Air Products Chemicals Inc

We believe we have sufficient cash, cash flows from operations, and funding sources to meet our liquidity needs. As further discussed in the "Cash Flows From Financing Activities" section below, we have the ability to raise capital through a variety of financing activities, including accessing capital or commercial paper markets or drawing upon our credit facilities.

As of 31 December 2023, we had $1,852.1 of foreign cash and cash items compared to total cash and cash items of $1,962.6. We do not expect that a significant portion of the earnings of our foreign subsidiaries and affiliates will be subject to U.S. income tax upon repatriation to the U.S. Depending on the country in which the subsidiaries and affiliates reside, the repatriation of these earnings may be subject to foreign withholding and other taxes. However, since we have significant current investment plans outside the U.S., it is our intent to permanently reinvest the majority of our foreign cash and cash items that would be subject to additional taxes outside the U.S.

Cash Flows From Operations

For the first three months of fiscal year 2024, cash provided by operating activities was $626.6. The working capital accounts were a use of cash of $369.6, primarily driven by $268.5 from payables and accrued liabilities, $64.5 from other receivables, and $48.6 from inventories. The use of cash within payables and accrued liabilities primarily resulted from payments for incentive compensation under the fiscal year 2023 plan, a reduction of customer advances for sale of equipment projects as we recognized revenue, and a reduction of liabilities associated with accrued utilities. The use of cash within other receivables primarily relates to the payment of value added taxes incurred in the construction of our larger projects for which we will claim a refund in the near term. The use of cash within inventories primarily relates to purchases of helium.

For the first three months of fiscal year 2023, cash provided by operating activities was $719.3. Distributed earnings of equity method investments reflect distributions in excess of earnings for the period of $17.2. Other adjustments of $99.0 primarily included adjustments for noncash currency impacts of intercompany balances. The working capital accounts were a use of cash of $337.6, primarily driven by $257.6 from payables and accrued liabilities and $102.8 from inventory. The use of cash within payables and accrued liabilities primarily resulted from the decrease in value of derivatives that hedge intercompany loans, payments for incentive compensation under the fiscal year 2022 plan and a reduction of liabilities associated with the purchase of natural gas.

Cash Flows From Investing Activities

For the first three months of fiscal year 2024, cash used for investing activities was $1,665.6. The use of cash primarily resulted from additions to plant and equipment, including long-term deposits, of $1,445.5 and an investment in financing receivables of $301.8. Refer to the Capital Expenditures section below for further detail. Proceeds from investments of $120.1 resulted from maturities of time deposits and treasury securities with terms greater than three months but less than one year and exceeded purchases of investments of $55.5.

For the first three months of fiscal year 2023, cash used for investing activities was $256.2. Capital expenditures for additions to plant and equipment, including long-term deposits, were $834.2. Proceeds from investments of $591.5 resulted from maturities of time deposits and treasury securities with terms greater than three months but less than one year and exceeded purchases of investments of $19.2.

Capital Expenditures

The components of our capital expenditures are detailed in the table below. Refer to page 45 for a definition of this non-GAAP measure as well as a reconciliation to cash used for investing activities.

(A)Reflects the portion of "Additions to plant and equipment, including long-term deposits" that is associated with NGHC, less our approximate cash investment in the joint venture.

Capital expenditures for the first three months of fiscal year 2024 totaled $1,385.7 compared to $724.5 for the first three months of fiscal year 2023. The investment in financing receivables of $301.8 primarily reflects payments associated with the purchase of renewable fuel assets from World Energy as well as the purchase of a natural gas-to-syngas processing facility in Uzbekistan. Refer to Note 3, Variable Interest Entities, and Note 18, Supplemental Information, to the consolidated financial statements, respectively, for additional information.

Outlook for Investing Activities

It is not possible, without unreasonable efforts, to reconcile our forecasted capital expenditures to future cash used for investing activities because we are unable to identify the timing or occurrence of our future investment activity, which is driven by our assessment of competing opportunities at the time we enter into transactions. These decisions, either individually or in the aggregate, could have a significant effect on our cash used for investing activities.

We continue to expect capital expenditures for fiscal year 2024 to be approximately $5.0 billion to $5.5 billion.

Cash Flows From Financing Activities

For the first three months of fiscal year 2024, cash provided by financing activities was $1,362.8. The source of cash was primarily driven by net increase in commercial paper and short-term borrowings of $1,020.9 and long-term debt proceeds of $810.4, partially offset by dividend payments to shareholders of $388.9 and payments on long-term debt of $54.8.

For the first three months of fiscal year 2023, cash used for financing activities was $85.6. The use of cash was primarily driven by dividend payments to shareholders of $359.4 and payments on long-term debt of $195.9 partially offset by long-term debt proceeds of $476.3.

Financing and Capital Structure

Debt

Total debt increased from $10,305.8 as of 30 September 2023 to $12,107.7 as of 31 December 2023. The increase from 30 September 2023 was primarily due to the issuance of commercial paper as well as additional borrowings under the project financing associated with the NEOM Green Hydrogen Project as discussed in Note 3, Variable Interest Entities, to the consolidated financial statements. As of 31 December 2023, we classified our outstanding commercial paper, which totaled approximately $1.3 billion, as well as our 3.35% Senior Note of $400 maturing in July 2024 as long-term debt as we have the ability to refinance the debt under our $2.75 billion revolving credit agreement (the “2021 Credit Agreement”), which is further discussed below. Our current intent is to refinance this debt via the U.S. public debt market.

Total debt includes related party debt of $294.8 and $328.3 as of 31 December 2023 and 30 September 2023, respectively.

Various debt agreements to which we are a party include financial covenants and other restrictions, including restrictions pertaining to the ability to create property liens and enter into certain sale and leaseback transactions. As of 31 December 2023, we were in compliance with all of the financial and other covenants under our debt agreements.

2021 Credit Agreement

We have a five-year $2.75 billion revolving credit agreement maturing 31 March 2026 with a syndicate of banks (the “2021 Credit Agreement”), under which senior unsecured debt is available to us and certain of our subsidiaries. The 2021 Credit Agreement provides a source of liquidity and supports our commercial paper program. No borrowings were outstanding under the 2021 Credit Agreement as of 31 December 2023. At this time, we do not expect to borrow from the facility.

The only financial covenant in the 2021 Credit Agreement is a maximum ratio of total debt to total capitalization (equal to total debt plus total equity) not to exceed 70%. The 2021 Credit Agreement defines total debt as the aggregate principal amount of all indebtedness, excluding limited recourse debt of any project financed subsidiary. Accordingly, this calculation does not consider borrowings associated with NGHC. Total debt to total capitalization was 38.7% and 36.6% as of 31 December 2023 and 30 September 2023, respectively.

Foreign Credit Facilities

We also have credit facilities available to certain of our foreign subsidiaries totaling $1,611.4, of which $1,091.1 was borrowed and outstanding as of 31 December 2023. The amount borrowed and outstanding as of 30 September 2023 was $1,041.4.

NEOM Green Hydrogen Project Financing

In May 2023, NGHC secured non-recourse project financing of approximately $6.1 billion, which is expected to fund approximately 73% of the NEOM Green Hydrogen Project and will be drawn over the construction period. At the same time, NGHC secured additional non-recourse credit facilities totaling approximately $500 primarily for working capital needs. The joint venture had borrowed $2.1 billion and $1.4 billion of the available financing as of 31 December 2023 and 30 September 2023, respectively. Refer to Note 3, Variable Interest Entities, to the consolidated financial statements for additional information.

Dividends

The Board of Directors determines whether to declare cash dividends on our common stock and the timing and amount based on financial condition and other factors it deems relevant. Dividends are paid quarterly, usually during the sixth week after the close of the fiscal quarter. On 15 November 2023, the Board of Directors declared a quarterly dividend of $1.75 per share that is payable on 12 February 2024 to shareholders of record at the close of business on 2 January 2024.

In January 2024, the Board of Directors increased the quarterly dividend to $1.77 per share, representing our 42 nd consecutive year of dividend increases. The new dividend was declared on 25 January 2024 and is payable on 13 May 2024 to shareholders of record at the close of business on 1 April 2024.