Air Products & Chemicals, Inc.: Form 10-K for the period ended Sep 30, 2024

As used in this report, unless the context indicates otherwise, the terms “we,” “our,” “us,” the “Company,” "Air Products," or “registrant” include controlled subsidiaries and affiliates of Air Products.

Additional information about Air Products is available on our website at www.airproducts.com (http://www.airproducts.com). References to our website within this report are inactive textual references only. The content of our website is not incorporated by reference into, and does not form part of, this Annual Report on Form 10-K.

Air Products trades on the New York Stock Exchange under the symbol "APD". All periodic and current reports, registration statements, proxy statements, and other filings that we are required to file with the Securities and Exchange Commission ("SEC"), including our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), are available free of charge through our website as soon as reasonably practicable after electronic filing of the material with the SEC. All such reports filed during the period covered by this report were available on our website on the same day as filing. Additionally, these filings are available free of charge on the SEC's website, www.sec.gov (http://www.sec.gov).

Notes to the consolidated financial statements that are referenced in the disclosures that follow can be found under Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K.

About Air Products

Air Products and Chemicals, Inc., a Delaware corporation originally founded in 1940, is a world-leading industrial gases company that has built a reputation for its innovative culture, operational excellence, and commitment to safety and the environment. Focused on serving energy, environmental, and emerging markets, we are committed to generating a cleaner future by offering products and services that enable our customers to improve their environmental performance, product quality, and productivity.

With sustainability at its core, our two-pillar growth strategy includes the optimization and growth of our core industrial gases business while developing, engineering, building, owning, and operating some of the world’s largest clean hydrogen projects that will advance the transition to low- and zero-carbon energy in the industrial and heavy-duty transportation sectors. Our regional industrial gases business provides essential gases, related equipment, and applications expertise to customers in dozens of industries, including refining, chemicals, metals, electronics, manufacturing, medical, and food. Through our sale of equipment businesses, we also provide turbomachinery, membrane systems, and cryogenic containers globally.

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 26, Business Segment and Geographic Information, to the consolidated financial statements for additional information.

Our Businesses

Industrial Gases Business

Our industrial gases business, which is organized and operated regionally in the Americas, Asia, Europe, and Middle East and India segments, produces and sells atmospheric gases such as oxygen, nitrogen, and argon; process gases such as hydrogen, helium, carbon dioxide ("CO2"), carbon monoxide, and syngas (a mixture of hydrogen and carbon monoxide); and specialty gases. Overall regional industrial gases sales constituted over 90% of consolidated sales in fiscal years 2024, 2023, and 2022, approximately half of which were attributable to atmospheric gases.

Each of the regional industrial gases segments competes against three global industrial gas companies: Air Liquide S.A., Linde plc, and Messer Group GmbH, as well as regional competitors. Competition in industrial gases is based primarily on price, reliability of supply, and the development of industrial gas applications. We derive a competitive advantage in locations where we have pipeline networks, which enable us to provide a reliable and economic supply of products to our larger customers.

Production

Industrial gases are generally produced at or near the point of use given the complexity and inefficiency of storing molecules at low temperatures. The industrial gases business develops, builds, and operates equipment for the production or processing of gases. Atmospheric gases are produced through various air separation processes, of which cryogenic distillation is the most prevalent, while process gases are produced by methods other than air separation. To produce hydrogen, we purify byproduct sources obtained from the chemical and petrochemical industries. We have historically produced hydrogen from hydrocarbons exclusively without carbon capture (known as "gray hydrogen"); however, we are also investing in projects that are intended to create a reliable and consistent world-scale source of low-carbon hydrogen produced from hydrocarbons with carbon capture (known as “blue hydrogen”) as well as carbon-free hydrogen produced from renewable energy (known as “green hydrogen”).

Electricity is the largest cost component in the production of atmospheric gases. To produce hydrogen, carbon monoxide, and syngas, steam methane reformers use natural gas as the primary raw material, while gasifiers use liquid and solid hydrocarbons as the primary raw material. We mitigate electricity, natural gas, and hydrocarbon price fluctuations contractually through pricing formulas, surcharges, cost pass-through provisions, and tolling arrangements. During fiscal year 2024, no significant difficulties were encountered in obtaining adequate supplies of power and natural gas.

Helium is produced as a byproduct of gases extracted from underground reservoirs, primarily natural gas as well as CO2 purified before resale. Because helium is generally sourced globally at long distances from point of sale, we maintain an inventory of helium in our fleet of ISO containers as well as in underground storage facilities in Amarillo, Texas and Beaumont, Texas.

Supply Modes

We distribute gases to our industrial gas customers through different supply modes depending on various factors including the customer's volume requirements and location. Our supply modes are as follows:

• *On-Site Gases—*Supply mode associated with customers, principally in the energy production and refining, chemical, metals, and electronics industries worldwide, that require large volumes of gases and have relatively constant demand. Gases are produced and supplied by large facilities we construct or acquire on or near the customers’ facilities or by pipeline systems from centrally located production facilities. These sale of gas contracts are generally governed by 15- to 20-year contracts. We also deliver smaller quantities of product through small on-site plants (cryogenic or non-cryogenic generators), typically via a 10- to 15-year sale of gas contract. The contracts within this supply mode generally contain fixed monthly charges and/or minimum purchase requirements with price escalation provisions that are typically based on external indices. Our on-site supply mode generates approximately half our total company sales.
• *Merchant Gases—*Supply mode for liquid bulk and packaged gas products. Liquid bulk product is delivered in bulk in either liquid or gaseous form by tanker or tube trailer and stored, usually in its liquid state, in equipment that we typically design and install at the customer’s site for vaporizing into a gaseous state as needed. Liquid bulk sales are usually governed by three- to five-year contracts. Packaged gas products are delivered in small quantities in either cylinders or dewars. We operate packaged gas businesses in Europe, Asia, and Latin America.

We maintain inventory in locations that facilitate supply of products to customers on a reasonable delivery schedule. Inventory consists primarily of crude helium, specialty gases, and other industrial gases supplied via the merchant gases supply mode.

End Use

The refining industry uses hydrogen to facilitate the conversion of heavy crude feedstock and lower the sulfur content of gasoline and diesel fuels. This produces cleaner transportation fuels that can be used with other equipment, particularly in the developing hydrogen-for-mobility markets, to significantly reduce emissions that contribute to climate change. Many other industries that already benefit from hydrogen’s unique properties to improve quality, optimize performance, and reduce costs are also looking to hydrogen as a fuel that can help decarbonize their manufacturing processes. We have hydrogen fueling stations that support commercial markets as well as demonstration projects across the globe.

The chemicals industry uses hydrogen, oxygen, nitrogen, carbon monoxide, and syngas as feedstocks in the production of many basic chemicals. The energy production industry uses nitrogen injection for enhanced recovery of oil and natural gas and oxygen for gasification. Oxygen is used in combustion and industrial heating applications, including in the steel, certain nonferrous metals, glass, and cement industries. Nitrogen applications are used in food processing for freezing and preserving flavor, and nitrogen is used for inerting in various fields, including the metals, chemical, and semiconductor industries. Helium is used in laboratories and healthcare for cooling and in other industries for pressurizing, purging, and lifting. Argon is used in the metals and other industries for its unique inerting, thermal conductivity, and other properties. Industrial gases are also used in welding and providing healthcare and are utilized in various manufacturing processes to make them more efficient and to optimize performance.

Industrial Gases Equipment

We design and manufacture equipment for air separation, hydrocarbon recovery and purification, and liquid helium and liquid hydrogen transport and storage. The Corporate and other segment includes activity related to the sale of cryogenic and gas processing equipment for air separation. The equipment is sold worldwide to customers in a variety of industries, including chemical and petrochemical manufacturing, oil and gas recovery and processing, and steel and primary metals processing. The Corporate and other segment also includes the results of our Rotoflow business, which manufactures turboexpanders and other precision rotating equipment, and our Gardner Cryogenics business, which fabricates helium and hydrogen transport and storage containers. Additionally, through the end of fiscal year 2024, our Corporate and other segment included our liquefied natural gas ("LNG") process technology and equipment business, which was sold to Honeywell International Inc. on 30 September 2024. Refer to Note 4, Gain on Sale of Business, to the consolidated financial statements for additional information regarding the sale.

Steel, aluminum, and capital equipment subcomponents such as compressors are the principal raw materials in the manufacturing of equipment. Raw materials for individual projects typically are acquired under firm purchase agreements. Equipment is produced at our manufacturing sites with certain components procured from subcontractors and vendors.

Competition in the equipment business is based primarily on plant efficiency and technological performance, service, technical know-how, and price, as well as schedule and plant performance guarantees. Our sale of equipment supply mode constituted less than 10% of consolidated sales in fiscal years 2024, 2023, and 2022.

Customers

We do not have a homogeneous customer base or end market, and no single customer accounts for more than 10% of our consolidated sales. We do have concentrations of customers in specific industries, primarily refining, chemicals, and electronics. Within each of these industries, we have several large-volume customers with long-term contracts. A negative trend affecting one of these industries, or the loss of one of these major customers, although not material to our consolidated sales, could have an adverse impact on our financial results.

Seasonality

Our businesses are not subject to seasonal fluctuations to any material extent.

Governmental Contracts

Our business is not subject to a government entity’s renegotiation of profits or termination of contracts that would be material to our business as a whole.

Equity Affiliates

Our reporting segments include our share of the results of joint ventures accounted for under the equity method. Our share of our investees' net earnings is primarily presented net of income taxes within “Equity affiliates’ income" on our consolidated income statements. The carrying value of our equity method investments is reflected as "Investment in net assets of and advances to equity affiliates" on our consolidated balance sheets. Substantially all our equity method investments are in foreign industrial gas producers, the largest of which operate in Algeria, China, India, Italy, Mexico, Saudi Arabia, South Africa, and Thailand. For additional information regarding these investments, refer to Note 10, Equity Affiliates, to the consolidated financial statements.

International Operations

Through our subsidiaries, affiliates, and joint ventures accounted for using the equity method, we conduct business in approximately 50 countries and regions outside the United States. Our international businesses are subject to risks customarily encountered in foreign operations, including fluctuations in foreign currency exchange rates and controls, tariffs, trade sanctions, import and export controls, and other economic, political, and regulatory policies of local governments described in Item 1A, Risk Factors, of this Annual Report on Form 10-K.

We have controlling interests in foreign subsidiaries that operate in Canada and approximately 10 countries in Latin America (primarily Chile and Brazil); approximately 10 countries and regions in Asia (primarily China, South Korea, and Taiwan); approximately 25 countries in the Europe and Africa region (primarily the Netherlands, the countries of the United Kingdom, and Spain); and approximately five countries in the Middle East, primarily Saudi Arabia. As discussed under "Equity Affiliates" above, we also own non-controlling interests in entities operating in Africa, Asia, Europe, Latin America, and the Middle East.

Financial information about our foreign operations and investments is included in Note 10, Equity Affiliates; Note 24, Income Taxes; and Note 26, Business Segment and Geographic Information, to the consolidated financial statements. Information about foreign currency translation is included under “Foreign Currency” in Note 1, Basis of Presentation and Major Accounting Policies, to the consolidated financial statements. Information about our exposure to currency fluctuations is included in Note 15, Financial Instruments, to the consolidated financial statements, and in “Foreign Currency Exchange Rate Risk” included under Item 7A, Quantitative and Qualitative Disclosures About Market Risk, of this Annual Report on Form 10-K.

Technology Development

We pursue a market-oriented approach to technology development through research and development, engineering, and commercial development processes. We conduct research and development principally in our laboratories located in the United States (Allentown, Pennsylvania), the United Kingdom (Basingstoke and Carrington), Spain (Barcelona), China (Shanghai), and Saudi Arabia (Dhahran). We also fund and cooperate in research and development programs conducted by a number of major universities and undertake research work funded by others, including the United States government.

Development of technology for use within the Industrial Gases business focuses primarily on new and improved processes and equipment for the production and delivery of industrial gases and new or improved applications for industrial gas products.

During fiscal year 2024, we owned approximately 600 United States patents, approximately 3,200 foreign patents, and were a licensee under certain patents owned by others. While the patents and licenses are considered important, we do not consider our business as a whole to be materially dependent upon any particular patent, patent license, or group of patents or licenses.

Environmental Regulation

We are subject to various environmental laws, regulations, and public policies in the countries in which we have operations. Compliance with these measures often results in higher capital expenditures and costs. In the normal course of business, we are involved in legal proceedings under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA," the federal Superfund law); Resource Conservation and Recovery Act ("RCRA"); and similar state and foreign environmental laws relating to the designation of certain sites for investigation or remediation. Our accounting policy for environmental expenditures is discussed in Note 1, Basis of Presentation and Major Accounting Policies, and environmental loss contingencies are discussed in Note 19, Commitments and Contingencies, to the consolidated financial statements.

Some of our operations are within jurisdictions that have or are developing regulatory regimes governing emissions of greenhouse gases (“GHG”), including CO2. These include existing coverage under the European Union Emission Trading System, the California Cap-and-Trade Program, China’s Emission Trading Scheme and its nation-wide expansion, and South Korea’s Emission Trading Scheme. In the Netherlands, a CO2 emissions tax was enacted on 1 January 2021. In Canada, Alberta’s Technology Innovation and Emission Reduction System went into effect 1 January 2020. In Ontario, Environment & Climate Change Canada’s Output Based Pricing System was replaced by the GHG Emissions Performance Standards program beginning 1 January 2022. In Singapore, the Carbon Pricing Tax Act was implemented effective 1 January 2019. In Taiwan, enforcement of the Climate Change Response Act began in 2023 and a carbon fee was implemented effective 29 August 2024. In addition, the U.S. Environmental Protection Agency requires mandatory reporting of GHG emissions and is regulating GHG emissions for new construction and major modifications to existing facilities. The European Union has issued the Corporate Sustainability Reporting Directive as well as the Corporate Sustainability Due Diligence Directive, and California has enacted the Climate Corporate Data Accountability Act and the Climate Related Financial Risk Act that will require reporting and third-party assurance of GHG emissions information for certain entities. In March 2024, the SEC issued final rules for "The Enhancement and Standardization of Climate-Related Disclosures for Investors,” which would have required certain climate-related disclosures in our Annual Report on Form 10-K. In April 2024, the SEC stayed the effectiveness of the final rules pending the outcome of certain legal challenges. Furthermore, some jurisdictions have various mechanisms to target the power sector to achieve emission reductions, which often result in higher power costs.

Increased public concern may result in more international, U.S. federal, and/or regional requirements to reduce or mitigate the effects of GHG emissions. Although uncertain, these developments could increase our costs related to consumption of electric power, hydrogen production and application of our gasification technology. We will be able to mitigate costs related to the consumption of electric power through the use of renewable electricity and some of the other increased costs through contractual terms. However, the lack of definitive legislation or regulatory requirements prevents an accurate estimate of the long-term impact these measures will have on our operations. Any legislation that limits or taxes GHG emissions could negatively impact our growth, increase our operating costs, or reduce demand for certain of our products.

Regulation of GHG may also produce new opportunities for us. We continue to develop technologies to help our facilities and our customers lower energy consumption, improve efficiency, and lower emissions. We see significant opportunities for hydrogen for mobility, low carbon intensity hydrogen production supporting the global energy transition, utilization of carbon capture technologies, including subsequent CO2 product use or sequestration, and gasification.

Expenditures for capital projects intended to control pollution from existing operating facilities as required under current environmental regulations were not material in fiscal years 2024, 2023, and 2022. We do not expect material expenditures for these projects in fiscal year 2025.

For additional information regarding environmental matters, refer to Note 19, Commitments and Contingencies, to the consolidated financial statements.

Sustainability

Sustainability is at the core of our higher purpose to bring people together to collaborate and innovate solutions to the world’s most significant energy and environmental sustainability challenges. Our low- and zero-carbon hydrogen and other first mover projects demonstrate our commitment to making investments that will make a meaningful difference on climate issues, allowing us to support our customers’ sustainability journeys, conserve resources, and care for our employees and communities.

Our Sustainability Report details our strategy and the role our employees play in achieving our goals. Our latest Sustainability Report is available at www.airproducts.com/company/sustainability/sustainability-report (http://www.airproducts.com/company/sustainability/sustainability-report).

Human Capital Management

As of 30 September 2024, we had approximately 23,000 employees, of which over 95% were working full-time and approximately 75% were located outside the United States. We have collective bargaining agreements with unions and works councils at certain locations that expire on various dates over the next four years. Under 20% of our total workforce is covered by such agreements. Overall, we have a corporate strategy supported by our leaders and enabled by a positive organizational culture.

We believe our employees are our most valuable asset and are critical to our organization's success. Our goal is to be the safest, most diverse, and most profitable industrial gas company in the world, providing excellent service to our customers. Integral to our success is the continued development of our 4S culture (Safety, Speed, Simplicity and Self-Confidence) and the creation of a work environment where our employees feel that they belong and matter. Our talent-related initiatives, including employee recruitment and development, diversity and inclusion, and compensation and benefits programs, focus on building and retaining the world-class talent to execute our two-pillar growth strategy and fulfill Air Products' higher purpose.

Safety

Safety is a core value and fundamental to our goal of being the safest, most diverse, and most profitable industrial gas company in the world. We believe safety is a moral obligation, and we want our employees to return home to their families safe and healthy daily. Our overarching safety goal is zero accidents and incidents. We strive to continually improve the safety and health of our colleagues, contractors, customers, and host communities. Air Products uses a multidisciplinary approach to safety and health, which includes a global Environment, Health and Safety ("EHS) policy; goals for employee, contractor, and transportation safety; a Global EHS Management System that supports the principles of ISO 45001; employee training based on job function; risk assessment processes for workers, operations, products, transportation, and regulatory requirements, including an escalation process for engaging our EHS Risk Council; compliance audits conducted by our EHS Assurance Team; review of performance by our Board of Directors, Sustainability Leadership Council, businesses and operations, and members of our Safety and Health Centers of Excellence at least annually; internal reporting of results on a monthly basis; and external reporting on safety performance through our annual Sustainability Report, public website, and responses to various stakeholders.

Diversity, Inclusion, and Belonging

Our 2024 Sustainability Report sets forth our announced goals to further increase the percentage of women and U.S. minorities in professional and managerial roles and the recruitment and talent development strategies we have in place to ensure we meet these ambitions. By 2025, Air Products aims to achieve at least 28 percent female representation in the professional and managerial population globally, and at least 30 percent minority representation in that same population in the United States. We established these goals following analysis of our global employee representation metrics and future talent needs, as well as assessing industry benchmarks and peer companies. For more information on these initiatives and to access our most recently published Equal Employment Opportunity EEO-1 Report, please refer to our Diversity, Inclusion and Belonging website at www.airproducts.com/company/diversity (http://www.airproducts.com/company/diversity).

Compensation

As detailed in our 2024 Sustainability Report, in order to create an engaged workforce, individuals must be compensated fairly and equitably. A work environment where employees know they belong and matter includes fair and equitable pay. Our pay practices apply equally to all employees irrespective of gender, race, religion, disability, age, or any other form of personal difference. We pay competitively in local markets where we do business and compete for talent. We benchmark our compensation to ensure we keep pace with the market to provide competitive pay and benefits. Our compensation programs are generally comprised of base pay, annual variable pay (bonus), and long-term incentives (stock awards under the Air Products Long-Term Incentive Plan) for eligible employees.

Our Executive Officers

In addition to our Chairman, President, and Chief Executive Officer, our Executive Vice President and Chief Financial Officer, and our Executive Vice President, General Counsel and Secretary, the executive officers' information below includes members of senior leadership who were named to the Management Board as announced on 22 July 2024. These Management Board members were designated as executive officers effective 1 October 2024.

The table below identifies each executive officer by name, age, and offices held as of 21 November 2024. Information with respect to offices held is stated in fiscal years.

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Our operations are affected by various risks, many of which are beyond our control. In evaluating investment in the Company and the forward-looking information contained in this Annual Report on Form 10-K or presented elsewhere from time to time, you should carefully consider the risk factors discussed below. Any of these risks could have a material adverse effect on our business, operating results, financial condition, and the actual outcome of matters as to which forward-looking statements are made and could adversely affect the value of an investment in our securities. The risks described below are not all inclusive but are designed to highlight what we believe are important factors to consider when evaluating our expectations. In addition to such risks, there may be additional risks and uncertainties that adversely affect our business, performance, or financial condition in the future that are not presently known, are not currently believed to be significant, or are not identified below because they are common to all businesses.

Risks Related to Economic Conditions

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

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

Demand for our products and services depends in part on the general economic conditions affecting the regions and markets in which we do business. Weak economic conditions and changing supply and demand balances in the markets we serve have negatively impacted demand for our products and services in the past and may do so in the future. In addition, our growth strategy is largely based on expected demand for technologies and projects to limit the impact of global climate change. Demand for our solutions could be negatively impacted if the public and private sectors reduce their focus on reducing carbon emissions. Reduced demand for our products and services would have a negative impact on our revenues and earnings and could decrease our margins, constrain our operating flexibility, reduce efficient utilization of our manufacturing capacity, or result in unexpected charges. Excess capacity in our manufacturing facilities or those of our competitors could decrease our ability to maintain pricing and generate profits.

In addition, our operating results in one or more segments have in the past, and may in the future, be affected by uncertain or deteriorating economic conditions for particular customer markets within a segment. A decline in the industries served by our customers or adverse events or circumstances affecting individual customers can reduce demand for our products and services and impair the ability of such customers to satisfy their obligations to us, resulting in uncollected receivables, unanticipated contract terminations, project delays or the inability to recover plant investments, any of which may negatively impact our financial results.

Weak overall demand or specific customer conditions may also cause customer shutdowns or defaults or otherwise make us unable to operate facilities profitably and may force sale or abandonment of facilities and equipment or prevent projects from coming on-stream when expected. These or other events associated with weak economic conditions or specific market, industry, product, or customer events may require us to record an impairment on tangible assets, such as facilities and equipment, or intangible assets, such as intellectual property or goodwill. Any charges relating to such impairments could be significant and could have a material adverse impact on our financial condition and results of operations.

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

In fiscal year 2024, approximately 60% of our sales were derived from customers outside the United States and many of our operations, suppliers, customers, and employees are located outside the United States. Our operations in foreign jurisdictions may be subject to risks including exchange control regulations, import and trade restrictions, trade policy and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S. companies doing business abroad. Changing economic and political conditions within foreign jurisdictions, strained relations between countries, or the imposition, extension, or expansion of tariffs or international sanctions can cause fluctuations in demand, price volatility, supply disruptions, or loss of property. We have experienced these events in the past and the occurrence of any of these risks in the future could have a material adverse impact on our financial condition, results of operations, and cash flows.

Our growth strategies depend in part on our ability to further penetrate markets outside the United States, such as China, India, the Middle East, and Uzbekistan, and involve significantly larger and more complex projects, including gasification and large-scale hydrogen projects, some in regions where there is the potential for significant economic and political disruptions. We are actively investing large amounts of capital and other resources, in some cases through joint ventures, in developing markets, which we believe to have high growth potential. Our operations in these markets may be subject to greater risks than those faced by our operations in mature economies, including political and economic instability, project delay or abandonment due to unanticipated government actions, inadequate investment in infrastructure, undeveloped property rights and legal systems, unfamiliar regulatory environments, relationships with local partners, language and cultural differences and increased difficulty recruiting, training and retaining qualified employees. In addition, our properties and contracts in these locations may be subject to seizure and cancellation, respectively, without full compensation for loss. Successful operation of particular facilities or execution of projects may be disrupted by civil unrest, acts of war, sabotage or terrorism, and other local security concerns. Such concerns may require us to incur greater costs for security or require us to shut down operations for a period of time.

Furthermore, because the majority of our revenue is generated from sales outside the United States, we are exposed to fluctuations in foreign currency exchange rates. Our business is primarily exposed to translational currency risk as the results of our foreign operations are translated into U.S. dollars at current exchange rates throughout the fiscal period. Our policy is to minimize cash flow volatility from changes in currency exchange rates. We choose not to hedge the translation of our foreign subsidiaries’ earnings into dollars. Accordingly, reported sales, net earnings, cash flows, and fair values have been, and in the future will be, affected by changes in foreign exchange rates. For a more detailed discussion of currency exposure, see Item 7A, Quantitative and Qualitative Disclosures About Market Risk, below.

Risks Related to Our Business

Risks related to the approval, execution, and operation of our projects, particularly with respect to our largest projects, may adversely affect our operations or financial results.

A significant and growing portion of our business involves clean hydrogen, carbon capture, gasification, and other large-scale projects that involve challenging engineering, permitting, procurement, and construction phases that may last several years and involve the investment of billions of dollars. These projects are technically complex, often reliant on significant interaction with government authorities, and face significant financing, development, operational, and reputational risks. These projects may also be subject to complex government approvals, as well as legal or regulatory challenges by government authorities or third parties. Delays in receiving required approvals or related to litigation have required us and could in the future require us to delay or abandon certain projects, which may result in higher costs, lower returns, the loss of invested proceeds, and reputational damage.

We have in the past and may in the future encounter difficulties related to the development of projects that may result in delays, scope changes and additional costs. Such difficulties may relate to engineering, delays in designs or materials provided by the customer or a third party, equipment and materials delivery delays, schedule changes, customer scope changes, delays related to obtaining regulatory permits and rights-of-way, inability to find adequate sources of labor in the locations where we are building new plants, weather-related delays, delays by customers' contractors in completing their portion of a project, technical or transportation difficulties, cost overruns, supply difficulties, geopolitical risks, and other factors, many of which are beyond our control, that may impact our ability to complete a project within the original delivery schedule. In some cases, delays and additional costs have been and may in the future be substantial and could have a material adverse effect on our financial condition and results of operations. We also may be required to cancel a project and/or compensate the customer for the delay, which may also cause us to incur material costs that we may be unable to recover. In addition, in some cases we seek financing for large projects and face market risk associated with the availability and terms of such financing. These financing arrangements may require that we comply with certain performance requirements which, if not met, could result in default and restructuring costs or other losses. All of these factors could also negatively impact our reputation or relationships with our customers, suppliers and other third parties, any of which could adversely affect our ability to secure new projects in the future.

In addition, our large-scale clean hydrogen projects are being built before finalization of offtake agreements for a substantial percentage of expected production, which may create uncertainty regarding future demand, pricing, and other commercial terms. If we are unable to enter into favorable commercial agreements with prospective customers, our projected returns could be adversely impacted, which may harm our business and financial performance. In addition, uncertainty regarding future offtake agreements for our clean hydrogen projects may lead to greater uncertainty regarding our prospects, which may adversely affect the market prices for our securities and our credit ratings.

The operation of our facilities, pipelines, and delivery systems inherently entails hazards that require continuous oversight and control, such as pipeline leaks and ruptures, fire, explosions, toxic releases, mechanical failures, vehicle accidents, or cyber incidents. If operational risks materialize, they could result in loss of life, damage to the environment, or loss of production, all of which could negatively impact our ongoing operations, reputation, financial results, and cash flows. In addition, our operating results are dependent on the continued operation of our production facilities and our ability to meet customer requirements, which depend, in part, on our ability to properly maintain and replace aging assets.

We are subject to extensive government regulation in the jurisdictions in which we do business. Regulations addressing, among other things, import/export restrictions, anti-bribery and corruption, and taxes, can negatively impact our financial condition, results of operation, and cash flows.

We are subject to government regulation in the United States and in the foreign jurisdictions where we conduct business. The application of laws and regulations to our business is sometimes unclear. Compliance with laws and regulations may involve significant costs or require changes in business practices that could result in reduced profitability. If there is a determination that we have failed to comply with applicable laws or regulations, we may be subject to penalties or sanctions that could adversely impact our reputation and financial results. Compliance with changes in laws or regulations can result in increased operating costs and require additional, unplanned capital expenditures. Export controls or other regulatory restrictions could prevent us from shipping our products to and from some markets or increase the cost of doing so. Changes in tax laws and regulations and international tax treaties could affect the financial results of our businesses. Increasingly aggressive enforcement of anti-bribery and anti-corruption requirements, including the U.S. Foreign Corrupt Practices Act, the United Kingdom Bribery Act and the China Anti-Unfair Competition Law, could subject us to criminal or civil sanctions if a violation is deemed to have occurred. In addition, we are subject to laws and sanctions imposed by the U.S. and other jurisdictions where we do business that may prohibit us, or certain of our affiliates, from doing business in certain countries, or restricting the kind of business that we may conduct. Such restrictions may provide a competitive advantage to competitors who are not subject to comparable restrictions or prevent us from taking advantage of growth opportunities.

Further, we cannot guarantee that our internal controls and compliance systems will always protect us from acts committed by employees, agents, business partners or that businesses that we acquire would not violate U.S. and/or non-U.S. laws, including the laws governing payments to government officials, bribery, fraud, kickbacks and false claims, pricing, sales and marketing practices, conflicts of interest, competition, export and import compliance, money laundering, and data privacy. Any such improper actions or allegations of such acts could damage our reputation and subject us to civil or criminal investigations in the U.S. and in other jurisdictions and related shareholder lawsuits, could lead to substantial civil and criminal, monetary and non-monetary penalties, and could cause us to incur significant legal and investigatory fees. In addition, the government may seek to hold us liable as a successor for violations committed by companies in which we invest or that we acquire.

We may be unable to successfully identify, execute or effectively integrate acquisitions, manage our joint ventures, or effectively disentangle divested businesses.

Our ability to grow revenue, earnings, and cash flow at anticipated rates depends in part on our ability to identify, successfully acquire and integrate businesses and assets at appropriate prices, and realize expected growth, synergies, and operating efficiencies. We may not be able to complete transactions on favorable terms, on a timely basis or at all. In addition, our results of operations and cash flows may be adversely impacted by the failure of acquired businesses or assets to meet expected returns, the failure to integrate acquired businesses, the inability to dispose of non-core assets and businesses on satisfactory terms and conditions, and the discovery of unanticipated liabilities or other problems in acquired businesses or assets for which we lack adequate contractual protections or insurance. In addition, we may incur asset impairment charges related to acquisitions that do not meet expectations.

In addition, some of our largest projects involve joint ventures. These arrangements may involve significant risks and uncertainties, including our ability to cooperate with our strategic partners, our strategic partners having interests or goals that are inconsistent with ours, and the potential that our strategic partners may be unable to meet their economic or other obligations to the joint venture, which may negatively impact the expected benefits of the joint venture and cause us to incur additional expense or suffer reputational damage. In addition, due to the nature of these arrangements, we may have limited ability to direct or influence the management of the joint venture, which may limit our ability to assist and oversee the design and implementation of the joint venture’s business as well as its accounting, legal, governance, human resources, information technology, and other administrative systems. This may expose us to additional risks and uncertainties because we may be dependent upon and subject to liability, losses, or reputational damage relating to systems, controls, and personnel that are not under our control. These risks may be augmented when the joint venture is operating outside the United States due to differences in language, culture, and regulation, as well as the factors listed above that are relevant to our international operations.

We continually assess the strategic fit of our existing businesses and may divest businesses that are deemed not to fit with our strategic plan or are not achieving the desired return on investment. These transactions pose risks and challenges that could negatively impact our business and financial statements. For example, when we decide to sell or otherwise dispose of a business or assets, we may be unable to do so on satisfactory terms within our anticipated time frame or at all. In addition, divestitures or other dispositions may dilute our earnings per share, have other adverse financial and accounting impacts, distract management, and give rise to disputes with buyers or others. In addition, we have agreed, and may in the future agree, to indemnify buyers against known and unknown contingent liabilities. Our financial results could be impacted adversely by claims under these indemnification provisions.

The security of our information technology systems could be compromised, which could adversely affect our ability to operate.

We depend on information technology to enable us to operate safely and efficiently and interface with our customers as well as to maintain our internal control environment and financial reporting accuracy and efficiency. Our information technology capabilities are delivered through a combination of internal and external services and service providers. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, property damage, or the loss of or damage to our confidential business information due to a security breach. In addition, our information technology systems may be damaged, disrupted or shut down due to attacks by computer hackers, computer viruses, employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate. Security breaches of our systems (or the systems of our customers, suppliers or other business partners) could result in the misappropriation, destruction or unauthorized access or disclosure of confidential information or personal data belonging to us or to our employees, partners, customers or suppliers, and may subject us to legal liability.

As with most large systems, our information technology systems have in the past been, and in the future likely will be subject to computer viruses, malicious codes, unauthorized access and other cyber-attacks, and we expect the sophistication and frequency of such attacks to continue to increase. In addition, advancements in, and the deployment of, intelligent automation, including artificial intelligence tooling and “bots”, may increase our and our vendors’ vulnerability to such attacks. To date, we are not aware of any significant impact on our operations or financial results from such attempts; however, unauthorized access could disrupt our business operations, result in the loss of assets, and have a material adverse effect on our business, financial condition, or results of operations. Any of the attacks, breaches or other disruptions or damage described above could: interrupt our operations at one or more sites; delay production and shipments; result in the theft of our and our customers’ intellectual property and trade secrets; damage customer and business partner relationships and our reputation; result in defective products or services, physical damage to facilities, pipelines or delivery systems, including those we own or operate for third parties, legal claims and proceedings, liability and penalties under privacy laws, or increased costs for security and remediation; or raise concerns regarding our internal control environment and internal control over financial reporting. Each of these consequences could adversely affect our business, reputation and our financial statements.

Our business involves the use, storage, and transmission of information about our employees, vendors, and customers. The protection of such information, as well as our proprietary information, is critical to us. The regulatory environment surrounding information security and privacy is increasingly demanding, with the frequent imposition of new and constantly changing requirements. We have established policies and procedures to help protect the security and privacy of this information. We also, from time to time, export sensitive customer data and technical information to recipients outside the United States. Breaches of our security measures or the accidental loss, inadvertent disclosure, or unapproved dissemination of proprietary information or sensitive or confidential data about us or our customers, including the potential loss or disclosure of such information or data as a result of fraud, trickery, or other forms of deception, could expose us, our customers, or the individuals affected to a risk of loss or misuse of this information, which could ultimately result in litigation and potential legal and financial liability. These events could also damage our reputation or otherwise harm our business.

Interruption in ordinary sources of raw material or energy supply or an inability to recover increases in energy and raw material costs from customers could result in lost sales or reduced profitability.

Hydrocarbons, including natural gas, are the primary feedstock for the production of hydrogen, carbon monoxide, and syngas. Energy, including electricity, natural gas, and diesel fuel for delivery trucks, is the largest cost component of our business. Because our industrial gas facilities use substantial amounts of electricity, inflation and energy price fluctuations have impacted our revenues and earnings and may continue to do so in the future. A disruption in the supply of energy, components, or raw materials, whether due to market conditions, legislative or regulatory actions, natural disasters, public health crises and pandemics, or other disruption, could prevent us from meeting our contractual commitments and harm our business and financial results.

Our supply of crude helium for purification and resale is largely dependent upon natural gas production by crude helium suppliers. Lower natural gas production resulting from natural gas pricing dynamics, supplier operating or transportation issues, or other interruptions in sales from crude helium suppliers, can reduce our supplies of crude helium available for processing and resale to customers.

We typically contract to pass-through cost increases in energy and raw materials to customers, but such cost pass-through results in declining margins, and cost variability can negatively impact our other operating results. For example, we may be unable to raise prices as quickly as costs rise, or competitive pressures may prevent full recovery of such costs. In addition, increases in energy or raw material costs that cannot be passed on to customers for competitive or other reasons may negatively impact our revenues and earnings. Even where costs are passed through, price increases can cause lower sales volume.

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

We are continually developing and implementing new technologies and product offerings. Existing technologies are being implemented in products and designs or at scales beyond our experience base. These technological expansions can create nontraditional performance risks to our operations. Failure of the technologies to work as predicted, or unintended consequences of new designs or uses, could lead to cost overruns, project delays, financial penalties, or damage to our reputation. We may face difficulties marketing products produced using new technologies including, but not limited to, green hydrogen, which may adversely impact our sales and financial results. In addition, certain large-scale projects may contain processes or technologies that we have not operated at the same scale or in the same combination, and although such projects generally include technologies and processes that have been demonstrated previously by others, such technologies or processes may be new to us and may introduce new risks to our operations. Additionally, there is also a risk that our new technologies may become obsolete and be replaced by other market alternatives. Performance difficulties on these larger projects may have a material adverse effect on our operations and financial results. In addition, performance challenges may adversely affect our reputation and our ability to obtain future contracts.

Protecting our intellectual property is critical to our technological development, and we may suffer competitive harm from infringement on such rights.

As we develop new technologies, it is critical that we protect our intellectual property assets against third-party infringement. We own a number of patents and other forms of intellectual property related to our products and services. As we develop new technologies there is a risk that our patent applications may not be granted, or we may not receive sufficient protection of our proprietary interests. We may also expend considerable resources in defending our patents against third-party infringement. It is critical that we protect our proprietary interests to prevent competitive harm.

Legal and Regulatory Risks

Legislative, regulatory, societal, and market efforts to address global climate change may impact our business and create financial risk.

We are the world’s leading supplier of hydrogen, the primary use of which is the production of ultra-low sulfur transportation fuels that have significantly reduced transportation emissions and helped improve human health. To make the high volumes of hydrogen needed by our customers, we have historically used steam methane reforming to produce hydrogen without carbon capture (i.e., "gray hydrogen"), which results in the emission of CO2. In addition, gasification enables the conversion of lower value feedstocks into cleaner energy and value-added products; however, our gasification projects also produce CO2. Some of our operations are within jurisdictions that have or are developing regulatory regimes governing disclosure of GHG emissions, including CO2, such as the European Union's CSRD, California’s Climate Corporate Data Accountability Act and Climate Related Financial Risk Act, and similar regulations under consideration by the SEC, which may lead to direct and indirect costs on our operations. We could also face scrutiny from stakeholders regarding our reporting under various frameworks for disclosing GHG emissions-related data, including those we use currently in our sustainability reporting. If our GHG emissions-related data, processes, and reporting are incomplete or inaccurate, or if we fail to comply with relevant reporting frameworks from newly emerging regulations, we may incur monetary penalties and reputational harm, and we could become subject to litigation or government investigations, which may also adversely affect our reputation and business.

Increased public concern and governmental action may result in more international, U.S. federal and/or regional requirements to reduce or mitigate the effects of GHG emissions or increased demand for technologies and projects to limit the impact of global climate change. Although uncertain, these developments could increase our costs related to consumption of electric power, hydrogen production, and application of our gasification technology, although these developments may be mitigated by our growth strategy focused on world-scale clean hydrogen projects. We believe we will be able to mitigate some of the increased costs through contractual terms, but the lack of definitive legislation or regulatory requirements prevents an accurate estimate of the long-term impact these measures will have on our operations. Any legislation or governmental action that limits or taxes GHG emissions could negatively impact our growth, increase our operating costs, or reduce demand for certain of our products, particularly for our core industrial gases business.

In addition, our growth strategy is partially dependent on a regulatory environment that favors technologies focused on limiting the impact of climate change, in particular toward the production and distribution of clean hydrogen. For example, we anticipate benefits from tax incentives created by the U.S. Inflation Reduction Act of 2022 for carbon sequestration and clean hydrogen production in future years once our projects in these areas come on-stream in the U.S. If there is a reversal in the regulatory environment or a discontinuation or reduction of incentives or benefits for the development of technologies limiting the impact of climate change, particularly those focused on low- and zero-carbon hydrogen production, demand for our products may be less than we anticipate and certain projects and our long-term growth strategy could be adversely affected. Any such occurrence could adversely affect our projected returns, which may harm our business and financial performance.

Our operations may present a safety risk to our employees and others.

Notwithstanding our emphasis on the safety of our employees and contractors and the precautions we take related to health and safety, we may be unable to avoid safety incidents relating to our operations that result in injuries or deaths. Certain safety incidents may result in legal or regulatory action that could result in increased expenses or reputational damage. We maintain workers' compensation insurance to address the risk of incurring material liabilities for injuries or deaths, but there can be no assurance that the insurance coverage will be adequate or will continue to be available on terms acceptable to us, or at all, which could result in material liabilities to us for any injuries or deaths. Changes to federal, state, and local employee health and safety regulations, and legislative, regulatory, or societal responses to safety incidents may result in heightened regulations or public scrutiny that may increase our compliance costs or result in reputational damage.

The manufacturing and sale of our products, as well as the construction and sale of plants and facilities, may give rise to risks associated with the production, filling, storage, handling, and transport of raw materials, goods, or waste. Our products and services, if defective or not handled or performed appropriately, have in the past and may in the future lead to personal injuries, business interruptions, environmental damages, or other significant damages, which may result, among other consequences, in liability, losses, monetary penalties, or compensation payments, environmental clean-up costs, or other costs and expenses, exclusion from certain market sectors deemed important for future development of the business, and/or loss of reputation, all of which could have a material adverse effect on our business and results of operations.

Our business depends on our ability to attract, develop, engage, and retain qualified employees.

Our success depends on our ability to attract, develop, engage, and retain employees with the skills necessary to our business. Competitive labor market conditions have resulted in increased demand for qualified personnel, which makes it difficult to attract, hire, and retain employees with specialized technical experience. In addition, the increasing number of experienced employees becoming retirement-eligible and our company headcount growth further amplify this challenge. The number of our employees has grown both internationally and in the United States, with our total headcount increasing from approximately 16,300 at the end of fiscal 2018 to approximately 23,000 at the end of fiscal 2024. Our results of operations have been and in the future could be adversely affected by increased costs due to increased competition for skilled talent in the market. In addition, increased turnover and decreased tenure of employees may impact productivity, costs, and organizational culture. We undertake significant efforts to hire, engage, and retain our employees and to effectively manage workforce costs, even with rapid political, social, and economic shifts in our markets. If these efforts are unsuccessful, our growth may be limited and we may suffer financial or reputational harm that could have a material adverse effect on our business, financial condition, or results of operations.

Our financial results may be affected by various legal and regulatory proceedings, including antitrust, tax, environmental, or other matters.

We are subject to litigation and regulatory investigations and proceedings in the normal course of business and could become subject to additional claims in the future, some of which could be material. While we seek to limit our liability in our commercial contractual arrangements, there are no guarantees that each contract will contain suitable limitations of liability or that limitations of liability will be enforceable. Also, the outcome of existing legal proceedings may differ from our expectations because the outcomes of litigation, including regulatory matters, are often difficult to predict reliably. Various factors or developments can lead us to change current estimates of liabilities and related insurance receivables, where applicable, or make such estimates for matters previously not susceptible to reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant regulatory developments, or changes in applicable law. A future adverse ruling, settlement, or unfavorable development could result in charges that could have a material adverse effect on our financial condition, results of operations, and cash flows in any particular period.

Costs and expenses resulting from compliance with environmental regulations may negatively impact our operations and financial results.

We are subject to extensive federal, state, local, and foreign environmental and safety laws and regulations concerning, among other things, emissions in the air; discharges to land and water; and the generation, handling, treatment, and disposal of hazardous waste and other materials. We take our environmental responsibilities very seriously, but there is a risk of adverse environmental impact inherent in our manufacturing operations and in the transportation of our products. Future developments and more stringent environmental regulations may require us to make additional unforeseen environmental expenditures. In addition, laws and regulations may require significant expenditures for environmental protection equipment, compliance, and remediation. These additional costs may adversely affect our financial results. For a more detailed description of these matters, see Item 1, Business–Environmental Regulation, above.

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

The multinational nature of our business subjects us to taxation in the United States and numerous foreign jurisdictions. Due to economic and political conditions, tax rates in various jurisdictions may be subject to significant change. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, global minimum taxes related to the new tax framework established by the Organization for Economic Co-operation and Development, or changes in tax laws or their interpretation.

Changes to income tax laws and regulations in any of the jurisdictions in which we operate, or in the interpretation of such laws, could significantly increase our effective tax rate and adversely impact our financial condition, results of operations, or cash flows. Various levels of government, including the U.S. federal government, are increasingly focused on tax reform and other legislative action to increase tax revenue. Further changes in tax laws in the U.S. or foreign jurisdictions where we operate could have a material adverse effect on our business, results of operations, or financial condition.

Actions of activist shareholders may be disruptive and costly.

While we value constructive feedback from our investors and regularly engage in dialogue with them on various matters, the Company may nonetheless be subject to actions or proposals from activist shareholders that may not align with our business strategies or the interests of our other shareholders. An activist investor, Mantle Ridge L.P. and certain of its affiliates (together, "Mantle Ridge") recently nominated a slate of nine director candidates to stand for election at the Company’s 2025 Annual Meeting of Shareholders and on 19 November 2024, Mantle Ridge filed a preliminary proxy statement with the SEC indicating its intention to solicit proxies on behalf of its nominees. Because Mantle Ridge nominated a full slate of nine directors, if all or a majority of Mantle Ridge's nominees are elected, Mantle Ridge would gain control of the Company without paying a premium to shareholders. The Board of Directors accordingly concluded that Mantle Ridge's proposal should be decided by the shareholders of the Company and not by the Board. The resulting proxy contest could be costly and time consuming for the Company and may divert management’s and our Board’s attention and resources from our business. In addition, if nominees advanced by Mantle Ridge are elected to our Board with a specific agenda, it may adversely affect our ability to effectively and timely implement our growth strategy, which could have an adverse effect on our business and our results of operations and financial condition. If a sufficient number of Mantle Ridge's nominees are elected, it may be deemed to constitute a change in control under certain of our material contracts and agreements. As a result of these factors, the proxy contest may cause significant fluctuation in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business. Even if we are successful in this proxy contest, we may incur significant expenses. In addition, perceived uncertainties as to our future direction, strategy, or leadership created by the proxy contest may result in the loss of business opportunities and make it more difficult to attract and retain investors, customers, employees, and other business partners. We cannot predict the outcome or timing of any matters relating to the anticipated proxy contest or the ultimate impact that such matters may have on our business, liquidity, financial condition, or results of operations.

General Risk Factors

Catastrophic events could disrupt our operations or the operations of our suppliers or customers, having a negative impact on our business, financial results, and cash flows.

Our operations could be impacted by catastrophic events outside our control, including severe weather conditions such as hurricanes, floods, earthquakes, storms, epidemics, pandemics, acts of war, and terrorism. Any such event could cause a serious business disruption that could affect our ability to produce and distribute products and possibly expose us to third-party liability claims. Additionally, such events could impact our suppliers, customers, and partners, which could cause energy and raw materials to be unavailable to us, or our customers to be unable to purchase or accept our products and services. Any such occurrence could have a negative impact on our operations and financial results.

Inability to compete effectively in a segment could adversely impact sales and financial performance.

We face strong competition from large global competitors and many smaller regional competitors in many of our business segments. Introduction by competitors of new technologies, competing products, or additional capacity could weaken demand for, or impact pricing of our products, negatively impacting financial results. In addition, competitors’ pricing policies could affect our profitability or market share.

Cybersecurity risk management and oversight are of utmost importance to Air Products and are necessary to maintain the trust and confidence of our customers, employees, and other stakeholders. The Company has implemented a thorough cybersecurity program for assessing, identifying, and managing material risks from cybersecurity threats as a fully integrated component of the Company's overall Enterprise Risk Management ("ERM").

In fiscal year 2024, we achieved our primary cybersecurity risk management objective of having no material cybersecurity incidents. Over the past three years, we have not experienced any material information security breaches and have not incurred material expenses from cybersecurity incidents, including those arising at third parties.

Cybersecurity Risk Management and Strategy

Our cybersecurity risk management program is designed as a holistic program focused on predicting, preventing, detecting, and responding to cybersecurity threats across enterprise systems as well as the operational technology systems for our plants and pipelines.

The Company regularly assesses industry best practices, frameworks, and standards, and leverages them to advance its cybersecurity risk management maturity. These frameworks include the International Society of Automation and the International Electrotechnical Commission standards for industrial automation, as well as the National Institute of Standards and Technology.

Our cybersecurity program includes procedures for the detection, analysis, and mitigation of cybersecurity incidents. Our cybersecurity incident response includes criteria for prioritization and escalation based on severity under an established incident prioritization framework. Incidents are reported internally to senior management, the Board or the Board's Audit and Finance Committee, as appropriate based on the potential severity of the incident. Incidents that are elevated based on their potential severity, including any event that is potentially material, are promptly escalated and analyzed for potential external reporting requirements.

As part of the Company’s information security training program, all employees participate in various cybersecurity awareness activities, including an annual Information Security Awareness training module and monthly simulated phishing events.

We leverage third-party service partners to expand the capabilities of our cybersecurity program. This may include testing of the program’s protection measures as well as services for incident detection, investigation, and recovery. We also leverage third-party service providers to conduct tabletop exercises and perform assessments against cybersecurity frameworks.

Our suppliers and third-party service providers are subject to cybersecurity obligations. Prior to engagement, we assess the cybersecurity posture of third-party service providers who store, process, or transmit Air Products' information.

The Company maintains policies and procedures for preventive controls for enterprise applications including, but not limited to, access controls and change management. In addition, we maintain relevant business continuity and disaster recovery plans as part of our overall cybersecurity risk management strategy.

For a discussion of risks related to potential cybersecurity incidents, please refer to Item 1A, Risk Factors, of this Annual Report on Form 10-K.

Cybersecurity Governance

Our Board of Directors recognizes the importance of cybersecurity and has oversight responsibility for cybersecurity risks. The Board of Directors receives updates on our cybersecurity program at least quarterly from our Chief Information Officer ("CIO") and Chief Information Security Officer ("CISO"). In addition, the Board’s Audit and Finance Committee, which is composed entirely of independent directors, receives quarterly reports regarding our ERM program and top risks, including those relating to cybersecurity.

Our CIO is a member of the Company’s Management Board and is responsible for the administration of the cybersecurity risk management program. Prior to joining the company in 2020, our CIO spent 24 years in the aerospace and defense industry and held multiple senior leadership roles within digital technology, leading large global organizations in all aspects of digital technology, including cybersecurity risk management.

Under the direction of our CIO, our CISO leads the execution of the cybersecurity risk management program for our enterprise and operational technology systems. Our CISO is a seasoned cybersecurity executive with over 30 years of broad digital technology experience at Air Products. Our CISO has experience in leading global enterprise and operational technology cybersecurity programs, maintains a Certified Information Systems Security Professional certification, and has completed CISO executive education at Carnegie Mellon University. The Information Security leadership team that reports to the CISO is composed of four security leaders with over 80 years of combined experience and multiple professional certifications.

Our CISO has announced his intention to retire at the end of December 2024. The Company expects to appoint a successor in the near future.

Air Products and Chemicals, Inc. owns its principal administrative offices located at the Company's global headquarters and co-located research and development facility in Allentown, Pennsylvania, as well as regional offices in Hersham, England; Medellin, Colombia; and Santiago, Chile. We lease the principal administrative offices in Shanghai, China; Pune, India; Vadodara, India; and Dhahran, Saudi Arabia. We lease administrative offices in the United States, Canada, Spain, Malaysia, and China, primarily for our Finance and Business Services organization.

Descriptions of the properties used by our five business segments are provided below. We believe that our facilities are suitable and adequate for our current and anticipated future levels of operation.

Americas

Our Americas segment operates from approximately 465 production and distribution facilities in North and South America. Of these facilities, approximately 25% are located on owned property. We have sufficient property rights and permits for the ongoing operation of our pipeline systems in the Gulf Coast, California, and Arizona in the United States and Alberta and Ontario in Canada. Management and sales support is based in our Allentown, Medellin, and Santiago offices referred to above, and at approximately 20 leased properties located throughout North and South America.

Asia

Our Asia segment operates from approximately 300 production and distribution facilities within the region, of which approximately 35% are on owned property or long-duration term grants. We have sufficient property rights and permits for the ongoing operation of our pipeline systems in China, South Korea, Taiwan, Malaysia, Singapore, and Indonesia. Management and sales support for this business segment is based in Shanghai, China, and Kuala Lumpur, Malaysia, and in approximately 35 leased office locations throughout the region.

Europe

Our Europe segment operates from approximately 245 production and distribution facilities in Europe, of which approximately 35% are on owned property. We have sufficient property rights and permits for the ongoing operation of our pipeline systems in the Netherlands, the United Kingdom, Belgium, France, and Germany. Management and sales support for this business segment is based in Hersham, England; and Barcelona, Spain; and at approximately 15 leased regional office sites and 15 leased local office sites throughout the region.

Middle East and India

Our Middle East and India segment operates from approximately 15 production and distribution facilities throughout the region, all of which are leasehold properties. Management and sales support for this business segment are based in Dharan, Saudi Arabia; Dubai, United Arab Emirates; and Pune, India; as well as approximately 10 leased local office sites throughout the region.

Corporate and other

This business segment includes our sale of equipment businesses for which equipment is manufactured in Missouri in the United States; Shanghai, China; and Johor, Malaysia. The Gardner Cryogenic business operates at facilities in Pennsylvania and Kansas in the United States. The Rotoflow business operates manufacturing and service facilities in Texas and Pennsylvania in the United States with management, engineering, and sales support based in the Allentown offices referred to above and a nearby leased office. Prior to its sale on 30 September 2024, the LNG business operated a manufacturing facility in Florida in the United States with management, engineering, and sales support based in the Allentown offices referred to above.

Research and development activities are primarily conducted at owned locations in the United States, the United Kingdom, and Saudi Arabia.

Helium is processed at multiple sites in the United States and then distributed to and from transfill sites globally.

Our Corporate and other segment also has management, sales, engineering support, and corporate administrative functions that are based in our administrative offices referred to above.

In the normal course of business, we and our subsidiaries are involved in various legal proceedings, including commercial, competition, environmental, intellectual property, regulatory, product liability, and insurance matters. Although litigation with respect to these matters is routine and incidental to the conduct of our business, such litigation could result in large monetary awards, especially if compensatory and/or punitive damages are awarded. However, we believe that litigation currently pending to which we are a party will be resolved without any material adverse effect on our financial position, earnings, or cash flows.

From time to time, we are also involved in proceedings, investigations, and audits involving governmental authorities in connection with environmental, health, safety, competition, and tax matters.

We are a party to proceedings under CERCLA, RCRA, and similar state and foreign environmental laws relating to the designation of certain sites for investigation or remediation. Presently there are 26 sites on which a final settlement has not been reached where we, usually along with others, have been designated a potentially responsible party by the Environmental Protection Agency or are otherwise engaged in investigation or remediation, including cleanup activity at certain of our current and former manufacturing sites. We do not expect that any sums we may have to pay in connection with these environmental matters would have a material adverse impact on our consolidated financial position. Additional information on our environmental exposure is included under Item 1, Business–Environmental Regulation, and Note 19, Commitments and Contingencies, to the consolidated financial statements.

In September 2010, the Brazilian Administrative Council for Economic Defense ("CADE") issued a decision against our Brazilian subsidiary, Air Products Brasil Ltda., and several other Brazilian industrial gas companies for alleged anticompetitive activities. CADE imposed a civil fine of R$179.2 million (approximately $33 million at 30 September 2024) on Air Products Brasil Ltda. This fine was based on a recommendation by a unit of the Brazilian Ministry of Justice, following an investigation beginning in 2003, which alleged violation of competition laws with respect to the sale of industrial and medical gases. The fines are based on a percentage of our total revenue in Brazil in 2003.

We have denied the allegations made by the authorities and filed an appeal in October 2010 with the Brazilian courts. On 6 May 2014, our appeal was granted and the fine against Air Products Brasil Ltda. was dismissed. CADE has appealed that ruling and the matter remains pending. We, with advice of our outside legal counsel, have assessed the status of this matter and have concluded that, although an adverse final judgment after exhausting all appeals is possible, such a judgment is not probable. As a result, no provision has been made in the consolidated financial statements. In the event of an adverse final judgment, we estimate the maximum possible loss to be the full amount of the fine of R$179.2 million (approximately $33 million at 30 September 2024) plus interest accrued thereon until final disposition of the proceedings.

During the third quarter of fiscal year 2024, we settled a dispute regarding energy management charges related to a severe winter weather storm that impacted the U.S. Gulf Coast in February 2021. As a result of the settlement, we recognized a gain of $7.7 million that is reflected within "Other income (expense), net" on our consolidated income statements for the fiscal year ended 30 September 2024. We collected the settlement in full in July 2024.

Other than the matters discussed above, we do not currently believe there are any legal proceedings, individually or in the aggregate, that are reasonably possible to have a material impact on our financial condition, results of operations, or cash flows. However, a future charge for regulatory fines or damage awards could have a significant impact on our net income in the period in which it is recorded.

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 Annual Report on Form 10-K 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 this Annual Report on Form 10-K.

This discussion should be read in conjunction with the consolidated financial statements and the accompanying notes contained in this Annual Report on Form 10-K. Unless otherwise stated, financial information is presented in millions of U.S. 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.

The financial measures discussed below are presented in accordance with U.S. generally accepted accounting principles ("GAAP"), except as noted. We present certain financial measures on an "adjusted," or "non-GAAP," basis because we believe such measures, when viewed together with financial results computed in accordance with GAAP, provide a more complete understanding of the factors and trends affecting our historical financial performance. For each non-GAAP financial measure, including adjusted diluted earnings per share ("EPS"), adjusted EBITDA, adjusted EBITDA margin, adjusted effective tax rate, and capital expenditures, we present a reconciliation to the most directly comparable financial measure calculated in accordance with GAAP. These reconciliations and explanations regarding the use of non-GAAP measures are presented under the “Reconciliations of Non-GAAP Financial Measures” section beginning on page 37.

Comparisons included in the discussion that follows are for fiscal year 2024 versus ("vs.") fiscal year 2023. A discussion of changes from fiscal year 2022 to fiscal year 2023 and other financial information related to fiscal year 2022 is available in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the fiscal year ended 30 September 2023, which was filed with the SEC on 16 November 2023.

For information concerning activity with our related parties, refer to Note 25, Supplemental Information, to the consolidated financial statements.

BUSINESS OVERVIEW

Founded in 1940, Air Products and Chemicals, Inc. is a world-leading industrial gases company that has built a reputation for its innovative culture, operational excellence, and commitment to safety and the environment. Approximately 23,000 passionate, talented, and committed employees from diverse backgrounds together are driven by Air Products’ higher purpose to create innovative solutions that benefit the environment, enhance sustainability, and reimagine what is possible to address the challenges facing customers, communities, and the world.

Focused on serving energy, environmental, and emerging markets, we are committed to generating a cleaner future by offering products and services that enable our customers to improve their environmental performance, product quality, and productivity. Our core industrial gases business provides essential gases, related equipment, and applications expertise to customers in dozens of industries, including refining, chemicals, metals, electronics, manufacturing, medical, and food. We also develop, engineer, build, own, and operate some of the world's largest clean hydrogen projects that will support the transition to low- and zero-carbon energy in the industrial and heavy-duty transportation sectors. Through our sale of equipment businesses, we also provide turbomachinery, membrane systems, and cryogenic containers globally. For additional information on our product and service offerings, including production, distribution, and end use, refer to Item 1, Business, of this Annual Report on Form 10-K.

We conduct business in approximately 50 countries and regions throughout the world. Our industrial gases business is organized and operated regionally in the Americas, Asia, Europe, and Middle East and India segments and generates the majority of our sales via our on-site and merchant supply modes. Approximately half our total revenue is generated through the on-site supply mode, which is governed by contracts that are generally long-term in nature with provisions that allow us to pass through changes in energy costs to our customers. Our Corporate and other segment includes the results of our sale of equipment businesses, costs for corporate support functions and global management activities, and other income and expenses not directly associated with the regional segments, such as foreign exchange gains and losses. For additional information regarding our supply modes and business segments, refer to Note 7, Revenue Recognition, and Note 26, Business Segment and Geographic Information, to the consolidated financial statements.

Our results of operations for the periods presented in this Annual Report on Form 10-K include the results of our former liquefied natural gas ("LNG") process technology and equipment business, which we sold to Honeywell International Inc. on 30 September 2024. This divestiture, which does not qualify for presentation as a discontinued operation, reflects our commitment to our industrial gases and clean hydrogen growth strategy. Refer to Note 4, Gain on Sale of Business, to the consolidated financial statements for additional information.

2024 IN SUMMARY

Underlying results in our core industrial gases business were positive across our three largest regional segments, reflecting both merchant pricing gains and lower power costs in the Americas and Europe segments as well as favorable on-site volumes globally as we brought new plants onstream. The favorable volumes in our on-site business, which contributed approximately half our annual consolidated sales, were partially offset by lower global demand for merchant products as well as lower equipment sales in our Corporate and other segment. Additionally, the strategic productivity actions that we initiated in 2023 drove cost improvement across our organization, which partially offset higher costs resulting from inflation and increased planned maintenance activities. We also recognized higher equity affiliates' income from our unconsolidated joint ventures, particularly in the Americas segment.

Strategic capital allocation is one of our top priorities at Air Products. In addition to investing in our low- and zero-carbon hydrogen projects currently under construction, we continued to deploy capital in our core industrial gases business by investing in new industrial gas plants as well as maintaining and replacing existing facilities. Additionally, at the end of September, we recognized a gain of approximately $1.6 billion in operating income ($1.2 billion after tax, or $5.38 per share) upon completion of the sale of the LNG business. Divesting this non-core business reflects our continued focus on executing our growth strategy. We also issued $2.5 billion of green senior notes to fund projects that are expected to have environmental benefits as defined under our Green Finance Framework. These cash-generating actions will enable us to continue investing in projects that will provide clean hydrogen at scale to accelerate the energy transition while creating long-term value for our shareholders.

We believe providing a consistent dividend plays a critical part in the creation of shareholder value. During fiscal year 2024, we returned approximately $1.6 billion to our shareholders through dividend payments.

Fiscal Year 2024 Highlights

Comparisons presented in the highlights below are for fiscal year 2024 vs. fiscal year 2023.

• Sales of $12.1 billion decreased 4%, or $499.4, primarily due to 5% lower energy cost pass-through, which was partially offset by 1% higher pricing. Volume and currency were both flat versus the prior year.
• Operating income of $4.5 billion increased 79%, or $2.0 billion, primarily due to the $1.6 billion gain recognized on the sale of the LNG business during the fourth quarter of fiscal year 2024 as well as positive pricing, lower charges for business and asset actions, and favorable business mix, partially offset by an unfavorable impact from currency and higher costs. Operating margin of 36.9% increased 1,710 basis points ("bp") from 19.8% in the prior year.
• Equity affiliates' income of $647.7 increased 7%, or $43.4, as higher income from affiliates in the Americas segment was partially offset by a lower contribution from an affiliate in Europe.
• Net income of $3.9 billion increased 65%, or $1.5 billion, and net income margin of 31.9% increased 1,330 bp from 18.6% in the prior year, in each case primarily due to the $1.2 billion after-tax gain recognized upon the sale of the LNG business at the end of the fourth quarter.
• Adjusted EBITDA of $5.0 billion increased 7%, or $344.5, and adjusted EBITDA margin of 41.7% increased 440 bp from 37.3% in the prior year.
• Diluted EPS of $17.24 increased 67%, or $6.94 per share, and adjusted diluted EPS of $12.43 increased 8%, or $0.92 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 for the items presented in the table below were calculated independently and may not sum to the total change in diluted EPS due to rounding.

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

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OUTLOOK

Statements regarding business outlook should be read in conjunction with the Forward-Looking Statements of this Annual Report on Form 10-K.

We have focused teams within Air Products executing the two pillars of our growth strategy, which are underpinned by our core competencies, technology, and more than 80 years of industrial gas experience, including over 65 years of hydrogen expertise. Our employees are dedicated to the ongoing success of our core industrial gases business while we pursue strategic high growth opportunities in clean hydrogen.

In fiscal year 2025, we expect merchant pricing improvement as well as positive volume contributions from several smaller industrial gas on-site plants that are scheduled to come onstream. Cost discipline remains a top priority as we seek to mitigate the impact of ongoing inflationary pressures through productivity actions. Economic activity in China remains uncertain. Additionally, we estimate an earnings per share headwind of approximately 4%, or $0.49, as a result of the LNG business divestiture. We expect sustained performance and our ability to raise capital to meet the cash needs of our growth strategy while rewarding shareholders through increased dividends, as we have done for the past 42 consecutive years.

Beyond fiscal year 2025, we see significant opportunity in clean hydrogen driven by demand for decarbonization solutions such as the application of green hydrogen to meet Europe's emission reduction mandates across the heavy industrial and transport sectors, blue hydrogen in the form of blue ammonia to minimize the use of coal in Asia's power plants, as well as blue and green ammonia to directly power ships. We have made significant progress in the construction of some of our energy transition projects, such as the NEOM Green Hydrogen Project that is on schedule to come onstream at the end of 2026 with first product delivery in early 2027.

RESULTS OF OPERATIONS

DISCUSSION OF CONSOLIDATED RESULTS

Sales

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

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Sales of $12.1 billion decreased 4%, or $499.4, primarily due to 5% lower energy cost pass-through driven by lower natural gas prices in North America and Europe. Sales in our on-site business, which typically represent approximately half our total company sales, fluctuate with power and fuel prices due to contract provisions that allow us to pass through changes in energy costs to our customers. The lower sales due to energy cost pass-through were partially offset by a modest 1% total company price improvement, which equates to a 2% improvement for the merchant business. The pricing improvement was attributable to our Americas and Europe segments. Volumes were flat on a total company basis as weaker global merchant demand and lower sales of equipment offset improvements in our on-site business, which were driven by new assets in Europe and Asia as well as higher demand for hydrogen in the U.S. Additionally, favorable on-site volumes in our Americas segment included a one-time asset sale associated with an early contract termination at the request of a customer. Currency was stable versus the prior year.

Cost of Sales and Gross Margin

Cost of sales of $8.2 billion decreased 8%, or $664.3, due to lower energy cost pass-through to customers of $646, a favorable impact from currency of $20, and lower other costs of $10, partially offset by higher costs associated with sales volumes of $12. Higher costs due to labor inflation and planned maintenance activities were partially offset by lower power costs in our merchant business in Europe and the Americas as well as improvements from strategic productivity actions. Gross margin of 32.5% increased 260 bp from 29.9% in the prior year. Approximately half of the margin improvement was attributable to lower energy cost pass-through to customers.

Selling and Administrative Expense

Selling and administrative expense of $942.4 decreased 2%, or $14.6, primarily due to lower incentive compensation and strategic productivity actions, partially offset by labor inflation. Selling and administrative expense as a percentage of sales increased to 7.8% from 7.6% in the prior year.

Research and Development Expense

Research and development expense of $100.2 decreased 5%, or $5.4. Research and development expense as a percentage of sales of 0.8% was flat versus the prior year.

Gain on Sale of Business

On 30 September 2024, we completed the sale of our LNG business to Honeywell International Inc. As a result of the transaction, we recorded a gain of $1,575.6 during the fourth quarter of fiscal year 2024 that is reflected within "Gain on sale of business" on our consolidated income statements ($1,198.4 after tax, or $5.38 per share). This gain was not recorded in segment results. Prior to the divestiture, the results of the LNG business were reflected within the Corporate and other segment. Refer to Note 4, Gain on Sale of Business, to the consolidated financial statements for additional information.

Business and Asset Actions

Our consolidated income statements for the fiscal years ended 30 September 2024 and 2023 reflect 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 fiscal year 2024 charge of $57.0 was for severance and other postemployment benefits payable to employees identified under a global cost reduction plan. We originated this plan during the third quarter of fiscal year 2023, which resulted in an initial charge of $27.0. Fiscal year 2023 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.

For additional information, refer to Note 5, Business and Asset Actions, to the consolidated financial statements for additional information.

Other Income (Expense), Net

Other income of $58.2 increased 67%, or $23.4, primarily due to higher income from the sale of assets as well as the favorable settlement of a legal dispute. Refer to Note 19, 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 Margin

Operating income of $4.5 billion increased 79%, or $2.0 billion, primarily due to the $1.6 billion gain recognized on the sale of the LNG business during the fourth quarter of fiscal year 2024. The improvement from the prior year also reflects positive pricing, net of power and fuel costs, of $192, lower charges for business and asset actions of $188, and favorable business mix of $63. The on-site improvements reflected within favorable business mix were partially offset by lower merchant demand and recognition of higher project cost estimates related to our sale of equipment activities in fiscal year 2024. Unfavorable items versus the prior year included an unfavorable impact from currency of $25 and higher costs of $22. The higher costs were driven by labor inflation and higher planned maintenance, partially offset by improved productivity resulting from strategic business and asset actions and lower costs for incentive compensation.

Operating margin of 36.9% increased 1,710 bp from 19.8% in the prior year primarily due to the gain recognized on the sale of the LNG business, lower charges for business and asset actions, and favorable pricing. Additionally, while energy cost pass-through has no impact on profit, it does contribute to our margins. Of the 1,710 bp operating margin improvement, lower energy cost pass-through to customers contributed approximately 100 bp.

Equity Affiliates’ Income

Equity affiliates' income of $647.7 increased 7%, or $43.4, as higher income from affiliates in the Americas segment was partially offset by a lower contribution from an affiliate in Europe.

Interest Expense

Interest incurred increased 73%, or $215.0, primarily due to a higher debt balance from senior notes issued to fund projects under our Green Finance Framework as well as borrowings on financing available for the NEOM Green Hydrogen Project. Capitalized interest increased $173.7 due to a higher carrying value of projects under construction, which is largely attributable to the NEOM Green Hydrogen Project.

Other Non-Operating Income (Expense), Net

Other non-operating expense of $73.8 increased 89%, or $34.8. We recognized non-service pension costs of $102.0 ($76.8 after tax, or $0.34 per share) in fiscal year 2024 compared to $86.8 ($65.2 after tax, or $0.29 per share) in fiscal year 2023. Additionally, in fiscal year 2024, we recorded unrealized losses of $16.3 ($4.3 attributable to Air Products after tax, or $0.02 per share) related to certain de-designated interest rate swaps associated with the financing for the NEOM Green Hydrogen Project. Refer to Note 3, Variable Interest Entities, and Note 15, Financial Instruments, to the consolidated financial statements for additional information. These unfavorable items were partially offset by higher interest income on cash and cash items and short-term investments.

Discontinued Operations

During the fourth quarter of fiscal year 2024, we recorded a pre-tax loss from discontinued operations of $19.4 ($13.9 after tax, or $0.06 per share) to increase our existing liability for retained environmental remediation obligations associated with the sale of our former Amines business in September 2006. Refer to the Pace discussion within Note 19, Commitments and Contingencies, to the consolidated financial statements for additional information. In fiscal year 2023, income from discontinued operations, net of tax, of $7.4 ($0.03 per share) primarily resulted from a net tax benefit recorded in the fourth quarter upon release of tax liabilities for uncertain tax positions taken with respect to the sale of our former Performance Materials Division ("PMD"), which was completed in 2017.

Net Income and Net Income Margin

Net income of $3.9 billion increased 65%, or $1.5 billion, and net income margin of 31.9% increased 1,330 bp from 18.6% in the prior year, in each case primarily due to the $1.2 billion after-tax gain recognized upon the sale of the LNG business at the end of the fourth quarter.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA of $5.0 billion increased 7%, or $344.5, and adjusted EBITDA margin of 41.7% increased 440 bp from 37.3% in the prior year, primarily due to positive pricing, net of power and fuel costs, and favorable business mix, partially offset by labor inflation and higher planned maintenance costs. The on-site improvements reflected within favorable business mix were partially offset by lower merchant demand and recognition of higher project cost estimates related to our sale of equipment activities in fiscal year 2024. The higher costs for labor inflation and planned maintenance activities were offset by improved productivity resulting from strategic business and asset actions and lower costs for incentive compensation. While lower energy cost pass-through does not impact profit, it improved adjusted EBITDA margin by approximately 200 basis points.

Effective Tax Rate

The effective tax rate equals the income tax provision divided by income from continuing operations before taxes. Refer to Note 24, Income Taxes, to the consolidated financial statements for details regarding factors affecting the effective tax rate.

Our effective tax rate was 19.6% and 19.1% for the fiscal years ended 30 September 2024 and 2023, respectively. Our current year effective tax rate was higher primarily due to the recognition of the $1,575.6 gain on the sale of our LNG business during the fourth quarter of fiscal year 2024. This gain increased our income from continuing operations before taxes, which diluted the impact of recurring effective tax rate reconciling items for fiscal year 2024. The gain was also recognized in jurisdictions with higher tax rates. Partially offsetting this increase were tax benefits unrelated to the sale of our LNG business, which included the release of certain unrecognized tax benefits upon expiration of the statute of limitations for uncertain tax positions taken in prior years, a tax benefit on the sale of a non-U.S. subsidiary, and a tax election for a non-U.S. subsidiary during fiscal year 2024.

Our adjusted effective tax rate, which excludes the impact of the gain on the sale of the LNG business as well as other adjustments described in the "Reconciliations of Non-GAAP Financial Measures" section, was 17.8% and 18.9% for the fiscal years ended 30 September 2024 and 2023, respectively. Our current year adjusted effective tax rate is lower primarily due to earning a greater share of income in jurisdictions with lower tax rates in addition to the tax benefits discussed above.

DISCUSSION OF RESULTS BY BUSINESS SEGMENT

Americas

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

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Sales of $5.0 billion decreased 6%, or $329.2, due to lower energy cost pass-through to customers of 9% and an unfavorable currency impact of 1%, partially offset by higher pricing of 3% and higher volumes of 1%. The total segment pricing increase of 3% equates to a 6% improvement in our merchant business, where pricing was favorable across most product lines. Volumes improved modestly as higher hydrogen demand and a one-time asset sale associated with an early contract termination at the request of a customer were mostly offset by lower demand for merchant products.

Operating income of $1.6 billion increased 9%, or $125.4, due to positive pricing, net of lower power and fuel costs, of $145 and favorable business mix of $49, partially offset by higher costs of $61 and unfavorable currency of $8. Favorable business mix was attributable to the one-time asset sale as well as higher hydrogen demand. 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 31.1% increased 430 bp from 26.8% in the prior year primarily due to lower energy cost pass-through to customers and favorable pricing. Of the 430 bp operating margin improvement, lower energy cost pass-through to customers contributed approximately 250 bp.

Equity affiliates’ income of $158.8 increased 45%, or $49.6, due to higher income from an affiliate in Mexico as well as recognition of our share of income from a one-time asset sale.

Asia

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

Sales of $3.2 billion were flat as higher volumes of 1% and higher energy cost pass-through to customers of 1% were offset by unfavorable currency impacts of 2%. Higher volumes in our on-site business, including several new assets across the region, were offset by lower demand for merchant products. The unfavorable currency impact was primarily attributable to the strengthening of the U.S. Dollar against the Chinese Renminbi. Pricing was flat versus the prior year.

Operating income of $859.2 decreased 5%, or $47.3, primarily due to unfavorable mix of $22, an unfavorable currency impact of $21, and higher variable costs in our merchant business of $13, partially offset by favorable other costs of $12. Favorable other costs reflect lower distribution costs and strategic productivity actions that more than offset the impact of inflation. Operating margin of 26.6% decreased 160 bp from 28.2% in the prior year primarily due to unfavorable mix.

Equity affiliates’ income of $32.9 increased 11%, or $3.2, as higher income from affiliates in Thailand was partially offset by higher maintenance expense for one of our affiliates in China.

Europe

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

Sales of $2.8 billion decreased 5%, or $139.7, due to lower energy cost pass-through to customers of 8%, partially offset by a favorable currency impact of 2% and higher volumes of 1%. The positive currency impact was primarily attributable 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. Pricing was flat versus the prior year.

Operating income of $810.0 increased 22%, or $146.6, due to favorable mix of $80, pricing, net of lower power and fuel costs, of $69, and a favorable impact from currency of $14, partially offset by higher costs of $16. Higher costs resulting from labor inflation were partially offset by strategic productivity actions. Operating margin of 28.7% increased 630 bp from 22.4% in the prior year due to favorable volumes and pricing as well as lower energy cost pass-through to customers. Of the 630 bp operating margin improvement, lower energy cost pass-through to customers contributed approximately 200 bp.

Equity affiliates’ income of $88.1 decreased 14%, or $14.4, driven by prior year non-recurring items for our affiliate in Italy.

Middle East and India

Sales of $134.4 decreased 17%, or $28.1, and operating income of $5.9 decreased 65%, or $11.0, in each case primarily due to lower merchant volumes and pricing.

Equity affiliates' income of $347.5 decreased 1%, or $2.3, driven by higher costs for an affiliate in Saudi Arabia.

Corporate and other

Sales of $878.4 decreased 1%, or $10.6, and operating loss of $292.7 increased 2%, or $5.4, primarily due to lower equipment sales and higher project cost estimates. The lower profit contribution was partially offset by lower incentive compensation and strategic productivity actions.

As discussed above, we completed the sale of the LNG business on 30 September 2024. The LNG business generated operating income for this segment of approximately $135 and $120 in fiscal years 2024 and 2023, respectively.

Equity affiliates' income of $20.4 increased 56%, or $7.3, driven by higher contributions from an affiliate in Algeria.

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. The net impact of non-service related components is reflected within “Other non-operating income (expense), net” on our consolidated income statements. Adjusting for the impact of non-service pension components provides management and users of our financial statements with a more accurate representation of our underlying business performance because these components are driven by factors that are unrelated to our operations, such as volatility in equity and debt markets. Further, non-service related components are not indicative of our defined benefit plans’ future contribution needs due to the funded status of the plans. We may also exclude certain expenses associated with cost reduction actions and impairment charges as well as gains on disclosed transactions, such as the sale of the LNG business. 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.

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ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN

We define adjusted EBITDA as net income less income or 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 tables below present 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:

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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 fiscal years ended 30 September 2024 and 2023:

Americas

Asia

Europe

40

Middle East and India

Corporate and other

41

ADJUSTED EFFECTIVE TAX RATE

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

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:

(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 September 2024, we had $1,571.3 of foreign cash and cash items compared to total cash and cash items of $2,979.7. 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

In fiscal year 2024, cash provided by operating activities was $3,646.7. Gain on sale of business of $1,575.6 related to the sale of the LNG business. Refer to Note 4, Gain on Sale of Business, to the consolidated financial statements for additional information. Business and asset actions of $57.0 included an expense recognized for severance and other benefits related to a global cost reduction plan. Refer to Note 5, Business and Asset Actions, to the consolidated financial statements for additional information. Other operating adjustments of $183.8 primarily included pension expense, net of contributions, of $89.1. Working capital accounts resulted in a net use of cash of $183.0. The use of cash of $338.7 within payables and accrued liabilities primarily resulted from a reduction of customer advances for sale of equipment projects as we recognize revenue, payments against severance actions, and payments for incentive compensation under the fiscal year 2023 plan. Inventories resulted in a use of cash of $137.8 primarily due to purchases of helium. The use of cash of $111.0 from trade receivables was primarily attributable to the timing of collections. The source of cash of $370.1 within other working capital was primarily driven by the timing of income tax payments associated with the sale of the LNG business. We expect to remit all tax payments associated with this transaction in the first half of fiscal year 2025.

In fiscal year 2023, cash provided by operating activities was $3,205.7. Business and asset actions of $244.6 included 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 5, Business and Asset Actions, to the consolidated financial statements for additional information. The impacts associated with our operating leases are reflected within "Other adjustments," which included a lump-sum payment of $209 for a land lease associated with the NGHC joint venture. Working capital accounts resulted in a net use of cash of $424.8. The use of cash of $213.3 within payables and accrued liabilities primarily resulted from 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. Inventories resulted in a use of cash of $129.4 primarily due to additional packaged gases inventory, including helium. The use of cash of $119.0 within other working capital was primarily driven by the timing of income tax payments. The source of cash of $130.7 from trade receivables was primarily attributable to collection of higher natural gas costs contractually passed through to on-site customers.

Cash Flows From Investing Activities

In fiscal year 2024, cash used for investing activities was $4,919.2. The use of cash primarily resulted from capital expenditures of $6,796.7 for additions to plant and equipment, including long-term deposits, and investments in financing receivables of $403.0. Refer to the Capital Expenditures section below for further detail. Proceeds from sale of assets and investments of $1,878.8 primarily related to the sale of the LNG business. Refer to Note 4, Gain on Sale of Business, to the consolidated financial statements for additional information. Maturities of time deposits provided cash of $470.7, which exceeded purchases of time deposits of $141.4.

In fiscal year 2023, cash used for investing activities was $5,916.4. The use of cash primarily resulted from capital expenditures of $4,626.4 for additions to plant and equipment, including long-term deposits, investments in and advances to unconsolidated affiliates of $912.0, and investments in financing receivables of $665.1. Refer to the "Capital Expenditures" section below for further detail. Maturities of time deposits and short-term treasury securities provided cash of $897.0, which exceeded purchases of investments of $640.1.

Capital Expenditures

The components of our capital expenditures are detailed in the table below. Refer to page 42 for a definition of this non-GAAP measure as well as a reconciliation to cash used for investing activities.

(A) Includes contributions from noncontrolling partners in consolidated subsidiaries as discussed below.

(B) 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 in fiscal year 2024 totaled $5,152.0 compared to $5,224.4 in fiscal year 2023. Spending for plant and equipment primarily included project spending for our clean energy projects such as the NEOM Green Hydrogen Project in NEOM City, Saudi Arabia, as well as our clean energy complexes in Louisiana, United States, and Alberta, Canada. Additionally, we continued to invest capital in our core industrial gas business for new industrial gas plants as well as maintaining and replacing existing facilities. We did not recognize any investments in and advances to unconsolidated affiliates during fiscal year 2024; however, we expect to complete our remaining investment of approximately $115 associated with our investment in JIGPC in fiscal year 2025. Refer to Note 10, Equity Affiliates, to the consolidated financial statements for additional information. The investment in financing receivables of $403.0 primarily reflects payments associated with the purchase of renewable fuel assets from World Energy as well as remaining payments on the purchase of a natural gas-to-syngas processing facility in Uzbekistan. Refer to Note 3, Variable Interest Entities and to Note 6, Acquisition, to the consolidated financial statements 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 expect capital expenditures for fiscal year 2025 to be approximately $4.5 billion to $5.0 billion, which is driven by additional spending for our clean energy projects that are currently under construction as well as ongoing maintenance capital spending in our core industrial gases business. We anticipate capital expenditures to be funded with our current cash balance, cash generated from continuing operations, and additional financing activities.

Cash Flows From Financing Activities

In fiscal year 2024, cash provided by financing activities was $2,615.4. The source of cash was primarily driven by long-term debt proceeds of $4,678.3 as well as an increase in investments by noncontrolling interests of $428.5. Sources were partially offset by dividend payments to shareholders of $1,564.9, payments on long-term debt of $486.2 and net decreases in commercial paper and short-term borrowings of $289.9.

Long-term debt proceeds included $2.5 billion from green senior notes issued during the second quarter in U.S. Dollar-denominated fixed-rate note offerings. Consistent with our Green Finance Framework, we have allocated the net proceeds to finance or refinance, in whole or in part, existing or future projects that are expected to have environmental benefits, including those related to pollution prevention and control, renewable energy generation and procurement, and sustainable aviation fuel. Additionally, as further discussed below, the NGHC joint venture borrowed approximately $2.0 billion. These proceeds were partially offset by financing fees of approximately $112.0, which are reflected within "Other financing activities". Refer to the Credit Facilities section below as well as Note 17, Debt, to the consolidated financial statements for additional information.

In fiscal year 2023, cash provided by financing activities was $1,609.6. The source of cash was primarily attributable to long-term debt proceeds of $3,516.2 as well as an increase in commercial paper and short-term borrowings of $268.2. These cash inflows were partially offset by dividend payments to shareholders of $1,496.6 and payments on long-term debt of $615.4.

Financing and Capital Structure

Total debt increased from $10,305.8 as of 30 September 2023 to $14,227.9 as of 30 September 2024, primarily due to the issuance of green U.S. Dollar-denominated fixed-rate notes as well as additional borrowings from the non-recourse project financing available to the NGHC joint venture for construction of the NEOM Green Hydrogen project. Total debt includes related party debt of $304.4 and $328.3 as of 30 September 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 September 2024, we were in compliance with all of the financial and other covenants under our debt agreements.

2024 Credit Agreements

In March 2024, we entered into a five-year $3.0 billion revolving credit agreement maturing 31 March 2029 (the “2024 Five-Year Credit Agreement”) as well as a 364-day $500.0 revolving credit agreement maturing 27 March 2025 that we have the ability to convert into a term loan maturing 27 March 2026 (the “2024 364-Day Credit Agreement” and, together with the 2024 Five-Year Credit Agreement, the “2024 Credit Agreements”). Both of the 2024 Credit 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. The 2024 Five-Year Credit Agreement replaced our previous $2.75 billion revolving credit agreement (the “2021 Credit Agreement”), which was terminated upon execution of the 2024 Five-Year Credit Agreement. No borrowings were outstanding under the 2021 Credit Agreement at the time of its termination, and no early termination penalties were incurred. No borrowings were outstanding under either of the 2024 Credit Agreements as of 30 September 2024.

Foreign Credit Facilities

We also have credit facilities available to certain of our foreign subsidiaries totaling $1,223.9, of which $1,129.0 was borrowed and outstanding as of 30 September 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 September 2024 and 2023, the joint venture had drawn principal amounts of approximately $3.3 billion and $1.4 billion, respectively, from the available financing. 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. In fiscal year 2024, the Board of Directors increased the quarterly dividend to $1.77 per share, representing a 1% increase, or $0.02 per share, from the previous dividend of $1.75 per share. We expect to continue increasing our quarterly dividend as we have done for the last 42 consecutive years.

Dividends are paid quarterly, usually during the sixth week after the close of the fiscal quarter. On 18 July 2024, the Board of Directors declared a quarterly dividend of $1.77 per share that was payable on 12 November 2024 to shareholders of record at the close of business on 1 October 2024. On 21 November 2024, the Board of Directors declared a quarterly dividend of $1.77 per share that is payable on 10 February 2025 to shareholders of record at the close of business on 2 January 2025.

Discontinued Operations

In fiscal year 2023, cash provided by operating activities of discontinued operations was $0.6.

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 18, 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 for the fiscal years ended 30 September:

Net periodic cost was $123.8 and $110.9 in fiscal years 2024 and 2023, respectively. The increased costs from the prior year were primarily attributable to non-service related 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. The net impact of non-service related items 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 fiscal years 2024 and 2023 was not material.

The table below summarizes the assumptions used in the calculation of net periodic cost for the fiscal years ended 30 September:

2025 Outlook

In fiscal year 2025, we expect to recognize pension expense of approximately $60 to $70 primarily driven by approximately $40 to $50 of non-service related costs, including higher expected return on plan assets due to a higher beginning balance of plan assets, lower interest cost, and a decrease in actuarial loss amortization.

In fiscal year 2024, we recognized net actuarial gains of $44.6 in other comprehensive income. Actuarial gains and losses are amortized into pension expense over prospective periods to the extent they are not offset by future gains or losses. Future changes in the discount rate and actual returns on plan assets could impact the actuarial gain or loss and resulting amortization in years beyond fiscal year 2025.

Pension Funding

Funded Status

The projected benefit obligation represents the actuarial present value of benefits attributable to employee service rendered to date, including the effects of estimated future salary increases. The plan funded status is calculated as the difference between the projected benefit obligation and the fair value of plan assets at the end of the period.

The table below summarizes the projected benefit obligation, the fair value of plan assets, and the funded status for our U.S. and international plans as of 30 September:

The net unfunded liability of $44.3 as of 30 September 2024 decreased $33.9 from $78.2 as of 30 September 2023, as actual return on plan assets was greater than increases to the projected benefit obligation from actuarial losses due to lower discount rates as well as the interest cost component of the net periodic pension cost.

Company Contributions

Pension funding includes both contributions to funded plans and benefit payments for unfunded plans, which are primarily non-qualified plans. With respect to funded plans, our funding policy is that contributions, combined with appreciation and earnings, will be sufficient to pay benefits without creating unnecessary surpluses.

In addition, we make contributions to satisfy all legal funding requirements while managing our capacity to benefit from tax deductions attributable to plan contributions. With the assistance of third-party actuaries, we analyze the liabilities and demographics of each plan, which help guide the level of contributions. During fiscal years 2024 and 2023, our cash contributions to funded pension plans and benefit payments for unfunded pension plans were $34.7 and $32.6, respectively.

For fiscal year 2025, cash contributions to defined benefit plans are estimated to be $30 to $40. The estimate is based on expected contributions to certain international plans and anticipated benefit payments for unfunded plans, which are dependent upon the timing of retirements. Actual future contributions will depend on future funding legislation, discount rates, investment performance, plan design, and various other factors.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Refer to Note 1, Basis of Presentation and Major Accounting Policies, and Note 2, New Accounting Guidance, to the consolidated financial statements for a description of our major accounting policies and information concerning implementation and impact of new accounting guidance.

The accounting policies discussed below are those policies that we consider to be the most critical to understanding our financial statements because they require management's most difficult, subjective, or complex judgments, often as the result of the need to make estimates about the effects of matters that are inherently uncertain. 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. Our management has reviewed these critical accounting policies and estimates and related disclosures with the Audit and Finance Committee of our Board of Directors.

Depreciable Lives of Plant and Equipment

Plant and equipment, net as of 30 September 2024 totaled $23,370.9, and depreciation expense totaled $1,419.6 during fiscal year 2024. Plant and equipment is recorded at cost and depreciated using the straight-line method, which deducts equal amounts of the cost of each asset from earnings every year over its estimated economic useful life. Economic useful life is the duration of time an asset is expected to be productively employed by us, which may be less than its physical life. Assumptions on the following factors, among others, affect the determination of estimated economic useful life: wear and tear, obsolescence, technical standards, contract life, market demand, competitive position, raw material availability, and geographic location.

The estimated economic useful life of an asset is monitored to determine its appropriateness, especially when business circumstances change. For example, changes in technology, changes in the estimated future demand for products, excessive wear and tear, or unanticipated government actions may result in a shorter estimated useful life than originally anticipated. In these cases, we would depreciate the remaining net book value over the new estimated remaining life, thereby increasing depreciation expense per year on a prospective basis. Likewise, if the estimated useful life is increased, the adjustment to the useful life decreases depreciation expense per year on a prospective basis.

Our regional industrial gas segments have numerous long-term customer supply contracts for which we construct an on-site plant on or near the customer’s facility. These contracts typically have initial contract terms of 10 to 20 years. Depreciable lives of the production assets related to long-term supply contracts are generally matched to the contract lives. Extensions to the contract term of supply frequently occur prior to the expiration of the initial term. As contract terms are extended, the depreciable life of the associated production assets is adjusted to match the new contract term, as long as it does not exceed the remaining physical life of the asset.

Our regional industrial gas segments also have contracts for liquid or gaseous bulk supply and, for smaller customers, packaged gases. The depreciable lives of production facilities associated with these contracts are generally 15 years. These depreciable lives have been determined based on historical experience combined with judgment on future assumptions such as technological advances, potential obsolescence, and competitors’ actions.

In addition, we may purchase assets through transactions accounted for as either an asset acquisition or a business combination. Depreciable lives are assigned to acquired assets based on the age and condition of the assets, the remaining duration of long-term supply contracts served by the assets, and our historical experience with similar assets. Management monitors its assumptions and may potentially need to adjust depreciable life as circumstances change.

Impairment of Assets

There were no triggering events in fiscal year 2024 that would require impairment testing for any of our asset groups, reporting units that contain goodwill, or indefinite-lived intangibles assets. We completed our annual impairment tests for goodwill and other indefinite-lived intangible assets and concluded there were no indications of impairment. Refer to the “Impairment of Assets” subsections below for additional detail.

Impairment of Assets: Plant and Equipment

Plant and equipment meeting the held for sale criteria are reported at the lower of carrying amount or fair value less cost to sell. Plant and equipment to be disposed of other than by sale may be reviewed for impairment upon the occurrence of certain triggering events, such as unexpected contract terminations or unexpected foreign government-imposed restrictions or expropriations. Plant and equipment held for use is grouped for impairment testing at the lowest level for which there is identifiable cash flows. Impairment testing of the asset group occurs whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Such circumstances may include:

• a significant decrease in the market value of a long-lived asset grouping;
• a significant adverse change in the manner in which the asset grouping is being used or in its physical condition;
• an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the long-lived asset;
• a reduction in revenues that is other than temporary;
• a history of operating or cash flow losses associated with the use of the asset grouping; or
• changes in the expected useful life of the long-lived assets.

If such circumstances are determined to exist, an estimate of undiscounted future cash flows produced by the asset group is compared to the carrying value to determine whether impairment exists. If an asset group is determined to be impaired, the loss is measured based on the difference between the asset group’s fair value and its carrying value. An estimate of the asset group’s fair value is based on the discounted value of its estimated cash flows.

The assumptions underlying the undiscounted future cash flow projections require significant management judgment. Factors that management must estimate include but are not limited to industry and market conditions, sales volume and prices, costs to produce, and inflation. The assumptions underlying the cash flow projections represent management’s best estimates at the time of the impairment review and could include probability weighting of cash flow projections associated with multiple potential future scenarios. Changes in key assumptions or actual conditions that differ from estimates could result in an impairment charge. We use reasonable and supportable assumptions when performing impairment reviews and cannot predict the occurrence of future events and circumstances that could result in impairment charges.

In fiscal year 2024, there was no need to test for impairment on any of our asset groupings as no events or changes in circumstances indicated that the carrying amount of our asset groupings may not be recoverable.

Impairment of Assets: Goodwill

The acquisition method of accounting for business combinations requires us to make use of estimates and judgments to allocate the purchase price paid for acquisitions to the fair value of the net tangible and identifiable intangible assets. Goodwill represents the excess of the aggregate purchase price, plus the fair value of any noncontrolling interest and previously held equity interest in the acquiree, over the fair value of identifiable net assets of an acquired entity. Goodwill, net was $905.1 as of 30 September 2024. Disclosures related to goodwill are included in Note 12, Goodwill, to the consolidated financial statements.

We review goodwill for impairment annually in the fourth quarter of the fiscal year and whenever events or changes in circumstances indicate that the carrying value of goodwill might not be recoverable. The tests are done at the reporting unit level, which is defined as being equal to or one level below the operating segment for which discrete financial information is available and whose operating results are reviewed by segment managers regularly. At the time of our fiscal year 2024 testing, we had five reportable business segments, seven operating segments and 11 reporting units, eight of which included a goodwill balance. Refer to Note 26, Business Segment and Geographic Information, for additional information. Reporting units are primarily based on products and subregions within each reportable segment. The majority of our goodwill is assigned to reporting units within our regional industrial gases segments.

As part of annual goodwill impairment testing, we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Our evaluation of qualitative factors includes an assessment of relevant facts, events, and circumstances of a reporting unit including but not limited to: business performance, strategy, and outlook; macroeconomic conditions; local market dynamics; cost management; and significant changes in key personnel, customers, operating assets, or product mix. We perform a quantitative test when qualitative factors alone are not sufficient to conclude whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. If we perform a quantitative test, an impairment loss will only be recognized for the amount by which the carrying value of the reporting unit exceeds its fair value, not to exceed the total amount of goodwill allocated to that reporting unit.

In the fourth quarter of fiscal year 2024, we conducted our annual assessment and concluded that it was more likely than not that the fair value of each reporting unit was greater than its carrying value.

Impairment of Assets: Intangible Assets

Disclosures related to intangible assets other than goodwill are included in Note 13, Intangible Assets, to the consolidated financial statements.

Intangible assets, net with determinable lives as of 30 September 2024 totaled $275.3 and consisted primarily of customer relationships, purchased patents and technology, and land use rights. These intangible assets are tested for impairment as part of the long-lived asset grouping impairment tests. Impairment testing of the asset group occurs whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. See the impairment discussion above under "Impairment of Assets – Plant and Equipment" for a description of how impairment losses are determined.

Indefinite-lived intangible assets as of 30 September 2024 totaled $36.3 and consisted of trade names and trademarks. Indefinite-lived intangibles are subject to impairment testing at least annually or more frequently if events or changes in circumstances indicate that potential impairment exists. As part of annual indefinite-lived intangible asset impairment testing, we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of the intangible asset is less than its carrying value. Our evaluation of qualitative factors includes an assessment of relevant facts, events, and circumstances including but not limited to: business performance, strategy and outlook; macroeconomic conditions; local market dynamics; cost management; and significant changes in key personnel, customers, operating assets, or product mix. We perform a quantitative test when qualitative factors alone are not sufficient to conclude whether it is more likely than not that the fair value of the intangible asset is less than its carrying value. If we perform a quantitative test, an impairment loss will only be recognized for the amount by which the carrying value of the indefinite-lived intangible asset exceeds its fair value, not to exceed the total carrying value of the asset.

In the fourth quarter of fiscal year 2024, we conducted our annual assessment and concluded that it was more likely than not that the fair value of each asset was greater than its carrying value.

Impairment of Assets: Equity Method Investments

Investments in and advances to equity affiliates totaled $4,792.5 as of 30 September 2024. The majority of our equity method investments are ventures with other industrial gas companies. Summarized financial information of our equity affiliates is included in Note 10, Equity Affiliates, to the consolidated financial statements.

We review our equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment may not be recoverable. An impairment loss is recognized in the event that an other-than-temporary decline in fair value below the carrying value of an investment occurs. We estimate the fair value of our investments under the income approach, which considers the estimated discounted future cash flows expected to be generated by the investee, and/or the market approach, which considers market multiples of revenue and earnings derived from comparable publicly-traded industrial gas companies. Changes in key assumptions about the financial condition of an investee or actual conditions that differ from estimates could result in an impairment charge.

In fiscal year 2024, there was no need to test any of our equity method investments for impairment as no events or changes in circumstances indicated that the carrying amount of the investments may not be recoverable.

Revenue Recognition: Cost Incurred Input Method

Revenue from sale of equipment contracts is generally recognized over time as we have an enforceable right to payment for performance completed to date and our performance under the contract terms does not create an asset with alternative use. We use a cost incurred input method to recognize revenue by which costs incurred to date relative to total estimated costs at completion are used to measure progress toward satisfying performance obligations. Costs incurred include material, labor, and overhead costs and represent work contributing and proportionate to the transfer of control to the customer.

Accounting for contracts using the cost incurred input method requires management judgment relative to assessing risks and their impact on the estimates of revenues and costs. Our estimates are impacted by factors such as the potential for incentives or penalties on performance, schedule delays, technical issues, cost inflation, labor productivity, the complexity of work performed, the availability of materials, and performance of subcontractors. When adjustments in estimated total contract revenues or estimated total costs are required, any changes in the estimated profit from prior estimates are recognized in the current period for the inception-to-date effect of such change. When estimates of total costs to be incurred on a contract exceed estimates of total revenues to be earned, a provision for the entire estimated loss on the contract is recorded in the period in which the loss is determined.

In addition to the typical risks associated with underlying performance of engineering, project procurement, and construction activities, our sale of equipment projects within our Corporate and other segment require monitoring of risks associated with schedule, geography, and other aspects of the contract and their effects on our estimates of total revenues and total costs to complete the contract.

Changes in estimates on projects accounted for under the cost incurred input method unfavorably impacted operating income by approximately $175 in fiscal year 2024 and $115 in fiscal year 2023.

We assess the performance of our sale of equipment projects as they progress. Our earnings could be positively or negatively impacted by changes to our contractual revenues and cost forecasts on these projects.

Revenue Recognition: On-site Customer Contracts

For customers who require large volumes of gases on a long-term basis, we produce and supply gases under long-term contracts from large facilities that we build, own, and operate on or near the customer’s facilities. Certain of these on-site contracts contain complex terms and provisions regarding tolling arrangements, minimum payment requirements, variable components, pricing provisions, and amendments, which require significant judgment to determine the amount and timing of revenue recognition.

Income Taxes

We account for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the tax effects of temporary differences between the financial reporting and tax basis of assets and liabilities measured using enacted tax rates in effect for the year in which the differences are expected to be recovered or settled. As of 30 September 2024, accrued income taxes, including the amount recorded as noncurrent, were $619.3, and our net deferred income tax liability was $1,032.1. Tax liabilities related to uncertain tax positions as of 30 September 2024 were $101.0, excluding interest and penalties. Income tax expense for the fiscal year ended 30 September 2024 was $944.9.

Management judgment is required concerning the ultimate outcome of tax contingencies and the realization of deferred tax assets.

Actual income taxes paid may vary from estimates, depending upon changes in income tax laws, actual results of operations, and the final audit of tax returns by taxing authorities. Tax assessments may arise several years after tax returns have been filed. We believe that our recorded tax liabilities adequately provide for these assessments.

Deferred tax assets are recorded for operating losses and tax credit carryforwards. However, when we do not expect sufficient sources of future taxable income to realize the benefit of the operating losses or tax credit carryforwards, these deferred tax assets are reduced by a valuation allowance. A valuation allowance is recognized if, based on the weight of available evidence, it is considered more likely than not that some portion or all of the deferred tax asset will not be realized. The factors used to assess the likelihood of realization include forecasted future taxable income and available tax planning strategies that could be implemented to realize or renew net deferred tax assets in order to avoid the potential loss of future tax benefits. The effect of a change in the valuation allowance is reported in income tax expense.

A 1% increase or decrease in our effective tax rate may result in a decrease or increase to net income, respectively, of approximately $48.

Disclosures related to income taxes are included in Note 24, Income Taxes, to the consolidated financial statements.

Pension and Other Postretirement Benefits

The amounts recognized in the consolidated financial statements for pension and other postretirement benefits are determined on an actuarial basis utilizing numerous assumptions. The discussion that follows provides information on the significant assumptions, expense, and obligations associated with the defined benefit plans.

Actuarial models are used in calculating the expense and liability related to the various defined benefit plans. These models have an underlying assumption that the employees render service over their service lives on a relatively consistent basis; therefore, the expense of benefits earned should follow a similar pattern.

Several assumptions and statistical variables are used in the models to calculate the expense and liability related to the plans. We determine assumptions about the discount rate, the expected rate of return on plan assets, and the rate of compensation increase. Note 18, Retirement Benefits, to the consolidated financial statements includes disclosure of these rates on a weighted-average basis for both the U.S. and international plans. The actuarial models also use assumptions about demographic factors such as retirement age, mortality, and turnover rates. Mortality rates are based on the most recent U.S. and international mortality tables. We believe the actuarial assumptions are reasonable. However, actual results could vary materially from these actuarial assumptions due to economic events and differences in rates of retirement, mortality, and turnover.

One of the assumptions used in the actuarial models is the discount rate used to measure benefit obligations. This rate reflects the prevailing market rate for high-quality, fixed-income debt instruments with maturities corresponding to the expected timing of benefit payments as of the annual measurement date for each of the various plans. We measure the service cost and interest cost components of pension expense by applying spot rates along the yield curve to the relevant projected cash flows. The rates along the yield curve are used to discount the future cash flows of benefit obligations back to the measurement date. These rates change from year to year based on market conditions that affect corporate bond yields. A higher discount rate decreases the present value of the benefit obligations and results in lower pension expense. With respect to impacts on pension benefit obligations, a 50 bp increase or decrease in the discount rate may result in a decrease or increase, respectively, to pension expense of approximately $13 per year.

The expected rate of return on plan assets represents an estimate of the long-term average rate of return to be earned by plan assets reflecting current asset allocations. In determining estimated asset class returns, we take into account historical and future expected long-term returns and the value of active management, as well as the interest rate environment. Asset allocation is determined based on long-term return, volatility and correlation characteristics of the asset classes, the profiles of the plans’ liabilities, and acceptable levels of risk. Lower returns on the plan assets result in higher pension expense. A 50 bp increase or decrease in the estimated rate of return on plan assets may result in a decrease or increase, respectively, to pension expense of approximately $16 per year.

We use a market-related valuation method for recognizing certain investment gains or losses for our significant pension plans. Investment gains or losses are the difference between the expected return and actual return on plan assets. The expected return on plan assets is determined based on a market-related value of plan assets. This is a calculated value that recognizes investment gains and losses on equities over a five-year period from the year in which they occur and reduces year-to-year volatility. The market-related value for non-equity investments equals the actual fair value. Expense in future periods will be impacted as gains or losses are recognized in the market-related value of assets.

The expected rate of compensation increase is another key assumption. We determine this rate based on review of the underlying long-term salary increase trend characteristic of labor markets and historical experience, as well as comparison to peer companies. A 50 bp increase or decrease in the expected rate of compensation may result in an increase or decrease to pension expense, respectively, of approximately $4 per year.

Loss Contingencies

In the normal course of business, we encounter contingencies, or situations involving varying degrees of uncertainty as to the outcome and effect on our company. We accrue a liability for loss contingencies when it is considered probable that a liability has been incurred and the amount of loss can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued.

Contingencies include those associated with litigation and environmental matters, for which our accounting policy is discussed in Note 1, Basis of Presentation and Major Accounting Policies, to the consolidated financial statements, and details are provided in Note 19, Commitments and Contingencies, to the consolidated financial statements. Significant judgment is required to determine both the probability and whether the amount of loss associated with a contingency can be reasonably estimated. These determinations are made based on the best available information at the time. As additional information becomes available, we reassess probability and estimates of loss contingencies. Revisions to the estimates associated with loss contingencies could have a significant impact on our results of operations in the period in which an accrual for loss contingencies is recorded or adjusted. For example, due to the inherent uncertainties related to environmental exposures, a significant increase to environmental liabilities could occur if a new site is designated, the scope of remediation is increased, a different remediation alternative is identified, or our proportionate share of the liability increases. Similarly, a future charge for regulatory fines or damage awards associated with litigation could have a significant impact on our net income in the period in which it is recorded.

Our earnings, cash flows, and financial position are exposed to market risks arising from fluctuations in interest rates and foreign currency exchange rates. It is our policy to minimize our cash flow exposure to adverse changes in currency exchange rates and to manage the financial risks inherent in funding with debt capital.

We address these financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. We have established counterparty credit guidelines and generally enter into transactions with financial institutions of investment grade or better, thereby minimizing the risk of credit loss. All instruments are entered into for other than trading purposes. For details on the types and use of these derivative instruments and related major accounting policies, refer to Note 1, Basis of Presentation and Major Accounting Policies, and Note 15, Financial Instruments, to the consolidated financial statements. Additionally, we mitigate adverse energy price impacts through our cost pass-through contracts with customers and price increases.

Our derivative and other financial instruments consist of long-term debt, including the current portion and amounts owed to related parties; interest rate swaps; cross currency interest rate swaps; and foreign exchange-forward contracts. The net market value of these financial instruments combined is referred to below as the "net financial instrument position" and is disclosed in Note 16, Fair Value Measurements, to the consolidated financial statements. Our net financial instrument position increased from a liability of $8,990.8 at 30 September 2023 to a liability of $13,855.3 at 30 September 2024. The increase was primarily due to the issuance of green senior notes as well as additional borrowings under the project financing associated with the NEOM Green Hydrogen Project as discussed in Note 3, Variable Interest Entities, to the consolidated financial statements.

The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market rates and prices. Market values are the present values of projected future cash flows based on the market rates and prices chosen. The market values for interest rate risk and foreign currency risk are calculated by us using a third-party software model that utilizes standard pricing models to determine the present value of the instruments based on market conditions as of the valuation date, such as interest rates, spot and forward exchange rates, and implied volatility.

Interest Rate Risk

Our debt portfolio as of 30 September 2024, including the effect of currency and interest rate swap agreements, was composed of 87% fixed-rate debt and 13% variable-rate debt. Our debt portfolio as of 30 September 2023, including the effect of currency and interest rate swap agreements, was composed of 80% fixed-rate debt and 20% variable-rate debt.

The sensitivity analysis related to the interest rate risk on the fixed portion of our debt portfolio assumes an instantaneous 100 bp parallel move in interest rates from the level at 30 September 2024, with all other variables held constant. A 100 bp increase in market interest rates would result in a decrease of $1,035 and $728 in the net liability position of financial instruments at 30 September 2024 and 2023, respectively. A 100 bp decrease in market interest rates would result in an increase of $1,197 and $845 in the net liability position of financial instruments at 30 September 2024 and 2023, respectively.

Based on the variable-rate debt included in our debt portfolio, including the interest rate swap agreements, a 100 bp increase in interest rates would result in an additional $19 and $21 of interest incurred per year at 30 September 2024 and 2023, respectively. A 100 bp decline in interest rates would lower interest incurred by $19 and $21 per year at 30 September 2024 and 2023, respectively.

Foreign Currency Exchange Rate Risk

The sensitivity analysis related to foreign currency exchange rates assumes an instantaneous 10% change in the foreign currency exchange rates from their levels at 30 September 2024 and 2023, with all other variables held constant. A 10% strengthening or weakening of the functional currency of an entity versus all other currencies would result in a decrease or increase, respectively, of $408 and $308 in the net liability position of financial instruments at 30 September 2024 and 2023, respectively. The increase in sensitivity is primarily due to additional borrowings under the project financing associated with the NEOM Green Hydrogen Project.

The primary currency pairs for which we have exchange rate exposure are the Euro and U.S. Dollar and Chinese Renminbi and U.S. Dollar. Foreign currency debt, cross currency interest rate swaps, and foreign exchange-forward contracts are used in countries where we do business, thereby reducing our net asset exposure. Foreign exchange-forward contracts and cross currency interest rate swaps are also used to hedge our firm and highly anticipated foreign currency cash flows. Thus, there is either an asset or liability or cash flow exposure related to all of the financial instruments in the above sensitivity analysis for which the impact of a movement in exchange rates would be in the opposite direction and materially equal to the impact on the instruments in the analysis.

The majority of our sales are denominated in foreign currencies as they are derived outside the United States. Therefore, financial results will be affected by changes in foreign currency rates. The Chinese Renminbi and the Euro represent the largest exposures in terms of our foreign earnings. We estimate that a 10% reduction in either the Chinese Renminbi or the Euro versus the U.S. Dollar would lower our annual operating income by approximately $55 and $25, respectively.

Disclosure Controls and Procedures

We maintain a comprehensive set of disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15(e) under the Exchange Act). Under the supervision of the Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our disclosure controls and procedures as of 30 September 2024. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of 30 September 2024, the disclosure controls and procedures were effective.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Management has evaluated the effectiveness of our internal control over financial reporting as of 30 September 2024 based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on that evaluation, management concluded that, as of 30 September 2024, our internal control over financial reporting was effective. Management’s Report on Internal Control over Financial Reporting is provided under Part II, Item 8, of this Annual Report on Form 10-K.

There was no change in our internal control over financial reporting during the fourth quarter of fiscal year 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Deloitte & Touche LLP, our independent registered public accounting firm, has audited our internal control over financial reporting as of 30 September 2024. The Report of the Independent Registered Public Accounting Firm is provided under Part II, Item 8, of this Annual Report on Form 10-K.