Air Products & Chemicals (APD) 10-K risk factor changes: FY2018 vs FY2017

Unfavorable conditions in the global [removed: economy,] [added: economy or regional economies,] the markets we [removed: serve,] [added: serve] or [removed: the] financial [removed: markets,] [added: markets] may decrease the demand for our goods and services and adversely impact our revenues, operating results, and cash flows.

Demand for [removed: the Company’s] [added: our] products and services depends in part on the general economic conditions affecting the countries and markets in which [removed: the Company does] [added: we do] business.

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

[removed: Unfavorable conditions can] [added: In addition, reduced demand could] depress sales, [removed: affect] [added: reduce] our margins, constrain our operating [removed: flexibility, impact] [added: flexibility or reduce] efficient utilization of [removed: the Company’s] [added: our] manufacturing capacity, or result in charges which are unusual or nonrecurring.

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

Our operating results in one or more segments may also be affected by uncertain or deteriorating economic conditions [removed: particularly germane to that segment or to] [added: for] particular customer markets within [removed: that] [added: a] segment.

A decline in the industries served by our customers or adverse events or circumstances affecting individual customers can impair the ability of such customers to satisfy their obligations to the Company, resulting in uncollected receivables, unanticipated contract terminations, project delays, or inability to recover plant [removed: investments] [added: investments, any of which may] negatively [removed: impacting] [added: impact] our financial results.

These or other events associated with weak economic conditions or specific end market, product, or customer events may require [removed: the Company] [added: us] 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 our financial results.

[removed: Our] [added: Our] extensive international operations can be adversely impacted by operational, economic, political, security, [removed: legal risks,] [added: legal,] and currency [removed: translation,] [added: translation risks] that could decrease [removed: profitability.][added: profitability.]

In [removed: 2017,] [added: fiscal year 2018,] 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 operations in foreign jurisdictions may be subject to risks including exchange control regulations, import and trade restrictions, [removed: and] trade policy and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad.

Changing economic and political conditions within foreign jurisdictions, strained relations between countries, or [added: the] imposition of [added: tariffs or] international sanctions can cause fluctuations in demand, price volatility, supply disruptions, or loss of property.

We are actively investing significant capital and other [removed: resources] [added: resources,] in [added: some cases through joint ventures, in] developing [added: or high growth] markets, which present special [removed: risks, including through joint ventures.][added: risks.]

Our [removed: developing market] operations [added: in these markets] may be subject to greater risks than those faced by our operations in mature economies, including political and 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.

Our [removed: contractual relationship within] [added: contracts in] these [removed: jurisdictions] [added: locations] may be subject to cancellation without full compensation for loss.

Successful operation of particular facilities or [added: execution of] 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 [added: require us] to shut down operations for a period of time.

Accordingly, reported sales, net earnings, cash flows, and fair values have [removed: been] [added: been,] and in the future will [removed: be] [added: be,] affected by changes in foreign exchange rates.

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

[removed: Operational] [added: Operational] and project execution risks may adversely affect our operations or financial [removed: results.][added: results.]

In addition, our operating results are dependent on the continued operation of our production facilities and our ability to meet customer requirements, which [removed: depends,] [added: depend,] in part, on our ability to properly maintain and replace aging assets.

Some of our [removed: projects] [added: projects, including some of our largest growth projects,] involve challenging engineering, procurement and construction phases that may occur [added: in more risky locations and] 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, [removed: delays from] customer [removed: failure] [added: scope changes, delays related] to [removed: timely obtain] [added: obtaining] regulatory permits and rights-of-way, inability to find adequate sources of labor in the [removed: geographies] [added: locations] where we are building new plants, weather-related delays, delays by [removed: subcontractors] [added: customers' contractors] in completing their portion of [removed: the project] [added: a project, technical or transportation difficulties,] 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.

These factors could also negatively impact our reputation or relationships with our customers, which could adversely affect our ability to secure new [removed: contracts.][added: contracts in the future, and these risks are more significant as we take on larger and more complex projects, including gasification projects, as part of our growth strategy.]

[removed: We] [added: We] are subject to extensive government regulation in [removed: jurisdictions around] the [removed: globe] [added: jurisdictions] in which we do business.

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

We are subject to government regulation in the United States and [added: in the] foreign jurisdictions [removed: in which] [added: where] we [removed: conducts our] [added: conduct] business.

Compliance with laws and regulations may involve significant costs or require changes in business [removed: practice] [added: practices] that could result in reduced profitability.

Compliance with changes in laws or regulations can [added: result in increased operating costs and] require additional capital [removed: expenditures or increase operating costs.][added: expenditures.]

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 us to criminal or civil sanctions if a violation [removed: occurs.][added: is deemed to have occurred.]

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

Further, we cannot guarantee that our internal controls and compliance systems will always protect us from acts committed by employees, [removed: agents or our] [added: agents,] business [removed: partners (or of] [added: partners, or] businesses [added: that] we acquire [removed: 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 [removed: laundering] [added: 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 [removed: penalties] [added: penalties,] and could cause us to incur significant legal and investigatory fees.

[removed: We] [added: We] may be unable to successfully [added: identify,] execute or effectively integrate acquisitions, or effectively disentangle divested [removed: businesses.][added: businesses.]

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 [removed: prices;] [added: prices,] and realize expected [removed: synergies] [added: growth, synergies,] and operating efficiencies.

In addition, our results of operations and cash flows may be adversely impacted by the failure of acquired businesses or assets to meet expected returns, the failure to integrate acquired businesses, the inability to dispose of non-core assets and businesses on satisfactory terms and conditions, and the discovery of unanticipated liabilities or other problems in acquired businesses or assets for which we lack [added: adequate] contractual protections or insurance.

[removed: We] [added: In addition, we] may incur asset impairment charges related to acquisitions that do not meet expectations.

In addition, divestitures or other dispositions may dilute our earnings per share, have other adverse financial and accounting [removed: impacts and] [added: impacts,] distract management, and [added: give rise to] disputes [removed: may arise] with buyers.

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

Our financial results could be impacted [added: adversely] by claims under these indemnities.

Changes in global and regional economic conditions, the markets we serve, or the financial markets may adversely affect our results of operations and cash flows.

Reduced demand for our products and services would have a negative impact on our revenues and earnings.

Our growth strategies depend in part on our ability to further penetrate markets outside the United States, particularly in higher-growth markets, and involve larger and more complex projects, including world-scale gasification projects, in regions where there is the potential for significant economic and political disruptions, including Russia, the Middle East and China.

If there is a determination that we have failed to comply with applicable laws or regulations, we may be subject to penalties or sanctions that could adversely impact our reputation and financial results.

Each of these consequences could adversely affect our business, reputation and our financial statements.

These events could also damage our reputation or otherwise harm our business.

A change of tax law in key jurisdictions could result in a material increase in our tax expense.

Changes to income tax laws and regulations in any of the jurisdictions in which we operate, or in the interpretation of such laws, could significantly increase our effective tax rate and adversely impact our financial condition, results of operations or cash flows.

In December 2017, the U.S. enacted the Tax Cuts and Jobs Act ("the Tax Act"), which significantly revised the U.S. federal corporate income tax law by, among other things, lowering the corporate income tax rate, implementing a territorial tax system, and imposing a one-time tax on unremitted cumulative non-U.S. earnings of foreign subsidiaries.

As a result of the Tax Act, we recorded a discrete net tax expense of $180.6 for fiscal 2018, including a reduction in the deemed repatriation tax related to the taxation of deemed foreign dividends that may be eliminated by future legislation.

Various levels of government are increasingly focused on tax reform and other legislative action to increase tax revenue.

Further changes in tax laws in the U.S. or foreign jurisdictions where we operate could have a material adverse effect on our business, results of operations, or financial condition.

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

Determination of noncompliance can result in penalties or sanctions that could also impact financial results.

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.

These operations could be impacted by the outcome of the current unrest.

The Company could be subject to changes in its tax rates, the adoption of new U.S. or foreign tax legislation or exposure to additional tax liabilities.

For example, the United States Congress is considering comprehensive tax reform which, among other things, may significantly reduce the corporate tax rate and change certain U.S. tax rules impacting the way U.S. based multinationals are taxed on foreign income.

Changes to the tax system in the United States, particularly a proposed mandatory deemed repatriation tax, could have a material impact to our financial statements.

The cumulative undistributed earnings that are considered to be indefinitely reinvested in foreign subsidiaries and corporate joint ventures on the consolidated balance sheets amounted to $6,032.5 as of 30 September 2017.

The potential impact of the mandatory deemed repatriation proposal and other proposals is uncertain at this time, especially as the outcome of U.S. tax reform discussions is unknown.

At this time, we are properly reflecting the provision for taxes on income using all current enacted global tax laws in every jurisdiction in which we operate.

[removed: OF OPERATIONS][added: OF OPERATIONS]

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

[removed: | [Results of Operations](#sD261244F729F58F79C2F4F728E918990) | [22](#sD261244F729F58F79C2F4F728E918990) |][added: RESULTS OF OPERATIONS]

[removed: | [Reconciliation of Non-GAAP Financial Measures](#sF6D000F6D85A5F4286B63E1762576D33) | [31](#sF6D000F6D85A5F4286B63E1762576D33) |][added: RECONCILIATION OF NON-GAAP FINANCIAL MEASURES]

[removed: | [Liquidity and Capital Resources](#s1BA87200E6CB52A0BD8F3251C027AD52) | [37](#s1BA87200E6CB52A0BD8F3251C027AD52) |][added: LIQUIDITY AND CAPITAL RESOURCES]

[removed: | [Contractual Obligations](#s9BEC4C43249057B0B191049E9BB94F01) | [41](#s9BEC4C43249057B0B191049E9BB94F01) |][added: CONTRACTUAL OBLIGATIONS]

[removed: | [Pension Benefits](#sD569A117B30653E7A7A7631859A5B5DF) | [43](#sD569A117B30653E7A7A7631859A5B5DF) |][added: PENSION BENEFITS]

[removed: | [Environmental Matters](#sA084C84FE5625E22AF4E997180C75431) | [44](#sA084C84FE5625E22AF4E997180C75431) |][added: ENVIRONMENTAL MATTERS]

[removed: | [Off-Balance Sheet Arrangements](#s8D05286B885A5CE18C37C92829F5247D) | [45](#s8D05286B885A5CE18C37C92829F5247D) |][added: OFF-BALANCE SHEET ARRANGEMENTS]

[removed: | [Related Party Transactions](#sA2858803033450BD97E11E39768E66C7) | [45](#sA2858803033450BD97E11E39768E66C7) |][added: RELATED PARTY TRANSACTIONS]

[removed: | [Inflation](#sAD4E3EEA6B565119B86873840B54D9D9) | [45](#sAD4E3EEA6B565119B86873840B54D9D9) |][added: INFLATION]

[removed: | [Critical Accounting Policies and Estimates](#sCAD424E7E90556F18882D7DE90F58104) | [46](#sCAD424E7E90556F18882D7DE90F58104) |][added: CRITICAL ACCOUNTING POLICIES AND ESTIMATES]

[removed: | [New Accounting Guidance](#s0FC947A6EE9054AB9B9CB9C5E94FE2DF) | [52](#s0FC947A6EE9054AB9B9CB9C5E94FE2DF) |][added: NEW ACCOUNTING GUIDANCE]

All comparisons in the discussion are to the corresponding prior [removed: year] [added: year,] unless otherwise stated.

[removed: Refer] [added: For additional information on the dispositions, refer] to Note 3, Discontinued Operations, to the consolidated financial [removed: statements for additional information regarding the discontinued businesses.][added: statements.]

The reconciliations of reported GAAP results to non-GAAP measures are presented on pages [removed: 31-37.][added: 33-39.]

Descriptions of the excluded items appear on pages [removed: 24-26.][added: 25-28.]

[removed: BUSINESS OVERVIEW][added: | [Business Overview](#s6E6AD90830B9554EA5C7718CB430601D) | [20](#s6E6AD90830B9554EA5C7718CB430601D) |]

The Company’s core industrial gases business provides [removed: atmospheric] [added: atmospheric, process,] and [removed: process] [added: specialty] gases and related equipment to [removed: manufacturing markets,] [added: many industries] including [removed: refining and petrochemical,] [added: refining, chemical, gasification,] metals, electronics, [added: manufacturing,] and food and beverage.

Air Products is also the world’s leading supplier of liquefied natural gas [added: (LNG)] process technology and equipment.

With operations in 50 countries, in [removed: 2017] [added: fiscal year 2018] we had sales of [removed: $8.2] [added: $8.9] billion, [removed: total company assets, including] assets of [removed: both continuing and discontinued operations, of $18.5] [added: $19.2] billion, and a worldwide workforce of approximately [removed: 15,300] [added: 16,300] full- and part-time [removed: employees from continuing and discontinued operations.][added: employees.]

As of 30 September [removed: 2017,] [added: 2018,] our operations were organized into five reportable business segments: Industrial Gases – Americas; Industrial Gases – EMEA (Europe, Middle East, and Africa); Industrial Gases – Asia; Industrial Gases – Global; and Corporate and other.

In [added: fiscal year] 2017, we [removed: were able to focus on our core industrial gases business by completing] [added: completed] the separation of [removed: EMD] [added: the divisions comprising the former Materials Technologies segment] through the spin-off of [added: the Electronics Materials Division (EMD) as] Versum Materials, Inc. (Versum) and the sale of [removed: PMD] [added: the Performance Materials Division (PMD)] to Evonik Industries AG (Evonik).

Diluted EPS of [removed: $5.16] [added: $6.59] increased [removed: 2%] [added: 28%] from the prior year.

On a non-GAAP basis, adjusted diluted EPS of [removed: $6.31] [added: $7.45] increased [removed: 12%.][added: 18%.]

[removed: Highlights] [added: Highlights] for [removed: 2017][added: 2018]

[removed: | • |] Adjusted EBITDA [removed: of $2,795.0 increased 7%, or $173.5. Adjusted EBITDA] margin of [removed: 34.1%] [added: 34.2%] decreased [removed: 80 bp and was negatively impacted by] [added: 70 bp, primarily due to a] 90 bp [added: impact] from higher [removed: contractual] energy pass-through to customers. [removed: Excluding this impact, adjusted EBITDA margin was up 10 bp. |]

| • | Income from continuing operations of [removed: $1,134.4] [added: $1,455.6] increased [removed: 3%,] [added: 28%,] or [removed: $34.9,] [added: $321.2,] and diluted EPS of [removed: $5.16] [added: $6.59] increased [removed: 2%,] [added: 28%,] or [removed: $.12.] [added: $1.43.] On a non-GAAP basis, adjusted income from continuing operations of [removed: $1,385.9] [added: $1,644.7] increased [removed: 13%,] [added: 19%,] or [removed: $155.6,] [added: $258.8,] and adjusted diluted EPS of [removed: $6.31] [added: $7.45] increased [removed: 12%,] [added: 18%,] or [removed: $.67.] [added: $1.14.] A summary table of changes in diluted earnings per [removed: share, including a non‑GAAP reconciliation,] [added: share] is presented [removed: below.] [added: on the following page.] |

| • | We increased our quarterly dividend by [removed: 10%] [added: 16%] from [removed: $.86 to] $.95 [added: to $1.10] per [removed: share.] [added: share, or $4.40 per share annually, the largest increase in Company history.] This represents the [removed: 35th] [added: 36th] 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: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | (Decrease) | | |

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

| Income [removed: (Loss)] from discontinued operations | | [removed: 8.49] [added: .19] | | | | [removed: (2.15] [added: 8.49] | | [removed: )] | | [removed: 10.64] [added: (8.30] | | [added: )] |

| [removed: Income] [added: Income] from Continuing Operations – GAAP [removed: Basis] [added: Basis] | | [removed: $] | [removed: 5.16] [added: $6.59] | | | [removed: $] | [removed: 5.04] [added: $5.16] | | | [removed: $] | [removed: .12] [added: $1.43] | |

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

| Volume | [removed: | | | | | | | |] [added: 6] | [removed: $] [added: %] | [removed: .29] [added: 6] | [added: %] |

| Price/raw materials | | | | | | | | | | [removed: .03] [added: .16] | | |

| Currency | [removed: | | | | | | | |] [added: 2] | [removed: (.03] [added: %] | [added: (1] | [removed: )] [added: )%] |

[removed: | Business separation costs | | | | | | | | | | .09 | | |][added: Business Separation Costs]

[removed: | Business restructuring] [added: Cost Reduction] and [removed: cost reduction actions | | | | | | | | | | (.38 | | ) |][added: Asset Actions]

| [2018 in Summary](#sF775479B21A15D58A3C9095D4A635942) | [21](#sF775479B21A15D58A3C9095D4A635942) |

| [2019 Outlook](#sBA9C0020B399571B980605A12FAD4EBA) | [23](#sBA9C0020B399571B980605A12FAD4EBA) |

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

2018 IN SUMMARY

In fiscal year 2018, we delivered strong safety and financial results.

Sales of $8.9 billion increased nine percent over the prior year primarily driven by higher volumes from base business growth and new, large industrial gas project onstreams.

The higher regional volumes were partially offset by lower sale of equipment activity on our Jazan project as we near project completion.

In addition, we began to execute our gasification strategy with the completion and onstream of the Lu'An acquisition and our announcements of the Jazan gasifier/power project in Jazan, Saudi Arabia, the Yankuang coal-to-syngas production facility in Yulin City, Shaanxi Province, China, and the Jiutai coal-to-syngas project in Hohhot, China.

We delivered operating margin of 22.0% and adjusted EBITDA margin of 34.9%.

| • | We completed the formation of a syngas supply joint venture with Lu'An, including the acquisition of Lu'An's gasification and syngas purification assets. |

| Net income | | | $6.78 | | | | $13.65 | | | | ($6.87 | ) |

| Income from Continuing Operations – GAAP | | | $6.59 | | | | $5.16 | | | | $1.43 | |

| Costs | | | | | | | | | | (.45 | | ) |

| Change in inventory valuation method | | | | | | | | | | .08 | | |

| Tax reform repatriation | | | | | | | | | | (2.16 | | ) |

| Tax reform benefit related to deemed foreign dividends | | | | | | | | | | .25 | | |

| Tax reform rate change and other | | | | | | | | | | .96 | | |

| Tax restructuring | | | | | | | | | | .16 | | |

| | | 2018 | | | | 2017 | | | | (Decrease) | | |

| Change in inventory valuation method | | (.08 | | ) | | — | | | | | ($.08 | ) |

| Tax benefit associated with business separation | | — | | | | (.02 | | ) | | .02 | | |

| Tax reform repatriation | | 2.16 | | | | — | | | | 2.16 | | |

| Tax reform benefit related to deemed foreign dividends | | (.25 | | ) | | — | | | | (.25 | | ) |

| Tax reform rate change and other | | (.96 | | ) | | — | | | | (.96 | | ) |

| Tax restructuring | | (.16 | | ) | | — | | | | (.16 | | ) |

2019 OUTLOOK

In fiscal year 2019, we intend to grow our earnings by continuing to improve our base businesses and by bringing new, large projects onstream.

We expect the full year impact of the Lu'An project to be a large contributor to our earnings growth.

Backed by our strong financial position, we will strive to continue to win and invest in key growth projects, including large gasification projects that are consistent with our onsite business model.

In addition, we expect lower sale of equipment activity from our Jazan project as it nears completion.

| Operating income | 1,965.6 | | | 1,440.0 | | | 1,535.1 | | |

| Operating margin | 22.0 | | % | 17.6 | | % | 20.5 | | % |

| Income from continuing operations | 1,455.6 | | | 1,134.4 | | | 1,099.5 | | |

| Adjusted EBITDA | | $3,115.5 | | | $2,799.2 | | | $2,621.8 | |

| Adjusted operating income | 1,941.5 | | | 1,773.8 | | | 1,620.2 | | |

| Sales | 2018 | | 2017 | |

2018 vs. 2017

Sales of $8,930.2 increased 9%, or $742.6.

Volumes were higher across all regional Industrial Gases segments driven by new project onstreams, primarily in the Industrial Gases – Asia and Industrial Gases – EMEA segments, underlying base business growth, and an equipment sale resulting from the termination of a contract in the Industrial Gases – Asia segment.

The regional volume increase was partially offset by lower sale of equipment activity in the Industrial Gases – Global segment.

| | |

| --- | --- |

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

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

| [Forward-Looking Statements](#s1843947E52F951DB8BCBB933605A4A96) | [53](#s1843947E52F951DB8BCBB933605A4A96) |

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.

2017 IN SUMMARY

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.

| • | 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. |

| • | We completed the spin-off of EMD as Versum on 1 October 2016. |

| • | 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. |

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

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

2018 OUTLOOK

In 2018, we intend to build on our strong fiscal year 2017 operating results through a combination of base business growth, new project onstreams, and productivity benefits.

We expect lower income from transition services agreements to be offset by cost reductions associated with these services.

Our recent portfolio actions, including the spin-off of Versum and the sale PMD, and improved operating results have positioned us with a strong balance sheet and the opportunity to invest in our core industrial gases business to drive future growth and create shareholder value.

| Operating income | 1,427.6 | | | 1,529.7 | | | 1,233.2 | | |

| Operating margin | 17.4 | | % | 20.4 | | % | 15.8 | | % |

| Adjusted operating income | 1,769.6 | | | 1,619.9 | | | 1,388.6 | | |

Sales

Sales of $7,503.7 decreased 4.0%, or $320.6.

Price was flat as increases in the Industrial Gases – Americas and Industrial Gases – EMEA segments were offset by lower prices in the Industrial Gases – Asia segment.

Underlying sales growth was more than offset by lower energy contractual cost pass-through to customers of 4% and unfavorable currency of 3%.

Net operating costs were lower primarily due to benefits from cost reduction actions and higher other income.

Operating income of $1,529.7 increased 24%, or $296.5, as lower operating costs of $235, lower business restructuring and cost reduction actions of $146, favorable pricing, net of energy, fuel, and raw material costs, of $33, and lower pension settlement losses of $14 were partially offset by higher business separation costs of $43, unfavorable currency impacts of $35, and lower volumes of $2.

In addition, fiscal year 2015 included a gain on land sales of $34 and a gain of $18 on a previously held equity interest.

Operating costs decreased due to benefits from our cost reduction actions of $115, lower pension expense of $33, lower maintenance expense of $37, and lower other costs of $50.

Adjusted EBITDA margin of 34.1% decreased 80 bp, primarily due to a 90 bp impact from higher energy pass-through to customers.

Adjusted EBITDA of $2,621.5 increased $222.1, or 9%, primarily due to favorable costs and favorable pricing, net of energy, fuel, and raw material costs.

Income from equity affiliates of $147.0 decreased $5.3, as lower income from Industrial Gases – Americas and Industrial Gases – EMEA affiliates was partially offset by higher income from Industrial Gases – Asia affiliates.

Cost of sales of $5,176.6 decreased $421.6, or 8%, primarily due to lower energy costs of $271, a favorable currency impact of $192, and lower operating costs of $148, partially offset by higher costs attributable to sales volumes of $189.

Operating costs included favorable impacts from cost reduction actions of $48, lower maintenance costs of $37, lower pension expense of $21, as well as the benefits of other operational improvements and productivity.

Costs associated with volumes were higher primarily due to the Jazan sale of equipment activity.

Gross margin of 31.0% increased 250 bp, primarily due to lower costs.

Selling and administrative expense of $685.0 decreased $88.0, or 11%, primarily due to the benefits of cost reduction actions of $59 and favorable currency effects of $27.

Our derivative and other financial instruments consist of long-term debt (including current [removed: portion),] [added: and related party portions),] interest rate swaps, cross currency interest rate swaps, and foreign exchange-forward contracts.

At 30 September [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] the net financial instrument position was a liability of [removed: $3,832.3] [added: $3,736.2] and [removed: $4,195.6,] [added: $3,832.3,] respectively.

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

Our debt portfolio as of 30 September [removed: 2016,] [added: 2018,] including the effect of currency and interest rate swap agreements, was composed of [removed: 55%] [added: 66%] fixed-rate debt and [removed: 45%] [added: 34%] 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: 2017,] [added: 2018,] with all other variables held constant.

A 100 bp increase in market interest rates would result in a decrease of [removed: $112] [added: $96] and [removed: $137] [added: $112] in the net liability position of financial instruments at 30 September [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively.

A 100 bp decrease in market interest rates would result in an increase of [removed: $119] [added: $101] and [removed: $148] [added: $119] in the net liability position of financial instruments at 30 September [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] 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: $14] [added: $13] and [removed: $24] [added: $14] of interest incurred per year at the end of 30 September [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively.

A 100 bp decline in interest rates would lower interest incurred by [removed: $14] [added: $13] and [removed: $24] [added: $14] per year at 30 September [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] 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: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] 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: $312] [added: $329] and [removed: $422] [added: $312] in the net liability position of financial instruments at 30 September [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] respectively.

The primary currency [removed: pair] [added: pairs] for which we have exchange rate exposure [removed: is Euros] [added: are the Euro] and U.S. [removed: Dollars.][added: Dollar and Chinese Renminbi and U.S. Dollar.]

The [removed: Euro and the] Chinese Renminbi [added: and the Euro] represent the largest exposures in terms of our foreign earnings.

We estimate that a 10% reduction in either the [removed: Euro or the] Chinese Renminbi [added: or the Euro] versus the U.S. Dollar would lower our annual operating income by approximately [removed: $25] [added: $30] and [removed: $20,] [added: $25,] respectively.

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

Air Products and Chemicals, [removed: Inc. (“we,” “our,” “us,” the “Company,” “Air Products,” or “registrant”),] [added: Inc.,] a Delaware corporation originally founded in 1940, serves [removed: 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, equipment, and services.

During its fiscal year ended 30 September [removed: 2017] [added: 2018] (“fiscal year [removed: 2017”),] [added: 2018”),] the Company reported its continuing operations in 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; and Corporate and other.

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

Refer to [added: Management's Discussion and Analysis of Financial Condition and Results of Operations and] Note 25, Business Segment and Geographic Information, and Note 3, Discontinued Operations, to the consolidated financial statements for additional details on our reportable business segments and our discontinued operations.

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

[removed: For example, hydrogen] [added: Hydrogen] is [added: also] produced by [removed: steam methane reforming of natural gas or by] purifying byproduct sources obtained from the chemical and petrochemical industries; and helium is produced as a byproduct of gases extracted from underground reservoirs, primarily natural gas, but also carbon dioxide purified before resale.

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 [added: refining, chemical, gasification,] metals, [removed: glass, chemical processing,] electronics, [removed: energy production] [added: manufacturing,] and [removed: refining,] food [removed: processing, medical,] and [removed: general manufacturing.][added: beverage.]

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

[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.

[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, [added: gasification,] and metals industries [removed: worldwide who] [added: worldwide, that] require large volumes of gases [removed: that] [added: and] have relatively constant demand.

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

During fiscal year [removed: 2017,] [added: 2018,] no significant difficulties were encountered in obtaining adequate supplies of power and natural gas.

Each of the regional Industrial Gases segments competes against [removed: three] [added: two] global industrial gas companies: Air Liquide [removed: S.A., Linde AG,] [added: S.A.] and [added: Linde plc (the successor to] Praxair, [removed: Inc.;] [added: Inc. and Linde AG, pursuant to a combination that became effective on 31 October 2018),] as well as regional competitors.

Overall regional industrial gases sales constituted approximately [removed: 90%] [added: 94%] of consolidated sales in fiscal year [removed: 2017,] [added: 2018,] 90% in fiscal year [removed: 2016,] [added: 2017,] and [removed: 92%] [added: 90%] in fiscal year [removed: 2015.][added: 2016.]

Sales of tonnage hydrogen and related products constituted approximately [removed: 24%] [added: 25%] of consolidated sales in fiscal year [removed: 2017, 21%] [added: 2018, 24%] in fiscal year [removed: 2016,] [added: 2017,] and [removed: 24%] [added: 21%] in fiscal year [removed: 2015.][added: 2016.]

Sales of atmospheric gases constituted approximately [removed: 45%] [added: 46%] of consolidated sales in fiscal year [removed: 2017, 46%] [added: 2018, 45%] in fiscal year [removed: 2016] [added: 2017,] and [removed: 45%] [added: 46%] in fiscal year [removed: 2015.][added: 2016.]

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

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

The Corporate and other segment includes [removed: two] [added: three] global equipment [removed: businesses,] [added: businesses:] our LNG equipment business, [removed: and] our [removed: liquid] [added: Gardner Cryogenics business fabricating] helium and [removed: liquid] hydrogen transport and storage [removed: containers business.][added: containers, and our Rotoflow business which manufactures turboexpanders and other precision rotating equipment.]

Sale of equipment constituted approximately [removed: 10%] [added: 6%] of consolidated sales in fiscal year [removed: 2017,] [added: 2018,] 10% in fiscal year [removed: 2016,] [added: 2017,] and [removed: 8%] [added: 10%] in fiscal year [removed: 2015.][added: 2016.]

The Company estimates that approximately [removed: 80%] [added: 50%] of the total sales backlog as of 30 September [removed: 2017] [added: 2018] will be recognized as revenue during fiscal year [removed: 2018,] [added: 2019,] dependent on execution schedules of the relevant projects.

[removed: International Operations][added: International Operations]

The Company has majority or wholly owned foreign subsidiaries that operate in Canada; [removed: 17] [added: 16] European countries (including the United Kingdom, the Netherlands, and Spain); [removed: 11] [added: eight] Asian countries (including China, South Korea, and Taiwan); [removed: 8] [added: seven] Latin American countries (including Chile and Brazil); [removed: 3 African countries; and 2] [added: four countries in the] Middle [removed: Eastern] [added: East, and two African] countries.

Export sales from operations in the United States to third-party customers amounted to [removed: $64.2] [added: $33.1] million, [removed: $134.9] [added: $64.2] million, and [removed: $231.5] [added: $134.9] million in fiscal years [added: 2018,] 2017, [removed: 2016,] and [removed: 2015,] [added: 2016,] respectively.

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

It conducts research and development principally in its laboratories located in the United States (Trexlertown, [removed: Pennsylvania);] [added: Pennsylvania),] Canada [removed: (Vancouver);] [added: (Vancouver),] the United Kingdom (Basingstoke and [removed: Carrington);] [added: Carrington),] Spain [removed: (Barcelona); and] [added: (Barcelona),] China [removed: (Shanghai).][added: (Shanghai), and Saudi Arabia (Dhahran).]

During fiscal year [removed: 2017,] [added: 2018,] the Company owned approximately [removed: 532] [added: 535] United States patents, approximately [removed: 2,544] [added: 2,888] foreign patents, and was a licensee under certain patents owned by others.

[removed: Environmental Controls][added: Environmental Controls]

In the normal course of business, the Company is involved in legal proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act [removed: ("CERCLA",] [added: (CERCLA:] the federal Superfund law); Resource Conservation and Recovery Act (RCRA); and similar state and foreign environmental laws relating to the designation of certain sites for investigation or remediation.

The amounts charged to income from continuing operations related to environmental matters totaled [removed: $11.4] [added: $12.8] million in fiscal year [removed: 2017, $12.2] [added: 2018, $11.4] million in fiscal [removed: 2016,] [added: year 2017,] and [removed: $11.8] [added: $12.2] million in [removed: 2015.][added: fiscal year 2016.]

The Company estimates that we spent approximately [removed: $7] [added: $3] million in [removed: 2017, $3] [added: fiscal year 2018, $7] million in [removed: 2016,] [added: fiscal year 2017,] and [removed: $2] [added: $3] million in [removed: 2015] [added: fiscal year 2016] on capital projects reflected in continuing operations to control pollution.

Capital expenditures to control pollution [removed: in future years] are estimated to be approximately [removed: $3] [added: $4] million in both [removed: 2018] [added: fiscal years 2019] and [removed: 2019.][added: 2020.]

[removed: Employees][added: Employees]

On 30 September [removed: 2017,] [added: 2018,] the Company (including majority-owned subsidiaries) had approximately [removed: 15,300] [added: 16,300] employees, of whom approximately [removed: 15,000] [added: 16,000] were full-time employees and of whom approximately [removed: 10,800] [added: 11,800] were located outside the United States.

[removed: Available Information][added: Available Information]

[removed: Seasonality][added: Seasonality]

[removed: Inventories][added: Inventories]

[removed: Customers][added: Customers]

[removed: Governmental Contracts][added: Governmental Contracts]

For example, hydrogen, carbon monoxide and syngas are produced by steam methane reforming of natural gas and by the gasification of liquid and solid hydrocarbons.

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

Steam methane reformers utilize natural gas as the primary raw material and gasifiers use liquid and solid hydrocarbons as the principal raw material for the production of hydrogen, carbon monoxide and syngas.

The backlog of equipment orders was approximately $.2 billion on 30 September 2018 (as compared to a total backlog of approximately $.5 billion on 30 September 2017).

In addition, our filings with the SEC are available free of charge on the SEC's website, www.sec.gov.

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.

The results of operations, financial condition, and cash flows for the Electronic Materials and Performance Materials businesses are presented herein as discontinued operations.

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.

Electricity is the largest cost component in the production of atmospheric gases, and natural gas is the principal raw material for hydrogen, carbon monoxide, and syngas production.

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.

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

Revenue from this contract is recognized under the percentage-of-completion method based on costs incurred to date compared with total estimated costs to be incurred.

Research and development expenditures were $57.8 million during fiscal year 2017, $71.6 million during fiscal year 2016, and $76.4 million in fiscal year 2015.

Amounts expended on customer sponsored research activities were immaterial.

The public may also read and copy any materials filed by the Company with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.

The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

The SEC maintains a website that contains reports, proxy, and information statements, and other information regarding issuers that file electronically with the SEC.

The address of that site is www.sec.gov.

| | | |

| Russell A. Flugel | 48 | Vice President, Corporate Controller and Principal Accounting Officer (became Vice President, Corporate Controller and Principal Accounting Officer in 2015; Corporate Controller in 2014; Director, Accounting and Corporate Decision Support in 2013; and Director, Corporate Decision Support, Technical Accounting and Consolidation in 2011). |

| Jennifer L. Grant | 45 | Vice President and Chief Human Resources Officer (became Vice President and Chief Human Resources Officer in 2013). Prior to joining Air Products, was Vice President of Human Resources for Pfizer Inc. Specialty Products and Oncology Divisions from 2009-2013. |

| Corning F. Painter | 55 | Executive Vice President Industrial Gases (became Executive Vice President Industrial Gases in 2015; Senior Vice President and General Manager –Merchant Gases in 2014; Senior Vice President – Supply Chain in 2012; and Senior Vice President –Corporate Strategy and Technology in 2011. |

Presently there are [removed: approximately] 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 Item [removed: 1 - Business Environmental Controls.][added: 1.]

CADE imposed a civil fine of R$179.2 million (approximately [removed: $57] [added: $44] million at 30 September [removed: 2017)] [added: 2018)] on Air Products Brasil Ltda.

Business, Environmental Controls.

[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: FORM 10-K][added: FORM 10-K]

| 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: 2017] [added: 2018] |

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

Commission file number [removed: 001-04534][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: 0.375%] [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 whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: 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 [removed: and post] such files). | | YES | x | | NO | ¨ |

| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ [removed: 229.405)] [added: 229.405 of this chapter)] 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. | | | | | | [removed: x] [added: ¨] |

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

The aggregate market value of the voting stock held by non-affiliates of the registrant on 31 March [removed: 2017] [added: 2018] was approximately [removed: $29.3] [added: $34.8] billion.

The number of shares of common stock outstanding as of 31 October [removed: 2017] [added: 2018] was [removed: 218,618,346.][added: 219,533,532.]

[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: 25] [added: 24] January [removed: 2018] [added: 2019] 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 [removed: ended 30] [added: ended 30] September [removed: 2017][added: 2018]

[removed: TABLE] [added: TABLE] OF [removed: CONTENTS][added: CONTENTS]

| ITEM 1. | [removed: [BUSINESS](#s20FB5F0B7C525E86BC676275C93CFD8D)] [added: [BUSINESS](#s4D1EBAB471135AA79DF38C3493677578)] | [removed: [3](#s20FB5F0B7C525E86BC676275C93CFD8D)] [added: [4](#s4D1EBAB471135AA79DF38C3493677578)] |

| ITEM 1A. | [RISK [removed: FACTORS](#s37BF9C0656AD564BBA486DCBD4245C7B)] [added: FACTORS](#s01227EBFB22558B78ACBB8C6A05B0B4D)] | [removed: [7](#s37BF9C0656AD564BBA486DCBD4245C7B)] [added: [8](#s01227EBFB22558B78ACBB8C6A05B0B4D)] |

| ITEM 1B. | [UNRESOLVED STAFF [removed: COMMENTS](#sB124A02D49925C1FA7031EAF4FD05B7A)] [added: COMMENTS](#s69C890D77B94549CA0CAF26CA724C61F)] | [removed: [13](#sB124A02D49925C1FA7031EAF4FD05B7A)] [added: [14](#s69C890D77B94549CA0CAF26CA724C61F)] |

| ITEM 2. | [removed: [PROPERTIES](#sBAE4C31C314C5ACC97C1C8F3FE7F07ED)] [added: [PROPERTIES](#s029093EBD54854E9854582376243619A)] | [removed: [13](#sBAE4C31C314C5ACC97C1C8F3FE7F07ED)] [added: [14](#s029093EBD54854E9854582376243619A)] |

| ITEM 3. | [LEGAL [removed: PROCEEDINGS](#s53087C95C426591AA3D110A5C0AA5A34)] [added: PROCEEDINGS](#s170C86083D295929A335726B53B9E660)] | [removed: [14](#s53087C95C426591AA3D110A5C0AA5A34)] [added: [15](#s170C86083D295929A335726B53B9E660)] |

| ITEM 4. | [MINE SAFETY [removed: DISCLOSURES](#s6A3ED42FCFA75B298742D4789BB8C23A)] [added: DISCLOSURES](#s322BECB3975853118765D65E4F66EAC7)] | [removed: [14](#s6A3ED42FCFA75B298742D4789BB8C23A)] [added: [16](#s322BECB3975853118765D65E4F66EAC7)] |

| ITEM 5. | [MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY [removed: SECURITIES](#s39788AFEB150550A85F182B04E0C2CD7)] [added: SECURITIES](#s494EB0B58C8F5749A531FC6CF0E3D8E8)] | [removed: [15](#s39788AFEB150550A85F182B04E0C2CD7)] [added: [16](#s494EB0B58C8F5749A531FC6CF0E3D8E8)] |

| ITEM 6. | [SELECTED FINANCIAL [removed: DATA](#sCF0894951D6B5AB6BF36BD6584479946)] [added: DATA](#sB86209F09E695B289F6CEBC3F9231E9C)] | [removed: [17](#sCF0894951D6B5AB6BF36BD6584479946)] [added: [18](#sB86209F09E695B289F6CEBC3F9231E9C)] |

| ITEM 7. | [MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF [removed: OPERATIONS](#s39DEF3DEC22755A8BEDBE6E65C99E6C4)] [added: OPERATIONS](#sE006A594763A5212B37B19EDB7BE788F)] | [removed: [19](#s39DEF3DEC22755A8BEDBE6E65C99E6C4)] [added: [20](#sE006A594763A5212B37B19EDB7BE788F)] |

| ITEM 7A. | [QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET [removed: RISK](#s21BB70AE172C5C03A0133CD732A866DE)] [added: RISK](#s6A2CE5F9DC9158EAB468BCAC8C6E25C4)] | [removed: [54](#s21BB70AE172C5C03A0133CD732A866DE)] [added: [55](#s6A2CE5F9DC9158EAB468BCAC8C6E25C4)] |

| ITEM 8. | [FINANCIAL STATEMENTS AND SUPPLEMENTARY [removed: DATA](#s9E33AD6D69235E7BA5858DEE5B2DB9CA)] [added: DATA](#s57064B15A7F35154823BC62247C6A1ED)] | [removed: [56](#s9E33AD6D69235E7BA5858DEE5B2DB9CA)] [added: [57](#s57064B15A7F35154823BC62247C6A1ED)] |

| ITEM 9. | [CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL [removed: DISCLOSURE](#sD96D5A59257A5B1D90E1F4B8588ACF58)] [added: DISCLOSURE](#s1343A2338D045757A727AAF93A8AB0BB)] | [removed: [123](#sD96D5A59257A5B1D90E1F4B8588ACF58)] [added: [122](#s1343A2338D045757A727AAF93A8AB0BB)] |

OR

AIR PRODUCTS AND CHEMICALS, INC.

| ITEM 16. | [FORM 10-K SUMMARY](#sfdbf31f80fdf49a48270de0c1497691e) | [125](#sfdbf31f80fdf49a48270de0c1497691e) |

| [INDEX TO EXHIBITS](#s9079552A8E825A808A653C09DE643979) | | [126](#s9079552A8E825A808A653C09DE643979) |

| | | |

| [SIGNATURES](#s6F13B5395B5D5A51BD7CD3D4F7A75D7A) | | [130](#s6F13B5395B5D5A51BD7CD3D4F7A75D7A) |

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains “forward-looking statements” within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements include all statements that do not relate solely to historical or current facts and can generally be identified by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “outlook,” “plan,” “positioned,” “possible,” “potential,” “project,” “should,” “target,” “will,” “would,” and similar expressions or variations thereof, or the negative thereof, but these terms are not the exclusive means of identifying such statements.

Forward-looking statements are based on management’s expectations and assumptions as of the date of this report and are not guarantees of future performance.

You are cautioned not to place undue reliance on our forward-looking statements.

Forward-looking statements may relate to a number of matters, including expectations regarding revenue, margins, expenses, earnings, tax provisions, cash flows, pension obligations, share repurchases or other statements regarding economic conditions or our business outlook; statements regarding plans, projects, strategies and objectives for our future operations, including our ability to win new projects and execute the projects in our backlog; and statements regarding our expectations with respect to pending legal claims or disputes.

While forward-looking statements are made in good faith and based on assumptions, expectations and projections that management believes are reasonable based on currently available information, actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors, including, without limitation:

| | |

| --- | --- |

| • | changes in global or regional economic conditions, supply and demand dynamics in the market segments we serve, or in the financial markets; |

| | |

| --- | --- |

| • | risks associated with having extensive international operations, including political risks, risks associated with unanticipated government actions and risks of investing in developing markets; |

| | |

| --- | --- |

| • | project delays, contract terminations, customer cancellations, or postponement of projects and sales; |

| | |

| --- | --- |

| • | future financial and operating performance of major customers and joint venture partners; |

| | |

| --- | --- |

| • | our ability to develop, implement, and operate new technologies, or to execute the projects in our backlog; |

| | |

| --- | --- |

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

| | |

| --- | --- |

| • | the impact of environmental, tax or other legislation, as well as regulations affecting our business and related compliance requirements, including regulations related to global climate change; |

| | |

| --- | --- |

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

| | |

| --- | --- |

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

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

OR

| [INDEX TO EXHIBITS](#s765B03B725845A0989050795477A035E) | | [127](#s765B03B725845A0989050795477A035E) |

| [SIGNATURES](#sF877014752D95EC1A83029A7410D602F) | | [131](#sF877014752D95EC1A83029A7410D602F) |

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

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

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

Management and sales support is based in our Trexlertown and Santiago offices referred to above, and at [removed: 10] [added: 12] leased properties located throughout North and South America.

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

This business segment currently operates from over [removed: 150] [added: 180] production and distribution facilities in Europe, the Middle East, and Africa (approximately [removed: 1/3rd] [added: one-third] of which are on owned property).

Management and sales support for this business segment is based in Hersham, [removed: England] [added: England,] referred to above, Barcelona, Spain and at [removed: 12] [added: 16] leased regional office sites 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 170 production and distribution facilities within Asia (approximately [removed: 1/4th] [added: one-fourth] of which are on owned property or long duration term grants).

Management and sales support for this business segment is based in Shanghai, China and Kuala Lumpur, Malaysia, and in [removed: 12] [added: 18] leased office locations throughout the region.

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

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

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

The Company leases the principal administrative office in Shanghai, China.

The Rotoflow business operates manufacturing and service facilities in Texas and Pennsylvania in the United States with management, engineering, and sales support based in the Trexlertown offices referred to above and a nearby leased office.

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

[removed: AND] [added: AND] ISSUER PURCHASES OF EQUITY [removed: SECURITIES][added: SECURITIES]

As of 31 October [removed: 2017,] [added: 2018,] there were [removed: 5,644] [added: 5,391] record holders of our common stock.

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

We repurchase shares pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended, through repurchase agreements established with [removed: several] [added: one or more] brokers.

There were no purchases of stock during fiscal year [removed: 2017.][added: 2018.]

At 30 September [removed: 2017,] [added: 2018,] $485.3 million in share repurchase authorization remained.

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

[removed: ][added: ]

| | Sept [removed: 2012 | Sept] 2013 | Sept 2014 | Sept 2015 | Sept 2016 | Sept 2017 | [added: Sept 2018 |]

Dividend information for each quarter of fiscal years 2018 and 2017 is summarized below:

| | 2018 | | | 2017 | | |

| First quarter | | $.95 | | | $.86 | |

| Second quarter | 1.10 | | | .95 | | |

| Third quarter | 1.10 | | | .95 | | |

| Fourth quarter | 1.10 | | | .95 | | |

| Total | | $4.25 | | | $3.71 | |

| | | | | | | |

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

| | | | | | | |

| Air Products | 100 | 128 | 122 | 149 | 168 | 191 |

| S&P 500 Index | 100 | 120 | 116 | 137 | 161 | 191 |

| S&P 500 Materials Index | 100 | 122 | 96 | 120 | 146 | 152 |

Quarterly stock prices, as reported on the New York Stock Exchange composite tape of transactions, and dividend information for the last two fiscal years appear below.

Quarterly Stock Information

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

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

| 2017 | | High | | | | Low | | | | Close | | | | Dividend | | |

| 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 | |

| 2016 | | High | | | | Low | | | | Close | | | | Dividend | | |

| 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 | |

| 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 |

| (Millions of dollars, except for share and per share data) | [added: 2018(A) | | |] 2017(A) | | | 2016(A) | | | 2015(A) | | | 2014(A) | | | [removed: 2013(A) | | |]

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

| Sales | [removed: $] | [removed: 8,188] [added: $8,930] | | [removed: $] | [removed: 7,504] [added: $8,188] | | [removed: $] | [removed: 7,824] [added: $7,504] | | [removed: $] | [removed: 8,384] [added: $7,824] | | [removed: $] | [removed: 8,313] [added: $8,384] | |

| Research and development | [removed: 58] [added: 65] | | | [removed: 72] [added: 58] | | | [removed: 76] [added: 72] | | | [removed: 79] [added: 76] | | | [removed: 74] [added: 78] | | |

| [removed: Business restructuring and cost] [added: Cost] reduction [added: and asset] actions | [added: — | | |] 151 | | | 35 | | | 180 | | | 11 | | | [removed: 98 | | |]

| Equity affiliates’ [removed: income(B)] [added: income(C)] | [added: 175 | | |] 80 | | | 147 | | | 152 | | | 149 | | | [removed: 165 | | |]

| Income from continuing operations attributable to Air Products | [added: 1,456 | | |] 1,134 | | | 1,100 | | | 933 | | | 697 | | | [removed: 869 | | |]

| Net income attributable to Air [removed: Products(C)] [added: Products(D)] | [added: 1,498 | | |] 3,000 | | | 631 | | | 1,278 | | | 992 | | | [removed: 994 | | |]

| Income from continuing operations | [added: 6.64 | | |] 5.20 | | | 5.08 | | | 4.34 | | | 3.28 | | | [removed: 4.14 | | |]

| Net [removed: income(C)] [added: income(D)] | [added: 6.83 | | |] 13.76 | | | 2.92 | | | 5.95 | | | 4.66 | | | [removed: 4.74 | | |]

| Income from continuing operations | [added: 6.59 | | |] 5.16 | | | 5.04 | | | 4.29 | | | 3.24 | | | [removed: 4.09 | | |]

| Net [removed: income(C)] [added: income(D)] | [added: 6.78 | | |] 13.65 | | | 2.89 | | | 5.88 | | | 4.61 | | | [removed: 4.68 | | |]

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

| Plant and equipment, at cost | [removed: $] | [removed: 19,548] [added: $21,490] | | [removed: $] | [removed: 18,660] [added: $19,548] | | [removed: $] | [removed: 17,999] [added: $18,660] | | [removed: $] | [removed: 18,180] [added: $17,999] | | [removed: $] | [removed: 17,676] [added: $18,180] | |

| Total [removed: assets(C)(D)(E)] [added: assets(D)] | [added: 19,178 | | |] 18,467 | | | 18,029 | | | 17,317 | | | 17,648 | | | [removed: 17,740 | | |]

| Working [removed: capital(C)] [added: capital(D)] | [added: 2,744 | | |] 3,388 | | | 1,034 | | | (851 | | ) | 199 | | | [removed: 100 | | |]

| Total [removed: debt(E)(F)] [added: debt(E)] | [added: 3,813 | | |] 3,963 | | | 5,211 | | | 5,856 | | | 6,081 | | | [removed: 6,231 | | |]

| Air Products shareholders’ [removed: equity(C)] [added: equity(D)] | [added: 10,858 | | |] 10,086 | | | 7,080 | | | 7,249 | | | 7,366 | | | [removed: 7,042 | | |]

| Total [removed: equity(C)] [added: equity(D)] | [added: 11,176 | | |] 10,186 | | | 7,213 | | | 7,381 | | | 7,521 | | | [removed: 7,199 | | |]

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

| Return on average Air Products shareholders’ [removed: equity(G)] [added: equity(F)] | [added: 13.9 | | % |] 13.2 | | % | 15.4 | | % | 12.7 | | % | 9.5 | | % | [removed: 13.3 | | % |]

| Selling and administrative as a percentage of [removed: sales] [added: sales(B)] | [removed: 8.7] [added: 8.5] | | [removed: %] [added: %] | [removed: 9.1] [added: 8.7] | | % | [removed: 9.9] [added: 9.1] | | % | [removed: 10.6] [added: 9.8] | | % | [removed: 10.8] [added: 10.4] | | % |

| Total debt to total [removed: capitalization(E)(F)(H)] [added: capitalization(E)(G)] | [added: 25.4 | | % |] 28.0 | | % | 41.9 | | % | 44.2 | | % | 43.8 | | % | [removed: 45.1 | | % |]

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

| Income from continuing operations including noncontrolling interests | [removed: $] | [removed: 1,155] [added: $1,491] | | [removed: $] | [removed: 1,122] [added: $1,155] | | [removed: $] | [removed: 966] [added: $1,122] | | [removed: $] | [removed: 691] [added: $966] | | [removed: $] | [removed: 900] [added: $691] | |

| Depreciation and amortization | [added: 971 | | |] 866 | | | 855 | | | 859 | | | 876 | | | [removed: 825 | | |]

| Capital expenditures on a GAAP [removed: basis(J)] [added: basis(I)] | [added: 1,914 | | |] 1,056 | | | 908 | | | 1,201 | | | 1,297 | | | [removed: 1,400 | | |]

| Capital expenditures on a non-GAAP [removed: basis(J)] [added: basis(I)] | [added: 1,934 | | |] 1,066 | | | 935 | | | 1,575 | | | 1,498 | | | [removed: 1,642 | | |]

| Cash provided by operating activities | [added: 2,555 | | |] 2,534 | | | 2,259 | | | 2,047 | | | 1,862 | | | [removed: 1,313 | | |]

| Cash used for investing activities | [added: (1,649 | | ) |] (1,418 | | ) | (865 | | ) | (1,147 | | ) | (1,257 | | ) | [removed: (1,354 | | ) |]

| Cash [removed: (used for) provided by] [added: used for] financing activities | [added: (1,360 | | ) |] (2,041 | | ) | (860 | | ) | (960 | | ) | (524 | | ) | [removed: 112 | | |]

| Dividends declared per common share | [added: 4.25 | | |] 3.71 | | | 3.39 | | | 3.20 | | | 3.02 | | | [removed: 2.77 | | |]

| Weighted Average Common Shares – Basic (in millions) | [added: 219 | | |] 218 | | | 216 | | | 215 | | | 213 | | | [removed: 210 | | |]

| Weighted Average Common Shares – Diluted (in millions) | [added: 221 | | |] 220 | | | 218 | | | 217 | | | 215 | | | [removed: 212 | | |]

| Book value per common share at year-end | [removed: $] | [removed: 46.19] [added: $49.46] | | [removed: $] | [removed: 32.57] [added: $46.19] | | [removed: $] | [removed: 33.66] [added: $32.57] | | [removed: $] | [removed: 34.49] [added: $33.66] | | [removed: $] | [removed: 33.35] [added: $34.49] | |

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

| Employees at [removed: year-end(K)] [added: year-end(J)] | [added: 16,300 | | |] 15,300 | | | 18,600 | | | 19,700 | | | 21,200 | | | [removed: 21,600 | | |]

| (A) | Unless otherwise stated, selected financial data is presented [added: in accordance with U.S. generally accepted accounting principles (GAAP). The Company has presented certain financial measures] on a [removed: GAAP basis. Our operating results were impacted by certain] [added: non-GAAP (“adjusted”) basis to exclude] items which management does not believe to be indicative of ongoing business [removed: trends and are excluded from the non-GAAP measure.] [added: trends.] Refer to pages [removed: 31-37] [added: 33-39] for reconciliations of the GAAP to non-GAAP measures for fiscal [removed: year] [added: years 2018,] 2017, [removed: 2016,] and [removed: 2015.] [added: 2016.] Descriptions of the excluded items appear on pages [removed: 24-26.] [added: 25-28.] For [removed: 2014,] [added: fiscal year 2015,] these items include: (i) a charge to operating income of [removed: $11 ($7] [added: $8 ($.03 per share) related to business separation costs, (ii) a charge to operating income of $180 ($133] after-tax, or [removed: $.03] [added: $.61] per share) related to business restructuring and cost reduction actions, [removed: (ii) pension settlement losses] [added: (iii) a gain] of [removed: $5 ($3 after-tax,] [added: $18 ($11 after tax,] or [removed: $.02] [added: $.05] per [removed: share), and (iii)] [added: share) reflected in operating income related to the gain on previously held equity interest in] a [removed: goodwill] [added: liquefied atmospheric industrial gases production joint venture, (iv) a gain of $34 ($28 after tax, or $.13 per share) reflected in operating income resulting from the sale of two parcels of land,] and [removed: intangible asset impairment] [added: (v) a] charge [removed: of $310 ($275 attributable] to [removed: Air Products,] [added: other non-operating income (expense), net related to pension settlement losses of $19 ($12] after-tax, or [removed: $1.27] [added: $.06] per share). For [removed: 2013,] [added: fiscal year 2014,] these items include: (i) a charge to operating income of [removed: $98 ($71] [added: $11 ($7] after-tax, or [removed: $.33] [added: $.03] per share) related to business restructuring and cost reduction actions, [removed: and] (ii) [removed: expenses] [added: a charge to operating income] of [removed: $10 ($6] [added: $310 ($275 attributable to Air Products,] after-tax, or [removed: $.03] [added: $1.27] per share) related to [removed: advisory costs.] [added: the impairment of goodwill and intangible assets, and (iii) a charge to other non-operating income (expense), net related to pension settlement losses of $5 ($3 after-tax, or $.02 per share).] |

| [removed: (B)] [added: (C)] | [removed: For 2017,] [added: Fiscal year 2017] includes the [added: third quarter] impact of [removed: a] [added: an other-than-temporary] 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. |

| [removed: (C)] [added: (D)] | Information presented on a total company basis, which includes both continuing and discontinued operations. |

| Cost of sales(B) | 6,190 | | | 5,752 | | | 5,177 | | | 5,584 | | | 6,178 | | |

| Selling and administrative(B) | 761 | | | 714 | | | 684 | | | 765 | | | 876 | | |

| Operating income(B) | 1,966 | | | 1,440 | | | 1,535 | | | 1,276 | | | 976 | | |

| Operating margin(B) | 22.0 | | % | 17.6 | | % | 20.5 | | % | 16.3 | | % | 11.6 | | % |

| Adjusted EBITDA(B)(H) | 3,116 | | | 2,799 | | | 2,622 | | | 2,422 | | | 2,322 | | |

| Adjusted EBITDA margin(B) | 34.9 | | % | 34.2 | | % | 34.9 | | % | 31.0 | | % | 27.7 | | % |

| (B) | Reflects adoption of guidance on presentation of net periodic pension and postretirement benefit cost on a retrospective basis during the first quarter of fiscal year 2018. Refer to Note 2, New Accounting Guidance, to the consolidated financial statements for additional information. |

| 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 | | |

| Redeemable noncontrolling interest | — | | | — | | | — | | | 287 | | | 376 | | |

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

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

| | |

| --- | --- |

| (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 information. |

| (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. |

[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: 2017,] [added: 2018,] the Company’s internal control over financial reporting was effective.

KPMG LLP, an independent registered public accounting firm, has issued its opinion on the Company’s internal control over financial reporting as of 30 September [removed: 2017] [added: 2018] as stated in its report which appears herein.

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

[removed: The] [added: To the Shareholders and] Board of Directors [removed: and Shareholders] of Air Products and Chemicals, Inc.:

We have audited the accompanying consolidated balance sheets of Air Products and Chemicals, Inc. and Subsidiaries (the Company) as of 30 September [removed: 2017 and 2016,] [added: 2018] and [added: 2017,] the related consolidated income statements, consolidated comprehensive income statements, consolidated statements of cash [removed: flows,] [added: flows] and [added: consolidated statements of] equity for each of the years in the three-year period ended 30 September [removed: 2017.][added: 2018, and the related notes and the financial statement schedule referred to in Item 15(a)(2) in this Form 10-K (collectively, the consolidated financial statements).]

We [removed: have] also [added: have] audited the Company’s internal control over financial reporting as of 30 September [removed: 2017,] [added: 2018,] based on criteria established in [removed: Internal] [added: *Internal] Control [removed: –] [added: -] Integrated [removed: Framework (2013)] [added: Framework* *(2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission.

The Company’s management is responsible for these consolidated financial [removed: statements and financial statement schedule,] [added: statements,] for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report on Internal Control over Financial [removed: Reporting.” Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audits.][added: Reporting”.]

We conducted our audits in accordance with the standards of the [removed: Public Company Accounting Oversight Board (United States).][added: PCAOB.]

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the [added: consolidated] financial statements are free of material [removed: misstatement] [added: misstatement, whether due to error or fraud,] and whether effective internal control over financial reporting was maintained in all material respects.

Our audits [removed: of the consolidated financial statements] [added: also] included [removed: examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing] [added: evaluating] the accounting principles used and significant estimates made by management, [removed: and] [added: as well as] evaluating the overall [added: presentation of the consolidated] financial [removed: statement presentation.][added: statements.]

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of [removed: Air Products and Chemicals, Inc. and Subsidiaries] [added: the Company] as of 30 September [removed: 2017] [added: 2018] and [removed: 2016,] [added: 2017,] and the results of its operations and its cash flows for each of the years in the three-year period ended 30 September [removed: 2017,] [added: 2018,] in conformity with U.S. generally accepted accounting principles.

Also in our opinion, [removed: Air Products and Chemicals, Inc. and Subsidiaries] [added: the Company] maintained, in all material respects, effective internal control over financial reporting as of 30 September [removed: 2017,] [added: 2018,] based on criteria established in [removed: Internal] [added: *Internal] Control [removed: –] [added: -] Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission.

[removed: The] [added: The] Consolidated Financial [removed: Statements][added: Statements]

[removed: CONSOLIDATED] [added: CONSOLIDATED] INCOME [removed: STATEMENTS][added: STATEMENTS]

| Year ended 30 September (Millions of dollars, except for share and per share data) | [removed: 2017] [added: 2018] | | | [removed: 2016] [added: 2017] | | | [removed: 2015] [added: 2016] | | |

| [removed: Sales] [added: Sales] | [removed: $] | [removed: 8,187.6] [added: $8,930.2] | | [removed: $] | [removed: 7,503.7] [added: $8,187.6] | | [removed: $] | [removed: 7,824.3] [added: $7,503.7] | |

[removed: | Cost] [added: Cost] of [removed: sales | 5,753.4 | | | 5,176.6 | | | 5,598.2 | | |][added: Sales]

[removed: | Selling] [added: Selling] and [removed: administrative | 715.6 | | | 685.0 | | | 773.0 | | |][added: Administrative]

| Business separation costs | [removed: 30.2] [added: —] | | | [removed: 50.6] [added: 32.5] | | | [removed: 7.5] [added: 50.6] | | |

| [removed: Business restructuring and cost] [added: Cost] reduction [added: and asset] actions | [removed: 151.4] [added: —] | | | [removed: 34.5] [added: 151.4] | | | [removed: 180.1] [added: 34.5] | | |

| Pension settlement [removed: loss] [added: loss(B)] | [removed: 10.5] [added: (48.5] | | [added: )] | [removed: 5.1] [added: (10.5] | | [added: )] | [removed: 19.3] [added: (5.1] | | [added: )] |

| Goodwill and intangible asset impairment charge | [removed: 162.1] [added: —] | | | [removed: —] [added: 162.1] | | | — | | |

| Other income (expense), net | [removed: 121.0] [added: 50.2] | | | [removed: 49.4] [added: 121.0] | | | [removed: 45.5] [added: 49.4] | | |

| Equity affiliates' income | [removed: 80.1] [added: 174.8] | | | [removed: 147.0] [added: 80.1] | | | [removed: 152.3] [added: 147.0] | | |

| Interest expense | [removed: 120.6] [added: 130.5] | | | [removed: 115.2] [added: 120.6] | | | [removed: 102.8] [added: 115.2] | | |

[removed: | Other non-operating income (expense), net | 29.0 | | | — | | | — | | |][added: Other Non-Operating Income (Expense), net]

| Loss on extinguishment of debt | [removed: —] [added: —] | | | [removed: 6.9] [added: —] | | | [removed: 16.6] [added: 6.9] | | |

| [removed: Income] [added: Income] From Continuing Operations Before [removed: Taxes] [added: Taxes] | [removed: 1,416.1] [added: 2,015.0] | | | [removed: 1,554.6] [added: 1,416.1] | | | [removed: 1,266.1] [added: 1,554.6] | | |

| Income tax provision | [removed: 260.9] [added: 524.3] | | | [removed: 432.6] [added: 260.9] | | | [removed: 300.2] [added: 432.6] | | |

| [removed: Income] [added: Income] From Continuing [removed: Operations] [added: Operations] | [removed: 1,155.2] [added: 1,490.7] | | | [removed: 1,122.0] [added: 1,155.2] | | | [removed: 965.9] [added: 1,122.0] | | |

| [removed: Income] [added: Income] (Loss) From Discontinued Operations, net of [removed: tax] [added: tax] | [removed: 1,866.0] [added: 42.2] | | | [removed: (460.5] [added: 1,866.0] | | [removed: )] | [removed: 351.7] [added: (460.5] | | [added: )] |

| [removed: Net Income] [added: Net Income] | [removed: 3,021.2] [added: 1,532.9] | | | [removed: 661.5] [added: 3,021.2] | | | [removed: 1,317.6] [added: 661.5] | | |

| [removed: Net] [added: Net] Income Attributable to Noncontrolling Interests of Continuing [removed: Operations] [added: Operations] | [removed: 20.8] [added: 35.1] | | | [removed: 22.5] [added: 20.8] | | | [removed: 32.6] [added: 22.5] | | |