Air Products & Chemicals, Inc.

12. SHARE-BASED COMPENSATION

Our share-based compensation program includes performance and time-based deferred stock units. We issue shares from treasury stock upon the payout of deferred stock units. As of 31 December 2025, there were 0.6 million shares available for future grant under our Long-Term Incentive Plan ("LTIP"), which is shareholder approved.

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

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 the first three months of fiscal years 2026 and 2025 was not material.

Deferred Stock Units

During the three months ended 31 December 2025, we granted 100,048 performance shares to be earned over the performance period beginning 1 October 2025 and ending 30 September 2028.

The award conditions are equally weighted between market-based awards, which consider total shareholder return ("TSR") measured against a fixed group of companies that comprise the S&P 500 Industrials Index and the S&P Materials Index and awards that consider an internal performance measure for return on capital.

The fair value of the portion of the awards subject to the achievement of return on capital targets were valued based on the closing stock price of $260.86 on the grant date. The portion of the awards subject to market conditions were valued using a Monte Carlo simulation on the date of grant with an estimated grant-date fair value of $275.21 per unit. 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.

The calculation of the fair value of market-based deferred stock units used the following assumptions:

In addition, during the three months ended 31 December 2025, we granted 121,005 time-based deferred stock units at a weighted average grant-date fair value of $260.80.

We generally expense the grant-date fair value of these awards on a straight-line basis over the applicable vesting period. For the portion of performance shares subject to the achievement of return on capital, we consider the probability of meeting performance targets when recording compensation expense throughout the performance period.