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OFFON

AIR PRODUCTS AND CHEMICALS, INC.

(APD)
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Air Products and Chemicals : & CHEMICALS INC /DE/ Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

08/09/2021 | 10:11am EDT
Third Quarter 2021 in Summary                          36
              Third Quarter 2021 Results of Operations               37
              First Nine Months 2021 in Summary                      42
              First Nine Months 2021 Results of Operations           44
              Reconciliations of Non-GAAP Financial Measures         50
              Liquidity and Capital Resources                        57
              Contractual Obligations                                59
              Pension Benefits                                       59
              Commitments and Contingencies                          59
              Off-Balance Sheet Arrangements                         60
              Related Party Transactions                             60
              Critical Accounting Policies and Estimates             60
              New Accounting Guidance                                60



The discussion that follows should be read in conjunction with the interim
consolidated financial statements and the accompanying notes contained in this
quarterly report. Unless otherwise stated, financial information is presented in
millions of dollars, except for per share data. Except for net income, which
includes the results of discontinued operations, financial information is
presented on a continuing operations basis. Comparisons of our results of
operations and liquidity and capital resources are for the third quarter and
first nine months of fiscal years 2021 and 2020. The disclosures provided in
this quarterly report are complementary to those made in our 2020 Form 10-K.
The financial measures 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 these measures are
presented under "Reconciliations of Non-GAAP Financial Measures" beginning on
page 50.
COVID-19 Pandemic
COVID-19 was declared a global pandemic by the World Health Organization in
March 2020. The health and safety policies we implemented at the beginning of
the pandemic have allowed us to safely maintain plant operations and reliably
supply critical products and services to our customers. As this significant
health crisis continues, we remain focused on business continuity while
prioritizing the health and well-being of our people.
COVID-19 had a less significant impact on our business operations and results in
the third quarter and first nine months of fiscal year 2021 compared to the same
periods in the prior year. Although we are encouraged by signs of improvement,
particularly in our merchant business, volume recovery has not been consistent
across our product lines. Throughout the pandemic, our on-site business remained
stable, and we continued to acquire new assets and businesses, execute pricing
actions, and bring new plants on stream. We also strengthened our organization
by adding resources in various functions, particularly in engineering and
project development, to help us pursue and execute our growth strategy.
There are many unknowns regarding the pandemic, including the ongoing spread and
severity of the virus and the pace of vaccine rollouts globally. Although some
countries in which we operate, such as the United States, have made COVID-19
vaccines available to most of the population, some areas continue to face
challenges with increasing outbreaks, reinstated lockdowns, and travel
restrictions. Given the dynamic nature of these circumstances, uncertainty
remains related to how the pandemic may affect our future business, results of
operations, and overall financial performance.
                                       35

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                   THIRD QUARTER 2021 VS. THIRD QUARTER 2020
THIRD QUARTER 2021 IN SUMMARY
•Sales of $2,604.7 increased 26%, or $539.5, due to higher volumes and energy
and natural gas cost pass-through to customers, as well as favorable currency
and pricing actions.
•Operating income of $577.1 increased 7%, or $37.9, and operating margin of
22.2% decreased 390 basis points ("bp").
•Net income of $532.3 increased 16%, or $75.2, and net income margin of 20.4%
decreased 170 bp.
•Adjusted EBITDA of $976.0 increased 11%, or $95.0, and adjusted EBITDA margin
of 37.5% decreased 520 bp.
•Diluted EPS of $2.36 increased 17%, or $0.35 per share, and adjusted diluted
EPS of $2.31 increased 15%, or $0.30 per share. A summary table of changes in
diluted EPS is presented below.
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.
                                                                 Three Months Ended
                                                                       30 June                     Increase
                                                               2021               2020            (Decrease)
Total Diluted EPS                                               $2.40              $2.01               $0.39
Less: Diluted EPS from income from discontinued
operations                                                       0.04                  -                0.04
Diluted EPS from continuing operations                          $2.36              $2.01               $0.35
Operating Impacts
Underlying business
Volume(A)                                                                                              $0.26
Price, net of variable costs                                                                            0.05
Other costs                                                                                            (0.29)
Currency                                                                                                0.12

Total Operating Impacts                                                                                $0.14
Other Impacts
Equity affiliates' income                                                                              $0.04

Interest expense                                                                                       (0.01)

Other non-operating income (expense), net                                                               0.05

Change in effective tax rate, excluding discrete item below

                                                                                                   0.03

Tax election benefit and other                                                                          0.05

Noncontrolling interests(A)                                                                             0.05

Total Other Impacts                                                                                    $0.21

Total Change in Diluted EPS From Continuing Operations                                                 $0.35


(A)The volume impact on diluted EPS includes reduced contributions from our
60%-owned Lu'An joint venture that we consolidate within our Industrial Gases -
Asia segment. Refer to the sales discussion below for additional detail. This
impact is partially offset by the positive impact of lower net income being
attributed to our joint venture partner within "Noncontrolling interests."
                                                       Three Months Ended
                                                             30 June           Increase
                                                        2021        2020      (Decrease)
  Diluted EPS From Continuing Operations              $2.36       $2.01        $0.35

  Tax election benefit and other                      (0.05)          -        (0.05)

  Adjusted Diluted EPS From Continuing Operations     $2.31       $2.01        $0.30



                                       36
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THIRD QUARTER 2021 RESULTS OF OPERATIONS
Discussion of Consolidated Results
                                        Three Months Ended
                                              30 June
                                       2021                2020          $ Change        Change
GAAP Measures
Sales                                   $2,604.7        $2,065.2        $539.5            26  %
Operating income                           577.1           539.2          37.9             7  %
Operating margin                            22.2  %         26.1  %                     (390)  bp
Equity affiliates' income                   63.2            51.2          12.0            23  %
Net income                                 532.3           457.1          75.2            16  %
Net income margin                           20.4  %         22.1  %                     (170)  bp
Non-GAAP Measures
Adjusted EBITDA                           $976.0          $881.0         $95.0            11  %
Adjusted EBITDA margin                      37.5  %         42.7  %                     (520)  bp



Sales % Change from Prior Year
Volume                                         12  %
Price                                           2  %

Energy and natural gas cost pass-through 6 % Currency

                                        6  %

Total Consolidated Sales Change                26  %



Sales of $2,604.7 increased 26%, or $539.5, due to higher volumes of 12%, higher
energy and natural gas cost pass-through to customers of 6%, favorable currency
impacts of 6%, and positive pricing of 2%. The volume improvement was primarily
attributable to higher demand in our base merchant business driven by recovery
from COVID-19, new plants, and acquisitions. These factors were partially offset
by reduced contributions from the Lu'An gasification project, as further
discussed below. The higher energy and natural gas cost pass-through to
customers was primarily attributable to higher natural gas prices in our
Industrial Gases - Americas segment. Favorable currency was primarily driven by
the appreciation of the Chinese Renminbi and Euro against the U.S. Dollar.
Continued focus on pricing actions in our merchant businesses resulted in price
improvement in each of our three regional segments.
During the third quarter of fiscal year 2021, Lu'An Clean Energy Company
("Lu'An"), a long-term onsite customer in Asia with which we have a consolidated
joint venture, restarted its facility following the successful completion of
major maintenance work in September 2020. In the first quarter of fiscal year
2021, we agreed with Lu'An to a short-term reduction in charges and we are
recognizing lower revenue in our Industrial Gases - Asia segment. During the
third quarter, our facility resumed operations, and the joint venture is
supplying product under the short-term agreement.
Cost of Sales and Gross Margin
Cost of sales of $1,801.9 increased 34%, or $457.0. The increase from the prior
year was primarily due to higher costs associated with sales volumes of $185,
higher energy and natural gas cost pass-through to customers of $111,
unfavorable currency impacts of $84, and higher other costs, including power and
other cost inflation, of $77. Gross margin of 30.8% decreased 410 bp from 34.9%
in the prior year, as the factors noted above were partially offset by the
positive impact of our pricing actions.
Selling and Administrative
Selling and administrative expense of $213.3 increased 21%, or $36.4, primarily
driven by higher spending for business development resources to support our
growth strategy and unfavorable currency impacts. Selling and administrative
expense as a percentage of sales decreased to 8.2% from 8.6% in the prior year.
                                       37
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Research and Development
Research and development expense of $23.2 increased 17%, or $3.3, primarily due
to higher product development costs in our Industrial Gases - Global segment.
Research and development expense as a percentage of sales decreased to 0.9% from
1.0% in the prior year.
Other Income (Expense), Net
Other income of $10.8 decreased 31%, or $4.9, primarily due to the impact of
currency and lower asset sales.
Operating Income and Operating Margin
Operating income of $577.1 increased 7%, or $37.9, as higher volumes of $72,
favorable currency of $34, and positive pricing, net of power and fuel costs, of
$12 were partially offset by higher net operating costs of $80. Unfavorable net
operating costs were driven by higher planned maintenance, particularly in the
Industrial Gases - Americas segment, and the addition of resources, primarily in
the engineering and project development organization to support our growth
strategy.
Operating margin of 22.2% decreased 390 bp from 26.1% in the prior year,
primarily due to unfavorable net operating costs and higher energy and natural
gas cost pass-through to customers, which contributed to sales but not operating
income, partially offset by higher volumes.
Equity Affiliates' Income
Equity affiliates' income of $63.2 increased 23%, or $12.0, primarily driven by
higher income from an affiliate in India.
Interest Expense
                                         Three Months Ended
                                               30 June
                                          2021        2020
Interest incurred                       $42.8       $36.6
Less: Capitalized interest                7.2         4.5
Interest expense                        $35.6       $32.1


Interest incurred increased 17%, or $6.2, primarily driven by a higher debt
balance due to the issuance of U.S. Dollar- and Euro-denominated fixed-rate
notes in the third quarter of fiscal year 2020. Capitalized interest increased
60%, or $2.7, due to a net increase in the carrying value of projects under
construction.
Other Non-Operating Income (Expense), Net
Other non-operating income of $21.1 increased $13.0, primarily driven by higher
non-service pension income in 2021 resulting from lower interest costs and
higher total assets, particularly for our U.S. pension plans.
Discontinued Operations
In the third quarter of fiscal year 2021, we recorded a net tax benefit of $8.2
($0.04 per share) as a component of discontinued operations upon release of tax
liabilities related to uncertain tax positions associated with our former
Energy-from-Waste ("EfW") business. These liabilities were established in 2016
and released after expiration of the statute of limitations.
Net Income and Net Income Margin
Net income of $532.3, including net income from discontinued operations of $8.2,
increased 16%, or $75.2, primarily due to higher volumes, favorable currency,
positive pricing, net of power and fuel costs, and higher income from equity
affiliates and other non-operating income, partially offset by higher net
operating costs. In addition, the current year includes a tax benefit reflected
in continuing operations for the release of tax reserves established in 2017, as
further discussed below.
Net income margin of 20.4% decreased 170 bp from 22.1% in the prior year.
Unfavorable net operating costs, driven by higher maintenance activities and the
addition of resources to support our growth strategy, decreased margin by
approximately 250 bp. Higher energy and natural gas cost pass-through to
customers, which contributes to sales but not net income, negatively impacted
margin by approximately 100 bp. These factors were partially offset by positive
impacts from a lower effective tax rate, higher non-operating income, and higher
income from equity affiliates.
                                       38
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Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA of $976.0 increased 11%, or $95.0, primarily due to higher
volumes, favorable currency, positive pricing, and higher equity affiliates'
income, partially offset by unfavorable net operating costs. Adjusted EBITDA
margin of 37.5% decreased 520 bp from 42.7% in the prior year, primarily due to
the unfavorable net operating costs, which negatively impacted margin by
approximately 350 bp, and higher energy and natural gas cost pass-through to
customers, which negatively impacted margin by approximately 200 bp.
Effective Tax Rate
Our effective tax rate was 16.3% and 19.3% for the three months ended 30 June
2021 and 2020, respectively. The current year rate was lower primarily due to an
income tax benefit of $21.5 recorded in the third quarter of fiscal year 2021
upon release of tax reserves established for uncertain tax positions taken in
prior years. This included a benefit of $12.2 ($0.05 per share) for release of
reserves established in 2017 for a tax election related to a non-U.S. subsidiary
and other previously disclosed items ("tax election benefit and other"). Refer
to Note 16, Income Taxes, to the consolidated financial statements for
additional information. The impact of these tax benefits was partially offset by
higher beneficial changes in foreign tax law in the prior year.
The adjusted effective tax rate was 18.2% and 19.3% for the three months ended
30 June 2021 and 2020, respectively. The current year adjusted rate was lower
primarily due to income tax benefits recorded in the third quarter of fiscal
year 2021 upon release of tax reserves established for uncertain tax positions
taken in prior years. The impact of these tax benefits was partially offset by
higher beneficial changes in foreign tax law in the prior year.
Discussion of Segment Results
Industrial Gases - Americas
                                        Three Months Ended
                                              30 June
                                        2021               2020         $ Change       % Change
Sales                                    $1,063.3        $849.9        $213.4              25  %
Operating income                            286.0         248.3          37.7              15  %
Operating margin                             26.9  %       29.2  %                      (230) bp
Equity affiliates' income                    24.6          19.9           4.7              24  %
Adjusted EBITDA                             464.8         411.0          53.8              13  %
Adjusted EBITDA margin                       43.7  %       48.4  %                      (470) bp



Sales % Change from Prior Year
Volume                                             9  %
Price                                              4  %

Energy and natural gas cost pass-through 10 % Currency

                                           2  %

Total Industrial Gases - Americas Sales Change 25 %




Sales of $1,063.3 increased 25%, or $213.4, due to higher energy and natural gas
cost pass-through to customers of 10%, higher volumes of 9%, positive pricing of
4%, and favorable currency of 2%. Energy and natural gas cost pass-through to
customers was higher as natural gas prices remained elevated. The volume
improvement was primarily driven by COVID-19 recovery in our base merchant
business, higher medical oxygen sales in South America, and favorable one-time
items. While we are encouraged by higher demand for most merchant products,
hydrogen demand has not fully recovered. The pricing improvement was
attributable to continued focus on pricing actions in our merchant business.
                                       39
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Operating income of $286.0 increased 15%, or $37.7, due to higher volumes,
including one-time items, of $49, positive pricing of $19, and favorable
currency of $6, partially offset by higher net operating costs of $36. The
higher net operating costs were primarily driven by maintenance activities as
prior year work was limited due to restrictions imposed in response to COVID-19.
Operating margin of 26.9% decreased 230 bp from 29.2% in the prior year
primarily due to the higher net operating costs and higher energy and natural
gas cost pass-through to customers, which accounted for approximately 250 bp of
the decline, partially offset by the impact from higher volumes and one-time
items.
Equity affiliates' income of $24.6 increased 24%, or $4.7, primarily driven by
higher income from affiliates in Mexico.
Industrial Gases - EMEA
                                        Three Months Ended
                                              30 June
                                        2021               2020         $ Change       % Change
Sales                                      $623.3        $429.7        $193.6             45  %
Operating income                            140.1         105.1          35.0             33  %
Operating margin                             22.5  %       24.5  %                      (200) bp
Equity affiliates' income                    13.5          17.4          (3.9)           (22  %)
Adjusted EBITDA                             212.3         169.8          42.5             25  %
Adjusted EBITDA margin                       34.1  %       39.5  %                      (540) bp



Sales % Change from Prior Year
Volume                                         24  %
Price                                           1  %

Energy and natural gas cost pass-through 8 % Currency

                                       12  %

Total Industrial Gases - EMEA Sales Change 45 %




Sales of $623.3 increased 45%, or $193.6, due to higher volumes of 24%,
favorable currency of 12%, higher energy and natural gas cost pass-through to
customers of 8%, and positive pricing of 1%. The volume improvement was
primarily driven by COVID-19 recovery in our base merchant business and an
acquisition in Israel in July 2020. While we are encouraged by higher demand for
liquid bulk products, our packaged gas business has not fully recovered from
COVID-19. Favorable currency impacts were primarily driven by the appreciation
of the Euro and the British Pound Sterling against the U.S. Dollar. The positive
impact of our pricing actions, particularly in our merchant business, was
partially offset by the impact of unfavorable product mix.
Operating income of $140.1 increased 33%, or $35.0, primarily due to higher
volumes of $35 and favorable currency impacts of $12, partially offset by higher
net operating costs of $7 and unfavorable pricing, net of power and fuel costs,
of $5. Operating margin of 22.5% decreased 200 bp from 24.5% in the prior year,
primarily due to the higher energy and natural gas cost pass-through to
customers, which accounted for approximately 100 bp of the decline, and higher
costs driven by power and other cost inflation.
Equity affiliates' income of $13.5 decreased 22%, or $3.9, primarily due to
lower income from affiliates in Italy and Saudi Arabia, partially offset by
higher income from an affiliate in South Africa.
                                       40
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Industrial Gases - Asia
                                        Three Months Ended
                                              30 June
                                        2021               2020        $ Change       % Change
Sales                                      $751.8        $651.9        $99.9             15  %
Operating income                            219.1         221.9         (2.8)            (1  %)
Operating margin                             29.1  %       34.0  %                     (490) bp
Equity affiliates' income                    23.5          11.7         11.8            101  %
Adjusted EBITDA                             356.4         326.5         29.9              9  %
Adjusted EBITDA margin                       47.4  %       50.1  %                     (270) bp



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

Energy and natural gas cost pass-through - % Currency

                                       8  %

Total Industrial Gases - Asia Sales Change 15 %




Sales of $751.8 increased 15%, or $99.9, due to favorable currency of 8%, higher
volumes of 6%, and positive pricing of 1%. The favorable currency impact was
primarily attributable to the appreciation of the Chinese Renminbi against the
U.S. Dollar. Higher volumes in our base merchant business, including some
recovery from COVID-19, and positive contributions from new plants were
partially offset by reduced contributions from Lu'An. Energy and natural gas
cost pass-through to customers was flat versus the prior year.
Operating income of $219.1 decreased 1%, or $2.8, primarily due to higher costs
of $20, partially offset by favorable currency of $19. Reduced income
contributions from Lu'An were mostly offset by the higher volumes from merchant
and new plants. Operating margin of 29.1% decreased 490 bp from 34.0% in the
prior year, primarily due to the reduced volume contributions from Lu'An and
higher costs.
Equity affiliates' income of $23.5 increased 101%, or $11.8, primarily due to
higher income from an affiliate in India.
Industrial Gases - Global
The Industrial Gases - Global segment includes sales of cryogenic and gas
processing equipment for air separation and centralized global costs associated
with management of all the Industrial Gases segments.

                           Three Months Ended
                                30 June
                        2021                2020        $ Change       % Change
Sales                 $99.1               $77.6         $21.5             28  %
Operating loss        (33.6)              (13.4)        (20.2)          (151  %)
Adjusted EBITDA       (29.1)               (8.9)        (20.2)          (227  %)


Sales of $99.1 increased 28%, or $21.5, primarily due to higher sale of equipment project activity. Despite higher sales, operating loss of $33.6 increased 151%, or $20.2, due to higher project costs, including unfavorable changes in cost estimates on projects accounted for under the cost incurred input method, and higher product development spending.

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Corporate and other
The Corporate and other segment includes our liquefied natural gas ("LNG"),
turbo machinery equipment and services, and distribution sale of equipment
businesses as well as corporate support functions that benefit all segments. The
results of the Corporate and other segment also include income and expense that
is not directly associated with the other segments, such as foreign exchange
gains and losses.
                           Three Months Ended
                                30 June
                        2021                2020        $ Change       % Change
Sales                 $67.2               $56.1         $11.1             20  %
Operating loss        (34.5)              (22.7)        (11.8)           (52  %)
Adjusted EBITDA       (28.4)              (17.4)        (11.0)           (63  %)



Sales of $67.2 increased 20%, or $11.1, primarily due to higher project activity
in our distribution sale of equipment business. Despite higher sales, operating
loss of $34.5 increased 52%, or $11.8, as higher business development and
corporate support costs were only partially offset by higher sale of equipment
activity.



               FIRST NINE MONTHS 2021 VS. FIRST NINE MONTHS 2020

FIRST NINE MONTHS 2021 IN SUMMARY
The results below are compared to the first nine months of fiscal year 2020:
•Sales of $7,481.9 increased 14%, or $945.7, due to higher volumes and energy
and natural gas cost pass-through to customers, as well as favorable currency
and pricing actions.
•Operating income of $1,664.7 decreased 1%, or $12.7, and operating margin of
22.2% decreased 350 bp.
•Net income of $1,496.1 increased 4%, or $59.7, and net income margin
of 20.0% decreased 200 bp.
•Adjusted EBITDA of $2,842.1 increased 6%, or $160.2, and adjusted EBITDA margin
of 38.0% decreased 300 bp.
•Diluted EPS of $6.61 increased 4%, or $0.25, and adjusted diluted EPS of $6.51
increased 5%, or $0.32. A summary table of changes in diluted EPS is presented
below.
•We increased the quarterly dividend on our common stock to $1.50 per share,
representing a 12% increase from the previous dividend of $1.34 per share. This
is the 39th consecutive year that we have increased our quarterly dividend
payment.
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Changes in Diluted EPS Attributable to Air Products
The per share impacts presented in the tables below were calculated
independently and may not sum to the total change in diluted EPS due to
rounding.
                                                                     Nine Months Ended
                                                                          30 June                     Increase
                                                                  2021               2020            (Decrease)

Total Diluted EPS                                                  $6.69              $6.30              $0.39

Less: Diluted EPS from income (loss) from discontinued operations

                                                          0.08              (0.06)              0.14
Diluted EPS From Continuing Operations                             $6.61              $6.36              $0.25
Operating Impacts
Underlying business
Volume(A)                                                                                               ($0.18)
Price, net of variable costs                                                                              0.30
Other costs                                                                                              (0.38)

Currency                                                                                                  0.29
Facility closure                                                                                         (0.08)
Company headquarters relocation income                                                                   (0.12)

Gain on exchange with joint venture partner                                                               0.12
Total Operating Impacts                                                                                 ($0.05)
Other Impacts
Equity affiliates' income                                                                                 0.14
Interest expense                                                                                         (0.14)

Other non-operating income (expense), net                                                                 0.12

Change in effective tax rate, excluding discrete items below

                                                                                                     0.05
India Finance Act 2020                                                                                   (0.06)
Tax election benefit and other                                                                            0.05

Noncontrolling interests(A)                                                                               0.13
Weighted average diluted shares                                                                          (0.01)
Total Other Impacts                                                                                      $0.30

Total Change in Diluted EPS From Continuing Operations                                                   $0.25


(A)The negative volume impact on diluted EPS includes reduced contributions from
the Lu'An gasification project, which was partially offset by a positive impact
from lower net income being attributed to our joint venture partner within
"Noncontrolling interests."
                                                       Nine Months Ended
                                                            30 June           Increase
                                                       2021        2020      (Decrease)
  Diluted EPS From Continuing Operations             $6.61       $6.36      

$0.25

  Facility closure                                    0.08           -      

0.08

Gain on exchange with joint venture partner (0.12) -

(0.12)


  Company headquarters relocation income                 -       (0.12)     

0.12

  India Finance Act 2020                                 -       (0.06)     

0.06


  Tax election benefit and other                     (0.05)          -      

(0.05)

Adjusted Diluted EPS From Continuing Operations $6.51 $6.19

  $0.32



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FIRST NINE MONTHS 2021 RESULTS OF OPERATIONS
Discussion of Consolidated Results
                                        Nine Months Ended
                                             30 June
                                       2021               2020          $ Change        Change
GAAP Measures
Sales                                  $7,481.9        $6,536.2        $945.7            14  %
Operating income                        1,664.7         1,677.4         (12.7)           (1  %)
Operating margin                           22.2  %         25.7  %                     (350)  bp
Equity affiliates' income                 202.3           197.6           4.7             2  %
Net income                              1,496.1         1,436.4          59.7             4  %
Net income margin                          20.0  %         22.0  %                     (200)  bp
Non-GAAP Measures
Adjusted EBITDA                         2,842.1         2,681.9         160.2             6  %
Adjusted EBITDA margin                     38.0  %         41.0  %                      (300) bp



Sales % Change from Prior Year
Volume                                         4  %
Price                                          2  %

Energy and natural gas cost pass-through 4 % Currency

                                       4  %

Total Consolidated Sales Change               14  %


Sales of $7,481.9 increased 14%, or $945.7, due to higher volumes of 4%, higher
energy and natural gas cost pass-through to customers of 4%, favorable currency
impacts of 4%, and positive pricing of 2%. Positive volume contributions from
new plants, acquisitions, and increased sale-of-equipment activities were
partially offset by reduced contributions from the Lu'An gasification project.
The higher energy and natural gas cost pass-through to customers was primarily
attributable to our Industrial Gases - Americas segment and included unusually
high energy and natural gas prices related to Winter Storm Uri in the U.S. Gulf
Coast in February 2021. Favorable currency was primarily driven by the
appreciation of the Chinese Renminbi and Euro against the U.S. Dollar. Continued
focus on pricing actions in our merchant businesses resulted in price
improvement in each of the three regional segments.
Cost of Sales and Gross Margin
Total cost of sales of $5,203.0, including the facility closure discussed below,
increased 21%, or $911.4. The increase from the prior year was primarily due to
higher energy and natural gas cost pass-through to customers of $293, higher
costs associated with sales volumes of $279, unfavorable currency impacts of
$190, and higher costs, including power and other cost inflation, of $126. Gross
margin of 30.5% decreased 380 bp from 34.3% in the prior year, as the factors
noted above were partially offset by the positive impact of our pricing actions.
Facility Closure
In the second quarter of fiscal year 2021, we recorded a charge of $23.2 ($17.4
after-tax, or $0.08 per share) primarily for a noncash write-down of assets
associated with a contract termination in the Industrial Gases - Americas
segment. This charge is reflected as "Facility closure" on our consolidated
income statements for the nine months ended 30 June 2021 and was not recorded in
segment results.
Selling and Administrative Expense
Selling and administrative expense of $626.3 increased 8%, or $46.0, primarily
driven by higher spending for business development resources to support our
growth strategy and unfavorable currency impacts. Selling and administrative
expense as a percentage of sales decreased to 8.4% from 8.9%.
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Research and Development
Research and development expense of $67.8 increased 19%, or $11.0, primarily due
to higher product development costs in our Industrial Gases - Global segment.
Research and development expense as a percentage of sales of 0.9% was flat
versus the prior year.
Gain on Exchange with Joint Venture Partner
In the second quarter of fiscal year 2021, we recognized a gain of $36.8 ($27.3
after-tax, or $0.12 per share) on an exchange with the Tyczka Group, a former
joint venture partner in our Industrial Gases - EMEA segment. As part of the
exchange, we separated our 50/50 joint venture in Germany into two separate
businesses so each party could acquire a portion of the business on a 100%
basis. The gain included $12.7 from the revaluation of our previously held
equity interest in the portion of the business that we retained and $24.1 from
the sale of our equity interest in the remaining business. The gain is reflected
as "Gain on exchange with joint venture partner" on our consolidated income
statements for the nine months ended 30 June 2021 and was not recorded in
segment results. Refer to Note 3, Acquisitions, to the consolidated financial
statements for additional information.
Company Headquarters Relocation Income (Expense)
In the second quarter of fiscal year 2020, we sold property at our current
corporate headquarters located in Trexlertown, Pennsylvania, in anticipation of
relocating our U.S. headquarters. We received net proceeds of $44.1 and recorded
a gain of $33.8 ($25.6 after-tax, or $0.12 per share), which is reflected on our
consolidated income statements as "Company headquarters relocation income
(expense)" for the nine months ended 30 June 2021. The gain was not recorded in
the results of the Corporate and other segment.
Other Income (Expense), Net
Other income of $43.1 increased 19%, or $7.0, primarily driven by the settlement
of a supply contract in the first quarter of fiscal year 2021, partially offset
by the impact of currency and lower asset sales.
Operating Income and Operating Margin
Operating income of $1,664.7 decreased 1%, or $12.7, as higher net operating
costs of $105, unfavorable volume mix of $51, prior year income associated with
the company headquarters relocation of $34, and a facility closure of $23 were
partially offset by positive pricing, net of power and fuel costs, of $83,
favorable currency of $80, and a gain on an exchange with a joint venture
partner of $37. Unfavorable net operating costs were driven by higher
maintenance activities, particularly in the Industrial Gases - Americas segment,
and the addition of resources to support our growth strategy.
Operating margin of 22.2% decreased 350 bp from 25.7% in the prior year,
primarily due to the unfavorable net operating costs, unfavorable volume mix,
and higher energy and natural gas cost pass-through to customers, which
contributed to sales but not operating income, partially offset by positive
pricing. The positive impact from a gain on an exchange with a joint venture
partner was offset by the impact of income associated with the company
headquarters relocation in the prior year.
Equity Affiliates' Income
Equity affiliates' income of $202.3 increased 2%, or $4.7. Higher income from
affiliates in the regional segments was partially offset by a prior year benefit
of $33.8 for the release of our share of accumulated dividend distribution taxes
related to an Indian affiliate as a result of the enactment of the India Finance
Act 2020. Refer to Note 16, Income Taxes, to the consolidated financial
statements for additional information.
Interest Expense
                                          Nine Months Ended
                                               30 June
                                           2021        2020
Interest incurred                       $127.7       $82.2
Less: capitalized interest                19.3        12.1
Interest expense                        $108.4       $70.1


Interest incurred increased 55%, or $45.5, primarily driven by a higher debt
balance due to the issuance of U.S. Dollar- and Euro-denominated fixed-rate
notes in the third quarter of fiscal year 2020. Capitalized interest increased
60%, or $7.2, due to a net increase in the carrying value of projects under
construction.
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Other Non-Operating Income (Expense), net
Other non-operating income of $56.5 increased $32.2. We recorded higher
non-service pension income in 2021 due to lower interest costs and higher total
assets, primarily for our U.S. pension plans. The current year also included
favorable currency impacts. These factors were partially offset by lower
interest income on cash and cash items due to lower interest rates.
Discontinued Operations
Income from discontinued operations, net of tax, was $18.5 for the nine months
ended 30 June 2021. In the third quarter of fiscal year 2021, we recorded a net
tax benefit of $8.2 ($0.04 per share) as a component of discontinued operations
upon release of tax liabilities related to uncertain tax positions associated
with our former EfW business. These liabilities were established in 2016 and
released after expiration of the statute of limitations. Additionally, we
recorded a tax benefit from discontinued operations of $10.3 ($0.05 per share)
in the first quarter of fiscal year 2021, primarily from the settlement of a
state tax appeal related to the gain on the sale of our former Performance
Materials Division in fiscal year 2017.
In the second quarter of fiscal year 2020, we recorded a pre-tax loss from
discontinued operations of $19.0 ($14.3 after-tax, or $0.06 per share) to
increase our existing liability for retained environmental obligations
associated with the sale of our former Amines business in September 2006. Refer
to the Pace discussion within Note 12, Commitments and Contingencies, for
additional information.
Net Income and Net Income Margin
Net income of $1,496.1, including income from discontinued operations,
increased 4%, or $59.7. On a continuing operations basis, the increase was
primarily driven by positive pricing, net of power and fuel costs, favorable
currency impacts, and a gain on an exchange with a joint venture partner,
partially offset by unfavorable net operating costs, volume mix, and a loss from
a facility closure. The prior year included income associated with the company
headquarters relocation and a net benefit from the India Finance Act 2020.
Additionally, income from discontinued operations, net of tax, increased to
$18.5 from a loss of $14.3 in the prior year.
Net income margin of 20.0% decreased 200 bp from 22.0% in the prior year,
primarily due to the unfavorable net operating costs, volume mix, and higher
energy and natural gas cost pass-through to customers, which each decreased
margin by approximately 100 bp, partially offset by the impact from our pricing
actions.
Adjusted EBITDA and Adjusted EBITDA Margin
Adjusted EBITDA of $2,842.1 increased 6%, or $160.2, primarily due to positive
pricing, net of power and fuel costs, and favorable currency impacts, partially
offset by unfavorable net operating costs. Adjusted EBITDA margin of 38.0%
decreased 300 bp from 41.0% in the prior year, primarily due to the unfavorable
net operating costs and higher energy and natural gas cost pass-through to
customers, which each decreased margin by approximately 150 bp.
Effective Tax Rate
Our effective tax rate was 18.6% and 20.7% for the nine months ended 30 June
2021 and 2020, respectively. The current year rate was lower primarily due to
income tax benefits recorded upon release of tax reserves established for
uncertain tax positions taken in prior years, which included reserves released
in the first quarter due to an agreement reached with foreign tax authorities
and reserves released during the third quarter upon expiration of the statute of
limitations. The third quarter included a benefit of $12.2 ($0.05 per share) for
release of reserves established in 2017 for a tax election related to a non-U.S.
subsidiary and other previously disclosed items ("tax election benefit and
other"). Refer to Note 16, Income Taxes, to the consolidated financial
statements for additional information.
Additionally, the prior year rate includes the unfavorable impact of India
Finance Act 2020, which resulted in additional net income of $13.5 ($0.06 per
share). This included an increase to equity affiliates' income of $33.8,
partially offset by an increase to our income tax provision of $20.3 for changes
in the future tax costs of repatriated earnings. The impact of India Finance Act
2020 was partially offset by beneficial tax law changes in the prior year.
The adjusted effective tax rate was 19.2% and 19.9% for the nine months ended 30
June 2021 and 2020, respectively. The current year adjusted rate was lower
primarily due to income tax benefits recorded upon release of tax reserves
established for uncertain tax positions taken in prior years. These items were
partially offset by the impact of higher beneficial tax law changes recorded in
2020.
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Segment Analysis
Industrial Gases - Americas
                                         Nine Months Ended
                                              30 June
                                        2021               2020          $ Change       % Change
Sales                                   $3,052.4        $2,718.5        $333.9              12  %
Operating income                           775.2           773.5           1.7               -  %
Operating margin                            25.4  %         28.5  %                      (310) bp
Equity affiliates' income                   79.2            62.1          17.1              28  %
Adjusted EBITDA                          1,313.7         1,245.7          68.0               5  %
Adjusted EBITDA margin                      43.0  %         45.8  %                      (280) bp



Sales % Change from Prior Year
Volume                                             (1  %)
Price                                               3  %
Energy and natural gas cost pass-through            9  %
Currency                                            1  %

Total Industrial Gases - Americas Sales Change 12 %



Sales of $3,052.4 increased 12%, or $333.9, as higher energy and natural gas
cost pass-through to customers of 9%, positive pricing of 3%, and favorable
currency of 1% were partially offset by lower volumes of 1%. Energy and natural
gas cost pass-through to customers included unusually high energy and natural
gas prices related to Winter Storm Uri in the U.S. Gulf Coast in February 2021.
The pricing improvement was attributable to continued focus on pricing actions
in our merchant business. Volumes declined as positive contributions from new
plants, including hydrogen assets we acquired in April 2020, were more than
offset by lower demand due to COVID-19 in the first half of the fiscal year.
While we are encouraged by higher demand for most merchant products in the third
quarter, hydrogen demand has not fully recovered.
Operating income of $775.2 increased $1.7, primarily due to higher pricing, net
of power and fuel costs, of $61, partially offset by higher net operating costs
of $58. Operating margin of 25.4% decreased 310 bp from 28.5% in the prior year
primarily due to higher energy and natural gas cost pass-through to customers,
which negatively impacted margin by approximately 250 bp, and higher net
operating costs, partially offset by the impact of our pricing actions.
Equity affiliates' income of $79.2 increased 28%, or $17.1, primarily driven by
higher income from affiliates in Mexico.
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Industrial Gases - EMEA
                                         Nine Months Ended
                                              30 June
                                        2021               2020          $ Change       % Change
Sales                                   $1,770.9        $1,421.1        $349.8              25  %
Operating income                           421.2           350.2          71.0              20  %
Operating margin                            23.8  %         24.6  %                       (80) bp
Equity affiliates' income                   58.8            50.2           8.6              17  %
Adjusted EBITDA                            651.7           543.7         108.0              20  %
Adjusted EBITDA margin                      36.8  %         38.3  %                      (150) bp



Sales % Change from Prior Year
Volume                                         11  %
Price                                           2  %

Energy and natural gas cost pass-through 3 % Currency

                                        9  %

Total Industrial Gases - EMEA Sales Change 25 %




Sales of $1,770.9 increased 25%, or $349.8, due to higher volumes of 11%,
favorable currency impacts of 9%, higher energy and natural gas cost
pass-through to customers of 3%, and positive pricing of 2%. The volume
improvement was mainly attributable to an acquisition in Israel in July 2020 and
our base merchant business, partly due to COVID-19 recovery in the third
quarter. While we are encouraged by higher demand for liquid bulk products, our
packaged gas business has not fully recovered. Favorable currency impacts were
primarily driven by the appreciation of the Euro against the U.S. Dollar. The
pricing improvement was primarily attributable to our merchant business.
Operating income of $421.2 increased 20%, or $71.0, primarily due to higher
volumes of $36, favorable currency impacts of $27, and positive pricing, net of
power and fuel costs, of $12. Operating margin of 23.8% decreased 80 bp from
24.6% in the prior year, primarily due to impacts from higher energy and natural
gas cost pass-through to customers and unfavorable net operating costs.
Equity affiliates' income of $58.8 increased 17%, or $8.6, primarily due to
higher income from affiliates in Saudi Arabia and South Africa.
Industrial Gases - Asia
                                         Nine Months Ended
                                              30 June
                                        2021               2020          $ Change       % Change
Sales                                   $2,166.8        $2,002.8        $164.0              8  %
Operating income                           632.4           659.5         (27.1)            (4  %)
Operating margin                            29.2  %         32.9  %                      (370) bp
Equity affiliates' income                   58.9            42.4          16.5             39  %
Adjusted EBITDA                          1,022.7         1,000.5          22.2              2  %
Adjusted EBITDA margin                      47.2  %         50.0  %                      (280) bp



Sales % Change from Prior Year
Volume                                        -  %
Price                                         1  %

Energy and natural gas cost pass-through - % Currency

                                      7  %

Total Industrial Gases - Asia Sales Change 8 %

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Sales of $2,166.8 increased 8%, or $164.0, due to favorable currency of 7% and
positive pricing of 1%, as both volumes and energy and natural gas cost
pass-through to customers were flat. The favorable currency impact was primarily
attributable to the appreciation of the Chinese Renminbi against the U.S.
Dollar. Positive volume contributions from our base merchant business and new
plants were offset by reduced contributions from Lu'An.
Operating income of $632.4 decreased 4%, or $27.1, due to unfavorable volume mix
of $61 and higher net operating costs of $23, partially offset by favorable
currency of $48 and positive pricing, net of power and fuel costs, of
$9. Operating margin of 29.2% decreased 370 bp from 32.9% in the prior year
primarily due to reduced contributions from Lu'An.
Equity affiliates' income of $58.9 increased 39%, or $16.5, primarily due to
higher income from an affiliate in India.
Industrial Gases - Global

                             Nine Months Ended
                                  30 June
                         2021                  2020         $ Change       % Change
Sales                  $301.5                $249.5         $52.0             21  %
Operating loss          (64.3)                (29.6)        (34.7)          (117  %)
Adjusted EBITDA         (50.8)                (13.4)        (37.4)          (279  %)



Sales of $301.5 increased 21%, or $52.0, due to higher sale of equipment project
activity. Despite higher sales, operating loss of $64.3 increased 117%, or
$34.7, as higher project costs, including unfavorable changes in estimates on
projects accounted for under the cost incurred input method, and higher product
development spending were partially offset by income from the settlement of a
supply contract in the first quarter of 2021.
Corporate and other

                             Nine Months Ended
                                  30 June
                         2021                  2020         $ Change       % Change
Sales                  $190.3                $144.3         $46.0             32  %
Operating loss         (113.4)               (110.0)         (3.4)            (3  %)
Adjusted EBITDA         (95.2)                (94.6)         (0.6)            (1  %)



Sales of $190.3 increased 32%, or $46.0, primarily due to higher project
activity in our distribution sale of equipment and LNG businesses. Despite
higher sales, operating loss of $113.4 increased 3%, or $3.4, as higher business
development and corporate support costs were only partially offset by higher
sale of equipment activity.

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RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Millions of 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,
adjusted effective tax rate, and capital expenditures. On a segment basis, these
measures include adjusted EBITDA and adjusted EBITDA margin. In addition to
these measures, we also present certain supplemental non-GAAP financial measures
to help the reader understand the impact that certain disclosed items, or
"non-GAAP adjustments," have on the calculation of our adjusted diluted EPS. For
each non-GAAP financial measure, we present a reconciliation to the most
directly comparable financial measure calculated in accordance with GAAP.
Our non-GAAP financial measures are not meant to be considered in isolation or
as a substitute for the most directly comparable measure calculated in
accordance with GAAP. We believe these non-GAAP financial measures provide
investors, potential investors, securities analysts, and others with useful
information to evaluate the performance of our business because such measures,
when viewed together with financial results computed in accordance with GAAP,
provide a more complete understanding of the factors and trends affecting our
historical financial performance and projected future results.
In many cases, non-GAAP financial measures are determined by adjusting the most
directly comparable GAAP measure to exclude non-GAAP adjustments that we believe
are not representative of our underlying business performance. For example, we
previously excluded certain expenses associated with cost reduction actions,
impairment charges, and gains on disclosed transactions. The reader should be
aware that we may recognize similar losses or gains in the future. Readers
should also consider the limitations associated with these non-GAAP financial
measures, including the potential lack of comparability of these measures from
one company to another.
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.

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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. The per share impact for each non-GAAP adjustment was calculated
independently and may not sum to total adjusted diluted EPS due to rounding.
                                                                           Three Months Ended 30 June
                                                                                     Equity                          Net Income
                                                        Operating          

Affiliates' Income Tax Attributable to Diluted Q3 2021 vs. Q3 2020

                                        Income                    Income        Provision       Air Products             EPS
2021 GAAP                                             $577.1                    $63.2            $101.7            $525.4              $2.36
2020 GAAP                                              539.2                     51.2             109.3             446.5               2.01
Change GAAP                                                                                                                            $0.35
% Change GAAP                                                                                                                             17  %

2021 GAAP                                             $577.1                    $63.2            $101.7            $525.4              $2.36

Tax election benefit and other                             -                        -              12.2             (12.2)             (0.05)

2021 Non-GAAP ("Adjusted")                            $577.1                    $63.2            $113.9            $513.2              $2.31

2020 GAAP                                             $539.2                    $51.2            $109.3            $446.5              $2.01

No non-GAAP adjustments                                    -                        -                 -                 -                  -
2020 Non-GAAP ("Adjusted")                            $539.2                    $51.2            $109.3            $446.5              $2.01
Change Non-GAAP ("Adjusted")                                                                                                           $0.30
% Change Non-GAAP ("Adjusted")                                                                                                            15  %


                                                                      Nine Months Ended 30 June
                                                                                Equity                           Net Income
                                                   Operating               Affiliates'       Income Tax     Attributable to         Diluted
2021 vs. 2020                                         Income                    Income        Provision        Air Products             EPS
2021 GAAP                                      $1,664.7                   $202.3            $337.5           $1,470.2              $6.61
2020 GAAP                                       1,677.4                    197.6             378.5            1,414.2               6.36
Change GAAP                                                                                                                        $0.25
% Change GAAP                                                                                                                          4  %

2021 GAAP                                      $1,664.7                   $202.3            $337.5           $1,470.2              $6.61
Facility closure                                   23.2                        -               5.8               17.4               0.08

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

Tax election benefit and other                        -                        -              12.2              (12.2)             (0.05)

2021 Non-GAAP ("Adjusted")                     $1,651.1                   $202.3            $346.0           $1,448.1              $6.51

2020 GAAP                                      $1,677.4                   $197.6            $378.5           $1,414.2              $6.36

Company headquarters relocation (income)
expense                                           (33.8)                       -              (8.2)             (25.6)             (0.12)
India Finance Act 2020                                -                    (33.8)            (20.3)             (13.5)             (0.06)

2020 Non-GAAP ("Adjusted")                     $1,643.6                   $163.8            $350.0           $1,375.1              $6.19
Change Non-GAAP ("Adjusted")                                                                                                       $0.32
% Change Non-GAAP ("Adjusted")                                                                                                         5  %



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ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN
We define adjusted EBITDA as net income less income (loss) from discontinued
operations, net of tax, and excluding non-GAAP adjustments, which we do not
believe to be indicative of underlying business trends, before interest expense,
other non-operating income (expense), net, income tax provision, and
depreciation and amortization expense. Adjusted EBITDA and adjusted EBITDA
margin provide useful metrics for management to assess operating performance.
Margins are calculated independently for each period by dividing each line item
by consolidated sales for the respective period and may not sum to total margin
due to rounding.
The table below presents consolidated sales and a reconciliation of net income
on a GAAP basis to adjusted EBITDA and net income margin on a GAAP basis to
adjusted EBITDA margin:
                                                             Three Months Ended                                                                 Nine Months Ended
                                                                  30 June                                                                            30 June
                                                 2021                                     2020                                     2021                                     2020
                                           $                Margin                   $            Margin                     $               Margin                   $             Margin
Sales                                        $2,604.7                              $2,065.2                                   $7,481.9                              $6,536.2

Net income and net income
margin                                         $532.3          20.4  %               $457.1          22.1  %                  $1,496.1          20.0  %             $1,436.4          22.0  %
Less: Income (Loss) from
discontinued operations, net of
tax                                               8.2           0.3  %                    -             -  %                      18.5           0.2  %                (14.3)         (0.2  %)
Add: Interest expense                            35.6           1.4  %                 32.1           1.6  %                     108.4           1.4  %                 70.1           1.1  %
Less: Other non-operating
income (expense), net                            21.1           0.8  %                  8.1           0.4  %                      56.5           0.8  %                 24.3           0.4  %
Add: Income tax provision                       101.7           3.9  %                109.3           5.3  %                     337.5           4.5  %                378.5           5.8  %
Add: Depreciation and
amortization                                    335.7          12.9  %                290.6          14.1  %                     988.7          13.2  %                874.5          13.4  %
Add: Facility closure                               -             -  %                    -             -  %                      23.2           0.3  %                    -             -  %

Less: Gain on exchange with
joint venture partner                               -             -  %                    -             -  %                      36.8           0.5  %                    -             -  %
Less: Company headquarters
relocation income (expense)                         -             -  %                    -             -  %                         -             -  %                 33.8           0.5  %
Less: India Finance Act 2020 -
equity affiliate income impact                      -             -  %                    -             -  %                         -             -  %                 33.8           0.5  %

Adjusted EBITDA and adjusted
EBITDA margin                                  $976.0          37.5  %               $881.0          42.7  %                  $2,842.1          38.0  %             $2,681.9          41.0  %

                                               Q3 2021                                                                             2021
                                                 vs.                                                                               vs.
                                               Q3 2020                                                                             2020
Change GAAP
Net income $ change                             $75.2                                                                             $59.7
Net income % change                              16%                                                                                4%
Net income margin change                       (170) bp                                                                          (200) bp
Change Non-GAAP
Adjusted EBITDA $ change                        $95.0                                                                             $160.2
Adjusted EBITDA % change                         11%                                                                                6%
Adjusted EBITDA margin change                  (520) bp                                                                          (300) bp




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The tables below present sales and a reconciliation of operating income and
operating margin by segment to adjusted EBITDA and adjusted EBITDA margin by
segment for the three months ended 30 June 2021 and 2020:
               Industrial     Industrial     Industrial     Industrial
                   Gases-         Gases-         Gases-         Gases-   Corporate
Sales            Americas           EMEA           Asia         Global   and other          Total
Q3 2021    $1,063.3         $623.3         $751.8          $99.1        $67.2        $2,604.7
Q3 2020       849.9          429.7          651.9           77.6         56.1         2,065.2


                                                    Industrial         Industrial         Industrial         Industrial
                                                        Gases-             Gases-             Gases-             Gases-         Corporate
                                                      Americas               EMEA               Asia             Global         and other          Total

Q3 2021 GAAP
Operating income (loss)                            $286.0             $140.1             $219.1              ($33.6)           ($34.5)        $577.1     (A)
Operating margin                                     26.9  %            22.5  %            29.1  %
Q3 2020 GAAP
Operating income (loss)                            $248.3             $105.1             $221.9              ($13.4)           ($22.7)        $539.2     (A)
Operating margin                                     29.2  %            24.5  %            34.0  %
Q3 2021 vs. Q3 2020 Change GAAP
Operating income/loss $ change                      $37.7              $35.0              ($2.8)             ($20.2)           ($11.8)
Operating income/loss % change                         15  %              33  %              (1  %)            (151  %)           (52  %)
Operating margin change                              (230)  bp          (200)  bp          (490)  bp

Q3 2021 Non-GAAP
Operating income (loss)                            $286.0             $140.1             $219.1              ($33.6)           ($34.5)        $577.1     (A)
Add: Depreciation and amortization                  154.2               58.7              113.8                 2.9               6.1          

335.7

Add: Equity affiliates' income                       24.6               13.5               23.5                 1.6                 -           63.2     (A)
Adjusted EBITDA                                    $464.8             $212.3             $356.4              ($29.1)           ($28.4)        $976.0
Adjusted EBITDA margin                               43.7  %            34.1  %            47.4  %
Q3 2020 Non-GAAP
Operating income (loss)                            $248.3             $105.1             $221.9              ($13.4)           ($22.7)        $539.2     (A)
Add: Depreciation and amortization                  142.8               47.3               92.9                 2.3               5.3          

290.6

Add: Equity affiliates' income                       19.9               17.4               11.7                 2.2                 -           51.2     (A)
Adjusted EBITDA                                    $411.0             $169.8             $326.5               ($8.9)           ($17.4)        $881.0
Adjusted EBITDA margin                               48.4  %            39.5  %            50.1  %
Q3 2021 vs. Q3 2020 Change Non-GAAP
Adjusted EBITDA $ change                            $53.8              $42.5              $29.9              ($20.2)           ($11.0)
Adjusted EBITDA % change                               13  %              25  %               9  %             (227  %)           (63  %)
Adjusted EBITDA margin change                        (470)  bp          (540)  bp          (270)  bp

(A)Refer to the Reconciliations to Consolidated Results section below.

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The tables below present sales and a reconciliation of operating income and
operating margin by segment to adjusted EBITDA and adjusted EBITDA margin by
segment for the nine months ended 30 June 2021 and 2020:
              Industrial      Industrial      Industrial     Industrial
                  Gases-          Gases-          Gases-         Gases-    Corporate
Sales           Americas            EMEA            Asia         Global    and other          Total
2021      $3,052.4        $1,770.9        $2,166.8         $301.5        $190.3        $7,481.9
2020       2,718.5         1,421.1         2,002.8          249.5         144.3         6,536.2


                                                     Industrial         Industrial           Industrial         Industrial
                                                         Gases-             Gases-               Gases-             Gases-          Corporate
                                                       Americas               EMEA                 Asia             Global          and other           Total
2021 GAAP
Operating income (loss)                             $775.2             $421.2               $632.4              ($64.3)           ($113.4)       $1,651.1     (A)
Operating margin                                      25.4  %            23.8  %              29.2  %
2020 GAAP
Operating income (loss)                             $773.5             $350.2               $659.5              ($29.6)           ($110.0)       $1,643.6     (A)
Operating margin                                      28.5  %            24.6  %              32.9  %
2021 vs. 2020 Change GAAP
Operating income/loss $ change                        $1.7              $71.0               ($27.1)             ($34.7)             ($3.4)
Operating income/loss % change                           -  %              20  %                (4  %)            (117  %)             (3  %)
Operating margin change                               (310)  bp           (80)  bp            (370)  bp

2021 Non-GAAP
Operating income (loss)                             $775.2             $421.2               $632.4              ($64.3)           ($113.4)       $1,651.1     (A)
Add: Depreciation and amortization                   459.3              171.7                331.4                 8.1               18.2           

988.7

Add: Equity affiliates' income                        79.2               58.8                 58.9                 5.4                  -           202.3     (A)
Adjusted EBITDA                                   $1,313.7             $651.7             $1,022.7              ($50.8)            ($95.2)       $2,842.1
Adjusted EBITDA margin                                43.0  %            36.8  %              47.2  %
2020 Non-GAAP
Operating income (loss)                             $773.5             $350.2               $659.5              ($29.6)           ($110.0)       $1,643.6     (A)
Add: Depreciation and amortization                   410.1              143.3                298.6                 7.1               15.4           

874.5

Add: Equity affiliates' income                        62.1               50.2                 42.4                 9.1                  -           163.8     (A)
Adjusted EBITDA                                   $1,245.7             $543.7             $1,000.5              ($13.4)            ($94.6)       $2,681.9
Adjusted EBITDA margin                                45.8  %            38.3  %              50.0  %
2021 vs. 2020 Change Non-GAAP
Adjusted EBITDA $ change                             $68.0             $108.0                $22.2              ($37.4)             ($0.6)
Adjusted EBITDA % change                                 5  %              20  %                 2  %             (279  %)             (1  %)
Adjusted EBITDA margin change                         (280)  bp          (150)  bp            (280)  bp


(A)Refer to the Reconciliations to Consolidated Results section below.

                                       54

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  Table of Contents
Reconciliations to Consolidated Results
The table below reconciles operating income as reflected on our consolidated
income statements to total operating income disclosed in the table above:

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