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

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


Third Quarter 2024 in Summary			38
Third Quarter 2024 Results of Operations			40
First Nine Months 2024 in Summary			45
First Nine Months 2024 Results of Operations			47
Reconciliations of Non-GAAP Financial Measures			52
Liquidity and Capital Resources			59
Pension Benefits			63
Critical Accounting Policies and Estimates			64

This Management’s Discussion and Analysis contains “forward-looking statements” within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements about business outlook. These forward-looking statements are based on management’s expectations and assumptions as of the date of this Quarterly Report on Form 10-Q and are not guarantees of future performance. Actual performance and financial results may differ materially from projections and estimates expressed in the forward-looking statements because of many factors not anticipated by management, including, without limitation, those described in "Forward-Looking Statements" and Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended 30 September 2023 (the "2023 Form 10-K"), which was filed with the SEC on 16 November 2023.

This discussion should be read in conjunction with the interim consolidated financial statements and the accompanying notes contained in this Quarterly Report on Form 10-Q. Unless otherwise stated, financial information is presented in millions of U.S. Dollars, except for per share data. Financial information is presented on a continuing operations basis.

The financial measures discussed below are presented in accordance with U.S. generally accepted accounting principles ("GAAP"), except as noted. We present certain financial measures on an "adjusted", or "non-GAAP", basis because we believe such measures, when viewed together with financial results computed in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our historical financial performance. For each non-GAAP financial measure, including adjusted diluted earnings per share ("EPS"), adjusted EBITDA, adjusted EBITDA margin, adjusted effective tax rate, and capital expenditures, we present a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. These reconciliations and explanations regarding the use of non-GAAP financial measures are presented under the “Reconciliations of Non-GAAP Financial Measures” section beginning on page 52.

Comparisons included in the discussion that follows are for the third quarter and first nine months of fiscal year 2024 versus ("vs.") the third quarter and first nine months of fiscal year 2023. The disclosures provided in this Quarterly Report on Form 10-Q are complementary to those made in our 2023 Form 10-K.

We manage our operations, assess performance, and report earnings under five reportable segments: Americas, Asia, Europe, Middle East and India, and Corporate and other. The discussion that follows is based on these operations. Refer to Note 17, Business Segment Information, to the consolidated financial statements for additional information.

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

THIRD QUARTER 2024 VS. THIRD QUARTER 2023

THIRD QUARTER 2024 IN SUMMARY

Sales of $2,985.5 decreased 2%, or $48.4, due to an unfavorable impact from currency of 2% and lower energy cost pass-through to customers of 1%, which were partially offset by higher pricing of 1%. Volumes were flat versus the prior year.
Operating income of $737.6 increased 14%, or $93.4, as a prior year charge for business and asset actions, positive pricing, net of power and fuel costs, and favorable business mix were partially offset by unfavorable currency and higher costs. Operating margin of 24.7% increased 350 basis points ("bp").
Equity affiliates' income of $168.9 increased 2%, or $3.9, primarily due to higher income from an affiliate in the Americas, which was partially offset by lower contributions from affiliates in the Middle East.
Net income of $708.9 increased 16%, or $98.4, primarily due to a prior year charge for business and asset actions, favorable pricing, net of power and fuel costs, and favorable business mix. Higher costs driven by planned maintenance and inflation were partially offset by improved productivity. Net income margin of 23.7% increased 360 bp.
Adjusted EBITDA of $1,266.8 increased 5%, or $58.7, and adjusted EBITDA margin of 42.4% increased 260 bp.
Diluted EPS of $3.13 increased 17%, or $0.46 per share. On a non-GAAP basis, adjusted diluted EPS of $3.20 increased 7%, or $0.22 per share. A summary table of changes in diluted EPS is presented below.
In July 2024, we entered into an agreement to divest our liquefied natural gas ("LNG") process technology and equipment business for approximately $1.8 billion in an all-cash transaction. We expect to close the sale before the end of calendar year 2024, subject to the satisfaction or waiver of customary closing conditions, including the receipt of certain regulatory approvals.

Changes in Diluted EPS Attributable to Air Products

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


	Three Months Ended		Change vs. Prior Year
	30 June
	2024	2023
Diluted EPS	$3.13	$2.67	$0.46


% Change from prior year			17	%
Operating Impacts
Underlying business:
Volume			0.05
Price, net of variable costs			0.16
Other costs			(0.04)
Currency			(0.04)


Business and asset actions			0.23






Total Operating Impacts			$0.36
Other Impacts
Equity affiliates' income			$0.01

Interest expense			(0.03)
Other non-operating income/expense, net:
Gain on de-designation of cash flow hedges			0.01
Non-service pension cost, net			(0.02)
Other			0.01

Change in effective tax rate			0.06







Noncontrolling interests			0.04

Total Other Impacts			$0.08
Total Change in Diluted EPS			$0.46
% Change from prior year			17	%

The table below summarizes the diluted per share impact of our non-GAAP adjustments for the third quarter of fiscal years 2024 and 2023:


	Three Months Ended		Change vs. Prior Year
	30 June
	2024	2023
Diluted EPS	$3.13	$2.67	$0.46


Business and asset actions	—	0.23	(0.23)









Gain on de-designation of cash flow hedges	(0.01)	—	(0.01)
Non-service pension cost, net	0.09	0.07	0.02







Adjusted Diluted EPS	$3.20	$2.98	$0.22
% Change from prior year			7	%

THIRD QUARTER 2024 RESULTS OF OPERATIONS

Discussion of Third Quarter Consolidated Results


	Three Months Ended
	30 June				Change vs. Prior Year
	2024		2023		$	%/bp
GAAP Measures
Sales	$2,985.5		$3,033.9		($48.4)	(2	%)
Operating income	737.6		644.2		93.4	14	%
Operating margin	24.7	%	21.2	%		350	bp
Equity affiliates’ income	$168.9		$165.0		$3.9	2	%
Net income	708.9		610.5		98.4	16	%
Net income margin	23.7	%	20.1	%		360	bp
Non-GAAP Measures
Adjusted EBITDA	$1,266.8		$1,208.1		$58.7	5	%
Adjusted EBITDA margin	42.4	%	39.8	%		260	bp

Sales

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



Volume	—	%
Price	1	%
Energy cost pass-through to customers	(1	%)
Currency	(2	%)
Total Consolidated Sales Change	(2	%)

Sales of $2,985.5 decreased 2%, or $48.4, due to an unfavorable impact from currency of 2% and lower energy cost pass-through to customers of 1%, which were partially offset by higher pricing of 1% driven by our Americas segment. Volume was flat versus the prior year as higher demand for hydrogen in the Americas as well as contributions from new on-site assets in Europe and Asia were offset by weaker merchant demand.

Cost of Sales and Gross Margin

Cost of sales of $2,005.6 decreased 3%, or $65.1, primarily due to lower energy cost pass-through to customers of $42 and favorable currency of $31, partially offset by higher costs of $11. Higher costs resulting from inflation and planned maintenance activities were partially offset by lower power costs in our merchant business as well as improvements from strategic productivity actions. Gross margin of 32.8% increased 110 bp from 31.7% in the prior year primarily due to favorable pricing.

Selling and Administrative Expense

Selling and administrative expense of $235.4 decreased 1%, or $3.3, primarily due to our productivity improvements, which were partially offset by labor inflation. Selling and administrative expense as a percentage of sales of 7.9% was flat versus the prior year.

Research and Development Expense

Research and development expense of $27.0 decreased 8%, or $2.3. Research and development expense as a percentage of sales decreased to 0.9% from 1.0% in the prior year.

Business and Asset Actions

Our consolidated income statement for the three months ended 30 June 2023 reflected a charge of $59.0 ($51.2 after tax, or $0.23 per share) for strategic business and asset actions intended to optimize costs and focus resources on our growth projects. This charge, which was not recorded in segment results, included a noncash charge of $32.0 to write off assets related to our exit from certain projects previously under construction in our Asia segment as well as an expense of $27.0 for severance and other benefits payable to employees identified under a global cost reduction plan that originated during the third quarter of fiscal year 2023.

Other Income (Expense), Net

Other income of $20.1 increased $12.1 primarily due to the favorable settlement of a legal dispute regarding energy management charges related to an extreme weather event in 2021 in our Americas segment. Refer to Note 12, Commitments and Contingencies, to the consolidated financial statements for additional information.

Operating Income and Operating Margin

Operating income of $737.6 increased 14%, or $93.4, as a prior year charge for business and asset actions of $59, positive pricing, net of power and fuel costs, of $44, and favorable business mix of $12 were partially offset by an unfavorable impact from currency of $11 and higher costs of $10. Higher costs were driven by labor inflation and planned maintenance activities, which were partially offset by productivity improvements as well as the favorable settlement of a legal dispute in the Americas segment. Operating margin of 24.7% increased 350 bp from 21.2% in the prior year primarily due to the business and asset actions and favorable pricing.

Equity Affiliates' Income

Equity affiliates' income of $168.9 increased 2%, or $3.9, primarily due to higher income from an affiliate in the Americas, which was partially offset by lower contributions from affiliates in the Middle East.

Interest Expense


	Three Months Ended
	30 June
	2024	2023
Interest incurred	$133.7	$77.8
Less: Capitalized interest	78.0	30.4
Interest expense	$55.7	$47.4

Interest incurred increased 72%, or $55.9, primarily due to a higher debt balance from senior notes issued in February 2024 to fund projects under our Green Finance Framework as well as borrowings on financing available for the NEOM Green Hydrogen Project. Capitalized interest increased $47.6 due to a higher carrying value of projects under construction, including the NEOM Green Hydrogen Project.

Other Non-Operating Income (Expense), Net

Other non-operating expense of $1.3 decreased 89%, or $10.4, primarily due to an unrealized gain of $11.2 ($3.0 attributable to Air Products after tax, or $0.01 per share) that was recorded upon de-designation of certain interest rate swaps associated with the financing for the NEOM Green Hydrogen Project. Refer to Note 3, Variable Interest Entities, and Note 8, Financial Instruments, to the consolidated financial statements for additional information.

Net Income and Net Income Margin

Net income of $708.9 increased 16%, or $98.4, due to higher pricing, net of power and fuel costs, and favorable business mix. Additionally, the prior year included a charge of $59.0 for business and asset actions intended to optimize costs and focus resources on our growth projects. These strategic actions resulted in productivity improvements across our organization, which partially offset higher costs driven by planned maintenance and inflation. Net income margin of 23.7% increased 360 bp from 20.1% in the prior year, primarily due to the prior year charge for business and asset actions and higher pricing.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA of $1,266.8 increased 5%, or $58.7, as higher pricing, net of power and fuel costs, favorable business mix, and improvements from our strategic productivity actions were partially offset by higher maintenance costs and inflation. Adjusted EBITDA margin of 42.4% increased 260 bp from 39.8% in the prior year.

Effective Tax Rate

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

Our effective tax rate was 16.6% and 18.6% for the three months ended 30 June 2024 and 2023, respectively. Our current quarter effective tax rate was lower due to earning a greater share of income in jurisdictions with lower tax rates, higher equity affiliates' income, the tax benefit from a tax election related to a non-U.S. subsidiary, higher excess tax benefits on share-based compensation, and the release of certain unrecognized tax benefits upon expiration of the statute of limitations for uncertain tax positions taken in prior years.

Additionally, during the third quarter of fiscal year 2023, we recognized a charge of $59.0 ($51.2 attributable to Air Products after tax) related to various business and asset actions that are described in Note 4, Business and Asset Actions, to the consolidated financial statements. This charge included certain losses for which we could not recognize an income tax benefit.

Our adjusted effective tax rate, which excludes the impact of the business and asset actions discussed above as well as other adjustments described in the "Reconciliations of Non-GAAP Financial Measures" section, was 16.9% and 18.4% for the three months ended 30 June 2024 and 2023, respectively.

Discussion of Third Quarter Results by Business Segment

Americas


	Three Months Ended
	30 June				Change vs. Prior Year
	2024		2023		$	%/bp
Sales	$1,234.7		$1,260.7		($26.0)	(2	%)
Operating income	391.1		374.8		16.3	4	%
Operating margin	31.7	%	29.7	%		200	bp
Equity affiliates’ income	$37.5		$29.9		$7.6	25	%
Adjusted EBITDA	604.2		567.8		36.4	6	%
Adjusted EBITDA margin	48.9	%	45.0	%		390	bp

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



Volume	(1	%)
Price	3	%
Energy cost pass-through to customers	(3	%)
Currency	(1	%)
Total Americas Sales Change	(2	%)

Sales of $1,234.7 decreased 2%, or $26.0, as lower energy cost pass-through to customers of 3%, lower volumes of 1%, and an unfavorable impact from currency of 1% were partially offset by higher pricing of 3%. Pricing was favorable across all merchant product lines. Volumes declined modestly primarily due to weaker merchant volume, which was partially offset by higher demand for hydrogen in our on-site business.

Operating income of $391.1 increased 4%, or $16.3, as positive pricing, net of power and fuel costs, of $32 was partially offset by higher costs of $9, unfavorable currency of $4, and lower volumes of $3. Higher costs for planned maintenance and labor inflation were partially offset by productivity improvements as well as other income recognized for the favorable settlement of a legal dispute. Operating margin of 31.7% increased 200 bp from 29.7% in the prior year primarily due to favorable pricing and lower energy cost pass-through to customers, partially offset by the impact of higher costs. Of the 200 bp improvement, lower energy cost pass-through to customers contributed approximately 100 bp.

Equity affiliates’ income of $37.5 increased 25%, or $7.6, driven by higher income from an affiliate in Mexico.

Asia


	Three Months Ended
	30 June				Change vs. Prior Year
	2024		2023		$	%/bp
Sales	$789.6		$822.9		($33.3)	(4	%)
Operating income	200.1		240.8		(40.7)	(17	%)
Operating margin	25.3	%	29.3	%		(400	bp)
Equity affiliates’ income	$8.7		$7.5		$1.2	16	%
Adjusted EBITDA	324.3		356.6		(32.3)	(9	%)
Adjusted EBITDA margin	41.1	%	43.3	%		(220	bp)

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



Volume	(1	%)
Price	—	%

Energy cost pass-through to customers	1	%
Currency	(4	%)
Total Asia Sales Change	(4	%)

Sales of $789.6 decreased 4%, or $33.3, as an unfavorable impact from currency of 4% driven by strengthening of the U.S. Dollar against most major currencies and lower volumes of 1% were partially offset by higher energy cost pass-through to customers of 1%. Volumes declined modestly overall primarily due to lower demand for merchant products and planned maintenance outages, which were partially offset by contributions from new industrial gas on-site plants across the region. Pricing was flat versus the prior year.

Operating income of $200.1 decreased 17%, or $40.7, due to lower volumes of $26, unfavorable currency of $8, lower pricing, net of power and fuel costs, of $4, and higher costs of $3. Volume and costs were unfavorable primarily due to planned maintenance outages. Operating margin of 25.3% decreased 400 bp from 29.3% in the prior year primarily due to the planned maintenance outages.

Equity affiliates’ income of $8.7 increased 16%, or $1.2, driven by higher income from an affiliate in Thailand.

Europe


	Three Months Ended
	30 June				Change vs. Prior Year
	2024		2023		$	%/bp
Sales	$693.4		$706.6		($13.2)	(2	%)
Operating income	204.7		176.1		28.6	16	%
Operating margin	29.5	%	24.9	%		460	bp
Equity affiliates’ income	$26.3		$28.8		($2.5)	(9	%)
Adjusted EBITDA	283.2		253.5		29.7	12	%
Adjusted EBITDA margin	40.8	%	35.9	%		490	bp

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



Volume	1	%
Price	—	%
Energy cost pass-through to customers	(2	%)
Currency	(1	%)
Total Europe Sales Change	(2	%)

Sales of $693.4 decreased 2%, or $13.2, due to lower energy cost pass-through to customers of 2% and an unfavorable impact from currency of 1%, partially offset by higher volumes of 1%. Volumes improved modestly as contributions from a new facility in Uzbekistan were partially offset by weaker merchant demand. Pricing was flat versus the prior year.

Operating income of $204.7 increased 16%, or $28.6, primarily due to higher volumes of $19 and pricing, net of lower power and fuel costs, of $17, partially offset by higher costs of $7. Higher costs driven by labor inflation were partially offset by productivity improvements. Operating margin of 29.5% increased 460 bp from 24.9% in the prior year.

Equity affiliates’ income of $26.3 decreased 9%, or $2.5, driven by lower income from our affiliate in Italy.

Middle East and India


	Three Months Ended
	30 June		Change vs. Prior Year
	2024	2023	$	%
Sales	$32.8	$39.7	($6.9)	(17	%)
Operating (loss) income	(1.4)	5.8	(7.2)	(124	%)
Equity affiliates' income	89.2	95.5	(6.3)	(7	%)
Adjusted EBITDA	94.6	108.3	(13.7)	(13	%)

Sales of $32.8 decreased 17%, or $6.9, and operating loss of $1.4 decreased $7.2 from income of $5.8 in the prior year, in each case primarily due to lower merchant volumes and pricing.

Equity affiliates' income of $89.2 decreased 7%, or $6.3, driven by higher costs across our affiliates.

Corporate and other


	Three Months Ended
	30 June		Change vs. Prior Year
	2024	2023	$	%
Sales	$235.0	$204.0	$31.0	15	%
Operating loss	(56.9)	(94.3)	37.4	40	%
Adjusted EBITDA	(39.5)	(78.1)	38.6	49	%

Sales of $235.0 increased 15%, or $31.0, and operating loss of $56.9 decreased 40%, or $37.4, primarily due to higher LNG and other equipment sales. Our operating results also benefited from lower costs driven by productivity improvements.

FIRST NINE MONTHS 2024 VS. FIRST NINE MONTHS 2023

FIRST NINE MONTHS 2024 IN SUMMARY

Sales of $8,913.1 decreased 5%, or $495.6, due to lower energy cost pass-through to customers of 6%, which was partially offset by higher pricing of 1%. Volume and currency were both flat versus the prior year.
Operating income of $2,041.7 increased 16%, or $285.7, as lower charges for business and asset actions, positive pricing, net of power and fuel costs, and favorable business mix were partially offset by higher costs and unfavorable currency. Operating margin of 22.9% increased 420 bp from 18.7% in the prior year and included a positive impact from lower energy cost pass-through to customers.
Equity affiliates' income of $470.6 increased 7%, or $29.7, as higher income from affiliates in the Americas segment was partially offset by lower contributions from affiliates in Europe.
Net income of $1,911.4 increased 16%, or $267.2, due to lower charges for business and asset actions, favorable pricing, and favorable business mix. Higher costs driven by inflation and planned maintenance were partially offset by lower incentive compensation, favorable non-recurring items, and improved productivity. Net income margin of 21.4% increased 390 bp and included a positive impact from lower energy cost pass-through to customers.
Adjusted EBITDA of $3,639.6 increased 6%, or $197.1, and adjusted EBITDA margin of 40.8% increased 420 bp.
Diluted EPS of $8.43 increased 17%, or $1.21 per share. On a non-GAAP basis, adjusted diluted EPS of $8.87 increased 6%, or $0.51 per share. A summary table of changes in diluted EPS is presented below.
In July 2024, we entered into an agreement to divest our LNG business for approximately $1.8 billion in an all-cash transaction. We expect to close the sale before the end of calendar year 2024, subject to the satisfaction or waiver of customary closing conditions, including the receipt of certain regulatory approvals.

Changes in Diluted EPS Attributable to Air Products

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


	Nine Months Ended		Change vs. Prior Year
	30 June
	2024	2023
Diluted EPS	$8.43	$7.22	$1.21


% Change from prior year			17	%
Operating Impacts
Underlying business:
Volume			$0.08
Price, net of variable costs			0.47
Other costs			(0.13)
Currency			(0.07)


Business and asset actions			0.72






Total Operating Impacts			$1.07
Other Impacts
Equity affiliates' income			$0.11

Interest expense			(0.14)
Other non-operating income/expense, net:
Gain on de-designation of cash flow hedges			0.01
Non-service pension cost, net			(0.03)


Change in effective tax rate			0.12







Noncontrolling interests			0.07

Total Other Impacts			$0.14
Total Change in Diluted EPS			$1.21
% Change from prior year			17	%

The table below summarizes the diluted per share impact of our non-GAAP adjustments for the first nine months of fiscal years 2024 and 2023:


	Nine Months Ended		Change vs. Prior Year
	30 June
	2024	2023
Diluted EPS	$8.43	$7.22	$1.21


Business and asset actions	0.20	0.92	(0.72)









Gain on de-designation of cash flow hedges	(0.01)	—	(0.01)
Non-service pension cost, net	0.25	0.22	0.03







Adjusted Diluted EPS	$8.87	$8.36	$0.51
% Change from prior year			6	%

FIRST NINE MONTHS 2024 RESULTS OF OPERATIONS

Discussion of First Nine Months Consolidated Results


	Nine Months Ended
	30 June				Changes
	2024		2023		$	%/bp
GAAP Measures
Sales	$8,913.1		$9,408.7		($495.6)	(5	%)
Operating income	2,041.7		1,756.0		285.7	16	%
Operating margin	22.9	%	18.7	%		420	bp
Equity affiliates’ income	$470.6		$440.9		$29.7	7	%
Net income	1,911.4		1,644.2		267.2	16	%
Net income margin	21.4	%	17.5	%		390	bp
Non-GAAP Measures
Adjusted EBITDA	$3,639.6		$3,442.5		$197.1	6	%
Adjusted EBITDA margin	40.8	%	36.6	%		420 bp

Sales

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


Volume	—	%
Price	1	%
Energy cost pass-through to customers	(6	%)
Currency	—	%
Total Consolidated Sales Change	(5	%)

Sales of $8,913.1 decreased 5%, or $495.6, due to lower energy cost pass-through to customers of 6%, driven by lower natural gas prices in North America and Europe, partially offset by higher pricing of 1%. Volumes were flat as weaker merchant demand offset improvements in our on-site business, which included higher demand for hydrogen in the Americas as well as contributions from new assets in Europe and Asia. Currency was also stable versus the prior year.

Cost of Sales and Gross Margin

Cost of sales of $6,064.3 decreased 8%, or $561.5, due to lower energy cost pass-through to customers of $584 and a favorable impact from currency of $20, partially offset by higher costs associated with sales volumes of $32 and higher costs of $10. Higher costs resulting from inflation and planned maintenance activities were partially offset by lower power costs in our merchant business as well as improvements from strategic productivity actions. Gross margin of 32.0% increased 240 bp from 29.6% in the prior year primarily due to lower energy cost pass-through to customers.

Selling and Administrative Expense

Selling and administrative expense of $714.4 decreased 1%, or $9.9, primarily due to lower incentive compensation and productivity improvements, partially offset by labor inflation. Selling and administrative expense as a percentage of sales increased to 8.0% from 7.7% in the prior year.

Research and Development Expense

Research and development expense of $78.1 decreased 3%, or $2.8. Research and development expense as a percentage of sales of 0.9% was flat versus the prior year.

Business and Asset Actions

Our consolidated income statements for the nine months ended 30 June 2024 and 2023 include charges of $57.0 ($43.8 after tax, or $0.20 per share) and $244.6 ($204.9 attributable to Air Products after tax, or $0.92 per share), respectively, for strategic business and asset actions intended to optimize costs and focus resources on our growth projects. Charges for business and asset actions are not recorded in segment results.

The current year charge of $57.0 was for severance and other postemployment benefits payable to employees identified under a global cost reduction plan that originated during the third quarter of fiscal year 2023, which resulted in an initial charge of $27.0. The prior year also included a noncash charge of $217.6 to write off assets associated with exited projects that were previously under construction in our Asia and Europe segments. The assets written off included those related to our withdrawal from coal gasification in Indonesia as well as a project in Ukraine that was permanently suspended due to Russia's invasion of the country.

Other Income (Expense), Net

Other income of $42.4 increased 85%, or $19.5, primarily due to higher income from the sale of assets as well as the favorable settlement of a legal dispute. Refer to Note 12, Commitments and Contingencies, to the consolidated financial statements for additional information. These items were partially offset by an unfavorable foreign exchange impact from the devaluation of the Argentine peso during the first quarter of fiscal year 2024.

Operating Income and Operating Margin

Operating income of $2,041.7 increased 16%, or $285.7, as lower charges for business and asset actions of $188, positive pricing, net of power and fuel costs, of $130, and favorable business mix of $22 were partially offset by higher costs of $35 and an unfavorable impact from currency of $19. The higher costs were driven by labor inflation and higher planned maintenance, partially offset by lower incentive compensation, productivity improvements, as well as favorable non-recurring items such as sales of assets and the favorable settlement of a legal dispute in our Americas segment. Operating margin of 22.9% increased 420 bp from 18.7% in the prior year primarily due to lower charges for business and asset actions, favorable pricing, and lower energy cost pass-through to customers. Of the 420 bp improvement, lower energy cost pass-through to customers contributed approximately 150 bp.

Equity Affiliates' Income

Equity affiliates' income of $470.6 increased 7%, or $29.7, as higher income from affiliates in the Americas segment, which included recognition of our share of income from an asset sale, was partially offset by a lower contribution from an affiliate in Europe.

Interest Expense


	Nine Months Ended
	30 June
	2024	2023
Interest incurred	$367.8	$198.2
Less: Capitalized interest	198.7	68.7
Interest expense	$169.1	$129.5

Interest incurred increased 86%, or $169.6, primarily due to a higher debt balance from senior notes issued in March 2023 and February 2024 to fund projects under our Green Finance Framework as well as borrowings on financing available for the NEOM Green Hydrogen Project. Capitalized interest increased $130.0 due to a higher carrying value of projects under construction, including the NEOM Green Hydrogen Project.

Other Non-Operating Income (Expense), net

Other non-operating expense of $25.3 decreased 3%, or $0.9. During the third quarter of fiscal year 2024, we recorded an unrealized gain of $11.2 ($3.0 attributable to Air Products after tax, or $0.01 per share) upon de-designation of certain interest rate swaps associated with the financing for the NEOM Green Hydrogen Project. Refer to Note 3, Variable Interest Entities, and Note 8, Financial Instruments, to the consolidated financial statements for additional information. Additionally, we recognized higher interest income on cash and cash items and short-term investments during the first nine months of fiscal year 2024. These favorable items were partially offset by higher non-service pension costs.

Net Income and Net Income Margin

Net income of $1,911.4 increased 16%, or $267.2, due to higher pricing, net of power and fuel costs, and favorable business mix. Additionally, strategic business and asset actions for which we incurred higher charges in the prior year resulted in productivity improvements across our organization, which partially offset higher costs driven by inflation and planned maintenance. Higher costs were partially offset by lower incentive compensation and favorable non-recurring operating items.

Net income margin of 21.4% increased 390 bp from 17.5% in the prior year primarily due to the lower charges for business and asset actions, higher pricing, and lower energy cost pass-through to customers. Of the 390 bp improvement, lower energy cost pass-through to customers contributed approximately 150 bp.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA of $3,639.6 increased 6%, or $197.1, due to higher pricing, net of power and fuel costs, and favorable business mix, partially offset by higher costs. Higher costs driven by inflation and planned maintenance costs were partially offset by lower incentive compensation, favorable non-recurring operating items, and productivity improvements. Adjusted EBITDA margin of 40.8% increased 420 bp from 36.6% in the prior year primarily due to lower energy cost pass-through to customers and higher pricing. Of the 420 bp improvement, lower energy cost pass-through to customers contributed approximately 250 bp.

Effective Tax Rate

Our effective tax rate was 17.5% and 19.4% for the nine months ended 30 June 2024 and 2023, respectively. Our current year effective tax rate was lower due to earning a greater share of income in jurisdictions with lower tax rates, higher equity affiliates' income, the tax benefit from a tax election related to a non-U.S. subsidiary, and the release of certain unrecognized tax benefits upon expiration of the statute of limitations for uncertain tax positions taken in prior years. In addition, during the first nine months of fiscal year 2023, we recorded a charge for business and asset actions of $244.6 ($204.9 attributable to Air Products after tax) that included certain losses for which we could not recognize an income tax benefit and were subject to a valuation allowance of $36.0. Partially offsetting the valuation allowance cost was a $15.9 income tax benefit from a tax election related to a non-U.S. subsidiary. For additional information on the charge for business and asset actions, refer to Note 4, Business and Asset Actions, to the consolidated financial statements.

Our adjusted effective tax rate, which excludes the impact of the business and asset actions discussed above as well as other adjustments described in the "Reconciliations of Non-GAAP Financial Measures" section, was 17.9% and 19.1% for the nine months ended 30 June 2024 and 2023, respectively.

Discussion of First Nine Months Results by Business Segment

Americas


	Nine Months Ended
	30 June				Changes
	2024		2023		$	%/bp
Sales	$3,732.6		$4,018.0		($285.4)	(7	%)
Operating income	1,117.4		1,042.0		75.4	7	%
Operating margin	29.9	%	25.9	%		400	bp
Equity affiliates’ income	$118.8		$74.4		$44.4	60	%
Adjusted EBITDA	1,755.6		1,597.2		158.4	10	%
Adjusted EBITDA margin	47.0	%	39.8	%		720 bp

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



Volume	1	%
Price	3	%
Energy cost pass-through to customers	(10	%)
Currency	(1	%)
Total Americas Sales Change	(7	%)

Sales of $3,732.6 decreased 7%, or $285.4, as lower energy cost pass-through to customers of 10% driven by lower natural gas prices in North America and an unfavorable currency impact of 1% were partially offset by higher pricing of 3% and higher volumes of 1%. Pricing was favorable across all merchant product lines. Volumes improved modestly as higher demand for hydrogen in our on-site business was partially offset by weaker merchant volume.

Operating income of $1,117.4 increased 7%, or $75.4, due to positive pricing, net of power and fuel costs, of $102 and favorable volumes of $28, partially offset by higher costs of $50 and unfavorable currency of $5. The higher costs were driven by higher planned maintenance and labor inflation, partially offset by lower incentive compensation as well as the favorable settlement of a legal dispute during the third quarter. Operating margin of 29.9% increased 400 bp from 25.9% in the prior year primarily due to lower energy cost pass-through to customers and favorable pricing, which were partially offset by the impact of higher costs. Of the 400 bp improvement, lower energy cost pass-through to customers contributed approximately 250 bp.

Equity affiliates’ income of $118.8 increased 60%, or $44.4, due to higher income from an affiliate in Mexico as well as recognition of our share of income from an asset sale.

Asia


	Nine Months Ended
	30 June				Changes
	2024		2023		$	%/bp
Sales	$2,363.1		$2,414.6		($51.5)	(2	%)
Operating income	614.9		709.7		(94.8)	(13	%)
Operating margin	26.0	%	29.4	%		(340	bp)
Equity affiliates’ income	$21.2		$22.2		($1.0)	(5	%)
Adjusted EBITDA	979.8		1,052.1		(72.3)	(7	%)
Adjusted EBITDA margin	41.5	%	43.6	%		(210	bp)

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



Volume	—	%
Price	—	%
Energy cost pass-through to customers	1	%
Currency	(3	%)
Total Asia Sales Change	(2	%)

Sales of $2,363.1 decreased 2%, or $51.5, due to an unfavorable currency impact of 3%, partially offset by higher energy cost pass-through to customers of 1%. Despite higher volumes from new industrial gas on-site plants across the region, overall volumes were flat primarily due to lower demand for merchant products. Pricing was flat versus the prior year.

Operating income of $614.9 decreased 13%, or $94.8, primarily due to unfavorable business mix of $59, an unfavorable currency impact of $21, lower pricing, net of power and fuel costs, of $9, and higher costs of $6. Higher costs for labor inflation and higher planned maintenance were partially offset by lower distribution costs. Operating margin of 26.0% decreased 340 bp from 29.4% in the prior year primarily due to unfavorable business mix.

Equity affiliates’ income of $21.2 decreased 5%, or $1.0, as higher maintenance expense for one of our affiliates in China was partially offset by higher income from an affiliate in Thailand.

Europe


	Nine Months Ended
	30 June				Changes
	2024		2023		$	%/bp
Sales	$2,092.5		$2,251.4		($158.9)	(7	%)
Operating income	603.3		495.1		108.2	22	%
Operating margin	28.8	%	22.0	%		680	bp
Equity affiliates’ income	$58.7		$76.0		($17.3)	(23	%)
Adjusted EBITDA	813.2		712.3		100.9	14	%
Adjusted EBITDA margin	38.9	%	31.6	%		730	bp

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



Volume	1	%
Price	(1	%)
Energy cost pass-through to customers	(10	%)
Currency	3	%
Total Europe Sales Change	(7	%)

Sales of $2,092.5 decreased 7%, or $158.9, due to lower energy cost pass-through to customers of 10% and lower pricing of 1%, partially offset by a favorable impact from currency of 3% and higher volumes of 1%. Currency positively impacted sales primarily due to the weakening of the U.S. Dollar against the Euro. Volumes improved modestly as contributions from a new facility in Uzbekistan were partially offset by weaker merchant demand.

Operating income of $603.3 increased 22%, or $108.2, due to higher volumes of $72, pricing, net of lower power and fuel costs, of $42, and a favorable impact from currency of $12, partially offset by higher costs of $18. Higher costs driven by labor inflation were partially offset by productivity improvements as well as income from the sale of assets. Operating margin of 28.8% increased 680 bp from 22.0% in the prior year due to favorable volumes and pricing as well as lower energy cost pass-through to customers. Of the 680 bp improvement, lower energy cost pass-through to customers contributed approximately 200 bp.

Equity affiliates’ income of $58.7 decreased 23%, or $17.3, driven by prior year non-recurring items for our affiliate in Italy.

Middle East and India


	Nine Months Ended
	30 June		Changes
	2024	2023	$	%
Sales	$103.9	$125.9	($22.0)	(17	%)
Operating income	8.1	13.8	(5.7)	(41	%)
Equity affiliates' income	256.0	258.5	(2.5)	(1	%)
Adjusted EBITDA	284.2	292.5	(8.3)	(3	%)

Sales of $103.9 decreased 17%, or $22.0, and operating income of $8.1 decreased 41%, or $5.7, in each case primarily due to lower merchant volumes and pricing.

Equity affiliates' income of $256.0 decreased 1%, or $2.5, driven by higher costs in Saudi Arabia.

Corporate and other


	Nine Months Ended
	30 June		Changes
	2024	2023	$	%
Sales	$621.0	$598.8	$22.2	4	%
Operating loss	(245.0)	(260.0)	15.0	6	%
Adjusted EBITDA	(193.2)	(211.6)	18.4	9	%

Sales of $621.0 increased 4%, or $22.2, and operating loss of $245.0 decreased 6%, or $15.0, in each case primarily due to higher LNG sales. Our operating results also benefited from lower incentive compensation, favorable non-recurring items, and productivity improvements.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

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

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

In many cases, non-GAAP financial measures are determined by adjusting the most directly comparable GAAP measure to exclude non-GAAP adjustments that we believe are not representative of our underlying business performance. For example, we exclude the impact of the non-service components of net periodic benefit/cost for our defined benefit pension plans. Non-service related components are recurring, non-operating items that include interest cost, expected returns on plan assets, prior service cost amortization, actuarial loss amortization, as well as special termination benefits, curtailments, and settlements, all of which are not indicative of our defined benefit plans’ future contribution needs due to the funded status of the plans. Additionally, we exclude the impact of fair value adjustments for certain of our derivative instruments for which we discontinued cash flow hedge accounting during the third quarter of fiscal year 2024. We will continue to adjust for these unrealized gains or losses until the related hedges re-qualify for cash flow hedge accounting, which we expect to occur once the hedged transaction is consistent with the terms of the related long-term hedges. The net impact of adjustments for non-service related components as well as fair value adjustments for the de-designated cash flow hedges is reflected within “Other non-operating income (expense), net” on our consolidated income statements. Adjusting for these impacts provides management and users of our financial statements with a more accurate representation of our underlying business performance because they are driven by factors that are unrelated to our operations, such as volatility in equity and debt markets. We may also exclude certain expenses associated with cost reduction actions, impairment charges, and gains on disclosed transactions. The reader should be aware that we may recognize similar losses or gains in the future.

When applicable, the tax impact of our pre-tax non-GAAP adjustments reflects the expected current and deferred income tax impact of our non-GAAP adjustments. These tax impacts are primarily driven by the statutory tax rate of the various relevant jurisdictions and the taxability of the adjustments in those jurisdictions.

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

ADJUSTED DILUTED EPS

The table below provides a reconciliation to the most directly comparable GAAP measure for each of the major components used to calculate adjusted diluted EPS from continuing operations, which we view as a key performance metric. In periods that we have non-GAAP adjustments, we believe it is important for the reader to understand the per share impact of each such adjustment because management does not consider these impacts when evaluating underlying business performance. Per share impacts are calculated independently and may not sum to total diluted EPS and total adjusted diluted EPS due to rounding.


	Three Months Ended 30 June
Q3 2024 vs. Q3 2023	Operating Income	Equity Affiliates' Income	Other Non-Operating Income/Expense, Net	Income Tax Provision	Net Income Attributable to Air Products	Diluted EPS
Q3 2024 GAAP	$737.6	$168.9	($1.3)	$140.6	$696.6	$3.13
Q3 2023 GAAP	644.2	165.0	(11.7)	139.6	595.6	2.67
$ Change GAAP						$0.46
% Change GAAP						17	%

Q3 2024 GAAP	$737.6	$168.9	($1.3)	$140.6	$696.6	$3.13












(Gain) Loss on de-designation of cash flow hedges(A)	—	—	(11.2)	(0.9)	(3.0)	(0.01)
Non-service pension cost, net	—	—	25.3	6.2	19.1	0.09








Q3 2024 Non-GAAP ("Adjusted")	$737.6	$168.9	$12.8	$145.9	$712.7	$3.20

Q3 2023 GAAP	$644.2	$165.0	($11.7)	$139.6	$595.6	$2.67


Business and asset actions	59.0	—	—	7.8	51.2	0.23










Non-service pension cost, net	—	—	22.0	5.4	16.6	0.07








Q3 2023 Non-GAAP ("Adjusted")	$703.2	$165.0	$10.3	$152.8	$663.4	$2.98
$ Change Non-GAAP ("Adjusted")						$0.22
% Change Non-GAAP ("Adjusted")						7	%
(A )Includes $7.3 attributable to noncontrolling interests.



	Nine Months Ended 30 June
2024 vs. 2023	Operating Income	Equity Affiliates' Income	Other Non-Operating Income/Expense, Net	Income Tax Provision	Net Income Attributable to Air Products	Diluted EPS
2024 GAAP	$2,041.7	$470.6	($25.3)	$406.5	$1,878.3	$8.43
2023 GAAP	1,756.0	440.9	(26.2)	397.0	1,607.6	7.22
$ Change GAAP						$1.21
% Change GAAP						17	%

2024 GAAP	$2,041.7	$470.6	($25.3)	$406.5	$1,878.3	$8.43


Business and asset actions	57.0	—	—	13.2	43.8	0.20









(Gain) Loss on de-designation of cash flow hedges(A)	—	—	(11.2)	(0.9)	(3.0)	(0.01)
Non-service pension cost, net	—	—	75.3	18.6	56.7	0.25








2024 Non-GAAP ("Adjusted")	$2,098.7	$470.6	$38.8	$437.4	$1,975.8	$8.87

2023 GAAP	$1,756.0	$440.9	($26.2)	$397.0	$1,607.6	$7.22


Business and asset actions(B)	244.6	—	—	34.7	204.9	0.92










Non-service pension cost, net	—	—	64.4	16.0	48.4	0.22








2023 Non-GAAP ("Adjusted")	$2,000.6	$440.9	$38.2	$447.7	$1,860.9	$8.36
$ Change Non-GAAP ("Adjusted")						$0.51
% Change Non-GAAP ("Adjusted")						6	%

(A ) Includes $7.3 attributable to noncontrolling interests. (B ) Includes $5.0 attributable to noncontrolling interests.

ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN

We define adjusted EBITDA as net income less income from discontinued operations, net of tax, and excluding non-GAAP adjustments, which we do not believe to be indicative of underlying business trends, before interest expense, other non-operating income (expense), net, income tax provision, and depreciation and amortization expense. Adjusted EBITDA and adjusted EBITDA margin provide useful metrics for management to assess operating performance. Margins are calculated independently for each period by dividing each line item by consolidated sales for the respective period and may not sum to total margin due to rounding.

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


	Three Months Ended 30 June						Nine Months Ended 30 June
	2024			2023			2024			2023
	$	Margin		$	Margin		$	Margin		$	Margin
Sales	$2,985.5			$3,033.9			$8,913.1			$9,408.7

Net income and net income margin	$708.9	23.7	%	$610.5	20.1	%	$1,911.4	21.4	%	$1,644.2	17.5	%

Add: Interest expense	55.7	1.9	%	47.4	1.6	%	169.1	1.9	%	129.5	1.4	%
Less: Other non-operating income (expense), net	(1.3)	—	%	(11.7)	(0.4	%)	(25.3)	(0.3	%)	(26.2)	(0.3	%)
Add: Income tax provision	140.6	4.7	%	139.6	4.6	%	406.5	4.6	%	397.0	4.2	%
Add: Depreciation and amortization	360.3	12.1	%	339.9	11.2	%	1,070.3	12.0	%	1,001.0	10.6	%
Add: Business and asset actions	—	—	%	59.0	1.9	%	57.0	0.6	%	244.6	2.6	%









Adjusted EBITDA and adjusted EBITDA margin	$1,266.8	42.4	%	$1,208.1	39.8	%	$3,639.6	40.8	%	$3,442.5	36.6	%


Change GAAP
Net income $ change	$98.4						$267.2
Net income % change	16%						16%
Net income margin change	360bp						390 bp
Change Non-GAAP
Adjusted EBITDA $ change	$58.7						$197.1
Adjusted EBITDA % change	5%						6%
Adjusted EBITDA margin change	260bp						420 bp

The tables below present sales and a reconciliation of operating income and operating margin by segment to adjusted EBITDA and adjusted EBITDA margin by segment for the three and nine months ended 30 June 2024 and 2023:

Americas


	Three Months Ended							Nine Months Ended
	30 June				Change vs. Prior Year			30 June				Change vs. Prior Year
	2024		2023		$	%/bp		2024		2023		$	%/bp
Sales	$1,234.7		$1,260.7		($26.0)	(2	%)	$3,732.6		$4,018.0		($285.4)	(7	%)

Operating income	$391.1		$374.8		$16.3	4	%	$1,117.4		$1,042.0		$75.4	7	%
Operating margin	31.7	%	29.7	%		200	bp	29.9	%	25.9	%		400	bp

Reconciliation of GAAP to Non-GAAP:
Operating income	$391.1		$374.8					$1,117.4		$1,042.0
Add: Depreciation and amortization	175.6		163.1					519.4		480.8
Add: Equity affiliates' income	37.5		29.9					118.8		74.4
Adjusted EBITDA	$604.2		$567.8		$36.4	6	%	$1,755.6		$1,597.2		$158.4	10	%
Adjusted EBITDA margin	48.9	%	45.0	%		390	bp	47.0	%	39.8	%		720	bp

Asia


	Three Months Ended							Nine Months Ended
	30 June				Change vs. Prior Year			30 June				Change vs. Prior Year
	2024		2023		$	%/bp		2024		2023		$	%/bp
Sales	$789.6		$822.9		($33.3)	(4	%)	$2,363.1		$2,414.6		($51.5)	(2	%)

Operating income	$200.1		$240.8		($40.7)	(17	%)	$614.9		$709.7		($94.8)	(13	%)
Operating margin	25.3	%	29.3	%		(400	bp)	26.0	%	29.4	%		(340	bp)

Reconciliation of GAAP to Non-GAAP:
Operating income	$200.1		$240.8					$614.9		$709.7
Add: Depreciation and amortization	115.5		108.3					343.7		320.2
Add: Equity affiliates' income	8.7		7.5					21.2		22.2
Adjusted EBITDA	$324.3		$356.6		($32.3)	(9	%)	$979.8		$1,052.1		($72.3)	(7	%)
Adjusted EBITDA margin	41.1	%	43.3	%		(220	bp)	41.5	%	43.6	%		(210	bp)

Europe


	Three Months Ended							Nine Months Ended
	30 June				Change vs. Prior Year			30 June				Change vs. Prior Year
	2024		2023		$	%/bp		2024		2023		$	%/bp
Sales	$693.4		$706.6		($13.2)	(2	%)	$2,092.5		$2,251.4		($158.9)	(7	%)

Operating income	$204.7		$176.1		$28.6	16	%	$603.3		$495.1		$108.2	22	%
Operating margin	29.5	%	24.9	%		460	bp	28.8	%	22.0	%		680	bp

Reconciliation of GAAP to Non-GAAP:
Operating income	$204.7		$176.1					$603.3		$495.1
Add: Depreciation and amortization	52.2		48.6					151.2		141.2
Add: Equity affiliates' income	26.3		28.8					58.7		76.0
Adjusted EBITDA	$283.2		$253.5		$29.7	12	%	$813.2		$712.3		$100.9	14	%
Adjusted EBITDA margin	40.8	%	35.9	%		490	bp	38.9	%	31.6	%		730	bp

Middle East and India


	Three Months Ended					Nine Months Ended
	30 June		Change vs. Prior Year			30 June		Change vs. Prior Year
	2024	2023	$	%		2024	2023	$	%
Sales	$32.8	$39.7	($6.9)	(17	%)	$103.9	$125.9	($22.0)	(17	%)

Operating income (loss)	($1.4)	$5.8	($7.2)	(124	%)	$8.1	$13.8	($5.7)	(41	%)
Reconciliation of GAAP to Non-GAAP:
Operating income (loss)	($1.4)	$5.8				$8.1	$13.8
Add: Depreciation and amortization	6.8	7.0				20.1	20.2
Add: Equity affiliates' income	89.2	95.5				256.0	258.5
Adjusted EBITDA	$94.6	$108.3	($13.7)	(13	%)	$284.2	$292.5	($8.3)	(3	%)

Corporate and other


	Three Months Ended					Nine Months Ended
	30 June		Change vs. Prior Year			30 June		Change vs. Prior Year
	2024	2023	$	%		2024	2023	$	%
Sales	$235.0	$204.0	$31.0	15	%	$621.0	$598.8	$22.2	4	%

Operating loss	($56.9)	($94.3)	$37.4	40	%	($245.0)	($260.0)	$15.0	6	%
Reconciliation of GAAP to Non-GAAP:
Operating loss	($56.9)	($94.3)				($245.0)	($260.0)
Add: Depreciation and amortization	10.2	12.9				35.9	38.6
Add: Equity affiliates' income	7.2	3.3				15.9	9.8
Adjusted EBITDA	($39.5)	($78.1)	$38.6	49	%	($193.2)	($211.6)	$18.4	9	%

ADJUSTED EFFECTIVE TAX RATE

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



	Three Months Ended 30 June				Nine Months Ended 30 June
	2024		2023		2024		2023
Income tax provision	$140.6		$139.6		$406.5		$397.0
Income before taxes	849.5		750.1		2,317.9		2,041.2
Effective tax rate	16.6	%	18.6	%	17.5	%	19.4	%


Income tax provision	$140.6		$139.6		$406.5		$397.0
Business and asset actions tax impact	—		7.8		13.2		34.7

(Gain) Loss on de-designation of cash flow hedges tax impact	(0.9)		—		(0.9)		—
Non-service pension tax impact	6.2		5.4		18.6		16.0















Adjusted income tax provision	$145.9		$152.8		$437.4		$447.7

Income before taxes	$849.5		$750.1		$2,317.9		$2,041.2

Business and asset actions	—		59.0		57.0		244.6
(Gain) Loss on de-designation of cash flow hedges	(11.2)		—		(11.2)		—
Non-service pension cost, net	25.3		22.0		75.3		64.4










Adjusted income before taxes	$863.6		$831.1		$2,439.0		$2,350.2
Adjusted effective tax rate	16.9	%	18.4	%	17.9	%	19.1	%

CAPITAL EXPENDITURES

Capital expenditures is a non-GAAP financial measure that we define as the sum of cash flows for additions to plant and equipment, including long-term deposits, acquisitions (less cash acquired), investment in and advances to unconsolidated affiliates, and investment in financing receivables on our consolidated statements of cash flows. Additionally, we adjust additions to plant and equipment to exclude NEOM Green Hydrogen Company (“NGHC”) expenditures funded by the joint venture's non-recourse project financing as well as our partners’ equity contributions to arrive at a measure that we believe is more representative of our investment activities. Substantially all the funding we provide to NGHC is limited for use by the venture for capital expenditures.

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



	Nine Months Ended
	30 June
	2024	2023
Cash used for investing activities	$4,773.8	$4,399.8
Proceeds from sale of assets and investments	26.3	13.3
Purchases of investments	(141.4)	(443.4)
Proceeds from investments	413.1	766.0
Other investing activities	45.9	4.8
NGHC expenditures not funded by Air Products' equity(A)	(1,242.0)	(656.0)
Capital expenditures	$3,875.7	$4,084.5

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

LIQUIDITY AND CAPITAL RESOURCES

We believe we have sufficient cash, cash flows from operations, and funding sources to meet our liquidity needs. As further discussed in the "Cash Flows From Financing Activities" section below, we have the ability to raise capital through a variety of financing activities, including accessing capital or commercial paper markets or drawing upon our credit facilities.

As of 30 June 2024, we had $1,442.5 of foreign cash and cash items compared to total cash and cash items of $2,375.7. We do not expect that a significant portion of the earnings of our foreign subsidiaries and affiliates will be subject to U.S. income tax upon repatriation to the U.S. Depending on the country in which the subsidiaries and affiliates reside, the repatriation of these earnings may be subject to foreign withholding and other taxes. However, since we have significant current investment plans outside the U.S., it is our intent to permanently reinvest the majority of our foreign cash and cash items that would be subject to additional taxes outside the U.S.

Cash Flows From Operations


	Nine Months Ended
	30 June
	2024	2023
Net income attributable to Air Products	$1,878.3	$1,607.6

Adjustments to reconcile income to cash provided by operating activities:
Depreciation and amortization	1,070.3	1,001.0
Deferred income taxes	(74.3)	(14.1)
Business and asset actions	57.0	244.6

Undistributed earnings of equity method investments	(124.1)	(130.1)
Gain on sale of assets and investments	(23.3)	(5.2)
Share-based compensation	46.2	45.8
Noncurrent lease receivables	59.2	60.9


Other adjustments	36.4	152.3
Changes in working capital accounts	(236.0)	(759.4)
Cash Provided by Operating Activities	$2,689.7	$2,203.4

For the first nine months of fiscal year 2024, cash provided by operating activities was $2,689.7. We recorded a charge of $57.0 for the accrual of severance and other postemployment benefits. Refer to Note 4, Business and Asset Actions, to the consolidated financial statements for additional information. The working capital accounts were a use of cash of $236.0. A use of cash of $175.1 within "Payables and accrued liabilities" primarily resulted from payments for incentive compensation under the fiscal year 2023 plan, a reduction of customer advances for sale of equipment projects as we recognized revenue, and a reduction of liabilities associated with accrued utilities. The use of cash of $111.0 within "Inventories" primarily related to purchases of helium. The use of cash of $21.9 within "Other working capital" primarily related to the timing of tax payments. The source of cash of $82.4 within "Other receivables" primarily related to the refunds of value added taxes paid during the construction of the NEOM Green Hydrogen Project.

For the first nine months of fiscal year 2023, cash provided by operating activities was $2,203.4. Business and asset actions of $244.6 includes noncash charges to write off assets related to our exit from certain projects previously under construction as well as an expense for severance and other benefits. Refer to Note 4, Business and Asset Actions, to the consolidated financial statements for additional information. Other adjustments of $152.3 primarily included adjustments for noncash currency impacts of intercompany balances. The working capital accounts were a use of cash of $759.4, primarily driven by $375.4 from payables and accrued liabilities, $133.5 from inventories, $98.5 from other receivables, $102.8 from other working capital, and $49.2 from trade receivables, less allowances. The use of cash within payables and accrued liabilities primarily resulted from the impact of lower prices for the purchase of natural gas, a decrease in value of derivatives that hedge intercompany loans, and payments for incentive compensation under the fiscal year 2022 plan. The use of cash within inventories primarily relates to purchases of helium. The use of cash within other working capital primarily relates to the timing of income tax payments. The use of cash within trade receivables primarily relates to the timing of milestone invoices on sale of equipment projects.

Cash Flows From Investing Activities


	Nine Months Ended
	30 June
	2024		2023
Additions to plant and equipment, including long-term deposits	$	(4,721.5)	$	(3,163.5)

Investment in and advances to unconsolidated affiliates	—		(912.0)
Investment in financing receivables	(396.2)		(665.0)
Proceeds from sale of assets and investments	26.3		13.3
Purchases of investments	(141.4)		(443.4)
Proceeds from investments	413.1		766.0

Other investing activities	45.9		4.8
Cash Used for Investing Activities	($4,773.8)		($4,399.8)

For the first nine months of fiscal year 2024, cash used for investing activities was $4,773.8. The use of cash primarily resulted from additions to plant and equipment, including long-term deposits, of $4,721.5 and an investment in financing receivables of $396.2. Refer to the "Capital Expenditures" section below for further detail. Proceeds from investments of $413.1 resulted from maturities of time deposits with terms greater than three months but less than one year and exceeded purchases of investments of $141.4.

For the first nine months of fiscal year 2023, cash used for investing activities was $4,399.8. The use of cash primarily resulted from additions to plant and equipment, including long-term deposits, of $3,163.5, investment in and advances to unconsolidated affiliates of $912.0, and an investment in financing receivables of $665.0. Refer to the Capital Expenditures section below for further detail. Proceeds from investments of $766.0 resulted from maturities of time deposits and treasury securities with terms greater than three months but less than one year and exceeded purchases of investments of $443.4.

Capital Expenditures

The components of our capital expenditures are detailed in the table below. Refer to page 58 for a definition of this non-GAAP financial measure as well as a reconciliation to cash used for investing activities.


	Nine Months Ended
	30 June
	2024	2023
Additions to plant and equipment, including long-term deposits	$4,721.5	$3,163.5

Investment in and advances to unconsolidated affiliates	—	912.0
Investment in financing receivables	396.2	665.0
NGHC expenditures not funded by Air Products' equity(A)	(1,242.0)	(656.0)
Capital Expenditures	$3,875.7	$4,084.5

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

Capital expenditures for the first nine months of fiscal year 2024 totaled $3,875.7 compared to $4,084.5 for the first nine months of fiscal year 2023. The investment in financing receivables of $396.2 primarily reflects payments associated with the purchase of renewable fuel assets from World Energy as well as the purchase of a natural gas-to-syngas processing facility in Uzbekistan. Refer to Note 3, Variable Interest Entities, and Note 16, Supplemental Information, to the consolidated financial statements, respectively, for additional information.

Outlook for Investing Activities

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

We continue to expect capital expenditures for fiscal year 2024 to be in the range of $5.0 billion to $5.5 billion.

Cash Flows From Financing Activities


	Nine Months Ended
	30 June
	2024		2023
Long-term debt proceeds	$	4,119.9	$	2,116.3
Payments on long-term debt	(76.7)		(605.8)
(Decrease) Increase in commercial paper and short-term borrowings	(183.3)		567.3

Dividends paid to shareholders	(1,171.4)		(1,107.9)

Proceeds from stock option exercises	6.2		19.5
Investments by noncontrolling interests	278.7		188.8

Other financing activities	(125.7)		(79.3)
Cash Provided by Financing Activities	$2,847.7		$1,098.9

For the first nine months of fiscal year 2024, cash provided by financing activities was $2,847.7. The source of cash was primarily driven by long-term debt proceeds of $4,119.9, which was largely attributable to U.S. Dollar-denominated green bonds totaling $2.5 billion that were issued during the second quarter of fiscal year 2024 under our Green Finance Framework as well as borrowings from project financing associated with the NGHC joint venture, partially offset by dividend payments to shareholders of $1,171.4.

For the first nine months of fiscal year 2023, cash provided by financing activities was $1,098.9. The source of cash was primarily driven by long-term debt proceeds of $2,116.3, and an increase in commercial paper and short-term borrowings of $567.3, partially offset by dividend payments to shareholders of $1,107.9 and payments on long-term debt of $605.8. Refer to the Credit Facilities section below and Note 11, Debt, to the consolidated financial statements for additional information.

Financing and Capital Structure

Debt

Total debt increased from $10,305.8 as of 30 September 2023 to $14,032.7 as of 30 June 2024 primarily due to the $2.5 billion issuance of senior notes intended for projects defined under our Green Finance Framework as well as additional borrowings under the non-recourse project financing associated with the NEOM Green Hydrogen Project as discussed in Note 3, Variable Interest Entities, to the consolidated financial statements. Total debt includes related party debt of $289.5 and $328.3 as of 30 June 2024 and 30 September 2023, respectively.

Various debt agreements to which we are a party include financial covenants and other restrictions, including restrictions pertaining to the ability to create property liens and enter into certain sale and leaseback transactions. As of 30 June 2024, we were in compliance with all of the financial and other covenants under our debt agreements.

Credit Facilities

In March 2024, we entered into a five-year $3.0 billion revolving credit agreement maturing 31 March 2029 (the “2024 Credit Agreement”) as well as a 364-day $500 revolving credit agreement maturing 27 March 2025 that we have the ability to convert into a term loan maturing 27 March 2026. Both agreements are syndicated facilities that provide a source of liquidity and support our commercial paper program through availability of senior unsecured debt to us and certain of our subsidiaries. As of 30 June 2024, no borrowings were outstanding under either agreement. The 2024 Credit Agreement replaced our previous $2.75 billion revolving credit agreement (the “2021 Credit Agreement”), which was terminated upon execution of the 2024 Credit Agreement. No borrowings were outstanding under the 2021 Credit Agreement at the time of its termination, and no early termination penalties were incurred.

We also have credit facilities available to certain of our foreign subsidiaries totaling $1,223.2, of which $1,091.1 was borrowed and outstanding as of 30 June 2024. The amount borrowed and outstanding as of 30 September 2023 was $1,041.4.

NEOM Green Hydrogen Project Financing

In May 2023, NGHC secured non-recourse project financing of approximately $6.1 billion, which is expected to fund approximately 73% of the NEOM Green Hydrogen Project and will be drawn over the construction period. At the same time, NGHC secured additional non-recourse credit facilities totaling approximately $500 primarily for working capital needs. As of 30 June 2024, the joint venture had borrowed short- and long-term principal amounts totaling $2.9 billion compared to $1.4 billion as of 30 September 2023. Refer to Note 3, Variable Interest Entities, to the consolidated financial statements for additional information.

Dividends

The Board of Directors determines whether to declare cash dividends on our common stock and the timing and amount based on financial condition and other factors it deems relevant. Dividends are paid quarterly, usually during the sixth week after the close of the fiscal quarter. We have increased our quarterly dividend for 42 consecutive years.

On 17 May 2024, the Board of Directors declared a quarterly dividend of $1.77 per share that is payable on 12 August 2024 to shareholders of record at the close of business on 1 July 2024.

On 18 July 2024, the Board of Directors declared a quarterly dividend of $1.77 per share that is payable on 12 November 2024 to shareholders of record at the close of business on 1 October 2024.

PENSION BENEFITS

We and certain of our subsidiaries sponsor defined benefit pension plans and defined contribution plans that cover a substantial portion of our worldwide employees. The principal defined benefit pension plans are the U.S. salaried pension plan and the U.K. pension plan. These plans were closed to new participants in 2005, after which defined contribution plans were offered to new employees. The shift to defined contribution plans is expected to continue to reduce volatility of both plan expense and contributions. For additional information, refer to Note 11, Retirement Benefits, to the consolidated financial statements.

Net Periodic Cost

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


	Three Months Ended		Nine Months Ended
	30 June		30 June
	2024	2023	2024	2023
Service cost	$5.2	$5.7	$15.6	$17.5







Non-service cost	25.3	22.0	75.3	64.4
Other	0.6	0.2	0.8	0.7
Net Periodic Cost	$31.1	$27.9	$91.7	$82.6

Net periodic cost was $31.1 and $91.7 for the three and nine months ended 30 June 2024, respectively. Net periodic cost was $27.9 and $82.6 for the three and nine months ended 30 June 2023, respectively. The increased costs versus the prior year were primarily attributable to non-service costs, which were driven by lower expected returns on plan assets due to a smaller beginning of fiscal year balance of plan assets and higher interest cost, partially offset by a decrease in actuarial loss amortization. Non-service related components of net periodic cost are reflected within "Other non-operating income (expense), net" on our consolidated income statements.

Service costs result from benefits earned by active employees and are reflected as operating expenses primarily within "Cost of sales" and "Selling and administrative expense" on our consolidated income statements. The amount of service costs capitalized in the first nine months of fiscal years 2024 and 2023 was not material.

Company Contributions

Management considers various factors when making pension funding decisions, including tax, cash flow, and regulatory implications. For the nine months ended 30 June 2024 and 2023, our cash contributions to funded pension plans and benefit payments for unfunded pension plans were $25.6 and $22.0, respectively.

Total contributions for fiscal year 2024 are expected to be approximately $35 to $45. During fiscal year 2023, total contributions were $32.6.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

A description of our major accounting policies, including those that we consider to be the most critical to understanding our financial statements, is included in our 2023 Form 10-K. There were no changes to our accounting policies during the first nine months of fiscal year 2024.

Management’s Discussion and Analysis of our financial condition and results of operations is based on the consolidated financial statements and accompanying notes that have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates reflect our best judgment about current and/or future economic and market conditions and their effect based on information available as of the date of our consolidated financial statements. If conditions change, actual results may differ materially from these estimates.

Judgments and estimates of uncertainties are required to apply our accounting policies in many areas. However, application of policies that management has identified as critical places significant importance on management’s judgment, often as the result of the need to make estimates about the effects of matters that are inherently uncertain. During the first nine months of fiscal year 2024, we recorded changes to project cost estimates on certain sale of equipment projects that are accounted for under the cost incurred input method. Accordingly, we recorded cumulative effect adjustments that unfavorably impacted operating income by approximately $50 and $115 for the three and nine months ended 30 June 2024, respectively. There were no other changes to our estimates during the first nine months of fiscal year 2024 that had a significant impact on our financial condition, change in financial condition, liquidity, or results of operations.

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