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~~December 2022


☐			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 001-04534

AIR PRODUCTS AND CHEMICALS, INC.

(Exact name of registrant as specified in its charter)

Delaware

23-1274455

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

1940 Air Products Boulevard

Allentown, Pennsylvania 18106-5500

(Address of principal executive offices and Zip Code)

610-481-4911

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00 per share	APD	New York Stock Exchange
1.000% Euro Notes due 2025	APD25	New York Stock Exchange
0.500% Euro Notes due 2028	APD28	New York Stock Exchange
0.800% Euro Notes due 2032	APD32	New 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, par value $1 per share, outstanding at 31 ~~March~~December 2022 was ~~221,773,327.~~222,082,851.

Table of Contents

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

QUARTERLY REPORT ON FORM 10-Q

For the quarterly period ended 31 ~~March~~December 2022

TABLE OF CONTENTS



Forward-Looking Statements			3

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)
Consolidated Income Statements – Three ~~and Six~~ Months Ended 31 ~~March~~December 2022 and 2021			5
Consolidated Comprehensive Income Statements – Three ~~and Six~~ Months Ended ~~31 March~~3 1 December 2022 and 2021			6
Consolidated Balance Sheets – 31 ~~March~~December 2022 and 30 September ~~2021~~2022			7
Consolidated Statements of Cash Flows – ~~Six~~Three Months Ended 31 ~~March~~De cember 2022 and 2021			8
Consolidated Statements of Equity – Three ~~and Six~~ Months Ended 31 ~~March~~December 2022 and 2021			9
Notes to Consolidated Financial Statements			1110

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3430
Item 3. Quantitative and Qualitative Disclosures About Market Risk			5848
Item 4. Controls and Procedures			5849

PART II—OTHER INFORMATION



Item 6. Exhibits			5950
Signature			6051

Table of Contents

FORWARD-LOOKING STATEMENTS

This ~~quarterly report~~Quarterly Report on Form 10-Q 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 ongoing 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, inflation, and supply and demand dynamics in the market segments we serve, orincluding demand for technologies and projects to limit the impact of global climate change;

•changes in the financial markets that may affect the availability and terms on which we may obtain financing;

•the ability to implement price increases to offset cost increases;

•disruptions to our supply chain and related distribution delays and cost increases;

•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 safely develop, operate, and manage costs of large scale and technically complex ~~projects, including gasification and hydrogen~~ projects;

•the future financial and operating performance of major customers, joint ventures, and equity affiliates;

•our ability to develop, implement, and operate new technologies and to market products produced utilizing new technologies;

•our ability to execute the projects in our backlog and refresh our pipeline of new projects;

•tariffs, economic sanctions and regulatory activities in jurisdictions in which we and our affiliates and joint ventures operate;

•the impact of environmental, tax, safety, or other legislation, as well as regulations and other public policy initiatives affecting our business and the business of our affiliates and related compliance requirements, including legislation, regulations, or policies intended to address global climate change;

•changes in tax rates and other changes in tax law;

•safety incidents relating to our operations;

•the timing, impact, and other uncertainties relating to acquisitions and divestitures, including our ability to integrate acquisitions and separate divested businesses, respectively;

Table of Contents

FORWARD-LOOKING STATEMENTS (CONTINUED)

•risks relating to cybersecurity incidents, including risks from the interruption, failure or compromise of our information systems;

~~Table of Contents~~

~~FORWARD-LOOKING STATEMENTS (CONTINUED)~~

•catastrophic events, such as natural disasters and extreme weather events, public health crises, acts of war, including Russia’s invasion of Ukraine and the ongoing civil war in Yemen, 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;

•asset impairments due to economic conditions or specific events;

•significant fluctuations in inflation, 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 electric power, natural gas, and other 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 ~~2021.~~2022. 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.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Air Products and Chemicals, Inc. and Subsidiaries

CONSOLIDATED INCOME STATEMENTS

(Unaudited)

Three Months Ended Six Months Ended
31 March 31 March
(Millions of dollars, except for share and per share data) 2022 2021 2022 2021
Sales $2,945.1 $2,502.0 $5,939.3 $4,877.2
Cost of sales 2,151.6 1,745.5 4,375.2 3,377.9
Facility closure — 23.2 — 23.2
Selling and administrative 227.0 210.3 459.8 413.0
Research and development 23.7 21.1 47.0 44.6
Gain on exchange with joint venture partner — 36.8 — 36.8
Other income (expense), net 19.1 9.8 27.6 32.3
Operating Income 561.9 548.5 1,084.9 1,087.6
Equity affiliates' income 120.8 69.8 268.6 139.1
Interest expense 32.3 36.1 62.8 72.8
Other non-operating income (expense), net 9.1 16.8 31.7 35.4
Income From Continuing Operations Before Taxes 659.5 599.0 1,322.4 1,189.3
Income tax provision 122.7 121.9 236.0 235.8
Income From Continuing Operations 536.8 477.1 1,086.4 953.5
Income from discontinued operations, net of tax — — — 10.3
Net Income 536.8 477.1 1,086.4 963.8
Net income (loss) attributable to noncontrolling interests of continuing operations 6.3 4.0 (4.5) 8.7
Net Income Attributable to Air Products $530.5 $473.1 $1,090.9 $955.1
Net Income Attributable to Air Products
Net income from continuing operations $530.5 $473.1 $1,090.9 $944.8
Net income from discontinued operations — — — 10.3
Net Income Attributable to Air Products $530.5 $473.1 $1,090.9 $955.1
Per Share Data*
Basic EPS from continuing operations $2.39 $2.13 $4.91 $4.26
Basic EPS from discontinued operations — — — 0.05
Basic EPS Attributable to Air Products $2.39 $2.13 $4.91 $4.31
Diluted EPS from continuing operations $2.38 $2.13 $4.90 $4.25
Diluted EPS from discontinued operations — — — 0.05
Diluted EPS Attributable to Air Products $2.38 $2.13 $4.90 $4.29
Weighted Average Common Shares (in millions)
Basic 222.0 221.6 222.0 221.6
Diluted 222.5 222.5 222.5 222.5

*Earnings per share ("EPS") is calculated independently for each component and may not sum to total EPS due to rounding.


	Three Months Ended
	31 December
(Millions of U.S. Dollars, except for share and per share data)	2022	2021
Sales	$3,174.7	$2,994.2
Cost of sales	2,272.3	2,223.6


Selling and administrative expense	234.4	232.8
Research and development expense	24.4	23.3












Other income (expense), net	8.4	8.5
Operating Income	652.0	523.0
Equity affiliates' income	110.0	147.8
Interest expense	41.2	30.5
Other non-operating income (expense), net	(0.6)	22.6

Income Before Taxes	720.2	662.9
Income tax provision	136.4	113.3


Net Income	583.8	549.6
Net income (loss) attributable to noncontrolling interests	11.6	(10.8)


Net Income Attributable to Air Products	$572.2	$560.4






Per Share Data (U.S. Dollars per share)


Basic earnings per share attributable to Air Products	$2.58	$2.53



Diluted earnings per share attributable to Air Products	$2.57	$2.52

Weighted Average Common Shares (in millions)
Basic	222.2	221.9
Diluted	222.6	222.6

The accompanying notes are an integral part of these statements.

Table of Contents

Air Products and Chemicals, Inc. and Subsidiaries

CONSOLIDATED COMPREHENSIVE INCOME STATEMENTS

(Unaudited)

Three Months Ended
31 March
(Millions of dollars) 2022 2021
Net Income $536.8 $477.1
Other Comprehensive Loss, net of tax:
Translation adjustments, net of tax of $9.2 and $22.6 (58.8) (144.6)
Net loss on derivatives, net of tax of ($15.3) and ($13.2) (39.4) (5.2)
Reclassification adjustments:
Derivatives, net of tax of $8.6 and $12.0 26.0 36.0
Pension and postretirement benefits, net of tax of $5.5 and $5.9 15.9 18.3
Total Other Comprehensive Loss (56.3) (95.5)
Comprehensive Income 480.5 381.6
Net Income Attributable to Noncontrolling Interests 6.3 4.0
Other Comprehensive (Loss) Income Attributable to Noncontrolling Interests (3.0) 15.6
Comprehensive Income Attributable to Air Products $477.2 $362.0


					Three Months Ended
		Six Months Ended			31 December
		31 March
(Millions of dollars)		2022	2021
(Millions of U.S. Dollars)				(Millions of U.S. Dollars)	2022	2021
Net Income	Net Income	$1,086.4	$963.8	Net Income	$583.8	$549.6
Other Comprehensive Income, net of tax:	Other Comprehensive Income, net of tax:			Other Comprehensive Income, net of tax:
Translation adjustments, net of tax of $16.8 and ($1.6)		(18.2)	271.1
Translation adjustments, net of tax of ($38.0) and $7.6				Translation adjustments, net of tax of ($38.0) and $7.6	509.6	40.6

Net (loss) gain on derivatives, net of tax of ($26.4) and ($10.5)		(39.9)	8.6

Net gain (loss) on derivatives, net of tax of $38.2 and ($11.1)				Net gain (loss) on derivatives, net of tax of $38.2 and ($11.1)	121.0	(0.5)
Pension and postretirement benefits, net of tax of $2.4 and $—				Pension and postretirement benefits, net of tax of $2.4 and $—	6.7	—
Reclassification adjustments:	Reclassification adjustments:			Reclassification adjustments:

Derivatives, net of tax of $14.7 and $11.2		44.7	34.7
Pension and postretirement benefits, net of tax of $10.9 and $11.8		31.9	36.6
Derivatives, net of tax of ($21.7) and $6.1				Derivatives, net of tax of ($21.7) and $6.1	(68.7)	18.7
Pension and postretirement benefits, net of tax of $3.7 and $5.4				Pension and postretirement benefits, net of tax of $3.7 and $5.4	11.9	16.0
Total Other Comprehensive Income	Total Other Comprehensive Income	18.5	351.0	Total Other Comprehensive Income	580.5	74.8
Comprehensive Income	Comprehensive Income	1,104.9	1,314.8	Comprehensive Income	1,164.3	624.4
Net (Loss) Income Attributable to Noncontrolling Interests		(4.5)	8.7

Net Income (Loss) Attributable to Noncontrolling Interests				Net Income (Loss) Attributable to Noncontrolling Interests	11.6	(10.8)
Other Comprehensive Income Attributable to Noncontrolling Interests	Other Comprehensive Income Attributable to Noncontrolling Interests	8.2	35.3	Other Comprehensive Income Attributable to Noncontrolling Interests	12.7	11.2
Comprehensive Income Attributable to Air Products	Comprehensive Income Attributable to Air Products	$1,101.2	$1,270.8	Comprehensive Income Attributable to Air Products	$1,140.0	$624.0

The accompanying notes are an integral part of these statements.

Table of Contents

Air Products and Chemicals, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Unaudited)


		31 March	30 September		31 December	30 September
(Millions of dollars, except for share and per share data)		2022	2021
(Millions of U.S. Dollars, except for share and per share data)				(Millions of U.S. Dollars, except for share and per share data)	2022	2022
Assets	Assets			Assets
Current Assets	Current Assets			Current Assets
Cash and cash items	Cash and cash items	$2,348.7	$4,468.9	Cash and cash items	$3,131.0	$2,711.0
Short-term investments	Short-term investments	848.9	1,331.9	Short-term investments	19.6	590.7
Trade receivables, net	Trade receivables, net	1,728.2	1,451.3	Trade receivables, net	1,827.2	1,794.4
Inventories	Inventories	507.5	453.9	Inventories	635.3	514.2

Prepaid expenses	Prepaid expenses	195.5	119.4	Prepaid expenses	165.1	156.8
Other receivables and current assets	Other receivables and current assets	620.6	550.9	Other receivables and current assets	542.9	515.8

Total Current Assets	Total Current Assets	6,249.4	8,376.3	Total Current Assets	6,321.1	6,282.9
Investment in net assets of and advances to equity affiliates	Investment in net assets of and advances to equity affiliates	3,423.8	1,649.3	Investment in net assets of and advances to equity affiliates	3,391.5	3,353.8
Plant and equipment, at cost	Plant and equipment, at cost	28,720.4	27,488.8	Plant and equipment, at cost	29,772.3	28,160.1
Less: accumulated depreciation	Less: accumulated depreciation	14,625.2	14,234.2	Less: accumulated depreciation	14,733.1	13,999.6
Plant and equipment, net	Plant and equipment, net	14,095.2	13,254.6	Plant and equipment, net	15,039.2	14,160.5
Goodwill, net	Goodwill, net	912.8	911.5	Goodwill, net	876.3	823.0
Intangible assets, net	Intangible assets, net	419.2	420.7	Intangible assets, net	363.1	347.5
Operating lease right-of-use assets, net				Operating lease right-of-use assets, net	754.8	694.8
Noncurrent lease receivables	Noncurrent lease receivables	692.3	740.3	Noncurrent lease receivables	579.3	583.1
Other noncurrent assets	Other noncurrent assets	1,657.0	1,506.5	Other noncurrent assets	953.0	947.0

Total Noncurrent Assets	Total Noncurrent Assets	21,200.3	18,482.9	Total Noncurrent Assets	21,957.2	20,909.7
Total Assets	Total Assets	$27,449.7	$26,859.2	Total Assets	$28,278.3	$27,192.6
Liabilities and Equity	Liabilities and Equity			Liabilities and Equity
Current Liabilities	Current Liabilities			Current Liabilities
Payables and accrued liabilities	Payables and accrued liabilities	$2,407.1	$2,218.3	Payables and accrued liabilities	$2,552.0	$2,771.6
Accrued income taxes	Accrued income taxes	104.6	93.9	Accrued income taxes	159.9	135.2
Short-term borrowings	Short-term borrowings	207.2	2.4	Short-term borrowings	2.2	10.7
Current portion of long-term debt	Current portion of long-term debt	486.2	484.5	Current portion of long-term debt	562.8	548.3

Total Current Liabilities	Total Current Liabilities	3,205.1	2,799.1	Total Current Liabilities	3,276.9	3,465.8
Long-term debt	Long-term debt	6,462.2	6,875.7	Long-term debt	6,834.4	6,433.8
Long-term debt – related party	Long-term debt – related party	285.9	274.6	Long-term debt – related party	658.4	652.0
Noncurrent operating lease liabilities				Noncurrent operating lease liabilities	627.4	592.1
Other noncurrent liabilities	Other noncurrent liabilities	1,736.8	1,640.9	Other noncurrent liabilities	1,117.7	1,099.1
Deferred income taxes	Deferred income taxes	1,249.0	1,180.9	Deferred income taxes	1,246.1	1,247.4

Total Noncurrent Liabilities	Total Noncurrent Liabilities	9,733.9	9,972.1	Total Noncurrent Liabilities	10,484.0	10,024.4
Total Liabilities	Total Liabilities	12,939.0	12,771.2	Total Liabilities	$13,760.9	$13,490.2
Commitments and Contingencies - See Note 13		0	0
Commitments and Contingencies - See Note 11				Commitments and Contingencies - See Note 11
Air Products Shareholders’ Equity	Air Products Shareholders’ Equity			Air Products Shareholders’ Equity
Common stock (par value $1 per share; issued 2022 and 2021 - 249,455,584 shares)		249.4	249.4
Common stock (par value $1 per share; issued 2023 and 2022 - 249,455,584 shares)				Common stock (par value $1 per share; issued 2023 and 2022 - 249,455,584 shares)	249.4	249.4
Capital in excess of par value	Capital in excess of par value	1,120.8	1,115.8	Capital in excess of par value	1,148.4	1,141.4
Retained earnings	Retained earnings	16,075.9	15,678.3	Retained earnings	16,731.4	16,520.3
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(1,505.6)	(1,515.9)	Accumulated other comprehensive loss	(2,218.3)	(2,786.1)
Treasury stock, at cost (2022 - 27,682,257 shares; 2021 - 28,058,829 shares)		(1,985.4)	(1,987.9)
Treasury stock, at cost (2023 - 27,372,733 shares; 2022 - 27,616,888 shares)				Treasury stock, at cost (2023 - 27,372,733 shares; 2022 - 27,616,888 shares)	(1,975.2)	(1,981.0)
Total Air Products Shareholders’ Equity	Total Air Products Shareholders’ Equity	13,955.1	13,539.7	Total Air Products Shareholders’ Equity	13,935.7	13,144.0
Noncontrolling Interests	Noncontrolling Interests	555.6	548.3	Noncontrolling Interests	581.7	558.4
Total Equity	Total Equity	14,510.7	14,088.0	Total Equity	$14,517.4	$13,702.4
Total Liabilities and Equity	Total Liabilities and Equity	$27,449.7	$26,859.2	Total Liabilities and Equity	$28,278.3	$27,192.6

The accompanying notes are an integral part of these statements.

Table of Contents

Air Products and Chemicals, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Six Months Ended			Three Months Ended
		31 March			31 December
(Millions of dollars)		2022	2021
(Millions of U.S. Dollars)				(Millions of U.S. Dollars)	2022	2021
Operating Activities	Operating Activities			Operating Activities
Net income	Net income	$1,086.4	$963.8	Net income	$583.8	$549.6
Less: Net (loss) income attributable to noncontrolling interests of continuing operations		(4.5)	8.7
Less: Net income (loss) attributable to noncontrolling interests				Less: Net income (loss) attributable to noncontrolling interests	11.6	(10.8)

Net income attributable to Air Products	Net income attributable to Air Products	1,090.9	955.1	Net income attributable to Air Products	572.2	560.4
Income from discontinued operations		—	(10.3)
Income from continuing operations attributable to Air Products		1,090.9	944.8

Adjustments to reconcile income to cash provided by operating activities:	Adjustments to reconcile income to cash provided by operating activities:			Adjustments to reconcile income to cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	668.2	653.0	Depreciation and amortization	321.5	332.3
Deferred income taxes	Deferred income taxes	51.3	76.1	Deferred income taxes	13.8	15.7

Facility closure		—	23.2
Undistributed earnings of equity method investments		(200.8)	(58.7)

Distributed (Undistributed) earnings of equity method investments				Distributed (Undistributed) earnings of equity method investments	17.2	(117.3)
Gain on sale of assets and investments	Gain on sale of assets and investments	(11.8)	(26.2)	Gain on sale of assets and investments	(2.3)	(0.8)
Share-based compensation	Share-based compensation	26.5	22.4	Share-based compensation	16.1	15.8
Noncurrent lease receivables	Noncurrent lease receivables	43.9	43.4	Noncurrent lease receivables	19.4	21.8

Other adjustments	Other adjustments	(101.0)	(6.5)	Other adjustments	99.0	(49.4)
Working capital changes that provided (used) cash, excluding effects of acquisitions:	Working capital changes that provided (used) cash, excluding effects of acquisitions:			Working capital changes that provided (used) cash, excluding effects of acquisitions:
Trade receivables	Trade receivables	(203.1)	(74.8)	Trade receivables	40.4	(132.7)
Inventories	Inventories	(57.3)	(25.4)	Inventories	(102.8)	(33.7)
Other receivables	Other receivables	13.8	15.7	Other receivables	(6.7)	14.0
Payables and accrued liabilities	Payables and accrued liabilities	123.1	135.7	Payables and accrued liabilities	(257.6)	167.6
Other working capital	Other working capital	(138.7)	(142.4)	Other working capital	(10.9)	(8.5)
Cash Provided by Operating Activities	Cash Provided by Operating Activities	1,305.0	1,580.3	Cash Provided by Operating Activities	719.3	785.2
Investing Activities	Investing Activities			Investing Activities
Additions to plant and equipment, including long-term deposits	Additions to plant and equipment, including long-term deposits	(1,433.6)	(1,227.8)	Additions to plant and equipment, including long-term deposits	(834.2)	(663.8)
Acquisitions, less cash acquired	Acquisitions, less cash acquired	(65.1)	—	Acquisitions, less cash acquired	—	(34.6)
Investment in and advances to unconsolidated affiliates	Investment in and advances to unconsolidated affiliates	(1,650.9)	(69.8)	Investment in and advances to unconsolidated affiliates	—	(1,632.7)
Proceeds from sale of assets and investments	Proceeds from sale of assets and investments	25.3	14.8	Proceeds from sale of assets and investments	4.0	1.1
Purchases of investments	Purchases of investments	(909.4)	(569.0)	Purchases of investments	(19.2)	(727.4)
Proceeds from investments	Proceeds from investments	1,391.4	1,265.5	Proceeds from investments	591.5	1,331.9

Other investing activities	Other investing activities	6.5	3.1	Other investing activities	1.7	6.4
Cash Used for Investing Activities	Cash Used for Investing Activities	(2,635.8)	(583.2)	Cash Used for Investing Activities	(256.2)	(1,719.1)
Financing Activities	Financing Activities			Financing Activities
Long-term debt proceeds	Long-term debt proceeds	87.5	92.8	Long-term debt proceeds	476.3	51.6
Payments on long-term debt	Payments on long-term debt	(400.0)	(15.9)	Payments on long-term debt	(195.9)	(400.0)
Net increase in commercial paper and short-term borrowings		210.9	33.6
Net (decrease) increase in commercial paper and short-term borrowings				Net (decrease) increase in commercial paper and short-term borrowings	(4.1)	113.1

Dividends paid to shareholders	Dividends paid to shareholders	(664.7)	(592.7)	Dividends paid to shareholders	(359.4)	(332.1)

Proceeds from stock option exercises	Proceeds from stock option exercises	14.4	4.7	Proceeds from stock option exercises	14.0	13.3

Other financing activities	Other financing activities	(33.7)	(25.7)	Other financing activities	(16.5)	(31.0)
Cash Used for Financing Activities	Cash Used for Financing Activities	(785.6)	(503.2)	Cash Used for Financing Activities	(85.6)	(585.1)
Discontinued Operations
Cash provided by operating activities		—	6.7
Cash provided by investing activities		—	—
Cash provided by financing activities		—	—
Cash Provided by Discontinued Operations		—	6.7

Effect of Exchange Rate Changes on Cash	Effect of Exchange Rate Changes on Cash	(3.8)	32.7	Effect of Exchange Rate Changes on Cash	42.5	3.8
(Decrease) Increase in cash and cash items		(2,120.2)	533.3
Increase (Decrease) in cash and cash items				Increase (Decrease) in cash and cash items	420.0	(1,515.2)
Cash and Cash items – Beginning of year	Cash and Cash items – Beginning of year	4,468.9	5,253.0	Cash and Cash items – Beginning of year	2,711.0	4,468.9
Cash and Cash Items – End of Period	Cash and Cash Items – End of Period	$2,348.7	$5,786.3	Cash and Cash Items – End of Period	$3,131.0	$2,953.7

The accompanying notes are an integral part of these statements.

Table of Contents

Air Products and Chemicals, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

Six Months Ended
31 March 2022
(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 2021 $249.4 $1,115.8 $15,678.3 ($1,515.9) ($1,987.9) $13,539.7 $548.3 $14,088.0
Net income — — 1,090.9 — — 1,090.9 (4.5) 1,086.4
Other comprehensive income — — — 10.3 — 10.3 8.2 18.5
Dividends on common stock (per share $3.12) — — (691.8) — — (691.8) — (691.8)
Dividends to noncontrolling interests — — — — — — (1.0) (1.0)
Share-based compensation — 25.7 — — — 25.7 — 25.7
Issuance of treasury shares for stock option and award plans — (21.0) — — 2.5 (18.5) — (18.5)
Investments by noncontrolling interests — — — — — — 3.6 3.6
Purchase of noncontrolling interests — — — — — — (1.9) (1.9)
Other equity transactions — 0.3 (1.5) — — (1.2) 2.9 1.7
Balance at 31 March 2022 $249.4 $1,120.8 $16,075.9 ($1,505.6) ($1,985.4) $13,955.1 $555.6 $14,510.7


											Three Months Ended 31 December 2022
(Millions of U.S. Dollars, except for per share data)										(Millions of U.S. 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 2022										Balance at 30 September 2022	$249.4	$1,141.4	$16,520.3	($2,786.1)	($1,981.0)	$13,144.0	$558.4	$13,702.4
Net income										Net income	—	—	572.2	—	—	572.2	11.6	583.8
Other comprehensive income										Other comprehensive income	—	—	—	567.8	—	567.8	12.7	580.5
Dividends on common stock (per share $1.62)										Dividends on common stock (per share $1.62)	—	—	(359.8)	—	—	(359.8)	—	(359.8)
Dividends to noncontrolling interests										Dividends to noncontrolling interests	—	—	—	—	—	—	(0.8)	(0.8)
Share-based compensation										Share-based compensation	—	14.2	—	—	—	14.2	—	14.2
Issuance of treasury shares for stock option and award plans										Issuance of treasury shares for stock option and award plans	—	(7.4)	—	—	5.8	(1.6)	—	(1.6)

		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		—	—	—	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	Other equity transactions	—	0.2	(2.3)	—	—	(2.1)	0.1	(2.0)	Other equity transactions	—	0.2	(1.3)	—	—	(1.1)	(0.2)	(1.3)
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

Balance at 31 December 2022										Balance at 31 December 2022	$249.4	$1,148.4	$16,731.4	($2,218.3)	($1,975.2)	$13,935.7	$581.7	$14,517.4


	Three Months Ended 31 December 2021
(Millions of U.S. 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 2021	$249.4	$1,115.8	$15,678.3	($1,515.9)	($1,987.9)	$13,539.7	$548.3	$14,088.0
Net income	—	—	560.4	—	—	560.4	(10.8)	549.6
Other comprehensive income	—	—	—	63.6	—	63.6	11.2	74.8
Dividends on common stock (per share $1.50)	—	—	(332.6)	—	—	(332.6)	—	(332.6)

Share-based compensation	—	14.1	—	—	—	14.1	—	14.1
Issuance of treasury shares for stock option and award plans	—	(18.1)	—	—	(1.3)	(19.4)	—	(19.4)
Investments by noncontrolling interests	—	—	—	—	—	—	3.6	3.6
Purchase of noncontrolling interests	—	—	—	—	—	—	(1.9)	(1.9)
Other equity transactions	—	0.2	(0.9)	—	—	(0.7)	0.1	(0.6)
Balance at 31 December 2021	$249.4	$1,112.0	$15,905.2	($1,452.3)	($1,989.2)	$13,825.1	$550.5	$14,375.6

The accompanying notes are an integral part of these statements.

Table of ~~Contents~~

~~Air Products and Chemicals, Inc. and Subsidiaries~~

~~CONSOLIDATED STATEMENTS OF EQUITY (cont.)~~

~~(Unaudited)~~

Three Months Ended
31 March 2022
(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 2021 $249.4 $1,112.0 $15,905.2 ($1,452.3) ($1,989.2) $13,825.1 $550.5 $14,375.6
Net income — — 530.5 — — 530.5 6.3 536.8
Other comprehensive income (loss) — — — (53.3) — (53.3) (3.0) (56.3)
Dividends on common stock (per share $1.62) — — (359.3) — — (359.3) — (359.3)
Dividends to noncontrolling interests — — — — — — (1.0) (1.0)
Share-based compensation — 11.6 — — — 11.6 — 11.6
Issuance of treasury shares for stock option and award plans — (2.9) — — 3.8 0.9 — 0.9
Other equity transactions — 0.1 (0.5) — — (0.4) 2.8 2.4
Balance at 31 March 2022 $249.4 $1,120.8 $16,075.9 ($1,505.6) ($1,985.4) $13,955.1 $555.6 $14,510.7

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

~~The accompanying notes are an integral part of these statements.~~

~~Table of~~ Contents

Air Products and Chemicals, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Millions of ~~dollars~~U.S. Dollars, unless otherwise indicated ~~except for share and per share data)~~


1.	1.	Basis of Presentation and Major Accounting Policies	12	1.	Basis of Presentation and Major Accounting Policies	11
2.	2.	New Accounting Guidance	13	2.	New Accounting Guidance	11

3.	3.	Acquisitions	13	3.	Revenue Recognition	12

4.	4.	Revenue Recognition	14	4.	Inventories	13
5.	5.	Discontinued Operations	15	5.	Equity Affiliates	13
6.	6.	Inventories	15	6.	Goodwill	14

7.	7.	Equity Affiliates	15	7.	Financial Instruments	15
8.	8.	Goodwill	16	8.	Fair Value Measurements	20

9.	9.	Financial Instruments	17	9.	Debt	22
10.	10.	Fair Value Measurements	23	10.	Retirement Benefits	22
11.	11.	Debt	25	11.	Commitments and Contingencies	23
12.	12.	Retirement Benefits	25	12.	Share-Based Compensation	25
13.	13.	Commitments and Contingencies	26	13.	Accumulated Other Comprehensive Loss	26
14.	14.	Share-Based Compensation	29	14.	Earnings per Share	27
15.	15.	Accumulated Other Comprehensive Loss	30	15.	Income Taxes	27
16.	16.	Earnings per Share	31	16.	Supplemental Information	27
17.	17.	Income Taxes	31	17.	Business Segment Information	29
18.		Supplemental Information	31
19.		Business Segment Information	32

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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 fairly 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 to the interim consolidated financial 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 ~~2021~~2022 (the ~~"2021~~"2022 Form ~~10-K"~~10-K")., which was filed with the SEC on 22 November 2022. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

Major Accounting Policies

Refer to our ~~2021~~2022 Form 10-K for a description of major accounting policies. There have been no significant changes to these accounting policies during the first ~~six~~three months of fiscal year ~~2022.~~

~~Segment Reorganization~~

~~We reorganized our reporting segments effective 1 October 2021. Prior year segment information presented has been updated to conform with the fiscal year 2022 presentation. Refer to Note 19,~~ ~~Business Segment Information, for additional information.~~

~~Russia's Invasion of Ukraine~~

In March 2022, we announced our intent to divest our small industrial gas business in Russia due to Russia's invasion of Ukraine. As a result, we reclassified assets of $54.1 that met the held for sale criteria in our Europe segment to "Other receivables and current assets" on our consolidated balance sheet as of 31 March 2022. The effect of this reclassification was excluded from our consolidated statement of cash flows for the six months ended 31 March 2022. Sales from this business were less than $25 in fiscal year 2021.

In addition, we suspended the construction of a plant in Ukraine. Our consolidated balance sheet includes approximately $45 as of 31 March 2022 within "Plant and equipment, net" related to this project. Sales from other operations in Ukraine were less than $5 in fiscal year 2021.2023.

Risks and Uncertainties

We are subject to various risks and uncertainties, including, but not limited to, those resulting from the COVID-19 pandemic, ~~as well as~~increased inflationary pressures, and Russia's invasion of Ukraine. Our results of operations for the periods covered by this report were not materially impacted by these events; however, ~~given the dynamic nature of these circumstances,~~there is uncertainty ~~remains related to~~regarding how these events and others may affect our business, results of operations, and overall financial performance in future ~~periods. For example,~~periods, including our ability to ~~recover~~complete suspended projects.

Reclassifications

Beginning in the ~~carrying value~~first quarter of fiscal year 2023, we present "Operating lease right-of-use assets, net" and "Noncurrent operating lease liabilities" in separate captions on our ~~assets in Russia~~consolidated balance sheets. These balances were previously presented within "Other noncurrent assets" and ~~Ukraine~~"Other noncurrent liabilities," respectively. Our balance sheet as ~~well as our ability~~of 30 September 2022 has been reclassified to ~~exit contracts in Russia could be impacted by sanctions imposed on Russia and potential Russian retaliatory measures.~~conform to the fiscal year 2023 presentation.

~~Table of Contents~~

2. NEW ACCOUNTING GUIDANCE

New Accounting Guidance to be Implemented

Government Assistance

In November 2021, the Financial Accounting Standards Board ("FASB") issued disclosure guidance to increase the transparency of transactions an entity has with a government that are accounted for by applying a grant or contribution accounting model. ~~This guidance is effective beginning in fiscal year 2023, with early adoption permitted.~~ We are evaluating the impact this guidance will have on our ~~consolidated financial statements.~~

~~Acquired Revenue Contracts in a Business Combination~~

In October 2021, the FASB issued an update for the recognition of contract assets and liabilities acquired in a business combination. Rather than recognizing such items at fair value on the acquisition date, the acquirer would measure and recognize contract assets and liabilities in accordance with ASC 606, ~~Revenue from Contracts with Customers, as if it had originated the contract. This guidance is effective beginning in fiscal year 2024, with early adoption permitted. We are evaluating the impact this guidance will have on~~annual disclosures to our consolidated financial statements. We will adopt this guidance prospectively in our Annual Report for fiscal year 2023.

Reference Rate Reform

In March 2020, the FASB issued an update to provide practical expedients and exceptions for applying 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 the London Inter-Bank Offered Rate ("LIBOR"). ~~The~~In December 2022, the FASB extended the date through which the amendments may be applied to impacted contracts and hedges ~~prospectively through~~to 31 December ~~2022. To date, we~~2024. We have had no ~~impacts on our hedging relationships related to~~ reference rate ~~reform.~~reform modifications to date. We will ~~continue to evaluate the impact~~adopt this ~~guidance could have on our consolidated financial statements.~~

~~3. ACQUISITIONS~~

~~Fiscal Year 2021~~

~~Gain on Exchange With Joint Venture Partner~~

We previously held a 50% ownership interest in Tyczka Industrie-Gases GmbH ("TIG"), a joint venture in Germany with the Tyczka Group that was primarily a merchant gases business. We accounted for this arrangement as an equity method investment in our former Industrial Gases – EMEA segment.

~~Effective 23 February 2021 (the "acquisition date"), TIG was separated into 2 businesses, one of which we acquired~~update on a 100% basis. Our partner paid us $10.8 to acquire the other 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 interestprospective basis in the ~~portion~~event 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. The results of this business are consolidated within our Europe segment.~~

any such modifications.

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4.3. REVENUE RECOGNITION

The majority of our revenue is generated from our sale of gas customers within the regional industrial gases 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. We also design and manufacture equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction, and liquid helium and liquid hydrogen transport and storage. The Corporate and other segment serves our sale of equipment customers.

Disaggregation of Revenue

The ~~tables~~table below ~~present~~presents our consolidated sales disaggregated by supply mode for each of our ~~reporting~~reportable segments for the ~~three~~first quarter of fiscal years 2023 and ~~six months ended 31 March 2022 and 2021.~~2022. We believe this presentation best depicts the nature, timing, type of customer, and contract terms for our sales.


		Americas	Asia	Europe	Middle East and India	Corporate and other	Total	%			Three Months Ended 31 December 2022
Three Months Ended 31 March 2022

											Americas	Asia	Europe	Middle East and India	Corporate and other	Total	%

On-site	On-site	$716.5	$460.4	$292.0	$17.3	$—	$1,486.2	51	%	On-site	$845.8	$457.7	$328.1	$18.8	$—	$1,650.4	52	%
Merchant	Merchant	470.1	290.8	446.6	11.6	—	1,219.1	41	%	Merchant	538.4	320.1	463.8	22.6	—	1,344.9	42	%
Sale of Equipment	Sale of Equipment	—	—	—	—	239.8	239.8	8	%	Sale of Equipment	—	—	—	—	179.4	179.4	6	%
Total	Total	$1,186.6	$751.2	$738.6	$28.9	$239.8	$2,945.1	100	%	Total	$1,384.2	$777.8	$791.9	$41.4	$179.4	$3,174.7	100	%

Three Months Ended 31 March 2021
											Three Months Ended 31 December 2021

											Americas	Asia	Europe	Middle East and India	Corporate and other	Total	%

On-site	On-site	$636.7	$416.0	$182.7	$19.6	$—	$1,255.0	50	%	On-site	$797.6	$451.6	$325.6	$16.3	$—	$1,591.1	53	%
Merchant	Merchant	419.4	281.5	375.7	6.6	—	1,083.2	43	%	Merchant	426.5	328.8	418.6	7.4	—	1,181.3	40	%
Sale of Equipment	Sale of Equipment	—	—	—	—	163.8	163.8	7	%	Sale of Equipment	—	—	—	—	221.8	221.8	7	%
Total	Total	$1,056.1	$697.5	$558.4	$26.2	$163.8	$2,502.0	100	%	Total	$1,224.1	$780.4	$744.2	$23.7	$221.8	$2,994.2	100	%

Americas Asia Europe Middle East
and India Corporate
and other Total %
Six Months Ended 31 March 2022
On-site $1,514.1 $912.0 $617.6 $33.6 $— $3,077.3 52 %
Merchant 896.6 619.6 865.2 19.0 — 2,400.4 40 %
Sale of Equipment — — — — 461.6 461.6 8 %
Total $2,410.7 $1,531.6 $1,482.8 $52.6 $461.6 $5,939.3 100 %
Six Months Ended 31 March 2021
On-site $1,178.0 $830.9 $359.2 $31.8 $— $2,399.9 49 %
Merchant 811.1 584.1 742.7 13.9 — 2,151.8 44 %
Sale of Equipment — — — — 325.5 325.5 7 %
Total $1,989.1 $1,415.0 $1,101.9 $45.7 $325.5 $4,877.2 100 %

Remaining Performance Obligations

As of 31 ~~March~~December 2022, the transaction price allocated to remaining performance obligations is estimated to be approximately ~~$24~~$23 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 the next five years and the balance thereafter.

~~Expected~~Our remaining performance obligations do not include (1) expected revenue associated with new on-site plants that are not yet ~~on stream is excluded from this amount. In addition, this amount excludes~~on-stream; (2) consideration associated with contracts ~~having~~that have an expected duration of less than one ~~year~~year; and (3) variable consideration for which we recognize revenue at the amount to which we have the right to invoice, including energy cost pass-through ~~costs.~~to customers.

In the future, actual amounts will differ due to events outside of our control, including, but not limited to, inflationary price escalations; currency exchange rates; and amended, terminated, or renewed contracts.

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Table of Contents

Contract Balances

The table below details balances arising from contracts with customers:

31 March

30 September

31 December

30 September

Balance Sheet Location

2022

2021

Balance Sheet Location

2022

Assets

Contract assets – current

Other receivables and current assets

$56.8

$119.4

Contract assets – current

Other receivables and current assets

$81.9

$69.0

Contract fulfillment costs – current

Other receivables and current assets

226.6

125.5

Contract fulfillment costs – current

Other receivables and current assets

103.5

84.1

Liabilities

Contract liabilities – current

Payables and accrued liabilities

565.8

366.8

Contract liabilities – current

Payables and accrued liabilities

$424.6

$439.1

Contract liabilities – noncurrent

Other noncurrent liabilities

70.8

58.4

Contract liabilities – noncurrent

Other noncurrent liabilities

97.4

67.2

Changes to our contract balances primarily relate to our sale of equipment contracts. During the ~~six~~three months ended 31 ~~March~~December 2022, we recognized sales of approximately ~~$155 in revenue~~$80 associated with sale of equipment contracts that ~~was~~were included within our contract liabilities as of 30 September ~~2021.~~

2022.

~~5. DISCONTINUED OPERATIONS~~

In the first quarter of fiscal year 2021, we recorded a tax benefit of $10.3 primarily 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 statement for the 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.

6.4. INVENTORIES

The components of inventories are as follows:


		31 March	30 September		31 December	30 September
		2022	2021		2022	2022
Finished goods	Finished goods	$173.5	$150.7	Finished goods	$244.7	$162.0
Work in process	Work in process	22.3	24.0	Work in process	25.1	22.0
Raw materials, supplies and other		311.7	279.2
Raw materials, supplies, and other				Raw materials, supplies, and other	365.5	330.2
Inventories	Inventories	$507.5	$453.9	Inventories	$635.3	$514.2

7.5. EQUITY AFFILIATES

Equity Affiliate Investment in Jazan Integrated Gasification and Power Company (“JIGPC”)

On 27 October 2021, we made an initial investment of $1.6 billion in Jazan Integrated Gasification and Power Company ("JIGPC"). JIGPC is a joint venture with Saudi Aramco Power Company (a subsidiary of Aramco), ACWA Power, and Air Products Qudra in the Jazan Economic City, Saudi Arabia. Our investment represents a 55% interest in the joint venture, of which 4% is attributable to the ~~non-controlling~~noncontrolling partner of Air Products Qudra. The $1.6 billion investment, which includes approximately $130 from the non-controlling partner, is primarily in the form of shareholder loans that qualify as in-substance common stock in the joint venture.

~~We expect to make an additional investment in JIGPC of approximately $1 billion in 2023.~~

We determined JIGPC is a variable interest entity for which we are not the primary beneficiary as we do not have the power to direct the activities that are most significant to the economic performance of the joint venture. Instead, these activities, including plant dispatch, operating and maintenance decisions, budgeting, capital expenditures, and financing, require unanimous approval of the owners or are controlled by the customer. Since we have the ability to exercise significant influence in the joint venture, we accounted for our investment in JIGPC under the equity method within the Middle East and India segment.

~~Pursuant~~Certain shareholders receive a preferred cash distribution pursuant to the joint venture agreement, ~~cash distributions will include preferred distributions to some shareholders. We record our~~which specifies each shareholder’s share of income after considering ~~current distributions and projections~~the amount of cash available for distribution. As such, the earnings attributable to Air Products ~~over~~may not be proportionate to our ownership interest in the ~~life of the~~ venture.

~~Table of Contents~~

As of 31 ~~March~~December 2022, the carrying value of our investment totaled ~~$1,779.0~~$1,776.5 and is presented as “Investments in net assets of and advances to equity affiliates” on our consolidated balance sheet. Our loss exposure is limited to our investment in the joint venture.

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Subsequent Event

On 19 January 2023, we made an additional investment of $908 toward the second phase of the project as further discussed below. This investment included $73 received from the noncontrolling partner of Air Products Qudra. We expect to complete a remaining investment of approximately $115, including approximately $9 from the non-controlling partner of Air Products Qudra, later this calendar year.

JIGPC Joint Venture

On 27 September 2021, JIGPC signed definitive agreements for the acquisition of project assets from Aramco for $12 billion and entered into related project financing for the ~~purchase. JIGPC will complete the acquisition~~purchase of the project assets, which include power blocks, gasifiers, air separation units, syngas cleanup assets, and utilities, in two phases. The first phase was completed on 27 October 2021 for $7 ~~billion. The~~billion, and the second phase ~~is expected~~was completed for $4.15 billion on 19 January 2023. We expect final commissioning items to be completed ~~in 2023.~~later this calendar year. JIGPC will commission, operate, and maintain the project assets to supply electricity, steam, hydrogen, and utilities to Aramco’s refinery and terminal complex under a 25-year agreement, which commenced in the first quarter of fiscal year 2022.

JIGPC ~~accounted for the asset transfer as a financing. Accordingly, the joint venture~~ recorded a financing ~~receivable~~receivables upon acquisition of the assets and ~~will recognize~~is recognizing financing income over the supply term.

Jazan Gas Project Company

Jazan Gas Project Company (“JGPC”), a joint venture between Air Products and ACWA Holding, entered into a 20-year oxygen and nitrogen supply agreement in 2015 to supply Aramco’s oil refinery and power plant in Jazan, Saudi Arabia. ~~We own 26% of the joint venture.~~

In October 2021, the supply agreement between JGPC and Aramco was terminated, and JGPC sold its air separation units to Aramco. We initially sold these assets to JGPC and deferred ~~revenue and~~ profit ~~equal~~proportionate to our ownership ~~percentage~~ in the joint venture. With the termination of the supply agreement and sale of the air separation units complete, we recognized the remaining deferred profit, net of other project finalization costs, in equity affiliates’ income in the first quarter of fiscal year 2022.

As of 30 September 2021, our consolidated balance sheets included $94.4 reflected within "Payables and accrued liabilities" for our obligation to make equity contributions based on our proportionate share of advances received by the joint venture under an equity bridge loan. The joint venture utilized a portion of the proceeds from the sale of the air separation units to repay its outstanding debt, including the equity bridge loan. Accordingly, we recorded a noncash adjustment of $94.4 in the first quarter of fiscal year 2022 to reduce our obligation to zero with a corresponding reduction to the carrying value of our investment in the joint venture.

8.6. GOODWILL

Changes to the carrying amount of consolidated goodwill by segment for the ~~six~~three months ended 31 ~~March~~December 2022 are as follows:

Americas Asia Europe Middle East
and India Corporate
and other Total
Goodwill, net at 30 September 2021 $151.0 $184.3 $533.5 $8.0 $34.7 $911.5
Acquisitions(A)
— — 17.0 7.5 — 24.5
Currency translation and other 1.4 (0.3) (24.3) — — (23.2)
Goodwill, net at 31 March 2022 $152.4 $184.0 $526.2 $15.5 $34.7 $912.8


	Americas	Asia	Europe	Middle East and India	Corporate and other	Total
Goodwill, net at 30 September 2022	$143.2	$172.7	$457.5	$15.8	$33.8	$823.0


Currency translation and other	5.6	4.2	43.1	—	0.4	53.3
Goodwill, net at 31 December 2022	$148.8	$176.9	$500.6	$15.8	$34.2	$876.3

~~(A)We recognized goodwill in the first half of fiscal year 2022 for expected cost synergies associated with small business combinations, of which $3.2 is deductible for tax purposes.~~


		31 March	30 September		31 December	30 September
		2022	2021		2022	2022
Goodwill, gross	Goodwill, gross	$1,250.8	$1,239.2	Goodwill, gross	$1,188.1	$1,096.0
Accumulated impairment losses(A)	Accumulated impairment losses(A)	(338.0)	(327.7)	Accumulated impairment losses(A)	(311.8)	(273.0)
Goodwill, net	Goodwill, net	$912.8	$911.5	Goodwill, net	$876.3	$823.0

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

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9.7. 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 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~~December 2022 is ~~3.8~~3.5 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 2022		30 September 2021			31 December 2022		30 September 2022
		US$ Notional	Years Average Maturity	US$ Notional	Years Average Maturity		US$ Notional	Years Average Maturity	US$ Notional	Years Average Maturity
Forward Exchange Contracts:	Forward Exchange Contracts:					Forward Exchange Contracts:
Cash flow hedges	Cash flow hedges	$3,882.1	0.6	$3,465.2	0.6	Cash flow hedges	$4,877.6	0.6	$4,525.0	0.7
Net investment hedges	Net investment hedges	616.8	2.5	638.0	3.0	Net investment hedges	616.5	1.9	542.2	2.2
Not designated	Not designated	510.8	0.2	692.6	0.1	Not designated	408.2	0.2	534.3	0.3
Total Forward Exchange Contracts	Total Forward Exchange Contracts	$5,009.7	0.8	$4,795.8	0.8	Total Forward Exchange Contracts	$5,902.3	0.7	$5,601.5	0.8

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 ~~€1,304.6~~€1,280.5 million ($~~1,443.9)~~1,370.7) at 31 ~~March~~December 2022 and ~~€1,297.5~~€1,265.4 million ($~~1,502.6)~~1,240.4) at 30 September ~~2021.~~2022. 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, we manage 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.

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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~~December 2022, 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 the U.S. ~~Dollars~~Dollar and each of the Chinese Renminbi, ~~U.S. Dollars and~~ Indian ~~Rupees, and U.S. Dollars~~Rupee, and Chilean ~~Pesos.~~Peso.

The table below summarizes our outstanding interest rate management contracts and cross currency interest rate swaps:


		31 March 2022						30 September 2021							31 December 2022						30 September 2022
		US$ Notional	Average Pay %		Average Receive %		Years Average Maturity	US$ Notional	Average Pay %		Average Receive %		Years Average Maturity		US$ Notional	Average Pay %		Average Receive %		Years Average Maturity	US$ Notional	Average Pay %		Average Receive %		Years Average Maturity
Interest rate swaps (fair value hedge)	Interest rate swaps (fair value hedge)	$800.0	Various		1.64	%	5.5	$200.0	LIBOR		2.76	%	0.1	Interest rate swaps (fair value hedge)	$800.0	Various		1.64	%	4.8	$800.0	Various		1.64	%	5.0
Cross currency interest rate swaps (net investment hedge)	Cross currency interest rate swaps (net investment hedge)	$214.4	4.34	%	3.15	%	1.7	$210.2	4.32	%	3.14	%	2.2	Cross currency interest rate swaps (net investment hedge)	$131.0	3.67	%	2.93	%	1.3	$176.7	4.12	%	3.07	%	1.2
Cross currency interest rate swaps (cash flow hedge)	Cross currency interest rate swaps (cash flow hedge)	$1,013.6	4.90	%	2.92	%	2.3	$1,005.7	4.98	%	2.93	%	2.7	Cross currency interest rate swaps (cash flow hedge)	$741.9	4.82	%	2.92	%	2.2	$785.7	4.78	%	3.05	%	2.3
Cross currency interest rate swaps (not designated)	Cross currency interest rate swaps (not designated)	$—	—	%	—	%	0.0	$4.2	5.39	%	3.54	%	2.2	Cross currency interest rate swaps (not designated)	$39.4	5.39	%	3.54	%	0.9	$37.7	5.39	%	3.54	%	1.2

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 item		Cumulative hedging adjustment, included in carrying amount			Carrying amounts of hedged item		Cumulative hedging adjustment, included in carrying amount
		31 March	30 September	31 March	30 September		31 December	30 September	31 December	30 September
Balance Sheet Location	Balance Sheet Location	2022	2021	2022	2021	Balance Sheet Location	2022		2022
Current portion of long-term debt		$—	$400.5	$—	$0.5

Long-term debt	Long-term debt	2,065.1	—	(24.0)	—	Long-term debt	$2,017.8	$2,012.9	($72.7)	($77.1)

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The table below summarizes the fair value and balance sheet location of our outstanding derivatives:


		Balance Sheet	31 March	30 September	Balance Sheet	31 March	30 September		Balance Sheet	31 December	30 September	Balance Sheet	31 December	30 September
		Location	2022	2021	Location	2022	2021		Location	2022		Location	2022
Derivatives Designated as Hedging Instruments:	Derivatives Designated as Hedging Instruments:							Derivatives Designated as Hedging Instruments:
Forward exchange contracts	Forward exchange contracts	Other receivables and current assets	$43.9	$35.1	Payables and accrued liabilities	$50.9	$57.2	Forward exchange contracts	Other receivables and current assets	$85.0	$71.6	Payables and accrued liabilities	$79.5	$226.2
Interest rate management contracts	Interest rate management contracts	Other receivables and current assets	10.6	16.0	Payables and accrued liabilities	22.2	5.2	Interest rate management contracts	Other receivables and current assets	16.8	36.7	Payables and accrued liabilities	1.5	—
Forward exchange contracts	Forward exchange contracts	Other noncurrent assets	6.2	5.5	Other noncurrent liabilities	18.7	25.2	Forward exchange contracts	Other noncurrent assets	26.8	60.8	Other noncurrent liabilities	6.6	46.9
Interest rate management contracts	Interest rate management contracts	Other noncurrent assets	15.5	18.1	Other noncurrent liabilities	76.5	27.5	Interest rate management contracts	Other noncurrent assets	8.8	12.5	Other noncurrent liabilities	99.0	91.2
Total Derivatives Designated as Hedging Instruments	Total Derivatives Designated as Hedging Instruments		$76.2	$74.7		$168.3	$115.1	Total Derivatives Designated as Hedging Instruments		$137.4	$181.6		$186.6	$364.3
Derivatives Not Designated as Hedging Instruments:	Derivatives Not Designated as Hedging Instruments:							Derivatives Not Designated as Hedging Instruments:
Forward exchange contracts	Forward exchange contracts	Other receivables and current assets	3.7	8.7	Payables and accrued liabilities	3.1	6.4	Forward exchange contracts	Other receivables and current assets	3.1	6.1	Payables and accrued liabilities	2.2	2.1

Interest rate management contracts								Interest rate management contracts	Other receivables and current assets	0.5	—	Payables and accrued liabilities	—	—
Forward exchange contracts								Forward exchange contracts	Other noncurrent assets	—	0.1	Other noncurrent liabilities	—	0.1
Interest rate management contracts								Interest rate management contracts	Other noncurrent assets	—	1.3	Other noncurrent liabilities	—	—
Total Derivatives Not Designated as Hedging Instruments	Total Derivatives Not Designated as Hedging Instruments		$3.7	$8.7		$3.1	$6.4	Total Derivatives Not Designated as Hedging Instruments		$3.6	$7.5		$2.2	$2.2
Total Derivatives	Total Derivatives		$79.9	$83.4		$171.4	$121.5	Total Derivatives		$141.0	$189.1		$188.8	$366.5

Refer to Note ~~10,~~8, Fair Value Measurements, which defines fair value, describes the method for measuring fair value, and provides additional disclosures regarding fair value measurements.

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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 Ended		Six Months Ended			Three Months Ended
		31 March		31 March			31 December
		2022	2021	2022	2021		2022	2021
Net Investment Hedging Relationships	Net Investment Hedging Relationships					Net Investment Hedging Relationships
Forward exchange contracts	Forward exchange contracts	($4.2)	$18.6	$10.3	($17.3)	Forward exchange contracts	($47.1)	$14.5
Foreign currency debt	Foreign currency debt	39.4	63.5	67.0	(0.7)	Foreign currency debt	(115.3)	27.6
Cross currency interest rate swaps	Cross currency interest rate swaps	(7.4)	1.9	(9.7)	(12.3)	Cross currency interest rate swaps	(10.6)	(2.3)
Total Amount Recognized in OCI	Total Amount Recognized in OCI	27.8	84.0	67.6	(30.3)	Total Amount Recognized in OCI	(173.0)	39.8
Tax effects	Tax effects	(6.9)	(21.2)	(16.7)	7.4	Tax effects	42.5	(9.8)
Net Amount Recognized in OCI	Net Amount Recognized in OCI	$20.9	$62.8	$50.9	($22.9)	Net Amount Recognized in OCI	($130.5)	$30.0


		Three Months Ended		Six Months Ended			Three Months Ended
		31 March		31 March			31 December
		2022	2021	2022	2021		2022	2021
Derivatives in Cash Flow Hedging Relationships	Derivatives in Cash Flow Hedging Relationships					Derivatives in Cash Flow Hedging Relationships
Forward exchange contracts	Forward exchange contracts	($40.1)	($57.3)	($63.5)	$7.4	Forward exchange contracts	$188.8	($23.4)
Forward exchange contracts, excluded components	Forward exchange contracts, excluded components	2.0	(4.3)	(0.7)	(7.0)	Forward exchange contracts, excluded components	(5.6)	(2.7)
Other(A)	Other(A)	(16.6)	43.2	(2.1)	(2.3)	Other(A)	(24.0)	14.5
Total Amount Recognized in OCI	Total Amount Recognized in OCI	(54.7)	(18.4)	(66.3)	(1.9)	Total Amount Recognized in OCI	159.2	(11.6)
Tax effects	Tax effects	15.3	13.2	26.4	10.5	Tax effects	(38.2)	11.1
Net Amount Recognized in OCI	Net Amount Recognized in OCI	($39.4)	($5.2)	($39.9)	$8.6	Net Amount Recognized in OCI	$121.0	($0.5)

(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.

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The ~~tables~~table below ~~summarize~~summarizes 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								Three Months Ended 31 December
		Sales		Cost of Sales		Interest Expense			Other Non-Operating Income (Expense), Net				Sales				Cost of Sales			Interest Expense		Other Non-Operating Income (Expense), Net
		2022	2021	2022	2021		2022	2021			2022	2021			2022	2021		2022	2021		2022	2021	2022	2021
Total presented in consolidated income statements that includes effects of hedging below	Total presented in consolidated income statements that includes effects of hedging below	$2,945.1	$2,502.0	$2,151.6	$1,745.5		$32.3	$36.1			$9.1	$16.8		Total presented in consolidated income statements that includes effects of hedging below	$3,174.7	$2,994.2		$2,272.3	$2,223.6		$41.2	$30.5	($0.6)	$22.6

(Gain) Loss Effects of Cash Flow Hedging:	(Gain) Loss Effects of Cash Flow Hedging:													(Gain) Loss Effects of Cash Flow Hedging:

Forward Exchange Contracts:	Forward Exchange Contracts:													Forward Exchange Contracts:
Amount reclassified from OCI into income	Amount reclassified from OCI into income	$0.3	$0.1	$0.4	($1.8)		$—	$—			$26.4	$54.0		Amount reclassified from OCI into income	$—	$0.4		$1.2	($0.1)		$—	$—	($117.8)	$14.5

Amount excluded from effectiveness testing recognized in earnings based on amortization approach	Amount excluded from effectiveness testing recognized in earnings based on amortization approach	—	—	—	—		—	—			1.1	2.6		Amount excluded from effectiveness testing recognized in earnings based on amortization approach	—	—		—	—		—	—	2.0	1.3
Other:	Other:													Other:
Amount reclassified from OCI into income	Amount reclassified from OCI into income	—	—	—	—		1.5	1.4			4.9	(8.3)		Amount reclassified from OCI into income	—	—		—	—		1.5	1.4	22.7	7.3

Total (Gain) Loss Reclassified from OCI to Income	Total (Gain) Loss Reclassified from OCI to Income	0.3	0.1	0.4	(1.8)		1.5	1.4			32.4	48.3		Total (Gain) Loss Reclassified from OCI to Income	—	0.4		1.2	(0.1)		1.5	1.4	(93.1)	23.1
Tax effects	Tax effects	(0.1)	—	(0.1)	0.4		(0.6)	(0.5)			(7.8)	(11.9)		Tax effects	—	(0.1)		(0.2)	—		(0.5)	(0.5)	22.4	(5.5)
Net (Gain) Loss Reclassified from OCI to Income	Net (Gain) Loss Reclassified from OCI to Income	$0.2	$0.1	$0.3	($1.4)		$0.9	$0.9			$24.6	$36.4		Net (Gain) Loss Reclassified from OCI to Income	$—	$0.3		$1.0	($0.1)		$1.0	$0.9	($70.7)	$17.6

(Gain) Loss Effects of Fair Value Hedging:	(Gain) Loss Effects of Fair Value Hedging:													(Gain) Loss Effects of Fair Value Hedging:

Other:	Other:													Other:
Hedged items	Hedged items	$—	$—	$—	$—		($22.0)	($1.4)			$—	$—		Hedged items	$—	$—		$—	$—		$4.4	($2.5)	$—	$—
Derivatives designated as hedging instruments	Derivatives designated as hedging instruments	—	—	—	—		22.0	1.4			—	—		Derivatives designated as hedging instruments	—	—		—	—		(4.4)	2.5	—	—
Total (Gain) Loss Recognized in Income	Total (Gain) Loss Recognized in Income	$—	$—	$—	$—		$—	$—			$—	$—		Total (Gain) Loss Recognized in Income	$—	$—		$—	$—		$—	$—	$—	$—

~~Table of Contents~~

Six Months Ended 31 March
Sales Cost of Sales Interest Expense Other Non-Operating Income (Expense), Net
2022 2021 2022 2021 2022 2021 2022 2021
Total presented in consolidated income statements that includes effects of hedging below $5,939.3 $4,877.2 $4,375.2 $3,377.9 $62.8 $72.8 $31.7 $35.4
(Gain) Loss Effects of Cash Flow Hedging:
Forward Exchange Contracts:
Amount reclassified from OCI into income $0.7 $0.2 $0.3 ($1.9) $— $— $40.9 $2.4
Amount excluded from effectiveness testing recognized in earnings based on amortization approach — — — — — — 2.4 5.4
Other:
Amount reclassified from OCI into income — — — — 2.9 2.8 12.2 37.0
Total (Gain) Loss Reclassified from OCI to Income 0.7 0.2 0.3 (1.9) 2.9 2.8 55.5 44.8
Tax effects (0.2) — (0.1) 0.6 (1.1) (1.0) (13.3) (10.8)
Net (Gain) Loss Reclassified from OCI to Income $0.5 $0.2 $0.2 ($1.3) $1.8 $1.8 $42.2 $34.0
(Gain) Loss Effects of Fair Value Hedging:
Other:
Hedged items $— $— $— $— ($24.5) ($2.7) $— $—
Derivatives designated as hedging instruments — — — — 24.5 2.7 — —
Total (Gain) Loss Recognized in Income $— $— $— $— $— $— $— $—

The ~~tables~~table below ~~summarize~~summarizes the location and amounts recognized in income related to our derivatives not designated as hedging instruments by contract type:


		Three Months Ended 31 March					Three Months Ended 31 December
		Other Income (Expense), Net		Other Non-Operating Income (Expense), Net			Other Income (Expense), Net		Other Non-Operating Income (Expense), Net
		2022	2021	2022	2021		2022	2021	2022	2021
The Effects of Derivatives Not Designated as Hedging Instruments:	The Effects of Derivatives Not Designated as Hedging Instruments:					The Effects of Derivatives Not Designated as Hedging Instruments:
Forward Exchange Contracts	Forward Exchange Contracts	$0.3	($0.3)	($0.7)	($0.3)	Forward Exchange Contracts	$0.6	$1.1	($1.6)	($0.6)
Other	Other	—	—	0.1	(0.1)	Other	—	—	1.1	0.1
Total (Gain) Loss Recognized in Income	Total (Gain) Loss Recognized in Income	$0.3	($0.3)	($0.6)	($0.4)	Total (Gain) Loss Recognized in Income	$0.6	$1.1	($0.5)	($0.5)

Six Months Ended 31 March
Other Income (Expense), Net Other Non-Operating Income (Expense), Net
2022 2021 2022 2021
The Effects of Derivatives Not Designated as Hedging Instruments:
Forward Exchange Contracts $1.4 $2.5 ($1.3) ($1.6)
Other — — 0.2 0.4
Total (Gain) Loss Recognized in Income $1.4 $2.5 ($1.1) ($1.2)

~~Table of Contents~~

The amount of unrealized gains and losses related to cash flow hedges as of 31 ~~March~~December 2022 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 generally reported in the operating activities section of the consolidated statements of cash flows.

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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 ~~$110.1~~$105.0 and ~~$53.4~~$114.8 as of 31 ~~March~~December 2022 and 30 September ~~2021,~~2022, respectively. Because our current credit rating is above the various pre-established thresholds, no 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 ~~$28.6~~$36.3 and ~~$38.1~~$62.8 as of 31 ~~March~~December 2022 and 30 September ~~2021,~~2022, respectively. No financial institution is required to post collateral at this time as all have credit ratings at or above threshold.

~~10.~~8. 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.

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 Level 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.

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. 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 Level 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 9,7, Financial Instruments, for a description of derivative instruments, including details related to the balance sheet line classifications.

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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 Level 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 2022		30 September 2021			31 December 2022		30 September 2022
		Carrying Value	Fair Value	Carrying Value	Fair Value		Carrying Value	Fair Value	Carrying Value	Fair Value
Assets	Assets					Assets
Derivatives	Derivatives					Derivatives
Forward exchange contracts	Forward exchange contracts	$53.8	$53.8	$49.3	$49.3	Forward exchange contracts	$114.9	$114.9	$138.6	$138.6
Interest rate management contracts	Interest rate management contracts	26.1	26.1	34.1	34.1	Interest rate management contracts	26.1	26.1	50.5	50.5
Liabilities	Liabilities					Liabilities
Derivatives	Derivatives					Derivatives
Forward exchange contracts	Forward exchange contracts	$72.7	$72.7	$88.8	$88.8	Forward exchange contracts	$88.3	$88.3	$275.3	$275.3
Interest rate management contracts	Interest rate management contracts	98.7	98.7	32.7	32.7	Interest rate management contracts	100.5	100.5	91.2	91.2
Long-term debt, including current portion and related party	Long-term debt, including current portion and related party	7,234.3	6,905.6	7,634.8	7,812.2	Long-term debt, including current portion and related party	8,055.6	7,227.2	7,634.1	6,721.2

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.

The table below summarizes assets and liabilities on the consolidated balance sheets that are measured at fair value on a recurring basis:


		31 March 2022				30 September 2021					31 December 2022				30 September 2022
		Total	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3		Total	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3
Assets at Fair Value	Assets at Fair Value									Assets at Fair Value

Derivatives	Derivatives									Derivatives
Forward exchange contracts	Forward exchange contracts	$53.8	$—	$53.8	$—	$49.3	$—	$49.3	$—	Forward exchange contracts	$114.9	$—	$114.9	$—	$138.6	$—	$138.6	$—
Interest rate management contracts	Interest rate management contracts	26.1	—	26.1	—	34.1	—	34.1	—	Interest rate management contracts	26.1	—	26.1	—	50.5	—	50.5	—
Total Assets at Fair Value	Total Assets at Fair Value	$79.9	$—	$79.9	$—	$83.4	$—	$83.4	$—	Total Assets at Fair Value	$141.0	$—	$141.0	$—	$189.1	$—	$189.1	$—
Liabilities at Fair Value	Liabilities at Fair Value									Liabilities at Fair Value
Derivatives	Derivatives									Derivatives
Forward exchange contracts	Forward exchange contracts	$72.7	$—	$72.7	$—	$88.8	$—	$88.8	$—	Forward exchange contracts	$88.3	$—	$88.3	$—	$275.3	$—	$275.3	$—
Interest rate management contracts	Interest rate management contracts	98.7	—	98.7	—	32.7	—	32.7	—	Interest rate management contracts	100.5	—	100.5	—	91.2	—	91.2	—
Total Liabilities at Fair Value	Total Liabilities at Fair Value	$171.4	$—	$171.4	$—	$121.5	$—	$121.5	$—	Total Liabilities at Fair Value	$188.8	$—	$188.8	$—	$366.5	$—	$366.5	$—

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~~11.~~9. DEBT

Related Party Debt ~~Repayment~~

~~In November 2021, we repaid a 3.0% Senior Note of $400, plus interest, on its maturity date.~~

~~Credit Facilities~~

~~2021 Credit Agreement~~

~~On 31 March 2021, we entered into a five-year $2,500 revolving credit agreement maturing 31 March 2026 with a syndicate of banks (the “2021 Credit Agreement”), under which senior unsecured~~Total debt ~~is available~~owed to usrelated parties was $791.5 and certain of our subsidiaries. On 31 March 2022, we amended the 2021 Credit Agreement to exercise our option to increase the maximum borrowing capacity to $2,750 and transition the benchmark rate from LIBOR to the Secured Overnight Financing Rate ("SOFR"). All other terms remain unchanged from the original agreement. No borrowings were outstanding under the 2021 Credit Agreement$781.0 as of 31 ~~March 2022.~~December 2022 and 30 September 2022, respectively, of which $133.1 and $129.0, respectively, was reflected within "Current portion of long-term debt" on our consolidated balance sheets. Our related party debt includes loans with joint venture partners, including Lu’An Clean Energy Company, as well as shareholder loans associated with the NEOM project. Refer to Note 16, Supplemental Information, for additional information.

Other

We ~~also~~ have credit facilities available to certain of our foreign subsidiaries totaling ~~$486.5,~~$1,319.5, of which ~~$446.9~~$751.9 was borrowed and outstanding as of 31 ~~March~~December 2022. The amount borrowed and outstanding as of 30 September ~~2021~~2022 was ~~$176.2.~~

$457.5. The increase from 30 September 2022 was driven by borrowings on a new variable-rate Saudi Riyal loan facility that matures in October 2026. The interest rate on the facility is based on the Saudi Arabian Interbank Offered Rate ("SAIBOR") plus an annual margin of 1.35%. We entered into this facility in October 2022 and utilized a portion of the proceeds to repay a variable-rate 4.10% Saudi Riyal Loan Facility of $195.6, which was presented within long-term debt on our consolidated balance sheet as of 30 September 2022.

~~12.~~10. RETIREMENT BENEFITS

The components of net periodic (benefit) cost for our defined benefit pension plans for the three ~~and six~~ months ended 31 ~~March~~December 2022 and 2021 were as follows:


		Pension Benefits				Pension Benefits
		2022		2021				2022			2021
Three Months Ended 31 March		U.S.	International	U.S.	International
Three Months Ended 31 December							Three Months Ended 31 December	U.S.	Inter-national	Total	U.S.	Inter-national	Total
Service cost	Service cost	$4.6	$5.6	$5.3	$5.9		Service cost	$2.7	$3.3	$6.0	$4.6	$5.6	$10.2
Non-service (benefit) cost:							Non-service (benefit) cost:
Interest cost	Interest cost	18.4	7.6	17.3	6.3		Interest cost	32.5	14.4	46.9	18.4	7.6	26.0
Expected return on plan assets	Expected return on plan assets	(42.1)	(17.6)	(48.7)	(21.0)		Expected return on plan assets	(31.8)	(11.8)	(43.6)	(42.1)	(17.7)	(59.8)
Prior service cost amortization	Prior service cost amortization	0.3	—	0.3	—		Prior service cost amortization	0.3	—	0.3	0.3	—	0.3
Actuarial loss amortization	Actuarial loss amortization	16.6	3.8	19.6	4.8		Actuarial loss amortization	14.8	3.0	17.8	16.7	3.9	20.6

Settlements	Settlements	0.9	0.2	—	—		Settlements	—	—	—	0.9	—	0.9

Curtailments							Curtailments	—	(1.9)	(1.9)	—	—	—

Other	Other	—	0.2	—	0.2		Other	—	0.3	0.3	—	0.8	0.8
Net Periodic (Benefit) Cost	Net Periodic (Benefit) Cost	($1.3)	($0.2)	($6.2)	($3.8)		Net Periodic (Benefit) Cost	$18.5	$7.3	$25.8	($1.2)	$0.2	($1.0)

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Pension Benefits
2022 2021
Six Months Ended 31 March U.S. International U.S. International
Service cost $9.2 $11.2 $10.7 $11.6
Interest cost 36.8 15.2 34.5 12.4
Expected return on plan assets (84.2) (35.3) (97.3) (41.2)
Prior service cost amortization 0.6 — 0.6 —
Actuarial loss amortization 33.3 7.7 39.3 9.4
Settlements 1.8 0.2 — —
Other — 1.0 — 0.5
Net Periodic (Benefit) Cost ($2.5) $— ($12.2) ($7.3)

Our service costs are primarily included within "Cost of sales" and "Selling and ~~administrative"~~administrative expense" on our consolidated income statements. The amount of service costs capitalized in the first ~~six~~three months of fiscal years ~~2022~~2023 and ~~2021~~2022 were not material. The non-service related impacts, including pension settlement losses and curtailment gains, are presented outside operating income within ~~"Other~~"Other non-operating income (expense), net."

For the ~~six~~three months ended 31 ~~March~~December 2022 and 2021, our cash contributions to funded pension plans and benefit payments under unfunded pension plans were ~~$16.1~~$8.0 and ~~$27.7,~~$9.1, respectively. Total contributions for fiscal year ~~2022~~2023 are expected to be approximately ~~$40~~$25 to ~~$50.~~$35. During fiscal year ~~2021,~~2022, total contributions were ~~$44.6.~~$44.7.

In December 2022, we amended an international defined benefit pension plan to move its participants to a defined contribution plan for future benefit accumulation. As a result of this amendment, we recognized a $1.9 curtailment gain for the write-off of prior service credits and remeasured the projected benefit obligations of the plan. This resulted in a net decrease to our projected benefit obligation and accumulated other comprehensive loss of $9.1 in the first quarter of fiscal year 2023. The impact of the remeasurement on 2023 expense is not material.

During the three ~~and six~~ months ended 31 ~~March~~December 2022 ~~we recognized actuarial gain amortization of $0.4~~ and ~~$0.8, respectively, for our other postretirement benefits plan. During the three and six months ended 31 March~~ 2021, we recognized actuarial gain amortization of ~~$0.5~~$0.6 and ~~$0.9,~~$0.4 respectively, for our other postretirement benefits plan.

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11. 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 ~~$38~~$34 at 31 ~~March~~December 2022) on Air Products Brasil Ltda. This fine was based on a recommendation by a unit of the Brazilian Ministry of Justice, following an investigation beginning in 2003, which alleged 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, no provision has been made in the consolidated financial statements. In the event of an adverse final judgment, we estimate the maximum possible loss to be the full amount of the fine of R$179.2 million (approximately ~~$38~~$34 at 31 ~~March~~December 2022) plus interest accrued thereon until final disposition of the proceedings.

Additionally, Winter Storm Uri, a severe winter weather storm in the U.S. Gulf Coast in February 2021, disrupted our operations and caused power and natural gas prices to spike significantly in Texas. We remain in litigation of a dispute regarding energy management services related to the impact of this event, and other disputes may arise from such power price increases. In addition, legislative action may affect power supply and energy management charges. While it is reasonably possible that we could incur additional costs related to power supply and energy management services in Texas related to the winter storm, it is too early to estimate potential losses, if any, given significant unknowns resulting from the unusual nature of this event.

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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 3230 sites on which a final settlement or remediation has not been achieved where we, usually along with others, have been designated a potentially responsible party by environmental authorities 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~~December 2022 and 30 September ~~2021~~2022 included an accrual of ~~$74.1~~$70.4 and ~~$76.7,~~$71.3, 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 ~~$73~~$70 to a reasonably possible upper exposure of ~~$87~~$83 as of 31 ~~March~~December 2022.

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.

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Pace

At 31 ~~March~~December 2022, ~~$38.7~~$37.9 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") to continue our remediation efforts. 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 maintain 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 ancillary equipment, in addition to future capital to consider the extended 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 before-tax expense of $19 in results from discontinued operations in the second quarter of fiscal year 2020. There have been no significant changes to the estimated exposure range related to the Pace facility since the second quarter of fiscal year 2020.

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 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 the efficacy of existing measures, 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 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 completed additional field work during 2021 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. The design of the optimized recovery system will likely be initiated in fiscal year 2023 with construction to begin thereafter. 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.

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Piedmont

At 31 ~~March~~December 2022, ~~$8.9~~$7.1 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, after which we signed a Consent Agreement Amendment memorializing our obligations to complete the cleanup of the site. Remediation has started in accordance with the design, which includes in-situ chemical oxidation treatment, as well as the installation of a soil vapor extraction system to remove volatile organic compounds from the unsaturated soils beneath the impacted areas of the plant. 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.

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Pasadena

At 31 ~~March~~December 2022, ~~$11.0~~$10.7 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~~continue 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~~continuing post closure care for two closed RCRA surface impoundment units, ~~establishing~~and maintaining engineering ~~controls, and performing a chemical-reduction pilot study~~controls. Additionally, we have conducted an interim corrective action to treat impacted ~~soils.~~soils as recommended in the TCEQ 2019 Annual Report. In 2012, we estimated the total exposure at this site to be $13. There have been no significant changes to the estimated exposure.

~~Unconditional Purchase Obligations~~

We have unconditional purchase obligations related to helium and rare gases totaling approximately $8.7 billion as of 31 March 2022. The majority of these obligations occur after fiscal year 2027. Helium purchases include crude feedstock supply to helium refining plants in North America as well as refined helium purchases from sources around the world.

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~~14.~~12. SHARE-BASED COMPENSATION

~~We have various~~Our outstanding share-based compensation programs ~~which~~ include deferred stock units and stock ~~options, and restricted stock.~~options. During the ~~six~~three months ended 31 ~~March~~December 2022, 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 and the exercise of stock ~~options, and the issuance of restricted stock awards.~~options. As of 31 ~~March~~December 2022, there were ~~1.3~~1.2 million shares available for future grant under our Long-Term Incentive Plan ("LTIP").

Share-based compensation cost recognized on the consolidated income statements is summarized below:


		Three Months Ended		Six Months Ended			Three Months Ended
		31 March		31 March			31 December
		2022	2021	2022	2021		2022	2021
Before-tax share-based compensation cost	Before-tax share-based compensation cost	$10.5	$12.9	$27.3	$22.4	Before-tax share-based compensation cost	$16.9	$16.8
Income tax benefit	Income tax benefit	(2.6)	(3.1)	(6.7)	(5.4)	Income tax benefit	(4.1)	(4.1)
After-tax share-based compensation cost	After-tax share-based compensation cost	$7.9	$9.8	$20.6	$17.0	After-tax share-based compensation cost	$12.8	$12.7

Before-tax share-based compensation cost is primarily included in "Selling and ~~administrative"~~administrative expense" on our consolidated income statements. The amount of share-based compensation cost capitalized in the first ~~six~~three months of fiscal years ~~2022~~2023 and ~~2021~~2022 was not material.

Deferred Stock Units

During the ~~six~~three months ended 31 ~~March~~December 2022, we granted ~~74,364~~85,612 market-based deferred stock units. The market-based deferred stock units are earned over the performance period beginning 1 October ~~2021~~2022 and ending 30 September ~~2024,~~2025, conditioned on the level of our 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 ~~$427.23~~$502.03 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 volatility	~~30.5~~32.5	%
Risk-free interest rate	~~0.8~~4.0	%
Expected dividend yield	~~2.1~~2.4	%

In addition, during the ~~six~~three months ended 31 ~~March~~December 2022, we granted ~~106,721~~107,621 time-based deferred stock units at a weighted average grant-date fair value of ~~$283.34.~~$310.79.

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~~15.~~13. ACCUMULATED OTHER COMPREHENSIVE LOSS

The ~~tables~~table below ~~summarize~~summarizes changes in accumulated other comprehensive loss ("AOCL"), net of tax, attributable to Air Products for the three ~~and six~~ months ended 31 ~~March~~December 2022:

Derivatives
qualifying
as hedges Foreign
currency
translation
adjustments Pension and
postretirement
benefits Total
Balance at 31 December 2021 ($17.5) ($857.0) ($577.8) ($1,452.3)
Other comprehensive loss before reclassifications (39.4) (58.8) — (98.2)
Amounts reclassified from AOCL 26.0 — 15.9 41.9
Net current period other comprehensive (loss) income (13.4) (58.8) 15.9 (56.3)
Amount attributable to noncontrolling interests 1.1 (4.2) 0.1 (3.0)
Balance at 31 March 2022 ($32.0) ($911.6) ($562.0) ($1,505.6)

Derivatives
qualifying
as hedges Foreign
currency
translation
adjustments Pension and
postretirement
benefits Total
Balance at 30 September 2021 ($28.3) ($893.8) ($593.8) ($1,515.9)
Other comprehensive loss before reclassifications (39.9) (18.2) — (58.1)
Amounts reclassified from AOCL 44.7 — 31.9 76.6
Net current period other comprehensive income (loss) 4.8 (18.2) 31.9 18.5
Amount attributable to noncontrolling interests 8.5 (0.4) 0.1 8.2
Balance at 31 March 2022 ($32.0) ($911.6) ($562.0) ($1,505.6)

~~The table below summarizes the reclassifications out of AOCL and the affected line item on the consolidated income statements:~~

Three Months Ended Six Months Ended
31 March 31 March
2022 2021 2022 2021
Loss on Cash Flow Hedges, net of tax
Sales $0.2 $0.1 $0.5 $0.2
Cost of sales 0.3 (1.4) 0.2 (1.3)
Interest expense 0.9 0.9 1.8 1.8
Other non-operating income (expense), net 24.6 36.4 42.2 34.0
Total Loss on Cash Flow Hedges, net of tax $26.0 $36.0 $44.7 $34.7
Pension and Postretirement Benefits, net of tax(A)
$15.9 $18.3 $31.9 $36.6

~~(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 12, ~~Retirement Benefits, for additional information.~~

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~~16. EARNINGS PER SHARE~~

~~The table below details the computation of basic and diluted earnings per share ("EPS"):~~

Three Months Ended Six Months Ended
31 March 31 March
2022 2021 2022 2021
Numerator
Net income from continuing operations $530.5 $473.1 $1,090.9 $944.8
Net income from discontinued operations — — — 10.3
Net Income Attributable to Air Products $530.5 $473.1 $1,090.9 $955.1
Denominator (in millions)
Weighted average common shares — Basic 222.0 221.6 222.0 221.6
Effect of dilutive securities
Employee stock option and other award plans 0.5 0.9 0.5 0.9
Weighted average common shares — Diluted 222.5 222.5 222.5 222.5
Per Share Data*
Basic EPS from continuing operations $2.39 $2.13 $4.91 $4.26
Basic EPS from discontinued operations — — — 0.05
Basic EPS Attributable to Air Products $2.39 $2.13 $4.91 $4.31
Diluted EPS from continuing operations $2.38 $2.13 $4.90 $4.25
Diluted EPS from discontinued operations — — — 0.05
Diluted EPS Attributable to Air Products $2.38 $2.13 $4.90 $4.29

*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 2022 and 2021, there were no antidilutive outstanding share-based awards.~~

~~17. INCOME TAXES~~

~~Effective Tax Rate~~

Our effective tax rate was 18.6% and 17.8% for the three and six months ended 31 March 2022, respectively. Our effective tax rate was 20.4% and 19.8% for the three and six months ended 31 March 2021, respectively.

~~Cash Paid for Taxes (Net of Cash Refunds)~~

Income tax payments, net of refunds, were $236.9 and $223.8 for the six months ended 31 March 2022 and 2021, respectively. Fiscal year 2021 reflects an income tax refund of $6.7 that is related to cash provided by discontinued operations.

~~18. SUPPLEMENTAL INFORMATION~~

~~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 $60 and $125 for the three and six months ended 31 March 2022, respectively, and $40 and $90 for the three and six months ended 31 March 2021, 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. As of 31 March 2022 and 30 September 2021, our consolidated balance sheets included related party trade receivables of approximately $185 and $90, respectively.

We also have related party debt primarily for a loan with our joint venture partner, Lu’An Clean Energy Company, which partially funded the acquisition of their assets by a consolidated joint venture in 2018. Total related party debt, including the current portion, was $371.1 and $358.4 as of 31 March 2022 and 30 September 2021, respectively.

~~Table of Contents~~

~~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 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.

~~Changes in Estimates~~

Changes in estimates on projects accounted for under the cost incurred input method are recognized as a cumulative adjustment for the inception-to-date effect of such change. We recorded changes to project cost estimates during the first six months of fiscal years 2022 and 2021 for which the impact to operating income was not material. Our changes in estimates would not have significantly impacted amounts recorded in prior years.

~~Lessee Accounting~~

~~During the six months ended 31 March 2022, we recorded noncash right-of-use asset additions of approximately $150, primarily for operating leases that had not yet commenced as of 30 September 2021.~~

~~19. BUSINESS SEGMENT INFORMATION~~

Our reporting segments reflect the manner in which our chief operating decision maker reviews results and allocates resources. Effective 1 October 2021, we report our results under the following five reporting segments:

•~~Americas;~~

•~~Asia;~~

•~~Europe;~~

•~~Middle East and India; and~~

•~~Corporate and other~~

Except for the Corporate and other segment, each reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments. Our Corporate and other segment includes the aggregation of three operating segments that meet the aggregation criteria under GAAP.

~~Segment Reorganization~~

The segment results presented below reflect the segment reorganization announced on 4 November 2021. The reorganization included the separation of our former Industrial Gases – EMEA (Europe, Middle East, and Africa) segment into two separate reporting segments: (1) Europe and (2) Middle East and India. The results of an affiliate formerly reflected in the Asia segment are now reported in the Middle East and India segment. Additionally, the results of our Industrial Gases – Global operating segment are reflected in the Corporate and other segment. The prior year information presented below has been updated to conform with the fiscal year 2022 presentation.

~~Summary by Business Segment~~

Americas Asia Europe Middle East
and India Corporate
and other Total
Three Months Ended 31 March 2022
Sales $1,186.6 $751.2 $738.6 $28.9 $239.8 $2,945.1 (A)
Operating income (loss) 275.5 203.6 116.4 4.8 (38.4) 561.9 (B)
Depreciation and amortization 153.7 111.8 50.3 6.9 13.2 335.9
Equity affiliates' income 20.1 6.2 23.3 71.1 0.1 120.8
Three Months Ended 31 March 2021
Sales $1,056.1 $697.5 $558.4 $26.2 $163.8 $2,502.0 (A)
Operating income (loss) 263.4 198.5 132.9 6.7 (66.6) 534.9 (B)
Depreciation and amortization 153.3 109.7 51.0 6.6 8.7 329.3
Equity affiliates' income 32.3 7.1 12.6 16.1 1.7 69.8

~~(A)Sales relate to external customers only. All intersegment sales are eliminated in consolidation.~~

~~(B)Refer to the~~ ~~Reconciliation to Consolidated Results~~ ~~section below.~~

~~Table of Contents~~

Americas Asia Europe Middle East
and India Corporate
and other Total
Six Months Ended 31 March 2022
Sales $2,410.7 $1,531.6 $1,482.8 $52.6 $461.6 $5,939.3 (A)
Operating income (loss) 542.7 424.7 215.6 9.6 (107.7) 1,084.9 (B)
Depreciation and amortization 309.0 222.6 100.1 13.0 23.5 668.2
Equity affiliates' income 54.3 12.8 37.2 163.4 0.9 268.6
Six Months Ended 31 March 2021
Sales $1,989.1 $1,415.0 $1,101.9 $45.7 $325.5 $4,877.2 (A)
Operating income (loss) 489.2 413.3 270.4 10.7 (109.6) 1,074.0 (B)
Depreciation and amortization 305.1 217.6 100.3 12.7 17.3 653.0
Equity affiliates' income 54.6 15.9 27.5 37.3 3.8 139.1
Total Assets
31 March 2022 $7,801.9 $7,712.6 $3,933.9 $2,676.8 $5,324.5 $27,449.7
30 September 2021 7,092.5 7,349.4 3,830.3 800.6 7,786.4 26,859.2

~~(A)Sales relate to external customers only. All intersegment sales are eliminated in consolidation.~~

~~(B)Refer to the~~ ~~Reconciliation to Consolidated Results~~ ~~section below.~~

~~Reconciliation to Consolidated Results~~

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

Three Months Ended Six Months Ended
31 March 31 March
Operating Income 2022 2021 2022 2021
Total $561.9 $534.9 $1,084.9 $1,074.0
Facility closure — (23.2) — (23.2)
Gain on exchange with joint venture partner — 36.8 — 36.8
Consolidated Operating Income $561.9 $548.5 $1,084.9 $1,087.6



	Derivatives qualifying as hedges	Foreign currency translation adjustments	Pension and postretirement benefits	Total
Balance at 30 September 2022	($71.9)	($2,072.4)	($641.8)	($2,786.1)
Other comprehensive income before reclassifications	121.0	509.6	6.7	637.3
Amounts reclassified from AOCL	(68.7)	—	11.9	(56.8)
Net current period other comprehensive income	52.3	509.6	18.6	580.5

Amount attributable to noncontrolling interests	(0.6)	13.2	0.1	12.7
Balance at 31 December 2022	($19.0)	($1,576.0)	($623.3)	($2,218.3)

The table below summarizes the reclassifications out of AOCL and the affected line item on the consolidated income statements:


	Three Months Ended
	31 December
	2022	2021
(Gain) Loss on Cash Flow Hedges, net of tax
Sales	$—	$0.3
Cost of sales	1.0	(0.1)

Interest expense	1.0	0.9
Other non-operating income (expense), net	(70.7)	17.6
Total (Gain) Loss on Cash Flow Hedges, net of tax	($68.7)	$18.7











Pension and Postretirement Benefits, net of tax(A)	$11.9	$16.0

(A)The components of net periodic benefit cost reclassified out of AOCL include items such as prior service cost amortization, actuarial loss amortization, settlements, and curtailments and are included in “Other non-operating income (expense), net” on the consolidated income statements. Refer to Note 10, Retirement Benefits, for additional information.

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14. EARNINGS PER SHARE

The table below details the computation of basic and diluted earnings per share ("EPS"):


	Three Months Ended
	31 December
	2022	2021
Numerator


Net income attributable to Air Products	$572.2	$560.4

Denominator (in millions)
Weighted average common shares — Basic	222.2	221.9
Effect of dilutive securities
Employee stock option and other award plans	0.4	0.7
Weighted average common shares — Diluted	222.6	222.6

Per Share Data (U.S. Dollars per share)


Basic EPS attributable to Air Products	$2.58	$2.53



Diluted EPS attributable to Air Products	$2.57	$2.52

Outstanding share-based awards of 0.1 million shares were antidilutive and therefore excluded from the computation of diluted earnings per share for the three months ended 31 December 2022. For the three months ended 31 December 2021, there were no antidilutive outstanding share-based awards.

15. INCOME TAXES

Effective Tax Rate

Our effective tax rate was 18.9% and 17.1% for the three months ended 31 December 2022 and 2021, respectively.

Cash Paid for Taxes (Net of Cash Refunds)

Income tax payments, net of refunds, were $88.5 and $50.3 for the three months ended 31 December 2022 and 2021, respectively.

16. SUPPLEMENTAL INFORMATION

NEOM Green Hydrogen Project

In the fourth quarter of fiscal year 2020, we announced the NEOM Green Hydrogen Project (the "NEOM project”), a multi-billion dollar green hydrogen-based ammonia production facility powered by renewable energy located in the NEOM city of the Kingdom of Saudi Arabia. We, along with our joint venture partners, ACWA Power and NEOM Company, are equal owners in the newly formed NEOM Green Hydrogen Company joint venture (“NGHC”) that will develop, construct, own, operate, and finance the NEOM project. The NEOM project is expected to be financed through non-recourse project financing and the partners’ investments.

During the third quarter of fiscal year 2022, we entered into an agreement with NGHC under which we commenced construction of the NEOM project. In addition, we executed an agreement with NGHC under which we will be the exclusive offtaker of green ammonia produced by the NEOM project under a long-term take-if-tendered agreement. The NEOM project is expected to be on-stream in 2026. We intend to transport green ammonia around the world to be dissociated to produce green hydrogen, primarily for the transportation market.

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Air Products has one-third of the voting interests in the NGHC joint venture; however, substantially all the activities of the joint venture involve or are conducted on behalf of Air Products. Since we have disproportionately few voting rights relative to our economic interests in the joint venture, we determined that NGHC is a variable interest entity. In addition, we determined that we are the primary beneficiary of NGHC since we have the power to unilaterally direct certain significant activities, including key design and construction decisions, and we share power with our joint venture partners related to other activities that are significant to the economic performance of NGHC. Therefore, we consolidated NGHC within the Middle East and India segment beginning in the third quarter of fiscal year 2022.

Our consolidated balance sheets include the following balances from the consolidation of NGHC:


	31 December	30 September
	2022	2022
Cash and cash items	$224	$275
Other receivables and current assets	29	23
Plant and equipment, net	332	219
Payables and accrued liabilities	68	58
Long-term debt – related party	447	447
Noncontrolling interests	31	30

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 $80for each of the three months ended 31 December 2022 and 2021.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. As of 31 December 2022 and 30 September 2022, our consolidated balance sheets included related party trade receivables of approximately $110and $55, respectively.

Refer to Note 9, Debt, for information concerning debt owed to related parties.

Changes in Estimates

Changes in estimates on projects accounted for under the cost incurred input method are recognized as a cumulative adjustment for the inception-to-date effect of such change. We recorded changes to project cost estimates that unfavorably impacted operating income by approximately$25 in the first three months of fiscal year 2023. The impact of changes in estimates in the first three months of fiscal year 2022 was not material.

Lessee Accounting

During the three months ended 31 December 2022, we recorded noncash right-of-use asset additions of approximately $51, primarily for operating leases that had not yet commenced as of 30 September 2022.

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17. BUSINESS SEGMENT INFORMATION

Our reportable segments reflect the manner in which our chief operating decision maker assesses performance and allocates resources. Our reportable segments are as follows:

•Americas;

•Asia;

•Europe;

•Middle East and India; and

•Corporate and other

Except for the Corporate and other segment, each reportable segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments. Our Corporate and other segment includes the aggregation of three operating segments that meet the aggregation criteria under GAAP.

Summary by Business Segment


	Americas	Asia	Europe	Middle East and India	Corporate and other	Total
Three Months Ended 31 December 2022
Sales	$1,384.2	$777.8	$791.9	$41.4	$179.4	$3,174.7	(A)
Operating income (loss)	343.0	235.9	145.8	6.7	(79.4)	652.0
Depreciation and amortization	156.0	101.9	44.3	6.6	12.7	321.5
Equity affiliates' income	16.4	7.4	17.7	64.1	4.4	110.0
Three Months Ended 31 December 2021
Sales	$1,224.1	$780.4	$744.2	$23.7	$221.8	$2,994.2	(A)
Operating income (loss)	267.2	221.1	99.2	4.8	(69.3)	523.0
Depreciation and amortization	155.3	110.8	49.8	6.1	10.3	332.3
Equity affiliates' income	34.2	6.6	13.9	92.3	0.8	147.8















Total Assets
31 December 2022	$8,515.0	$7,439.3	$3,908.1	$3,154.2	$5,261.7	$28,278.3
30 September 2022	8,237.7	6,968.7	3,645.1	2,980.7	5,360.4	27,192.6

(A)Sales relate to external customers only. All intersegment sales are eliminated in consolidation.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations


~~Second~~First Quarter ~~2022~~2023 in Summary			3531
~~Second~~First Quarter ~~2022~~2023 Results of Operations			3633
~~First Six Months 2022 in Summary~~			41
~~First Six Months 2022 Results of Operations~~			43
Reconciliations of Non-GAAP Financial Measures			4838
Liquidity and Capital Resources			5443
Pension Benefits			5747
Critical Accounting Policies and Estimates			5748

~~The following~~As used in the discussion that follows, unless the context indicates otherwise, the terms “we,” “our,” “us,” the “Company,” "Air Products," or “registrant” include controlled subsidiaries and affiliates of Air Products. This discussion should be read in conjunction with the interim consolidated financial statements and the accompanying notes contained in this ~~quarterly report.~~Quarterly Report on Form 10-Q. Unless otherwise stated, financial information is presented in millions of ~~dollars,~~U.S. Dollars, except for per share data. Except for net income, which includes the results of discontinued operations, when applicable, financial information is presented on a continuing operations basis.

Comparisons of our results of operations and liquidity and capital resources are for the ~~second~~first quarter ~~and first six months~~ of fiscal ~~years 2022 and 2021.~~year 2023 versus ("vs.") the first quarter of fiscal year 2022. The disclosures provided in this ~~quarterly report~~Quarterly Report on Form 10-Q are complementary to those made in our Annual Report on Form 10-K for the fiscal year ended 30 September ~~2021,~~2022 (the "2022 Form 10-K"), which was filed with the SEC on 1822 November ~~2021.~~

~~We reorganized our reporting segments effective 1 October 2021. Prior year segment information presented has beenupdated to conform with the fiscal year 2022 presentation. Refer to Note 19,~~ ~~Business Segment Information, to the consolidated financial statements for additional information.~~2022.

The financial measures discussed 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, adjusted effective tax rate, and capital expenditures, we present a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. These reconciliations and explanations regarding the use of non-GAAP measures are presented under the “Reconciliations of Non-GAAP Financial Measures” section beginning on page 4838.

For information concerning activity with our related parties, refer to Note ~~18,~~16, Supplemental Information, to the consolidated financial statements.

~~Russia's Invasion~~About Air Products

Air Products and Chemicals, Inc., a Delaware corporation originally founded in 1940, has built a reputation for its innovative culture, operational excellence, and commitment to safety and the environment. Our passionate, talented, and committed employees are from diverse backgrounds, but are driven by our higher purpose to create innovative solutions that benefit the environment, enhance sustainability, and address the challenges facing customers, communities, and the world. As of ~~Ukraine~~

~~The safety~~30 September 2022, we had approximately 21,900 employees, of which over 90% were working full-time and 75% were located outside the United States. For information on our ~~team members in areas affected by Russia's invasion of Ukraine remains~~product, service, and solution offerings, refer to our ~~top priority.~~

Additionally, in March we announced our intent to divest our small industrial gas business in Russia, which had fiscal year 2021 sales of less than $25. The results of our business in Russia are reflected in the Europe segment. We do not intend to pursue any new business development activities in the country.2022 Form 10-K.

We ~~also have~~manage our operations, ~~in Ukraine that generated sales of less than $5 in fiscal year 2021,~~assess performance, and ~~we have suspended the construction of a plant.~~

~~Our~~report earnings under five reportable segments: Americas, Asia, Europe, Middle East and India, and Corporate and other. This Management’s Discussion and Analysis discusses our results ~~of operations for the periods covered by this report were not materially impacted by~~based on these events; however, given the dynamic nature of these circumstances, uncertainty remains related to how these events may affect our business, results of operations, and overall financial performance in future periods. For example, our ability to recover the carrying value of our assets in Russia and Ukraine as well as our ability to exit contracts in Russia could be impacted by sanctions imposed on Russia and potential Russian retaliatory measures.

operations.

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~~SECOND~~FIRST QUARTER ~~2022~~2023 VS. ~~SECOND~~FIRST QUARTER ~~2021~~2022

~~SECOND~~FIRST QUARTER ~~2022~~2023 IN SUMMARY

•Sales of ~~$2,945.1~~$3,174.7 increased ~~18%~~6%, or ~~$443.1, primarily~~$180.5, due to higher ~~volumes, positive~~ pricing ~~and~~of 7%, higher energy cost pass-through to ~~customers. Merchant~~customers of 3%, and higher volumes ~~and pricing improved across~~of 2%, partially offset by an unfavorable impact from currency of 6% due to the regional segments, while our on-site business remained stable. Pricing actions were particularly successful in Europe, where our team was able to implement increases to offset unprecedented power and fuel costs.strengthening of the U.S. Dollar.

•Operating income of ~~$561.9~~$652.0 increased 2%25%, or ~~$13.4, primarily due to~~$129.0, as our pricing actions and higher volumes overcame the unfavorable impact from currency and ~~pricing actions that more than offset~~ higher costs. Operating margin of ~~19.1% decreased 280~~20.5% increased 300 basis points ("bp"), primarily due to ~~the~~higher pricing, partially offset by unfavorable costs ~~and higher energy cost pass-through to customers, which increases sales but not operating income.~~.

•Equity affiliates' income of ~~$120.8 increased 73%~~$110.0 decreased 26%, or ~~$51.0,~~$37.8, primarily ~~driven~~due to a prior year benefit associated with the sale of air separation units by the Jazan ~~Integrated Gasification and Power~~Gas Project Company ~~("JIGPC")~~ joint ~~venture, which began contributing to our results in the Middle East and India segment in late October 2021.~~venture.

•Net income of ~~$536.8~~$583.8 increased ~~13%~~6%, or ~~$59.7, while net~~$34.2, primarily due to higher pricing and volumes, partially offset by unfavorable currency, lower equity affiliates' income, and higher costs. Net income margin of ~~18.2% decreased 90 bp.~~18.4% was flat versus the prior year.

•Adjusted EBITDA of ~~$1,018.6~~$1,083.5 increased 9%8%, or ~~$84.6, while~~$80.4, and adjusted EBITDA margin of ~~34.6% decreased 270~~34.1% increased 60 bp.

•Diluted EPS of ~~$2.38~~$2.57 increased ~~12%~~2%, or ~~$0.25~~$0.05 per share, and adjusted diluted EPS of ~~$2.38~~$2.64 increased ~~14%~~6%, or ~~$0.30~~$0.16 per share. A summary table of changes in diluted EPS is presented below.

•~~We increased the quarterly dividend on our common stock to $1.62 per share, representing an 8% increase, or $0.12 per share, from the previous dividend~~Table of ~~$1.50 per share. This is the 40~~Contentsth ~~consecutive year we have increased our quarterly dividend, highlighting our commitment to creating shareholder value through capital deployment and rewarding our investors through dividends.~~

Changes in Diluted EPS Attributable to Air Products

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

Three Months Ended

31 December

Increase

2022

2021

(Decrease)

Diluted EPS

$2.57

$2.52

$0.05

Operating Impacts

Underlying business

Volume

$0.03

Price, net of variable costs

0.71

Other costs

(0.11)

Currency

(0.15)

Three Months Ended

31 March

Increase

2022

2021

(Decrease)

Diluted EPS From Continuing Operations

$2.38

$2.13

$0.25

Operating Impacts

Underlying business

Volume

$0.18

Price, net of variable costs

0.14

Other costs

(0.21)

Currency

(0.01)

Total operating impacts

$0.48

Facility closure

0.08

Gain on exchange with joint venture partner

(0.12)

Total Operating Impacts

$0.06

Other Impacts

Equity affiliates' income

$0.18

Equity affiliates' income

($0.14)

Interest expense

0.01

Interest expense

(0.04)

Other non-operating income/expense, net

(0.03)

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

0.03

Non-service pension benefit/cost, net

(0.11)

Change in effective tax rate

0.05

Change in effective tax rate

(0.07)

Noncontrolling interests

(0.01)

Noncontrolling interests

(0.10)

Total Other Impacts

$0.20

Total other impacts

($0.43)

Total Change in Diluted EPS From Continuing Operations

$0.25

Total change in diluted EPS

$0.05

% Change from prior year

Upon completion of the first phase of the Jazan gasification and power project in the first quarter of fiscal year 2022, we recognized a net benefit from the recognition of previously deferred profits, net of other project finalization costs, related to the Jazan Gas Project Company joint venture within "Equity affiliates' income." Our non-controlling partner's share of the project finalization costs favorably impacted EPS within "Noncontrolling interests." Diluted earnings per share for the first quarter of fiscal year 2022 reflects a total net benefit from this event of approximately $0.20 per share.

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


	Three Months Ended
	31 December		Increase
	2022	2021	(Decrease)
Diluted EPS	$2.57	$2.52	$0.05









Non-service pension (benefit) cost, net	0.07	(0.04)	0.11





Adjusted Diluted EPS	$2.64	$2.48	$0.16

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Three Months Ended
31 March Increase
2022 2021 (Decrease)
Diluted EPS From Continuing Operations $2.38 $2.13 $0.25
Facility closure — 0.08 (0.08)
Gain on exchange with joint venture partner — (0.12) 0.12
Adjusted Diluted EPS From Continuing Operations $2.38 $2.08 $0.30

~~SECOND~~FIRST QUARTER ~~2022~~2023 RESULTS OF OPERATIONS

Discussion of Consolidated Results


		Three Months Ended								Three Months Ended
		31 March								31 December				Changes
		2022		2021		$ Change	Change			2022		2021		$	%/bp
GAAP Measures	GAAP Measures								GAAP Measures
Sales	Sales	$2,945.1		$2,502.0		$443.1	18	%	Sales	$3,174.7		$2,994.2		$180.5	6	%
Operating income	Operating income	561.9		548.5		13.4	2	%	Operating income	652.0		523.0		129.0	25	%
Operating margin	Operating margin	19.1	%	21.9	%		(280)	bp	Operating margin	20.5	%	17.5	%		300	bp
Equity affiliates’ income	Equity affiliates’ income	$120.8		$69.8		$51.0	73	%	Equity affiliates’ income	$110.0		$147.8		($37.8)	(26	%)
Net income	Net income	536.8		477.1		59.7	13	%	Net income	583.8		549.6		34.2	6	%
Net income margin	Net income margin	18.2	%	19.1	%		(90)	bp	Net income margin	18.4	%	18.4	%		—	bp
Non-GAAP Measures	Non-GAAP Measures								Non-GAAP Measures
Adjusted EBITDA	Adjusted EBITDA	$1,018.6		$934.0		$84.6	9	%	Adjusted EBITDA	$1,083.5		$1,003.1		$80.4	8	%
Adjusted EBITDA margin	Adjusted EBITDA margin	34.6	%	37.3	%		(270)	bp	Adjusted EBITDA margin	34.1	%	33.5	%		60	bp

Sales

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


~~Sales % Change from Prior Year~~
Volume	82	%
Price	67	%

Energy cost pass-through to customers	63	%
Currency	(26	%)

Total ~~Consolidated Sales Change~~consolidated sales change	186	%

Sales of ~~$2,945.1~~$3,174.7 increased ~~18%~~6%, or ~~$443.1,~~$180.5, due to ~~higher volumes of 8%,~~ positive pricing of 6%7%, ~~and~~ higher energy cost pass-through to customers of 6%3%, and higher volumes of 2%, partially offset by an unfavorable currency ~~impacts~~impact of 2%6%. ~~Volume growth~~The pricing improvement was primarily attributable to our merchant businesses in the Americas and Europe segments. Higher contractual energy cost pass-through to our on-site customers was driven by our Europe segment, which continues to be impacted by historically heightened energy costs throughout the region. The volume improvement was primarily driven by ~~new assets, recovery in hydrogen, strong~~higher demand for merchant ~~demand, and higher activity in~~products as well as our on-site business, partially offset by lower sale of equipment businesses. Energy costs were significantly higher versus the prior year, particularly in Europe. Continued focus on pricing actions in our merchant businesses, including those intended to recover the escalating power and fuel costs, resulted in price improvement in our three largest segments. Contractual provisions associated with our on-site business, which represents approximately half our total company sales, allow us to pass the higher energy costs through to our customers. Theproject activity. Currency was unfavorable ~~currency impact was primarily driven by the weakening of the Euro against~~as the U.S. ~~Dollar.~~

~~Table of Contents~~

Dollar strengthened against most major currencies.

Cost of Sales and Gross Margin

Cost of sales of ~~$2,151.6~~$2,272.3 increased ~~22%~~2%, or ~~$382.9, from total cost of sales of $1,768.7 in the prior year, which included a $23.2 charge for a facility closure as discussed below. The increase was~~$48.7, due to higher energy cost pass-through to customers of ~~$151,~~$75, higher costs associated with sales volumes of ~~$149,~~$55, and unfavorable other costs of ~~$147,~~$56, partially offset by favorable currency impacts of ~~$42.~~$137. The unfavorable other cost impact ~~included higher operating and distribution costs that were~~was driven by power for our merchant business, inflation, and higher planned maintenance, supply chain challenges, costs for a helium storage cavern to support reliable helium supply to our customers globally, as well as costs for resources needed to support new project start-ups.maintenance. Gross margin of ~~26.9% decreased 240~~28.4% increased 270 bp from ~~29.3%~~25.7% in the prior year, primarily due to ~~unfavorable costs and higher energy cost pass-through to customers, partially offset by~~ the positive impact of our pricing ~~actions.~~

~~Facility Closure~~

~~During~~actions, partially offset by the second quarter of fiscal year 2021, we recorded a charge of $23.2 ($17.4 after-tax, or $0.08 per share) primarily for a noncash write-down of assets associated with a contract termination in the Americas segment. This charge is reflected as "Facility closure" on our consolidated income statements for the three months ended 31 March 2021 and was not recorded in segment results.unfavorable costs.

Selling and Administrative Expense

Selling and administrative expense of ~~$227.0~~$234.4 increased 8%1%, or ~~$16.7,~~$1.6, primarily ~~driven by~~due to inflation and increased headcount to support our growth strategy, ~~costs associated with our new global headquarters, and inflation.~~partially offset by a favorable currency impact from the strengthening of the U.S. Dollar. Selling and administrative expense as a percentage of sales decreased to ~~7.7%~~7.4% from ~~8.4%~~7.8% in the prior year.

Research and Development Expense

Research and development expense of ~~$23.7~~$24.4 increased ~~12%~~5%, or ~~$2.6.~~$1.1. Research and development expense as a percentage of sales of 0.8% was flat versus the prior year.

~~Gain on Exchange with Joint Venture Partner~~

~~In the second quarter~~Table of fiscal year 2021, we recognized a gain of $36.8 ($27.3 after-tax, or $0.12 per share) on an exchange with the Tyczka Group, a former joint venture partner. As part of the exchange, we separated our 50/50 joint venture in Germany into two separate businesses so each party could acquire a portion of the business on a 100% basis. The gain included $12.7 from the revaluation of our previously held equity interest in the portion of the business that we retained and $24.1 from the sale of our interest in the remaining business. The gain is reflected as "Gain on exchange with joint venture partner" on our consolidated income statements for the three months ended 31 March 2021 and was not recorded in segment results for our Europe segment. Refer to Note 3, Contents~~Acquisitions, to the consolidated financial statements for additional information.~~

Other Income (Expense), Net

Other income of ~~$19.1 increased 95%~~$8.4 decreased 1%, or ~~$9.3, primarily due to income from the sale of assets.~~$0.1.

Operating Income and Operating Margin

Operating income of ~~$561.9~~$652.0 increased 2%25%, or ~~$13.4, primarily due to higher volumes of $49 and~~$129.0, as positive pricing, net of power and fuel costs, of ~~$40. These factors~~$191 and higher volumes of $8 were partially offset by an unfavorable currency impact of $40 and higher costs of ~~$59 that~~$30. Costs were ~~driven by business development,~~higher primarily due to labor inflation and higher planned maintenance, as well as various external factors, including inflation and supply chain challenges. In addition, the prior year included a charge of $23 associated with a facility closure, partially offset by a gain of $37 on an exchange with a joint venture partner.maintenance.

Operating margin of ~~19.1% decreased 280~~20.5% increased 300 bp from ~~21.9%~~17.5% in the prior year, primarily due to ~~the~~higher pricing, partially offset by unfavorable costs ~~and higher energy cost pass-through to customers, which increases sales but not operating income.~~.

Equity Affiliates' Income

Equity affiliates' income of ~~$120.8 increased 73%~~$110.0 decreased 26%, or ~~$51.0, primarily driven by the JIGPC joint venture, which began contributing to our results in the Middle East and India segment in late October 2021.~~

~~Table of Contents~~

~~Interest Expense~~

Three Months Ended
31 March
2022 2021
Interest incurred $40.4 $42.6
Less: Capitalized interest 8.1 6.5
Interest expense $32.3 $36.1

~~Interest incurred decreased 5%, or $2.2, primarily driven by a lower debt balance. Capitalized interest increased 25%, or $1.6, due to a higher carrying value of projects under construction.~~

~~Other Non-Operating Income (Expense), Net~~

Other non-operating income of $9.1 decreased 46%, or $7.7, driven mainly by lower pension income. Non-service pension income decreased in fiscal year 2022 primarily due to lower expected returns on plan assets for the U.S. salaried pension plan and the U.K. pension plan.

~~Net Income and Net Income Margin~~

Net income of $536.8 increased 13%, or $59.7, primarily due to higher volumes, pricing, and equity affiliates' income, partially offset by higher costs. Net income margin of 18.2% decreased 90 bp from 19.1% in the prior year. The margin decline included an unfavorable impact of approximately 100 bp from higher energy cost pass-through to customers, which increases sales but not net income.

~~Adjusted EBITDA and Adjusted EBITDA Margin~~

Adjusted EBITDA of $1,018.6 increased 9%, or $84.6, primarily due to higher volumes, pricing, and equity affiliates' income, partially offset by higher costs. Adjusted EBITDA margin of 34.6% decreased 270 bp from 37.3% in the prior year. The margin decline included an unfavorable impact of approximately 200 bp from higher energy cost pass-through to customers.

~~Effective Tax Rate~~

The effective tax rate equals the income tax provision divided by income from continuing operations before taxes. Our effective tax rate was 18.6% and 20.4% for the three months ended 31 March 2022 and 2021, respectively. The current year rate was lower primarily due to higher equity affiliates' income that is primarily presented net of income taxes within income from continuing operations on our consolidated income statements. The current year rate also includes the impact of an agreement reached with foreign tax authorities that resolved uncertainties related to unrecognized tax benefits.

~~The adjusted effective tax rate was 18.6% and 20.2% for the three months ended 31 March 2022 and 2021, respectively.~~

~~Segment Analysis~~

~~Americas~~

Three Months Ended
31 March
2022 2021 $ Change % Change
Sales $1,186.6 $1,056.1 $130.5 12 %
Operating income 275.5 263.4 12.1 5 %
Operating margin 23.2 % 24.9 % (170) bp
Equity affiliates’ income $20.1 $32.3 ($12.2) (38 %)
Adjusted EBITDA 449.3 449.0 0.3 — %
Adjusted EBITDA margin 37.9 % 42.5 % (460) bp

~~Table of Contents~~


~~Sales % Change from Prior Year~~
~~Volume~~	6	%
~~Price~~	5	%
~~Energy cost pass-through~~	2	%
~~Currency~~	(1	%)
~~Total Americas Sales Change~~	12	%

Sales of $1,186.6 increased 12%, or $130.5, due to higher volumes of 6%, positive pricing of 5%, and higher energy cost pass-through to customers of 2%, partially offset by unfavorable currency of 1%. The volume improvement was primarily driven by a recovery in hydrogen and better demand for merchant products in North America. However, merchant volumes were weaker in South America due to lower demand for medical oxygen. Pricing improved across all major merchant product lines, which more than offset power cost increases in the region.

Operating income of $275.5 increased 5%, or $12.1, primarily from pricing, net of power and fuel costs, of $37 and favorable volumes of $6. These factors were partially offset by unfavorable costs of $30, which were primarily attributable to higher planned maintenance, inflation, and supply chain challenges, including driver shortages that are broadly impacting the industry. Operating margin of 23.2% decreased 170 bp from 24.9% in the prior year, as higher costs and negative volume mix were only partially offset by higher pricing.

~~Equity affiliates’ income of $20.1 decreased 38%, or $12.2, primarily driven by lower merchant volumes in our Mexico affiliate.~~

~~Asia~~

Three Months Ended
31 March
2022 2021 $ Change % Change
Sales $751.2 $697.5 $53.7 8 %
Operating income 203.6 198.5 5.1 3 %
Operating margin 27.1 % 28.5 % (140) bp
Equity affiliates’ income $6.2 $7.1 ($0.9) (13 %)
Adjusted EBITDA 321.6 315.3 6.3 2 %
Adjusted EBITDA margin 42.8 % 45.2 % (240) bp


~~Sales % Change from Prior Year~~
~~Volume~~	6	%
~~Price~~	1	%

~~Energy cost pass-through~~	1	%
~~Currency~~	—	%
~~Total Asia Sales Change~~	8	%

Sales of $751.2 increased 8%, or $53.7, due to higher volumes of 6%, positive pricing of 1%, and higher energy cost pass-through to customers of 1%. The volume improvement was driven by several new traditional industrial gas plants in our on-site business; however, merchant demand was negatively impacted due to COVID-19 restrictions in certain parts of China. Currency was flat versus the prior year.

Operating income of $203.6 increased 3%, or $5.1. Higher volumes of $16 were partially offset by unfavorable operating costs of $6, which were primarily driven by inflation, resources needed to support new project start-ups, and higher distribution and product sourcing costs.~~Additionally, higher power and fuel costs exceeded our pricing actions by $5. We expect higher costs for planned maintenance activities in the second half of the year.~~

~~Operating margin of 27.1% decreased 140 bp from 28.5% in the prior year, as the positive volume impact was more than offset by higher energy and other costs.~~

~~Equity affiliates’ income of $6.2 decreased 13%, or $0.9.~~

~~Table of Contents~~

~~Europe~~

Three Months Ended
31 March
2022 2021 $ Change % Change
Sales $738.6 $558.4 $180.2 32 %
Operating income 116.4 132.9 (16.5) (12 %)
Operating margin 15.8 % 23.8 % (800) bp
Equity affiliates’ income $23.3 $12.6 $10.7 85 %
Adjusted EBITDA 190.0 196.5 (6.5) (3 %)
Adjusted EBITDA margin 25.7 % 35.2 % (950) bp


~~Sales % Change from Prior Year~~
~~Volume~~	2	%
~~Price~~	14	%

~~Energy cost pass-through~~	24	%
~~Currency~~	(8	%)

~~Total Europe Sales Change~~	32	%

Sales of $738.6 increased 32%, or $180.2, due to higher energy cost pass-through to customers of 24%, higher pricing of 14%, and higher volumes of 2%, partially offset by unfavorable currency impacts of 8%.Energy costs remained elevated in the second quarter of fiscal year 2022. In our on-site business, we are contractually able to pass these costs through to our customers. In our merchant business, we implemented pricing actions across all major product lines, which recovered the higher power and fuel costs experienced during the second quarter as well as a portion of higher costs from the first quarter. We remain focused on ongoing actions to continue recovering the higher power and fuel costs. Volumes improved primarily due to higher demand for merchant products. The unfavorable currency impacts were primarily driven by the weakening of the Euro against the U.S. Dollar.

Operating income of $116.4 decreased 12%, or $16.5. Unfavorable costs of $14 were primarily attributable to higher operating and distribution costs associated with energy-related supply chain challenges, inflation, and development of new projects. Operating income was also impacted by unfavorable volume mix of $7 and unfavorable currency of $6. These factors were partially offset by significant pricing actions in our merchant business, which more than offset the escalating power costs and increased operating income by $10. Operating margin of 15.8% decreased 800 bp from 23.8% in the prior year primarily due to higher energy cost pass-through to customers, which increases sales but not operating income and negatively impacted margin by approximately 450 basis points.

~~Equity affiliates’ income of $23.3 increased 85%, or $10.7, primarily driven by an affiliate in Italy.~~

~~Middle East and India~~

Three Months Ended
31 March
2022 2021 $ Change % Change
Sales $28.9 $26.2 $2.7 10 %
Operating income 4.8 6.7 (1.9) (28 %)
Equity affiliates' income 71.1 16.1 55.0 342 %
Adjusted EBITDA 82.8 29.4 53.4 182 %

Sales of $28.9 increased 10%, or $2.7, primarily due to a new plant in India and a small acquisition. Operating income of $4.8 decreased 28%, or $1.9, primarily due to unfavorable volume mix. Equity affiliates' income of $71.1 increased $55.0 primarily driven by the JIGPC joint venture, which began contributing to our results in late October 2021.

~~Table of Contents~~

~~Corporate and other~~

The Corporate and other segment includes sales of cryogenic and gas processing equipment for air separation as well as our liquefied natural gas ("LNG"), turbo machinery equipment and services, and distribution sale of equipment businesses. The results of this segment also include centralized global management costs and corporate support functions that benefit all segments as well as income and expense not directly associated with the other segments, such as foreign exchange gains and losses.

Three Months Ended
31 March
2022 2021 $ Change % Change
Sales $239.8 $163.8 $76.0 46 %
Operating loss (38.4) (66.6) 28.2 42 %
Adjusted EBITDA (25.1) (56.2) 31.1 55 %

Sales of $239.8 increased 46%, or $76.0, and operating loss of $38.4 decreased 42%, or $28.2, primarily due to higher sale of equipment project activity in air separation equipment and other non-LNG products.

~~FIRST SIX MONTHS 2022 VS. FIRST SIX MONTHS 2021~~

~~FIRST SIX MONTHS 2022 IN SUMMARY~~

•~~Sales of $5,939.3 increased 22%, or $1,062.1, primarily due to higher energy cost pass-through to customers, higher volumes, and positive pricing.~~

•Operating income of $1,084.9 was flat as higher volumes and pricing were offset by higher costs. Operating margin of 18.3% decreased 400 bp, primarily due to higher energy cost pass-through to customers, which increases our sales but not operating income.

•Equity affiliates' income of $268.6 increased 93%, or $129.5, primarily driven by the JIGPC joint venture, which began contributing to our results in the Middle East and India segment in late October 2021.

•~~Net income of $1,086.4 increased 13%, or $122.6, while net income margin of 18.3% decreased 150 bp.~~

•~~Adjusted EBITDA of $2,021.7 increased 8%, or $155.6, while adjusted EBITDA margin of 34.0% decreased 430 bp.~~

•~~Diluted EPS of $4.90 increased 15%, or $0.65 per share, and adjusted diluted EPS of $4.90 increased 17%, or $0.70 per share. A summary table of changes in diluted EPS is presented below.~~

•~~We increased the quarterly dividend on our common stock to $1.62 per share, representing an 8% increase, or $0.12 per share, from the previous dividend of $1.50 per share. This is the 40~~th ~~consecutive year we have increased our quarterly dividend, highlighting our commitment to creating shareholder value through capital deployment and rewarding our investors through dividends.~~

~~Table of Contents~~

~~Changes in Diluted EPS Attributable to Air Products~~

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

Six Months Ended
31 March Increase
2022 2021 (Decrease)
Total Diluted EPS $4.90 $4.29 $0.61
Less: Diluted EPS from income from discontinued operations — 0.05 (0.05)
Diluted EPS From Continuing Operations $4.90 $4.25 $0.65
Operating Impacts
Underlying business
Volume $0.36
Price, net of variable costs 0.11
Other costs (0.42)
Currency (0.01)
Facility closure 0.08
Gain on exchange with joint venture partner (0.12)
Total Operating Impacts $—
Other Impacts
Equity affiliates' income 0.47
Interest expense 0.04
Other non-operating income/expense, net (0.02)
Change in effective tax rate 0.11
Noncontrolling interests 0.06
Total Other Impacts $0.66
Total Change in Diluted EPS From Continuing Operations $0.65

Six Months Ended
31 March Increase
2022 2021 (Decrease)
Diluted EPS From Continuing Operations $4.90 $4.25 $0.65
Facility closure — 0.08 (0.08)
Gain on exchange with joint venture partner — (0.12) 0.12
Adjusted Diluted EPS From Continuing Operations $4.90 $4.20 $0.70

Our diluted earnings per share for the first half of fiscal year 2022 reflects our 55% share of the JIGPC joint venture's results, of which 4% is attributable to the non-controlling partner of Air Products Qudra. Additionally, upon completion of the first phase of the gasification and power project in October 2021, we also recognized a net benefit within "Equity affiliates' income" from the recognition of previously deferred profits, net of other project finalization costs, related to the existing Jazan Gas Project Company joint venture. Our non-controlling partner's share of the project finalization costs favorably impacted EPS within "Noncontrolling interests." The total net benefit from this first quarter event was approximately $0.20 per share.

~~Table of Contents~~

~~FIRST SIX MONTHS 2022 RESULTS OF OPERATIONS~~

~~Discussion of Consolidated Results~~

Six Months Ended
31 March
2022 2021 $ Change Change
GAAP Measures
Sales $5,939.3 $4,877.2 $1,062.1 22 %
Operating income 1,084.9 1,087.6 (2.7) — %
Operating margin 18.3 % 22.3 % (400) bp
Equity affiliates’ income 268.6 139.1 129.5 93 %
Net income 1,086.4 963.8 122.6 13 %
Net income margin 18.3 % 19.8 % (150) bp
Non-GAAP Measures
Adjusted EBITDA 2,021.7 1,866.1 155.6 8 %
Adjusted EBITDA margin 34.0 % 38.3 % (430) bp


~~Sales % Change from Prior Year~~
~~Volume~~	8	%
~~Price~~	5	%
~~Energy cost pass-through~~	10	%
~~Currency~~	(1	%)

~~Total Consolidated Sales Change~~	22	%

Sales of $5,939.3 increased 22%, or $1,062.1, due to higher energy cost pass-through to customers of 10%, higher volumes of 8%, and positive pricing of 5%, partially offset by unfavorable currency impacts of 1%. Energy costs were significantly higher versus the prior year, particularly in Europe and North America. Contractual provisions associated with our on-site business, which represents approximately half our total company sales, allow us to pass these costs through to our customers. Volume growth was primarily driven by recovery in hydrogen, strong merchant demand, higher activity in our sale of equipment businesses, and new assets. Continued focus on pricing actions in our merchant businesses, including those intended to recover the escalating power and fuel costs, resulted in price improvement in our three largest segments. The unfavorable currency impact was primarily driven by the weakening of the Euro against the U.S. Dollar.

~~Cost of Sales and Gross Margin~~

Cost of sales of $4,375.2 increased 29%, or $974.1, from total cost of sales of $3,401.1 in the prior year, which included a $23.2 charge for a facility closure as discussed below. The increase was due to higher energy cost pass-through to customers of $471, higher costs associated with sales volumes of $298, and unfavorable costs of $288, partially offset by favorable currency impacts of $60. The unfavorable cost impact included higher operating and distribution costs driven by supply chain challenges as well as costs for a helium storage cavern to support reliable helium supply to our customers globally. Gross margin of 26.3% decreased 400 bp from 30.3% in the prior year, primarily due to unfavorable costs and higher energy cost pass-through to customers, partially offset by the positive impact of our pricing actions.

~~Facility Closure~~

During the second quarter of fiscal year 2021, we recorded a charge of $23.2 ($17.4 after-tax, or $0.08 per share) primarily for a noncash write-down of assets associated with a contract termination in the Americas segment. This charge is reflected as "Facility closure" on our consolidated income statements for the six months ended 31 March 2021 and was not recorded in segment results.

~~Selling and Administrative Expense~~

~~Selling and administrative expense of $459.8 increased 11%, or $46.8,~~primarily driven by increased headcount to support our growth strategy, costs associated with our new global headquarters, inflation, and higher incentive compensation. Selling and administrative expense as a percentage of sales decreased to 7.7% from 8.5% in the prior year.

~~Table of Contents~~

~~Research and Development~~

~~Research and development expense of $47.0 increased 5%, or $2.4. Research and development expense as a percentage of sales decreased to 0.8% from 0.9% in the prior year.~~

~~Gain on Exchange with Joint Venture Partner~~

In the second quarter of fiscal year 2021, we recognized a gain of $36.8 ($27.3 after-tax, or $0.12 per share) on an exchange with the Tyczka Group, a former joint venture partner. As part of the exchange, we separated our 50/50 joint venture in Germany into two separate businesses so each party could acquire a portion of the business on a 100% basis. The gain included $12.7 from the revaluation of our previously held equity interest in the portion of the business that we retained and $24.1 from the sale of our interest in the remaining business. The gain is reflected as "Gain on exchange with joint venture partner" on our consolidated income statements for the six months ended 31 March 2021 and was not recorded in segment results for our Europe segment. Refer to Note 3, ~~Acquisitions, to the consolidated financial statements for additional information.~~

~~Other Income (Expense), Net~~

~~Other income of $27.6 decreased 15%, or $4.7, as income from the sale of assets in the first half of fiscal year 2022 was more than offset by a prior year settlement of a supply contract.~~

~~Operating Income and Operating Margin~~

~~Operating income of $1,084.9 was flat, primarily due to higher volumes of $101 and positive pricing, net of power and fuel costs, of $30.~~These factors were offset by unfavorable costs of $117 driven by business development, higher planned maintenance, as well as various external factors, including inflation and supply chain challenges. In addition, the prior year included a charge of $23 associated with a facility closure, partially offset by a gain of $37 on an exchange with a joint venture partner.

~~Operating margin of 18.3% decreased 400 bp from 22.3% in the prior year,~~$37.8, primarily due to the ~~unfavorable costs and higher energy cost pass-through to customers, which increases sales but not operating income.~~

~~Equity Affiliates' Income~~

Equity affiliates' income of $268.6 increased 93%, or $129.5, primarily driven by the JIGPC joint venture, which began contributing to our results in the Middle East and India segment in late October 2021. Additionally, in the first quarter, we recognized the remaining deferred profit associated with air separation units previously sold to Jazan Gas Project Company, net of other project finalization costs. Refer to Note 7, ~~Equity Affiliates, to the consolidated financial statements for additional information.~~

~~Interest Expense~~

Six Months Ended
31 March
2022 2021
Interest incurred $81.4 $84.9
Less: capitalized interest 18.6 12.1
Interest expense $62.8 $72.8

~~Interest incurred decreased 4%, or $3.5, primarily driven by a lower debt balance. Capitalized interest increased 54%, or $6.5, due to a higher carrying value of projects under construction.~~

~~Table of Contents~~

~~Other Non-Operating Income (Expense), net~~

Other non-operating income of $31.7 decreased 10%, or $3.7, driven mainly by lower pension income. Non-service pension income decreased in fiscal year 2022 primarily due to lower expected returns on plan assets for the U.S. salaried pension plan and the U.K. pension plan.

~~Discontinued Operations~~

In the first quarter of fiscal year 2021, we recorded a tax benefit of $10.3 ($0.05 per share) primarily 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 statement for the six months ended 31 March 2021.

~~Net Income and Net Income Margin~~

~~Net income of $1,086.4 increased 13%, or $122.6, primarily due to higher equity affiliates' income and higher volumes, partially offset by higher costs. Additionally, the~~ prior year included net income from discontinued operations of $10.3. Net income margin of 18.3% decreased 150 bp from 19.8% in the prior year. The margin decline included an unfavorable impact of approximately 150 bp from higher energy cost pass-through to customers, which increases sales but not net income.

~~Adjusted EBITDA and Adjusted EBITDA Margin~~

~~Adjusted EBITDA of $2,021.7 increased 8%, or $155.6,~~primarily due to higher volumes and higher equity affiliates' income, partially offset by higher costs. Adjusted EBITDA margin of 34.0% decreased 430 bp from 38.3% in the prior year. The margin decline included an unfavorable impact of approximately 300 bp from higher energy cost pass-through to customers.

~~Effective Tax Rate~~

Our effective tax rate was 17.8% and 19.8% for the six months ended 31 March 2022 and 2021, respectively. The current year rate was lower primarily due to higher equity affiliates' income that is primarily presented net of income taxes within income from continuing operations on our consolidated income statements.

Our results for the first half of the year include higher tax benefits from share-based compensation vesting and stock option exercises. Because many of our share-based compensation grants vest in December, the tax benefits from these awards typically have a larger impact on our first quarter effective tax rate compared to other periods.

~~The adjusted effective tax rate was 17.8% and 19.7% for the six months ended 31 March 2022 and 2021, respectively.~~

~~Segment Analysis~~

~~Americas~~

Six Months Ended
31 March
2022 2021 $ Change % Change
Sales $2,410.7 $1,989.1 $421.6 21 %
Operating income 542.7 489.2 53.5 11 %
Operating margin 22.5 % 24.6 % (210) bp
Equity affiliates’ income 54.3 54.6 (0.3) (1 %)
Adjusted EBITDA 906.0 848.9 57.1 7 %
Adjusted EBITDA margin 37.6 % 42.7 % (510) bp


~~Sales % Change from Prior Year~~
~~Volume~~	7	%
~~Price~~	4	%
~~Energy cost pass-through~~	10	%
~~Currency~~	—	%
~~Total Americas Sales Change~~	21	%

~~Table of Contents~~

Sales of $2,410.7 increased 21%, or $421.6, due to higher energy cost pass through to customers of 10%, higher volumes of 7%, and positive pricing of 4%. Energy cost pass-through to customers was higher primarily due to elevated natural gas prices, which we are contractually able to pass through to our on-site customers. The volume improvement was primarily driven by a recovery in hydrogen and better demand for merchant products in North America. Pricing improved across all major merchant product lines, which more than offset power cost increases in the region. Currency was flat versus the prior year.

Operating income of $542.7 increased 11%, or $53.5, primarily from pricing, net of power and fuel costs, of $46 and favorable volumes of $33. These factors were partially offset by unfavorable costs of $24, which were primarily attributable to higher planned maintenance, inflation, and supply chain challenges, including driver shortages that are broadly impacting the industry. Operating margin of 22.5% decreased 210 bp from 24.6% in the prior year, as higher energy cost pass-through to customers and higher costs were only partially offset by higher pricing.

~~Equity affiliates’ income of $54.3 decreased 1%, or $0.3.~~

~~Asia~~

Six Months Ended
31 March
2022 2021 $ Change % Change
Sales $1,531.6 $1,415.0 $116.6 8 %
Operating income 424.7 413.3 11.4 3 %
Operating margin 27.7 % 29.2 % (150) bp
Equity affiliates’ income 12.8 15.9 (3.1) (19 %)
Adjusted EBITDA 660.1 646.8 13.3 2 %
Adjusted EBITDA margin 43.1 % 45.7 % (260) bp


~~Sales % Change from Prior Year~~
~~Volume~~	5	%
~~Price~~	2	%

~~Energy cost pass-through~~	—	%
~~Currency~~	1	%
~~Total Asia Sales Change~~	8	%

Sales of $1,531.6 increased 8%, or $116.6, due to higher volumes of 5%, positive pricing of 2%, and favorable currency impacts of 1%. Higher volumes were primarily attributable to new on-site plants across the region. Energy cost pass-through to customers was flat versus the prior year.

Operating income of $424.7 increased 3%, or $11.4. Higher volumes of $36 and favorable currency impacts of $3 were partially offset by unfavorable operating costs of $27, which were primarily driven by higher distribution and product sourcing costs, inflation, and resources needed to support new project start-ups. Additionally, higher power and fuel costs were largely recovered by pricing actions, resulting in a net decrease to operating income of $1. We expect higher costs for planned maintenance activities in the second half of the year. Operating margin of 27.7% decreased 150 bp from 29.2% in the prior year as the positive volume impact was more than offset by higher energy and other costs.

~~Equity affiliates’ income of $12.8 decreased 19%, or $3.1, primarily due to lower income from affiliates in Thailand.~~

~~Table of Contents~~

~~Europe~~

Six Months Ended
31 March
2022 2021 $ Change % Change
Sales $1,482.8 $1,101.9 $380.9 35 %
Operating income 215.6 270.4 (54.8) (20 %)
Operating margin 14.5 % 24.5 % (1,000) bp
Equity affiliates’ income 37.2 27.5 9.7 35 %
Adjusted EBITDA 352.9 398.2 (45.3) (11 %)
Adjusted EBITDA margin 23.8 % 36.1 % (1,230) bp


~~Sales % Change from Prior Year~~
~~Volume~~	4	%
~~Price~~	12	%

~~Energy cost pass-through~~	25	%
~~Currency~~	(6	%)

~~Total Europe Sales Change~~	35	%

Sales of $1,482.8 increased 35%, or $380.9, due to higher energy cost pass-through to customers of 25%, higher pricing of 12%, and higher volumes of 4%, partially offset by unfavorable currency impacts of 6%. Energy costs remained elevated in the first half of fiscal year 2022. In our on-site business, we are contractually able to pass these costs through to our customers. In our merchant business, we implemented pricing actions across all major product lines, which recovered the higher power and fuel costs experienced during the second quarter as well as a portion of higher costs from the first quarter. We remain focused on ongoing actions to continue recovering the higher power and fuel costs. Volumes improved primarily due to higher demand for merchant products. The unfavorable currency impacts were primarily driven by the weakening of the Euro against the U.S. Dollar.

Operating income of $215.6 decreased 20%, or $54.8. Unfavorable costs of $29 were primarily attributable to higher operating and distribution costs associated with energy-related supply chain challenges, inflation, and development of new projects. Operating income was also impacted by unfavorable volume mix of $10, higher power and fuel costs that exceeded our pricing actions by $10, and unfavorable currency of $6. Operating margin of 14.5% decreased 1,000 bp from 24.5% in the prior year primarily due to higher energy cost pass-through to customers, which increases sales but not operating income and accounted for approximately half the margin decline.

~~Equity affiliates’ income of $37.2 increased 35%, or $9.7, primarily driven by an affiliate in Italy.~~

~~Middle East and India~~

Six Months Ended
31 March
2022 2021 $ Change % Change
Sales $52.6 $45.7 $6.9 15 %
Operating income 9.6 10.7 (1.1) (10 %)
Equity affiliates' income 163.4 37.3 126.1 338 %
Adjusted EBITDA 186.0 60.7 125.3 206 %

Sales of $52.6 increased 15%, or $6.9, and operating income of $9.6 decreased 10%, or $1.1, primarily due to a new plant in India and a small acquisition. Equity affiliates' income of $163.4 increased $126.1 primarily driven by the JIGPC joint venture, which began contributing to our results in late October 2021, as well as recognition of the remaining deferred profit associated with air separation units previously sold to Jazan Gas Project Company, net of other project finalization costs, as well as a lower contribution from our Mexico affiliate. These impacts were partially offset by contributions from the Jazan Integrated Gasification and Power Company ("JIGPC") joint venture, which began contributing to our results in the ~~first quarter.~~Middle East and India segment in late October 2021. We expect the contribution from JIGPC to grow in future periods as a result of the second phase of the asset purchase associated with the Jazan gasification and power project, which was completed in January 2023. We expect final commissioning items to be completed later this calendar year.

Interest Expense


	Three Months Ended
	31 December
	2022	2021
Interest incurred	$56.3	$41.0
Less: Capitalized interest	15.1	10.5
Interest expense	$41.2	$30.5

Interest incurred increased 37%, or $15.3, driven by a higher average interest rate on variable-rate instruments in our debt portfolio. Capitalized interest increased 44%, or $4.6, due to a higher carrying value of projects under construction.

Other Non-Operating Income (Expense), Net

Other non-operating expense was $0.6 versus income of $22.6 in the prior year. The decrease of $23.2was primarily attributable to higher non-service pension costs, which were driven by higher interest cost and lower expected returns on plan assets for the U.S. salaried pension plan and the U.K. pension plan. This impact was partially offset by higher interest income on cash and cash items due to higher interest rates.

Net Income and Net Income Margin

Net income of $583.8 increased 6%, or $34.2, primarily due to higher pricing, net of power and fuel costs, and higher volumes, partially offset by unfavorable currency, lower equity affiliates' income, and higher costs driven byinflation,higher planned maintenance, and higher non-service pension costs. Additionally, the effective tax rate was higher in fiscal year 2023 as further discussed below. Net income margin of 18.4% was flat.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA of $1,083.5 increased 8%, or $80.4, primarily due to higher pricing, net of power and fuel costs, and higher volumes, partially offset by unfavorable currency, lower equity affiliates' income, and higher costs driven by inflation and higher planned maintenance. Adjusted EBITDA margin of 34.1% increased 60 bp from 33.5% in the prior year.

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~~Corporate and other~~Effective Tax Rate

The effective tax rate equals the income tax provision divided by income before taxes. Equity affiliates' income is primarily included net of income taxes within income before taxes on our consolidated income statements.

Six Months Ended
31 March
2022 2021 $ Change % Change
Sales $461.6 $325.5 $136.1 42 %
Operating loss (107.7) (109.6) 1.9 2 %
Adjusted EBITDA (83.3) (88.5) 5.2 6 %
Our effective tax rate was 18.9% and 17.1% for the three months ended 31 December 2022 and 2021, respectively. Our effective tax rate for the first quarter of fiscal year 2023 was higher primarily due to lower excess tax benefits on share-based compensation.

Many of our share-based compensation grants vest in December. Accordingly, the tax benefits from these awards typically have a larger impact on our first quarter effective tax rate compared to other periods.

Our adjusted effective tax rate was 19.1% and 17.0% for the three months ended 31 December 2022 and 2021, respectively.

Discussion of Results by Business Segment

Americas


	Three Months Ended
	31 December				Changes
	2022		2021		$	%/bp
Sales	$1,384.2		$1,224.1		$160.1	13	%
Operating income	343.0		267.2		75.8	28	%
Operating margin	24.8	%	21.8	%		300 bp
Equity affiliates’ income	$16.4		$34.2		($17.8)	(52	%)
Adjusted EBITDA	515.4		456.7		58.7	13	%
Adjusted EBITDA margin	37.2	%	37.3	%		(10) bp

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



Volume	6	%
Price	9	%
Energy cost pass-through to customers	(1	%)
Currency	(1	%)
Total Americas sales change	13	%

Sales of ~~$461.6~~$1,384.2 increased ~~42%~~13%, or ~~$136.1,~~$160.1, due to higher pricing of 9% and higher volumes of 6%, partially offset by lower energy cost pass-through to customers of 1% and an unfavorable currency impact of 1%. We successfully recovered higher energy costs in our merchant business through continued focus on pricing actions. The volume improvement was driven by better merchant demand as well as our on-site business.

Operating income of $343.0 increased 28%, or $75.8, primarily from positive pricing, net of power and fuel costs, of $92 and favorable volumes of $13, partially offset by higher costs of $26. Higher costs were driven by higher planned maintenance and inflation. Operating margin of 24.8% increased 300 bp from 21.8% in the prior year primary due to the pricing improvement, which was partially offset by the impact of higher costs.

Equity affiliates’ income of $16.4 decreased 52%, or $17.8, driven by our Mexico affiliate.

Table of Contents

Asia


	Three Months Ended
	31 December				Changes
	2022		2021		$	%/bp
Sales	$777.8		$780.4		($2.6)	—	%
Operating income	235.9		221.1		14.8	7	%
Operating margin	30.3	%	28.3	%		200 bp
Equity affiliates’ income	$7.4		$6.6		$0.8	12	%
Adjusted EBITDA	345.2		338.5		6.7	2	%
Adjusted EBITDA margin	44.4	%	43.4	%		100 bp

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



Volume	7	%
Price	1	%

Energy cost pass-through to customers	2	%
Currency	(10	%)
Total Asia sales change	—	%

Sales of $777.8 were flat versus the prior year as higher volumes of 7%, higher energy cost pass-through to customers of 2%, and positive pricing of 1% were offset by an unfavorable impact from currency of 10%.Volumes improved overall despite COVID-19 impacts in certain parts of China. The results of our on-site business include positive volume contributions from several traditional industrial gas plants that were brought onstream across the region. The unfavorable currency impact was primarily attributable to the strengthening of the U.S. Dollar against the Chinese Renminbi and the South Korean Won.

Operating income of $235.9 increased 7%, or $14.8, due to higher volumes of $24, positive pricing, net of power and fuel costs, of $9, and lower costs of $5, partially offset by an unfavorable currency impact of $23.Operating margin of 30.3% increased 200 bp from 28.3% in the prior year due to the volume improvement and positive pricing.

Equity affiliates’ income of $7.4 increased 12%, or $0.8.

Table of Contents

Europe


	Three Months Ended
	31 December				Changes
	2022		2021		$	%/bp
Sales	$791.9		$744.2		$47.7	6	%
Operating income	145.8		99.2		46.6	47	%
Operating margin	18.4	%	13.3	%		510	bp
Equity affiliates’ income	$17.7		$13.9		$3.8	27	%
Adjusted EBITDA	207.8		162.9		44.9	28	%
Adjusted EBITDA margin	26.2	%	21.9	%		430	bp

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



Volume	(6	%)
Price	14	%

Energy cost pass-through to customers	9	%
Currency	(11	%)

Total Europe sales change	6	%

Sales of $791.9 increased 6%, or $47.7, due to higher pricing of 14% and higher energy cost pass-through to customers of 9%, partially offset by an unfavorable impact from currency of 11% and lower volumes of 6%. Price improved due to continued focus on recovering higher energy costs in our merchant business. Higher energy costs driven by natural gas prices in our on-site business were contractually passed through to customers.The volume decline was primarily attributable to lower demand for hydrogen and merchant products. Additionally, sales in this region were negatively impacted by the strengthening of the U.S. Dollar against the Euro and the British Pound Sterling.

Operating income of $145.8 increased 47%, or $46.6, as higher pricing, net of power and fuel costs, of $89 was partially offset by lower volumes of $23, an unfavorable currency impact of $12, and higher costs of $7. Operating margin of 18.4% increased 510 bp from 13.3% in the prior year primarily due to the pricing improvement, partially offset by the impact of lower volumes and higher costs.

Equity affiliates’ income of $17.7 increased 27%, or $3.8, driven by an affiliate in Italy.

Table of Contents

Middle East and India


	Three Months Ended
	31 December		Changes
	2022	2021	$	%
Sales	$41.4	$23.7	$17.7	75	%
Operating income	6.7	4.8	1.9	40	%
Equity affiliates' income	64.1	92.3	(28.2)	(31	%)
Adjusted EBITDA	77.4	103.2	(25.8)	(25	%)

Sales of $41.4 increased 75%, or $17.7, and operating income of $6.7 increased 40%, or $1.9, primarily driven by a small acquisition completed in January 2022. The positive profit impact from the acquisition was partially offset by higher costs for planned maintenance activities. Despite higher equity affiliates' income attributable to the JIGPC joint venture, which contributed for the full quarter in fiscal year 2023, equity affiliates' income of $64.1 decreased 31%, or $28.2, due to a net benefit recognized in fiscal year 2022 for the remaining deferred profit associated with air separation units previously sold to Jazan Gas Project Company, net of other project finalization costs. We expect the contribution from JIGPC to grow in future periods as a result of the second phase of the asset purchase associated with the Jazan gasification and power project, which was completed in January 2023. We expect final commissioning items to be completed later this calendar year.

Corporate and other


	Three Months Ended
	31 December		Changes
	2022	2021	$	%
Sales	$179.4	$221.8	($42.4)	(19	%)
Operating loss	(79.4)	(69.3)	(10.1)	(15	%)
Adjusted EBITDA	(62.3)	(58.2)	(4.1)	(7	%)

Sales of $179.4 decreased 19%, or $42.4, and operating loss of ~~$107.7 decreased 2%~~$79.4 increased 15%, or ~~$1.9,~~$10.1, primarily due to ~~higher non-LNG~~lower project activity in our sale of equipment ~~project activity. The favorable impact of sale of equipment activity on operating income was partially offset by a prior year~~business. Our Corporate and other segment also incurs costs to provide corporate support functions and global management activities that benefit ~~from the settlement of a supply contract.~~all segments, which have increased due to efforts to support our growth strategy.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

(Millions of ~~dollars~~U.S. Dollars unless otherwise indicated, except for per share data)

We present certain financial measures, other than in accordance with U.S. generally accepted accounting principles ("GAAP"), on an "adjusted" or "non-GAAP" basis. On a consolidated basis, these measures include adjusted diluted earnings per share ("EPS"), adjusted EBITDA, adjusted EBITDA margin, the adjusted effective tax rate, and capital expenditures. On a segment basis, these measures include adjusted EBITDA and adjusted EBITDA margin. In addition to these measures, we also present certain supplemental non-GAAP financial measures to help the reader understand the impact that certain disclosed items, or "non-GAAP adjustments," have on the calculation of our adjusted diluted EPS. For each non-GAAP financial measure, we present a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP.

Our 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. We believe these non-GAAP financial measures provide investors, potential investors, securities analysts, and others with useful information to evaluate the performance of our 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 our 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 non-GAAP adjustments that we believe are not representative of our underlying business performance. For example, we exclude the impact of the non-service components of net periodic benefit/cost for our defined benefit pension plans as further discussed below. Additionally, we have previously excluded certain expenses associated with cost reduction actions, impairment charges, and gains on disclosed transactions. The reader should be aware that we may recognize similar losses or gains in the future. ~~Readers should also consider the limitations associated with these non-GAAP financial measures, including the potential lack~~

Table of ~~comparability of these measures from one company to another.~~Contents

When applicable, the tax impact of 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.

We provide these non-GAAP financial measures to allow investors, potential investors, securities analysts, and others to evaluate the performance of our business in the same manner as our management. We believe these 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 and projected future results. However, we caution readers not to consider these measures in isolation or as a substitute for the most directly comparable measures calculated in accordance with GAAP. Readers should also consider the limitations associated with these non-GAAP financial measures, including the potential lack of comparability of these measures from one company to another.

NON-GAAP ADJUSTMENTS

Non-Service Pension (Benefit)/Cost, Net

~~Table~~Effective beginning in the first quarter of ~~Contents~~fiscal year 2023, our adjusted EPS and the adjusted effective tax rate exclude the impact of non-service related components of net periodic benefit/cost for our defined benefit pension plans. The prior year non-GAAP financial measures presented below have been recast accordingly to conform to the fiscal year 2023 presentation. Non-service related components are recurring, non-operating items that include interest cost, expected returns on plan assets, prior service cost amortization, actuarial loss amortization, as well as special termination benefits, curtailments, and settlements. The net impact of non-service related components is reflected within “Other non-operating income (expense), net” on our consolidated income statements. Adjusting for the impact of non-service pension components provides management and users of our financial statements with a more accurate representation of our underlying business performance because these components are driven by factors that are unrelated to our operations, such as recent changes to the allocation of our pension plan assets associated with de-risking as well as volatility in equity and debt markets. Further, non-service related components are not indicative of our defined benefit plans’ future contribution needs due to the funded status of the plans.

ADJUSTED DILUTED EPS

~~There were no non-GAAP adjustments in the first six months of fiscal year 2022 that impacted 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 we view as a key performance metric. In periods that we have non-GAAP adjustments, we believe it is important for the reader to understand the per share impact of each such adjustment because management does not consider these impacts when evaluating underlying business performance. Per share impacts are calculated independently and may not sum to total diluted EPS and total adjusted diluted EPS due to rounding.

Three Months Ended 31 March
Q2 2022 vs. Q2 2021 Operating
Income Equity
Affiliates'
Income Income Tax
Provision Net Income
Attributable to
Air Products Diluted
EPS
2022 GAAP $561.9 $120.8 $122.7 $530.5 $2.38
2021 GAAP 548.5 69.8 121.9 473.1 2.13
Change GAAP $0.25
% Change GAAP 12 %
2022 GAAP $561.9 $120.8 $122.7 $530.5 $2.38
No non-GAAP adjustments — — — — —
2022 Non-GAAP ("Adjusted") $561.9 $120.8 $122.7 $530.5 $2.38
2021 GAAP $548.5 $69.8 $121.9 $473.1 $2.13
Facility closure 23.2 — 5.8 17.4 0.08
Gain on exchange with joint venture partner (36.8) — (9.5) (27.3) (0.12)
2021 Non-GAAP ("Adjusted") $534.9 $69.8 $118.2 $463.2 $2.08
Change Non-GAAP ("Adjusted") $0.30
% Change Non-GAAP ("Adjusted") 14 %

Six Months Ended 31 March
2022 vs. 2021 Operating
Income Equity
Affiliates'
Income Income Tax
Provision Net Income
Attributable to
Air Products Diluted
EPS
2022 GAAP $1,084.9 $268.6 $236.0 $1,090.9 $4.90
2021 GAAP 1,087.6 139.1 235.8 944.8 4.25
Change GAAP $0.65
% Change GAAP 15 %
2022 GAAP $1,084.9 $268.6 $236.0 $1,090.9 $4.90
No non-GAAP adjustments — — — — —
2022 Non-GAAP ("Adjusted") $1,084.9 $268.6 $236.0 $1,090.9 $4.90
2021 GAAP $1,087.6 $139.1 $235.8 $944.8 $4.25
Facility closure 23.2 — 5.8 17.4 0.08
Gain on exchange with joint venture partner (36.8) — (9.5) (27.3) (0.12)
2021 Non-GAAP ("Adjusted") $1,074.0 $139.1 $232.1 $934.9 $4.20
Change Non-GAAP ("Adjusted") $0.70
% Change Non-GAAP ("Adjusted") 17 %


	Three Months Ended 31 December
Q1 2023 vs. Q1 2022	Operating Income	Equity Affiliates' Income	Other Non-Operating Income/Expense, net	Income Tax Provision	Net Income Attributable to Air Products	Diluted EPS
2023 GAAP	$652.0	$110.0	($0.6)	$136.4	$572.2	$2.57
2022 GAAP	523.0	147.8	22.6	113.3	560.4	2.52
$ Change GAAP						$0.05
% Change GAAP						2	%

2023 GAAP	$652.0	$110.0	($0.6)	$136.4	$572.2	$2.57














Non-service pension (benefit) cost, net	—	—	19.5	4.9	14.6	0.07







2023 Non-GAAP ("Adjusted")	$652.0	$110.0	$18.9	$141.3	$586.8	$2.64

2022 GAAP	$523.0	$147.8	$22.6	$113.3	$560.4	$2.52













Non-service pension (benefit) cost, net	—	—	(12.0)	(2.9)	(9.1)	(0.04)







2022 Non-GAAP ("Adjusted")	$523.0	$147.8	$10.6	$110.4	$551.3	$2.48
$ Change Non-GAAP						$0.16
% Change Non-GAAP						6	%

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ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN

We define adjusted EBITDA as net income less income ~~(loss)~~ from discontinued operations, net of tax, and excluding non-GAAP adjustments, which we do not believe to be indicative of underlying business trends, before interest expense, other non-operating income (expense), net, income tax provision, and depreciation and amortization expense. Adjusted EBITDA and adjusted EBITDA margin provide useful metrics for management to assess operating performance. 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.

The 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 Ended						Six Months Ended							Three Months Ended
		31 March						31 March							31 December
		2022			2021			2022			2021				2022			2021
		$	Margin		$	Margin		$	Margin		$	Margin			$	Margin		$	Margin
Sales	Sales	$2,945.1			$2,502.0			$5,939.3			$4,877.2			Sales	$3,174.7			$2,994.2

Net income and net income margin	Net income and net income margin	$536.8	18.2	%	$477.1	19.1	%	$1,086.4	18.3	%	$963.8	19.8	%	Net income and net income margin	$583.8	18.4	%	$549.6	18.4	%
Less: Income from discontinued operations, net of tax		—	—	%	—	—	%	—	—	%	10.3	0.2	%

Add: Interest expense	Add: Interest expense	32.3	1.1	%	36.1	1.4	%	62.8	1.1	%	72.8	1.5	%	Add: Interest expense	41.2	1.3	%	30.5	1.0	%
Less: Other non-operating income (expense), net	Less: Other non-operating income (expense), net	9.1	0.3	%	16.8	0.7	%	31.7	0.5	%	35.4	0.7	%	Less: Other non-operating income (expense), net	(0.6)	—	%	22.6	0.8	%
Add: Income tax provision	Add: Income tax provision	122.7	4.2	%	121.9	4.9	%	236.0	4.0	%	235.8	4.8	%	Add: Income tax provision	136.4	4.3	%	113.3	3.8	%
Add: Depreciation and amortization	Add: Depreciation and amortization	335.9	11.4	%	329.3	13.2	%	668.2	11.3	%	653.0	13.4	%	Add: Depreciation and amortization	321.5	10.1	%	332.3	11.1	%

Add: Facility closure		—	—	%	23.2	0.9	%	—	—	%	23.2	0.5	%

Less: Gain on exchange with joint venture partner		—	—	%	36.8	1.5	%	—	—	%	36.8	0.8	%

Adjusted EBITDA and adjusted EBITDA margin	Adjusted EBITDA and adjusted EBITDA margin	$1,018.6	34.6	%	$934.0	37.3	%	$2,021.7	34.0	%	$1,866.1	38.3	%	Adjusted EBITDA and adjusted EBITDA margin	$1,083.5	34.1	%	$1,003.1	33.5	%

		Q2 2022 vs. Q2 2021						2022 vs. 2021
Change GAAP	Change GAAP													Change GAAP
Net income $ change	Net income $ change	$59.7						$122.6						Net income $ change	$34.2
Net income % change	Net income % change	13%						13%						Net income % change	6%
Net income margin change	Net income margin change	(90) bp						(150) bp						Net income margin change	— bp
Change Non-GAAP	Change Non-GAAP													Change Non-GAAP
Adjusted EBITDA $ change	Adjusted EBITDA $ change	$84.6						$155.6						Adjusted EBITDA $ change	$80.4
Adjusted EBITDA % change	Adjusted EBITDA % change	9%						8%						Adjusted EBITDA % change	8%
Adjusted EBITDA margin change	Adjusted EBITDA margin change	(270) bp						(430) bp						Adjusted EBITDA margin change	60 bp

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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 three months ended 31 ~~March~~December 2022 and 2021:

Sales Americas Asia Europe Middle East
and India Corporate
and other
Q2 2022 $1,186.6 $751.2 $738.6 $28.9 $239.8
Q2 2021 1,056.1 697.5 558.4 26.2 163.8

Americas Asia Europe Middle East
and India Corporate
and other
Q2 2022 GAAP
Operating income (loss) $275.5 $203.6 $116.4 $4.8 ($38.4)
Operating margin 23.2 % 27.1 % 15.8 %
Q2 2021 GAAP
Operating income (loss) $263.4 $198.5 $132.9 $6.7 ($66.6)
Operating margin 24.9 % 28.5 % 23.8 %
Q2 2022 vs. Q2 2021 Change GAAP
Operating income/loss $ change $12.1 $5.1 ($16.5) ($1.9) $28.2
Operating income/loss % change 5 % 3 % (12 %) (28 %) 42 %
Operating margin change (170) bp (140) bp (800) bp
Q2 2022 Non-GAAP
Operating income (loss) $275.5 $203.6 $116.4 $4.8 ($38.4)
Add: Depreciation and amortization 153.7 111.8 50.3 6.9 13.2
Add: Equity affiliates' income 20.1 6.2 23.3 71.1 0.1
Adjusted EBITDA $449.3 $321.6 $190.0 $82.8 ($25.1)
Adjusted EBITDA margin 37.9 % 42.8 % 25.7 %
Q2 2021 Non-GAAP
Operating income (loss) $263.4 $198.5 $132.9 $6.7 ($66.6)
Add: Depreciation and amortization 153.3 109.7 51.0 6.6 8.7
Add: Equity affiliates' income 32.3 7.1 12.6 16.1 1.7
Adjusted EBITDA $449.0 $315.3 $196.5 $29.4 ($56.2)
Adjusted EBITDA margin 42.5 % 45.2 % 35.2 %
Q2 2022 vs. Q2 2021 Change Non-GAAP
Adjusted EBITDA $ change $0.3 $6.3 ($6.5) $53.4 $31.1
Adjusted EBITDA % change — % 2 % (3 %) 182 % 55 %
Adjusted EBITDA margin change (460) bp (240) bp (950) bp
Americas


	Three Months Ended 31 December				Changes vs. Prior Year
	2022		2021		$	%/bp
Sales	$1,384.2		$1,224.1		$160.1	13	%

Operating income	$343.0		$267.2		$75.8	28	%
Operating margin	24.8	%	21.8	%		300 bp

Reconciliation of GAAP to Non-GAAP:
Operating income	$343.0		$267.2
Add: Depreciation and amortization	156.0		155.3
Add: Equity affiliates' income	16.4		34.2
Adjusted EBITDA	$515.4		$456.7		$58.7	13	%
Adjusted EBITDA margin	37.2	%	37.3	%		(10) bp

Asia


	Three Months Ended 31 December				Changes vs. Prior Year
	2022		2021		$	%/bp
Sales	$777.8		$780.4		($2.6)	—	%

Operating income	$235.9		$221.1		$14.8	7	%
Operating margin	30.3	%	28.3	%		200 bp

Reconciliation of GAAP to Non-GAAP:
Operating income	$235.9		$221.1
Add: Depreciation and amortization	101.9		110.8
Add: Equity affiliates' income	7.4		6.6
Adjusted EBITDA	$345.2		$338.5		$6.7	2	%
Adjusted EBITDA margin	44.4	%	43.4	%		100 bp

Europe


	Three Months Ended 31 December				Changes vs. Prior Year
	2022		2021		$	%/bp
Sales	$791.9		$744.2		$47.7	6	%

Operating income	$145.8		$99.2		$46.6	47	%
Operating margin	18.4	%	13.3	%		510	bp

Reconciliation of GAAP to Non-GAAP:
Operating income	$145.8		$99.2
Add: Depreciation and amortization	44.3		49.8
Add: Equity affiliates' income	17.7		13.9
Adjusted EBITDA	$207.8		$162.9		$44.9	28	%
Adjusted EBITDA margin	26.2	%	21.9	%		430	bp

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~~The tables below present sales~~Middle East and ~~a reconciliation of operating income~~India


	Three Months Ended 31 December		Changes vs. Prior Year
	2022	2021	$	%/bp
Sales	$41.4	$23.7	$17.7	75	%

Operating income	$6.7	$4.8	$1.9	40	%

Reconciliation of GAAP to Non-GAAP:
Operating income	$6.7	$4.8
Add: Depreciation and amortization	6.6	6.1
Add: Equity affiliates' income	64.1	92.3
Adjusted EBITDA	$77.4	$103.2	($25.8)	(25	%)

Corporate and ~~operating margin by segment to adjusted EBITDA and adjusted EBITDA margin by segment for the six months ended 31 March 2022 and 2021:~~other

Sales Americas Asia Europe Middle East
and India Corporate
and other
2022 $2,410.7 $1,531.6 $1,482.8 $52.6 $461.6
2021 1,989.1 1,415.0 1,101.9 45.7 325.5

Americas Asia Europe Middle East
and India Corporate
and other
2022 GAAP
Operating income (loss) $542.7 $424.7 $215.6 $9.6 ($107.7)
Operating margin 22.5 % 27.7 % 14.5 %
2021 GAAP
Operating income (loss) $489.2 $413.3 $270.4 $10.7 ($109.6)
Operating margin 24.6 % 29.2 % 24.5 %
2022 vs. 2021 Change GAAP
Operating income/loss $ change $53.5 $11.4 ($54.8) ($1.1) $1.9
Operating income/loss % change 11 % 3 % (20 %) (10 %) 2 %
Operating margin change (210) bp (150) bp (1,000) bp
2022 Non-GAAP
Operating income (loss) $542.7 $424.7 $215.6 $9.6 ($107.7)
Add: Depreciation and amortization 309.0 222.6 100.1 13.0 23.5
Add: Equity affiliates' income 54.3 12.8 37.2 163.4 0.9
Adjusted EBITDA $906.0 $660.1 $352.9 $186.0 ($83.3)
Adjusted EBITDA margin 37.6 % 43.1 % 23.8 %
2021 Non-GAAP
Operating income (loss) $489.2 $413.3 $270.4 $10.7 ($109.6)
Add: Depreciation and amortization 305.1 217.6 100.3 12.7 17.3
Add: Equity affiliates' income 54.6 15.9 27.5 37.3 3.8
Adjusted EBITDA $848.9 $646.8 $398.2 $60.7 ($88.5)
Adjusted EBITDA margin 42.7 % 45.7 % 36.1 %
2022 vs. 2021 Change Non-GAAP
Adjusted EBITDA $ change $57.1 $13.3 ($45.3) $125.3 $5.2
Adjusted EBITDA % change 7 % 2 % (11 %) 206 % 6 %
Adjusted EBITDA margin change (510) bp (260) bp (1,230) bp


	Three Months Ended 31 December		Changes vs. Prior Year
	2022	2021	$	%/bp
Sales	$179.4	$221.8	($42.4)	(19	%)

Operating loss	($79.4)	($69.3)	($10.1)	(15	%)

Reconciliation of GAAP to Non-GAAP:
Operating loss	($79.4)	($69.3)
Add: Depreciation and amortization	12.7	10.3
Add: Equity affiliates' income	4.4	0.8
Adjusted EBITDA	($62.3)	($58.2)	($4.1)	(7	%)

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ADJUSTED EFFECTIVE TAX RATE

The effective tax rate equals the income tax provision divided by income ~~from continuing operations~~ before taxes. We calculate our adjusted effective tax rate by adjusting the numerator and denominator to exclude the tax and before tax impacts of our non-GAAP adjustments, respectively. The table below presents a reconciliation of the GAAP effective tax rate to our adjusted effective tax rate:

Three Months Ended
31 March Six Months Ended
31 March
2022 2021 2022 2021
Income tax provision $122.7 $121.9 $236.0 $235.8
Income from continuing operations before taxes 659.5 599.0 1,322.4 1,189.3
Effective tax rate 18.6 % 20.4 % 17.8 % 19.8 %
Income tax provision $122.7 $121.9 $236.0 $235.8
Facility closure — 5.8 — 5.8
Gain on exchange with joint venture partner — (9.5) — (9.5)
Adjusted income tax provision $122.7 $118.2 $236.0 $232.1
Income from continuing operations before taxes $659.5 $599.0 $1,322.4 $1,189.3
Facility closure — 23.2 — 23.2
Gain on exchange with joint venture partner — (36.8) — (36.8)
Adjusted income from continuing operations before taxes $659.5 $585.4 $1,322.4 $1,175.7
Adjusted effective tax rate 18.6 % 20.2 % 17.8 % 19.7 %



	Three Months Ended 31 December
	2022		2021
Income tax provision	$136.4		$113.3
Income before taxes	720.2		662.9
Effective tax rate	18.9	%	17.1	%


Income tax provision	$136.4		$113.3
Non-service pension tax impact	4.9		(2.9)


















Adjusted income tax provision	$141.3		$110.4

Income before taxes	$720.2		$662.9
Non-service pension (benefit) cost, net	19.5		(12.0)













Adjusted income before taxes	$739.7		$650.9
Adjusted effective tax rate	19.1	%	17.0	%

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CAPITAL EXPENDITURES

We define capital expenditures as cash flows for additions to plant and equipment, including long-term deposits, acquisitions (less cash acquired), and investment in and advances to unconsolidated affiliates. A reconciliation of cash used for investing activities to our reported capital expenditures is provided below:


		Six Months Ended			Three Months Ended
		31 March			31 December
		2022	2021		2022	2021
Cash used for (provided by) investing activities		$2,635.8	$583.2
Cash used for investing activities				Cash used for investing activities	$256.2	$1,719.1
Proceeds from sale of assets and investments	Proceeds from sale of assets and investments	25.3	14.8	Proceeds from sale of assets and investments	4.0	1.1
Purchases of investments	Purchases of investments	(909.4)	(569.0)	Purchases of investments	(19.2)	(727.4)
Proceeds from investments	Proceeds from investments	1,391.4	1,265.5	Proceeds from investments	591.5	1,331.9
Other investing activities	Other investing activities	6.5	3.1	Other investing activities	1.7	6.4
Capital expenditures	Capital expenditures	$3,149.6	$1,297.6	Capital expenditures	$834.2	$2,331.1

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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.

As of 31 ~~March~~December 2022, we had ~~$1,626.7~~$1,516.3 of foreign cash and cash items compared to total cash and cash items of ~~$2,348.7.~~$3,131.0. 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 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.

Cash Flows From Operations


Six Months Ended 31 March		2022	2021
Three Months Ended 31 December				Three Months Ended 31 December	2022	2021

Net income attributable to Air Products				Net income attributable to Air Products	$572.2	$560.4

Income from continuing operations attributable to Air Products		$1,090.9	$944.8
Adjustments to reconcile income to cash provided by operating activities:	Adjustments to reconcile income to cash provided by operating activities:			Adjustments to reconcile income to cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	668.2	653.0	Depreciation and amortization	321.5	332.3
Deferred income taxes	Deferred income taxes	51.3	76.1	Deferred income taxes	13.8	15.7

Facility closure		—	23.2
Undistributed earnings of equity method investments		(200.8)	(58.7)

Distributed (Undistributed) earnings of equity method investments				Distributed (Undistributed) earnings of equity method investments	17.2	(117.3)
Gain on sale of assets and investments	Gain on sale of assets and investments	(11.8)	(26.2)	Gain on sale of assets and investments	(2.3)	(0.8)
Share-based compensation	Share-based compensation	26.5	22.4	Share-based compensation	16.1	15.8
Noncurrent lease receivables	Noncurrent lease receivables	43.9	43.4	Noncurrent lease receivables	19.4	21.8

Other adjustments	Other adjustments	(101.0)	(6.5)	Other adjustments	99.0	(49.4)

Changes in working capital accounts	Changes in working capital accounts	(262.2)	(91.2)	Changes in working capital accounts	(337.6)	6.7

Cash Provided by Operating Activities	Cash Provided by Operating Activities	$1,305.0	$1,580.3	Cash Provided by Operating Activities	$719.3	$785.2

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For the first ~~six~~three months of fiscal year 2023, cash provided by operating activities was $719.3. Distributed earnings of equity method investments reflect distributions in excess of earnings for the period of $17.2. Other adjustments of $99.0 primarily included adjustments for noncash currency impacts of intercompany balances. The working capital accounts were a use of cash of $337.6, primarily driven by $257.6 from payables and accrued liabilities and $102.8 from inventory. The use of cash within payables and accrued liabilities primarily resulted from the decrease in value of derivatives that hedge intercompany loans, payments for incentive compensation under the fiscal year 2022 plan and a reduction of liabilities associated with the purchase of natural gas.

For the first three months of fiscal year 2022, cash provided by operating activities was ~~$1,305.0.~~$785.2. The working capital accounts were a ~~use~~source of cash of ~~$262.2,~~$6.7, primarily driven by a source of cash of $167.6 from payables and accrued liabilities, partially offset by a use of cash of ~~$203.1~~$132.7 from trade receivables, less ~~allowances, $138.7 from other working capital, and $57.3 from inventory partially offset by a source of cash of $123.1 from payables and accrued liabilities.~~allowances. The source of cash within payables and accrued liabilities primarily resulted from customer advances for sale of equipment projects and higher natural gas costs, which also ~~impacted~~drove the use of cash within trade receivables as we contractually passed through these higher costs to customers. ~~The use of cash within other working capital primarily relates to contract fulfillment costs and the timing of income tax payments.~~

For the first six months of fiscal year 2021, cash provided by operating activities was $1,580.3. 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.

~~Table of Contents~~

Cash Flows From Investing Activities


Six Months Ended 31 March		2022	2021
Three Months Ended 31 December				Three Months Ended 31 December	2022	2021
Additions to plant and equipment, including long-term deposits	Additions to plant and equipment, including long-term deposits	($1,433.6)	($1,227.8)	Additions to plant and equipment, including long-term deposits	($834.2)	($663.8)
Acquisitions, less cash acquired	Acquisitions, less cash acquired	(65.1)	—	Acquisitions, less cash acquired	—	(34.6)
Investment in and advances to unconsolidated affiliates	Investment in and advances to unconsolidated affiliates	(1,650.9)	(69.8)	Investment in and advances to unconsolidated affiliates	—	(1,632.7)
Proceeds from sale of assets and investments	Proceeds from sale of assets and investments	25.3	14.8	Proceeds from sale of assets and investments	4.0	1.1
Purchases of investments	Purchases of investments	(909.4)	(569.0)	Purchases of investments	(19.2)	(727.4)
Proceeds from investments	Proceeds from investments	1,391.4	1,265.5	Proceeds from investments	591.5	1,331.9
Other investing activities	Other investing activities	6.5	3.1	Other investing activities	1.7	6.4
Cash Used for Investing Activities	Cash Used for Investing Activities	($2,635.8)	($583.2)	Cash Used for Investing Activities	($256.2)	($1,719.1)

For the first ~~six~~three months of fiscal year ~~2022,~~2023, cash used for investing activities was ~~$2,635.8.~~$256.2. Capital expenditures ~~primarily included $1,650.9 for investment in and advances to unconsolidated affiliates and $1,433.6~~ for additions to plant and equipment, including long-term ~~deposits. Refer to the~~ ~~Capital Expenditures~~ ~~section below for further detail.~~deposits, were $834.2. Proceeds from investments of ~~$1,391.4~~$591.5 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 ~~$909.4.~~$19.2.

For the first ~~six~~three months of fiscal year ~~2021,~~2022, cash used byfor investing activities was ~~$583.2.~~$1,719.1. Capital expenditures primarily included $1,632.7 for ~~plant~~investment in and ~~equipment, including long-term deposits, were $1,227.8.~~advances to unconsolidated affiliates, as further discussed below. Proceeds from investments of ~~$1,265.5~~$1,331.9 resulted from maturities of time deposits and treasury securities with terms greater than three months ~~and~~but less than one year and exceeded purchases of investments of ~~$569.0.~~$727.4.

Capital Expenditures

Capital expenditures is a non-GAAP financial measure that we define as cash flows for additions to plant and equipment, including long-term deposits, acquisitions (less cash acquired), and investment in and advances to unconsolidated affiliates. The components of our capital expenditures are detailed in the table below. We also present a reconciliation of our capital expenditures to cash used for investing activities on page 5343.


		Six Months Ended			Three Months Ended
		31 March			31 December
		2022	2021		2022	2021
Additions to plant and equipment, including long-term deposits	Additions to plant and equipment, including long-term deposits	$1,433.6	$1,227.8	Additions to plant and equipment, including long-term deposits	$834.2	$663.8
Acquisitions, less cash acquired	Acquisitions, less cash acquired	65.1	—	Acquisitions, less cash acquired	—	34.6
Investment in and advances to unconsolidated affiliates~~(A)~~	Investment in and advances to unconsolidated affiliates~~(A)~~	1,650.9	69.8	Investment in and advances to unconsolidated affiliates~~(A)~~	—	1,632.7
Capital Expenditures(A)	Capital Expenditures(A)	$3,149.6	$1,297.6	Capital Expenditures(A)	$834.2	$2,331.1

(A)Includes contributions from noncontrolling partners in consolidated subsidiaries, including investments associated with the Jazan gasification and power project as discussed below.

Table of Contents

Capital expenditures for the first ~~six~~three months of fiscal year ~~2022~~2023 totaled ~~$3,149.6~~$834.2 compared to ~~$1,297.6~~$2,331.1 for the first ~~six~~three months of fiscal year ~~2021.~~2022. The ~~increase of $1,852.0 was primarily driven by~~prior year included our initial investment of $1.6 billion in the ~~new~~ JIGPC joint venture ~~which~~in the first quarter of fiscal year 2022. This investment included approximately $130 from ~~a non-controlling~~the noncontrolling partner ~~in one~~ of our subsidiaries. We expect to make an additional investment of approximately $1 billion, which will also include a contribution from our non-controlling partner, for the second phase of the project in 2023.Air Products Qudra. Refer to Note 7,5, Equity Affiliates, to the consolidated financial statements for additional information.

Subsequent Event

On 19 January 2023, we made an additional investment of $908 toward the second phase of the Jazan gasification and power project. This investment included $73 received from the noncontrolling partner of Air Products Qudra. We expect to complete a remaining investment of approximately $115, including approximately $9 from the non-controlling partner of Air Products Qudra, later this calendar year.

Outlook for Investing Activities

~~We expect capital expenditures for fiscal year 2022 to be approximately $4.5 to $5 billion.~~

It is not possible, without unreasonable efforts, to reconcile our forecasted capital expenditures to future cash used for investing activities because we are unable to identify the timing or occurrence of our future investment activity, which is driven by our assessment of competing opportunities at the time we enter into transactions. These decisions, either individually or in the aggregate, could have a significant effect on our cash used for investing activities.

~~Table of Contents~~

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

Cash Flows From Financing Activities


Six Months Ended 31 March		2022	2021
Three Months Ended 31 December				Three Months Ended 31 December	2022	2021
Long-term debt proceeds	Long-term debt proceeds	$87.5	$92.8	Long-term debt proceeds	$476.3	$51.6
Payments on long-term debt	Payments on long-term debt	(400.0)	(15.9)	Payments on long-term debt	(195.9)	(400.0)
Net increase in commercial paper and short-term borrowings		210.9	33.6
Net (decrease) increase in commercial paper and short-term borrowings				Net (decrease) increase in commercial paper and short-term borrowings	(4.1)	113.1
Dividends paid to shareholders	Dividends paid to shareholders	(664.7)	(592.7)	Dividends paid to shareholders	(359.4)	(332.1)
Proceeds from stock option exercises	Proceeds from stock option exercises	14.4	4.7	Proceeds from stock option exercises	14.0	13.3

Other financing activities	Other financing activities	(33.7)	(25.7)	Other financing activities	(16.5)	(31.0)
Cash Used for Financing Activities	Cash Used for Financing Activities	($785.6)	($503.2)	Cash Used for Financing Activities	($85.6)	($585.1)

For the first ~~six~~three months of fiscal year ~~2022,~~2023, cash used for financing activities was ~~$785.6.~~$85.6. The use of cash was primarily driven by dividend payments to shareholders of ~~$664.7~~$359.4 and payments on long-term debt of $195.9 partially offset by long-term debt proceeds of $476.3. Refer to the Credit Facilities section below and Note 9, Debt, to the consolidated financial statements for additional information.

For the first three months of fiscal year 2022, cash used for financing activities was $585.1. The use of cash was primarily driven by payments on long-term debt of $400.0 for the repayment of a 3.0% Senior ~~Note.~~Note and dividend payments to shareholders of $332.1. These uses of cash were partially offset by short-term borrowings and long-term debt proceeds of ~~$210.9~~$113.1 and ~~$87.5,~~$51.6, respectively.

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.

Financing and Capital Structure

Debt

Capital needs in the first ~~six~~three months of fiscal year ~~2022~~2023 were satisfied with our cash balance, ~~and~~ cash from ~~operations.~~operations and long-term borrowings. Total debt ~~decreased~~increased from ~~$7,637.2~~$7,644.8 as of 30 September ~~2021~~2022 to ~~$7,441.5~~$8,057.8 as of 31 ~~March 2022, primarily due to repayment of the 3.0% Senior Note of $400.0, partially offset by proceeds from short-term notes and long-term borrowings on our foreign commitments.~~December 2022. Total debt includes related party debt of ~~$371.1~~$791.5 and ~~$358.4~~$781.0 as of 31 ~~March~~December 2022 and 30 September ~~2021, respectively, primarily associated with the Lu'An joint venture.~~2022, respectively.

Various debt agreements to which we are a party include financial covenants and other restrictions, including restrictions pertaining to the ability to create property liens and enter into certain sale and leaseback transactions. As of 31 ~~March~~December 2022, we are in compliance with all of the financial and other covenants under our debt agreements.

Table of Contents

Credit Facilities

~~On 31 March 2021, we entered into~~We have a five-year ~~$2,500~~$2,750 revolving credit agreement maturing 31 March 2026 with a syndicate of banks (the “2021 Credit Agreement”), under which senior unsecured debt is available to us and certain of our subsidiaries. ~~On 31 March 2022, we amended the~~The 2021 Credit Agreement ~~to exercise~~provides a source of liquidity and supports our ~~option to increase the maximum borrowing capacity to $2,750 and transition the benchmark rate from LIBOR to SOFR. All other terms remain unchanged from the original agreement.~~

commercial paper program. The only financial covenant in the 2021 Credit Agreement is a maximum ratio of total debt to total capitalization (equal to total debt plus total equity) not to exceed 70%. Total debt as of 31 ~~March~~December 2022 and 30 September ~~2021,~~2022, expressed as a percentage of total capitalization, was ~~33.9%~~35.7% and ~~35.2%~~35.8%, respectively. No borrowings were outstanding under the 2021 Credit Agreement as of 31 ~~March~~December 2022.

We also have credit facilities available to certain of our foreign subsidiaries totaling ~~$486.5,~~$1,319.5, of which ~~$446.9~~$751.9 was borrowed and outstanding as of 31 ~~March~~December 2022. The amount borrowed and outstanding as of 30 September ~~2021~~2022 was ~~$176.2.~~$457.5. The increase from 30 September 2022 was driven by borrowings on a new variable-rate Saudi Riyal loan facility that matures in October 2026. The interest rate on the facility is based on the Saudi Arabian Interbank Offered Rate ("SAIBOR") plus an annual margin of 1.35%. We entered into this facility in October 2022 and utilized a portion of the proceeds to repay a variable-rate 4.10% Saudi Riyal Loan Facility of $195.6, which was presented within long-term debt on our consolidated balance sheet as of 30 September 2022.

Equity Securities

On 15 September 2011, the Board of Directors authorized the repurchase of up to $1,000 of our outstanding common stock. We did not purchase any of our outstanding shares ~~for~~in the first ~~six~~three months of fiscal years ~~2022~~2023 or ~~2021.~~2022. As of 31 ~~March~~December 2022, $485.3 in share repurchase authorization remained.

Dividends

~~Table~~The Board of ~~Contents~~

~~Dividends~~

~~Cash~~Directors determines whether to declare cash dividends on our common stock and the timing and amount based on financial condition and other factors it deems relevant. Dividends are paid quarterly, usually during the sixth week after the close of the fiscal quarter. We expect to continue to pay cash dividends in the future at comparable or increased levels.

~~The Board of Directors determines whether to declare dividends and the timing and amount based on financial condition and other factors it deems relevant.~~ On ~~3 February~~22 November 2022, the Board of Directors declared a quarterly dividend of $1.62 per share ~~representing an 8% increase, or $0.12 per share, from the previous dividend of $1.50 per share. This is the 40~~th ~~consecutive year we have increased our quarterly dividend. The dividend~~that is payable on ~~9 May 2022~~13 February 2023 to shareholders of record at the close of business on 13 January 2023.

On 26 January 2023, the Board of Directors declared a quarterly dividend of $1.75 per share, representing an 8% increase, or $0.13 per share, from the prior quarterly dividend of $1.62 per share. The dividend is payable on 8 May 2023 to shareholders of record at the close of business on 3 April ~~2022.~~2023. This is the 41st consecutive year that we have increased our quarterly dividend.

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PENSION BENEFITS

We and certain of our subsidiaries sponsor defined benefit pension plans and defined contribution plans that cover a substantial portion of our worldwide employees. The principal defined benefit pension plans are the U.S. salaried pension plan and the U.K. pension plan. These plans were closed to new participants in 2005, after which defined contribution plans were offered to new employees. The shift to defined contribution plans is expected to continue to reduce volatility of both plan expense and contributions. For additional information, refer to Note 10, Retirement Benefits, to the ~~six months ended 31 March 2022 and 2021,~~consolidated financial statements.

Net Periodic Cost/Benefit

The table below summarizes the components of net periodic cost/benefit for our U.S. and international defined benefit pension plans:


	Three Months Ended
	31 December
	2022	2021
Service cost	$6.0	$10.2







Non-service related cost (benefit)	19.5	(12.0)
Other	0.3	0.8
Net periodic cost (benefit)	$25.8	($1.0)

Net periodic cost was $25.8 for the first quarter of fiscal year 2023 versus a benefit ~~was $2.5 and $19.5, respectively. These periods included service-related costs~~ of ~~$21.4 and $22.8, respectively, which are reflected on our consolidated income statements within "Operating income." The amount of service costs capitalized~~$1.0 in the ~~first six months of fiscal years 2022~~prior year. The increased costs from the prior year were primarily attributable to higher non-service costs, which were driven by higher interest cost and ~~2021 were not material. Non-service related benefits were $23.9 and $42.3 for the six months ended 31 March 2022 and 2021, respectively. The decrease in fiscal year 2022 primarily resulted from~~ lower expected returns on plan assets due to a smaller beginning balance of plan assets. Fiscal year 2023 non-service items also include a $1.9 curtailment gain for the ~~increased percentage~~write-off of ~~fixed income investments within the plan asset portfolios and higher interest cost, partially offset by lower actuarial loss amortization.~~prior service credits in an amended international defined benefit pension plan. Non-service related ~~benefits~~components of net periodic cost/benefit are reflected within "Other non-operating income (expense), net" on our consolidated income statements.

~~For the six months ended 31 March 2022, we recognized pension settlement losses~~Service costs result from benefits earned by active employees and are reflected as operating expenses primarily within "Cost of $2.0 to accelerate recognition of a portion of actuarial losses deferred in accumulated other comprehensive loss primarily associated with the U.S. supplementary pension plan. These losses are included within "Other non-operating income (expense), net"sales" and "Selling and administrative expense" on our consolidated income statements. ~~We expect total pension settlement losses~~The amount of ~~approximately $10 in fiscal year 2022, of which approximately $5.0 is expected~~service costs capitalized in the ~~third~~first quarter of fiscal ~~year~~years 2023 and 2022 ~~in our U.S. supplementary pension plan.~~was not material.

Company Contributions

Management considers various factors when making pension funding decisions, including tax, cash flow, and regulatory implications. For the ~~six~~three months ended 31 ~~March~~December 2022 and 2021, our cash contributions to funded pension plans and benefit payments for unfunded pension plans were ~~$16.1~~$8.0 and ~~$27.7,~~$9.1, respectively.

Funding Outlook

Total contributions for fiscal year ~~2022~~2023 are expected to be approximately ~~$40~~$25 to ~~$50.~~$35. During fiscal year ~~2021,~~2022, total contributions were ~~$44.6.~~$44.7.

~~For additional information, refer to Note 12,~~ ~~Retirement Benefits, to the consolidated financial statements.~~Table of Contents

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 as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates reflect our best judgment about current and/or future economic and market conditions and their effect based on information available as of the date of our consolidated financial statements. If conditions change, actual results may differ materially from these estimates.

Judgments and estimates of uncertainties are required ~~in applying~~to apply 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 about the effects of matters that are inherently uncertain. A description of our major accounting policies, including those that we consider to be the most critical to understanding our financial statements, is included in our ~~2021~~2022 Form 10-K.

In March 2022, we announced our intent to divest our small industrial gas business in Russia due to Russia's invasion of Ukraine. As a result, we reclassified assets meeting the held for sale criteria to "Other receivables and current assets" on our consolidated balance sheet as of 31 March 2022. Refer to Note 1, ~~Basis of Presentation and Major Accounting Policies, to the consolidated financial statements for additional information.~~

~~Table of Contents~~

There have been no changes to our accounting policies or estimates during the first ~~six~~three months of fiscal year ~~2022~~2023 that had a significant impact on our financial condition, change in financial condition, liquidity, or results of operations.

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 ~~2021~~2022 Form 10-K.

Our net financial instrument position ~~decreased~~increased from a liability of ~~$7,850.3~~$6,898.6 at 30 September ~~2021~~2022 to a liability of ~~$6,997.1~~$7,275.0 at 31 ~~March~~December 2022. The ~~decrease~~increase was primarily due to long-term debt proceeds net of repayments and the effect of ~~higher~~a weaker U.S. Dollar ~~interest rates~~ on ~~the fair value of outstanding U.S. Dollar-denominated fixed-rate notes and the repayment of a $400.0 million U.S. Dollar-denominated note on its maturity date in November 2021.~~foreign currency-denominated debt.

Interest Rate Risk

Our debt portfolio as of 31 March 2022, including the effect of currency and interest rate swap agreements, was composed of 80% fixed-rate debt and 20% variable-rate debt. Our debt portfolio as of 30 September 2021, including the effect of currency and interest rate swap agreements, was composed of 89% fixed-rate debt and 11% variable-rate debt. The increase in variable-rate debt is the result of a $600 million increase in the outstanding notional of fixed-to-variable interest rate swaps.

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~~December 2022, with all other variables held constant. A 100 bp increase in market interest rates would result in a decrease of ~~$475~~$354 and ~~$587~~$364 in the net liability position of financial instruments at 31 ~~March~~December 2022 and 30 September ~~2021,~~2022, respectively. A 100 bp decrease in market interest rates would result in an increase of ~~$562~~$412 and ~~$692~~$425 in the net liability position of financial instruments at 31 ~~March~~December 2022 and 30 September ~~2021.~~2022, respectively.

There were no material changes to the sensitivity analysis related to the variable portion of our debt portfolio since 30 September ~~2021.~~2022.

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~~December 2022, with all other variable 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 ~~$303~~$188 and ~~$343~~$165 in the net liability position of financial instruments at 31 ~~March~~December 2022 and 30 September ~~2021,~~2022, respectively.

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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, our management conducted an evaluation of the effectiveness of our disclosure controls and procedures as of 31 ~~March~~December 2022. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of 31 ~~March~~December 2022, our disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

There was no change in our 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~~December 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 6. Exhibits.

(a) Exhibits required by Item 601 of Regulation S-K


	Exhibit No.	Description

	(10)	Material Contracts

	10.1	~~Amendment No. 2 to Revolving Credit~~Form of Restricted Stock Unit Award Agreement ~~dated 31 March 2022~~under the Long-Term Incentive Plan of the Company, used for FY2023 Awards.†

	10.2	.Form of Performance Share Award Agreement under the Long-Term Incentive Plan of the Company, used for FY2023 Awards.†

	(31)	Rule 13a-14(a)/15d-14(a) Certifications

	31.1	Certification by the Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification by the Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	(32)	Section 1350 Certifications

	32.1	Certification by the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ††

	(101)	Interactive Data Files

	101.INS	Inline 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.SCH	Inline XBRL Taxonomy Extension Schema Document.

	101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.

	101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.

	101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.

	101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.

	104	Cover Page Interactive Data File, formatted in Inline XBRL (included in Exhibit 101).

†	Indicates management contract or compensatory arrangement.
††	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.

5950

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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)

			By:			/s/ Melissa N. Schaeffer
						Melissa N. Schaeffer Senior Vice President and Chief Financial Officer (Principal Financial Officer)

			Date:			~~5 May 2022~~2 February 2023

6051


	Three Months Ended 31 March
Q2 2022 vs. Q2 2021	Operating Income	Equity Affiliates' Income	Income Tax Provision	Net Income Attributable to Air Products	Diluted EPS
2022 GAAP	$561.9	$120.8	$122.7	$530.5	$2.38
2021 GAAP	548.5	69.8	121.9	473.1	2.13
Change GAAP					$0.25
% Change GAAP					12	%

2022 GAAP	$561.9	$120.8	$122.7	$530.5	$2.38





















No non-GAAP adjustments	—	—	—	—	—
2022 Non-GAAP ("Adjusted")	$561.9	$120.8	$122.7	$530.5	$2.38

2021 GAAP	$548.5	$69.8	$121.9	$473.1	$2.13
Facility closure	23.2	—	5.8	17.4	0.08






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













2021 Non-GAAP ("Adjusted")	$534.9	$69.8	$118.2	$463.2	$2.08
Change Non-GAAP ("Adjusted")					$0.30
% Change Non-GAAP ("Adjusted")					14	%



	Six Months Ended 31 March
2022 vs. 2021	Operating Income	Equity Affiliates' Income	Income Tax Provision	Net Income Attributable to Air Products	Diluted EPS
2022 GAAP	$1,084.9	$268.6	$236.0	$1,090.9	$4.90
2021 GAAP	1,087.6	139.1	235.8	944.8	4.25
Change GAAP					$0.65
% Change GAAP					15	%

2022 GAAP	$1,084.9	$268.6	$236.0	$1,090.9	$4.90



















No non-GAAP adjustments	—	—	—	—	—
2022 Non-GAAP ("Adjusted")	$1,084.9	$268.6	$236.0	$1,090.9	$4.90

2021 GAAP	$1,087.6	$139.1	$235.8	$944.8	$4.25
Facility closure	23.2	—	5.8	17.4	0.08





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












2021 Non-GAAP ("Adjusted")	$1,074.0	$139.1	$232.1	$934.9	$4.20
Change Non-GAAP ("Adjusted")					$0.70
% Change Non-GAAP ("Adjusted")					17	%



	Three Months Ended 31 March				Six Months Ended 31 March
	2022		2021		2022		2021
Income tax provision	$122.7		$121.9		$236.0		$235.8
Income from continuing operations before taxes	659.5		599.0		1,322.4		1,189.3
Effective tax rate	18.6	%	20.4	%	17.8	%	19.8	%

Income tax provision	$122.7		$121.9		$236.0		$235.8


Facility closure	—		5.8		—		5.8




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











Adjusted income tax provision	$122.7		$118.2		$236.0		$232.1

Income from continuing operations before taxes	$659.5		$599.0		$1,322.4		$1,189.3


Facility closure	—		23.2		—		23.2




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






Adjusted income from continuing operations before taxes	$659.5		$585.4		$1,322.4		$1,175.7
Adjusted effective tax rate	18.6	%	20.2	%	17.8	%	19.7	%