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):
July 30, 2020
Linde
plc
(Exact name of registrant as specified in its charter)
| Ireland | 001-38730 | 98-1448883 |
|---|---|---|
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer 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<br>of each class | Trading<br>symbol(s) | Name of<br>each exchange on which 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 July 30, 2020, Linde plc issued a press release setting forth Linde plc’s results of operations for the quarter ended June 30, 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 July 30, 2020 |
EXHIBIT INDEX
Exhibit 99.1 Press release dated July 30, 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 | |
|---|---|
| By: | /s/ Kelcey E.<br>Hoyt |
| Name: | Kelcey<br>E. Hoyt |
| Title: | Principal<br>Accounting Officer |
Date: July 30, 2020
lin_ex991
Exhibit 99.1
Press release
Linde Reports Second-Quarter 2020 Results
Financial Highlights
➢ Strong operating cash flow of $1.8 billion, up 76% versus prior year
➢ Operating profit margin flat versus prior year; adjusted operating profit margin up 230 basis points
➢ EPS of $0.87, down 7% versus prior year; adjusted EPS of $1.90, up 4%
➢ Full-year 2020 adjusted EPS guidance of $7.60 - $7.80, up 7% to 9% year-over-year, ex-FX*
Guildford, UK, July 30, 2020 – Linde plc (NYSE: LIN; FWB: LIN) today reported second-quarter 2020 income from continuing operations of $458 million and diluted earnings per share of $0.87. Excluding Linde AG purchase accounting impacts and other charges, adjusted income from continuing operations was $1,005 million, up 1% versus prior year and flat sequentially. Adjusted earnings per share were $1.90, 4% above prior year, or 8% higher when excluding negative currency translation effects. Sequentially, adjusted earnings per share increased 1%, or 3% when excluding negative currency translation effects.
Linde’s sales for the second quarter were $6,377 million, 5% below prior year excluding negative currency translation, cost pass-through and divestitures. Price improved 2% and was attained across all geographic segments. Volume decreased 7% as growth from project start-ups and engineering was more than offset by the global macroeconomic slowdown as a result of the COVID-19 pandemic.
Second-quarter operating profit was $591 million. Adjusted operating profit of $1,317 million was flat versus prior year, or 4% higher, when excluding unfavorable currency translation effects. Adjusted operating margin of 20.7% expanded 230 basis points versus prior year primarily due to price and cost actions underpinned by stable fixed payment revenues.
Second-quarter operating cash flow of $1,764 million increased $759 million or 76% over prior year primarily driven by higher cash earnings, lower merger-related cost and improved working capital. During the quarter, the company invested $783 million in capital expenditures and returned $506 million to shareholders through dividends.
Commenting on the financial results, Chief Executive Officer Steve Angel said, “I’m proud of how the Linde team came together to safely and reliably serve our customers and deliver high-quality financial results. Despite volume reductions from the pandemic, EPS excluding currency increased 8%, operating margin expanded 230 basis points and operating cash flow grew 76% from prior-year levels. These results demonstrate the resiliency of our integrated industrial gas supply model.”
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Press release
Angel continued, “Looking ahead, the full effects of COVID-19 and the rate of recovery are uncertain. However, the growth opportunities for Linde remain strong from our high-quality project backlog, defensive end markets and leading infrastructure and technology in support of the secular trend in clean energy. Our resilient business model combined with our ability to continuously optimize business performance, while capitalizing on short and long-term growth opportunities, gives me the confidence that Linde can grow earnings in any environment.”
For the third quarter of 2020, Linde expects adjusted diluted earnings per share in the range of $1.90 to $1.95. This guidance assumes a negative currency impact of approximately 3% versus the prior-year quarter based on projected exchange rates.
For the full year, the company expects adjusted diluted earnings per share to be in the range of $7.60 to $7.80, up 4% to 6% versus prior year, or 7% to 9% excluding currency headwinds. Full-year capital expenditures are expected to between $3.0 billion to $3.4 billion to support maintenance and growth requirements including the $3.6 billion contractual sale of gas project backlog.
Second-Quarter 2020 Results by Segment
Americas sales of $2,417 million were 13% below prior-year quarter as 2% higher pricing was more than offset by 9% volume decline led mainly by manufacturing and metals end markets. Furthermore, currency was unfavorable by 4% and cost pass-through was down 1%. Operating profit of $622 million was 25.7% of sales, up 250 basis points versus prior year.
APAC (Asia Pacific) sales of $1,295 million were 13% below prior year. Price increased 1% versus prior year but was more than offset by negative 9% volumes driven by lower demand in the manufacturing end market and a prior-year sale of equipment. Additionally, currency was unfavorable by 4% and cost pass-through was down 1%. Operating profit of $294 million was 22.7% of sales, up 230 basis points versus prior year.
EMEA (Europe, Middle East & Africa) sales of $1,448 million were down 13% versus prior year as 1% higher pricing was more than offset by negative 7% volumes primarily due to lower demand in the manufacturing and metals end market. Currency was unfavorable by 5% and cost pass through was down 1%. Operating profit of $303 million was 20.9% of sales, up 110 basis points versus prior year.
Linde Engineering sales were $810 million and operating profit was $138 million or 17% of sales. Operating profit grew 39% versus prior year due primarily to strong project execution and productivity initiatives.
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Press release
Earnings Call
A teleconference on Linde’s second-quarter 2020 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: 5368349 |
|---|---|
| Live webcast (listen-only) & on-demand | 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 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.
*Note: We are providing adjusted earnings per share (“EPS”) guidance for 2020. 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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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: 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, 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, 2019 filed with the SEC on March 2, 2020 and in Item 1A. of Linde plc's Form 10-Q for the period ending March 31, 2020 filed with the SEC on May 7, 2020, 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 10 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 June 30 | ||||||||
| Reported<br>GAAP Amounts | $6,377 | $7,204 | $591 | $669 | $458 | $513 | $0.87 | $0.94 |
| Cost<br>reduction program and other charges (a) | - | - | 249 | 141 | 187 | 115 | 0.35 | 0.22 |
| Pension<br>settlement charges (b) | - | - | - | - | - | 8 | - | 0.01 |
| Merger-related<br>divestitures (c) | - | (25) | - | (6) | - | (4) | - | (0.01) |
| Purchase<br>accounting impacts - Linde AG (d) | - | - | 477 | 515 | 360 | 368 | 0.68 | 0.67 |
| Total<br>adjustments | - | (25) | 726 | 650 | 547 | 487 | 1.03 | 0.89 |
| Adjusted<br>amounts | $6,377 | $7,179 | $1,317 | $1,319 | $1,005 | $1,000 | $1.90 | $1.83 |
| Sales | Operating Profit | Income from Continuing Operations | Diluted EPS from Continuing Operations | |||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |
| Year to Date June 30 | ||||||||
| Reported<br>GAAP Amounts | $13,116 | $14,148 | $1,324 | $1,278 | $1,029 | $948 | $1.93 | $1.73 |
| Cost<br>reduction program and other charges (a) | - | - | 380 | 230 | 282 | 198 | 0.53 | 0.37 |
| Pension<br>settlement charges (b) | - | - | - | - | - | 46 | - | 0.08 |
| Merger-related<br>divestitures (c) | - | (55) | - | (13) | - | (9) | - | (0.02) |
| Purchase<br>accounting impacts - Linde AG (d) | - | - | 965 | 1,046 | 703 | 744 | 1.32 | 1.36 |
| Total<br>adjustments | - | (55) | 1,345 | 1,263 | 985 | 979 | 1.85 | 1.79 |
| Adjusted<br>amounts | $13,116 | $14,093 | $2,669 | $2,541 | $2,014 | $1,927 | $3.78 | $3.52 |
(a) To adjust for cost reduction program and other charges; 2020 includes severance of $192 million and $250 million for the quarter and year-to-date periods, other cost reduction charges of $21 million and $41 million for the quarter and year-to-date periods, and other charges of $36 million and $89 million for the quarter and year-to-date periods.
(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 | Year To Date | |||
|---|---|---|---|---|
| June 30, | June 30, | |||
| 2020 | 2019 | 2020 | 2019 | |
| SALES | $6,377 | $7,204 | $13,116 | $14,148 |
| Cost<br>of sales | 3,619 | 4,280 | 7,462 | 8,396 |
| Selling,<br>general and administrative | 760 | 884 | 1,621 | 1,763 |
| Depreciation<br>and amortization | 1,124 | 1,195 | 2,266 | 2,418 |
| Research<br>and development | 34 | 45 | 78 | 91 |
| Cost<br>reduction programs and other charges | 249 | 141 | 380 | 230 |
| Other<br>income (expense) - net | - | 10 | 15 | 28 |
| OPERATING PROFIT | 591 | 669 | 1,324 | 1,278 |
| Interest<br>expense - net | 18 | 10 | 42 | 33 |
| Net<br>pension and OPEB cost (benefit), excluding service<br>cost | (45) | (24) | (90) | (9) |
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY<br>INVESTMENTS | 618 | 683 | 1,372 | 1,254 |
| Income<br>taxes | 164 | 169 | 329 | 309 |
| INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY<br>INVESTMENTS | 454 | 514 | 1,043 | 945 |
| Income<br>from equity investments | 29 | 28 | 46 | 62 |
| INCOME FROM CONTINUING OPERATIONS (INCLUDING NONCONTROLLING<br>INTERESTS) | 483 | 542 | 1,089 | 1,007 |
| Add:<br>income from discontinued operations, net of tax | - | 9 | 2 | 98 |
| INCOME (INCLUDING NONCONTROLLING INTERESTS) | 483 | 551 | 1,091 | 1,105 |
| Less:<br>noncontrolling interests from continuing operations | (25) | (29) | (60) | (59) |
| Less:<br>noncontrolling interests from discontinued operations | - | - | - | (7) |
| NET INCOME - LINDE PLC | $458 | $522 | $1,031 | $1,039 |
| NET INCOME - LINDE PLC | ||||
| Income<br>from continuing operations | $458 | $513 | $1,029 | $948 |
| Income<br>from discontinued operations | $- | $9 | $2 | $91 |
| PER SHARE DATA - LINDE PLC SHAREHOLDERS | ||||
| Basic<br>earnings per share from continuing operations | $0.87 | $0.95 | $1.95 | $1.74 |
| Basic<br>earnings per share from discontinued operations | - | 0.02 | - | 0.17 |
| Basic<br>earnings per share | $0.87 | $0.97 | $1.95 | $1.91 |
| Diluted<br>earnings per share from continuing operations | 0.87 | 0.94 | 1.93 | 1.73 |
| Diluted<br>earnings per share from discontinued operations | - | 0.02 | - | 0.17 |
| Diluted<br>earnings per share | $0.87 | $0.96 | $1.93 | $1.90 |
| Cash<br>dividends | $0.963 | $0.875 | $1.926 | $1.75 |
| WEIGHTED AVERAGE SHARES OUTSTANDING | ||||
| Basic<br>shares outstanding (000's) | 525,510 | 542,561 | 528,385 | 544,033 |
| Diluted<br>shares outstanding (000's) | 529,054 | 546,488 | 532,112 | 547,771 |
Note: See page 10 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)
| June 30, | December 31, | |
|---|---|---|
| 2020 | 2019 | |
| ASSETS | ||
| Cash<br>and cash equivalents | $4,941 | $2,700 |
| Accounts<br>receivable - net | 3,994 | 4,322 |
| Contract<br>assets | 226 | 368 |
| Inventories | 1,715 | 1,697 |
| Assets<br>held for sale | 3 | 125 |
| Prepaid<br>and other current assets | 1,194 | 1,140 |
| TOTAL CURRENT ASSETS | 12,073 | 10,352 |
| Property,<br>plant and equipment - net | 27,693 | 29,064 |
| Goodwill | 26,580 | 27,019 |
| Other<br>intangibles - net | 15,504 | 16,137 |
| Other<br>long-term assets | 4,006 | 4,040 |
| TOTAL ASSETS | $85,856 | $86,612 |
| LIABILITIES AND EQUITY | ||
| Accounts<br>payable | $2,816 | $3,266 |
| Short-term<br>debt | 3,679 | 1,732 |
| Current<br>portion of long-term debt | 2,723 | 1,531 |
| Contract<br>liabilities | 1,693 | 1,758 |
| Liabilities<br>of assets held for sale | 1 | 2 |
| Other<br>current liabilities | 4,183 | 3,871 |
| TOTAL CURRENT LIABILITIES | 15,095 | 12,160 |
| Long-term<br>debt | 11,078 | 10,693 |
| Other<br>long-term liabilities | 11,746 | 12,124 |
| TOTAL LIABILITIES | 37,919 | 34,977 |
| REDEEMABLE NONCONTROLLING INTERESTS | 13 | 113 |
| LINDE PLC SHAREHOLDERS' EQUITY: | ||
| Common<br>stock | 1 | 1 |
| Additional<br>paid-in capital | 40,211 | 40,201 |
| Retained<br>earnings | 16,782 | 16,842 |
| Accumulated<br>other comprehensive income (loss) | (6,621) | (4,814) |
| Less:<br>Treasury stock, at cost | (4,836) | (3,156) |
| Total<br>Linde plc shareholders' equity | 45,537 | 49,074 |
| Noncontrolling<br>interests | 2,387 | 2,448 |
| TOTAL EQUITY | 47,924 | 51,522 |
| TOTAL LIABILITIES AND EQUITY | $85,856 | $86,612 |
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LINDE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
| Quarter Ended | Year to Date | |||
|---|---|---|---|---|
| June 30, | June 30, | |||
| 2020 | 2019 | 2020 | 2019 | |
| OPERATIONS | ||||
| Net<br>income - Linde plc | $458 | $522 | $1,031 | $1,039 |
| Less:<br>income from discontinued operations, net of tax and noncontrolling<br>interests | - | (9) | (2) | (91) |
| Add:<br>noncontrolling interests | 25 | 29 | 60 | 59 |
| Net<br>income (including noncontrolling interests) | 483 | 542 | 1,089 | 1,007 |
| Adjustments<br>to reconcile net income to net cash provided by operating<br>activities: | ||||
| Cost<br>reduction programs and other charges, net of payments<br>(a) | 199 | (119) | 239 | (286) |
| Depreciation<br>and amortization | 1,124 | 1,195 | 2,266 | 2,418 |
| Accounts<br>receivable | (9) | (132) | (118) | (188) |
| Contract<br>assets and liabilities, net | (105) | (19) | 71 | (103) |
| Inventory | (20) | (41) | (82) | (73) |
| Payables<br>and accruals | 156 | (216) | (27) | (247) |
| Pension<br>contributions | (24) | (25) | (41) | (43) |
| Deferred<br>income taxes and other | (40) | (180) | (286) | (412) |
| Net<br>cash provided by operating activities | 1,764 | 1,005 | 3,111 | 2,073 |
| INVESTING | ||||
| Capital<br>expenditures | (783) | (865) | (1,586) | (1,708) |
| Acquisitions,<br>net of cash acquired | - | 12 | (41) | (140) |
| Divestitures<br>and asset sales | 149 | 1,234 | 380 | 4,689 |
| Net<br>cash provided by (used for) investing activities | (634) | 381 | (1,247) | 2,841 |
| FINANCING | ||||
| Debt<br>increase (decrease) - net | 411 | (250) | 3,523 | (1,277) |
| Issuances<br>of ordinary shares | 12 | 27 | 25 | 55 |
| Purchases<br>of ordinary shares | - | (525) | (1,828) | (1,250) |
| Cash<br>dividends - Linde plc shareholders | (506) | (474) | (1,017) | (951) |
| Noncontrolling<br>interest transactions and other | (121) | (3,212) | (148) | (3,222) |
| Net<br>cash provided by (used for) financing activities | (204) | (4,434) | 555 | (6,645) |
| DISCONTINUED OPERATIONS | ||||
| Cash<br>provided by operating activities | - | 7 | - | 70 |
| Cash<br>provided by investing activities | - | (1) | - | (59) |
| Cash<br>provided by financing activities | - | - | - | 5 |
| Net<br>cash provided by (used for) discontinued operations | - | 6 | - | 16 |
| Effect<br>of exchange rate changes on cash and cash equivalents | 1 | (57) | (178) | (49) |
| Change<br>in cash and cash equivalents | 927 | (3,099) | 2,241 | (1,764) |
| Cash<br>and cash equivalents, beginning-of-period | 4,014 | 5,791 | 2,700 | 4,466 |
| Cash<br>and cash equivalents, including discontinued<br>operations | 4,941 | 2,692 | 4,941 | 2,702 |
| Cash<br>and cash equivalents of discontinued operations | - | (6) | - | (16) |
| Cash<br>and cash equivalents, end-of-period | $4,941 | $2,686 | $4,941 | $2,686 |
(a) Cost reduction programs and other charges cash outflows were $50 million and $260 million for the quarters ended June 30, 2020 and 2019, respectively, and $141 million and $516 million for the six months ended June 30, 2020 and 2019, respectively.
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LINDE PLC AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)
| Quarter Ended June 30, | Year to Date June 30, | |||
|---|---|---|---|---|
| 2020 | 2019 | 2020 | 2019 | |
| SALES | ||||
| Americas | $2,417 | $2,779 | $5,094 | $5,481 |
| EMEA | 1,448 | 1,673 | 3,081 | 3,355 |
| APAC | 1,295 | 1,488 | 2,631 | 2,915 |
| Engineering | 810 | 752 | 1,418 | 1,388 |
| Other | 407 | 487 | 892 | 954 |
| Segment<br>sales | $6,377 | $7,179 | $13,116 | $14,093 |
| Merger-related<br>divestitures (a) | - | 25 | - | 55 |
| Total<br>sales | $6,377 | $7,204 | $13,116 | $14,148 |
| OPERATING PROFIT | ||||
| Americas | $622 | $646 | $1,283 | $1,230 |
| EMEA | 303 | 332 | 658 | 679 |
| APAC | 294 | 304 | 575 | 577 |
| Engineering | 138 | 99 | 229 | 177 |
| Other | (40) | (62) | (76) | (122) |
| Segment<br>operating profit | $1,317 | $1,319 | $2,669 | $2,541 |
| Cost<br>reduction programs and other charges | (249) | (141) | (380) | (230) |
| Merger-related<br>divestitures (a) | - | 6 | - | 13 |
| Purchase<br>accounting impacts - Linde AG | (477) | (515) | (965) | (1,046) |
| Total<br>operating profit | $591 | $669 | $1,324 | $1,278 |
(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 | |||||||
|---|---|---|---|---|---|---|---|---|
| Year to Date<br><br><br>June 30, | Q2 | Q1 | Year to Date<br><br><br>June 30, | Q4 | Q3 | Q2 | Q1 | |
| Adjusted Sales | ||||||||
| Reported<br>Sales | $13,116 | $6,377 | $6,739 | $14,148 | $7,080 | $7,000 | $7,204 | $6,944 |
| Less:<br>Merger-related divestitures (d) | - | - | - | (55) | (3) | (7) | (25) | (30) |
| Adjusted<br>Sales | $13,116 | $6,377 | $6,739 | $14,093 | $7,077 | $6,993 | $7,179 | $6,914 |
| Adjusted Operating Profit and Operating Margin | ||||||||
| Reported<br>operating profit | $1,324 | $591 | $733 | $1,278 | $655 | $1,000 | $669 | $609 |
| Less:<br>Merger-related divestitures (d) | - | - | - | (13) | (1) | (2) | (6) | (7) |
| Add: Cost<br>reduction programs and other charges | 380 | 249 | 131 | 230 | 212 | 125 | 141 | 89 |
| Less: Net gain<br>on sale of businesses | - | - | - | - | - | (164) | - | - |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 965 | 477 | 488 | 1,046 | 481 | 425 | 515 | 531 |
| Total<br>adjustments | 1,345 | 726 | 619 | 1,263 | 692 | 384 | 650 | 613 |
| Adjusted<br>operating profit | $2,669 | $1,317 | $1,352 | $2,541 | $1,347 | $1,384 | $1,319 | $1,222 |
| Reported<br>percentage change | 4% | (12)% | 20% | |||||
| Adjusted<br>percentage change | 5% | (0)% | 11% | |||||
| Reported<br>sales | $13,116 | $6,377 | $6,739 | $14,148 | $7,080 | $7,000 | $7,204 | $6,944 |
| Adjusted<br>sales | $13,116 | $6,377 | $6,739 | $14,093 | $7,077 | $6,993 | $7,179 | $6,914 |
| Reported<br>operating margin | 10.1% | 9.3% | 10.9% | 9.0% | 9.3% | 14.3% | 9.3% | 8.8% |
| Adjusted<br>operating margin | 20.3% | 20.7% | 20.1% | 18.0% | 19.0% | 19.8% | 18.4% | 17.7% |
| Adjusted Depreciation and amortization | ||||||||
| Reported<br>depreciation and amortization | $2,266 | $1,124 | $1,142 | $2,418 | $1,162 | $1,095 | $1,195 | $1,223 |
| Less: Purchase<br>accounting impacts - Linde AG (c) | (944) | (468) | (476) | (1,036) | (481) | (423) | (515) | (521) |
| Adjusted<br>depreciation and amortization | $1,322 | $656 | $666 | $1,382 | $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 | $(90) | $(45) | $(45) | $(9) | $(25) | $2 | $(24) | $15 |
| Add: Pension<br>settlement charges | - | - | - | (61) | (6) | (40) | (10) | (51) |
| Adjusted Net<br>Pension and OPEB cost (benefit), excluding service<br>costs | $(90) | $(45) | $(45) | $(70) | $(31) | $(38) | $(34) | $(36) |
| Adjusted Interest Expense - Net | ||||||||
| Reported<br>interest expense - net | $42 | $18 | $24 | $33 | $8 | $(3) | $10 | $23 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 44 | 22 | 22 | 52 | 22 | 22 | 25 | 27 |
| Adjusted<br>interest expense - net | $86 | $40 | $46 | $85 | $30 | $19 | $35 | $50 |
| Adjusted Income Taxes (a) | ||||||||
| Reported<br>income taxes | $329 | $164 | $165 | $309 | $162 | $298 | $169 | $140 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 217 | 95 | 122 | 246 | 105 | 99 | 119 | 127 |
| Add: Pension<br>settlement charges | - | - | - | 15 | 1 | 10 | 2 | 13 |
| Add: Cost<br>reduction programs and other charges | 98 | 62 | 36 | 32 | 53 | (2) | 26 | 6 |
| Less:<br>Merger-related divestitures (d) | - | - | - | (4) | - | (1) | (2) | (2) |
| Less: Net gain<br>on sale of businesses | - | - | - | - | - | (56) | - | - |
| Total<br>adjustments | 315 | 157 | 158 | 289 | 159 | 50 | 145 | 144 |
| Adjusted<br>income taxes | $644 | $321 | $323 | $598 | $321 | $348 | $314 | $284 |
| Adjusted Effective Tax Rate (a) | ||||||||
| Reported<br>income before income taxes and equity<br>investments | $1,372 | $618 | $754 | $1,254 | $672 | $1,001 | $683 | $571 |
| Less:<br>Merger-related divestitures (d) | - | - | - | (13) | (1) | (2) | (6) | (7) |
| Add: Pension<br>settlement charge | - | - | - | 61 | 6 | 40 | 10 | 51 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 921 | 455 | 466 | 994 | 459 | 403 | 490 | 504 |
| Add: Cost<br>reduction programs and other charges | 380 | 249 | 131 | 230 | 212 | 125 | 141 | 89 |
| Less: Net gain<br>on sale of businesses | - | - | - | - | - | (164) | - | - |
| Total<br>adjustments | 1,301 | 704 | 597 | 1,272 | 676 | 402 | 635 | 637 |
| Adjusted<br>income before income taxes and equity<br>investments | $2,673 | $1,322 | $1,351 | $2,526 | $1,348 | $1,403 | $1,318 | $1,208 |
| Reported<br>Income taxes | $329 | $164 | $165 | $309 | $162 | $298 | $169 | $140 |
| Reported<br>effective tax rate | 24.0% | 26.5% | 21.9% | 24.6% | 24.1% | 29.8% | 24.7% | 24.5% |
| Adjusted<br>income taxes | $644 | $321 | $323 | $598 | $321 | $348 | $314 | $284 |
| Adjusted<br>effective tax rate | 24.1% | 24.3% | 23.9% | 23.7% | 23.8% | 24.8% | 23.8% | 23.5% |
| Income from Equity Investments | ||||||||
| Reported<br>income from equity investments | $46 | $29 | $17 | $62 | $24 | $28 | $28 | $34 |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 28 | 14 | 14 | 28 | 14 | 15 | 14 | 14 |
| Adjusted<br>income from equity investments | $74 | $43 | $31 | $90 | $38 | $43 | $42 | $48 |
| Adjusted Noncontrolling Interests from Continuing<br>Operations | ||||||||
| Reported<br>noncontrolling interests from continuing<br>operations | $(60) | $(25) | $(35) | $(59) | $(27) | $(3) | $(29) | $(30) |
| Add: Cost<br>reduction programs and other charges | - | - | - | - | - | (35) | - | - |
| Add: Purchase<br>accounting impacts - Linde AG (c) | (29) | (14) | (15) | (32) | (14) | (8) | (17) | (15) |
| Total<br>adjustments | (29) | (14) | (15) | (32) | (14) | (43) | (17) | (15) |
| Adjusted<br>noncontrolling interests from continuing<br>operations | $(89) | $(39) | $(50) | $(91) | $(41) | $(46) | $(46) | $(45) |
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| LINDE PLC AND SUBSIDIARIES | ||||||||
|---|---|---|---|---|---|---|---|---|
| APPENDIX | ||||||||
| NON-GAAP MEASURES AND RECONCILIATIONS | ||||||||
| (Millions of dollars, except per share data) | ||||||||
| (UNAUDITED) | ||||||||
| Adjusted Income from Continuing Operations (b) | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reported<br>income from continuing operations | $1,029 | $458 | $571 | $948 | $507 | $728 | $513 | $435 |
| Add: Pension<br>settlement charge | - | - | - | 46 | 5 | 30 | 8 | 38 |
| Less:<br>Merger-related divestitures (d) | - | - | - | (9) | (1) | (2) | (4) | (5) |
| Add: Cost<br>reduction programs and other charges | 282 | 187 | 95 | 198 | 159 | 92 | 115 | 83 |
| Less: Net gain<br>on sale of business | - | - | - | - | - | (108) | - | - |
| Add: Purchase<br>accounting impacts - Linde AG (c) | 703 | 360 | 343 | 744 | 354 | 312 | 368 | 376 |
| Total<br>adjustments | 985 | 547 | 438 | 979 | 517 | 324 | 487 | 492 |
| Adjusted<br>income from continuing operations | $2,014 | $1,005 | $1,009 | $1,927 | $1,024 | $1,052 | $1,000 | $927 |
| Adjusted Diluted EPS from Continuing Operations<br>(b) | ||||||||
| Reported<br>diluted EPS from continuing operations | $1.93 | $0.87 | $1.07 | $1.73 | $0.94 | $1.34 | $0.94 | $0.79 |
| Add: Pension<br>settlement charge | - | - | - | 0.08 | 0.01 | 0.07 | 0.01 | 0.07 |
| Add: Cost<br>reduction programs and other charges | 0.53 | 0.35 | 0.18 | 0.37 | 0.29 | 0.17 | 0.22 | 0.15 |
| Less:<br>Merger-related divestitures (d) | - | - | - | (0.02) | - | (0.01) | (0.01) | (0.01) |
| Less: Net gain<br>on sale of business | - | - | - | - | - | (0.21) | - | - |
| Add: Purchase<br>accounting impacts - Linde AG | 1.32 | 0.68 | 0.64 | 1.36 | 0.65 | 0.58 | 0.67 | 0.69 |
| Total<br>adjustments | 1.85 | 1.03 | 0.82 | 1.79 | 0.95 | 0.60 | 0.89 | 0.90 |
| Adjusted<br>diluted EPS from continuing operations | $3.78 | $1.90 | $1.89 | $3.52 | $1.89 | $1.94 | $1.83 | $1.69 |
| Reported<br>percentage change | 12% | (8)% | 35% | $7.34 | Full Year 2019<br>Adjusted diluted EPS | |||
| Adjusted<br>percentage change | 7% | 4% | 12% | |||||
| Adjusted Diluted EPS from Continuing Operations Guidance<br>(e) | Third Quarter 2020 | Full Year 2020 | ||||||
| --- | --- | --- | --- | --- | ||||
| Low End | High End | Low End | High End | |||||
| 2020 Adjusted<br>Guidance | $1.90 | $1.95 | $7.60 | $7.80 | ||||
| Adjusted<br>percentage change versus 2019 adjusted diluted<br>EPS | (2)% | 1% | 4% | 6% | ||||
| Add: Estimated<br>currency headwind | 3% | 3% | 3% | 3% | ||||
| Adjusted<br>percentage change excluding currency | 1% | 4% | 7% | 9% | ||||
| Adjusted EBITDA and % of Sales | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Income from<br>continuing operations | $1,029 | $458 | $571 | $948 | $507 | $728 | $513 | $435 |
| Add:<br>Noncontrolling interests related to continuing<br>operations | 60 | 25 | 35 | 59 | 27 | 3 | 29 | 30 |
| Add: Net<br>pension and OPEB cost (benefit), excluding service<br>cost | (90) | (45) | (45) | (9) | (25) | 2 | (24) | 15 |
| Add: Interest<br>expense | 42 | 18 | 24 | 33 | 8 | (3) | 10 | 23 |
| Add: Income<br>taxes | 329 | 164 | 165 | 309 | 162 | 298 | 169 | 140 |
| Add:<br>Depreciation and amortization | 2,266 | 1,124 | 1,142 | 2,418 | 1,162 | 1,095 | 1,195 | 1,223 |
| EBITDA from<br>continuing operations | 3,636 | 1,744 | 1,892 | 3,758 | 1,841 | 2,123 | 1,892 | 1,866 |
| Less:<br>Merger-related divestitures (d) | - | - | - | (13) | (1) | (2) | (6) | (7) |
| Less: Net gain<br>on sale of business | - | - | - | - | - | (164) | - | - |
| Add: Cost<br>reduction programs and other charges | 380 | 249 | 131 | 230 | 212 | 125 | 141 | 89 |
| Add: Purchase<br>accounting impacts - Linde AG | 49 | 23 | 26 | 38 | 14 | 17 | 14 | 24 |
| Total<br>adjustments | 429 | 272 | 157 | 255 | 225 | (24) | 149 | 106 |
| Adjusted<br>EBITDA from continuing operations | $4,065 | $2,016 | $2,049 | $4,013 | $2,066 | $2,099 | $2,041 | $1,972 |
| Reported<br>sales | $13,116 | $6,377 | $6,739 | $14,148 | $7,080 | $7,000 | $7,204 | $6,944 |
| Adjusted<br>sales | $13,116 | $6,377 | $6,739 | $14,093 | $7,077 | $6,993 | $7,179 | $6,914 |
| % of<br>sales | ||||||||
| EBITDA from<br>continuing operations | 27.7% | 27.3% | 28.1% | 26.6% | 26.0% | 30.3% | 26.3% | 26.9% |
| Adjusted<br>EBITDA from continuing operations | 31.0% | 31.6% | 30.4% | 28.5% | 29.2% | 30.0% | 28.4% | 28.5% |
| (a) The income<br>tax expense (benefit) on the non-GAAP pre-tax adjustments was<br>determined using the applicable tax rates for the jurisdictions<br>that were utilized in calculating the GAAP income tax expense<br>(benefit) and included both current and deferred income tax<br>amounts. | ||||||||
| --- | ||||||||
| (b) Net of<br>income taxes which are shown separately in “Adjusted Income<br>Taxes and Effective Tax Rate”. | ||||||||
| (c)<br>The company believes that its non-GAAP measures excluding Purchase<br>accounting impacts - Linde AG are useful to investors because: (i)<br>the business combination was a merger of equals in an all-stock<br>merger transaction, with no cash consideration, (ii) the company is<br>managed on a geographic basis and the results of certain<br>geographies are more heavily impacted by purchase accounting than<br>others, causing results that are not comparable at the reportable<br>segment level, therefore, the impacts of purchasing accounting<br>adjustments to each segment vary and are not comparable within the<br>company and when compared to other companies in similar<br>regions,(iii) business management is evaluated and variable<br>compensation is determined based on results excluding purchase<br>accounting impacts, and; (iv) it is important to investors and<br>analysts to understand the purchase accounting impacts to the<br>financial statements.A summary of each of the adjustments made for<br>Purchase accounting impacts - Linde AG are as follows:<br>Adjusted Operating<br>Profit and Margin: The purchase<br>accounting adjustments for the periods presented relate primarily<br>to depreciation and amortization related to the fair value step up<br>of fixed assets and intangible assets (primarily customer related)<br>acquired in the merger. Adjusted Interest Expense -<br>Net: Relates to the<br>amortization of the fair value of debt acquired in the<br>merger. Adjusted Income Taxes and<br>Effective Tax Rate: Relates to<br>the current and deferred income tax impact on the adjustments<br>discussed above. The income tax expense (benefit) on the non-GAAP<br>pre-tax adjustments was determined using the applicable tax rates<br>for the jurisdictions that were utilized in calculating the GAAP<br>income tax expense (benefit) and included both current and deferred<br>income tax amounts. Adjusted Income from Equity<br>Investments: Represents the<br>amortization of increased fair value on equity investments related<br>to depreciable and amortizable assets. Adjusted Noncontrolling<br>Interests from Continuing Operations: Represents the noncontrolling interests’<br>ownership portion of the adjustments described above determined on<br>an entity by entity basis. | ||||||||
| (d) To adjust<br>for the results of Praxair's merger-related<br>divestitures. | ||||||||
| (e) We are<br>providing adjusted earnings per share ("EPS") guidance for 2020.<br>This is a non-GAAP financial measure that represents diluted<br>earnings per share from continuing operations (a GAAP measure) but<br>excludes the impact of certain items that we believe are not<br>representative of our underlying business performance, such as cost<br>reduction and other charges, the impact of potential divestitures<br>or other potentially significant items. Given the uncertainty of<br>timing and magnitude of such items, we cannot provide a<br>reconciliation of the differences between the non-GAAP adjusted EPS<br>guidance and the corresponding GAAP EPS measure without<br>unreasonable effort. |
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| LINDE PLC AND SUBSIDIARIES | ||||||
|---|---|---|---|---|---|---|
| APPENDIX | ||||||
| NON-GAAP MEASURES AND RECONCILIATIONS | ||||||
| (Millions of dollars) | ||||||
| (UNAUDITED) | ||||||
| 2020 | 2019 | 2018 | ||||
| --- | --- | --- | --- | --- | --- | --- |
| Q2 | Q1 | Q4 | 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 | $17,480 | $16,875 | 13,956 | $13,957 | $14,146 | $15,296 |
| Less: Cash and<br>cash equivalents | (4,941) | (4,014) | (2,700) | (2,686) | (5,791) | (4,466) |
| Net<br>debt | 12,539 | 12,861 | 11,256 | 11,271 | 8,355 | 10,830 |
| Less: Purchase<br>accounting impacts - Linde AG | (150) | (170) | (195) | (243) | (262) | (291) |
| Adjusted net<br>debt | $12,389 | $12,691 | 11,061 | $11,028 | $8,093 | $10,539 |
| Less: Net<br>assets held for sale | (2) | (115) | (123) | (272) | (1,629) | (4,730) |
| Adjusted net<br>debt less net assets held for sale | $12,387 | $12,576 | 10,938 | $10,756 | $6,464 | $5,809 |
| After-tax Return on Capital and<br>Adjusted After-tax Return on Capital (ROC) - After-tax return on capital is a measure used by<br>investors, financial analysts and management to evaluate the return<br>on net assets employed in the business. ROC measures the after-tax<br>operating profit that the company was able to generate with the<br>investments made by all parties in the business (debt,<br>noncontrolling interests and Linde plc shareholders’<br>equity). | ||||||
| Reported<br>income from continuing operations | $458 | $571 | 507 | $513 | $435 | $2,870 |
| Add:<br>noncontrolling interests from continuing<br>operations | 25 | 35 | 27 | 29 | 30 | (33) |
| Add: interest<br>expense - net | 18 | 24 | 8 | 10 | 23 | 72 |
| Less: tax<br>benefit on interest expense - net * | (5) | (6) | (2) | (3) | (6) | (18) |
| Reported NOPAT | $496 | $624 | 540 | $549 | $482 | $2,891 |
| Adjusted<br>income from continuing operations | $1,005 | $1,009 | 1,024 | $1,000 | $927 | $841 |
| Add: adjusted<br>noncontrolling interests from continuing<br>operations | 39 | 50 | 41 | 46 | 45 | 40 |
| Add: adjusted<br>interest expense - net | 40 | 46 | 30 | 35 | 50 | 50 |
| Less: tax<br>benefit on interest expense - net * | (10) | (12) | (7) | (9) | (13) | (13) |
| Adjusted NOPAT | $1,074 | $1,093 | 1,088 | $1,072 | $1,009 | $919 |
| 4-quarter<br>trailing reported NOPAT | $2,389 | $2,442 | 2,300 | |||
| 4-quarter<br>trailing adjusted NOPAT | $4,367 | $4,365 | 4,281 | |||
| Equity and<br>redeemable noncontrolling interests: | ||||||
| Redeemable<br>noncontrolling interests | $13 | $92 | 113 | $15 | $15 | $16 |
| Linde plc<br>shareholders' equity | 45,537 | 44,776 | 49,074 | 50,564 | 51,175 | 51,596 |
| Noncontrolling<br>interests | 2,387 | 2,375 | 2,448 | 2,315 | 5,457 | 5,484 |
| Total equity<br>and redeemable noncontrolling interests | $47,937 | $47,243 | 51,635 | $52,894 | $56,647 | $57,096 |
| Reported<br>capital | $60,474 | $59,989 | 62,768 | $63,893 | $63,373 | $63,196 |
| Total equity<br>and redeemable noncontrolling interests | $47,937 | $47,243 | 51,635 | $52,894 | $56,647 | $57,096 |
| Add: Adjusted<br>net debt less net assets held for sale | 12,387 | 12,576 | 10,938 | 10,756 | 6,464 | 5,809 |
| Less: Linde AG<br>Goodwill (a) | 24,256 | 24,256 | 24,256 | 24,197 | 24,197 | 24,146 |
| Less: Linde AG<br>Indefinite lived intangibles (a) | 1,868 | 1,868 | 1,868 | 1,868 | 1,868 | 1,648 |
| Adjusted<br>capital | $34,200 | $33,695 | 36,449 | $37,585 | $37,046 | $37,111 |
| (a)<br>Represent balance sheet purchase accounting impacts of<br>non-amortizing assets related to the Linde AG merger. | ||||||
| Ending capital<br>(see above) | $60,474 | $59,989 | 62,768 | |||
| 5-quarter<br>average ending capital | $61,858 | $62,438 | 63,079 | |||
| Ending<br>adjusted capital (see above) | $34,200 | $33,695 | 36,449 | |||
| 5-quarter<br>average ending adjusted capital | $35,564 | $36,133 | 36,816 | |||
| After-tax ROC (4 quarter reported NOPAT / 5-quarter average ending<br>capital) | 3.9% | 3.9% | 3.6% | |||
| Adjusted after-tax ROC (4 quarter trailing adjusted NOPAT /<br>5-quarter average ending adjusted capital) | 12.3% | 12.1% | 11.6% | |||
| * Tax benefit on<br>interest expense - net is generally presented using the reported<br>effective rate. |
All values are in US Dollars.
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