Air Products & Chemicals (APD) 10-K risk factor changes: FY2017 vs FY2016

In [removed: conjunction with] evaluating [removed: an] investment in the Company and the forward-looking information contained in this Annual Report on Form 10-K or presented elsewhere by management from time to time, you should [removed: carefully read] [added: consider] the following risk factors.

[removed: Overall Economic and Supply/Demand Conditions, Customer Vitality—A weakening economy or product supply versus demand imbalance] [added: Unfavorable conditions] in [added: the global economy, the] markets [removed: in which] [added: we serve, or] the [removed: Company does business] [added: financial markets,] may decrease the demand for [removed: its] [added: our] goods and services and adversely impact [removed: its] [added: our] revenues, operating results, and cash flows.

[removed: In the past few years, uncertain] [added: Weak] economic conditions in certain geographies and changing supply and demand balances in markets served by the Company have impacted [added: in the past] and may [added: impact] in the future [removed: impact] demand for the Company’s products and services, in turn negatively impacting the Company’s revenues and earnings.

Unfavorable conditions can depress [removed: sales in a given market or to a particular customer,] [added: sales,] affect our margins, constrain our operating flexibility, impact [added: efficient] utilization of the Company’s manufacturing capacity, or result in charges which are unusual or nonrecurring.

Excess capacity in the Company’s or its competitors’ manufacturing facilities [removed: could] [added: can] decrease the Company’s ability to maintain pricing and generate profits.

Weak overall demand or specific customer conditions may also cause [removed: elimination of product lines,] customer shutdowns or default, or other inabilities to [removed: profitably] operate facilities [added: profitably,] and may force sale or abandonment of facilities and equipment or [added: prevent] projects [removed: not to reach] [added: from coming] on-stream.

These or other events associated with weak economic conditions or specific end market, product, or customer events may require the Company to record an impairment on tangible assets, such as facilities and equipment, or intangible assets, such as intellectual property or goodwill, which would have a negative impact on [removed: its] [added: our] financial results.

[removed: Operational, Economic, Political, and Legal Risks of International Operations—The Company’s foreign] [added: Our extensive international] operations can be adversely impacted by operational, economic, [removed: political and] [added: political, security,] legal [removed: risks] [added: risks, and currency translation,] that could [removed: impact our] [added: decrease] profitability.

[removed: In addition, the Company is] [added: We are] actively investing significant capital and other resources in [removed: emerging] [added: developing] markets, [added: which present special risks,] including [added: through] joint [removed: ventures and other alliances.][added: ventures.]

[removed: Some of the Company’s] [added: Our] contractual [removed: relationships] [added: relationship] within these jurisdictions [removed: are] [added: may be] subject to cancellation without full compensation for loss.

[removed: Economic] [added: Changing economic] and political conditions within foreign jurisdictions, [removed: nationalization and expropriation risk, social unrest,] strained relations between countries, or imposition of international sanctions can cause fluctuations in demand, price volatility, supply disruptions, or loss of property.

The occurrence of any of these risks could have a material adverse impact on [removed: the Company’s] [added: our] financial condition, results of operation, and cash flows.

Our developing market operations may be subject to greater risks than those faced by our operations in mature economies, including [removed: geopolitical, legal, economic,] [added: political] and [added: economic instability, project delay or abandonment due to unanticipated government actions, inadequate investment in infrastructure, undeveloped property rights and legal systems, unfamiliar regulatory environments, relationships with local partners, language and cultural differences and] talent risks.

[removed: The] [added: Because the] majority of [removed: the Company’s] [added: our] revenue is generated from sales outside the United States, [removed: exposing it] [added: we are exposed] to fluctuations in foreign currency exchange rates.

Our [removed: Industrial Gases] business is primarily exposed to translational currency risk as the results of [removed: its] [added: our] foreign operations are translated into U.S. dollars at current exchange rates throughout the fiscal period.

[removed: The Company’s] [added: Our] policy is to minimize cash flow volatility from changes in currency exchange rates.

[removed: The Company chooses] [added: We choose] not to hedge the translation of [removed: its] [added: our] foreign subsidiaries’ earnings into dollars.

For a more detailed discussion of currency exposure, see Item [removed: 7A,] [added: 7A - Quantitative and Qualitative Disclosures About Market Risk,] below.

[removed: Raw Material and Energy Cost and Availability—Interruption] [added: Interruption] in ordinary sources of [added: raw material or energy] supply or an inability to recover increases in energy and raw material costs from customers could result in lost sales or reduced [removed: profitability.][added: profitability.]

Energy, including electricity, natural gas, and diesel fuel for delivery trucks, is the largest cost component of [removed: the Company’s] [added: our] business.

Because [removed: the Company’s] [added: our] industrial gas facilities use substantial amounts of electricity, energy price fluctuations could materially impact [removed: the Company’s] [added: our] revenues and earnings.

A disruption in the supply of energy, components, or raw materials, whether due to market conditions, legislative or regulatory actions, natural events, or other disruption, could prevent [removed: the Company] [added: us] from meeting [removed: its] [added: our] contractual commitments, harming [removed: its] [added: our] business and financial results.

[removed: The Company’s] [added: Our] supply of crude helium for purification and resale is largely dependent upon natural gas production by crude helium suppliers.

Lower natural gas production [removed: (which may result] [added: resulting] from natural gas pricing [removed: or] [added: dynamics,] supplier operating [removed: issues)] or [added: transportation issues (such as the Qatar embargo) or other] interruptions in sales from [removed: other] crude helium suppliers, can reduce [removed: the Company’s] [added: our] supplies of crude helium available for processing and resale to [removed: its] customers.

[removed: The Company] [added: We] typically [removed: contracts] [added: contract] to pass through cost increases in energy and raw materials to [removed: its] customers, but cost variability can still have a negative impact on [removed: its] [added: our] results.

[removed: The Company] [added: We] may [removed: not] be [removed: able] [added: unable] to raise prices as quickly as costs rise, or competitive pressures may prevent full recovery.

Increases in energy or raw material costs that cannot be passed on to customers for competitive or other reasons would negatively impact [removed: the Company’s] [added: our] revenues and earnings.

[removed: Regulatory Compliance—The Company is] [added: We are] subject to extensive government regulation in jurisdictions around the globe in which [removed: it does] [added: we do] business.

[removed: Changes in regulations] [added: Regulations] addressing, among other things, environmental compliance, import/export restrictions, anti-bribery and corruption, and taxes, can negatively impact [removed: the Company’s] [added: our] financial condition, results of operation, and cash [removed: flows.][added: flows.]

[removed: The Company is] [added: We are] subject to government regulation in the United States and foreign jurisdictions in which [removed: it] [added: we] conducts [removed: its] [added: our] business.

The application of laws and regulations to [removed: the Company’s] [added: our] business is sometimes unclear.

Export controls or other regulatory restrictions could prevent [removed: the Company] [added: us] from shipping [removed: its] [added: our] products to and from some markets or increase the cost of doing so.

Changes in tax laws and regulations and international tax treaties could affect the financial results of [removed: the Company’s] [added: our] businesses.

Increasingly aggressive enforcement of anti-bribery and anti-corruption requirements, including the U.S. Foreign Corrupt Practices Act, the United Kingdom Bribery Act and the China Anti-Unfair Competition Law, could subject [removed: the Company] [added: us] to criminal or civil sanctions if a violation occurs.

[removed: Environmental Compliance—Costs] [added: Costs] and expenses resulting from compliance with environmental regulations may negatively impact [removed: the Company’s] [added: our] operations and financial [removed: results.][added: results.]

[removed: The Company is] [added: We are] subject to extensive federal, state, local, and foreign environmental and safety laws and regulations concerning, among other things, emissions in the air; discharges to land and water; and the generation, handling, treatment, and disposal of hazardous waste and other materials.

[removed: The Company takes its] [added: We take our] environmental responsibilities very seriously, but there is a risk of environmental impact inherent in our manufacturing operations and transportation of [removed: chemicals.][added: our products.]

Future developments and more stringent environmental regulations may require [removed: the Company] [added: us] to make additional unforeseen environmental expenditures.

For a more detailed description of these matters, see [removed: “Narrative Description of the Company’s] [added: Item 1 -] Business [removed: Generally—Environmental Controls,”] [added: Environmental Controls,] above.

These [removed: circumstances] [added: transactions pose risks and challenges that] could [removed: adversely] [added: negatively] impact our business and financial statements.

Our operations are affected by various risks, many of which are beyond our control.

In 2017, over 60% of our sales were derived from customers outside the United States and many of our operations, suppliers, and employees are located outside the United States.

Our growth strategy depends in part on our ability to further penetrate markets outside the United States, particularly in high-growth markets.

Our operations in foreign jurisdictions may be subject to risks including exchange control regulations, import and trade restrictions, and trade policy and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad.

Successful operation of particular facilities or projects may be disrupted by civil unrest, acts of sabotage or terrorism, and other local security concerns.

Such concerns may require us to incur greater costs for security or to shut down operations for a period of time.

Some of our projects involve challenging engineering, procurement and construction phases that may occur over extended time periods, sometimes up to several years.

We may encounter difficulties in engineering, delays in designs or materials provided by the customer or a third party, equipment and materials delivery delays, schedule changes, delays from customer failure to timely obtain regulatory permits and rights-of-way, inability to find adequate sources of labor in the geographies where we are building new plants, weather-related delays, delays by subcontractors in completing their portion of the project and other factors, some of which are beyond our control, but which may impact our ability to complete a project within the original delivery schedule.

In some cases, delays and additional costs may be substantial, and we may be required to cancel a project and/or compensate the customer for the delay.

We may not be able to recover any of these costs.

These factors could also negatively impact our reputation or relationships with our customers, which could adversely affect our ability to secure new contracts.

In addition, we are subject to laws and sanctions imposed by the U.S. or by other jurisdictions where we do business that may prohibit us or certain of our affiliates from doing business in certain countries, or restricting the kind of business that may be conducted.

Such restrictions may provide a competitive advantage to competitors who are not subject to comparable restrictions or prevent us from taking advantage of growth opportunities.

Further, we cannot guarantee that our internal controls and compliance systems will always protect us from acts committed by employees, agents or our business partners (or of businesses we acquire or partner with) that would violate U.S. and/or non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, kickbacks and false claims, pricing, sales and marketing practices, conflicts of interest, competition, export and import compliance, money laundering and data privacy.

Any such improper actions or allegations of such acts could damage our reputation and subject us to civil or criminal investigations in the United States and in other jurisdictions and related shareholder lawsuits, could lead to substantial civil and criminal, monetary and non-monetary penalties and could cause us to incur significant legal and investigatory fees.

In addition, the government may seek to hold us liable as a successor for violations committed by companies in which we invest or that we acquire.

Our ability to grow revenue, earnings, and cash flow at anticipated rates depends in part on our ability to identify, successfully acquire and integrate businesses and assets at appropriate prices; and realize expected synergies and operating efficiencies.

We may incur asset impairment charges related to acquisitions that do not meet expectations.

We continually assess the strategic fit of our existing businesses and may divest businesses that are deemed not to fit with our strategic plan or are not achieving the desired return on investment.

For example, when we decide to sell or otherwise dispose of a business or assets, we may be unable to do so on satisfactory terms within our anticipated time frame or at all.

In addition, divestitures or other dispositions may dilute our earnings per share, have other adverse financial and accounting impacts and distract management, and disputes may arise with buyers.

In addition, we have agreed and may in the future agree to indemnify buyers against known and unknown contingent liabilities.

Our financial results could be impacted by claims under these indemnities.

In addition, these systems may be damaged, disrupted or shut down due to attacks by computer hackers, computer viruses, employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate.

Security breaches of our systems (or the systems of our customers, suppliers or other business partners) could result in the misappropriation, destruction or unauthorized disclosure of confidential information or personal data belonging to us or to our employees, partners, customers or suppliers.

As with most large systems, our information technology systems have in the past been and in the future likely will be subject to computer viruses, malicious codes, unauthorized access and other cyber-attacks, and we expect the sophistication and frequency of such attacks to continue to increase.

Any of the attacks, breaches or other disruptions or damage described above could interrupt our operations, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer and business partner relationships and our reputation, or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws and increased costs for security and remediation, each of which could adversely affect our business, reputation and financial statements.

New technologies create performance risks that could impact our financial results or reputation.

We are continually developing and implementing new technologies and product offerings.

Existing technologies are being implemented in products and designs or at scales beyond our experience base.

These technological expansions can create nontraditional performance risks to our operations.

Failure of the technologies to work as predicted or unintended consequences of new designs or uses could lead to cost overruns, project delays, financial penalties, or damage to our reputations.

Large scale gasification projects may contain processes or technologies that we have not operated at the same scale or in the same combination and, although such projects generally include technologies and processes that have been demonstrated previously by others, such technologies or processes may be new to us.

We are the world’s leading supplier of hydrogen, the primary use of which is the production of ultra-low sulfur transportation fuels that have significantly reduced transportation emissions and helped improve human health.

To make the high volumes of hydrogen needed by our customers, we use steam methane reforming, which releases carbon dioxide.

Implementation of the United Kingdom’s (“UK”) exit from European Union (“EU”) membership, or recent political instability in Spain, could adversely affect our European Operations.

Although it is unknown what the terms of the United Kingdom’s future relationship with the EU will be, it is possible that there will be greater restrictions on imports and exports between the United Kingdom and EU members and increased regulatory complexities.

Any of these factors could adversely affect customer demand, our relationships with customers and suppliers and our European business.

In addition, there has been recent political instability in Catalonia, Spain.

We maintain an administrative office in Catalonia which provides transactional accounting and other support services for our entire European business, and fiscal year 2017 sales of approximately US$320 million were attributable to Spain.

| --- | --- |

Cyclical downturns in the industries served by our customers or adverse economic events or conditions affecting specific customers can in turn have an adverse effect on our business.

Developing market operations present special risks.

The Company has extensive international operations.

The Company’s operations in certain foreign jurisdictions may be subject to project delays due to unanticipated government actions, inadequate investment in infrastructure, undeveloped property rights and legal systems, or political instability.

Our success will depend, in part, on our ability

##### [Table of Contents](#toc)

to manage the risks inherent in operating in a developing market, including unfamiliar regulatory environments, relationships with local partners, language and cultural differences, and tailoring products for acceptance by local markets.

Further, our operations outside the United States require us to comply with a number of United States and international regulations, including anti-corruption laws such as the United States Foreign Corrupt Practices Act, the United Kingdom Bribery Act, and the China Anti-Unfair Competition Law, as well as U.S. and international economic sanctions.

We have policies and procedures to foster compliance with these laws, including compliance and training programs for our employees and established due diligence procedures with regard to third parties; however, these cannot eliminate the risk that violations could be committed by our employees, agents or joint venture partners.

Violations of such laws and regulations could result in disruptive investigations of the Company, significant fines and sanctions which could adversely affect our consolidated results of operations.

Currency Fluctuations—Changes in foreign currencies may adversely affect the Company’s financial results.

Our Performance Materials business is also significantly exposed to transactional currency impacts as many of its products are manufactured in one country and sold in another.

The Company uses certain financial instruments to mitigate some of these effects.

Export restrictions continue to attract external focus by multiple customs and export enforcement authorities.

We may not be able to successfully control or reduce costs to improve productivity and streamline operations.

Reorganization and cost reduction efforts can disrupt operations.

Achieving our financial goals including continued profitability and margin growth depends significantly on our efforts to control or reduce our operating costs, including our ability to eliminate stranded costs related to our divested businesses.

Because many of our costs are affected by factors outside or substantially outside our control, we generally must seek to control or reduce costs through operating efficiency and repositioning actions.

If we are not able to identify and execute efforts designed to control or reduce costs and increase operating efficiency, our ability to attain our goals could be adversely impacted.

Ongoing restructuring and cost reduction actions may reduce our available talent and other resources, impact our ability to attract and retain key employees, slow improvements in our products and services, and adversely affect our ability to respond to customers.

Failure to achieve targeted improvements may diminish the operational and financial benefits we realize from such actions.

Interest Rate Increases—The Company’s earnings, cash flows, and financial position can be impacted by interest rate increases and access to credit.

At 30 September 2016, the Company had total consolidated debt of $6,225.2 million (including Versum debt of $997.2 million), of which $1,307.1 million (including Versum debt of $5.8 million) will mature in the next twelve months.

The Company expects to continue to incur indebtedness to fund new projects and replace maturing debt.

Although the Company actively manages its interest rate risk through the use of derivatives and diversified debt obligations, not all borrowings at variable rates are hedged, and new debt will be priced at market rates.

If interest rates increase, the Company’s interest expense could increase significantly, affecting earnings and reducing cash flow available for working capital, capital expenditures, acquisitions, and other purposes.

In addition, changes by any rating agency to the Company’s outlook or credit ratings could increase the Company’s cost of borrowing and weaken our ability to access capital and credit markets on terms commercially acceptable to us.

For a more detailed discussion of interest rate risk, see Item 7A, below.

We regularly review our portfolio of businesses and pursue growth through acquisitions and seek to divest non-core businesses.

In

With respect to divested businesses, our results may be impacted by claims by purchasers to whom we have provided contractual indemnification.

Operating results are also dependent on the Company’s ability to complete new construction projects on time, on budget, and in accordance with performance requirements, which depends, in part, on the availability of adequate sources of labor in the geographies where the Company intends to build new plants.

Failure to do so may expose the Company to loss of revenue, potential litigation, and loss of business reputation.

As with all large systems, our information systems could be penetrated by outside parties intent on extracting information, corrupting information, disrupting business processes, or causing harm to persons or property.

The Company’s systems have in the past been and likely will in the future be subject to sophisticated cyber security threats.

could expose us, our customers, or the individuals affected to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our reputation, or otherwise harm our business.

These reductions often result in higher power costs.

The results of the UK’s EU membership referendum, advising for the exit of the UK from the EU, has caused and may continue to cause significant volatility in global stock markets, currency exchange rate fluctuations and global economic uncertainty, which could adversely affect customer demand, our relationships with customers and suppliers and our business and financial statements.

[removed: | [Business Overview](#tx271291_22) | | | 22 | |][added: BUSINESS OVERVIEW]

[removed: | [Results of Operations](#tx271291_25) | | | 25 | |][added: RESULTS OF OPERATIONS]

[removed: | [Reconciliation of Non-GAAP Financial Measures](#tx271291_26) | | | 35 | |][added: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES]

[removed: | [Liquidity and Capital Resources](#tx271291_27) | | | 41 | |][added: LIQUIDITY AND CAPITAL RESOURCES]

[removed: | [Contractual Obligations](#tx271291_28) | | | 45 | |][added: CONTRACTUAL OBLIGATIONS]

[removed: | [Pension Benefits](#tx271291_29) | | | 46 | |][added: PENSION BENEFITS]

[removed: | [Environmental Matters](#tx271291_30) | | | 48 | |][added: ENVIRONMENTAL MATTERS]

[removed: | [Off-Balance Sheet Arrangements](#tx271291_31) | | | 49 | |][added: OFF-BALANCE SHEET ARRANGEMENTS]

[removed: | [Related Party Transactions](#tx271291_32) | | | 49 | |][added: RELATED PARTY TRANSACTIONS]

[removed: | [Inflation](#tx271291_33) | | | 49 | |][added: INFLATION]

[removed: | [Critical Accounting Policies and Estimates](#tx271291_34) | | | 49 | |][added: CRITICAL ACCOUNTING POLICIES AND ESTIMATES]

[removed: | [New Accounting Guidance](#tx271291_35) | | | 55 | |][added: NEW ACCOUNTING GUIDANCE]

[removed: | [Forward-Looking Statements](#tx271291_36) | | | 55 | |][added: FORWARD-LOOKING STATEMENTS]

All amounts are presented in millions of dollars, except for [added: per] share data, unless otherwise indicated.

[removed: Items] [added: Captions] such as income from continuing operations attributable to Air Products, net income attributable to Air Products, and diluted earnings per share attributable to Air Products [removed: (EPS)] are simply referred to as “income from continuing operations,” “net income,” and “diluted earnings per [removed: share”] [added: share (EPS)”] throughout this Management’s Discussion and Analysis, unless otherwise stated.

The discussion of results that follows includes comparisons to [added: certain] non-GAAP [added: ("adjusted")] financial measures.

The presentation of non-GAAP measures is intended to [removed: enhance] [added: provide investors, potential investors, securities analysts, and others with useful supplemental information to evaluate] the [removed: usefulness] [added: performance] of [removed: financial information by providing measures which,] [added: the business because such measures,] when viewed together with our financial results [removed: reported] [added: computed] in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our historical financial performance and projected future results.

The [removed: reconciliation] [added: reconciliations] of reported GAAP results to non-GAAP measures [removed: is] [added: are] presented on pages [removed: 35-40.][added: 31-37.]

Descriptions of the excluded items appear on pages [removed: 27-29.][added: 24-26.]

[removed: BUSINESS OVERVIEW][added: | [Business Overview](#sEA6B5011B6385EFABDC8BD1F379F0347) | [20](#sEA6B5011B6385EFABDC8BD1F379F0347) |]

As of 30 September [removed: 2016,] [added: 2017,] our operations were organized into [removed: six] [added: five] reportable business segments: Industrial [removed: Gases- Americas,] [added: Gases – Americas;] Industrial [removed: Gases-] [added: Gases –] EMEA (Europe, Middle East, and [removed: Africa),] [added: Africa);] Industrial [removed: Gases- Asia,] [added: Gases – Asia;] Industrial [removed: Gases- Global, Materials Technologies,] [added: Gases – Global;] and Corporate and other.

[removed: The] [added: Since that time, the] EfW segment [removed: is] [added: has been] presented as a discontinued operation.

[added: | • |] We completed the spin-off of EMD as Versum [removed: Materials, Inc.] on 1 October 2016. [added: |]

Refer to Note [removed: 26,] [added: 25,] Business Segment and Geographic Information, to the consolidated financial statements for additional details on our reportable business [removed: segments and Note 3, Materials Technologies Separation, for additional information on EMD and PMD.][added: segments.]

[removed: Also,] [added: Diluted] EPS of [removed: $6.94] [added: $5.16] increased [removed: 17%] [added: 2%] from the prior year.

On a non-GAAP basis, [added: adjusted diluted] EPS of [removed: $7.55] [added: $6.31] increased [removed: 14%.][added: 12%.]

[removed: Highlights] [added: Highlights] for [removed: 2016][added: 2017]

[removed: | | • | | Sales of $9,524.4 decreased 4%, or $370.5.] Underlying sales growth [removed: of 2%] was more than offset by [removed: unfavorable currency and] lower energy contractual cost pass-through to [removed: customers. Underlying sales increased from higher volumes in Industrial Gases – Global] [added: customers of 4%] and [removed: Industrial Gases – Asia. |][added: unfavorable currency of 3%.]

| [removed: |] • | [removed: |] Income from continuing operations of [removed: $1,515.3] [added: $1,134.4] increased [removed: 18%,] [added: 3%,] or [removed: $230.6,] [added: $34.9,] and diluted [removed: earnings per share from continuing operations] [added: EPS] of [removed: $6.94] [added: $5.16] increased [removed: 17%,] [added: 2%,] or [removed: $1.03.] [added: $.12.] On a non-GAAP basis, [added: adjusted] income from continuing operations of [removed: $1,647.8] [added: $1,385.9] increased [removed: 15%,] [added: 13%,] or [removed: $214.0,] [added: $155.6,] and [added: adjusted] diluted [removed: earnings per share from continuing operations] [added: EPS] of [removed: $7.55] [added: $6.31] increased [removed: 14%,] [added: 12%,] or [removed: $0.95.] [added: $.67.] A summary table of changes in diluted earnings per share, including a [removed: non-GAAP] [added: non‑GAAP] reconciliation, is presented below. |

[removed: | | • | | We committed to exit the] Energy-from-Waste [removed: business. |]

| [removed: |] • | [removed: |] We increased our quarterly dividend by [removed: 6%] [added: 10%] from [removed: $.81 to] $.86 [added: to $.95] per share. This represents the [removed: 34th] [added: 35th] consecutive year that we have increased our dividend payment. |

[removed: Changes] [added: Changes] in Diluted Earnings per Share Attributable to Air [removed: Products][added: Products]

| | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: Increase] (Decrease) | | |

| [removed: Diluted] [added: Diluted] Earnings per [removed: Share] [added: Share] | | | | | | | | | | | | |

| [removed: Income] [added: Income] from Continuing [removed: Operations—GAAP Basis] [added: Operations – GAAP Basis] | | [added: $] | [removed: $6.94] [added: 5.16] | | | [added: $] | [removed: $5.91] [added: 5.04] | | | [added: $] | [removed: $1.03] [added: .12] | |

| [removed: Operating income (after-tax)] [added: Operating Income Impact (after-tax)] | | | | | | | | | | | | |

| Underlying business | | | | | [removed: | | | | | | | |]

| Volume | [removed: | | | | | | | |] [added: 6] | [added: %] | [removed: (.01] [added: 3] | [removed: )] [added: %] |

| Price/raw materials | | | | | | | | | | [added: .03] | [removed: .29] | |

| Currency | [removed: | | | | | | | |] [added: (1] | [added: )%] | [removed: (.16] [added: (3] | [removed: )] [added: )%] |

OF OPERATIONS

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| [2017 in Summary](#sF7DC78229A835CA8B7A4161ACBBFD571) | [20](#sF7DC78229A835CA8B7A4161ACBBFD571) |

| [2018 Outlook](#s3DDF895EE3155A2689EFB73781A404EB) | [22](#s3DDF895EE3155A2689EFB73781A404EB) |

The results of our former Materials Technologies segment, which contained the Electronic Materials Division (EMD) and the Performance Materials Division (PMD), and the former Energy-from-Waste segment have been presented as discontinued operations.

The results of operations and cash flows of these businesses have been removed from the results of continuing operations and segment results for all periods presented.

Unless otherwise indicated, financial information is presented on a continuing operations basis.

With operations in 50 countries, in 2017 we had sales of $8.2 billion, total company assets, including assets of both continuing and discontinued operations, of $18.5 billion, and a worldwide workforce of approximately 15,300 full- and part-time employees from continuing and discontinued operations.

2017 IN SUMMARY

In 2017, we were able to focus on our core industrial gases business by completing the separation of EMD through the spin-off of Versum Materials, Inc. (Versum) and the sale of PMD to Evonik Industries AG (Evonik).

Sales of $8.2 billion increased nine percent over the prior year, primarily due to volume growth from new project onstreams across our regional industrial gases businesses, underlying growth in the base business, and continued progress on the Jazan project within our Industrial Gases – Global segment, partially offset by weaker liquefied natural gas (LNG) equipment sales.

We delivered operating margin of 17.4%, adjusted operating margin of 21.6%, and adjusted EBITDA margin of 34.1% as our productivity actions were offset by the impact of energy cost pass-through to customers.

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| • | Sales of $8,187.6 increased 9%, or $683.9 as underlying sales growth of 7% and higher energy and natural gas cost pass‑through to customers of 3% were partially offset by unfavorable currency impacts of 1%. Underlying sales increased primarily from higher volumes across the industrial gases businesses, including the Jazan project, partially offset by lower LNG sales in the corporate and other segment. |

| | |

| • | Operating income of $1,427.6 decreased 7%, or $102.1, primarily due to a noncash goodwill and intangible asset impairment charge and higher cost reduction and asset actions, partially offset by favorable volumes and lower other costs. Operating margin of 17.4% decreased 300 bp. On a non‑GAAP basis, adjusted operating income of $1,769.6 increased 9%, or $149.7, and adjusted operating margin of 21.6% was flat. |

| | |

| • | Adjusted EBITDA of $2,795.0 increased 7%, or $173.5. Adjusted EBITDA margin of 34.1% decreased 80 bp and was negatively impacted by 90 bp from higher contractual energy pass-through to customers. Excluding this impact, adjusted EBITDA margin was up 10 bp. |

| | |

| | |

| | |

| • | We completed the sale of PMD to Evonik on 3 January 2017. |

| | |

| • | We entered into an agreement to form a $1.3 billion joint venture in China with Lu’An Clean Energy Company. |

| | |

| | | | | | | | | | | Increase | | |

| Net income | | $ | 13.65 | | | $ | 2.89 | | | $ | 10.76 | |

| Income (Loss) from discontinued operations | | 8.49 | | | | (2.15 | | ) | | 10.64 | | |

| Costs | | | | | | | | | | .24 | | |

| Gain on land sale | | | | | | | | | | .03 | | |

| Total Operating Income Impact (after-tax) | | | | | | | | | | $ | (.44 | ) |

| Equity method investment impairment charge | | | | | | | | | | (.36 | | ) |

| Other non-operating income (expense), net | | | | | | | | | | .10 | | |

| Weighted average diluted shares | | | | | | | | | | (.04 | | ) |

| Total Other Impact (after-tax) | | | | | | | | | | $ | .56 | |

| | | | | | | | | | | Increase | | |

| | | 2017 | | | | 2016 | | | | (Decrease) | | |

| Income from Continuing Operations – GAAP Basis | | $ | 5.16 | | | $ | 5.04 | | | $ | .12 | |

| Business separation costs | | .12 | | | | .21 | | | | (.09 | | ) |

| [2016 in Summary](#tx271291_23) | | | 23 | |

| [2017 Outlook](#tx271291_24) | | | 24 | |

The Company’s Materials Technologies business serves the semiconductor, polyurethanes, cleaning and coatings, and adhesives industry.

With operations in over 50 countries, in 2016 we had sales of $9.5 billion, assets of $18.1 billion, and a worldwide workforce of approximately 18,600 employees.

During the second quarter of fiscal year 2016, we committed to exit the Energy-from-Waste (EfW) business.

Accordingly, prior year EfW business segment information has been reclassified to conform to current year presentation.

The Company’s Materials Technologies business contains the Electronic Materials Division (EMD) and Performance Materials Division (PMD).

PMD is under a sales agreement subject to regulatory approval.

##### [Table of Contents](#toc)

2016 IN SUMMARY

In 2016, we delivered strong results driven by cost improvement actions despite weakness in the worldwide economy and currency headwinds.

We made significant progress on our strategy by focusing on our core industrial gases business and have significantly improved our profitability as measured by operating margin, adjusted operating margin, and adjusted EBITDA margin which all increased by at least 400 bp versus the prior year.

During the year, we committed to exit our EfW business and completed the spin-off of our Electronic Materials division as a publicly traded company on 1 October 2016.

We improved our focus on safety, delivered on our cost reduction targets, and increased accountability by aligning pay with performance.

These changes drove increased profitability as we delivered operating margins of 22.1%, adjusted operating margins of 23.1%, and adjusted EBITDA margins of 34.4%.

| --- | --- | --- | --- |

| | • | | Operating income of $2,106.0 increased 23%, or $397.7, primarily due to better cost performance. On a non-GAAP basis, operating income of $2,198.5 increased 16%, or $305.3. Adjusted EBITDA of $3,273.0 increased 10%, or $288.9. |

| | • | | We entered into a sales agreement to sell the Performance Materials division of our Materials Technologies segment to Evonik, which is subject to regulatory approval and other closing conditions. |

| | • | | We completed the spin-off of the Electronic Materials division as Versum Materials, Inc. on 1 October 2016. |

For a discussion of the challenges, risks, and opportunities on which management is focused, refer to our 2017 Outlook below.

| | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Net income | | | $2.89 | | | | $5.88 | | | | $(2.99 | ) |

| Loss from discontinued operations | | | (4.05 | ) | | | (.03 | ) | | | (4.02 | ) |

| Costs/other | | | | | | | | | | | .94 | |

| Average shares outstanding | | | | | | | | | | | (.03 | ) |

| Other | | | | | | | | | | | (.30 | ) |

2017 OUTLOOK

For 2017, we intend to remain focused on key actions we can control to continue to drive earnings growth.

We intend to accomplish this by bringing new industrial gas plant investments on-stream, making progress on the Jazan sale of equipment project, and continuing to deliver on cost reduction actions.

We expect continued weakness in new LNG equipment orders primarily driven by low oil and natural gas prices.

On 1 October 2016, we completed the separation of our Electronic Materials division through the spin-off of Versum Materials, Inc. We continue to make progress on the sale of our Performance Materials division and are targeting to close on the sale in fiscal year 2017.

Fiscal 2017 earnings will be lower due to the separation of Electronic Materials.

If we are able to close on the sale of Performance Materials and it becomes a discontinued operation in fiscal 2017, we expect earnings will be reduced further.

| Sales | | | $9,524.4 | | | | $9,894.9 | | | | $10,439.0 | |

| Operating income—GAAP Basis | | | 2,106.0 | | | | 1,708.3 | | | | 1,339.1 | |

| Operating margin—GAAP Basis | | | 22.1% | | | | 17.3% | | | | 12.8% | |

| Adjusted EBITDA margin | | | 34.4% | | | | 30.2% | | | | 26.6% | |

| Operating margin | | | 23.1% | | | | 19.1% | | | | 16.0% | |

Sales of $9,524.4 decreased 4%, or $370.5.

At 30 September [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] the net financial instrument position was a liability of [removed: $5,187.7] [added: $3,832.3] and [removed: $4,452.0,] [added: $4,195.6,] respectively.

[removed: Interest] [added: Interest] Rate [removed: Risk][added: Risk]

Our debt portfolio as of 30 September 2016, including the effect of currency [added: and interest rate] swap agreements, [removed: primarily comprised] [added: was composed of 55% fixed-rate] debt [removed: denominated in U.S. dollars (37%)] and [removed: Euros (33%).][added: 45% variable-rate debt.]

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 30 September [removed: 2016,] [added: 2017,] with all other variables held constant.

A 100 bp increase in market interest rates would result in a decrease of [removed: $161] [added: $112] and [removed: $139] [added: $137] in the net liability position of financial instruments at 30 September [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively.

A 100 bp decrease in market interest rates would result in an increase of [removed: $178] [added: $119] and [removed: $151] [added: $148] in the net liability position of financial instruments at 30 September [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively.

Based on the variable-rate debt included in our debt portfolio, including the interest rate swap agreements, a 100 bp increase in interest rates would result in an additional [removed: $29] [added: $14] and [removed: $30] [added: $24] of interest incurred per year at the end of 30 September [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively.

A 100 bp decline in interest rates would lower interest incurred by [removed: $29] [added: $14] and [removed: $30] [added: $24] per year at 30 September [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively.

[removed: Foreign] [added: Foreign] Currency Exchange Rate [removed: Risk][added: Risk]

The sensitivity analysis related to foreign currency exchange rates assumes an instantaneous 10% change in the foreign currency exchange rates from their levels at 30 September [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] with all other variables held constant.

A 10% strengthening or weakening of the functional currency of an entity versus all other currencies would result in a decrease or increase, respectively, of [removed: $438] [added: $312] and [removed: $421] [added: $422] in the net liability position of financial instruments at 30 September [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] respectively.

The primary currency [removed: pairs] [added: pair] for which we have exchange rate exposure [removed: are] [added: is] Euros and U.S. [removed: dollars and British Pound Sterling and U.S. dollars.][added: Dollars.]

We estimate that a 10% reduction in either the Euro or the Chinese Renminbi versus the U.S. [removed: dollar] [added: Dollar] would lower our annual operating income by approximately [removed: $20] [added: $25] and [removed: $15,] [added: $20,] respectively.

The decrease in the net financial instrument position was primarily due to the repayment of long-term debt.

Our debt portfolio as of 30 September 2017, including the effect of currency and interest rate swap agreements, was composed of 65% fixed-rate debt and 35% variable-rate debt.

The change in debt portfolio composition was due primarily to the repayment of commercial paper.

The change in exchange rate sensitivity from 30 September 2016 to 30 September 2017 was due primarily to a reduction in our portfolio of forward exchange contracts.

Refer to Note 13, Financial Instruments, for additional information about our outstanding forward exchange contracts.

| --- | --- |

##### [Table of Contents](#toc)

The increase in the net financial instrument position was primarily due to the issuance of long-term debt by Versum, which included senior unsecured notes ($425.0) and a fully drawn term loan facility ($575.0).

This debt portfolio is composed of 53% fixed-rate debt and 47% variable-rate debt.

Changes in interest rates have different impacts on the fixed- and variable-rate portions of our debt portfolio.

A change in interest rates on the fixed portion of the debt portfolio impacts the net financial instrument position but has no impact on interest incurred or cash flows.

A change in interest rates on the variable portion of the debt portfolio impacts the interest incurred and cash flows but does not impact the net financial instrument position.

Air Products and Chemicals, Inc. (“we,” “our,” “us,” the “Company,” “Air Products,” or “registrant”), a Delaware corporation originally founded in 1940, serves energy, electronics, chemicals, metals, and manufacturing customers globally with a unique portfolio of products, services, and solutions that include atmospheric gases, process and specialty gases, [removed: electronics and performance materials,] equipment, and services.

The Company is the world’s largest supplier of hydrogen and has built leading positions in growth markets such as [removed: helium, refinery hydrogen, semiconductor materials,] [added: helium and] natural gas [removed: liquefaction, and advanced coatings and adhesives.][added: liquefaction.]

The Company [removed: also] designs and manufactures equipment for [added: air separation, hydrocarbon recovery and purification,] natural gas liquefaction [added: ("LNG"),] and [added: liquid] helium [removed: distribution.][added: and liquid hydrogen transport and storage.]

[removed: At the beginning of the] [added: During its] fiscal [removed: year,] [added: year ended 30 September 2017 (“fiscal year 2017”),] the Company reported its [removed: business] [added: continuing operations] in [removed: seven] [added: five] reporting segments under which it managed its operations, assessed performance, and reported earnings: Industrial Gases – Americas; Industrial Gases – EMEA (Europe, Middle East, and Africa); Industrial Gases – Asia; Industrial Gases – Global; [removed: Materials Technologies; Energy-from-Waste;] and Corporate and other.

Refer to Note [removed: 26,] [added: 25,] Business Segment and Geographic Information, [added: and Note 3, Discontinued Operations,] to the consolidated financial statements for additional details on our reportable business [removed: segments.][added: segments and our discontinued operations.]

[removed: As of 30 September 2016, the] [added: The] results of operations, financial condition, and cash flows for the Electronic Materials and Performance Materials businesses are presented [removed: within the Company’s consolidated financial statements] [added: herein] as [removed: continuing] [added: discontinued] operations.

[removed: Industrial] [added: Industrial] Gases [removed: Business][added: Business]

The Company’s Industrial Gases business produces atmospheric gases (oxygen, nitrogen, argon, and rare [removed: gases),] [added: gases);] process gases (hydrogen, helium, carbon dioxide, carbon monoxide, [removed: syngas] [added: syngas,] and specialty [removed: gases)] [added: gases);] and equipment for the production or processing of [removed: gases] [added: gases,] such as air separation units and non-cryogenic generators.

The regional Industrial Gases segments (Americas, EMEA, and Asia) supply gases and related equipment in the relevant region to diversified customers in many industries, including those in metals, glass, chemical processing, electronics, energy production and refining, food processing, [removed: metallurgical industries,] medical, and general manufacturing.

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

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

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

Helium is used in laboratories and healthcare for cooling and in other industries for pressurizing, [removed: purging] [added: purging,] and lifting.

Argon is used in the metals and other industries for its unique inerting, thermal [removed: conductivity] [added: conductivity,] and other properties.

[removed: Liquid Bulk—Product] [added: Liquid Bulk—Product] is delivered in bulk (in liquid or gaseous form) by tanker or tube trailer and stored, usually in its liquid state, in equipment designed and installed typically by the Company at the customer’s site for vaporizing into a gaseous state as needed.

[removed: Packaged Gases—Small] [added: Packaged Gases—Small] quantities of product are delivered in either cylinders or dewars.

In the United States, the Company’s packaged gas business sells products [added: (principally helium)] only for the electronics and magnetic resonance imaging [removed: (principally helium)] industries.

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

We mitigate [removed: energy] [added: electricity] and natural gas price fluctuations contractually through pricing formulas, surcharges, and cost pass-through arrangements.

During fiscal year [removed: 2016,] [added: 2017,] no significant difficulties were encountered in obtaining adequate supplies of power and natural gas.

Overall regional industrial gases sales constituted approximately [removed: 76%] [added: 90%] of consolidated sales in fiscal year [removed: 2016, 76%] [added: 2017, 90%] in fiscal year [removed: 2015,] [added: 2016,] and [removed: 77%] [added: 92%] in fiscal year [removed: 2014.][added: 2015.]

Sales of tonnage hydrogen and related products constituted approximately [removed: 17%] [added: 24%] of consolidated sales in fiscal year [removed: 2016, 19%] [added: 2017, 21%] in fiscal year [removed: 2015,] [added: 2016,] and [removed: 22%] [added: 24%] in fiscal year [removed: 2014.][added: 2015.]

Sales of atmospheric gases constituted approximately [removed: 36%] [added: 45%] of consolidated sales in fiscal year [removed: 2016, 35%] [added: 2017, 46%] in fiscal year [removed: 2015] [added: 2016] and [removed: 33%] [added: 45%] in fiscal year [removed: 2014.][added: 2015.]

[removed: Industrial] [added: Industrial] Gases [removed: Equipment][added: Equipment]

The Industrial [removed: Gases – Global] [added: Gases–Global] segment includes cryogenic and non-cryogenic equipment for air separation.

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

The Corporate and other segment includes two global equipment businesses, our LNG [removed: sale of] equipment [removed: business] [added: business,] and our liquid helium and liquid hydrogen transport and storage containers business.

Steel, aluminum, and capital equipment subcomponents (compressors, etc.) are the principal raw materials in the manufacturing of [removed: equipment in this business segment.][added: equipment.]

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

The backlog of equipment orders was approximately [removed: $1.1] [added: $.5] billion on 30 September [removed: 2016] [added: 2017] (as compared with a total backlog of approximately [removed: $1.5] [added: $1.1] billion on 30 September [removed: 2015)] [added: 2016)] and primarily contains Air Products’ share of the multi-year contract with a joint venture in Jazan, Saudi [removed: Arabia] [added: Arabia,] for the construction of an industrial gas facility that will supply gases to Saudi Arabian Oil Company [removed: (Saudi Aramco).][added: ("Saudi Aramco").]

Revenue from this contract is recognized under the [removed: percent complete] [added: percentage-of-completion] method based on costs incurred to date compared with total [removed: expected] [added: estimated] costs to be incurred.

The Company estimates that [removed: between 60-70%] [added: approximately 80%] of the total sales backlog as of 30 September [removed: 2016] [added: 2017] will be recognized as revenue during fiscal year [removed: 2017,] [added: 2018,] dependent on execution schedules of the relevant projects.

[removed: Performance Materials Division sales constituted approximately 11%] [added: Sale] of [removed: consolidated sales in fiscal year 2016, 11% in fiscal year 2015, and 11% in fiscal year 2014, and Electronic Materials Division sales] [added: equipment] constituted approximately 10% of consolidated sales in fiscal year [removed: 2016,] [added: 2017,] 10% [removed: of consolidated sales] in fiscal year [removed: 2015,] [added: 2016,] and [removed: 9%] [added: 8%] in fiscal year [removed: 2014.][added: 2015.]

Its international businesses are subject to risks customarily encountered in foreign operations, including fluctuations in foreign currency exchange rates and controls; import and export controls; and other economic, political, and regulatory policies of local [removed: governments.][added: governments described in Item 1A, Risk Factors, below.]

The Company has majority or wholly owned foreign subsidiaries that operate in [removed: Canada,] [added: Canada;] 17 European countries (including the United Kingdom, the Netherlands, and [removed: Spain),] [added: Spain);] 11 Asian countries (including China, [added: South] Korea, and [removed: Taiwan), 7] [added: Taiwan); 8] Latin American countries (including Chile and [removed: Brazil), 2] [added: Brazil); 3] African [removed: countries,] [added: countries;] and [removed: 1] [added: 2] Middle Eastern [removed: country.][added: countries.]

The Company also owns less-than-controlling interests in entities operating in Europe, Asia, Africa, the Middle East, and Latin America (including Italy, Germany, China, India, Saudi Arabia, [removed: Singapore,] Thailand, [removed: United Arab Emirates,] [added: Oman,] South Africa, and Mexico).

Financial information about the Company’s foreign operations and investments is included in Note 8, Summarized Financial Information of Equity Affiliates; Note [removed: 23,] [added: 22,] Income Taxes; and Note [removed: 26,] [added: 25,] Business Segment and Geographic Information, to the consolidated financial statements included under Item 8, [removed: herein.][added: below.]

Export sales from operations in the United States to third-party customers amounted to [removed: $307.7] [added: $64.2] million, [removed: $398.8] [added: $134.9] million, and [removed: $378.7] [added: $231.5] million in fiscal years [added: 2017,] 2016, [removed: 2015,] and [removed: 2014,] [added: 2015,] respectively.

[removed: Technology Development][added: Technology Development]

It conducts research and development principally in its laboratories located in the United States (Trexlertown, [removed: Pennsylvania; Carlsbad, California; Milton, Wisconsin; and Phoenix, Arizona),] [added: Pennsylvania);] Canada [removed: (Vancouver),] [added: (Vancouver);] the United Kingdom (Basingstoke and [removed: Carrington), Germany (Hamburg), the Netherlands (Utrecht),] [added: Carrington);] Spain [removed: (Barcelona), Japan (Kawasaki), China (Shanghai), Korea (Giheung), and Taiwan (Chupei] [added: (Barcelona);] and [removed: Hsinchu City).][added: China (Shanghai).]

On 1 October 2016, the Company completed the spin-off of its former Electronic Materials business by distributing to Air Products shareholders on a pro rata basis all of the issued and outstanding stock of Versum Materials, Inc. ("Versum"), the entity Air Products incorporated to hold this business, which established Versum as an independent publicly traded corporation.

On 3 January 2017, Air Products completed the sale of its Performance Materials business to Evonik Industries AG.

On 29 March 2016, the Board of Directors approved the Company's exit of its Energy-from-Waste ("EfW") business and efforts to start up and operate the two EfW projects located in Tees Valley, United Kingdom, were discontinued.

Since that time, the EfW segment has been presented as a discontinued operation.

Except as otherwise noted, the description of the Company's business below reflects the Company's continuing operations, which excludes the Electronic Materials, Performance Materials, and EfW businesses.

The Company obtains helium from a number of sources globally, including crude helium for purification from the U.S. Bureau of Land Management's helium reserve.

Qatar is a significant supplier of helium globally, providing over 25% of the world's supply.

During 2017, multiple Arab states cut diplomatic ties with and closed their borders to Qatar, disrupting helium production and transportation for several weeks.

Air Products' helium business was not materially affected during this initial phase of the embargo due to its diverse sourcing of crude helium, but customer demand exceeded supply during this period and supply challenges may recur prior to resolution of the embargo.

International Operations

Amounts expended on customer sponsored research activities were immaterial.

The Company’s businesses are not subject to seasonal fluctuations to any material extent.

Inventories

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| | | |

| Sean D. Major | 53 | Executive Vice President and General Counsel (since May, 2017). Previously, Mr. Major served as Executive Vice President, General Counsel and Secretary for Joy Global since 2007. |

| | | |

| | | |

| Dr. Samir Serhan | 56 | Executive Vice President (since December, 2016). Previously, Dr. Serhan served as President, Global HyCO, since 2014 for Praxair Inc. From 2000-2014, he worked in leadership positions in the U.S. and Germany for The Linde Group. |

| --- | --- |

General Description of Business

During its fiscal year ended 30 September 2016 (“fiscal year 2016”), the Company manufactured and distributed products in two principal lines of business: Industrial Gases and Materials Technologies.

Industrial Gases’ primary products were atmospheric gases, process gases, and equipment for air separation.

Materials Technologies’ primary products were performance materials and chemicals, such as epoxy amine curing agents, polyurethane catalysts, additives, and specialty surfactants, and electronic materials such as specialty gases, chemical mechanical planarization slurries, and specialty chemicals.

On 29 March 2016, the Board of Directors approved the Company’s exit of its Energy-from-Waste business based on continued difficulties encountered in making its two Energy-from-Waste projects operational and the Company’s conclusion, based on testing and analysis completed during the second quarter of fiscal year 2016, that significant additional time and resources would be required to make the projects operational.

The Energy-from-Waste segment is now presented as a discontinued operation.

On 16 September 2015, the Company announced that its Board of Directors approved a preliminary plan to spin off its Materials Technologies business, which contained the Electronic Materials and Performance Materials businesses.

On 6 May 2016, the Company entered into an agreement to sell certain subsidiaries and assets comprising the Performance Materials business to Evonik Industries AG for $3.8 billion in cash and the assumption of certain liabilities.

The Company also announced its intention to proceed with the spin-off of the Electronic Materials business.

In preparation for the spin-off, Air Products transferred operations, employees, assets, and liabilities of the Electronic Materials business to its wholly owned subsidiary, Versum Materials, Inc. (Versum).

On 1 October 2016, Air Products distributed all of the shares of Versum Materials, Inc. to its shareholders, creating a new publicly traded corporation.

Beginning with the first quarter of fiscal year 2017, the historical results of Electronic Materials will be presented as a discontinued operation.

The historical results of Performance Materials will be reflected as a discontinued operation when it becomes probable for the sale to occur and actions required to meet the plan of sale indicate that it is unlikely that significant changes will occur.

##### [Table of Contents](#toc)

Narrative Description of Business by Segments

The Company designs and manufactures equipment for air separation, hydrocarbon recovery and purification, natural gas liquefaction (LNG), and liquid helium and liquid hydrogen transport and storage.

Other activities, which are managed globally instead of regionally, are also part of this segment, such as technology development for air separation.

Materials Technologies

Materials Technologies is a global business that delivers innovation-driven solutions for specific customer applications within niche markets.

This segment employs applications technology to provide solutions to a broad range of global industries through chemical synthesis, analytical technology, process engineering, and surface science.

It is comprised of two business divisions: Performance Materials, which is focused on a portfolio of additives products that provide high value properties at low cost across a variety of industries, and Electronic Materials, which is focused on supplying critical materials and equipment to the semiconductor industry.

The Company completed the spin-off of the Electronic Materials business on 1 October 2016 and has entered into an agreement for the sale of the Performance Materials business, which is subject to regulatory approval and other conditions.

The Performance Materials business has critical competencies in specialty amines, alkoxylates and silicone chemistries.

The business provides a range of products concentrated in the areas of epoxy curing agents, accelerators and catalysts, polyurethane catalysts, surfactants and curatives and specialty additives, including surfactants, wetting agents, dispersants and de-foaming agents.

The products are used in a variety of industry applications, including coatings, inks, adhesives, construction and civil engineering, personal care, institutional and industrial cleaning, mining, oil refining, and polyurethanes.

The Performance Materials businesses focus on the development of new additive materials aimed at providing unique technologies and functionality.

The Electronic Materials business maintained critical competencies in molecular design, formulation expertise, and ultra-high purity chemistry.

This division provided the semiconductor industry with high purity process materials for deposition, metallization, chamber cleaning and etching, chemicals mechanical planarization slurries,

organosilanes, organometalics and liquid dopants for thin film deposition, formulated chemical products for post-etch cleaning and delivery equipment and services primarily for the manufacture of silicon and compound semiconductors and thin film transistor liquid crystal displays.

Both businesses are based on strong customer relationships and collaborative development, technology and innovation leadership, unique product positioning, and a strong global infrastructure with in-region flexible manufacturing capabilities.

The segment maintains manufacturing operations in North America, Europe and Asia and manages a complex global supply chain.

Products are delivered in bulk containers of different sizes, some of which are returnable.

Materials Technologies uses a wide variety of raw materials including amines and amine derivatives, alcohols and surfactants, tungsten powder, ethylene oxide, and ketones.

During fiscal year 2016, no significant difficulties were encountered in obtaining adequate supplies of energy or raw materials.

Materials Technologies faces competition on a product-by-product basis against competitors ranging from niche suppliers with a single product to larger and more vertically integrated companies.

Competition is principally conducted on the basis of price, quality, product performance, reliability of product supply, technical innovation, service, and global infrastructure.

Total sales from Materials Technologies constituted approximately 21% of consolidated sales in fiscal year 2016, 21% of consolidated sales in fiscal year 2015, and 20% in fiscal year 2014.

Narrative Description of the Company’s Business Generally

primarily on new and improved processes and equipment for the production and delivery of industrial gases and new or improved applications for industrial gas products.

Although litigation with respect to these matters is routine and incidental to the conduct of our business, such litigation could result in large monetary awards, especially if [removed: a civil jury is allowed to determine] compensatory and/or punitive [removed: damages.][added: damages are awarded.]

[added: The Company is a party to proceedings under CERCLA, the RCRA, and similar] state and foreign environmental laws relating to the designation of certain sites for investigation or remediation.

Presently there are approximately [removed: 33] [added: 32] sites on which a final settlement has not been reached where the Company, along with others, has been designated a potentially responsible party by the Environmental Protection Agency or is otherwise engaged in investigation or remediation, including cleanup activity at certain of its current and former manufacturing sites.

Additional information on the Company’s environmental exposure is included under [removed: “Narrative Description of the Company’s] [added: Item 1 -] Business [removed: Generally—Environmental Controls.”][added: Environmental Controls.]

In September 2010, the Brazilian Administrative Council for Economic Defense [removed: (CADE)] [added: ("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 [removed: $55] [added: $57] million at 30 September [removed: 2016)] [added: 2017)] on Air Products Brasil Ltda.

[removed: A] [added: However, a] future charge for regulatory fines or damage awards could have a significant impact on our net income in the period in which it is recorded.

| --- | --- |

The Company is a party to proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA: the federal Superfund law); Resource Conservation and Recovery Act (RCRA); and similar

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[removed: 10-K 1 d271291d10k.htm] FORM 10-K

[removed: ##### [Table of Contents](#toc)][added: TABLE OF CONTENTS]

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: WASHINGTON,] [added: WASHINGTON,] D.C. [removed: 20549][added: 20549]

| [removed: |] x | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended 30 September [removed: 2016] [added: 2017] |

| [removed: |] ¨ | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from [removed: to] [added: to] |

Commission file number [removed: 1-4534][added: 001-04534]

[removed: AIR] [added: AIR] PRODUCTS AND CHEMICALS, [removed: INC.][added: INC.]

| [removed: 7201] [added: 7201] Hamilton [removed: Boulevard] [added: Boulevard] | | [removed: State] [added: State] of incorporation: [removed: Delaware] [added: Delaware] |

| [removed: Allentown,] [added: Allentown,] Pennsylvania, [removed: 18195-1501] [added: 18195-1501] | | [removed: I.R.S.] [added: I.R.S.] identification number: [removed: 23-1274455] [added: 23-1274455] |

| [removed: Tel.] [added: Tel.] (610) [removed: 481-4911] [added: 481-4911] | | |

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of Each [removed: Class:] [added: Class:] | | [removed: Registered on:] [added: Registered on:] |

| [removed: Common] [added: Common] Stock, par value $1.00 per [removed: share] [added: share] | | [removed: New] [added: New] York Stock [removed: Exchange] [added: Exchange] |

| [removed: 2.0%] [added: 2.0%] Euro Notes due [removed: 2020] [added: 2020] | | [removed: New] [added: New] York Stock [removed: Exchange] [added: Exchange] |

| [removed: .375%] [added: 0.375%] Euro Notes due [removed: 2021] [added: 2021] | | [removed: New] [added: New] York Stock [removed: Exchange] [added: Exchange] |

| [removed: 1.0%] [added: 1.0%] Euro Notes due [removed: 2025] [added: 2025] | | [removed: New] [added: New] York Stock [removed: Exchange] [added: Exchange] |

[removed: Securities] [added: Securities] registered pursuant to Section 12(g) of the Act: [removed: None][added: None]

| Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. | | YES [added: |] x [added: | |] NO [added: |] ¨ |

| Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. | | YES [added: |] ¨ [added: | |] NO [added: |] x |

| 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 [added: |] x [added: | |] NO [added: |] ¨ |

| Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). | | YES [added: |] x [added: | |] NO [added: |] ¨ |

| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. | | [added: | | | |] x |

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, [removed: or a] smaller reporting [added: company, or an emerging growth] company.

See the definitions of “large accelerated filer,” “accelerated filer,” [removed: and] “smaller reporting [removed: company”] [added: company,” and "emerging growth company"] in Rule 12b-2 of the Exchange Act.

| Large accelerated filer x | | Accelerated filer ¨ | | Non-accelerated filer ¨ | | Smaller reporting company ¨ | [added: | Emerging growth company ¨ |]

| Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). | | YES [added: |] ¨ [added: | |] NO [added: |] x |

The aggregate market value of the voting stock held by non-affiliates of the registrant on 31 March [removed: 2016] [added: 2017] was approximately [removed: $31.0] [added: $29.3] billion.

For purposes of the foregoing [removed: calculations] [added: calculations,] all directors and/or executive officers have been deemed to be affiliates, but the registrant disclaims that any such director and/or executive officer is an affiliate.

The number of shares of common stock outstanding as of 31 October [removed: 2016] [added: 2017] was [removed: 217,375,097.][added: 218,618,346.]

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

Portions of the registrant’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on [removed: 26] [added: 25] January [removed: 2017] [added: 2018] are incorporated by reference into Part III.

[removed: ANNUAL] [added: ANNUAL] REPORT ON FORM [removed: 10-K][added: 10-K]

[removed: For] [added: For] the fiscal year ended 30 September [removed: 2016][added: 2017]

| ITEM 1. | [removed: | | | [BUSINESS](#tx271291_1) | | | 3] [added: [BUSINESS](#s20FB5F0B7C525E86BC676275C93CFD8D)] | [added: [3](#s20FB5F0B7C525E86BC676275C93CFD8D)] |

| ITEM 1A. | [removed: | | |] [RISK [removed: FACTORS](#tx271291_2) | | | 10] [added: FACTORS](#s37BF9C0656AD564BBA486DCBD4245C7B)] | [added: [7](#s37BF9C0656AD564BBA486DCBD4245C7B)] |

| ITEM 1B. | [removed: | | |] [UNRESOLVED STAFF [removed: COMMENTS](#tx271291_3) | | | 15] [added: COMMENTS](#sB124A02D49925C1FA7031EAF4FD05B7A)] | [added: [13](#sB124A02D49925C1FA7031EAF4FD05B7A)] |

| ITEM 2. | [removed: | | | [PROPERTIES](#tx271291_4) | | | 15] [added: [PROPERTIES](#sBAE4C31C314C5ACC97C1C8F3FE7F07ED)] | [added: [13](#sBAE4C31C314C5ACC97C1C8F3FE7F07ED)] |

| ITEM 3. | [removed: | | |] [LEGAL [removed: PROCEEDINGS](#tx271291_5) | | | 16] [added: PROCEEDINGS](#s53087C95C426591AA3D110A5C0AA5A34)] | [added: [14](#s53087C95C426591AA3D110A5C0AA5A34)] |

10-K 1 apd-10xkx30sep2017.htm FORM 10-K

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| 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. | | | | | | ¨ |

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AIR PRODUCTS AND CHEMICALS, INC.

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| ITEM 4. | [MINE SAFETY DISCLOSURES](#s6A3ED42FCFA75B298742D4789BB8C23A) | [14](#s6A3ED42FCFA75B298742D4789BB8C23A) |

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FORM 10-K

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OR

TABLE OF CONTENTS

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| ITEM 4. | | | | [SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS](#tx271291_6) | | | 18 | |

| [SIGNATURES](#tx271291_21) | | | | | | | 119 | |

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Air Products and Chemicals, Inc. owns its principal administrative offices, which are the Company’s headquarters located in Trexlertown, Pennsylvania, as well as Hersham, [removed: England] [added: England, Shanghai, China,] and Santiago, Chile.

The Company leases administrative offices in [added: the United States,] Spain, Malaysia, and China for its Global Business Support organization.

The following is a description of the properties used by our [removed: six business segments and the Energy-from-Waste] [added: five] business [removed: discontinued operation.][added: segments.]

[removed: Industrial] [added: Industrial] Gases – [removed: Global][added: Global]

[removed: Air separation equipment] [added: Equipment] is manufactured in Missouri, Pennsylvania, and China.

Research and development [removed: (R&D)] [added: ("R&D")] activities for this business segment are conducted at owned locations in the U.S. and the United Kingdom, and 4 leased locations in Canada, Europe, and Asia.

[removed: Industrial] [added: Industrial] Gases – [removed: Americas][added: Americas]

This business segment currently operates from over [removed: 295] [added: 400] production and distribution facilities in North and South America (approximately 1/4th of which are located on owned property), and 10% of which are integrated sites that serve dedicated customers as well as merchant customers.

[removed: Industrial] [added: Industrial] Gases – [removed: EMEA][added: EMEA]

Management and sales support for this business segment is based in Hersham, England referred to above, Barcelona, Spain and at 12 leased [added: regional] office sites [added: and at least 15 leased local office sites,] located throughout the region.

[removed: Industrial] [added: Industrial] Gases – [removed: Asia][added: Asia]

Industrial Gases – Asia currently operates from over [removed: 150] [added: 170] production and distribution facilities within Asia (approximately 1/4th of which are on owned property or long duration term grants).

The Company has sufficient property rights and permits for the ongoing operation of our pipeline systems in China, [added: South] Korea, Taiwan, Malaysia, Singapore, and Indonesia.

Management and sales support for this business segment is based in Shanghai, China and Kuala Lumpur, Malaysia, and in [removed: 7] [added: 12] leased office locations throughout the region.

[removed: Corporate] [added: Corporate] and [removed: other][added: other]

The LNG business [removed: has owned] [added: operates a] manufacturing [removed: facilities] [added: facility] in [removed: Pennsylvania and] Florida in the United States with management, engineering, and sales support based in the Trexlertown offices referred to above and a nearby leased office.

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##### [Table of Contents](#toc)

Materials Technologies

This business segment was comprised of two divisions, Electronic Materials and Performance Materials, prior to the 1 October 2016 spin-off of Electronic Materials.

The Electronic Materials portion of this segment was spun off into the separate legal entity, Versum Materials, Inc., along with its production, equipment manufacturing, and distribution operations at 24 sites in the United States, Europe, and Asia (1/3rd of which are owned sites, and the remainder of which are on leased sites or on sites where long duration term grants have been obtained).

The headquarters for this new entity will be based in Tempe, Arizona with supporting administration and research and development activities at 4 locations in Taiwan, 2 locations in South Korea, Singapore, China, the Netherlands, and Pennsylvania in the United States.

The Performance Materials portion of this segment is under an announced Purchase Agreement for the sale of this division, including its operations at 12 production sites globally, 50% of which are owned.

This segment conducts R&D related activities at 8 locations worldwide, including: Pennsylvania, California, and Wisconsin in the United States, the Netherlands, China, Japan, and multiple sites in Germany.

The management and sales support for Performance Materials is currently based in our Trexlertown offices referred to above, and at offices located in Utrecht, the Netherlands, Shanghai, China, Kawasaki, Japan, and Singapore.

Energy-from-Waste

On 29 March 2016, the Board of Directors approved the Company’s exit of its Energy-from-Waste business.

As a result, the Energy-from-Waste segment is presented as a discontinued operation.

The real estate interests for this business, which are comprised of a leased office, two leased production sites, and rights for utility infrastructure, will be exited with the assets of this business.

[removed: PART II][added: PART II]

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Our transfer agent and registrar is Broadridge Corporate Issuer Solutions, Inc., P.O. Box 1342, Brentwood, New York 11717, telephone (844) 318-0129 (U.S.) or (720) 358-3595 (all other locations); [removed: Internet] website, http://shareholder.broadridge.com/airproducts; and e-mail address, shareholder@broadridge.com.

As of 31 October [removed: 2016,] [added: 2017,] there were [removed: 5,974] [added: 5,644] record holders of our common stock.

[removed: Quarterly] [added: Quarterly] Stock [removed: Information][added: Information]

| 2016 | | [removed: |] High | | | | Low | | | | Close | | | | Dividend | | [added: |]

| [removed: 2015 |] [added: 2017] | | High | | | | Low | | | | Close | | | | Dividend | | [added: |]

[removed: Purchases] [added: Purchases] of Equity Securities by the [removed: Issuer][added: Issuer]

There were no purchases of stock during fiscal year [removed: 2016.][added: 2017.]

At 30 September [removed: 2016,] [added: 2017,] $485.3 million in share repurchase authorization remained.

[removed: Performance Graph][added: Performance Graph]

[removed: ][added: ]

AND ISSUER PURCHASES OF EQUITY SECURITIES

| First | | $ | 150.45 | | | $ | 129.00 | | | $ | 143.82 | | | $ | .86 | |

| Second | | 149.46 | | | | 133.63 | | | | 135.29 | | | | .95 | | |

| Third | | 147.66 | | | | 134.09 | | | | 143.06 | | | | .95 | | |

| Fourth | | 152.26 | | | | 141.88 | | | | 151.22 | | | | .95 | | |

| | | | | | | | | | | | | | | $ | 3.71 | |

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| First | | $ | 133.78 | | | $ | 117.80 | | | $ | 121.02 | | | $ | .81 | |

| Second | | 136.88 | | | | 106.63 | | | | 133.99 | | | | .86 | | |

| Third | | 141.53 | | | | 124.78 | | | | 132.12 | | | | .86 | | |

| Fourth | | 146.82 | | | | 127.72 | | | | 139.84 | | | | .86 | | |

| | | | | | | | | | | | | | | $ | 3.39 | |

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| | Sept 2012 | Sept 2013 | Sept 2014 | Sept 2015 | Sept 2016 | Sept 2017 |

| Air Products | 100 | 133 | 170 | 164 | 200 | 223 |

| S&P 500 Index | 100 | 120 | 143 | 139 | 163 | 194 |

| S&P 500 Materials Index | 100 | 117 | 142 | 113 | 140 | 171 |

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| First | | | $143.83 | | | | $126.65 | | | | $130.11 | | | | $0.81 | |

| Second | | | 147.16 | | | | 114.64 | | | | 144.05 | | | | 0.86 | |

| Third | | | 152.16 | | | | 134.15 | | | | 142.04 | | | | 0.86 | |

| Fourth | | | 157.84 | | | | 137.31 | | | | 150.34 | | | | 0.86 | |

| | | | | | | | | | | | | | | | $3.39 | |

| First | | | $149.61 | | | | $118.20 | | | | $144.23 | | | | $0.77 | |

| Second | | | 158.20 | | | | 137.07 | | | | 151.28 | | | | 0.81 | |

| Third | | | 153.93 | | | | 136.69 | | | | 136.83 | | | | 0.81 | |

| Fourth | | | 148.56 | | | | 123.66 | | | | 127.58 | | | | 0.81 | |

| | | | | | | | | | | | | | | | $3.20 | |

##### [Table of Contents](#toc)

| (Millions of dollars, except [added: for share and] per [removed: share) |] [added: share data)] | [added: 2017(A)] | | [removed: 2016(A)] | [added: 2016(A)] | | | 2015(A) | | | [removed: |] 2014(A) | | | [removed: |] 2013(A) | | | [removed: | 2012(A) | | |]

| [removed: Operating Results | | | | | | |] [added: Operating Results] | | | | | | | | | | | | | | | |

| Research and development | [removed: | | | | 132 | | |] [added: 58] | [removed: 137] | | [added: 72] | | [removed: 140] | [added: 76] | | | [removed: 132] [added: 79] | | | [added: 74] | [removed: 126] | |

| Business restructuring and cost reduction actions | [removed: | | | | 34 | | |] [added: 151] | [removed: 208] | | [added: 35] | | [removed: 13] | [added: 180] | | | [removed: 232] [added: 11] | | | [added: 98] | [removed: 327] | |

| Income from continuing operations attributable to Air Products | [removed: | | | | 1,515 | | |] [added: 1,134] | [removed: 1,285] | | [added: 1,100] | | [removed: 995] | [added: 933] | | | [removed: 1,009] [added: 697] | | | [added: 869] | [removed: 999] | |

| Net income attributable to Air [removed: Products | |] [added: Products(C)] | [added: 3,000] | | [removed: 631] | [added: 631] | | | 1,278 | | | [removed: |] 992 | | | [removed: |] 994 | | | [removed: | 1,167 | |]

| Basic earnings per common share attributable to Air Products: | | | | | | | | | | | | | | | | [removed: | | | | | | |]

| Net [removed: income | |] [added: income(C)] | [added: 13.76] | | [removed: 2.92] | [added: 2.92] | | | 5.95 | | | [removed: |] 4.66 | | | [removed: |] 4.74 | | | [removed: | 5.53 | |]

| Diluted earnings per common share attributable to Air Products: | | | | | | | | | | | | | | | | [removed: | | | | | | |]

| Net [removed: income | |] [added: income(C)] | [added: 13.65] | | [removed: 2.89] | [added: 2.89] | | | 5.88 | | | [removed: |] 4.61 | | | [removed: |] 4.68 | | | [removed: | 5.44 | |]

| [removed: Year-End] [added: Year-End] Financial [removed: Position | | | | | | |] [added: Position] | | | | | | | | | | | | | | | |

| Working [removed: capital | | |] [added: capital(C)] | [added: 3,388] | [removed: 1,034] | | [added: 1,034] | | [removed: (851)] | [added: (851] | | [added: )] | 199 | | | [removed: |] 100 | | | [removed: | 605 | |]

| Redeemable noncontrolling interest | [removed: | |] [added: —] | | [removed: —] | [added: —] | | | — | | | [removed: |] 287 | | | [removed: |] 376 | | | [removed: | 393 | |]

| Air Products shareholders’ [removed: equity | |] [added: equity(C)] | [added: 10,086] | | [removed: 7,080] | [added: 7,080] | | | 7,249 | | | [removed: |] 7,366 | | | [removed: |] 7,042 | | | [removed: | 6,477 | |]

| Total [removed: equity | |] [added: equity(C)] | [added: 10,186] | | [removed: 7,213] | [added: 7,213] | | | 7,381 | | | [removed: |] 7,521 | | | [removed: |] 7,199 | | | [removed: | 6,623 | |]

| [removed: Financial Ratios | | | | | | |] [added: Financial Ratios] | | | | | | | | | | | | | | | |

| Return on average Air Products shareholders’ [removed: equity(C) | | | |] [added: equity(G)] | [removed: 21.2] [added: 13.2] | [removed: %] | [added: %] | [added: 15.4] | [removed: 17.4] | % | [removed: |] [added: 12.7] | [removed: 13.5] | % | [removed: |] [added: 9.5] | [removed: 15.4] | % | [removed: |] [added: 13.3] | [removed: 16.1] | % |

| Selling and administrative as a percentage of sales | [removed: | | | | 8.9] [added: 8.7] | [removed: %] | [added: %] | [added: 9.1] | [removed: 9.5] | % | [removed: |] [added: 9.9] | [removed: 10.1] | % | [removed: |] [added: 10.6] | [removed: 10.4] | % | [removed: |] [added: 10.8] | [removed: 9.9] | % |

| [removed: Other Data | | | | | | |] [added: Other Data] | | | | | | | | | | | | | | | |

| Income from continuing operations including noncontrolling interests | [removed: | | | | $1,546 | | |] [added: $] | [removed: $1,324] [added: 1,155] | | [added: $] | [added: 1,122] | [removed: $996] | [added: $] | [added: 966] | | [removed: $1,048] [added: $] | [added: 691] | | [added: $] | [removed: $1,025] [added: 900] | |

| Cash (used for) provided by financing activities | [removed: | | | | (271] [added: (2,041] | [removed: )] | [added: )] | [added: (860] | [removed: (945] | ) | [removed: |] [added: (960] | [removed: (504] | ) | [removed: | | 115] [added: (524] | | [added: )] | [added: 112] | [removed: (78] | [removed: )] |

| Dividends declared per common share | [removed: | |] [added: 3.71] | | [removed: 3.39] | [added: 3.39] | | | 3.20 | | | [removed: |] 3.02 | | | [removed: |] 2.77 | | | [removed: | 2.50 | |]

| Weighted Average Common Shares – Basic (in millions) | [removed: | |] [added: 218] | | [removed: 216] | [added: 216] | | | 215 | | | [removed: |] 213 | | | [removed: |] 210 | | | [removed: | 211 | |]

| Weighted Average Common Shares – Diluted (in millions) | [removed: | |] [added: 220] | | [removed: 218] | [added: 218] | | | 217 | | | [removed: |] 215 | | | [removed: |] 212 | | | [removed: | 215 | |]

| Book value per common share at year-end | [removed: | | | | $32.57 | | |] [added: $] | [removed: $33.66] [added: 46.19] | | [added: $] | [added: 32.57] | [removed: $34.49] | [added: $] | [added: 33.66] | | [removed: $33.35] [added: $] | [added: 34.49] | | [added: $] | [removed: $30.48] [added: 33.35] | |

| Shareholders at year-end | [removed: | |] [added: 5,700] | | [removed: 6,000] | [added: 6,000] | | | 6,400 | | | [removed: |] 6,600 | | | [removed: |] 7,000 | | | [removed: | 7,500 | |]

| Employees at [removed: year-end(G) | |] [added: year-end(K)] | [added: 15,300] | | [removed: 18,600] | [added: 18,600] | | | 19,700 | | | [removed: |] 21,200 | | | [removed: |] 21,600 | | | [removed: | 21,300 | |]

| (A) | Unless otherwise stated, selected financial data is presented on a GAAP basis. Our operating results were impacted by certain items which management does not believe to be indicative of ongoing business trends and are excluded from the non-GAAP measure. Refer to pages [removed: 35-40] [added: 31-37] for [removed: a reconciliation] [added: reconciliations] of the GAAP to non-GAAP measures for [added: fiscal year 2017,] 2016, [removed: 2015,] and [removed: 2014.] [added: 2015.] Descriptions of the excluded items appear on pages [removed: 27-29.] [added: 24-26.] For [removed: 2013,] [added: 2014,] these items include: (i) a charge to operating income of [removed: $232 ($158] [added: $11 ($7] after-tax, or [removed: $.74] [added: $.03] per share) related to business restructuring and cost reduction actions, [removed: and] (ii) [removed: expenses] [added: pension settlement losses] of [removed: $10 ($6] [added: $5 ($3] after-tax, or [removed: $.03] [added: $.02] per [removed: share) related] [added: share), and (iii) a goodwill and intangible asset impairment charge of $310 ($275 attributable] to [removed: advisory costs.] [added: Air Products, after-tax, or $1.27 per share).] For [removed: 2012,] [added: 2013,] these items include: (i) a charge to operating income of [removed: $327 ($222] [added: $98 ($71] after-tax, or [removed: $1.03] [added: $.33] per share) related to business restructuring and cost reduction actions, [added: and] (ii) [removed: a gain of $86 ($55 after-tax, or $.25 per share) related to the gain on our previously held equity interest in DA NanoMaterials, (iii) a charge] [added: expenses] of $10 ($6 after-tax, or $.03 per share) related to [removed: a customer bankruptcy, (iv) a tax expense of $44 ($.20 per share) for a Spanish tax settlement, and (v) a tax benefit of $58 ($.27 per share) for a favorable Spanish tax ruling.] [added: advisory costs.] |

| [removed: (B)] [added: (F)] | Total debt includes long-term debt, current portion of long-term debt, and short-term borrowings as of the end of the [removed: year.] [added: year for continuing operations.] |

| [removed: (C)] [added: (G)] | Calculated using income from continuing operations attributable to Air Products and five-quarter average Air Products shareholders’ equity. |

| [removed: (D)] [added: (H)] | Total capitalization includes total debt [added: for continuing operations] plus total equity plus redeemable noncontrolling interest as of the end of the year. |

| [removed: (E)] [added: (I)] | A reconciliation of [removed: reported] [added: Income from Continuing Operations on a] GAAP [removed: results] [added: basis] to Adjusted EBITDA is presented on pages [removed: 37-39.] [added: 34-36.] |

| [removed: (F)] [added: (J)] | Capital expenditures [added: presented] on a GAAP basis include additions to plant and equipment, investment in and advances to unconsolidated affiliates, and acquisitions. The Company utilizes a non-GAAP measure in the computation of capital expenditures and includes spending associated with facilities accounted for as capital leases and purchases of noncontrolling interests. Refer to page [removed: 42] [added: 39] for a reconciliation of the GAAP to non-GAAP measures for [added: 2017,] 2016, [removed: 2015,] and [removed: 2014.] [added: 2015.] For [removed: 2013,] [added: 2014,] the GAAP measure was adjusted by [removed: $235 and $14] [added: $200] for spending associated with facilities accounted for as capital [removed: leases and purchases of noncontrolling interests, respectively.] [added: leases.] For [removed: 2012,] [added: 2013,] the GAAP measure was adjusted by [removed: $212] [added: $228] and [removed: $6] [added: $14] for spending associated with facilities accounted for as capital leases and purchases [added: of] noncontrolling interests, respectively. |

| [removed: (G)] [added: (K)] | Includes full- and part-time employees from continuing and discontinued operations. |

| [removed: (H)] [added: (D)] | Reflects adoption of guidance on the presentation of deferred income taxes on a retrospective basis. Refer to Note 2, New Accounting Guidance, for additional [removed: Information.] [added: information.] |

Unless otherwise indicated, information presented is on a continuing operations basis.

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| Sales | $ | 8,188 | | $ | 7,504 | | $ | 7,824 | | $ | 8,384 | | $ | 8,313 | |

| Cost of sales | 5,753 | | | 5,177 | | | 5,598 | | | 6,208 | | | 6,138 | | |

| Selling and administrative | 716 | | | 685 | | | 773 | | | 892 | | | 896 | | |

| Operating income | 1,428 | | | 1,530 | | | 1,233 | | | 924 | | | 1,149 | | |

| Equity affiliates’ income(B) | 80 | | | 147 | | | 152 | | | 149 | | | 165 | | |

| Income from continuing operations | 5.20 | | | 5.08 | | | 4.34 | | | 3.28 | | | 4.14 | | |

| Income from continuing operations | 5.16 | | | 5.04 | | | 4.29 | | | 3.24 | | | 4.09 | | |

| Plant and equipment, at cost | $ | 19,548 | | $ | 18,660 | | $ | 17,999 | | $ | 18,180 | | $ | 17,676 | |

| Total assets(C)(D)(E) | 18,467 | | | 18,029 | | | 17,317 | | | 17,648 | | | 17,740 | | |

| Total debt(E)(F) | 3,963 | | | 5,211 | | | 5,856 | | | 6,081 | | | 6,231 | | |

| Operating margin | 17.4 | | % | 20.4 | | % | 15.8 | | % | 11.0 | | % | 13.8 | | % |

| Total debt to total capitalization(E)(F)(H) | 28.0 | | % | 41.9 | | % | 44.2 | | % | 43.8 | | % | 45.1 | | % |

| Adjusted EBITDA(I) | 2,795 | | | 2,622 | | | 2,399 | | | 2,275 | | | 2,247 | | |

| Depreciation and amortization | 866 | | | 855 | | | 859 | | | 876 | | | 825 | | |

| Capital expenditures on a GAAP basis(J) | 1,056 | | | 908 | | | 1,201 | | | 1,297 | | | 1,400 | | |

| Capital expenditures on a non-GAAP basis(J) | 1,066 | | | 935 | | | 1,575 | | | 1,498 | | | 1,642 | | |

| Cash provided by operating activities | 2,534 | | | 2,259 | | | 2,047 | | | 1,862 | | | 1,313 | | |

| Cash used for investing activities | (1,418 | | ) | (865 | | ) | (1,147 | | ) | (1,257 | | ) | (1,354 | | ) |

| | |

| | |

| (B) | For 2017, includes the impact of a noncash impairment charge of $79.5 ($.36 per share) on our investment in Abdullah Hashim Industrial Gases & Equipment Co., Ltd. (AHG), a 25%‑owned equity affiliate in our Industrial Gases – EMEA segment. |

| | |

| (C) | Information presented on a total company basis, which includes both continuing and discontinued operations. |

| | |

| | |

| (E) | Reflects adoption of guidance on the presentation of deferred financing costs on a retrospective basis. Refer to Note 2, New Accounting Guidance, for additional information. |

| | |

| | |

| | |

| | |

| | |

| --- | --- |

| | |

| --- | --- |

| | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Sales | | | | | $9,524 | | | | $9,895 | | | | $10,439 | | | | $10,180 | | | | $9,612 | |

| Cost of sales | | | | | 6,403 | | | | 6,939 | | | | 7,630 | | | | 7,470 | | | | 7,052 | |

| Selling and administrative | | | | | 849 | | | | 939 | | | | 1,055 | | | | 1,063 | | | | 947 | |

| Operating income | | | | | 2,106 | | | | 1,708 | | | | 1,339 | | | | 1,332 | | | | 1,282 | |

| Equity affiliates’ income | | | | | 149 | | | | 155 | | | | 151 | | | | 168 | | | | 154 | |

| Income from continuing operations | | | | | 7.00 | | | | 5.98 | | | | 4.68 | | | | 4.81 | | | | 4.73 | |

| Income from continuing operations | | | | | 6.94 | | | | 5.91 | | | | 4.62 | | | | 4.75 | | | | 4.66 | |

| Plant and equipment, at cost | | | | | $20,190 | | | | $19,463 | | | | $19,633 | | | | $19,234 | | | | $17,965 | |

| Total assets(H) | | | | | 18,055 | | | | 17,335 | | | | 17,668 | | | | 17,761 | | | | 16,831 | |

| Total debt(B) | | | | | 6,225 | | | | 5,879 | | | | 6,119 | | | | 6,274 | | | | 5,292 | |

| Operating margin | | | | | 22.1 | % | | | 17.3 | % | | | 12.8 | % | | | 13.1 | % | | | 13.3 | % |

| Total debt to total capitalization(B)(D) | | | | | 46.3 | % | | | 44.3 | % | | | 43.9 | % | | | 45.3 | % | | | 43.0 | % |

| Adjusted EBITDA(E) | | | | | 3,273 | | | | 2,984 | | | | 2,776 | | | | 2,648 | | | | 2,528 | |

| Depreciation and amortization | | | | | 926 | | | | 936 | | | | 957 | | | | 907 | | | | 841 | |

| Capital expenditures on a GAAP basis(F) | | | | | 1,056 | | | | 1,304 | | | | 1,361 | | | | 1,459 | | | | 2,480 | |

| Capital expenditures on a non-GAAP basis(F) | | | | | 1,083 | | | | 1,678 | | | | 1,564 | | | | 1,708 | | | | 2,698 | |

| Cash provided by operating activities | | | | | 2,707 | | | | 2,446 | | | | 2,190 | | | | 1,548 | | | | 1,760 | |

| Cash used for investing activities | | | | | 972 | | | | 1,251 | | | | 1,317 | | | | 1,407 | | | | 2,356 | |

##### [Table of Contents](#toc)

[removed: MANAGEMENT’S] [added: MANAGEMENT’S] REPORT ON INTERNAL CONTROL OVER FINANCIAL [removed: REPORTING][added: REPORTING]

Based on this evaluation, management concluded that, as of 30 September [removed: 2016,] [added: 2017,] the Company’s internal control over financial reporting was effective.

KPMG LLP, an independent registered public accounting firm, has issued [removed: their] [added: its] opinion on the Company’s internal control over financial reporting as of 30 September [removed: 2016] [added: 2017] as stated in [removed: their] [added: its] report which appears herein.

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

We have audited the accompanying consolidated balance sheets of Air Products and Chemicals, Inc. and Subsidiaries (the Company) as of 30 September [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the related consolidated income statements, consolidated comprehensive income statements, consolidated statements of cash flows, and equity for each of the years in the three-year period ended 30 September [removed: 2016.][added: 2017.]

We have [added: also] audited the Company’s internal control over financial reporting as of 30 September [removed: 2016,] [added: 2017,] based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Air Products and Chemicals, Inc. and Subsidiaries as of 30 September [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] and the results of [removed: their] [added: its] operations and [removed: their] [added: its] cash flows for each of the years in the three-year period ended 30 September [removed: 2016,] [added: 2017,] in conformity with U.S. generally accepted accounting principles.