Related Party Transactions

12 Months Ended

Sep. 30, 2016

Air Products provides us with centrally managed services and corporate functions. Accordingly, certain shared costs including but not limited to administrative expenses for information technology, general services, human resources, legal, accounting and other services, have been allocated to us and are primarily reflected as expenses in the Corporate segment in the Annual Combined Financial Statements. Expenses have been allocated on the basis of direct usage when identifiable, with the remainder allocated on the basis of fixed costs, revenue, operating income, or headcount. We consider the expense allocation methodology and results to be reasonable and consistently applied for all periods presented.

Total costs allocated to us in the annual combined income statements are summarized below:



	Year Ended September 30,
	2016		2015		2014
(In millions)
Cost of sales	$	2.8	$	3.6	$	4.6
Selling and administrative	16.8		17.8		19.3
Research and development	1		1.4		1.9
Business restructuring and cost reduction actions	0.7		3.5		0.2
Total Allocated Costs	$	21.3	$	26.3	$	26.0

These allocated costs are reflected in “Air Products’ net investment” and in the annual combined statements of cash flows as a financing activity in “Net transfers (to) from Air Products.” It is impracticable to quantify the amount of expenses that Versum would have incurred on a stand-alone basis for the periods presented.

Air Products performs cash management and other treasury-related functions on a centralized basis for nearly all of its legal entities. Substantially all cash generated by our business is remitted to Air Products.

Certain of our employees participate in share-based compensation and retirement benefit plans that are sponsored and administered by Air Products or its affiliates. The costs of these plans associated with our employees are included in the Annual Combined Financial Statements, but excluded from the table of allocated costs above. Our annual combined balance sheets do not include the share-based compensation instrument.

Approximately 2% of our combined sales during the years ended September 30, 2015 and 2014 were to our equity affiliate, Daido Air Products Electronics, Inc. Sales between entities were not material for the year ended September 30, 2016.