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 7, 2020
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))
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. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol(s) | Name of each exchange on which<br>registered |
|---|---|---|
| Ordinary shares (€0.001 nominal value per<br>share) | LIN | New York Stock Exchange |
ITEM 2.02 Results of Operations and Financial
Condition
On May 7, 2020, Linde plc issued a press release setting forth Linde plc’s results of operations for the quarter ended March 31, 2020. 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 7, 2020 |
EXHIBIT INDEX
Exhibit 99.1 Press release dated May 7, 2020
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 | ||
|---|---|---|
| Date:<br>Date: May 7, 2020 | By: | /s/<br>Kelcey E. Hoyt |
| Name: | Kelcey<br>E. Hoyt | |
| Title: | Principal<br>Accounting Officer |
lin_ex991
Exhibit 99.1
Press Release
Linde Reports First-Quarter 2020 Results
Financial Highlights
➢
Strong operating cash flow of $1.3 billion, up 26% versus prior year
➢
Robust balance sheet with ample liquidity for growth opportunities
➢
Operating profit of $0.7 billion, up 20% versus prior year; adjusted operating profit of $1.4 billion up 11%
➢
Operating profit margin up 210 bps, adjusted operating profit margin up 240 bps versus prior year
➢
EPS of $1.07 up 35% versus prior year, adjusted EPS of $1.89 up 12%
Guildford, UK, May 7, 2020 – Linde plc (NYSE: LIN; FWB: LIN) today reported first-quarter 2020 income from continuing operations of $571 million and diluted earnings per share of $1.07. Excluding Linde AG purchase accounting impacts and other charges, adjusted income from continuing operations was $1,009 million, up 9% versus prior year. Adjusted earnings per share were $1.89, 12% above prior year, or 15% higher when excluding negative currency translation effects.
Linde’s sales for the first quarter were $6,739 million, 1% above prior year, excluding negative currency translation and cost pass-through. Price improved 2% and was attained across all geographic segments, but was partially offset by volume decrease of approximately 1% due mainly to the impact of the COVID-19 pandemic.
First-quarter operating profit was $733 million. Adjusted operating profit of $1,352 million was 11% above prior year or 14% higher when excluding unfavorable currency translation effects.
First-quarter operating cash flow of $1,347 million increased $279 million or 26% over prior year. During the quarter, the company invested $803 million in capital expenditures and returned $2,326 million to shareholders through dividends of $511 million and stock repurchases, net of issuance, of $1,815 million.
Commenting on the financial results, Chief Executive Officer Steve Angel said, “Linde delivered another strong quarter with EPS increasing 15%, excluding currency translation. Furthermore, operating cash flow grew 26% and operating profit margin expanded 240 basis points from prior year.”
“Linde entered 2020 with a very robust balance sheet, $10 billion of contractually secured backlog and significant opportunities to enhance the portfolio and overall business quality – all of which will serve us well during these uncertain times. And, we continue to successfully navigate this crisis through the dedication and hard work of all Linde employees maintaining safe and reliable supply to our customers, including critical medical gases, services and equipment for those afflicted by COVID-19.”
Angel continued, “While it is very difficult to predict the future impact, I have full confidence in our ability to continue to create shareholder value given our resilient business model and inherent opportunities to mitigate macroeconomic headwinds.”
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Press Release
First-Quarter 2020 Results by Segment
Americas sales of $2,677 million were 1% below prior-year quarter and down 2% sequentially. Excluding negative currency translation and cost pass-through, sales versus prior year were up 4%. Price increased 2% and volume also grew 2% led mainly by the resilient healthcare and food & beverage end markets. Operating profit of $661 million was 24.7% of sales, up 310 basis points versus prior-year quarter.
APAC (Asia Pacific) sales of $1,336 million were 6% below prior year and decreased 5% sequentially. Excluding negative currency translation, sales versus prior year were down 3%. Price increased 2% but was more than offset by negative volumes driven by customer shutdowns due to the COVID-19 impact, primarily in China, and higher sale of equipment in the prior-year quarter. Operating profit of $281 million was 21.0% of sales, up $8 million and 190 basis points versus prior year.
EMEA (Europe, Middle East & Africa) sales of $1,633 million were down 3% versus prior year and negative 1% sequentially. Excluding unfavorable currency and cost pass-through, sales increased 1% versus prior year. Pricing was up 2% but was partially offset by negative volumes primarily due to weaker manufacturing activity. Operating profit of $355 million was 21.7% of sales, up 110 basis points versus prior-year quarter.
Linde Engineering sales were $608 million and operating profit was $91 million or 15% of sales. Operating profit grew 17% versus prior year due primarily to strong project execution and productivity initiatives.
A teleconference on Linde’s first-quarter 2020 results is being held today at 10:00 am EST. The U.S. Toll-Free Dial-In Number is 1 855 758 5442; the access code is 3688359. The call is also available as a live webcast and on-demand at www.linde.com/investors. 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 2019 sales of $28 billion (€25 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.
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
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.
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Press Release
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: that Linde plc may be unable to achieve expected synergies from the business combination of Praxair and Linde AG or that it may take longer or be more costly than expected to achieve those synergies; the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances, including trade 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 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, 2019 filed with the SEC on March 2, 2020 and in subsequent filings with the SEC, which should be reviewed carefully. Please consider Linde plc’s forward-looking statements in light of those risks.
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Press Release
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 | |||||
|---|---|---|---|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Quarter Ended March 31 | ||||||||
| Reported GAAP<br>Amounts | $6,739 | $6,944 | $733 | $609 | $571 | $435 | $1.07 | $0.79 |
| Cost reduction<br>program and other charges (a) | — | — | 131 | 89 | 95 | 70 | 0.18 | 0.13 |
| Pension<br>settlement charges (b) | — | — | — | — | — | 51 | — | 0.09 |
| Merger-related<br>divestitures (c) | — | (30) | — | (7) | — | (5) | — | (0.01) |
| Purchase<br>accounting impacts - Linde AG (d) | — | — | 488 | 531 | 343 | 376 | 0.64 | 0.69 |
| Total<br>adjustments | — | (30) | 619 | 613 | 438 | 492 | 0.82 | 0.90 |
| Adjusted<br>amounts | $6,739 | $6,914 | $1,352 | $1,222 | $1,009 | $927 | $1.89 | $1.69 |
(a) To adjust for cost reduction program and other charges.
(b) To adjust for pension settlement charges relates to the merger.
(c) To adjust for the results of Praxair's merger-related divestitures.
(d) To adjust for purchase accounting impacts related to the merger.
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Press Release
LINDE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars, except per share data)
(UNAUDITED)
| Quarter Ended | ||
|---|---|---|
| March 31, | ||
| 2020 | 2019 | |
| SALES | $6,739 | $6,944 |
| Cost of<br>sales | 3,843 | 4,116 |
| Selling,<br>general and administrative | 861 | 879 |
| Depreciation<br>and amortization | 1,142 | 1,223 |
| Research and<br>development | 44 | 46 |
| Cost reduction<br>programs and other charges | 131 | 89 |
| Other income<br>(expense) - net | 15 | 18 |
| OPERATING PROFIT | 733 | 609 |
| Interest<br>expense - net | 24 | 23 |
| Net pension<br>and OPEB cost (benefit), excluding service cost | (45) | 15 |
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY<br>INVESTMENTS | 754 | 571 |
| Income<br>taxes | 165 | 140 |
| INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY<br>INVESTMENTS | 589 | 431 |
| Income from<br>equity investments | 17 | 34 |
| INCOME FROM CONTINUING OPERATIONS (INCLUDING NONCONTROLLING<br>INTERESTS) | 606 | 465 |
| Add: income<br>from discontinued operations, net of tax | 2 | 89 |
| INCOME (INCLUDING NONCONTROLLING INTERESTS) | 608 | 554 |
| Less:<br>noncontrolling interests from continuing<br>operations | (35) | (30) |
| Less:<br>noncontrolling interests from discontinued<br>operations | — | (7) |
| NET INCOME - LINDE PLC | $573 | $517 |
| NET INCOME - LINDE PLC | ||
| Income from<br>continuing operations | $571 | $435 |
| Income from<br>discontinued operations | $2 | $82 |
| PER SHARE DATA - LINDE PLC SHAREHOLDERS | ||
| Basic earnings<br>per share from continuing operations | $1.07 | $0.80 |
| Basic earnings<br>per share from discontinued operations | — | 0.15 |
| Basic earnings<br>per share | $1.07 | $0.95 |
| Diluted<br>earnings per share from continuing operations | $1.07 | $0.79 |
| Diluted<br>earnings per share from discontinued operations | — | 0.15 |
| Diluted<br>earnings per share | $1.07 | $0.94 |
| Cash<br>dividends | $0.963 | $0.875 |
| WEIGHTED AVERAGE SHARES OUTSTANDING | ||
| Basic shares<br>outstanding (000's) | 531,215 | 545,554 |
| Diluted shares<br>outstanding (000's) | 534,956 | 549,147 |
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, | |
|---|---|---|
| 2020 | 2019 | |
| ASSETS | ||
| Cash and cash<br>equivalents | $4,014 | $2,700 |
| Accounts<br>receivable - net | 4,084 | 4,322 |
| Contract<br>assets | 311 | 368 |
| Inventories | 1,689 | 1,697 |
| Assets held<br>for sale | 160 | 125 |
| Prepaid and<br>other current assets | 1,255 | 1,140 |
| TOTAL CURRENT ASSETS | 11,513 | 10,352 |
| Property,<br>plant and equipment - net | 27,418 | 29,064 |
| Goodwill | 26,073 | 27,019 |
| Other<br>intangibles - net | 15,339 | 16,137 |
| Other<br>long-term assets | 4,026 | 4,040 |
| TOTAL ASSETS | $84,369 | $86,612 |
| LIABILITIES AND EQUITY | ||
| Accounts<br>payable | $2,965 | $3,266 |
| Short-term<br>debt | 4,848 | 1,732 |
| Current<br>portion of long-term debt | 2,006 | 1,531 |
| Contract<br>liabilities | 1,854 | 1,758 |
| Liabilities of<br>assets held for sale | 45 | 2 |
| Other current<br>liabilities | 3,772 | 3,871 |
| TOTAL CURRENT LIABILITIES | 15,490 | 12,160 |
| Long-term<br>debt | 10,021 | 10,693 |
| Other<br>long-term liabilities | 11,615 | 12,124 |
| TOTAL LIABILITIES | 37,126 | 34,977 |
| REDEEMABLE NONCONTROLLING INTERESTS | 92 | 113 |
| LINDE PLC SHAREHOLDERS' EQUITY: | ||
| Common<br>stock | 1 | 1 |
| Additional<br>paid-in capital | 40,185 | 40,201 |
| Retained<br>earnings | 16,850 | 16,842 |
| Accumulated<br>other comprehensive income (loss) | (7,388) | (4,814) |
| Less: Treasury<br>stock, at cost | (4,872) | (3,156) |
| Total Linde<br>plc shareholders' equity | 44,776 | 49,074 |
| Noncontrolling<br>interests | 2,375 | 2,448 |
| TOTAL EQUITY | 47,151 | 51,522 |
| TOTAL LIABILITIES AND EQUITY | $84,369 | $86,612 |
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LINDE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
| Quarter Ended | ||
|---|---|---|
| March 31, | ||
| 2020 | 2019 | |
| OPERATIONS | ||
| Net income -<br>Linde plc | $573 | $517 |
| Less: income<br>from discontinued operations, net of tax and noncontrolling<br>interests | (2) | (82) |
| Add:<br>noncontrolling interests | 35 | 30 |
| Net income<br>(including noncontrolling interests) | 606 | 465 |
| 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) | 40 | (167) |
| Depreciation<br>and amortization | 1,142 | 1,223 |
| Accounts<br>receivable | (109) | (56) |
| Contract<br>assets and liabilities, net | 176 | (84) |
| Inventory | (62) | (32) |
| Payables and<br>accruals | (183) | (31) |
| Pension<br>contributions | (17) | (18) |
| Deferred<br>income taxes and other | (246) | (232) |
| Net cash<br>provided by operating activities | 1,347 | 1,068 |
| INVESTING | ||
| Capital<br>expenditures | (803) | (843) |
| Acquisitions,<br>net of cash acquired | (41) | (152) |
| Divestitures<br>and asset sales | 231 | 3,455 |
| Net cash<br>provided by (used for) investing activities | (613) | 2,460 |
| FINANCING | ||
| Debt increase<br>(decrease) - net | 3,112 | (1,027) |
| Issuances of<br>ordinary shares | 13 | 28 |
| Purchases of<br>ordinary shares | (1,828) | (725) |
| Cash dividends<br>- Linde plc shareholders | (511) | (477) |
| Noncontrolling<br>interest transactions and other | (27) | (10) |
| Net cash<br>provided by (used for) financing activities | 759 | (2,211) |
| DISCONTINUED OPERATIONS | ||
| Cash provided<br>by operating activities | — | 63 |
| Cash provided<br>by investing activities | — | (58) |
| Cash provided<br>by financing activities | — | 5 |
| Net cash<br>provided by (used for) discontinued operations | — | 10 |
| Effect of<br>exchange rate changes on cash and cash<br>equivalents | (179) | 8 |
| Change in cash<br>and cash equivalents | 1,314 | 1,335 |
| Cash and cash<br>equivalents, beginning-of-period | 2,700 | 4,466 |
| Cash and cash<br>equivalents, including discontinued operations | 4,014 | 5,801 |
| Cash and cash<br>equivalents of discontinued operations | — | (10) |
| Cash and cash<br>equivalents, end-of-period | $4,014 | $5,791 |
(a) Cost reduction programs and other charges cash outflows were $91 million and $256 million for the quarters ended March 31, 2020 and 2019, respectively.
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LINDE PLC AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)
| Quarter Ended March 31, | ||
|---|---|---|
| 2020 | 2019 | |
| SALES | ||
| Americas | $2,677 | $2,702 |
| EMEA | 1,633 | 1,682 |
| APAC | 1,336 | 1,427 |
| Engineering | 608 | 636 |
| Other | 485 | 467 |
| Segment<br>sales | $6,739 | $6,914 |
| Merger-related<br>divestitures (a) | — | 30 |
| Total<br>sales | $6,739 | $6,944 |
| OPERATING PROFIT | ||
| Americas | $661 | $584 |
| EMEA | 355 | 347 |
| APAC | 281 | 273 |
| Engineering | 91 | 78 |
| Other | (36) | (60) |
| Segment<br>operating profit | $1,352 | $1,222 |
| Cost reduction<br>programs and other charges | (131) | (89) |
| Merger-related<br>divestitures (a) | — | 7 |
| Purchase<br>accounting impacts - Linde AG | (488) | (531) |
| Total<br>operating profit | $733 | $609 |
(a) To adjust for the results of Praxair's merger-related divestitures.
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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.
| 2020 | 2019 | ||||
|---|---|---|---|---|---|
| Q1 | Q4 | Q3 | Q2 | Q1 | |
| Adjusted Sales | |||||
| Reported<br>Sales | $6,739 | $7,080 | $7,000 | $7,204 | $6,944 |
| Less:<br>Merger-related divestitures (d) | — | (3) | (7) | (25) | (30) |
| Adjusted<br>Sales | $6,739 | $7,077 | $6,993 | $7,179 | $6,914 |
| Adjusted Operating Profit and Operating Margin | |||||
| Reported<br>operating profit | $733 | $655 | $1,000 | $669 | $609 |
| Less:<br>Merger-related divestitures (d) | — | (1) | (2) | (6) | (7) |
| Add: Cost<br>reduction programs and other charges | 131 | 212 | 125 | 141 | 89 |
| Less: Net gain<br>on sale of businesses | — | — | (164) | — | — |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 488 | 481 | 425 | 515 | 531 |
| Total<br>adjustments | 619 | 692 | 384 | 650 | 613 |
| Adjusted<br>operating profit | $1,352 | $1,347 | $1,384 | $1,319 | $1,222 |
| Reported<br>percentage change | 20% | ||||
| Adjusted<br>percentage change | 11% | ||||
| Reported<br>sales | $6,739 | $7,080 | $7,000 | $7,204 | $6,944 |
| Adjusted<br>sales | $6,739 | $7,077 | $6,993 | $7,179 | $6,914 |
| Reported<br>operating margin | 10.9% | 9.3% | 14.3% | 9.3% | 8.8% |
| Adjusted<br>operating margin | 20.1% | 19.0% | 19.8% | 18.4% | 17.7% |
| Adjusted Depreciation and amortization | |||||
| Reported<br>depreciation and amortization | $1,142 | $1,162 | $1,095 | $1,195 | $1,223 |
| Less: Purchase<br>accounting impacts - Linde AG (c) | (476) | (481) | (423) | (515) | (521) |
| Adjusted<br>depreciation and amortization | $666 | $681 | $672 | $680 | $702 |
| Adjusted Net Pension and OPEB Cost (Benefit), Excluding Service<br>Cost | |||||
| Reported net<br>pension and OPEB cost (benefit), excluding service<br>cost | $(45) | $(25) | $2 | $(24) | $15 |
| Add: Pension<br>settlement charges | — | (6) | (40) | (10) | (51) |
| Adjusted Net<br>Pension and OPEB cost (benefit), excluding service<br>costs | $(45) | $(31) | $(38) | $(34) | $(36) |
| Adjusted Interest Expense - Net | |||||
| Reported<br>interest expense - net | $24 | $8 | $(3) | $10 | $23 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 22 | 22 | 22 | 25 | 27 |
| Adjusted<br>interest expense - net | $46 | $30 | $19 | $35 | $50 |
| Adjusted Income Taxes (a) | |||||
| Reported<br>income taxes | $165 | $162 | $298 | $169 | $140 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 122 | 105 | 99 | 119 | 127 |
| Add: Cost<br>reduction programs and other charges | 36 | 54 | 1 | 28 | 19 |
| Less:<br>Merger-related divestitures (d) | — | — | (1) | (2) | (2) |
| Less: Net gain<br>on sale of businesses | — | — | (49) | — | — |
| Total<br>adjustments | 158 | 159 | 50 | 145 | 144 |
| Adjusted<br>income taxes | $323 | $321 | $348 | $314 | $284 |
| Adjusted Effective Tax Rate (a) | |||||
| Reported<br>income before income taxes and equity<br>investments | $754 | $672 | $1,001 | $683 | $571 |
| Less:<br>Merger-related divestitures (d) | — | (1) | (2) | (6) | (7) |
| Add: Pension<br>settlement charge | — | 6 | 40 | 10 | 51 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 466 | 459 | 403 | 490 | 504 |
| Add: Cost<br>reduction programs and other charges | 131 | 212 | 125 | 141 | 89 |
| Less: Net gain<br>on sale of businesses | — | — | (164) | — | — |
| Total<br>adjustments | 597 | 676 | 402 | 635 | 637 |
| Adjusted<br>income before income taxes and equity<br>investments | $1,351 | $1,348 | $1,403 | $1,318 | $1,208 |
| Reported<br>Income taxes | $165 | $162 | $298 | $169 | $140 |
| Reported<br>effective tax rate | 21.9% | 24.1% | 29.8% | 24.7% | 24.5% |
| Adjusted<br>income taxes | $323 | $321 | $348 | $314 | $284 |
| Adjusted<br>effective tax rate | 23.9% | 23.8% | 24.8% | 23.8% | 23.5% |
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LINDE PLC AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES AND RECONCILIATIONS
(Millions of dollars, except per share data)
(UNAUDITED)
| Income from Equity Investments | |||||
|---|---|---|---|---|---|
| Reported<br>income from equity investments | $17 | $24 | $28 | $28 | $34 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 14 | 14 | 15 | 14 | 14 |
| Adjusted<br>income from equity investments | $31 | $38 | $43 | $42 | $48 |
| Adjusted Noncontrolling Interests from Continuing<br>Operations | |||||
| Reported<br>noncontrolling interests from continuing<br>operations | $(35) | $(27) | $(3) | $(29) | $(30) |
| Add: Cost<br>reduction programs and other charges | — | — | (35) | — | — |
| Add: Purchase<br>accounting impacts - Linde AG (c) | (15) | (14) | (8) | (17) | (15) |
| Total<br>adjustments | (15) | (14) | (43) | (17) | (15) |
| Adjusted<br>noncontrolling interests from continuing<br>operations | $(50) | $(41) | $(46) | $(46) | $(45) |
| Adjusted Income from Continuing Operations (b) | |||||
| Reported<br>income from continuing operations | $571 | $507 | $728 | $513 | $435 |
| Add: Pension<br>settlement charge | — | 8 | 40 | — | 51 |
| Less:<br>Merger-related divestitures (d) | — | (1) | (2) | (4) | (5) |
| Add: Cost<br>reduction programs and other charges | 95 | 156 | 89 | 123 | 70 |
| Less: Net gain<br>on sale of business | — | — | (115) | — | — |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 343 | 354 | 312 | 368 | 376 |
| Total<br>adjustments | 438 | 517 | 324 | 487 | 492 |
| Adjusted<br>income from continuing operations | $1,009 | $1,024 | $1,052 | $1,000 | $927 |
| Adjusted Diluted EPS from Continuing Operations<br>(b) | |||||
| Reported<br>diluted EPS from continuing operations | $1.07 | $0.94 | $1.34 | $0.94 | $0.79 |
| Add: Pension<br>settlement charge | — | 0.01 | 0.07 | — | 0.09 |
| Add: Cost<br>reduction programs and other charges | 0.18 | 0.29 | 0.17 | 0.23 | 0.13 |
| Less:<br>Merger-related divestitures (d) | — | — | (0.01) | (0.01) | (0.01) |
| Less: Net gain<br>on sale of business | — | — | (0.21) | — | — |
| Add: Purchase<br>accounting impacts - Linde AG | 0.64 | 0.65 | 0.58 | 0.67 | 0.69 |
| Total<br>adjustments | 0.82 | 0.95 | 0.60 | 0.89 | 0.90 |
| Adjusted<br>diluted EPS from continuing operations | $1.89 | $1.89 | $1.94 | $1.83 | $1.69 |
| Adjusted EBITDA and % of Sales | |||||
| Income from<br>continuing operations | $571 | $507 | $728 | $513 | $435 |
| Add:<br>Noncontrolling interests related to continuing<br>operations | 35 | 27 | 3 | 29 | 30 |
| Add: Net<br>pension and OPEB cost (benefit), excluding service<br>cost | (45) | (25) | 2 | (24) | 15 |
| Add: Interest<br>expense | 24 | 8 | (3) | 10 | 23 |
| Add: Income<br>taxes | 165 | 162 | 298 | 169 | 140 |
| Add:<br>Depreciation and amortization | 1,142 | 1,162 | 1,095 | 1,195 | 1,223 |
| EBITDA from<br>continuing operations | 1,892 | 1,841 | 2,123 | 1,892 | 1,866 |
| Less:<br>Merger-related divestitures (d) | — | (1) | (2) | (6) | (7) |
| Less: Net gain<br>on sale of business | — | — | (164) | — | — |
| Add: Cost<br>reduction programs and other charges | 131 | 212 | 125 | 141 | 89 |
| Add: Purchase<br>accounting impacts - Linde AG | 26 | 14 | 17 | 14 | 24 |
| Total<br>adjustments | 157 | 225 | (24) | 149 | 106 |
| Adjusted<br>EBITDA from continuing operations | $2,049 | $2,066 | $2,099 | $2,041 | $1,972 |
| Reported<br>sales | $6,739 | $7,080 | $7,000 | $7,204 | $6,944 |
| Adjusted<br>sales | $6,739 | $7,077 | $6,993 | $7,179 | $6,914 |
| % of<br>sales | |||||
| EBITDA from<br>continuing operations | 28.1% | 26.0% | 30.3% | 26.3% | 26.9% |
| Adjusted<br>EBITDA from continuing operations | 30.4% | 29.2% | 30.0% | 28.4% | 28.5% |
(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) To adjust for the results of Praxair's merger-related divestitures.
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Press Release
LINDE PLC AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES AND RECONCILIATIONS
(Millions of dollars)
(UNAUDITED)
| 2020 | 2019 | 2018 | ||||
|---|---|---|---|---|---|---|
| Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | |
| Net Debt - Net debt is a financial liquidity metric used by<br>investors, financial analysts and management to evaluate the<br>ability of a company to repay its debt and is calculated as total<br>debt (excluding purchase accounting impacts) less liquid<br>assets. | ||||||
| --- | ||||||
| Debt | $16,875 | $13,956 | $13,201 | $13,957 | $14,146 | $15,296 |
| --- | --- | --- | --- | --- | --- | --- |
| Less: Cash and<br>cash equivalents | (4,014) | (2,700) | (2,120) | (2,686) | (5,791) | (4,466) |
| Net<br>debt | 12,861 | 11,256 | 11,081 | 11,271 | 8,355 | 10,830 |
| Less: Purchase<br>accounting impacts - Linde AG | (170) | (195) | (211) | (243) | (262) | (291) |
| Adjusted net<br>debt | $12,691 | $11,061 | $10,870 | $11,028 | $8,093 | $10,539 |
| Less: Net<br>assets held for sale | (115) | (123) | (223) | (272) | (1,629) | (4,730) |
| Adjusted net<br>debt less net assets held for sale | $12,576 | $10,938 | $10,647 | $10,756 | $6,464 | $5,809 |
| Equity and<br>redeemable noncontrolling interests: | ||||||
| Redeemable<br>noncontrolling interests | 92 | 113 | 14 | 15 | 15 | 16 |
| Linde plc<br>shareholders' equity | 44,776 | 49,074 | 48,953 | 50,564 | 51,175 | 51,596 |
| Noncontrolling<br>interests | 2,375 | 2,448 | 2,341 | 2,315 | 5,457 | 5,484 |
| Total equity<br>and redeemable noncontrolling interests | 47,243 | 51,635 | 51,308 | 52,894 | 56,647 | 57,096 |
| Reported<br>capital | 59,989 | 62,768 | 62,166 | 63,893 | 63,373 | 63,196 |
| Adjusted<br>capital | 59,819 | 62,573 | 61,955 | 63,650 | 63,111 | 62,905 |
| Less: Linde AG<br>Goodwill | 24,256 | 24,256 | 24,197 | 24,197 | 24,197 | 24,146 |
| Less: Linde AG<br>Indefinite lived intangibles | 1,868 | 1,868 | 1,868 | 1,868 | 1,868 | 1,648 |
| Adjusted<br>capital | $33,695 | $36,449 | $35,890 | $37,585 | $37,046 | $37,111 |
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 | $571 | 507 | $513 | $435 | $2,870 |
|---|---|---|---|---|---|
| Add:<br>noncontrolling interests from continuing<br>operations | 35 | 27 | 29 | 30 | (33) |
| Add: interest<br>expense - net | 24 | 8 | 10 | 23 | 72 |
| Less: tax<br>benefit on interest expense - net * | (6) | (2) | (3) | (6) | (18) |
| Reported NOPAT | $624 | 540 | $549 | $482 | $2,891 |
| Adjusted<br>income from continuing operations | $1,009 | 1,024 | $1,000 | $927 | $841 |
| Add: adjusted<br>noncontrolling interests from continuing<br>operations | 50 | 41 | 46 | 45 | 40 |
| Add: adjusted<br>interest expense - net | 46 | 30 | 35 | 50 | 50 |
| Less: tax<br>benefit on interest expense - net * | (12) | (7) | (9) | (13) | (13) |
| Adjusted NOPAT | $1,093 | 1,088 | $1,072 | $1,009 | $919 |
| 4-quarter<br>trailing reported NOPAT | $2,442 | 2,300 | |||
| 4-quarter<br>trailing adjusted NOPAT | $4,365 | 4,281 | |||
| Ending capital<br>(see above) | $59,989 | 62,768 | |||
| 5-quarter<br>average ending capital | $62,438 | 63,079 | |||
| Ending<br>adjusted capital (see above) | $33,695 | 36,449 | |||
| 5-quarter<br>average ending adjusted capital | $36,133 | 36,816 | |||
| After-tax ROC (4 quarter reported NOPAT / 5-quarter average ending<br>capital) | 3.9% | 3.6% | |||
| Adjusted after-tax ROC (4 quarter trailing adjusted NOPAT /<br>5-quarter average ending adjusted capital) | 12.1% | 11.6% |
All values are in US Dollars.
* Tax benefit on interest expense - net is generally presented using the reported effective rate.
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