working capital accounts resulted in a net use of cash of $115.8.

The use of cash of $475.2 within trade receivables included the impacts of higher underlying sales and higher natural gas costs passed through to our on-site customers.

The source of cash of $532.5 within payables and accrued liabilities primarily resulted from higher natural gas costs and customer advances for sale of equipment projects.

Other working capital accounts resulted in a use of cash of $77.0 primarily due to contract fulfillment costs and the timing of income tax payments.

Cash Flows From Investing Activities

3 unchanged sentences

Investment in and advances to unconsolidated affiliates (912.0) (1,658.4)

Investment in financing receivables (665.1) —

Proceeds from sale of assets and investments 25.4 46.2

3 unchanged sentences

Cash Used for Investing Activities

For the fiscal year ended 30 September 2022, cash used for investing activities was $3,857.2.

Capital expenditures primarily included $2,926.5 for additions to plant and equipment, including long-term deposits and $1,658.4 for investment in and advances to unconsolidated affiliates.

($5,916.4) ($3,857.2)

In fiscal year 2023, cash used for investing activities was $5,916.4.

The use of cash primarily resulted from capital expenditures of $4,626.4 for additions to plant and equipment, including long-term deposits, investments in and advances to unconsolidated affiliates of $912.0, and investments in financing receivables of $665.1.

Refer to the Capital Expenditures section below for further detail.

Proceeds from investments of $2,377.4 resulted from maturities of time deposits and treasury securities with terms greater than three months but less than one year and exceeded purchases of investments of $1,637.8.

For the fiscal year ended 30 September 2021, cash used for investing activities was $2,732.9.

Capital expenditures for plant and equipment, including long-term deposits, were $2,464.2.

Purchases of investments with terms greater than three months but less than one year of $2,100.7 exceeded proceeds from investments of $1,875.2, which resulted from maturities of time deposits and treasury securities.

Maturities of time deposits and short-term treasury securities provided cash of $897.0, which exceeded purchases of investments of $640.1.

In fiscal year 2022, cash used for investing activities was $3,857.2.

Capital expenditures primarily included $2,926.5 for additions to plant and equipment, including long-term deposits, and $1,658.4 for investments in and advances to unconsolidated affiliates.

Proceeds from investments of $2,377.4 resulted from maturities of time deposits and short-term treasury securities and exceeded purchases of investments of $1,637.8.

Capital Expenditures

Capital expenditures is a non-GAAP financial measure that we define as cash flows for additions to plant and equipment, including long-term deposits, acquisitions (less cash acquired), and investment in and advances to unconsolidated affiliates.

The components of our capital expenditures are detailed in the table below.

We also present a reconciliation of our capital expenditures to cash used for investing activities on page 40 .

Refer to page 38 for a definition of this non-GAAP measure as well as a reconciliation to cash used for investing activities.

Fiscal Year Ended 30 September 2023 2022

Additions to plant and equipment, including long-term deposits

$4,626.4 $2,926.5

Acquisitions, less cash acquired — 65.1

Investment in and advances to unconsolidated affiliates (A)

912.0 1,658.4

Investment in financing receivables 665.1 —

NGHC expenditures not funded by Air Products' equity (B)

Capital Expenditures $5,224.4 $4,650.0

(A) Includes contributions from noncontrolling partners in consolidated subsidiaries as discussed below.

(B) Reflects the portion of "Additions to plant and equipment, including long-term deposits" that is associated with NGHC, less our approximate cash investment in the joint venture.

Table of Conte n t s

Capital expenditures in fiscal year 2023 totaled $5,224.4 compared to $4,650.0 in fiscal year 2022.

The increase of $2,099.3 was primarily driven by our initial investment of $1.6 billion in the new JIGPC joint venture, which included approximately $130 from a non-controlling partner in one of our subsidiaries.

We expect to make an additional investment of approximately $1 billion, which will also include a contribution from our non-controlling partner, for the second phase of the project, which we expect to occur in the second quarter of fiscal year 2023.

The increase of $574.4 was driven by spending for plant and equipment, which was largely attributable to purchases associated with our low- and zero-carbon hydrogen projects, as well as ongoing maintenance capital spending.

Higher spending for plant and equipment was partially offset by lower investments in and advances to unconsolidated affiliates, as the second phase of our investment in JIGPC of $908 in fiscal year 2023 was lower than the initial investment of $1.6 billion completed in fiscal year 2022.

These investments included approximately $130 and $73 in fiscal years 2023 and 2022, respectively, received from a noncontrolling partner in one of our subsidiaries.

We expect to complete a remaining investment of approximately $115.

Refer to Note 9, Equity Affiliates , to the consolidated financial statements for additional information.

Fiscal year 2023 also included an investment in financing receivables of $665.1, primarily for progress payments towards the purchase of a natural gas-to-syngas processing facility in Uzbekistan.

Refer to Note 5, Acquisitions , to the consolidated financial statements for additional information.

Outlook for Investing Activities

We expect capital expenditures for fiscal year 2023 to be approximately $5 to $5.5 billion.

It is not possible, without unreasonable efforts, to reconcile our forecasted capital expenditures to future cash used for investing activities because we are unable to identify the timing or occurrence of our future investment activity, which is driven by our assessment of competing opportunities at the time we enter into transactions.

These decisions, either individually or in the aggregate, could have a significant effect on our cash used for investing activities.

We anticipate capital expenditures to be funded principally with our current cash balance, cash generated from continuing operations, and financing activities as needed.

In addition, we intend to continue to evaluate (1) investments in large industrial gas projects driven by demand for more energy, cleaner energy, and emerging market growth;

(2) purchases of existing industrial gas facilities from our customers to create long-term contracts under which we own and operate the plant and sell industrial gases to the customer based on a fixed fee;

and (3) acquisitions of small- and medium-sized industrial gas companies or assets from other industrial gas companies.

We expect capital expenditures for fiscal year 2024 to be approximately $5.0 billion to $5.5 billion, which is driven by clean hydrogen and sustainable aviation fuel projects such as those being executed in California and Louisiana, United States, as well as Alberta, Canada.

We anticipate capital expenditures to be funded with our current cash balance, cash generated from continuing operations, and additional financing activities.

As of the end of fiscal year 2023, we have committed capital of approximately $15 billion to projects intended to accelerate the energy transition.

These low- and zero-carbon hydrogen and other first mover projects demonstrate our commitment to making investments that will make a meaningful difference on climate issues, allowing us to support our customers’ sustainability journeys, conserve resources, and care for our employees and communities.

Cash Flows From Financing Activities

6 unchanged sentences

Investments by noncontrolling interests 234.9 21.0

Distributions to noncontrolling interests

(115.9) (4.8)

Other financing activities (205.8) (36.9)

Cash Used for Financing Activities ($1,000.6) ($1,420.9)

Cash Provided by (Used for) Financing Activities

$1,609.6 ($1,000.6)

In fiscal year 2023, cash provided by financing activities was $1,609.6.

As further discussed below, the source of cash was primarily attributable to long-term debt proceeds of $3,516.2 as well as an increase in commercial paper and short-term borrowings of $268.2.

These cash inflows were partially offset by dividend payments to shareholders of $1,496.6 and payments on long-term debt of $615.4.

The long-term debt proceeds included proceeds from our inaugural multi-currency green bonds that were issued during the second quarter in concurrent U.S.

Dollar- and Euro-denominated fixed-rate note offerings with aggregate principal amounts of $600 and €700 million, respectively.

Consistent with our Green Finance Framework, we have allocated the net proceeds to finance or refinance, in whole or in part, existing or future projects that are expected to have environmental benefits, including those related to pollution prevention and control, renewable energy generation and procurement, and sustainable aviation fuel.

We expect to issue our first allocation report in 2024.

Additionally, as further discussed below, the NGHC joint venture borrowed approximately $1.4 billion.

These proceeds were partially offset by financing fees of approximately $150, which are reflected within "Other financing activities".

Refer to the Credit Facilities section below as well as Note 16, Debt , to the consolidated financial statements for additional information.

Table of Conte n t s

In fiscal year 2022, cash used for financing activities was $1,000.6.

The use of cash was primarily driven by dividend payments to shareholders of $1,383.3 and payments on long-term debt of $400.0 for the repayment of a 3.0% Senior Note at maturity.

These uses of cash were partially offset by long-term debt proceeds of $766.2.

In fiscal year 2021, cash used for financing activities was $1,420.9 and primarily included dividend payments to shareholders of $1,256.7 and payments on long-term debt of $462.9, partially offset by long-term debt proceeds of $178.9 and investments by noncontrolling interests of $136.6.

The payments on long-term debt included the repayment of a 0.375% €350.0 million Eurobond ($428) in June 2021.

The use of cash was primarily driven by dividend payments to shareholders of $1,383.3 and payments on long-term debt of $400.0 for the repayment of a 3.0% Senior Note.

These uses of cash were partially offset by long-term debt proceeds and short-term borrowings of $766.2 and $17.9, respectively.

Financing and Capital Structure

Capital needs in fiscal year 2022 were satisfied with our cash balance and cash from operations.

Total debt increased from $7,637.2 as of 30 September 2021 to $7,644.8 as of 30 September 2022.

Total debt increased from $7,644.8 as of 30 September 2022 to $10,305.8 as of 30 September 2023, primarily due to non-recourse project financing secured by the NGHC joint venture for construction of the NEOM Green Hydrogen project, issuance of our inaugural green U.S.

Dollar- and Euro-denominated fixed-rate notes, and an increase in outstanding commercial paper.

Total debt includes related party debt of $328.3 and $781.0 as of 30 September 2023 and 30 September 2022, respectively.

Various debt agreements to which we are a party include financial covenants and other restrictions, including restrictions pertaining to the ability to create property liens and enter into certain sale and leaseback transactions.

As of 30 September 2022, we are in compliance with all of the financial and other covenants under our debt agreements.

Credit Facilities

On 31 March 2021, we entered into a five-year $2,500 revolving credit agreement maturing 31 March 2026 with a syndicate of banks (the “2021 Credit Agreement”), under which senior unsecured debt is available to us and certain of our subsidiaries.

On 31 March 2022, we amended the 2021 Credit Agreement to exercise our option to increase the maximum borrowing capacity to $2,750 and transition the benchmark rate from the London Inter-Bank Offered Rate ("LIBOR") to the Secured Overnight Financing Rate ("SOFR").

All other terms remain unchanged from the original agreement.

The only financial covenant in the 2021 Credit Agreement is a maximum ratio of total debt to total capitalization (equal to total debt plus total equity) not to exceed 70%.

Total debt as of 30 September 2022 and 30 September 2021, expressed as a percentage of total capitalization, was 35.8% and 35.2%, respectively.

As of 30 September 2023, we were in compliance with all of the financial and other covenants under our debt agreements.

2021 Credit Agreement

We have a five-year $2.75 billion revolving credit agreement maturing 31 March 2026 with a syndicate of banks (the “2021 Credit Agreement”), under which senior unsecured debt is available to us and certain of our subsidiaries.

The 2021 Credit Agreement provides a source of liquidity and supports our commercial paper program.

No borrowings were outstanding under the 2021 Credit Agreement as of 30 September 2023.

At this time, we do not expect to access the facility for additional liquidity.

The only financial covenant in the 2021 Credit Agreement is a maximum ratio of total debt to total capitalization (equal to total debt plus total equity) not to exceed 70%.

The 2021 Credit Agreement defines total debt as the aggregate principal amount of all indebtedness, excluding limited recourse debt of any project finance subsidiary.

Accordingly, this calculation does not consider borrowings associated with NGHC.

Total debt to total capitalization was 36.6% and 35.8% as of 30 September 2023 and 30 September 2022, respectively.

Foreign Credit Facilities

We also have credit facilities available to certain of our foreign subsidiaries totaling $1,596.8, of which $1,041.4 was borrowed and outstanding as of 30 September 2023.

The amount borrowed and outstanding as of 30 September 2022 was $457.5.

Equity Securities

On 15 September 2011, the Board of Directors authorized the repurchase of up to $1,000 of our outstanding common stock.

We did not purchase any of our outstanding shares in fiscal years 2022 or 2021.

As of 30 September 2022, $485.3 in share repurchase authorization remained.

The increase from 30 September 2022 was driven by borrowings on a new variable-rate Saudi Riyal loan facility that matures in October 2026.

The interest rate on the facility is based on the Saudi Arabian Interbank Offered Rate plus an annual margin of 1.35%.

We entered into this facility in October 2022 and utilized a portion of the proceeds to repay a variable-rate 4.10% Saudi Riyal Loan Facility of $195.6, which was presented within long-term debt on our consolidated balance sheet as of 30 September 2022.

NEOM Green Hydrogen Project Financing

In May 2023, NGHC secured non-recourse project financing of approximately $6.1 billion, which is expected to fund approximately 73% of the NEOM Green Hydrogen Project and will be drawn over the construction period.

At the same time, NGHC secured additional non-recourse credit facilities totaling approximately $500 primarily for working capital needs.

As of 30 September 2023, the joint venture had borrowed $1.4 billion of the available financing.

Refer to Note 3, Variable Interest Entities , to the consolidated financial statements for additional information.

The Board of Directors determines whether to declare cash dividends on our common stock and the timing and amount based on financial condition and other factors it deems relevant.

In fiscal year 2023, the Board of Directors increased the quarterly dividend to $1.75 per share, representing an 8% increase, or $0.13 per share, from the previous dividend of $1.62 per share.

We expect to continue increasing our quarterly dividend as we have done for the last 41 consecutive years.

Dividends are paid quarterly, usually during the sixth week after the close of the fiscal quarter.

In fiscal year 2022, the Board of Directors increased the quarterly dividend on our common stock to $1.62 per share, representing an 8% increase, or $0.12 per share, from the previous dividend of $1.50 per share.

This is the 40 th consecutive year that we have increased our quarterly dividend.

We expect to continue to pay cash dividends in the future at comparable or increased levels.

On 21 July 2023, the Board of Directors declared a quarterly dividend of $1.75 per share that was payable on 13 November 2023 to shareholders of record at the close of business on 2 October 2023.

On 15 November 2023, the Board of Directors declared a quarterly dividend of $1.75 per share that is payable on 12 February 2024 to shareholders of record at the close of business on 2 January 2024.

Discontinued Operations

In fiscal year 2022, cash provided by operating activities of discontinued operations of $59.6 resulted from cash received as part of a state tax refund related to the sale of our former Performance Materials Division in fiscal year 2017.

In fiscal year 2021, cash provided by operating activities of discontinued operations of $6.7 resulted from cash received as part of a state tax settlement related to the sale of our former Performance Materials Division in fiscal year 2017.

In fiscal years 2023 and 2022, cash provided by operating activities of discontinued operations of $0.6 and $59.6, respectively, resulted from cash received as part of state tax refunds related to the sale of our former Performance Materials Division in fiscal year 2017.

Table of Conte n t s

PENSION BENEFITS

5 unchanged sentences

The shift to defined contribution plans is expected to continue to reduce volatility of both plan expense and contributions.

Refer to Note 15, Retirement Benefits , to the consolidated financial statements for additional disclosures on our postretirement benefits.

Net Periodic Benefit

The table below summarizes the components of net periodic benefit for our U.S.

For additional information, refer to Note 17, Retirement Benefits , to the consolidated financial statements.

Net Periodic Cost (Benefit)

The table below summarizes the components of net periodic cost/benefit for our U.S.

and international defined benefit pension plans for the fiscal years ended 30 September:

Service cost $23.2 $39.8

Non-service related benefits (44.7) (83.0)

Non-service related costs (benefits)

Other 0.9 1.3

Net periodic benefit ($3.6) ($37.3)

Net periodic benefit of $3.6 decreased from $37.3 in the prior year, primarily due to lower non-service related benefits.

We increased the percentage of fixed income investments within the plan asset portfolios, which resulted in lower expected returns on plan assets for both the U.S.

salaried and the U.K.

pension plans.

Additionally, a higher discount rate resulted in higher interest costs.

These two reductions in non-service related benefits were only partially offset by lower actuarial loss amortization.

Our non-service related benefits are reflected within "Other non-operating income (expense), net" on our consolidated income statements.

Service costs result from benefits earned by active employees and are reflected as operating expenses primarily within "Cost of sales" and "Selling and administrative" on our consolidated income statements.

Net Periodic Cost (Benefit) $110.9 ($3.6)

Net periodic cost was $110.9 in fiscal year 2023 versus a benefit of $3.6 in the prior year.

The increased costs from the prior year were primarily attributable to higher non-service costs, which were driven by higher interest cost and lower expected returns on plan assets due to a smaller beginning balance of plan assets.

The net impact of non-service related items are reflected within "Other non-operating income (expense), net" on our consolidated income statements.

Service costs result from benefits earned by active employees and are reflected as operating expenses primarily within "Cost of sales" and "Selling and administrative expense" on our consolidated income statements.

The amount of service costs capitalized in fiscal years 2023 and 2022 was not material.

The table below summarizes the assumptions used in the calculation of net periodic benefit for the fiscal years ended 30 September:

The table below summarizes the assumptions used in the calculation of net periodic cost/benefit for the fiscal years ended 30 September:

Weighted average discount rate – Service cost 5.1 % 2.4 %

2 unchanged sentences

Weighted average expected rate of compensation increase 3.5 % 3.4 %

In fiscal year 2023, we expect to recognize pension expense of approximately $110 to $120 primarily driven by non-service related costs, including higher interest cost and lower estimated expected returns on plan assets due to a smaller beginning balance of plan assets.

In fiscal year 2024, we expect to recognize pension expense of approximately $120 to $130 primarily driven by approximately $100 to $110 of non-service related costs, including lower estimated expected returns on plan assets due to a smaller beginning balance of plan assets and higher interest cost, partially offset by a decrease in actuarial loss amortization.

In fiscal year 2023, we recognized net actuarial losses of $4.4 in other comprehensive income.

1 unchanged sentence

Future changes in the discount rate and actual returns on plan assets could impact the actuarial gain or loss and resulting amortization in years beyond fiscal year 2024.

Effective beginning in the first quarter of fiscal year 2023, management will review and disclose our adjusted results excluding the impact of non-service related costs as they are not indicative of the plans’ future contribution needs due to the funded status of the plans.

Non-service related costs are driven by factors that are unrelated to our operations, such as recent changes to the allocation of our pension plan assets associated with de-risking as well as volatility in equity and debt markets.

Table of Conte n t s

Pension Funding

2 unchanged sentences

The plan funded status is calculated as the difference between the projected benefit obligation and the fair value of plan assets at the end of the period.

The table below summarizes the project benefit obligation, the fair value of plan assets, and the funded status for our U.S.

The table below summarizes the projected benefit obligation, the fair value of plan assets, and the funded status for our U.S.

and international plans as of 30 September:

5 unchanged sentences

($78.2) ($62.3)

The net unfunded liability of $62.3 as of 30 September 2022 increased $6.1 from $56.2 as of 30 September 2021, primarily due to unfavorable asset experience, partially offset by a lower liability due to increased discount rates.

The net unfunded liability of $78.2 as of 30 September 2023 increased $15.9 from $62.3 as of 30 September 2022, as increases to the projected benefit obligation from the service and interest cost components of net period pension cost were greater than actuarial gains from higher discount rates.

Company Contributions

3 unchanged sentences

With the assistance of third-party actuaries, we analyze the liabilities and demographics of each plan, which help guide the level of contributions.

During 2022 and 2021, our cash contributions to funded plans and benefit payments for unfunded plans were $44.7 and $44.6, respectively.

Funding Outlook

During 2023 and 2022, our cash contributions to funded pension plans and benefit payments for unfunded pension plans were $32.6 and $44.7, respectively.

For fiscal year 2024, cash contributions to defined benefit plans are estimated to be $35 to $45.

13 unchanged sentences

wear and tear, obsolescence, technical standards, contract life, market demand, competitive position, raw material availability, and geographic location.

Table of Conte n t s

The estimated economic useful life of an asset is monitored to determine its appropriateness, especially when business circumstances change.

16 unchanged sentences

We completed our annual impairment tests for goodwill and other indefinite-lived intangible assets and concluded there were no indications of impairment.

In the fourth quarter of fiscal year 2022, we recorded a noncash charge of $14.8 for the other-than-temporary impairment of two small equity method investments in our Asia segment.

Refer to the “Impairment of Assets” subsections below for additional detail.

Impairment of Assets – Plant and Equipment

Impairment of Assets:

Plant and Equipment

Plant and equipment meeting the held for sale criteria are reported at the lower of carrying amount or fair value less cost to sell.

12 unchanged sentences

An estimate of the asset group’s fair value is based on the discounted value of its estimated cash flows.

Table of Conte n t s

The assumptions underlying the undiscounted future cash flow projections require significant management judgment.

4 unchanged sentences

In fiscal year 2023, there was no need to test for impairment on any of our asset groupings as no events or changes in circumstances indicated that the carrying amount of our asset groupings may not be recoverable.

Impairment of Assets – Goodwill

Impairment of Assets:

The acquisition method of accounting for business combinations requires us to make use of estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the net tangible and identifiable intangible assets.

22 unchanged sentences

Management judgment is required in the determination of each assumption utilized in the valuation model, and actual results could differ from the estimates.

During the fourth quarter of fiscal year 2022, we conducted our annual goodwill impairment test, noting no indications of impairment.

The fair value of all of our reporting units substantially exceeded their carrying value.

In the fourth quarter of fiscal year 2023, we conducted our annual goodwill impairment test, noting no indications of impairment.

The fair value of all our reporting units substantially exceeded their carrying value.

Table of Conte n t s

Future events that could have a negative impact on the level of excess fair value over carrying value of the reporting units include, but are not limited to:

1 unchanged sentence

Negative changes in one or more of these factors, among others, could result in impairment charges.

Impairment of Assets – Intangible Assets

Impairment of Assets:

Intangible Assets

Intangible assets, net with determinable lives at 30 September 2023 totaled $297.5 and consisted primarily of customer relationships, purchased patents and technology, and land use rights.

9 unchanged sentences

Disclosures related to intangible assets other than goodwill are included in Note 12, Intangible Assets , to the consolidated financial statements.

In the fourth quarter of 2022, we conducted our annual impairment test of indefinite-lived intangibles which resulted in no impairment.

Impairment of Assets – Equity Method Investments

In the fourth quarter of fiscal year 2023, we conducted our annual impairment test of indefinite-lived intangibles, noting no indications of impairment.

Impairment of Assets:

Equity Method Investments

Investments in and advances to equity affiliates totaled $4,617.8 at 30 September 2023.

The majority of our investments are ventures with other industrial gas companies.

The majority of our equity method investments are ventures with other industrial gas companies.

Summarized financial information of our equity affiliates is included in Note 9, Equity Affiliates , to the consolidated financial statements.

3 unchanged sentences

Changes in key assumptions about the financial condition of an investee or actual conditions that differ from estimates could result in an impairment charge.

During the fourth quarter of fiscal year 2022, we determined there was an other-than-temporary impairment of our investments in two small equity affiliates in the Asia segment.

As a result, we recorded a noncash charge of $14.8 ($11.1 after-tax, or $0.05 per share) to write down the full carrying value of the investments.

This charge is reflected on our consolidated income statements within “Equity affiliates' income” and was not recorded in segment results.

There were no events or changes in circumstances that indicated that the carrying amount of our other investments may not be recoverable.

Revenue Recognition – Cost Incurred Input Method

In fiscal year 2023, there was no need to test any of our equity affiliate investments for impairment as no events or changes in circumstances indicated that the carrying amount of the investments may not be recoverable.

Revenue Recognition:

Cost Incurred Input Method

Revenue from equipment sale contracts is generally recognized over time as we have an enforceable right to payment for performance completed to date and our performance under the contract terms does not create an asset with alternative use.

5 unchanged sentences

When estimates of total costs to be incurred on a contract exceed estimates of total revenues to be earned, a provision for the entire estimated loss on the contract is recorded in the period in which the loss is determined.

In addition to the typical risks associated with underlying performance of project procurement and construction activities, our sale of equipment projects within our Corporate and other segment require monitoring of risks associated with schedule, geography, and other aspects of the contract and their effects on our estimates of total revenues and total costs to complete the contract.

Table of Conte n t s

In addition to the typical risks associated with underlying performance of engineering, project procurement, and construction activities, our sale of equipment projects within our Corporate and other segment require monitoring of risks associated with schedule, geography, and other aspects of the contract and their effects on our estimates of total revenues and total costs to complete the contract.

Changes in estimates on projects accounted for under the cost incurred input method unfavorably impacted operating income by approximately $115 in fiscal year 2023 and $30 in fiscal year 2022.

Our changes in estimates would not have significantly impacted amounts recorded in prior years.

We assess the performance of our sale of equipment projects as they progress.

Our earnings could be positively or negatively impacted by changes to our forecast of revenues and costs on these projects.

Revenue Recognition – On-site Customer Contracts

Our earnings could be positively or negatively impacted by changes to our contractual revenues and cost forecasts on these projects.

Revenue Recognition:

On-site Customer Contracts

For customers who require large volumes of gases on a long-term basis, we produce and supply gases under long-term contracts from large facilities that we build, own, and operate on or near the customer’s facilities.

Certain of these on-site contracts contain complex terms and provisions such as tolling arrangements, minimum payment requirements, variable components and pricing provisions that require significant judgment to determine the amount and timing of revenue recognition.

Certain of these on-site contracts contain complex terms and provisions regarding tolling arrangements, minimum payment requirements, variable components, pricing provisions, and amendments, which require significant judgment to determine the amount and timing of revenue recognition.

We account for income taxes under the asset and liability method.

Under this method, deferred tax assets and liabilities are recognized for the tax effects of temporary differences between the financial reporting and tax bases of assets and liabilities measured using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled.

Under this method, deferred tax assets and liabilities are recognized for the tax effects of temporary differences between the financial reporting and tax basis of assets and liabilities measured using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled.

As of 30 September 2023, accrued income taxes, including the amount recorded as noncurrent, was $240.6, and net deferred tax liabilities were $1,106.4.

1 unchanged sentence

Income tax expense for the fiscal year ended 30 September 2023 was $551.2.

Disclosures related to income taxes are included in Note 21, Income Taxes , to the consolidated financial statements.

Management judgment is required concerning the ultimate outcome of tax contingencies and the realization of deferred tax assets.

8 unchanged sentences

A 1% increase or decrease in our effective tax rate may result in a decrease or increase to net income, respectively, of approximately $29.

Disclosures related to income taxes are included in Note 23, Income Taxes , to the consolidated financial statements.

Table of Conte n t s

Pension and Other Postretirement Benefits

34 unchanged sentences

A 50 bp increase or decrease in the expected rate of compensation may result in an increase or decrease to pension expense, respectively, of approximately $4 per year.

Table of Conte n t s

Loss Contingencies

11 unchanged sentences

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 7. Management’s Discussion and Analysis