# Table	of	Contents

# UNITED	STATES

# SECURITIES	AND	EXCHANGE	COMMISSION

ANNUAL	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934	For	the fiscal	year	ended	30	September	2016

TRANSITION	REPORT	PURSUANT	TO	SECTION	13	OR	15(d)	OF	THE	SECURITIES	EXCHANGE	ACT	OF	1934	For the	transition	period	from																		to

Commission	file	number	1-4534

# AIR	PRODUCTS	AND	CHEMICALS,	INC.

State	of	incorporation:	Delaware I.R.S.	identification	number:	23-1274455

Securities	registered	pursuant	to	Section	12(b)	of	the	Act:

Title	of	Each	Class:

Registered	on:

# New	York	Stock	Exchange

# Securities	registered	pursuant	to	Section	12(g)	of	the	Act:	None

Indicate	by	check	mark	if	the	registrant	is	a	well-known	seasoned	issuer,	as	defined	in	Rule	405	of	the	Securities	Act.

Indicate	by	check	mark	if	the	registrant	is	not	required	to	file	reports	pursuant	to	Section	13	or	Section	15(d)	of	the	Act.

Indicate	by	check	mark	whether	the	registrant	(1)	has	filed	all	reports	required	to	be	filed	by	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934 during	the	preceding	12	months	(or	for	such	shorter	period	that	the	registrant	was	required	to	file	such	reports),	and	(2)	has	been	subject	to	such	filing requirements	for	the	past	90	days.

Indicate	by	check	mark	whether	the	registrant	has	submitted	electronically	and	posted	on	its	corporate	Web	site,	if	any,	every	Interactive	Data	File required	to	be	submitted	and	posted	pursuant	to	Rule	405	of	Regulation	S-T	(§232.405	of	this	chapter)	during	the	preceding	12	months	(or	for	such shorter	period	that	the	registrant	was	required	to	submit	and	post	such	files).

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

Indicate	by	check	mark	whether	the	registrant	is	a	large	accelerated	filer,	an	accelerated	filer,	a	non-accelerated	filer,	or	a	smaller	reporting	company.	See	the	definitions	of	"large accelerated	filer,"	"accelerated	filer,"	and	"smaller	reporting	company"	in	Rule	12b-2	of	the	Exchange	Act.

Large	accelerated	filer			x

Accelerated	filer			¨

Non-accelerated	filer			¨

Indicate	by	check	mark	whether	the	registrant	is	a	shell	company	(as	defined	in	Rule	12b-2	of	the	Act).

Smaller	reporting	company			¨

The	aggregate	market	value	of	the	voting	stock	held	by	non-affiliates	of	the	registrant	on	31	March	2016	was	approximately	$31.0	billion.	For	purposes	of	the	foregoing	calculations all	directors	and/or	executive	officers	have	been	deemed	to	be	affiliates,	but	the	registrant	disclaims	that	any	such	director	and/or	executive	officer	is	an	affiliate.

# DOCUMENTS	INCORPORATED	BY	REFERENCE

Portions	of	the	registrant's	definitive	Proxy	Statement	for	the	Annual	Meeting	of	Shareholders	to	be	held	on	26	January	2017	are	incorporated	by	reference	into	Part	III.

# ANNUAL	REPORT	ON	FORM	10-K

# For	the	fiscal	year	ended	30	September	2016

| ITEM	1. | BUSINESS | 3 |
| :--- | :--- | :--- |
| ITEM\t1A. | \t\tRISK\tFACTORS | 10 |
| ITEM\t1B. | \t\tUNRESOLVED\tSTAFF\tCOMMENTS | 15 |
| ITEM\t2. | \t\tPROPERTIES | 15 |
| ITEM\t3. | \t\tLEGAL\tPROCEEDINGS | 16 |
| ITEM\t4. | \t\tSUBMISSION\tOF\tMATTERS\tTO\tA\tVOTE\tOF\tSECURITY\tHOLDERS | 18 |
| ITEM\t5. | MARKET\tFOR\tREGISTRANT'S\tCOMMON\tEQUITY,\tRELATED\tSTOCKHOLDER\tMATTERS,\tAND\tISSUER\tPURCHASES |  |
|  | OF\tEQUITY\tSECURITIES | 18 |
| ITEM\t6. | \t\tSELECTED\tFINANCIAL\tDATA | 20 |
| ITEM\t7. | \t\tMANAGEMENT'S\tDISCUSSION\tAND\tANALYSIS\tOF\tFINANCIAL\tCONDITION\tAND\tRESULTS\tOF\tOPERATIONS | 22 |
| ITEM\t7A. | \t\tQUANTITATIVE\tAND\tQUALITATIVE\tDISCLOSURES\tABOUT\tMARKET\tRISK | 55 |
| ITEM\t8. | \t\tFINANCIAL\tSTATEMENTS\tAND\tSUPPLEMENTARY\tDATA | 58 |
| ITEM\t9. | \t\tCHANGES\tIN\tAND\tDISAGREEMENTS\tWITH\tACCOUNTANTS\tON\tACCOUNTING\tAND\tFINANCIAL\tDISCLOSURE | \t116 |
| ITEM\t9A. | \t\tCONTROLS\tAND\tPROCEDURES | \t116 |
| ITEM\t9B. | \t\tOTHER\tINFORMATION | \t116 |
| ITEM\t10. | \t\tDIRECTORS,\tEXECUTIVE\tOFFICERS\tAND\tCORPORATE\tGOVERNANCE | \t116 |
| ITEM\t11. | \t\tEXECUTIVE\tCOMPENSATION | \t117 |
| ITEM\t12. | SECURITY\tOWNERSHIP\tOF\tCERTAIN\tBENEFICIAL\tOWNERS\tAND\tMANAGEMENT\tAND\tRELATED\tSTOCKHOLDER\nMATTERS | \t117 |
| ITEM\t13. | \t\tCERTAIN\tRELATIONSHIPS\tAND\tRELATED\tTRANSACTIONS,\tAND\tDIRECTOR\tINDEPENDENCE | \t118 |
| ITEM\t14. | \t\tPRINCIPAL\tACCOUNTANT\tFEES\tAND\tSERVICES | \t118 |
| ITEM\t15. | \t\tEXHIBITS\tAND\tFINANCIAL\tSTATEMENT\tSCHEDULES | \t118 |
| SIGNATURES |  | \t119 |

# PART	I

# ITEM	1. BUSINESS

# General	Description	of	Business

Air	Products	and	Chemicals,	Inc.	("we,"	"our,"	"us,"	the	"Company,"	"Air	Products,"	or	"registrant"),	a	Delaware	corporation	originally	founded	in	1940, serves	energy,	electronics,	chemicals,	metals,	and	manufacturing	customers	globally	with	a	unique	portfolio	of	products,	services,	and	solutions	that include	atmospheric	gases,	process	and	specialty	gases,	electronics	and	performance	materials,	equipment,	and	services.	The	Company	is	the	world's largest	supplier	of	hydrogen	and	has	built	leading	positions	in	growth	markets	such	as	helium,	refinery	hydrogen,	semiconductor	materials,	natural	gas liquefaction,	and	advanced	coatings	and	adhesives.	As	used	in	this	report,	unless	the	context	indicates	otherwise,	the	terms	"we,"	"our,"	"us,"	the "Company,"	or	"registrant"	include	controlled	subsidiaries,	affiliates,	and	predecessors	of	Air	Products	and	its	controlled	subsidiaries	and	affiliates.

During	its	fiscal	year	ended	30	September	2016	("fiscal	year	2016"),	the	Company	manufactured	and	distributed	products	in	two	principal	lines	of business:	Industrial	Gases	and	Materials	Technologies.	Industrial	Gases'	primary	products	were	atmospheric	gases,	process	gases,	and	equipment	for air	separation.	Materials	Technologies'	primary	products	were	performance	materials	and	chemicals,	such	as	epoxy	amine	curing	agents,	polyurethane catalysts,	additives,	and	specialty	surfactants,	and	electronic	materials	such	as	specialty	gases,	chemical	mechanical	planarization	slurries,	and	specialty chemicals.	The	Company	also	designs	and	manufactures	equipment	for	natural	gas	liquefaction	and	helium	distribution.

At	the	beginning	of	the	fiscal	year,	the	Company	reported	its	business	in	seven	reporting	segments	under	which	it	managed	its	operations,	assessed performance,	and	reported	earnings:	Industrial	Gases	–	Americas;	Industrial	Gases	–	EMEA	(Europe,	Middle	East,	and	Africa);	Industrial	Gases	–	Asia; Industrial	Gases	–	Global;	Materials	Technologies;	Energy-from-Waste;	and	Corporate	and	other.	On	29	March	2016,	the	Board	of	Directors	approved the	Company's	exit	of	its	Energy-from-Waste	business	based	on	continued	difficulties	encountered	in	making	its	two	 Energy-from-Waste	projects operational	and	the	Company's	conclusion,	based	on	testing	and	analysis	completed	during	the	second	quarter	of	fiscal	year	2016,	that	significant additional	time	and	resources	would	be	required	to	make	the	projects	operational.	The	Energy-from-Waste	segment	is	now	presented	as	a	discontinued operation.	Refer	to	Note	26,	Business	Segment	and	Geographic	Information,	to	the	consolidated	financial	statements	for	additional	details	on	our reportable	business	segments.

On	16	September	2015,	the	Company	announced	that	its	Board	of	Directors	approved	a	preliminary	plan	to	spin	off	its	Materials	Technologies	business, which	contained	the	Electronic	Materials	and	Performance	Materials	businesses.	On	6	May	2016,	the	Company	entered	into	an	agreement	to	sell	certain subsidiaries	and	assets	comprising	the	Performance	Materials	business	to	Evonik	Industries	AG	for	$3.8	billion	in	cash	and	the	assumption	of	certain liabilities.	The	Company	also	announced	its	intention	to	proceed	with	the	spin-off	of	the	Electronic	Materials	business.	In	preparation	for	the	spin-off,	Air Products	transferred	operations,	employees,	assets,	and	liabilities	of	the	Electronic	Materials	business	to	its	wholly	owned	subsidiary,	Versum	Materials, Inc.	(Versum).	On	1	October	2016,	Air	Products	distributed	all	of	the	shares	of	Versum	Materials,	Inc.	to	its	shareholders,	creating	a	new	publicly	traded corporation.	As	of	30	September	2016,	the	results	of	operations,	financial	condition,	and	cash	flows	for	the	Electronic	Materials	and	Performance Materials	businesses	are	presented	within	the	Company's	consolidated	financial	statements	as	continuing	operations.	Beginning	with	the	first	quarter	of fiscal	year	2017,	the	historical	results	of	Electronic	Materials	will	be	presented	as	a	discontinued	operation.	The	historical	results	of	Performance Materials	will	be	reflected	as	a	discontinued	operation	when	it	becomes	probable	for	the	sale	to	occur	and	actions	required	to	meet	the	plan	of	sale indicate	that	it	is	unlikely	that	significant	changes	will	occur.

# Narrative	Description	of	Business	by	Segments

# Industrial	Gases	Business

The	Company's	Industrial	Gases	business	produces	atmospheric	gases	(oxygen,	nitrogen,	argon,	and	rare	gases),	process	gases	(hydrogen,	helium, carbon	dioxide,	carbon	monoxide,	syngas	and	specialty	gases)	and	equipment	for	the	production	or	processing	of	gases	such	as	air	separation	units	and non-cryogenic	generators.	Atmospheric	gases	are	produced	through	various	air	separation	processes	of	which	cryogenic	is	the	most	prevalent.	Process gases	are	produced	by	methods	other	than	air	separation.	For	example,	hydrogen	is	produced	by	steam	methane	reforming	of	natural	gas	or	by	purifying byproduct	sources	obtained	from	the	chemical	and	petrochemical	industries;	and	helium	is	produced	as	a	byproduct	of	gases	extracted	from underground	reservoirs,	primarily	natural	gas,	but	also	carbon	dioxide	purified	before	resale.

The	Company's	Industrial	Gases	business	is	organized	and	operated	regionally.	The	regional	Industrial	Gases	segments	(Americas,	EMEA,	and	Asia) supply	gases	and	related	equipment	in	the	relevant	region	to	diversified	customers	in	many	industries,	including	those	in	metals,	glass,	chemical processing,	electronics,	energy	production	and	refining,	food	processing,	metallurgical	industries,	medical,	and	general	manufacturing.	Hydrogen	is	used by	refiners	to	facilitate	the	conversion	of	heavy	crude	feedstock	and	lower	the	sulfur	content	of	gasoline	and	diesel	fuels.	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	for	inerting	is	used	in	various	fields,	including	the	metallurgical,	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.

We	distribute	gases	to	our	customers	through	a	variety	of	supply	modes:

Liquid	Bulk—Product	is	delivered	in	bulk	(in	liquid	or	gaseous	form)	by	tanker	or	tube	trailer	and	stored,	usually	in	its	liquid	state,	in	equipment designed	and	installed	typically	by	the	Company	at	the	customer's	site	for	vaporizing	into	a	gaseous	state	as	needed.	Liquid	bulk	sales	are usually	governed	by	three-	to	five-year	contracts.

Packaged	Gases—Small	quantities	of	product	are	delivered	in	either	cylinders	or	dewars.	The	Company	operates	packaged	gas	businesses	in Europe,	Asia,	and	Latin	America.	In	the	United	States,	the	Company's	packaged	gas	business	sells	products	only	for	the	electronics	and magnetic	resonance	imaging	(principally	helium)	industries.

On-Site	Gases—Large	quantities	of	hydrogen,	nitrogen,	oxygen,	carbon	monoxide,	and	syngas	(a	mixture	of	hydrogen	and	carbon	monoxide) are	provided	to	customers,	principally	the	energy	production	and	refining,	chemical,	and	metallurgical	industries	worldwide	who	require	large volumes	of	gases	that	have	relatively	constant	demand.	Gases	are	produced	at	large	facilities	located	adjacent	to	customers'	facilities	or	by pipeline	systems	from	centrally	located	production	facilities	and	are	generally	governed	by	15-	to	20-	year	contracts.	The	Company	also	delivers small	quantities	of	product	through	small	on-site	plants	(cryogenic	or	non-cryogenic	generators),	typically	either	via	a	10-	to	15-	year	sale	of	gas contract	or	through	the	sale	of	the	equipment	to	the	customer.

Electricity	is	the	largest	cost	component	in	the	production	of	atmospheric	gases,	and	natural	gas	is	the	principal	raw	material	for	hydrogen,	carbon monoxide,	and	syngas	production.	We	mitigate	energy	and	natural	gas	price	fluctuations	contractually	through	pricing	formulas,	surcharges,	and	cost pass-through	arrangements.	During	fiscal	year	2016,	no	significant	difficulties	were	encountered	in	obtaining	adequate	supplies	of	power	and	natural	gas.

The	regional	Industrial	Gases	segments	also	include	our	share	of	the	results	of	several	joint	ventures	accounted	for	by	the	equity	method.	The	largest	of these	joint	ventures	operate	in	Mexico,	Italy,	South	Africa,	India,	Saudi	Arabia,	and	Thailand.

Each	of	the	regional	Industrial	Gases	segments	competes	against	three	global	industrial	gas	companies:	Air	Liquide	S.A.,	Linde	AG,	and	Praxair,	Inc.;	as well	as	regional	competitors.	Competition	in	Industrial	Gases	is	based	primarily	on	price,	reliability	of	supply,	and	the	development	of	industrial	gas applications.	In	locations	where	we	have	pipeline	networks,	which	enable	us	to	provide	reliable	and	economic	supply	of	products	to	larger	customers,	we derive	a	competitive	advantage.

Overall	regional	industrial	gases	sales	constituted	approximately	76%	of	consolidated	sales	in	fiscal	year	2016,	76%	in	fiscal	year	2015,	and	77%	in	fiscal year	2014.	Sales	of	tonnage	hydrogen	and	related	products	constituted	approximately	17%	of	consolidated	sales	in	fiscal	year	2016,	19%	in	fiscal	year 2015,	and	22%	in	fiscal	year	2014.	Sales	of	atmospheric	gases	constituted	approximately	36%	of	consolidated	sales	in	fiscal	year	2016,	35%	in	fiscal year	2015	and	33%	in	fiscal	year	2014.

# Industrial	Gases	Equipment

The	Company	designs	and	manufactures	equipment	for	air	separation,	hydrocarbon	recovery	and	purification,	natural	gas	liquefaction	(LNG),	and	liquid helium	and	liquid	hydrogen	transport	and	storage.	The	Industrial	Gases	–	Global	segment	includes	cryogenic	and	non-cryogenic	equipment	for	air separation.	The	equipment	is	sold	worldwide	to	customers	in	a	variety	of	industries,	including	chemical	and	petrochemical	manufacturing,	oil	and	gas recovery,	and	processing	and	steel	and	primary	metals	processing.	Other	activities,	which	are	managed	globally	instead	of	regionally,	are	also	part	of	this segment,	such	as	technology	development	for	air	separation.	The	Corporate	and	other	segment	includes	two	global	equipment	businesses,	our	LNG	sale of	equipment	business	and	our	liquid	helium	and	liquid	hydrogen	transport	and	storage	containers	business.	Steel,	aluminum,	and	capital	equipment subcomponents	(compressors,	etc.)	are	the	principal	raw	materials	in	the	manufacturing	of	equipment	in	this	business	segment.	Adequate	raw	materials for	individual	projects	are	acquired	under	firm	purchase	agreements.	Equipment	is	produced	at	the	Company's	manufacturing	sites	with	certain components	being	procured	from	subcontractors	and	vendors.	Competition	in	the	equipment	business	is	based	primarily	on	technological	performance, service,	technical	know-how,	price	and	performance	guarantees.

The	backlog	of	equipment	orders	was	approximately	$1.1	billion	on	30	September	2016	(as	compared	with	a	total	backlog	of	approximately	$1.5	billion	on 30	September	2015)	and	primarily	contains	Air	Products'	share	of	the	multi-year	contract	with	a	joint	venture	in	Jazan,	Saudi	Arabia	for	the	construction of	an	industrial	gas	facility	that	will	supply	gases	to	Saudi	Arabian	Oil	Company	(Saudi	Aramco).	Revenue	from	this	contract	is	recognized	under	the percent	complete	method	based	on	costs	incurred	to	date	compared	with	total	expected	costs	to	be	incurred.	The	Company	estimates	that	between	60- 70%	of	the	total	sales	backlog	as	of	30	September	2016	will	be	recognized	as	revenue	during	fiscal	year	2017,	dependent	on	execution	schedules	of	the relevant	projects.

# Materials	Technologies

Materials	Technologies	is	a	global	business	that	delivers	innovation-driven	solutions	for	specific	customer	applications	within	niche	markets.	This segment	employs	applications	technology	to	provide	solutions	to	a	broad	range	of	global	industries	through	chemical	synthesis,	analytical	technology, process	engineering,	and	surface	science.	It	is	comprised	of	two	business	divisions:	Performance	Materials,	which	is	focused	on	a	portfolio	of	additives products	that	provide	high	value	properties	at	low	cost	across	a	variety	of	industries,	and	Electronic	Materials,	which	is	focused	on	supplying	critical materials	and	equipment	to	the	semiconductor	industry.	The	Company	completed	the	spin-off	of	the	Electronic	Materials	business	on	1	October	2016	and has	entered	into	an	agreement	for	the	sale	of	the	Performance	Materials	business,	which	is	subject	to	regulatory	approval	and	other	conditions.

The	Performance	Materials	business	has	critical	competencies	in	specialty	amines,	alkoxylates	and	silicone	chemistries.	The	business	provides	a	range of	products	concentrated	in	the	areas	of	epoxy	curing	agents,	accelerators	and	catalysts,	polyurethane	catalysts,	surfactants	and	curatives	and	specialty additives,	including	surfactants,	wetting	agents,	dispersants	and	de-foaming	agents.	The	products	are	used	in	a	variety	of	industry	applications,	including coatings,	inks,	adhesives,	construction	and	civil	engineering,	personal	care,	institutional	and	industrial	cleaning,	mining,	oil	refining,	and	polyurethanes. The	Performance	Materials	businesses	focus	on	the	development	of	new	additive	materials	aimed	at	providing	unique	technologies	and	functionality.

The	Electronic	Materials	business	maintained	critical	competencies	in	molecular	design,	formulation	expertise,	and	ultra-high	purity	chemistry.	This division	provided	the	semiconductor	industry	with	high	purity	process	materials	for	deposition,	metallization,	chamber	cleaning	and	etching,	chemicals mechanical	planarization	slurries,

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

Both	businesses	are	based	on	strong	customer	relationships	and	collaborative	development,	technology	and	innovation	leadership,	unique	product positioning,	and	a	strong	global	infrastructure	with	in-region	flexible	manufacturing	capabilities.	The	segment	maintains	manufacturing	operations	in	North America,	Europe	and	Asia	and	manages	a	complex	global	supply	chain.	Products	are	delivered	in	bulk	containers	of	different	sizes,	some	of	which	are returnable.

Materials	Technologies	uses	a	wide	variety	of	raw	materials	including	amines	and	amine	derivatives,	alcohols	and	surfactants,	tungsten	powder,	ethylene oxide,	and	ketones.	During	fiscal	year	2016,	no	significant	difficulties	were	encountered	in	obtaining	adequate	supplies	of	energy	or	raw	materials.

Materials	Technologies	faces	competition	on	a	product-by-product	basis	against	competitors	ranging	from	niche	suppliers	with	a	single	product	to	larger and	more	vertically	integrated	companies.	Competition	is	principally	conducted	on	the	basis	of	price,	quality,	product	performance,	reliability	of	product supply,	technical	innovation,	service,	and	global	infrastructure.

Total	sales	from	Materials	Technologies	constituted	approximately	21%	of	consolidated	sales	in	fiscal	year	2016,	21%	of	consolidated	sales	in	fiscal	year 2015,	and	20%	in	fiscal	year	2014.	Performance	Materials	Division	sales	constituted	approximately	11%	of	consolidated	sales	in	fiscal	year	2016,	11%	in fiscal	year	2015,	and	11%	in	fiscal	year	2014,	and	Electronic	Materials	Division	sales	constituted	approximately	10%	of	consolidated	sales	in	fiscal	year 2016,	10%	of	consolidated	sales	in	fiscal	year	2015,	and	9%	in	fiscal	year	2014.

# Narrative	Description	of	the	Company's	Business	Generally

The	Company,	through	subsidiaries,	affiliates,	and	less-than-controlling	interests,	conducts	business	in	50	countries	outside	the	United	States.	Its international	businesses	are	subject	to	risks	customarily	encountered	in	foreign	operations,	including	fluctuations	in	foreign	currency	exchange	rates	and controls;	import	and	export	controls;	and	other	economic,	political,	and	regulatory	policies	of	local	governments.

The	Company	has	majority	or	wholly	owned	foreign	subsidiaries	that	operate	in	Canada,	17	European	countries	(including	the	United	Kingdom,	the Netherlands,	and	Spain),	11	Asian	countries	(including	China,	Korea,	and	Taiwan),	7	Latin	American	countries	(including	Chile	and	Brazil),	2	African countries,	and	1	Middle	Eastern	country.	The	Company	also	owns	less-than-controlling	interests	in	entities	operating	in	Europe,	Asia,	Africa,	the	Middle East,	and	Latin	America	(including	Italy,	Germany,	China,	India,	Saudi	Arabia,	Singapore,	Thailand,	United	Arab	Emirates,	South	Africa,	and	Mexico).

Financial	information	about	the	Company's	foreign	operations	and	investments	is	included	in	Note	8,	Summarized	Financial	Information	of	Equity Affiliates;	Note	23,	Income	Taxes;	and	Note	26,	Business	Segment	and	Geographic	Information,	to	the	consolidated	financial	statements	included	under Item	8,	herein.	Information	about	foreign	currency	translation	is	included	under	"Foreign	Currency"	in	Note	1,	Major	Accounting	Policies,	and	information on	the	Company's	exposure	to	currency	fluctuations	is	included	in	Note	13,	Financial	Instruments,	to	the	consolidated	financial	statements,	included under	Item	8,	below,	and	in	"Foreign	Currency	Exchange	Rate	Risk,"	included	under	Item	7A,	below.	Export	sales	from	operations	in	the	United	States	to third-party	customers	amounted	to	$307.7	million,	$398.8	million,	and	$378.7	million	in	fiscal	years	2016,	2015,	and	2014,	respectively.

# Technology	Development

The	Company	pursues	a	market-oriented	approach	to	technology	development	through	research	and	development,	engineering,	and	commercial development	processes.	It	conducts	research	and	development	principally	in	its	laboratories	located	in	the	United	States	(Trexlertown,	Pennsylvania; Carlsbad,	California;	Milton,	Wisconsin;	and	Phoenix,	Arizona),	Canada	(Vancouver),	the	United	Kingdom	(Basingstoke	and	Carrington),	Germany (Hamburg),	the	Netherlands	(Utrecht),	Spain	(Barcelona),	Japan	(Kawasaki),	China	(Shanghai),	Korea	(Giheung),	and	Taiwan	(Chupei	and	Hsinchu City).	The	Company	also	funds	and	cooperates	in	research	and	development	programs	conducted	by	a	number	of	major	universities	and	undertakes research	work	funded	by	others—principally	the	United	States	government.

The	Company's	research	groups	are	aligned	with	and	support	the	research	efforts	of	various	businesses	throughout	the	Company.	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.	Research	and	technology	development	for	Materials	Technologies	supports	development	of	new	products	and	applications	to strengthen	and	extend	the	Company's	present	positions	as	well	as	to	lower	processing	costs	and	develop	new	processes	for	the	new	products.

Research	and	development	expenditures	were	$132.0	million	during	fiscal	year	2016,	$137.1	million	during	fiscal	year	2015,	and	$139.8	million	in	fiscal year	2014.	In	addition,	the	Company	expended	approximately	$1	million	on	customer	sponsored	research	activities	during	fiscal	year	2016,	$6	million during	fiscal	year	2015,	and	$19	million	in	fiscal	year	2014.

The	Company	owns	approximately	970	United	States	patents,	approximately	3,900	foreign	patents,	and	is	a	licensee	under	certain	patents	owned	by others.	While	the	patents	and	licenses	are	considered	important,	the	Company	does	not	consider	its	business	as	a	whole	to	be	materially	dependent upon	any	particular	patent,	patent	license,	or	group	of	patents	or	licenses.

# Environmental	Controls

The	Company	is	subject	to	various	environmental	laws	and	regulations	in	the	countries	in	which	it	has	operations.	Compliance	with	these	laws	and regulations	results	in	higher	capital	expenditures	and	costs.	In	the	normal	course	of	business,	the	Company	is	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.	Additional information	with	respect	to	these	proceedings	is	included	under	Item	3,	Legal	Proceedings,	below.	The	Company's	accounting	policy	for	environmental expenditures	is	discussed	in	Note	1,	Major	Accounting	Policies,	and	environmental	loss	contingencies	are	discussed	in	Note	17,	Commitments	and Contingencies,	to	the	consolidated	financial	statements,	included	under	Item	8,	below.

The	amounts	charged	to	income	from	continuing	operations	related	to	environmental	matters	totaled	$27.0	million	in	fiscal	year	2016,	$28.3	million	in fiscal	2015,	and	$35.1	million	in	2014.	These	amounts	represent	an	estimate	of	expenses	for	compliance	with	environmental	laws	and	activities undertaken	to	meet	internal	Company	standards.	Refer	to	Note	17,	Commitments	and	Contingencies,	to	the	consolidated	financial	statements	for additional	information.

The	Company	estimates	that	we	spent	$7	million	in	2016,	$4	million	in	2015	and	$5	million	in	2014	on	capital	projects	to	control	pollution.	Capital expenditures	to	control	pollution	in	future	years	are	estimated	to	be	approximately	$3	million	in	both	2017	and	2018.

# Employees

On	30	September	2016,	the	Company	(including	majority-owned	subsidiaries)	had	approximately	18,600	employees,	of	whom	approximately	18,300	were full-time	employees	and	of	whom	approximately	11,800	were	located	outside	the	United	States.	The	Company	has	collective	bargaining	agreements	with unions	at	various	locations	that	expire	on	various	dates	over	the	next	four	years.	The	Company	considers	relations	with	its	employees	to	be	satisfactory.

# Available	Information

All	periodic	and	current	reports,	registration	statements,	and	other	filings	that	the	Company	is	required	to	file	with	the	Securities	and	Exchange Commission	(SEC),	including	the	Company's	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	1934	Act	Reports),	are	available free	of	charge	through	the	Company's	Internet	website	at	www.airproducts.com.	Such	documents	are	available	as	soon	as	reasonably	practicable	after electronic	filing	of	the	material	with	the	SEC.	All	1934	Act	Reports	filed	during	the	period	covered	by	this	report	were	available	on	the	Company's	website on	the	same	day	as	filing.

The	public	may	also	read	and	copy	any	materials	filed	by	the	Company	with	the	SEC	at	the	SEC's	Public	Reference	Room	at	100	F	Street,	N.E., Washington,	DC	20549.	The	public	may	obtain	information	on	the	operation	of	the	Public	Reference	Room	by	calling	the	SEC	at	1-800-SEC-0330.	The SEC	maintains	an	Internet	site	that	contains	reports,	proxy,	and	information	statements,	and	other	information	regarding	issuers	that	file	electronically with	the	SEC.	The	address	of	that	site	is	www.sec.gov.

# Seasonality

Although	the	Company's	businesses	are	not	subject	to	seasonal	fluctuations	to	any	material	extent,	Materials	Technologies	is	susceptible	to	the	cyclical nature	of	the	electronics	industry	and	to	seasonal	fluctuations	in	underlying	end-use	performance	materials	markets.

# Working	Capital

Our	working	capital	balance	was	a	positive	$1,034	at	30	September	2016.	The	cash	and	cash	items	balance	is	higher	than	our	historical	trend	and primarily	results	from	transactions	related	to	the	anticipated	spin-off	of	Versum	and	positive	operating	cash	flows.

The	Company	maintains	inventory	where	required	to	facilitate	the	supply	of	products	to	customers	on	a	reasonable	delivery	schedule.	Industrial	Gases' inventory	consists	primarily	of	industrial	gas,	specialty	gas,	and	crude	helium	inventories	supplied	to	customers	through	liquid	bulk	and	packaged	gases supply	modes.	Materials	Technologies'	inventories	consist	primarily	of	bulk	and	packaged	specialty	gases	and	chemicals,	bulk	and	packaged performance	chemical	solutions	and	also	include	inventories	to	support	sales	of	equipment	and	services.

# Customers

We	do	not	have	a	homogeneous	customer	base	or	end	market,	and	no	single	customer	accounts	for	more	than	10%	of	our	consolidated	revenues.	We do	have	concentrations	of	customers	in	specific	industries,	primarily	refining,	chemicals,	and	electronics.	Within	each	of	these	industries,	the	Company has	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	revenue,	could	have	an	adverse	impact	on	the	affected	segment.

# Governmental	Contracts

No	segment's	business	is	subject	to	a	government	entity's	renegotiation	of	profits	or	termination	of	contracts	that	would	be	material	to	our	business	as	a whole.

# Executive	Officers	of	the	Company

The	Company's	executive	officers	and	their	respective	positions	and	ages	on	21	November	2016	follow.	Information	with	respect	to	offices	held	is	stated in	fiscal	years.

# ITEM	1A. RISK	FACTORS

In	conjunction	with	evaluating	an	investment	in	the	Company	and	the	forward-looking	information	contained	in	this	Annual	Report	on	Form	10-K	or presented	elsewhere	by	management	from	time	to	time,	you	should	carefully	read	the	following	risk	factors.	Any	of	the	following	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	common	stock	as	well.	While	we	believe	we	have	identified	and	discussed	below the	key	risk	factors	affecting	our	business,	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.

Overall	Economic	and	Supply/Demand	Conditions,	Customer	Vitality—A	weakening	economy	or	product	supply	versus	demand	imbalance	in markets	in	which	the	Company	does	business	may	decrease	the	demand	for	its	goods	and	services	and	adversely	impact	its	revenues, operating	results,	and	cash	flows.	Cyclical	downturns	in	the	industries	served	by	our	customers	or	adverse	economic	events	or	conditions affecting	specific	customers	can	in	turn	have	an	adverse	effect	on	our	business.

Demand	for	the	Company's	products	and	services	depends	in	part	on	the	general	economic	conditions	affecting	the	countries	and	markets	in	which	the Company	does	business.	In	the	past	few	years,	uncertain	economic	conditions	in	certain	geographies	and	changing	supply	and	demand	balances	in markets	served	by	the	Company	have	impacted	and	may	in	the	future	impact	demand	for	the	Company's	products	and	services,	in	turn	negatively impacting	the	Company's	revenues	and	earnings.	Unfavorable	conditions	can	depress	sales	in	a	given	market	or	to	a	particular	customer,	affect	our margins,	constrain	our	operating	flexibility,	impact	utilization	of	the	Company's	manufacturing	capacity,	or	result	in	charges	which	are	unusual	or nonrecurring.	Excess	capacity	in	the	Company's	or	its	competitors'	manufacturing	facilities	could	decrease	the	Company's	ability	to	maintain	pricing	and generate	profits.

Our	operating	results	in	one	or	more	segments	may	also	be	affected	by	uncertain	or	deteriorating	economic	conditions	particularly	germane	to	that segment	or	to	particular	customer	markets	within	that	segment.	A	decline	in	the	industries	served	by	our	customers	or	adverse	events	or	circumstances affecting	individual	customers	can	impair	the	ability	of	such	customers	to	satisfy	their	obligations	to	the	Company,	resulting	in	uncollected	receivables, unanticipated	contract	terminations,	project	delays,	or	inability	to	recover	plant	investments	negatively	impacting	our	financial	results.

Weak	overall	demand	or	specific	customer	conditions	may	also	cause	elimination	of	product	lines,	customer	shutdowns	or	default,	or	other	inabilities	to profitably	operate	facilities	and	may	force	sale	or	abandonment	of	facilities	and	equipment	or	projects	not	to	reach	on-stream.	These	or	other	events associated	with	weak	economic	conditions	or	specific	end	market,	product,	or	customer	events	may	require	the	Company	to	record	an	impairment	on tangible	assets,	such	as	facilities	and	equipment,	or	intangible	assets,	such	as	intellectual	property	or	goodwill,	which	would	have	a	negative	impact	on its	financial	results.

# Operational,	Economic,	Political,	and	Legal	Risks	of	International	Operations—The	Company's	foreign	operations	can	be	adversely	impacted by	operational,	economic,	political	and	legal	risks	that	could	impact	our	profitability.	Developing	market	operations	present	special	risks.

The	Company	has	extensive	international	operations.	In	addition,	the	Company	is	actively	investing	significant	capital	and	other	resources	in	emerging markets,	including	joint	ventures	and	other	alliances.	The	Company's	operations	in	certain	foreign	jurisdictions	may	be	subject	to	project	delays	due	to unanticipated	government	actions,	inadequate	investment	in	infrastructure,	undeveloped	property	rights	and	legal	systems,	or	political	instability.	Some	of the	Company's	contractual	relationships	within	these	jurisdictions	are	subject	to	cancellation	without	full	compensation	for	loss.	Economic	and	political conditions	within	foreign	jurisdictions,	nationalization	and	expropriation	risk,	social	unrest,	strained	relations	between	countries,	or	imposition	of international	sanctions	can	cause	fluctuations	in	demand,	price	volatility,	supply	disruptions,	or	loss	of	property.	The	occurrence	of	any	of	these	risks could	have	a	material	adverse	impact	on	the	Company's	financial	condition,	results	of	operation,	and	cash	flows.

Our	developing	market	operations	may	be	subject	to	greater	risks	than	those	faced	by	our	operations	in	mature	economies,	including	geopolitical,	legal, economic,	and	talent	risks.	Our	success	will	depend,	in	part,	on	our	ability

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

Further,	our	operations	outside	the	United	States	require	us	to	comply	with	a	number	of	United	States	and	international	regulations,	including	anti- corruption	laws	such	as	the	United	States	Foreign	Corrupt	Practices	Act,	the	United	Kingdom	Bribery	Act,	and	the	China	Anti-Unfair	Competition	Law,	as well	as	U.S.	and	international	economic	sanctions.	We	have	policies	and	procedures	to	foster	compliance	with	these	laws,	including	compliance	and training	programs	for	our	employees	and	established	due	diligence	procedures	with	regard	to	third	parties;	however,	these	cannot	eliminate	the	risk	that violations	could	be	committed	by	our	employees,	agents	or	joint	venture	partners.	Violations	of	such	laws	and	regulations	could	result	in	disruptive investigations	of	the	Company,	significant	fines	and	sanctions	which	could	adversely	affect	our	consolidated	results	of	operations.

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

The	majority	of	the	Company's	revenue	is	generated	from	sales	outside	the	United	States,	exposing	it	to	fluctuations	in	foreign	currency	exchange	rates. Our	Industrial	Gases	business	is	primarily	exposed	to	translational	currency	risk	as	the	results	of	its	foreign	operations	are	translated	into	U.S.	dollars	at current	exchange	rates	throughout	the	fiscal	period.	Our	Performance	Materials	business	is	also	significantly	exposed	to	transactional	currency	impacts as	many	of	its	products	are	manufactured	in	one	country	and	sold	in	another.

The	Company	uses	certain	financial	instruments	to	mitigate	some	of	these	effects.	The	Company's	policy	is	to	minimize	cash	flow	volatility	from	changes in	currency	exchange	rates.	The	Company	chooses	not	to	hedge	the	translation	of	its	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,	below.

# Raw	Material	and	Energy	Cost	and	Availability—Interruption	in	ordinary	sources	of	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	the	Company's	business.	Because	the	Company's	industrial gas	facilities	use	substantial	amounts	of	electricity,	energy	price	fluctuations	could	materially	impact	the	Company's	revenues	and	earnings.	A	disruption in	the	supply	of	energy,	components,	or	raw	materials,	whether	due	to	market	conditions,	legislative	or	regulatory	actions,	natural	events,	or	other disruption,	could	prevent	the	Company	from	meeting	its	contractual	commitments,	harming	its	business	and	financial	results.

The	Company's	supply	of	crude	helium	for	purification	and	resale	is	largely	dependent	upon	natural	gas	production	by	crude	helium	suppliers.	Lower natural	gas	production	(which	may	result	from	natural	gas	pricing	or	supplier	operating	issues)	or	interruptions	in	sales	from	other	crude	helium	suppliers, can	reduce	the	Company's	supplies	of	crude	helium	available	for	processing	and	resale	to	its	customers.

The	Company	typically	contracts	to	pass	through	cost	increases	in	energy	and	raw	materials	to	its	customers,	but	cost	variability	can	still	have	a	negative impact	on	its	results.	The	Company	may	not	be	able	to	raise	prices	as	quickly	as	costs	rise,	or	competitive	pressures	may	prevent	full	recovery.	Increases in	energy	or	raw	material	costs	that	cannot	be	passed	on	to	customers	for	competitive	or	other	reasons	would	negatively	impact	the	Company's	revenues and	earnings.	Even	where	costs	are	passed	through,	price	increases	can	cause	lower	sales	volume.

Regulatory	Compliance—The	Company	is	subject	to	extensive	government	regulation	in	jurisdictions	around	the	globe	in	which	it	does business.	Changes	in	regulations	addressing,	among	other	things,	environmental	compliance,	import/export	restrictions,	anti-bribery	and corruption,	and	taxes,	can	negatively	impact	the	Company's	financial	condition,	results	of	operation,	and	cash	flows.

The	Company	is	subject	to	government	regulation	in	the	United	States	and	foreign	jurisdictions	in	which	it	conducts	its	business.	The	application	of	laws and	regulations	to	the	Company's	business	is	sometimes	unclear.

Compliance	with	laws	and	regulations	may	involve	significant	costs	or	require	changes	in	business	practice	that	could	result	in	reduced	profitability. Determination	of	noncompliance	can	result	in	penalties	or	sanctions	that	could	also	impact	financial	results.	Compliance	with	changes	in	laws	or regulations	can	require	additional	capital	expenditures	or	increase	operating	costs.	Export	controls	or	other	regulatory	restrictions	could	prevent	the Company	from	shipping	its	products	to	and	from	some	markets	or	increase	the	cost	of	doing	so.	Export	restrictions	continue	to	attract	external	focus	by multiple	customs	and	export	enforcement	authorities.	Changes	in	tax	laws	and	regulations	and	international	tax	treaties	could	affect	the	financial	results of	the	Company's	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	the	Company	to	criminal	or	civil	sanctions	if	a violation	occurs.

# Environmental	Compliance—Costs	and	expenses	resulting	from	compliance	with	environmental	regulations	may	negatively	impact	the Company's	operations	and	financial	results.

The	Company	is	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.	The Company	takes	its	environmental	responsibilities	very	seriously,	but	there	is	a	risk	of	environmental	impact	inherent	in	our	manufacturing	operations	and transportation	of	chemicals.	Future	developments	and	more	stringent	environmental	regulations	may	require	the	Company	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	financial	results.	For	a	more	detailed	description	of	these	matters,	see	"Narrative Description	of	the	Company's	Business	Generally—Environmental	Controls,"	above.

# We	may	not	be	able	to	successfully	control	or	reduce	costs	to	improve	productivity	and	streamline	operations.	Reorganization	and	cost reduction	efforts	can	disrupt	operations.

Achieving	our	financial	goals	including	continued	profitability	and	margin	growth	depends	significantly	on	our	efforts	to	control	or	reduce	our	operating costs,	including	our	ability	to	eliminate	stranded	costs	related	to	our	divested	businesses.	Because	many	of	our	costs	are	affected	by	factors	outside	or substantially	outside	our	control,	we	generally	must	seek	to	control	or	reduce	costs	through	operating	efficiency	and	repositioning	actions.	If	we	are	not able	to	identify	and	execute	efforts	designed	to	control	or	reduce	costs	and	increase	operating	efficiency,	our	ability	to	attain	our	goals	could	be	adversely impacted.

Ongoing	restructuring	and	cost	reduction	actions	may	reduce	our	available	talent	and	other	resources,	impact	our	ability	to	attract	and	retain	key employees,	slow	improvements	in	our	products	and	services,	and	adversely	affect	our	ability	to	respond	to	customers.	Failure	to	achieve	targeted improvements	may	diminish	the	operational	and	financial	benefits	we	realize	from	such	actions.	These	circumstances	could	adversely	impact	our business	and	financial	statements.

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

At	30	September	2016,	the	Company	had	total	consolidated	debt	of	$6,225.2	million	(including	Versum	debt	of	$997.2	million),	of	which	$1,307.1	million (including	Versum	debt	of	$5.8	million)	will	mature	in	the	next	twelve	months.	The	Company	expects	to	continue	to	incur	indebtedness	to	fund	new projects	and	replace	maturing	debt.	Although	the	Company	actively	manages	its	interest	rate	risk	through	the	use	of	derivatives	and	diversified	debt obligations,	not	all	borrowings	at	variable	rates	are	hedged,	and	new	debt	will	be	priced	at	market	rates.	If	interest	rates	increase,	the	Company's	interest expense	could	increase	significantly,	affecting	earnings	and	reducing	cash	flow	available	for	working	capital,	capital	expenditures,	acquisitions,	and	other purposes.	In	addition,	changes	by	any	rating	agency	to	the	Company's	outlook	or	credit	ratings	could	increase	the	Company's	cost	of	borrowing	and weaken	our	ability	to	access	capital	and	credit	markets	on	terms	commercially	acceptable	to	us.	For	a	more	detailed	discussion	of	interest	rate	risk,	see Item	7A,	below.

# We	may	be	unable	to	successfully	execute	or	effectively	integrate	acquisitions,	and	divestitures	may	not	occur	as	planned.

We	regularly	review	our	portfolio	of	businesses	and	pursue	growth	through	acquisitions	and	seek	to	divest	non-core	businesses.	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	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	for	which	we	lack	contractual	protections	or	insurance.	With	respect	to	divested businesses,	our	results	may	be	impacted	by	claims	by	purchasers	to	whom	we	have	provided	contractual	indemnification.

# Catastrophic	Events—Catastrophic	events	could	disrupt	the	Company's	operations	or	the	operations	of	its	suppliers	or	customers,	having	a negative	impact	on	the	Company's	business,	financial	results,	and	cash	flows.

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

# Operational	Risks—Operational	and	execution	risks	may	adversely	affect	the	Company's	operations	or	financial	results.

The	Company's	operation	of	its	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,	or	vehicle	accidents.	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	the	Company's	ongoing	operations,	reputation, financial	results,	and	cash	flows.	In	addition,	the	Company's	operating	results	are	dependent	on	the	continued	operation	of	its	production	facilities	and	its ability	to	meet	customer	requirements,	which	depends,	in	part,	on	the	Company's	ability	to	properly	maintain	and	replace	aging	assets.	Operating	results are	also	dependent	on	the	Company's	ability	to	complete	new	construction	projects	on	time,	on	budget,	and	in	accordance	with	performance requirements,	which	depends,	in	part,	on	the	availability	of	adequate	sources	of	labor	in	the	geographies	where	the	Company	intends	to	build	new	plants. Failure	to	do	so	may	expose	the	Company	to	loss	of	revenue,	potential	litigation,	and	loss	of	business	reputation.

# Information	Security—The	security	of	the	Company's	Information	Technology	systems	could	be	compromised,	which	could	adversely	affect its	ability	to	operate.

We	depend	on	information	technology	to	enable	us	to	operate	efficiently	and	interface	with	customers	as	well	as	to	maintain	financial	accuracy	and efficiency.	Our	information	technology	capabilities	are	delivered	through	a	combination	of	internal	and	external	services	and	services	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,	or	the	loss	of	or	damage	to	our	confidential	business	information	or	multiple site	impact	through	a	security	breach.	As	with	all	large	systems,	our	information	systems	could	be	penetrated	by	outside	parties	intent	on	extracting information,	corrupting	information,	disrupting	business	processes,	or	causing	harm	to	persons	or	property.	The	Company's	systems	have	in	the	past been	and	likely	will	in	the	future	be	subject	to	sophisticated	cyber	security	threats.	To	date,	the	Company	is	not	aware	of	any	significant	impact	on	its 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.

The	Company's	business	involves	the	use,	storage,	and	transmission	of	information	about	its	employees,	vendors,	and	customers.	The	protection	of such	information,	as	well	as	the	Company's	information,	is	critical	to	the	Company.	The	regulatory	environment	surrounding	information	security	and privacy	is	increasingly	demanding,	with	the	frequent	imposition	of	new	and	constantly	changing	requirements.	The	Company	has	established	policies	and procedures	to	help	protect	the	security	and	privacy	of	this	information.	The	Company	also,	from	time	to	time,	exports	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,	result	in	litigation	and	potential	liability	for	us, damage	our	reputation,	or	otherwise	harm	our	business.

# Litigation	and	Regulatory	Proceedings—The	Company's	financial	results	may	be	affected	by	various	legal	and	regulatory	proceedings, including	those	involving	antitrust,	tax,	environmental,	or	other	matters.

The	Company	is	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	the	Company	seeks	to	limit	its	liability	in	its	commercial	contractual	arrangements, there	are	no	guarantees	that	each	contract	will	contain	suitable	limitations	of	liability	or	that	limitations	of	liability	will	be	enforceable	at	law.	Also,	the outcome	of	existing	legal	proceedings	may	differ	from	the	Company's	expectations	because	the	outcomes	of	litigation,	including	regulatory	matters,	are often	difficult	to	predict	reliably.	Various	factors	or	developments	can	lead	the	Company	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	the	Company's	financial	condition,	results	of	operations, and	cash	flows	in	any	particular	period.

# Greenhouse	Gases—Legislative	and	regulatory	responses	to	global	climate	change	create	financial	risk.

Some	of	the	Company's	operations	are	within	jurisdictions	that	have	or	are	developing	regulatory	regimes	governing	emissions	of	greenhouse	gases (GHG).	These	include	existing	coverage	under	the	European	Union	Emission	Trading	Scheme,	California's	cap	and	trade	scheme,	Alberta's	Emission Reduction	Program,	China's	Emission	Trading	Scheme	pilots,	South	Korea's	Emission	Trading	Scheme,	and	mandatory	reporting	and	anticipated constraints	on	GHG	emissions	under	an	Ontario	cap	and	trade	scheme,	nation-wide	expansion	of	the	China	Emission	Trading	Scheme,	and	federal emission	performance	standards	in	Canada.	In	addition,	the	U.S.	Environmental	Protection	Agency	(EPA)	requires	mandatory	reporting	of	GHG emissions	and	is	regulating	GHG	emissions	for	new	construction	and	major	modifications	to	existing	facilities.	Moreover,	some	jurisdictions	have	various mechanisms	to	target	the	power	sector	(e.g.	U.S.	EPA	Clean	Power	Plan)	to	achieve	emission	reductions.	These	reductions	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.	Although uncertain,	these	developments	could	increase	the	Company's	costs	related	to	consumption	of	electric	power,	hydrogen	production,	and	fluorinated	gases production.	The	Company	believes	it	will	be	able	to	mitigate	some	of	the	increased	costs	through	its	contractual	terms,	but	the	lack	of	definitive	legislation or	regulatory	requirements	prevents	an	accurate	estimate	of	the	long-term	impact	on	the	Company.	Any	legislation	that	limits	or	taxes	GHG	emissions could	impact	the	Company's	growth,	increase	its	operating	costs,	or	reduce	demand	for	certain	of	its	products.

# The	results	of	the	United	Kingdom's	("UK")	European	Union	("EU")	membership	referendum	could	adversely	affect	customer	demand,	our relationships	with	customers	and	suppliers	and	our	business	and	financial	statements.

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

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

The	Company	faces	strong	competition	from	several	large	global	competitors	and	many	smaller	regional	ones	in	many	of	its	business	segments. Introduction	by	competitors	of	new	technologies,	competing	products,	or	additional	capacity	could	weaken	demand	for	or	impact	pricing	of	the	Company's products,	negatively	impacting	financial	results.	In	addition,	competitors'	pricing	policies	could	affect	the	Company's	profitability	or	its	market	share.

# We	could	incur	significant	liability	if	the	distribution	of	Versum	common	stock	to	our	stockholders	is	determined	to	be	a	taxable	transaction.

We	have	received	an	opinion	from	outside	tax	counsel	to	the	effect	that	the	spin-off	of	Versum	qualifies	as	a	transaction	that	is	described	in	Sections 355(a)	and	368(a)(1)(D)	of	the	Internal	Revenue	Code.	The	opinion	relies	on	certain	facts,	assumptions,	representations	and	undertakings	from	Versum and	us	regarding	the	past	and	future	conduct	of	the	companies'	respective	businesses	and	other	matters.	If	any	of	these	facts,	assumptions, representations	or	undertakings	are	incorrect	or	not	satisfied,	our	shareholders	and	we	may	not	be	able	to	rely	on	the	opinion	of	tax	counsel	and	could	be subject	to	significant	tax	liabilities.	Notwithstanding	the	opinion	of	tax	counsel	we	have	received,	the	IRS	could	determine	on	audit	that	the	spin-off	is taxable	if	it	determines	that	any	of	these	facts,	assumptions,	representations	or	undertakings	are	not	correct	or	have	been	violated	or	if	it	disagrees	with the	conclusions	in	the	opinion.	If	the	spin-off	is	determined	to	be	taxable	for	U.S.	federal	income	tax	purposes,	our	shareholders	that	are	subject	to	U.S. federal	income	tax	and	we	could	incur	significant	U.S.	federal	income	tax	liabilities.

# ITEM	1B. UNRESOLVED	STAFF	COMMENTS

We	have	not	received	any	written	comments	from	the	Commission	staff	that	remain	unresolved.

# ITEM	2. PROPERTIES

Air	Products	and	Chemicals,	Inc.	owns	its	principal	administrative	offices,	which	are	the	Company's	headquarters	located	in	Trexlertown,	Pennsylvania, as	well	as	Hersham,	England	and	Santiago,	Chile.	The	Company	leases	administrative	offices	in	Spain,	Malaysia,	and	China	for	its	Global	Business Support	organization.

The	following	is	a	description	of	the	properties	used	by	our	six	business	segments	and	the	 Energy-from-Waste	business	discontinued	operation.	We believe	that	our	facilities	are	suitable	and	adequate	for	our	current	and	anticipated	future	levels	of	operation.

# Industrial	Gases	–	Global

Management,	sales,	and	engineering	support	for	this	business	segment	is	based	in	our	principal	administrative	offices	noted	above,	and	an	office	in India.

Air	separation	equipment	is	manufactured	in	Missouri,	Pennsylvania,	and	China.

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

Helium	is	processed	at	multiple	sites	in	the	U.S.	and	then	distributed	to/from	transfill	sites	globally.

# Industrial	Gases	–	Americas

This	business	segment	currently	operates	from	over	295	production	and	distribution	facilities	in	North	and	South	America	(approximately	1/4 th	of	which are	located	on	owned	property),	and	10%	of	which	are	integrated	sites	that	serve	dedicated	customers	as	well	as	merchant	customers.	The	Company has	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,	Canada.	Management	and	sales	support	is	based	in	our	Trexlertown	and	Santiago	offices	referred	to	above,	and	at	10	leased properties	located	throughout	North	and	South	America.

Hydrogen	fueling	stations	built	by	the	Company	support	commercial	markets	in	California	and	Japan	as	well	as	demonstration	projects	in	Europe	and other	parts	of	Asia.

# Industrial	Gases	–	EMEA

This	business	segment	currently	operates	from	over	150	production	and	distribution	facilities	in	Europe,	the	Middle	East,	and	Africa	(approximately	1/3 rd of	which	are	on	owned	property).	The	Company	has	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	referred	to	above,	Barcelona,	Spain	and	at	12	leased	office	sites	located	throughout	the	region.

# Industrial	Gases	–	Asia

Industrial	Gases	–	Asia	currently	operates	from	over	150	production	and	distribution	facilities	within	Asia	(approximately	1/4 th	of	which	are	on	owned property	or	long	duration	term	grants).	The	Company	has	sufficient	property	rights	and	permits	for	the	ongoing	operation	of	our	pipeline	systems	in China,	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	7	leased	office	locations	throughout	the	region.

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

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

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

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

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

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

# Corporate	and	other

Corporate	administrative	functions	are	based	in	the	Company's	administrative	offices	referred	to	above.

The	Gardner	Cryogenic	business	operates	at	facilities	in	Pennsylvania	and	Kansas	in	the	United	States	and	in	France.

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

# Energy-from-Waste

On	29	March	2016,	the	Board	of	Directors	approved	the	Company's	exit	of	its	 Energy-from-Waste	business.	As	a	result,	the	Energy-from-Waste	segment is	presented	as	a	discontinued	operation.	The	real	estate	interests	for	this	business,	which	are	comprised	of	a	leased	office,	two	leased	production	sites, and	rights	for	utility	infrastructure,	will	be	exited	with	the	assets	of	this	business.

# ITEM	3. LEGAL	PROCEEDINGS

In	the	normal	course	of	business,	the	Company	and	its	subsidiaries	are	involved	in	various	legal	proceedings,	including	contract,	product	liability, intellectual	property,	insurance,	and	regulatory	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	a	civil	jury	is	allowed	to	determine	compensatory	and/or	punitive	damages. 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.

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

state	and	foreign	environmental	laws	relating	to	the	designation	of	certain	sites	for	investigation	or	remediation.	Presently	there	are	approximately	33	sites on	which	a	final	settlement	has	not	been	reached	where	the	Company,	along	with	others,	has	been	designated	a	potentially	responsible	party	by	the Environmental	Protection	Agency	or	is	otherwise	engaged	in	investigation	or	remediation,	including	cleanup	activity	at	certain	of	its	current	and	former manufacturing	sites.	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	the	Company's	environmental	exposure	is	included	under	"Narrative	Description of	the	Company's	Business	Generally—Environmental	Controls."

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	$55	million	at	30	September	2016)	on	Air	Products	Brasil	Ltda.	This	fine	was	based	on	a	recommendation	by	a	unit	of	the	Brazilian Ministry	of	Justice,	whose	investigation	began	in	2003,	alleging	violation	of	competition	laws	with	respect	to	the	sale	of	industrial	and	medical	gases.	The fines	are	based	on	a	percentage	of	the	Company's	total	revenue	in	Brazil	in	2003.

We	have	denied	the	allegations	made	by	the	authorities	and	filed	an	appeal	in	October	2010	to	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.	The	Company, with	advice	of	its	outside	legal	counsel,	has	assessed	the	status	of	this	matter	and	has	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.

Other	than	this	matter,	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.	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.

# ITEM	4. SUBMISSION	OF	MATTERS	TO	A	VOTE	OF	SECURITY	HOLDERS

# Not	applicable

# PART	II

# ITEM	5. MARKET	FOR	REGISTRANT'S	COMMON	EQUITY,	RELATED	STOCKHOLDER	MATTERS,	AND	ISSUER	PURCHASES	OF	EQUITY SECURITIES

Our	common	stock	(ticker	symbol	APD)	is	listed	on	the	New	York	Stock	Exchange.	Our	transfer	agent	and	registrar	is	Broadridge	Corporate	Issuer Solutions,	Inc.,	P.O.	Box	1342,	Brentwood,	New	York	11717,	telephone	(844)	318-0129	(U.S.)	or	(720)	358-3595	(all	other	locations);	Internet	website, http://shareholder.broadridge.com/airproducts;	and	e-mail	address,	shareholder@broadridge.com.	As	of	31	October	2016,	there	were	5,974	record holders	of	our	common	stock.	Quarterly	stock	prices,	as	reported	on	the	New	York	Stock	Exchange	composite	tape	of	transactions,	and	dividend information	for	the	last	two	fiscal	years	appear	below.	Cash	dividends	on	the	Company's	common	stock	are	paid	quarterly.	It	is	our	expectation	that	we will	continue	to	pay	cash	dividends	in	the	future	at	comparable	or	increased	levels.	The	Board	of	Directors	determines	whether	to	declare	dividends	and the	timing	and	amount	based	on	financial	condition	and	other	factors	it	deems	relevant.

# Quarterly	Stock	Information

| 2016 | High | Low | Close | Dividend |
| :--- | :--- | :--- | :--- | :--- |
| First | \t$143.83 | \t$126.65 | \t $130.11 | $0.81 |
| Second | 147.16 | 114.64 | 144.05 | 0.86 |
| Third | 152.16 | 134.15 | 142.04 | 0.86 |
| Fourth | 157.84 | 137.31 | 150.34 | 0.86 |

| 2015 | High | Low | Close | Dividend |
| :--- | :--- | :--- | :--- | :--- |
| First | \t$149.61 | \t$118.20 | \t $144.23 | $0.77 |
| Second | 158.20 | 137.07 | 151.28 | 0.81 |
| Third | 153.93 | 136.69 | 136.83 | 0.81 |
| Fourth | 148.56 | 123.66 | 127.58 | 0.81 |

# Purchases	of	Equity	Securities	by	the	Issuer

On	15	September	2011,	the	Board	of	Directors	authorized	the	repurchase	of	up	to	$1.0	billion	of	our	outstanding	common	stock.	This	program	does	not have	a	stated	expiration	date.	We	repurchase	shares	pursuant	to	Rules	10b5-1	and	10b-18	under	the	Securities	Exchange	Act	of	1934,	as	amended, through	repurchase	agreements	established	with	several	brokers.	There	were	no	purchases	of	stock	during	fiscal	year	2016.	At	30	September	2016, $485.3	million	in	share	repurchase	authorization	remained.	Additional	purchases	will	be	completed	at	the	Company's	discretion	while	maintaining sufficient	funds	for	investing	in	its	businesses	and	growth	opportunities.

# Performance	Graph

The	performance	graph	below	compares	the	five-year	cumulative	returns	of	the	Company's	common	stock	with	those	of	the	Standard	&	Poor's	500	Index (S&P	500	Index)	and	the	Standard	&	Poor's	500	Materials	Index	(S&P	500	Materials	Index).	The	figures	assume	an	initial	investment	of	$100	and	the reinvestment	of	all	dividends.

# COMPARISON	OF	FIVE	YEAR	CUMULATIVE	SHAREHOLDER	RETURN

Air	Products,	S&P	500	Index,	and	S&P	500	Materials	Index

Comparative	Growth	of	a	$100	Investment

(Assumes	Reinvestment	of	All	Dividends)

# ITEM	6. SELECTED	FINANCIAL	DATA

| ITEM	6. | SELECTED	FINANCIAL	DATA |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| (Millions\tof\tdollars,\texcept\tper\tshare) | (Millions\tof\tdollars,\texcept\tper\tshare) | 2016(A) | 2015(A) | 2014(A) | 2013(A) | 2012(A) |
| Operating\tResults |  |  |  |  |  |  |
| Sales |  | $9,524 | $9,895 | \t$10,439 | \t$10,180 | $9,612 |
| Cost\tof\tsales | Cost\tof\tsales | 6,403 | 6,939 | 7,630 | 7,470 | 7,052 |
| Selling\tand\tadministrative | Selling\tand\tadministrative | 849 | 939 | 1,055 | 1,063 | 947 |
| Research\tand\tdevelopment | Research\tand\tdevelopment | 132 | 137 | 140 | 132 | 126 |
| Business\trestructuring\tand\tcost\treduction\tactions | Business\trestructuring\tand\tcost\treduction\tactions | 34 | 208 | 13 | 232 | 327 |
| Operating\tincome | Operating\tincome | 2,106 | 1,708 | 1,339 | 1,332 | 1,282 |
| Equity\taffiliates'\tincome |  | 149 | 155 | 151 | 168 | 154 |
| Income\tfrom\tcontinuing\toperations\tattributable\tto\tAir\tProducts | Income\tfrom\tcontinuing\toperations\tattributable\tto\tAir\tProducts | 1,515 | 1,285 | 995 | 1,009 | 999 |
| Net\tincome\tattributable\tto\tAir\tProducts | Net\tincome\tattributable\tto\tAir\tProducts | 631 | 1,278 | 992 | 994 | 1,167 |
| Basic\tearnings\tper\tcommon\tshare\tattributable\tto\tAir\tProducts: |  |  |  |  |  |  |
| Income\tfrom\tcontinuing\toperations | Income\tfrom\tcontinuing\toperations | 7.00 | 5.98 | 4.68 | 4.81 | 4.73 |
| Net\tincome | Net\tincome | 2.92 | 5.95 | 4.66 | 4.74 | 5.53 |
| Diluted\tearnings\tper\tcommon\tshare\tattributable\tto\tAir\tProducts: |  |  |  |  |  |  |
| Income\tfrom\tcontinuing\toperations | Income\tfrom\tcontinuing\toperations | 6.94 | 5.91 | 4.62 | 4.75 | 4.66 |
| Net\tincome |  | 2.89 | 5.88 | 4.61 | 4.68 | 5.44 |
| Year-End\tFinancial\tPosition |  |  |  |  |  |  |
| Plant\tand\tequipment,\tat\tcost | Plant\tand\tequipment,\tat\tcost | \t$20,190 | \t$19,463 | \t$19,633 | \t$19,234 | \t$17,965 |
| Total\tassets(H) | Total\tassets(H) | 18,055 | 17,335 | 17,668 | 17,761 | 16,831 |
| Working\tcapital |  | 1,034 | (851) | 199 | 100 | 605 |
| Total\tdebt(B) | Total\tdebt(B) | 6,225 | 5,879 | 6,119 | 6,274 | 5,292 |
| Redeemable\tnoncontrolling\tinterest | Redeemable\tnoncontrolling\tinterest | — | — | 287 | 376 | 393 |
| Air\tProducts\tshareholders'\tequity | Air\tProducts\tshareholders'\tequity | 7,080 | 7,249 | 7,366 | 7,042 | 6,477 |
| Total\tequity |  | 7,213 | 7,381 | 7,521 | 7,199 | 6,623 |
| Financial\tRatios |  |  |  |  |  |  |
| Return\ton\taverage\tAir\tProducts\tshareholders'\tequity(C) | Return\ton\taverage\tAir\tProducts\tshareholders'\tequity(C) | 21.2\t% | 17.4\t% | 13.5\t% | 15.4\t% | 16.1\t% |
| Operating\tmargin | Operating\tmargin | 22.1\t% | 17.3\t% | 12.8\t% | 13.1\t% | 13.3\t% |
| Selling\tand\tadministrative\tas\ta\tpercentage\tof\tsales | Selling\tand\tadministrative\tas\ta\tpercentage\tof\tsales | 8.9\t% | 9.5\t% | 10.1\t% | 10.4\t% | 9.9\t% |
| Total\tdebt\tto\ttotal\tcapitalization(B)(D) | Total\tdebt\tto\ttotal\tcapitalization(B)(D) | 46.3\t% | 44.3\t% | 43.9\t% | 45.3\t% | 43.0\t% |
| Other\tData |  |  |  |  |  |  |
| Income\tfrom\tcontinuing\toperations\tincluding\tnoncontrolling\tinterests | Income\tfrom\tcontinuing\toperations\tincluding\tnoncontrolling\tinterests | $1,546 | $1,324 | $996 | $1,048 | $1,025 |
| Adjusted\tEBITDA(E) |  | 3,273 | 2,984 | 2,776 | 2,648 | 2,528 |
| Depreciation\tand\tamortization | Depreciation\tand\tamortization | 926 | 936 | 957 | 907 | 841 |
| Capital\texpenditures\ton\ta\tGAAP\tbasis(F) | Capital\texpenditures\ton\ta\tGAAP\tbasis(F) | 1,056 | 1,304 | 1,361 | 1,459 | 2,480 |
| Capital\texpenditures\ton\ta\tnon-GAAP\tbasis(F) | Capital\texpenditures\ton\ta\tnon-GAAP\tbasis(F) | 1,083 | 1,678 | 1,564 | 1,708 | 2,698 |
| Cash\tprovided\tby\toperating\tactivities | Cash\tprovided\tby\toperating\tactivities | 2,707 | 2,446 | 2,190 | 1,548 | 1,760 |
| Cash\tused\tfor\tinvesting\tactivities | Cash\tused\tfor\tinvesting\tactivities | 972 | 1,251 | 1,317 | 1,407 | 2,356 |
| Cash\t(used\tfor)\tprovided\tby\tfinancing\tactivities | Cash\t(used\tfor)\tprovided\tby\tfinancing\tactivities | (271) | (945) | (504) | 115 | (78) |
| Dividends\tdeclared\tper\tcommon\tshare | Dividends\tdeclared\tper\tcommon\tshare | 3.39 | 3.20 | 3.02 | 2.77 | 2.50 |
| Weighted\tAverage\tCommon\tShares\t–\tBasic\t(in\tmillions) | Weighted\tAverage\tCommon\tShares\t–\tBasic\t(in\tmillions) | 216 | 215 | 213 | 210 | 211 |
| Weighted\tAverage\tCommon\tShares\t–\tDiluted\t(in\tmillions) | Weighted\tAverage\tCommon\tShares\t–\tDiluted\t(in\tmillions) | 218 | 217 | 215 | 212 | 215 |
| Book\tvalue\tper\tcommon\tshare\tat\tyear-end | Book\tvalue\tper\tcommon\tshare\tat\tyear-end | $32.57 | $33.66 | $34.49 | $33.35 | $30.48 |
| Shareholders\tat\tyear-end | Shareholders\tat\tyear-end | 6,000 | 6,400 | 6,600 | 7,000 | 7,500 |
| Employees\tat\tyear-end(G) | Employees\tat\tyear-end(G) | 18,600 | 19,700 | 21,200 | 21,600 | 21,300 |

(A)	Unless	otherwise	stated,	selected	financial	data	is	presented	on	a	GAAP	basis.	Our	operating	results	were	impacted	by	certain	items	which	management	does	not	believe	to	be indicative	of	ongoing	business	trends	and	are	excluded	from	the	non-GAAP	measure.	Refer	to	pages	35-40	for	a	reconciliation	of	the	GAAP	to	non-GAAP	measures	for	2016, 2015,	and	2014.	Descriptions	of	the	excluded	items	appear	on	pages	27-29.	For	2013,	these	items	include:	(i)	a	charge	to	operating	income	of	$232	($158	after-tax,	or	$.74	per share)	related	to	business	restructuring	and	cost	reduction	actions,	and	(ii)	expenses	of	$10	($6	after-tax,	or	$.03	per	share)	related	to	advisory	costs.	For	2012,	these	items include:	(i)	a	charge	to	operating	income	of	$327	($222	after-tax,	or	$1.03	per	share)	related	to	business	restructuring	and	cost	reduction	actions,	(ii)	a	gain	of	$86	($55	after-tax, or	$.25	per	share)	related	to	the	gain	on	our	previously	held	equity	interest	in	DA	NanoMaterials,	(iii)	a	charge	of	$10	($6	after-tax,	or	$.03	per	share)	related	to	a	customer bankruptcy,	(iv)	a	tax	expense	of	$44	($.20	per	share)	for	a	Spanish	tax	settlement,	and	(v)	a	tax	benefit	of	$58	($.27	per	share)	for	a	favorable	Spanish	tax	ruling.

(B)	Total	debt	includes	long-term	debt,	current	portion	of	long-term	debt,	and	short-term	borrowings	as	of	the	end	of	the	year.

(C)	Calculated	using	income	from	continuing	operations	attributable	to	Air	Products	and	five-quarter	average	Air	Products	shareholders'	equity.

(D)	Total	capitalization	includes	total	debt	plus	total	equity	plus	redeemable	noncontrolling	interest	as	of	the	end	of	the	year.

(E)	A	reconciliation	of	reported	GAAP	results	to	Adjusted	EBITDA	is	presented	on	pages	37-39.

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

(G)	Includes	full-	and	part-time	employees	from	continuing	and	discontinued	operations.

(H)	Reflects	adoption	of	guidance	on	the	presentation	of	deferred	income	taxes	on	a	retrospective	basis.	Refer	to	Note	2,	New	Accounting	Guidance,	for	additional	Information.

# ITEM	7. MANAGEMENT'S	DISCUSSION	AND	ANALYSIS	OF	FINANCIAL	CONDITION	AND	RESULTS	OF	OPERATIONS

| Business	Overview | 22 |
| :--- | :--- |
| 2016\tin\tSummary | \t23 |
| 2017\tOutlook | \t24 |
| Results\tof\tOperations | \t25 |
| Reconciliation\tof\tNon-GAAP\tFinancial\tMeasures | \t35 |
| Liquidity\tand\tCapital\tResources | \t41 |
| Contractual\tObligations | \t45 |
| Pension\tBenefits | \t46 |
| Environmental\tMatters | \t48 |
| Off-Balance\tSheet\tArrangements | \t49 |
| Related\tParty\tTransactions | \t49 |
| Inflation | \t49 |
| Critical\tAccounting\tPolicies\tand\tEstimates | \t49 |
| New\tAccounting\tGuidance | \t55 |
| Forward-Looking\tStatements | \t55 |

The	following	discussion	should	be	read	in	conjunction	with	the	consolidated	financial	statements	and	the	accompanying	notes	contained	in	this	report. All	comparisons	in	the	discussion	are	to	the	corresponding	prior	year	unless	otherwise	stated.	All	amounts	presented	are	in	accordance	with	U.S. generally	accepted	accounting	principles	(GAAP),	except	as	noted.	All	amounts	are	presented	in	millions	of	dollars,	except	for	share	data,	unless otherwise	indicated.

Items	such	as	income	from	continuing	operations	attributable	to	Air	Products,	net	income	attributable	to	Air	Products,	and	diluted	earnings	per	share attributable	to	Air	Products	(EPS)	are	simply	referred	to	as	"income	from	continuing	operations,"	"net	income,"	and	"diluted	earnings	per	share"	throughout this	Management's	Discussion	and	Analysis,	unless	otherwise	stated.

The	discussion	of	results	that	follows	includes	comparisons	to	non-GAAP	financial	measures.	The	presentation	of	non-GAAP	measures	is	intended	to enhance	the	usefulness	of	financial	information	by	providing	measures	which,	when	viewed	together	with	our	financial	results	reported	in	accordance with	GAAP,	provide	a	more	complete	understanding	of	the	factors	and	trends	affecting	our	historical	financial	performance	and	projected	future	results. The	reconciliation	of	reported	GAAP	results	to	non-GAAP	measures	is	presented	on	pages	35-40.	Descriptions	of	the	excluded	items	appear	on	pages 27-29.

# BUSINESS	OVERVIEW

Air	Products	and	Chemicals,	Inc.	is	a	world-leading	Industrial	Gases	company	in	operation	for	over	75	years.	The	Company's	core	Industrial	Gases business	provides	atmospheric	and	process	gases	and	related	equipment	to	manufacturing	markets,	including	refining	and	petrochemical,	metals, electronics,	and	food	and	beverage.	Air	Products	is	also	the	world's	leading	supplier	of	liquefied	natural	gas	process	technology	and	equipment.	The Company's	Materials	Technologies	business	serves	the	semiconductor,	polyurethanes,	cleaning	and	coatings,	and	adhesives	industry.

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

As	of	30	September	2016,	our	operations	were	organized	into	six	reportable	business	segments:	Industrial	Gases-	Americas,	Industrial	Gases-	EMEA (Europe,	Middle	East,	and	Africa),	Industrial	Gases-	Asia,	Industrial	Gases-	Global,	Materials	Technologies,	and	Corporate	and	other.	The	financial statements	and	analysis	that	follow	discuss	our	results	based	on	these	operations.

During	the	second	quarter	of	fiscal	year	2016,	we	committed	to	exit	the	Energy-from-Waste	(EfW)	business.	The	EfW	segment	is	presented	as	a discontinued	operation.	Accordingly,	prior	year	EfW	business	segment	information	has	been	reclassified	to	conform	to	current	year	presentation.

The	Company's	Materials	Technologies	business	contains	the	Electronic	Materials	Division	(EMD)	and	Performance	Materials	Division	(PMD).	We completed	the	spin-off	of	EMD	as	Versum	Materials,	Inc.	on	1	October	2016.	PMD	is	under	a	sales	agreement	subject	to	regulatory	approval.

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

In	2016,	we	delivered	strong	results	driven	by	cost	improvement	actions	despite	weakness	in	the	worldwide	economy	and	currency	headwinds.	We	made significant	progress	on	our	strategy	by	focusing	on	our	core	industrial	gases	business	and	have	significantly	improved	our	profitability	as	measured	by operating	margin,	adjusted	operating	margin,	and	adjusted	EBITDA	margin	which	all	increased	by	at	least	400	bp	versus	the	prior	year.	During	the	year, we	committed	to	exit	our	EfW	business	and	completed	the	spin-off	of	our	Electronic	Materials	division	as	a	publicly	traded	company	on	1	October	2016. We	improved	our	focus	on	safety,	delivered	on	our	cost	reduction	targets,	and	increased	accountability	by	aligning	pay	with	performance.	These	changes drove	increased	profitability	as	we	delivered	operating	margins	of	22.1%,	adjusted	operating	margins	of	23.1%,	and	adjusted	EBITDA	margins	of	34.4%. Also,	EPS	of	$6.94	increased	17%	from	the	prior	year.	On	a	non-GAAP	basis,	EPS	of	$7.55	increased	14%.

# Highlights	for	2016

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

•Income	from	continuing	operations	of	$1,515.3	increased	18%,	or	$230.6,	and	diluted	earnings	per	share	from	continuing	operations	of	$6.94 increased	17%,	or	$1.03.	On	a	non-GAAP	basis,	income	from	continuing	operations	of	$1,647.8	increased	15%,	or	$214.0,	and	diluted	earnings	per share	from	continuing	operations	of	$7.55	increased	14%,	or	$0.95.	A	summary	table	of	changes	in	diluted	earnings	per	share,	including	a	non- GAAP	reconciliation,	is	presented	below.

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

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

•	 We	committed	to	exit	the	Energy-from-Waste	business.

•	 We	increased	our	quarterly	dividend	by	6%	from	$.81	to	$.86	per	share.	This	represents	the	34 th	consecutive	year	that	we	have	increased	our dividend	payment.

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

# Changes	in	Diluted	Earnings	per	Share	Attributable	to	Air	Products

|  |  |  | Increase |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | (Decrease) |
| Income\tfrom\tContinuing\tOperations—GAAP\tBasis | \t$6.94 | \t$5.91 | $1.03 |
| Business\tseparation\tcosts | .22 | .03 | .19 |
| Tax\tcosts\trelated\tto\tbusiness\tseparation | .24 | — | .24 |
| Business\trestructuring\tand\tcost\treduction\tactions | .11 | .71 | (.60) |
| Pension\tsettlement\tloss | .02 | .06 | (.04) |
| Gain\ton\tpreviously\theld\tequity\tinterest | — | (.05) | .05 |
| Gain\ton\tland\tsales | — | (.13) | .13 |
| Loss\ton\textinguishment\tof\tdebt | .02 | .07 | (.05) |
| Income\tfrom\tContinuing\tOperations—Non-GAAP\tBasis | \t$7.55 | \t$6.60 | $.95 |

For	2017,	we	intend	to	remain	focused	on	key	actions	we	can	control	to	continue	to	drive	earnings	growth.	We	intend	to	accomplish	this	by	bringing	new industrial	gas	plant	investments	on-stream,	making	progress	on	the	Jazan	sale	of	equipment	project,	and	continuing	to	deliver	on	cost	reduction	actions. We	expect	continued	weakness	in	new	LNG	equipment	orders	primarily	driven	by	low	oil	and	natural	gas	prices.

On	1	October	2016,	we	completed	the	separation	of	our	Electronic	Materials	division	through	the	spin-off	of	Versum	Materials,	Inc.	We	continue	to	make progress	on	the	sale	of	our	Performance	Materials	division	and	are	targeting	to	close	on	the	sale	in	fiscal	year	2017.	Fiscal	2017	earnings	will	be	lower due	to	the	separation	of	Electronic	Materials.	If	we	are	able	to	close	on	the	sale	of	Performance	Materials	and	it	becomes	a	discontinued	operation	in fiscal	2017,	we	expect	earnings	will	be	reduced	further.

The	above	guidance	should	be	read	in	conjunction	with	the	section	entitled	"Forward-Looking	Statements."

# RESULTS	OF	OPERATIONS

# Sales

Sales	of	$9,524.4	decreased	4%,	or	$370.5.	Underlying	sales	increased	2%	primarily	due	to	higher	volumes	in	Industrial	Gases	–	Global	and	Industrial Gases	–	Asia,	partially	offset	by	lower	volumes	in	all	other	segments.	Price	was	flat	as	increases	in	the	Industrial	Gases	–	Americas	and	Industrial Gases	–	EMEA	segments	were	offset	by	lower	prices	in	Industrial	Gases	–	Asia.	Underlying	sales	growth	was	more	than	offset	by	lower	energy contractual	cost	pass-through	to	customers	of	3%	and	unfavorable	currency	of	3%.

Sales	of	$9,894.9	decreased	5%,	or	$544.1.	Underlying	sales	were	up	3%	from	higher	volumes	of	2%	and	higher	pricing	of	1%.	Volumes	increased primarily	from	new	plant	on-streams	in	Industrial	Gases	–	Asia	and	base	business	growth	in	Materials	Technologies.	The	favorable	pricing	was	primarily driven	by	price	increases	in	the	Industrial	Gases	–	Americas	and	Materials	Technologies	segments.	Currency	unfavorably	impacted	sales	by	5%	and lower	energy	and	raw	material	contractual	cost	pass-through	to	customers	decreased	sales	by	3%.

# Operating	Income	and	Margin

On	a	GAAP	basis,	operating	income	of	$2,106.0	increased	23%,	or	$397.7,	as	lower	operating	costs	of	$271,	lower	business	restructuring	and	cost reduction	actions	of	$174,	favorable	pricing,	net	of	energy,	fuel,	and	raw	material	costs,	of	$84,	and	lower	pension	settlement	losses	of	$15,	were	partially offset	by	unfavorable	currency	impacts	of	$46,	higher	business	separation	costs	of	$45,	and	lower	volumes	of	$4.	In	addition,	the	prior	year	included	a gain	on	land	sales	of	$34	and	a	gain	of	$18	on	a	previously	held	equity	interest.	Operating	costs	decreased	due	to	benefits	from	our	cost	reduction actions	of	$132,	lower	pension	expense	of	$38,	lower	maintenance	expense	of	$34,	and	lower	other	costs	of	$67.

Operating	margin	of	22.1%	increased	480	bp,	primarily	due	to	favorable	costs	and	favorable	pricing,	net	of	energy,	fuel,	and	raw	material	costs.

On	a	GAAP	basis,	operating	income	of	$1,708.3	increased	28%,	or	$369.2,	primarily	from	higher	volumes	of	$144,	favorable	pricing,	net	of	energy	and fuel	costs,	of	$105,	and	favorable	cost	performance	across	most	segments	of	$92,	partially	offset	by	unfavorable	currency	impacts	of	$115.	In	addition, operating	income	in	2015	included	a	charge	for	business	reorganization	and	cost	reduction	actions	of	$208,	a	pension	settlement	loss	of	$21,	business separation	costs	of	$8,	gains	on	land	sales	of	$34,	and	a	gain	of	$18	on	revaluing	a	previously	held	equity	interest	upon	purchase	of	our	partner's	shares. Operating	income	in	2014	included	a	goodwill	and	intangible	asset	charge	of	$310,	a	business	restructuring	and	cost	reduction	charge	of	$13,	and	a pension	settlement	loss	of	$6.	The	favorable	operating	costs	of	$92	included	benefits	from	our	cost	reduction	actions	of	$170	and	lower	maintenance expense	of	$33,	partially	offset	by	higher	incentive	compensation	of	approximately	$100	due	to	improved	results.	Operating	margin	of	17.3%	increased 450	bp.

On	a	non-GAAP	basis,	operating	income	of	$1,893.2	increased	14%,	or	$225.8.	The	increase	was	primarily	due	to	higher	volumes	of	$144,	favorable pricing,	net	of	energy	and	fuel	costs,	of	$105,	and	favorable	cost	performance	across	most	segments	of	$92,	partially	offset	by	unfavorable	currency	of $115.	Costs	were	lower	as	benefits	from	cost	reduction	actions	of	approximately	$170	and	lower	maintenance	expense	of	$33	were	offset	by	higher incentive	compensation	of	approximately	$100	due	to	improved	results.	Non-GAAP	operating	margin	of	19.1%	increased	310	bp	due	to	favorable	costs, higher	volumes,	and	higher	pricing.

# Adjusted	EBITDA

We	define	Adjusted	EBITDA	as	income	from	continuing	operations	(including	noncontrolling	interests)	excluding	certain	disclosed	items,	which	the Company	does	not	believe	to	be	indicative	of	underlying	business	trends,	before	interest	expense,	income	tax	provision,	and	depreciation	and amortization	expense.	Adjusted	EBITDA	provides	a	useful	metric	for	management	to	assess	operating	performance.

Adjusted	EBITDA	of	$3,273.0	increased	$288.9,	or	10%,	primarily	due	to	favorable	costs	and	favorable	pricing,	net	of	energy,	fuel,	and	raw	material costs.	Adjusted	EBITDA	margin	of	34.4%	increased	420	bp.

Adjusted	EBITDA	of	$2,984.1	increased	$208.4,	or	8%,	due	to	higher	volumes,	higher	pricing,	and	favorable	costs.	Adjusted	EBITDA	margin	of	30.2% increased	360	bp.

# Equity	Affiliates'	Income

Income	from	equity	affiliates	of	$148.6	decreased	$5.9,	as	lower	income	from	Industrial	Gases	–	Americas	and	Industrial	Gases	–	EMEA	affiliates	was partially	offset	by	higher	income	from	Industrial	Gases	–	Asia	affiliates.

Income	from	equity	affiliates	of	$154.5	increased	$3.1,	primarily	due	to	higher	volumes	and	favorable	cost	performance	in	our	Industrial	Gases	–	Asia	and Industrial	Gases	–	Americas	affiliates.

# Cost	of	Sales	and	Gross	Margin

Cost	of	sales	of	$6,402.7	decreased	$536.3,	or	8%,	primarily	due	to	lower	energy	costs	of	$271,	lower	operating	costs	of	$239,	and	a	favorable	currency impact	of	$202,	partially	offset	by	higher	costs	attributable	to	sales	volumes	of	$176.	Operating	costs	included	favorable	impacts	from	cost	reduction actions	of	$57,	lower	maintenance	costs	of	$34,	lower	pension	expense	of	$24,	as	well	as	the	benefits	of	other	operational	improvements	and productivity.	Costs	associated	with	volumes	were	higher	primarily	due	to	the	Jazan	sale	of	equipment	activity.

Gross	margin	of	32.8%	increased	290	bp,	primarily	due	to	lower	costs.

Cost	of	sales	of	$6,939.0	decreased	$690.9,	or	9%,	primarily	due	to	a	favorable	currency	impact	of	$368,	lower	energy	costs	of	$313,	and	lower	operating costs	of	$102,	partially	offset	by	costs	attributable	to	higher	sales	volumes	of	$92.	Operating	costs	included	favorable	impacts	from	cost	reduction	actions of	$48	and	lower	other	costs,	including	maintenance,	of	$115,	partially	offset	by	higher	incentive	compensation	of	$61.

Gross	margin	of	29.9%	increased	300	bp,	due	to	lower	costs	of	120	bp,	higher	price,	net	of	raw	materials,	of	100	bp,	and	higher	volumes	of	80	bp.

# Selling	and	Administrative	Expense

Selling	and	administrative	expense	of	$849.3	decreased	$90.0,	or	10%,	primarily	due	to	the	benefits	of	cost	reduction	actions	of	$68	and	favorable currency	effects	of	$28,	partially	offset	by	higher	other	costs	of	$6.	Selling	and	administrative	expense	as	a	percent	of	sales	decreased	to	8.9%	from 9.5%.

Selling	and	administrative	expense	of	$939.3	decreased	$115.4,	or	11%,	primarily	due	to	the	benefits	of	cost	reduction	actions	of	$122	and	favorable currency	effects	of	$62,	partially	offset	by	higher	other	costs	of	$69,	driven	by	higher	incentive	compensation.	Selling	and	administrative	expense	as	a percent	of	sales	decreased	to	9.5%	from	10.1%.

# Research	and	Development

Research	and	development	expense	of	$132.0	decreased	$5.1,	or	4%.	Fiscal	year	2016	and	2015	research	and	development	expense	as	a	percent	of sales	was	1.4%.

Research	and	development	expense	of	$137.1	decreased	$2.7,	or	2%.	Fiscal	year	2015	and	2014	research	and	development	expense	as	a	percent	of sales	was	1.4%	and	1.3%,	respectively.

# Business	Separation	Costs

On	16	September	2015,	the	Company	announced	plans	to	separate	its	Materials	Technologies	business,	which	contains	two	divisions,	Electronic Materials	(EMD)	and	Performance	Materials	(PMD),	into	an	independent	publicly	traded	company	and	distribute	to	Air	Products	shareholders	all	of	the shares	of	the	new	public	company	in	a	tax	free	distribution	(a	"spin-off").	Versum	Materials,	LLC,	or	Versum,	was	formed	as	the	new	company	to	hold	the Materials	Technologies	business	subject	to	the	spin-off.	On	6	May	2016,	the	Company	entered	into	an	agreement	to	sell	certain	subsidiaries	and	assets comprising	the	PMD	division	to	Evonik	Industries	AG	for	$3.8	billion	in	cash	and	the	assumption	of	certain	liabilities.	As	a	result,	the	Company	moved forward	with	the	planned	spin-off	of	Versum	containing	only	the	EMD	division.

On	1	October	2016,	Air	Products	completed	the	separation	of	its	EMD	division	through	the	spin-off	of	Versum.	As	a	result,	the	historical	results	of	EMD will	be	presented	as	a	discontinued	operation	beginning	in	fiscal	year	2017.	We	continue	to	evaluate	the	progress	of	the	sale	of	the	PMD	division	to determine	when	it	should	be	presented	as	a	discontinued	operation.

In	fiscal	year	2016,	we	incurred	separation	costs	of	$52.2	($48.3	after-tax,	or	$.22	per	share),	primarily	related	to	legal,	advisory,	and	indirect	tax	costs associated	with	these	transactions.	The	costs	are	reflected	on	the	consolidated	income	statements	as	"Business	separation	costs."	A	significant	portion	of these	costs	were	not	tax	deductible	because	they	were	directly	related	to	the	plan	for	the	tax-free	spin-off	of	Versum.	Our	income	tax	provision	includes additional	tax	expense	related	to	the	separation	of	$51.8	($.24	per	share),	of	which	$45.7	resulted	from	a	dividend	declared	during	the	third	quarter	of 2016	to	repatriate	$443.8	from	a	subsidiary	in	South	Korea	to	the	U.S.	Previously,	most	of	these	foreign	earnings	were	considered	to	be	indefinitely reinvested.

We	expect	to	incur	additional	legal	and	advisory	fees	in	fiscal	2017.

On	30	September	2016,	in	anticipation	of	the	spin-off,	Versum	entered	into	certain	financing	transactions	to	allow	for	a	cash	distribution	of	$550.0	and	a distribution	in-kind	of	notes	issued	by	Versum	with	an	aggregate	principal	amount	of	$425.0	to	Air	Products.	Air	Products	then	exchanged	these	notes with	certain	financial	institutions	for

$418.3	of	Air	Products'	outstanding	commercial	paper.	The	exchange	resulted	in	a	loss	of	$6.9	($4.3	after-tax,	or	$.02	per	share)	and	has	been	reflected on	the	consolidated	income	statements	as	"Loss	on	extinguishment	of	debt."	This	loss	is	deductible	for	tax	purposes.

# Business	Restructuring	and	Cost	Reduction	Actions

We	recorded	charges	in	2016,	2015,	and	2014	for	business	restructuring	and	cost	reduction	actions.	The	charges	for	these	actions	are	excluded	from segment	operating	income.

# Cost	Reduction	Actions

In	fiscal	year	2016,	we	recognized	an	expense	of	$33.9	($24.0	after-tax,	or	$.11	per	share)	for	severance	and	other	benefits	related	to	cost	reduction actions	resulting	from	the	elimination	of	approximately	700	positions.	The	expense	related	primarily	to	the	Industrial	Gases	–	Americas	and	the	Industrial Gases	–	EMEA	segments.

# Business	Realignment	and	Reorganization

On	18	September	2014,	we	announced	plans	to	reorganize	the	Company,	including	realignment	of	our	businesses	in	new	reporting	segments	and	other organizational	changes,	effective	as	of	1	October	2014,	which	at	the	time	resulted	in	the	largest	transformational	change	in	the	history	of	the	Company. As	a	result	of	this	reorganization,	we	incurred	severance	and	other	charges.

In	fiscal	year	2015,	we	recognized	an	expense	of	$207.7	($153.2	after-tax,	or	$.71	per	share).	Severance	and	other	benefits	totaled	$151.9	and	related	to the	elimination	of	approximately	2,000	positions.	Asset	and	associated	contract	actions	totaled	$55.8	and	related	primarily	to	a	plant	shutdown	in	the Corporate	and	other	segment	and	the	exit	of	product	lines	within	Industrial	Gases	–	Global	and	Materials	Technologies	segments.

During	the	fourth	quarter	of	2014,	an	expense	of	$12.7	($8.2	after-tax,	or	$.04	per	share)	was	incurred	relating	to	the	elimination	of	approximately	50 positions.

Refer	to	Note	5,	Business	Restructuring	and	Cost	Reduction	Actions,	to	the	consolidated	financial	statements	for	additional	details	on	these	actions.

# Pension	Settlement	Loss

Certain	of	our	pension	plans	provide	for	a	lump	sum	benefit	payment	option	at	the	time	of	retirement,	or	for	corporate	officers,	six	months	after	the retirement	date.	Pension	settlements	are	recognized	when	cash	payments	exceed	the	sum	of	the	service	and	interest	cost	components	of	net	periodic pension	cost	of	the	plan	for	the	fiscal	year.	We	recognized	$6.4	($4.1	after-tax,	or	$.02	per	share),	$21.2	($13.7	after-tax,	or	$.06	per	share),	and	$5.5 ($3.6	after-tax,	or	$.02	per	share)	of	settlement	charges	in	2016,	2015,	and	2014,	respectively.	The	settlement	accelerated	the	recognition	of	a	portion	of actuarial	losses	deferred	in	accumulated	other	comprehensive	loss	primarily	related	to	our	U.S.	Supplementary	Pension	Plan.

# Goodwill	and	Intangible	Asset	Impairment	Charge

During	the	fourth	quarter	of	2014,	we	concluded	that	the	goodwill	and	indefinite-lived	intangible	assets	(primarily	acquired	trade	names)	associated	with our	Latin	America	reporting	unit	of	our	Industrial	Gases	–	Americas	segment	were	impaired	and	recorded	a	noncash	impairment	charge	of	$310.1 ($275.1	attributable	to	Air	Products	after-tax,	or	$1.27	per	share).

# Gain	on	Previously	Held	Equity	Interest

On	30	December	2014,	we	acquired	our	partner's	equity	ownership	interest	in	a	liquefied	atmospheric	industrial	gases	production	joint	venture	in	North America	for	$22.6	which	increased	our	ownership	from	50%	to	100%.	The	transaction	was	accounted	for	as	a	business	combination,	and	subsequent	to the	acquisition,	the	results	are	consolidated	within	our	Industrial	Gases	–	Americas	segment.	The	assets	acquired,	primarily	plant	and	equipment,	were recorded	at	their	fair	value	as	of	the	acquisition	date.

The	acquisition	date	fair	value	of	the	previously	held	equity	interest	was	determined	using	a	discounted	cash	flow	analysis	under	the	income	approach. During	the	first	quarter	of	2015,	we	recorded	a	gain	of	$17.9	($11.2	after-tax,	or	$.05	per	share)	as	a	result	of	revaluing	our	previously	held	equity	interest to	fair	value	as	of	the	acquisition	date.

# Other	Income	(Expense),	Net

Items	recorded	to	other	income	(expense),	net	arise	from	transactions	and	events	not	directly	related	to	our	principal	income	earning	activities.	The	detail of	other	income	(expense),	net	is	presented	in	Note	24,	Supplemental	Information,	to	the	consolidated	financial	statements.

Other	income	(expense),	net	of	$58.1	increased	$10.8	primarily	due	to	lower	foreign	exchange	losses,	favorable	contract	settlements,	and	receipt	of	a government	subsidy.	The	prior	year	included	a	gain	of	$33.6	($28.3	after-tax,	or	$.13	per	share)	resulting	from	the	sale	of	two	parcels	of	land.	No	other individual	items	were	significant	in	comparison	to	the	prior	year.

Other	income	(expense),	net	of	$47.3	decreased	$5.5	and	included	a	gain	of	$33.6	($28.3	after-tax,	or	$.13	per	share)	resulting	from	the	sale	of	two parcels	of	land.	The	gain	was	partially	offset	by	unfavorable	foreign	exchange	impacts	and	lower	gains	on	other	sales	of	assets	and	emissions	credits.	No other	individual	items	were	significant	in	comparison	to	fiscal	year	2014.

# Interest	Expense

Interest	incurred	decreased	$4.2.	The	decrease	primarily	resulted	from	a	stronger	U.S.	dollar	on	the	translation	of	foreign	currency	interest	of	$6,	partially offset	by	a	higher	average	debt	balance	of	$2.	The	change	in	capitalized	interest	was	driven	by	a	decrease	in	the	carrying	value	of	projects	under construction,	primarily	as	a	result	of	our	exit	from	the	Energy-from-Waste	business.

Interest	incurred	decreased	$5.5.	The	decrease	was	driven	by	the	impact	of	a	stronger	U.S.	dollar	on	the	translation	of	foreign	currency	interest	of	$12, partially	offset	by	a	higher	average	debt	balance	of	$7.	The	change	in	capitalized	interest	was	driven	by	a	higher	carrying	value	in	construction	in progress.

# Loss	on	Extinguishment	of	Debt

On	30	September	2016,	in	anticipation	of	the	Versum	spin-off,	Versum	issued	$425.0	of	notes	to	Air	Products,	who	then	exchanged	these	notes	with certain	financial	institutions	for	$418.3	of	Air	Products'	outstanding	commercial	paper.	The	exchange	resulted	in	a	loss	of	$6.9	($4.3	after-tax,	or	$.02	per share).

# Effective	Tax	Rate

The	effective	tax	rate	equals	the	income	tax	provision	divided	by	income	from	continuing	operations	before	taxes.	Refer	to	Note	23,	Income	Taxes,	to	the consolidated	financial	statements	for	details	on	factors	affecting	the	effective	tax	rate.

On	a	GAAP	basis,	the	effective	tax	rate	was	27.5%	and	24.0%	in	2016	and	2015,	respectively.	The	change	included	a	240	bp	impact	from	tax	costs associated	with	business	separation,	primarily	resulting	from	a	dividend	declared	in	2016	to	repatriate	cash	from	a	foreign	subsidiary,	as	discussed	above in	"Business	Separation	Costs."	The	remaining	110	bp	change	was	primarily	due	to	the	increase	in	mix	of	income	in	jurisdictions	with	a	higher	effective tax	rate	and	the	impact	of	business	separation	costs	for	which	a	tax	benefit	was	not	available.	On	a	non-GAAP	basis,	the	effective	tax	rate	increased from	24.2%	in	2015	to	24.8%	in	2016,	primarily	due	to	the	increase	in	and	mix	of	income	in	jurisdictions	with	a	higher	effective	tax	rate.

On	a	GAAP	basis,	the	effective	tax	rate	was	24.0%	and	27.1%	in	2015	and	2014,	respectively.	The	effective	tax	rate	was	higher	in	fiscal	year	2014 primarily	due	to	the	goodwill	impairment	charge	of	$305.2,	which	was	not	deductible	for	tax	purposes,	and	the	Chilean	tax	reform	enacted	in	September 2014	which	increased	income	tax	expense	by	$20.6.	These	impacts	were	partially	offset	by	an	income	tax	benefit	of	$51.6	associated	with	losses	from transactions	and	a	tax	election	in	a	non-U.S.	subsidiary.	Refer	to	Note	10,	Goodwill,	and	Note	23,	Income	Taxes,	to	the	consolidated	financial	statements for	additional	information.	On	a	non-GAAP	basis,	the	effective	tax	rate	was	24.2%	and	24.1%	in	2015	and	2014,	respectively.

# Discontinued	Operations

On	29	March	2016,	the	Board	of	Directors	approved	the	Company's	exit	of	its	Energy-from-Waste	(EfW)	business.	As	a	result,	efforts	to	start	up	and operate	its	two	EfW	projects	located	in	Tees	Valley,	United	Kingdom,	have	been	discontinued.	The	decision	to	exit	the	business	and	stop	development	of the	projects	was	based	on	continued	difficulties	encountered	and	the	Company's	conclusion,	based	on	testing	and	analysis	completed	during	the	second quarter	of	fiscal	year	2016,	that	significant	additional	time	and	resources	would	be	required	to	make	the	projects	operational.	In	addition,	the	decision allows	the	Company	to	execute	its	strategy	of	focusing	resources	on	its	core	Industrial	Gases	business.	The	EfW	segment	has	been	presented	as	a discontinued	operation.	Prior	year	EfW	business	segment	information	has	been	reclassified	to	conform	to	current	year	presentation.

In	fiscal	2016,	our	loss	from	discontinued	operations,	net	of	tax,	of	$884.2	primarily	resulted	from	the	write	down	of	assets	to	their	estimated	net realizable	value	and	to	record	a	liability	for	plant	disposition	and	other	costs.	Income	tax	benefits	related	only	to	one	of	the	projects,	as	the	other	did	not qualify	for	a	local	tax	deduction.	The	loss	from	discontinued	operations	also	includes	land	lease	costs,	commercial	and	administrative	costs,	and	costs incurred	for	ongoing	project	exit	activities.

We	expect	additional	exit	costs	of	$50	to	$100	to	be	recorded	in	future	periods.

In	fiscal	2015,	our	loss	from	discontinued	operations,	net	of	tax,	related	to	EfW	was	$6.8.	This	resulted	from	costs	for	land	leases	and	commercial	and administrative	expenses.

In	fiscal	2014,	our	loss	from	discontinued	operations,	net	of	tax,	was	$2.9.	This	included	a	loss,	net	of	tax,	of	$7.5	for	the	cost	of	EfW	land	leases	and commercial	and	administrative	expenses.	This	loss	was	partially	offset	by	a	gain	of	$3.9	for	the	sale	of	the	remaining	Homecare	business	and	settlement of	contingencies	related	to	a	sale	of	a	separate	portion	of	the	business	to	The	Linde	Group	in	2012.

Refer	to	Note	4,	Discontinued	Operations,	for	additional	details.

# Segment	Analysis

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Sales | \t$3,343.6 | \t$3,693.9 | \t$4,078.5 |
| Operating\tincome | 895.2 | 808.4 | 762.6 |
| Operating\tmargin | 26.8\t% | 21.9\t% | 18.7\t% |
| Equity\taffiliates'\tincome | 52.7 | 64.6 | 60.9 |
| Adjusted\tEBITDA | 1,390.4 | 1,289.9 | 1,237.9 |
| Adjusted\tEBITDA\tmargin | 41.6\t% | 34.9\t% | 30.4\t% |

# Industrial	Gases	–	Americas	Sales

| Industrial	Gases	–	Americas	Sales |  |  |
| :--- | :--- | :--- |
|  | %\tChange\tfrom\tPrior\tYear | %\tChange\tfrom\tPrior\tYear |
|  | 2016 | 2015 |
| Underlying\tbusiness |  |  |
| Volume | (2)% | —% |
| Price | \t\t\t\t\t\t\t\t\t\t\t\t1% | \t\t\t\t\t\t\t\t\t\t\t\t2% |
| Energy\tand\traw\tmaterial\tcost\tpass-through | (6)% | (8)% |
| Currency | (2)% | (3)% |
| Total\tIndustrial\tGases\t–\tAmericas\tChange | (9)% | (9)% |

Underlying	sales	decreased	1%	from	lower	volumes	of	2%,	partially	offset	by	higher	pricing	of	1%.	Volumes	were	down	due	to	weakness	in	Latin	America and	lower	steel	demand	in	North	America.	Pricing	was	higher	due	to	the	benefit	of	pricing	actions,	mainly	the	recovery	of	inflationary	and	power	cost increases	in	Latin	America.	Lower	energy	contractual	cost	pass-through	to	customers,	primarily	natural	gas,	decreased	sales	by	6%.	Currency	decreased sales	by	2%	primarily	due	to	the	impacts	of	the	Chilean	Peso,	Brazilian	Real,	and	Canadian	Dollar.

Operating	income	of	$895.2	increased	11%,	or	$86.8,	due	to	lower	operating	costs	of	$108	and	higher	pricing,	net	of	energy	and	fuel	costs,	of	$26, partially	offset	by	lower	volumes	of	$33	and	unfavorable	currency	impacts	of	$14.	Operating	costs	were	lower	due	to	benefits	from	cost	reduction	actions. Operating	margin	increased	490	bp	from	the	prior	year,	primarily	due	to	the	lower	costs,	with	additional	benefits	from	lower	energy	pass-through	and higher	pricing.

Equity	affiliates'	income	of	$52.7	decreased	$11.9	primarily	due	to	unfavorable	currency	impacts	and	higher	maintenance	expense.

Underlying	sales	increased	2%	from	higher	pricing.	Volumes	were	flat	as	growth	in	liquid	oxygen	and	nitrogen	and	gaseous	hydrogen	were	offset	by lower	helium	and	gaseous	oxygen	demand.	Pricing	was	higher	due	to	strength	in	helium	and	price	increases	to	recover	higher	costs.	Currency decreased	sales	by	3%	primarily	due	to	the	impacts	of	the	Chilean	Peso,	Brazilian	Real,	and	Canadian	Dollar.	Lower	energy	contractual	cost	pass- through	to	customers,	primarily	natural	gas,	decreased	sales	by	8%.

Operating	income	of	$808.4	increased	6%,	or	$45.8,	due	to	higher	pricing	net	of	energy	and	fuel	costs	of	$65	and	favorable	volume	mix	impacts	of	$6, partially	offset	by	unfavorable	currency	impacts	of	$21	and	higher	costs	of	$4	mainly	due	to	higher	incentive	compensation	mostly	offset	by	the	benefits	of our	recent	restructuring	actions.	Operating	margin	increased	320	bp	from	the	prior	year,	primarily	due	to	the	higher	pricing	and	lower	energy	contractual cost	pass-through	to	customers.

Equity	affiliates'	income	of	$64.6	increased	$3.7	due	to	improved	performance	in	our	Mexican	equity	affiliate.

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Sales | \t$1,700.3 | \t$1,864.9 | \t$2,150.7 |
| Operating\tincome | 382.8 | 330.7 | 351.2 |
| Operating\tmargin | 22.5\t% | 17.7\t% | 16.3\t% |
| Equity\taffiliates'\tincome | 36.5 | 42.4 | 44.1 |
| Adjusted\tEBITDA | 605.0 | 567.4 | 615.5 |
| Adjusted\tEBITDA\tmargin | 35.6\t% | 30.4\t% | 28.6\t% |

# Industrial	Gases	–	EMEA	Sales

| Industrial	Gases	–	EMEA	Sales |  |  |
| :--- | :--- | :--- |
|  | %\tChange\tfrom\tPrior\tYear | %\tChange\tfrom\tPrior\tYear |
|  | 2016 | 2015 |
| Underlying\tbusiness |  |  |
| Volume | (2)% | \t\t\t\t\t\t\t\t\t\t\t\t\t—% |
| Price | \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t1% | 1% |
| Energy\tand\traw\tmaterial\tcost\tpass-through | (4)% | (1)% |
| Currency | (4)% | (13)% |
| Total\tIndustrial\tGases\t–\tEMEA\tChange | (9)% | (13)% |

Underlying	sales	decreased	1%	as	lower	volumes	of	2%	were	partially	offset	by	higher	pricing	of	1%.	Volumes	decreased	primarily	due	to	continued weakness	in	the	European	economy.	Lower	energy	and	natural	gas	contractual	cost	pass-through	to	customers	decreased	sales	by	4%.	Unfavorable currency	effects	from	the	Euro	and	the	British	Pound	Sterling	reduced	sales	by	4%.	Other	than	the	impact	on	currency,	the	Brexit	vote	did	not	have	a notable	impact	on	our	business.

Operating	income	of	$382.8	increased	16%,	or	$52.1,	primarily	due	to	favorable	operating	costs	of	$59	and	higher	pricing,	net	of	energy	and	fuel	costs,	of $20,	partially	offset	by	unfavorable	currency	impacts	of	$18	and	lower	volumes	of	$9.	Operating	margin	increased	480	bp	from	the	prior	year	primarily	due to	favorable	cost	performance,	higher	pricing,	and	lower	energy	pass-through.

Equity	affiliates'	income	of	$36.5	decreased	$5.9	primarily	due	to	unfavorable	currency	impacts.

As	a	result	of	our	exit	from	the	Energy-from-Waste	segment,	the	Company	is	evaluating	the	disposition	of	an	air	separation	unit	in	the	Industrial Gases	–	EMEA	segment	that	was	constructed	primarily	to	provide	oxygen	to	one	of	the	Tees	Valley	plants.	The	current	value	of	this	asset	is approximately	£40	million	($52	million).

Underlying	sales	increased	1%	from	pricing	improvement	in	both	packaged	gas	and	liquid	bulk.	Volumes	were	flat	as	higher	liquid	oxygen	and	nitrogen volumes	were	offset	by	lower	cylinder	and	helium	volumes.	Unfavorable	currency	effects,	primarily	from	the	Euro,	the	British	Pound	Sterling,	and	the Polish	Zloty,	reduced	sales	by	13%.	Lower	energy	contractual	cost	pass-through	to	customers	decreased	sales	by	1%.

Operating	income	of	$330.7	decreased	6%,	or	$20.5,	due	to	unfavorable	currency	impacts	of	$44,	partially	offset	by	lower	costs	of	$13	resulting	from restructuring	actions,	favorable	volume	mix	impacts	of	$5,	and	higher	pricing,	net	of	energy	and	fuel	costs,	of	$5.	Operating	margin	increased	140	bp	from 2014	primarily	due	to	the	lower	costs.

Equity	affiliates'	income	of	$42.4	decreased	$1.7.

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Sales | \t$1,716.1 | $1,637.5 | $1,527.0 |
| Operating\tincome | 449.1 | 380.5 | 310.4 |
| Operating\tmargin | 26.2\t% | 23.2\t% | 20.3\t% |
| Equity\taffiliates'\tincome | 57.8 | 46.1 | 38.0 |
| Adjusted\tEBITDA | 704.0 | 629.5 | 553.7 |
| Adjusted\tEBITDA\tmargin | 41.0\t% | 38.4\t% | 36.3\t% |

# Industrial	Gases	–	Asia	Sales

| Industrial	Gases	–	Asia	Sales |  |  |
| :--- | :--- | :--- |
|  | %\tChange\tfrom\tPrior\tYear | %\tChange\tfrom\tPrior\tYear |
|  | 2016 | 2015 |
| Underlying\tbusiness |  |  |
| Volume | 11% | 12% |
| Price | (1)% | (2)% |
| Energy\tand\traw\tmaterial\tcost\tpass-through | —% | \t\t\t\t\t\t\t\t\t\t\t\t1% |
| Currency | (5)% | (4)% |
| Total\tIndustrial\tGases\t–\tAsia\tChange | 5% | 7% |

Underlying	sales	increased	by	10%	from	higher	volumes	of	11%,	partially	offset	by	lower	pricing	of	1%.	Volumes	were	higher	primarily	from	new	plants	in China	and	higher	merchant	volumes	across	Asia.	Pricing	was	down	due	to	continued	pricing	pressure	on	merchant	products	in	China	and	helium oversupply	into	Asia.	Unfavorable	currency	impacts,	primarily	from	the	Chinese	Renminbi,	Korean	Won,	and	Taiwanese	Dollar	decreased	sales	by	5%.

Operating	income	of	$449.1	increased	18%,	or	$68.6,	primarily	due	to	higher	volumes	of	$66	and	lower	operating	costs	of	$34,	partially	offset	by	an unfavorable	currency	impact	of	$19	and	unfavorable	pricing,	net	of	energy	and	fuel	costs,	of	$12.	The	lower	operating	costs	were	driven	by	our operational	improvements.	Operating	margin	increased	300	bp,	due	to	favorable	cost	performance	and	higher	volumes.

Equity	affiliates'	income	of	$57.8	increased	$11.7	primarily	due	to	favorable	contract	and	insurance	settlements,	higher	volumes,	and	improved	cost performance.

Underlying	sales	increased	by	10%	from	higher	volumes	of	12%,	partially	offset	by	lower	pricing	of	2%.	Volumes	were	higher	primarily	from	new	plants, and	in	particular,	a	large	on-site	project	in	China.	Pricing	was	down	due	to	continued	pricing	pressure	on	merchant	products	in	China.	Unfavorable currency	impacts	decreased	sales	by	4%.	Higher	energy	contractual	cost-pass	through	to	customers	increased	sales	by	1%.

Operating	income	of	$380.5	increased	23%,	or	$70.1,	primarily	due	to	higher	volumes	of	$76	and	lower	costs	of	$42	resulting	from	restructuring	and underlying	productivity,	partially	offset	by	lower	pricing,	net	of	energy	and	fuel	costs,	of	$35	and	an	unfavorable	currency	impact	of	$13.	Operating	margin increased	290	bp,	primarily	due	to	favorable	cost	performance	and	higher	volumes,	partially	offset	by	lower	pricing.

Equity	affiliates'	income	of	$46.1	increased	$8.1	primarily	due	to	higher	volumes	and	favorable	cost	performance.

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Sales | \t\t\t$498.8 | \t$286.8 | \t$296.0 |
| Operating\tloss | (21.3) | (51.6) | (57.3) |
| Adjusted\tEBITDA | (13.5) | (35.9) | (44.4) |

The	Industrial	Gases	–	Global	segment	includes	sales	of	cryogenic	and	gas	processing	equipment	for	air	separation	and	centralized	global	costs associated	with	management	of	all	the	Industrial	Gases	segments.

Sales	of	$498.8	increased	$212.0,	or	74%.	The	increase	in	sales	was	driven	by	a	sale	of	equipment	contract	for	multiple	air	separation	units	that	will serve	Saudi	Aramco's	Jazan	oil	refinery	and	power	plant	in	Saudi	Arabia	which	more	than	offset	the	decrease	in	small	equipment	and	other	air separation	unit	sales.	In	2016,	we	recognized	approximately	$300	of	sales	related	to	the	Jazan	project.

Operating	loss	of	$21.3	decreased	59%,	or	$30.3,	primarily	from	income	on	the	Jazan	project	and	benefits	from	the	cost	reduction	actions,	partially	offset by	lower	other	sale	of	equipment	project	activity	and	a	gain	associated	with	the	cancellation	of	a	sale	of	equipment	contract	that	was	recorded	in	the	prior year.

Sales	of	$286.8	decreased	$9.2,	or	3%,	due	to	unfavorable	currency	impacts.	Operating	loss	of	$51.6	decreased	10%,	or	$5.7,	primarily	due	to	benefits	of cost	reduction	actions	and	a	gain	associated	with	the	cancellation	of	a	sale	of	equipment	contract,	partially	offset	by	less	profitable	business	mix, unfavorable	project	costs,	and	bad	debt	expense.

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Sales | \t$2,019.5 | \t$2,087.1 | \t$2,064.6 |
| Operating\tincome | 530.2 | 476.7 | 379.0 |
| Operating\tmargin | 26.3\t% | 22.8\t% | 18.4\t% |
| Adjusted\tEBITDA | 609.3 | 571.7 | 480.7 |
| Adjusted\tEBITDA\tmargin | 30.2\t% | 27.4\t% | 23.3\t% |

# Materials	Technologies	Sales

| Materials	Technologies	Sales |  |  |
| :--- | :--- | :--- |
|  | %\tChange\tfrom\tPrior\tYear | %\tChange\tfrom\tPrior\tYear |
|  | \t\t\t\t\t\t\t\t\t\t\t\t2016 | \t\t\t\t\t\t\t\t\t\t\t\t2015 |
| Underlying\tbusiness |  |  |
| Volume | (2)% | 3% |
| Price | \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t–% | \t\t\t\t\t\t\t\t\t\t\t\t2% |
| Currency | (1)% | (4)% |
| Total\tMaterials\tTechnologies\tChange | (3)% | 1% |

Underlying	sales	decreased	by	2%	from	lower	volumes.	Electronic	Materials	underlying	sales	decreased	2%	primarily	from	lower	delivery	systems volumes,	partially	offset	by	higher	pricing.	Performance	Materials	underlying	sales	decreased	2%	primarily	due	to	lower	price,	which	was	down	due	to lower	raw	material	costs,	partially	offset	by	higher	volumes.	Unfavorable	currency	impacts	decreased	sales	by	1%.

Operating	income	of	$530.2	increased	11%,	or	$53.5,	as	higher	pricing,	net	of	raw	material	costs,	of	$51	and	lower	costs	of	$15	were	partially	offset	by unfavorable	currency	impacts	of	$11.	The	lower	costs	include	the	benefits	of	business	restructuring	and	cost	reduction	actions.

Operating	margin	increased	350	bp,	primarily	from	favorable	pricing,	net	of	raw	material	costs,	and	improved	cost	performance.

Underlying	sales	increased	by	5%	from	higher	volumes	of	3%	and	positive	pricing	of	2%.	Unfavorable	currency	impacts	decreased	sales	by	4%. Electronic	Materials	underlying	sales	increased	10%	from	positive	volume	and	price	from	new	products	and	memory	market	demand,	partially	offset	by lower	delivery	systems	activity.	Performance	Materials	underlying	sales	were	flat	as	higher	volumes	of	1%	were	offset	by	lower	pricing	of	1%.

Operating	income	of	$476.7	increased	26%,	or	$97.7,	due	to	favorable	price	and	mix,	net	of	raw	material	costs,	of	$70,	higher	volumes	of	$40,	and	lower costs	of	$13,	partially	offset	by	unfavorable	currency	impacts	of	$25.	The	cost	improvement	came	primarily	from	optimization	of	production	and	supply chain	networks	and	benefits	of	cost	reduction	actions.	Operating	margin	increased	440	bp,	from	higher	pricing,	higher	volumes,	and	lower	operating costs.

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Sales | \t\t\t$246.1 | \t$324.7 | \t$322.2 |
| Operating\tloss | (37.5) | (51.5) | (78.5) |
| Adjusted\tEBITDA | (22.2) | (38.5) | (67.7) |

The	Corporate	and	other	segment	consists	of	our	liquefied	natural	gas	(LNG)	and	helium	container	businesses,	as	well	as	corporate	costs	which	are	not business-specific.

Sales	of	$246.1	decreased	$78.6,	or	24%,	primarily	due	to	lower	LNG	sale	of	equipment	activity.

Operating	loss	of	$37.5	decreased	27%,	or	$14.0,	due	to	benefits	from	our	recent	cost	reduction	actions	and	lower	foreign	exchange	losses,	partially offset	by	lower	LNG	activity.

Sales	of	$324.7	increased	$2.5,	or	1%,	primarily	due	to	higher	LNG	project	activity,	mostly	offset	by	lower	helium	container	sales	and	the	impact	of	exiting our	PUI	business	which	was	completed	as	of	the	end	of	the	first	quarter	of	2014.	Operating	loss	of	$51.5	decreased	34%,	or	$27.0,	primarily	due	to higher	LNG	project	activity	and	the	benefits	of	our	cost	reduction	actions.

# RECONCILIATION	OF	NON-GAAP	FINANCIAL	MEASURES

(Millions	of	dollars	unless	otherwise	indicated,	except	for	share	data)

The	Company	has	presented	certain	financial	measures	on	a	non-GAAP	("adjusted")	basis	and	has	provided	a	reconciliation	to	the	most	directly comparable	financial	measure	calculated	in	accordance	with	GAAP.	These	financial	measures	are	not	meant	to	be	considered	in	isolation	or	as	a substitute	for	the	most	directly	comparable	financial	measure	calculated	in	accordance	with	GAAP.	The	Company	believes	these	non-GAAP	measures provide	investors,	potential	investors,	securities	analysts,	and	others	with	useful	information	to	evaluate	the	performance	of	the	business	because	such measures,	when	viewed	together	with	our	financial	results	computed	in	accordance	with	GAAP,	provide	a	more	complete	understanding	of	the	factors and	trends	affecting	our	historical	financial	performance	and	projected	future	results.

In	many	cases,	our	non-GAAP	measures	are	determined	by	adjusting	the	most	directly	comparable	GAAP	financial	measure	to	exclude	certain	disclosed items	("non-GAAP	adjustments")	that	we	believe	are	not	representative	of	the	underlying	business	performance.	For	example,	Air	Products	is	currently executing	its	strategic	plan	to	restructure	the	Company	and	to	focus	on	the	Company's	core	Industrial	Gases	businesses,	which	has	and	will	continue	to result	in	significant	disclosed	items	that	we	believe	are	important	for	investors	to	understand	separately	from	the	performance	of	the	underlying	business. The	tax	impact	of	our	non-GAAP	adjustments	reflects	the	expected	current	and	deferred	income	tax	expense	impact	of	the	transactions	and	is	impacted primarily	by	the	statutory	tax	rate	of	the	various	relevant	jurisdictions	and	the	taxability	of	the	adjustments	in	those	jurisdictions.	In	evaluating	these financial	measures,	the	reader	should	be	aware	that	we	may	incur	expenses	similar	to	those	eliminated	in	this	presentation	in	the	future.	Investors	should also	consider	the	limitations	associated	with	these	non-GAAP	measures,	including	the	potential	lack	of	comparability	of	these	measures	from	one company	to	another.

Presented	below	are	reconciliations	of	the	reported	GAAP	results	to	the	non-GAAP	measures:

# CONSOLIDATED	RESULTS

# Continuing	Operations

|  |  | Continuing	Operations | Continuing	Operations | Continuing	Operations |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Operating | Operating |  | Income\tTax | Net | Diluted |
|  | Income | Margin | (A) | (B)\nProvision | Income | EPS |
| 2016\tGAAP | $2,106.0 | 22.1% | 22.1% | $586.5 | \t$1,515.3 | $6.94 |
| 2015\tGAAP | 1,708.3 | 17.3% | 17.3% | 418.3 | 1,284.7 | 5.91 |
| Change\tGAAP | $397.7 | 480bp |  | $168.2 | $230.6 | $1.03 |
| %\tChange\tGAAP | 23% |  |  | 40% | 18% | 17% |
| 2016\tGAAP | $2,106.0 | 22.1% | 22.1% | $586.5 | \t$1,515.3 | $6.94 |
| Business\tseparation\tcosts(C) | 52.2 | .5% | .5% | 3.9 | 48.3 | .22 |
| Tax\tcosts\tassociated\twith\tbusiness\tseparation(C) | — | — | — | (51.8) | 51.8 | .24 |
| Business\trestructuring\tand\tcost\treduction\tactions | 33.9 | .4% | .4% | 9.9 | 24.0 | .11 |
| Pension\tsettlement\tloss | 6.4 | .1% | .1% | 2.3 | 4.1 | .02 |
| Loss\ton\textinguishment\tof\tdebt(D) | — | — | — | 2.6 | 4.3 | .02 |
| 2016\tNon-GAAP\tMeasure | $2,198.5 | 23.1% | 23.1% | $553.4 | \t$1,647.8 | $7.55 |
| 2015\tGAAP | $1,708.3 | 17.3% | 17.3% | $418.3 | \t$1,284.7 | $5.91 |
| Business\tseparation\tcosts(C) | 7.5 | .1% | .1% | — | 7.5 | .03 |
| Business\trestructuring\tand\tcost\treduction\tactions | 207.7 | 2.1% | 2.1% | 54.5 | 153.2 | .71 |
| Pension\tsettlement\tloss | 21.2 | .2% | .2% | 7.5 | 13.7 | .06 |
| Gain\ton\tpreviously\theld\tequity\tinterest | (17.9) | (.2)% | (.2)% | (6.7) | (11.2) | (.05) |
| Gain\ton\tland\tsales(E) | (33.6) | (.4)% | (.4)% | (5.3) | (28.3) | (.13) |
| Loss\ton\textinguishment\tof\tdebt(D) | — | — | — | 2.4 | 14.2 | .07 |
| 2015\tNon-GAAP\tMeasure | $1,893.2 | 19.1% | 19.1% | $470.7 | \t$1,433.8 | $6.60 |
| Change\tNon-GAAP\tMeasure | $305.3 | 400bp |  | $82.7 | $214.0 | $.95 |
| %\tChange\tNon-GAAP\tMeasure | 16% |  |  | 18% | 15% | 14% |

|  |  | Continuing	Operations | Continuing	Operations | Continuing	Operations |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Operating | Operating |  | Income\tTax | Net | Diluted |
|  | Income | Margin | (A) | (B)\nProvision | Income | EPS |
| 2015\tGAAP | $1,708.3 | 17.3% | 17.3% | $418.3 | \t$1,284.7 | $5.91 |
| 2014\tGAAP | 1,339.1 | 12.8% | 12.8% | 369.4 | 994.6 | 4.62 |
| Change\tGAAP | $369.2 | 450bp |  | $48.9 | $290.1 | $1.29 |
| %\tChange\tGAAP | 28% |  |  | 13% | 29% | 28% |
| 2015\tGAAP | $1,708.3 | 17.3% | 17.3% | $418.3 | \t$1,284.7 | $5.91 |
| Business\tseparation\tcosts(C) | 7.5 | .1% | .1% | — | 7.5 | .03 |
| Business\trestructuring\tand\tcost\treduction\tactions | 207.7 | 2.1% | 2.1% | 54.5 | 153.2 | .71 |
| Pension\tsettlement\tloss | 21.2 | .2% | .2% | 7.5 | 13.7 | .06 |
| Gain\ton\tpreviously\theld\tequity\tinterest | (17.9) | (.2)% | (.2)% | (6.7) | (11.2) | (.05) |
| Gain\ton\tland\tsales(E) | (33.6) | (.4)% | (.4)% | (5.3) | (28.3) | (.13) |
| Loss\ton\textinguishment\tof\tdebt(D) | — | — | — | 2.4 | 14.2 | .07 |
| 2015\tNon-GAAP\tMeasure | $1,893.2 | 19.1% | 19.1% | $470.7 | \t$1,433.8 | $6.60 |
| 2014\tGAAP | $1,339.1 | 12.8% | 12.8% | $369.4 | $994.6 | $4.62 |
| Business\trestructuring\tand\tcost\treduction\tactions | 12.7 | .1% | .1% | 4.5 | 8.2 | .04 |
| Pension\tsettlement\tloss | 5.5 | .1% | .1% | 1.9 | 3.6 | .02 |
| Goodwill\tand\tintangible\tasset\timpairment\tcharge (F) | 310.1 | 3.0% | 3.0% | 1.3 | 275.1 | 1.27 |
| Chilean\ttax\trate\tchange | — | — | — | (20.6) | 20.6 | .10 |
| Tax\telection\tbenefit | — | — | — | 51.6 | (51.6) | (.24) |
| 2014\tNon-GAAP\tMeasure | $1,667.4 | 16.0% | 16.0% | $408.1 | \t$1,250.5 | $5.81 |
| Change\tNon-GAAP\tMeasure | $225.8 | 310bp |  | $62.6 | $183.3 | $.79 |
| %\tChange\tNon-GAAP\tMeasure | 14% |  |  | 15% | 15% | 14% |

(A) Operating	margin	is	calculated	by	dividing	operating	income	by	sales.

(B) The	tax	impact	of	our	non-GAAP	adjustments	reflects	the	expected	current	and	deferred	income	tax	expense	impact	of	the	transactions	and	is	impacted	primarily by	the	statutory	tax	rate	of	the	various	relevant	jurisdictions	and	the	taxability	of	the	adjustments	in	those	jurisdictions.

(C) Refer	to	Note	3,	Materials	Technologies	Separation,	to	the	consolidated	financial	statements	for	additional	information.

(D) Income	from	continuing	operations	before	taxes	impact	of	$6.9	and	$16.6	in	2016	and	2015,	respectively.

(E) Reflected	on	the	consolidated	income	statements	in	"Other	income	(expense),	net."

(F) Net	income	attributable	to	noncontrolling	interests	impact	of	$33.7.

Below	is	a	reconciliation	of	Income	from	Continuing	Operations	on	a	GAAP	basis	to	Adjusted	EBITDA:

|  | 2016 | 2015 | 2014 | 2013 | 2012 |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Income\tfrom\tContinuing\tOperations(A) | \t$1,545.7 | \t$1,324.4 | $996.0 | \t$1,047.6 | \t$1,025.2 |
| Add:\tInterest\texpense | 115.5 | 103.5 | 125.1 | 141.8 | 123.7 |
| Add:\tIncome\ttax\tprovision | 586.5 | 418.3 | 369.4 | 310.2 | 287.3 |
| Add:\tDepreciation\tand\tamortization | 925.9 | 936.4 | 956.9 | 907.0 | 840.8 |
| Add:\tBusiness\tseparation\tcosts | 52.2 | 7.5 | — | — | — |
| Add:\tBusiness\trestructuring\tand\tcost\treduction\tactions | 33.9 | 207.7 | 12.7 | 231.6 | 327.4 |
| Add:\tPension\tsettlement\tloss | 6.4 | 21.2 | 5.5 | — | — |
| Add:\tGoodwill\tand\tintangible\tasset\timpairment\tcharge | — | — | 310.1 | — | — |
| Less:\tGain\ton\tpreviously\theld\tequity\tinterest | — | 17.9 | — | — | 85.9 |
| Add:\tAdvisory\tcosts | — | — | — | 10.1 | — |
| Add:\tCustomer\tbankruptcy | — | — | — | — | 9.8 |
| Less:\tGain\ton\tland\tsales(B) | — | 33.6 | — | — | — |
| Add:\tLoss\ton\tearly\tretirement\tof\tdebt | 6.9 | 16.6 | — | — | — |
| Adjusted\tEBITDA | \t$3,273.0 | \t$2,984.1 | \t$2,775.7 | \t$2,648.3 | \t$2,528.3 |
| Change\tGAAP |  |  |  |  |  |
| Income\tfrom\tcontinuing\toperations\tchange | $221.3 | $328.4 | $(51.6) | $22.4 |  |
| Income\tfrom\tcontinuing\toperations\t%\tchange | 17% | 33% | (5)% | 2% |  |
| Change\tNon-GAAP |  |  |  |  |  |
| Adjusted\tEBITDA\tchange | $288.9 | $208.4 | $127.4 | $120.0 |  |
| Adjusted\tEBITDA\t%\tchange | 10% | 8% | 5% | 5% |  |

(B)	Reflected	on	the	consolidated	income	statements	in	"Other	income	(expense),	net."

# Below	is	a	summary	of	segment	operating	income:

|  | Industrial<br>Gases–<br>Americas | Industrial<br>Gases–<br>EMEA | Industrial<br>Gases–<br>Asia | Industrial<br>Gases–<br>Global | Materials<br>Technologies | Corporate<br>and	other | Segment<br>Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| GAAP\tMeasure |  |  |  |  |  |  |  |
| Twelve\tMonths\tEnded\t30\tSeptember\t2016 |  |  |  |  |  |  |  |
| Operating\tincome\t(loss) | $895.2 | $382.8 | $449.1 | $(21.3) | $530.2 | $(37.5) | \t$2,198.5 |
| Operating\tmargin | 26.8% | 22.5% | 26.2% |  | 26.3% |  | 23.1% |
| Twelve\tMonths\tEnded\t30\tSeptember\t2015 |  |  |  |  |  |  |  |
| Operating\tincome\t(loss) | $808.4 | $330.7 | $380.5 | $(51.6) | $476.7 | $(51.5) | \t$1,893.2 |
| Operating\tmargin | 21.9% | 17.7% | 23.2% |  | 22.8% |  | 19.1% |
| Twelve\tMonths\tEnded\t30\tSeptember\t2014 |  |  |  |  |  |  |  |
| Operating\tincome\t(loss) | $762.6 | $351.2 | $310.4 | $(57.3) | $379.0 | $(78.5) | \t$1,667.4 |
| Operating\tmargin | 18.7% | 16.3% | 20.3% |  | 18.4% |  | 16.0% |
| 2016\tvs.\t2015 |  |  |  |  |  |  |  |
| Operating\tincome\t(loss)\tchange | $86.8 | $52.1 | $68.6 | $30.3 | $53.5 | $14.0 | $305.3 |
| Operating\tincome\t(loss)\t%\tchange | 11% | 16% | 18% | 59% | 11% | 27% | 16% |
| Operating\tmargin\tchange | 490bp | 480bp | 300bp |  | 350bp |  | 400bp |
| 2015\tvs.\t2014 |  |  |  |  |  |  |  |
| Operating\tincome\t(loss)\tchange | $45.8 | $(20.5) | $70.1 | $5.7 | $97.7 | $27.0 | $225.8 |
| Operating\tincome\t(loss)\t%\tchange | 6% | (6)% | 23% | 10% | 26% | 34% | 14% |
| Operating\tmargin\tchange | 320bp | 140bp | 290bp |  | 440bp |  | 310bp |

Below	is	a	reconciliation	of	segment	operating	income	to	adjusted	EBITDA:

|  | Industrial<br>Gases–<br>Americas | Industrial<br>Gases–<br>EMEA | Industrial<br>Gases–<br>Asia | Industrial<br>Gases–<br>Global | Materials<br>Technologies | Corporate<br>and	other | Segment<br>Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Non-GAAP\tMeasure |  |  |  |  |  |  |  |
| Twelve\tMonths\tEnded\t30\tSeptember\t2016 |  |  |  |  |  |  |  |
| Operating\tincome\t(loss) | $895.2 | $382.8 | $449.1 | $(21.3) | $530.2 | $(37.5) | \t$2,198.5 |
| Add:\tDepreciation\tand\tamortization | 442.5 | 185.7 | 197.1 | 7.9 | 77.4 | 15.3 | 925.9 |
| Add:\tEquity\taffiliates'\tincome\t(loss) | 52.7 | 36.5 | 57.8 | (.1) | 1.7 | — | 148.6 |
| Adjusted\tEBITDA | \t$1,390.4 | $605.0 | $704.0 | $(13.5) | $609.3 | $(22.2) | \t$3,273.0 |
| Adjusted\tEBITDA\tmargin(A) | 41.6% | 35.6% | 41.0% |  | 30.2% |  | 34.4% |
| Twelve\tMonths\tEnded\t30\tSeptember\t2015 |  |  |  |  |  |  |  |
| Operating\tincome\t(loss) | $808.4 | $330.7 | $380.5 | $(51.6) | $476.7 | $(51.5) | \t$1,893.2 |
| Add:\tDepreciation\tand\tamortization | 416.9 | 194.3 | 202.9 | 16.5 | 92.8 | 13.0 | 936.4 |
| Add:\tEquity\taffiliates'\tincome | 64.6 | 42.4 | 46.1 | (.8) | 2.2 | — | 154.5 |
| Adjusted\tEBITDA | \t$1,289.9 | $567.4 | $629.5 | $(35.9) | $571.7 | $(38.5) | \t$2,984.1 |
| Adjusted\tEBITDA\tmargin(A) | 34.9% | 30.4% | 38.4% |  | 27.4% |  | 30.2% |
| Twelve\tMonths\tEnded\t30\tSeptember\t2014 |  |  |  |  |  |  |  |
| Operating\tincome\t(loss) | $762.6 | $351.2 | $310.4 | $(57.3) | $379.0 | $(78.5) | \t$1,667.4 |
| Add:\tDepreciation\tand\tamortization | 414.4 | 220.2 | 205.3 | 7.1 | 99.1 | 10.8 | 956.9 |
| Add:\tEquity\taffiliates'\tincome | 60.9 | 44.1 | 38.0 | 5.8 | 2.6 | — | 151.4 |
| Adjusted\tEBITDA | \t$1,237.9 | $615.5 | $553.7 | $(44.4) | $480.7 | $(67.7) | \t$2,775.7 |
| Adjusted\tEBITDA\tmargin(A) | 30.4% | 28.6% | 36.3% |  | 23.3% |  | 26.6% |
| 2016\tvs.\t2015 |  |  |  |  |  |  |  |
| Adjusted\tEBITDA\tchange | $100.5 | $37.6 | $74.5 | $22.4 | $37.6 | $16.3 | $288.9 |
| Adjusted\tEBITDA\t%\tchange | 8% | 7% | 12% | 62% | 7% | 42% | 10% |
| Adjusted\tEBITDA\tmargin\tchange | 670bp | 520bp | 260bp |  | 280bp |  | 420bp |
| 2015\tvs.\t2014 |  |  |  |  |  |  |  |
| Adjusted\tEBITDA\tchange | $52.0 | $(48.1) | $75.8 | $8.5 | $91.0 | $29.2 | $208.4 |
| Adjusted\tEBITDA\t%\tchange | 4% | (8)% | 14% | 19% | 19% | 43% | 8% |
| Adjusted\tEBITDA\tmargin\tchange | 450bp | 180bp | 210bp |  | 410bp |  | 360bp |

(A)	Adjusted	EBITDA	margin	is	calculated	by	dividing	Adjusted	EBITDA	by	sales.

# INCOME	TAXES

The	tax	impact	of	our	non-GAAP	adjustments	reflects	the	expected	current	and	deferred	income	tax	expense	impact	of	the	transactions	and	is	impacted primarily	by	the	statutory	tax	rate	of	the	various	relevant	jurisdictions	and	the	taxability	of	the	adjustments	in	those	jurisdictions.

|  |  | Effective	Tax	Rate |  |
| :--- | :--- | :--- | :--- |
|  | 2016 | 2015 | 2014 |
| Income\tTax\tProvision—GAAP | $586.5 | $418.3 | $369.4 |
| Income\tfrom\tContinuing\tOperations\tbefore\tTaxes—GAAP | \t$2,132.2 | \t$1,742.7 | \t$1,365.4 |
| Effective\tTax\tRate—GAAP | 27.5% | 24.0% | 27.1% |
| Income\tTax\tProvision—GAAP | $586.5 | $418.3 | $369.4 |
| Business\tseparation\tcosts | 3.9 | — | — |
| Tax\tcosts\tassociated\twith\tbusiness\tseparation | (51.8) | — | — |
| Business\trestructuring\tand\tcost\treduction\tactions | 9.9 | 54.5 | 4.5 |
| Pension\tsettlement\tloss | 2.3 | 7.5 | 1.9 |
| Goodwill\tand\tintangible\tasset\timpairment\tcharge | — | — | 1.3 |
| Gain\ton\tpreviously\theld\tequity\tinterest | — | (6.7) | — |
| Gain\ton\tland\tsales | — | (5.3) | — |
| Loss\ton\textinguishment\tof\tdebt | 2.6 | 2.4 | — |
| Chilean\ttax\trate\tchange | — | — | (20.6) |
| Tax\telection\tbenefit | — | — | 51.6 |
| Income\tTax\tProvision—Non-GAAP\tMeasure | $553.4 | $470.7 | $408.1 |
| Income\tfrom\tContinuing\tOperations\tbefore\tTaxes—GAAP | \t$2,132.2 | \t$1,742.7 | \t$1,365.4 |
| Business\tseparation\tcosts | 52.2 | 7.5 | — |
| Business\trestructuring\tand\tcost\treduction\tactions | 33.9 | 207.7 | 12.7 |
| Pension\tsettlement\tloss | 6.4 | 21.2 | 5.5 |
| Goodwill\tand\tintangible\tasset\timpairment\tcharge | — | — | 310.1 |
| Gain\ton\tpreviously\theld\tequity\tinterest | — | (17.9) | — |
| Gain\ton\tland\tsales | — | (33.6) | — |
| Loss\ton\textinguishment\tof\tdebt | 6.9 | 16.6 | — |
| Income\tfrom\tContinuing\tOperations\tBefore\tTaxes—Non-GAAP\tMeasure | \t$2,231.6 | \t$1,944.2 | \t$1,693.7 |
| Effective\tTax\tRate—Non-GAAP\tMeasure | 24.8% | 24.2% | 24.1% |

# LIQUIDITY	AND	CAPITAL	RESOURCES

We	maintained	a	strong	financial	position	throughout	2016	and	as	of	30	September	2016	our	consolidated	balance	sheet	included	cash	and	cash	items	of $1,501.3.	The	cash	and	cash	items	balance	is	higher	than	our	historical	trend	and	primarily	results	from	transactions	related	to	the	anticipated	spin-off	of Versum	and	positive	operating	cash	flows.	Approximately	$1,000.0	of	debt	was	raised	by	Versum	in	September	which	included	a	$575.0	term	loan	that drove	an	increase	in	cash	and	cash	items.	We	expect	our	cash	balance	and	cash	flows	from	operating	and	financing	activities	to	meet	liquidity	needs	for the	foreseeable	future.

As	of	30	September	2016,	we	had	$545.3	of	foreign	cash	and	cash	items	compared	to	a	total	amount	of	cash	and	cash	items	of	$1,501.3.	If	the	foreign cash	and	cash	items	are	needed	for	operations	in	the	U.S.	or	we	otherwise	elect	to	repatriate	the	funds,	we	may	be	required	to	accrue	and	pay	U.S. taxes	on	a	significant	portion	of	these	amounts.	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	outside	the	U.S.	Current	financing	alternatives	do	not	require	the	repatriation	of foreign	funds.

Our	cash	flows	from	operating,	investing,	and	financing	activities	from	continuing	operations,	as	reflected	in	the	consolidated	statements	of	cash	flows, are	summarized	in	the	following	table:

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Cash\tprovided\tby\t(used\tfor) |  |  |  |
| Operating\tactivities | $2,707.4 | $2,446.4 | $2,190.1 |
| Investing\tactivities | (972.0) | (1,250.5) | (1,316.5) |
| Financing\tactivities | (271.1) | (945.4) | (504.3) |

# Operating	Activities

For	the	year	ended	2016,	cash	provided	by	operating	activities	was	$2,707.4.	Income	from	continuing	operations	of	$1,515.3	included	a	loss	on extinguishment	of	debt	of	$6.9.	Income	from	continuing	operations	is	adjusted	for	reconciling	items	that	include	depreciation	and	amortization,	deferred income	taxes,	share-based	compensation,	noncurrent	capital	lease	receivables,	and	undistributed	earnings	of	unconsolidated	affiliates.	Other adjustments	of	$155.2	were	primarily	driven	by	the	remeasurement	of	intercompany	transactions	as	the	related	hedging	instruments	that	eliminate	the earnings	impact	are	included	in	other	receivables	and	payables	and	accrued	liabilities.	The	working	capital	accounts	were	a	use	of	cash	of	$20.1	that were	primarily	driven	by	trade	receivables	and	other	working	capital	partially	offset	by	payables	and	accrued	liabilities.	The	use	of	cash	from	other	working capital	of	$57.4	was	primarily	driven	by	advances	associated	with	the	purchase	of	helium.	The	increase	in	payables	and	accrued	liabilities	of	$57.0	was primarily	related	to	an	increase	in	customer	advances	which	includes	payment	from	our	joint	venture	in	Jazan,	Saudi	Arabia	and	was	partially	offset	by the	changes	in	the	fair	value	of	foreign	exchange	contracts	that	hedge	intercompany	loans.

For	the	year	ended	2015,	cash	provided	by	operating	activities	was	$2,446.4.	Income	from	continuing	operations	of	$1,284.7	included	the	write-down	of long-lived	assets	associated	with	business	restructuring	of	$47.4,	a	non-cash	gain	on	the	previously	held	equity	interest	of	$17.9,	and	a	loss	on extinguishment	of	debt	of	$16.6.	Other	adjustments	included	pension	and	postretirement	expense	of	$141.4	and	contributions	to	our	pension	plans	of $137.5,	primarily	for	plans	in	the	U.S.	and	U.K.	Management	considers	various	factors	when	making	pension	funding	decisions,	including	tax,	cash	flow, and	regulatory	implications.	The	working	capital	accounts	were	a	source	of	cash	of	$224.7.	The	increase	of	payables	and	accrued	liabilities	of	$156.2 includes	an	increase	in	accrued	incentive	compensation	of	$97.0.

For	the	year	ended	2014,	cash	provided	by	operating	activities	was	$2,190.1.	Income	from	continuing	operations	of	$994.6	included	the	goodwill	and intangible	asset	impairment	charge	of	$310.1.	Other	adjustments	included	$143.2	for	pension	and	other	postretirement	expense,	partially	offset	by	a	use of	cash	of	$78.2	for	pension	contributions.	The	working	capital	accounts	were	a	use	of	cash	of	$250.0.	Inventory	was	a	use	of	cash	of	$23.5	primarily	due to	the	timing	of	helium	purchases.	The	reduction	of	payables	and	accrued	liabilities	of	$237.9	includes	$148.5	for	payments	associated	with	projects accounted	for	as	capital	leases	and	$52.5	of	payments	related	to	the	2013	business	restructuring	and	cost	reduction	plan.

# Investing	Activities

For	the	year	ended	30	September	2016,	cash	used	for	investing	activities	was	$972.0,	driven	by	capital	expenditures	for	plant	and	equipment	of $1,055.8.	Proceeds	from	the	sale	of	assets	and	investments	of	$85.5	was	primarily	driven	by	the	receipt	of	$30.0	for	our	rights	to	a	corporate	aircraft	that was	under	construction,	$15.9	for	the	sale	of	our	20%	equity	investment	in	Daido	Air	Products	Electronics,	Inc.,	and	$14.9	for	the	sale	of	a	wholly	owned subsidiary	located	in	Wuhu,	China.

For	the	year	ended	30	September	2015,	cash	used	for	investing	activities	was	$1,250.5,	primarily	capital	expenditures	for	plant	and	equipment.	On 30	December	2014,	we	acquired	our	partner's	equity	ownership	interest	in	a	liquefied	atmospheric	industrial	gases	production	joint	venture	in	North America	which	increased	our	ownership	from	50%	to	100%.	Refer	to	Note	6,	Business	Combination,	to	the	consolidated	financial	statements	for additional	information.

For	the	year	ended	30	September	2014,	cash	used	for	investing	activities	was	$1,316.5,	primarily	capital	expenditures	for	plant	and	equipment.	Refer	to the	Capital	Expenditures	section	below	for	additional	detail.

# Capital	Expenditures

Capital	expenditures	are	detailed	in	the	following	table:

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Additions\tto\tplant\tand\tequipment | $1,055.8 | $1,265.6 | $1,362.7 |
| Acquisitions,\tless\tcash\tacquired | — | 34.5 | — |
| Investments\tin\tand\tadvances\tto\tunconsolidated\taffiliates | — | 4.3 | (2.0) |
| Capital\tExpenditures\ton\ta\tGAAP\tBasis | $1,055.8 | $1,304.4 | $1,360.7 |
| Capital\tlease\texpenditures(A) | 27.2 | 95.6 | 202.4 |
| Purchase\tof\tnoncontrolling\tinterests\tin\ta\tsubsidiary(A) | — | 278.4 | .5 |
| Capital\tExpenditures\ton\ta\tNon-GAAP\tBasis | $1,083.0 | $1,678.4 | $1,563.6 |
| (A)\nWe\tutilize\ta\tnon-GAAP\tmeasure\tin\tthe\tcomputation\tof\tcapital\texpenditures\tand\tinclude\tspending\tassociated\twith\tfacilities\taccounted\tfor\tas\tcapital\tleases\tand\tpurchases\tof |  |  |  |

(A) We	utilize	a	non-GAAP	measure	in	the	computation	of	capital	expenditures	and	include	spending	associated	with	facilities	accounted	for	as	capital	leases	and	purchases	of noncontrolling	interests.	Certain	contracts	associated	with	facilities	that	are	built	to	provide	product	to	a	specific	customer	are	required	to	be	accounted	for	as	leases,	and	such spending	is	reflected	as	a	use	of	cash	within	cash	provided	by	operating	activities,	if	the	arrangement	qualifies	as	a	capital	lease.	Additionally,	the	purchase	of	subsidiary	shares from	noncontrolling	interests	is	accounted	for	as	a	financing	activity	in	the	statement	of	cash	flows.	The	presentation	of	this	non-GAAP	measure	is	intended	to	enhance	the usefulness	of	information	by	providing	a	measure	that	our	management	uses	internally	to	evaluate	and	manage	our	expenditures.

Capital	expenditures	on	a	GAAP	basis	in	2016	totaled	$1,055.8,	compared	to	$1,265.6	in	2015.	The	decrease	of	$209.8	was	primarily	due	to	the completion	of	major	projects	in	2016	and	2015.	Additions	to	plant	and	equipment	also	included	support	capital	of	a	routine,	ongoing	nature,	including expenditures	for	distribution	equipment	and	facility	improvements.	Spending	in	2016	and	2015	included	plant	and	equipment	constructed	to	provide oxygen	for	coal	gasification	in	China,	hydrogen	to	the	global	market,	oxygen	to	the	steel	industry,	nitrogen	to	the	electronic	semiconductor	industry,	and capacity	expansion	for	the	Materials	Technologies	segment.

Capital	expenditures	on	a	non-GAAP	basis	in	2016	totaled	$1,083.0	compared	to	$1,678.4	in	2015.	The	decrease	of	$595.4	was	primarily	due	to	the	prior year	purchase	of	the	30.5%	equity	interest	in	our	Indura	S.A.	subsidiary	from	the	largest	minority	shareholder	for	$277.9.	Refer	to	Note	21,	Noncontrolling Interests,	to	the	consolidated	financial	statements	for	additional	details.	Additionally,	capital	lease	expenditures	of	$27.2,	decreased	by	$68.4,	reflecting lower	project	spending.

On	19	April	2015,	a	joint	venture	between	Air	Products	and	ACWA	Holding	entered	into	a	20-year	oxygen	and	nitrogen	supply	agreement	to	supply	Saudi Aramco's	oil	refinery	and	power	plant	being	built	in	Jazan,	Saudi	Arabia.	Air	Products	owns	25%	of	the	joint	venture.	During	2016	and	2015,	we	recorded noncash	transactions	which	resulted	in	an	increase	of	$26.9	and	$67.5,	respectively,	to	our	investment	in	net	assets	of	and	advances	to	equity	affiliates for	our	obligation	to	invest	in	the	joint	venture.	These	noncash	transactions	have	been	excluded	from	the	consolidated	statements	of	cash	flows.	In	total, we	expect	to	invest	approximately	$100	in	this	joint	venture.	Air	Products	has	also	entered	into	a	sale	of	equipment	contract	with	the	joint	venture	to engineer,	procure,	and	construct	the	industrial	gas	facilities	that	will	supply	the	gases	to	Saudi	Aramco.

Sales	backlog	represents	our	estimate	of	revenue	to	be	recognized	in	the	future	on	our	share	of	Air	Products'	sale	of	equipment	orders	and	related process	technology	that	are	under	firm	contracts.	The	sales	backlog	for	the	Company	at	30	September	2016	was	$1,057,	compared	to	$1,535	at 30	September	2015.	The	decrease	was	driven	by	progress	on	the	Jazan	project	and	completion	of	LNG	orders.

Excluding	acquisitions,	capital	expenditures	for	new	plant	and	equipment	in	2017	are	expected	to	be	approximately	$1,200.	A	majority	of	the	total	capital expenditures	is	expected	to	be	for	new	plants	that	are	currently	under	construction	or	expected	to	start	construction.	It	is	anticipated	that	capital expenditures	will	be	funded	principally	with	cash	from	continuing	operations.	In	addition,	we	intend	to	continue	to	evaluate	acquisition	opportunities	and investments	in	equity	affiliates.

# Financing	Activities

For	the	year	ended	2016,	cash	used	for	financing	activities	was	$271.1.	Our	borrowings	(short-	and	long-term	proceeds,	net	of	repayments)	were	a	net source	of	cash	(issuance)	of	$331.2	and	included	debt	proceeds	from	the	issuance	of	a	.375%	Eurobond	of	€350	million	($386.9)	on	1	June	2016	and	the issuance	of	a	$575.0	term	loan	by	Versum	in	anticipation	of	the	spin-off,	partially	offset	by	the	repayment	of	long-term	debt,	including	the	2.0%	Senior Note	of	$350.0	million	on	2	August	2016,	and	a	$144.2	use	of	cash	for	net	commercial	paper	and	other	short-term	debt	borrowings.	Versum	distributed in-kind	notes	with	an	aggregate	principal	amount	of	$425.0	to	Air	Products.	However,	since	Air	Products	exchanged	these	notes	with	certain	financial institutions	for	$418.3	of	Air	Products'	outstanding	commercial	paper,	this	non-cash	debt	for	debt	exchange	was	excluded	from	the	consolidated statement	of	cash	flows.	Refer	to	Note	15,	Debt,	to	the	consolidated	financial	statements	for	additional	details.	We	also	used	cash	to	pay	dividends	of $721.2	and	received	proceeds	from	stock	option	exercises	of	$141.3.

For	the	year	ended	2015,	cash	used	for	financing	activities	was	$945.4	primarily	attributable	to	cash	used	to	pay	dividends	of	$677.5	and	payments	for subsidiary	shares	from	noncontrolling	interest	of	$278.4,	which	was	partially	offset	by	proceeds	from	stock	option	exercises	of	$121.3.	Our	borrowings were	a	net	use	of	cash	of	$84.4	and	included	$284.0	of	net	commercial	paper	and	other	short-term	debt	issuances,	debt	proceeds	from	the	issuance	of	a 1.0%	Eurobond	of	€300	million	($335.3),	repayment	of	a	3.875%	Eurobond	of	 €300	million	($335.9),	repayment	of	Industrial	Revenue	Bonds	totaling $147.2,	and	repayment	of	3,000,000	Unidades	de	Fomento	("UF")	Series	E	6.30%	Bonds	totaling	$146.6.	Refer	to	Note	15,	Debt,	to	the	consolidated financial	statements	for	additional	details.

For	the	year	ended	2014,	cash	used	for	financing	activities	was	$504.3	primarily	attributable	to	cash	used	to	pay	dividends	of	$627.7	which	was	partially offset	by	proceeds	from	stock	options	exercised	of	$141.6.	Our	borrowings	were	a	net	use	of	cash	(issuance)	of	$3.5	and	included	$148.7	of	net commercial	paper	and	other	short-term	debt	issuances,	debt	proceeds	from	the	issuance	of	a	$400	senior	fixed-rate	3.35%	note	on	31	July	2014	and $61.0	of	other,	primarily	international,	debt	issuances	and	debt	repayments	of	a	3.75%	Eurobond	of	€300	million	($401.0)	in	November	2013	and	$207.6 of	other,	primarily	international,	debt.

For	the	year	ended	2016,	discontinued	operations	primarily	includes	the	Energy-from-Waste	business	which	the	Company	decided	to	exit	in	the	second quarter	of	2016.	Cash	used	by	discontinued	operations	was	$176.9	primarily	driven	by	capital	expenditures	for	plant	and	equipment	of	$97.0	and	the	loss from	discontinued	operations	of	$37.6.	Refer	to	Note	4,	Discontinued	Operations,	to	the	consolidated	financial	statements	for	additional	information.

For	the	year	ended	2015,	cash	used	by	discontinued	operations	was	$357.8.	The	use	of	cash	was	primarily	driven	by	expenditures	for	plant	and equipment	of	$349.2	related	to	the	Energy-from-Waste	facilities.	Refer	to	Note	4,	Discontinued	Operations,	to	the	consolidated	financial	statements	for additional	information.

For	the	year	ended	2014,	cash	used	by	discontinued	operations	was	$471.8.	The	use	of	cash	was	driven	by	capital	expenditures	of	$321.5	for	our Energy-from-Waste	facilities	and	a	payment	made	to	the	Linde	Group	for	contingent	proceeds	we	were	obligated	to	return	from	the	sale	of	our	Homecare business	of	$157.1.	Refer	to	Note	4,	Discontinued	Operations,	to	the	consolidated	financial	statements	for	additional	information.

# Financing	and	Capital	Structure

During	fiscal	2013,	we	entered	into	a	five-year	$2,500.0	revolving	credit	agreement	maturing	30	April	2018	with	a	syndicate	of	banks	(the	"2013	Credit Agreement"),	under	which	senior	unsecured	debt	is	available	to	both	the	Company	and	certain	of	its	subsidiaries.	There	have	been	subsequent amendments	to	the	2013	Credit	Agreement,	and	as	of	30	September	2016,	the	maximum	borrowing	capacity	was	$2,690.0.	The	2013	Credit	Agreement provides	a	source	of	liquidity	for	the	Company	and	supports	its	commercial	paper	program.	This	credit	facility	includes	a	financial	covenant	for	a maximum	ratio	of	total	debt	to	total	capitalization	no	greater	than	70%.	No	borrowings	were	outstanding	under	the	2013	Credit	Agreement	as	of 30	September	2016.

During	September	2016,	in	anticipation	of	the	Versum	spin-off,	Versum	entered	into	certain	financing	transactions	to	allow	for	a	cash	distribution	of $550.0	and	a	distribution	in-kind	of	notes	issued	by	Versum	with	an	aggregate	principal	amount	of	$425.0	to	Air	Products.	Air	Products	then	exchanged these	notes	with	certain	financial	institutions	for	$418.3	of	Air	Products'	outstanding	commercial	paper.	Since	Versum	debt	was	issued	in	September	but Versum	did	not	become	a	separate	entity	until	1	October	2016,	Air	Products'	consolidated	balance	sheet	includes	the	Versum	debt.	The	$575.0	term	loan and	the	$425.0	of	notes	were	included	in	the	Versum	spin-off	transaction	and	do	not	represent	obligation	of	the	Company	in	the	future.	In	addition, Versum	entered	into	a	senior	secured	first	lien	revolving	credit	facility	(Versum	Revolving	Facility)	in	an	aggregate	principal	amount	of	$200.0	that matures	on	30	September	2021.	Lenders	under	the	Revolving	Facility	have	a	maximum	first	lien	net	leverage	ratio	covenant	(total	debt	net	of	cash	on hand	to	total	adjusted	EBITDA)	of	3.25:1.00	and	certain	other	customary	covenants.	No	borrowings	were	outstanding	on	the	Versum	Revolving	Facility as	of	30	September	2016.	Refer	to	Note	3,	Materials	Technologies	Separation,	to	the	consolidated	financial	statements	for	additional	details.

Commitments	totaling	$51.3	are	maintained	by	our	foreign	subsidiaries,	all	of	which	was	borrowed	and	outstanding	at	30	September	2016.

As	of	30	September	2016,	we	are	in	compliance	with	all	of	the	financial	and	other	covenants	under	our	debt	agreements.

On	15	September	2011,	the	Board	of	Directors	authorized	the	repurchase	of	up	to	$1,000	of	our	outstanding	common	stock.	We	did	not	purchase	any	of our	outstanding	shares	during	fiscal	years	2016,	2015	or	2014.	At	30	September	2016,	$485.3	in	share	repurchase	authorization	remains.

Cash	flows	from	operations	and	financing	activities	are	expected	to	meet	liquidity	needs	for	the	foreseeable	future	and	our	working	capital	balance	was $1,034.0	at	30	September	2016.	We	expect	that	we	will	continue	to	be	in	compliance	with	all	of	our	financial	covenants.

We	expect	to	utilize	the	proceeds	from	the	distribution	from	Versum	to	pay	down	debt,	largely	commercial	paper,	in	the	first	quarter	of	fiscal	2017.

# Dividends

Dividends	are	declared	by	the	Board	of	Directors	and	are	usually	paid	during	the	sixth	week	after	the	close	of	the	fiscal	quarter.	During	2016,	the	Board	of Directors	increased	the	quarterly	dividend	from	$.81	per	share	to	$.86	per	share.

# CONTRACTUAL	OBLIGATIONS

We	are	obligated	to	make	future	payments	under	various	contracts,	such	as	debt	agreements,	lease	agreements,	unconditional	purchase	obligations,	and other	long-term	obligations.	The	following	table	summarizes	our	obligations	as	of	30	September	2016:

|  | Total | 2017 | 2018 | 2019 | 2020 | 2021 | Thereafter |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Long-term\tdebt\tobligations |  |  |  |  |  |  |  |
| Debt\tmaturities | $5,289 | $371 | $419 | \t$407 | \t$353 | \t$417 | $3,322 |
| Contractual\tinterest | 880 | 131 | 119 | 117 | 99 | 91 | 323 |
| Capital\tleases | 31 | 2 | 1 | 2 | 2 | 3 | 21 |
| Operating\tleases | 355 | 71 | 62 | 50 | 38 | 32 | 102 |
| Pension\tobligations | 1,211 | 67 | 50 | 51 | 52 | 56 | 935 |
| Unconditional\tpurchase\tobligations | 5,331 | 942 | 525 | 307 | 298 | 276 | 2,983 |
| Obligation\tfor\tfuture\tcontribution\tto\tan\tequity\taffiliate | 100 | — | — | — | 100 | — | — |
| Total\tContractual\tObligations | \t$13,197 | \t$1,584 | \t$1,176 | \t$934 | \t$942 | \t$875 | $7,686 |

# Long-Term	Debt	Obligations

The	long-term	debt	obligations	include	the	maturity	payments	of	long-term	debt,	including	current	portion,	and	the	related	contractual	interest	obligations. Refer	to	Note	15,	Debt,	to	the	consolidated	financial	statements	for	additional	information	on	long-term	debt.

Contractual	interest	is	the	interest	we	are	contracted	to	pay	on	the	long-term	debt	obligations	without	taking	into	account	the	interest	impact	of	interest rate	swaps	related	to	any	of	this	debt,	which	at	current	interest	rates	would	slightly	decrease	contractual	interest.	We	had	$1,396	of	long-term	debt	subject to	variable	interest	rates	at	30	September	2016,	excluding	fixed-rate	debt	that	has	been	swapped	to	variable-rate	debt.	The	rate	assumed	for	the	variable interest	component	of	the	contractual	interest	obligation	was	the	rate	in	effect	at	30	September	2016.	Variable	interest	rates	are	primarily	determined	by interbank	offer	rates	and	by	U.S.	short-term	tax-exempt	interest	rates.

Consistent	with	the	debt	maturities	table	within	Note	15,	Debt,	the	long-term	debt	obligations	reflect	financing	entered	into	in	anticipation	of	the	spin-off	of EMD	as	Versum	Materials,	Inc.	The	spin-off	was	completed	on	1	October	2016	and	the	related	debt	of	$997.2	was	maintained	by	Versum.

# Leases

Refer	to	Note	12,	Leases,	to	the	consolidated	financial	statements	for	additional	information	on	capital	and	operating	leases.

# Pension	Obligations

The	amounts	in	the	table	above	represent	the	current	estimated	cash	payments	to	be	made	by	us	that	in	total	equal	the	recognized	pension	liabilities. Refer	to	Note	16,	Retirement	Benefits,	to	the	consolidated	financial	statements.	These	payments	are	based	upon	the	current	valuation	assumptions	and regulatory	environment.

The	total	accrued	liability	for	pension	benefits	is	impacted	by	interest	rates,	plan	demographics,	actual	return	on	plan	assets,	continuation	or	modification of	benefits,	and	other	factors.	Such	factors	can	significantly	impact	the	amount	of	the	liability	and	related	contributions.

# Unconditional	Purchase	Obligations

Approximately	$4,000	of	our	unconditional	purchase	obligations	relate	to	helium	purchases,	which	include	crude	feedstock	supply	to	multiple	helium refining	plants	in	North	America	as	well	as	refined	helium	purchases	from	sources	around	the	world.	As	a	rare	byproduct	of	natural	gas	production	in	the energy	sector,	these	helium	sourcing	agreements	are	medium-	to	long-term	and	contain	take-or-pay	provisions.	The	refined	helium	is	distributed	globally and	sold	as	a	merchant	gas,	primarily	under	medium-term	requirements	contracts.	While	contract	terms	in	the	energy	sector	are	longer	than	those	in merchant,	helium	is	a	rare	gas	used	in	applications	with	few	or	no	substitutions	because	of	its	unique	physical	and	chemical	properties.

Approximately	$330	of	our	long-term	unconditional	purchase	obligations	relate	to	feedstock	supply	for	numerous	HyCO	(hydrogen,	carbon	monoxide,	and syngas)	facilities.	The	price	of	feedstock	supply	is	principally	related	to

the	price	of	natural	gas.	However,	long-term	take-or-pay	sales	contracts	to	HyCO	customers	are	generally	matched	to	the	term	of	the	feedstock	supply obligations	and	provide	recovery	of	price	increases	in	the	feedstock	supply.	Due	to	the	matching	of	most	long-term	feedstock	supply	obligations	to customer	sales	contracts,	we	do	not	believe	these	purchase	obligations	would	have	a	material	effect	on	our	financial	condition	or	results	of	operations. Refer	to	Note	17,	Commitments	and	Contingencies,	to	the	consolidated	financial	statements	for	additional	information	on	our	unconditional	purchase obligations.

The	unconditional	purchase	obligations	also	include	other	product	supply	and	purchase	commitments	and	electric	power	and	natural	gas	supply purchase	obligations,	which	are	primarily	pass-through	contracts	with	our	customers.

Purchase	commitments	to	spend	approximately	$350	for	additional	plant	and	equipment	are	included	in	the	unconditional	purchase	obligations	in	2017. In	addition,	we	have	purchase	commitments	totaling	approximately	$500	in	2017	and	2018	relating	to	our	long-term	sale	of	equipment	project	for	Saudi Aramco's	Jazan	oil	refinery.

We	also	purchase	materials,	energy,	capital	equipment,	supplies,	and	services	as	part	of	the	ordinary	course	of	business	under	arrangements	that	are not	unconditional	purchase	obligations.	The	majority	of	such	purchases	are	for	raw	materials	and	energy,	which	are	obtained	under	requirements-type contracts	at	market	prices.

# Obligation	for	Future	Contribution	to	an	Equity	Affiliate

On	19	April	2015,	a	joint	venture	between	Air	Products	and	ACWA	Holding	entered	into	a	20-year	oxygen	and	nitrogen	supply	agreement	to	supply	Saudi Aramco's	oil	refinery	and	power	plant	being	built	in	Jazan,	Saudi	Arabia.	Air	Products	owns	25%	of	the	joint	venture	and	guarantees	the	repayment	of	its share	of	an	equity	bridge	loan.	In	total,	we	expect	to	invest	approximately	$100	in	this	joint	venture.	As	of	30	September	2016,	we	recorded	a	noncurrent liability	of	$94.4	for	our	obligation	to	make	future	equity	contributions	based	on	our	proportionate	share	of	the	advances	received	by	the	joint	venture under	the	loan.

# Income	Tax	Liabilities

Noncurrent	deferred	income	tax	liabilities	as	of	30	September	2016	were	$767.1.	Tax	liabilities	related	to	unrecognized	tax	benefits	as	of	30	September 2016	were	$106.9.	These	tax	liabilities	were	excluded	from	the	Contractual	Obligations	table,	as	it	is	impractical	to	determine	a	cash	impact	by	year given	that	payments	will	vary	according	to	changes	in	tax	laws,	tax	rates,	and	our	operating	results.	In	addition,	there	are	uncertainties	in	timing	of	the effective	settlement	of	our	uncertain	tax	positions	with	respective	taxing	authorities.	Refer	to	Note	23,	Income	Taxes,	to	the	consolidated	financial statements	for	additional	information.

# PENSION	BENEFITS

The	Company	and	certain	of	its	subsidiaries	sponsor	defined	benefit	pension	plans	and	defined	contribution	plans	that	cover	a	substantial	portion	of	its 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	and	were	replaced	with	defined	contribution	plans.	Over	the	long	run,	the	shift	to	defined	contribution	plans	is	expected to	reduce	volatility	of	both	plan	expense	and	contributions.

The	fair	market	value	of	plan	assets	for	our	defined	benefit	pension	plans	as	of	the	30	September	2016	measurement	date	increased	to	$4,116.4	from $3,916.4	at	the	end	of	fiscal	year	2015.	The	projected	benefit	obligation	for	these	plans	was	$5,327.3	and	$4,787.8	at	the	end	of	the	fiscal	years	2016	and 2015,	respectively.	The	net	unfunded	liability	increased	by	approximately	$340	from	$871	to	$1,211	due	primarily	to	lower	discount	rates.	Refer	to	Note 16,	Retirement	Benefits,	to	the	consolidated	financial	statements	for	comprehensive	and	detailed	disclosures	on	our	postretirement	benefits.

# Pension	Expense

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Pension\texpense | \t\t\t$68.1 | \t$135.6 | \t$135.9 |
| Special\tterminations,\tsettlements,\tand\tcurtailments\t(included\tabove) | 7.3 | 35.2 | 5.8 |
| Weighted\taverage\tdiscount\trate(A) | 4.1% | 4.0% | 4.6% |
| Weighted\taverage\texpected\trate\tof\treturn\ton\tplan\tassets | 7.5% | 7.4% | 7.7% |
| Weighted\taverage\texpected\trate\tof\tcompensation\tincrease | 3.5% | 3.5% | 3.9% |
| (A)\nEffective\tin\t2016,\tthe\tCompany\tbegan\tto\tmeasure\tthe\tservice\tcost\tand\tinterest\tcost\tcomponents\tof\tpension\texpense\tby\tapplying\tspot\trates\talong\tthe\tyield\tcurve |  |  |  |

(A) Effective	in	2016,	the	Company	began	to	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,	as	we	believe	this	provides	a	better	measurement	of	these	costs.	The	Company	has	accounted	for	this	as	a	change	in accounting	estimate	and,	accordingly	has	accounted	for	it	on	a	prospective	basis.	This	change	does	not	affect	the	measurement	of	the	total	benefit	obligation.

Pension	expense,	excluding	special	items,	decreased	from	the	prior	year	due	to	the	adoption	of	the	spot	rate	approach	which	reduced	service	cost	and interest	cost,	the	impact	from	expected	return	on	assets	and	demographic	gains,	partially	offset	by	the	impact	of	the	adoption	of	new	mortality	tables	for our	major	plans.	Special	items	of	$7.3	included	pension	settlement	losses	of	$6.4,	special	termination	benefits	of	$2.0,	and	curtailment	gains	of $1.1.	These	resulted	primarily	from	our	recent	business	restructuring	and	cost	reduction	actions.

The	decrease	in	pension	expense,	excluding	special	items,	was	due	to	the	impact	from	expected	return	on	assets,	a	40	bp	reduction	in	the	weighted average	compensation	increase	assumption,	and	lower	service	cost	and	interest	cost.	The	decrease	was	partially	offset	by	the	impact	of	higher amortization	of	actuarial	losses,	which	resulted	primarily	from	a	60	bp	decrease	in	weighted	average	discount	rate.	Special	items	of	$35.2	included pension	settlement	losses	of	$21.2,	special	termination	benefits	of	$8.7,	and	curtailment	losses	of	$5.3.	These	resulted	primarily	from	our	recent	business restructuring	and	cost	reduction	actions.

In	2017,	pension	expense,	excluding	special	items,	is	estimated	to	be	approximately	$70	to	$75,	an	increase	of	$10	to	$15	from	2016,	resulting	primarily from	a	decrease	in	discount	rates,	offset	by	favorable	asset	experience,	effects	of	the	Versum	spin-off	and	the	adoption	of	new	mortality	tables.	Pension settlement	losses	of	$10	to	$15	are	expected,	dependent	on	the	timing	of	retirements.	In	2017,	we	expect	pension	expense	to	include	approximately	$164 for	amortization	of	actuarial	losses	compared	to	$121	in	2016.	Net	actuarial	losses	of	$484	were	recognized	in	accumulated	other	comprehensive	income in	2016,	primarily	attributable	to	lower	discount	rates	and	improved	mortality	projections.	Actuarial	gains/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 different	from	expected	returns	would	impact	the	actuarial	gains/losses	and	resulting	amortization	in	years	beyond	2017.

During	the	first	quarter	of	2017,	the	Company	expects	to	record	a	curtailment	loss	estimated	to	be	$5	to	$10	related	to	employees	transferring	to	Versum. The	loss	will	be	reflected	in	the	results	from	discontinued	operations	on	the	consolidated	income	statements.	We	continue	to	evaluate	opportunities	to manage	the	liabilities	associated	with	our	pension	plans.

# Pension	Funding

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	2016	and	2015,	our	cash	contributions	to	funded	plans	and	benefit	payments	for	unfunded	plans	were	$79.3	and	$137.5, respectively.

For	2017,	cash	contributions	to	defined	benefit	plans	are	estimated	to	be	$65	to	$85.	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	and	future	cost	reduction	actions.	Actual	future	contributions	will	depend	on	future	funding	legislation, discount	rates,	investment	performance,	plan	design,	and	various	other	factors.	Refer	to	the	Contractual	Obligations	discussion	on	page	45	for	a projection	of	future	contributions.

# ENVIRONMENTAL	MATTERS

We	are	subject	to	various	environmental	laws	and	regulations	in	the	countries	in	which	we	have	operations.	Compliance	with	these	laws	and	regulations 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,	Major	Accounting	Policies,	to	the	consolidated	financial	statements,	and	environmental	loss contingencies	are	discussed	in	Note	17,	Commitments	and	Contingencies,	to	the	consolidated	financial	statements.

The	amounts	charged	to	income	from	continuing	operations	related	to	environmental	matters	totaled	$27.0,	$28.3,	and	$35.1	in	2016,	2015,	and	2014, respectively.	These	amounts	represent	an	estimate	of	expenses	for	compliance	with	environmental	laws	and	activities	undertaken	to	meet	internal Company	standards.	Future	costs	are	not	expected	to	be	materially	different	from	these	amounts.	Refer	to	Note	17,	Commitments	and	Contingencies,	to the	consolidated	financial	statements	for	additional	information.

Although	precise	amounts	are	difficult	to	determine,	we	estimate	that	we	spent	$7	and	$4	in	2016	and	2015,	respectively,	on	capital	projects	to	control pollution.	Capital	expenditures	to	control	pollution	in	future	years	are	estimated	to	be	approximately	$3	in	both	2017	and	2018.

We	accrue	environmental	investigatory	and	remediation	costs	for	identified	sites	when	it	is	probable	that	a	liability	has	been	incurred	and	the	amount	of loss	can	be	reasonably	estimated.	The	potential	exposure	for	such	costs	is	estimated	to	range	from	$81	to	a	reasonably	possible	upper	exposure	of	$95 as	of	30	September	2016.	The	consolidated	balance	sheets	at	30	September	2016	and	2015	included	an	accrual	of	$81.4	and	$80.6,	respectively.	The accrual	for	the	environmental	obligations	includes	amounts	for	the	Pace,	Florida;	Piedmont,	South	Carolina;	and	Pasadena,	Texas,	locations	which	were a	part	of	previously	divested	chemicals	businesses.	Refer	to	Note	17,	Commitments	and	Contingencies,	to	the	consolidated	financial	statements	for further	details	on	these	facilities.

Actual	costs	to	be	incurred	at	identified	sites	in	future	periods	may	vary	from	the	estimates,	given	inherent	uncertainties	in	evaluating	environmental exposures.	Subject	to	the	imprecision	in	estimating	future	environmental	costs,	we	do	not	expect	that	any	sum	we	may	have	to	pay	in	connection	with environmental	matters	in	excess	of	the	amounts	recorded	or	disclosed	above	would	have	a	material	adverse	impact	on	our	financial	position	or	results	of operations	in	any	one	year.

Some	of	our	operations	are	within	jurisdictions	that	have	or	are	developing	regulations	governing	emissions	of	greenhouse	gases	(GHG).	These	include existing	and	expanding	coverage	under	the	European	Union	Emissions	Trading	Scheme,	California's	cap	and	trade	scheme,	South	Korea's	Emission Trading	Scheme,	Alberta's	Specified	Gases	Emitter	Regulation	and,	beginning	in	2017,	the	Ontario	cap	and	trade	scheme	and	China	National	Emission Trading	Scheme.	Where	these	regulations	impose	compliance	costs	on	our	hydrogen	production	facilities	(California,	Alberta,	and	Ontario),	we	have	been able	to	mitigate	the	majority	of	such	costs	through	our	contractual	terms.

Increased	public	awareness	and	concern	may	result	in	more	international,	U.S.	federal,	and/or	regional	requirements	to	reduce	or	mitigate	the	effects	of GHG.	Although	uncertain,	these	developments	could	increase	our	costs	related	to	consumption	of	electric	power,	hydrogen	production,	and	fluorinated gases	production.	We	believe	we	will	be	able	to	mitigate	some	of	the	potential	costs	through	our	contractual	terms,	but	the	lack	of	definitive	legislation	or regulatory	requirements	in	some	of	the	jurisdictions	where	we	operate	prevents	accurate	prediction	of	the	long-term	impact	on	us.	Any	legislation	that limits	or	taxes	GHG	emissions	from	our	facilities	could	impact	our	growth	by	increasing	our	operating	costs	or	reducing	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	are	also	developing	a	portfolio	of	technologies	that	capture	carbon	dioxide	from	power	and chemical	plants	before	it	reaches	the	atmosphere,	enable	cleaner	transportation	fuels,	and	facilitate	alternate	fuel	source	development.	In

addition,	the	potential	demand	for	clean	coal	and	our	carbon	capture	solutions	could	increase	demand	for	oxygen,	one	of	our	main	products,	and	our proprietary	technology	for	delivering	low-cost	oxygen.

# OFF-BALANCE	SHEET	ARRANGEMENTS

We	have	entered	into	certain	guarantee	agreements	as	discussed	in	Note	17,	Commitments	and	Contingencies,	to	the	consolidated	financial	statements. We	are	not	a	primary	beneficiary	in	any	material	variable	interest	entity.	Our	off-balance	sheet	arrangements	are	not	reasonably	likely	to	have	a	material impact	on	financial	condition,	changes	in	financial	condition,	results	of	operations,	or	liquidity.

# RELATED	PARTY	TRANSACTIONS

Our	principal	related	parties	are	equity	affiliates	operating	in	the	industrial	gas	business.	In	2015,	we	entered	into	a	long-term	sale	of	equipment	contract to	engineer,	procure,	and	construct	industrial	gas	facilities	with	a	25%	owned	joint	venture	for	Saudi	Aramco's	Jazan	oil	refinery	and	power	plant	in	Saudi Arabia.	The	agreement	included	terms	that	are	consistent	with	those	that	we	believe	would	have	been	negotiated	at	an	arm's	length	with	an	independent party.	Sales	related	to	this	contract	are	included	in	the	results	of	our	Industrial	Gases	–	Global	segment	and	were	approximately	$300	during	fiscal	year 2016	and	were	not	material	during	fiscal	year	2015.

# INFLATION

We	operate	in	many	countries	that	experience	volatility	in	inflation	and	foreign	exchange	rates.	The	ability	to	pass	on	inflationary	cost	increases	is	an uncertainty	due	to	general	economic	conditions	and	competitive	situations.	It	is	estimated	that	the	cost	of	replacing	our	plant	and	equipment	today	is greater	than	its	historical	cost.	Accordingly,	depreciation	expense	would	be	greater	if	the	expense	were	stated	on	a	current	cost	basis.

# CRITICAL	ACCOUNTING	POLICIES	AND	ESTIMATES

Note	1,	Major	Accounting	Policies,	to	the	consolidated	financial	statements	describes	our	major	accounting	policies.	Judgments	and	estimates	of uncertainties	are	required	in	applying	our	accounting	policies	in	many	areas.	However,	application	of	the	critical	accounting	policies	discussed	below requires	management's	significant	judgments,	often	as	the	result	of	the	need	to	make	estimates	of	matters	that	are	inherently	uncertain.	If	actual	results were	to	differ	materially	from	the	estimates	made,	the	reported	results	could	be	materially	affected.	Our	management	has	reviewed	these	critical accounting	policies	and	estimates	and	related	disclosures	with	our	audit	committee.

# Depreciable	Lives	of	Plant	and	Equipment

Net	plant	and	equipment	at	30	September	2016	totaled	$8,852.7,	and	depreciation	expense	totaled	$893.0	during	2016.	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	in	light	of	changed	business	circumstances.	For example,	changes	in	technology,	changes	in	the	estimated	future	demand	for	products,	or	excessive	wear	and	tear	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.

The	regional	Industrial	Gases	segments	have	numerous	long-term	customer	supply	contracts	for	which	we	construct	an	on-site	plant	adjacent	to	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	contracts	are	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	remaining	net	book	value	of	the	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	Gases	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.	The	depreciable	lives	of	production	facilities	within	the	Materials	Technologies	segment,	where	there	is	not	an	associated	long-term supply	agreement,	range	from	10	to	15	years.	These	depreciable	lives	have	been	determined	based	on	historical	experience	combined	with	judgment	on future	assumptions	such	as	technological	advances,	potential	obsolescence,	competitors'	actions,	etc.	Management	monitors	its	assumptions	and	may potentially	need	to	adjust	depreciable	life	as	circumstances	change.

A	change	in	the	weighted	average	remaining	depreciable	life	by	one	year	for	assets	associated	with	our	regional	Industrial	Gases	segments	and Materials	Technologies	segment	would	impact	annual	depreciation	expense	as	summarized	below:

|  | Decrease	Life | Increase	Life |
| :--- | :--- | :--- |
|  | By\t1\tYear | By\t1\tYear |
| Industrial\tGases\t–\tRegional | $36 | $(31) |
| Materials\tTechnologies | $4 | $(3) |

# Impairment	of	Assets

# Plant	and	Equipment

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	would	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	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	that	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. Assets	that	meet	the	held	for	sale	criteria	are	reported	at	the	lower	of	carrying	amount	or	fair	value	less	cost	to	sell.

The	assumptions	underlying	the	undiscounted	future	cash	flow	projections	require	significant	management	judgment.	Factors	that	management	must estimate	include	industry	and	market	conditions,	sales	volume	and	prices,	costs	to	produce,	inflation,	etc.	The	assumptions	underlying	the	cash	flow projections	represent	management's	best	estimates	at	the	time	of	the	impairment	review.	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.

On	29	March	2016,	the	Board	of	Directors	approved	the	Company's	exit	of	its	Energy-from-Waste	business.	Accordingly,	we	assessed	the	recoverability of	capital	costs	for	the	two	projects	associated	with	this	business	and	recorded	an	impairment	charge	of	$913.5	to	reduce	the	carrying	values	of	plant assets	to	their	estimated	net	realizable	value	of	$20.	We	estimated	the	net	realizable	value	of	the	projects	assuming	an	orderly	liquidation	of	assets capable	of	being	marketed	on	a	secondary	equipment	market	based	on	market	quotes	and	our	experience	with	selling	similar	equipment.	An	asset's orderly	liquidation	value	is	the	amount	that	could	be	realized	from	a	liquidation	sale,	given	a	reasonable	period	of	time	to	find	a	buyer,	selling	the	asset	in the	existing	condition	where	it	is	located,	and	assuming	the	highest	and	best	use	of	the	asset	by	market	participants.	The	valuation	includes	inputs	that are	unobservable	and	therefore	considered	Level	3	inputs	in	the	fair	value	hierarchy.	The	loss	was	measured	as	the	difference	between	the	orderly liquidation	value	of	the	assets	and	the	net	book	value	of	the	assets.	Refer	to	Note	4,	Discontinued	Operations,	for	additional	information.	There	have been	no	significant	changes	in	the	estimated	net	realizable	value	as	of	30	September	2016.

# 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	over	the	fair	value	of	identifiable	net	assets	of	an	acquired	entity. Goodwill	was	$1,150.2	as	of	30	September	2016.	Disclosures	related	to	goodwill	are	included	in	Note	10,	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	the	need for	more	frequent	testing.	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.	As	of	30	September	2016,	we had	six	business	segments	and	thirteen	reporting	units.	Reporting	units	are	primarily	based	on	products	and	subregions	within	each	business	segment. The	majority	of	our	goodwill	is	assigned	to	reporting	units	within	the	three	regional	Industrial	Gases	segments	and	the	Materials	Technologies	segment.

As	part	of	the	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.	If	we	choose	not	to	complete	a	qualitative	assessment	for	a	given	reporting	unit,	or	if	the	initial assessment	indicates	that	it	is	more	likely	than	not	that	the	carrying	value	of	a	reporting	unit	exceeds	its	estimated	fair	value,	a	two-step	quantitative	test is	required.	We	chose	to	bypass	the	qualitative	assessment	and	conduct	quantitative	testing,	as	further	described	below.

The	first	step	of	the	quantitative	test	requires	that	we	compare	the	fair	value	of	our	reporting	units	to	their	carrying	value,	including	assigned	goodwill.	To determine	the	fair	value	of	a	reporting	unit,	we	initially	use	an	income	approach	valuation	model,	representing	the	present	value	of	estimated	future	cash flows.	Our	valuation	model	uses	a	discrete	growth	period	and	an	estimated	exit	trading	multiple.	The	income	approach	is	an	appropriate	valuation method	due	to	our	capital-intensive	nature,	the	long-term	contractual	nature	of	our	business,	and	the	relatively	consistent	cash	flows	generated	by	our reporting	units.	The	principal	assumptions	utilized	in	our	income	approach	valuation	model	include	revenue	growth	rates,	operating	profit	margins, discount	rate,	and	exit	multiple.	Projected	revenue	growth	rates	and	operating	profit	assumptions	are	consistent	with	those	utilized	in	our	operating	plan and	long-term	financial	planning	process.	The	discount	rate	assumption	is	calculated	based	on	an	estimated	market-participant	risk-adjusted	weighted- average	cost	of	capital,	which	includes	factors	such	as	the	risk-free	rate	of	return,	cost	of	debt,	and	expected	equity	premiums.	The	exit	multiple	is determined	from	comparable	industry	transactions	and	where	appropriate,	reflects	expected	long-term	growth	rates.	If	our	initial	review	under	the	income approach	indicates	there	may	be	impairment,	we	incorporate	results	under	the	market	approach	to	further	evaluate	the	existence	of	impairment.	When the	market	approach	is	utilized,	fair	value	is	estimated	based	on	market	multiples	of	revenue	and	earnings	derived	from	comparable	publicly-traded industrial	gases	companies	engaged	in	the	same	or	similar	lines	of	business	as	the	reporting	unit,	adjusted	to	reflect	differences	in	size	and	growth prospects.	When	both	the	income	and	market	approach	are	utilized,	we	review	relevant	facts	and	circumstances	and	make	a	qualitative	assessment	to determine	the	proper	weighting.	Management	judgment	is	required	in	the	determination	of	each	assumption	utilized	in	the	valuation	model,	and	actual results	could	differ	from	the	estimates.

If	the	estimated	fair	value	of	the	reporting	unit	is	less	than	the	carrying	value,	we	perform	the	second	step	of	the	impairment	test	to	measure	the	amount of	impairment	loss,	if	any.	In	the	second	step,	the	reporting	unit's	fair	value	is	allocated	to	all	of	the	assets	and	liabilities	of	the	reporting	unit,	including any	unrecognized	intangible	assets,	in	an	analysis	that	calculates	the	implied	fair	value	of	goodwill	in	the	same	manner	as	if	the	reporting	unit	were	being acquired	in	a	business	combination.	If	the	implied	fair	value	of	the	reporting	unit's	goodwill	is	less	than	the	carrying	value,	the	difference	is	recorded	as an	impairment	loss.

In	2014,	we	conducted	our	annual	goodwill	impairment	testing	as	of	1	July	2014	and	concluded	that	the	goodwill	associated	with	the	Latin	America reporting	unit	was	impaired	and	recorded	a	non-cash	impairment	charge	of	$305.2.	The	Latin	America	reporting	unit	is	composed	predominately	of	our Indura	business	with	business	units	in	Chile,	Colombia,	and	other	Latin	America	countries,	which	the	Company	acquired	in	2012.

During	the	fourth	quarter	of	2016,	we	conducted	our	annual	goodwill	impairment	testing	noting	no	indications	of	impairment.	The	fair	value	of	all	of	our reporting	units	substantially	exceeded	their	carrying	value.

The	excess	of	fair	value	over	carrying	value	for	our	reporting	units	ranged	from	approximately	30%	to	approximately	350%.	Management	judgment	is required	in	the	determination	of	each	assumption	utilized	in	the	valuation	model,	and	actual	results	could	differ	from	the	estimates.	In	order	to	evaluate the	sensitivity	of	the	fair	value	calculation	on	the	goodwill	impairment	test,	we	applied	a	hypothetical	10%	decrease	to	the	fair	value	of

these	reporting	units.	In	this	scenario,	the	fair	value	of	our	reporting	units	continued	to	exceed	their	carrying	value	by	a	range	of	approximately	15%	to 300%.

Future	events	that	could	have	a	negative	impact	on	the	level	of	excess	fair	value	over	carrying	value	of	the	reporting	units	include,	but	are	not	limited	to: long-term	economic	weakness,	decline	in	market	share,	pricing	pressures,	inability	to	successfully	implement	cost	improvement	measures,	increases	to our	cost	of	capital,	and	changes	to	the	structure	of	our	business	as	a	result	of	future	reorganizations	or	divestitures	of	assets	or	businesses.	Negative changes	in	one	or	more	of	these	factors,	among	others,	could	result	in	impairment	charges.

We	will	continue	to	evaluate	goodwill	on	an	annual	basis	as	of	the	beginning	of	our	fourth	fiscal	quarter	and	whenever	there	are	indicators	of	potential impairment,	such	as	significant	adverse	changes	in	business	climate	or	operating	results	or	changes	in	management's	business	outlook	or	strategy.

# Intangible	Assets

Intangible	assets	with	determinable	lives	at	30	September	2016	totaled	$425.3	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	amount	of	the	assets	may	not	be	recoverable. See	the	impairment	discussion	above	under	Plant	and	Equipment	for	a	description	of	how	impairment	losses	are	determined.

Indefinite-lived	intangible	assets	at	30	September	2016	totaled	$62.7	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.	The impairment	test	for	indefinite-lived	intangible	assets	encompasses	calculating	the	fair	value	of	the	indefinite-lived	intangible	assets	and	comparing	the	fair value	to	their	carrying	value.	If	the	fair	value	is	less	than	the	carrying	value,	the	difference	is	recorded	as	an	impairment	loss.	To	determine	fair	value,	we utilize	the	royalty	savings	method,	a	form	of	the	income	approach.	This	method	values	an	intangible	asset	by	estimating	the	royalties	avoided	through ownership	of	the	asset.

In	the	fourth	quarter	of	2014,	we	conducted	our	annual	impairment	test	and	determined	that	our	indefinite-lived	intangible	assets	were	impaired.	Refer	to Note	11,	Intangible	Assets,	to	the	consolidated	financial	statements	for	additional	information.

In	the	fourth	quarter	of	2016,	we	conducted	our	annual	impairment	test	of	indefinite-lived	intangibles	and	found	no	indications	of	impairment.

# Equity	Investments

Investments	in	and	advances	to	equity	affiliates	totaled	$1,288.1	at	30	September	2016.	The	majority	of	our	investments	are	non-publicly	traded	ventures with	other	companies	in	the	industrial	gas	business.	Summarized	financial	information	of	equity	affiliates	is	included	in	Note	8,	Summarized	Financial Information	of	Equity	Affiliates,	to	the	consolidated	financial	statements.	Equity	investments	are	reviewed	for	impairment	whenever	events	or	changes	in circumstances	indicate	that	the	carrying	amount	of	the	investment	may	not	be	recoverable.

In	the	event	that	a	decline	in	fair	value	of	an	investment	occurs,	and	the	decline	in	value	is	considered	to	be	other	than	temporary,	an	impairment	loss would	be	recognized.	Management's	estimate	of	fair	value	of	an	investment	is	based	on	estimated	discounted	future	cash	flows	expected	to	be generated	by	the	investee.	Changes	in	key	assumptions	about	the	financial	condition	of	an	investee	or	actual	conditions	that	differ	from	estimates	could result	in	an	impairment	charge.

# Revenue	Recognition-	Percentage-of-Completion	Method

Revenue	from	equipment	sale	contracts	is	recorded	primarily	using	the	percentage-of-completion	method.	Under	this	method,	revenue	from	the	sale	of major	equipment,	such	as	liquefied	natural	gas	(LNG)	heat	exchangers	and	large	air	separation	units,	is	recognized	based	on	labor	hours	or	costs incurred	to	date	compared	with	total	estimated	labor	hours	or	costs	to	be	incurred,	depending	on	the	nature	of	the	project	and	the	best	measure	of progress	toward	completion.	We	estimate	the	profit	on	a	contract	as	the	difference	between	the	total	estimated	revenue	and	expected	costs	to	complete the	contract	and	recognize	the	profit	over	the	life	of	the	contract.

Accounting	for	contracts	using	the	percentage-of-completion	method	requires	management	judgment	relative	to	assessing	risks	and	their	impact	on	the estimate	of	revenues	and	costs.	Our	estimates	are	impacted	by	factors

such	as	the	potential	for	incentives	or	penalties	on	performance,	schedule	and	technical	issues,	labor	productivity,	the	complexity	of	work	performed,	the cost	and	availability	of	materials,	and	performance	of	subcontractors.	When	adjustments	in	estimated	total	contract	revenues	or	estimated	total	costs	or labor	hours	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.

Our	Jazan	large	air	separation	unit	sale	of	equipment	project	within	our	Industrial	Gases	–	Global	segment	spans	several	years.	In	addition	to	the	typical risks	associated	with	underlying	performance	of	project	procurement	and	construction	activities,	this	project	requires	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. Given	the	revenue	and	cost	uncertainties	associated	with	these	risks,	we	recognized	revenue	and	cost	with	no	estimated	profit	through	the	third	quarter of	2016.	During	the	fourth	quarter	of	2016,	as	a	result	of	progress	toward	completion	and	a	reassessment	of	revenue	and	cost	risks,	we	changed	our estimated	profit	on	the	project	and	recognized	the	inception-to-date	effect	of	that	change	associated	with	approximately	$300	of	revenue.

Changes	in	estimates	on	projects	accounted	for	under	the	 percentage-of-completion	method,	including	the	Jazan	project,	favorably	impacted	operating income	by	approximately	$20	in	fiscal	year	2016,	primarily	during	the	fourth	quarter.	Our	changes	in	estimates	would	not	have	significantly	impacted amounts	recorded	in	prior	years.	Changes	in	estimates	during	fiscal	years	2015	and	2014	were	not	significant.

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	forecast	of	revenues	and	costs	on	these	projects.

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	bases	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.	At	30	September	2016,	accrued	income	taxes	and	net	deferred	tax	liabilities	amounted	to $146.6	and	$574.4,	respectively.	Tax	liabilities	related	to	uncertain	tax	positions	as	of	30	September	2016	were	$106.9,	excluding	interest	and	penalties. Income	tax	expense	for	the	year	ended	30	September	2016	was	$586.5.	Disclosures	related	to	income	taxes	are	included	in	Note	23,	Income	Taxes,	to the	consolidated	financial	statements.

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	the	income	tax	expense.

A	1%	point	increase/decrease	in	our	effective	tax	rate	would	decrease/increase	net	income	by	approximately	$21.

# 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	and	expense	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	16,	Retirement	Benefits,	to the	consolidated	financial	statements	includes	disclosure	of	these	rates	on	a	weighted-average	basis	for	both	the	domestic	and	international	plans.	The actuarial	models	also	use	assumptions	about	demographic	factors	such	as	retirement	age,	mortality,	and	turnover	rates.	We	believe	the	actuarial assumptions	are	reasonable.	However,	actual	results	could	vary	materially	from	these	actuarial	assumptions	due	to	economic	events	and	different	rates of	retirement,	mortality,	and	turnover.	In	fiscal	year	2016,	the	beginning-of-year	projected	benefit	obligation	and	benefit	costs	for	the	U.S.	plans	reflect	the adoption	of	the	new	Society	of	Actuaries	RP-2014	mortality	table	projected	with	Scale	BB-2D.	As	of	30	September	2016,	the	projected	benefit	obligation reflects	the	adoption	of	the	new	mortality	projection	scale	MP-2016	for	the	U.S.	plans.	Our	mortality	assumptions	will	differ	from	the	IRS	mortality assumptions	used	to	determine	funding	valuations,	as	the	IRS	is	not	expected	to	adopt	the	new	tables	until	2018	or	later.

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.	Effective	in	2016,	the	Company	began	to	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,	as	we	believe	this	provides	a	better	measurement	of	these	costs.	The Company	has	accounted	for	this	as	a	change	in	accounting	estimate	and,	accordingly	has	accounted	for	it	on	a	prospective	basis.	This	change	does	not affect	the	measurement	of	the	total	benefit	obligation.	The	rate	is	used	to	discount	the	future	cash	flows	of	benefit	obligations	back	to	the	measurement date.	This	rate	will	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.	A	50	bp	increase/decrease	in	the	discount	rate	decreases/increases	pension expense	by	approximately	$33	per	year.

The	expected	rate	of	return	on	plan	assets	represents	an	estimate	of	the	average	rate	of	return	to	be	earned	by	plan	assets	over	the	period	that	the benefits	included	in	the	benefit	obligation	are	to	be	paid.	The	expected	return	on	plan	assets	assumption	is	based	on	a	weighted	average	of	estimated long-term	returns	of	major	asset	classes	and	the	historical	performance	of	plan	assets.	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/decrease	in	the	estimated	rate	of	return	on	plan	assets decreases/increases	pension	expense	by	approximately	$19	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.	For	equities,	this	is	a	calculated	value	that	recognizes	investment	gains	and	losses	in	fair	value	related	to	equities	over	a five-year	period	from	the	year	in	which	they	occur	and	reduces	year-to-year	volatility.	The	market-related	value	for	fixed	income	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/decrease	in	the expected	rate	of	compensation	increases/decreases	pension	expense	by	approximately	$16	per	year.

# Loss	Contingencies

In	the	normal	course	of	business	we	encounter	contingencies,	i.e.,	situations	involving	varying	degrees	of	uncertainty	as	to	the	outcome	and	effect	on	us. 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,	Major Accounting	Policies,	to	the	consolidated	financial	statements,	and	particulars	are	provided	in	Note	17,	Commitments	and	Contingencies,	to	the consolidated	financial	statements.	Significant	judgment	is	required	in	both	determining	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	in	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,	or	our	proportionate	share	is	increased.	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.

# NEW	ACCOUNTING	GUIDANCE

As	of	the	first	quarter	of	fiscal	year	2016,	we	adopted	guidance	on	the	presentation	of	deferred	income	taxes	that	resulted	in	all	deferred	tax	liabilities	and assets	being	classified	as	noncurrent	on	the	balance	sheet.	Accordingly,	prior	year	amounts	were	reclassified	to	conform	to	the	current	year presentation.	The	guidance,	which	did	not	change	the	existing	requirement	to	net	deferred	tax	assets	and	liabilities	within	a	jurisdiction,	resulted	in	a reclassification	adjustment	that	increased	noncurrent	deferred	tax	assets	by	$13.7	and	decreased	noncurrent	deferred	tax	liabilities	by	$99.9	as	of 30	September	2015.

See	Note	2,	New	Accounting	Guidance,	to	the	consolidated	financial	statements	for	information	concerning	the	implementation	and	impact	of	new accounting	guidance.

# FORWARD-LOOKING	STATEMENTS

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	reasonable expectations	and	assumptions	as	of	the	date	of	this	report.	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,	global	or	regional economic	conditions	and	supply	and	demand	dynamics	in	market	segments	into	which	the	Company	sells;	significant	fluctuations	in	interest	rates	and foreign	currencies	from	that	currently	anticipated;	future	financial	and	operating	performance	of	major	customers;	unanticipated	contract	terminations	or customer	cancellations	or	postponement	of	projects	and	sales;	asset	impairments	due	to	economic	conditions	or	specific	customer	or	other	events;	the impact	of	competitive	products	and	pricing;	ability	to	protect	and	enforce	the	Company's	intellectual	property	rights;	unexpected	changes	in	raw	material supply	and	markets;	the	impact	of	price	fluctuations	in	natural	gas	and	disruptions	in	markets	and	the	economy	due	to	oil	price	volatility;	the	ability	to recover	increased	energy	and	raw	material	costs	from	customers;	costs	and	outcomes	of	litigation	or	regulatory	investigations;	the	success	of	productivity and	cost	reduction	programs;	the	timing,	impact,	and	other	uncertainties	of	future	acquisitions	or	divestitures;	political	risks,	including	the	risks	of unanticipated	government	actions;	acts	of	war	or	terrorism;	the	impact	of	changes	in	environmental,	tax	or	other	legislation	and	regulatory	activities	in jurisdictions	in	which	the	Company	and	its	affiliates	operate;	and	other	risk	factors	described	in	Section	1A,	Risk	Factors.	The	Company	disclaims	any obligation	or	undertaking	to	disseminate	any	updates	or	revisions	to	any	forward-looking	statements	contained	in	this	document	to	reflect	any	change	in the	Company's	assumptions,	beliefs	or	expectations	or	any	change	in	events,	conditions,	or	circumstances	upon	which	any	such	forward-looking statements	are	based.

# ITEM	7A. QUANTITATIVE	AND	QUALITATIVE	DISCLOSURES	ABOUT	MARKET	RISK

Our	earnings,	cash	flows,	and	financial	position	are	exposed	to	market	risks	relating	to	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	the	major	accounting	policies,	see	Note	1,	Major	Accounting Policies,	and	Note	13,	Financial	Instruments,	to	the	consolidated	financial	statements,	for	additional	information.	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	current	portion),	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	14,	Fair	Value	Measurements,	to	the	consolidated	financial	statements.

At	30	September	2016	and	2015,	the	net	financial	instrument	position	was	a	liability	of	$5,187.7	and	$4,452.0,	respectively.	The	increase	in	the	net financial	instrument	position	was	primarily	due	to	the	issuance	of	long-term	debt	by	Versum,	which	included	senior	unsecured	notes	($425.0)	and	a	fully drawn	term	loan	facility	($575.0).

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	value	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	(interest	rates,	spot	and	forward	exchange	rates,	and	implied	volatilities)	as	of	the	valuation	date.

# Interest	Rate	Risk

Our	debt	portfolio	as	of	30	September	2016,	including	the	effect	of	currency	swap	agreements,	primarily	comprised	debt	denominated	in	U.S.	dollars (37%)	and	Euros	(33%).	This	debt	portfolio	is	composed	of	53%	fixed-rate	debt	and	47%	variable-rate	debt.	Changes	in	interest	rates	have	different impacts	on	the	fixed-	and	variable-rate	portions	of	our	debt	portfolio.	A	change	in	interest	rates	on	the	fixed	portion	of	the	debt	portfolio	impacts	the	net financial	instrument	position	but	has	no	impact	on	interest	incurred	or	cash	flows.	A	change	in	interest	rates	on	the	variable	portion	of	the	debt	portfolio impacts	the	interest	incurred	and	cash	flows	but	does	not	impact	the	net	financial	instrument	position.

The	sensitivity	analysis	related	to	the	interest	rate	risk	on	the	fixed	portion	of	our	debt	portfolio	assumes	an	instantaneous	100	bp	move	in	interest	rates from	the	level	at	30	September	2016,	with	all	other	variables	held	constant.	A	100	bp	increase	in	market	interest	rates	would	result	in	a	decrease	of	$161 and	$139	in	the	net	liability	position	of	financial	instruments	at	30	September	2016	and	2015,	respectively.	A	100	bp	decrease	in	market	interest	rates would	result	in	an	increase	of	$178	and	$151	in	the	net	liability	position	of	financial	instruments	at	30	September	2016	and	2015,	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	$29	and	$30	of	interest	incurred	per	year	at	the	end	of	30	September	2016	and	2015,	respectively.	A	100	bp	decline	in	interest rates	would	lower	interest	incurred	by	$29	and	$30	per	year	at	30	September	2016	and	2015,	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	2016	and	2015,	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	$438	and	$421	in	the	net	liability	position	of	financial	instruments at	30	September	2016	and	2015,	respectively.

The	primary	currency	pairs	for	which	we	have	exchange	rate	exposure	are	Euros	and	U.S.	dollars	and	British	Pound	Sterling	and	U.S.	dollars.	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/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	the	Company's	sales	are	derived	from	outside	of	the	United	States	and	denominated	in	foreign	currencies.	Financial	results	therefore	will be	affected	by	changes	in	foreign	currency	rates.	The	Euro	and	the	Chinese	Renminbi	represent	the	largest	exposures	in	terms	of	our	foreign	earnings. We	estimate	that	a	10%	reduction	in	either	the	Euro	or	the	Chinese	Renminbi	versus	the	U.S.	dollar	would	lower	our	annual	operating	income	by approximately	$20	and	$15,	respectively.

# ITEM	8. FINANCIAL	STATEMENTS	AND	SUPPLEMENTARY	DATA

# MANAGEMENT'S	REPORT	ON	INTERNAL	CONTROL	OVER	FINANCIAL	REPORTING

Air	Products'	management	is	responsible	for	establishing	and	maintaining	adequate	internal	control	over	financial	reporting.	Our	internal	control	over financial	reporting,	which	is	defined	in	the	following	sentences,	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	our financial	reporting	and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	U.S.	generally	accepted	accounting	principles	and includes	those	policies	and	procedures	that:

(i) pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately	and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the Company;

(ii) provide	reasonable	assurance	that	the	transactions	are	recorded	as	necessary	to	permit	preparation	of	financial	statements	in	accordance	with U.S.	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures	of	the	Company	are	being	made	only	in	accordance	with authorizations	of	management	and	directors	of	the	Company;	and

(iii) provide	reasonable	assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use	or	disposition	of	the	Company's	assets	that could	have	a	material	effect	on	the	financial	statements.

Because	of	inherent	limitations,	internal	control	over	financial	reporting	can	only	provide	reasonable	assurance	and	may	not	prevent	or	detect misstatements.	Further,	because	of	changes	in	conditions,	the	effectiveness	of	our	internal	control	over	financial	reporting	may	vary	over	time.	Our processes	contain	self-monitoring	mechanisms,	and	actions	are	taken	to	correct	deficiencies	as	they	are	identified.

Management	has	evaluated	the	effectiveness	of	its	internal	control	over	financial	reporting	based	on	criteria	established	in	Internal	Control—Integrated Framework	(2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission	(COSO).	Based	on	this	evaluation,	management concluded	that,	as	of	30	September	2016,	the	Company's	internal	control	over	financial	reporting	was	effective.

KPMG	LLP,	an	independent	registered	public	accounting	firm,	has	issued	their	opinion	on	the	Company's	internal	control	over	financial	reporting	as	of 30	September	2016	as	stated	in	their	report	which	appears	herein.

/s/	Seifi	Ghasemi

Seifi	Ghasemi

Chairman,	President,	and

Chief	Executive	Officer

/s/	M.	Scott	Crocco

M.	Scott	Crocco

Executive	Vice	President	and Chief	Financial	Officer 21	November	2016

# REPORT	OF	INDEPENDENT	REGISTERED	PUBLIC	ACCOUNTING	FIRM

The	Board	of	Directors	and	Shareholders	of	Air	Products	and	Chemicals,	Inc.:

We	have	audited	the	accompanying	consolidated	balance	sheets	of	Air	Products	and	Chemicals,	Inc.	and	Subsidiaries	(the	Company)	as	of 30	September	2016	and	2015,	and	the	related	consolidated	income	statements,	consolidated	comprehensive	income	statements,	consolidated statements	of	cash	flows,	and	equity	for	each	of	the	years	in	the	three-year	period	ended	30	September	2016.	In	connection	with	our	audits	of	the consolidated	financial	statements,	we	also	have	audited	the	financial	statement	schedule	referred	to	in	Item	15(a)(2)	in	this	Form	10-K.	We	have	audited the	Company's	internal	control	over	financial	reporting	as	of	30	September	2016,	based	on	criteria	established	in	Internal	Control	–	Integrated	Framework (2013)	issued	by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.	The	Company's	management	is	responsible	for	these consolidated	financial	statements	and	financial	statement	schedule,	for	maintaining	effective	internal	control	over	financial	reporting,	and	for	its assessment	of	the	effectiveness	of	internal	control	over	financial	reporting,	included	in	the	accompanying	"Management's	Report	on	Internal	Control	over Financial	Reporting."	Our	responsibility	is	to	express	an	opinion	on	these	consolidated	financial	statements	and	financial	statement	schedule	and	an opinion	on	the	Company's	internal	control	over	financial	reporting	based	on	our	audits.

We	conducted	our	audits	in	accordance	with	the	standards	of	the	Public	Company	Accounting	Oversight	Board	(United	States).	Those	standards	require that	we	plan	and	perform	the	audits	to	obtain	reasonable	assurance	about	whether	the	financial	statements	are	free	of	material	misstatement	and whether	effective	internal	control	over	financial	reporting	was	maintained	in	all	material	respects.	Our	audits	of	the	consolidated	financial	statements included	examining,	on	a	test	basis,	evidence	supporting	the	amounts	and	disclosures	in	the	financial	statements,	assessing	the	accounting	principles used	and	significant	estimates	made	by	management,	and	evaluating	the	overall	financial	statement	presentation.	Our	audit	of	internal	control	over financial	reporting	included	obtaining	an	understanding	of	internal	control	over	financial	reporting,	assessing	the	risk	that	a	material	weakness	exists,	and testing	and	evaluating	the	design	and	operating	effectiveness	of	internal	control	based	on	the	assessed	risk.	Our	audits	also	included	performing	such other	procedures	as	we	considered	necessary	in	the	circumstances.	We	believe	that	our	audits	provide	a	reasonable	basis	for	our	opinions.

A	company's	internal	control	over	financial	reporting	is	a	process	designed	to	provide	reasonable	assurance	regarding	the	reliability	of	financial	reporting and	the	preparation	of	financial	statements	for	external	purposes	in	accordance	with	generally	accepted	accounting	principles.	A	company's	internal control	over	financial	reporting	includes	those	policies	and	procedures	that	(1)	pertain	to	the	maintenance	of	records	that,	in	reasonable	detail,	accurately and	fairly	reflect	the	transactions	and	dispositions	of	the	assets	of	the	company;	(2)	provide	reasonable	assurance	that	transactions	are	recorded	as necessary	to	permit	preparation	of	financial	statements	in	accordance	with	generally	accepted	accounting	principles,	and	that	receipts	and	expenditures of	the	company	are	being	made	only	in	accordance	with	authorizations	of	management	and	directors	of	the	company;	and	(3)	provide	reasonable assurance	regarding	prevention	or	timely	detection	of	unauthorized	acquisition,	use,	or	disposition	of	the	company's	assets	that	could	have	a	material effect	on	the	financial	statements.

Because	of	its	inherent	limitations,	internal	control	over	financial	reporting	may	not	prevent	or	detect	misstatements.	Also,	projections	of	any	evaluation	of effectiveness	to	future	periods	are	subject	to	the	risk	that	controls	may	become	inadequate	because	of	changes	in	conditions,	or	that	the	degree	of compliance	with	the	policies	or	procedures	may	deteriorate.

In	our	opinion,	the	consolidated	financial	statements	referred	to	above	present	fairly,	in	all	material	respects,	the	financial	position	of	Air	Products	and Chemicals,	Inc.	and	Subsidiaries	as	of	30	September	2016	and	2015,	and	the	results	of	their	operations	and	their	cash	flows	for	each	of	the	years	in	the three-year	period	ended	30	September	2016,	in	conformity	with	U.S.	generally	accepted	accounting	principles.	Also	in	our	opinion,	the	related	financial statement	schedule,	when	considered	in	relation	to	the	basic	consolidated	financial	statements	taken	as	a	whole,	presents	fairly,	in	all	material	respects, the	information	set	forth	therein.	Also	in	our	opinion,	Air	Products	and	Chemicals,	Inc.	and	Subsidiaries	maintained,	in	all	material	respects,	effective internal	control	over	financial	reporting	as	of	30	September	2016,	based	on	criteria	established	in	Internal	Control	–	Integrated	Framework	(2013)	issued by	the	Committee	of	Sponsoring	Organizations	of	the	Treadway	Commission.

/s/	KPMG	LLP

Philadelphia,	Pennsylvania

# The	Consolidated	Financial	Statements

Air	Products	and	Chemicals,	Inc.	and	Subsidiaries

# CONSOLIDATED	INCOME	STATEMENTS

| Year	ended	30	September	(Millions	of	dollars,	except	for	share	data) | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Sales | $9,524.4 | $9,894.9 | $10,439.0 |
| Cost\tof\tsales | 6,402.7 | 6,939.0 | 7,629.9 |
| Selling\tand\tadministrative | 849.3 | 939.3 | 1,054.7 |
| Research\tand\tdevelopment | 132.0 | 137.1 | 139.8 |
| Business\tseparation\tcosts | 52.2 | 7.5 | — |
| Business\trestructuring\tand\tcost\treduction\tactions | 33.9 | 207.7 | 12.7 |
| Pension\tsettlement\tloss | 6.4 | 21.2 | 5.5 |
| Goodwill\tand\tintangible\tasset\timpairment\tcharge | — | — | 310.1 |
| Gain\ton\tpreviously\theld\tequity\tinterest | — | 17.9 | — |
| Other\tincome\t(expense),\tnet | 58.1 | 47.3 | 52.8 |
| Operating\tIncome | 2,106.0 | 1,708.3 | 1,339.1 |
| Equity\taffiliates'\tincome | 148.6 | 154.5 | 151.4 |
| Interest\texpense | 115.5 | 103.5 | 125.1 |
| Loss\ton\textinguishment\tof\tdebt | 6.9 | 16.6 | — |
| Income\tFrom\tContinuing\tOperations\tBefore\tTaxes | 2,132.2 | 1,742.7 | 1,365.4 |
| Income\ttax\tprovision | 586.5 | 418.3 | 369.4 |
| Income\tFrom\tContinuing\tOperations | 1,545.7 | 1,324.4 | 996.0 |
| Loss\tfrom\tDiscontinued\tOperations,\tnet\tof\ttax | (884.2) | (6.8) | (2.9) |
| Net\tIncome | 661.5 | 1,317.6 | 993.1 |
| Less:\tNet\tIncome\tAttributable\tto\tNoncontrolling\tInterests | 30.4 | 39.7 | 1.4 |
| Net\tIncome\tAttributable\tto\tAir\tProducts | $631.1 | $1,277.9 | $991.7 |
| Net\tIncome\tAttributable\tto\tAir\tProducts |  |  |  |
| Income\tfrom\tcontinuing\toperations | $1,515.3 | $1,284.7 | $994.6 |
| Loss\tfrom\tdiscontinued\toperations | (884.2) | (6.8) | (2.9) |
| Net\tIncome\tAttributable\tto\tAir\tProducts | $631.1 | $1,277.9 | $991.7 |
| Basic\tEarnings\tPer\tCommon\tShare\tAttributable\tto\tAir\tProducts |  |  |  |
| Income\tfrom\tcontinuing\toperations | $7.00 | $5.98 | $4.68 |
| Loss\tfrom\tdiscontinued\toperations | (4.08) | (.03) | (.02) |
| Net\tIncome\tAttributable\tto\tAir\tProducts | $2.92 | $5.95 | $4.66 |
| Diluted\tEarnings\tPer\tCommon\tShare\tAttributable\tto\tAir\tProducts |  |  |  |
| Income\tfrom\tcontinuing\toperations | $6.94 | $5.91 | $4.62 |
| Loss\tfrom\tdiscontinued\toperations | (4.05) | (.03) | (.01) |
| Net\tIncome\tAttributable\tto\tAir\tProducts | $2.89 | $5.88 | $4.61 |
| Weighted\tAverage\tCommon\tShares\t—\tBasic\t(in\tmillions) | 216.4 | 214.9 | 212.7 |
| Weighted\tAverage\tCommon\tShares\t—\tDiluted\t(in\tmillions) | 218.3 | 217.3 | 215.2 |

The	accompanying	notes	are	an	integral	part	of	these	statements.

# CONSOLIDATED	COMPREHENSIVE	INCOME	STATEMENTS

| Year	ended	30	September	(Millions	of	dollars) | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Net\tIncome | \t\t\t $661.5 | $1,317.6 | $993.1 |
| Other\tComprehensive\tLoss,\tnet\tof\ttax: |  |  |  |
| Translation\tadjustments,\tnet\tof\ttax\tof\t($19.8),\t$45.2,\tand\t$36.5 | 9.9 | (699.3) | (213.1) |
|  | 13.7 | (35.0) | (15.2) |
| Pension\tand\tpostretirement\tbenefits,\tnet\tof\ttax\tof\t($157.4),\t($148.5), |  |  |  |
| and\t($28.0) | (335.1) | (278.5) | (74.2) |
| Reclassification\tadjustments: |  |  |  |
| Currency\ttranslation\tadjustment | 2.7 | — | — |
| Derivatives,\tnet\tof\ttax\tof\t($9.4),\t$7.0,\tand\t($1.9) | (36.0) | 20.8 | (9.1) |
| Pension\tand\tpostretirement\tbenefits,\tnet\tof\ttax\tof\t$43.0,\t$47.7, |  |  |  |
| and\t$40.0 | 87.2 | 97.0 | 84.7 |
| Total\tOther\tComprehensive\tLoss | (257.6) | (895.0) | (226.9) |
| Comprehensive\tIncome | 403.9 | 422.6 | 766.2 |
| Net\tIncome\tAttributable\tto\tNoncontrolling\tInterests | 30.4 | 39.7 | 1.4 |
| Other\tComprehensive\tIncome\t(Loss)\tAttributable\tto\tNoncontrolling\tInterests | 4.8 | (11.0) | (5.6) |
| Comprehensive\tIncome\tAttributable\tto\tAir\tProducts | \t\t\t $368.7 | $393.9 | $770.4 |

# CONSOLIDATED	BALANCE	SHEETS

| 30	September	(Millions	of	dollars,	except	for	share	data) | 2016 | 2015 |
| :--- | :--- | :--- |
| Assets |  |  |
| Current\tAssets |  |  |
| Cash\tand\tcash\titems | $1,501.3 | $206.4 |
| Trade\treceivables,\tnet | 1,439.9 | 1,406.2 |
| Inventories | 619.9 | 657.8 |
| Contracts\tin\tprogress,\tless\tprogress\tbillings | 81.6 | 110.8 |
| Prepaid\texpenses | 99.6 | 67.0 |
| Other\treceivables\tand\tcurrent\tassets | 555.6 | 343.5 |
| Current\tassets\tof\tdiscontinued\toperations | 19.4 | 1.8 |
| Total\tCurrent\tAssets | 4,317.3 | 2,793.5 |
| Investment\tin\tnet\tassets\tof\tand\tadvances\tto\tequity\taffiliates | 1,288.1 | 1,265.7 |
| Plant\tand\tequipment,\tnet | 8,852.7 | 8,745.1 |
| Goodwill,\tnet | 1,150.2 | 1,131.3 |
| Intangible\tassets,\tnet | 488.0 | 508.3 |
| Noncurrent\tcapital\tlease\treceivables | 1,221.7 | 1,350.2 |
| Other\tnoncurrent\tassets | 737.3 | 648.6 |
| Noncurrent\tassets\tof\tdiscontinued\toperations | — | 891.8 |
| Total\tNoncurrent\tAssets | 13,738.0 | 14,541.0 |
| Total\tAssets | $18,055.3 | $17,334.5 |
| Liabilities\tand\tEquity |  |  |
| Current\tLiabilities |  |  |
| Payables\tand\taccrued\tliabilities | $1,810.6 | $1,641.7 |
| Accrued\tincome\ttaxes | 146.6 | 55.8 |
| Short-term\tborrowings | 935.8 | 1,494.3 |
| Current\tportion\tof\tlong-term\tdebt | 371.3 | 435.6 |
| Current\tliabilities\tof\tdiscontinued\toperations | 19.0 | 17.0 |
| Total\tCurrent\tLiabilities | 3,283.3 | 3,644.4 |
| Long-term\tdebt | 4,918.1 | 3,949.1 |
| Other\tnoncurrent\tliabilities | 1,873.4 | 1,554.0 |
| Deferred\tincome\ttaxes | 767.1 | 803.4 |
| Noncurrent\tliabilities\tof\tdiscontinued\toperations | — | 2.5 |
| Total\tNoncurrent\tLiabilities | 7,558.6 | 6,309.0 |
| Total\tLiabilities | 10,841.9 | 9,953.4 |
| Commitments\tand\tContingencies\t–\tSee\tNote\t17 |  |  |
| Air\tProducts\tShareholders'\tEquity |  |  |
| Common\tstock\t(par\tvalue\t$1\tper\tshare;\tissued\t2016\tand\t2015\t–\t249,455,584\tshares) | 249.4 | 249.4 |
| Capital\tin\texcess\tof\tpar\tvalue | 970.0 | 904.7 |
| Retained\tearnings | 10,475.5 | 10,580.4 |
| Accumulated\tother\tcomprehensive\tloss | (2,388.3) | (2,125.9) |
| Treasury\tstock,\tat\tcost\t(2016–32,104,759\tshares;\t2015–34,096,471\tshares) | (2,227.0) | (2,359.6) |
| Total\tAir\tProducts\tShareholders'\tEquity |  |  |
|  | 7,079.6 | 7,249.0 |
| Noncontrolling\tInterests | 133.8 | 132.1 |
| Total\tEquity | 7,213.4 | 7,381.1 |
| Total\tLiabilities\tand\tEquity | $18,055.3 | $17,334.5 |

# CONSOLIDATED	STATEMENTS	OF	CASH	FLOWS

| Year	ended	30	September	(Millions	of	dollars) | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Operating\tActivities |  |  |  |
| Net\tIncome | $661.5 | \t $1,317.6 | $993.1 |
| Less:\tNet\tincome\tattributable\tto\tnoncontrolling\tinterests | 30.4 | 39.7 | 1.4 |
| Net\tincome\tattributable\tto\tAir\tProducts | 631.1 | 1,277.9 | 991.7 |
| Loss\tfrom\tdiscontinued\toperations | 884.2 | 6.8 | 2.9 |
| Income\tfrom\tcontinuing\toperations\tattributable\tto\tAir\tProducts | 1,515.3 | 1,284.7 | 994.6 |
| Adjustments\tto\treconcile\tincome\tto\tcash\tprovided\tby\toperating\tactivities: |  |  |  |
| Depreciation\tand\tamortization | 925.9 | 936.4 | 956.9 |
| Deferred\tincome\ttaxes | 62.9 | 2.9 | 125.5 |
| Loss\ton\textinguishment\tof\tdebt | 6.9 | 16.6 | — |
| Gain\ton\tpreviously\theld\tequity\tinterest | — | (17.9) | — |
| Undistributed\tearnings\tof\tunconsolidated\taffiliates | (51.8) | (102.6) | (76.0) |
| (Gain)\tLoss\ton\tsale\tof\tassets\tand\tinvestments | (10.0) | (30.1) | 4.3 |
| Share-based\tcompensation | 37.6 | 45.7 | 44.0 |
| Noncurrent\tcapital\tlease\treceivables | 85.5 | (9.5) | 20.0 |
| Goodwill\tand\tintangible\tasset\timpairment\tcharge | — | — | 310.1 |
| Write-down\tof\tlong-lived\tassets\tassociated\twith\trestructuring | — | 47.4 | — |
| Other\tadjustments | 155.2 | 48.1 | 60.7 |
| Working\tcapital\tchanges\tthat\tprovided\t(used)\tcash,\texcluding\teffects\tof\tacquisitions\tand |  |  |  |
| divestitures: |  |  |  |
| Trade\treceivables | (61.7) | (29.7) | (2.7) |
| Inventories | 32.9 | 8.3 | (23.5) |
| Contracts\tin\tprogress,\tless\tprogress\tbillings | 21.3 | 36.4 | (5.6) |
| Other\treceivables | (12.2) | 57.6 | (33.0) |
| Payables\tand\taccrued\tliabilities | 57.0 | 156.2 | (237.9) |
| Other\tworking\tcapital | (57.4) | (4.1) | 52.7 |
| Cash\tProvided\tby\tOperating\tActivities | 2,707.4 | 2,446.4 | 2,190.1 |
| Investing\tActivities |  |  |  |
| Additions\tto\tplant\tand\tequipment |  |  |  |
|  | (1,055.8) | (1,265.6) | (1,362.7) |
| Acquisitions,\tless\tcash\tacquired | — | (34.5) | — |
| Investment\tin\tand\tadvances\tto\tunconsolidated\taffiliates | — | (4.3) | 2.0 |
| Proceeds\tfrom\tsale\tof\tassets\tand\tinvestments | 85.5 | 55.3 | 45.6 |
| Other\tinvesting\tactivities | (1.7) | (1.4) | (1.4) |
| Cash\tUsed\tfor\tInvesting\tActivities | (972.0) | (1,250.5) | (1,316.5) |
| Financing\tActivities |  |  |  |
| Long-term\tdebt\tproceeds | 960.4 | 340.3 | 463.4 |
| Payments\ton\tlong-term\tdebt | (485.0) | (708.7) | (608.6) |
| Net\t(decrease)\tincrease\tin\tcommercial\tpaper\tand\tshort-term\tborrowings | (144.2) | 284.0 | 148.7 |
| Debt\tissuance\tcosts | (11.7) | (2.2) | (2.4) |
| Dividends\tpaid\tto\tshareholders | (721.2) | (677.5) | (627.7) |
| Proceeds\tfrom\tstock\toption\texercises | 141.3 | 121.3 | 141.6 |
| Excess\ttax\tbenefit\tfrom\tshare-based\tcompensation | 33.2 | 31.9 | 28.3 |
| Payment\tfor\tsubsidiary\tshares\tto\tnoncontrolling\tinterests | — | (278.4) | (.5) |
| Other\tfinancing\tactivities | (43.9) | (56.1) | (47.1) |
| Cash\tUsed\tfor\tFinancing\tActivities | (271.1) | (945.4) | (504.3) |
| Discontinued\tOperations |  |  |  |
| Cash\tused\tfor\toperating\tactivities | (79.9) | (8.6) | (3.0) |
| Cash\tused\tfor\tinvesting\tactivities | (97.0) | (349.2) | (311.7) |
| Cash\tused\tfor\tfinancing\tactivities | — | — | (157.1) |
| Cash\tUsed\tfor\tDiscontinued\tOperations | (176.9) | (357.8) | (471.8) |
| Effect\tof\tExchange\tRate\tChanges\ton\tCash | 7.5 | (22.9) | (11.3) |
| Increase\t(Decrease)\tin\tCash\tand\tCash\tItems | 1,294.9 | (130.2) | (113.8) |
| Cash\tand\tCash\tItems\t–\tBeginning\tof\tYear | 206.4 | 336.6 | 450.4 |
| Cash\tand\tCash\tItems\t–\tEnd\tof\tPeriod | \t\t\t $1,501.3 | $206.4 | $336.6 |

# CONSOLIDATED	STATEMENTS	OF	EQUITY

|  |  | Capital |  | Accumulated |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | in\tExcess |  | Other |  | Air\tProducts | Non- |  |
| Year\tended\t30\tSeptember | Common | of\tPar | Retained | Comprehensive | Treasury | Shareholders' | controlling | Total |
| (Millions\tof\tdollars) | Stock | Value | Earnings | Loss | Stock | Equity | Interests | Equity |
| Balance\t30\tSeptember\t2013 | $249.4 | $799.2 | $9,646.4 | $(1,020.6) | \t$(2,632.3) | $7,042.1 | $156.8 | \t$7,198.9 |
| Net\tincome |  |  | 991.7 |  |  | 991.7 | 28.8 | 1,020.5 |
| Other\tcomprehensive\tloss |  |  |  | (221.3) |  | (221.3) | (5.6) | (226.9) |
| Cash\tdividends\t($3.02\tper\tshare) |  |  | (641.8) |  |  | (641.8) |  | (641.8) |
| Share-based\tcompensation\texpense |  | 44.0 |  |  |  | 44.0 |  | 44.0 |
| Issuance\tof\ttreasury\tshares\tfor\tstock |  |  |  |  |  |  |  |  |
| option\tand\taward\tplans |  | (30.0) |  |  | 155.4 | 125.4 |  | 125.4 |
| Tax\tbenefit\tof\tstock\toption\tand\taward\tplans |  | 29.3 |  |  |  | 29.3 |  | 29.3 |
| Dividends\tto\tnoncontrolling\tinterests |  |  |  |  |  |  | (24.4) | (24.4) |
| Purchase\tof\tnoncontrolling\tinterests |  | (.5) |  |  |  | (.5) |  | (.5) |
| Other |  |  | (3.1) |  |  | (3.1) |  | (3.1) |
| Balance\t30\tSeptember\t2014 | $249.4 | $842.0 | $9,993.2 | $(1,241.9) | \t$(2,476.9) | $7,365.8 | $155.6 | \t$7,521.4 |
| Net\tincome |  |  | 1,277.9 |  |  | 1,277.9 | 28.2 | 1,306.1 |
| Other\tcomprehensive\tloss |  |  |  | (884.0) |  | (884.0) | (11.0) | (895.0) |
| Cash\tdividends\t($3.20\tper\tshare) |  |  | (687.9) |  |  | (687.9) |  | (687.9) |
| Share-based\tcompensation\texpense |  | 43.7 |  |  |  | 43.7 |  | 43.7 |
| Issuance\tof\ttreasury\tshares\tfor\tstock |  |  |  |  |  |  |  |  |
| option\tand\taward\tplans |  | (15.1) |  |  | 117.3 | 102.2 |  | 102.2 |
| Tax\tbenefit\tof\tstock\toption\tand\taward\tplans |  | 32.0 |  |  |  | 32.0 |  | 32.0 |
| Dividends\tto\tnoncontrolling\tinterests |  |  |  |  |  |  | (38.0) | (38.0) |
| Purchase\tof\tnoncontrolling\tinterests |  | (.3) |  |  |  | (.3) | (.2) | (.5) |
| Other |  | 2.4 | (2.8) |  |  | (.4) | (2.5) | (2.9) |
| Balance\t30\tSeptember\t2015 | $249.4 | $904.7 | \t$10,580.4 | $(2,125.9) | \t$(2,359.6) | $7,249.0 | $132.1 | \t$7,381.1 |
| Net\tincome |  |  | 631.1 |  |  | 631.1 | 30.4 | 661.5 |
| Other\tcomprehensive\tincome\t(loss) |  |  |  | (262.4) |  | (262.4) | 4.8 | (257.6) |
| Cash\tdividends\t($3.39\tper\tshare) |  |  | (733.7) |  |  | (733.7) |  | (733.7) |
| Share-based\tcompensation\texpense |  | 37.6 |  |  |  | 37.6 |  | 37.6 |
| Issuance\tof\ttreasury\tshares\tfor\tstock |  |  |  |  |  |  |  |  |
| option\tand\taward\tplans |  | (5.5) |  |  | 132.6 | 127.1 |  | 127.1 |
| Tax\tbenefit\tof\tstock\toption\tand\taward\tplans |  | 33.2 |  |  |  | 33.2 |  | 33.2 |
| Dividends\tto\tnoncontrolling\tinterests |  |  |  |  |  |  | (33.6) | (33.6) |
| Other |  |  | (2.3) |  |  | (2.3) | .1 | (2.2) |
| Balance\t30\tSeptember\t2016 | $249.4 | $970.0 | \t$10,475.5 | $(2,388.3) | \t$(2,227.0) | $7,079.6 | $133.8 | \t$7,213.4 |

# NOTES	TO	THE	CONSOLIDATED	FINANCIAL	STATEMENTS

(Millions	of	dollars,	except	for	share	data)

# 1.		MAJOR	ACCOUNTING	POLICIES

# Basis	of	Presentation	and	Consolidation	Principles

The	accompanying	consolidated	financial	statements	of	Air	Products	and	Chemicals,	Inc.	were	prepared	in	accordance	with	accounting	principles generally	accepted	in	the	United	States	of	America	("U.S.	GAAP")	and	include	the	accounts	of	Air	Products	and	Chemicals,	Inc.	and	those	of	its controlled	subsidiaries	("we,"	"our,"	"us,"	the	"Company,"	"Air	Products,"	or	"registrant"),	which	are	generally	majority	owned.	Intercompany	transactions and	balances	are	eliminated	in	consolidation.

We	consolidate	all	entities	that	we	control.	The	general	condition	for	control	is	ownership	of	a	majority	of	the	voting	interests	of	an	entity.	Control	may	also exist	in	arrangements	where	we	are	the	primary	beneficiary	of	a	variable	interest	entity	(VIE).	An	entity	that	has	both	the	power	to	direct	the	activities	that most	significantly	impact	the	economic	performance	of	a	VIE	and	the	obligation	to	absorb	the	losses	or	receive	the	benefits	significant	to	the	VIE	is considered	the	primary	beneficiary	of	that	entity.	We	have	determined	that	we	are	not	a	primary	beneficiary	in	any	material	VIE.

Certain	prior	year	information	has	been	reclassified	to	conform	to	the	2016	presentation.

# Estimates	and	Assumptions

The	preparation	of	the	financial	statements	in	conformity	with	U.S.	GAAP	requires	management	to	make	estimates	and	assumptions	that	affect	amounts reported	in	the	financial	statements	and	accompanying	notes.	Actual	results	could	differ	from	those	estimates.

# Revenue	Recognition

Revenue	from	product	sales	is	recognized	as	risk	and	title	to	the	product	transfer	to	the	customer	(which	generally	occurs	at	the	time	shipment	is	made), the	sales	price	is	fixed	or	determinable,	and	collectability	is	reasonably	assured.	Sales	returns	and	allowances	are	not	a	business	practice	in	the	industry.

Revenue	from	equipment	sale	contracts	is	recorded	primarily	using	the	percentage-of-completion	method.	Under	this	method,	revenue	from	the	sale	of major	equipment,	such	as	liquefied	natural	gas	(LNG)	heat	exchangers	and	large	air	separation	units,	is	recognized	based	on	labor	hours	or	costs incurred	to	date	compared	with	total	estimated	labor	hours	or	costs	to	be	incurred.	When	adjustments	in	estimated	total	contract	revenues	or	estimated total	costs	or	labor	hours	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.	Changes	in	estimates	on	projects	accounted	for	under	the	percentage-of-completion	method	favorably	impacted	operating income	by	approximately	$20	in	fiscal	year	2016,	primarily	during	the	fourth	quarter.	Our	changes	in	estimates	would	not	have	significantly	impacted amounts	recorded	in	prior	years.	Changes	in	estimates	during	fiscal	years	2015	and	2014	were	not	significant.

Certain	contracts	associated	with	facilities	that	are	built	to	provide	product	to	a	specific	customer	are	required	to	be	accounted	for	as	leases.	In	cases where	operating	lease	treatment	is	necessary,	there	is	no	difference	in	revenue	recognition	over	the	life	of	the	contract	as	compared	to	accounting	for	the contract	as	product	sales.	In	cases	where	capital	lease	treatment	is	necessary,	the	timing	of	revenue	and	expense	recognition	is	impacted.	Revenue	and expense	are	recognized	up	front	for	the	sale	of	equipment	component	of	the	contract	as	compared	to	revenue	recognition	over	the	life	of	the	arrangement under	contracts	not	qualifying	as	capital	leases.	Additionally,	a	portion	of	the	revenue	representing	interest	income	from	the	financing	component	of	the lease	receivable	is	reflected	as	sales	over	the	life	of	the	contract.	Allowances	for	credit	losses	associated	with	capital	lease	receivables	are	recorded using	the	specific	identification	method.	As	of	30	September	2016	and	2015,	the	credit	quality	of	capital	lease	receivables	did	not	require	an	allowance	for credit	losses.

If	an	arrangement	involves	multiple	deliverables,	the	delivered	items	are	considered	separate	units	of	accounting	if	the	items	have	value	on	a	stand-alone basis.	Revenues	are	allocated	to	each	deliverable	based	upon	relative	selling	prices	derived	from	company	specific	evidence.

Amounts	billed	for	shipping	and	handling	fees	are	classified	as	sales	in	the	consolidated	income	statements.

Amounts	billed	for	sales	and	use	taxes,	value-added	taxes,	and	certain	excise	and	other	specific	transactional	taxes	imposed	on	revenue-producing transactions	are	presented	on	a	net	basis	and	excluded	from	sales	in	the	consolidated	income	statements.	We	record	a	liability	until	remitted	to	the respective	taxing	authority.

# Cost	of	Sales

Cost	of	sales	predominantly	represents	the	cost	of	tangible	products	sold.	These	costs	include	labor,	raw	materials,	plant	engineering,	power, depreciation,	production	supplies	and	materials	packaging	costs,	and	maintenance	costs.	Costs	incurred	for	shipping	and	handling	are	also	included	in cost	of	sales.

# Depreciation

Depreciation	is	recorded	using	the	straight-line	method,	which	deducts	equal	amounts	of	the	cost	of	each	asset	from	earnings	every	year	over	its expected	economic	useful	life.	The	principal	lives	for	major	classes	of	plant	and	equipment	are	summarized	in	Note	9,	Plant	and	Equipment,	net.

# Selling	and	Administrative

The	principal	components	of	selling	and	administrative	expenses	are	compensation,	advertising,	and	promotional	costs.

# Postemployment	Benefits

We	provide	termination	benefits	to	employees	as	part	of	ongoing	benefit	arrangements	and	record	a	liability	for	termination	benefits	when	probable	and estimable.	These	criteria	are	met	when	management,	with	the	appropriate	level	of	authority,	approves	and	commits	to	its	plan	of	action	for	termination; the	plan	identifies	the	employees	to	be	terminated	and	their	related	benefits;	and	the	plan	is	to	be	completed	within	one	year.	We	do	not	provide	one-time benefit	arrangements	of	significance.

# Fair	Value	Measurements

We	are	required	to	measure	certain	assets	and	liabilities	at	fair	value,	either	upon	initial	measurement	or	for	subsequent	accounting	or	reporting.	For example,	fair	value	is	used	in	the	initial	measurement	of	net	assets	acquired	in	a	business	combination;	on	a	recurring	basis	in	the	measurement	of derivative	financial	instruments;	and	on	a	nonrecurring	basis	when	long-lived	assets	are	written	down	to	fair	value	when	held	for	sale	or	determined	to	be impaired.	Refer	to	Note	14,	Fair	Value	Measurements,	for	information	on	the	methods	and	assumptions	used	in	our	fair	value	measurements.

# Financial	Instruments

We	address	certain	financial	exposures	through	a	controlled	program	of	risk	management	that	includes	the	use	of	derivative	financial	instruments.	The types	of	derivative	financial	instruments	permitted	for	such	risk	management	programs	are	specified	in	policies	set	by	management.	Refer	to	Note	13, Financial	Instruments,	for	further	detail	on	the	types	and	use	of	derivative	instruments	into	which	we	enter.

Major	financial	institutions	are	counterparties	to	all	of	these	derivative	contracts.	We	have	established	counterparty	credit	guidelines	and	generally	enter into	transactions	with	financial	institutions	of	investment	grade	or	better.	Management	believes	the	risk	of	incurring	losses	related	to	credit	risk	is	remote, and	any	losses	would	be	immaterial	to	the	consolidated	financial	results,	financial	condition,	or	liquidity.

We	recognize	derivatives	on	the	balance	sheet	at	fair	value.	On	the	date	the	derivative	instrument	is	entered	into,	we	generally	designate	the	derivative as	either	(1)	a	hedge	of	a	forecasted	transaction	or	of	the	variability	of	cash	flows	to	be	received	or	paid	related	to	a	recognized	asset	or	liability	(cash flow	hedge),	(2)	a	hedge	of	a	net	investment	in	a	foreign	operation	(net	investment	hedge),	or	(3)	a	hedge	of	the	fair	value	of	a	recognized	asset	or liability	(fair	value	hedge).

The	following	details	the	accounting	treatment	of	our	cash	flow,	fair	value,	net	investment,	and	non-designated	hedges:

•	 Changes	in	the	fair	value	of	a	derivative	that	is	designated	as	and	meets	the	cash	flow	hedge	criteria	are	recorded	in	Accumulated	other comprehensive	loss	(AOCL)	to	the	extent	effective	and	then	recognized	in	earnings	when	the	hedged	items	affect	earnings.

•	 Changes	in	the	fair	value	of	a	derivative	that	is	designated	as	and	meets	all	the	required	criteria	for	a	fair	value	hedge,	along	with	the	gain	or	loss on	the	hedged	asset	or	liability	that	is	attributable	to	the	hedged	risk,	are	recorded	in	current	period	earnings.

•	 Changes	in	the	fair	value	of	a	derivative	and	foreign	currency	debt	that	are	designated	as	and	meet	all	the	required	criteria	for	a	hedge	of	a	net investment	are	recorded	as	translation	adjustments	in	AOCL.

•	 Changes	in	the	fair	value	of	a	derivative	that	is	not	designated	as	a	hedge	are	recorded	immediately	in	earnings.

We	formally	document	the	relationships	between	hedging	instruments	and	hedged	items,	as	well	as	our	risk	management	objective	and	strategy	for undertaking	various	hedge	transactions.	This	process	includes	relating	derivatives	that	are	designated	as	fair	value	or	cash	flow	hedges	to	specific	assets and	liabilities	on	the	balance	sheet	or	to	specific	firm	commitments	or	forecasted	transactions.	We	also	formally	assess,	at	the	inception	of	the	hedge	and on	an	ongoing	basis,	whether	derivatives	are	highly	effective	in	offsetting	changes	in	fair	values	or	cash	flows	of	the	hedged	item.	If	it	is	determined	that a	derivative	is	not	highly	effective	as	a	hedge,	or	if	a	derivative	ceases	to	be	a	highly	effective	hedge,	we	will	discontinue	hedge	accounting	with	respect to	that	derivative	prospectively.

# Foreign	Currency

Since	we	do	business	in	many	foreign	countries,	fluctuations	in	currency	exchange	rates	affect	our	financial	position	and	results	of	operations.

In	most	of	our	foreign	operations,	the	local	currency	is	considered	the	functional	currency.	Foreign	subsidiaries	translate	their	assets	and	liabilities	into U.S.	dollars	at	current	exchange	rates	in	effect	at	the	end	of	the	fiscal	period.	The	gains	or	losses	that	result	from	this	process	are	shown	as	translation adjustments	in	AOCI	in	the	equity	section	of	the	balance	sheet.

The	revenue	and	expense	accounts	of	foreign	subsidiaries	are	translated	into	U.S.	dollars	at	the	average	exchange	rates	that	prevail	during	the	period. Therefore,	the	U.S.	dollar	value	of	these	items	on	the	income	statement	fluctuates	from	period	to	period,	depending	on	the	value	of	the	dollar	against foreign	currencies.	Some	transactions	are	made	in	currencies	different	from	an	entity's	functional	currency.	Gains	and	losses	from	these	foreign	currency transactions	are	generally	included	in	other	income	(expense),	net	on	our	consolidated	income	statements	as	they	occur.

# Environmental	Expenditures

Accruals	for	environmental	loss	contingencies	are	recorded	when	it	is	probable	that	a	liability	has	been	incurred	and	the	amount	of	loss	can	be reasonably	estimated.	Remediation	costs	are	capitalized	if	the	costs	improve	the

Company's	property	as	compared	with	the	condition	of	the	property	when	originally	constructed	or	acquired,	or	if	the	costs	prevent	environmental contamination	from	future	operations.	We	expense	environmental	costs	related	to	existing	conditions	resulting	from	past	or	current	operations	and	from which	no	current	or	future	benefit	is	discernible.	The	amounts	charged	to	income	from	continuing	operations	related	to	environmental	matters	totaled $27.0	in	fiscal	2016,	$28.3	in	2015,	and	$35.1	in	2014.

The	measurement	of	environmental	liabilities	is	based	on	an	evaluation	of	currently	available	information	with	respect	to	each	individual	site	and considers	factors	such	as	existing	technology,	presently	enacted	laws	and	regulations,	and	prior	experience	in	remediation	of	contaminated	sites.	An environmental	liability	related	to	cleanup	of	a	contaminated	site	might	include,	for	example,	a	provision	for	one	or	more	of	the	following	types	of	costs:	site investigation	and	testing	costs,	cleanup	costs,	costs	related	to	soil	and	water	contamination	resulting	from	tank	ruptures,	post-remediation	monitoring costs,	and	outside	legal	fees.	These	liabilities	include	costs	related	to	other	potentially	responsible	parties	to	the	extent	that	we	have	reason	to	believe such	parties	will	not	fully	pay	their	proportionate	share.	They	do	not	take	into	account	any	claims	for	recoveries	from	insurance	or	other	parties	and	are not	discounted.

As	assessments	and	remediation	progress	at	individual	sites,	the	amount	of	projected	cost	is	reviewed,	and	the	liability	is	adjusted	to	reflect	additional technical	and	legal	information	that	becomes	available.	Management	has	an	established	process	in	place	to	identify	and	monitor	the	Company's environmental	exposures.	An	environmental	accrual	analysis	is	prepared	and	maintained	that	lists	all	environmental	loss	contingencies,	even	where	an accrual	has	not	been	established.	This	analysis	assists	in	monitoring	the	Company's	overall	environmental	exposure	and	serves	as	a	tool	to	facilitate ongoing	communication	among	the	Company's	technical	experts,	environmental	managers,	environmental	lawyers,	and	financial	management	to	ensure that	required	accruals	are	recorded	and	potential	exposures	disclosed.

Given	inherent	uncertainties	in	evaluating	environmental	exposures,	actual	costs	to	be	incurred	at	identified	sites	in	future	periods	may	vary	from	the estimates.	Refer	to	Note	17,	Commitments	and	Contingencies,	for	additional	information	on	the	Company's	environmental	loss	contingencies.

The	accruals	for	environmental	liabilities	are	reflected	in	the	consolidated	balance	sheets,	primarily	as	part	of	other	noncurrent	liabilities.

# Litigation

In	the	normal	course	of	business,	we	are	involved	in	legal	proceedings.	We	accrue	a	liability	for	such	matters	when	it	is	probable	that	a	liability	has	been incurred	and	the	amount	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.	The accrual	for	a	litigation	loss	contingency	includes	estimates	of	potential	damages	and	other	directly	related	costs	expected	to	be	incurred.	Refer	to	Note 17,	Commitments	and	Contingencies,	for	additional	information	on	our	current	legal	proceedings.

# Share-Based	Compensation

We	have	various	share-based	compensation	programs,	which	include	deferred	stock	units,	stock	options,	and	restricted	stock.	We	expense	the	grant- date	fair	value	of	these	awards	over	the	vesting	period	during	which	employees	perform	related	services.	Expense	recognition	is	accelerated	for retirement-eligible	individuals	who	would	meet	the	requirements	for	vesting	of	awards	upon	their	retirement.	We	utilize	a	Black	Scholes	model	to	value stock	option	awards.	The	grant-date	fair	value	of	the	deferred	stock	units	tied	to	a	market	condition	is	estimated	using	a	Monte	Carlo	simulation	model.

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	bases	of	assets	and	liabilities	using	enacted	tax	rates	in	effect	for	the	year	in	which	the differences	are	expected	to	be	recovered	or	settled.	A	principal	temporary	difference	results	from	the	excess	of	tax	depreciation	over	book	depreciation because	accelerated	methods	of	depreciation	and	shorter	useful	lives	are	used	for	income	tax	purposes.	The	cumulative	impact	of	a	change	in	tax	rates or	regulations	is	included	in	income	tax	expense	in	the	period	that	includes	the	enactment	date.	We	recognize	deferred	tax	assets	net	of	existing valuation	allowance	to	the	extent	we	believe	that	these	assets	are	more	likely	than	not	to	be	realized	considering	all	available	evidence.

A	tax	benefit	for	an	uncertain	tax	position	is	recognized	when	it	is	more	likely	than	not	that	the	position	will	be	sustained	upon	examination	based	on	its technical	merits.	This	position	is	measured	as	the	largest	amount	of	tax	benefit	that	is	greater	than	50%	likely	of	being	realized.	Interest	and	penalties related	to	unrecognized	tax	benefits	are	recognized	as	a	component	of	income	tax	expense.	For	additional	information	regarding	our	income	taxes,	refer to	Note	23,	Income	Taxes.

# Cash	and	Cash	Items

Cash	and	cash	items	include	cash,	time	deposits,	and	certificates	of	deposit	acquired	with	an	original	maturity	of	three	months	or	less.

# Trade	Receivables,	net

Trade	receivables	comprise	amounts	owed	to	us	through	our	operating	activities	and	are	presented	net	of	allowances	for	doubtful	accounts.	The allowances	for	doubtful	accounts	represent	estimated	uncollectible	receivables	associated	with	potential	customer	defaults	on	contractual	obligations.	A provision	for	customer	defaults	is	made	on	a	general	formula	basis	when	it	is	determined	that	the	risk	of	some	default	is	probable	and	estimable	but cannot	yet	be	associated	with	specific	customers.	The	assessment	of	the	likelihood	of	customer	defaults	is	based	on	various	factors,	including	the	length of	time	the	receivables	are	past	due,	historical	experience,	and	existing	economic	conditions.	The	allowance	also	includes	amounts	for	certain	customers where	a	risk	of	default	has	been	specifically	identified,	considering	factors	such	as	the	financial	condition	of	the	customer	and	customer	disputes	over contractual	terms	and	conditions.	Allowance	for	doubtful	accounts	were	$56.8	and	$48.5	as	of	fiscal	year	end	30	September	2016	and	2015,	respectively. Provisions	to	the	allowance	for	doubtful	accounts	charged	against	income	were	$22.8,	$26.3	and	$16.4	in	2016,	2015,	and	2014,	respectively.

# Inventories

Inventories	are	stated	at	the	lower	of	cost	or	market.	We	write	down	our	inventories	for	estimated	obsolescence	or	unmarketable	inventory	based	upon assumptions	about	future	demand	and	market	conditions.

We	utilize	the	last-in,	first-out	(LIFO)	method	for	determining	the	cost	of	inventories	in	the	United	States	for	the	Industrial	Gases	and	the	Materials Technologies	segments.	Inventories	for	these	segments	outside	of	the	United	States	are	accounted	for	on	the	first-in,	first-out	(FIFO)	method,	as	the LIFO	method	is	not	generally	permitted	in	the	foreign	jurisdictions	where	these	segments	operate.	The	inventories	of	the	Industrial	Gases	–	Global	and the	Corporate	and	other	segments	on	a	worldwide	basis,	as	well	as	all	other	inventories,	are	accounted	for	on	the	FIFO	basis.

At	the	business	segment	level,	inventories	are	recorded	at	FIFO	and	the	LIFO	pool	adjustments	are	not	allocated	to	the	business	segments.

The	equity	method	of	accounting	is	used	when	we	exercise	significant	influence	but	do	not	have	operating	control,	generally	assumed	to	be	20%	–	50% ownership.	Under	the	equity	method,	original	investments	are	recorded	at	cost	and	adjusted	by	our	share	of	undistributed	earnings	or	losses	of	these companies.	Equity	investments	are	reviewed	for	impairment	whenever	events	or	changes	in	circumstances	indicate	that	the	carrying	amount	of	the investment	may	not	be	recoverable.

Plant	and	equipment	is	stated	at	cost	less	accumulated	depreciation.	Construction	costs,	labor,	and	applicable	overhead	related	to	installations	are capitalized.	Expenditures	for	additions	and	improvements	that	extend	the	lives	or	increase	the	capacity	of	plant	assets	are	capitalized.	The	costs	of maintenance	and	repairs	of	plant	and	equipment	are	charged	to	expense	as	incurred.

Fully	depreciated	assets	are	retained	in	the	gross	plant	and	equipment	and	accumulated	depreciation	accounts	until	they	are	removed	from	service.	In the	case	of	disposals,	assets	and	related	depreciation	are	removed	from	the	accounts,	and	the	net	amounts,	less	proceeds	from	disposal,	are	included	in income.	Refer	to	Note	9,	Plant	and	Equipment,	net,	for	further	detail.

# Computer	Software

We	capitalize	costs	incurred	to	purchase	or	develop	software	for	internal	use.	Capitalized	costs	include	purchased	computer	software	packages, payments	to	vendors/consultants	for	development	and	implementation	or	modification	to	a	purchased	package	to	meet	our	requirements,	payroll	and related	costs	for	employees	directly

involved	in	development,	and	interest	incurred	while	software	is	being	developed.	Capitalized	computer	software	costs	are	included	in	the	balance	sheet classification	plant	and	equipment,	net	and	depreciated	over	the	estimated	useful	life	of	the	software,	generally	a	period	of	three	to	ten	years.

# Capitalized	Interest

As	we	build	new	plant	and	equipment,	we	include	in	the	cost	of	these	assets	a	portion	of	the	interest	payments	we	make	during	the	year.	The	amount	of capitalized	interest	was	$32.9,	$49.1,	and	$33.0	in	2016,	2015,	and	2014,	respectively.

# Impairment	of	Long-Lived	Assets

Long-lived	assets	are	grouped	for	impairment	testing	at	the	lowest	level	for	which	there	are	identifiable	cash	flows	that	are	largely	independent	of	the cash	flows	of	other	assets	and	liabilities	and	are	evaluated	for	impairment	whenever	events	or	changes	in	circumstances	indicate	that	the	carrying amount	of	an	asset	group	may	not	be	recoverable.	We	assess	recoverability	by	comparing	the	carrying	amount	of	the	asset	group	to	estimated undiscounted	future	cash	flows	expected	to	be	generated	by	the	asset	group.	If	an	asset	group	is	considered	impaired,	the	impairment	loss	to	be recognized	is	measured	as	the	amount	by	which	the	asset	group's	carrying	amount	exceeds	its	fair	value.	Long-lived	assets	to	be	sold	are	reported	at the	lower	of	carrying	amount	or	fair	value	less	cost	to	sell.

# Asset	Retirement	Obligations

The	fair	value	of	a	liability	for	an	asset	retirement	obligation	is	recognized	in	the	period	in	which	it	is	incurred.	The	fair	value	of	the	liability	is	measured using	discounted	estimated	cash	flows	and	is	adjusted	to	its	present	value	in	subsequent	periods	as	accretion	expense	is	recorded.	The	corresponding asset	retirement	costs	are	capitalized	as	part	of	the	carrying	amount	of	the	related	long-lived	asset	and	depreciated	over	the	asset's	useful	life.	Our	asset retirement	obligations	are	primarily	associated	with	Industrial	Gases	on-site	long-term	supply	contracts,	under	which	we	have	built	a	facility	on	land owned	by	the	customer	and	are	obligated	to	remove	the	facility	at	the	end	of	the	contract	term.	Our	asset	retirement	obligations	totaled	$119.9	and $109.4	at	30	September	2016	and	2015,	respectively.

Business	combinations	are	accounted	for	using	the	acquisition	method.	The	purchase	price	is	allocated	to	the	assets	acquired	and	liabilities	assumed based	on	their	estimated	fair	market	values.	Any	excess	purchase	price	over	the	fair	market	value	of	the	net	assets	acquired,	including	identified intangibles,	is	recorded	as	goodwill.	Preliminary	purchase	price	allocations	are	made	at	the	date	of	acquisition	and	finalized	when	information	needed	to affirm	underlying	estimates	is	obtained,	within	a	maximum	allocation	period	of	one	year.

Goodwill	is	subject	to	impairment	testing	at	least	annually.	In	addition,	goodwill	is	tested	more	frequently	if	a	change	in	circumstances	or	the	occurrence of	events	indicates	that	potential	impairment	exists.	Refer	to	Note	10,	Goodwill,	for	further	detail.

Intangible	assets	with	determinable	lives	primarily	consist	of	customer	relationships,	purchased	patents	and	technology,	and	land	use	rights.	The	cost	of intangible	assets	with	determinable	lives	is	amortized	on	a	straight-line	basis	over	the	estimated	period	of	economic	benefit.	No	residual	value	is estimated	for	these	intangible	assets.	Indefinite-lived	intangible	assets	consist	of	trade	names	and	trademarks.	Indefinite-lived	intangibles	are	subject	to impairment	testing	at	least	annually.	In	addition,	intangible	assets	are	tested	more	frequently	if	a	change	in	circumstances	or	the	occurrence	of	events indicates	that	potential	impairment	exists.

Customer	relationships	are	generally	amortized	over	periods	of	five	to	twenty-five	years.	Purchased	patents	and	technology	and	other	are	generally amortized	over	periods	of	five	to	twenty	years.	Land	use	rights,	which	are	included	in	other	intangibles,	are	generally	amortized	over	a	period	of	fifty years.	Amortizable	lives	are	adjusted	whenever	there	is	a	change	in	the	estimated	period	of	economic	benefit.	Refer	to	Note	11,	Intangible	Assets,	for further	detail.

# Retirement	Benefits

The	cost	of	pension	benefits	is	recognized	over	the	employees'	service	period.	We	are	required	to	use	actuarial	methods	and	assumptions	in	the valuation	of	defined	benefit	obligations	and	the	determination	of	expense.	Differences	between	actual	and	expected	results	or	changes	in	the	value	of obligations	and	plan	assets	are	not	recognized	in	earnings	as	they	occur	but,	rather,	systematically	and	gradually	over	subsequent	periods.	Refer	to Note	16,	Retirement	Benefits,	for	disclosures	related	to	our	pension	and	other	postretirement	benefits.

# Accounting	Guidance	Implemented	in	2016

# Balance	Sheet	Classification	of	Deferred	Taxes

In	November	2015,	the	Financial	Accounting	Standards	Board	(FASB)	issued	guidance	to	simplify	the	presentation	of	deferred	income	taxes	by	requiring that	all	deferred	tax	liabilities	and	assets	be	classified	as	noncurrent	on	the	balance	sheet.	As	of	the	first	quarter	of	fiscal	year	2016,	we	adopted	this guidance	on	a	retrospective	basis.	Accordingly,	prior	year	amounts	have	been	reclassified	to	conform	to	the	current	year	presentation.	The	guidance, which	did	not	change	the	existing	requirement	to	net	deferred	tax	assets	and	liabilities	within	a	jurisdiction,	resulted	in	a	reclassification	adjustment	that increased	noncurrent	deferred	tax	assets	by	$13.7	and	decreased	noncurrent	deferred	tax	liabilities	by	$99.9	as	of	30	September	2015.

In	April	2014,	the	FASB	issued	an	update	to	change	the	criteria	for	determining	which	disposals	qualify	as	a	discontinued	operation	and	to	expand related	disclosure	requirements.	Under	the	new	guidance,	a	disposal	is	required	to	be	reported	in	discontinued	operations	if	the	disposal	represents	a strategic	shift	that	has	or	will	have	a	major	effect	on	operations	and	financial	results.	We	adopted	this	guidance	prospectively	for	new	disposals	and	new disposal	groups	classified	as	held	for	sale	beginning	in	the	first	quarter	of	fiscal	year	2016.	This	guidance	had	no	impact	on	our	consolidated	financial statements	upon	adoption.	As	a	result	of	actions	taken	during	the	second	quarter	of	2016,	our	Energy-from-Waste	segment	has	been	reported	as	a discontinued	operation.	Refer	to	Note	4,	Discontinued	Operations,	for	additional	information.

# New	Accounting	Guidance	to	be	Implemented

In	May	2014,	the	FASB	issued	guidance	based	on	the	principle	that	revenue	is	recognized	in	an	amount	expected	to	be	collected	and	to	which	the	entity expects	to	be	entitled	in	exchange	for	the	transfer	of	goods	or	services.	As	originally	issued,	this	guidance	was	effective	for	us	beginning	in	fiscal	year 2018.	In	August	2015,	the	FASB	deferred	the	effective	date	by	one	year	while	providing	the	option	to	early	adopt	the	standard	on	the	original	effective date.	Accordingly,	we	will	have	the	option	to	adopt	the	standard	in	either	fiscal	year	2018	or	2019.	The	guidance	can	be	adopted	either	retrospectively	or as	a	cumulative-effect	adjustment	as	of	the	date	of	adoption.

We	are	in	the	initial	stages	of	evaluating	the	adoption	alternatives	allowed	by	the	new	standard	and	the	impact	the	standard	is	expected	to	have	on	our consolidated	financial	statements.	As	the	new	standard	will	supersede	substantially	all	existing	revenue	guidance	affecting	us	under	U.S.	GAAP,	it	could impact	the	timing	of	revenue	and	cost	recognition	across	all	of	our	business	segments,	in	addition	to	our	business	processes	and	our	information technology	systems.	As	a	result,	our	evaluation	of	the	effect	of	the	new	standard	will	extend	over	future	periods.

# Consolidation	Analysis

In	February	2015,	the	FASB	issued	an	update	to	amend	current	consolidation	guidance.	The	guidance	impacts	the	analysis	an	entity	must	perform	in determining	if	it	should	consolidate	certain	legal	entities	such	as	limited	partnerships,	limited	liability	corporations,	and	securitization	structures.	The guidance	is	effective	beginning	fiscal	year	2017,	with	early	adoption	permitted.	The	guidance	may	be	applied	retrospectively	or	using	a	modified retrospective	approach	by	recording	a	cumulative-effect	adjustment	to	equity	as	of	the	beginning	of	the	fiscal	year	of	adoption.	This	guidance	will	not have	a	significant	impact	on	our	consolidated	financial	statements.

# Debt	Issuance	Costs

In	April	2015,	the	FASB	issued	guidance	requiring	that	debt	issuance	costs	related	to	a	recognized	debt	liability	be	presented	in	the	balance	sheet	as	a direct	deduction	from	the	carrying	amount	of	the	debt	instead	of	as	a	separate	deferred	asset.	In	August	2015,	the	FASB	issued	an	update	to	incorporate the	U.S.	Securities	and	Exchange	Commission	(SEC)	Staff	guidance	which	allows	debt	issuance	costs	associated	with	a	line-of-credit	arrangement	to	be presented	as	a	deferred	asset	that	is	subsequently	amortized	over	the	term	of	the	arrangement,	regardless	of	whether	there	are	any	outstanding borrowings.	This	change	in	accounting	principle	will	be	adopted	retrospectively	beginning	in	fiscal	year	2017.	This	guidance	will	not	have	a	significant impact	on	our	consolidated	financial	statements.

In	February	2016,	the	FASB	issued	guidance	which	requires	lessees	to	recognize	a	right-of-use	asset	and	lease	liability	on	the	balance	sheet	for	all leases,	including	operating	leases,	with	a	term	in	excess	of	12	months.	The	guidance	also	expands	the	quantitative	and	qualitative	disclosure requirements.	The	guidance	is	effective	in	fiscal	year	2020,	with	early	adoption	permitted,	and	must	be	applied	using	a	modified	retrospective	approach. We	are	currently	evaluating	the	impact	of	adopting	this	new	guidance	on	the	consolidated	financial	statements,	and	we	have	started	the	assessment process	by	evaluating	the	population	of	leases	under	the	revised	definition	of	what	qualifies	as	a	leased	asset.	The	Company	is	the	lessee	under	various agreements	for	real	estate,	distribution	equipment,	aircraft,	and	vehicles	that	are	currently	accounted	for	as	operating	leases	as	discussed	in	Note	12, Leases.	The	new	guidance	requires	the	lessee	to	record	operating	leases	on	the	balance	sheet	with	a	right-of-use	asset	and	corresponding	liability	for future	payment	obligations.

In	March	2016,	the	FASB	issued	an	update	to	simplify	the	accounting	for	employee	share-based	payments,	including	the	income	tax	impacts,	the classification	on	the	statement	of	cash	flows,	and	forfeitures.	The	amendments	are	effective	for	fiscal	year	2018,	with	early	adoption	permitted.	We continue	to	evaluate	the	impact	of	this	guidance	on	our	consolidated	financial	statements	and	the	timing	of	adoption.	Upon	adoption,	we	currently anticipate	a	greater	degree	of	volatility	in	the	income	tax	provision	and	effective	income	tax	rate	as	a	result	of	the	new	guidance,	which	requires	excess tax	benefits	and	deficiencies	to	be	recognized	in	the	income	statement	rather	than	in	additional	paid-in	capital	on	the	balance	sheet.

# Derivative	Contract	Novations

In	March	2016,	the	FASB	issued	guidance	to	clarify	that	a	change	in	the	counterparty	to	a	derivative	instrument	that	has	been	designated	as	a	hedging instrument	does	not,	in	and	of	itself,	require	re-designation	of	that	hedging	relationship	provided	that	all	other	hedge	accounting	criteria	continue	to	be met.	This	guidance	is	effective	in	fiscal	year	2018,	with	early	adoption	permitted.	We	do	not	expect	adoption	of	this	guidance	to	have	a	significant	impact on	our	consolidated	financial	statements.

# Credit	Losses	on	Financial	Instruments

In	June	2016,	the	FASB	issued	an	update	on	the	measurement	of	credit	losses,	which	requires	measurement	and	recognition	of	expected	credit	losses for	financial	assets,	including	trade	receivables	and	capital	lease	receivables,	held	at	the	reporting	date	based	on	historical	experience,	current conditions,	and	reasonable	and	supportable	forecasts.	The	method	to	determine	a	loss	is	different	from	the	existing	guidance,	which	requires	a	credit loss	to	be	recognized	when	it	is	probable.	The	guidance	is	effective	beginning	fiscal	year	2021,	with	early	adoption	permitted	beginning	fiscal	year	2020. We	are	currently	evaluating	the	impact	this	update	will	have	on	our	consolidated	financial	statements.

# Cash	Flow	Statement	Classification

In	August	2016,	the	FASB	issued	guidance	to	reduce	diversity	in	practice	on	how	certain	cash	receipts	and	cash	payments	are	classified	in	the	statement of	cash	flows.	The	guidance	is	effective	beginning	fiscal	year	2019,	with	early	adoption	permitted,	and	should	be	applied	retrospectively.	We	are	currently evaluating	the	impact	of	adopting	this	new	guidance	on	the	consolidated	financial	statements.

# 3.		MATERIALS	TECHNOLOGIES	SEPARATION

On	16	September	2015,	the	Company	announced	plans	to	separate	its	Materials	Technologies	business,	which	contains	two	divisions,	Electronic Materials	(EMD)	and	Performance	Materials	(PMD),	into	an	independent	publicly	traded	company	and	distribute	to	Air	Products	shareholders	all	of	the shares	of	the	new	public	company	in	a	tax-free	distribution	(a	"spin-off").	Versum	Materials,	Inc.,	or	Versum,	was	formed	as	the	new	company	to	hold	the Materials	Technologies	business	subject	to	spin-off.	On	6	May	2016,	the	Company	entered	into	an	agreement	to	sell	certain	subsidiaries	and	assets comprising	the	PMD	division	to	Evonik	Industries	AG	for	$3.8	billion	in	cash	and	the	assumption	of	certain	liabilities.	As	a	result,	the	Company	moved forward	with	the	planned	spin-off	of	Versum	containing	only	the	EMD	division.

As	further	discussed	below,	Air	Products	completed	the	separation	of	its	EMD	division	through	the	spin-off	of	Versum	on	1	October	2016.	As	a	result,	the historical	results	of	the	EMD	division	will	be	presented	as	a

discontinued	operation	beginning	in	fiscal	year	2017.	The	historical	results	of	the	PMD	division	will	be	reflected	as	a	discontinued	operation	when	it becomes	probable	for	the	sale	to	occur	and	actions	required	to	meet	the	plan	of	sale	indicate	that	it	is	unlikely	that	significant	changes	will	occur.	The PMD	division	is	not	classified	as	held	for	sale	due	to	certain	conditions	of	the	sale,	including	regulatory	and	anti-trust	requirements.	We	continue	to evaluate	the	progress	of	the	sale	of	the	PMD	division	to	determine	when	it	should	be	presented	as	a	discontinued	operation.

In	fiscal	year	2016,	we	incurred	separation	costs	of	$52.2	($48.3	after-tax,	or	$.22	per	share),	primarily	related	to	legal,	advisory,	and	indirect	tax	costs associated	with	these	transactions.	The	costs	are	reflected	on	the	consolidated	income	statements	as	"Business	separation	costs."	A	significant	portion	of these	costs	were	not	tax	deductible	because	they	were	directly	related	to	the	plan	for	the	tax-free	spin-off	of	Versum.	Our	income	tax	provision	includes additional	tax	expense	related	to	the	separation	of	$51.8	($.24	per	share),	of	which	$45.7	resulted	from	a	dividend	declared	during	the	third	quarter	of 2016	to	repatriate	$443.8	from	a	subsidiary	in	South	Korea	to	the	U.S.	due	to	the	intended	separation	of	the	EMD	division	from	the	industrial	gases business	in	South	Korea.	Previously,	most	of	these	foreign	earnings	were	considered	to	be	indefinitely	reinvested.

On	30	September	2016,	in	anticipation	of	the	spin-off,	Versum	entered	into	certain	financing	transactions	to	allow	for	a	cash	distribution	of	$550.0	and	a distribution	in-kind	of	notes	issued	by	Versum	with	an	aggregate	principal	amount	of	$425.0	to	Air	Products.	Air	Products	then	exchanged	these	notes with	certain	financial	institutions	for	$418.3	of	Air	Products'	outstanding	commercial	paper.	The	exchange	resulted	in	a	loss	of	$6.9	($4.3	after-tax,	or	$.02 per	share)	and	has	been	reflected	on	the	consolidated	income	statements	as	"Loss	on	extinguishment	of	debt."	This	loss	is	deductible	for	tax	purposes. This	non-cash	exchange	was	excluded	from	the	consolidated	statements	of	cash	flows.	Refer	to	Note	15,	Debt,	for	additional	information	on	the	Versum financing.

# Subsequent	Event

On	1	October	2016	(the	distribution	date),	Air	Products	completed	the	spin-off	of	Versum	into	a	separate	and	independent	public	company	by	way	of	a distribution	to	the	Air	Products'	stockholders	of	all	of	the	then	issued	and	outstanding	shares	of	common	stock	of	Versum	on	the	basis	of	one	share	of Versum	common	stock	for	every	two	shares	of	Air	Products'	common	stock	held	as	of	the	close	of	business	on	21	September	2016	(the	record	date	for the	distribution).	Fractional	shares	of	Versum	common	stock	were	not	distributed	to	Air	Products	common	stockholders.	Air	Products'	stockholders received	cash	in	lieu	of	fractional	shares.	As	a	result	of	the	distribution,	Versum	Materials,	Inc.	is	now	an	independent	public	company	and	its	common stock	is	listed	under	the	symbol	"VSM"	on	the	New	York	Stock	Exchange.

# Energy-from-Waste	(EfW)

On	29	March	2016,	the	Board	of	Directors	approved	the	Company's	exit	of	its	EfW	business.	As	a	result,	efforts	to	start	up	and	operate	the	two	EfW projects	located	in	Tees	Valley,	United	Kingdom,	have	been	discontinued.	The	decision	to	exit	the	business	and	stop	development	of	the	projects	was based	on	continued	difficulties	encountered	and	the	Company's	conclusion,	based	on	testing	and	analysis	completed	during	the	second	quarter	of	fiscal year	2016,	that	significant	additional	time	and	resources	would	be	required	to	make	the	projects	operational.	The	EfW	segment	is	presented	as	a discontinued	operation.	Prior	year	EfW	business	segment	information	has	been	reclassified	to	conform	to	current	year	presentation.

During	the	second	quarter	of	fiscal	year	2016,	we	recorded	a	loss	of	$945.7	($846.6	after-tax)	for	the	disposal	of	the	business.	Income	tax	benefits related	only	to	one	of	the	projects,	as	the	other	did	not	qualify	for	a	local	tax	deduction.	This	loss	included	$913.5	to	write	down	plant	assets,	previously recorded	as	construction	in	progress,	to	their	estimated	net	realizable	value	of	$20.0	and	$32.2	to	record	a	liability	for	plant	disposition	and	other	costs. We	estimated	the	net	realizable	value	of	the	projects	as	of	31	March	2016	assuming	an	orderly	liquidation	of	assets	capable	of	being	marketed	on	a secondary	equipment	market	based	on	market	quotes	and	our	experience	with	selling	similar	equipment.	An	asset's	orderly	liquidation	value	is	the amount	that	could	be	realized	from	a	liquidation	sale,	given	a	reasonable	period	of	time	to	find	a	buyer,	selling	the	asset	in	the	existing	condition	where	it is	located,	and	assuming	the	highest	and	best	use	of	the	asset	by	market	participants.	There	have	been	no	significant	changes	in	the	estimated	net realizable	value	as	of	30	September	2016.	A	valuation	allowance	of	$58.0	and	unrecognized	tax	benefits	of	$7.9	were	recorded	relating	to	deferred	tax assets	on	capital	assets	generated	from	the	loss.

The	following	table	summarizes	the	carrying	amount	of	the	accrual	for	our	actions	to	dispose	of	the	EfW	business	at	30	September	2016,	which	is included	in	current	liabilities	of	discontinued	operations:

The	loss	from	operations	of	EfW	discontinued	operations	primarily	relates	to	land	lease	costs,	commercial	and	administrative	costs,	and	cost	incurred	for ongoing	project	exit	activities.

Assets	and	liabilities	of	the	EfW	discontinued	operations	consist	of	the	following:

|  | 30	September | 30	September |
| :--- | :--- | :--- |
|  | 2016 | 2015 |
| Plant\tand\tequipment | $18.2 | $— |
| Other\tcurrent\tassets | 1.2 | 1.8 |
| Total\tCurrent\tAssets | $19.4 | $1.8 |
| Plant\tand\tequipment | $— | $891.8 |
| Total\tNoncurrent\tAssets | $— | $891.8 |
| Payables\tand\taccrued\tliabilities | $19.0 | $17.0 |
| Total\tCurrent\tLiabilities | $19.0 | $17.0 |
| Other\tnoncurrent\tliabilities | $— | $2.5 |
| Total\tNoncurrent\tLiabilities | $— | $2.5 |

# Homecare

In	2012,	the	Board	of	Directors	authorized	the	sale	of	our	Homecare	business.	We	sold	the	majority	of	our	Homecare	business	to	The	Linde	Group	in 2012.	In	2014,	a	gain	of	$3.9	was	recognized	for	the	sale	of	the	remaining	Homecare	business,	which	was	primarily	in	the	United	Kingdom	and	Ireland, and	the	settlement	of	contingencies	related	to	the	2012	sale	to	The	Linde	Group.

The	results	of	the	Homecare	discontinued	operations	are	summarized	below:

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Sales | $— | $— | \t$8.5 |
| Income\tbefore\ttaxes | $— | $— | $.7 |
| Income\ttax\tprovision | — | — | — |
| Income\tfrom\toperations\tof\tdiscontinued\toperations | — | — | .7 |
| Gain\ton\tsale\tof\tbusiness,\tnet\tof\ttax | — | — | 3.9 |
| Income\t(Loss)\tfrom\tDiscontinued\tOperations,\tnet\tof\ttax | $— | $— | \t$4.6 |

As	of	30	September	2016	and	2015,	there	were	no	assets	or	liabilities	classified	as	discontinued	operations	relating	to	the	Homecare	business.

The	charges	we	record	for	business	restructuring	and	cost	reduction	actions	have	been	excluded	from	segment	operating	income.

In	fiscal	year	2016,	we	recognized	an	expense	of	$33.9	($24.0	after-tax,	or	$.11	per	share)	for	severance	and	other	benefits	related	to	cost	reduction actions	which	resulted	in	the	elimination	of	approximately	700	positions.	The	expenses	related	primarily	to	the	Industrial	Gases	–	Americas	and	the Industrial	Gases	–	EMEA	segments.

The	following	table	summarizes	the	carrying	amount	of	the	accrual	for	cost	reduction	actions	at	30	September	2016:

On	18	September	2014,	we	announced	plans	to	reorganize	the	Company,	including	realignment	of	our	businesses	in	new	reporting	segments	and	other organizational	changes,	effective	as	of	1	October	2014.	As	a	result	of	this	reorganization,	we	incurred	severance	and	other	charges.

In	fiscal	year	2015,	we	recognized	an	expense	of	$207.7	($153.2	after-tax,	or	$.71	per	share).	Severance	and	other	benefits	totaled	$151.9	and	related	to the	elimination	of	approximately	2,000	positions.	Asset	and	associated	contract	actions	totaled	$55.8	and	related	primarily	to	a	plant	shutdown	in	the Corporate	and	other	segment	and	the	exit	of	product	lines	within	the	Industrial	Gases	–	Global	and	Materials	Technologies	segments.	The	2015	charges related	to	the	segments	as	follows:	$31.7	in	Industrial	Gases	–	Americas,	$52.2	in	Industrial	Gases	–	EMEA,	$10.3	in	Industrial	Gases	–	Asia,	$37.0	in Industrial	Gases	–	Global,	$27.6	in	Materials	Technologies,	and	$48.9	in	Corporate	and	other.

During	the	fourth	quarter	of	2014,	an	expense	of	$12.7	($8.2	after-tax,	or	$.04	per	share)	was	incurred	relating	to	the	elimination	of	approximately	50 positions.	The	2014	charge	related	to	the	segments	as	follows:	$2.9	in	Industrial	Gases	–	Americas,	$3.1	in	Industrial	Gases	–	EMEA,	$1.5	in	Industrial Gases	–	Asia,	$1.5	in	Industrial	Gases	–	Global,	$1.6	in	Materials	Technologies,	and	$2.1	in	Corporate	and	other.

The	following	table	summarizes	the	carrying	amount	of	the	accrual	for	the	business	realignment	and	reorganization	at	30	September	2016:

|  | Severance	and | Asset |  |
| :--- | :--- | :--- | :--- |
|  | Other\tBenefits | Actions/Other | Total |
| 2014\tCharge | $12.7 | $— | $12.7 |
| Cash\texpenditures | (2.2) | — | (2.2) |
| 30\tSeptember\t2014 | $10.5 | $— | $10.5 |
| 2015\tCharge | 151.9 | 55.8 | 207.7 |
| Amount\treflected\tin\tpension\tliability | (14.0) | — | (14.0) |
| Noncash\texpenses | — | (47.4) | (47.4) |
| Cash\texpenditures | (113.5) | (1.2) | \t(114.7) |
| Currency\ttranslation\tadjustment | (.4) | — | (.4) |
| 30\tSeptember\t2015 | $34.5 | $7.2 | $41.7 |
| Cash\texpenditures | (34.1) | (3.8) | (37.9) |
| Currency\ttranslation\tadjustment | (.4) | — | (.4) |
| 30\tSeptember\t2016 | $— | $3.4 | $3.4 |

# 6.		BUSINESS	COMBINATION

On	30	December	2014,	we	acquired	our	partner's	equity	ownership	interest	in	a	liquefied	atmospheric	industrial	gases	production	joint	venture	in	North America	for	$22.6,	which	increased	our	ownership	from	50%	to	100%.	The	transaction	was	accounted	for	as	a	business	combination,	and	subsequent	to the	acquisition,	the	results	are	consolidated	within	our	Industrial	Gases	–	Americas	segment.	The	assets	acquired,	primarily	plant	and	equipment,	were recorded	at	their	fair	market	values	as	of	the	acquisition	date.

The	acquisition	date	fair	value	of	the	previously	held	equity	interest	was	determined	using	a	discounted	cash	flow	analysis	under	the	income	approach. The	twelve	months	ended	30	September	2015	include	a	gain	of	$17.9	($11.2	after-tax,	or	$.05	per	share)	as	a	result	of	revaluing	our	previously	held equity	interest	to	fair	value	as	of	the	acquisition	date.	This	gain	is	reflected	on	the	consolidated	income	statements	as	"Gain	on	previously	held	equity interest."

The	components	of	inventories	are	as	follows:

| 30	September | 2016 | 2015 |
| :--- | :--- | :--- |
| Inventories\tat\tFIFO\tcost |  |  |
| Finished\tgoods | $456.7 | $494.9 |
| Work\tin\tprocess | 38.2 | 34.4 |
| Raw\tmaterials,\tsupplies\tand\tother | 204.0 | 229.3 |
|  | 698.9 | 758.6 |
| Less:\tExcess\tof\tFIFO\tcost\tover\tLIFO\tcost | (79.0) | (100.8) |
| Inventories | $619.9 | $657.8 |

Inventories	valued	using	the	LIFO	method	comprised	34.9%	and	35.8%	of	consolidated	inventories	before	LIFO	adjustment	at	30	September	2016	and 2015,	respectively.	Liquidation	of	LIFO	inventory	layers	in	2016,	2015,	and	2014	did	not	materially	affect	the	results	of	operations.

FIFO	cost	approximates	replacement	cost.

# 8.		SUMMARIZED	FINANCIAL	INFORMATION	OF	EQUITY	AFFILIATES

The	summarized	financial	information	below	is	on	a	combined	100%	basis	and	has	been	compiled	based	on	financial	statements	of	the	companies accounted	for	by	the	equity	method.	The	amounts	presented	include	the	accounts	of	the	following	equity	affiliates:

On	19	April	2015,	a	joint	venture	between	Air	Products	and	ACWA	Holding	entered	into	a	20-year	oxygen	and	nitrogen	supply	agreement	to	supply	Saudi Aramco's	oil	refinery	and	power	plant	being	built	in	Jazan,	Saudi	Arabia.	Air	Products	owns	25%	of	the	joint	venture	and	guarantees	the	repayment	of	its share	of	an	equity	bridge	loan.	ACWA	also	guarantees	their	share	of	the	loan.	As	of	30	September	2016	and	2015,	other	noncurrent	liabilities	included $94.4	and	$67.5,	respectively,	for	our	obligation	to	make	future	equity	contributions	based	on	our	proportionate	share	of	the	advances	received	by	the joint	venture	under	the	loan.	During	2016	and	2015,	we	recorded	noncash	transactions	which	resulted	in	an	increase	of	$26.9	and	$67.5,	respectively,	to our	investment	in	net	assets	of	and	advances	to	equity	affiliates.	These	noncash	transactions	have	been	excluded	from	the	consolidated	statements	of cash	flows.	In	total,	we	expect	to	invest	approximately	$100	in	this	joint	venture.	We	determined	that	the	joint	venture	is	a	variable	interest	entity,	for which	we	are	not	the	primary	beneficiary.	Air	Products	has	a	long-term	sale	of	equipment	contract	with	the	joint	venture	to	engineer,	procure,	and construct	the	industrial	gas	facilities	that	will	supply	the	gases	to	Saudi	Aramco.

In	December	2015,	we	sold	our	investment	in	Daido	Air	Products	Electronics,	Inc.	for	$15.9,	which	resulted	in	a	gain	of	$.7.	The	carrying	value	at	time	of sale	included	a	$12.8	investment	in	net	assets	of	and	advances	to	equity	affiliates	and	a	$2.4	foreign	currency	translation	loss	that	had	been	deferred	in accumulated	other	comprehensive	loss.

In	January	2016,	we	sold	our	investment	in	SembCorp	Air	Products	(HyCo)	Pte.	Ltd.	The	transaction	did	not	have	a	material	impact	on	the	financial statements.

There	have	been	no	other	significant	changes	to	our	investments	in	equity	affiliates	during	fiscal	year	2016.

The	investment	in	net	assets	of	and	advances	to	equity	affiliates	as	of	30	September	2016	and	2015	included	investment	in	foreign	affiliates	of	$1,286.0 and	$1,262.8,	respectively.

As	of	30	September	2016	and	2015,	the	amount	of	investment	in	companies	accounted	for	by	the	equity	method	included	goodwill	in	the	amount	of $109.5	and	$112.0,	respectively.

# 9.		PLANT	AND	EQUIPMENT,	NET

The	major	classes	of	plant	and	equipment	are	as	follows:

| 30	September | in	years | 2016 | 2015 |
| :--- | :--- | :--- | :--- |
| Land |  | $232.9 | $226.2 |
| Buildings | 30 | 1,119.8 | 1,080.2 |
| Production\tfacilities |  |  |  |
| Industrial\tGases\t–\tRegional(A) | 10\tto\t20\t\t\t12,372.1\t\t\t\t\t11,873.8 | 10\tto\t20\t\t\t12,372.1\t\t\t\t\t11,873.8 | 10\tto\t20\t\t\t12,372.1\t\t\t\t\t11,873.8 |
| Materials\tTechnologies | 10\tto\t15 | 859.2 | 902.7 |
| Other | 5\tto\t20 | 36.0 | 43.0 |
| Total\tproduction\tfacilities |  | \t\t\t13,267.3\t\t\t\t\t12,819.5 | \t\t\t13,267.3\t\t\t\t\t12,819.5 |
| (B)\nDistribution\tand\tother\tmachinery\tand\tequipment | 5\tto\t25 | 4,042.1 | 3,963.1 |
| Construction\tin\tprogress |  | 1,528.0 | 1,373.8 |
| Plant\tand\tequipment,\tat\tcost |  | \t\t\t20,190.1\t\t\t\t\t19,462.8 | \t\t\t20,190.1\t\t\t\t\t19,462.8 |

(A) Depreciable	lives	of	production	facilities	related	to	long-term	customer	supply	contracts	are	matched	to	the	contract	lives.

(B) The	depreciable	lives	for	various	types	of	distribution	equipment	are	10	to	25	years	for	cylinders,	depending	on	the	nature	and	properties	of	the	product;	20	years for	tanks;	7.5	years	for	customer	stations;	and	5	to	15	years	for	tractors	and	trailers.

Changes	to	the	carrying	amount	of	consolidated	goodwill	by	segment	are	as	follows:

|  | Industrial | Industrial | Industrial | Industrial |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Gases– | Gases– | Gases– | Gases– | Materials |  |
|  | Americas | EMEA | Asia | Global | Technologies | Total |
| Goodwill,\tnet\tat\t30\tSeptember\t2014 | $327.2 | $433.3 | $140.0 | $21.4 | $315.4 | \t$1,237.3 |
| Acquisitions\tand\tadjustments | 2.2 | 3.2 | — | — | — | 5.4 |
| Currency\ttranslation\tand\tother | (31.8) | (50.0) | (6.9) | (1.5) | (21.2) | (111.4) |
| Goodwill,\tnet\tat\t30\tSeptember\t2015 | $297.6 | $386.5 | $133.1 | $19.9 | $294.2 | \t$1,131.3 |
| Currency\ttranslation\tand\tother | 11.5 | (5.9) | 2.1 | .3 | 10.9 | 18.9 |
| Goodwill,\tnet\tat\t30\tSeptember\t2016 | $309.1 | $380.6 | $135.2 | $20.2 | $305.1 | \t$1,150.2 |

| 30	September | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Goodwill,\tgross | $1,408.8 | $1,375.0 | $1,522.1 |
| Accumulated\timpairment\tlosses(A) | (258.6) | (243.7) | (284.8) |
| Goodwill,\tnet | $1,150.2 | $1,131.3 | $1,237.3 |

We	conduct	goodwill	impairment	testing	in	the	fourth	quarter	of	each	fiscal	year	and	whenever	events	and	changes	in	circumstances	indicate	that	the carrying	value	of	goodwill	might	not	be	recoverable.	Our	goodwill	impairment	test	involves	a	two-step	process.	In	the	first	step,	we	estimate	the	fair	value of	each	reporting	unit	and	compare	it	to	its	carrying	value.	If	the	fair	value	of	the	reporting	unit	exceeds	its	carrying	value,	goodwill	is	not	impaired	and	no further	testing	is	required.	If	the	fair	value	of	the	reporting	unit	is	less	than	its	carrying	value,	we	perform	a	second	step	to	determine	the	amount	of goodwill	impairment	loss,	if	any.	In	the	second	step,	the	reporting	unit's	fair	value	is	allocated	to	the	assets	and	liabilities	of	the	reporting	unit,	including any	unrecognized	intangible	assets,	in	an	analysis	that	calculates	the	implied	fair	value	of	goodwill	in	the	same	manner	as	if	the	reporting	unit	were	being acquired	in	a	business	combination.	If	the	implied	fair	value	of	the	reporting	unit's	goodwill	is	less	than	its	carrying	value,	the	difference	is	recorded	as	a goodwill	impairment	charge.

In	the	fourth	quarter	of	2014,	we	determined	that	the	fair	value	of	each	reporting	unit	exceeded	its	carrying	value,	with	the	exception	of	the	Latin	America reporting	unit	within	the	Industrial	Gases	–	Americas	segment.	The	Latin	America	reporting	unit	is	composed	predominately	of	our	Indura	business	with assets	and	goodwill	associated	with	operations	in	Chile	and	other	Latin	American	countries.	In	2014,	economic	conditions	in	Latin	America,	including	the impact	of	tax	legislation	in	Chile,	became	less	favorable	due	to	increasing	inflation,	a	decline	in	Chilean	manufacturing	growth,	and	weaker	export demand	for	many	commodities.	As	a	result,	our	growth	projections	for	this	reporting	unit	were	lowered	and	we	determined	that	the	associated	goodwill was	impaired.	A	noncash	goodwill	impairment	charge	of	$305.2	was	recorded	to	write	down	goodwill	to	its	implied	fair	value	as	of	1	July	2014.	This impairment	is	reflected	on	our	consolidated	income	statements	within	"Goodwill	and	intangible	assets	impairment	charge."	As	of	30	September	2016, accumulated	impairment	losses	were	$258.6,	due	to	the	currency	impacts	since	the	loss	was	recorded	on	1	July	2014.

During	the	fourth	quarter	of	2016,	we	conducted	our	annual	goodwill	impairment	test.	We	determined	that	the	fair	value	of	all	our	reporting	units exceeded	their	carrying	value.	There	were	no	indications	of	impairment.

The	table	below	provides	details	of	acquired	intangible	assets:

|  |  | 30	September	2016 |  |  | 30	September	2015 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Accumulated |  |  | Accumulated |  |
|  |  | Amortization/ |  |  | Amortization/ |  |
|  | Gross | Impairment | Net | Gross | Impairment | Net |
| Customer\trelationships | \t$517.4 | $(155.2) | \t$362.2 | \t$507.4 | $(129.6) | \t$377.8 |
| Patents\tand\ttechnology | 76.6 | (57.9) | 18.7 | 76.9 | (53.3) | 23.6 |
| Other | 81.7 | (37.3) | 44.4 | 81.8 | (35.0) | 46.8 |
| Total\tfinite-lived\tintangibles | 675.7 | (250.4) | 425.3 | 666.1 | (217.9) | 448.2 |
| Trade\tnames\tand\ttrademarks,\tindefinite-lived | 66.2 | (3.5) | 62.7 | 63.4 | (3.3) | 60.1 |
| Total\tIntangible\tAssets | \t$741.9 | $(253.9) | \t$488.0 | \t$729.5 | $(221.2) | \t$508.3 |

The	decrease	in	net	intangible	assets	from	2015	to	2016	is	primarily	due	to	amortization.	Amortization	expense	for	intangible	assets	was	$32.9,	$36.0, and	$42.1	in	2016,	2015,	and	2014,	respectively.	Refer	to	Note	1,	Major	Accounting	Policies,	for	amortization	periods	associated	with	our	intangible assets.

In	the	fourth	quarter	of	2014,	we	conducted	our	annual	impairment	test	of	indefinite-lived	intangibles	utilizing	the	royalty	savings	method,	a	form	of	the income	approach.	We	determined	that	the	carrying	value	of	trade	names	and	trademarks	were	in	excess	of	their	fair	value,	and	as	a	result,	we	recorded an	impairment	charge	of	$4.9	to	reduce	these	assets	to	their	fair	value.	This	impairment	is	reflected	within	"Goodwill	and	intangible	asset	impairment charge"	on	our	consolidated	income	statements.	These	trade	names	and	trademarks	are	included	in	our	Industrial	Gases	–	Americas	segment.

Projected	annual	amortization	expense	for	intangible	assets	as	of	30	September	2016	is	as	follows:

# Lessee	Accounting

Capital	leases,	primarily	for	the	right	to	use	machinery	and	equipment,	are	included	with	owned	plant	and	equipment	on	the	consolidated	balance	sheet in	the	amount	of	$22.7	and	$12.8	at	30	September	2016	and	2015,	respectively.	Related	amounts	of	accumulated	depreciation	are	$4.8	and	$4.3, respectively.

Operating	leases	principally	relate	to	real	estate	and	also	include	aircraft,	distribution	equipment,	and	vehicles.	Certain	leases	include	escalation	clauses, renewal,	and/or	purchase	options.	Rent	expense	is	recognized	on	a	straight-line	basis	over	the	minimum	lease	term.	Rent	expense	under	operating leases,	including	month-to-month	agreements,	was	$80.8	in	2016,	$88.2	in	2015,	and	$97.9	in	2014.

At	30	September	2016,	minimum	payments	due	under	leases	are	as	follows:

|  | Capital | Operating |
| :--- | :--- | :--- |
|  | Leases | Leases |
| 2017 | $2.0 | $70.5 |
| 2018 | 1.8 | 62.5 |
| 2019 | 1.6 | 49.9 |
| 2020 | 1.6 | 38.4 |
| 2021 | 2.7 | 31.6 |
| Thereafter | 21.3 | 102.2 |
| Total | $31.0 | $355.1 |

The	present	value	of	the	above	future	capital	lease	payments	totaled	$10.2.	Refer	to	Note	15,	Debt.

In	addition	to	the	operating	lease	payments	disclosed	above,	future	minimum	payments	due	under	leases	related	to	discontinued	operations	(i.e.,	Tees Valley,	United	Kingdom	)	include	approximately	$2	in	each	of	the	next	five	years	and	$40	thereafter,	for	a	total	lease	commitment	of	approximately	$50.

# Lessor	Accounting

As	discussed	under	Revenue	Recognition	in	Note	1,	Major	Accounting	Policies,	certain	contracts	associated	with	facilities	that	are	built	to	provide	product to	a	specific	customer	are	required	to	be	accounted	for	as	leases.	Lease	receivables,	net,	are	primarily	included	in	noncurrent	capital	lease	receivables on	our	consolidated	balance	sheets,	with	the	remaining	balance	in	other	receivables	and	current	assets.

The	components	of	lease	receivables	were	as	follows:

| 30	September | 2016 | 2015 |
| :--- | :--- | :--- |
| Gross\tminimum\tlease\tpayments\treceivable | $2,072.6 | $2,322.5 |
| Unearned\tinterest\tincome | (762.7) | (888.1) |
| Lease\tReceivables,\tnet | $1,309.9 | $1,434.4 |

At	30	September	2016,	minimum	lease	payments	expected	to	be	collected	are	as	follows:

# Currency	Price	Risk	Management

Our	earnings,	cash	flows,	and	financial	position	are	exposed	to	foreign	currency	risk	from	foreign	currency	denominated	transactions	and	net	investments in	foreign	operations.	It	is	our	policy	to	minimize	our	cash	flow	volatility	from	changes	in	currency	exchange	rates.	This	is	accomplished	by	identifying	and evaluating	the	risk	that	our	cash	flows	will	change	in	value	due	to	changes	in	exchange	rates	and	by	executing	the	appropriate	strategies	necessary	to manage	such	exposures.	Our	objective	is	to	maintain	economically	balanced	currency	risk	management	strategies	that	provide	adequate	downside protection.

# Forward	Exchange	Contracts

We	enter	into	forward	exchange	contracts	to	reduce	the	cash	flow	exposure	to	foreign	currency	fluctuations	associated	with	highly	anticipated	cash	flows and	certain	firm	commitments,	such	as	the	purchase	of	plant	and	equipment.	We	also	enter	into	forward	exchange	contracts	to	hedge	the	cash	flow exposure	on	intercompany	loans.	This	portfolio	of	forward	exchange	contracts	consists	primarily	of	Euros	and	U.S.	dollars.	The	maximum	remaining	term of	any	forward	exchange	contract	currently	outstanding	and	designated	as	a	cash	flow	hedge	at	30	September	2016	is	2.8	years.

Forward	exchange	contracts	are	also	used	to	hedge	the	value	of	investments	in	certain	foreign	subsidiaries	and	affiliates	by	creating	a	liability	in	a currency	in	which	we	have	a	net	equity	position.	The	primary	currency	pairs	in	this	portfolio	of	forward	exchange	contracts	are	Euros	and	U.S.	dollars	and British	Pound	Sterling	and	U.S.	dollars.

In	addition	to	the	forward	exchange	contracts	that	are	designated	as	hedges,	we	utilize	forward	exchange	contracts	that	are	not	designated	as	hedges. These	contracts	are	used	to	economically	hedge	foreign	currency-denominated	monetary	assets	and	liabilities,	primarily	working	capital.	The	primary objective	of	these	forward	exchange	contracts	is	to	protect	the	value	of	foreign	currency-denominated	monetary	assets	and	liabilities	from	the	effects	of volatility	in	foreign	exchange	rates	that	might	occur	prior	to	their	receipt	or	settlement.	This	portfolio	of	forward	exchange	contracts	consists	of	many different	foreign	currency	pairs,	with	a	profile	that	changes	from	time	to	time	depending	on	business	activity	and	sourcing	decisions.

The	table	below	summarizes	our	outstanding	currency	price	risk	management	instruments:

|  | 30	September	2016 |  | 30	September	2015 |  |
| :--- | :--- | :--- | :--- | :--- |
|  | US$\nNotional | Years\nAverage\nMaturity | US$\nNotional | Years\nAverage\nMaturity |
| Forward\tExchange\tContracts |  |  |  |  |
| Cash\tflow\thedges | \t$4,130.3 | .5 | \t$4,543.8 | .5 |
| Net\tinvestment\thedges | 968.2 | \t\t\t\t\t\t\t\t\t\t\t2.7 | 491.3 | \t\t\t\t\t\t\t\t\t4.0 |
| Not\tdesignated | 2,850.5 | .4 | 863.3 | .7 |
| Total\tForward\tExchange\tContracts | \t$7,949.0 | .7 | \t$5,898.4 | .9 |

The	notional	value	of	forward	exchange	contracts	not	designated	in	the	table	above	increased	as	a	result	of	repayment	of	certain	outstanding intercompany	loans	prior	to	their	original	maturity	dates	in	anticipation	of	the	spin-off	of	Versum.	The	forward	exchange	contracts	no	longer	qualified	as cash	flow	hedges	due	to	the	early	repayment	of	the	loans.	We	entered	into	additional	forward	exchange	contracts	to	offset	these	outstanding	positions	to eliminate	any	future	earnings	impact.

In	addition	to	the	above,	we	use	foreign	currency-denominated	debt	to	hedge	the	foreign	currency	exposures	of	our	net	investment	in	certain	foreign subsidiaries.	The	designated	foreign	currency	denominated	debt	and	related	accrued	interest	included	€920.7	million	($1,034.4)	at	30	September	2016 and	€687.7	million	($768.4)	at	30	September	2015.	The	designated	foreign	currency-denominated	debt	is	located	on	the	balance	sheet	in	the	long-term debt	and	current	portion	of	long-term	debt	line	items.

# Debt	Portfolio	Management

It	is	our	policy	to	identify	on	a	continuing	basis	the	need	for	debt	capital	and	evaluate	the	financial	risks	inherent	in	funding	the	Company	with	debt capital.	Reflecting	the	result	of	this	ongoing	review,	the	debt	portfolio	and	hedging

program	are	managed	with	the	objectives	and	intent	to	(1)	reduce	funding	risk	with	respect	to	borrowings	made	by	us	to	preserve	our	access	to	debt capital	and	provide	debt	capital	as	required	for	funding	and	liquidity	purposes,	and	(2)	manage	the	aggregate	interest	rate	risk	and	the	debt	portfolio	in accordance	with	certain	debt	management	parameters.

# Interest	Rate	Management	Contracts

We	enter	into	interest	rate	swaps	to	change	the	fixed/variable	interest	rate	mix	of	our	debt	portfolio	in	order	to	maintain	the	percentage	of	fixed-	and variable-rate	debt	within	the	parameters	set	by	management.	In	accordance	with	these	parameters,	the	agreements	are	used	to	manage	interest	rate risks	and	costs	inherent	in	our	debt	portfolio.	Our	interest	rate	management	portfolio	generally	consists	of	fixed-to-floating	interest	rate	swaps	(which	are designated	as	fair	value	hedges),	pre-issuance	interest	rate	swaps	and	treasury	locks	(which	hedge	the	interest	rate	risk	associated	with	anticipated fixed-rate	debt	issuances	and	are	designated	as	cash	flow	hedges),	and	floating-to-fixed	interest	rate	swaps	(which	are	designated	as	cash	flow	hedges). At	30	September	2016,	the	outstanding	interest	rate	swaps	were	denominated	in	U.S.	dollars.	The	notional	amount	of	the	interest	rate	swap	agreements is	equal	to	or	less	than	the	designated	debt	being	hedged.	When	interest	rate	swaps	are	used	to	hedge	variable-rate	debt,	the	indices	of	the	swaps	and the	debt	to	which	they	are	designated	are	the	same.	It	is	our	policy	not	to	enter	into	any	interest	rate	management	contracts	which	lever	a	move	in interest	rates	on	a	greater	than	one-to-one	basis.

# Cross	Currency	Interest	Rate	Swap	Contracts

We	enter	into	cross	currency	interest	rate	swap	contracts	when	our	risk	management	function	deems	necessary.	These	contracts	may	entail	both	the exchange	of	fixed-	and	floating-rate	interest	payments	periodically	over	the	life	of	the	agreement	and	the	exchange	of	one	currency	for	another	currency at	inception	and	at	a	specified	future	date.	These	contracts	effectively	convert	the	currency	denomination	of	a	debt	instrument	into	another	currency	in which	we	have	a	net	equity	position	while	changing	the	interest	rate	characteristics	of	the	instrument.	The	contracts	are	used	to	hedge	either	certain	net investments	in	foreign	operations	or	nonfunctional	currency	cash	flows	related	to	intercompany	loans.	The	current	cross	currency	interest	rate	swap portfolio	consists	of	fixed-to-fixed	swaps	primarily	between	U.S.	dollars	and	offshore	Chinese	Renminbi,	U.S.	dollars	and	Chilean	Pesos,	and	U.S.	dollars and	British	Pound	Sterling.

The	following	table	summarizes	our	outstanding	interest	rate	management	contracts	and	cross	currency	interest	rate	swaps:

|  |  | 30	September	2016 | 30	September	2016 |  |  | 30	September	2015 | 30	September	2015 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  |  | Average | Average | Years |  | Average | Average | Years |
|  | US$ | Receive | Receive | Average | US$ | Receive | Receive | Average |
|  | Notional | Pay\t% | % | Maturity | Notional | Pay\t% | % | Maturity |
| Interest\trate\tswaps\t(fair\tvalue\thedge) | $600.0 | \tLIBOR | 2.28% | 2.3 | $600.0 | \tLIBOR | 2.77% | 3.3 |
| Cross\tcurrency\tinterest\trate\tswaps\t(net\tinvestment |  |  |  |  |  |  |  |  |
| hedge) | $517.7 | \t 3.24% | 2.43% | 2.6 | $609.9 | \t4.06% | 2.61% | 3.2 |
| Cross\tcurrency\tinterest\trate\tswaps\t(cash\tflow |  |  |  |  |  |  |  |  |
| hedge) | \t$1,088.9 | \t 4.77% | 2.72% | 3.3 | \t$1,055.2 | \t4.29% | 2.63% | 3.9 |
| Cross\tcurrency\tinterest\trate\tswaps\t(not\tdesignated) | $27.4 | \t 3.62% | .81% | 1.8 | $12.9 | \t3.12% | 3.08% | 4.1 |

The	table	below	summarizes	the	fair	value	and	balance	sheet	location	of	our	outstanding	derivatives:

|  | Balance	Sheet<br>Location | 2016 | 30	September<br>2015 | Balance	Sheet<br>Location | 30	September<br>2016 | 2015 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Derivatives\tDesignated\tas\tHedging\tInstruments: |  |  |  |  |  |  |
| Forward\texchange\tcontracts | Other\treceivables | $72.3 | $52.1 | Accrued\tliabilities | \t $44.0 | $110.7 |
| Interest\trate\tmanagement\tcontracts | Other\treceivables | 19.9 | 17.6 | Accrued\tliabilities | — | — |
|  | Other\tnoncurrent |  |  | Other\tnoncurrent |  |  |
| Forward\texchange\tcontracts | assets | 44.4 | 68.5 | liabilities | 9.1 | 9.2 |
|  | Other\tnoncurrent |  |  | Other\tnoncurrent |  |  |
| Interest\trate\tmanagement\tcontracts | assets | 160.0 | 153.4 | liabilities | 12.0 | .8 |
| Total\tDerivatives\tDesignated\tas\tHedging\tInstruments |  | \t $296.6 | \t $291.6 |  | \t $65.1 | $120.7 |
| Derivatives\tNot\tDesignated\tas\tHedging\tInstruments: |  |  |  |  |  |  |
| Forward\texchange\tcontracts | Other\treceivables | $78.7 | $3.2 | Accrued\tliabilities | \t $30.0 | $3.9 |
|  | Other\tnoncurrent |  |  | Other\tnoncurrent |  |  |
| Forward\texchange\tcontracts | assets | — | 23.3 | liabilities | — | .6 |
|  | Other\tnoncurrent |  |  | Other\tnoncurrent |  |  |
| Interest\trate\tmanagement\tcontracts | assets | — | .8 | liabilities | .7 | — |
| Total\tDerivatives\tNot\tDesignated\tas\tHedging\tInstruments |  | $78.7 | $27.3 |  | \t $30.7 | $4.5 |
| Total\tDerivatives |  | \t $375.3 | \t $318.9 |  | \t $95.8 | $125.2 |

Refer	to	Note	14,	Fair	Value	Measurements,	which	defines	fair	value,	describes	the	method	for	measuring	fair	value,	and	provides	additional	disclosures regarding	fair	value	measurements.

The	table	below	summarizes	the	gain	or	loss	related	to	our	cash	flow	hedges,	fair	value	hedges,	net	investment	hedges,	and	derivatives	not	designated as	hedging	instruments:

|  | Forward |  | Currency |  |  |  |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Exchange\tContracts | Exchange\tContracts | Debt |  | Other(A) |  | Total |  |
|  | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 | 2016 | 2015 |
| Cash\tFlow\tHedges,\tnet\tof\ttax: |  |  |  |  |  |  |  |  |
| Net\tgain\t(loss)\trecognized\tin\tOCI\t(effective\tportion) | $10.5 | $(44.9) | $— | $— | $3.2 | $9.9 | \t$13.7 | \t$(35.0) |
| Net\t(gain)\tloss\treclassified\tfrom\tOCI\tto\tsales/cost\tof\tsales\t(effective |  |  |  |  |  |  |  |  |
| portion) | .2 | .6 | — | — | — | — | .2 | .6 |
| Net\t(gain)\tloss\treclassified\tfrom\tOCI\tto\tother\tincome\t(expense),\tnet |  |  |  |  |  |  |  |  |
| (effective\tportion) | (25.7) | 35.6 | — | — | \t(20.3) | \t(20.2) | \t(46.0) | 15.4 |
| Net\t(gain)\tloss\treclassified\tfrom\tOCI\tto\tinterest\texpense\t(effective |  |  |  |  |  |  |  |  |
| portion) | 6.7 | .7 | — | — | 3.3 | 2.6 | 10.0 | 3.3 |
| Net\t(gain)\tloss\treclassified\tfrom\tOCI\tto\tother\tincome\t(expense),\tnet |  |  |  |  |  |  |  |  |
| (ineffective\tportion) | (.2) | 1.5 | — | — | — | — | (.2) | 1.5 |
| Fair\tValue\tHedges: |  |  |  |  |  |  |  |  |
| Net\tgain\t(loss)\trecognized\tin\tinterest\texpense (B) | $— | $— | $— | $— | \t$(8.8) | $9.9 | \t$(8.8) | $9.9 |
| Net\tInvestment\tHedges,\tnet\tof\ttax: |  |  |  |  |  |  |  |  |
| Net\tgain\t(loss)\trecognized\tin\tOCI | $17.4 | $60.1 | \t$(9.6) | \t$91.4 | \t$35.0 | \t$49.5 | \t$42.8 | \t$201.0 |
| Derivatives\tNot\tDesignated\tas\tHedging\tInstruments: |  |  |  |  |  |  |  |  |
| (C)\nNet\tgain\t(loss)\trecognized\tin\tother\tincome\t(expense),\tnet | $(.8) | $(7.3) | $— | $— | \t$(1.6) | $.6 | \t$(2.4) | $(6.7) |
| (A) |  |  |  |  |  |  |  |  |

(A) Other	includes	the	impact	on	other	comprehensive	income	(OCI)	and	earnings	primarily	related	to	interest	rate	and	cross	currency	interest	rate	swaps.

(B) The	impact	of	fair	value	hedges	noted	above	was	largely	offset	by	recognized	gains	and	losses	resulting	from	the	impact	of	changes	in	related	interest	rates	on outstanding	debt.

(C) The	impact	of	the	non-designated	hedges	noted	above	was	largely	offset	by	recognized	gains	and	losses	resulting	from	the	impact	of	changes	in	exchange	rates on	assets	and	liabilities	denominated	in	nonfunctional	currencies.

The	amount	of	cash	flow	hedges'	unrealized	gains	and	losses	at	30	September	2016	that	are	expected	to	be	reclassified	to	earnings	in	the	next	twelve months	is	not	material.

The	cash	flows	related	to	all	derivative	contracts	are	reported	in	the	operating	activities	section	of	the	consolidated	statements	of	cash	flows.

# Credit	Risk-Related	Contingent	Features

Certain	derivative	instruments	are	executed	under	agreements	that	require	us	to	maintain	a	minimum	credit	rating	with	both	Standard	&	Poor's	and Moody's.	If	our	credit	rating	falls	below	this	threshold,	the	counterparty	to	the	derivative	instruments	has	the	right	to	request	full	collateralization	on	the derivatives'	net	liability	position.	The	net	liability	position	of	derivatives	with	credit	risk-related	contingent	features	was	$11.2	as	of	30	September	2016 and	$.2	as	of	30	September	2015.	Because	our	current	credit	rating	is	above	the	various	pre-established	thresholds,	no	collateral	has	been	posted	on these	liability	positions.

# Counterparty	Credit	Risk	Management

We	execute	financial	derivative	transactions	with	counterparties	that	are	highly	rated	financial	institutions,	all	of	which	are	investment	grade	at	this	time. Some	of	our	underlying	derivative	agreements	give	us	the	right	to	require	the	institution	to	post	collateral	if	its	credit	rating	falls	below	the	pre-established thresholds	with	Standard	&	Poor's	or	Moody's.	The	collateral	that	the	counterparties	would	be	required	to	post	was	$267.6	as	of	30	September	2016	and $226.9	as	of	30		September	2015.	No	financial	institution	is	required	to	post	collateral	at	this	time,	as	all	have	credit	ratings	at	or	above	the	threshold.

Fair	value	is	defined	as	an	exit	price,	i.e.,	the	price	that	would	be	received	to	sell	an	asset	or	paid	to	transfer	a	liability	in	an	orderly	transaction	between market	participants	at	the	measurement	date.

The	fair	value	hierarchy	prioritizes	the	inputs	to	valuation	techniques	used	to	measure	fair	value	into	three	broad	levels	as	follows:

Level	1— 	 Quoted	prices	(unadjusted)	in	active	markets	for	identical	assets	or	liabilities.

Level	2— Inputs	that	are	observable	for	the	asset	or	liability,	either	directly	or	indirectly	through	market	corroboration,	for	substantially	the	full	term	of the	asset	or	liability.

Level	3— Inputs	that	are	unobservable	for	the	asset	or	liability	based	on	our	own	assumptions	(about	the	assumptions	market	participants	would	use in	pricing	the	asset	or	liability).

The	methods	and	assumptions	used	to	measure	the	fair	value	of	financial	instruments	are	as	follows:

# Derivatives

The	fair	value	of	our	interest	rate	management	contracts	and	forward	exchange	contracts	are	quantified	using	the	income	approach	and	are	based	on estimates	using	standard	pricing	models.	These	models	take	into	account	the	value	of	future	cash	flows	as	of	the	balance	sheet	date,	discounted	to	a present	value	using	discount	factors	that	match	both	the	time	to	maturity	and	currency	of	the	underlying	instruments.	The	computation	of	the	fair	values	of these	instruments	is	generally	performed	by	the	Company.	These	standard	pricing	models	utilize	inputs	which	are	derived	from	or	corroborated	by observable	market	data	such	as	interest	rate	yield	curves	and	currency	spot	and	forward	rates.	Therefore,	the	fair	value	of	our	derivatives	is	classified	as a	level	2	measurement.	On	an	ongoing	basis,	we	randomly	test	a	subset	of	our	valuations	against	valuations	received	from	the	transaction's	counterparty to	validate	the	accuracy	of	our	standard	pricing	models.	Counterparties	to	these	derivative	contracts	are	highly	rated	financial	institutions.

Refer	to	Note	13,	Financial	Instruments,	for	a	description	of	derivative	instruments,	including	details	on	the	balance	sheet	line	classifications.

# Long-term	Debt

The	fair	value	of	our	debt	is	based	on	estimates	using	standard	pricing	models	that	take	into	account	the	value	of	future	cash	flows	as	of	the	balance sheet	date,	discounted	to	a	present	value	using	discount	factors	that	match

both	the	time	to	maturity	and	currency	of	the	underlying	instruments.	These	standard	valuation	models	utilize	observable	market	data	such	as	interest rate	yield	curves	and	currency	spot	rates.	Therefore,	the	fair	value	of	our	debt	is	classified	as	a	level	2	measurement.	We	generally	perform	the computation	of	the	fair	value	of	these	instruments.

The	carrying	values	and	fair	values	of	financial	instruments	were	as	follows:

|  | 30	September	2016<br>Carrying	Value | Fair	Value | 30	September	2015<br>Carrying	Value | Fair	Value |
| :--- | :--- | :--- | :--- | :--- |
| Assets |  |  |  |  |
| Derivatives |  |  |  |  |
| Forward\texchange\tcontracts | $195.4 | $195.4 | $147.1 | $147.1 |
| Interest\trate\tmanagement\tcontracts | 179.9 | 179.9 | 171.8 | 171.8 |
| Liabilities |  |  |  |  |
| Derivatives |  |  |  |  |
| Forward\texchange\tcontracts | $83.1 | $83.1 | $124.4 | $124.4 |
| Interest\trate\tmanagement\tcontracts | 12.7 | 12.7 | .8 | .8 |
| Long-term\tdebt,\tincluding\tcurrent\tportion | \t\t\t\t\t\t\t\t\t\t\t\t5,289.4 | \t\t\t\t5,467.2 | \t\t\t\t\t\t\t\t\t\t\t\t4,384.7 | \t\t\t\t4,645.7 |

The	carrying	amounts	reported	in	the	balance	sheet	for	cash	and	cash	items,	trade	receivables,	payables	and	accrued	liabilities,	accrued	income	taxes, and	short-term	borrowings	approximate	fair	value	due	to	the	short-term	nature	of	these	instruments.	Accordingly,	these	items	have	been	excluded	from the	above	table.

The	following	table	summarizes	assets	and	liabilities	measured	at	fair	value	on	a	recurring	basis	in	the	consolidated	balance	sheets:

|  |  | 30	September	2016 | 30	September	2016 |  |  | 30	September	2015 | 30	September	2015 |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Total | Level\t1 | Level\t2 | Level\t3 | Total | Level\t1 | Level\t2 | Level\t3 |
| Assets\tat\tFair\tValue |  |  |  |  |  |  |  |  |
| Derivatives |  |  |  |  |  |  |  |  |
| Forward\texchange\tcontracts | \t$195.4 | $— | \t$195.4 | $— | \t$147.1 | $— | \t$147.1 | $— |
| Interest\trate\tmanagement\tcontracts | 179.9 | — | 179.9 | — | 171.8 | — | 171.8 | — |
| Total\tAssets\tat\tFair\tValue | \t$375.3 | $— | \t$375.3 | $— | \t$318.9 | $— | \t$318.9 | $— |
| Liabilities\tat\tFair\tValue |  |  |  |  |  |  |  |  |
| Derivatives |  |  |  |  |  |  |  |  |
| Forward\texchange\tcontracts | $83.1 | $— | $83.1 | $— | \t$124.4 | $— | \t$124.4 | $— |
| Interest\trate\tmanagement\tcontracts | 12.7 | — | 12.7 | — | .8 | — | .8 | — |
| Total\tLiabilities\tat\tFair\tValue | $95.8 | $— | $95.8 | $— | \t$125.2 | $— | \t$125.2 | $— |

The	following	is	a	tabular	presentation	of	nonrecurring	fair	value	measurements	along	with	the	level	within	the	fair	value	hierarchy	in	which	the	fair	value measurement	in	its	entirety	falls:

(A) As	a	result	of	our	exit	from	the	Energy-from-Waste	business,	we	assessed	the	recoverability	of	assets	capable	of	being	marketed	on	a	secondary	equipment market	using	an	orderly	liquidation	valuation	resulting	in	an	impairment	loss	for	the	difference	between	the	orderly	liquidation	value	and	net	book	value	of	the assets	as	of	31	March	2016.	There	have	been	no	significant	changes	in	the	estimated	net	realizable	value	as	of	30	September	2016.	For	additional	information, see	Note	4,	Discontinued	Operations.

The	tables	below	summarize	our	outstanding	debt	at	30	September	2016	and	2015:

The	weighted	average	interest	rate	of	short-term	borrowings	outstanding	at	30	September	2016	and	2015	was	1.1%	and	.8%,	respectively.

| 30	September | Maturities | 2016 | 2015 |
| :--- | :--- | :--- | :--- |
| Payable\tin\tU.S.\tDollars |  |  |  |
| Debentures |  |  |  |
| 8.75% | 2021 | $18.4 | $18.4 |
| Medium-term\tNotes\t(weighted\taverage\trate) |  |  |  |
| Series\tD\t7.3% | 2016 | — | 32.1 |
| Series\tE\t7.6% | 2026 | 17.2 | 17.2 |
| Senior\tNotes |  |  |  |
| Note\t2.0% | 2016 | — | 350.0 |
| Note\t1.2% | 2018 | 400.0 | 400.0 |
| Note\t4.375% | 2019 | 400.0 | 400.0 |
| Note\t3.0% | 2022 | 400.0 | 400.0 |
| Note\t2.75% | 2023 | 400.0 | 400.0 |
| Note\t3.35% | 2024 | 400.0 | 400.0 |
| Versum\tFinancing |  |  |  |
| Senior\tNote\t5.5% | 2024 | 425.0 | — |
| Term\tLoan\tB\t3.346% | 2023 | 575.0 | — |
| Other\t(weighted\taverage\trate) |  |  |  |
| Variable-rate\tindustrial\trevenue\tbonds\t.68% | 2035\tto\t2050 | 769.9 | 769.9 |
| Other\t1.3% | 2018\tto\t2019 | 25.7 | 35.0 |
| Payable\tin\tOther\tCurrencies |  |  |  |
| Eurobonds\t4.625% | 2017 | 337.0 | 335.2 |
| Eurobonds\t2.0% | 2020 | 337.0 | 335.2 |
| Eurobonds\t1.0% | 2025 | 337.0 | 335.2 |
| Eurobonds\t.375% | 2021 | 393.2 | — |
| Other\t4.4% | 2016\tto\t2022 | 53.0 | 161.0 |
| Capital\tLease\tObligations |  |  |  |
| United\tStates\t5.0% | 2018 | .5 | .7 |
| Foreign\t11.3% | 2017\tto\t2036 | 9.7 | 1.1 |
| Less:\tUnamortized\tDiscount |  | (9.2) | (6.3) |
| Total\tLong-term\tDebt |  | 5,289.4 | 4,384.7 |
| Less:\tCurrent\tportion\tof\tlong-term\tdebt |  | (371.3) | (435.6) |
| Long-term\tDebt |  | $4,918.1 | $3,949.1 |

Maturities	of	long-term	debt	in	each	of	the	next	five	years	and	beyond	are	as	follows:

Various	debt	agreements	to	which	we	are	a	party	also	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	2016,	we	are	in	compliance	with	all	the	financial	and other	covenants	under	our	debt	agreements.

We	have	entered	into	a	five-year	revolving	credit	agreement	maturing	30	April	2018	with	a	syndicate	of	banks	(the	"2013	Credit	Agreement"),	under which	senior	unsecured	debt	is	available	to	both	the	Company	and	certain	of	its	subsidiaries.	There	have	been	subsequent	amendments	to	the	2013 Credit	Agreement,	and	as	of	30	September	2016,	the	maximum	borrowing	capacity	was	$2,690.0.	The	2013	Credit	Agreement	provides	a	source	of liquidity

for	the	Company	and	supports	its	commercial	paper	program.	The	Company's	only	financial	covenant	is	a	maximum	ratio	of	total	debt	to	total capitalization	no	greater	than	70%.	No	borrowings	were	outstanding	under	the	2013	Credit	Agreement	as	of	30	September	2016.

Additional	commitments	totaling	$51.3	are	maintained	by	our	foreign	subsidiaries,	all	of	which	was	borrowed	and	outstanding	at	30	September	2016.

# Versum	Financing

On	30	September	2016,	in	connection	with	the	spin-off,	Versum	entered	into	certain	financing	transactions.	Versum	continued	to	maintain	the	financing, further	described	below,	subsequent	to	the	spin-off	which	occurred	on	1	October	2016.	Refer	to	Note	3,	Materials	Technologies	Separation,	for	additional information	on	the	spin-off.

Versum	issued	$425.0	aggregate	principal	amount	of	senior	unsecured	notes	(the	"Notes").	The	Notes	bear	interest	at	a	fixed	interest	rate	of	5.50%	per annum	and	will	mature	on	September	30,	2024.	In	addition,	Versum	entered	into	a	credit	agreement	providing	for	(i)	a	senior	secured	first	lien	term	loan B	facility	in	an	aggregate	principal	amount	of	$575.0	(the	"Term	Facility")	and	(ii)	a	senior	secured	first	lien	revolving	credit	facility	in	an	aggregate principal	amount	of	$200.0	(the	"Revolving	Facility").	Borrowings	under	the	Term	Facility	bear	interest	at	a	rate	per	annum	of,	at	Versum's	option,	LIBOR, subject	to	a	minimum	floor	of	0.75%,	plus	a	margin	of	2.50%	or	an	alternate	base	rate,	subject	to	a	minimum	floor	of	1.75%,	plus	a	margin	of	1.50%. Borrowings	under	the	Revolving	Facility	bear	interest	initially	at	a	rate	per	annum	of,	at	Versum's	option,	LIBOR	plus	a	margin	of	2.00%	or	an	alternate base	rate	plus	a	margin	of	1.00%.	The	Term	Facility	amortizes	in	equal	quarterly	installments	in	aggregate	annual	amounts	equal	to	1.00%	of	the	original principal	amount	of	the	Term	Facility,	with	the	balance	payable	on	30	September	2023.	The	Revolving	Facility	matures	on	30	September	2021.	Lenders under	the	Revolving	Facility	have	a	maximum	first	lien	net	leverage	ratio	covenant	(total	debt	net	of	cash	on	hand	to	total	adjusted	EBITDA)	of	3.25:1.00 and	certain	other	customary	covenants.	On	30	September	2016,	the	Term	Facility	was	fully	drawn	and	no	borrowings	were	outstanding	under	the Revolving	Facility.

The	Company	and	certain	of	its	subsidiaries	sponsor	defined	benefit	pension	plans	and	defined	contribution	plans	that	cover	a	substantial	portion	of	its 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	and	were	replaced	with	defined	contribution	plans.	The	principal	defined	contribution	plan	is	the	Retirement	Savings Plan,	in	which	a	substantial	portion	of	the	U.S.	employees	participate;	a	similar	plan	is	offered	to	U.K.	employees.	We	also	provide	other	postretirement benefits	consisting	primarily	of	healthcare	benefits	to	U.S.	retirees	who	meet	age	and	service	requirements.

# Defined	Benefit	Pension	Plans

Pension	benefits	earned	are	generally	based	on	years	of	service	and	compensation	during	active	employment.	The	cost	of	our	defined	benefit	pension plans	included	the	following	components:

|  |  | 2016 |  | 2015 |  | 2014 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | U.S. | International | U.S. | International | U.S. | International |
| Service\tcost | $36.5 | $24.3 | $42.2 | $31.3 | $42.6 | $36.0 |
| Interest\tcost | 110.7 | 44.3 | 124.7 | 57.8 | 130.7 | 67.2 |
| Expected\treturn\ton\tplan\tassets | \t(202.0) | (78.3) | \t(202.0) | (79.8) | \t(187.8) | (78.1) |
| Amortization |  |  |  |  |  |  |
| Net\tactuarial\tloss | 85.3 | 35.6 | 78.9 | 41.4 | 78.3 | 36.1 |
| Prior\tservice\tcost | 2.8 | (.2) | 2.8 | — | 2.9 | .2 |
| Settlements | 5.1 | 1.3 | 18.9 | 2.3 | 4.8 | .7 |
| Curtailments | — | (1.1) | 5.3 | — | — | — |
| Special\ttermination\tbenefits | 2.0 | — | 7.2 | 1.5 | .2 | .1 |
| Other | (.3) | 2.1 | 1.0 | 2.1 | — | 2.0 |
| Net\tPeriodic\tBenefit\tCost | $40.1 | $28.0 | $79.0 | $56.6 | $71.7 | $64.2 |

Net	periodic	benefit	cost	is	primarily	included	in	cost	of	sales,	selling	and	administrative	expense,	and	pension	settlement	loss	on	our	consolidated income	statements.	The	amount	of	net	periodic	benefit	cost	capitalized	in	2016,	2015,	and	2014	was	not	material.

Certain	of	our	pension	plans	provide	for	a	lump	sum	benefit	payment	option	at	the	time	of	retirement,	or	for	corporate	officers,	six	months	after	their retirement	date.	A	participant's	vested	benefit	is	considered	settled	upon	cash	payment	of	the	lump	sum.	We	recognize	pension	settlement	losses	when cash	payments	exceed	the	sum	of	the	service	and	interest	cost	components	of	net	periodic	benefit	cost	of	the	plan	for	the	fiscal	year.	In	2016,	2015,	and 2014,	we	recognized	$6.4,	$21.2	and	$5.5	of	settlement	losses,	respectively,	to	accelerate	recognition	of	a	portion	of	actuarial	losses	deferred	in accumulated	other	comprehensive	loss	primarily	associated	with	the	U.S.	Supplementary	Pension	Plan.	Special	termination	benefits	for	2016,	2015,	and 2014	are	primarily	related	to	the	business	restructuring	and	cost	reduction	actions	initiated	in	their	respective	years.	In	addition,	curtailment	gains	of	$1.1 and	curtailment	losses	of	$5.3	are	also	reflected	in	the	business	restructuring	and	cost	reduction	actions	charge	in	2016	and	2015,	respectively.

We	calculate	net	periodic	benefit	cost	for	a	given	fiscal	year	based	on	assumptions	developed	at	the	end	of	the	previous	fiscal	year.	The	following	table sets	forth	the	weighted	average	assumptions	used	in	the	calculation	of	net	periodic	benefit	cost:

|  | 2016 | 2016 | 2015 | 2015 | 2014 | 2014 |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | U.S. | International | U.S. | International | U.S. | International |
| Discount\trate(A) | \t\t\t\t\t\t4.3% | \t\t\t\t\t\t\t\t\t\t\t\t\t\t3.3% | \t\t\t\t\t\t4.3% | \t\t\t\t\t\t\t\t\t\t\t\t3.6% | \t\t\t\t\t\t4.8% | \t\t\t\t\t\t\t\t\t\t\t\t4.3% |
| Expected\treturn\ton\tplan\tassets | 8.0% | 6.3% | 8.3% | 6.1% | 8.3% | 6.5% |
| Rate\tof\tcompensation\tincrease | 3.5% | 3.5% | 3.5% | 3.6% | 4.0% | 3.7% |

(A) Effective	in	2016,	the	Company	began	to	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,	as	we	believe	this	provides	a	better	measurement	of	these	costs.	The	2016	discount	rates	used	to	measure	the	service	cost and	interest	cost	of	our	U.S.	pension	plans	were	4.5%	and	4.1%,	respectively.	The	rates	used	to	measure	the	service	cost	and	interest	cost	of	our	major International	pension	plans	were	3.4%	and	3.2%,	respectively.	The	previous	method	would	have	used	a	single	discount	rate	for	both	service	and	interest	costs. The	Company	has	accounted	for	this	as	a	change	in	accounting	estimate	and,	accordingly	has	accounted	for	it	on	a	prospective	basis.	This	change	does	not affect	the	measurement	of	the	total	benefit	obligation.

The	projected	benefit	obligation	(PBO)	is	the	actuarial	present	value	of	benefits	attributable	to	employee	service	rendered	to	date,	including	the	effects	of estimated	future	salary	increases.	The	following	table	sets	forth	the	weighted	average	assumptions	used	in	the	calculation	of	the	PBO:

|  | 2016 | 2016 | 2015 |  |
| :--- | :--- | :--- | :--- | :--- |
|  | \t\t\t\t\t\tU.S. | International | \t\t\t\t\t\tU.S. | International |
| Discount\trate | \t\t\t\t\t\t3.5% | \t\t\t\t\t\t\t\t\t\t\t\t\t\t2.0% | \t\t\t\t\t\t4.4% | 3.4% |
| Rate\tof\tcompensation\tincrease | 3.5% | 3.5% | 3.5% | \t\t\t\t\t\t\t\t\t\t\t\t\t\t3.5% |

The	following	table	reflects	the	change	in	the	PBO	and	the	change	in	the	fair	value	of	plan	assets	based	on	the	plan	year	measurement	date,	as	well	as the	amounts	recognized	in	the	consolidated	balance	sheets:

|  | U.S. | 2016<br>International | 2015<br>U.S. | International |
| :--- | :--- | :--- | :--- | :--- |
| Change\tin\tProjected\tBenefit\tObligation |  |  |  |  |
| Obligation\tat\tbeginning\tof\tyear | \t$3,139.9 | $1,647.9 | \t$3,002.9 | $1,735.7 |
| Service\tcost | 36.5 | 24.3 | 42.2 | 31.3 |
| Interest\tcost | 110.7 | 44.3 | 124.7 | 57.8 |
| Amendments | 1.2 | — | 1.2 | (3.1) |
| Actuarial\tloss | 380.2 | 376.4 | 130.4 | 30.0 |
| Curtailments | (.4) | (1.2) | 5.3 | (5.1) |
| Settlement\t(gain)\tloss | 5.4 | (3.4) | 6.7 | (8.6) |
| Special\ttermination\tbenefits | 2.0 | — | 7.2 | 1.5 |
| Participant\tcontributions | — | 1.6 | — | 2.1 |
| Benefits\tpaid | (197.4) | (46.6) | (181.8) | (50.3) |
| Currency\ttranslation/other | (.4) | (193.7) | 1.1 | (143.4) |
| Obligation\tat\tEnd\tof\tYear | \t$3,477.7 | $1,849.6 | \t$3,139.9 | $1,647.9 |
| Change\tin\tPlan\tAssets |  |  |  |  |
| Fair\tvalue\tat\tbeginning\tof\tyear | \t$2,613.6 | $1,302.8 | \t$2,746.2 | $1,368.4 |
| Actual\treturn\ton\tplan\tassets | 275.2 | 273.2 | (14.0) | 25.9 |
| Company\tcontributions | 13.9 | 65.4 | 63.1 | 74.4 |
| Participant\tcontributions | — | 1.6 | — | 2.1 |
| Benefits\tpaid | (197.4) | (46.6) | (181.8) | (50.3) |
| Settlements | — | (3.4) | — | (8.6) |
| Currency\ttranslation/other | — | (181.9) | .1 | (109.1) |
| Fair\tValue\tat\tEnd\tof\tYear | \t$2,705.3 | $1,411.1 | \t$2,613.6 | $1,302.8 |
| Funded\tStatus\tat\tEnd\tof\tYear | $(772.4) | $(438.5) | \t $(526.3) | $(345.1) |
| Amounts\tRecognized |  |  |  |  |
| Noncurrent\tassets | $— | $— | $4.0 | $.3 |
| Accrued\tliabilities | (24.1) | — | (15.7) | — |
| Noncurrent\tliabilities | (748.3) | (438.5) | (514.6) | (345.4) |
| Net\tAmount\tRecognized | $(772.4) | $(438.5) | $(526.3) | $(345.1) |

Certain	U.S.	plans	offered	terminated	vested	participants	an	election	to	receive	their	accrued	pension	benefit	as	a	one-time	lump	sum	payment	in 2016.	Benefits	paid	in	2016	include	$52.9	of	lump	sum	cash	payments	in	connection	with	this	offering.

The	changes	in	plan	assets	and	benefit	obligation	that	have	been	recognized	in	other	comprehensive	income	on	a	pretax	basis	during	2016	and	2015 consist	of	the	following:

|  | U.S. | International | U.S. | International |
| :--- | :--- | :--- | :--- | :--- |
| Net\tactuarial\tloss\tarising\tduring\tthe\tperiod | \t$311.8 | $172.1 | \t$351.8 | $79.4 |
| Amortization\tof\tnet\tactuarial\tloss | (90.4) | (36.5) | (97.8) | (43.3) |
| Prior\tservice\tcost\t(credit)\tarising\tduring\tthe\tperiod | 1.2 | (.1) | 1.2 | (3.1) |
| Amortization\tof\tprior\tservice\tcost | (2.8) | .2 | (2.8) | — |
| Total | \t$219.8 | $135.7 | \t$252.4 | $33.0 |

The	net	actuarial	loss	represents	the	actual	changes	in	the	estimated	obligation	and	plan	assets	that	have	not	yet	been	recognized	in	the	consolidated income	statements	and	are	included	in	accumulated	other	comprehensive	loss.	Actuarial	losses	arising	during	2016	are	primarily	attributable	to	lower discount	rates,	partially	offset	by	a	higher	than	expected	return	on	plan	assets.	Accumulated	actuarial	gains	and	losses	that	exceed	a	corridor	are amortized	over	the	average	remaining	service	period	of	participants,	which	was	approximately	10	years	as	of	30	September	2016.

The	components	recognized	in	accumulated	other	comprehensive	loss	on	a	pretax	basis	at	30	September	consisted	of:

|  | U.S. | International | U.S. | International |
| :--- | :--- | :--- | :--- | :--- |
| Net\tactuarial\tloss | \t$1,273.6 | $769.6 | \t$1,052.2 | $634.0 |
| Prior\tservice\tcost | 8.5 | (1.9) | 10.1 | (2.0) |
| Net\ttransition\tliability | — | .4 | — | .4 |
| Total | \t$1,282.1 | $768.1 | \t$1,062.3 | $632.4 |

The	amount	of	accumulated	other	comprehensive	loss	at	30	September	2016	that	is	expected	to	be	recognized	as	a	component	of	net	periodic	pension cost	during	fiscal	year	2017,	excluding	amounts	that	may	be	recognized	through	settlement	losses,	is	as	follows:

The	accumulated	benefit	obligation	(ABO)	is	the	actuarial	present	value	of	benefits	attributed	to	employee	service	rendered	to	a	particular	date,	based	on current	salaries.	The	ABO	for	all	defined	benefit	pension	plans	was	$4,954.9	and	$4,444.8	as	of	30	September	2016	and	2015,	respectively.

The	following	table	provides	information	on	pension	plans	where	the	benefit	liability	exceeds	the	value	of	plan	assets:

|  | 30	September	2016<br>U.S. | International | 30	September	2015<br>U.S. | International |
| :--- | :--- | :--- | :--- | :--- |
| Pension\tPlans\twith\tPBO\tin\tExcess\tof\tPlan\tAssets: |  |  |  |  |
| PBO | \t$3,477.7 | $1,849.6 | \t$2,917.1 | $1,644.5 |
| Fair\tvalue\tof\tplan\tassets | 2,705.3 | 1,411.1 | 2,386.7 | 1,299.1 |
| Pension\tPlans\twith\tABO\tin\tExcess\tof\tPlan\tAssets: |  |  |  |  |
| ABO | \t$3,242.5 | $1,673.6 | \t$2,689.2 | $1,498.0 |
| Fair\tvalue\tof\tplan\tassets | 2,705.3 | 1,370.1 | 2,386.7 | 1,263.2 |

Included	in	the	tables	above	are	several	pension	arrangements	that	are	not	funded	because	of	jurisdictional	practice.	The	ABO	and	PBO	related	to	these plans	for	2016	were	$108.0	and	$115.3,	respectively.

# Pension	Plan	Assets

Our	pension	plan	investment	strategy	is	to	invest	in	diversified	portfolios	to	earn	a	long-term	return	consistent	with	acceptable	risk	in	order	to	pay retirement	benefits	and	meet	regulatory	funding	requirements	while	minimizing	company	cash	contributions	over	time.	The	plans	invest	primarily	in passive	and	actively	managed	equity	and	debt	securities.	Equity	investments	are	diversified	geographically	and	by	investment	style	and	market capitalization.	Fixed	income	investments	include	sovereign,	corporate	and	asset-backed	securities	generally	denominated	in	the	currency	of	the	plan.

Asset	allocation	targets	are	established	based	on	the	long-term	return,	volatility	and	correlation	characteristics	of	the	asset	classes,	the	profiles	of	the plans'	liabilities,	and	acceptable	levels	of	risk.	Actual	allocations	vary	from	target	due	to	market	changes	and	are	reviewed	regularly.	Assets	are	routinely rebalanced	through	contributions,	benefit	payments,	and	otherwise	as	deemed	appropriate.	The	actual	and	target	allocations	at	the	measurement	date are	as	follows:

|  | 2016	Target	Allocation | 2016	Target	Allocation | 2016	Actual	Allocation |  | 2015	Actual	Allocation |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | \t\t\t\t\t\t\t\tU.S. | International | \t\t\t\t\t\t\t\tU.S. | International | \t\t\t\t\t\t\t\tU.S. | International |
| Asset\tCategory |  |  |  |  |  |  |
| Equity\tsecurities | \t 60–80% | 55–67% | 65% | 60% | 68% | 59% |
| Debt\tsecurities | \t 20–30% | 32–43% | 28% | 38% | 25% | 40% |
| Real\testate/other | 0–10% | 0–2% | 7% | 1% | 7% | 0% |
| Cash | — | — | 0% | 1% | 0% | 1% |
| Total |  |  | \t\t\t\t\t\t\t\t100% | \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t100% | \t\t\t\t\t\t\t\t100% | \t\t\t\t\t\t\t\t\t\t\t\t100% |

The	8.0%	expected	return	for	U.S.	plan	assets	is	based	on	a	weighted	average	of	estimated	long-term	returns	of	major	asset	classes	and	the	historical performance	of	plan	assets.	The	estimated	long-term	return	for	equity,	debt	securities,	and	real	estate	is	8.3%,	5.1%,	and	6.9%,	respectively.	In determining	asset	class	returns,	we	take	into	account	historical	long-term	returns	and	the	value	of	active	management,	as	well	as	other	economic	and market	factors.

The	6.3%	expected	rate	of	return	for	international	plan	assets	is	based	on	a	weighted	average	return	for	plans	outside	the	U.S.,	which	vary	significantly	in size,	asset	structure	and	expected	returns.	The	expected	asset	return	for	the	U.K.	plan,	which	represents	over	80%	of	the	assets	of	our	International plans,	is	6.6%	and	was	derived	from	expected	equity	and	debt	security	returns	of	7.3%	and	3.5%,	respectively.

The	following	table	summarizes	pension	plan	assets	measured	at	fair	value	by	asset	class	(see	Note	14,	Fair	Value	Measurements,	for	definition	of	the levels):

|  |  | 30	September	2016 | 30	September	2016 |  |  | 30	September	2015 |  |  |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
|  | Total | \t Level\t1 | Level\t2 | \t Level\t3 | Total | Level\t1 | Level\t2 | Level\t3 |
| U.S.\tQualified\tPension\tPlans |  |  |  |  |  |  |  |  |
| Cash\tand\tcash\tequivalents | $12.7 | $12.7 | $— | $— | $11.1 | $11.1 | $— | $— |
| Equity\tsecurities | 637.0 | 637.0 | — | — | 681.7 | 681.7 | — | — |
| Equity\tmutual\tfunds | 300.2 | 300.2 | — | — | 480.1 | 480.1 | — | — |
| Equity\tpooled\tfunds | 815.5 | — | 815.5 | — | 615.1 | — | 615.1 | — |
| Fixed\tincome: |  |  |  |  |  |  |  |  |
| Bonds\t(government |  |  |  |  |  |  |  |  |
| and\tcorporate) | 747.8 | — | 747.8 | — | 651.4 | — | 651.4 | — |
| Real\testate\tpooled\tfunds | 192.1 | — | — | 192.1 | 174.2 | — | — | 174.2 |
| Total\tU.S.\tQualified\tPension\tPlans | \t$2,705.3 | \t$949.9 | \t$1,563.3 | \t$192.1 | \t$2,613.6 | \t$1,172.9 | \t$1,266.5 | \t$174.2 |
| International\tPension\tPlans |  |  |  |  |  |  |  |  |
| Cash\tand\tcash\tequivalents | $6.6 | $6.6 | $— | $— | $10.1 | $10.1 | $— | $— |
| Equity\tpooled\tfunds | 854.8 | — | 854.8 | — | 766.9 | — | 766.9 | — |
| Fixed\tincome\tpooled\tfunds | 486.9 | — | 486.9 | — | 465.6 | — | 465.6 | — |
| Other\tpooled\tfunds | 17.0 | — | 9.7 | 7.3 | 14.9 | — | 8.3 | 6.6 |
| Insurance\tcontracts | 45.8 | — | — | 45.8 | 45.3 | — | — | 45.3 |
| Total\tInternational\tPension\tPlans | \t$1,411.1 | $6.6 | \t$1,351.4 | $53.1 | \t$1,302.8 | $10.1 | \t$1,240.8 | $51.9 |

The	following	table	summarizes	changes	in	fair	value	of	the	pension	plan	assets	classified	as	Level	3,	by	asset	class:

|  | Real	Estate | Other | Insurance |  |
| :--- | :--- | :--- | :--- | :--- |
|  | Pooled\tFunds | Pooled\tFunds | Contracts | Total |
| 30\tSeptember\t2014 | $150.2 | $9.3 | $59.7 | \t$219.2 |
| Actual\treturn\ton\tplan\tassets: |  |  |  |  |
| Assets\theld\tat\tend\tof\tyear | 24.0 | (.2) | (11.1) | 12.7 |
| Assets\tsold\tduring\tthe\tperiod | — | .5 | — | .5 |
| Purchases,\tsales,\tand\tsettlements,\tnet | — | (3.0) | (3.3) | (6.3) |
| 30\tSeptember\t2015 | $174.2 | $6.6 | $45.3 | \t$226.1 |
| Actual\treturn\ton\tplan\tassets: |  |  |  |  |
| Assets\theld\tat\tend\tof\tyear | 17.9 | .1 | 3.2 | 21.2 |
| Assets\tsold\tduring\tthe\tperiod | — | .3 | — | .3 |
| Purchases,\tsales,\tand\tsettlements,\tnet | — | .3 | (2.7) | (2.4) |
| 30\tSeptember\t2016 | $192.1 | $7.3 | $45.8 | \t$245.2 |

The	descriptions	and	fair	value	methodologies	for	the	U.S.	and	International	pension	plan	assets	are	as	follows:

# Cash	and	Cash	Equivalents

The	carrying	amounts	of	cash	and	cash	equivalents	approximate	fair	value	due	to	the	short-term	maturity.

# Equity	Securities

Equity	securities	are	valued	at	the	closing	market	price	reported	on	a	U.S.	or	international	exchange	where	the	security	is	actively	traded	and	are therefore	classified	as	Level	1	assets.

# Mutual	and	Pooled	Funds

Shares	of	mutual	funds	are	valued	at	the	net	asset	value	(NAV)	of	the	fund	and	are	classified	as	Level	1	assets.	Units	of	pooled	funds	are	valued	at	the per	unit	NAV	determined	by	the	fund	manager	and	are	classified	as	Level	2	assets.	The	investments	are	utilizing	NAV	as	a	practical	expedient	for	fair value.

# Corporate	and	Government	Bonds

Corporate	and	government	bonds	are	classified	as	Level	2	assets,	as	they	are	either	valued	at	quoted	market	prices	from	observable	pricing	sources	at the	reporting	date	or	valued	based	upon	comparable	securities	with	similar	yields	and	credit	ratings.

# Real	Estate	Pooled	Funds

Real	estate	pooled	funds	are	classified	as	Level	3	assets,	as	they	are	carried	at	the	estimated	fair	value	of	the	underlying	properties.	Estimated	fair	value is	calculated	utilizing	a	combination	of	key	inputs,	such	as	revenue	and	expense	growth	rates,	terminal	capitalization	rates,	and	discount	rates.	These key	inputs	are	consistent	with	practices	prevailing	within	the	real	estate	investment	management	industry.

# Other	Pooled	Funds

Other	pooled	funds	classified	as	Level	2	assets	are	valued	at	the	NAV	of	the	shares	held	at	year	end,	which	is	based	on	the	fair	value	of	the	underlying investments.	Securities	and	interests	classified	as	Level	3	are	carried	at	the	estimated	fair	value.	The	estimated	fair	value	is	based	on	the	fair	value	of the	underlying	investment	values,	which	includes	estimated	bids	from	brokers	or	other	third-party	vendor	sources	that	utilize	expected	cash	flow	streams and	other	uncorroborated	data	including	counterparty	credit	quality,	default	risk,	discount	rates,	and	the	overall	capital	market	liquidity.

# Insurance	Contracts

Insurance	contracts	are	classified	as	Level	3	assets,	as	they	are	carried	at	contract	value,	which	approximates	the	estimated	fair	value.	The	estimated fair	value	is	based	on	the	fair	value	of	the	underlying	investment	of	the	insurance	company.

# Contributions	and	Projected	Benefit	Payments

Pension	contributions	to	funded	plans	and	benefit	payments	for	unfunded	plans	for	fiscal	year	2016	were	$79.3.	Contributions	for	funded	plans	resulted primarily	from	contractual	and	regulatory	requirements.	Benefit	payments	to	unfunded	plans	were	due	primarily	to	the	timing	of	retirements	and	cost reduction	actions.	We	anticipate	contributing	$65	to	$85	to	the	defined	benefit	pension	plans	in	2017.	These	contributions	are	anticipated	to	be	driven primarily	by	contractual	and	regulatory	requirements	for	funded	plans	and	benefit	payments	for	unfunded	plans,	which	are	dependent	upon	timing	of retirements	and	actions	to	reorganize	the	business.

Projected	benefit	payments,	which	reflect	expected	future	service,	are	as	follows:

|  | U.S. | International |
| :--- | :--- | :--- |
| 2017 | \t\t\t$150.3 | $45.7 |
| 2018 | 152.7 | 48.3 |
| 2019 | 157.2 | 50.2 |
| 2020 | 161.8 | 51.1 |
| 2021 | 166.7 | 54.3 |
| 2022–2026 | 909.6 | \t\t\t\t\t\t\t\t\t\t\t\t306.9 |

These	estimated	benefit	payments	are	based	on	assumptions	about	future	events.	Actual	benefit	payments	may	vary	significantly	from	these	estimates.

# Defined	Contribution	Plans

We	maintain	a	nonleveraged	employee	stock	ownership	plan	(ESOP)	which	forms	part	of	the	Air	Products	and	Chemicals,	Inc.	Retirement	Savings	Plan (RSP).	The	ESOP	was	established	in	May	of	2002.	The	balance	of	the	RSP	is	a	qualified	defined	contribution	plan	including	a	401(k)	elective	deferral component.	A	substantial	portion	of	U.S.	employees	are	eligible	and	participate.

We	treat	dividends	paid	on	ESOP	shares	as	ordinary	dividends.	Under	existing	tax	law,	we	may	deduct	dividends	which	are	paid	with	respect	to	shares held	by	the	plan.	Shares	of	the	Company's	common	stock	in	the	ESOP	totaled	3,031,534	as	of	30	September	2016.

Our	contributions	to	the	RSP	include	a	Company	core	contribution	for	certain	eligible	employees	who	do	not	receive	their	primary	retirement	benefit	from the	defined	benefit	pension	plans,	with	the	core	contribution	based

on	a	percentage	of	pay	that	is	dependent	on	years	of	service.	For	the	RSP,	we	also	make	matching	contributions	on	overall	employee	contributions	as	a percentage	of	the	employee	contribution	and	include	an	enhanced	contribution	for	certain	eligible	employees	that	do	not	participate	in	the	defined	benefit pension	plans.	Worldwide	contributions	expensed	to	income	in	2016,	2015,	and	2014	were	$43.2,	$44.2,	and	$45.2,	respectively.

# Other	Postretirement	Benefits

We	provide	other	postretirement	benefits	consisting	primarily	of	healthcare	benefits	to	certain	U.S.	retirees	who	meet	age	and	service	requirements.	The healthcare	benefit	is	a	continued	medical	benefit	until	the	retiree	reaches	age	65.	Healthcare	benefits	are	contributory,	with	contributions	adjusted periodically.	The	retiree	medical	costs	are	capped	at	a	specified	dollar	amount,	with	the	retiree	contributing	the	remainder.

The	cost	of	our	other	postretirement	benefit	plans	includes	the	following	components:

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Service\tcost | \t\t\t$2.2 | \t\t\t$2.8 | \t$3.3 |
| Interest\tcost | 2.0 | 2.2 | 2.3 |
| Amortization\tof\tnet\tactuarial\tloss | .7 | .8 | 1.7 |
| Net\tPeriodic\tPostretirement\tCost | \t\t\t$4.9 | \t\t\t$5.8 | \t$7.3 |

We	calculate	net	periodic	postretirement	cost	for	a	given	fiscal	year	based	on	assumptions	developed	at	the	end	of	the	previous	fiscal	year.	The	discount rate	assumption	used	in	the	calculation	of	net	periodic	postretirement	cost	for	2016,	2015,	and	2014	was	2.4%,	2.6%,	and	2.4%,	respectively.

We	measure	the	other	postretirement	benefits	as	of	30	September.	The	discount	rate	assumption	used	in	the	calculation	of	the	accumulated postretirement	benefit	obligation	was	1.9%	and	2.4%	for	2016	and	2015,	respectively.

The	following	table	reflects	the	change	in	the	accumulated	postretirement	benefit	obligation	and	the	amounts	recognized	in	the	consolidated	balance sheets:

The	changes	in	benefit	obligation	that	have	been	recognized	in	other	comprehensive	income	on	a	pretax	basis	during	2016	and	2015	for	our	other postretirement	benefit	plans	consist	of	the	following:

|  | 2016 | 2015 |
| :--- | :--- | :--- |
| Net\tactuarial\tloss\t(gain)\tarising\tduring\tthe\tperiod | \t\t\t$7.5 | $(2.3) |
| Amortization\tof\tnet\tactuarial\tloss | (.7) | (.8) |
| Total | \t\t\t$6.8 | $(3.1) |

The	net	actuarial	loss	recognized	in	accumulated	other	comprehensive	loss	on	a	pretax	basis	was	$18.7	at	30	September	2016	and	$11.9	at 30	September	2015.	Of	the	30	September	2016	net	actuarial	loss,	it	is	estimated	that	$2.3	will	be	amortized	into	net	periodic	postretirement	cost	during fiscal	year	2017.

The	effect	of	a	change	in	the	healthcare	trend	rate	is	tempered	by	a	cap	on	the	average	retiree	medical	cost.	The	expected	per	capita	claims	costs	are currently	assumed	to	be	greater	than	the	annual	cap,	therefore	the	assumed	healthcare	cost	trend	rate,	ultimate	trend	rate,	and	the	year	the	ultimate trend	rate	is	reached	in	2016	does	not

apply	as	it	has	no	impact	on	plan	obligations.	For	2015,	the	healthcare	trend	rate	was	7%,	the	ultimate	trend	rate	was	5%,	and	the	year	the	ultimate	trend rate	is	reached	was	2019.

# Projected	benefit	payments	are	as	follows:

# 17.				COMMITMENTS	AND	CONTINGENCIES

We	are	involved	in	various	legal	proceedings,	including	commercial,	competition,	environmental,	health,	safety,	product	liability,	and	insurance	matters.	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	$55	at	30	September	2016)	on	Air	Products	Brasil	Ltda.	This	fine	was	based	on	a	recommendation	by	a	unit	of	the	Brazilian	Ministry	of Justice,	whose	investigation	began	in	2003,	alleging	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.	We	estimate	the maximum	possible	loss	to	be	the	full	amount	of	the	fine	of	R$179.2	million	(approximately	$55	at	30	September	2016)	plus	interest	accrued	thereon	until final	disposition	of	the	proceedings.

Other	than	this	matter,	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.

# ENVIRONMENTAL

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.	Presently,	there	are	approximately	33	sites	on	which	a	final	settlement	has	not	been reached	where	we,	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	continually	monitor	these sites	for	which	we	have	environmental	exposure.

Accruals	for	environmental	loss	contingencies	are	recorded	when	it	is	probable	that	a	liability	has	been	incurred	and	the	amount	of	loss	can	be reasonably	estimated.	The	consolidated	balance	sheets	at	30	September	2016	and	2015	included	an	accrual	of	$81.4	and	$80.6,	respectively,	primarily as	part	of	other	noncurrent	liabilities.	The	environmental	liabilities	will	be	paid	over	a	period	of	up	to	30	years.	We	estimate	the	exposure	for environmental	loss	contingencies	to	range	from	$81	to	a	reasonably	possible	upper	exposure	of	$95	as	of	30	September	2016.

Actual	costs	to	be	incurred	at	identified	sites	in	future	periods	may	vary	from	the	estimates,	given	inherent	uncertainties	in	evaluating	environmental exposures.	Using	reasonably	possible	alternative	assumptions	of	the	exposure	level	could	result	in	an	increase	to	the	environmental	accrual.	Due	to	the inherent	uncertainties	related	to	environmental	exposures,	a	significant	increase	to	the	reasonably	possible	upper	exposure	level	could	occur	if	a	new	site is	designated,	the	scope	of	remediation	is	increased,	a	different	remediation	alternative	is	identified,	or	a	significant	increase	in	our	proportionate	share occurs.	We	do	not	expect	that	any	sum	we	may	have	to	pay	in	connection	with	environmental	matters	in	excess	of	the	amounts	recorded	or	disclosed above	would	have	a	material	adverse	impact	on	our	financial	position	or	results	of	operations	in	any	one	year.

At	30	September	2016,	$30.1	of	the	environmental	accrual	was	related	to	the	Pace	facility.

In	2006,	we	sold	our	Amines	business,	which	included	operations	at	Pace,	Florida,	and	recognized	a	liability	for	retained	environmental	obligations associated	with	remediation	activities	at	Pace.	We	are	required	by	the	Florida	Department	of	Environmental	Protection	(FDEP)	and	the	United	States Environmental	Protection	Agency	(USEPA)	to	continue	our	remediation	efforts.	We	estimated	that	it	would	take	20	years	to	complete	the	groundwater remediation,	and	the	costs	through	completion	were	estimated	to	range	from	$42	to	$52.	As	no	amount	within	the	range	was	a	better	estimate	than another,	we	recognized	a	pretax	expense	in	fiscal	2006	of	$42	as	a	component	of	income	from	discontinued	operations	and	recorded	an	environmental accrual	of	$42	in	continuing	operations	on	the	consolidated	balance	sheets.	There	has	been	no	change	to	the	estimated	exposure	range	related	to	the Pace	facility.

We	have	implemented	many	of	the	remedial	corrective	measures	at	the	Pace	facility	required	under	1995	Consent	Orders	issued	by	the	FDEP	and	the USEPA.	Contaminated	soils	have	been	bioremediated,	and	the	treated	soils	have	been	secured	in	a	lined	on-site	disposal	cell.	Several	groundwater recovery	systems	have	been	installed	to	contain	and	remove	contamination	from	groundwater.	We	completed	an	extensive	assessment	of	the	site	to determine	how	well	existing	measures	are	working,	what	additional	corrective	measures	may	be	needed,	and	whether	newer	remediation	technologies that	were	not	available	in	the	1990s	might	be	suitable	to	more	quickly	and	effectively	remove	groundwater	contaminants.	Based	on	assessment	results, we	completed	a	focused	feasibility	study	that	has	identified	alternative	approaches	that	may	more	effectively	remove	contaminants.	We	continue	to review	alternative	remedial	approaches	with	the	FDEP.	In	the	first	quarter	of	2015,	we	entered	into	a	new	Consent	Order	with	the	FDEP	requiring	us	to continue	our	remediation	efforts	at	the	Pace	facility.	The	costs	we	are	incurring	under	the	new	Consent	Order	are	expected	to	be	consistent	with	our previous	estimates.

# Piedmont

At	30	September	2016,	$17.5	of	the	environmental	accrual	was	related	to	the	Piedmont	site.

On	30	June	2008,	we	sold	our	Elkton,	Maryland,	and	Piedmont,	South	Carolina,	production	facilities	and	the	related	North	American	atmospheric emulsions	and	global	pressure	sensitive	adhesives	businesses.	In	connection	with	the	sale,	we	recognized	a	liability	for	retained	environmental obligations	associated	with	remediation	activities	at	the	Piedmont	site.	This	site	is	under	active	remediation	for	contamination	caused	by	an	insolvent	prior owner.	We	are	required	by	the	South	Carolina	Department	of	Health	and	Environmental	Control	to	address	both	contaminated	soil	and	groundwater. Numerous	areas	of	soil	contamination	have	been	addressed,	and	contaminated	groundwater	is	being	recovered	and	treated.	We	estimate	that	it	will	take until	2019	to	complete	source	area	remediation	with	groundwater	recovery	and	treatment,	continuing	through	2029.	Thereafter,	we	are	expecting	this	site to	go	into	a	state	of	monitored	natural	attenuation	through	2047.	We	recognized	a	pretax	expense	in	2008	of	$24	as	a	component	of	income	from discontinued	operations	and	recorded	an	environmental	liability	of	$24	in	continuing	operations	on	the	consolidated	balance	sheets.	There	have	been	no significant	changes	to	the	estimated	exposure.

# Pasadena

At	30	September	2016,	$10.4	of	the	environmental	accrual	was	related	to	the	Pasadena	site.

During	the	fourth	quarter	of	2012,	management	committed	to	permanently	shutting	down	our	polyurethane	intermediates	(PUI)	production	facility	in Pasadena,	Texas.	In	shutting	down	and	dismantling	the	facility,	we	have	undertaken	certain	obligations	related	to	soil	and	groundwater	contaminants.	We have	been	pumping	and	treating	groundwater	to	control	off-site	contaminant	migration	in	compliance	with	regulatory	requirements	and	under	the

approval	of	the	Texas	Commission	on	Environmental	Quality	(TCEQ).	We	estimate	that	the	pump	and	treat	system	will	continue	to	operate	until 2042.	We	plan	to	perform	additional	work	to	address	other	environmental	obligations	at	the	site.	This	additional	work	includes	remediating,	as	required, impacted	soils,	investigating	groundwater	west	of	the	former	PUI	facility,	performing	post	closure	care	for	two	closed	RCRA	surface	impoundment	units, and	establishing	engineering	controls.	In	2012,	we	estimated	the	total	exposure	at	this	site	to	be	$13.	There	has	been	no	change	to	the	estimated exposure.

Our	asset	retirement	obligations	are	primarily	associated	with	Industrial	Gases	on-site	long-term	supply	contracts,	under	which	we	have	built	a	facility	on land	owned	by	the	customer	and	are	obligated	to	remove	the	facility	at	the	end	of	the	contract	term.	The	retirement	of	assets	includes	the	contractually required	removal	of	a	long-lived	asset	from	service,	and	encompasses	the	sale,	removal,	abandonment,	recycling,	or	disposal	of	the	assets	as	required	at the	end	of	the	contract	terms.	The	timing	and/or	method	of	settlement	of	these	obligations	are	conditional	on	a	future	event	that	may	or	may	not	be	within our	control.

Changes	to	the	carrying	amount	of	our	asset	retirement	obligations	are	as	follows:

These	obligations	are	primarily	reflected	in	other	noncurrent	liabilities	on	the	consolidated	balance	sheets.

# GUARANTEES	AND	WARRANTIES

In	April	2015,	we	entered	into	joint	venture	arrangements	in	Saudi	Arabia.	An	equity	bridge	loan	has	been	provided	to	the	joint	venture	until	2020	to	fund equity	commitments,	and	we	guaranteed	the	repayment	of	our	25%	share	of	this	loan.	Our	venture	partner	guaranteed	repayment	of	their	share.	Our maximum	exposure	under	the	guarantee	is	approximately	$100.	As	of	30	September	2016,	we	recorded	a	noncurrent	liability	of	$94.4	for	our	obligation	to make	future	equity	contributions	based	on	the	equity	bridge	loan.

Air	Products	has	also	entered	into	a	sale	of	equipment	contract	with	the	joint	venture	to	engineer,	procure,	and	construct	the	industrial	gas	facilities	that will	supply	gases	to	Saudi	Aramco.	We	have	provided	bank	guarantees	to	the	joint	venture	of	up	to	$311	to	support	our	performance	under	the	contract. Exposures	under	the	guarantees	decline	over	time	and	will	be	completely	extinguished	after	completion	of	the	project.

We	are	party	to	an	equity	support	agreement	and	operations	guarantee	related	to	an	air	separation	facility	constructed	in	Trinidad	for	a	venture	in	which we	own	50%.	At	30	September	2016,	maximum	potential	payments	under	joint	and	several	guarantees	were	$29.0.	Exposures	under	the	guarantees decline	over	time	and	will	be	completely	extinguished	by	2024.

During	the	first	quarter	of	2014,	we	sold	the	remaining	portion	of	our	Homecare	business	and	entered	into	an	operations	guarantee	related	to	obligations under	certain	homecare	contracts	assigned	in	connection	with	the	transaction.	Our	maximum	potential	payment	under	the	guarantee	is	£20	million (approximately	$25	at	30	September	2016),	and	our	exposure	will	be	extinguished	by	2020.

To	date,	no	equity	contributions	or	payments	have	been	made	since	the	inception	of	these	guarantees.	The	fair	value	of	the	above	guarantees	is	not material.

We,	in	the	normal	course	of	business	operations,	have	issued	product	warranties	related	to	equipment	sales.	Also,	contracts	often	contain	standard	terms and	conditions	which	typically	include	a	warranty	and	indemnification	to	the	buyer	that	the	goods	and	services	purchased	do	not	infringe	on	third-party intellectual	property	rights.	The	provision	for	estimated	future	costs	relating	to	warranties	is	not	material	to	the	consolidated	financial	statements.

We	do	not	expect	that	any	sum	we	may	have	to	pay	in	connection	with	guarantees	and	warranties	will	have	a	material	adverse	effect	on	our	consolidated financial	condition,	liquidity,	or	results	of	operations.

We	are	obligated	to	make	future	payments	under	unconditional	purchase	obligations	as	summarized	below:

Approximately	$330	of	our	long-term	unconditional	purchase	obligations	relate	to	feedstock	supply	for	numerous	HyCO	(hydrogen,	carbon	monoxide,	and syngas)	facilities.	The	price	of	feedstock	supply	is	principally	related	to	the	price	of	natural	gas.	However,	long-term	take-or-pay	sales	contracts	to	HyCO customers	are	generally	matched	to	the	term	of	the	feedstock	supply	obligations	and	provide	recovery	of	price	increases	in	the	feedstock	supply.	Due	to the	matching	of	most	long-term	feedstock	supply	obligations	to	customer	sales	contracts,	we	do	not	believe	these	purchase	obligations	would	have	a material	effect	on	our	financial	condition	or	results	of	operations.

# Common	Stock

Authorized	common	stock	consists	of	300	million	shares	with	a	par	value	of	$1	per	share.	As	of	30	September	2016,	249	million	shares	were	issued,	with 217	million	outstanding.

On	15	September	2011,	the	Board	of	Directors	authorized	the	repurchase	of	up	to	$1,000	of	our	outstanding	common	stock.	We	repurchase	shares pursuant	to	Rules	10b5-1	and	10b-18	under	the	Securities	Exchange	Act	of	1934,	as	amended,	through	repurchase	agreements	established	with	several brokers.	We	did	not	purchase	any	of	our	outstanding	shares	during	fiscal	year	2016.	At	30	September	2016,	$485.3	in	share	repurchase	authorization remains.

The	following	table	reflects	the	changes	in	common	shares:

| Year	ended	30	September | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Number\tof\tCommon\tShares\tOutstanding |  |  |  |
| Balance,\tbeginning\tof\tyear | 215,359,113 | 213,538,144 | 211,179,257 |
| Issuance\tof\ttreasury\tshares\tfor\tstock\toption\tand\taward\tplans | 1,991,712 | 1,820,969 | 2,358,887 |
| Balance,\tend\tof\tyear | 217,350,825 | 215,359,113 | 213,538,144 |

# Preferred	Stock

Authorized	preferred	stock	consists	of	25	million	shares	with	a	par	value	of	$1	per	share,	of	which	2.5	million	were	designated	as	Series	A	Junior Participating	Preferred	Stock.	There	were	no	shares	issued	or	outstanding	as	of	30	September	2016	and	2015.

We	have	various	share-based	compensation	programs,	which	include	deferred	stock	units,	stock	options,	and	restricted	stock.	Under	all	programs,	the terms	of	the	awards	are	fixed	at	the	grant	date.	We	issue	shares	from	treasury	stock	upon	the	payout	of	deferred	stock	units,	the	exercise	of	stock options,	and	the	issuance	of	restricted	stock	awards.	As	of	30	September	2016,	there	were	4,840,837	shares	available	for	future	grant	under	our	Long- Term	Incentive	Plan,	which	is	shareholder	approved.

Share-based	compensation	cost	recognized	in	the	consolidated	income	statements	is	summarized	below:

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Before-Tax\tShare-Based\tCompensation\tCost | $37.6 | $45.7 | $44.0 |
| Income\ttax\tbenefit | (13.1) | (16.0) | (15.6) |
| After-Tax\tShare-Based\tCompensation\tCost | $24.5 | $29.7 | $28.4 |

Before-tax	share-based	compensation	cost	is	primarily	included	in	selling	and	administrative	expense	on	our	consolidated	income	statements.	The amount	of	share-based	compensation	cost	capitalized	in	2016,	2015,	and	2014	was	not	material.

Total	before-tax	share-based	compensation	cost	by	type	of	program	was	as	follows:

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Deferred\tstock\tunits | \t\t\t$29.9\t\t\t\t\t$28.8 | \t\t\t$29.9\t\t\t\t\t$28.8 | \t$20.2 |
| Stock\toptions | 4.2 | 12.6 | 21.6 |
| Restricted\tstock | 3.5 | 4.3 | 2.2 |
| Before-Tax\tShare-Based\tCompensation\tCost | \t\t\t$37.6\t\t\t\t\t$45.7 | \t\t\t$37.6\t\t\t\t\t$45.7 | \t$44.0 |

# Deferred	Stock	Units

We	have	granted	deferred	stock	units	to	executives,	selected	employees,	and	outside	directors.	These	deferred	stock	units	entitle	the	recipient	to	one share	of	common	stock	upon	vesting,	which	is	conditioned,	for	employee	recipients,	on	continued	employment	during	the	deferral	period	and	may	be conditioned	on	achieving	certain	performance	targets.	We	grant	deferred	stock	unit	awards	with	a	two	to	five	year	deferral	period	that	is	subject	to	payout upon	death,	disability,	or	retirement.	Deferred	stock	units	issued	to	outside	directors	are	paid	after	service	on	the	Board	of	Directors	ends	at	the	time elected	by	the	director	(not	to	exceed	10	years	after	service	ends).	We	generally	expense	the	grant-date	fair	value	of	these	awards	on	a	straight-line basis	over	the	vesting	period;	however,	expense	recognition	is	accelerated	for	retirement	eligible	individuals	who	meet	the	requirements	for	vesting	upon retirement.

In	2015,	we	granted	119,272	market-based	deferred	stock	units.	The	market-based	deferred	stock	units	vest	as	long	as	the	employee	continues	to	be employed	by	the	Company	and	upon	the	achievement	of	the	performance	target.	The	performance	target,	which	is	approved	by	the	Compensation Committee,	is	the	Company's	total	shareholder	return	(share	price	appreciation	and	dividends	paid)	in	relation	to	a	defined	peer	group	over	a	three-year performance	period.

In	2016,	we	granted	130,167	market-based	deferred	stock	units.	The	market-based	deferred	stock	units	are	earned	out	at	the	end	of	a	three-year performance	period	beginning	1	October	2015	and	ending	30	September	2018.

The	fair	value	of	market-based	deferred	stock	units	was	estimated	using	a	Monte	Carlo	simulation	model	as	these	equity	awards	are	tied	to	a	market condition.	The	model	utilizes	multiple	input	variables	that	determine	the	probability	of	satisfying	the	market	condition	stipulated	in	the	grant	and	calculates the	fair	value	of	the	awards.	We	generally	expense	the	grant-date	fair	value	of	these	awards	on	a	straight	line	basis	over	the	vesting	period.	The calculation	of	the	fair	value	of	market-based	deferred	stock	units	used	the	following	assumptions:

In	addition,	during	2016,	we	granted	153,792	time-based	deferred	stock	units	at	a	weighted	average	grant-date	fair	value	of	$137.12.

| Deferred	Stock	Units | Shares	(000) | Grant-Date	Fair	Value |
| :--- | :--- | :--- |
| Outstanding\tat\t30\tSeptember\t2015 | \t\t\t\t\t\t\t\t1,056 | \t\t\t\t\t\t\t\t\t\t\t\t$102.01 |
| Granted | 284 | 136.37 |
| Paid\tout | (299) | 77.81 |
| Forfeited/adjustments | (40) | 90.83 |
| Outstanding\tat\t30\tSeptember\t2016 | 1,001 | \t\t\t\t\t\t\t\t\t\t\t\t$119.44 |

Cash	payments	made	for	deferred	stock	units	were	$2.9,	$9.6,	and	$2.1	in	2016,	2015,	and	2014,	respectively.	As	of	30	September	2016,	there	was $41.4	of	unrecognized	compensation	cost	related	to	deferred	stock	units.	The	cost	is	expected	to	be	recognized	over	a	weighted	average	period	of 2.2	years.	The	total	fair	value	of	deferred	stock	units	paid	out	during	2016,	2015,	and	2014,	including	shares	vested	in	prior	periods,	was	$41.6,	$35.5, and	$31.8,	respectively.

# Stock	Options

We	have	granted	awards	of	options	to	purchase	common	stock	to	executives	and	selected	employees.	The	exercise	price	of	stock	options	equals	the market	price	of	our	stock	on	the	date	of	the	grant.	Options	generally	vest	incrementally	over	three	years,	and	remain	exercisable	for	ten	years	from	the date	of	grant.	In	2016,	no	stock	options	were	awarded.

Fair	values	of	stock	options	were	estimated	using	a	Black	Scholes	model	that	used	the	assumptions	noted	in	the	table	below.	Expected	volatility	and expected	dividend	yield	are	based	on	actual	historical	experience	of	our	stock	and	dividends	over	the	historical	period	equal	to	the	expected	life.	The expected	life	represents	the	period	of	time	that	options	granted	are	expected	to	be	outstanding	based	on	an	analysis	of	Company-specific	historical exercise	data.	Ranges	are	used	when	certain	groups	of	employees	exhibit	different	behavior,	such	as	timing	of	exercise.	The	risk-free	rate	is	based	on the	U.S.	Treasury	Strips	with	terms	equal	to	the	expected	time	of	exercise	as	of	the	grant	date.

|  | 2015 | 2014 |
| :--- | :--- | :--- |
| Expected\tvolatility | \t\t\t30.3% | \t29.8%–31.1% |
| Expected\tdividend\tyield | 2.6% | 2.4–2.9% |
| Expected\tlife\t(in\tyears) | 7.5 | 6.5–8.4 |
| Risk-free\tinterest\trate | 2.2% | 2.0%–2.7% |

The	weighted	average	grant-date	fair	value	of	options	granted	during	2015	and	2014	was	$37.19	and	$29.10	per	option,	respectively.

A	summary	of	stock	option	activity	is	presented	below:

| Stock	Options | Shares	(000) | Exercise	Price |
| :--- | :--- | :--- |
| Outstanding\tat\t30\tSeptember\t2015 | \t\t\t\t\t\t\t\t\t\t\t\t5,725 | $87.35 |
| Granted | — | — |
| Exercised | (1,783) | 80.66 |
| Forfeited | (26) | 106.52 |
| Outstanding\tat\t30\tSeptember\t2016 | 3,916 | $90.28 |
| Exercisable\tat\t30\tSeptember\t2016 | 3,537 | $86.99 |

|  | Weighted	Average |  |
| :--- | :--- | :--- |
|  | Remaining\tContractual | Aggregate |
| Stock\tOptions | Terms\t(in\tyears) | Intrinsic\tValue |
| Outstanding\tat\t30\tSeptember\t2016 | \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t5.0 | $235 |
| Exercisable\tat\t30\tSeptember\t2016 | 4.7 | $224 |

The	aggregate	intrinsic	value	represents	the	amount	by	which	our	closing	stock	price	of	$150.34	as	of	30	September	2016	exceeds	the	exercise	price multiplied	by	the	number	of	in-the-money	options	outstanding	or	exercisable.

Compensation	cost	is	generally	recognized	over	the	stated	vesting	period	consistent	with	the	terms	of	the	arrangement	(i.e.,	either	on	a	straight-line	or graded-vesting	basis).	Expense	recognition	is	accelerated	for	retirement-eligible	individuals	who	would	meet	the	requirements	for	vesting	of	awards	upon their	retirement.	As	of	30	September	2016,	there	was	$1.1	of	unrecognized	compensation	cost	related	to	nonvested	stock	options,	which	is	expected	to be	recognized	over	a	weighted	average	period	of	0.9	years.

Cash	received	from	option	exercises	during	2016	was	$141.3.	The	total	tax	benefit	realized	from	stock	option	exercises	in	2016	was	$39.8,	of	which $25.0	was	the	excess	tax	benefit.

# Restricted	Stock

The	grant-date	fair	value	of	restricted	stock	is	estimated	on	the	date	of	grant	based	on	the	market	price	of	the	stock,	and	compensation	cost	is	generally amortized	to	expense	on	a	straight-line	basis	over	the	vesting	period	during	which	employees	perform	related	services.	Expense	recognition	is accelerated	for	retirement-eligible	individuals	who	would	meet	the	requirements	for	vesting	of	awards	upon	their	retirement.

We	have	issued	shares	of	restricted	stock	to	certain	officers.	Participants	are	entitled	to	cash	dividends	and	to	vote	their	respective	shares.	Restrictions on	shares	lift	in	one	to	four	years	or	upon	the	earlier	of	retirement,	death,	or	disability.	The	shares	are	nontransferable	while	subject	to	forfeiture.

|  |  | Weighted	Average |
| :--- | :--- | :--- |
| Restricted\tStock | Shares\t(000) | Grant-Date\tFair\tValue |
| Outstanding\tat\t30\tSeptember\t2015 | \t\t\t\t\t\t\t\t\t\t\t\t83 | \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$121.17 |
| Granted | 33 | 138.00 |
| Vested | (31) | 119.95 |
| Outstanding\tat\t30\tSeptember\t2016 | 85 | \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$128.16 |

As	of	30	September	2016,	there	was	$5.1	of	unrecognized	compensation	cost	related	to	restricted	stock	awards.	The	cost	is	expected	to	be	recognized over	a	weighted	average	period	of	2.6	years.	The	total	fair	value	of	restricted	stock	vested	during	2016,	2015,	and	2014	was	$4.3,	$1.4,	and	$12.1, respectively.

# 20.				ACCUMULATED	OTHER	COMPREHENSIVE	LOSS

The	table	below	summarizes	changes	in	accumulated	other	comprehensive	loss	(AOCL),	net	of	tax,	attributable	to	Air	Products:

|  | Net	loss	on | Foreign |  |  |
| :--- | :--- | :--- | :--- | :--- |
|  | derivatives | currency | Pension\tand |  |
|  | qualifying | translation | postretirement |  |
|  | as\thedges | adjustments | benefits | Total |
| Balance\tat\t30\tSeptember\t2013 | $(4.1) | $(61.5) | $(955.0) | \t$(1,020.6) |
| Other\tcomprehensive\tincome\t(loss)\tbefore\treclassifications | (15.2) | (213.1) | (74.2) | (302.5) |
| Amounts\treclassified\tfrom\tAOCL | (9.1) | — | 84.7 | 75.6 |
| Net\tcurrent\tperiod\tother\tcomprehensive\tincome\t(loss) | $(24.3) | $(213.1) | $10.5 | $(226.9) |
| Amount\tattributable\tto\tnoncontrolling\tinterest | .1 | (5.9) | .2 | (5.6) |
| Balance\tat\t30\tSeptember\t2014 | $(28.5) | $(268.7) | $(944.7) | \t$(1,241.9) |
| Other\tcomprehensive\tincome\t(loss)\tbefore\treclassifications | (35.0) | (699.3) | (278.5) | (1,012.8) |
| Amounts\treclassified\tfrom\tAOCL | 20.8 | — | 97.0 | 117.8 |
| Net\tcurrent\tperiod\tother\tcomprehensive\tincome\t(loss) | $(14.2) | $(699.3) | $(181.5) | $(895.0) |
| Amount\tattributable\tto\tnoncontrolling\tinterest | .2 | (11.5) | .3 | (11.0) |
| Balance\tat\t30\tSeptember\t2015 | $(42.9) | $(956.5) | $(1,126.5) | \t$(2,125.9) |
| Other\tcomprehensive\tincome\t(loss)\tbefore\treclassifications | 13.7 | 9.9 | (335.1) | (311.5) |
| Amounts\treclassified\tfrom\tAOCL | (36.0) | 2.7 | 87.2 | 53.9 |
| Net\tcurrent\tperiod\tother\tcomprehensive\tincome\t(loss) | $(22.3) | $12.6 | $(247.9) | $(257.6) |
| Amount\tattributable\tto\tnoncontrolling\tinterest | (.2) | 5.4 | (.4) | 4.8 |
| Balance\tat\t30\tSeptember\t2016 | $(65.0) | $(949.3) | $(1,374.0) | \t$(2,388.3) |

The	table	below	summarizes	the	reclassifications	out	of	accumulated	other	comprehensive	loss	and	the	affected	line	item	on	the	consolidated	income statements:

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| (Gain)\tLoss\ton\tCash\tFlow\tHedges,\tnet\tof\ttax |  |  |  |
| Sales/Cost\tof\tsales | $.2 | $.6 | $.7 |
| Other\tincome\t(expense),\tnet | (46.2) | 16.9 | (8.7) |
| Interest\texpense | 10.0 | 3.3 | (1.1) |
| Total\t(Gain)\tLoss\ton\tCash\tFlow\tHedges,\tnet\tof\ttax | \t$(36.0) | \t$20.8\t\t\t\t\t$(9.1) | \t$20.8\t\t\t\t\t$(9.1) |
| Currency\tTranslation\tAdjustment(A) | $2.7 | $— | $— |
| Pension\tand\tPostretirement\tBenefits,\tnet\tof\ttax (B) | $87.2 | \t$97.0\t\t\t\t\t$84.7 | \t$97.0\t\t\t\t\t$84.7 |

(A)	The	impact	is	reflected	in	Other	income	(expense),	net	and	primarily	relates	to	the	sale	of	an	equity	affiliate	in	the	first	quarter	of	2016.	Refer	to	Note	8,

(B)	The	components	include	items	such	as	prior	service	cost	amortization,	actuarial	loss	amortization,	and	settlements	and	are	reflected	in	net	periodic	benefit	cost. Refer	to	Note	16,	Retirement	Benefits.

# 21.				NONCONTROLLING	INTERESTS

# INDURA	S.A.

# Redeemable	Noncontrolling	Interest

In	2012,	we	purchased	a	controlling	equity	interest	in	the	outstanding	shares	of	Indura	S.A.	As	part	of	the	purchase	agreement,	the	largest	minority shareholder	in	Indura	S.A.	had	the	right	to	exercise	a	put	option	to	require	us	to	purchase	up	to	a	30.5%	equity	interest	during	the	two-year	period beginning	on	1	July	2015,	at	a

redemption	value	equal	to	the	greater	of	fair	market	value	or	the	acquisition	date	value	escalated	by	an	inflation	factor	(the	"floor	value").	The	put	option was	not	accounted	for	separate	from	the	minority	interest	shares	that	were	subject	to	the	put	option.	The	redemption	feature	of	the	put	option	required classification	of	the	minority	shareholder's	interest	in	the	consolidated	balance	sheet	outside	of	equity	under	the	caption	"Redeemable	Noncontrolling Interest."

In	July	2015,	we	completed	the	purchase	of	the	30.5%	equity	interest	in	our	Indura	S.A.	subsidiary	from	the	largest	minority	shareholder	for	$277.9	based on	terms	substantially	consistent	with	the	original	purchase	agreement.	The	purchase	was	funded	by	the	issuance	of	commercial	paper.	We	currently have	a	97.8%	controlling	equity	interest	in	Indura	S.A.

The	following	is	a	summary	of	the	changes	in	redeemable	noncontrolling	interest	for	the	year	ended	30	September	2015:

As	redeemable	noncontrolling	interest	is	not	part	of	total	equity,	the	impacts	above	are	excluded	from	our	consolidated	statements	of	equity.

The	following	table	sets	forth	the	computation	of	basic	and	diluted	earnings	per	share	(EPS):

| 30	September | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Numerator |  |  |  |
| Income\tfrom\tcontinuing\toperations | $1,515.3 | $1,284.7 | $994.6 |
| Income\t(Loss)\tfrom\tdiscontinued\toperations | (884.2) | (6.8) | (2.9) |
| Net\tIncome\tAttributable\tto\tAir\tProducts | $631.1 | $1,277.9 | $991.7 |
| Denominator\t(in\tmillions) |  |  |  |
| Weighted\taverage\tcommon\tshares\t—\tBasic | 216.4 | 214.9 | 212.7 |
| Effect\tof\tdilutive\tsecurities |  |  |  |
| Employee\tstock\toption\tand\tother\taward\tplans | 1.9 | 2.4 | 2.5 |
| Weighted\taverage\tcommon\tshares\t—\tDiluted | 218.3 | 217.3 | 215.2 |
| Basic\tEPS\tAttributable\tto\tAir\tProducts |  |  |  |
| Income\tfrom\tcontinuing\toperations | $7.00 | $5.98 | $4.68 |
| Income\t(Loss)\tfrom\tdiscontinued\toperations | (4.08) | (.03) | (.02) |
| Net\tIncome\tAttributable\tto\tAir\tProducts | $2.92 | $5.95 | $4.66 |
| Diluted\tEPS\tAttributable\tto\tAir\tProducts |  |  |  |
| Income\tfrom\tcontinuing\toperations | $6.94 | $5.91 | $4.62 |
| Income\t(Loss)\tfrom\tdiscontinued\toperations | (4.05) | (.03) | (.01) |
| Net\tIncome\tAttributable\tto\tAir\tProducts | $2.89 | $5.88 | $4.61 |

Diluted	EPS	attributable	to	Air	Products	reflects	the	potential	dilution	that	could	occur	if	stock	options	or	other	share-based	awards	were	exercised	or converted	into	common	stock.	The	dilutive	effect	is	computed	using	the	treasury	stock	method,	which	assumes	all	share-based	awards	are	exercised and	the	hypothetical	proceeds	from	exercise	are	used	by	the	Company	to	purchase	common	stock	at	the	average	market	price	during	the	period.	The incremental	shares	(difference	between	shares	assumed	to	be	issued	versus	purchased),	to	the	extent	they	would	have	been	dilutive,	are	included	in	the denominator	of	the	diluted	EPS	calculation.	Outstanding

share-based	awards	of	.2	million	shares,	.2	million	shares,	and	.6	million	shares	were	antidilutive	and	therefore	excluded	from	the	computation	of	diluted EPS	for	2016,	2015,	and	2014,	respectively.

The	following	table	summarizes	the	income	of	U.S.	and	foreign	operations	before	taxes:

|  | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Income\tfrom\tContinuing\tOperations\tbefore\tTaxes |  |  |  |
| United\tStates | $897.5 | $742.0 | $562.2 |
| Foreign | 1,086.1 | 846.2 | 651.8 |
| Income\tfrom\tequity\taffiliates | 148.6 | 154.5 | 151.4 |
| Total | $2,132.2 | $1,742.7 | $1,365.4 |

(A)	Other	includes	the	impact	of	Chilean	tax	rate	changes	of	1.5%	in	2014.

Foreign	tax	differentials	represent	the	differences	between	foreign	earnings	subject	to	foreign	tax	rates	lower	than	the	U.S.	federal	statutory	tax	rate	of 35.0%.	Foreign	earnings	are	subject	to	local	country	tax	rates	that	are	generally	below	the	35.0%	U.S.	federal	statutory	rate	and	include	tax	holidays	and incentives.	As	a	result,	our	effective	non-U.S.	tax	rate	is	typically	lower	than	the	U.S.	statutory	rate.	If	foreign	pre-tax	earnings	increase	relative	to	U.S. pre-tax	earnings,	this	rate	difference	could	increase.	The	jurisdictions	in	which	we	earn	pre-tax	earnings	subject	to	lower	foreign	taxes	than	the	U.S. statutory	rate	include	South	Korea,	Taiwan,	the	United

Kingdom,	China,	Canada,	Spain	and	Belgium.	As	more	than	80%	of	the	undistributed	earnings	are	in	countries	with	a	statutory	tax	rate	of	24%	or	higher, we	do	not	generate	a	disproportionate	amount	of	taxable	income	in	countries	with	very	low	tax	rates.	U.S.	taxes	on	foreign	earnings	is	a	tax	benefit primarily	due	to	foreign	tax	credits	on	the	repatriation	of	foreign	earnings	to	the	U.S.

In	2016,	the	effective	tax	rate	was	impacted	by	tax	costs	of	$51.8	incurred	in	anticipation	of	the	tax-free	spin-off	of	Versum,	primarily	for	a	dividend declared	during	the	third	quarter	of	2016	to	repatriate	$443.8	from	a	subsidiary	in	South	Korea	to	the	U.S.	Previously,	most	of	these	foreign	earnings were	considered	to	be	indefinitely	reinvested.	In	addition,	a	tax	benefit	was	not	available	on	a	significant	portion	of	the	business	separation	costs.	Refer	to Note	3,	Materials	Technologies	Separation,	for	additional	information.

In	2014,	the	effective	tax	rate	was	impacted	by	losses	from	transactions	and	a	tax	election	made	with	respect	to	a	non-U.S.	subsidiary	resulting	in	an income	tax	benefit	of	$51.6.	This	benefit	was	partially	offset	by	income	tax	expense	of	$20.6	related	to	the	tax	reform	legislation	enacted	in	Chile.	The effective	tax	rate	was	also	impacted	by	the	goodwill	impairment	charge	of	$305.2	that	was	not	deductible	for	tax	purposes.	See	Note	10,	Goodwill,	for additional	information	regarding	the	impairment	charge.

The	significant	components	of	deferred	tax	assets	and	liabilities	are	as	follows:

| 30	September | 2016 | 2015 |
| :--- | :--- | :--- |
| Gross\tDeferred\tTax\tAssets |  |  |
| Retirement\tbenefits\tand\tcompensation\taccruals | \t $537.9 | \t $468.7 |
| Tax\tloss\tcarryforwards | 93.0 | 116.7 |
| Tax\tcredits\tand\tother\ttax\tcarryforwards | 56.0 | 43.8 |
| Reserves\tand\taccruals | 80.1 | 71.9 |
| Partnership\tand\tother\tinvestments | 4.8 | 6.2 |
| Other | 45.8 | 66.3 |
| Valuation\tallowance | (155.2) | (103.6) |
| Deferred\tTax\tAssets | 662.4 | 670.0 |
| Gross\tDeferred\tTax\tLiabilities |  |  |
| Plant\tand\tequipment | \t1,034.8 | \t1,124.6 |
| Currency\tgains | 46.4 | 65.7 |
| Unremitted\tearnings\tof\tforeign\tentities | 5.4 | 62.7 |
| Intangible\tassets | 134.1 | 135.6 |
| Other | 16.1 | 2.1 |
| Deferred\tTax\tLiabilities | \t1,236.8 | \t1,390.7 |
| Net\tDeferred\tIncome\tTax\tLiability | \t $574.4 | \t $720.7 |

|  | 2016 | 2015 |
| :--- | :--- | :--- |
| Deferred\tTax\tAssets |  |  |
| Other\tnoncurrent\tassets | \t\t\t$192.7 | $82.7 |
| Deferred\tTax\tLiabilities |  |  |
| Deferred\tincome\ttaxes | 767.1 | 803.4 |
| Net\tDeferred\tIncome\tTax\tLiability | \t\t\t$574.4\t\t\t\t\t $720.7 | \t\t\t$574.4\t\t\t\t\t $720.7 |

Gross	federal	loss	and	tax	credit	carryforwards	as	of	30	September	2016	were	$137.1	and	$25.7,	respectively.	The	federal	loss	carryforward	is	primarily a	capital	loss	due	to	a	2014	tax	election	related	to	a	non-U.S.	subsidiary	that	expires	in	2019.	The	federal	tax	credit	carryforwards	expire	in	2025	and 2026.	Gross	state	loss	and	tax	credit	carryforwards	as	of	30	September	2016	were	$123.2	and	$3.3,	respectively.	The	state	tax	carryforwards	have expiration	periods	between	2018	and	2034.	Gross	foreign	loss	and	tax	credit	carryforwards	as	of	30	September	2016	were	$155.0	and	$27.0, respectively.	Foreign	tax	carryforwards	of	$119.5	have	expiration	periods	between	2017	and	2026;	the	remainder	have	unlimited	carryforward	periods.

The	valuation	allowance	as	of	30	September	2016	of	$155.2	primarily	related	to	the	tax	benefit	on	the	federal	capital	loss	carryforward	of	$48.0,	tax benefit	of	foreign	loss	carryforwards	of	$37.7,	and	capital	assets	of	$58.0	that	were	generated	from	the	loss	recorded	on	the	exit	from	the	Energy-from- Waste	business	in	2016.	If	events	warrant	the	reversal	of	the	valuation	allowance,	it	would	result	in	a	reduction	of	tax	expense.	We	believe	it	is	more likely	than	not	that	future	earnings	and	reversal	of	deferred	tax	liabilities	will	be	sufficient	to	utilize	our	deferred	tax	assets,	net	of	existing	valuation allowance,	at	30	September	2016.	The	deferred	tax	liability	associated	with	unremitted	earnings	of	foreign	entities	decreased	in	part	due	to	the	dividend to	repatriate	cash	from	a	foreign	subsidiary	in	South	Korea.	This	amount	was	also	impacted	by	ongoing	activity	including	earnings,	dividend	payments, tax	credit	adjustments,	and	currency	translation	impacting	the	undistributed	earnings	of	our	foreign	subsidiaries	and	corporate	joint	ventures	which	are	not considered	to	be	indefinitely	reinvested	outside	of	the	U.S.

We	record	U.S.	income	taxes	on	the	undistributed	earnings	of	our	foreign	subsidiaries	and	corporate	joint	ventures	unless	those	earnings	are	indefinitely reinvested	outside	of	the	U.S.	These	cumulative	undistributed	earnings	that	are	considered	to	be	indefinitely	reinvested	in	foreign	subsidiaries	and corporate	joint	ventures	are	included	in	retained	earnings	on	the	consolidated	balance	sheets	and	amounted	to	$6,300.9	as	of	30	September	2016.	An estimated	$1,467.8	in	U.S.	income	and	foreign	withholding	taxes	would	be	due	if	these	earnings	were	remitted	as	dividends	after	payment	of	all	deferred taxes.

A	reconciliation	of	the	beginning	and	ending	amount	of	the	unrecognized	tax	benefits	is	as	follows:

| Unrecognized	Tax	Benefits | 2016 | 2015 | 2014 |
| :--- | :--- | :--- | :--- |
| Balance\tat\tbeginning\tof\tyear | $97.5 | \t$108.7 | \t$124.3 |
| Additions\tfor\ttax\tpositions\tof\tthe\tcurrent\tyear | 15.0 | 6.9 | 8.1 |
| Additions\tfor\ttax\tpositions\tof\tprior\tyears | 3.8 | 7.5 | 4.9 |
| Reductions\tfor\ttax\tpositions\tof\tprior\tyears | (.3) | (7.9) | (14.6) |
| Settlements | (5.6) | (.6) | — |
| Statute\tof\tlimitations\texpiration | (3.0) | (11.2) | (14.0) |
| Foreign\tcurrency\ttranslation | (.5) | (5.9) | — |
| Balance\tat\tEnd\tof\tYear | \t$106.9 | $97.5 | \t$108.7 |

At	30	September	2016	and	2015,	we	had	$106.9	and	$97.5	of	unrecognized	tax	benefits,	excluding	interest	and	penalties,	of	which	$64.5	and	$62.5, respectively,	would	impact	the	effective	tax	rate	if	recognized.

Interest	and	penalties	related	to	unrecognized	tax	benefits	are	recorded	as	a	component	of	income	tax	expense	and	totaled	$2.3	in	2016,	$(1.8)	in	2015, and	$1.2	in	2014.	Our	accrued	balance	for	interest	and	penalties	was	$9.8	and	$7.5	as	of	30	September	2016	and	2015,	respectively.

We	are	currently	under	examination	in	a	number	of	tax	jurisdictions,	some	of	which	may	be	resolved	in	the	next	twelve	months.	As	a	result,	it	is reasonably	possible	that	a	change	in	the	unrecognized	tax	benefits	may	occur	during	the	next	twelve	months.	However,	quantification	of	an	estimated range	cannot	be	made	at	this	time.

We	generally	remain	subject	to	examination	in	the	following	major	tax	jurisdictions	for	the	years	indicated	below:

# Payables	and	Accrued	Liabilities

# Gain	on	Land	Sales

During	the	fourth	quarter	of	2015,	we	sold	two	parcels	of	land	resulting	in	a	gain	of	$33.6	($28.3	after-tax,	or	$.13	per	share).	The	gain	is	reflected	in	sale of	assets	and	investments	in	the	table	above.

# 25.				SUMMARY	BY	QUARTER	(UNAUDITED)

These	tables	summarize	the	unaudited	results	of	operations	for	each	quarter	of	2016	and	2015:

| 2016 |  | Q1 | Q2 | Q3 | Q4 | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Sales |  | \t$2,355.8 | \t$2,271.2 | \t$2,434.4 | \t$2,463.0 | \t$9,524.4 |
| Gross\tprofit(A) |  | 760.1 | 752.2 | 795.1 | 814.3 | 3,121.7 |
| Business\tseparation\tcosts(B) |  | 12.0 | 7.4 | 9.5 | 23.3 | 52.2 |
| Business\trestructuring\tand\tcost\treduction\tactions(C) |  | — | 8.6 | 14.2 | 11.1 | 33.9 |
| Pension\tsettlement\tloss(D) |  | — | 2.6 | 1.0 | 2.8 | 6.4 |
| Operating\tincome(A) |  | 510.6 | 513.3 | 535.1 | 547.0 | 2,106.0 |
| Loss\ton\textinguishment\tof\tdebt(E) |  | — | — | — | 6.9 | 6.9 |
| Income\ttax\tprovision |  | 135.9 | 132.5(F) | 179.5(F) | 138.6(F) | 586.5(F) |
| Net\tincome\t(loss) |  | 372.0 | (465.5) | 354.1 | 400.9 | 661.5 |
| Net\tincome\tattributable\tto\tAir\tProducts |  |  |  |  |  |  |
| Income\tfrom\tcontinuing\toperations |  | 377.8 | 379.8 | 355.7 | 402.0 | 1,515.3 |
| Loss\tfrom\tdiscontinued\toperations |  | (14.2) | (853.1) | (8.9) | (8.0) | (884.2) |
| Net\tincome\t(loss)\tattributable\tto\tAir\tProducts |  | 363.6 | (473.3) | 346.8 | 394.0 | 631.1 |
| Basic\tEarnings\tPer\tCommon\tShare\tAttributable\tto\tAir\tProducts |  |  |  |  |  |  |
| Income\tfrom\tcontinuing\toperations |  | 1.75 | 1.76 | 1.64 | 1.85 | 7.00 |
| Loss\tfrom\tdiscontinued\toperations |  | (.07) | (3.95) | (.04) | (.04) | (4.08) |
| Net\tincome\t(loss)\tattributable\tto\tAir\tProducts |  | 1.68 | (2.19) | 1.60 | 1.81 | 2.92 |
| Diluted\tEarnings\tPer\tCommon\tShare\tAttributable\tto\tAir\tProducts |  |  |  |  |  |  |
| Income\tfrom\tcontinuing\toperations |  | 1.73 | 1.74 | 1.63 | 1.84 | 6.94 |
| Loss\tfrom\tdiscontinued\toperations |  | (.06) | (3.91) | (.04) | (.04) | (4.05) |
| Net\tincome\t(loss)\tattributable\tto\tAir\tProducts |  | 1.67 | (2.17) | 1.59 | 1.80 | 2.89 |
| Dividends\tdeclared\tper\tcommon\tshare |  | .81 | .86 | .86 | .86 | 3.39 |
| Market\tprice\tper\tcommon\tshare: | \t\t\tHigh | 143.83 | 147.16 | 152.16 | 157.84 |  |
|  | \t\t\t Low | 126.65 | 114.64 | 134.15 | 137.31 |  |

| 2015 |  | Q1 | Q2 | Q3 | Q4 | Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| Sales |  | \t$2,560.8 | \t$2,414.5 | \t$2,470.2 | \t$2,449.4 | \t$9,894.9 |
| Gross\tprofit |  | 731.1 | 716.3 | 755.0 | 753.5 | 2,955.9 |
| Business\tseparation\tcosts(B) |  | — | — | — | 7.5 | 7.5 |
| Business\trestructuring\tand\tcost\treduction\tactions(C) |  | 32.4 | 55.4 | 58.2 | 61.7 | 207.7 |
| Pension\tsettlement\tloss(D) |  | — | 12.6 | 1.6 | 7.0 | 21.2 |
| Gain\ton\tpreviously\theld\tequity\tinterest(G) |  | 17.9 | — | — | — | 17.9 |
| Gain\ton\tland\tsales(H) |  | — | — | — | 33.6 | 33.6 |
| Operating\tincome |  | 432.3 | 376.9 | 424.8 | 474.3 | 1,708.3 |
| Loss\ton\textinguishment\tof\tdebt(E) |  | — | — | — | 16.6 | 16.6 |
| Income\ttax\tprovision |  | 107.1 | 87.7 | 104.1 | 119.4 | 418.3 |
| Net\tincome |  | 337.5 | 296.9 | 333.2 | 350.0 | 1,317.6 |
| Net\tincome\tattributable\tto\tAir\tProducts |  |  |  |  |  |  |
| Income\tfrom\tcontinuing\toperations |  | 326.3 | 291.9 | 320.5 | 346.0 | 1,284.7 |
| Loss\tfrom\tdiscontinued\toperations |  | (1.7) | (1.9) | (1.7) | (1.5) | (6.8) |
| Net\tincome\tattributable\tto\tAir\tProducts |  | 324.6 | 290.0 | 318.8 | 344.5 | 1,277.9 |
| Basic\tEarnings\tPer\tCommon\tShare\tAttributable\tto\tAir\tProducts |  |  |  |  |  |  |
| Income\tfrom\tcontinuing\toperations |  | 1.53 | 1.36 | 1.49 | 1.61 | 5.98 |
| Loss\tfrom\tdiscontinued\toperations |  | (.01) | (.01) | (.01) | (.01) | (.03) |
| Net\tincome\tattributable\tto\tAir\tProducts |  | 1.52 | 1.35 | 1.48 | 1.60 | 5.95 |
| Diluted\tEarnings\tPer\tCommon\tShare\tAttributable\tto\tAir\tProducts |  |  |  |  |  |  |
| Income\tfrom\tcontinuing\toperations |  | 1.51 | 1.34 | 1.48 | 1.59 | 5.91 |
| Loss\tfrom\tdiscontinued\toperations |  | (.01) | (.01) | (.01) | (.01) | (.03) |
| Net\tincome\tattributable\tto\tAir\tProducts |  | 1.50 | 1.33 | 1.47 | 1.58 | 5.88 |
| Dividends\tdeclared\tper\tcommon\tshare |  | .77 | .81 | .81 | .81 | 3.20 |
| Market\tprice\tper\tcommon\tshare: | \tHigh | 149.61 | 158.20 | 153.93 | 148.56 |  |
|  | \t Low | 118.20 | 137.07 | 136.69 | 123.66 |  |

(A) Changes	in	estimates	on	projects	accounted	for	under	the	percentage	of	completion	method	favorably	impacted	income	by	approximately	$20	in	fiscal	year	2016,	primarily during	the	fourth	quarter.	For	additional	information,	see	Note	1,	Major	Accounting	Policies	(Revenue	Recognition).

(B) For	additional	information,	see	Note	3,	Materials	Technologies	Separation.

(C) For	additional	information,	see	Note	5,	Business	Restructuring	and	Cost	Reduction	Actions.

(D) For	additional	information,	see	Note	16,	Retirement	Benefits.

(E) For	additional	information,	see	Note	15,	Debt.

(F) Includes	income	tax	expense	for	tax	costs	associated	with	business	separation.	For	additional	information,	see	Note	3,	Materials	Technologies	Separation.

(G) For	additional	information,	see	Note	6,	Business	Combination.

(H) The	gain	is	reflected	on	the	consolidated	income	statements	in	"Other	income	(expense),	net."	For	additional	information,	see	Note	24,	Supplemental	Information.

# 26.				BUSINESS	SEGMENT	AND	GEOGRAPHIC	INFORMATION

Our	reporting	segments	reflect	the	manner	in	which	our	chief	operating	decision	maker	reviews	results	and	allocates	resources.	Except	in	the	Corporate and	other	segment,	each	reporting	segment	meets	the	definition	of	an	operating	segment	and	does	not	include	the	aggregation	of	multiple	operating segments.	Our	liquefied	natural	gas	(LNG)	and	helium	storage	and	distribution	sale	of	equipment	businesses	are	aggregated	within	the	Corporate	and other	segment.

# Our	reporting	segments	are:

•Industrial	Gases	–	EMEA	(Europe,	Middle	East,	and	Africa)

# Industrial	Gases	–	Regional

The	regional	Industrial	Gases	(Americas,	EMEA,	Asia)	segments	include	the	results	of	our	regional	industrial	gas	businesses,	which	produce	and	sell atmospheric	gases	such	as	oxygen,	nitrogen,	and	argon	(primarily	recovered	by	the	cryogenic	distillation	of	air)	and	process	gases	such	as	hydrogen, carbon	monoxide,	helium,	syngas,	and	specialty	gases.	We	supply	gases	to	customers	in	many	industries,	including	those	in	metals,	glass,	chemical processing,	energy	production	and	refining,	food	processing,	metallurgical	industries,	medical,	and	general	manufacturing.	We	distribute	gases	to	our customers	through	a	variety	of	supply	modes	including	liquid	or	gaseous	bulk	supply	delivered	by	tanker	or	tube	trailer	and,	for	smaller	customers, packaged	gases	delivered	in	cylinders	and	dewars	or	small	on-sites	(cryogenic	or	non-cryogenic	generators).	For	large-volume	customers,	we	construct an	on-site	plant	adjacent	to	or	near	the	customer's	facility	or	deliver	product	from	one	of	our	pipelines.	We	are	the	world's	largest	provider	of	hydrogen, which	is	used	by	refiners	to	facilitate	the	conversion	of	heavy	crude	feedstock	and	lower	the	sulfur	content	of	gasoline	and	diesel	fuels.

Electricity	is	the	largest	cost	component	in	the	production	of	atmospheric	gases,	and	natural	gas	is	the	principal	raw	material	for	hydrogen,	carbon monoxide,	and	syngas	production.	We	mitigate	energy	and	natural	gas	prices	contractually	through	pricing	formulas,	surcharges,	and	cost	pass-through arrangements.	The	regional	Industrial	Gases	segments	also	include	our	share	of	the	results	of	several	joint	ventures	accounted	for	by	the	equity	method. The	largest	of	these	joint	ventures	operate	in	Mexico,	Italy,	South	Africa,	India,	Saudi	Arabia,	and	Thailand.	Each	of	the	regional	Industrial	Gases segments	competes	against	global	industrial	gas	companies	as	well	as	regional	competitors.	Competition	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	reliable	and	economic	supply	of	products	to	larger	customers.

The	Industrial	Gases	–	Global	segment	includes	cryogenic	and	gas	processing	equipment	sales	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	Industrial	Gases	–	Global	segment	also	includes	centralized	global	costs	associated	with	management	of	all	the	Industrial	Gases segments.	These	costs	include	Industrial	Gases	global	administrative	costs,	product	development	costs,	and	research	and	development	costs.	We compete	with	a	large	number	of	firms	for	all	the	offerings	included	in	the	Industrial	Gases	–	Global	segment.	Competition	in	the	equipment	businesses	is based	primarily	on	technological	performance,	service,	technical	know-how,	price,	and	performance	guarantees.

The	Materials	Technologies	segment,	which	contains	two	divisions,	Electronic	Materials	(EMD)	and	Performance	Materials	(PMD),	employs	applications technology	to	provide	solutions	to	a	broad	range	of	global	industries	through	chemical	synthesis,	analytical	technology,	process	engineering,	and	surface science.	EMD	provides	specialty	gases,	specialty	chemicals,	services,	and	equipment	to	the	electronics	industry,	primarily	for	the	manufacture	of	silicon and	compound	semiconductors	and	thin	film	transistor	liquid	crystal	(LCD)	displays.	PMD

provides	performance	chemical	solutions	for	the	coatings,	inks,	adhesives,	construction	and	civil	engineering,	personal	care,	institutional	and	industrial cleaning,	mining,	oil	refining,	and	polyurethanes	industries.	We	compete	in	the	businesses	included	in	the	Materials	Technologies	segment	on	a	product- by-product	basis	against	competitors	ranging	from	niche	suppliers	with	a	single	product	to	larger	and	more	vertically	integrated	companies.	Competition is	principally	conducted	on	the	basis	of	price,	quality,	product	performance,	reliability	of	product	supply,	technical	innovation,	service,	and	global infrastructure.

During	2016,	Air	Products	entered	into	an	agreement	to	sell	certain	subsidiaries	and	assets	comprising	the	PMD	division.	The	sale	is	subject	to	regulatory and	anti-trust	requirements.	On	1	October	2016,	Air	Products	completed	the	separation	of	its	EMD	division	through	the	spin-off	of	Versum.	Refer	to	Note 3,	Materials	Technologies	Separation,	for	additional	information.

The	Corporate	and	other	segment	includes	two	ongoing	global	businesses	(our	LNG	sale	of	equipment	business	and	our	liquid	helium	and	liquid hydrogen	transport	and	storage	container	businesses),	the	polyurethane	intermediates	(PUI)	business	that	was	exited	in	early	fiscal	year	2014,	and corporate	support	functions	that	benefit	all	the	segments.	Competition	for	the	two	sale	of	equipment	businesses	is	based	primarily	on	technological performance,	service,	technical	know-how,	price,	and	performance	guarantees.	Corporate	and	other	also	includes	income	and	expense	that	cannot	be directly	associated	with	the	business	segments,	including	foreign	exchange	gains	and	losses	and	stranded	costs	resulting	from	discontinued	operations. Also	included	are	LIFO	inventory	adjustments,	as	the	business	segments	use	FIFO,	and	the	LIFO	pool	adjustments	are	not	allocated	to	the	business segments.

In	addition	to	assets	of	the	global	businesses	included	in	this	segment,	other	assets	include	cash,	deferred	tax	assets,	and	financial	instruments.

We	do	not	have	a	homogeneous	customer	base	or	end	market,	and	no	single	customer	accounts	for	more	than	10%	of	our	consolidated	revenues.

# Accounting	Policies

The	accounting	policies	of	the	segments	are	the	same	as	those	described	in	Note	1,	Major	Accounting	Policies.	We	evaluate	the	performance	of segments	based	upon	reported	segment	operating	income.

# Business	Segment

|  | Industrial<br>Gases–<br>Americas | Industrial<br>Gases–<br>EMEA | Industrial<br>Gases–<br>Asia | Industrial<br>Gases–<br>Global | Materials<br>Technologies | Corporate<br>and	other | Segment<br>Total |
| :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- |
| 2016 |  |  |  |  |  |  |  |
| Sales\tto\texternal\tcustomers | \t $3,343.6 | \t $1,700.3 | \t $1,716.1 | \t $498.8 | $2,019.5 | $246.1 | $9,524.4 |
| Operating\tincome\t(loss) | 895.2 | 382.8 | 449.1 | (21.3) | 530.2 | (37.5) | 2,198.5 |
| Depreciation\tand\tamortization | 442.5 | 185.7 | 197.1 | 7.9 | 77.4 | 15.3 | 925.9 |
| Equity\taffiliates'\tincome\t(loss) | 52.7 | 36.5 | 57.8 | (.1) | 1.7 | — | 148.6 |
| Expenditures\tfor\tlong-lived\tassets | 406.6 | 159.5 | 313.3 | 6.0 | 147.9 | 22.5 | 1,055.8 |
| Investments\tin\tnet\tassets\tof\tand\tadvances\tto\tequity\taffiliates | 250.6 | 580.5 | 442.5 | 10.0 | 4.5 | — | 1,288.1 |
| Total\tassets | 5,889.2 | 3,178.6 | 4,232.7 | 367.6 | 1,787.0 | 2,580.8 | 18,035.9 |
| 2015 |  |  |  |  |  |  |  |
| Sales\tto\texternal\tcustomers | \t $3,693.9 | \t $1,864.9 | \t $1,637.5 | \t $286.8 | $2,087.1 | $324.7 | $9,894.9 |
| Operating\tincome\t(loss) | 808.4 | 330.7 | 380.5 | (51.6) | 476.7 | (51.5) | 1,893.2 |
| Depreciation\tand\tamortization | 416.9 | 194.3 | 202.9 | 16.5 | 92.8 | 13.0 | 936.4 |
| Equity\taffiliates'\tincome\t(loss) | 64.6 | 42.4 | 46.1 | (.8) | 2.2 | — | 154.5 |
| Expenditures\tfor\tlong-lived\tassets | 414.5 | 215.6 | 402.5 | 94.8 | 102.5 | 35.7 | 1,265.6 |
| Investments\tin\tnet\tassets\tof\tand\tadvances\tto\tequity\taffiliates | 249.7 | 564.1 | 421.7 | 14.3 | 15.9 | — | 1,265.7 |
| Total\tassets | 5,774.9 | 3,323.9 | 4,154.0 | 370.5 | 1,741.9 | 1,075.7 | 16,440.9 |
| 2014 |  |  |  |  |  |  |  |
| Sales\tto\texternal\tcustomers | \t $4,078.5 | \t $2,150.7 | \t $1,527.0 | \t $296.0 | $2,064.6 | $322.2 | $10,439.0 |
| Operating\tincome\t(loss) | 762.6 | 351.2 | 310.4 | (57.3) | 379.0 | (78.5) | 1,667.4 |
| Depreciation\tand\tamortization | 414.4 | 220.2 | 205.3 | 7.1 | 99.1 | 10.8 | 956.9 |
| Equity\taffiliates'\tincome | 60.9 | 44.1 | 38.0 | 5.8 | 2.6 | — | 151.4 |
| Expenditures\tfor\tlong-lived\tassets | 484.2 | 239.1 | 430.3 | 77.7 | 64.2 | 67.2 | 1,362.7 |
| Investments\tin\tnet\tassets\tof\tand\tadvances\tto\tequity\taffiliates | 234.3 | 552.9 | 434.1 | 18.8 | 17.8 | — | 1,257.9 |
| Total\tassets | 6,240.7 | 3,521.0 | 4,045.6 | 389.4 | 1,835.7 | 1,044.5 | 17,076.9 |

Below	is	a	reconciliation	of	segment	total	operating	income	to	consolidated	operating	income:

The	sales	information	noted	above	relates	to	external	customers	only.	All	intersegment	sales	are	eliminated	in	consolidation.	The	Industrial Gases	–	Global	segment	had	intersegment	sales	of	$232.4	in	2016,	$242.8	in	2015,

and	$192.4	in	2014.	These	sales	are	generally	transacted	at	market	pricing.	For	all	other	segments,	intersegment	sales	are	not	material	for	all	periods presented.	Equipment	manufactured	for	our	regional	industrial	gases	segments	are	generally	transferred	at	cost	and	not	reflected	as	an	intersegment sale.

# Geographic	Information

(A)	Long-lived	assets	include	plant	and	equipment,	net.

Geographic	information	is	based	on	country	of	origin.	Included	in	United	States	revenues	are	export	sales	to	third-party	customers	of	$307.7	in	2016, $398.8	in	2015,	and	$378.7	in	2014.	The	Europe	region	operates	principally	in	France,	Germany,	the	Netherlands,	Poland,	Saudi	Arabia,	Spain,	and	the United	Kingdom.	The	Asia	region	operates	principally	in	China,	Singapore,	South	Korea,	and	Taiwan.	The	Latin	America	region	operates	principally	in Brazil	and	Chile.

# ITEM	9. CHANGES	IN	AND	DISAGREEMENTS	WITH	ACCOUNTANTS	ON	ACCOUNTING	AND	FINANCIAL	DISCLOSURE

# ITEM	9A. CONTROLS	AND	PROCEDURES

Under	the	supervision	of	the	Chief	Executive	Officer	and	Chief	Financial	Officer,	the	Company's	management	conducted	an	evaluation	of	the effectiveness	of	the	Company's	disclosure	controls	and	procedures	as	of	30	September	2016.	Based	on	that	evaluation,	the	Chief	Executive	Officer	and Chief	Financial	Officer	concluded	that,	as	of	the	end	of	the	annual	period	covered	by	this	report,	the	disclosure	controls	and	procedures	have	been effective.	There	has	been	no	change	in	the	Company's	internal	control	over	financial	reporting	(as	that	term	is	defined	in	Rules	13a-15(f)	and	15d-15(f) under	the	Exchange	Act)	as	of	30	September	2016	that	has	materially	affected,	or	is	reasonably	likely	to	materially	affect,	the	Company's	internal	control over	financial	reporting.

Management's	Report	on	Internal	Control	over	Financial	Reporting	is	provided	under	Item	8	appearing	above.	The	report	of	KPMG	LLP,	the	Company's independent	registered	public	accounting	firm,	regarding	the	Company's	internal	control	over	financial	reporting,	is	also	provided	under	Item	8	appearing above.

In	connection	with	the	spin-off	of	Versum	Materials,	Inc.,	the	Company	entered	into	a	transition	services	agreement	pursuant	to	which	it	will	continue	to provide	information	technology,	systems	applications,	business	processes,	and	associated	internal	controls	to	Versum	for	a	period	of	18	months	to	allow Versum	the	time	to	establish	its	own	infrastructure	and	both	companies	sufficient	time	to	physically	separate	their	information	technology	applications	and infrastructure.	Management	has	established	controls	to	mitigate	the	risk	that	personnel	of	either	company	obtain	unauthorized	access	to	the	other company's	data	and	will	continue	to	monitor	and	evaluate	the	sufficiency	of	the	controls.

# ITEM	9B. OTHER	INFORMATION

# PART	III

# ITEM	10. DIRECTORS,	EXECUTIVE	OFFICERS	AND	CORPORATE	GOVERNANCE

The	information	required	by	this	item	relating	to	the	Company's	directors	and	nominees	is	incorporated	herein	by	reference	to	the	section	captioned	"The Board	of	Directors"	in	the	Proxy	Statement	for	the	Annual	Meeting	of	Shareholders	to	be	held	on	26	January	2017.	The	information	required	by	this	item relating	to	the	Company's	executive	officers	is	set	forth	in	Item	1	of	Part	1	of	this	report.

The	information	required	by	this	item	relating	to	the	Company's	Audit	Committee	and	its	Audit	Committee	Financial	Expert	is	incorporated	herein	by reference	to	the	sections	captioned	"Standing	Committees	Of	The	Board"	and	"Audit	Committee"	in	the	Proxy	Statement	for	the	Annual	Meeting	of Shareholders	to	be	held	on	26	January	2017.

The	information	required	by	this	item	relating	to	the	Company's	procedures	regarding	the	consideration	of	candidates	recommended	by	shareholders	and a	procedure	for	submission	of	such	candidates	is	incorporated	herein	by	reference	to	the	section	captioned	"Selection	of	Directors"	in	the	Proxy Statement	for	the	Annual	Meeting	of	Shareholders	to	be	held	on	26	January	2017.

The	information	required	by	the	item	relating	to	Section	16(a)	Beneficial	Ownership	Reporting	Compliance	is	incorporated	herein	by	reference	to	the section	captioned	"Section	16(a)	Beneficial	Ownership	Reporting	Compliance"	in	the	Proxy	Statement	for	the	Annual	Meeting	of	Shareholders	to	be	held on	26	January	2017.

The	Company	has	adopted	a	Code	of	Conduct	that	applies	to	all	employees,	including	the	Chief	Executive	Officer,	the	Chief	Financial	Officer,	and	the Principal	Accounting	Officer.	The	Code	of	Conduct	can	be	found	at	our	Internet	website	at	www.airproducts.com/codeofconduct.

# ITEM	11. EXECUTIVE	COMPENSATION

The	information	required	by	this	item	is	incorporated	herein	by	reference	to	the	sections	captioned	"Compensation	of	Executive	Officers"	and "Compensation	of	Directors"	in	the	Proxy	Statement	for	the	Annual	Meeting	of	Shareholders	to	be	held	on	26	January	2017.

# ITEM	12. SECURITY	OWNERSHIP	OF	CERTAIN	BENEFICIAL	OWNERS	AND	MANAGEMENT	AND	RELATED	STOCKHOLDER	MATTERS

# Securities	Authorized	for	Issuance	Under	Equity	Compensation	Plans.

# Equity	Compensation	Plan	Information

The	following	table	provides	information	as	of	30	September	2016	about	Company	stock	that	may	be	issued	upon	the	exercise	of	options,	warrants,	and rights	granted	to	employees	or	members	of	the	Board	under	the	Company's	existing	equity	compensation	plans,	including	plans	approved	by shareholders	and	plans	that	have	not	been	approved	by	shareholders	in	reliance	on	the	NYSE's	former	treasury	stock	exception	or	other	applicable exception	to	the	Exchange's	listing	requirements.

|  | Number	of	securities |  | future	issuance	under |
| :--- | :--- | :--- | :--- |
|  | to\tbe\tissued\tupon | Weighted-average | equity\tcompensation |
|  | exercise\tof | exercise\tprice\tof | plans\t(excluding |
|  | outstanding\toptions, | outstanding\toptions, | securities\treflected\tin |
| Plan\tCategory | warrants,\tand\trights | warrants,\tand\trights | column\t(a)) |
| Equity\tcompensation\tplans\tapproved\tby |  |  |  |
| security\tholders | 5,070,916(1) | \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$90.28 | \t\t\t\t\t\t\t\t4,840,837(2) |
| Equity\tcompensation\tplans\tnot\tapproved\tby |  |  |  |
| security\tholders | 71,770(3) | \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$— | — |
| Total | \t\t\t\t\t\t\t\t\t\t\t\t5,142,686 | \t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t$90.28 | 4,840,837 |

(1)	Represents	Long-Term	Incentive	Plan	outstanding	stock	options	and	deferred	stock	units	that	have	been	granted.	Deferred	stock	units	entitle	the	recipient	to	one	share	of Company	common	stock	upon	vesting,	which	is	conditioned	on	continued	employment	during	a	deferral	period	and	may	also	be	conditioned	on	earn-out	against	certain performance	targets.

(2)	Represents	authorized	shares	that	were	available	for	future	grants	as	of	30	September	2016.	These	shares	may	be	used	for	options,	deferred	stock	units,	restricted	stock,	and other	stock-based	awards	to	officers,	directors,	and	key	employees.	Full	value	awards	such	as	restricted	stock	are	limited	to	20%	of	cumulative	awards	after	1	October	2001.

(3)	This	number	represents	deferred	stock	units	issued	under	the	Deferred	Compensation	Plan,	which	are	purchased	for	the	fair	market	value	of	the	underlying	shares	of	stock	with eligible	deferred	compensation.

The	Deferred	Compensation	Plan	was	not	approved	by	shareholders.	It	does	not	require	shareholder	approval	because	participants	forego	compensation equal	to	the	full	market	value	of	any	share	units	credited	under	the	plans.

Deferred	Compensation	Plan—The	Company's	Deferred	Compensation	Plan	is	an	unfunded	employee	retirement	benefit	plan	available	to	certain	of	the Company's	U.S.-based	management	and	other	highly	compensated	employees	(and	those	of	its	subsidiaries)	who	receive	awards	under	the	Company's Annual	Incentive	Plan,	which	is	the	annual	cash	bonus	plan	for	executives	and	key	salaried	employees	of	the	Company	and	its	subsidiaries.	Because participants	forego	current	compensation	to	"purchase"	deferred	stock	units	for	full	value	under	the	Plan,	it	is	not	required	to	be	approved	by	shareholders under	the	NYSE	listing	standards.	Under	the	Plan,	participants	may	defer	a	portion	of	base	salary	(elective	deferrals)	which	cannot	be	contributed	to	the Company's	Retirement	Savings	Plan,	a	401(k)	and	profit-sharing	plan	offered	to	all	salaried	employees	(RSP),	because	of	tax	limitations	and	earn matching	contributions	from	the	Company	that	they	would	have	received	if	their	elective	deferrals	had	been	contributed	to	the	RSP	(matching	credits).	In addition,	participants	in	the	Plan	may	defer	all	or	a	portion	of	their	bonus	awards	under	the	Annual	Incentive	Plan	(bonus	deferrals)	under	the

Deferred	Compensation	Plan.	Finally,	certain	participants	under	the	Plan	who	participate	in	the	profit-sharing	component	of	the	RSP	rather	than	the Company's	salaried	pension	plans	receive	contribution	credits	under	the	Plan	which	are	a	percentage	ranging	from	4%-6%,	based	on	their	years	of service,	of	their	salary	in	excess	of	tax	limitations	and	their	bonus	awards	under	the	Annual	Incentive	Plan	(contribution	credits).	The	dollar	amount	of elective	deferrals,	matching	credits,	bonus	deferrals,	and	contribution	credits	is	initially	credited	to	an	unfunded	account,	which	earns	interest	credits. Participants	are	periodically	permitted	while	employed	by	the	Company	to	irrevocably	convert	all	or	a	portion	of	their	interest-bearing	account	to	deferred stock	units	in	a	Company	stock	account.	Upon	conversion,	the	Company	stock	account	is	credited	with	deferred	stock	units	based	on	the	fair	market value	of	a	share	of	Company	stock	on	the	date	of	crediting.	Dividend	equivalents	corresponding	to	the	number	of	units	are	credited	quarterly	to	the interest-bearing	account.	Deferred	stock	units	generally	are	paid	after	termination	of	employment	in	shares	of	Company	stock.

The	Deferred	Compensation	Plan	was	formerly	known	as	the	Supplementary	Savings	Plan.	The	name	was	changed	in	2006	when	the	deferred	bonus program,	previously	administered	under	the	Annual	Incentive	Plan,	was	merged	into	this	Plan.

Certain	information	required	by	this	item	regarding	the	beneficial	ownership	of	the	Company's	common	stock	is	incorporated	herein	by	reference	to	the sections	captioned	"Persons	Owning	More	than	5%	of	Air	Products	Stock	as	of	September	30,	2016"	and	"Air	Products	Stock	Beneficially	Owned	by Officers	and	Directors"	in	the	Proxy	Statement	for	the	Annual	Meeting	of	Shareholders	to	be	held	on	26	January	2017.

# ITEM	13. CERTAIN	RELATIONSHIPS	AND	RELATED	TRANSACTIONS,	AND	DIRECTOR	INDEPENDENCE

The	information	required	by	this	item	is	incorporated	herein	by	reference	to	the	sections	captioned	"Director	Independence"	and	"Transactions	with Related	Persons"	in	the	Proxy	Statement	for	the	Annual	Meeting	of	Shareholders	to	be	held	on	26	January	2017.

# ITEM	14. PRINCIPAL	ACCOUNTANT	FEES	AND	SERVICES

The	information	required	by	this	item	is	incorporated	herein	by	reference	to	the	section	captioned	"Independent	Registered	Public	Accountant"	in	the Proxy	Statement	for	the	Annual	Meeting	of	Shareholders	to	be	held	on	26	January	2017.

# PART	IV

# ITEM	15. EXHIBITS	AND	FINANCIAL	STATEMENT	SCHEDULES

# 		(a) 	 The	following	documents	are	filed	as	a	part	of	this	report:

(1) The	Company's	2016	consolidated	financial	statements	and	the	Report	of	the	Independent	Registered	Public	Accounting	Firm	are included	in	Part	II,	Item	8.

(2) Financial	Statement	Schedules—the	following	additional	information	should	be	read	in	conjunction	with	the	consolidated	financial statements	in	the	Company's	2016	consolidated	financial	statements.

	 Schedule	II	Valuation	and	Qualifying	Accounts	for	the	three	fiscal	years	ended	30	September	2016 	 121

All	other	schedules	are	omitted	because	the	required	matter	or	conditions	are	not	present	or	because	the	information	required	by	the Schedules	is	submitted	as	part	of	the	consolidated	financial	statements	and	notes	thereto.

(3) Exhibits—The	exhibits	filed	as	a	part	of	this	Annual	Report	on	Form	10-K	are	listed	in	the	Index	to	Exhibits	located	on	page	122	of	this Report.

# SIGNATURES

Pursuant	to	the	requirements	of	Section	13	or	15(d)	of	the	Securities	Exchange	Act	of	1934,	the	registrant	has	duly	caused	this	Report	to	be	signed	on	its behalf	by	the	undersigned,	thereunto	duly	authorized.

(Registrant)

Executive	Vice	President	and	Chief	Financial	Officer

(Principal	Financial	Officer)

Pursuant	to	the	requirements	of	the	Securities	Exchange	Act	of	1934,	this	Report	has	been	signed	below	by	the	following	persons	on	behalf	of	the registrant	and	in	the	capacities	and	on	the	dates	indicated.

Director

(Matthew	H.	Paull)

* Mary	T.	Afflerbach,	Corporate	Secretary	and	Chief	Governance	Officer,	by	signing	her	name	hereto,	does	sign	this	document	on	behalf	of	the	above noted	individuals,	pursuant	to	a	power	of	attorney	duly	executed	by	such	individuals,	which	is	filed	with	the	Securities	and	Exchange	Commission herewith.

/s/	Mary	T.	Afflerbach

Mary	T.	Afflerbach

Attorney-in-Fact

# SCHEDULE	II

# CONSOLIDATED

# SCHEDULE	II–VALUATION	AND	QUALIFYING	ACCOUNTS

|  | Balance	at<br>Beginning<br>of	Period | Additions<br>Charged	to<br>Expense | Additions<br>Charged	to<br>Other	Accounts | Other<br>Changes(A) | Balance<br>at	End	of<br>Period |
| :--- | :--- | :--- | :--- | :--- | :--- |
| Year\tEnded\t30\tSeptember\t2016 |  |  |  |  |  |
| Allowance\tfor\tdoubtful\taccounts | $49 | $9 | $14 | $(15) | $57 |
| Allowance\tfor\tdeferred\ttax\tassets(B) | 104 | 1 | 51 | (1) | 155 |
| Year\tEnded\t30\tSeptember\t2015 |  |  |  |  |  |
| Allowance\tfor\tdoubtful\taccounts | $60 | $8 | $18 | $(37) | $49 |
| Allowance\tfor\tdeferred\ttax\tassets | 104 | — | 2 | (2) | 104 |
| Year\tEnded\t30\tSeptember\t2014 |  |  |  |  |  |
| Allowance\tfor\tdoubtful\taccounts | $102 | $8 | $8 | $(58) | $60 |
| Allowance\tfor\tdeferred\ttax\tassets(C) | 45 | 58 | 1 | — | 104 |

(A) Primarily	includes	write-offs	of	uncollectible	trade	receivables.	Other	Changes	also	includes	the	impact	of	foreign	currency	translation	adjustments.

(B) The	increase	in	the	valuation	allowance	was	primarily	due	to	the	loss	recorded	on	the	exit	from	the	Energy-from-Waste	business.	These	costs	were	recorded	in	discontinued operations.	See	Note	4,	Discontinued	Operations,	for	additional	information.

(C) The	increase	in	the	valuation	allowance	was	primarily	due	to	the	capital	loss	generated	from	the	tax	election	related	to	a	non-U.S.	subsidiary.

# INDEX	TO	EXHIBITS

10.2 Annual	Incentive	Plan	as	Amended	and	Restated	Effective	1	October	2008.	(Filed	as	Exhibit	10.7	to	the	Company's	Form	10- Q	Report	for	the	quarter	ended	31	March	2009.)*

10.3 Stock	Incentive	Program	of	the	Company	effective	1	October	1996.	(Filed	as	Exhibit	10.21	to	the	Company's	Form	10-K	Report	for the	fiscal	year	ended	30	September	2002.)* 10.4 Amended	and	Restated	Deferred	Compensation	Program	for	Directors,	effective	16	July	2015.	(Filed	as	Exhibit	10.7	to	the Company's	Form	10-K	Report	for	the	fiscal	year	ended	30	September	2015.)* 10.5 Amended	and	Restated	Long-Term	Incentive	Plan	of	the	Company	effective	1	October	2014.	(Filed	as	Exhibit	10.1	to	the Company's	Form	8-K	filed	on	23	September	2014.)

10.5(a) Form	of	Award	Agreement	under	the	Long-Term	Incentive	Plan	of	the	Company,	used	for	FY	2007	awards.	(Filed	as	Exhibit	10.1	to the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2006.)*

10.5(b) Form	of	Award	Agreement	under	the	Long-Term	Incentive	Plan	of	the	Company,	used	for	FY	2008	awards.	(Filed	as	Exhibit	10.1	to the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2007.)*

10.5(c) Form	of	Award	Agreement	under	the	Long-Term	Incentive	Plan	of	the	Company,	used	for	FY	2009	Awards.	(Filed	as	Exhibit	10.1	to the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2008.)*

10.5(d) Form	of	Award	Agreement	under	the	Long-Term	Incentive	Plan	of	the	Company,	used	for	FY2010	awards.	(Filed	as	Exhibit	10.1	to the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2009.)*

10.5(e) Form	of	Award	Agreement	under	the	Long-Term	Incentive	Plan	of	the	Company,	used	for	FY2011	awards.	(Filed	as	Exhibit	10.1	to the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2010.)*

10.5(f) Form	of	Award	Agreement	under	the	Long-Term	Incentive	Plan	of	the	Company,	used	for	FY2012	awards.	(Filed	as	Exhibit	10.1	to the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2011.)*

10.5(g) Form	of	Award	Agreement	under	the	Long-Term	Incentive	Plan	of	the	Company,	used	for	FY2013	awards.	(Filed	as	Exhibit	10.1	to the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2012.)*

10.5(h) Form	of	Award	Agreement	under	the	Long-Term	Incentive	Plan	of	the	Company,	used	for	FY2014	awards.	(Filed	as	Exhibit	10.1	to the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2013.)*

10.5(i) Form	of	Award	Agreement	under	the	Long-Term	Incentive	Plan	of	the	Company,	used	for	FY2015	awards.	(Filed	as	Exhibit	10.1	to the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2014.)*

10.5(j) Form	of	Award	Agreement	under	the	Long-Term	Incentive	Plan	of	the	Company,	used	for	FY2016	awards.	(Filed	as	Exhibit	10.1	to the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2015.)*

10.6 Air	Products	and	Chemicals,	Inc.	Retirement	Savings	Plan	as	amended	and	restated	effective	1	January	2016.	(Filed	as	Exhibit 10.2	to	the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2015)*

Amendment	No.	1	dated	as	of	30	September	2016	to	the	Air	Products	and	Chemicals,	Inc.	Retirement	Savings	Plan	as	Amended and	Restated	effective	1	January	2016.

10.7 Supplementary	Pension	Plan	of	Air	Products	and	Chemicals,	Inc.	as	Amended	and	Restated	Effective	August	1,	2014.	(Filed	as Exhibit	10.10	to	the	Company's	Form	10-K	Report	for	the	fiscal	year	ended	30	September	2014.)*

10.8(a) Amendment	No.	1	dated	as	of	1	January	2016	to	the	Deferred	Compensation	Plan	as	Amended	and	Restated	effective	1	August 2014.	(Filed	as	Exhibit	10.3	to	the	Company's	Form	10-Q	Report	for	the	quarter	ended	31	December	2015.)

10.8(b) Amendment	No.	2	dated	as	of	30	September	2016	to	the	Deferred	Compensation	Plan	as	Amended	and	Restated	effective 1	August	2014.

10.10 Air	Products	and	Chemicals,	Inc.	Executive	Separation	Program	as	amended	effective	as	of	20	May	2015.	(Filed	as	Exhibit	10.2	to the	Company's	Form	10-Q	for	the	quarter	ended	30	June	2015.)*

10.11 Form	of	Change	in	Control	Severance	Agreement	for	an	Executive	Officer.	(Filed	as	Exhibit	10.21	to	the	Company's	Form	10-K Report	for	the	fiscal	year	ended	30	September	2011.)*

101.DEF XBRL	Taxonomy	Extension	Definition	Linkbase

* Previously	filed	as	indicated	and	incorporated	herein	by	reference.	Exhibits	incorporated	by	reference	are	located	in	SEC	File	No.	1-4534.

† The	certification	attached	as	Exhibit	32.1	that	accompanies	this	Annual	Report	on	Form	10-K,	is	not	deemed	filed	with	the	Securities	and Exchange	Commission	and	is	not	to	be	incorporated	by	reference	into	any	filing	of	Air	Products	and	Chemicals,	Inc.	under	the	Securities	Act	of 1933,	as	amended,	or	the	Securities	Exchange	Act	of	1934,	as	amended,	whether	made	before	or	after	the	date	of	this	Form	10-K,	irrespective	of any	general	incorporation	language	contained	in	such	filing.



Question: what is the increase in the operating margin observed in 2015 and 2016?
Calculation: margin_2015 = 0.219
margin_2016 = 0.268
increase = margin_2016 - margin_2015
answer = increase * 100
Answer: 4.9%