Business Segment and Geographic Information

12 Months Ended

Sep. 30, 2018

Business Segment and Geographic Information

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 Industrial Gases – EMEA and Corporate and other segments, each reporting segment meets the definition of an operating segment and does not include the aggregation of multiple operating segments. Our Industrial Gases – EMEA and Corporate and other segment each include the aggregation of two operating segments that meet the aggregation criteria under GAAP.

Our reporting segments are:


•	Industrial Gases – Americas


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


•	Industrial Gases – Asia


•	Industrial Gases – Global


•	Corporate and other

Industrial Gases – Regional

The regional Industrial Gases segments (Americas, EMEA, and Asia) include the results of our regional industrial gas businesses, which produce and sell atmospheric gases such as oxygen, nitrogen, argon, and rare gases (primarily recovered by the cryogenic distillation of air), process gases such as hydrogen, helium, carbon dioxide, carbon monoxide, syngas (a mixture of hydrogen and carbon monoxide), and specialty gases, and equipment for the production or processing of gases, such as air separation units and non-cryogenic generators.

We supply gases to customers in many industries, including those in refining, chemical, gasification, metals, electronics, manufacturing, and food and beverage. 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 price fluctuations contractually through pricing formulas, surcharges, cost pass-through, and tolling 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.

Industrial Gases – Global

The Industrial Gases – Global segment includes cryogenic and gas processing equipment for air separation. The equipment is sold worldwide to customers in a variety of industries, including chemical and petrochemical manufacturing, oil and gas recovery and processing, and steel and primary metals processing. The 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.

Corporate and other

The Corporate and other segment includes our LNG equipment and helium storage and distribution sale of equipment businesses and corporate support functions that benefit all segments. Competition for the 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 is not directly associated with the other segments, including foreign exchange gains and losses and stranded costs. Stranded costs result from functional support previously provided to the two divisions comprising the former Materials Technologies segment. The majority of these costs are reimbursed to Air Products pursuant to short-term transition services agreements under which Air Products provides transition services to Versum for EMD and to Evonik for PMD. The reimbursement for costs in support of the transition services has been reflected on the consolidated income statements within “Other income (expense), net.” All transition services were completed during fiscal year 2018. Refer to Note 4, Materials Technologies Separation, for additional information.

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

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.

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 Gases– Americas		Industrial Gases– EMEA		Industrial Gases– Asia		Industrial Gases– Global			Corporate and other			Segment Total
2018
Sales		$3,758.8		$2,193.3		$2,458.0		$436.1			$84.0			$8,930.2
Operating income (loss)	927.9		445.8		689.9		53.9			(176.0		)	1,941.5
Depreciation and amortization	485.3		198.6		265.8		8.1			12.9			970.7
Equity affiliates' income	82.0		61.1		58.3		1.9			—			203.3
Expenditures for long-lived assets	546.5		163.1		791.9		17.3			49.6			1,568.4
Investments in net assets of and advances to equity affiliates	312.1		503.3		445.6		16.2			—			1,277.2
Total assets	5,904.0		3,280.4		5,899.5		240.1			3,854.3			19,178.3
2017
Sales		$3,637.0		$1,780.4		$1,964.7		$722.9			$82.6			$8,187.6
Operating income (loss)	946.1		395.5		532.6		71.1			(171.5		)	1,773.8
Depreciation and amortization	464.4		177.1		203.2		8.9			12.2			865.8
Equity affiliates' income	58.1		47.1		53.5		.9			—			159.6
Expenditures for long-lived assets	427.2		143.2		337.8		25.6			105.9			1,039.7
Investments in net assets of and advances to equity affiliates	287.5		508.6		471.8		19.0			—			1,286.9
Total assets	5,840.8		3,276.1		4,412.1		279.6			4,648.4			18,457.0
2016
Sales		$3,344.1		$1,704.4		$1,720.4		$498.8			$236.0			$7,503.7
Operating income (loss)	891.3		387.0		452.8		(21.5		)	(89.4		)	1,620.2
Depreciation and amortization	443.6		185.7		197.9		7.9			19.5			854.6
Equity affiliates' income	52.7		36.5		57.8		—			—			147.0
Expenditures for long-lived assets	406.6		159.5		313.3		6.0			22.3			907.7
Investments in net assets of and advances to equity affiliates	250.6		580.5		442.5		10.0			—			1,283.6
Total assets	5,896.7		3,178.6		4,232.7		367.6			2,384.5			16,060.1

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



Operating Income	2018		2017			2016
Segment total		$1,941.5		$1,773.8			$1,620.2
Change in inventory valuation method	24.1		—			—
Business separation costs	—		(32.5		)	(50.6		)
Cost reduction and asset actions	—		(151.4		)	(34.5		)
Goodwill and intangible asset impairment charge	—		(162.1		)	—
Gain on land sale	—		12.2			—
Consolidated Total		$1,965.6		$1,440.0			$1,535.1

Below is a reconciliation of segment total equity affiliates' income to consolidated equity affiliates' income:



Equity Affiliates' Income	2018			2017			2016
Segment total		$203.3			$159.6			$147.0
Equity method investment impairment charge	—			(79.5		)	—
Tax reform repatriation - equity method investment	(28.5		)	—			—
Consolidated Total		$174.8			$80.1			$147.0

Below is a reconciliation of segment total assets to consolidated total assets:



Total Assets	2018		2017		2016
Segment total		$19,178.3		$18,457.0		$16,060.1
Discontinued operations	—		10.2		1,968.5
Consolidated Total		$19,178.3		$18,467.2		$18,028.6

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 $254.3, $239.0, and $232.4 in fiscal years 2018, 2017, and 2016, respectively. These sales are generally transacted at market pricing.

We generally do not have intersegment sales from our regional industrial gases businesses. Equipment manufactured for our regional industrial gases segments are generally transferred at cost and are not reflected as an intersegment sale.

Geographic Information



Sales to External Customers	2018		2017		2016
United States		$3,149.6		$2,886.8		$2,911.7
Europe, including Middle East	2,292.5		2,478.5		2,186.5
Asia, excluding China and India	904.0		849.6		721.4
China	1,585.7		1,143.4		1,020.4
Other^(A)	998.4		829.3		663.7
Total		$8,930.2		$8,187.6		$7,503.7
Long-Lived Assets^(B)	2018		2017		2016
United States		$3,512.7		$3,407.4		$3,411.4
Europe, including Middle East	1,283.3		1,279.0		1,292.5
Asia, excluding China and India	899.8		778.5		707.0
China	3,066.6		1,737.9		1,675.8
Other^(A)	1,161.3		1,237.4		1,173.0
Total		$9,923.7		$8,440.2		$8,259.7


^(A)	Includes Canada, Latin America, and India.


^(B)	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 $33.1 in fiscal year 2018, $64.2 in fiscal year 2017, and $134.9 in fiscal year 2016.