Air Products & Chemicals, Inc.APD
Air Products & Chemicals, Inc. Stock Compensation Disclosure
SHARE-BASED COMPENSATION
Our outstanding share-based compensation program includes market-based and time-based deferred stock units. We issue shares from treasury stock upon the payout of deferred stock units and the exercise of stock options. As of 30 September 2025, there were 0.9 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:
| 2025 | 2024 | 2023 | |||||||||
Before-tax share-based compensation cost(A) | $76.6 | $61.7 | $60.7 | ||||||||
| Income tax benefit | (18.3) | (14.9) | (14.6) | ||||||||
| After-tax share-based compensation cost | $58.3 | $46.8 | $46.1 | ||||||||
(A)Fiscal year 2025 includes noncash executive separation costs of $22.4 to accelerate vesting of share-based awards. Refer to the "Shareholder Activism-Related Costs" disclosure in Note 25, Supplemental Information, for additional information.
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 fiscal years 2025, 2024, and 2023 was not material.
Deferred Stock Units
We have granted deferred stock units to executives, selected employees, and outside directors. These deferred stock units entitle the recipient to one share of common stock upon vesting, which is conditioned, for employee recipients, on continued employment during the deferral period and may be conditioned on achieving certain performance targets. We grant deferred stock unit awards with a - to five-year deferral period that are subject to payout upon death, disability, or retirement. Deferred stock units issued to outside directors are paid after their service on the Board of Directors ends at the time elected by the director (not to exceed ten years after service ends). We generally expense the grant-date fair value of awards on a straight-line basis over the vesting period; however, expense recognition is accelerated for retirement eligible individuals who meet the requirements for vesting upon retirement. We have elected to account for forfeitures as they occur, rather than to estimate them. Forfeitures have not been significant historically.
Market-based deferred stock units vest as long as the employee continues to be employed by the Company and upon the achievement of the performance target. The performance target, which is approved by the Compensation Committee, is our share price appreciation and dividends paid, or "total shareholder return," in relation to the S&P 500 Index over a three-year performance period beginning 1 October of the fiscal year of grant. We granted 95,490, 102,120, and 85,612 market-based deferred stock units in fiscal years 2025, 2024, and 2023, respectively.
The fair value of market-based deferred stock units was estimated using a Monte Carlo simulation model as these equity awards are tied to a market condition. 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. We generally expense the grant-date fair value of these awards on a straight-line basis over the vesting period. The estimated grant-date fair value of market-based deferred stock units was $470.13, $302.10, and $502.03 per unit in fiscal years 2025, 2024, and 2023, respectively. The calculation of the fair value of market-based deferred stock units used the following assumptions:
| 2025 | 2024 | 2023 | ||||||||||||
| Expected volatility | 30.3 | % | 25.0 | % | 32.5 | % | ||||||||
| Risk-free interest rate | 4.1 | % | 4.3 | % | 4.0 | % | ||||||||
| Expected dividend yield | 2.1 | % | 2.6 | % | 2.4 | % | ||||||||
In addition, in fiscal year 2025, we granted 143,059 time-based deferred stock units at a weighted average grant-date fair value of $328.54. In fiscal years 2024 and 2023, we granted 146,947 and 119,954 time-based deferred stock units at a weighted average grant-date fair value of $270.86 and $308.91, respectively.
A summary of deferred stock unit activity in fiscal year 2025 is presented below:
| Shares (000) | Weighted Average Grant-Date Fair Value | |||||||||||||
| Deferred stock units outstanding at 30 September 2024 | 758 | $293.99 | ||||||||||||
| Granted | 239 | 385.22 | ||||||||||||
| Paid out | (314) | 288.02 | ||||||||||||
| Forfeited | (50) | 321.37 | ||||||||||||
| Deferred stock units outstanding at 30 September 2025 | 633 | $329.23 | ||||||||||||
Cash payments made for deferred stock units totaled $4.6, $2.7, and $3.6 in fiscal years 2025, 2024, and 2023, respectively. As of 30 September 2025, there was $68.5 of unrecognized compensation cost related to deferred stock units. This cost is expected to be recognized over a weighted average period of 1.7 years. The total fair value of deferred stock units paid out during fiscal years 2025, 2024, and 2023, including shares vested in prior periods, was $94.5, $24.1, and $45.3, respectively.
Stock Options
We have not issued stock option awards since fiscal year 2015. These awards generally vested incrementally over three years and remained exercisable for ten years from the date of grant. All stock options have now been exercised, and no intrinsic value remains as of 30 September 2025.
A summary of stock option activity in fiscal year 2025 is presented below:
| Shares (000) | Weighted Average Exercise Price | |||||||||||||
| Stock options outstanding and exercisable at 30 September 2024 | 54 | $134.54 | ||||||||||||
| Exercised | (54) | 134.54 | ||||||||||||
Stock options outstanding and exercisable at 30 September 2025 | — | $— | ||||||||||||
The intrinsic value of stock options exercised during fiscal years 2025, 2024, and 2023 was $10.5, $35.1, and $53.5, respectively.
Cash received from option exercises during fiscal year 2025 was $1.1. The total tax benefit realized from stock option exercises in fiscal year 2025 was $2.5, of which $1.9 was the excess tax benefit.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 20, 2025 | Showing above |
| 2024 | Nov 21, 2024 | |
| 2023 | Nov 16, 2023 | |
| 2022 | Nov 22, 2022 | |
| 2021 | Nov 18, 2021 | |
| 2016 | Nov 21, 2016 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.