8-K
LINDE PLC (LIN)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): May 6,
2021
Linde plc
(Exact name of registrant as specified in its charter)
| Ireland | 001-38730 | 98-1448883 |
|---|---|---|
| (State or other jurisdiction<br><br><br>of incorporation) | (Commission<br><br><br>File Number) | (I.R.S. Employer<br><br><br>Identification No.) |
The Priestley Centre
10 Priestley Road
Surrey Research Park
Guildford, Surrey GU2 7XY
United Kingdom
(Address of principal executive offices) (Zip Code)
+44 1483 242200
(Registrant’s telephone numbers, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title<br>of each class | Trading<br>symbol(s) | Name of<br>each exchange on which registered |
|---|---|---|
| Ordinary<br>shares (€0.001 nominal value per share) | LIN | New<br>York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02 Results of Operations and Financial
Condition
On May 6, 2021, Linde plc issued a press release setting forth Linde plc’s results of operations for the quarter ended March 31, 2021. A copy of Linde plc’s press release is furnished herewith as Exhibit 99.1 and is hereby incorporated by reference in this Item 2.02.
ITEM 9.01. Financial Statements and Exhibits.
(d) Exhibits. The following exhibit is furnished herewith pursuant to Item 2.02 hereof:
| Exhibit No. | Description |
|---|---|
| 99.1 | Press<br>Release dated May 6, 2021 |
| 104 | Cover<br>Page Interactive Data File (embedded within the Inline XBRL<br>document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| LINDE PLC | |
|---|---|
| By: | /s/<br>Kelcey E. Hoyt |
| Name: | Kelcey<br>E. Hoyt |
| Title: | Principal<br>Accounting Officer |
Date: May 6, 2021
Untitled Document
Exhibit 99.1
Press release
Linde Reports First-Quarter 2021 Results
Financial Highlights
➢
Sales $7.2 billion, up 7% versus prior-year quarter
➢
Operating profit $1.2 billion; adjusted operating profit $1.7 billion, up 25%
➢
Operating profit margin 16.7%; adjusted operating profit margin 23.3%, up 320 basis points
➢
EPS $1.86; adjusted EPS $2.49, up 32%
➢
Strong operating cash flow $2.1 billion, up 57%
➢
Increased full-year 2021 adjusted EPS guidance to $9.60 - $9.80, represents 17% to 19% growth year-over-year
Guildford, UK, May 6, 2021 – Linde plc (NYSE: LIN; FWB: LIN) today reported first-quarter 2021 income from continuing operations of $979 million and diluted earnings per share of $1.86, an increase of 74% versus prior year. Excluding Linde AG purchase accounting impacts and other charges, adjusted income from continuing operations was $1,312 million, up 30% versus prior year and 8% sequentially. Adjusted earnings per share was $2.49, 32% above prior year and 8% higher sequentially.
Linde’s sales for the first quarter were $7,243 million, 7% above prior year and flat sequentially. Compared to prior year, underlying sales increased 5%, including 2% price attainment and 3% higher volumes, led by healthcare, electronics and a recovery in the cyclical end markets of manufacturing, metals, chemicals and refining. Sequentially, underlying sales increased 2% driven by higher volume and price.
First-quarter operating profit was $1,213 million. Adjusted operating profit of $1,688 million was up 25% versus prior year led by higher price and continued productivity initiatives across all segments. Adjusted operating margin of 23.3% expanded 320 basis points versus prior year and 110 basis points sequentially.
First-quarter operating cash flow of $2,109 million increased 57% versus prior year. After capital expenditures of $762 million, free cash flow was $1,347 million, up 148% versus prior year. During the quarter, the company returned $1,404 million to shareholders through dividends and stock repurchases, net of issuance.
Commenting on the financial results and business outlook, Chief Executive Officer Steve Angel said, ”Linde employees delivered another strong quarter of financial results with operating profit margins expanding over 320 basis points, ROC improving to 14.5% and operating cash flow increasing 57%. In addition, EPS grew 32%, reaching a new record high of $2.49. The resiliency of our business model coupled with the ability to leverage any economic recovery has allowed Linde to continue delivering stellar results.”
Angel continued, “Looking ahead, I have confidence the company will continue to create significant shareholder value for years to come.”
For the second quarter of 2021, Linde expects adjusted diluted earnings per share in the range of $2.50 to $2.55, up 37% to 39% versus the same quarter in 2019 and 32% to 34% versus prior-year quarter. This guidance assumes a year-over-year 4% currency tailwind and sequentially a negative currency impact of 1%.
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Press release
For the full year 2021, the company expects adjusted diluted earnings per share to be in the range of $9.60 to $9.80, up 31% to 34% versus 2019 and 17% to 19% versus prior year. This guidance assumes a 2% currency tailwind versus 2020. Full-year capital expenditures are expected to be in the range of $3.0 billion to $3.4 billion to support maintenance and growth requirements including the $3.5 billion contractual sale of gas project backlog.
First-Quarter 2021 Results by Segment
Americas sales of $2,840 million were 6% above prior year. Underlying sales increased 7% driven by 3% higher pricing and 4% higher volume, led by higher demand across all end markets. Sequentially, price increased 1% and volumes grew 3%, led by higher demand in healthcare, electronics and cyclical end markets. Operating profit of $795 million was 28.0% of sales, up 330 basis points versus prior year.
APAC (Asia Pacific) sales of $1,436 million were 7% above prior year. Underlying sales grew 11% driven by 1% price attainment and 10% volume growth, primarily in the electronics and cyclical end markets plus project start-ups. Sequentially, volume was flat as contribution from project start-ups was offset by weaker base volumes, mainly due to seasonality. Divestitures were driven by an accounting deconsolidation of a joint venture which reduced sales 11% versus prior year and 12% sequentially, but had no impact on earnings per share. Operating profit of $351 million was 24.4% of sales, up 340 basis points versus prior year.
EMEA (Europe, Middle East & Africa) sales of $1,799 million were up 10% versus prior year. Underlying sales grew 4%, primarily led by 3% higher pricing and increased demand from the healthcare end market. Sequentially, underlying sales were flat, with 1% higher pricing offset by slightly lower volumes. Operating profit of $451 million was 25.1% of sales, up 340 basis points versus prior year.
Linde Engineering sales were $674 million, 11% above prior year, and operating profit was $109 million or 16.2% of sales. Order intake for the quarter was $461 million, up 30% sequentially, and third-party sale of equipment backlog was $4.3 billion.
Earnings Call
A teleconference on Linde’s first-quarter 2021 results is being held today at 10:00 am EDT.
| Live conference call | US<br>Toll-Free Dial-In Number: 1 855 758 5442<br><br><br>Germany<br>Toll-Free Dial-In Number: 0800 181 5287<br><br><br>UK<br>Toll-Free Dial-In Number: 0800 028 8438<br><br><br>Access<br>code: 8561159 |
|---|---|
| Live webcast (listen-only) | https://investors.linde.com/events-presentations<br><br><br>Short<br>URL: https://t1p.de/i2ho |
Materials to be used in the teleconference are also available on the website.
About Linde
Linde is a leading global industrial gases and engineering company with 2020 sales of $27 billion (€24 billion). We live our mission of making our world more productive every day by providing high-quality solutions, technologies and services which are making our customers more successful and helping to sustain and protect our planet.
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Press release
The company serves a variety of end markets including chemicals & refining, food & beverage, electronics, healthcare, manufacturing and primary metals. Linde’s industrial gases are used in countless applications, from life-saving oxygen for hospitals to high-purity & specialty gases for electronics manufacturing, hydrogen for clean fuels and much more. Linde also delivers state-of-the-art gas processing solutions to support customer expansion, efficiency improvements and emissions reductions.
For more information about the company and its products and services, please visit www.linde.com
Adjusted amounts, free cash flow and return on capital are non-GAAP measures. See the attachments for a summary of non-GAAP reconciliations and calculations for adjusted amounts.
Attachments: Summary Non-GAAP Reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information and Appendix: Non-GAAP Measures and Reconciliations.
*Note: We are providing adjusted earnings per share (“EPS”) guidance for 2021. This is a non-GAAP financial measure that represents diluted earnings per share from continuing operations (a GAAP measure) but excludes the impact of certain items that we believe are not representative of our underlying business performance, such as cost reduction and other charges, the impact of potential divestitures or other potentially significant items. Given the uncertainty of timing and magnitude of such items, we cannot provide a reconciliation of the differences between the non-GAAP adjusted EPS guidance and the corresponding GAAP EPS measure without unreasonable effort.
Forward-looking Statements
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by terms and phrases such as: anticipate, believe, intend, estimate, expect, continue, should, could, may, plan, project, predict, will, potential, forecast, and similar expressions. They are based on management’s reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances, includingtrade conflicts and tariffs; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics, pandemics such as COVID-19 and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; the impact of potential unusual or non-recurring items; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; the impact of information technology system failures, network disruptions and breaches in data security; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from accounting principles generally accepted in the United States of America, International Financial Reporting Standards or adjusted projections, estimates or other forward-looking statements.
Linde plc assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A. Risk Factors in Linde plc’s Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 1, 2021 which should be reviewed carefully. Please consider Linde plc’s forward-looking statements in light of those risks.
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LINDE PLC AND SUBSIDIARIES
SUMMARY NON-GAAP RECONCILIATIONS
(UNAUDITED)
The following adjusted amounts are Non-GAAP measures and are intended to supplement investors' understanding of the company's financial statements by providing measures which investors, financial analysts and management use to help evaluate the company's operating performance. Items which the company does not believe to be indicative of ongoing business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these Non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. See the "NON GAAP MEASURES AND RECONCILIATIONS" starting on page 9 for additional details relating to the adjustments.
(Millions of dollars, except per share amounts)
| Sales | Operating Profit | Income from Continuing Operations | Diluted EPS from Continuing Operations | |||||
|---|---|---|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | 2021 | 2020 | |
| Quarter Ended March 31 | ||||||||
| Reported GAAP<br>Amounts | $7,243 | $6,739 | $1,213 | $733 | $979 | $571 | $1.86 | $1.07 |
| Cost reduction<br>program and other charges (a) | - | - | (8) | 131 | (28) | 95 | (0.05) | 0.18 |
| Purchase<br>accounting impacts - Linde AG (b) | - | - | 483 | 488 | 361 | 343 | 0.68 | 0.64 |
| Total<br>adjustments | - | - | 475 | 619 | 333 | 438 | 0.63 | 0.82 |
| Adjusted<br>amounts | $7,243 | $6,739 | $1,688 | $1,352 | $1,312 | $1,009 | $2.49 | $1.89 |
(a) To adjust for cost reduction program and other charges; 2021 includes severance of $26 million for the quarter and other cost reduction charges of $18 million more than offset by an other net benefit of $52 million.
(b) To adjust for purchase accounting impacts related to the merger.
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LINDE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars, except per share data)
(UNAUDITED)
| Quarter Ended | ||
|---|---|---|
| March 31, | ||
| 2021 | 2020 | |
| SALES | $7,243 | $6,739 |
| Cost of<br>sales | 4,054 | 3,843 |
| Selling,<br>general and administrative | 787 | 861 |
| Depreciation<br>and amortization | 1,166 | 1,142 |
| Research and<br>development | 35 | 44 |
| Cost reduction<br>programs and other charges | (8) | 131 |
| Other income<br>(expense) - net | 4 | 15 |
| OPERATING PROFIT | 1,213 | 733 |
| Interest<br>expense - net | 20 | 24 |
| Net pension<br>and OPEB cost (benefit), excluding service cost | (49) | (45) |
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY<br>INVESTMENTS | 1,242 | 754 |
| Income<br>taxes | 268 | 165 |
| INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY<br>INVESTMENTS | 974 | 589 |
| Income from<br>equity investments | 43 | 17 |
| INCOME FROM CONTINUING OPERATIONS (INCLUDING NONCONTROLLING<br>INTERESTS) | 1,017 | 606 |
| Add: income<br>from discontinued operations, net of tax | 1 | 2 |
| INCOME (INCLUDING NONCONTROLLING INTERESTS) | 1,018 | 608 |
| Less:<br>noncontrolling interests from continuing<br>operations | (38) | (35) |
| Less:<br>noncontrolling interests from discontinued<br>operations | - | - |
| NET INCOME - LINDE PLC | $980 | $573 |
| NET INCOME - LINDE PLC | ||
| Income from<br>continuing operations | $979 | $571 |
| Income from<br>discontinued operations | $1 | $2 |
| PER SHARE DATA - LINDE PLC SHAREHOLDERS | ||
| Basic earnings<br>per share from continuing operations | $1.87 | $1.07 |
| Basic earnings<br>per share from discontinued operations | - | - |
| Basic earnings<br>per share | $1.87 | $1.07 |
| Diluted<br>earnings per share from continuing operations | 1.86 | 1.07 |
| Diluted<br>earnings per share from discontinued operations | - | - |
| Diluted<br>earnings per share | $1.86 | $1.07 |
| Cash<br>dividends | $1.060 | $0.963 |
| WEIGHTED AVERAGE SHARES OUTSTANDING | ||
| Basic shares<br>outstanding (000's) | 522,459 | 531,215 |
| Diluted shares<br>outstanding (000's) | 526,927 | 534,956 |
Note: See page 9 for a reconciliation to adjusted amounts which are Non-GAAP.
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LINDE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
(UNAUDITED)
| March 31, | December 31, | |
|---|---|---|
| 2021 | 2020 | |
| ASSETS | ||
| Cash and cash<br>equivalents | $4,096 | $3,754 |
| Accounts<br>receivable - net | 4,139 | 4,167 |
| Contract<br>assets | 137 | 162 |
| Inventories | 1,695 | 1,729 |
| Prepaid and<br>other current assets | 1,065 | 1,112 |
| TOTAL CURRENT ASSETS | 11,132 | 10,924 |
| Property,<br>plant and equipment - net | 26,934 | 28,711 |
| Goodwill | 27,472 | 28,201 |
| Other<br>intangibles - net | 14,559 | 16,184 |
| Other<br>long-term assets | 4,896 | 4,209 |
| TOTAL ASSETS | $84,993 | $88,229 |
| LIABILITIES AND EQUITY | ||
| Accounts<br>payable | $2,945 | $3,095 |
| Short-term<br>debt | 3,276 | 3,251 |
| Current<br>portion of long-term debt | 2,524 | 751 |
| Contract<br>liabilities | 1,863 | 1,769 |
| Other current<br>liabilities | 4,419 | 4,874 |
| TOTAL CURRENT LIABILITIES | 15,027 | 13,740 |
| Long-term<br>debt | 9,950 | 12,152 |
| Other<br>long-term liabilities | 12,383 | 12,755 |
| TOTAL LIABILITIES | 37,360 | 38,647 |
| REDEEMABLE NONCONTROLLING INTERESTS | 13 | 13 |
| LINDE PLC SHAREHOLDERS' EQUITY: | ||
| Common<br>stock | 1 | 1 |
| Additional<br>paid-in capital | 40,192 | 40,202 |
| Retained<br>earnings | 17,563 | 17,178 |
| Accumulated<br>other comprehensive income (loss) | (5,345) | (4,690) |
| Less: Treasury<br>stock, at cost | (6,201) | (5,374) |
| Total Linde<br>plc shareholders' equity | 46,210 | 47,317 |
| Noncontrolling<br>interests | 1,410 | 2,252 |
| TOTAL EQUITY | 47,620 | 49,569 |
| TOTAL LIABILITIES AND EQUITY | $84,993 | $88,229 |
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LINDE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
| Quarter Ended | ||
|---|---|---|
| March 31, | ||
| 2021 | 2020 | |
| OPERATIONS | ||
| Net income -<br>Linde plc | $980 | $573 |
| Less: income<br>from discontinued operations, net of tax and noncontrolling<br>interests | (1) | (2) |
| Add:<br>noncontrolling interests | 38 | 35 |
| Net income<br>(including noncontrolling interests) | 1,017 | 606 |
| Adjustments to<br>reconcile net income to net cash provided by operating<br>activities: | ||
| Cost reduction<br>programs and other charges, net of payments (a) | (76) | 40 |
| Depreciation<br>and amortization | 1,166 | 1,142 |
| Accounts<br>receivable | (178) | (109) |
| Contract<br>assets and liabilities, net | 191 | 176 |
| Inventory | (60) | (62) |
| Payables and<br>accruals | 69 | (183) |
| Pension<br>contributions | (12) | (17) |
| Deferred<br>income taxes and other | (8) | (246) |
| Net cash<br>provided by operating activities | 2,109 | 1,347 |
| INVESTING | ||
| Capital<br>expenditures | (762) | (803) |
| Acquisitions,<br>net of cash acquired | (10) | (41) |
| Divestitures<br>and asset sales | 21 | 231 |
| Net cash<br>provided by (used for) investing activities | (751) | (613) |
| FINANCING | ||
| Debt increase<br>(decrease) - net | 681 | 3,112 |
| Issuances of<br>ordinary shares | 17 | 13 |
| Purchases of<br>ordinary shares | (868) | (1,828) |
| Cash dividends<br>- Linde plc shareholders | (553) | (511) |
| Noncontrolling<br>interest transactions and other | (247) | (27) |
| Net cash<br>provided by (used for) financing activities | (970) | 759 |
| Effect of<br>exchange rate changes on cash and cash<br>equivalents | (46) | (179) |
| Change in cash<br>and cash equivalents | 342 | 1,314 |
| Cash and cash<br>equivalents, beginning-of-period | 3,754 | 2,700 |
| Cash and cash<br>equivalents, end-of-period | $4,096 | $4,014 |
(a) Cost reduction programs and other charges was a net benefit of $8 million and a charge of $131 million for the quarters ended March 31, 2021 and 2020, respectively. Related cash outflows were $68 million and $91 million for the same respective periods.
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LINDE PLC AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)
| Quarter Ended March 31, | ||
|---|---|---|
| 2021 | 2020 | |
| SALES | ||
| Americas | $2,840 | $2,677 |
| EMEA | 1,799 | 1,633 |
| APAC | 1,436 | 1,336 |
| Engineering | 674 | 608 |
| Other | 494 | 485 |
| Total segment<br>sales | $7,243 | $6,739 |
| OPERATING PROFIT | ||
| Americas | $795 | $661 |
| EMEA | 451 | 355 |
| APAC | 351 | 281 |
| Engineering | 109 | 91 |
| Other | (18) | (36) |
| Segment<br>operating profit | $1,688 | $1,352 |
| Cost reduction<br>programs and other charges | 8 | (131) |
| Purchase<br>accounting impacts - Linde AG | (483) | (488) |
| Total<br>operating profit | $1,213 | $733 |
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LINDE PLC AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES AND RECONCILIATIONS
(Millions of dollars, except per share data)
(UNAUDITED)
The following Non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s operating performance and liquidity. Items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these Non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures.
| 2021 | 2020 | ||||
|---|---|---|---|---|---|
| Q1 | Q4 | Q3 | Q2 | Q1 | |
| Adjusted Operating Profit and Operating Margin | |||||
| Reported<br>operating profit | $1,213 | $1,029 | $969 | $591 | $733 |
| Add: Cost<br>reduction programs and other charges | (8) | 78 | 48 | 249 | 131 |
| Less: Net gain<br>on sale of businesses | - | - | - | - | - |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 483 | 506 | 498 | 477 | 488 |
| Total<br>adjustments | 475 | 584 | 546 | 726 | 619 |
| Adjusted<br>operating profit | $1,688 | $1,613 | $1,515 | $1,317 | $1,352 |
| Reported<br>percentage change | 65% | 20% | |||
| Adjusted<br>percentage change | 25% | 11% | |||
| Reported<br>sales | $7,243 | $7,272 | $6,855 | $6,377 | $6,739 |
| Reported<br>operating margin | 16.7% | 14.2% | 14.1% | 9.3% | 10.9% |
| Adjusted<br>operating margin | 23.3% | 22.2% | 22.1% | 20.7% | 20.1% |
| Adjusted Depreciation and amortization | |||||
| Reported<br>depreciation and amortization | $1,166 | $1,192 | $1,168 | $1,124 | $1,142 |
| Less: Purchase<br>accounting impacts - Linde AG (c) | (478) | (489) | (487) | (468) | (476) |
| Adjusted<br>depreciation and amortization | $688 | $703 | $681 | $656 | $666 |
| Adjusted Other Income (Expense) - net | |||||
| Reported Other<br>Income (Expense) - net | $4 | $(47) | $(29) | $- | $15 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | (5) | (17) | (11) | (9) | (12) |
| Adjusted Other<br>Income (Expense) - net | $9 | $(30) | $(18) | $9 | $27 |
| Adjusted Net Pension and OPEB Cost (Benefit), Excluding Service<br>Cost | |||||
| Reported net<br>pension and OPEB cost (benefit), excluding service<br>cost | $(49) | $(46) | $(41) | $(45) | $(45) |
| Add: Pension<br>settlement charges | - | - | (6) | - | - |
| Adjusted Net<br>Pension and OPEB cost (benefit), excluding service<br>costs | $(49) | $(46) | $(47) | $(45) | $(45) |
| Adjusted Interest Expense - Net | |||||
| Reported<br>interest expense - net | $20 | $35 | $38 | $18 | $24 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 18 | 18 | 23 | 22 | 22 |
| Less: Bond<br>Redemption | - | (16) | - | - | - |
| Total<br>adjustments | 18 | 2 | 23 | 22 | 22 |
| Adjusted<br>interest expense - net | $38 | $37 | $61 | $40 | $46 |
| Adjusted Income Taxes (a) | |||||
| Reported<br>income taxes | $268 | $253 | $265 | $164 | $165 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 118 | 107 | 75 | 95 | 122 |
| Add: Pension<br>settlement charges | - | - | 1 | - | - |
| Add: Cost<br>reduction programs and other charges | 20 | 20 | 12 | 62 | 36 |
| Less: Bond<br>Redemption | - | 4 | - | - | - |
| Total<br>adjustments | 138 | 131 | 88 | 157 | 158 |
| Adjusted<br>income taxes | $406 | $384 | $353 | $321 | $323 |
| Adjusted Effective Tax Rate (a) | |||||
| Reported<br>income before income taxes and equity<br>investments | $1,242 | $1,040 | $972 | $618 | $754 |
| Add: Pension<br>settlement charge | - | - | 6 | - | - |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 465 | 488 | 475 | 455 | 466 |
| Add: Cost<br>reduction programs and other charges | (8) | 78 | 48 | 249 | 131 |
| Less: Bond<br>Redemption | - | 16 | - | - | - |
| Total<br>adjustments | 457 | 582 | 529 | 704 | 597 |
| Adjusted<br>income before income taxes and equity<br>investments | $1,699 | $1,622 | $1,501 | $1,322 | $1,351 |
| Reported<br>Income taxes | $268 | $253 | $265 | $164 | $165 |
| Reported<br>effective tax rate | 21.6% | 24.3% | 27.3% | 26.5% | 21.9% |
| Adjusted<br>income taxes | $406 | $384 | $353 | $321 | $323 |
| Adjusted<br>effective tax rate | 23.9% | 23.7% | 23.5% | 24.3% | 23.9% |
| Income from Equity Investments | |||||
| Reported<br>income from equity investments | $43 | $16 | $23 | $29 | $17 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 19 | 15 | 14 | 14 | 14 |
| Adjusted<br>income from equity investments | $62 | $31 | $37 | $43 | $31 |
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Press release
LINDE PLC AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES AND RECONCILIATIONS
(Millions of dollars, except per share data)
(UNAUDITED)
| 2021 | 2020 | ||||
|---|---|---|---|---|---|
| Q1 | Q4 | Q3 | Q2 | Q1 | |
| Adjusted Noncontrolling Interests from Continuing<br>Operations | |||||
| Reported<br>noncontrolling interests from continuing<br>operations | $(38) | $(34) | $(31) | $(25) | $(35) |
| Add: Cost<br>reduction programs and other charges | - | (4) | - | - | - |
| Add: Purchase<br>accounting impacts - Linde AG (c) | (5) | (14) | (14) | (14) | (15) |
| Total<br>adjustments | (5) | (18) | (14) | (14) | (15) |
| Adjusted<br>noncontrolling interests from continuing<br>operations | $(43) | $(52) | $(45) | $(39) | $(50) |
| Adjusted Income from Continuing Operations (b) | |||||
| Reported<br>income from continuing operations | $979 | $769 | $699 | $458 | $571 |
| Add: Pension<br>settlement charge | - | - | 5 | - | - |
| Add: Cost<br>reduction programs and other charges | (28) | 54 | 36 | 187 | 95 |
| Less: Bond<br>redemption | - | 12 | - | - | - |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 361 | 382 | 400 | 360 | 343 |
| Total<br>adjustments | 333 | 448 | 441 | 547 | 438 |
| Adjusted<br>income from continuing operations | $1,312 | $1,217 | $1,140 | $1,005 | $1,009 |
| Adjusted Diluted EPS from Continuing Operations<br>(b) | |||||
| Reported<br>diluted EPS from continuing operations | $1.86 | $1.45 | $1.32 | $0.87 | $1.07 |
| Add: Pension<br>settlement charge | - | - | 0.01 | - | - |
| Add: Cost<br>reduction programs and other charges | (0.05) | 0.10 | 0.07 | 0.35 | 0.18 |
| Less: Bond<br>Redemption | - | 0.02 | - | - | - |
| Add: Purchase<br>accounting impacts - Linde AG | 0.68 | 0.73 | 0.75 | 0.68 | 0.64 |
| Total<br>adjustments | 0.63 | 0.85 | 0.83 | 1.03 | 0.82 |
| Adjusted<br>diluted EPS from continuing operations | $2.49 | $2.30 | $2.15 | $1.90 | $1.89 |
| Reported<br>percentage change | 74% | 54% | (1)% | (7)% | 35% |
| Adjusted<br>percentage change | 32% | 22% | 11% | 4% | 12% |
| Adjusted Diluted EPS from Continuing Operations Guidance<br>(d) | Second Quarter 2021 | Full Year 2021 | |||
| --- | --- | --- | --- | --- | |
| Low End | High End | Low End | High End | ||
| 2021 Adjusted<br>Guidance | $2.50 | $2.55 | $9.60 | $9.80 | |
| Adjusted<br>percentage changes versus 2020 adjusted diluted<br>EPS | 32% | 34% | 17% | 19% | |
| Add: Estimated<br>currency headwind/(tailwind) | (4)% | (4)% | (2)% | (2)% | |
| Adjusted<br>percentage change excluding currency | 28% | 30% | 15% | 17% | |
| Adjusted EBITDA and % of Sales | |||||
| --- | --- | --- | --- | --- | --- |
| Income from<br>continuing operations | $979 | $769 | $699 | $458 | $571 |
| Add:<br>Noncontrolling interests related to continuing<br>operations | 38 | 34 | 31 | 25 | 35 |
| Add: Net<br>pension and OPEB cost (benefit), excluding service<br>cost | (49) | (46) | (41) | (45) | (45) |
| Add: Interest<br>expense | 20 | 35 | 38 | 18 | 24 |
| Add: Income<br>taxes | 268 | 253 | 265 | 164 | 165 |
| Add:<br>Depreciation and amortization | 1,166 | 1,192 | 1,168 | 1,124 | 1,142 |
| EBITDA from<br>continuing operations | 2,422 | 2,237 | 2,160 | 1,744 | 1,892 |
| Add: Cost<br>reduction programs and other charges | (8) | 78 | 48 | 249 | 131 |
| Add: Purchase<br>accounting impacts - Linde AG | 24 | 32 | 25 | 23 | 26 |
| Total<br>adjustments | 16 | 110 | 73 | 272 | 157 |
| Adjusted<br>EBITDA from continuing operations | $2,438 | $2,347 | $2,233 | $2,016 | $2,049 |
| Reported<br>sales | $7,243 | $7,272 | $6,855 | $6,377 | $6,739 |
| % of<br>sales | |||||
| EBITDA from<br>continuing operations | 33.4% | 30.8% | 31.5% | 27.3% | 28.1% |
| Adjusted<br>EBITDA from continuing operations | 33.7% | 32.3% | 32.6% | 31.6% | 30.4% |
(a) The income tax expense (benefit) on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense (benefit) and included both current and deferred income tax amounts.
(b) Net of income taxes which are shown separately in “Adjusted Income Taxes and Effective Tax Rate”.
(c) The company believes that its non-GAAP measures excluding Purchase accounting impacts - Linde AG are useful to investors because: (i) the business combination was a merger of equals in an all-stock merger transaction, with no cash consideration, (ii) the company is managed on a geographic basis and the results of certain geographies are more heavily impacted by purchase accounting than others, causing results that are not comparable at the reportable segment level, therefore, the impacts of purchasing accounting adjustments to each segment vary and are not comparable within the company and when compared to other companies in similar regions, (iii) business management is evaluated and variable compensation is determined based on results excluding purchase accounting impacts, and; (iv) it is important to investors and analysts to understand the purchase accounting impacts to the financial statements.
A summary of each of the adjustments made for Purchase accounting impacts - Linde AG are as follows:
Adjusted Operating Profit and Margin: The purchase accounting adjustments for the periods presented relate primarily to depreciation and amortization related to the fair value step up of fixed assets and intangible assets (primarily customer related) acquired in the merger.
Adjusted Interest Expense - Net: Relates to the amortization of the fair value of debt acquired in the merger.
Adjusted Income Taxes and Effective Tax Rate: Relates to the current and deferred income tax impact on the adjustments discussed above. The income tax expense (benefit) on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense (benefit) and included both current and deferred income tax amounts.
Adjusted Income from Equity Investments: Represents the amortization of increased fair value on equity investments related to depreciable and amortizable assets.
Adjusted Noncontrolling Interests from Continuing Operations: Represents the noncontrolling interests’ ownership portion of the adjustments described above determined on an entity by entity basis.
(d) We are providing adjusted earnings per share ("EPS") guidance for 2021. This is a non-GAAP financial measure that represents diluted earnings per share from continuing operations (a GAAP measure) but excludes the impact of certain items that we believe are not representative of our underlying business performance, such as cost reduction and other charges, the impact of potential divestitures or other potentially significant items. Given the uncertainty of timing and magnitude of such items, we cannot provide a reconciliation of the differences between the non-GAAP adjusted EPS guidance and the corresponding GAAP EPS measure without unreasonable effort.
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LINDE PLC AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES AND RECONCILIATIONS
(Millions of dollars)
(UNAUDITED)
| 2021 | 2020 | 2019 | ||||||
|---|---|---|---|---|---|---|---|---|
| Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 |
Free Cash Flow (FCF) - Free cash flow is a measure used by investors, financial analysts and management to evaluate the ability of a company to pursue opportunities that enhance shareholder value. FCF equals cash flow from operations less capital expenditures.
| Operating Cash<br>Flow | $2,109 | $2,434 | $1,884 | $1,764 | $1,347 | $2,174 | $1,872 | $1,005 | $1,068 |
|---|---|---|---|---|---|---|---|---|---|
| Less: Capital<br>Expenditures | (762) | (1,027) | (787) | (783) | (803) | (1,015) | (959) | (865) | (843) |
| Free Cash Flow | $1,347 | $1,407 | $1,097 | $981 | $544 | $1,159 | $913 | $140 | $225 |
Net Debt - Net debt is a financial liquidity metric used by investors, financial analysts and management to evaluate the ability of a company to repay its debt and is calculated as total debt (excluding purchase accounting impacts) less liquid assets.
| Debt | $15,750 | $16,154 | $17,803 | $17,480 | $16,875 | $13,956 | $13,201 | $13,957 | $14,146 |
|---|---|---|---|---|---|---|---|---|---|
| Less: Cash and<br>cash equivalents | (4,096) | (3,754) | (5,199) | (4,941) | (4,014) | (2,700) | (2,120) | (2,686) | (5,791) |
| Net<br>debt | 11,654 | 12,400 | 12,604 | 12,539 | 12,861 | 11,256 | 11,081 | 11,271 | 8,355 |
| Less: Purchase<br>accounting impacts - Linde AG | (98) | (121) | (133) | (150) | (170) | (195) | (211) | (243) | (262) |
| Adjusted net<br>debt | $11,556 | $12,279 | $12,471 | $12,389 | $12,691 | $11,061 | $10,870 | $11,028 | $8,093 |
| Less: Net<br>assets held for sale | (4) | (3) | (2) | (2) | (115) | (123) | (223) | (272) | (1,629) |
| Adjusted net<br>debt less net assets held for sale | $11,552 | $12,276 | $12,469 | $12,387 | $12,576 | $10,938 | $10,647 | $10,756 | $6,464 |
After-tax Return on Capital and Adjusted After-tax Return on Capital (ROC) - After-tax return on capital is a measure used by investors, financial analysts and management to evaluate the return on net assets employed in the business. ROC measures the after-tax operating profit that the company was able to generate with the investments made by all parties in the business (debt, noncontrolling interests and Linde plc shareholders’ equity).
| Reported<br>income from continuing operations | $979 | $769 | $699 | $458 | $571 | $507 | $728 | $513 | $435 |
|---|---|---|---|---|---|---|---|---|---|
| Add:<br>noncontrolling interests from continuing<br>operations | 38 | 34 | 31 | 25 | 35 | 27 | 3 | 29 | 30 |
| Add: interest<br>expense - net | 20 | 35 | 38 | 18 | 24 | 8 | (3) | 10 | 23 |
| Less: tax<br>benefit on interest expense - net * | (5) | (9) | (10) | (5) | (6) | (2) | 1 | (3) | (6) |
| Reported NOPAT | $1,032 | $829 | $758 | $496 | $624 | $540 | $729 | $549 | $482 |
| Adjusted<br>income from continuing operations | $1,312 | $1,217 | $1,140 | $1,005 | $1,009 | $1,024 | $1,052 | $1,000 | $927 |
| Add: adjusted<br>noncontrolling interests from continuing<br>operations | 43 | 52 | 45 | 39 | 50 | 41 | 46 | 46 | 45 |
| Add: adjusted<br>interest expense - net | 38 | 37 | 61 | 40 | 46 | 30 | 19 | 35 | 50 |
| Less: tax<br>benefit on interest expense - net * | (10) | (9) | (15) | (10) | (12) | (7) | (5) | (9) | (13) |
| Adjusted NOPAT | $1,383 | $1,297 | $1,231 | $1,074 | $1,093 | $1,088 | $1,112 | $1,072 | $1,009 |
| 4-quarter<br>trailing reported NOPAT | $3,115 | $2,707 | $2,418 | $2,389 | $2,442 | $2,300 | |||
| --- | --- | --- | --- | --- | --- | --- | |||
| 4-quarter<br>trailing adjusted NOPAT | $4,985 | $4,695 | $4,486 | $4,367 | $4,365 | $4,281 | |||
| Equity and<br>redeemable noncontrolling interests: | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Redeemable<br>noncontrolling interests | $13 | $13 | $13 | $13 | $92 | $113 | $14 | $15 | $15 |
| Linde plc<br>shareholders' equity | 46,210 | 47,317 | 46,175 | 45,537 | 44,776 | 49,074 | 48,953 | 50,564 | 51,175 |
| Noncontrolling<br>interests | 1,410 | 2,252 | 2,404 | 2,387 | 2,375 | 2,448 | 2,341 | 2,315 | 5,457 |
| Total equity<br>and redeemable noncontrolling interests | $47,633 | $49,582 | $48,592 | $47,937 | $47,243 | $51,635 | $51,308 | $52,894 | $56,647 |
| Reported<br>capital | $59,283 | $61,979 | $61,194 | $60,474 | $59,989 | $62,768 | $62,166 | $63,893 | $63,373 |
| Total equity<br>and redeemable noncontrolling interests | $47,633 | $49,582 | $48,592 | $47,937 | $47,243 | $51,635 | $51,308 | $52,894 | $56,647 |
| Add: Adjusted<br>net debt less net assets held for sale | 11,552 | 12,276 | 12,469 | 12,387 | 12,576 | 10,938 | 10,647 | 10,756 | 6,464 |
| Less: Linde AG<br>Goodwill (a) | 24,256 | 24,256 | 24,256 | 24,256 | 24,256 | 24,256 | 24,197 | 24,197 | 24,197 |
| Less: Linde AG<br>Indefinite lived intangibles (a) | 1,868 | 1,868 | 1,868 | 1,868 | 1,868 | 1,868 | 1,868 | 1,868 | 1,868 |
| Adjusted<br>capital | $33,061 | $35,734 | $34,937 | $34,200 | $33,695 | $36,449 | $35,890 | $37,585 | $37,046 |
(a) Represent opening balance sheet purchase accounting impacts of non-amortizing assets related to the Linde AG merger.
| Ending capital<br>(see above) | $59,283 | $61,979 | $61,194 | $60,474 | $59,989 |
|---|---|---|---|---|---|
| 5-quarter<br>average ending capital | $60,584 | $61,281 | $61,318 | $61,858 | $62,438 |
| Ending<br>adjusted capital (see above) | $33,061 | $35,734 | $34,937 | $34,200 | $33,695 |
| 5-quarter<br>average ending adjusted capital | $34,325 | $35,003 | $35,034 | $35,564 | $36,133 |
| After-tax ROC (4 quarter reported NOPAT / 5-quarter average ending<br>capital) | 5.1% | 4.4% | 3.9% | 3.9% | 3.9% |
| Adjusted after-tax ROC (4 quarter trailing adjusted NOPAT /<br>5-quarter average ending adjusted capital) | 14.5% | 13.4% | 12.8% | 12.3% | 12.1% |
*
Tax benefit on interest expense - net is generally presented using the reported effective rate.
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