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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended 31 March 20202021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to             
Commission file number File Number 001-04534
apd-20210331_g1.jpg
AIR PRODUCTS AND CHEMICALS, INC.
(Exact Namename of Registrantregistrant as Specifiedspecified in Its Charter)
its charter)
Delaware23-1274455
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
Delaware23-1274455
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
7201 Hamilton Boulevard
Allentown,, Pennsylvania18195-1501
(Address of Principal Executive Officesprincipal executive offices and Zip Code)
610-481-4911610-481-4911
(Registrant’s Telephone Number, Including Area Code)telephone number, including area code)
Not Applicable
(Former Name, Former Addressname, former address and Former Fiscal Year,former fiscal year, if Changed Since Last Report)changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1.00 per shareAPDNew York Stock Exchange
2.000% Euro Notes due 2020APD20New York Stock Exchange
0.375% Euro Notes due 2021APD21BNew York Stock Exchange
1.000% Euro Notes due 2025APD25New York Stock Exchange
0.500% Euro Notes due 2028APD28New York Stock Exchange
0.800% Euro Notes due 2032APD32New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of common stock, $1 par value $1 per share, outstanding at 31 March 20202021 was 220,854,647.221,314,258.


Table of Contents
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
INDEXQUARTERLY REPORT ON FORM 10-Q
For the quarterly period ended 31 March 2021

TABLE OF CONTENTS
3
PART I. I—FINANCIAL INFORMATION
Consolidated Income Statements – Three and Six Months Ended 31 March 20202021 and 20192020
5
Consolidated Comprehensive Income Statements – Three and Six Months Ended 31 March 20202021 and 20192020
6
Consolidated Balance Sheets – 31 March 20202021 and 30 September 20192020
7
Consolidated Statements of Cash Flows – Six Months Ended 31 March 20202021 and 20192020
8
Consolidated Statements of Equity – Three and Six Months Ended 31 March 20202021 and 20192020
9
Notes to Consolidated Financial Statements
11
3735
6360
6360
PART II. II—OTHER INFORMATION
6461
6562
Signature
66

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FORWARD-LOOKING STATEMENTS
This quarterly report contains “forward-looking statements” within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include all statements that do not relate solely to historical or current facts and can generally be identified by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” "future," “goal,” “intend,” “may,” “outlook,” “plan,” “positioned,” “possible,” “potential,” “project,” “should,” “target,” “will,” “would,” and similar expressions or variations thereof, or the negative thereof, but these terms are not the exclusive means of identifying such statements. Forward-looking statements are based on management’s expectations and assumptions as of the date of this report and are not guarantees of future performance. You are cautioned not to place undue reliance on our forward-looking statements.
Forward-looking statements may relate to a number of matters, including expectations regarding revenue, margins, expenses, earnings, tax provisions, cash flows, pension obligations, share repurchases or other statements regarding economic conditions or our business outlook; statements regarding plans, projects, strategies and objectives for our future operations, including our ability to win new projects and execute the projects in our backlog; and statements regarding our expectations with respect to pending legal claims or disputes. While forward-looking statements are made in good faith and based on assumptions, expectations and projections that management believes are reasonable based on currently available information, actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors, including, without limitation:
•
•the duration and impacts of the novel coronavirus (“COVID-19”) global pandemic and efforts to contain its transmission, including the effect of these factors on our business, our customers, economic conditions and markets generally;
•
changes in global or regional economic conditions, supply and demand dynamics in the market segments we serve, or in the financial markets that may affect the availability and terms on which we may obtain financing;
•risks associated with having extensive international operations, including political risks, risks associated with unanticipated government actions and risks of investing in developing markets;
•project delays, contract terminations, customer cancellations, or postponement of projects and sales;
•our ability to develop and operate large scale and technically complex projects, including gasification projects;
•the future financial and operating performance of major customers and joint venture partners;
•our ability to develop, implement, and operate new technologies, ortechnologies;
•our ability to execute the projects in our backlog;
•tariffs, economic sanctions and regulatory activities in jurisdictions in which we and our affiliates and joint ventures operate;
•the impact of environmental, tax or other legislation, as well as regulations affecting our business and related compliance requirements, including legislation or regulations related to global climate change;
•changes in tax rates and other changes in tax law;
•the timing, impact, and other uncertainties relating to acquisitions and divestitures, including our ability to integrate acquisitions and separate divested businesses, respectively;
•risks relating to cybersecurity incidents, including risks from the interruption, failure or compromise of our information systems;
•catastrophic events, such as natural disasters and extreme weather events, public health crises, acts of war, or terrorism;
•the impact on our business and customers of price fluctuations in oil and natural gas and disruptions in markets and the economy due to oil and natural gas price volatility;
•costs and outcomes of legal or regulatory proceedings and investigations;
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FORWARD-LOOKING STATEMENTS (CONTINUED)
•asset impairments due to economic conditions or specific events;
•significant fluctuations in interest rates and foreign currency exchange rates from those currently anticipated;

•damage to facilities, pipelines or delivery systems, including those we own or operate for third parties;
•availability and cost of raw materials; and
•the success of productivity and operational improvement programs.
In addition to the foregoing factors, forward-looking statements contained herein are qualified with respect to the risks disclosed elsewhere in this document, including in Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Item 3, Quantitative and Qualitative Disclosures About Market Risk, as well as with respect to the risks described in Item 1A, Risk Factors, to our Annual Report on Form 10-K for the fiscal year ended 30 September 2019.2020. Any of these factors, as well as those not currently anticipated by management, could cause our results of operations, financial condition or liquidity to differ materially from what is expressed or implied by any forward-looking statement. Except as required by law, we disclaim any obligation or undertaking to update or revise any forward-looking statements contained herein to reflect any change in assumptions, beliefs, or expectations or any change in events, conditions, or circumstances upon which any such forward-looking statements are based.


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Table of Contents
PART I. I—FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED INCOME STATEMENTS
(Unaudited)

Three Months EndedSix Months Ended

31 March31 March
(Millions of dollars, except for share and per share data)2020201920202019
Sales
$2,216.3

$2,187.7

$4,471.0

$4,411.7
Cost of sales1,460.1
1,474.7
2,946.7
3,018.7
Facility closure—
—
—
29.0
Selling and administrative201.7
190.0
403.4
379.6
Research and development19.2
16.9
36.9
31.9
Company headquarters relocation income (expense)33.8
—
33.8
—
Other income (expense), net8.1
10.4
20.4
19.0
Operating Income577.2
516.5
1,138.2
971.5
Equity affiliates' income88.2
46.2
146.4
99.1
Interest expense19.3
35.4
38.0
72.7
Other non-operating income (expense), net7.1
13.7
16.2
32.2
Income From Continuing Operations Before Taxes653.2
541.0
1,262.8
1,030.1
Income tax provision148.5
107.5
269.2
239.6
Income From Continuing Operations504.7
433.5
993.6
790.5
Loss from discontinued operations, net of tax(14.3)—
(14.3)—
Net Income490.4
433.5
979.3
790.5
Net income attributable to noncontrolling interests of continuing operations12.6
12.2
25.9
21.7
Net Income Attributable to Air Products
$477.8

$421.3

$953.4

$768.8
Net Income Attributable to Air Products    
Net income from continuing operations
$492.1

$421.3

$967.7

$768.8
Net loss from discontinued operations(14.3)—
(14.3)—
Net Income Attributable to Air Products
$477.8

$421.3

$953.4

$768.8
Basic Earnings Per Common Share Attributable to Air Products*    
Basic earnings per share from continuing operations
$2.22

$1.91

$4.38

$3.49
Basic earnings per share from discontinued operations(0.06)—
(0.06)—
Basic Earnings Per Common Share Attributable to Air Products
$2.16

$1.91

$4.31

$3.49
Diluted Earnings Per Common Share Attributable to Air Products*    
Diluted earnings per share from continuing operations
$2.21

$1.90

$4.36

$3.48
Diluted earnings per share from discontinued operations(0.06)—
(0.06)—
Diluted Earnings Per Common Share Attributable to Air Products
$2.15

$1.90

$4.29

$3.48
Weighted Average Common Shares – Basic (in millions)
221.2
220.2
221.0
220.0
Weighted Average Common Shares – Diluted (in millions)
222.3
221.4
222.2
221.2
The accompanying notes are an integral part of these statements.
Three Months EndedSix Months Ended
31 March31 March
(Millions of dollars, except for share and per share data)2021202020212020
Sales$2,502.0 $2,216.3 $4,877.2 $4,471.0 
Cost of sales1,745.5 1,460.1 3,377.9 2,946.7 
Facility closure23.2 0 23.2 0 
Selling and administrative210.3 201.7 413.0 403.4 
Research and development21.1 19.2 44.6 36.9 
Gain on exchange with joint venture partner36.8 0 36.8 0 
Company headquarters relocation income (expense)0 33.8 0 33.8 
Other income (expense), net9.8 8.1 32.3 20.4 
Operating Income548.5 577.2 1,087.6 1,138.2 
Equity affiliates' income69.8 88.2 139.1 146.4 
Interest expense36.1 19.3 72.8 38.0 
Other non-operating income (expense), net16.8 7.1 35.4 16.2 
Income From Continuing Operations Before Taxes599.0 653.2 1,189.3 1,262.8 
Income tax provision121.9 148.5 235.8 269.2 
Income From Continuing Operations477.1 504.7 953.5 993.6 
Income (Loss) from discontinued operations, net of tax0 (14.3)10.3 (14.3)
Net Income477.1 490.4 963.8 979.3 
Net income attributable to noncontrolling interests of continuing operations4.0 12.6 8.7 25.9 
Net Income Attributable to Air Products$473.1 $477.8 $955.1 $953.4 
Net Income Attributable to Air Products
Net income from continuing operations$473.1 $492.1 $944.8 $967.7 
Net income (loss) from discontinued operations0 (14.3)10.3 (14.3)
Net Income Attributable to Air Products$473.1 $477.8 $955.1 $953.4 
Per Share Data*
Basic EPS from continuing operations$2.13 $2.22 $4.26 $4.38 
Basic EPS from discontinued operations0 (0.06)0.05 (0.06)
Basic EPS Attributable to Air Products$2.13 $2.16 $4.31 $4.31 
Diluted EPS from continuing operations$2.13 $2.21 $4.25 $4.36 
Diluted EPS from discontinued operations0 (0.06)0.05 (0.06)
Diluted EPS Attributable to Air Products$2.13 $2.15 $4.29 $4.29 
Weighted Average Common Shares (in millions)
Basic221.6 221.2 221.6 221.0 
Diluted222.5 222.3 222.5 222.2 
*Earnings per share ("EPS") is calculated independently for each component and may not sum to total EPS due to rounding.


The accompanying notes are an integral part of these statements.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS
(Unaudited)
Three Months Ended
31 March
(Millions of dollars)20212020
Net Income$477.1 $490.4 
Other Comprehensive Loss, net of tax:
Translation adjustments, net of tax of $22.6 and $11.3(144.6)(398.2)
Net gain (loss) on derivatives, net of tax of ($13.2) and $6.0(5.2)(27.4)
Reclassification adjustments:
Derivatives, net of tax of $12.0 and ($5.0)36.0 (17.0)
Pension and postretirement benefits, net of tax of $5.9 and $6.518.3 21.2 
Total Other Comprehensive Loss(95.5)(421.4)
Comprehensive Income381.6 69.0 
Net Income Attributable to Noncontrolling Interests4.0 12.6 
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interests15.6 (31.8)
Comprehensive Income Attributable to Air Products$362.0 $88.2 
 Three Months Ended
 31 March
(Millions of dollars)2020 2019
Net Income
$490.4
 
$433.5
Other Comprehensive Income (Loss), net of tax:   
Translation adjustments, net of tax of $11.3 and $8.0(398.2) 51.3
Net gain (loss) on derivatives, net of tax of $6.0 and ($8.7)(27.4) (35.4)
Reclassification adjustments:   
Derivatives, net of tax of ($5.0) and $11.5(17.0) 36.9
Pension and postretirement benefits, net of tax of $6.5 and $6.021.2
 18.7
Total Other Comprehensive Income (Loss)(421.4) 71.5
Comprehensive Income69.0
 505.0
Net Income Attributable to Noncontrolling Interests12.6
 12.2
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interests(31.8) 5.1
Comprehensive Income Attributable to Air Products
$88.2
 
$487.7
   
Six Months EndedSix Months Ended
31 March31 March
(Millions of dollars)2020 2019(Millions of dollars)20212020
Net Income
$979.3
 
$790.5
Net Income$963.8 $979.3 
Other Comprehensive Income (Loss), net of tax:   Other Comprehensive Income (Loss), net of tax:
Translation adjustments, net of tax of $0.5 and $12.9(134.2) (16.8)
Net gain (loss) on derivatives, net of tax of $8.6 and ($9.4)(5.3) (45.7)
Pension and postretirement benefits, net of tax of $– and ($0.8)—
 (3.9)
Translation adjustments, net of tax of ($1.6) and $0.5Translation adjustments, net of tax of ($1.6) and $0.5271.1 (134.2)
Net gain (loss) on derivatives, net of tax of ($10.5) and $8.6Net gain (loss) on derivatives, net of tax of ($10.5) and $8.68.6 (5.3)
Reclassification adjustments:   Reclassification adjustments:
Derivatives, net of tax of ($5.8) and $10.7(20.6) 33.8
Pension and postretirement benefits, net of tax of $13.0 and $11.040.9
 33.9
Derivatives, net of tax of $11.2 and ($5.8)Derivatives, net of tax of $11.2 and ($5.8)34.7 (20.6)
Pension and postretirement benefits, net of tax of $11.8 and $13.0Pension and postretirement benefits, net of tax of $11.8 and $13.036.6 40.9 
Total Other Comprehensive Income (Loss)(119.2) 1.3
Total Other Comprehensive Income (Loss)351.0 (119.2)
Comprehensive Income860.1
 791.8
Comprehensive Income1,314.8 860.1 
Net Income Attributable to Noncontrolling Interests25.9
 21.7
Net Income Attributable to Noncontrolling Interests8.7 25.9 
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interests(16.6) 4.2
Other Comprehensive Income (Loss) Attributable to Noncontrolling Interests35.3 (16.6)
Comprehensive Income Attributable to Air Products
$850.8
 
$765.9
Comprehensive Income Attributable to Air Products$1,270.8 $850.8 
The accompanying notes are an integral part of these statements.

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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Unaudited)
31 March30 September
(Millions of dollars, except for share and per share data)20212020
Assets
Current Assets
Cash and cash items$5,786.3 $5,253.0 
Short-term investments409.2 1,104.9 
Trade receivables, net1,388.9 1,274.8 
Inventories430.3 404.8 
Prepaid expenses206.8 164.5 
Other receivables and current assets545.1 482.9 
Total Current Assets8,766.6 8,684.9 
Investment in net assets of and advances to equity affiliates1,538.2 1,432.2 
Plant and equipment, at cost26,438.5 25,176.2 
Less: accumulated depreciation13,810.2 13,211.5 
Plant and equipment, net12,628.3 11,964.7 
Goodwill, net914.7 891.5 
Intangible assets, net449.1 435.8 
Noncurrent lease receivables789.2 816.3 
Other noncurrent assets1,072.8 943.1 
Total Noncurrent Assets17,392.3 16,483.6 
Total Assets$26,158.9 $25,168.5 
Liabilities and Equity  
Current Liabilities
Payables and accrued liabilities$2,042.2 $1,833.2 
Accrued income taxes86.7 105.8 
Short-term borrowings15.4 7.7 
Current portion of long-term debt873.1 470.0 
Total Current Liabilities3,017.4 2,416.7 
Long-term debt6,804.6 7,132.9 
Long-term debt – related party311.3 297.2 
Other noncurrent liabilities1,840.0 1,916.0 
Deferred income taxes1,050.8 962.6 
Total Noncurrent Liabilities10,006.7 10,308.7 
Total Liabilities13,024.1 12,725.4 
Commitments and Contingencies - See Note 1200
Air Products Shareholders’ Equity
Common stock (par value $1 per share; issued 2021 and 2020 - 249,455,584 shares)249.4 249.4 
Capital in excess of par value1,094.4 1,094.8 
Retained earnings15,200.0 14,875.7 
Accumulated other comprehensive loss(1,824.4)(2,140.1)
Treasury stock, at cost (2021 - 28,141,326 shares; 2020 - 28,438,125 shares)(1,993.2)(2,000.0)
Total Air Products Shareholders’ Equity12,726.2 12,079.8 
Noncontrolling Interests408.6 363.3 
Total Equity13,134.8 12,443.1 
Total Liabilities and Equity$26,158.9 $25,168.5 
 31 March 30 September
(Millions of dollars, except for share and per share data)2020 2019
Assets   
Current Assets   
Cash and cash items
$2,220.1
 
$2,248.7
Short-term investments—
 166.0
Trade receivables, net1,399.4
 1,260.2
Inventories399.7
 388.3
Prepaid expenses129.6
 77.4
Other receivables and current assets539.7
 477.7
Total Current Assets4,688.5
 4,618.3
Investment in net assets of and advances to equity affiliates1,314.6
 1,276.2
Plant and equipment, at cost23,005.2
 22,333.7
Less: accumulated depreciation12,381.5
 11,996.1
Plant and equipment, net10,623.7
 10,337.6
Goodwill, net785.3
 797.1
Intangible assets, net377.9
 419.5
Noncurrent lease receivables840.8
 890.0
Other noncurrent assets870.4
 604.1
Total Noncurrent Assets14,812.7
 14,324.5
Total Assets
$19,501.2
 
$18,942.8
Liabilities and Equity   
Current Liabilities   
Payables and accrued liabilities
$1,649.1
 
$1,635.7
Accrued income taxes90.4
 86.6
Short-term borrowings29.0
 58.2
Current portion of long-term debt38.4
 40.4
Total Current Liabilities1,806.9
 1,820.9
Long-term debt2,922.1
 2,907.3
Long-term debt – related party323.1
 320.1
Other noncurrent liabilities1,881.0
 1,712.4
Deferred income taxes844.4
 793.8
Total Noncurrent Liabilities5,970.6
 5,733.6
Total Liabilities7,777.5
 7,554.5
Commitments and Contingencies - See Note 13

 

Air Products Shareholders’ Equity   
Common stock (par value $1 per share; issued 2020 and 2019 - 249,455,584 shares)249.4
 249.4
Capital in excess of par value1,074.6
 1,070.9
Retained earnings14,537.2
 14,138.4
Accumulated other comprehensive loss(2,478.2) (2,375.6)
Treasury stock, at cost (2020 - 28,600,937 shares; 2019 - 29,040,322 shares)(2,011.1) (2,029.5)
Total Air Products Shareholders’ Equity11,371.9
 11,053.6
Noncontrolling Interests351.8
 334.7
Total Equity11,723.7
 11,388.3
Total Liabilities and Equity
$19,501.2
 
$18,942.8
The accompanying notes are an integral part of these statements.
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
 31 March
(Millions of dollars)20212020
Operating Activities
Net income$963.8 $979.3 
Less: Net income attributable to noncontrolling interest of continuing operations8.7 25.9 
Net income attributable to Air Products955.1 953.4 
(Income) Loss from discontinued operations(10.3)14.3 
Income from continuing operations attributable to Air Products944.8 967.7 
Adjustments to reconcile income to cash provided by operating activities:
Depreciation and amortization653.0 583.9 
Deferred income taxes76.1 55.0 
Facility closure23.2 0 
Undistributed earnings of equity method investments(58.7)(101.6)
Gain on sale of assets and investments(26.2)(40.5)
Share-based compensation22.4 26.9 
Noncurrent lease receivables43.4 47.1 
Other adjustments(6.5)54.0 
Working capital changes that provided (used) cash, excluding effects of acquisitions:
Trade receivables(74.8)(111.9)
Inventories(25.4)(16.5)
Other receivables15.7 (0.7)
Payables and accrued liabilities135.7 (111.8)
Other working capital(142.4)(113.1)
Cash Provided by Operating Activities1,580.3 1,238.5 
Investing Activities
Additions to plant and equipment, including long-term deposits(1,227.8)(930.6)
Investment in and advances to unconsolidated affiliates(69.8)(22.7)
Proceeds from sale of assets and investments14.8 68.0 
Purchases of investments(569.0)0 
Proceeds from investments1,265.5 177.0 
Other investing activities3.1 1.9 
Cash Used for Investing Activities(583.2)(706.4)
Financing Activities
Long-term debt proceeds92.8 0 
Payments on long-term debt(15.9)(3.4)
Net increase (decrease) in commercial paper and short-term borrowings33.6 (33.3)
Dividends paid to shareholders(592.7)(511.7)
Proceeds from stock option exercises4.7 20.2 
Other financing activities(25.7)(9.6)
Cash Used for Financing Activities(503.2)(537.8)
Discontinued Operations
Cash provided by operating activities6.7 0 
Cash provided by investing activities0 0 
Cash provided by financing activities0 0 
Cash Provided by Discontinued Operations6.7 0 
Effect of Exchange Rate Changes on Cash32.7 (22.9)
Increase (Decrease) in cash and cash items533.3 (28.6)
Cash and Cash items – Beginning of Year5,253.0 2,248.7 
Cash and Cash Items – End of Period$5,786.3 $2,220.1 
 Six Months Ended
 31 March
(Millions of dollars)20202019
Operating Activities  
Net income
$979.3

$790.5
Less: Net income attributable to noncontrolling interests of continuing operations25.9
21.7
Net income attributable to Air Products953.4
768.8
Loss from discontinued operations14.3
—
Income from continuing operations attributable to Air Products967.7
768.8
Adjustments to reconcile income to cash provided by operating activities:  
Depreciation and amortization583.9
520.1
Deferred income taxes55.0
27.5
Tax reform repatriation—
46.2
Facility closure—
29.0
Undistributed (earnings) losses of unconsolidated affiliates(101.6)(27.2)
Gain on sale of assets and investments(40.5)(2.3)
Share-based compensation26.9
21.2
Noncurrent lease receivables47.1
47.6
Other adjustments54.0
(3.5)
Working capital changes that provided (used) cash, excluding effects of acquisitions:  
Trade receivables(111.9)(55.4)
Inventories(16.5)(14.2)
Other receivables(0.7)49.6
Payables and accrued liabilities(111.8)(125.5)
Other working capital(113.1)3.9
Cash Provided by Operating Activities1,238.5
1,285.8
Investing Activities  
Additions to plant and equipment(930.6)(963.5)
Acquisitions, less cash acquired—
(106.3)
Investment in and advances to unconsolidated affiliates(22.7)(1.4)
Proceeds from sale of assets and investments68.0
3.8
Purchases of investments—
(5.3)
Proceeds from investments177.0
187.9
Other investing activities1.9
2.7
Cash Used for Investing Activities(706.4)(882.1)
Financing Activities  
Payments on long-term debt(3.4)(2.7)
Net decrease in commercial paper and short-term borrowings(33.3)(6.6)
Dividends paid to shareholders(511.7)(483.1)
Proceeds from stock option exercises20.2
45.4
Other financing activities(9.6)(12.8)
Cash Used for Financing Activities(537.8)(459.8)
Effect of Exchange Rate Changes on Cash(22.9)0.7
Decrease in cash and cash items(28.6)(55.4)
Cash and Cash items – Beginning of Year2,248.7
2,791.3
Cash and Cash Items – End of Period
$2,220.1

$2,735.9
The accompanying notes are an integral part of these statements.
8
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AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
Six Months Ended
31 March 2021
(Millions of dollars, except for per share data)Common
 Stock		Capital in
 Excess of
 Par Value		Retained
 Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury
 Stock		Air
Products
Shareholders'
Equity		Non-
controlling
Interests		Total
Equity
Balance at 30 September 2020$249.4 $1,094.8 $14,875.7 ($2,140.1)($2,000.0)$12,079.8 $363.3 $12,443.1 
Net income— — 955.1 — — 955.1 8.7 963.8 
Other comprehensive income (loss)— — — 315.7 — 315.7 35.3 351.0 
Dividends on common stock (per share $2.84)— — (628.5)— — (628.5)— (628.5)
Dividends to noncontrolling interests— — — — — — (3.4)(3.4)
Share-based compensation— 22.3 — — — 22.3 — 22.3 
Issuance of treasury shares for stock option and award plans— (21.7)— — 6.8 (14.9)— (14.9)
Investments by noncontrolling interests— — — — — — 8.7 8.7 
Purchase of noncontrolling interests— (1.2)— — — (1.2)(4.1)(5.3)
Other equity transactions— 0.2 (2.3)— — (2.1)0.1 (2.0)
Balance at 31 March 2021$249.4 $1,094.4 $15,200.0 ($1,824.4)($1,993.2)$12,726.2 $408.6 $13,134.8 
 Six Months Ended
 31 March 2020
(Millions of dollars, except for per share data)Common Stock
Capital in Excess of Par Value
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Treasury Stock
Air
Products Shareholders' Equity

Non-
controlling
Interests

Total
Equity

Balance at 30 September 2019
$249.4

$1,070.9

$14,138.4

($2,375.6)
($2,029.5)
$11,053.6

$334.7

$11,388.3
Net income—
—
953.4
—
—
953.4
25.9
979.3
Other comprehensive income (loss)—
—
—
(102.6)—
(102.6)(16.6)(119.2)
Dividends on common stock (per share $2.50)—
—
(551.9)—
—
(551.9)—
(551.9)
Dividends to noncontrolling interests—
—
—
—
—
—
(4.4)(4.4)
Share-based compensation—
24.6
—
—
—
24.6
—
24.6
Issuance of treasury shares for stock option and award plans—
(16.2)—
—
18.4
2.2
—
2.2
Investments by noncontrolling interests—
—
—
—
—
—
11.9
11.9
Other equity transactions—
(4.7)(2.7)—
—
(7.4)0.3
(7.1)
Balance at 31 March 2020
$249.4

$1,074.6

$14,537.2

($2,478.2)
($2,011.1)
$11,371.9

$351.8

$11,723.7
Six Months EndedSix Months Ended
31 March 201931 March 2020
(Millions of dollars, except for per share data)Common Stock
Capital in Excess of Par Value
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Treasury Stock
Air
Products Shareholders' Equity

Non-
controlling
Interests

Total
Equity

(Millions of dollars, except for per share data)Common
 Stock		Capital in
 Excess of
 Par Value		Retained
 Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury
 Stock		Air
Products
Shareholders'
Equity		Non-
controlling
Interests		Total
Equity
Balance at 30 September 2018
$249.4

$1,029.3

$13,409.9

($1,741.9)
($2,089.2)
$10,857.5

$318.8

$11,176.3
Balance at 30 September 2019Balance at 30 September 2019$249.4 $1,070.9 $14,138.4 ($2,375.6)($2,029.5)$11,053.6 $334.7 $11,388.3 
Net income—
—
768.8
—
—
768.8
21.7
790.5
Net income— — 953.4 — — 953.4 25.9 979.3 
Other comprehensive income (loss)—
—
—
(2.9)—
(2.9)4.2
1.3
Other comprehensive income (loss)— — — (102.6)— (102.6)(16.6)(119.2)
Dividends on common stock (per share $2.26)—
—
(497.5)—
—
(497.5)—
(497.5)
Dividends on common stock (per share $2.50)Dividends on common stock (per share $2.50)— — (551.9)— — (551.9)— (551.9)
Dividends to noncontrolling interests—
—
—
—
—
—
(7.0)(7.0)Dividends to noncontrolling interests— — — — — — (4.4)(4.4)
Share-based compensation—
20.7
—
—
—
20.7
—
20.7
Share-based compensation— 24.6 — — — 24.6 — 24.6 
Issuance of treasury shares for stock option and award plans—
(0.9)—
—
40.6
39.7
—
39.7
Issuance of treasury shares for stock option and award plans— (16.2)— — 18.4 2.2 — 2.2 
Cumulative change in accounting principle—
—
(17.1)—
—
(17.1)—
(17.1)
Investments by noncontrolling interestsInvestments by noncontrolling interests— — — — — — 11.9 11.9 
Other equity transactions—
(1.4)(2.1)—
—
(3.5)—
(3.5)Other equity transactions— (4.7)(2.7)— — (7.4)0.3 (7.1)
Balance at 31 March 2019
$249.4

$1,047.7

$13,662.0

($1,744.8)
($2,048.6)
$11,165.7

$337.7

$11,503.4
Balance at 31 March 2020Balance at 31 March 2020$249.4 $1,074.6 $14,537.2 ($2,478.2)($2,011.1)$11,371.9 $351.8 $11,723.7 
The accompanying notes are an integral part of these statements.


9
Table of Contents
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
CONSOLIDATED STATEMENTS OF EQUITY (cont.)
(Unaudited)
Three Months Ended
31 March 2021
(Millions of dollars, except for per share data)Common
 Stock		Capital in
 Excess of
 Par Value		Retained
 Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury
 Stock		Air
Products
Shareholders'
Equity		Non-
controlling
Interests		Total
Equity
Balance at 31 December 2020$249.4 $1,083.0 $15,060.5 ($1,713.3)($1,996.0)$12,683.6 $388.3 $13,071.9 
Net income— — 473.1 — — 473.1 4.0 477.1 
Other comprehensive income (loss)— — — (111.1)— (111.1)15.6 (95.5)
Dividends on common stock (per share $1.50)— — (332.0)— — (332.0)— (332.0)
Dividends to noncontrolling interests— — — — — — (3.4)(3.4)
Share-based compensation— 12.0 — — — 12.0 — 12.0 
Issuance of treasury shares for stock option and award plans— (0.7)— — 2.8 2.1 — 2.1 
Investment by noncontrolling interests— — — — — — 4.0 4.0 
Other equity transactions— 0.1 (1.6)— — (1.5)0.1 (1.4)
Balance at 31 March 2021$249.4 $1,094.4 $15,200.0 ($1,824.4)($1,993.2)$12,726.2 $408.6 $13,134.8 
         
 Three Months Ended
 31 March 2020
(Millions of dollars, except for per share data)Common Stock
Capital in Excess of Par Value
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Treasury Stock
Air
Products Shareholders' Equity

Non-
controlling
Interests

Total
Equity

Balance at 31 December 2019
$249.4

$1,061.7

$14,356.9

($2,088.6)
($2,023.4)
$11,556.0

$373.8

$11,929.8
Net income—
—
477.8
—
—
477.8
12.6
490.4
Other comprehensive income (loss)—
—
—
(389.6)—
(389.6)(31.8)(421.4)
Dividends on common stock (per share $1.34)—
—
(295.9)—
—
(295.9)—
(295.9)
Dividends to noncontrolling interests—
—
—
—
—
—
(3.1)(3.1)
Share-based compensation—
10.7
—
—
—
10.7
—
10.7
Issuance of treasury shares for stock option and award plans—
2.3
—
—
12.3
14.6
—
14.6
Other equity transactions—
(0.1)(1.6)—
—
(1.7)0.3
(1.4)
Balance at 31 March 2020
$249.4

$1,074.6

$14,537.2

($2,478.2)
($2,011.1)
$11,371.9

$351.8

$11,723.7
 
Three Months EndedThree Months Ended
31 March 201931 March 2020
(Millions of dollars, except for per share data)Common Stock
Capital in Excess of Par Value
Retained Earnings
Accumulated Other Comprehensive Income (Loss)
Treasury Stock
Air
Products Shareholders' Equity

Non-
controlling
Interests

Total
Equity

(Millions of dollars, except for per share data)Common
 Stock		Capital in
 Excess of
 Par Value		Retained
 Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Treasury
 Stock		Air
Products
Shareholders'
Equity		Non-
controlling
Interests		Total
Equity
Balance at 31 December 2018
$249.4

$1,030.4

$13,497.9

($1,811.2)
($2,083.6)
$10,882.9

$320.5

$11,203.4
Balance at 31 December 2019Balance at 31 December 2019$249.4 $1,061.7 $14,356.9 ($2,088.6)($2,023.4)$11,556.0 $373.8 $11,929.8 
Net income—
—
421.3
—
—
421.3
12.2
433.5
Net income— — 477.8 — — 477.8 12.6 490.4 
Other comprehensive income (loss)—
—
—
66.4
—
66.4
5.1
71.5
Other comprehensive income (loss)— — — (389.6)— (389.6)(31.8)(421.4)
Dividends on common stock (per share $1.16)—
—
(255.9)—
—
(255.9)—
(255.9)
Dividends on common stock (per share $1.34)Dividends on common stock (per share $1.34)— — (295.9)— — (295.9)— (295.9)
Dividends to noncontrolling interests—
—
—
—
—
—
(0.1)(0.1)Dividends to noncontrolling interests— — — — — — (3.1)(3.1)
Share-based compensation—
11.8
—
—
—
11.8
—
11.8
Share-based compensation— 10.7 — — — 10.7 — 10.7 
Issuance of treasury shares for stock option and award plans—
6.7
—
—
35.0
41.7
—
41.7
Issuance of treasury shares for stock option and award plans— 2.3 — — 12.3 14.6 — 14.6 
Other equity transactions—
(1.2)(1.3)—
—
(2.5)—
(2.5)Other equity transactions— (0.1)(1.6)— — (1.7)0.3 (1.4)
Balance at 31 March 2019
$249.4

$1,047.7

$13,662.0

($1,744.8)
($2,048.6)
$11,165.7

$337.7

$11,503.4
Balance at 31 March 2020Balance at 31 March 2020$249.4 $1,074.6 $14,537.2 ($2,478.2)($2,011.1)$11,371.9 $351.8 $11,723.7 
The accompanying notes are an integral part of these statements.


10
Table of Contents
AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Millions of dollars unless otherwise indicated, except for share and per share data)
1.
12
2.
13
3.
14
4.
14
5.
16
6.
16
7.
16
8.
17
9.
23
10.
25
11.
25
12.
26
13.
29
14.
30
15.
31
16.
31
17.
32
18.
32
11
1.
Basis of Presentation and Major Accounting Policies
11
2.
New Accounting Guidance
12
3.
Revenue Recognition
15
4.
Discontinued Operations
16
5.
Cost Reduction Actions
16
6.
Acquisitions
16
7.
Inventories
17
8.
Goodwill
17
9.
Leases
17
10.
Financial Instruments
20
11.
Fair Value Measurements
26
12.
Retirement Benefits
29
13.
Commitments and Contingencies
30
14.
Share-Based Compensation
32
15.
Accumulated Other Comprehensive Loss
33
16.
Earnings per Share
34
17.
Income Taxes
34
18.
Supplemental Information
35
19.
Business Segment Information
35
Table of Contents

1. BASIS OF PRESENTATION AND MAJOR ACCOUNTING POLICIES
Basis of Presentation
The interim consolidated financial statements of Air Products and Chemicals, Inc. and its subsidiaries (“we,” “our,” “us,” the “Company,” “Air Products,” or “registrant”) included herein have been prepared by us, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. In our opinion, the accompanying statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated and contain adequate disclosures to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the notes. The notes to the interim consolidated financial statements,statements. These notes, unless otherwise indicated, are presented on a continuing operations basis.
To fully understand the basis of presentation, the interim consolidated financial statements and related notes included herein should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended 30 September 2019 ( the "20192020 (the "2020 Form 10-K"). Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.
COVID-19 Risks and Uncertainties
The novel strain of coronavirus ("COVID-19"), which was declared a global pandemic by the World Health Organization in March 2020, continues to impact our business operations and results. We are encouraged by signs of improvement in our business. However, there are many unknowns regarding the pandemic, including the ongoing spread and severity of the virus and the pace of vaccine rollouts globally. Given the dynamic nature of these circumstances, uncertainty remains related to how the pandemic may affect our business, results of operations, and overall financial performance.
Major Accounting Policies
Refer to our 20192020 Form 10-K for a description of major accounting policies. In fiscal year 2020, these2021, accounting policies related to customer credit losses were impacted by the implementation of certain new accounting guidance, including the adoption of Accounting Standards Codification ("ASC") Topic 842, Leases,as further discussed below and all related amendments (the "new lease standard”). We adopted the new lease standard as of 1 October 2019 under the modified retrospective approach. Comparative prior year information has not been restated and continues to be reported under the accounting standards in effect for those periods. Our updated lease policy is discussed below.
Other than the adoption of new accounting guidance as discussed in Note 2, New Accounting Guidance, and presentation changes discussed below, there. There were no other notable changes to our accounting policies during the first six months of fiscal year 2020.2021.

Credit Losses
LeasesWe are exposed to credit losses through sales of products and services. When extending credit, we evaluate customer creditworthiness based on a combination of qualitative and quantitative factors that include, but are not limited to, the customer’s credit score from external providers, financial condition, and past payment experience.
As lessee, we recognize a right-of-use ("ROU") assetWe assess allowances for credit losses on our trade receivables and lease liabilityreceivable portfolios. Allowances are evaluated by portfolio on a collective basis where similar characteristics exist. A provision for customer defaults is made on a general formula basis as the balance sheet for all leasesrisk of some default is expected but cannot yet be associated with a term in excess of 12 months. We determine if an arrangement contains a lease at inception.specific customers. The arrangement contains a lease when there is an identifiable asset, we obtain substantially allassessment of the likelihood of default is based on various factors, including the length of time the receivables are past due, historical experience, existing economic benefits from that asset,conditions, and forward-looking information. When we direct howidentify specific customers with known collectability issues, the assessment for credit losses is performed on an individual basis, considering current and for what purpose the asset is used during the termforward-looking information of the arrangement. Ifcustomer.
The use of forward-looking information considers economic conditions that may affect the initial term of an arrangement is 12 monthscustomers’ ability to pay. Although we historically have not experienced significant credit losses, our exposure to credit losses may increase if our customers are adversely affected by economic pressures or less, we have made an accounting election to not assess if these arrangements contain a lease for inclusion on our balance sheet.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Since our leases generally do not provide an implicit discount rate, we use our incremental borrowing rates based on the information available at the commencement date in determining the present value of lease payments.To determine the incremental borrowing rate, we consider our unsecured borrowings and published market rates, and then adjust those rates to assume full collateralization and to factor in the individual lease term, geography, and payment structure.
Our lease term includes periods covered by options to extend or terminate the lease when it is reasonably certain that we will exercise an option to extend or not exercise an option to terminate. Lease payments consider our practical expedient to combine amounts for lease and related non-lease components for all classes of underlying assets in which we are lessee. Fixed payments and paymentsuncertainty associated with escalation clauses basedlocal or global economic recessions, disruption associated with the ongoing COVID-19 pandemic, or other customer-specific factors. We review our reserves for credit losses on an index are included in the ROU asset and lease liability at commencement. Variable lease payments are excluded from the ROU assets and lease liabilitiesa quarterly basis.
12
Table of Contents
Trade receivables comprise amounts owed to us through our operating activities and are recognized inpresented net of allowances for credit losses.
Changes to the period in whichcarrying amount of the obligationallowance for those payments is incurred. Our variable lease payments primarily include the impact from escalation clauses that are not fixed or basedcredit losses on an index. Prepaid lease payments are included in the recognition of ROU assets. Our lease agreements do not contain any material lease incentives, residual value guarantees or restrictions or covenants.
Foreign Currency
As further discussed in Note 2, New Accounting Guidance, we adopted new accounting guidance on hedging activities in fiscal year 2020 that changed the income statement presentation of excluded components (foreign currency forward points and currency swap basis differences) of our cash flow hedges of intercompany loans. This activity is now amortized on a straight-line basis within “Other non-operating income (expense), net" instead of being recognized in "Interest expense." In addition, gains and losses from the foreign currency remeasurement of balances associated with intercompany and third-party financing transactions, related income tax assets and liabilities, and the impact of related hedges are now also reflected within “Other non-operating income (expense), net.” All other gains and losses from foreign currency transactions continue to be reflected within "Other income (expense), net" on our consolidated income statements. Comparative prior year information has not been restated.
COVID-19 Risks and Uncertainties
In March 2020, the World Health Organization declared the novel strain of coronavirus ("COVID-19") a global pandemic and recommended containment and mitigation measures worldwide. The Company is monitoring this, and although operations have not been materially affected by the COVID-19 outbreak as of andtrade receivables for the three and six months ended 31 March 2021 are as follows:
Balance at 30 September 2020$23.9 
Adoption of new credit losses standard0.5 
Provision for credit losses1.2 
Write-offs charged against the allowance(1.6)
Currency translation and other2.6 
Balance at 31 March 2021$26.6

Lease receivables, net, primarily relate to sales-type leases on certain on-site assets which are collected over the contract term. As of 31 March 2021 and 30 September 2020, weour lease receivables, net were $875.7 and $903.0, respectively. Lease receivables, net, are unable to predict the impact that COVID-19 will haveprimarily included within "Noncurrent lease receivables" on our future financial positionconsolidated balance sheets, with the remaining balance in "Other receivables and operating results duecurrent assets." The majority of our leases are of high credit quality and were originated prior to numerous uncertainties. The durationfiscal year 2017. Allowances for credit losses on lease receivables were not material as of 31 March 2021 and severity of the outbreak and its long-term impact on our business are uncertain at this time.30 September 2020, respectively.


2. NEW ACCOUNTING GUIDANCE
Accounting Guidance Implemented in Fiscal Year 2020
Leases
In February 2016, the FASB issued lease guidance (the "new lease guidance") that requires lessees to recognize a right-of-use asset and lease liability on the balance sheet for all leases, including operating leases, with a term in excess of 12 months. The guidance also expands the quantitative and qualitative disclosure requirements.
The Company is the lessee under various agreements for real estate, vehicles, aircraft, and other equipment that are accounted for as operating leases.
We adopted this guidance in fiscal year 2020 using a modified retrospective approach with the election to apply the guidance as of 1 October 2019, "the adoption date," instead of the earliest comparative period presented in the consolidated financial statements.

We elected the following practical expedients provided by this guidance:
The package of practical expedients, which allows us to carry forward the lease population and classification existing as of the adoption date, among other things;
The land easements practical expedient, which allows us to carry forward our accounting treatment for land easements on agreements existing before the adoption date;
The hindsight practical expedient, which is used to determine the reasonably certain lease term for existing leases as of the adoption date;
The component combination practical expedient, which allows us to account for lease and non-lease components associated with that lease as a single component, if certain criteria are met; and
The short-term leases practical expedient, which allows us to not record the related lease liabilities and right-of-use assets for operating leases in which we are the lessee with a term of 12 months or less.
Adoption of the standard resulted in recognition of lease liabilities and right-of-use assets on our consolidated balance sheets of $375.3 and $332.3, respectively. The standard did not materially affect our retained earnings, results of operations or liquidity. Refer to Note 9, Leases, for additional information.
Hedging Activities
In August 2017, the FASB issued guidance on hedging activities to expand the related presentation and disclosure requirements, change how companies assess effectiveness, and eliminate the separate measurement and reporting of hedge ineffectiveness. The guidance also enables more hedging strategies to become eligible for hedge accounting.
We adopted the new guidance on 1 October 2019 on a modified retrospective basis. The primary impact of adoption was the presentation in the consolidated income statement of foreign currency forward points and currency swap basis differences ("excluded components"), since these are excluded from the assessment of hedge effectiveness for our hedges of intercompany loans. Historically, the impacts from changes in value of these components were recorded in "Interest expense." Beginning in fiscal year 2020, the excluded components were recognized in "Other non-operating income (expense), net" consistent with the remeasurement of the intercompany loans. During the three and six months ended 31 March 2020, we recognized $8.5 and $17.4, respectively, in "Other non-operating income (expense), net.” During the three and six months ended 31 March 2019, we recognized $9.1 and $17.4, respectively, in “Interest expense.”
In accordance with the transition provisions of the guidance, the separate measurement of ineffectiveness for our cash flow hedging instruments existing as of the date of adoption should be eliminated through a cumulative-effect adjustment within equity. Ineffectiveness recognized for our cash flow hedging instruments existing as of the date of adoption was not material to the consolidated financial statements.
New Accounting Guidance to be Implemented2021
Credit Losses on Financial Instruments
In June 2016, the FASB issued guidance on the measurement of credit losses, which requires measurement and recognition of expected credit losses for financial assets, including trade receivables and capital lease receivables, held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The method to determine a loss is different from the existingprevious guidance, which requiresdelayed recognition of a credit loss to be recognized whenuntil it is probable. The guidance is effective beginning in fiscal year 2021, with early adoption permitted beginning in fiscal year 2020.was probable that a loss had been incurred. We are currently evaluating the impactadopted this guidance will have on 1 October 2020 using a modified retrospective approach with an after-tax cumulative-effect adjustment of $1.3 to retained earnings. Refer to the “Major Accounting Polices – Credit Losses" section of Note 1, Basis of Presentation and Major Accounting Policies, for a description of our consolidated financial statements.
Fair Value Measurement Disclosures
In August 2018, the FASB issued guidance which modifies the disclosure requirements for fair value measurements. The guidance is effective in fiscal year 2021, with early adoption permitted. Certain amendments must be applied prospectively and other amendments retrospectively. We are currently evaluating the impact this guidance will haveaccounting policy on disclosures in the notes to our consolidated financial statements.

Retirement Benefit Disclosures
In August 2018, the FASB issued guidance which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The guidance is effective in fiscal year 2021, with early adoption permitted, and must be applied on a retrospective basis. We expect to adopt this guidance in the fourth quarter of fiscal year 2020 and update the disclosures contained in our annual report on Form 10-K accordingly. Other than the modification of certain disclosures, this guidance will have no effect on our consolidated financial statements.credit losses.
Cloud Computing Implementation Costs
In August 2018, the FASB issued guidance which aligns the capitalization requirements for implementation costs incurred in a hosting arrangement that is a service contract with the existing capitalization requirements for implementation costs incurred to develop or obtain internal-use software. TheWe adopted this guidance is effectiveprospectively at the beginning of fiscal year 2021. Eligible implementation costs previously capitalized in "Plant and equipment, net" were reclassified to "Other noncurrent assets" on our consolidated balance sheets beginning in fiscal year 2021, with early adoption permitted, and may be applied either prospectively or retrospectively. We are currently evaluating the2021. This guidance did not have a material impact this guidance will have on our consolidated financial statements.
Related Party Guidance for Variable Interest Entities
In October 2018, the FASB issued an update which amends the guidance for determining whether a decision-making fee is a variable interest. The amendments require consideration of indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety as currently required. The guidance is effective in fiscal year 2021, with early adoption permitted. The amendments must be applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented. We are currently evaluating the impact this guidance will have on our consolidated financial statements.statements upon adoption.
Simplifying the Accounting for Income Taxes
In December 2019, the FASB issued an update to simplify the accounting for income taxes and improve consistent application by clarifying or amending existing guidance. We adopted this guidance at the beginning of fiscal year 2021. This guidance is effective in fiscal year 2022, with early adoption permitted. Depending on the provision, application can be made on a prospective, retrospective, or on a modified retrospective basis. We dodid not expect this guidance to have a material impact on our consolidated financial statements upon adoption.
New Accounting Guidance to be Implemented
Reference Rate Reform
In March 2020, the FASB issued an update to provide practical expedients and exceptionexceptions for applying U.S. GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. This update is primarily applicable to our contracts and hedging relationships that reference LIBOR. The amendments may be applied to impacted contracts and hedges prospectively through 31 December 2022. To date, we have had no impacts on our hedging relationships related to reference rate reform. We are currently evaluatingwill continue to evaluate the impact this guidance willcould have on our consolidated financial statements.


13
Table of Contents
3. ACQUISITIONS
Gain on Exchange With Joint Venture Partner
As of 30 September 2020, we held a 50% ownership interest in Tyczka Industrie-Gases GmbH ("TIG"), a joint venture in Germany with the Tyczka Group that is primarily a merchant gases business. We accounted for this arrangement as an equity method investment in our Industrial Gases – EMEA segment.
Effective 23 February 2021 (the "acquisition date"), we agreed with our joint venture partner to separate TIG into 2 separate businesses. On the acquisition date, we acquired a portion of the business on a 100% basis, and our partner paid us $10.8 to acquire the rest of the business. The exchange resulted in a gain of $36.8 ($27.3 after-tax), which is reflected as “Gain on exchange with joint venture partner” on our consolidated income statements for the three and six months ended 31 March 2021. 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 equity interest in the remaining business. The gain was not recorded in segment results.
We estimated an acquisition date fair value of $15.4 for our previously held equity interest in the acquired portion of the business using a market approach, which considered historical earnings and the application of a market-based multiple derived from comparable transactions.
We accounted for the acquisition as a business combination within our Industrial Gases – EMEA segment. As a result of the acquisition, we recognized intangible assets of $16.7 for customer relationships, goodwill of $14.5, and plant and equipment of $10.3. The customer relationships have a weighted-average useful life of approximately 15 years.
The acquired assets were recorded at their estimated fair values based primarily on a preliminary purchase price allocation. We may record adjustments to these assets during the preliminary purchase price allocation period, which could be up to one year from the acquisition date.
We expect the acquisition to allow us to have more control over the business we retained and to serve customers more effectively. The results of this business did not materially impact our consolidated income statements for the periods presented.

4. REVENUE RECOGNITION
The majority of the Company'sour revenue is generated from itsour sale of gas customers within itsthe Industrial Gases regional segments. We distribute gases through either our on-site or merchant supply mode depending on various factors, including the customer's volume requirements and location. The Industrial Gases – Global and the Corporate and other segments serve our sale of equipment customers.
Disaggregation of Revenue
The tables below present our consolidated sales disaggregated by supply mode for each of our reporting segments for the three and six months ended 31 March 20202021 and 2019.2020. We believe this presentation best depicts the nature, timing, type of customer, and contract terms for our sales.
Industrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
and other		Total%
Three Months Ended 31 March 2021
On-site$636.7 $202.3 $416.0 $0 $0 $1,255.0 50 %
Merchant419.4 382.3 281.5 0 0 1,083.2 43 %
Sale of Equipment0 0 0 97.9 65.9 163.8 7 %
Total$1,056.1 $584.6 $697.5 $97.9 $65.9 $2,502.0 100 %
Three Months Ended 31 March 2020
On-site$516.2 $160.3 $425.6 $0 $0 $1,102.1 50 %
Merchant416.2 332.4 232.5 0 0 981.1 44 %
Sale of Equipment0 0 0 79.3 53.8 133.1 6 %
Total$932.4 $492.7 $658.1 $79.3 $53.8 $2,216.3 100 %
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Table of Contents
 Industrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
and other		Total%
Three Months Ended 31 March 2020
On-site
$516.2

$160.3

$425.6

$—

$—

$1,102.1
50%
Merchant416.2
332.4
232.5
—
—
981.1
44%
Sale of Equipment—
—
—
79.3
53.8
133.1
6%
Total
$932.4

$492.7

$658.1

$79.3

$53.8

$2,216.3
100%
Three Months Ended 31 March 2019
On-site
$580.9

$178.6

$386.0

$—

$—

$1,145.5
52%
Merchant410.8
315.8
239.4
—
—
966.0
44%
Sale of Equipment—
—
—
53.8
22.4
76.2
4%
Total
$991.7

$494.4

$625.4

$53.8

$22.4

$2,187.7
100%
        
 Industrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
and other		Total%
Six Months Ended 31 March 2020
On-site
$1,050.7

$331.7

$843.9

$—

$—

$2,226.3
50%
Merchant817.9
659.7
507.0
—
—
1,984.6
44%
Sale of Equipment—
—
—
171.9
88.2
260.1
6%
Total
$1,868.6

$991.4

$1,350.9

$171.9

$88.2

$4,471.0
100%
Six Months Ended 31 March 2019
On-site
$1,176.9

$400.8

$767.0

$—

$—

$2,344.7
53%
Merchant804.0
617.8
485.2
—
—
1,907.0
43%
Sale of Equipment—
—
—
122.0
38.0
160.0
4%
Total
$1,980.9

$1,018.6

$1,252.2

$122.0

$38.0

$4,411.7
100%


Industrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
and other		Total%
Six Months Ended 31 March 2021
On-site$1,178.0 $391.0 $830.9 $0 $0 $2,399.9 49 %
Merchant811.1 756.6 584.1 0 0 2,151.8 44 %
Sale of Equipment0 0 0 202.4 123.1 325.5 7 %
Total$1,989.1 $1,147.6 $1,415.0 $202.4 $123.1 $4,877.2 100 %
Six Months Ended 31 March 2020
On-site$1,050.7 $331.7 $843.9 $0 $0 $2,226.3 50 %
Merchant817.9 659.7 507.0 0 0 1,984.6 44 %
Sale of Equipment0 0 0 171.9 88.2 260.1 6 %
Total$1,868.6 $991.4 $1,350.9 $171.9 $88.2 $4,471.0 100 %
Remaining Performance Obligations
As of 31 March 2020,2021, the transaction price allocated to remaining performance obligations is estimated to be approximately $20$24 billion. This amount includes fixed-charge contract provisions associated with our on-site and sale of equipment supply modes. We estimate that approximately half of this revenue will be recognized over approximately the next five years and the balance thereafter.
Expected revenue associated with new on-site plants that are not yet onstream is excluded from this amount. In addition, this amount excludes consideration associated with contracts having an expected duration of less than one year and variable consideration for which we recognize revenue at the amount to which we have the right to invoice, including pass-through costs related to energy and natural gas.

In the future, actual amounts will differ due to events outside of our control, including, but not limited to, inflationary price escalations,escalations; currency exchange rates,rates; and amended, terminated, or renewed contracts.
Contract Balances
The table below details balances arising from contracts with customers:
 Balance Sheet Location31 March 202030 September 2019
Assets   
Contract assets – currentOther receivables and current assets
$84.2

$64.3
Contract fulfillment costs – currentOther receivables and current assets84.8
64.5
Liabilities   
Contract liabilities – currentPayables and accrued liabilities284.1
247.4
Contract liabilities – noncurrentOther noncurrent liabilities51.2
49.2

Balance Sheet Location31 March 202130 September 2020
Assets
Contract assets – currentOther receivables and current assets$68.8 $55.9 
Contract fulfillment costs – currentOther receivables and current assets154.5 109.9 
Liabilities
Contract liabilities – currentPayables and accrued liabilities413.0 313.8 
Contract liabilities – noncurrentOther noncurrent liabilities59.4 57.9 
Changes to our contract balances primarily relate to our sale of equipment contracts. During the six months ended 31 March 2020,2021, we recognized approximately $95$145 in revenue associated with sale of equipment contracts that was included within our contract liabilities as of 30 September 2019.

2020.
4.
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Table of Contents
5. DISCONTINUED OPERATIONS
OurIn the first quarter of fiscal year 2021, we recorded a tax benefit of $10.3 as a component of discontinued operations. This benefit primarily resulted from the settlement of a state tax appeal related to the gain on the sale of our former Performance Materials Division in fiscal year 2017. The benefit is reflected within "Income from discontinued operations, net of tax" on our consolidated income statementsstatement for the three and six months ended 31 March 2021. Our consolidated statement of cash flows for the six months ended 31 March 2021 includes $6.7 received as part of the settlement.
In the second quarter of fiscal year 2020, includewe recorded a pre-tax loss from discontinued operations of $19.0 ($14.3 after-tax). We recorded this loss to increase our existing liability for retained environmental obligationsliability associated with the sale of our former Amines business in September 2006. Refer to the Pace discussion within Note 13,12, Commitments and Contingencies, for additional information. The loss did not have an impact on our consolidated statement of cash flows for the six months ended 31 March 31, 2020.

5. COST REDUCTION ACTIONS
In fiscal year 2019, we recognized an expense of $25.5 for severance and other benefits associated with the elimination or planned elimination of approximately 300 positions. These actions were taken to drive cost synergies primarily within the Industrial Gases – EMEA and the Industrial Gases – Americas segments. The charge was not recorded in segment results.
Liabilities associated with these actions are reflected on our consolidated balance sheets within "Payables and accrued liabilities." The table below summarizes the carrying amount of the accrual as of 31 March 2020:
2019 Charge
$25.5
Cash expenditures(6.9)
Amount reflected in pension liability(0.3)
Currency translation adjustment(0.5)
30 September 2019
$17.8
Cash expenditures(7.8)
Currency translation adjustment0.2
31 March 2020
$10.2


6. ACQUISITIONS
During the second quarter of fiscal year 2019, we acquired ACP Europe SA, the largest independent carbon dioxide business in Continental Europe, for an aggregate purchase price, net of cash acquired, of $106.3. The results of this business are consolidated within our Industrial Gases – EMEA segment.
Subsequent Event
On 17 April 2020, Air Products acquired 5 operating hydrogen production plants from PBF Energy Inc. for $530 and has commenced the long-term supply of hydrogen from those plants to PBF refineries.

7. INVENTORIES
The components of inventories are as follows:
31 March30 September
20212020
Finished goods$143.7 $134.5 
Work in process25.0 21.3 
Raw materials, supplies and other261.6 249.0 
Inventories$430.3 $404.8 
  31 March 30 September
  2020 2019
Finished goods 
$131.2
 
$128.8
Work in process 28.5
 27.5
Raw materials, supplies and other 240.0
 232.0
Inventories 
$399.7
 
$388.3


8.7. GOODWILL
Changes to the carrying amount of consolidated goodwill by segment for the six months ended 31 March 20202021 are as follows:
Industrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
 and other		Total
Goodwill, net at 30 September 2020$152.6 $524.1 $180.4 $19.5 $14.9 $891.5 
Acquisitions(A)
0 14.5 0 0 0 14.5 
Currency translation and other4.4 0.9 3.0 0.4 0 8.7 
Goodwill, net at 31 March 2021$157.0 $539.5 $183.4 $19.9 $14.9 $914.7 
  
Industrial
Gases–
Americas
 
Industrial
Gases–
EMEA
 
Industrial
Gases–
Asia
 
Industrial
Gases–
Global
 Corporate and other Total
Goodwill, net at 30 September 2019 
$156.3
 
$432.3
 
$178.5
 
$19.6
 
$10.4
 
$797.1
Currency translation and other (7.8) (2.0) (1.5) (0.5) —
 (11.8)
Goodwill, net at 31 March 2020 
$148.5
 
$430.3
 
$177.0
 
$19.1
 
$10.4
 
$785.3
(A)We recognized goodwill for expected cost synergies and growth opportunities resulting from a business combination in the second quarter of fiscal year 2021. Refer to Note 3, Acquisitions, for additional information. The goodwill recognized is 0t deductible for tax purposes.
31 March30 September
20212020
Goodwill, gross$1,284.8 $1,230.2 
Accumulated impairment losses(B)
(370.1)(338.7)
Goodwill, net$914.7 $891.5 
  31 March 30 September
  2020 2019
Goodwill, gross 
$1,095.9
 
$1,162.2
Accumulated impairment losses(A)
 (310.6) (365.1)
Goodwill, net 
$785.3
 
$797.1

(B)
(A)Accumulated impairment losses include the impacts of currency translation. These losses are attributable to our Latin America reporting unit ("LASA") within the Industrial Gases – Americas segment.
Accumulated impairment losses include the impacts of currency translation. These losses are attributable to our Latin America reporting unit ("LASA") within the Industrial Gases – Americas segment.

We review goodwill for impairment annually in the fourth quarter of the fiscal year and whenever events or changes in circumstances indicate that the carrying value of goodwill might not be recoverable.

9. LEASES
As discussed in Note 2, New Accounting Guidance, we adopted the new lease guidance in fiscal year 2020 using a modified retrospective approach with the election to apply the guidance as of 1 October 2019. For adoption, we elected the package of practical expedients permitted under the transition guidance to carry forward the historical lease populations as well as their classifications existing as of the adoption date (i.e. contracts having a lease commencement date prior to 1 October 2019). Refer to Note 1, Basis of Presentation and Major Accounting Policies, and Note 2, New Accounting Guidance, for additional information on our adoption and related policies under the new lease standard.
Lessee Accounting
The Company is the lessee under various agreements for real estate, vehicles, aircraft, and other equipment that are accounted for as operating leases. Our finance leases principally relate to the right to use machinery and equipment and are not material.
The operating lease expense for the three and six months ended 31 March 2020, which exclude short-term and variable lease expenses, as those expenses are immaterial, was $20.1 and $39.5, respectively.

Amounts associated with operating leases, including their presentation on our consolidated balance sheets, as of our most recent balance sheet date and our adoption date are as follows:
 31 March 2020 1 October 2019
Operating lease ROU asset   
Other noncurrent assets
$351.1
 
$332.3
Operating lease liabilities   
Payables and accrued liabilities67.2
 68.6
Other noncurrent liabilities326.2
 306.7
Total Operating Lease Liabilities
$393.4
 
$375.3
The difference between the ROU assets and lease liabilities recorded upon adoption primarily relate to the land lease associated with our former Energy-from-Waste business in which an ROU asset was not recognized.
31 March 2020
Weighted-average remaining lease term (in years)(A)
15.4
Weighted-average discount rate(B)
2.2%
(A)
Calculated on the basis of the remaining lease term and the lease liability balance for each lease as of the reporting date.
(B)
Calculated on the basis of the discount rate used to calculate the lease liability for each lease as of the reporting date and the remaining balance of the lease payments for each lease as of the reporting date.
At 31 March 2020, the maturity analysis of lease liabilities, showing the undiscounted cash flows, is as follows:
  
Operating
Leases
2020 (excluding the six months ended 31 March 2020) 
$39.2
2021 66.4
2022 48.3
2023 40.6
2024 33.2
Thereafter 232.0
Total Undiscounted Lease Payments 
$459.7
Imputed interest (66.3)
Present Value of Lease Liability Recognized on the Balance Sheet 
$393.4

As previously disclosed in our 2019 Form 10-K, at 30 September 2019, prior to our adoption
16
Table of the new lease guidance, minimum payments due under leases were as follows:Contents
  Operating
Leases
2020 
$75.1
2021 62.6
2022 44.4
2023 35.9
2024 28.6
Thereafter 171.4
Total Undiscounted Lease Payments 
$418.0

The impacts associated with our operating leases on the consolidated statements of cash flows are reflected within "Other adjustments" within operating activities. This includes the non-cash impact from operating lease costs of $39.5 as well as a use of cash of $39.1 for payments on amounts included in the measurement of the lease liability. The net impact to operating cash flows from these activities is not material.
In addition to the ROU assets established upon adoption, we recorded $70 of non-cash additions during the six months ended 31 March 2020.

Lessor Accounting
Historically, certain contracts associated with facilities that are built to provide product to a specific customer were accounted for as leases. As noted above, we elected the package of practical expedients permitted under the transition guidance to carry forward these lease determinations as of 30 September 2019.
In cases where operating lease treatment is appropriate, there is no difference in revenue recognition over the life of the contract as compared to accounting for the contract under a sale of gas agreement. Under the new lease standard, these contracts qualify for a practical expedient available to lessors to combine the lease and non-lease components and account for the combined component in accordance with the accounting treatment for the predominant component. We elected to apply this practical expedient and have accounted for the combined component as product sales under the revenue standard as we control the operations and maintenance of the assets that provide the supply of gas to our customers.
In cases where sales-type lease treatment is appropriate, revenue and expense are recognized up front for the sale of equipment component of the contract as compared to revenue recognition over the life of the arrangement under contracts not qualifying as sales-type leases. Additionally, a portion of the revenue representing interest income from the financing component of the lease receivable is reflected as sales over the life of the contract. During the six months ended 31 March 2020, we recognized interest income of $36.4 on our lease receivables. As we generally control the operations and maintenance of the assets that provide the supply of gas to our customers, we do not expect new arrangements to qualify as leases.
Our contracts generally do not have the option to extend or terminate the lease or provide the customer the right to purchase the asset at the end of the contract term. Instead, renewal of such contracts requires negotiation of mutually agreed terms by both parties. Unless the customer terminates within the required notice period, the contract will go into evergreen. Given the long-term duration of our contracts, there is no assumed residual value for the assets at the end of the lease term.
Lease receivables, net, primarily relate to sales-type leases and are mostly included within "Noncurrent lease receivables" on our consolidated balance sheets, with the remaining balance in "Other receivables and current assets."
Lease payments collected during the six months ended 31 March 2020 were $83.5. These payments reduced the lease receivable balance by $47.1 in fiscal year 2020.
At 31 March 2020, minimum lease payments expected to be collected, which reconciles to the total undiscounted minimum lease payments reflected in the table below, were as follows:
2020 (excluding the six months ended 31 March 2020)
$79.7
2021155.4
2022144.7
2023138.6
2024132.6
Thereafter715.7
Total
$1,366.7
Unearned interest income(436.1)
Lease Receivables, net
$930.6


As previously disclosed in our 2019 Form 10-K, at 30 September 2019, prior to our adoption of the new lease guidance, minimum lease payments expected to be collected were as follows:
2020
$162.5
2021156.9
2022145.7
2023139.4
2024133.2
Thereafter715.5
Total
$1,453.2
Unearned interest income(472.3)
Lease Receivables, net
$980.9

Other than lease payments received during the first six months of fiscal year 2020 and the impact of currency, there have been no significant changes to our minimum lease payments expected to be collected since those disclosed as of 30 September 2019 in our 2019 Form 10-K.

10.8. FINANCIAL INSTRUMENTS
Currency Price Risk Management
Our earnings, cash flows, and financial position are exposed to foreign currency risk from foreign currency-denominated transactions and net investments in foreign operations. It is our policy to seek to minimize our cash flow volatility from changes in currency exchange rates. This is accomplished by identifying and evaluating the risk that our cash flows will change in value due to changes in exchange rates and by executing strategies necessary to manage such exposures. Our objective is to maintain economically balanced currency risk management strategies that provide adequate downside protection.
Forward Exchange Contracts
We enter into forward exchange contracts to reduce the cash flow exposure to foreign currency fluctuations associated with highly anticipated cash flows and certain firm commitments, such as the purchase of plant and equipment. We also enter into forward exchange contracts to hedge the cash flow exposure on intercompany loans.loans and third-party debt. This portfolio of forward exchange contracts consists primarily of Euros and U.S. Dollars. The maximum remaining term of any forward exchange contract currently outstanding and designated as a cash flow hedge at 31 March 20202021 is 3.22.3 years.
Forward exchange contracts are also used to hedge the value of investments in certain foreign subsidiaries and affiliates by creating a liability in a currency in which we have a net equity position. The primary currency pair in this portfolio of forward exchange contracts is Euros and U.S. Dollars.
We also utilize forward exchange contracts that are not designated as hedges. These contracts are used to economically hedge foreign currency-denominated monetary assets and liabilities, primarily working capital. The primary objective of these forward exchange contracts is to protect the value of foreign currency-denominated monetary assets and liabilities from the effects of volatility in foreign exchange rates that might occur prior to their receipt or settlement. This portfolio of forward exchange contracts consists of many different foreign currency pairs, with a profile that changes from time to time depending on our business activity and sourcing decisions.

The table below summarizes our outstanding currency price risk management instruments:
31 March 202130 September 2020
US$
Notional		Years
Average
Maturity		US$
Notional		Years
Average
Maturity
Forward Exchange Contracts:
Cash flow hedges$2,985.0 0.4$2,842.1 0.5
Net investment hedges656.4 3.3636.6 3.8
Not designated775.7 0.21,685.2 0.3
Total Forward Exchange Contracts$4,417.1 0.8$5,163.9 0.8
  31 March 2020 30 September 2019
  
US$
Notional
 
Years
Average
Maturity
 
US$
Notional
 
Years
Average
Maturity
Forward Exchange Contracts:        
Cash flow hedges 
$2,682.9
 0.4 
$2,418.2
 0.5
Net investment hedges 450.0
 1.6 830.8
 0.9
Not designated 1,342.3
 0.5 1,053.5
 0.6
Total Forward Exchange Contracts 
$4,475.2
 0.6 
$4,302.5
 0.6

The decrease in the notional value of forward exchange contracts that are not designated is primarily due to maturities.
We also use foreign currency-denominated debt to hedge the foreign currency exposures of our net investment in certain foreign subsidiaries. The designated foreign currency-denominated debt and related accrued interest was €938.8€1,303.8 million ($1,036.1)1,529.1) at 31 March 20202021 and €951.3€1,288.7 million ($1,036.9)1,510.8) at 30 September 2019.2020. The designated foreign currency-denominated debt is presented within "Long-term debt" on the consolidated balance sheets.
Debt Portfolio Management
It is our policy to identify, on a continuing basis, the need for debt capital and to evaluate the financial risks inherent in funding the Company with debt capital. Reflecting the result of this ongoing review, our debt portfolio and hedging program are managed with the intent to (1) reduce funding risk with respect to borrowings made by us to preserve our access to debt capital and provide debt capital as required for funding and liquidity purposes, and (2) manage the aggregate interest rate risk and the debt portfolio in accordance with certain debt management parameters.
17
Table of Contents
Interest Rate Management Contracts
We enter into interest rate swaps to change the fixed/variable interest rate mix of our debt portfolio in order to maintain the percentage of fixed- and variable-rate debt within the parameters set by management. In accordance with these parameters, the agreements are used to manage interest rate risks and costs inherent in our debt portfolio. Our interest rate management portfolio generally consists of fixed-to-floating interest rate swaps (which are designated as fair value hedges), pre-issuance interest rate swaps and treasury locks (which hedge the interest rate risk associated with anticipated fixed-rate debt issuances and are designated as cash flow hedges), and floating-to-fixed interest rate swaps (which are designated as cash flow hedges). As of 31 March 2020,2021, the outstanding interest rate swaps were denominated in U.S. Dollars. The notional amount of the interest rate swap agreements is equal to or less than the designated debt being hedged. When interest rate swaps are used to hedge variable-rate debt, the indices of the swaps and the debt to which they are designated are the same. It is our policy not to enter into any interest rate management contracts which lever a move in interest rates on a greater than one-to-one basis.
Cross Currency Interest Rate Swap Contracts
We enter into cross currency interest rate swap contracts when our risk management function deems necessary. These contracts may entail both the exchange of fixed- and floating-rate interest payments periodically over the life of the agreement and the exchange of one currency for another currency at inception and at a specified future date. The contracts are used to hedge either certain net investments in foreign operations or non-functional currency cash flows related to intercompany loans. The current cross currency interest rate swap portfolio consists of fixed-to-fixed swaps primarily between U.S. Dollars and Chinese Renminbi, U.S. Dollars and Indian Rupee, and U.S. Dollars and Chilean Pesos.

The following table summarizes our outstanding interest rate management contracts and cross currency interest rate swaps:
31 March 202130 September 2020
US$
Notional		Average
Pay %		Average
Receive
%		Years
Average
Maturity		US$
Notional		Average
Pay %		Average
Receive
%		Years
Average
Maturity
Interest rate swaps
(fair value hedge)		$200.0 LIBOR2.76 %0.6$200.0 LIBOR2.76 %1.1
Cross currency interest rate swaps
(net investment hedge)		$199.3 4.26 %3.12 %2.7$201.6 4.27 %3.12 %3.2
Cross currency interest rate swaps
(cash flow hedge)		$1,145.9 4.79 %2.93 %2.4$1,057.9 4.83 %2.98 %2.5
Cross currency interest rate swaps
(not designated)		$15.1 5.39 %3.54 %2.7$12.8 5.39 %3.54 %3.2
  31 March 2020 30 September 2019
  
US$
Notional
 
Average
Pay %
 
Average
Receive
%
 
Years
Average
Maturity
 
US$
Notional
 
Average
Pay %
 
Average
Receive
%
 
Years
Average
Maturity
Interest rate swaps
(fair value hedge)
 
$200.0
 LIBOR
 2.76% 1.6 
$200.0
 LIBOR
 2.76% 2.1
Cross currency interest rate swaps
(net investment hedge)
 
$222.9
 4.74% 3.32% 3.0 
$216.8
 4.80% 3.31% 3.5
Cross currency interest rate swaps
(cash flow hedge)
 
$1,063.6
 4.83% 3.07% 2.0 
$1,129.3
 4.92% 3.04% 2.3
Cross currency interest rate swaps
(not designated)
 
$—
 —% —% 0.0 
$6.1
 2.55% 3.72% 4.5

The table below provides the amounts recorded on the consolidated balance sheet related to cumulative basis adjustments for fair value hedges:
Carrying amounts of hedged itemCumulative hedging adjustment, included in carrying amount
Balance Sheet Location31 March 202130 September 202031 March 202130 September 2020
Current portion of long-term debt$402.8 $0 $3.0 $0 
Long-term debt0 405.4 0 5.7 
 Carrying amounts of hedged item Cumulative hedging adjustment, included in carrying amount
Balance Sheet Location31 March 202030 September 2019 31 March 202030 September 2019
Long-term debt
$407.4

$404.7
 
$7.8

$5.2
18

Table of Contents
The table below summarizes the fair value and balance sheet location of our outstanding derivatives:
Balance Sheet
Location		31 March 202130 September 2020Balance Sheet
Location		31 March 202130 September 2020
Derivatives Designated as Hedging Instruments:
Forward exchange contractsOther receivables and current assets$45.4 $51.1 Payables and accrued liabilities$55.5 $22.5 
Interest rate management contractsOther receivables and current assets10.3 14.7 Payables and accrued liabilities6.5 0.4 
Forward exchange contractsOther noncurrent assets2.0 0.8 Other noncurrent liabilities37.2 33.0 
Interest rate management contractsOther noncurrent
assets		18.5 44.3 Other noncurrent liabilities26.4 1.7 
Total Derivatives Designated as Hedging Instruments$76.2 $110.9 $125.6 $57.6 
Derivatives Not Designated as Hedging Instruments:
Forward exchange contractsOther receivables and current assets$19.6 $31.7 Payables and accrued liabilities$17.1 $28.0 
Forward exchange contractsOther noncurrent assets0.1 0 Other noncurrent liabilities0 0 
Interest rate management contractsOther noncurrent assets0.1 0.7 Other noncurrent liabilities0 0 
Total Derivatives Not Designated as Hedging Instruments$19.8 $32.4 $17.1 $28.0 
Total Derivatives$96.0 $143.3 $142.7 $85.6 
 
Balance Sheet
Location
31 March 202030 September 2019
Balance Sheet
Location
31 March 202030 September 2019
Derivatives Designated as Hedging Instruments:      
Forward exchange contractsOther receivables and current assets
$90.7

$79.0
Payables and accrued liabilities
$40.5

$53.8
Interest rate management contractsOther receivables and current assets33.7
24.8
Payables and accrued liabilities0.5
1.1
Forward exchange contracts
Other noncurrent
assets
16.3
11.9
Other noncurrent
liabilities
2.0
0.7
Interest rate management contracts
Other noncurrent
assets
83.3
60.9
Other noncurrent
liabilities
—
0.7
Total Derivatives Designated as Hedging Instruments 
$224.0

$176.6
 
$43.0

$56.3
Derivatives Not Designated as Hedging Instruments:      
Forward exchange contractsOther receivables and current assets
$40.0

$38.7
Payables and accrued liabilities
$19.7

$36.3
Forward exchange contracts
Other noncurrent
assets
10.2
8.4
Other noncurrent
liabilities
21.6
19.8
Interest rate management contracts
Other noncurrent
assets
—
0.5
Other noncurrent
liabilities
—
—
Total Derivatives Not Designated as Hedging Instruments 
$50.2

$47.6
 
$41.3

$56.1
Total Derivatives 
$274.2

$224.2
 
$84.3

$112.4

Refer to Note 11,9, Fair Value Measurements, which defines fair value, describes the method for measuring fair value, and provides additional disclosures regarding fair value measurements.

19
Table of Contents
The tables below summarize gains (losses) recognized in other comprehensive income during the period related to our net investment and cash flow hedging relationships:
Three Months EndedSix Months Ended
31 March31 March
2021202020212020
Net Investment Hedging Relationships
Forward exchange contracts$18.6 $40.5 ($17.3)$31.4 
Foreign currency debt63.5 16.7 (0.7)(13.2)
Cross currency interest rate swaps1.9 12.4 (12.3)8.9 
Total Amount Recognized in OCI84.0 69.6 (30.3)27.1 
Tax effects(21.2)(16.8)7.4 (6.6)
Net Amount Recognized in OCI$62.8 $52.8 ($22.9)$20.5 
 Three Months Ended 31 March Six Months Ended 31 March
 20202019 20202019
Net Investment Hedging Relationships     
Forward exchange contracts
$40.5

$8.2
 31.4
23.7
Foreign currency debt16.7
22.7
 (13.2)35.3
Cross currency interest rate swaps12.4
(3.5) 8.9
(2.6)
Total Amount Recognized in OCI69.6
27.4
 27.1
56.4
Tax effects(16.8)(6.7) (6.6)(13.7)
Net Amount Recognized in OCI
$52.8

$20.7
 20.5
42.7

Three Months EndedSix Months Ended
31 March31 March
2021202020212020
Derivatives in Cash Flow Hedging Relationships
Forward exchange contracts($57.3)($10.1)$7.4 $16.2 
Forward exchange contracts, excluded components(4.3)(2.8)(7.0)(7.3)
Other(A)
43.2 (8.5)(2.3)(5.6)
Total Amount Recognized in OCI(18.4)(21.4)(1.9)3.3 
Tax effects13.2 (6.0)10.5 (8.6)
Net Amount Recognized in OCI($5.2)($27.4)$8.6 ($5.3)
(A)Other primarily includes interest rate and cross currency interest rate swaps for which excluded components are recognized in “Payables and accrued liabilities” and “Other receivables and current assets” as a component of accrued interest payable and accrued interest receivable, respectively. These excluded components are recorded in “Other non-operating income (expense), net” over the life of the cross currency interest rate swap. Other also includes the recognition of our share of gains and losses, net of tax, related to interest rate swaps held by our equity affiliates.
20
 Three Months Ended 31 March Six Months Ended 31 March
 20202019 20202019
Derivatives in Cash Flow Hedging Relationships     
Forward exchange contracts
($10.1)
($22.2) 16.2
(13.3)
Forward exchange contracts, excluded components(2.8)(3.6) (7.3)(7.4)
Other(A)
(8.5)(18.3) (5.6)(34.4)
Total Amount Recognized in OCI(21.4)(44.1) 3.3
(55.1)
Tax effects(6.0)8.7
 (8.6)9.4
Net Amount Recognized in OCI
($27.4)
($35.4) (5.3)(45.7)
(A)
Table of Contents
Other primarily includes interest rate and cross currency interest rate swaps for which excluded components are recognized in “Payables and accrued liabilities” and “Other receivables and current assets” as a component of accrued interest payable and accrued interest receivable, respectively. These excluded components are recorded in “Other Non-operating income (expense), net” over the life of the cross currency interest rate swap. Other also includes the recognition of our share of gains and losses, net of tax, related to interest rate swaps held by our equity affiliates.

The tables below summarize the location and amounts recognized in income related to our cash flow and fair value hedging relationships by contract type:
Three Months Ended 31 March
SalesCost of SalesInterest ExpenseOther Non-Operating Income (Expense), Net
20212020202120202021202020212020
Total presented in consolidated income statements that includes effects of hedging below$2,502.0 $2,216.3 $1,745.5 $1,460.1 $36.1 $19.3 $16.8 $7.1 
(Gain) Loss Effects of Cash Flow Hedging:
Forward Exchange Contracts:
Amount reclassified from OCI into income$0.1 ($0.2)($1.8)($0.6)$0 $0 $54.0 $5.9 
Amount excluded from effectiveness testing recognized in earnings based on amortization approach0 0 0 0 0 0 2.6 4.1 
Other:
Amount reclassified from OCI into income0 0 0 0 1.4 1.0 (8.3)(32.2)
Total (Gain) Loss Reclassified from OCI to Income0.1 (0.2)(1.8)(0.6)1.4 1.0 48.3 (22.2)
Tax effects0 0 0.4 0.1 (0.5)(0.3)(11.9)5.2 
Net (Gain) Loss Reclassified from OCI to Income$0.1 ($0.2)($1.4)($0.5)$0.9 $0.7 $36.4 ($17.0)
(Gain) Loss Effects of Fair Value Hedging:
Other:
Hedged items$0 $0 $0 $0 ($1.4)$3.5 $0 $0 
Derivatives designated as hedging instruments0 0 0 0 1.4 (3.5)0 0 
Total (Gain) Loss Recognized in Income$0 $0 $0 $0 $0 $0 $0 $0 

21
Table of Contents
Three Months Ended 31 MarchSix Months Ended 31 March
Sales Cost of Sales Other Income (Expense), Net Interest Expense Other Non-Operating Income (Expense), NetSalesCost of SalesInterest ExpenseOther Non-Operating Income (Expense), Net
20202019 20202019 20202019 20202019 2020201920212020202120202021202020212020
Total Amounts Presented in the Consolidated Income Statement in which the Effects of Cash Flow and Fair Value Hedges are Recorded
$2,216.3

$2,187.7
 
$1,460.1

$1,474.7
 
$8.1

$10.4
 
$19.3

$35.4
 
$7.1

$13.7
Total presented in consolidated income statements that includes effects of hedging belowTotal presented in consolidated income statements that includes effects of hedging below$4,877.2 $4,471.0 $3,377.9 $2,946.7 $72.8 $38.0 $35.4 $16.2 
(Gain) Loss Effects of Cash Flow Hedging:         (Gain) Loss Effects of Cash Flow Hedging:
Forward Exchange Contracts:         Forward Exchange Contracts:
Amount reclassified from OCI into income(A)

($0.2)
$—
 
($0.6)
($0.1) 
$—

$24.8
 
$—

$4.2
 
$5.9

$—
Amount excluded from effectiveness testing recognized in earnings based on amortization approach(A)
—
—
 —
—
 —
—
 —
—
 4.1
—
Amount reclassified from OCI into incomeAmount reclassified from OCI into income$0.2 ($0.1)($1.9)($0.8)$0 $0 $2.4 ($17.5)
Amount excluded from effectiveness testing recognized in earnings based on amortization approachAmount excluded from effectiveness testing recognized in earnings based on amortization approach0 0 0 0 0 0 5.4 8.6 
Other:         Other:
Amount reclassified from OCI into income(B)
—
—
 —
—
 —
18.5
 1.0
1.0
 (32.2)—
Amount reclassified from OCI into incomeAmount reclassified from OCI into income0 0 0 0 2.8 2.0 37.0 (18.6)
Total (Gain) Loss Reclassified from OCI to Income(0.2)—
 (0.6)(0.1) —
43.3
 1.0
5.2
 (22.2)—
Total (Gain) Loss Reclassified from OCI to Income0.2 (0.1)(1.9)(0.8)2.8 2.0 44.8 (27.5)
Tax effects—
—
 0.1
—
 —
(10.1) (0.3)(1.4) 5.2
—
Tax effects0 0 0.6 0.2 (1.0)(0.6)(10.8)6.2 
Net (Gain) Loss Reclassified from OCI to Income
($0.2)
$—
 
($0.5)
($0.1) 
$—

$33.2
 
$0.7

$3.8
 
($17.0)
$—
Net (Gain) Loss Reclassified from OCI to Income$0.2 ($0.1)($1.3)($0.6)$1.8 $1.4 $34.0 ($21.3)
(Gain) Loss Effects of Fair Value Hedging:         (Gain) Loss Effects of Fair Value Hedging:
Other:         Other:
Hedged items
$—

$—
 
$—

$—
 
$—

$—
 
$3.5

$—
 
$—

$—
Hedged items$0 $0 $0 $0 ($2.7)$2.6 $0 $0 
Derivatives designated as hedging instruments—
—
 —
—
 —
—
 (3.5)—
 —
—
Derivatives designated as hedging instruments0 0 0 0 2.7 (2.6)0 0 
Total (Gain) Loss Recognized in Income
$—

$—
 
$—

$—
 
$—

$—
 
$—

$—
 
$—

$—
Total (Gain) Loss Recognized in Income$0 $0 $0 $0 $0 $0 $0 $0 

               
 Six Months Ended 31 March
 Sales Cost of Sales Other Income (Expense), Net Interest Expense Other Non-Operating Income (Expense), Net
 20202019 20202019 20202019 20202019 20202019
Total Amounts Presented in the Consolidated Income Statement in which the Effects of Cash Flow and Fair Value Hedges are Recorded
$4,471.0

$4,411.7
 
$2,946.7

$3,018.7
 
$20.4

$19.0
 
$38.0

$72.7
 
$16.2

$32.2
(Gain) Loss Effects of Cash Flow Hedging:              
Forward Exchange Contracts:              
Amount reclassified from OCI into income(A)

($0.1)
$0.4
 
($0.8)
$0.1
 
$—

$12.9
 
$—

$8.4
 
($17.5)
$—
Amount excluded from effectiveness testing recognized in earnings based on amortization approach(A)
—
—
 —
—
 —
—
 —
—
 8.6
—
Other:              
Amount reclassified from OCI into income(B)
—
—
 —
—
 —
20.7
 2.0
2.0
 (18.6)—
Total (Gain) Loss Reclassified from OCI to Income(0.1)0.4
 (0.8)0.1
 —
33.6
 2.0
10.4
 (27.5)—
Tax effects—
(0.1) 0.2
—
 —
(7.8) (0.6)(2.8) 6.2
—
Net (Gain) Loss Reclassified from OCI to Income
($0.1)
$0.3
 
($0.6)
$0.1
 
$—

$25.8
 
$1.4

$7.6
 
($21.3)
$—
(Gain) Loss Effects of Fair Value Hedging:              
Other:              
Hedged items
$—

$—
 
$—

$—
 
$—

$—
 
$2.6

$2.6
 
$—

$—
Derivatives designated as hedging instruments—
—
 —
—
 —
—
 (2.6)(2.6) —
—
Total (Gain) Loss Recognized in Income
$—

$—
 
$—

$—
 
$—

$—
 
$—

$—
 
$—

$—
(A)
Net amount excluded from effectiveness testing recognized in interest expense for fiscal year 2019, see Note 2, New Accounting Guidance, for additional details.
(B)
Other primarily includes interest rate and cross currency interest rate swaps for which excluded components are recognized in “Payables and accrued liabilities” and “Other receivables and current assets” as a component of accrued interest payable and accrued interest receivable, respectively. These excluded components are recorded in “Other Non-operating income (expense), net” over the life of the cross currency interest rate swap.
The tables below summarize the location and amounts recognized in income related to our derivatives not designated as hedging instruments by contract type:
Three Months Ended 31 March
Other Income (Expense), NetOther Non-Operating Income (Expense), Net
2021202020212020
The Effects of Derivatives Not Designated as Hedging Instruments:
Forward Exchange Contracts($0.3)($2.4)($0.3)$1.2 
Other0 0 (0.1)0 
Total (Gain) Loss Recognized in Income($0.3)($2.4)($0.4)$1.2 
22
Table of Contents
Three Months Ended 31 MarchSix Months Ended 31 March
Other Income (Expense), net Other Non-Operating Income (Expense), netOther Income (Expense), NetOther Non-Operating Income (Expense), Net
2020 2019 2020 20192021202020212020
The Effects of Derivatives Not Designated as a Hedging Instruments:   
The Effects of Derivatives Not Designated as Hedging Instruments:The Effects of Derivatives Not Designated as Hedging Instruments:
Forward Exchange Contracts
($2.4) 
$2.2
 
$1.2
 
$—
Forward Exchange Contracts$2.5 ($2.2)($1.6)$0.6 
Other—
 1.3
 —
 —
Other0 0 0.4 0.4 
Total (Gain) Loss Recognized in Income
($2.4) 
$3.5
 
$1.2
 
$—
Total (Gain) Loss Recognized in Income$2.5 ($2.2)($1.2)$1.0 

        
 Six Months Ended 31 March
 Other Income (Expense) Other Non-Operating Income (Expense)
 2020 2019 2020 2019
The Effects of Derivatives Not Designated as a Hedging Instruments:   
Forward Exchange Contracts
($2.2) 
$2.3
 
$0.6
 
$—
Other—
 0.5
 0.4
 —
Total (Gain) Loss Recognized in Income
($2.2) 
$2.8
 
$1.0
 
$—

The amount of unrealized gains and losses related to cash flow hedges as of 31 March 20202021 that are expected to be reclassified to earnings in the next twelve months is not material.
The cash flows related to all derivative contracts are reported in the operating activities section of the consolidated statements of cash flows.
Credit Risk-Related Contingent Features
Certain derivative instruments are executed under agreements that require us to maintain a minimum credit rating with both Standard & Poor’s and Moody’s. If our credit rating falls below this threshold, the counterparty to the derivative instruments has the right to request full collateralization on the derivatives’ net liability position. The net liability position of derivatives with credit risk-related contingent features was $32.5$76.5 and $30.1$30.0 as of 31 March 20202021 and 30 September 2019,2020, respectively. Because our current credit rating is above the various pre-established thresholds, 0 collateral has been posted on these liability positions.
Counterparty Credit Risk Management
We execute financial derivative transactions with counterparties that are highly rated financial institutions, all of which are investment grade at this time. Some of our underlying derivative agreements give us the right to require the institution to post collateral if its credit rating falls below the pre-established thresholds with Standard & Poor’s or Moody’s. The collateral that the counterparties would be required to post was $204.8$46.8 and $157.1$76.5 as of 31 March 20202021 and 30 September 2019,2020, respectively. No financial institution is required to post collateral at this time as all have credit ratings at or above threshold.

11.9. FAIR VALUE MEASUREMENTS
Fair value is defined as an exit price, or the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:
Level 1— Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2— Inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability.
Level 3— Inputs that are unobservable for the asset or liability based on our own assumptions about the assumptions market participants would use in pricing the asset or liability.
Level 1    — Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2    — Inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability.
Level 3    — Inputs that are unobservable for the asset or liability based on our own assumptions about the assumptions market participants would use in pricing the asset or liability.
The methods and assumptions used to measure the fair value of financial instruments are as follows:
Short-term Investments
Short-term investments primarily include time deposits with original maturities greater than three months and less than one year. We estimated the fair value of our short-term investments, which approximates carrying value as of the balance sheet date, using levelLevel 2 inputs within the fair value hierarchy. Level 2 measurements were based on current interest rates for similar investments with comparable credit risk and time to maturity.

23
Table of Contents
Derivatives
The fair value of our interest rate management contracts and forward exchange contracts are quantified using the income approach and are based on estimates using standard pricing models. These models consider the value of future cash flows as of the balance sheet date, discounted to a present value using discount factors that match both the time to maturity and currency of the underlying instruments. The computation of the fair values of these instruments is generally performed by the Company. These standard pricing models utilize inputs that are derived from or corroborated by observable market data such as interest rate yield curves as well as currency spot and forward rates; therefore, the fair value of our derivatives is classified as a levelLevel 2 measurement. On an ongoing basis, we randomly test a subset of our valuations against valuations received from the transaction’s counterparty to validate the accuracy of our standard pricing models. Counterparties to these derivative contracts are highly rated financial institutions.
Refer to Note 10,8, Financial Instruments, for a description of derivative instruments, including details related to the balance sheet line classifications.
Long-term Debt, Including Related Party
The fair value of our debt is based on estimates using standard pricing models that consider the value of future cash flows as of the balance sheet date, discounted to a present value using discount factors that match both the time to maturity and currency of the underlying instruments. These standard valuation models utilize observable market data such as interest rate yield curves and currency spot rates; therefore, the fair value of our debt is classified as a levelLevel 2 measurement. We generally perform the computation of the fair value of these instruments.
The carrying values and fair values of financial instruments were as follows:
  31 March 2020 30 September 2019
  Carrying Value Fair Value Carrying Value Fair Value
Assets        
Derivatives        
Forward exchange contracts 
$157.2
 
$157.2
 
$138.0
 
$138.0
Interest rate management contracts 117.0
 117.0
 86.2
 86.2
Liabilities        
Derivatives        
Forward exchange contracts 
$83.8
 
$83.8
 
$110.6
 
$110.6
Interest rate management contracts 0.5
 0.5
 1.8
 1.8
Long-term debt, including current portion and related party 3,283.6
 3,344.0
 3,267.8
 3,350.9


31 March 202130 September 2020
Carrying ValueFair ValueCarrying ValueFair Value
Assets
Derivatives
Forward exchange contracts$67.1 $67.1 $83.6 $83.6 
Interest rate management contracts28.9 28.9 59.7 59.7 
Liabilities
Derivatives
Forward exchange contracts$109.8 $109.8 $83.5 $83.5 
Interest rate management contracts32.9 32.9 2.1 2.1 
Long-term debt, including current portion and related party7,989.0 7,966.0 7,900.1 8,278.4 
The carrying amounts reported on the consolidated balance sheets for cash and cash items, short-term investments, trade receivables, payables and accrued liabilities, accrued income taxes, and short-term borrowings approximate fair value due to the short-term nature of these instruments. Accordingly, these items have been excluded from the above table.
24
Table of Contents
The following table summarizes assets and liabilities on the consolidated balance sheets that are measured at fair value on a recurring basis:
31 March 202130 September 2020
TotalLevel 1Level 2Level 3TotalLevel 1Level 2Level 3
Assets at Fair Value
Derivatives
Forward exchange contracts$67.1 $0 $67.1 $0 $83.6 $0 $83.6 $0 
Interest rate management contracts28.9 0 28.9 0 59.7 0 59.7 0 
Total Assets at Fair Value$96.0 $0 $96.0 $0 $143.3 $0 $143.3 $0 
Liabilities at Fair Value
Derivatives
Forward exchange contracts$109.8 $0 $109.8 $0 $83.5 $0 $83.5 $0 
Interest rate management contracts32.9 0 32.9 0 2.1 0 2.1 0 
Total Liabilities at Fair Value$142.7 $0 $142.7 $0 $85.6 $0 $85.6 $0 
 31 March 2020 30 September 2019
 TotalLevel 1Level 2Level 3 TotalLevel 1Level 2Level 3
Assets at Fair Value         
Derivatives         
Forward exchange contracts
$157.2

$—

$157.2

$—
 
$138.0

$—

$138.0

$—
Interest rate management contracts117.0
—
117.0
—
 86.2
—
86.2
—
Total Assets at Fair Value
$274.2

$—

$274.2

$—
 
$224.2

$—

$224.2

$—
Liabilities at Fair Value         
Derivatives         
Forward exchange contracts
$83.8

$—

$83.8

$—
 
$110.6

$—

$110.6

$—
Interest rate management contracts0.5
—
0.5
—
 1.8
—
1.8
—
Total Liabilities at Fair Value
$84.3

$—

$84.3

$—
 
$112.4

$—

$112.4

$—



10. DEBT
On 31 March 2021, we entered into a five-year $2,500 revolving credit agreement 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 will provide a source of liquidity and support our commercial paper program. The only financial covenant in the 2021 Credit Agreement is a maximum ratio of total debt to capitalization (equal to total debt plus total equity) not to exceed 70%. NaN borrowings were outstanding under the 2021 Credit Agreement as of 31 March 2021.
The 2021 Credit Agreement replaced our previous five-year $2,300 revolving credit agreement, which was to have matured on 31 March 2022. NaN borrowings were outstanding under the previous agreement as of 30 September 2020 or at the time of its termination. NaN early termination penalties were incurred.
In addition, we have credit facilities available to certain of our foreign subsidiaries totaling $291.5, of which $92.1 was borrowed and outstanding as of 31 March 2021.
12.
11. RETIREMENT BENEFITS
The components of net periodic benefit(benefit) cost for our defined benefit pension plans for the three and six months ended 31 March 20202021 and 20192020 were as follows:
Pension BenefitsPension Benefits
2020 201920212020
Three Months Ended 31 MarchU.S. International U.S. InternationalThree Months Ended 31 MarchU.S.InternationalU.S.International
Service cost
$5.8
 
$5.8
 
$5.3
 
$4.9
Service cost$5.3 $5.9 $5.8 $5.8 
Interest cost22.8
 6.2
 28.4
 9.0
Interest cost17.3 6.3 22.8 6.2 
Expected return on plan assets(47.2) (19.4) (43.1) (19.2)Expected return on plan assets(48.7)(21.0)(47.2)(19.4)
Prior service cost amortization0.3
 —
 0.3
 0.1
Prior service cost amortization0.3 0 0.3 0 
Actuarial loss amortization21.0
 4.9
 16.5
 2.8
Actuarial loss amortization19.6 4.8 21.0 4.9 
Settlements1.5
 —
 5.0
 —
Settlements0 0 1.5 0 
Special termination benefits—
 —
 —
 —
Other—
 0.2
 —
 0.1
Other0 0.2 0 0.2 
Net Periodic (Benefit) Cost
$4.2
 
($2.3) 
$12.4
 
($2.3)Net Periodic (Benefit) Cost($6.2)($3.8)$4.2 ($2.3)
        
 Pension Benefits
 2020 2019
Six Months Ended 31 MarchU.S. International U.S. International
Service cost
$11.6
 
$11.7
 
$10.7
 
$9.8
Interest cost45.6
 12.4
 56.8
 18.0
Expected return on plan assets(94.4) (38.9) (86.2) (38.1)
Prior service cost amortization0.6
 —
 0.6
 0.1
Actuarial loss amortization42.0
 9.8
 32.6
 5.6
Settlements1.5
 —
 5.8
 0.2
Special termination benefits—
 —
 0.7
 —
Other—
 0.4
 —
 0.4
Net Periodic (Benefit) Cost
$6.9
 
($4.6) 
$21.0
 
($4.0)
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Pension Benefits
20212020
Six Months Ended 31 MarchU.S.InternationalU.S.International
Service cost$10.7 $11.6 $11.6 $11.7 
Interest cost34.5 12.4 45.6 12.4 
Expected return on plan assets(97.3)(41.2)(94.4)(38.9)
Prior service cost amortization0.6 0 0.6 0 
Actuarial loss amortization39.3 9.4 42.0 9.8 
Settlements0 0 1.5 0 
Other0 0.5 0 0.4 
Net Periodic (Benefit) Cost($12.2)($7.3)$6.9 ($4.6)

Our service costs are primarily included within "Cost of sales" and "Selling and administrative" on our consolidated income statements. The amount of service costs capitalized in the first six months of fiscal years 20202021 and 20192020 were not material. The non-service related costs, including pension settlement losses,impacts are presented outside operating income within "Other non-operating income (expense), net."
For the six months ended 31 March 20202021 and 2019,2020, our cash contributions to funded pension plans and benefit payments under unfunded pension plans were $14.9$27.7 and $25.5,$14.9, respectively. Total contributions for fiscal year 20202021 are expected to be approximately $30$45 to $40.$55. During fiscal year 2019,2020, total contributions were $40.2.$37.5.
Certain of our pension plans provide for a lump sum benefit payment option atDuring the time of retirement, or for corporate officers,three and six months after their retirement date. A participant’s vested benefit is considered settled upon cash paymentended 31 March 2021, we recognized actuarial gain amortization of $0.5 and $0.9, respectively, for our other postretirement benefits plan. There was 0 amortization in fiscal year 2020 as the lump sum. We recognize pension settlement losses when cash payments exceed the sum of the service and interest cost components of net periodic benefit cost ofcorridor for the plan for the fiscal year. We recognized pension settlement losses of $1.5 and $5.0 in the second quarter of fiscal years 2020 and 2019, respectively, to accelerate recognition of a portion of actuarial losses deferred in accumulated other comprehensive loss, primarily associated with the U.S. supplementary pension plan.

U.K. Lloyds Pensions Equalization Ruling
On 26 October 2018, the United Kingdom High Court issued a ruling related to the equalization of pension plan participants’ benefits for the gender effects of Guaranteed Minimum Pensions. As a result of this ruling, we estimated the impact of retroactively increasing benefits in our U.K. plan in accordance with the High Court ruling. We treated the additional benefits as a prior service cost, which resulted in an increase to our projected benefit obligation and accumulated other comprehensive loss of $4.7 during the first quarter of fiscal year 2019. We are amortizing this cost over the average remaining life expectancy of the U.K. participants.

was not exceeded.
13.
12. COMMITMENTS AND CONTINGENCIES
Litigation
We are involved in various legal proceedings, including commercial, competition, environmental, intellectual property, regulatory, product liability, and insurance matters. We do not currently believe there are any legal proceedings, individually or in the aggregate, that are reasonably possible to have a material impact on our financial condition, results of operations, or cash flows.
In September 2010, the Brazilian Administrative Council for Economic Defense ("CADE") issued a decision against our Brazilian subsidiary, Air Products Brasil Ltda., and several other Brazilian industrial gas companies for alleged anticompetitive activities. CADE imposed a civil fine of R$179.2 million (approximately $34$32 at 31 March 2020)2021) on Air Products Brasil Ltda. This fine was based on a recommendation by a unit of the Brazilian Ministry of Justice, whose investigation began in 2003, alleging violation of competition laws with respect to the sale of industrial and medical gases. The fines are based on a percentage of our total revenue in Brazil in 2003.
We have denied the allegations made by the authorities and filed an appeal in October 2010 with the Brazilian courts. On 6 May 2014, our appeal was granted and the fine against Air Products Brasil Ltda. was dismissed. CADE has appealed that ruling and the matter remains pending. We, with advice of our outside legal counsel, have assessed the status of this matter and have concluded that, although an adverse final judgment after exhausting all appeals is possible, such a judgment is not probable. As a result, 0 provision has been made in the consolidated financial statements. We estimate the maximum possible loss to be the full amount of the fine of R$179.2 million (approximately $34$32 at 31 March 2020)2021) plus interest accrued thereon until final disposition of the proceedings.
Other than this matter, we do not currently believe there are any legal proceedings, individually or
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Additionally, Winter Storm Uri, a severe winter weather storm in the aggregate,U.S. Gulf Coast in February 2021, disrupted our operations and caused power and natural gas prices to spike significantly in Texas. We are currently in the early stages of litigation of a dispute regarding energy management services related to the impact of this unusual event, and other disputes may arise from such power price increases. In addition, there is the potential for legislative or regulatory action that aremay affect power supply and energy management charges. While it is reasonably possible that we could incur additional costs or realize gains related to have a material impact on our financial condition, resultspower supply and energy management services in Texas during this time period, it is too early to estimate potential losses or gains given significant unknowns resulting from the unusual nature of operations, or cash flows.this event.
Environmental
In the normal course of business, we are involved in legal proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA," the federal Superfund law), Resource Conservation and Recovery Act ("RCRA"), and similar state and foreign environmental laws relating to the designation of certain sites for investigation or remediation. Presently, there are 31 sites on which a final settlement has not been reached where we, along with others, have been designated a potentially responsible party by the Environmental Protection Agency or are otherwise engaged in investigation or remediation, including cleanup activity at certain of our current and former manufacturing sites. We continually monitor these sites for which we have environmental exposure.
Accruals for environmental loss contingencies are recorded when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. The consolidated balance sheets at 31 March 20202021 and 30 September 20192020 included an accrual of $87.2$80.8 and $68.9,$84.7, respectively, primarily as part of other noncurrent liabilities. The environmental liabilities will be paid over a period of up to 30 years. We estimate the exposure for environmental loss contingencies to range from $87$80 to a reasonably possible upper exposure of $100$94 as of 31 March 2020.2021.
Actual costs to be incurred at identified sites in future periods may vary from the estimates, given inherent uncertainties in evaluating environmental exposures. Using reasonably possible alternative assumptions of the exposure level could result in an increase to the environmental accrual. Due to the inherent uncertainties related to environmental exposures, a significant increase to the reasonably possible upper exposure level could occur if a new site is designated, the scope of remediation is increased, a different remediation alternative is identified, or a significant increase in our proportionate share occurs. We do not expect that any sum we may have to pay in connection with environmental matters in excess of the amounts recorded or disclosed above would have a material adverse impact on our financial position or results of operations in any one year.

Pace
At 31 March 2020, $42.72021, $41.6 of the environmental accrual was related to the Pace facility.
In 2006, we sold our Amines business, which included operations at Pace, Florida, and recognized a liability for retained environmental obligations associated with remediation activities at Pace. We are required by the Florida Department of Environmental Protection ("FDEP") and the United States Environmental Protection Agency (USEPA)("USEPA") to continue our remediation efforts. We estimated that it would take a substantial period of time to complete the groundwater remediation, and the costs through completion were estimated to range from $42 to $52. As no amount within the range was a better estimate than another, we recognized a before-tax expense of $42 in fiscal year 2006 in results from discontinued operations and recorded an environmental accrual of $42 in continuing operations on the consolidated balance sheets.
During the second quarter of fiscal year 2020, we completed an updated cost review of the environmental remediation status at the Pace facility. The review was completed in conjunction with requirements to completemaintain financial assurance per the Consent Order issued by the FDEP discussed below. Based on our review, we expect ongoing activities to continue for 30 years. Additionally, we will require near-term spending to install new groundwater recovery wells and piping, as well asin addition to future capital to consider the longer than expectedextended time horizon for remediation at the site. As a result of these changes, we increased our environmental accrual for this site by $19 in continuing operations on the consolidated balance sheets and recognized a pre-taxbefore-tax expense of $19 in results from discontinued operations in the second quarter of fiscal year 2020. There has been 0 change to the estimated exposure range related to the Pace facility in fiscal year 2021.
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We have implemented many of the remedial corrective measures at the Pace facility required under 1995 Consent Orders issued by the FDEP and the USEPA. Contaminated soils have been bioremediated, and the treated soils have been secured in a lined on-site disposal cell.corrective action management unit. Several groundwater recovery systems have been installed to contain and remove contamination from groundwater. We completed an extensive assessment of the site to determine how wellthe efficacy of existing measures, are working, what additional corrective measures may be needed, and whether newer remediation technologies that were not available in the 1990s might be suitable to more quickly and effectively remove groundwater contaminants.remediate groundwater. Based on assessment results, we completed a focused feasibility study that has identified alternative approaches that may more effectively remove contaminants. We continue to review alternative remedial approaches with the FDEP and have started additional field work to support the design of an improved groundwater recovery network with the objective of targeting areas of higher contaminant concentration and avoiding areas of high groundwater iron which has proven to be a significant operability issue for the project. In the first quarter of 2015, we entered into a new Consent Order with the FDEP requiring us to continue our remediation efforts at the Pace facility, along with the completion of a cost review every 5 years. In the second quarter of fiscal year 2020, we completed an updated cost review which resulted in a change in assumptions regarding future operating costs as discussed above. The costs we are incurring based on the fiscal year 2020 review are higher than our previous estimates.
Piedmont
At 31 March 2020, $14.02021, $11.4 of the environmental accrual was related to the Piedmont site.
On 30 June 2008, we sold our Elkton, Maryland, and Piedmont, South Carolina, production facilities and the related North American atmospheric emulsions and global pressure sensitive adhesives businesses. In connection with the sale, we recognized a liability for retained environmental obligations associated with remediation activities at the Piedmont site. This site is under active remediation for contamination caused by an insolvent prior owner.
We are required by the South Carolina Department of Health and Environmental Control ("SCDHEC") to address both contaminated soil and groundwater. Numerous areas of soil contamination have been addressed, and contaminated groundwater is being recovered and treated. The SCDHEC issued its final approval to the site-wide feasibility study on 13 June 2017 and the Record of Decision for the site on 27 June 2018. Field work has started to support the remedial design, and in the fourth quarter of fiscal year 2018, we signed a Consent Agreement Amendment memorializing our obligations to complete the cleanup of the site. We estimate that source area remediation and groundwater recovery and treatment will continue through 2029. Thereafter, we expect this site to go into a state of monitored natural attenuation through 2047. 
We recognized a before-tax expense of $24 in 2008 as a component of income from discontinued operations and recorded an environmental liability of $24 in continuing operations on the consolidated balance sheets. There have been no significant changes to the estimated exposure.

Pasadena
At 31 March 2020, $11.62021, $11.4 of the environmental accrual was related to the Pasadena site.
During the fourth quarter of 2012, management committed to permanently shutting down our polyurethane intermediates ("PUI") production facility in Pasadena, Texas. In shutting down and dismantling the facility, we have undertaken certain obligations related to soil and groundwater contaminants. We have been pumping and treating groundwater to control off-site contaminant migration in compliance with regulatory requirements and under the approval of the Texas Commission on Environmental Quality ("TCEQ"). We estimate that the pump and treat system will continue to operate until 2042.
We plan to perform additional work to address other environmental obligations at the site. This additional work includes remediating, as required, impacted soils, investigating groundwater west of the former PUI facility, performing post closure care for two closed RCRA surface impoundment units, and establishing engineering controls. In 2012, we estimated the total exposure at this site to be $13. There have been no significant changes to the estimated exposure.

Future Lease Obligations
As of 31 March 2021, operating leases that have not yet commenced are estimated to have lease payments totaling approximately $250.
14.
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13. SHARE-BASED COMPENSATION
We have various share-based compensation programs, which include deferred stock units, stock options, and restricted stock. During the six months ended 31 March 2020,2021, we granted market-based and time-based deferred stock units. Under all programs, the terms of the awards are fixed at the grant date. We issue shares from treasury stock upon the payout of deferred stock units, the exercise of stock options, and the issuance of restricted stock awards. At the annual shareholders meeting held on 28 January 2021, the shareholders approved a new Long-Term Incentive Plan ("LTIP"), which has an authorized pool of 1,500,000 shares available for future grant, plus additional shares underlying awards outstanding on the date the LTIP was adopted but that are not issued. As of 31 March 2020,2021, there were 4,321,6581,500,434 shares available for future grant under our Long-Term Incentive Plan ("LTIP"), which is shareholder approved..
Share-based compensation cost recognized on the consolidated income statements is summarized below:
  Three Months Ended Six Months Ended
  31 March 31 March
  2020 2019 2020 2019
Before-tax share-based compensation cost 
$13.5
 
$11.9
 
$28.9
 
$21.2
Income tax benefit (3.1) (2.8) (6.8) (5.0)
After-tax share-based compensation cost 
$10.4
 
$9.1
 
$22.1
 
$16.2

Three Months EndedSix Months Ended
31 March31 March
2021202020212020
Before-tax share-based compensation cost$12.9 $13.5 $22.4 $28.9 
Income tax benefit(3.1)(3.1)(5.4)(6.8)
After-tax share-based compensation cost$9.8 $10.4 $17.0 $22.1 
Before-tax share-based compensation cost is primarily included in "Selling and administrative" on our consolidated income statements. The amount of share-based compensation cost capitalized in the first six months of fiscal years 20202021 and 20192020 was not material.
Deferred Stock Units
During the six months ended 31 March 2020,2021, we granted 80,21577,251 market-based deferred stock units. The market-based deferred stock units are earned at the end ofover the performance period beginning 1 October 20192020 and ending 30 September 2022,2023, conditioned on the level of the Company’sour total shareholder return in relation to a defined peer group over the three-year performance period.
The market-based deferred stock units had an estimated grant-date fair value of $275.19$235.48 per unit, which was estimated using a Monte Carlo simulation model. The model utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the grant and calculates the fair value of the awards. We generally expense the grant-date fair value of these awards on a straight-line basis over the vesting period. The calculation of the fair value of market-based deferred stock units used the following assumptions:
Expected volatility17.829.9 %
Risk-free interest rate1.60.2 %
Expected dividend yield2.42.1 %

In addition, during the six months ended 31 March 2020,2021, we granted 118,194106,564 time-based deferred stock units at a weighted average grant-date fair value of $229.15.


$282.32.
15.
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14. ACCUMULATED OTHER COMPREHENSIVE LOSS
The tables below summarize changes in accumulated other comprehensive loss ("AOCL"), net of tax, attributable to Air Products for the three and six months ended 31 March 2020:2021:
Derivatives
qualifying as
hedges		Foreign
currency
translation
adjustments		Pension and
postretirement
benefits		Total
Balance at 31 December 2020($46.7)($742.1)($924.5)($1,713.3)
Other comprehensive loss before reclassifications(5.2)(144.6)0 (149.8)
Amounts reclassified from AOCL36.0 0 18.3 54.3 
Net current period other comprehensive income (loss)30.8 (144.6)18.3 (95.5)
Amount attributable to noncontrolling interests18.8 (3.2)0 15.6 
Balance at 31 March 2021($34.7)($883.5)($906.2)($1,824.4)
 
Derivatives
qualifying as
hedges

Foreign
currency
translation
adjustments

Pension and
postretirement
benefits

Total
Balance at 31 December 2019
($48.5)
($1,102.5)
($937.6)
($2,088.6)
Other comprehensive loss before reclassifications(27.4)(398.2)—
(425.6)
Amounts reclassified from AOCL(17.0)—
21.2
4.2
Net current period other comprehensive income (loss)(44.4)(398.2)21.2
(421.4)
Amount attributable to noncontrolling interests(25.6)(6.2)—
(31.8)
Balance at 31 March 2020
($67.3)
($1,494.5)
($916.4)
($2,478.2)
     
 
Derivatives
qualifying
as hedges

Foreign
currency
translation
adjustments

Pension and
postretirement
benefits

Total
Balance at 30 September 2019
($61.4)
($1,356.9)
($957.3)
($2,375.6)
Other comprehensive loss before reclassifications(5.3)(134.2)—
(139.5)
Amounts reclassified from AOCL(20.6)—
40.9
20.3
Net current period other comprehensive income (loss)(25.9)(134.2)40.9
(119.2)
Amount attributable to noncontrolling interests(20.0)3.4
—
(16.6)
Balance at 31 March 2020
($67.3)
($1,494.5)
($916.4)
($2,478.2)

Derivatives
qualifying
as hedges		Foreign
currency
translation
adjustments		Pension and
postretirement
benefits		Total
Balance at 30 September 2020($54.5)($1,142.8)($942.8)($2,140.1)
Other comprehensive income before reclassifications8.6 271.1 0 279.7 
Amounts reclassified from AOCL34.7 0 36.6 71.3 
Net current period other comprehensive income43.3 271.1 36.6 351.0 
Amount attributable to noncontrolling interests23.5 11.8 0 35.3 
Balance at 31 March 2021($34.7)($883.5)($906.2)($1,824.4)
The table below summarizes the reclassifications out of AOCL and the affected line item on the consolidated income statements:
Three Months EndedSix Months Ended
31 March31 March
2021202020212020
(Gain) Loss on Cash Flow Hedges, net of tax
Sales$0.1 ($0.2)$0.2 ($0.1)
Cost of sales(1.4)(0.5)(1.3)(0.6)
Interest expense0.9 0.7 1.8 1.4 
Other non-operating income (expense), net36.4 (17.0)34.0 (21.3)
Total (Gain) Loss on Cash Flow Hedges, net of tax$36.0 ($17.0)$34.7 ($20.6)
Pension and Postretirement Benefits, net of tax(A)
$18.3 $21.2 $36.6 $40.9 
 Three Months EndedSix Months Ended
 31 March31 March
 2020201920202019
(Gain) Loss on Cash Flow Hedges, net of tax    
Sales/Cost of sales
($0.7)
($0.1)
($0.7)
$0.4
Other income/expense, net—
33.2
—
25.8
Interest expense0.7
3.8
1.4
7.6
Other non-operating income (expense), net(A)
(17.0)—
(21.3)—
Total (Gain) Loss on Cash Flow Hedges, net of tax
($17.0)
$36.9

($20.6)
$33.8
     
Pension and Postretirement Benefits, net of tax(B)

$21.2

$18.7

$40.9

$33.9
(A)The components of net periodic benefit cost reclassified out of AOCL include items such as prior service cost amortization, actuarial loss amortization, and settlements and are included in “Other non-operating income (expense), net” on the consolidated income statements. Refer to Note 11, Retirement Benefits, for additional information.

(A)
30
The fiscal year 2020 impact includes amortization of the excluded component and the effective portion of the related hedges.
(B)
The components of net periodic benefit cost reclassified out of AOCL include items such as prior service cost amortization, actuarial loss amortization, and settlements and are included in “Other non-operating income (expense), net” on the consolidated income statements. Refer to Note 12, Retirement Benefits, for additional information.


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16.15. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per share ("EPS"):
Three Months EndedSix Months Ended
31 March31 March
2021202020212020
Numerator
Net income from continuing operations$473.1 $492.1 $944.8 $967.7 
Net income (loss) from discontinued operations0 (14.3)10.3 (14.3)
Net Income Attributable to Air Products$473.1 $477.8 $955.1 $953.4 
Denominator (in millions)
Weighted average common shares — Basic221.6 221.2 221.6 221.0 
Effect of dilutive securities
Employee stock option and other award plans0.9 1.1 0.9 1.2 
Weighted average common shares — Diluted222.5 222.3 222.5 222.2 
Per Share Data*
Basic EPS from continuing operations$2.13 $2.22 $4.26 $4.38 
Basic EPS from discontinued operations0 (0.06)0.05 (0.06)
Basic EPS Attributable to Air Products$2.13 $2.16 $4.31 $4.31 
Diluted EPS from continuing operations$2.13 $2.21 $4.25 $4.36 
Diluted EPS from discontinued operations0 (0.06)0.05 (0.06)
Diluted EPS Attributable to Air Products$2.13 $2.15 $4.29 $4.29 
 Three Months Ended Six Months Ended
 31 March 31 March
 2020 2019 2020 2019
Numerator       
Net income from continuing operations
$492.1
 
$421.3
 
$967.7
 
$768.8
Net loss from discontinued operations(14.3) —
 (14.3) —
Net Income Attributable to Air Products
$477.8
 
$421.3
 
$953.4
 
$768.8
Denominator (in millions)
       
Weighted average common shares — Basic221.2
 220.2
 221.0
 220.0
Effect of dilutive securities       
Employee stock option and other award plans1.1
 1.2
 1.2
 1.2
Weighted average common shares — Diluted222.3
 221.4
 222.2
 221.2
Basic EPS Attributable to Air Products(A)
       
Basic EPS from continuing operations
$2.22
 
$1.91
 
$4.38
 
$3.49
Basic EPS from discontinued operations(0.06) —
 (0.06) —
Basic EPS Attributable to Air Products
$2.16
 
$1.91
 
$4.31
 
$3.49
Diluted EPS Attributable to Air Products(A)
       
Diluted EPS from continuing operations
$2.21
 
$1.90
 
$4.36
 
$3.48
Diluted EPS from discontinued operations(0.06) —
 (0.06) —
Diluted EPS Attributable to Air Products
$2.15
 
$1.90
 
$4.29
 
$3.48
*EPS is calculated independently for each component and may not sum to total EPS due to rounding.

(A)
Earnings per share ("EPS") is calculated independently for each component and may not sum to total EPS due to rounding.
For the three and six months ended 31 March 20202021 and 2019,2020, there were 0 antidilutive outstanding share-based awards.

17.16. INCOME TAXES
India Finance Act 2020
On 27 March 2020, the Indian government passed Finance Act 2020 (the "India Finance Act"), which amended rules regarding the taxation of dividends declared and distributed by Indian companies. Under the India Finance Act, future dividends declared or distributed by an Indian company are no longer subject to dividend distribution tax. Instead, theany non-resident recipient will beis subject to a withholding tax.
AsOur consolidated income statements for the three and six months ended 31 March 2020 included a net benefit of $13.5 as a result of the India Finance Act, we recorded aAct. The net benefit of $13.5 in March 2020 related to our equity affiliate investment in INOX Air Products Private Limited ("INOX"). This included a benefit of $33.8 for our share of accumulated dividend distribution taxes released with respect to INOX. This benefit is reflected within "Equity affiliates' income" on our consolidated income statements and has been excluded from the results ofINOX Air Products Private Limited ("INOX"), an equity affiliate investment in our Industrial Gases – Asia segment. This benefit was reflected within "Equity affiliates' income" and was not recorded in segment results. In addition, our income tax provision reflectsreflected an expense of $20.3 for estimated withholding taxes that we may incur on future dividends.dividends related to INOX.
U.S.Effective Tax Cuts and Jobs ActRate
Our incomeeffective tax provisionrate was 20.4% and 19.8% for the three and six months ended 31 March 2019 reflected a discrete net income tax expense of $40.6 related to impacts from the U.S. Tax Cuts and Jobs Act (the “Tax Act”). The net expense included the reversal of a non-recurring $56.2 benefit recorded in fiscal year 2018 related to the U.S. taxation of deemed foreign dividends. This was partially offset by a benefit of $15.6 to finalize our estimates of the impacts of the Tax Act and reduce the total expected costs of the deemed repatriation tax.
Effective Tax Rate
2021, respectively. The effective tax rate was 22.7% and 21.3% for the three and six months ended 31 March 2020, respectively. The effective tax rate was 19.9% and 23.3% for the three and six months ended 31 March 2019, respectively.

Cash Paid for Taxes (Net of Cash Refunds)
Income tax payments, net of refunds, were $253.5$223.8 and $165.6$253.5 for the six months ended 31 March 2021 and 2020, and 2019, respectively.

Fiscal year 2021 reflects an income tax refund of $6.7 that is related to cash provided by discontinued operations.
18.
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17. SUPPLEMENTAL INFORMATION
Facility Closure
During the second quarter of fiscal year 2021, we recorded a charge of $23.2 primarily for a noncash write-down of assets associated with a contract termination in the Industrial Gases – Americas segment. This charge is reflected as "Facility closure" on our consolidated income statements for the three and six months ended 31 March 2021 and was not recorded in segment results.
Company Headquarters Relocation Income (Expense)
DuringIn the second quarter of fiscal year 2020, we sold property at our current corporate headquarters located in Trexlertown, Pennsylvania, for net proceeds of $44.1. The sale was completed in anticipation of relocating our U.S. headquarters and resulted in a gain of $33.8. This gain is reflected on our consolidated income statements as "Company headquarters relocation income (expense)" for the three and six months ended 31 March 2020 and has been excluded from2020. The gain was not recorded in the results of the Corporate and other segment.
Facility Closure
In December 2018, one of our customers was subject to a government enforced shutdown due to environmental reasons. As a result, we recognized a charge of $29.0 during the first quarter of fiscal year 2019 primarily related to the write-off of onsite assets. This charge is reflected as “Facility closure” on our consolidated income statements for the six months ended 31 March 2019 and has not been recorded in segment results.
Related Party Transactions
We have related party sales to some of our equity affiliates and joint venture partners as well as other income primarily from fees charged for use of Air Products' patents and technology. Sales to and other income from related parties totaled approximately $40 and $90 for the three and six months ended 31 March 2021, respectively, and $90 and $180 for the three and six months ended 31 March 2020, respectively, and $80 and $165 for the three and six months ended 31 March 2019, respectively. Sales agreements with related parties include terms that are consistent with those that we believe would have been negotiated at an arm’s length with an independent party. OurAs of 31 March 2021 and 30 September 2020, our consolidated balance sheets includeincluded related party trade receivables of approximately $205$110 and $130 as of 31 March 2020 and 30 September 2019,$95, respectively.
Air Products Lu An (Changzhi) Co., Ltd., our 60% owned JV with Lu'An Clean Energy Company ("Lu'An"),
acquiredWe also have related party debt primarily resulting from the 2018 acquisition of gasification and syngas clean-up assets from our joint venture partner, Lu'An in 2018. The table below summarizesClean Energy Company, which partially funded the acquisition with a loan to the joint venture. Total related party liabilities resulting from this acquisitiondebt, including the current portion, was $352.5 and $338.5 as reflectedof 31 March 2021 and 30 September 2020, respectively.
Changes in Estimates
Changes in estimates on our consolidated balance sheets:projects accounted for under the cost incurred input method are recognized as a cumulative adjustment for the inception-to-date effect of such change. Changes in estimates unfavorably impacted operating income in the Industrial Gases – Global segment by approximately$7 in the second quarter of fiscal year 2021. Our changes in estimates would not have significantly impacted amounts recorded in prior years.
  31 March 30 September
  2020 2019
Payables and accrued liabilities 8.9
 8.9
Current portion of long-term debt 38.1
 37.8
Long-term debt – related party 323.1
 320.1


19.18. BUSINESS SEGMENT INFORMATION
Our reporting segments reflect the manner in which our chief operating decision maker reviews results and allocates resources. Except in the Industrial Gases – EMEA and Corporate and other segments, each reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments. Our Industrial Gases – EMEA and Corporate and other segments each include the aggregation of two operating segments that meet the aggregation criteria under GAAP.
Our reporting segments are:
•Industrial Gases – Americas;
•Industrial Gases – EMEA (Europe, Middle East, and Africa);
•Industrial Gases – Asia;
•Industrial Gases – Global; and
•Corporate and other

 
Industrial
Gases –
Americas
Industrial
Gases –
EMEA
Industrial
Gases –
Asia
Industrial
Gases –
Global
Corporate
and other
Total 
Three Months Ended 31 March 2020 
Sales
$932.4

$492.7

$658.1

$79.3

$53.8

$2,216.3
(A) 
Operating income (loss)268.0
124.6
209.1
(19.8)(38.5)543.4
(B) 
Depreciation and amortization135.5
47.6
104.1
2.4
5.1
294.7
 
Equity affiliates' income21.6
13.5
13.8
5.5
—
54.4
(B) 
Three Months Ended 31 March 2019 
Sales
$991.7

$494.4

$625.4

$53.8

$22.4

$2,187.7
(A) 
Operating income (loss)255.6
122.5
199.7
(12.2)(49.1)516.5
(B) 
Depreciation and amortization124.9
46.3
84.9
2.0
4.0
262.1
 
Equity affiliates' income17.8
13.3
13.8
1.3
—
46.2
(B) 

        
 
Industrial
Gases –
Americas
Industrial
Gases –
EMEA
Industrial
Gases –
Asia
Industrial
Gases –
Global
Corporate
and other
Total 
Six Months Ended 31 March 2020 
Sales
$1,868.6

$991.4

$1,350.9

$171.9

$88.2

$4,471.0
(A) 
Operating income (loss)525.2
245.1
437.6
(16.2)(87.3)1,104.4
(B) 
Depreciation and amortization267.3
96.0
205.7
4.8
10.1
583.9
 
Equity affiliates' income42.2
32.8
30.7
6.9
—
112.6
(B) 
Six Months Ended 31 March 2019 
Sales
$1,980.9

$1,018.6

$1,252.2

$122.0

$38.0

$4,411.7
(A) 
Operating income (loss)474.8
228.1
401.5
(8.3)(95.6)1,000.5
(B) 
Depreciation and amortization250.5
92.6
164.8
4.1
8.1
520.1
 
Equity affiliates' income40.4
27.0
30.0
1.7
—
99.1
(B) 
Total Assets 
31 March 2020
$5,933.7

$3,378.8

$6,489.7

$438.1

$3,260.9

$19,501.2
 
30 September 20195,832.2
3,250.8
6,240.6
325.7
3,293.5
18,942.8
 
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Summary by Business Segments
Industrial
Gases –
Americas		Industrial
Gases –
EMEA		Industrial
Gases –
Asia		Industrial
Gases –
Global		Corporate
and other		Total
Three Months Ended 31 March 2021
Sales$1,056.1 $584.6 $697.5 $97.9 $65.9 $2,502.0 (A)
Operating income (loss)263.4 139.6 198.5 (26.1)(40.5)534.9 (B)
Depreciation and amortization153.3 57.6 109.7 2.6 6.1 329.3 
Equity affiliates' income32.3 20.3 15.5 1.7 0 69.8 (B)
Three Months Ended 31 March 2020
Sales$932.4 $492.7 $658.1 $79.3 $53.8 $2,216.3 (A)
Operating income (loss)268.0 124.6 209.1 (19.8)(38.5)543.4 (B)
Depreciation and amortization135.5 47.6 104.1 2.4 5.1 294.7 
Equity affiliates' income21.6 13.5 13.8 5.5 0 54.4 (B)
(A)Sales relate to external customers only. All intersegment sales are eliminated in consolidation. Intersegment sales are generally transacted at market pricing. We generally do not have intersegment sales from our regional industrial gases businesses. Equipment manufactured for our regional industrial gases segments are generally transferred at cost and are not reflected as an intersegment sale.
(B)Refer to the Reconciliations to Consolidated Results section below.
Industrial
Gases –
Americas		Industrial
Gases –
EMEA		Industrial
Gases –
Asia		Industrial
Gases –
Global		Corporate
and other		Total
Six Months Ended 31 March 2021
Sales$1,989.1 $1,147.6 $1,415.0 $202.4 $123.1 $4,877.2 (A)
Operating income (loss)489.2 281.1 413.3 (30.7)(78.9)1,074.0 (B)
Depreciation and amortization305.1 113.0 217.6 5.2 12.1 653.0 
Equity affiliates' income54.6 45.3 35.4 3.8 0 139.1 (B)
Six Months Ended 31 March 2020
Sales$1,868.6 $991.4 $1,350.9 $171.9 $88.2 $4,471.0 (A)
Operating income (loss)525.2 245.1 437.6 (16.2)(87.3)1,104.4 (B)
Depreciation and amortization267.3 96.0 205.7 4.8 10.1 583.9 
Equity affiliates' income42.2 32.8 30.7 6.9 0 112.6 (B)
Total Assets
31 March 2021$6,916.3 $4,176.4 $7,279.9 $451.8 $7,334.5 $26,158.9 
30 September 20206,610.1 3,917.0 6,842.9 397.8 7,400.7 25,168.5 
(A)Sales relate to external customers only. All intersegment sales are eliminated in consolidation. Intersegment sales are generally transacted at market pricing. We generally do not have intersegment sales from our regional industrial gases businesses. Equipment manufactured for our regional industrial gases segments are generally transferred at cost and are not reflected as an intersegment sale.
(B)Refer to the Reconciliations to Consolidated Results section below.
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The sales information noted above relates to external customers only. All intersegment sales are eliminated in consolidation. Intersegment sales are generally transacted at market pricing. We generally do not have intersegment sales from our regional industrial gases businesses. Equipment manufactured for our regional industrial gases segments are generally transferred at cost and are not reflect as an intersegment sale.
(B)
Refer to the Reconciliations to Consolidated Results section below.
Reconciliations to Consolidated Results
The table below reconciles total operating income disclosed in the table above to consolidated operating income as reflected on our consolidated income statements:
 Three Months EndedSix Months Ended
 31 March31 March
Operating Income2020201920202019
Total
$543.4

$516.5

$1,104.4

$1,000.5
Facility closure—
—
—
(29.0)
Company headquarters relocation income (expense)33.8
—
33.8
—
Consolidated Operating Income
$577.2

$516.5

$1,138.2

$971.5

Three Months EndedSix Months Ended
31 March31 March
Operating Income2021202020212020
Total$534.9 $543.4 $1,074.0 $1,104.4 
Facility closure(23.2)0 (23.2)0 
Gain on exchange with joint venture partner36.8 0 36.8 0 
Company headquarters relocation income (expense)0 33.8 0 33.8 
Consolidated Operating Income$548.5 $577.2 $1,087.6 $1,138.2 

The table below reconciles total equity affiliates' income disclosed in the table above to consolidated equity affiliates' income as reflected on our consolidated income statements:
Three Months EndedSix Months Ended
31 March31 March
Equity Affiliates' Income2021202020212020
Total$69.8 $54.4 $139.1 $112.6 
India Finance Act 20200 33.8 0 33.8 
Consolidated Equity Affiliates' Income$69.8 $88.2 $139.1 $146.4 
 Three Months EndedSix Months Ended
 31 March31 March
Equity Affiliates' Income2020201920202019
Total
$54.4

$46.2

$112.6

$99.1
India Finance Act 202033.8
—
33.8
—
Consolidated Equity Affiliates' Income
$88.2

$46.2

$146.4

$99.1


34

Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
3836
3937
4543
4745
5250
5956
6158
6158
6259
6259
6259
6259
6259

The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the second quarter and first six months of fiscal years 2020 and 2019. The disclosures provided in this quarterly report are complementary to those made in our 2019 Form 10-K.
The following discussion should be read in conjunction with the interim consolidated financial statements and the accompanying notes contained in this quarterly report. Unless otherwise stated, financial information is presented in millions of 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. Comparisons of our results of operations and liquidity and capital resources are for the second quarter and first six months of fiscal years 2021 and 2020. The disclosures provided in this quarterly report are complementary to those made in our 2020 Form 10-K.
The financial measures included in the discussion that followsdiscussed below are presented in accordance with U.S. generally accepted accounting principles ("GAAP"), except as noted. We present certain financial measures on an "adjusted" or "non-GAAP" basis because we believe such measures, when viewed together with financial results computed in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our historical financial performance. For each non-GAAP financial measure, including adjusted diluted earnings per share ("EPS"), adjusted EBITDA, adjusted EBITDA margin, and 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 these measures are presented under “Reconciliations of Non-GAAP Financial Measures” beginning on pages 52-58.page 50.

COVID-19 Pandemic

The novel strain of coronavirus ("COVID-19"), which was declared a global pandemic by the World Health Organization in March 2020, continues to impact our business operations and results. The health and safety policies we implemented at the beginning of the pandemic have allowed us to safely maintain plant operations and reliably supply critical products and services to our customers. As this significant health crisis continues, we remain focused on business continuity while prioritizing the health and well-being of our people.
As further discussed below, COVID-19 negatively impacted our results of operations in the first half of fiscal year 2021. Although some countries in which we operate, such as the United States, have made COVID-19 vaccines available to most of the population, other countries in which we operate continue to face challenges with increasing outbreaks, reinstated lockdowns, and travel restrictions. Our on-site business continues to remain stable, and we are encouraged by signs of improvement in our merchant business. However, there are many unknowns regarding the pandemic, including the ongoing spread and severity of the virus and the pace of vaccine rollouts globally. Given the dynamic nature of these circumstances, uncertainty remains related to how the pandemic may affect our business, results of operations, and overall financial performance.
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SECOND QUARTER 20202021 VS. SECOND QUARTER 2019

2020
SECOND QUARTER 20202021 IN SUMMARY
The results below are compared to the second quarter of fiscal year 2019.
•Sales of $2,216.3$2,502.0 increased 1%13%, or $28.6, as$285.7,due to higher volumes and positive pricing were mostly offset by lower energy and natural gas cost pass-through to customers, favorable currency, and unfavorable currency. We estimate that salespricing actions. Volumes were approximately 1% lower thanflat versus the prior year due to impacts from the COVID-19 pandemic, primarily driven by lower China merchant volumes in the Industrial Gases – Asia segment.year.
•Operating income of $577.2 increased 12%$548.5 decreased 5%, or $60.7,$28.7, and operating margin of 26.0% increased 24021.9% decreased 410 basis points ("bp").
•Net income of $490.4 increased 13%$477.1 decreased 3%, or $56.9,$13.3, and net income margin of 22.1% increased 23019.1% decreased 300 bp.
•Adjusted EBITDA of $892.5$934.0 increased 8%5%, or $67.7,$41.5, and adjusted EBITDA margin of 40.3% increased 26037.3% decreased 300 bp.
•Diluted EPS of $2.21 increased 16%$2.13 decreased 4%, or $0.31$0.08 per share. Adjustedshare, and adjusted diluted EPS of $2.04$2.08 increased 6%2%, or $0.12$0.04 per share. A summary table of changes in diluted EPS is presented below.
•We increased ourthe quarterly dividend by over 15% from $1.16on our common stock to $1.34$1.50 per share, representing a 12% increase from the largestprevious dividend increase in the Company's history.of $1.34 per share. This is the 38th39th consecutive year that we have increased our quarterly dividend payment.

Changes in Diluted EPS Attributable to Air Products
The per share impacts presented in the tabletables below were calculated independently and maydo not sum to the total change in diluted EPS due to rounding.
Three Months Ended
31 MarchIncrease
20212020(Decrease)
Total Diluted EPS$2.13 $2.15 ($0.02)
Less: Diluted EPS from loss from discontinued operations— (0.06)0.06 
Diluted EPS from continuing operations(A)
$2.13 $2.21 ($0.08)
Operating Impacts
Underlying business
Volume(B)
($0.19)
Price, net of variable costs0.09 
Other costs(0.03)
Currency0.10 
Facility closure(0.08)
Company headquarters relocation income(0.12)
Gain on exchange with joint venture partner0.12 
Total Operating Impacts($0.11)
Other Impacts
Equity affiliates' income$0.05 
Interest expense(0.06)
Other non-operating income (expense), net0.03 
Change in effective tax rate, excluding discrete item below0.01 
India Finance Act 2020(0.06)
Noncontrolling interests(B)
0.04 
Total Other Impacts$0.01 
Total Change in Diluted EPS From Continuing Operations($0.08)
(A)Diluted EPS from continuing operations for the second quarter of fiscal year 2021 includes an estimated negative impact of approximately $0.10-$0.15 from COVID-19, which affected our sales and costs.
(B)The negative volume impact on diluted EPS was primarily due to reduced contributions from a 60%-owned joint venture that we consolidate within our Industrial Gases – Asia segment. Refer to the sales discussion below for additional detail. This impact is partially offset by the positive impact of lower net income being attributed to our joint venture partner within "Noncontrolling interests."
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Table of Contents
 Three Months Ended 
 31 MarchIncrease
 20202019(Decrease)
Diluted EPS attributable to Air Products
$2.15

$1.90

$0.25
Diluted EPS from discontinued operations(0.06)—
(0.06)
Diluted EPS From Continuing Operations
$2.21

$1.90

$0.31
Operating Impacts   
Underlying business   
Volume(A)
  
$0.13
Price, net of variable costs  0.19
Other costs  (0.17)
Currency  (0.05)
Company headquarters relocation income (expense)  0.12
Total Operating Impacts  
$0.22
Other Impacts   
Equity affiliates' income  
$0.03
Interest expense  0.06
Other non-operating income (expense), net  (0.02)
Change in effective tax rate, excluding discrete item below  (0.02)
India Finance Act 2020  0.06
Weighted average diluted shares  (0.01)
Total Other Impacts  
$0.10
Total Change in Diluted EPS From Continuing Operations  
$0.31
(A)
Includes an estimated negative impact of $0.06-$0.08 from COVID-19, primarily in our Asia merchant business.

Three Months Ended
31 MarchIncrease
20212020(Decrease)
Diluted EPS From Continuing Operations$2.13 $2.21 ($0.08)
Facility closure0.08 — 0.08 
Gain on exchange with joint venture partner(0.12)— (0.12)
Company headquarters relocation income— (0.12)0.12 
India Finance Act 2020— (0.06)0.06 
Adjusted Diluted EPS From Continuing Operations$2.08 $2.04 $0.04 

 Three Months Ended 
 31 MarchIncrease
 20202019(Decrease)
Diluted EPS From Continuing Operations
$2.21

$1.90

$0.31
Company headquarters relocation (income) expense(0.12)—
(0.12)
India Finance Act 2020(0.06)—
(0.06)
Pension settlement loss—
0.02
(0.02)
Adjusted Diluted EPS From Continuing Operations
$2.04

$1.92

$0.12

SECOND QUARTER 20202021 RESULTS OF OPERATIONS
Discussion of Consolidated Results
  Three Months Ended    
  31 March    
  2020 2019 $ Change Change
GAAP Measures        
Sales 
$2,216.3
 
$2,187.7
 
$28.6
 1%
Operating income 577.2
 516.5
 60.7
 12%
Operating margin 26.0% 23.6% 

 240 bp
Equity affiliates’ income 88.2
 46.2
 42.0
 91%
Net income 490.4
 433.5
 56.9
 13%
Net income margin 22.1% 19.8% 

 230 bp
Non-GAAP Measures        
Adjusted EBITDA 
$892.5
 
$824.8
 
$67.7
 8%
Adjusted EBITDA margin 40.3% 37.7%   260 bp
As further discussed below, the novel coronavirus (“COVID-19”) global pandemic did not have a significant impact on our consolidated results of operations in the second quarter of fiscal year 2020. Our operations are among businesses that generally have been considered essential by local governments and public health authorities. We continue to safely maintain plant operations and focus on business continuity. Our second quarter sales and profit grew versus the prior year despite the disruption caused by COVID-19. Overall, we estimate that COVID-19 negatively impacted our volumes by approximately 1%, primarily in the Asia merchant business, for which volumes recovered to normal levels in late March 2020. Our merchant businesses in the Americas and EMEA region were slightly impacted as volume impacts did not begin until the end of March 2020. We expect declines in merchant volume in the Industrial Gases – Americas and Industrial Gases – EMEA segments to continue and be more significant into the third quarter and potentially longer depending on the duration of the COVID-19 pandemic and measures implemented by governments, public health authorities and businesses to mitigate the spread of COVID-19.
Three Months Ended
31 March
20212020$ ChangeChange
GAAP Measures
Sales$2,502.0 $2,216.3 $285.7 13 %
Operating income548.5 577.2 (28.7)(5 %)
Operating margin21.9 %26.0 %(410) bp
Equity affiliates’ income69.8 88.2 (18.4)(21 %)
Net income477.1 490.4 (13.3)(3 %)
Net income margin19.1 %22.1 %(300) bp
Non-GAAP Measures
Adjusted EBITDA$934.0 $892.5 $41.5 5 %
Adjusted EBITDA margin37.3 %40.3 %(300) bp
We will continue to evaluate the nature and extent of future impacts of COVID-19 on our business, particularly in our Industrial Gases – Americas and Industrial Gases – EMEA segments. Given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic on our ongoing business, results of operations, and overall financial performance cannot be reasonably estimated at this time.
Further, the timing of financial closing on our Jazan gas and power project has experienced some delay, which will also delay earnings from the project.

Sales
Sales % Change from Prior Year
Volume6— %
Price2%
Energy and natural gas cost pass-through(57 )%
Currency(24 )%
Total Consolidated Sales Change113%

Sales of $2,216.3$2,502.0 increased 1%13%, or $28.6, as$285.7, due to higher volumes of 6% and favorable pricing of 2% were mostly offset by lower energy and natural gas cost pass-through to customers of 5%7%, favorable currency impacts of 4%, and an unfavorable impact from currencypositive pricing of 2%. Both volumeThe higher energy and price were higher across the regional segments. Positive volumes from our base business, new plants, prior year acquisitions, and a short-term contract in Asia were partially offset by the estimated 1% negative impact resulting from COVID-19 on our merchant business. Our existing onsite business remained stable in the second quarter.The pricing improvementnatural gas cost pass-through to customers was primarily attributable to our merchant business. UnfavorableIndustrial Gases – Americas segment, which experienced significantly higher energy prices in the U.S. Gulf Coast largely driven by Winter Storm Uri, a severe winter weather storm. Favorable currency impacts werewas driven by the appreciation of the Chinese Renminbi, Euro, British Pound Sterling, and South Korean Won.Won against the U.S. Dollar. Continued focus on pricing actions in our merchant businesses resulted in price improvement in each of the three regional segments. Volumes were flat as new plants, acquisitions, and increased sale-of-equipment activities were offset by reduced contributions from the Lu'An gasification project, as discussed below, lower merchant demand due to COVID-19, and the impacts of the winter storm. In addition, we estimate that COVID-19 negatively impacted overall sales in the second quarter of fiscal year 2021 by approximately 3%.
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As of 31 March 2021, Lu’An Clean Energy Company (“Lu’An”), a long-term onsite customer in Asia with which we have a consolidated joint venture, did not restart its facility following the successful completion of major maintenance work in September 2020. In the first quarter of fiscal year 2021, we agreed with Lu'An to a short-term reduction in charges. This agreement reduced the project’s sales contribution in our Industrial Gases – Asia segment in the first half of fiscal year 2021. During the second quarter of fiscal year 2021, Lu'An asked us to restart the facility, and we are in the process of commissioning the plant. We expect the facility to resume operations during this fiscal year.
Cost of Sales and Gross Margin
CostTotal cost of sales of $1,460.1 decreased 1%$1,768.7, including the facility closure discussed below, increased 21%, or $14.6. The decrease from the prior year was driven by lower$308.6, due to higher energy and natural gas cost pass-through to customers of $108 and positive$163, unfavorable currency impacts of $31, partially offset by higher costs attributable to sales volumes$63, unfavorable volume mix of $97$38, the loss from the facility closure of $23, and higher othernet operating costs of $27.$22. The higher energy and natural gas cost-pass through to customers was primarily driven by significantly higher energy prices during the winter storm. Gross margin of 29.3% decreased 480 bp from 34.1% increased 150 bp,in the prior year, primarily due to positive pricing and lowerthe higher energy and natural gas cost pass-through to customers, which contributed to sales but not gross profit, unfavorable volume mix, and the facility closure, partially offset by unfavorable net operating costs.the impact from 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 Industrial Gases – Americas segment. This charge is reflected as "Facility closure" on our consolidated income statements for the three months ended 31 March 2021 and was not recorded in segment results.
Selling and Administrative
Selling and administrative expense of $201.7$210.3 increased 6%4%, or $11.7, from investing in business development resources$8.6, primarily due to support our growth strategy.the impact of currency fluctuations. Selling and administrative expense as a percentage of sales increaseddecreased to 8.4% from 8.7% to 9.1%.
Research and Development
Research and development expense of $19.2$21.1 increased 14%10%, or $2.3.$1.9, primarily due to higher product development costs. Research and development expense as a percentage of sales increaseddecreased to 0.8% from 0.8% to 0.9%.
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 in our Industrial Gases – EMEA segment. 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 three months ended 31 March 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 (Expense)
DuringIn the second quarter of fiscal year 2020, we sold property at our current corporate headquarters located in Trexlertown, Pennsylvania, for net proceeds of $44.1. The sale was completed in anticipation of relocating our U.S. headquartersheadquarters. We received net proceeds of $44.1 and resulted inrecorded a gain of $33.8 ($25.6 after-tax, or $0.12 per share). This gain, which is reflected on our consolidated income statements as "Company headquarters relocation income (expense)" for the three months ended 31 March 2020 and has been excluded from the2020. The gain was not recorded in results of the Corporate and other segment.
Other Income (Expense), Net
Other income (expense), net of $8.1 decreased 22%$9.8 increased 21%, or $2.3,$1.7, primarily due to foreign exchange impacts.
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Operating Income and Operating Margin
Operating income of $577.2 increased 12%$548.5 decreased 5%, or $60.7, due to$28.7, as unfavorable volume mix of $52, prior year income associated with the company headquarters relocation of $34, a facility closure of $23, and higher net operating costs of $9 were partially offset by a gain on an exchange with a joint venture partner of $37, favorable currency of $27, and positive pricing, net of power and fuel costs, of $54, favorable volumes of $35, and income associated with the company headquarters relocation of $34, partially offset by higher net operating costs of $48 and unfavorable currency impacts of $14. Net operating costs were higher primarily due to higher planned maintenance costs, particularly in North America, and our continued investment in resources to support our growth strategy. We expect previously planned maintenance activities to be delayed in the second half of the year due to the COVID-19 pandemic.$25.
Operating margin of 21.9% decreased 410 bp from 26.0% increased 240 bp,in the prior year, primarily due to unfavorable volume mix, higher energy and natural gas cost pass-through to customers, which contributed to sales but not operating income, and the facility closure, partially offset by positive pricing,pricing. The positive impact from a gain on an exchange with a joint venture partner was offset by the impact of income associated with the company headquarters relocation and lower energy and natural gas cost pass-through to customers, partially offset by unfavorable net operating costs.

in the prior year.
Equity Affiliates' Income
Equity affiliates' income of $88.2 increased 91%$69.8 decreased 21%, or $42.0, primarily due to$18.4. The prior year included a current year benefit of $33.8 for the release of our share of accumulated dividend distribution taxes related to an Indian affiliate as a result of the enactment of a tax law in India. Refer to Note 17,16, Income Taxes, to the consolidated financial statements for additional information. The prior year benefit from this tax law was partially offset by higher income from affiliates in India, Italy, Mexico, and Saudi Arabia in fiscal year 2021.
Interest Expense
Three Months EndedThree Months Ended
31 March31 March
2020201920212020
Interest incurred
$23.2

$38.5
Interest incurred$42.6 $23.2 
Less: Capitalized interest3.9
3.1
Less: Capitalized interest6.5 3.9 
Interest expense
$19.3

$35.4
Interest expense$36.1 $19.3 

Interest incurred decreased 40%increased 84%, or $15.3. The prior year included $9.1 of interest expense related to foreign currency forward points and currency swap basis differences of our cash flow hedges of intercompany loans. As discussed in Note 2, New Accounting Guidance,$19.4, primarily driven by a higher debt balance due to the consolidated financial statements, we adopted new accounting guidance on hedging activities that changedissuance of U.S. Dollar- and Euro-denominated fixed-rate notes in the presentationthird quarter of these items from "Interest expense, net" to “Other non-operating income (expense), net” in fiscal year 2020. In addition to this presentation change, interest expense decreased due to lower interest expense associated with financing the Lu'An joint venture and a lower average debt balance. Capitalized interest increased 26%67%, or $0.8,$2.6, due to ana net increase in the carrying value of projects under construction.
Other Non-Operating Income (Expense), Net
Other non-operating income (expense), net, of $7.1 decreased 48%, or $6.6, primarily$16.8 increased $9.7. We recorded higher non-service pension income in 2021 due to the impact of the adoption of the guidance on hedging activities discussed abovelower interest costs and higher total assets, primarily for our U.S. pension plans, partially offset by lower interest income on cash and cash items partially offset by higher non-service pension income and a prior year pension settlement loss of $5.0 ($3.8 after-tax, or $0.02 per share) associated with the U.S. Supplementary Pension Plan.due to lower interest rates.
Discontinued Operations
During the second quarter of fiscal year 2020, we recorded a pre-tax loss from discontinued operations of $19.0 ($14.3 after-tax, or $0.06 per share) to increase our liability for retained environmental obligations associated with the sale of our former Amines business in September 2006. Refer to the Pace discussion within Note 13,12, Commitments and Contingencies, to the consolidated financial statements for additional information.
Net Income and Net Income Margin
Net income of $490.4 increased 13%$477.1 decreased 3%, or $56.9,$13.3, primarily due to unfavorable volume mix, a loss from a facility closure, and higher interest expense and net operating costs, partially offset by a gain on an exchange with a joint venture partner, favorable currency, positive pricing, net of power and fuel costs, and higher volumes, currentequity affiliates' income. In addition, the prior year included income associated with the company headquarters relocation and impactsa net benefit from the enactment of a tax law in India Finance Act 2020, partially offset by unfavorable costs, including the after-taxa loss from discontinued operations.
Net income margin of 19.1% decreased 300 bp from 22.1% increased 230 bp,in the prior year, primarily due to the factors noted above as well as lowerunfavorable volume mix and higher energy and natural gas cost pass-through to customers.customers driven by the winter storm.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA of $892.5$934.0 increased 8%5%, or $67.7,$41.5, primarily due to higher volumesfavorable pricing, currency impacts, and positive pricing,equity affiliates' income, partially offset by unfavorable operating costs.volume mix. Adjusted EBITDA margin of 37.3% decreased 300 bp from 40.3% increased 260 bp,in the prior year, primarily due to lowerhigher energy and natural gas cost pass-through to customers and positive pricing, partially offsetdriven by unfavorable operating costs.the winter storm.
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Effective Tax Rate
The effective tax rate equals the income tax provision divided by income from continuing operations before taxes. TheOur effective tax rate was 20.4% and 22.7% for the three months ended 31 March 2021 and 19.9% in the second quarter of fiscal years 2020, and 2019, respectively.
The currentprior year rate was impacted byhigher primarily due to the enactment of a tax law in India ("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. The current year rate was also impacted by lower excess tax benefits on share-based compensation compared to the second quarter of 2019.

The adjusted effective tax rate increased from 19.9% in the second quarter of fiscal year 2019 to 20.5% in the second quarter of fiscal year 2020. This increase was primarily driven by lower excess tax benefits on share-based compensation compared to the second quarter of 2019.
Refer to Note 17,16, Income Taxes, to the consolidated financial statements for additional information. The adjusted effective tax rate was 20.2% and 20.5% for the three months ended 31 March 2021 and 2020, respectively.
Discussion of Segment AnalysisResults
Industrial Gases – Americas
Three Months Ended
31 March
20212020$ Change% Change
Sales$1,056.1 $932.4 $123.7 13 %
Operating income263.4 268.0 (4.6)(2 %)
Operating margin24.9 %28.7 %(380) bp
Equity affiliates’ income32.3 21.6 10.7 50 %
Adjusted EBITDA449.0 425.1 23.9 6 %
Adjusted EBITDA margin42.5 %45.6 %(310) bp
  Three Months Ended    
  31 March    
  2020 2019 $ Change % Change
Sales 
$932.4
 
$991.7
 
($59.3) (6)%
Operating income 268.0
 255.6
 12.4
 5 %
Operating margin 28.7% 25.8%   290 bp
Equity affiliates’ income 21.6
 17.8
 3.8
 21 %
Adjusted EBITDA 425.1
 398.3
 26.8
 7 %
Adjusted EBITDA margin 45.6% 40.2%   540 bp

Sales % Change from Prior Year
Volume2(6 %)
Price3%
Energy and natural gas cost pass-through(915 )%
Currency(21 )%
Total Industrial Gases – Americas Sales Change(613)%

Sales of $932.4 decreased 6%$1,056.1 increased 13%, or $59.3,$123.7, as lowerhigher energy and natural gas cost pass-through to customers of 9%15%, positive pricing of 3%, and a negative impact fromfavorable currency of 2%1% were only partially offset by positive pricing of 3% and higherlower volumes of 2%6%. Energy and natural gas cost pass-through to customers was significantly higher in the U.S. Gulf Coast due to unusually high power and natural gas prices related to Winter Storm Uri. The pricing improvement was driven byattributable to continued focus on pricing actions in our merchant business.Positive Lower volumes were primarily driven by hydrogenlower demand in the Gulf Coast and Canada.
Thedue to COVID-19, pandemicwhich began impacting our merchant businessthis segment at the end of March 2020. We expect these volume impacts to continue2020, and be more significant in the third quarter. Additionally, we expect North America maintenance activities that were previously planned for the second half of the year to be delayed due to the COVID-19 pandemic.winter storm.
Operating income of $268.0 increased 5%$263.4 decreased 2%, or $12.4,$4.6, primarily due to lower volumes of $26, partially offset by higher pricing, net of power and fuel costs, of $23$15 and favorable volumes of $11, partially offset by higherlower net operating costs of $21. The higher net operating costs were primarily driven by higher maintenance costs.$4. Operating margin of 24.9% decreased 380 bp from 28.7% increased 290 bp,in the prior year primarily due to lowerthe higher energy and natural gas cost pass-through to customers, and positive pricing, partially offsetwhich negatively impacted margin by unfavorable cost performance. The lower energy and natural gas cost pass-through to customers contributed approximately 250430 bp.
Equity affiliates’ income of $21.6$32.3 increased 21%50%, or $3.8,$10.7, primarily driven by improved resultshigher income from our affiliates in Mexico.

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Industrial Gases – EMEA (Europe, Middle East, and Africa)
  Three Months Ended    
  31 March    
  2020 2019 $ Change % Change
Sales 
$492.7
 
$494.4
 
($1.7) —%
Operating income 124.6
 122.5
 2.1
 2%
Operating margin 25.3% 24.8%   50 bp
Equity affiliates’ income 13.5
 13.3
 0.2
 2%
Adjusted EBITDA 185.7
 182.1
 3.6
 2%
Adjusted EBITDA margin 37.7% 36.8%   90 bp
Three Months Ended
31 March
20212020$ Change% Change
Sales$584.6 $492.7 $91.9 19 %
Operating income139.6 124.6 15.0 12 %
Operating margin23.9 %25.3 %(140) bp
Equity affiliates’ income20.3 13.5 6.8 50 %
Adjusted EBITDA217.5 185.7 31.8 17 %
Adjusted EBITDA margin37.2 %37.7 %(50) bp
Sales % Change from Prior Year
Volume45 %
Price32 %
Energy and natural gas cost pass-through(43 )%
Currency(39 )%
Total Industrial Gases – EMEA Sales Change—19%

Sales of $492.7 were flat as$584.6 increased 19%, or $91.9, due to favorable currency of 9%, higher volumes of 4%5%, higher energy and natural gas cost-pass through to customers of 3%, and positive pricing of 3%2%. Favorable currency impacts were primarily driven by the appreciation of the Euro and the British Pound Sterling against the U.S. Dollar. The volume improvement was mainly attributable to an acquisition in Israel in July 2020 and contributions from our onsite business. These factors were partially offset by lower energy and naturalpackaged gas cost pass-throughdemand due to customers of 4% and unfavorable currency impacts of 3%. The volume increase was primarily driven by new projects and the carbon dioxide business we acquired in the prior year, with solid refinery hydrogen demand. The pricing improvement was attributable to our merchant business.The negative currency impact was mainly driven by the Euro.
The COVID-19, pandemicwhich began impacting our merchant businessthis segment at the end of March 2020. We expect these volume impactsThe pricing improvement was primarily attributable to continue and be more significant in the third quarter, particularly in our merchant packaged gases business, which is characterized by smaller, more economically sensitive customers.business.
Operating income of $124.6$139.6 increased 2%12%, or $2.1,$15.0, primarily due to favorable currency of $10 and higher pricing, net of power and fuel costs, of $20, partially offset by higher costs of $14 and unfavorable currency impacts of $3.$4. Operating margin of 23.9% decreased 140 bp from 25.3% increased 50 bp,in the prior year, primarily due to favorable pricingthe unfavorable volume mix and lowerthe higher energy and natural gas cost pass-through to customers, partially offset by higher costs and unfavorable volume mix.customers.
Equity affiliates’ income of $13.5$20.3 increased 2%50%, or $0.2.$6.8, primarily due to higher income from affiliates in Italy and Saudi Arabia.
Industrial Gases – Asia
  Three Months Ended    
  31 March    
  2020 2019 $ Change % Change
Sales 
$658.1
 
$625.4
 
$32.7
 5%
Operating income 209.1
 199.7
 9.4
 5%
Operating margin 31.8% 31.9%   (10) bp
Equity affiliates’ income 13.8
 13.8
 —
 —%
Adjusted EBITDA 327.0
 298.4
 28.6
 10%
Adjusted EBITDA margin 49.7% 47.7%   200 bp

Three Months Ended
31 March
20212020$ Change% Change
Sales$697.5 $658.1 $39.4 6 %
Operating income198.5 209.1 (10.6)(5 %)
Operating margin28.5 %31.8 %(330) bp
Equity affiliates’ income15.5 13.8 1.7 12 %
Adjusted EBITDA323.7 327.0 (3.3)(1 %)
Adjusted EBITDA margin46.4 %49.7 %(330) bp
Sales % Change from Prior Year
Volume6(2 %)
Price21 %
Energy and natural gas cost pass-through—%
Currency(37 )%
Total Industrial Gases – Asia Sales Change56%

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Sales of $658.1$697.5 increased 5%6%, or $32.7,$39.4, as higher volumesfavorable currency of 6%7% and positive pricing, primarily on our merchant products, of 2%1% were partially offset by unfavorable currency impactslower volumes of 3%.Volumes increased primarily due to new plants and a short-term supply contract. We estimate that the disruption due to the COVID-19 pandemic negatively impacted overall volumes by approximately 4%2%. While our onsite volumes remained stable, we estimate that our merchant volumes declined approximately 25% due to COVID-19 for about six weeks after the Lunar New Year holiday before recovering to normal levels in late March 2020. Pricing improved across Asia, driven by our merchant business. The unfavorablefavorable currency impact was primarily attributable to the appreciation of the Chinese Renminbi and the South Korean Won.Won against the U.S. Dollar. Reduced volume contributions from Lu'An were only partially offset by higher volumes due to new plants and our base merchant business, which recovered quickly after the Lunar New Year slowdown. Energy and natural gas cost pass-through to customers was flat versus the prior year.
Operating income of $209.1 increased$198.5 decreased 5%, or $9.4,$10.6, primarily due to lower volumes of $28, partially offset by favorable currency of $15 and positive pricing, net of power and fuel costs, of $11 and favorable volumes of $6, partially offset by unfavorable currency impacts of $6.$5. Operating margin of 28.5% decreased 330 bp from 31.8% decreased 10 bp as unfavorablein the prior year, primarily due to reduced volume mix was mostly offset by positive pricing.contributions from Lu'An.
Equity affiliates’ income of $13.8 was flat versus the prior year.$15.5 increased 12%, or $1.7, primarily due to higher income from an affiliate in India.
Industrial Gases – Global
The Industrial Gases – Global segment includes sales of cryogenic and gas processing equipment for air separation and centralized global costs associated with management of all the Industrial Gases segments.
Three Months Ended
31 March
20212020$ Change% Change
Sales$97.9 $79.3 $18.6 23 %
Operating loss(26.1)(19.8)(6.3)(32 %)
Adjusted EBITDA(21.8)(11.9)(9.9)(83 %)
  Three Months Ended    
  31 March    
  2020 2019 $ Change % Change
Sales 
$79.3
 
$53.8
 
$25.5
 47 %
Operating loss (19.8) (12.2) (7.6) (62)%
Adjusted EBITDA (11.9) (8.9) (3.0) (34)%

Sales of $79.3$97.9 increased 47%23%, or $25.5. The increase in sales was primarily driven by$18.6, due to higher sale of equipment project activity.
Operating Despite higher sales, operating loss of $19.8$26.1 increased 62%32%, or $7.6, as$6.3, due to higher project costs and product development costs were only partially offset by the higher current quarter sale of equipment activity.spending.
Corporate and other
The Corporate and other segment includes our liquefied natural gas ("LNG"), turbo machinery equipment and services, and distribution sale of equipment businesses andas well as corporate support functions that benefit all segments. The results of the Corporate and other segment also include income and expense that is not directly associated with the other segments, such as foreign exchange gains and losses.
Three Months Ended
31 March
20212020$ Change% Change
Sales$65.9 $53.8 $12.1 22 %
Operating loss(40.5)(38.5)(2.0)(5 %)
Adjusted EBITDA(34.4)(33.4)(1.0)(3 %)
  Three Months Ended    
  31 March    
  2020 2019 $ Change % Change
Sales 
$53.8
 
$22.4
 
$31.4
 140%
Operating loss (38.5) (49.1) 10.6
 22%
Adjusted EBITDA (33.4) (45.1) 11.7
 26%

Sales of $53.8$65.9 increased 140%22%, or $31.4,$12.1, primarily due to higher LNG project activity. Operatingactivity in our distribution sale of equipment business. Despite higher sales, operating loss of $38.5 decreased 22%$40.5 increased 5%, or $10.6,$2.0, primarily due to the higher LNG project activity, partially offset by higher business development costs to support our growth strategy.

corporate costs.

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FIRST SIX MONTHS 20202021 VS. FIRST SIX MONTHS 20192020

FIRST SIX MONTHS 20202021 IN SUMMARY
The results below are compared to the first six months of fiscal year 2019.2020:
•Sales of $4,471.0$4,877.2 increased 1%9%, or $59.3, as$406.2, due to higher volumes and positive pricing were mostly offset by lower energy and natural gas cost pass-through to customers, unfavorablefavorable currency, and pricing actions. Volumes were down slightly versus the impact of a contract modification to a tolling arrangement in India.prior year.
•Operating income of $1,138.2 increased 17%$1,087.6 decreased 4%, or $166.7,$50.6, and operating margin of 25.5% increased 35022.3% decreased 320 bp.
•Net income of $979.3 increased 24%$963.8 decreased 2%, or $188.8,$15.5, and net income margin of 21.9% increased 40019.8% decreased 210 bp.
•Adjusted EBITDA of $1,800.9$1,866.1 increased 11%4%, or $181.2,$65.2, and adjusted EBITDA margin of 40.3% increased 36038.3% decreased 200 bp.
•Diluted EPS of $4.36 increased 25%$4.25 decreased 3%, or $0.88. Adjusted$0.11, and adjusted diluted EPS of $4.18$4.20 increased 11%, or $0.40. $0.02.A summary table of changes in diluted EPS is presented below.
•
We increased our quarterly dividend by over 15% from $1.16 to $1.34 per share, representing the largest dividend increase in the Company's history. This is the 38th consecutive year that we have increased our quarterly dividend payment.We increased the quarterly dividend on our common stock to $1.50 per share, representing a 12% increase from the previous dividend of $1.34 per share. This is the 39th consecutive year that we have increased our quarterly dividend payment.
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Changes in Diluted EPS Attributable to Air Products
The per share impacts presented in the tabletables below were calculated independently and maydo not sum to the total change in diluted EPS due to rounding.
Six Months Ended
31 MarchIncrease
20212020(Decrease)
Total Diluted EPS$4.29 $4.29 $— 
Less: Diluted EPS from income (loss) from discontinued operations0.05 (0.06)0.11 
Diluted EPS From Continuing Operations(A)
$4.25 $4.36 ($0.11)
Operating Impacts
Underlying business
Volume(B)
($0.44)
Price, net of variable costs0.26 
Other costs(0.09)
Currency0.16 
Facility closure(0.08)
Company headquarters relocation income(0.12)
Gain on exchange with joint venture partner0.12 
Total Operating Impacts($0.19)
Other Impacts
Equity affiliates' income0.10 
Interest expense(0.13)
Other non-operating income (expense), net0.07 
Change in effective tax rate, excluding discrete item below0.02 
India Finance Act 2020(0.06)
Noncontrolling interests(B)
0.08 
Weighted average diluted shares(0.01)
Total Other Impacts$0.07 
Total Change in Diluted EPS From Continuing Operations($0.11)
(A)Fiscal year 2021 diluted EPS from continuing operations includes an estimated negative impact of approximately$0.20-$0.30 from COVID-19, which affected our sales and costs.
(B)The negative volume impact on diluted EPS was primarily due to reduced contributions from the Lu'An gasification project, which was partially offset by a positive impact from lower net income being attributed to our joint venture partner within "Noncontrolling interests."

Six Months Ended
31 MarchIncrease
20212020(Decrease)
Diluted EPS From Continuing Operations$4.25 $4.36 ($0.11)
Facility closure0.08 — 0.08 
Gain on exchange with joint venture partner(0.12)— (0.12)
Company headquarters relocation income— (0.12)0.12 
India Finance Act 2020— (0.06)0.06 
Adjusted Diluted EPS From Continuing Operations$4.20 $4.18 $0.02 

44
 Six Months Ended 
 31 MarchIncrease
 20202019(Decrease)
Diluted EPS attributable to Air Products
$4.29

$3.48

$0.81
Diluted EPS from discontinued operations(0.06)—
(0.06)
Diluted EPS From Continuing Operations
$4.36

$3.48

$0.88
Operating Impacts   
Underlying business   
Volume(A)
  
$0.27
Price, net of variable costs  0.45
Other costs  (0.29)
Currency  (0.05)
Facility closure  0.10
Company headquarters relocation income (expense)  0.12
Total Operating Impacts  
$0.60
Other Impacts   
Equity affiliates' income  0.05
Interest expense  0.13
Other non-operating income (expense), net  (0.06)
Change in effective tax rate, excluding discrete items below  (0.04)
India Finance Act 2020  0.06
Tax reform repatriation  (0.07)
Tax reform adjustment related to deemed foreign dividends  0.25
Noncontrolling interests  (0.02)
Weighted average diluted shares  (0.02)
Total Other Impacts  
$0.28
Total Change in Diluted EPS From Continuing Operations  
$0.88
(A)
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Includes an estimated negative impact of $0.06-$0.08 from COVID-19, primarily in our Asia merchant business.

 Six Months Ended 
 31 MarchIncrease
 20202019(Decrease)
Diluted EPS From Continuing Operations
$4.36

$3.48

$0.88
Facility closure—
0.10
(0.10)
Company headquarters relocation (income) expense(0.12)—
(0.12)
India Finance Act 2020(0.06)—
(0.06)
Pension settlement loss—
0.02
(0.02)
Tax reform repatriation—
(0.07)0.07
Tax reform adjustment related to deemed foreign dividends—
0.25
(0.25)
Adjusted Diluted EPS From Continuing Operations
$4.18

$3.78

$0.40


FIRST SIX MONTHS 20202021 RESULTS OF OPERATIONS
Discussion of Consolidated Results
 Six Months Ended    Six Months Ended
 31 March    31 March
 2020 2019 $ Change Change20212020$ ChangeChange
GAAP Measures        GAAP Measures
Sales 
$4,471.0
 
$4,411.7
 
$59.3
 1%Sales$4,877.2 $4,471.0 $406.2 9 %
Operating income 1,138.2
 971.5
 166.7
 17%Operating income1,087.6 1,138.2 (50.6)(4 %)
Operating margin 25.5% 22.0%   350 bp
Operating margin22.3 %25.5 %(320) bp
Equity affiliates’ income 146.4
 99.1
 47.3
 48%Equity affiliates’ income139.1 146.4 (7.3)(5 %)
Net income 979.3
 790.5
 188.8
 24%Net income963.8 979.3 (15.5)(2 %)
Net income margin 21.9% 17.9%   400 bpNet income margin19.8 %21.9 %(210) bp
Non-GAAP Measures        Non-GAAP Measures
Adjusted EBITDA 1,800.9
 1,619.7
 181.2
 11%Adjusted EBITDA1,866.1 1,800.9 65.2 4 %
Adjusted EBITDA margin 40.3% 36.7%   360 bp
Adjusted EBITDA margin38.3 %40.3 %(200) bp
Consistent with our results discussion for the second quarter of 2020, the COVID-19 pandemic did not have a significant impact on our consolidated results of operations in the first half of fiscal year 2020. We will continue to evaluate the nature and extent of future impacts of COVID-19, particularly in our Industrial Gases – Americas and Industrial Gases – EMEA segments. Given the dynamic nature of these circumstances, the full impact of the COVID-19 pandemic on our ongoing business, results of operations, and overall financial performance cannot be reasonably estimated at this time.
Sales
Sales % Change from Prior Year
Volume6(1 %)
Price32 %
Energy and natural gas cost pass-through(54 )%
Currency(24 )%
Other(A)
(1)%
Total Consolidated Sales Change1 %
(A)Total Consolidated Sales Change
Includes the impact from the modification of a hydrogen supply contract to a tolling arrangement in India in December 2018 (the "India contract modification").9%

Sales of $4,471.0$4,877.2 increased 1%9%, or $59.3, as$406.2, due to higher volumes of 6% and favorable pricing of 3% were mostly offset by lower energy and natural gas cost pass-through to customers of 5%4%, unfavorablefavorable currency impacts of 4%, and positive pricing of 2%, and the impact from the India contract modificationpartially offset by lower volumes of 1%. Both volumeThe higher energy and price werenatural gas cost pass-through to customers was primarily attributable to our Industrial Gases – Americas segment, which experienced significantly higher acrossenergy prices in the regional segments. The volume growthU.S. Gulf Coast largely driven by Winter Storm Uri. Favorable currency was driven by our base business, new plants, and the carbon dioxide business we acquired in the prior year. The pricing improvement was attributable to our merchant business. Unfavorable currency impacts were driven byappreciation of the Chinese Renminbi and Euro against the U.S. Dollar. Continued focus on pricing actions in our merchant businesses resulted in price improvement in each of the three regional segments. Volumes declined slightly as new plants, acquisitions, and South Korean Won.increased sale-of-equipment activities were more than offset by reduced contributions from the Lu'An gasification project in Asia, as discussed in the second quarter results section above, and lower merchant demand due to COVID-19. We estimate that COVID-19 negatively impacted overall year-to-date sales by approximately 3%.
Cost of Sales and Gross Margin
Cost of sales of $2,946.7 decreased 3%, or $101.0, from totalTotal cost of sales of $3,047.7 in the prior year, which included$3,401.1, including the facility closure further discussed below.below, increased 15%, or $454.4. The decreaseincrease from the prior year was driven by lowerdue to higher energy and natural gas cost pass-through to customers of $209, positive$182, unfavorable currency impacts of $54,$107, unfavorable volume mix of $94, higher net operating costs of $48, and the favorable impactloss from the India contract modification of $41, and the facility closure of $29 that occurred$23. The higher energy and natural gas cost-pass through to customers was driven by significantly higher energy prices during the winter storm. Gross margin of 30.3% decreased 380 bp from 34.1% in the prior year, partially offset by higher costs attributable to sales volumes of $195 and higher other costs of $37. Gross margin of 34.1% increased 320 bp, primarily due to positive pricing, lowerunfavorable volume mix, higher energy and natural gas cost pass-through to customers, higher net operating costs, and the facility closure, that occurred in the prior year, partially offset by unfavorable net operating costs.

the impact from our pricing actions.
Facility Closure
In December 2018, one of our customers was subject to a government enforced shutdown due to environmental reasons. As a result, we recognized a charge of $29.0 ($22.1 after-tax, or $0.10 per share) duringDuring the firstsecond quarter of fiscal year 20192021, we recorded a charge of $23.2 ($17.4 after-tax, or $0.08 per share) primarily related tofor a noncash write-down of assets associated with a contract termination in the write-off of onsite assets.Industrial Gases – Americas segment. This charge is reflected as “Facility closure”"Facility closure" on our consolidated income statements for the six months ended 31 March 2019.2021 and was not recorded in segment results.
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Table of Contents
Selling and Administrative Expense
Selling and administrative expense of $403.4$413.0 increased 6%2%, or $23.8, from investing in$9.6, primarily due to the impact of currency fluctuations and higher spending for business development resources to support our growth strategy.strategy, partially offset by lower travel expenses. Selling and administrative expense, as a percentage of sales, increaseddecreased to 8.5% from 8.6% to 9.0%.
Research and Development
Research and development expense of $36.9$44.6 increased 16%21%, or $5.0.$7.7, primarily due to higher product development costs. Research and development expense as a percentage of sales increased to 0.9% from 0.7% to 0.8%.
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 in our Industrial Gases – EMEA segment. 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 six months ended 31 March 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 (Expense)
DuringIn the second quarter of fiscal year 2020, we sold property at our current corporate headquarters located in Trexlertown, Pennsylvania, for net proceeds of $44.1. The sale was completed in anticipation of relocating our U.S. headquartersheadquarters. We received net proceeds of $44.1 and resulted inrecorded a gain of $33.8 ($25.6 after-tax, or $0.12 per share). This gain, which is reflected on our consolidated income statements as "Company headquarters relocation income (expense)" for the six months ended 31 March 2020 and has been excluded from2020. The gain was not recorded in the results of the Corporate and other segment.
Other Income (Expense), Net
Other income (expense), net of $20.4$32.3 increased 7%58%, or $1.4.$11.9, primarily driven by the settlement of a supply contract in the first quarter of fiscal year 2021.
Operating Income and Operating Margin
Operating income of $1,138.2 increased 17%$1,087.6 decreased 4%, or $166.7, due to$50.6, as unfavorable volume mix of $123, prior year income associated with the company headquarters relocation of $34, higher net operating costs of $25, and a facility closure of $23 were partially offset by positive pricing, net of power and fuel costs, of $123,$71, favorable volumescurrency of $75,$46, and a gain on an exchange with a joint venture partner of $37.
Operating margin of 22.3% decreased 320 bp from 25.5% in the prior year, primarily due to unfavorable volume mix and higher energy and natural gas cost pass-through to customers, which contributed to sales but not operating income, partially offset by positive pricing. The positive impact from a gain on an exchange with a joint venture partner was offset by the impact of income associated with the company headquarters relocation of $34, and a charge for a facility closure of $29 in the prior year, partially offset by higher net operating costs of $79, including planned maintenance, and unfavorable currency of $15.Operating margin of 25.5% increased 350 bp, primarily due to positive pricing and lower energy and natural gas cost pass-through to customers.year.
Equity Affiliates' Income
Equity affiliates' income of $146.4 increased 48%$139.1 decreased 5%, or $47.3,primarily due to$7.3. The prior year included a current year benefit of $33.8 for the release of our share of accumulated dividend distribution taxes related to an Indian affiliate as a result of the enactment of a tax law in India.the India Finance Act 2020. Refer to Note 17,16, Income Taxes, to the consolidated financial statements for additional information. The currentprior year also includesbenefit from this tax law was partially offset by higher income from the Jazan Gas Projects Company joint venture.affiliates in India, Italy, Mexico, and Saudi Arabia in fiscal year 2021.
Interest Expense
Six Months Ended
31 March
20212020
Interest incurred$84.9 $45.6 
Less: capitalized interest12.1 7.6 
Interest expense$72.8 $38.0 

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 Six Months Ended
 31 March
 20202019
Interest incurred
$45.6

$78.5
Less: capitalized interest7.6
5.8
Interest expense
$38.0

$72.7
Interest incurred decreased 42%increased 86%, or $32.9. The prior year included $17.4 of interest expense related to foreign currency forward points and currency swap basis differences of our cash flow hedges of intercompany loans. As discussed in Note 2, New Accounting Guidance,$39.3, primarily driven by a higher debt balance due to the consolidated financial statements, we adopted new accounting guidance on hedging activities that changedissuance of U.S. Dollar- and Euro-denominated fixed-rate notes in the presentationthird quarter of these items from "Interest expense, net" to “Other non-operating income (expense), net” in fiscal year 2020. In addition to this presentation change, interest expense decreased due to lower interest expense associated with financing the Lu'An joint venture and a lower average debt balance. Capitalized interest increased 31%59%, or $1.8,$4.5, due to ana net increase in the carrying value of projects under construction.

Other Non-Operating Income (Expense), net
Other non-operating income (expense), net of $16.2 decreased 50%, or $16.0, primarily$35.4 increased $19.2. We recorded higher non-service pension income in 2021 due to the impact of the adoption of the guidance on hedging activities discussed abovelower interest costs and higher total assets, primarily for our U.S. pension plans. The current year also included favorable currency impacts. These factors were partially offset by lower interest income on cash and cash items partially offset by higher non-service pension income. The priordue to lower interest rates.
Discontinued Operations
During the first quarter of fiscal year included2021, we recorded a pension settlement losstax benefit of $5.0$10.3 ($3.8 after-tax, or $0.020.05 per share) associated withas a component of discontinued operations. This benefit primarily resulted from the U.S. Supplementary Pension Plan.
Discontinued Operationssettlement of a state tax appeal related to the gain on the sale of our former Performance Materials Division in fiscal year 2017.
During the second quarter of fiscal year 2020, we recorded a pre-tax loss from discontinued operations of $19.0 ($14.3 after-tax, or $0.06 per share) to increase our liability for retained environmental obligations associated with the sale of our former Amines business in September 2006. Refer to the Pace discussion within Note 13,12, Commitments and Contingencies, to the consolidated financial statements for additional information.
Net Income and Net Income Margin
Net income of $979.3 increased 24%$963.8, including income from discontinued operations of $10.3, decreased 2%, or $188.8,$15.5, primarily due to unfavorable volume mix and a loss from a facility closure, partially offset bypositive pricing, higher volumes,net of power and currentfuel costs, favorable currency, and a gain on an exchange with a joint venture partner. Additionally, the prior year included income associated with the company headquarters relocation as well as the impactsand a net benefit from the facility closure and the U.S. Tax Cuts and JobsIndia Finance Act in the prior year. These factors were2020, partially offset by unfavorable costs, including the after-taxa loss from discontinued operations.
Net income margin of 19.8% decreased 210 bp from 21.9% increased 400 bp,in the prior year, primarily due to the factors noted above as well as lowerunfavorable volume mix and higher energy and natural gas cost pass-through to customers.customers driven by the winter storm, partially offset by the impact from our pricing actions.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA of $1,800.9$1,866.1 increased 11%4%, or $181.2,$65.2, primarily due to positivefavorable pricing and higher volumes,currency impacts, partially offset by unfavorable operating costs.volume mix. Adjusted EBITDA margin of 38.3% decreased 200 bp from 40.3% increased 360 bp,in the prior year, primarily due to the factors noted above as well as lowerunfavorable volume mix and higher energy and natural gas cost pass-through to customers.customers driven by the winter storm, partially offset by the impact from our pricing actions.
Effective Tax Rate
TheOur effective tax rate was 21.3%19.8% and 23.3%21.3% for the six months ended 31 March 20202021 and 2019,2020, respectively. The higher 2019 tax rate reflected a discrete net income tax expense of $40.6 related to impacts from the U.S. Tax Cuts and Jobs Act (the “Tax Act”). The net expense included the reversal of a non-recurring $56.2 ($0.25 per share) benefit recorded in 2018 related to the U.S. taxation of deemed foreign dividends. This was partially offset by a benefit of $15.6 ($0.07 per share) to finalize our estimates of the impacts of the Tax Act and reduce the total expected costs of the deemed repatriation tax. These prior year impacts were partially offset by beneficial changes in foreign tax law and changes in valuation allowance recorded at various entities in 2019.
The current year rate was impacted byhigher primarily due to the enactment 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. This cost was partially offset by higher excessAdditionally, the current year includes the favorable impact of an agreement reached with foreign tax benefits on share-based compensation in the six months ended 31 March 2020.authorities that resolved uncertainties related to unrecognized tax benefits.
The adjusted effective tax rate increased from 19.5% in fiscal year 2019 towas 19.7% and 20.1% in fiscal year 2020. This increase was primarily driven by beneficial changes in foreign tax law and changes in valuation allowance recorded at various entities in 2019, partially offset by higher excess tax benefits on share-based compensation for the six months ended 31 March 2020.
Refer to Note 17, Income Taxes,2021 and 2020, respectively, primarily due to the consolidated financial statements for additional information.impact of the agreement reached with foreign tax authorities that resolved uncertainties related to unrecognized tax benefits.
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Segment Analysis
Industrial Gases – Americas
  Six Months Ended    
  31 March    
  2020 2019 $ Change % Change
Sales 
$1,868.6
 
$1,980.9
 
($112.3) (6)%
Operating income 525.2
 474.8
 50.4
 11 %
Operating margin 28.1% 24.0%   410 bp
Equity affiliates’ income 42.2
 40.4
 1.8
 4 %
Adjusted EBITDA 834.7
 765.7
 69.0
 9 %
Adjusted EBITDA margin 44.7% 38.7%   600 bp

Six Months Ended
31 March
20212020$ Change% Change
Sales$1,989.1 $1,868.6 $120.5 6 %
Operating income489.2 525.2 (36.0)(7 %)
Operating margin24.6 %28.1 %(350) bp
Equity affiliates’ income54.6 42.2 12.4 29 %
Adjusted EBITDA848.9 834.7 14.2 2 %
Adjusted EBITDA margin42.7 %44.7 %(200) bp
Sales % Change from Prior Year
Volume1(6 %)
Price3%
Energy and natural gas cost pass-through(9)%
Currency(1— )%
Total Industrial Gases – Americas Sales Change(6)%

Sales of $1,868.6 decreased$1,989.1 increased 6%, or $112.3,$120.5, as lowerhigher energy and natural gas cost pass-through to customers of 9% and a negative impact from currency of 1% were only partially offset by positive pricing of 3% and higherwere partially offset by lower volumes of 1%6%. Energy and natural gas cost pass-through to customers was significantly higher in February 2021 due to unusually high power and natural gas prices related to Winter Storm Uri in the U.S. Gulf Coast. The pricing improvement was driven byattributable to continued focus on pricing actions in our merchant business.
The Lower volumes were primarily driven by lower demand due to COVID-19, pandemicwhich began impacting our merchant businessthis segment at the end of March 2020. We expect these volume impacts to continue and be more significant inCurrency was flat versus the third quarter. Additionally, we expect North America maintenance activities that were previously planned for the second half of the year to be delayed due to the COVID-19 pandemic.prior year.
Operating income of $525.2 increased 11%$489.2 decreased 7%, or $50.4,$36.0, primarily due to lower volumes of $59 and higher net operating costs of $22, partially offset by higher pricing, net of power and fuel costs, of $51 and favorable volumes of $18, partially offset by higher net operating costs of $17.$42. Operating margin of 24.6% decreased 350 bp from 28.1% increased 410 bp, in the prior yearprimarily due to lowerhigher energy and natural gas cost pass-through to customers, which negatively impacted margin by approximately 240 bp, and positive pricing.higher net operating costs.
Equity affiliates’ income of $42.2$54.6 increased 4%29%, or $1.8.$12.4, primarily driven by higher income from affiliates in Mexico.
Industrial Gases – EMEA
  Six Months Ended    
  31 March    
  2020 2019 $ Change % Change
Sales 
$991.4
 
$1,018.6
 
($27.2) (3)%
Operating income 245.1
 228.1
 17.0
 7 %
Operating margin 24.7% 22.4%   230 bp
Equity affiliates’ income 32.8
 27.0
 5.8
 21 %
Adjusted EBITDA 373.9
 347.7
 26.2
 8 %
Adjusted EBITDA margin 37.7% 34.1%   360 bp
Six Months Ended
31 March
20212020$ Change% Change
Sales$1,147.6 $991.4 $156.2 16 %
Operating income281.1 245.1 36.0 15 %
Operating margin24.5 %24.7 %(20) bp
Equity affiliates’ income45.3 32.8 12.5 38 %
Adjusted EBITDA439.4 373.9 65.5 18 %
Adjusted EBITDA margin38.3 %37.7 %60 bp
Sales % Change from Prior Year
Volume5%
Price3%
Energy and natural gas cost pass-through(51 )%
Currency(27 )%
Other(A)
(4)%
Total Industrial Gases – EMEA Sales Change(316)%
(A)
Includes the impact from the modification of a hydrogen supply contract to a tolling arrangement in India in December 2018 (the "India contract modification").

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Sales of $991.4 decreased$1,147.6 increased 16%, or $156.2, due to favorable currency impacts of 7%, higher volumes of 5%, positive pricing of 3%, or $27.2, as lowerand higher energy and natural gas cost pass-through to customers of 5%, the negative impact from the India contract modification of 4%, and unfavorable1%. Favorable currency impacts were primarily driven by the appreciation of 2%the Euro against the U.S. Dollar. The volume improvement was mainly attributable to an acquisition in Israel in July 2020 and contributions from our onsite business. These factors were only partially offset by favorable volumes of 5% and positive pricing of 3%.Volumes increased primarilylower packaged gas demand due to new projects, demand for hydrogen in our Rotterdam pipeline system, and the carbon dioxide business we acquired in the second quarter of fiscal year 2019. The pricing improvement was attributable to our merchant business. The negative currency impact was mainly driven by the Euro.
The COVID-19, pandemicwhich began impacting our merchant businessthis segment at the end of March 2020. We expect these volume impactsThe pricing improvement was primarily attributable to continue and be more significant in the third quarter, particularly in our merchant packaged gases business, which is characterized by smaller, more economically sensitive customers.

business.
Operating income of $245.1$281.1 increased 7%15%, or $17.0,$36.0, primarily due to higherpositive pricing, net of power and fuel costs, of $40$18 and favorable volumes of $4, partially offset by higher costs of $22 and unfavorable currency impacts of $5.$15. Operating margin of 24.5% decreased 20 bp from 24.7% increased 230 bp, primarily due to favorablein the prior year, as the margin impact of our pricing lower energy and natural gas cost pass-through to customers, and the India contract modification, partiallyactions was mostly offset by higher costs.the unfavorable volume mix.
Equity affiliates’ income of $32.8$45.3 increased 21%38%, or $5.8,$12.5, primarily due to the Jazan Gas Projects Company joint venture.higher income from affiliates in Italy and Saudi Arabia.
Industrial Gases – Asia
  Six Months Ended    
  31 March    
  2020 2019 $ Change % Change
Sales 
$1,350.9
 
$1,252.2
 
$98.7
 8%
Operating income 437.6
 401.5
 36.1
 9%
Operating margin 32.4% 32.1%   30 bp
Equity affiliates’ income 30.7
 30.0
 0.7
 2%
Adjusted EBITDA 674.0
 596.3
 77.7
 13%
Adjusted EBITDA margin 49.9% 47.6%   230 bp
Six Months Ended
31 March
20212020$ Change% Change
Sales$1,415.0 $1,350.9 $64.1 5 %
Operating income413.3 437.6 (24.3)(6 %)
Operating margin29.2 %32.4 %(320) bp
Equity affiliates’ income35.4 30.7 4.7 15 %
Adjusted EBITDA666.3 674.0 (7.7)(1 %)
Adjusted EBITDA margin47.1 %49.9 %(280) bp
Sales % Change from Prior Year
Volume7(3 %)
Price31 %
Energy and natural gas cost pass-through—%
Currency(27 )%
Total Industrial Gases – Asia Sales Change85%

Sales of $1,350.9$1,415.0 increased 8%5%, or $98.7,$64.1, as higher volumesfavorable currency of 7% and positive pricing, primarily on our merchant products, of 3%1% were partially offset by unfavorable currency impactslower volumes of 2%3%. Volumes increased primarily due to a short-term supply contract, new plants, and base business growth. Merchant volumes were negatively impacted from COVID-19 for approximately six weeks after the Lunar New Year holiday before recovering to normal levels in late March 2020. Pricing improved across Asia, driven by our merchant business. The unfavorablefavorable currency impact was primarily attributable to the appreciation of the Chinese Renminbi against the U.S. Dollar. Reduced volume contributions from Lu'An were only partially offset by higher volumes from new plants and the South Korean Won.our base merchant business. Energy and natural gas cost pass-through to customers was flat versus the prior year.
Operating income of $437.6 increased 9%$413.3 decreased 6%, or $36.1,$24.3, primarily due to lower volumes of $61, partially offset by favorable currency of $29 and positive pricing, net of power and fuel costs, of $31 and favorable volumes of $22, partially offset by unfavorable currency impacts of $9 and higher net operating costs of $8.$11. Operating margin of 29.2% decreased 320 bp from 32.4% increased 30 bp,in the prior year primarily due to positive pricing, partially offset by higher net operating costs.reduced volume contributions from Lu'An.
Equity affiliates’ income of $30.7$35.4 increased 2%15%, or $0.7.$4.7, primarily due to higher income from an affiliate in India.
Industrial Gases – Global
Six Months Ended
31 March
20212020$ Change% Change
Sales$202.4 $171.9 $30.5 18 %
Operating loss(30.7)(16.2)(14.5)(90 %)
Adjusted EBITDA(21.7)(4.5)(17.2)(382 %)
  Six Months Ended    
  31 March    
  2020 2019 $ Change % Change
Sales 
$171.9


$122.0
 
$49.9
 41 %
Operating loss (16.2)
(8.3) (7.9) (95)%
Adjusted EBITDA (4.5)
(2.5) (2.0) (80)%


Sales of $171.9$202.4 increased 41%18%, or $49.9, primarily$30.5, due to higher sale of equipment project activity. OperatingDespite higher sales, operating loss of $16.2$30.7 increased 95%90%, or $7.9, as$14.5,due to higher project costs and product development costs were onlyspending, partially offset by higher saleincome from the settlement of equipment and other project activity.a supply contract in the first quarter of 2021.
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Corporate and other
Six Months Ended
31 March
20212020$ Change% Change
Sales$123.1 $88.2 $34.9 40 %
Operating loss(78.9)(87.3)8.4 10 %
Adjusted EBITDA(66.8)(77.2)10.4 13 %
  Six Months Ended    
  31 March    
  2020 2019 $ Change % Change
Sales 
$88.2
 
$38.0
 
$50.2
 132%
Operating loss (87.3) (95.6) 8.3
 9%
Adjusted EBITDA (77.2) (87.5) 10.3
 12%

Sales of $88.2$123.1 increased 132%40%, or $50.2,$34.9, primarily due to higher project activity in our LNG project activity.and distribution sale of equipment businesses. Operating loss of $87.3$78.9 decreased 9%10%, or $8.3,$8.4, primarily due to the higher LNG project activity, partially offset by higher business development costs toand corporate support our growth strategy.costs.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Millions of dollars unless otherwise indicated, except for per share data)
The Company presentsWe 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, and adjusted effective tax rate.rate, and capital expenditures. On a segment basis, these measures include adjusted EBITDA and adjusted EBITDA margin. In addition to these measures, which are presented above, we also includepresent certain supplemental non-GAAP financial measures that are presented below to help the reader understand the impact that our non-GAAPcertain disclosed items, or "non-GAAP adjustments," have on the calculation of our adjusted diluted EPS. For each non-GAAP financial measure, we present below a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP.
The Company'sOur non-GAAP financial measures are not meant to be considered in isolation or as a substitute for the most directly comparable measure calculated in accordance with GAAP. The Company believesWe believe these non-GAAP financial measures provide investors, potential investors, securities analysts, and others with useful information to evaluate the performance of theour business because such measures, when viewed together with financial results computed in accordance with GAAP, provide a more complete understanding of the factors and trends affecting the Company'sour historical financial performance and projected future results.
In many cases, non-GAAP financial measures are determined by adjusting the most directly comparable GAAP measure to exclude certain disclosed items, or “non-GAAPnon-GAAP adjustments” that the Company believeswe believe are not representative of our underlying business performance. For example, the Companywe previously excluded certain expenses associated with cost reduction actions, impairment charges, and gains on disclosed transactions. The reader should be aware that the Companywe may recognize similar losses or gains in the future. 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.
TheWhen applicable, the tax impact on our pre-tax non-GAAP adjustments reflects the expected current and deferred income tax impact of our non-GAAP adjustments. These tax impacts are primarily driven by the statutory tax rate of the various relevant jurisdictions and the taxability of the adjustments in those jurisdictions.


50
Table of Contents
ADJUSTED DILUTED EPS
The table below provides a reconciliation to the most directly comparable GAAP measure for each of the major components used to calculate adjusted diluted EPS from continuing operations, which the Company viewswe view as a key performance metric. WeIn periods that we have non-GAAP adjustments, we believe it is important for the reader to understand the per share impact of our non-GAAP adjustments aseach such adjustment because management does not consider these impacts when evaluating underlying business performance. The per share impact for each non-GAAP adjustment was calculated independently and may not sum to total adjusted diluted EPS due to rounding.
 Three Months Ended 31 March
Q2 2021 vs. Q2 2020Operating
Income		Equity
Affiliates'
Income		Income Tax
Provision		Net Income
Attributable to
Air Products		Diluted
EPS
2021 GAAP$548.5 $69.8 $121.9 $473.1 $2.13 
2020 GAAP577.2 88.2 148.5 492.1 2.21 
Change GAAP($0.08)
% Change GAAP(4 %)
2021 GAAP$548.5 $69.8 $121.9 $473.1 $2.13 
Facility closure23.2 — 5.8 17.4 0.08 
Gain on exchange with joint venture partner(36.8)— (9.5)(27.3)(0.12)
2021 Non-GAAP ("Adjusted")$534.9 $69.8 $118.2 $463.2 $2.08 
2020 GAAP$577.2 $88.2 $148.5 $492.1 $2.21 
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)
2020 Non-GAAP ("Adjusted")$543.4 $54.4 $120.0 $453.0 $2.04 
Change Non-GAAP ("Adjusted")$0.04 
% Change Non-GAAP ("Adjusted")2 %

Six Months Ended 31 March
2021 vs. 2020Operating
Income		Equity
Affiliates'
Income		Income Tax
Provision		Net Income
Attributable to
Air Products		Diluted
EPS
2021 GAAP$1,087.6 $139.1 $235.8 $944.8 $4.25 
2020 GAAP1,138.2 146.4 269.2 967.7 4.36 
Change GAAP($0.11)
% Change GAAP(3 %)
2021 GAAP$1,087.6 $139.1 $235.8 $944.8 $4.25 
Facility closure23.2 — 5.8 17.4 0.08 
Gain on exchange with joint venture partner(36.8)— (9.5)(27.3)(0.12)
2021 Non-GAAP ("Adjusted")$1,074.0 $139.1 $232.1 $934.9 $4.20 
2020 GAAP$1,138.2 $146.4 $269.2 $967.7 $4.36 
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)
2020 Non-GAAP ("Adjusted")$1,104.4 $112.6 $240.7 $928.6 $4.18 
Change Non-GAAP ("Adjusted")$0.02 
% Change Non-GAAP ("Adjusted")— %
51
 Continuing Operations
 Three Months Ended 31 March
Q2 2020 vs. Q2 2019Operating
Income		Equity Affiliates' IncomeIncome Tax ProvisionNet Income Attributable to Air Products
Diluted
EPS(A)
2020 GAAP
$577.2

$88.2

$148.5

$492.1

$2.21
2019 GAAP516.5
46.2
107.5
421.3
1.90
Change GAAP   
$70.8

$0.31
% Change GAAP   17%16%
2020 GAAP
$577.2

$88.2

$148.5

$492.1

$2.21
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)
2020 Non-GAAP Measure ("Adjusted")
$543.4

$54.4

$120.0

$453.0

$2.04
2019 GAAP
$516.5

$46.2

$107.5

$421.3

$1.90
Pension settlement loss(B)
—
—
1.2
3.8
0.02
2019 Non-GAAP Measure ("Adjusted")
$516.5

$46.2

$108.7

$425.1

$1.92
Change Non-GAAP Measure ("Adjusted")   
$27.9

$0.12
% Change Non-GAAP Measure ("Adjusted")   7%6%
(A)
Table of Contents
The per share impact for each of our non-GAAP adjustments was calculated independently and may not sum to total adjusted diluted EPS due to rounding.
(B)
Reflected on the consolidated income statements within "Other non-operating income (expense), net." Fiscal year 2019 includes a before-tax impact of $5.0 for the three months ended 31 March 2019.


      
 Continuing Operations
 Six Months Ended 31 March
2020 vs. 2019
Operating
Income
Equity Affiliates' IncomeIncome Tax ProvisionNet
Income Attributable to Air Products		Diluted
EPS
2020 GAAP
$1,138.2

$146.4

$269.2

$967.7

$4.36
2019 GAAP971.5
99.1
239.6
768.8
3.48
Change GAAP   
$198.9

$0.88
% Change GAAP   26%25%
2020 GAAP
$1,138.2

$146.4

$269.2

$967.7

$4.36
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)
2020 Non-GAAP Measure ("Adjusted")
$1,104.4

$112.6

$240.7

$928.6

$4.18
2019 GAAP
$971.5

$99.1

$239.6

$768.8

$3.48
Facility closure29.0
—
6.9
22.1
0.10
Pension settlement loss(B)
—
—
1.2
3.8
0.02
Tax reform repatriation—
—
15.6
(15.6)(0.07)
Tax reform adjustment related to deemed foreign dividends—
—
(56.2)56.2
0.25
2019 Non-GAAP Measure ("Adjusted")
$1,000.5

$99.1

$207.1

$835.3

$3.78
Change Non-GAAP Measure ("Adjusted")   
$93.3

$0.40
% Change Non-GAAP Measure ("Adjusted")   11%11%
(B)
Reflected on the consolidated income statements within "Other non-operating income (expense), net." Fiscal year 2019 includes a before-tax impact of $5.0 for the six months ended 31 March 2019.


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 non‑GAAPnon-GAAP adjustments, which the Company doeswe do not believe to be indicative of underlying business trends, before interest expense, other non‑operatingnon-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. Margins are calculated independently for each period by dividing each line item by consolidated sales for the respective period and may not sum to total margin due to rounding.
Below is a presentation ofThe table below presents 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:
Three Months EndedSix Months Ended
31 March31 March
2021202020212020
$Margin$Margin$Margin$Margin
Sales$2,502.0 $2,216.3 $4,877.2 $4,471.0 
Net income and Net income margin$477.1 19.1 %$490.4 22.1 %$963.8 19.8 %$979.3 21.9 %
Less: Income (Loss) from discontinued operations, net of tax— — %(14.3)(0.6 %)10.3 0.2 %(14.3)(0.3 %)
Add: Interest expense36.1 1.4 %19.3 0.9 %72.8 1.5 %38.0 0.9 %
Less: Other non-operating income (expense), net16.8 0.7 %7.1 0.3 %35.4 0.7 %16.2 0.4 %
Add: Income tax provision121.9 4.9 %148.5 6.7 %235.8 4.8 %269.2 6.0 %
Add: Depreciation and amortization329.3 13.2 %294.7 13.3 %653.0 13.4 %583.9 13.1 %
Add: Facility closure23.2 0.9 %— — %23.2 0.5 %— — %
Less: Gain on exchange with joint venture partner36.8 1.5 %— — %36.8 0.8 %— — %
Less: Company headquarters relocation income (expense)— — %33.8 1.5 %— — %33.8 0.8 %
Less: India Finance Act 2020 - equity affiliate income impact— — %33.8 1.5 %— — %33.8 0.8 %
Adjusted EBITDA and Adjusted EBITDA margin$934.0 37.3 %$892.5 40.3 %$1,866.1 38.3 %$1,800.9 40.3 %
Q2 2021
vs.
Q2 2020		2021
vs.
2020
Change GAAP
Net income $ change($13.3)($15.5)
Net income % change(3 %)(2 %)
Net income margin change(300) bp(210) bp
Change Non-GAAP
Adjusted EBITDA $ change$41.5 $65.2 
Adjusted EBITDA % change5 %4 %
Adjusted EBITDA margin change(300) bp(200) bp
52
Table of Contents
 Three Months Ended Six Months Ended
 31 March 31 March
 2020 2019 2020 2019
 $Margin $Margin $Margin $Margin
Sales
$2,216.3
  
$2,187.7
  
$4,471.0
  
$4,411.7
 
            
Net income and net income margin
$490.4
22.1% 
$433.5
19.8% 
$979.3
21.9% 
$790.5
17.9%
Less: Loss from discontinued operations, net of tax(14.3)(0.6)% —
—% (14.3)(0.3%) —
—%
Add: Interest expense19.3
0.9 % 35.4
1.6% 38.0
0.9 % 72.7
1.6%
Less: Other non-operating income (expense), net7.1
0.3 % 13.7
0.6% 16.2
0.4 % 32.2
0.7%
Add: Income tax provision148.5
6.7 % 107.5
4.9% 269.2
6.0 % 239.6
5.4%
Add: Depreciation and amortization294.7
13.3 % 262.1
12.0% 583.9
13.1 % 520.1
11.8%
Add: Facility closure—
— % —
—% —
— % 29.0
0.7%
Less: Company headquarters relocation income (expense)33.8
1.5 % —
—% 33.8
0.8 % —
—%
Less: India Finance Act 2020 - equity affiliate income impact33.8
1.5 % —
—% 33.8
0.8 % —
—%
Adjusted EBITDA and adjusted EBITDA margin
$892.5
40.3% 
$824.8
37.7% 
$1,800.9
40.3% 
$1,619.7
36.7%
2020 vs. 2019           
Change GAAP           
Net income $ change 
$56.9
     
$188.8
   
Net income % change 13%     24%   
Net income margin change 230 bp     400 bp   
Change Non-GAAP           
Adjusted EBITDA $ change 
$67.7
     
$181.2
   
Adjusted EBITDA % change 8%     11%   
Adjusted EBITDA margin change 260 bp     360 bp   

Below isThe 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 three months ended 31 March 20202021 and 2019:2020:

SalesIndustrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
and other		Total
Q2 2021$1,056.1 $584.6 $697.5 $97.9 $65.9 $2,502.0 
Q2 2020932.4 492.7 658.1 79.3 53.8 2,216.3 

  Industrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
and other		Total
Q2 2021 GAAP
Operating income (loss)$263.4 $139.6 $198.5 ($26.1)($40.5)$534.9 (A)
Operating margin24.9 %23.9 %28.5 %
Q2 2020 GAAP
Operating income (loss)$268.0 $124.6 $209.1 ($19.8)($38.5)$543.4 (A)
Operating margin28.7 %25.3 %31.8 %
Q2 2021 vs. Q2 2020 Change GAAP
Operating income/loss $ change($4.6)$15.0 ($10.6)($6.3)($2.0)
Operating income/loss % change(2 %)12 %(5 %)(32 %)(5 %)
Operating margin change(380) bp(140) bp(330) bp
Q2 2021 Non-GAAP
Operating income (loss)$263.4 $139.6 $198.5 ($26.1)($40.5)$534.9 (A)
Add: Depreciation and amortization153.3 57.6 109.7 2.6 6.1 329.3 
Add: Equity affiliates' income32.3 20.3 15.5 1.7 — 69.8 (A)
Adjusted EBITDA$449.0 $217.5 $323.7 ($21.8)($34.4)$934.0 
Adjusted EBITDA margin42.5 %37.2 %46.4 %
Q2 2020 Non-GAAP
Operating income (loss)$268.0 $124.6 $209.1 ($19.8)($38.5)$543.4 (A)
Add: Depreciation and amortization135.5 47.6 104.1 2.4 5.1 294.7 
Add: Equity affiliates' income21.6 13.5 13.8 5.5 — 54.4 (A)
Adjusted EBITDA$425.1 $185.7 $327.0 ($11.9)($33.4)$892.5 
Adjusted EBITDA margin45.6 %37.7 %49.7 %
Q2 2021 vs. Q2 2020 Change Non-GAAP
Adjusted EBITDA $ change$23.9 $31.8 ($3.3)($9.9)($1.0)
Adjusted EBITDA % change6 %17 %(1 %)(83 %)(3 %)
Adjusted EBITDA margin change(310) bp(50) bp(330) bp
(A)Refer to the Reconciliations to Consolidated Results section below.
53
Table of Contents
  Industrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
and other		Total 
GAAP MEASURES       
Three Months Ended 31 March 2020 
Operating income (loss)
$268.0

$124.6

$209.1

($19.8)
($38.5)
$543.4
(A) 
Operating margin28.7%25.3%31.8%    
Three Months Ended 31 March 2019 
Operating income (loss)
$255.6

$122.5

$199.7

($12.2)
($49.1)
$516.5
(A) 
Operating margin25.8%24.8%31.9%    
Operating income (loss) $ change
$12.4

$2.1

$9.4

($7.6)
$10.6
  
Operating income (loss) % change5%2%5%(62)%22%  
Operating margin change290 bp50 bp(10) bp    
NON-GAAP MEASURES       
Three Months Ended 31 March 2020 
Operating income (loss)
$268.0

$124.6

$209.1

($19.8)
($38.5)
$543.4
(A) 
Add: Depreciation and amortization135.5
47.6
104.1
2.4
5.1
294.7
 
Add: Equity affiliates' income21.6
13.5
13.8
5.5
—
54.4
(B) 
Adjusted EBITDA
$425.1

$185.7

$327.0

($11.9)
($33.4)
$892.5
 
Adjusted EBITDA margin45.6%37.7%49.7%    
Three Months Ended 31 March 2019 
Operating income (loss)
$255.6

$122.5

$199.7

($12.2)
($49.1)
$516.5
(A) 
Add: Depreciation and amortization124.9
46.3
84.9
2.0
4.0
262.1
 
Add: Equity affiliates' income17.8
13.3
13.8
1.3
—
46.2
(B) 
Adjusted EBITDA
$398.3

$182.1

$298.4

($8.9)
($45.1)
$824.8
 
Adjusted EBITDA margin40.2%36.8%47.7%    
Adjusted EBITDA $ change
$26.8

$3.6

$28.6

($3.0)
$11.7
  
Adjusted EBITDA % change7%2%10%(34)%26%  
Adjusted EBITDA margin change540 bp90 bp200 bp    
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 six months ended 31 March 2021 and 2020:


SalesIndustrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
and other		Total
Q2 2021$1,989.1 $1,147.6 $1,415.0 $202.4 $123.1 $4,877.2 
Q2 20201,868.6 991.4 1,350.9 171.9 88.2 4,471.0 

  Industrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
and other		Total
Q2 2021 GAAP
Operating income (loss)$489.2 $281.1 $413.3 ($30.7)($78.9)$1,074.0 (A)
Operating margin24.6 %24.5 %29.2 %
Q2 2020 GAAP
Operating income (loss)$525.2 $245.1 $437.6 ($16.2)($87.3)$1,104.4 (A)
Operating margin28.1 %24.7 %32.4 %
Q2 2021 vs. Q2 2020 Change GAAP
Operating income/loss $ change($36.0)$36.0 ($24.3)($14.5)$8.4 
Operating income/loss % change(7 %)15 %(6 %)(90 %)10 %
Operating margin change(350) bp(20) bp(320) bp
Q2 2021 Non-GAAP
Operating income (loss)$489.2 $281.1 $413.3 ($30.7)($78.9)$1,074.0 (A)
Add: Depreciation and amortization305.1 113.0 217.6 5.2 12.1 653.0 
Add: Equity affiliates' income54.6 45.3 35.4 3.8 — 139.1 (A)
Adjusted EBITDA$848.9 $439.4 $666.3 ($21.7)($66.8)$1,866.1 
Adjusted EBITDA margin42.7 %38.3 %47.1 %
Q2 2020 Non-GAAP
Operating income (loss)$525.2 $245.1 $437.6 ($16.2)($87.3)$1,104.4 (A)
Add: Depreciation and amortization267.3 96.0 205.7 4.8 10.1 583.9 
Add: Equity affiliates' income42.2 32.8 30.7 6.9 — 112.6 (A)
Adjusted EBITDA$834.7 $373.9 $674.0 ($4.5)($77.2)$1,800.9 
Adjusted EBITDA margin44.7 %37.7 %49.9 %
Q2 2021 vs. Q2 2020 Change Non-GAAP
Adjusted EBITDA $ change$14.2 $65.5 ($7.7)($17.2)$10.4 
Adjusted EBITDA % change2 %18 %(1 %)(382 %)13 %
Adjusted EBITDA margin change(200) bp60  bp(280) bp
(A)Refer to the Reconciliations to Consolidated Results section below.
54
Table of Contents
        
  Industrial
Gases–
Americas		Industrial
Gases–
EMEA		Industrial
Gases–
Asia		Industrial
Gases–
Global		Corporate
and other		Total 
GAAP MEASURE       
Six Months Ended 31 March 2020 
Operating income (loss)
$525.2

$245.1

$437.6

($16.2)
($87.3)
$1,104.4
(A) 
Operating margin28.1%24.7%32.4%    
Six Months Ended 31 March 2019 
Operating income (loss)
$474.8

$228.1

$401.5

($8.3)
($95.6)
$1,000.5
(A) 
Operating margin24.0%22.4%32.1%    
Operating income (loss) $ change
$50.4

$17.0

$36.1

($7.9)
$8.3
  
Operating income (loss) % change11%7%9%(95)%9%  
Operating margin change410 bp230 bp30 bp    
NON-GAAP MEASURE       
Six Months Ended 31 March 2020 
Operating income (loss)
$525.2

$245.1

$437.6

($16.2)
($87.3)
$1,104.4
(A) 
Add: Depreciation and amortization267.3
96.0
205.7
4.8
10.1
583.9
 
Add: Equity affiliates' income42.2
32.8
30.7
6.9
—
112.6
(B) 
Adjusted EBITDA
$834.7

$373.9

$674.0

($4.5)
($77.2)
$1,800.9
 
Adjusted EBITDA margin44.7%37.7%49.9%    
Six Months Ended 31 March 2019 
Operating income (loss)
$474.8

$228.1

$401.5

($8.3)
($95.6)
$1,000.5
(A) 
Add: Depreciation and amortization250.5
92.6
164.8
4.1
8.1
520.1
 
Add: Equity affiliates' income40.4
27.0
30.0
1.7
—
99.1
(B) 
Adjusted EBITDA
$765.7

$347.7

$596.3

($2.5)
($87.5)
$1,619.7
 
Adjusted EBITDA margin38.7%34.1%47.6%    
Adjusted EBITDA $ change
$69.0

$26.2

$77.7

($2.0)
$10.3
  
Adjusted EBITDA % change9%8%13%(80)%12%  
Adjusted EBITDA margin change600 bp360 bp230 bp    
Reconciliations to Consolidated Results

The table below reconciles operating income as reflected on our consolidated income statements to total operating income in the table above:

(A)
The table below reconciles operating income as reflected on our consolidated income statements to total operating income in the table above:
Three Months EndedSix Months Ended
31 March31 March
Operating Income2021202020212020
Consolidated operating income$548.5 $577.2 $1,087.6 $1,138.2 
Facility closure23.2 — 23.2 — 
Gain on exchange with joint venture partner(36.8)— (36.8)— 
Company headquarters relocation (income) expense— (33.8)— (33.8)
Total$534.9 $543.4 $1,074.0 $1,104.4 
 Three Months EndedSix Months Ended
 31 March31 March
Operating Income2020201920202019
Consolidated operating income
$577.2

$516.5

$1,138.2

$971.5
Facility closure—
—
—
29.0
Company headquarters relocation (income) expense(33.8)—
(33.8)—
Total
$543.4

$516.5

$1,104.4

$1,000.5
(B)
The table below reconciles equity affiliates' income as reflected on our consolidated income statements to total equity affiliates' income in the table above:
 Three Months EndedSix Months Ended
 31 March31 March
Equity Affiliates' Income2020201920202019
Consolidated equity affiliates' income
$88.2

$46.2

$146.4

$99.1
India Finance Act 2020(33.8)—
(33.8)—
Total
$54.4

$46.2

$112.6

$99.1
The table below reconciles equity affiliates' income as reflected on our consolidated income statements to total equity affiliates' income in the table above:

Three Months EndedSix Months Ended
31 March31 March
Equity Affiliates' Income2021202020212020
Consolidated equity affiliates' income$69.8 $88.2 $139.1 $146.4 
India Finance Act 2020— (33.8)— (33.8)
Total$69.8 $54.4 $139.1 $112.6 

ADJUSTED EFFECTIVE TAX RATE
The tax impact of our pre-tax non-GAAP adjustments reflects the expected current and deferred income tax expense associated with each adjustment and is primarily dependent upon the statutory tax rate of the various relevant jurisdictions and the taxability of the adjustments in those jurisdictions. For additional discussion on the impacts of India Finance Act 2020 and the U.S. Tax Cuts and Jobs Act, refer to Note 17,

Three Months Ended
31 March		Six Months Ended
31 March
  2021202020212020
Income Tax Provision$121.9 $148.5 $235.8 $269.2 
Income From Continuing Operations Before Taxes$599.0 $653.2 $1,189.3 $1,262.8 
Effective Tax Rate20.4 %22.7 %19.8 %21.3 %
Income Tax Provision$121.9 $148.5 $235.8 $269.2 
Facility closure5.8 — 5.8 — 
Gain on exchange with joint venture partner(9.5)— (9.5)— 
Company headquarters relocation— (8.2)— (8.2)
India Finance Act 2020— (20.3)— (20.3)
Adjusted Income Tax Provision$118.2 $120.0 $232.1 $240.7 
Income From Continuing Operations Before Taxes$599.0 $653.2 $1,189.3 $1,262.8 
Facility closure23.2 — 23.2 — 
Gain on exchange with joint venture partner(36.8)— (36.8)— 
Company headquarters relocation (income) expense— (33.8)— (33.8)
India Finance Act 2020 - equity affiliate income impact— (33.8)— (33.8)
Adjusted Income From Continuing Operations Before Taxes$585.4 $585.6 $1,175.7 $1,195.2 
Adjusted Effective Tax Rate20.2 %20.5 %19.7 %20.1 %
Income Taxes, to the consolidated financial statements.
55
 Three Months Ended
31 March		 Six Months Ended
31 March
  20202019 20202019
Income Tax Provision
$148.5

$107.5
 
$269.2

$239.6
Income From Continuing Operations Before Taxes
$653.2

$541.0
 
$1,262.8

$1,030.1
Effective Tax Rate22.7%19.9% 21.3%23.3%
Income Tax Provision
$148.5

$107.5
 
$269.2

$239.6
Facility closure—
—
 —
6.9
Company headquarters relocation(8.2)—
 (8.2)—
India Finance Act 2020(20.3)—
 (20.3)—
Pension settlement loss—
1.2
 —
1.2
Tax reform repatriation—
—
 —
15.6
Tax reform adjustment related to deemed foreign dividends—
—
 —
(56.2)
Adjusted Income Tax Provision
$120.0

$108.7
 
$240.7

$207.1
Income From Continuing Operations Before Taxes
$653.2

$541.0
 
$1,262.8

$1,030.1
Facility closure—
—
 —
29.0
Company headquarters relocation (income) expense(33.8)—
 (33.8)—
India Finance Act 2020 - equity affiliate income impact(33.8)—
 (33.8)—
Pension settlement loss—
5.0
 —
5.0
Adjusted Income From Continuing Operations Before Taxes
$585.6

$546.0
 
$1,195.2

$1,064.1
Adjusted Effective Tax Rate20.5%19.9% 20.1%19.5%
Table of Contents

CAPITAL EXPENDITURES

We define capital expenditures as cash flows for additions to plant and equipment, acquisitions (less cash acquired), and investment in and advances to unconsolidated affiliates. A reconciliation of cash used for investing activities to our reported capital expenditures is provided below:
Six Months Ended
31 March
20212020
Cash used for investing activities$583.2 $706.4 
Proceeds from sale of assets and investments14.8 68.0 
Purchases of investments(569.0)— 
Proceeds from investments1,265.5 177.0 
Other investing activities3.1 1.9 
Capital Expenditures$1,297.6 $953.3 

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. In addition, we have considered the impacts of COVID-19 on our liquidity and capital resources and do not expect it to impact our ability to meet future liquidity needs.
As of 31 March 2020,2021, we had $1,206.2$1,365.8 of foreign cash and cash items compared to total cash and cash items of $2,220.1. As a result of the Tax Act, we currently$5,786.3. We do not expect that a significant portion of the earnings of our foreign subsidiaries and affiliates will be subject to U.S. income tax upon subsequent repatriation to the U.S. Depending on the country in which the subsidiaries and affiliates reside, the repatriation of these earnings may be subject to foreign withholding and other taxes. However, since we have significant current investment plans outside the U.S., it is our intent to permanently reinvest the majority of our foreign cash and cash items that would be subject to additional taxes outside the U.S.
OurThe table below summarizes our cash flows from operating, investing, and financing activities as reflected on the consolidated statements of cash flows, are summarized in the following table:flows:
Six Months Ended
31 March
Cash Provided By (Used For)20212020
Operating activities$1,580.3 $1,238.5 
Investing activities(583.2)(706.4)
Financing activities(503.2)(537.8)
 Six Months Ended
 31 March
Cash provided by (used for)20202019
Operating activities
$1,238.5

$1,285.8
Investing activities(706.4)(882.1)
Financing activities(537.8)(459.8)

Operating Activities
For the first six months of fiscal year 2021, cash provided by operating activities was $1,580.3. Income from continuing operations of $944.8 was adjusted for items including depreciation and amortization, deferred income taxes, a loss for a facility closure, undistributed earnings of equity method investments, gain on sale of assets and investments, share-based compensation, and noncurrent lease receivables. The working capital accounts were a use of cash of $91.2, primarily driven by $142.4 from other working capital and $74.8 from trade receivables, less allowances, partially offset by a $135.7 source of cash from payables and accrued liabilities. The use within "other working capital" was primarily due to higher tax payments and contract fulfillment costs related to sale of equipment projects. The use of cash within trade receivables, less allowances, primarily resulted from increased sale of equipment project activity. The source within payables and accrued liabilities was primarily due to customer advances on sale of equipment projects and an increase in accrued utilities due to higher costs associated with Winter Storm Uri, a severe weather storm in the U.S. Gulf Coast.
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For the first six months of fiscal year 2020, cash provided by operating activities was $1,238.5. Income$1,238.5 which included income from continuing operations of $967.7 was adjusted for items including depreciation and amortization, deferred income taxes, undistributed earnings of unconsolidated affiliates, gains on sale of assets and investments, share-based compensation, and noncurrent lease receivables. We recorded a net benefit of $13.5 on our consolidated income statements related to an India tax law change during the quarter. This net benefit, which is further discussed in Note 17, Income Taxes, to the consolidated financial statements, increased "Undistributed earnings of unconsolidated affiliates" by $33.8 and increased "Deferred income taxes" by $20.3. The "Gain on sale of assets and investments" of $40.5 includes a gain of $33.8 related to the sale of property at our current corporate headquarters. Refer to Note 18, Supplemental Information, to the consolidated financial statements for additional information.$967.7. The working capital accounts were a use of cash of $354.0, primarily driven by $113.1 from other working capital, $111.9 from trade receivables, less allowances, and $111.8 from payables and accrued liabilities. The use within "Other working capital" was primarily due to higher tax payments and increases in contract assets and contract fulfillment costs associated with revenue generating project activity. The use of cash within "Trade receivables, less allowances" includes progress billings associated with sale of equipment activity. The use of cash within "Payables and accrued liabilities" was primarily driven by a $56.0 decrease in accrued incentive compensation due to payments on the 2019 annual incentive compensation plan and $31.5 from the maturity of a forward exchange contract that hedged a foreign currency exposure.
For the first six months of fiscal year 2019, cash provided by operating activities was $1,285.8 which includes income from continuing operations of $768.8. The working capital accounts were a use of cash of $141.6, primarily driven by $125.5 from payables and accrued liabilities and $55.4 from trade receivables. The use of cash within payables and accrued liabilities is primarily driven by a $61.9 decrease in accrued incentive compensation due to payments on the 2018 plan and a $24.9 decrease in accrued utilities. The decrease in accrued utilities was primarily driven by a contract modification to a tolling arrangement in India in December 2018.
Cash paid for income taxes, net of cash refunds, was $253.5$230.5 and $165.6$253.5 for the six months ended 31 March 2021 and 2020, and 2019, respectively.

Investing Activities
For the first six months of fiscal year 2021, cash used by investing activities was $583.2. Capital expenditures for plant and equipment, including long-term deposits, were $1,227.8. Proceeds from investments of $1,265.5 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 $569.0.
For the first six months of fiscal year 2020, cash used for investing activities was $706.4. Capital expenditures for plant and equipment, including long-term deposits were $930.6. Proceeds from investments of $177.0 resulted from maturities of time deposits with original terms greater than three months but less than one year. Proceeds from sale of assets and investments of $68.0 includesinclude net proceeds of $44.1 related to the sale of property at our current corporate headquarters.
For the first six months of fiscal year 2019, cash used for investing activities was $882.1. Capital expenditures for plant and equipment were $963.5. Cash paid for acquisitions, less cash acquired, was $106.3. See Note 6, Acquisitions, to the consolidated financial statements for further details regarding our acquisitions. Proceeds from investments of $187.9 resulted from maturities of time deposits with original terms greater than three months but less than one year.
Capital expenditures is a non-GAAP 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. A reconciliation of cash used for investing activities to our reported capital expenditures is provided below:
  Six Months Ended
  31 March
  20202019
Cash used for investing activities 
$706.4

$882.1
Proceeds from sale of assets and investments 68.0
3.8
Purchases of investments —
(5.3)
Proceeds from investments 177.0
187.9
Other investing activities 1.9
2.7
Capital Expenditures 
$953.3

$1,071.2
The components of our capital expenditures are detailed in the table below:below. We present a reconciliation of our capital expenditures to cash used for investing activities on page 56.
Six Months Ended
31 March
20212020
Additions to plant and equipment, including long-term deposits$1,227.8 $930.6 
Investment in and advances to unconsolidated affiliates69.8 22.7 
Capital Expenditures$1,297.6 $953.3 
  Six Months Ended
  31 March
  2020 2019
Additions to plant and equipment 
$930.6
 
$963.5
Acquisitions, less cash acquired —
 106.3
Investment in and advances to unconsolidated affiliates 22.7
 1.4
Capital Expenditures 
$953.3
 
$1,071.2

DueCapital expenditures for the first six months of fiscal year 2021 totaled $1,297.6 compared to $953.3 for the significant uncertainty that remains regarding the durationfirst six months of the COVID-19 crisis, the pacefiscal year 2020. This increase was primarily driven by higher spending on gasification projects. Additions to plant and equipment also included support capital of recovery,a routine, ongoing nature, including expenditures for distribution equipment and its negative impact on the global economy, Air Products is not providingfacility improvements.
We expect capital expenditure guidanceexpenditures for fiscal year 2020. Previously disclosed2021 to be approximately $2.5 billion. This does not include any future investment in the Jazan gas and power project. It is not possible, without unreasonable efforts, to reconcile our forecasted capital expenditure guidance should no longer be relied upon. Weexpenditures to future cash used for investing activities because we are monitoringunable to identify the timing or occurrence of our projects to determine whether capital spending and project onstream timing may be delayedfuture 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 those currently under construction.
Investing Activities – Subsequent Event
On 17 April 2020, Air Products acquired five operating hydrogen production plants from PBF Energy Inc. for $530 and has commenced the long-term supply of hydrogen from those plants to PBF refineries.investing activities.
Financing Activities
For the first six months of fiscal year 2021, cash used for financing activities was $503.2 and primarily included dividend payments to shareholders of $592.7, partially offset by long-term debt proceeds of $92.8.
For the first six months of fiscal year 2020, cash used for financing activities was $537.8 and primarily included dividend payments to shareholders of $511.7.
Discontinued Operations
For the first six months of fiscal year 2019,2021, cash used for financingprovided by operating activities was $459.8 and primarily included dividend paymentsof discontinued operations of $6.7 resulted from cash received as part of a state tax settlement related to shareholdersthe sale of $483.1, partially offset by proceeds from stock option exercisesour former Performance Materials Division in fiscal year 2017.
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Financing and Capital Structure
Capital needs for the first six months of fiscal year 20202021 were satisfied primarily with cash from operations. Total debt increased from $7,907.8 as of 30 September 2020 to $8,004.4 as of 31 March 2020 and 30 September 2019, expressed as a percentage of total capitalization (total debt plus total equity), was 22.0% and 22.6%, respectively. Total debt decreased from $3,326.0 at 30 September 2019 to $3,312.6 at 31 March 2020.2021. The current year total debt balance includes $361.2$352.5 of related party debt, primarily associated with the Lu'An joint venture.
We haveOn 31 March 2021, we entered into a $2,300.0five-year $2,500 revolving credit agreement with a syndicate of banks (the "Credit“2021 Credit Agreement”) maturing 31 March 2022. Under the Credit Agreement,, under which senior unsecured debt is available to both the Companyus and certain of itsour subsidiaries. The 2021 Credit Agreement provideswill provide a source of liquidity for the Company and supports itssupport our commercial paper program. The Company’s only financial covenant in the 2021 Credit Agreement is a maximum ratio of total debt to capitalization (equal to total debt plus total equity) not to exceed 70%. Total debt as of 31 March 2021 and 30 September 2020, expressed as a percentage of total capitalization, no greater than 70%.was 37.9% and 38.9%, respectively. No borrowings were outstanding under the 2021 Credit Agreement as of 31 March 2021.
The 2021 Credit Agreement replaced our previous five-year $2,300.0 revolving credit agreement, which was to have matured on 31 March 2022. No borrowings were outstanding under the previous agreement as of 30 September 2020 or 30 September 2019.at the time of its termination. No early termination penalties were incurred.
There were no outstanding commitmentsCommitments of $291.5 are maintained by our foreign subsidiaries, $92.1 of which was borrowed and outstanding as of 31 March 2020.2021.
As of 31 March 2020,2021, we were in compliance with all of the financial and other covenants under our debt agreements.
On 15 September 2011, the Board of Directors authorized the repurchase of up to $1,000 of our outstanding common stock. DuringWe did not purchase any of our outstanding shares during the first six months of fiscal year 2020, we did not purchase any2021. As of our outstanding shares. At 31 March 2020,2021, $485.3 in share repurchase authorization remained.
Dividends
On 2328 January 2019,2021, the Board of Directors declaredincreased the second quarterquarterly dividend on our common stock to $1.50 per share, representing a 12% increase from the previous dividend of $1.34 per share. This is the 39th consecutive year that we have increased our quarterly dividend payment. The dividend is payable on 1110 May 20202021 to shareholders of record at the closeas of business on 1 April 2020.2021.

CONTRACTUAL OBLIGATIONS
We are obligated to make future payments under various contracts, such as debt agreements, lease agreements, unconditional purchase obligations, and other long-term obligations.
We entered into additional operating lease commitments in the first half of fiscal year 2021 with lease terms that commence after 31 March 2021. Refer to Note 12, Commitments and Contingencies, to the consolidated financial statements for additional information.
There have been no other material changes to our contractual obligations since 30 September 2019.2020.

PENSION BENEFITS
For the six months ended 31 March 20202021 and 2019,2020, net periodic pension (benefit) cost was $2.3($19.5) and $17.0,$2.3, respectively. We recognized service-related costs of $23.7$22.8 and $20.9,$23.7, respectively, on our consolidated income statements within operating"Operating income." The non-service related benefits of $21.4$42.3 and $3.9$21.4 were included in "Other non-operating income (expense), net" for the six months ended 31 March 20202021 and 2019,2020, respectively. The decreaseincrease to pension income in pensionfiscal year 2021 from an expense in fiscal year 2020 primarily resulted from lower interest cost and higher expected return on assets, partially offset by higher loss amortization, primarily due to the impact of lower discount rates.total assets. The amount of service costs capitalized in the first six months of fiscal years 20202021 and 20192020 were not material.
For the six months ended 31 March 2020 and 2019, we recognized pension settlement losses of $1.5 and $6.0, respectively, to accelerate recognition of a portion of actuarial gains and losses deferred in accumulated other comprehensive loss. These losses are included within "Other non-operating income (expense), net" on our consolidated income statements. Pension settlement losses in fiscal years 2020 and 2019 were primarily associated with the U.S. supplementary pension plan. We expect total pension settlement losses of approximately $5$0 to $10$5 in fiscal year 2020.2021.
Management considers various factors when making pension funding decisions, including tax, cash flow, and regulatory implications. For the six months ended 31 March 20202021 and 2019,2020, our cash contributions to funded pension plans and benefit payments for unfunded pension plans were $14.9$27.7 and $25.5,$14.9, respectively. Total contributions for fiscal year 20202021 are expected to be approximately $30$45 to $40.$55. We do not expect COVID-19 to impact our contribution forecast for fiscal year 2020.2021. During fiscal year 2019,2020, total contributions were $40.2.$37.5.
ReferFor additional information, refer to Note 12,11, Retirement Benefits, to the consolidated financial statements for details on pension cost and cash contributions.statements.

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COMMITMENTS AND CONTINGENCIES
Refer to Note 13,12, Commitments and Contingencies, to the consolidated financial statements for information concerning our commitments and contingencies, including litigation and environmental matters.

OFF-BALANCE SHEET ARRANGEMENTS
There have been no material changes to off-balance sheet arrangements since 30 September 2019.2020. We are not a primary beneficiary in any material variable interest entity. Our off-balance sheet arrangements are not reasonably likely to have a material impact on financial condition, changes in financial condition, results of operations, or liquidity.

RELATED PARTY TRANSACTIONS
See Note 18,17, Supplemental Information, to the consolidated financial statements for information concerning activity with our related parties.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s Discussion and Analysis of our financial condition and results of operations is based on the consolidated financial statements and accompanying notes that have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Judgments and estimates of uncertainties are required in applying our accounting policies in many areas. However, application of policies that management has identified as critical places significant importance on management’s judgment, often as the result of the need to make estimates of matters that are inherently uncertain. If actual results were to differ materially from these estimates, the reported results could be materially affected. A description of our major accounting policies, including those identified as critical, is included in our 20192020 Form 10-K.
There have been no changes to our accounting policies or estimates during the first six months of fiscal year 20202021 that had a significant impact on our financial condition, change in financial condition, liquidity, or results of operations.
OurWhile our results of operations have not been materiallynegatively affected by the COVID-19 pandemic as of and for the three and six months ended 31 March 2020. As such, we concluded that a2021, there has been no triggering event whichthat would require interim impairment testing for any of our asset groups, indefinite-lived intangible assets, or reporting units that contain goodwill, did not occur. While volumes in our Asia merchant business recovered to normal levels in March 2020, volume reductions in our merchant businesses in the Americas and EMEA region began at the end of March and are expected to continue and be more significant into the third quarter.indefinite-lived intangible assets, or equity method investments. We will continue to evaluate the nature and extent of theseCOVID-19 impacts on our business and any impact they may have on management's estimates, particularly those for our Latin America reporting unit.business. The duration and severity of the COVID-19 outbreak and its long-term impact on our business is uncertain at this time.uncertain.

NEW ACCOUNTING GUIDANCE
See Note 2, New Accounting Guidance, and Note 9, Leases, to the consolidated financial statements for information concerning the implementation and impact of new accounting guidance.


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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Information on our utilization of financial instruments and an analysis of the sensitivity of these instruments to selected changes in market rates and prices is included in our 20192020 Form 10-K.
Our net financial instrument position decreased from a liability of $3,239.1$8,220.7 at 30 September 20192020 to a liability of $3,154.1$8,012.7 at 31 March 2021. The decrease was primarily due to the effect of higher U.S. Dollar interest rates on the fair value of $3.8 billion U.S. Dollar-denominated notes issued in fiscal 2020.
Interest Rate Risk
The sensitivity analysis related to the interest rate risk on the fixed portion of our debt portfolio assumes an instantaneous 100 bp move in interest rates from the level at 31 March 2020,2021, with all other variables held constant. A 100 bp increase in market interest rates would result in a decrease of $67$588 and $75$711 in the net liability position of financial instruments at 31 March 20202021 and 30 September 2019,2020, respectively. A 100 bp decrease in market interest rates would result in an increase of $71$691 and $80$846 in the net liability position of financial instruments at 31 March 20202021 and 30 September 2019.2020.
There were no material changes to the sensitivity analysis related to the variable portion of our debt portfolio since 30 September 2019.2020.
Foreign Currency Exchange Rate Risk
The sensitivity analysis related to foreign currency exchange rates assumes an instantaneous 10% change in foreign currency exchange rates from their levels at 31 March 2020,2021, with all other variables held constant. A 10% strengthening or weakening of the functional currency of an entity versus all other currencies would result in a decrease or increase, respectively, of $263$396 and $326$360 in the net liability position of financial instruments at 31 March 20202021 and 30 September 2019,2020, respectively.
COVID-19 Risks and Uncertainties
Refer to Item 1A. Risk Factors within this Quarterly Report on Form 10-Q for additional discussion of current and potential risks of the COVID-19 pandemic on our business and financial performance.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We maintain a comprehensive set of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Under the supervision of the Chief Executive Officer and Chief Financial Officer, the Company’sour management conducted an evaluation of the effectiveness of the Company’sour disclosure controls and procedures as of 31 March 2020.2021. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of 31 March 2020, the2021, our disclosure controls and procedures were effective.
Internal Control Over Financial Reporting
There was no change in the Company'sour internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended 31 March 20202021 that has materially affected, or is reasonably likely to materially affect, the Company'sour internal control over financial reporting.


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PART II. OTHER INFORMATION
Item 1A. Risk Factors
We are supplementing the risk factors described under “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended 30 September 2019 with the additional risk factor set forth below, which supplements, and to the extent inconsistent, supersedes such risk factors.
The COVID-19 global pandemic may materially and adversely impact our business, financial condition and results of operations.
The COVID-19 global pandemic and efforts to reduce its spread have led to a significant decline of economic activity and significant disruption and volatility in global markets. These factors have led to reduced demand for industrial gas products, particularly in our merchant business. We expect reduced demand in our merchant business to accelerate, particularly in our Industrial Gases – Americas and Industrial Gases – EMEA segments, and for certain planned maintenance activities to be delayed. In addition, COVID-19 may result in reduced sales in our other businesses, lower returns for certain of our projects, and the potential delay or cancellation of certain projects in our pipeline. In addition, we are monitoring the health of our employees and certain of our employees, including those based at our headquarters, are working remotely in accordance with health safety guidance and applicable governmental orders. Action by health or other governmental authorities requiring the closure of our facilities or recommending other physical distancing could negatively impact our business and those of our service providers and customers. Although we have business continuity and other safeguards in place, we cannot be certain that they will be fully effective for extended periods of time. As the pandemic and responses to it continue to evolve we may experience further adverse impacts on our operations, including increased costs under our existing debt arrangements, and our ability to access capital on favorable terms, or at all, may be impaired. In addition, we may face unpredictable increases in demand for certain of our products when restrictions on business and travel end. If demand for our products exceeds our capacity, it could adversely affect our financial results and customer relationships. Although the duration and ultimate impact of these factors is unknown at this time, the decline in economic conditions due to COVID-19, or another disease-causing similar impacts, may adversely affect our business, financial condition and results of operations and such impact may be material.
To the extent COVID-19 adversely affects our business, financial condition, and results of operations and global economic conditions more generally, it may also have the effect of heightening many of the other risk factors described in “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended 30 September 2019.


Item 6. Exhibits.
(a) Exhibits required by Item 601 of Regulation S-K
Exhibit No.Description
Exhibit No.Description
(10)Material Contracts
(10)Material Contracts
10.1
10.2
(31)10.3
(31)Rule 13a-14(a)/15d-14(a) Certifications
31.1
31.2
(32)Section 1350 Certifications
32.1
(101)Interactive Data Files
101.INSInline XBRL Instance Document. The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document.
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
104Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101).
†
The certification attached as Exhibit 32 that accompanies this Quarterly Report on Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Air Products and Chemicals, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Air Products and Chemicals, Inc.
(Registrant)
Air Products and Chemicals, Inc.
By:(Registrant)
Date: 23 April 2020By:/s/ M. Scott Crocco
M. Scott Crocco
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date:10 May 2021


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