UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended 30 June 2009

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

AIR PRODUCTS AND CHEMICALS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		23-1274455
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
7201 Hamilton Boulevard, Allentown, Pennsylvania		18195-1501
(Address of Principal Executive Offices)		(Zip Code)

610-481-4911
(Registrant’s Telephone Number, Including Area Code)

Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

     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. Yes þ No o

     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). Yes þ No o

     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. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at 20 July 2009
Common Stock, $1 par value		210,081,686

 

 

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries
INDEX

		Page No
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets — 30 June 2009 and 30 September 2008			3
Consolidated Income Statements — Three and Nine Months Ended 30 June 2009 and 2008			4
Consolidated Comprehensive Income Statements — Three and Nine Months Ended 30 June 2009 and 2008			5
Consolidated Statements of Cash Flows — Nine Months Ended 30 June 2009 and 2008			6
Notes to Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			41
Item 4. Controls and Procedures			41
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			42
Item 6. Exhibits			42
Signatures			43
Exhibit Index			44
EX-12
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

		30 June				30 September
(Millions of dollars, except for share data)		2009				2008
ASSETS
CURRENT ASSETS
Cash and cash items		$	70.3			$	103.5
Trade receivables, less allowances for doubtful accounts			1,332.6				1,575.2
Inventories			495.8				503.7
Contracts in progress, less progress billings			115.3				152.0
Prepaid expenses			96.0				107.7
Other receivables and current assets			445.6				349.4
Current assets of discontinued operations			15.5				56.6
TOTAL CURRENT ASSETS			2,571.1				2,848.1
INVESTMENT IN NET ASSETS OF AND ADVANCES TO EQUITY AFFILIATES			820.6				822.6
PLANT AND EQUIPMENT, at cost			15,254.7				14,988.6
Less accumulated depreciation			8,579.7				8,373.8
PLANT AND EQUIPMENT, net			6,675.0				6,614.8
GOODWILL			872.7				928.1
INTANGIBLE ASSETS, net			251.4				289.6
NONCURRENT CAPITAL LEASE RECEIVABLES			569.4				505.3
OTHER NONCURRENT ASSETS			478.9				504.1
NONCURRENT ASSETS OF DISCONTINUED OPERATIONS			4.4				58.7
TOTAL ASSETS		$	12,243.5			$	12,571.3
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Payables and accrued liabilities		$	1,299.7			$	1,665.6
Accrued income taxes			84.7				87.0
Short-term borrowings			385.6				419.3
Current portion of long-term debt			3.8				32.1
Current liabilities of discontinued operations			19.0				8.0
TOTAL CURRENT LIABILITIES			1,792.8				2,212.0
LONG-TERM DEBT			3,755.8				3,515.4
DEFERRED INCOME & OTHER NONCURRENT LIABILITIES			1,040.7				1,049.2
DEFERRED INCOME TAXES			591.0				626.6
NONCURRENT LIABILITIES OF DISCONTINUED OPERATIONS			.3				1.2
TOTAL LIABILITIES			7,180.6				7,404.4
MINORITY INTEREST IN SUBSIDIARY COMPANIES			134.6				136.2
COMMITMENTS AND CONTINGENCIES — See Note 12
SHAREHOLDERS’ EQUITY
Common stock (par value $1 per share; 2009 and 2008 — 249,455,584 shares)			249.4				249.4
Capital in excess of par value			821.6				811.7
Retained earnings			7,086.6				6,990.2
Accumulated other comprehensive income (loss)			(803.6	)			(549.3	)
Treasury stock, at cost (2009 —39,373,898 shares; 2008 — 40,120,957 shares)			(2,425.7	)			(2,471.3	)
TOTAL SHAREHOLDERS’ EQUITY			4,928.3				5,030.7
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	12,243.5			$	12,571.3

The accompanying notes are an integral part of these statements.

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

		Three Months Ended								Nine Months Ended
		30 June								30 June
(Millions of dollars, except for share data)		2009				2008				2009				2008
SALES		$	1,976.2			$	2,749.7			$	6,126.9			$	7,699.8
Cost of sales			1,427.5				2,041.1				4,497.1				5,666.3
Selling and administrative			232.3				284.4				709.9				815.0
Research and development			24.1				33.1				86.9				97.7
Global cost reduction plan			124.0				—				298.2				—
Customer bankruptcy			22.2				—				22.2				—
Pension settlement			8.0				1.0				8.0				28.7
Other income, net			5.7				3.6				13.7				30.6
OPERATING INCOME			143.8				393.7				518.3				1,122.7
Equity affiliates’ income			28.5				46.5				80.0				114.2
Interest expense			27.5				39.5				94.0				119.2
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES AND MINORITY INTEREST			144.8				400.7				504.3				1,117.7
Income tax provision			25.4				98.1				99.0				282.4
Minority interest in earnings of subsidiary companies			4.8				7.6				11.4				18.2
INCOME FROM CONTINUING OPERATIONS			114.6				295.0				393.9				817.1
LOSS FROM DISCONTINUED OPERATIONS, net of tax			(1.4	)			(224.9	)			(6.5	)			(169.0	)
NET INCOME		$	113.2			$	70.1			$	387.4			$	648.1
BASIC EARNINGS PER COMMON SHARE
Income from continuing operations		$	.55			$	1.40			$	1.88			$	3.84
Loss from discontinued operations			(.01	)			(1.07	)			(.03	)			(.79	)
Net Income		$	.54			$	.33			$	1.85			$	3.05
DILUTED EARNINGS PER COMMON SHARE
Income from continuing operations		$	.54			$	1.35			$	1.85			$	3.72
Loss from discontinued operations			(.01	)			(1.03	)			(.03	)			(.77	)
Net Income		$	.53			$	.32			$	1.82			$	2.95
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING (in millions)			209.8				211.2				209.6				212.8
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING ASSUMING DILUTION (in millions)			214.0				218.2				212.8				219.9
DIVIDENDS DECLARED PER COMMON SHARE — Cash		$	.45			$	.44			$	1.34			$	1.26

The accompanying notes are an integral part of these statements.

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

		Three Months Ended
		30 June
(Millions of dollars)		2009				2008
NET INCOME		$	113.2			$	70.1
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
Net unrealized holding gain on investments, net of income tax of $1.5 and $1.4			2.6				2.5
Net unrecognized gain (loss) on derivatives qualifying as hedges, net of income tax (benefit) of $2.6 and $(1.3) (a)			5.4				(3.0	)
Foreign currency translation adjustments, net of income tax (benefit) of $(30.5) and $8.1			253.4				(10.8	)
Pension and postretirement benefits, net of tax (benefit) of $(13.6) and $—			(22.7	)			—
Pension and postretirement benefits reclassified to earnings, net of tax of $4.7 and $3.7			8.7				7.3
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)			247.4				(4.0	)
COMPREHENSIVE INCOME		$	360.6			$	66.1

		Nine Months Ended
		30 June
(Millions of dollars)		2009				2008
NET INCOME		$	387.4			$	648.1
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
Net unrealized holding gain (loss) on investments, net of income tax (benefit) of $1.1 and $(.8)			1.8				(1.7	)
Net unrecognized (loss) on derivatives qualifying as hedges, net of income tax (benefit) of $(.2) and $(7.7) (a)			(.3	)			(14.2	)
Foreign currency translation adjustments, net of income tax (benefit) of $(25.8) and $(62.5)			(284.7	)			136.6
Reclassification adjustment for foreign currency translation adjustment realized in net income (b)			—				(53.7	)
Pension and postretirement benefits, net of tax (benefit) of $(13.6) and $(10.3)			(22.7	)			(13.8	)
Pension and postretirement benefits reclassified to earnings, net of tax of $7.3 and $20.7			15.8				38.6
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)			(290.1	)			91.8
COMPREHENSIVE INCOME		$	97.3			$	739.9

The accompanying notes are an integral part of these statements.

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

		Nine Months Ended
		30 June
(Millions of dollars)		2009				2008
OPERATING ACTIVITIES
Net income		$	387.4			$	648.1
Adjustments to reconcile income to cash provided by operating activities:
Depreciation and amortization			614.8				647.8
Impairment of assets of continuing operations			67.7				—
Impairment of assets of discontinued operations			48.7				314.8
Loss (gain) on sale of discontinued operations			.6				(119.5	)
Deferred income taxes			(41.6	)			(69.6	)
Customer bankruptcy			22.2				—
Undistributed earnings of unconsolidated affiliates			(45.5	)			(59.6	)
Loss (gain) on sale of assets and investments			7.0				(.4	)
Share-based compensation			45.1				47.1
Noncurrent capital lease receivables			(74.9	)			(160.5	)
Other adjustments			(38.5	)			82.7
Working capital changes that provided (used) cash, excluding effects of acquisitions and divestitures:
Trade receivables			160.0				(195.9	)
Inventories			(10.8	)			(39.5	)
Contracts in progress			29.8				84.8
Other receivables			16.1				(3.7	)
Payables and accrued liabilities			(313.2	)			(20.7	)
Other working capital			(17.7	)			(26.4	)
CASH PROVIDED BY OPERATING ACTIVITIES (a)			857.2				1,129.5
INVESTING ACTIVITIES
Additions to plant and equipment			(899.3	)			(791.4	)
Acquisitions, less cash acquired			(29.8	)			(2.0	)
Investment in and advances to unconsolidated affiliates			(1.1	)			(1.8	)
Proceeds from sale of assets and investments			30.1				18.4
Proceeds from sale of discontinued operations			39.0				419.5
Change in restricted cash			82.2				(135.6	)
Other investing activities			—				(17.8	)
CASH USED FOR INVESTING ACTIVITIES			(778.9	)			(510.7	)
FINANCING ACTIVITIES
Long-term debt proceeds			120.9				479.8
Payments on long-term debt			(70.0	)			(96.7	)
Net increase (decrease) in commercial paper and short-term borrowings			99.2				(236.0	)
Dividends paid to shareholders			(278.8	)			(256.1	)
Purchase of treasury stock			—				(560.2	)
Proceeds from stock option exercises			14.9				80.9
Excess tax benefit from share-based compensation/other			4.1				50.1
CASH USED FOR FINANCING ACTIVITIES			(109.7	)			(538.2	)
Effect of Exchange Rate Changes on Cash			(1.8	)			5.1
(Decrease) Increase in Cash and Cash Items			(33.2	)			85.7
Cash and Cash Items — Beginning of Year			103.5				40.5
Cash and Cash Items — End of Period		$	70.3			$	126.2

The accompanying notes are an integral part of these statements.

AIR PRODUCTS AND CHEMICALS, INC. and Subsidiaries

(Millions of dollars, except for share data)

1. MAJOR ACCOUNTING POLICIES

Refer to the Company’s 2008 annual report on Form 10-K for a description of major accounting policies. There have been no material changes to these accounting policies during the first nine months of 2009 other than those detailed in Note 2.

Basis of Presentation

The consolidated financial statements of Air Products and Chemicals, Inc. and its subsidiaries (the “Company” or “registrant”) included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of the Company, the accompanying statements reflect adjustments necessary to present fairly the financial position, results of operations, and cash flows for those periods indicated, and contain adequate disclosure to make the information presented not misleading. Adjustments included herein are of a normal, recurring nature unless otherwise disclosed in the Notes. However, the interim results for the periods indicated herein do not reflect certain adjustments, such as the valuation of inventories on the LIFO cost basis, which can only be finally determined on an annual basis. The consolidated financial statements and related Notes included herein should be read in conjunction with the financial statements and Notes thereto included in the Company’s latest annual report on Form 10-K in order to fully understand the basis of presentation. Results of operations for interim periods are not necessarily indicative of the results of operations for a full year.

2. NEW ACCOUNTING STANDARDS

Standards Implemented

Disclosures about Subsequent Events

In May 2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard (SFAS) No. 165, “Subsequent Events.” SFAS No. 165 establishes the standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. This Statement also requires the disclosure of the date through which subsequent events have been evaluated. The Company adopted this standard, as required, for the period ended 30 June 2009. Adoption of SFAS No. 165 did not have a material impact on the Company’s consolidated financial statements.

Refer to Note 14, Supplemental Information, for the required disclosure.

Fair Value Disclosures

Effective 1 April 2009, the Company adopted FASB Staff Position (FSP) FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” This FSP extends the disclosure requirements under SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to interim financial statements. It also amends APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in summarized financial information at interim reporting periods. This FSP only requires additional disclosure and did not have an impact on the Company’s consolidated financial statements.

Refer to Note 6, Fair Value Measurements, for the required disclosures.

Disclosures about Derivatives and Hedging

Effective 1 January 2009, the Company adopted SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133.” SFAS No. 161 requires enhanced disclosures about how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for; and how they affect an entity’s financial position, financial performance, and cash flows. This Statement only requires additional disclosure and did not have an impact on the Company’s consolidated financial statements upon adoption.

Refer to Note 5, Financial Instruments, for the required disclosures.

Fair Value Option

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115.” This Statement permits companies to elect to measure certain financial instruments at fair value on an instrument-by-instrument basis, with changes in fair value recognized in earnings each reporting period. In addition, SFAS No. 159 establishes financial statement presentation and disclosure requirements for assets and liabilities reported at fair value under the election. The Company adopted SFAS No. 159 as of 1 October 2008 and elected not to fair value any items under this Statement.

Postretirement Benefits

The Company adopted the measurement date change of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans,” for its U.K. and Belgium pension plans as of 1 October 2008. SFAS No. 158 required the Company to change the measurement date for these plans from 30 June to 30 September (end of fiscal year). As a result of this change, pension expense and actuarial gains/losses for the three-month period ended 30 September 2008 were recognized as adjustments to the beginning balances of retained earnings and Accumulated Other Comprehensive Income (AOCI), respectively. The after-tax charge to retained earnings was $8.1. AOCI was credited $35.8 for net actuarial gains on an after-tax basis. These adjustments only affected the balance sheet.

Fair Value Measurements

Effective 1 October 2008, the Company adopted SFAS No. 157, “Fair Value Measurements,” for financial assets and liabilities and any other assets and liabilities that are recognized and disclosed at fair value on a recurring basis. This Statement defines fair value, establishes a method for measuring fair value, and requires additional disclosures about fair value measurements. FASB Staff Position No. 157-2 delayed the adoption of SFAS No. 157 for other nonfinancial assets and liabilities until 1 October 2009 for the Company. The adoption of SFAS No. 157 did not impact the Company’s financial statements for assets and liabilities measured at fair value on a recurring basis.

Refer to Note 6, Fair Value Measurements, for the required disclosures.

New Standards to Be Implemented

The FASB Accounting Standards Codification

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification^TM and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162” (Codification). The Codification does not change current U.S. GAAP but reorganizes all authoritative literature in one place. This Statement is effective for financial statements issued for interim and annual periods ending after 15 September 2009. Once effective, the Codification will supersede existing GAAP and become the source of authoritative accounting principles recognized by the FASB. This Statement only requires a change in disclosure and will not impact the Company’s consolidated financial statements.

Consolidation of Variable Interest Entities

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (SFAS No. 167). This Statement amends certain guidance in FIN 46(R) for determining whether an entity is a variable interest entity (VIE). SFAS No. 167 requires an enterprise to perform an analysis to determine whether the Company’s variable interests give it a controlling financial interest in a VIE. A company would be required to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed when determining whether it has the power to direct the activities of the VIE that most significantly impact the entity’s economic performance. In addition, this Statement amends FIN 46(R) to require ongoing reassessments of whether an enterprise is the primary beneficiary of a VIE. SFAS 167 is effective for the Company for fiscal year 2011. The Company is currently evaluating the impact of this Statement.

3. GLOBAL COST REDUCTION PLAN

Third Quarter 2009

During the third quarter ended 30 June 2009, due to the continuing slow economic recovery, the Company committed to additional actions associated with its global cost reduction plan which resulted in a charge to continuing operations of $124.0 ($84.2 after-tax, or $.39 per share).

This charge included $90.0 for severance and other benefits, including pension-related costs, associated with the elimination of approximately 1,150 positions of its global workforce. The reductions are targeted at continued cost

reduction and productivity efforts, including the closure of certain manufacturing facilities. An impairment charge of $34.0 was recorded to write-down certain assets held for sale to net realizable value.

The planned actions associated with the third quarter charge are expected to be substantially completed by the end of the third quarter of fiscal year 2010.

First Quarter 2009

During the first quarter ended 31 December 2008, the Company announced a global cost reduction plan designed to lower its cost structure and better align its businesses to reflect rapidly declining economic conditions around the world. The results from continuing operations in the first quarter included a charge of $174.2 ($116.1 after-tax, or $.55 per share).

This charge included $120.0 for severance and pension-related costs, associated with eliminating approximately 1,400 positions from its global workforce. The reductions are targeted at reducing overhead and infrastructure costs, reducing and refocusing elements of the Company’s technology and business development spending, and lowering its plant operating costs. The remainder of this charge, $54.2, was for business exits and asset management actions. Assets held for sale were written down to net realizable value and an environmental liability of $16.0 was recognized. This environmental liability resulted from a decision to sell a production facility.

The planned actions associated with the first quarter 2009 charge are expected to be substantially completed by the end of the first quarter of fiscal year 2010.

Business Segments

The charges for the global cost reduction plan were excluded from segment operating profit. The tables below display how these charges related to the businesses at the segment level:

						Asset
		Severance and				Impairments/
Third Quarter 2009		Other Benefits				Other Costs				Total
Merchant Gases		$	43.0			$	.5			$	43.5
Tonnage Gases			3.1				—				3.1
Electronics and Performance Materials			8.9				11.7				20.6
Equipment and Energy			35.0				21.8				56.8
		$	90.0			$	34.0			$	124.0

						Asset
		Severance and				Impairment/
Nine Months Ended 30 June 2009		Other Benefits				Other Costs				Total
Merchant Gases		$	127.5			$	7.2			$	134.7
Tonnage Gases			14.2				—				14.2
Electronics and Performance Materials			30.6				58.9				89.5
Equipment and Energy			37.7				22.1				59.8
		$	210.0			$	88.2			$	298.2

Accrual Balance

The following table summarizes changes to the carrying amount of the accrual for the global cost reduction plan for the nine months ended 30 June 2009:

						Asset
		Severance and				Impairments/
		Other Benefits				Other Costs				Total
First quarter 2009 charge		$	120.0			$	54.2			$	174.2
Third quarter 2009 charge			90.0				34.0				124.0
Environmental charge (a)			—				(16.0	)			(16.0	)
Noncash expenses			(33.8	) (b)			(66.1	)			(99.9	)
Cash expenditures			(53.1	)			(.8	)			(53.9	)
Currency translation adjustment			1.4				—				1.4
Accrual Balance at 30 June 2009		$	124.5			$	5.3			$	129.8

4. DISCONTINUED OPERATIONS

The U.S. Healthcare business, Polymer Emulsions business, and the High Purity Process Chemicals (HPPC) business have been accounted for as discontinued operations. The results of operations of these businesses have been removed from the results of continuing operations for all periods presented.

For additional historical information on these discontinued operations, refer to the Company’s 2008 annual report on Form 10-K.

U.S. Healthcare

In July 2008, the Board of Directors authorized management to pursue the sale of the U.S. Healthcare business. In 2008, the Company recorded a total charge of $329.2 ($246.2 after-tax, or $1.12 per share) related to the impairment/write-down of the net carrying value of the U.S. Healthcare business.

In the first quarter of 2009, based on additional facts, the Company recorded an impairment charge of $48.7 ($30.9 after-tax, or $.15 per share) reflecting a revision in the estimated net realizable value of the U.S. Healthcare business. Also, a tax benefit of $8.8, or $.04 per share, was recorded to revise the estimated tax benefit related to previously recognized impairment charges.

As a result of events which occurred during the second quarter of 2009, which increased the Company’s ability to realize tax benefits associated with the impairment charges recorded in 2008, the Company recognized a one-time tax benefit of $16.7, or $.08 per share.

During the third quarter of 2009, the Company sold more than half of its remaining U.S. Healthcare business to OptionCare Enterprises, Inc., a subsidiary of Walgreen Co., and Landauer-Metropolitan, Inc. (LMI) for combined cash proceeds of $38.1. The Company recognized an after-tax gain of $.3 resulting from these sales combined with adjustments to the net realizable value of the remaining businesses. The Company expects to conclude the sale of the remaining portions of this business in 2009.

The operating results of the U.S. Healthcare business have been classified as discontinued operations and are summarized below:

		Three Months Ended								Nine Months Ended
		30 June								30 June
		2009				2008				2009				2008
Sales		$	25.2			$	58.3			$	117.3			$	187.1
Loss before taxes		$	(3.4	)		$	(326.2	)		$	(3.2	)		$	(345.4	)
Income tax benefit			(1.3	)			(82.0	)			(1.2	)			(89.3	)
Loss from operations of discontinued operations		$	(2.1	)		$	(244.2	)		$	(2.0	)		$	(256.1	)
Income (loss) on sale of businesses and impairment/write-down to estimated net realizable value, net of tax			.3				—				(4.8	)			—
Loss from discontinued operations, net of tax		$	(1.8	)		$	(244.2	)		$	(6.8	)		$	(256.1	)

Details of balance sheet items for the U.S. Healthcare business are summarized below:

		30 June 2009				30 September 2008
Trade receivables, less allowances		$	10.3			$	47.7
Inventories			1.8				7.2
Prepaid expenses			.5				1.4
Other receivables			2.9				.2
Total Current Assets		$	15.5			$	56.5
Plant and equipment, net		$	4.3			$	58.7
Other noncurrent assets			.1				—
Total Noncurrent Assets		$	4.4			$	58.7
Payables and accrued liabilities		$	18.7			$	6.8
Current portion long-term debt			.3				1.0
Total Current Liabilities		$	19.0			$	7.8
Long-term debt		$	.3			$	1.2
Total Noncurrent Liabilities		$	.3			$	1.2

Polymer Emulsions Business

On 31 January 2008, the Company completed the sale of its interest in its vinyl acetate ethylene polymers joint ventures to Wacker Chemie AG (Wacker), its long-time joint venture partner. The Company recognized a gain on the sale of $89.5 ($57.7 after-tax).

On 30 June 2008, the Company sold its Elkton, Md. and Piedmont, S.C. production facilities and the related North American atmospheric emulsions and global pressure sensitive adhesives businesses to Ashland Inc. The Company recorded a gain of $30.5 ($18.5 after-tax) in connection with the sale, which included the recording of a retained environmental obligation associated with the Piedmont site. The sale of the Elkton and Piedmont facilities completed the disposal of the Company’s Polymer Emulsions business.

The operating results of the Polymer Emulsions business have been classified as discontinued operations and are summarized below:

		Three Months Ended								Nine Months Ended
		30 June								30 June
		2009				2008				2009				2008
Sales		$	—			$	31.4			$	—			$	261.4
Income before taxes		$	—			$	1.9			$	—			$	17.5
Income tax provision			—				.8				—				6.3
Income from operations of discontinued operations		$	—			$	1.1			$	—			$	11.2
Gain on sale of business, net of tax			.4				18.5				.4				76.2
Income from discontinued operations, net of tax		$	.4			$	19.6			$	.4			$	87.4

HPPC Business

In the first quarter of 2008, the HPPC business generated sales of $22.9 and income from operations, net of tax, of $.2. The Company closed on the sale of its HPPC business on 31 December 2007.

5. FINANCIAL INSTRUMENTS

Currency Price Risk Management

The Company’s 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 the policy of the Company to minimize its cash flow exposure to adverse changes in currency and exchange rates. This is accomplished by identifying and evaluating the risk that the Company’s cash flows will decline in value due to changes in exchange rates, and by determining the appropriate strategies necessary to manage such exposures. The Company’s objective is to maintain economically balanced currency risk management strategies that provide adequate downside protection.

Forward Exchange Contracts

The Company enters 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. 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 the Company has a net equity position.

The Company recognizes these derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, the Company generally designates 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 or of an unrecognized firm commitment (fair value hedge).

In addition to the foreign exchange contracts that are designated as hedges under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS No. 133), the Company also hedges foreign currency exposures utilizing forward exchange contracts that are not designated as hedges under SFAS No. 133. These contracts are used to hedge foreign currency-denominated monetary assets and liabilities, primarily intercompany loans and working capital. The primary objective of these forward 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.

Option Contracts

The Company enters into option contracts to reduce the cash flow exposure to foreign currency fluctuations associated with highly anticipated export sales transactions. The Company recognizes these derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, the Company designates these derivatives as cash flow hedges.

The table below summarizes the Company’s outstanding currency price risk management instruments as of 30 June 2009 and 30 September 2008:

		30 June 2009								30 September 2008
		US$				Years Average				US$				Years Average
		Notional				Maturity				Notional				Maturity
Forward exchange contracts:
Cash flow hedges		$	666.4				.6			$	824.5				.6
Net investment hedges			882.0				3.5				749.5				4.0
Fair value hedges			3.7				.2				10.3				.3
Hedges not designated under SFAS No. 133			1,423.0				.4				1,282.8				.3
Total forward exchange contracts		$	2,975.1				1.3			$	2,867.1				1.4
Options:
Cash flow hedges		$	23.1				.2			$	26.0				.3
Total options		$	23.1				.2			$	26.0				.3

In addition to the above, the Company uses foreign currency denominated debt to hedge the foreign currency exposures of the Company’s net investment in certain foreign affiliates. The foreign currency denominated debt includes €1,013.0 as of 30 June 2009 and €1,450.0 as of 30 September 2008.

Debt Portfolio Management

It is the policy of the Company 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 of the Company are managed with the objectives and intent to (1) reduce funding risk with respect to borrowings made by the Company to preserve the Company’s 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 Swap Contracts

The Company enters into interest rate swap contracts to change the fixed/variable interest rate mix of its 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 optimize interest rate risks and costs inherent in the Company’s debt portfolio. In addition, the Company also uses interest rate swap agreements to hedge the interest rate on anticipated fixed-rate debt issuance. The notional amount of the interest rate swap agreements are equal to or less than the designated debt instrument being hedged. When variable-rate debt is hedged, the variable-rate indices of the swap instruments and the debt to which they are designated are the same. It is the Company’s policy not to enter into any interest rate swap contracts which lever a move in interest rates on a greater than one-to-one basis.

Cross Currency Interest Rate Swap Contracts

The Company also enters into cross currency interest rate swap contracts. 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 the Company has a net equity position while changing the interest rate characteristics of the instrument. The contracts are used to hedge intercompany and third-party borrowing transactions and certain net investments in foreign operations.

The following table summarizes the interest rate swaps and cross currency interest rate swaps outstanding as of 30 June 2009 and 30 September 2008:

		30 June 2009												30 September 2008
		US$								Average				US$								Average
		Notional				Pay %				Receive %				Notional				Pay %				Receive %
Interest rate swaps (fair value hedge)		$	321.2			6 month LIBOR					4.49	%		$	321.9			6 month LIBOR					4.49	%
Interest rate swaps (cash flow hedge)		$	100.0				3.73	%		3 month LIBOR					—				—				—
Cross currency interest rate swaps (net investment hedge)		$	32.2				5.54	%			5.48	%		$	40.3				5.55	%			3.89	%

Commodity Price Risk Management

The Company has entered into a limited number of commodity swap contracts in order to reduce the cash flow exposure to changes in the price of natural gas relative to certain oil-based feedstocks. The Company has also entered into contracts hedging the cash flow exposure of changes in the market price of certain metals which are raw materials used in the fabrication of certain industrial gas equipment with the overall intent of locking in, or minimizing its exposure to these base metals. As of 30 June 2009, there were no outstanding contracts hedging the changes in the market price of metals.

The table below summarizes the Company’s outstanding commodity contracts as of 30 June 2009 and 30 September 2008:

		30 June 2009								30 September 2008
						Years Average								Years Average
		US$ Notional				Maturity				US$ Notional				Maturity
Energy		$	33.0				.5			$	72.6				.8
Metals			—				—				4.2				.2
Total commodity contracts		$	33.0				.5			$	76.8				.8

The table below summarizes the fair value and balance sheet location of the Company’s outstanding derivatives at 30 June 2009 and 30 September 2008:

						30 June				30 September								30 June				30 September
						2009				2008								2009				2008
		Balance Sheet												Balance Sheet
		Location				Fair Value				Fair Value				Location				Fair Value				Fair Value
Derivatives designated as hedging instruments:
Foreign exchange contracts		Other Receivables				$	26.7			$	25.1			Accrued Liabilities				$	27.3			$	24.4
Interest rate swap contracts		Other Receivables					.1				1.2			Accrued Liabilities					—				—
Commodity swap contracts		Other Receivables					8.7				5.9			Accrued Liabilities					4.9				2.5
Foreign exchange contracts		Other Noncurrent Assets					16.2				19.6			Other Noncurrent Liabilities					35.9				29.8
Interest rate swap contracts		Other Noncurrent Assets					18.7				4.4			Other Noncurrent Liabilities					4.2				3.5
Commodity swap contracts		Other Noncurrent Assets					—				1.8			Other Noncurrent Liabilities					—				.4
Total derivatives designated as hedging instruments						$	70.4			$	58.0							$	72.3			$	60.6
Derivatives not designated as hedging instruments:
Foreign exchange contracts		Other Receivables				$	17.4			$	10.2			Accrued Liabilities				$	29.7			$	55.0
Total Derivatives						$	87.8			$	68.2							$	102.0			$	115.6

Refer to Note 6 for SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a method for measuring fair value, provides additional disclosures regarding fair value measurements, and discusses the Company’s counterparty risk.

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

	•		Changes in the fair value of a derivative that is designated as and meets all the required criteria for a cash flow hedge are recorded in accumulated Other Comprehensive Income (OCI) 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 accumulated OCI.
	•		Changes in the fair value of a derivative that is not designated as a hedge are recorded immediately in earnings.

The tables below summarize the information related to our cash flow, net investment, and non-designated hedges during the three and nine month periods ended 30 June 2009 and 30 June 2008. The outstanding fair value hedges for these time periods are not material.

		Three Months Ended 30 June 2009 and 2008
		Forward
		exchange								Foreign currency
		contracts								debt								Other (b)								Total
Cash Flow Hedges:		2009				2008				2009				2008				2009				2008				2009				2008
Net (gain) loss recognized in OCI (effective portion)		$	(2.9	)		$	2.9			$	—			$	—			$	(5.2	)		$	.3			$	(8.1	)		$	3.2
Net gain (loss) reclassified from OCI to sales/cost of sales (effective portion)			1.3				.3				—				—				1.2				(.5	)			2.5				(.2	)
Net gain (loss) from OCI to other (income) expense (ineffective portion)			.2				—				—				—				—				—				.2				—
Net Investment Hedges:
Net (gain) loss recognized in OCI		$	29.8			$	(3.6	)		$	65.0			$	(9.0	)		$	3.0			$	.1			$	97.8			$	(12.5	)
Non-designated Hedges:
Net (gain) loss recognized in other (income) expense (a)		$	.5			$	30.8			$	—			$	—			$	—			$	—			$	.5			$	30.8

		Nine Months Ended 30 June 2009 and 2008
		Forward
		exchange								Foreign currency
		contracts								debt								Other (b)								Total
Cash Flow Hedges:		2009				2008				2009				2008				2009				2008				2009				2008
Net (gain) loss recognized in OCI (effective portion)		$	4.2			$	9.7			$	—			$	—			$	(5.4	)		$	3.1			$	(1.2	)		$	12.8
Net gain (loss) reclassified from OCI to sales/cost of sales (effective portion)			(2.2	)			3.0				—				—				3.6				(1.6	)			1.4				1.4
Net gain (loss) from OCI to other (income) expense (ineffective portion)			.1				—				—				—				—				—				.1				—
Net Investment Hedges:
Net (gain) loss recognized in OCI		$	8.5			$	20.3			$	(9.3	)		$	145.5			$	(1.7	)		$	(1.1	)		$	(2.5	)		$	164.7
Non-designated Hedges:
Net (gain) loss recognized in other (income) expense (a)		$	9.9			$	22.6			$	—			$	—			$	—			$	—			$	9.9			$	22.6

Credit Risk-Related Contingent Features

Certain derivative instruments are executed under agreements that require the Company to maintain a credit rating of at least A- from Standard & Poor’s and A3 from Moody’s. If the Company’s credit rating falls below these levels, 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 $19.0 and $21.5 as of 30 June 2009 and 30 September 2008, respectively. Because of the Company’s current credit rating of A from Standard & Poor’s and A2 from Moody’s, no collateral has been posted on these liability positions.

Counterparty Credit Risk Management

The Company executes all derivative transactions with counterparties that are highly rated financial institutions, and all of which are investment grade at this time. Some of the Company’s underlying derivative agreements give the Company the right to require the institution to post collateral if its credit rating falls below A- from Standard & Poor’s or A3 from Moody’s. These are the same agreements referenced in Credit Risk-Related Contingent Features above. The collateral that the counterparties would be required to post is $26.9 as of 30 June 2009 and $14.1 as of

30 September 2008. No financial institution is required to post collateral at this time, as all have credit ratings at or above the threshold.

6. FAIR VALUE MEASUREMENTS

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

		30 June 2009								30 September 2008
		Carrying Value				Fair Value				Carrying Value				Fair Value
Assets
Derivatives (a)
Foreign exchange contracts		$	60.3			$	60.3			$	54.9			$	54.9
Interest rate swap contracts			18.8				18.8				5.6				5.6
Commodity swap contracts			8.7				8.7				7.7				7.7
Other investments (b)			18.5				18.5				31.9				31.9
Liabilities
Derivatives (a)
Foreign exchange contracts		$	92.9			$	92.9			$	109.2			$	109.2
Interest rate swap contracts			4.2				4.2				3.5				3.5
Commodity swap contracts			4.9				4.9				2.9				2.9
Long-term debt, including current portion (c)			3,759.6				3,901.9				3,547.5				3,581.5

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

	(a)		Derivatives
			The fair value of the Company’s interest rate swap agreements and foreign exchange contracts are based on estimates using standard pricing models that take into account the present value of future cash flows as of the balance sheet date. 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. In addition, on an ongoing basis, the Company randomly tests a subset of its valuations against valuations received from the counterparty to the transaction to validate the accuracy of its standard pricing models. The fair value of commodity swaps is based on current market price as provided by the financial institutions with which the commodity swaps have been executed. Counterparties to these derivative contracts are highly rated financial institutions none of which experienced significant downgrades since 30 September 2008 that could reduce the receivable amount collectible.
	(b)		Other investments
			The fair value of other investments in publicly traded companies is based on quoted market prices from the New York and Tokyo Stock Exchanges. The fair value of other investments is reported within other noncurrent assets on the balance sheet.
	(c)		Long-term debt
			The fair value of the Company’s debt is based on estimates using standard pricing models that take into account the present value of future cash flows as of the balance sheet date. The computation of the fair value of these instruments is generally performed by the Company.

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.

As discussed in Note 2 on New Accounting Standards, the Company adopted SFAS No. 157 as of 1 October 2008, with the exception of the application of the Statement to nonrecurring nonfinancial assets and nonfinancial liabilities, for which adoption has been delayed until 1 October 2009.

SFAS No. 157 defines fair value 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). SFAS No. 157 establishes a three-level fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

	•		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 the Company’s own assumptions (about the assumptions market participants would use in pricing the asset or liability).

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

30 June 2009		Total				Level 1				Level 2				Level 3
Assets at Fair Value
Derivatives (a)
Foreign exchange contracts		$	60.3			$	—			$	60.3			$	—
Interest rate swap contracts			18.8				—				18.8				—
Commodity swap contracts			8.7				—				8.7				—
Other investments (b)			18.5				18.5				—				—
Total Assets at Fair Value		$	106.3			$	18.5			$	87.8			$	—
Liabilities at Fair Value
Derivatives (a)
Forward exchange contracts		$	92.9			$	—			$	92.9			$	—
Interest rate swap contracts			4.2				—				4.2				—
Commodity swap contracts			4.9				—				4.9				—
Total Liabilities at Fair Value		$	102.0			$	—			$	102.0			$	—

Refer to Note 1 in the Company’s 2008 annual report on Form 10-K and Note 5 in this quarterly filing for additional information on the Company’s accounting and reporting of the fair value of financial instruments.

7. INVENTORIES

The components of inventories are as follows:

		30 June				30 September
		2009				2008
Inventories at FIFO Cost
Finished goods		$	389.7			$	365.1
Work in process			21.8				22.4
Raw materials and supplies			162.9				183.5
			574.4				571.0
Less: excess of FIFO cost over LIFO cost			(78.6	)			(67.3	)
		$	495.8			$	503.7

FIFO cost approximates replacement cost. The Company’s inventories have a high turnover, and as a result, there is little difference between the original cost of an item and its current replacement cost.

8. GOODWILL

Changes to the carrying amount of consolidated goodwill by segment for the nine months ended 30 June 2009 are as follows:

						Acquisition				Currency
		30 September				and				Translation				30 June
		2008				Adjustments				and Other				2009
Merchant Gases		$	626.5			$	.2			$	(57.6	)		$	569.1
Tonnage Gases			18.0				—				(3.1	)			14.9
Electronics and Performance Materials			283.6				9.5				(4.4	)			288.7
		$	928.1			$	9.7			$	(65.1	)		$	872.7

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.

9. SHARE-BASED COMPENSATION

The Company has various share-based compensation programs, which include stock options, deferred stock units, and restricted shares. During the nine months ended 30 June 2009, the Company granted 2.0 million stock options at a weighted-average exercise price of $66.90 and an estimated fair value of $20.86 per option. The fair value of these options was estimated using a lattice-based option valuation model that used the following assumptions: expected volatility of 31.2%; expected dividend yield of 2.1%; expected life in years of 6.7-8.0; and a risk-free interest rate of 3.5%-3.9%. In addition, the Company granted 403,470 deferred stock units at a weighted-average grant-date fair value of $52.21 and 40,092 restricted shares at a weighted-average grant-date fair value of $64.01. Refer to Note 15 in the Company’s 2008 annual report on Form 10-K for information on the valuation and accounting for these programs.

Share-based compensation cost charged against income in the three months ended 30 June 2009 was $15.0 ($9.2 after-tax). Of the share-based compensation cost recognized, $10.7 was a component of selling and administrative expense, $1.9 a component of cost of sales, $1.3 a component of research and development, and $1.1 a component of the global cost reduction plan. Share-based compensation cost charged against income in the three months ended 30 June 2008 was $14.1 ($8.7 after-tax).

Share-based compensation cost charged against income in the nine months ended 30 June 2009 was $45.1 ($27.7 after-tax). Of the share-based compensation cost recognized, $33.4 was a component of selling and administrative expense, $6.2 a component of cost of sales, $4.0 a component of research and development, and $1.5 a component of the global cost reduction plan. Share-based compensation cost charged against income in the nine months ended 30 June 2008 was $47.1 ($29.0 after-tax).

The amount of share-based compensation cost capitalized in 2009 and 2008 was not material.

10. EARNINGS PER SHARE

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

		Three Months Ended								Nine Months Ended
		30 June								30 June
		2009				2008				2009				2008
NUMERATOR
Used in basic and diluted EPS
Income from continuing operations		$	114.6			$	295.0			$	393.9			$	817.1
Loss from discontinued operations			(1.4	)			(224.9	)			(6.5	)			(169.0	)
Net Income		$	113.2			$	70.1			$	387.4			$	648.1
DENOMINATOR (in millions)
Weighted average number of common shares used in basic EPS			209.8				211.2				209.6				212.8
Effect of dilutive securities
Employee stock options			3.1				6.0				2.2				6.0
Other award plans			1.1				1.0				1.0				1.1
			4.2				7.0				3.2				7.1
Weighted average number of common shares and dilutive potential common shares used in diluted EPS			214.0				218.2				212.8				219.9
BASIC EPS
Income from continuing operations		$	.55			$	1.40			$	1.88			$	3.84
Loss from discontinued operations			(.01	)			(1.07	)			(.03	)			(.79	)
Net Income		$	.54			$	.33			$	1.85			$	3.05
DILUTED EPS
Income from continuing operations		$	.54			$	1.35			$	1.85			$	3.72
Loss from discontinued operations			(.01	)			(1.03	)			(.03	)			(.77	)
Net Income		$	.53			$	.32			$	1.82			$	2.95

Options on 4.6 million and 7.3 million shares were antidilutive and therefore excluded from the computation of diluted earnings per share for the three and nine months ended 30 June 2009, respectively. Options on 1.2 million shares were antidilutive and therefore excluded from the computation for the three and nine months ended 30 June 2008.

11. RETIREMENT BENEFITS

The components of net pension cost for the defined benefit pension plans and other postretirement benefit cost were as follows:

		Three Months Ended 30 June
		2009				2008				2009				2008
		Pension Benefits								Other Benefits
Service cost		$	15.2			$	19.4			$	.8			$	1.4
Interest cost			46.2				45.3				1.7				1.4
Expected return on plan assets			(50.5	)			(51.8	)			—				—
Prior service cost (credit) amortization			1.0				.8				(.3	)			(.3	)
Actuarial loss amortization			3.8				9.2				(.1	)			.5
Settlement and curtailment charges			11.8				1.0				—				—
Special termination benefits			14.4				.2				—				—
Other			.4				.9				—				—
Net periodic benefit cost		$	42.3			$	25.0			$	2.1			$	3.0

		Nine Months Ended 30 June
		2009				2008				2009				2008
		Pension Benefits								Other Benefits
Service cost		$	45.0			$	58.6			$	3.1			$	4.4
Interest cost			137.2				136.5				4.8				4.3
Expected return on plan assets			(149.1	)			(155.9	)			—				—
Prior service cost (credit) amortization			3.0				2.4				(1.0	)			(1.0	)
Actuarial loss amortization			11.2				28.9				.2				1.3
Settlement and curtailment charges			11.8				28.7				—				—
Special termination benefits			29.2				.7				—				—
Other			1.2				1.9				—				—
Net periodic benefit cost		$	89.5			$	101.8			$	7.1			$	9.0

Special termination benefits for the three and nine months ended 30 June 2009 included $14.4 and $28.8 for the global cost reduction plan, respectively. The global cost reduction charge for the third quarter of 2009 also included $3.8 for curtailment losses related to the U.K. pension plans.

For the nine months ended 30 June 2009, pension contributions of $169.5 were made. Total contributions for 2009 are expected to be approximately $185. For the nine months ended 30 June 2008, pension contributions of $123.0 were made. During 2008, total contributions were $234.0.

The Company’s supplemental pension plan provides for a lump sum benefit payment option at the time of retirement, or for corporate officers six months after the participant’s retirement date. The Company recognizes pension settlements when payments exceed the sum of service and interest cost components of net periodic pension cost of the plan for the fiscal year. A settlement loss is recognized when the pension obligation is settled. Based on the timing of when cash payments were made, the Company recognized an $8.0 ($5.0 after-tax, or $.02 per share) charge in the third quarter of 2009. An additional $2 to $3 for settlement losses is expected to be recognized in the fourth quarter of 2009. For the three and nine months ended 30 June 2008, the Company recognized $1.0 and $28.7 ($17.9 after-tax, or $.08 per share) of settlement charges, respectively.

12. COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in various legal proceedings, including competition, environmental, health, safety, product liability, and insurance matters. In the third quarter of 2008, a unit of the Brazilian Ministry of Justice issued a report (previously issued in January 2007, and then withdrawn) on its investigation of the Company’s Brazilian subsidiary, Air Products Brazil Ltda., and several other Brazilian industrial gas companies. The report recommended that the Brazilian Administrative Council for Economic Defense impose sanctions on Air Products Brazil Ltda. and the other industrial gas companies for alleged anticompetitive activities. The Company intends to defend this action and cannot, at this time, reasonably predict the ultimate outcome of the proceedings or sanctions, if any, that will be imposed. While the Company does not expect that any sums it may have to pay in connection with this or any other legal proceeding would have a materially adverse effect on its consolidated financial position or net cash flows, a future charge for regulatory fines or damage awards could have a significant impact on the Company’s net income in the period in which it is recorded.

Environmental

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 sheet at 30 June 2009 and 30 September 2008 included an accrual of $95.5 and $82.9, respectively, primarily as part of other noncurrent liabilities. The environmental liabilities will be paid over a period of up to 30 years. The Company estimates the exposure for environmental loss contingencies to range from $95 to a reasonably possible upper exposure of $109 as of 30 June 2009.

During the first quarter of 2009, the Company recognized a $16.0 environmental liability associated with a production facility. The Company is required by state law to investigate and remediate a site upon its sale. In the first quarter of 2009, management committed to a plan to sell this facility. The Company estimates that it will take at least several years to complete the remediation efforts at this site.

Refer to Note 19 to the Consolidated Financial Statements in the Company’s 2008 annual report on Form 10-K for information on the Company’s environmental accruals related to the Pace, Florida and Piedmont, S.C. facilities. At 30 June 2009, the accrual balances associated with the Pace, Florida and Piedmont, S.C. facilities totaled $38.5 and $22.5, respectively.

13. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION

The Company’s segments are organized based on differences in product and/or type of customer. The Company has four business segments consisting of Merchant Gases, Tonnage Gases, Electronics and Performance Materials, and Equipment and Energy.

Business Segment Information

		Three Months Ended								Nine Months Ended
		30 June								30 June
		2009				2008				2009				2008
Revenues from External Customers
Merchant Gases		$	882.6			$	1,087.3			$	2,678.2			$	3,097.7
Tonnage Gases			565.0				975.8				1,933.6				2,634.1
Electronics and Performance Materials			409.2				579.7				1,148.0				1,656.1
Equipment and Energy			119.4				106.9				367.1				311.9
Segment and Consolidated Totals		$	1,976.2			$	2,749.7			$	6,126.9			$	7,699.8
Operating Income
Merchant Gases		$	168.8			$	204.3			$	495.5			$	593.3
Tonnage Gases			87.6				125.5				294.4				347.7
Electronics and Performance Materials			39.0				70.4				52.5				204.0
Equipment and Energy			13.1				4.0				36.4				23.3
Segment Totals		$	308.5			$	404.2			$	878.8			$	1,168.3
Global cost reduction plan (a)			(124.0	)			—				(298.2	)			—
Customer bankruptcy and asset actions			(32.1	)			—				(32.1	)			—
Pension settlement			(8.0	)			(1.0	)			(8.0	)			(28.7	)
Other			(.6	)			(9.5	)			(22.2	)			(16.9	)
Consolidated Totals		$	143.8			$	393.7			$	518.3			$	1,122.7

		30 June				30 September
		2009				2008
Identifiable Assets (b)
Merchant Gases		$	4,729.6			$	4,881.6
Tonnage Gases			3,398.0				3,335.4
Electronics and Performance Materials			2,205.2				2,341.0
Equipment and Energy			304.6				300.2
Segment Totals			10,637.4				10,858.2
Other			765.6				775.2
Discontinued operations			19.9				115.3
Consolidated Totals		$	11,422.9			$	11,748.7

(a)		Information about this charge at the segment level is discussed in Note 3.
(b)		Identifiable assets are equal to total assets less investments in and advances to equity affiliates.

Geographic Information

		Three Months Ended								Nine Months Ended
		30 June								30 June
		2009				2008				2009				2008
Revenues from External Customers
North America		$	929.1			$	1,366.7			$	3,018.4			$	3,744.9
Europe			663.3				895.7				2,042.9				2,559.8
Asia			336.0				430.1				931.7				1,237.5
Latin America			47.8				57.2				133.9				157.6
Total		$	1,976.2			$	2,749.7			$	6,126.9			$	7,699.8

Geographic information is based on country of origin. The Europe segment operates principally in Belgium, France, Germany, the Netherlands, Poland, the U.K. and Spain. The Asia segment operates principally in China, Japan, Korea, and Taiwan.

14. SUPPLEMENTAL INFORMATION

Customer Bankruptcy and Asset Actions

As a result of events which occurred during the third quarter of 2009, the Company recognized a $22.2 charge primarily for the write-off of certain receivables due to a customer bankruptcy. This customer, who principally receives product from the Tonnage Gases segment, began operating under Chapter 11 bankruptcy protection on 6 January 2009. Sales and operating income associated with this customer are not material to the Tonnage Gases segment’s results. At 30 June 2009, the Company had remaining outstanding receivables with the customer of $16.4. At the present time, the Company does not expect to recognize additional charges related to this customer.

Additionally, the Company recorded a charge of $9.9 for other asset actions which consisted of the closure of certain manufacturing facilities. This charge was reflected in cost of sales on the consolidated income statement. The customer bankruptcy charge combined with this asset write-down resulted in a total charge of $32.1 ($21.0 after-tax, or $.10 per share).

Share Repurchase Program

On 20 September 2007, the Board of Directors authorized the repurchase of up to $1,000 of the Company’s outstanding common stock. During the nine months ended 30 June 2009, the Company did not purchase any shares under this authorization. At 30 June 2009, $649.2 in share repurchase authorization remains.

Industrial Revenue Bonds

During the first quarter of 2009, the Company issued two Industrial Revenue Bonds totaling $80.0, the proceeds of which must be held in escrow until related project spending occurs. As of 30 June 2009 and 30 September 2008, $95.4 and $181.2 were held in escrow from Industrial Revenue Bond issuances and classified as other noncurrent assets, respectively.

Subsequent Events

As discussed in Note 2, New Accounting Standards, the Company adopted the requirements of SFAS No. 165 and has evaluated subsequent events from 30 June 2009 to the filing date of this report on the Form 10-Q. There were no subsequent events required to be recognized or disclosed in the financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(Millions of dollars, except for share data)

The disclosures in this quarterly report are complementary to those made in the Company’s 2008 annual report on Form 10-K. An analysis of results for the third quarter and first nine months of 2009, including an update to the Company’s 2009 Outlook, is provided in the Management’s Discussion and Analysis to follow.

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, except as noted. All amounts are presented in millions of dollars, except for share data, unless otherwise indicated.

THIRD QUARTER 2009 VS. THIRD QUARTER 2008

THIRD QUARTER 2009 IN SUMMARY

	•		Due to the continuing slow economic recovery, the Company committed to additional actions associated with its global cost reduction plan which resulted in a charge to continuing operations of $124.0 ($84.2 after-tax, or $.39 per share). Additionally, the results included a charge of $32.1 ($21.0 after-tax, or $.10 per share) for a customer bankruptcy and asset actions, and a charge of $8.0 ($5.0 after-tax, or $.02 per share) for pension settlements.
	•		Sales of $1,976.2 declined 28%. Underlying business declined 11% from lower volumes primarily in the Electronics and Performance Materials and Merchant Gases segments and also in the Tonnage Gases segment. Additionally, lower energy and raw material cost pass-through to customers and unfavorable currency negatively impacted sales.
	•		Operating income of $143.8 declined $249.9 principally from lower volumes, the additional global cost reduction charge, and unfavorable currency impacts. In addition, operating income was lower as a result of the charge of $32.1 for the customer bankruptcy and asset actions and from the $8.0 pension settlement. The previous cost reduction actions favorably impacted operating income and resulted in lower operating and overhead costs.
	•		Income from continuing operations of $114.6 declined $180.4 and diluted earnings per share from continuing operations of $.54 declined $.81. A summary table of changes in diluted earnings per share is presented below.
	•		Loss from discontinued operations in the prior year included an after-tax charge of $237.0, or $1.09 per share, related to the impairment of the U.S. Healthcare assets.
	•		For a discussion of the challenges, risks, and opportunities on which management is focused, refer to the update to the Company’s 2009 Outlook provided on page 37.

Changes in Diluted Earnings per Share

		Three Months Ended
		30 June								Increase
		2009				2008				(Decrease)
Diluted Earnings per Share
Net Income		$	.53			$	.32			$	.21
Discontinued Operations			(.01	)			(1.03	)			1.02
Continuing Operations		$	.54			$	1.35			$	(.81	)
Operating Income (after-tax)
Underlying business
Volume											(.47	)
Price/energy and raw materials											.06
Costs											.20
Currency											(.09	)
Global cost reduction plan											(.39	)
Customer bankruptcy and asset actions											(.10	)
Pension settlement											(.02	)
Operating Income											(.81	)
Other (after-tax)
Equity affiliates’ income											(.06	)
Interest expense											.04
Minority interest											.01
Income tax rate											(.01	)
Average shares outstanding											.02
Other											.00
Total Change in Diluted Earnings per Share from Continuing Operations										$	(.81	)