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CORRESP
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CORRESP

26 February 2007

Mr. Rufus Decker

Accounting Branch Chief

Securities and Exchange Commission

Division of Corporate Finance

Mail Stop 7010

100 F Street, N.E.

Washington, D.C. 20549

    RE:

    Air Products and Chemicals, Inc.

    Form 10-K: For the Year Ended 30 September 2006

    Form 10-Q: For the Quarterly Period Ended 31 December 2006

Dear Mr. Decker,

In response to your letter of 15 February 2007, we provide the information below, which
should not be deemed “filed” with the Commission. Our responses have been numbered to
correspond with the comments in your letter. The original comments, contained in your
letter of 15 February 2007, have been included in italics for reference during your review.

* * * * * * * * * *

Comment 1 — General

Where a comment below requests additional disclosures or other revisions to be made, please show us
in your supplemental response what the revisions will look like. These revisions should be
included in your future filings.

Response:

In future filings, we will make the revisions described in our responses to your comments 2 through
16 as detailed below.

Comment 2 — Available Information, page 6

Please disclose our new address, which is 100 F Street, N.E., Washington D.C. 20549.

Response:

In future filings, we shall disclose the new address as detailed above.

Comment 3 — Item 9A. Controls and Procedures, page 15

Please disclose whether there have been any changes in your internal controls over financial
reporting that occurred during the most recent quarter rather than subsequent to the date of the
most recent evaluation. Refer to Item 308(c) of Regulation S-K.

Response:

In future filings, provided there has been no change in internal controls over financial reporting,
we shall include the following disclosure:

There has been no change in the Company’s internal controls over financial reporting (as that term
is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) which have occurred during the
quarter ended [                                  ] that has materially affected, or is
reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Comment 4 — Effective Tax Rate, page 24

On pages 24 and 25, you discuss the effective tax rate excluding certain items. These amounts
constitute non-GAAP measures. Please revise your MD&A for each period presented to remove these
non-GAAP measures and instead discuss the changes between periods in your GAAP amounts. Amounts
that are a business reason for the change between periods, such as the specified items you refer
to, should be discussed as one of the business reasons for the change in the applicable GAAP amount
between periods. Please make the appropriate revisions.

Response:

In future filings, we shall revise the MD&A discussion of the effective tax rates similar to the
following related to the change between 2005 and 2006:

The effective tax rate was 26.6%, down slightly from 26.9% in 2005. The sale of the Geismar,
Louisiana, DNT production facility, the global cost reduction plan charge, and the impairment of
loans receivable resulted in a 0.5% reduction of the fiscal 2006 effective tax rate.

Comment 5 — Statements of Cash Flows, page 48

You present a subtotal of cash provided by operating activities prior to working capital changes.
This amount constitutes a non-GAAP measure. Please remove this subtotal from your statements.
Refer to Item 10(e) (1) (ii) (C) of Regulation S-K.

Response:

In future filings, we shall remove the subtotal of cash provided by operating activities prior to
working capital changes from our Statements of Cash Flows.

Comment 6 — Statements of Cash Flows, page 48

Please separately present changes in inventories in your determination of cash provided by
operating activities. Refer to paragraph 29 of SFAS 95.

Response:

In future filings, we shall separately disclose both the change in inventories and the change in
contracts in progress in the Statements of Cash Flows.

Comment 7 — Statements of Shareholders’ Equity, page 49

Please disclose the components of accumulated other comprehensive income (loss) as of each balance
sheet date as required by paragraph 26 of SFAS 140. Please also disclose for all periods presented
the amounts of the reclassification adjustments for each classification of other comprehensive
income. See paragraph 20 of SFAS 130.

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Response:

In future filings, provided that the reclassification adjustments are not material, we will
specifically disclose that the reclassification adjustments were not material in the
Footnote for Other Comprehensive Income.

The components of accumulated other comprehensive income have been disclosed in Footnote 20
to the 30 September 2006 Consolidated Financial Statements in accordance with paragraph 26
of SFAS 130. The reclassification adjustments were not material for the periods presented.
Footnote 6 to the 30 September 2006 Consolidated Financial Statements disclosed that
amounts reclassified from other comprehensive income due to the discontinuance of a hedge
were not material.

Comment 8 — General, Note 1. Major Accounting Policies

Please disclose the types of expenses that you include in the cost of sales line item and
the types of expenses that you include in the selling and
administrative expenses line item.

Response:

In future filings, we will disclose the types of expenses included in cost of sales and
selling and administrative expenses, as described below.

Cost of sales predominately represents the cost of tangible products sold. These costs
include labor, raw materials, plant engineering and purchasing department overhead, power,
depreciation, production supplies and materials packaging costs, and maintenance costs. As
disclosed in Footnote 1 to the 30 September 2006 Consolidated Financial Statements, costs
incurred for shipping and handling are also included in cost of sales. The principal
components of selling and administrative expenses are salaries, advertising, and
promotional costs.

We believe that our historical disclosures have met the requirements of both U.S. GAAP and
Regulation S-X. However, we will add the above disclosures in future filings.

Comment 9 — Note 1. Major Accounting Policies, Inventories, page 53

You should use one inventory method for similar types of inventories. A mixture of methods
should only be used for different types of inventories, particularly when there are valid
business reasons for doing so. Please disclose which types of inventory you use each
method for. Please also disclose the dollar amounts of inventory accounted for under each
method. Please disclose whether you use more than one method for any similar types of
inventory. If so, please also disclose your basis for doing this. In a portion of these
instances, this may be due to a specific method not being allowed in certain countries.

Response:

In future filings, we will disclose the inventory method used for the various types of
inventory, as described below. A disclosure of the percentage of inventory valued on the
last-in first-out (LIFO) method at each balance sheet date has been included in Footnote 7
to the 30 September 2006 Consolidated Financial Statements. The Company does utilize one
inventory method for each type of inventory.

The Company utilizes the LIFO method for inventories in the Merchant Gases, Tonnage Gases,
Electronics and Performance Materials, and Chemicals segments in the United States.
Inventories for these segments outside of the United States are accounted for on the
first-in first-out (FIFO) method, as the LIFO method is not generally permitted in the
foreign jurisdictions where these segments operate. The Healthcare and Equipment and
Energy

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segments inventories on a worldwide basis, as well as all other inventories, are accounted
for on the FIFO basis.

We believe that our historical disclosures have met the requirements of both U.S. GAAP and
Regulation S-X. However, we will provide these additional disclosures described above in
future filings.

Comment 10 — Note 1. Major Accounting Policies, Adjustments, page 54

For each adjustment related to prior periods which was recorded during the fourth quarter
of 2006, please provide us with additional background information so we may better
understand the nature of each adjustment. Please tell us how you determined that both
individually and in the aggregate these adjustments were not material to any prior annual
and quarterly period. SAB 99 notes that a materiality evaluation must be based on all
relevant quantitative and qualitative factors. Please provide your SAB 99 materiality
analysis explaining how you determined that the errors related to each prior period were
immaterial on both a quantitative and qualitative basis. Please ensure your response
addresses all of the qualitative factors outlined in SAB 99 and any other relevant
qualitative factors.

Response:

A paper copy of the Company’s SAB 99 analysis, dated 22 October 2006, has been separately
submitted. The Company requests confidential treatment of this document under Rule 12b-4
and, also, requests that the staff return this document when its review is complete. The
adjustments discussed in this analysis were reviewed with the Company’s senior management,
the Audit Committee of the Board of Directors, and external auditors prior to filing the
Company’s 30 September 2006 Form 10-K.

As requested, below is supplemental information related to the adjustments recorded during
the fourth quarter of 2006.

Inventory

The Company’s Healthcare segment recorded an adjustment to reduce its inventories to actual
based on physical counts, of which $7 million related to prior years. In fiscal year 2006,
the Company discovered that physical inventory counts had resulted in the double counting
of certain inventories.

Environmental Liabilities

The Company acquired a facility in Pensacola, Florida (Pace) in 1969. In 1986, the Company
implemented a groundwater monitoring program, as required by the Florida Department of
Environmental Protection (FDEP). In 1986, the Company notified the FDEP that the Company’s
monitoring program had identified groundwater contamination. Subsequently, the Company
entered into an agreement with the FDEP to implement a groundwater remediation program.

During fiscal 2006, the Company sold its Amines business to a third party. The Company’s
Amines business included operations at Pace. With the sale of the Amines business, the
Company had no substantive operations remaining at Pace. In connection with the
disposition of the Amines business, the buyer would only agree to purchase the operating
assets (consisting of machinery, buildings, and equipment) at Pace and entered into an
arrangement with the Company to lease the land underlying the operating assets at Pace.
The Company is required by the FDEP to continue its remediation efforts in order for the
buyer to continue to operate the Amines facility at Pace. In connection with the sale of
the Amines business, the Company reexamined its accounting for the remediation activities
at Pace.

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Based on a review of SOP 96-1 during the reexamination as described above, the Company
concluded that a liability should have been accrued for the estimated remediation
expenditures at Pace in 1993 or earlier. The Company has concluded that during 1993 or
earlier, a liability for remediation at Pace had been incurred, was estimable, and was
related to past events. As indicated above, the Company is required to continue the
remediation efforts for the Amines business buyer to continue operations at Pace.

At 30 September 2006, it was the opinion of the Company’s environmental specialists that it
would take an additional 20 years to complete the groundwater remediation. The Company’s
environmental specialists have estimated costs through completion to range from $42 to $50
million. As no amount within the range was a better estimate than another, the Company
recognized a pretax expense in the fourth quarter of 2006 of $42 million as a component of
income from discontinued operations, of which $35 million pertained to prior years.

Income Taxes

The Company performed its book to tax reconciliation at 30 September 2006. In connection
with that review the Company identified several items that related to prior periods
representing a tax benefit of approximately $20 million. The identified prior period
adjustments related to both domestic and foreign operations and impacted fiscal years 2005,
2004 and years prior to 2004. The adjustments related to a true-up of the recognized tax
provision to the actual federal and state income tax returns, and an over-accrual of taxes
related to certain of the Company’s foreign operations.

Accounts Payable

There was an over-accrual of accounts payable of $4.2 million that was related to prior
years.

Comment 11 — Note 5. Discontinued Operations, page 59

Throughout the filing, including on page 21, you state that you are currently marketing
your Polymer Emulsions business and actively engaging its partner and potential buyers.
Please disclose whether or not you have reported the operations of this business as
discontinued. Please also tell us how you determined you did or did not meet the criteria
of paragraph 30 of SFAS 144 to report these operations as discontinued.

Response:

The Polymer Emulsions business was not reported as a discontinued operation in the 30
September 2006 Consolidated Financial Statements. The Polymer Emulsions business will be
reported as a discontinued operation if and when the Board of Directors, representing the
requisite level of authority, commits to sell the business (as disclosed in our Quarterly
Report on Form 10-Q for the period ended 30 June 2006). At 30 September 2006, and through
the date of this letter, the Company is exploring the sale of this business and the Board
of Directors has not committed to such an action. As a result, the Polymer Emulsions
business did not meet the criteria of a discontinued operation under paragraph 30 of SFAS
144 at 30 September 2006.

Comment 12 — Note 9. Plant and Equipment, page 62

Please break out the gas generating and chemical facilities, machinery and equipment line
item into smaller and more meaningful components. In addition, we see from page 51 that
the range of useful lives for this line item is also very broad. Please separately
disclose the range of useful lives for each new category presented. For categories that
still have very broad useful lives, you should separately discuss the types of assets that
fall in each part of the range.

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Response:

Gas generating and chemical facilities (production facilities) comprise the majority of the
Company’s gas generating and chemical facilities, machinery and equipment. The next
largest component of gas generating and chemical facilities, machinery and equipment, after
production facilities, is distribution equipment. The cost of distribution equipment
represents less than 10% of the Company’s total plant and equipment at 30 September 2006.
Other components of plant and equipment are immaterial relative to the Company’s total
plant and equipment at 30 September 2006. We believe the disclosure presented in the
Company’s 30 September 2006 Consolidated Financial Statements meets the disclosure
requirements of both U.S. GAAP and Regulation S-X.

On pages 39 and 40 of the Annual Report, the Company has disclosed the critical accounting
policy for depreciable lives of plant and equipment, including sensitivity analysis for
depreciation expense. In that discussion, the Company discloses the range of useful lives
for production facilities in the different segments.

In future filings, we shall provide the following additional disclosures in our
depreciation discussion in Footnote 1 to the Consolidated Financial Statements:

Depreciation is recorded using the straight-line me