Equibles

10-Q

LINDE PLC (LIN)

10-Q 2022-07-28 For: 2022-06-30
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Added on April 03, 2026

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to

Commission file number 001-38730

LINDE PLC

(Exact name of registrant as specified in its charter)

Ireland 98-1448883
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
10 Riverview Drive, Forge
Danbury, Connecticut 43 Church Street West
United States 06810 Woking, Surrey GU21 6HT
United Kingdom
(Address of principal executive offices) (Zip Code)
(203) 837 - 2000 +44 14 83 242200
(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading symbol(s) Name of each exchange on which registered
Ordinary shares (€0.001 nominal value per share) LIN New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ☒     No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  ☒     No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐     No ☒

At June 30, 2022, 498,365,588 ordinary shares (€0.001 par value) of the Registrant were outstanding.

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INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Statements of Income - Quarters EndedJune 30, 2022 and 2021 4
Consolidated Statements of Income - Six Months Ended June 30, 2022 and 2021 5
Consolidated Statements of Comprehensive Income - Quarters EndedJune 30, 2022 and 2021 6
Consolidated Statements of Comprehensive Income - Six Months Ended June 30, 2022 and 2021 7
Condensed Consolidated Balance Sheets -June 30, 2022 and December 31, 2021 8
Condensed Consolidated Statements of Cash Flows -Six MonthsEndedJune 30, 2022 and 2021 9
Notes to Condensed Consolidated Financial Statements 10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26
Item 3. Quantitative and Qualitative Disclosures about Market Risk 45
Item 4. Controls and Procedures 45
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 46
Item 1A. Risk Factors 46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 46
Item 3. Defaults Upon Senior Securities 46
Item 4. Mine Safety Disclosures 46
Item 5. Other Information 46
Item 6. Exhibits 47
Signature 48

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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 future results or circumstances to differ materially from 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, 2021 filed with the SEC on February 28, 2022, 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

CONSOLIDATED STATEMENTS OF INCOME

(Millions of dollars, except per share data)

(UNAUDITED)

Quarter Ended June 30,
2022 2021
Sales $ 8,457 $ 7,584
Cost of sales, exclusive of depreciation and amortization 4,940 4,194
Selling, general and administrative 771 822
Depreciation and amortization 1,091 1,171
Research and development 37 34
Russia-Ukraine conflict and other charges 993 204
Other income (expense) - net (36) (17)
Operating Profit 589 1,142
Interest expense - net 5 18
Net pension and OPEB cost (benefit), excluding service cost (62) (49)
Income From Continuing Operations Before Income Taxes and Equity Investments 646 1,173
Income taxes on continuing operations 286 334
Income From Continuing Operations Before Equity Investments 360 839
Income from equity investments 50 37
Income From Continuing Operations (Including Noncontrolling Interests) 410 876
Income from discontinued operations, net of tax — 1
Net Income (Including Noncontrolling Interests) 410 877
Less: noncontrolling interests from continuing operations (38) (36)
Net Income – Linde plc $ 372 $ 841
Net Income – Linde plc
Income from continuing operations $ 372 $ 840
Income from discontinued operations $ — $ 1
Per Share Data – Linde plc Shareholders
Basic earnings per share from continuing operations $ 0.74 $ 1.62
Basic earnings per share from discontinued operations — —
Basic earnings per share $ 0.74 $ 1.62
Diluted earnings per share from continuing operations $ 0.74 $ 1.60
Diluted earnings per share from discontinued operations — —
Diluted earnings per share $ 0.74 $ 1.60
Weighted Average Shares Outstanding (000’s):
Basic shares outstanding 501,034 518,950
Diluted shares outstanding 505,269 523,723

The accompanying notes are an integral part of these financial statements.

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LINDE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Millions of dollars, except per share data)

(UNAUDITED)

Six Months Ended June 30,
2022 2021
Sales $ 16,668 $ 14,827
Cost of sales, exclusive of depreciation and amortization 9,738 8,248
Selling, general and administrative 1,573 1,609
Depreciation and amortization 2,203 2,337
Research and development 72 69
Russia-Ukraine conflict and other charges 989 196
Other income (expense) - net (24) (13)
Operating Profit 2,069 2,355
Interest expense - net 14 38
Net pension and OPEB cost (benefit), excluding service cost (126) (98)
Income From Continuing Operations Before Income Taxes and Equity Investments 2,181 2,415
Income taxes on continuing operations 655 602
Income From Continuing Operations Before Equity Investments 1,526 1,813
Income from equity investments 94 80
Income From Continuing Operations (Including Noncontrolling Interests) 1,620 1,893
Income from discontinued operations, net of tax — 2
Net Income (Including Noncontrolling Interests) 1,620 1,895
Less: noncontrolling interests from continuing operations (74) (74)
Net Income – Linde plc $ 1,546 $ 1,821
Net Income – Linde plc
Income from continuing operations $ 1,546 $ 1,819
Income from discontinued operations $ — $ 2
Per Share Data – Linde plc Shareholders
Basic earnings per share from continuing operations $ 3.07 $ 3.49
Basic earnings per share from discontinued operations — —
Basic earnings per share $ 3.07 $ 3.49
Diluted earnings per share from continuing operations $ 3.04 $ 3.46
Diluted earnings per share from discontinued operations — —
Diluted earnings per share $ 3.04 $ 3.46
Weighted Average Shares Outstanding (000’s):
Basic shares outstanding 504,093 520,691
Diluted shares outstanding 508,432 525,380

The accompanying notes are an integral part of these financial statements.

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LINDE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Millions of dollars)

(UNAUDITED)

Quarter Ended June 30,
2022 2021
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) $ 410 $ 877
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments:
Foreign currency translation adjustments (1,570) 412
Reclassification to net income (134) —
Income taxes 5 (2)
Translation adjustments (1,699) 410
Funded status - retirement obligations (Note 8):
Retirement program remeasurements 67 (19)
Reclassifications to net income 19 44
Income taxes (7) (2)
Funded status - retirement obligations 79 23
Derivative instruments (Note 5):
Current unrealized gain (loss) 92 19
Reclassifications to net income 3 (3)
Income taxes (20) (3)
Derivative instruments 75 13
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) (1,545) 446
COMPREHENSIVE INCOME (LOSS) (INCLUDING NONCONTROLLING INTERESTS) (1,135) 1,323
Less: noncontrolling interests (21) (45)
COMPREHENSIVE INCOME (LOSS) - LINDE PLC $ (1,156) $ 1,278

The accompanying notes are an integral part of these financial statements.

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LINDE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Millions of dollars)

(UNAUDITED)

Six Months Ended June 30,
2022 2021
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) $ 1,620 $ 1,895
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments:
Foreign currency translation adjustments (1,510) (245)
Reclassification to net income (134) (52)
Income taxes (7) (8)
Translation adjustments (1,651) (305)
Funded status - retirement obligations (Note 8):
Retirement program remeasurements 122 1
Reclassifications to net income 38 87
Income taxes (28) (25)
Funded status - retirement obligations 132 63
Derivative instruments (Note 5):
Current unrealized gain (loss) 110 40
Reclassifications to net income (20) (5)
Income taxes (18) (8)
Derivative instruments 72 27
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) (1,447) (215)
COMPREHENSIVE INCOME (LOSS) (INCLUDING NONCONTROLLING INTERESTS) 173 1,680
Less: noncontrolling interests (45) (77)
COMPREHENSIVE INCOME (LOSS) - LINDE PLC $ 128 $ 1,603

The accompanying notes are an integral part of these financial statements.

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LINDE PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Millions of dollars)

(UNAUDITED)

June 30, 2022 December 31, 2021
Assets
Cash and cash equivalents $ 3,655 $ 2,823
Accounts receivable - net 4,803 4,499
Contract assets 78 134
Inventories 1,786 1,733
Prepaid and other current assets 950 970
Total Current Assets 11,272 10,159
Property, plant and equipment - net 23,993 26,003
Goodwill 25,678 27,038
Other intangible assets - net 12,634 13,802
Other long-term assets 4,308 4,603
Total Assets $ 77,885 $ 81,605
Liabilities and equity
Accounts payable $ 3,360 $ 3,503
Short-term debt 3,215 1,163
Current portion of long-term debt 1,651 1,709
Contract liabilities 2,933 2,940
Other current liabilities 4,136 4,328
Total Current Liabilities 15,295 13,643
Long-term debt 11,177 11,335
Other long-term liabilities 10,373 11,186
Total Liabilities 36,845 36,164
Redeemable noncontrolling interests 13 13
Linde plc Shareholders’ Equity:
Ordinary shares,€0.001 par value, authorized 1,750,000,000 shares, 2022 and 2021 issued: 552,012,862 ordinary shares 1 1
Additional paid-in capital 39,978 40,180
Retained earnings 19,159 18,710
Accumulated other comprehensive income (loss) (Note 11) (6,466) (5,048)
Less: Treasury shares, at cost (2022 – 53,647,274 shares and 2021 – 43,331,983 shares) (12,998) (9,808)
Total Linde plc Shareholders’ Equity 39,674 44,035
Noncontrolling interests 1,353 1,393
Total Equity 41,027 45,428
Total Liabilities and Equity $ 77,885 $ 81,605

The accompanying notes are an integral part of these financial statements.

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LINDE PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Millions of dollars)

(UNAUDITED)

Six Months Ended June 30,
2022 2021
Increase (Decrease) in Cash and Cash Equivalents
Operations
Net income - Linde plc $ 1,546 $ 1,821
Less: Income from discontinued operations, net of tax and noncontrolling interests — (2)
Add: Noncontrolling interests from continuing operations 74 74
Income from continuing operations (including noncontrolling interests) 1,620 1,893
Adjustments to reconcile net income to net cash provided by operating activities:
Russia-Ukraine conflict and other charges, net of payments 922 95
Depreciation and amortization 2,203 2,337
Deferred income taxes (221) (78)
Share-based compensation 51 63
Working capital:
Accounts receivable (543) (388)
Inventory (144) (42)
Prepaid and other current assets (123) (20)
Payables and accruals 70 39
Contract assets and liabilities, net 243 51
Pension contributions (19) (28)
Long-term assets, liabilities and other 74 14
Net cash provided by operating activities 4,133 3,936
Investing
Capital expenditures (1,475) (1,506)
Acquisitions, net of cash acquired (49) (31)
Divestitures and asset sales, net of cash divested 17 77
Net cash provided by (used for) investing activities (1,507) (1,460)
Financing
Short-term debt borrowings (repayments) - net 2,172 1,081
Long-term debt borrowings 2,291 51
Long-term debt repayments (1,703) (818)
Issuances of ordinary shares 22 32
Purchases of ordinary shares (3,329) (2,082)
Cash dividends - Linde plc shareholders (1,177) (1,102)
Noncontrolling interest transactions and other (35) (277)
Net cash provided by (used for) financing activities (1,759) (3,115)
Effect of exchange rate changes on cash and cash equivalents (35) 22
Change in cash and cash equivalents 832 (617)
Cash and cash equivalents, beginning-of-period 2,823 3,754
Cash and cash equivalents, end-of-period $ 3,655 $ 3,137

The accompanying notes are an integral part of these financial statements.

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INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes to Condensed Consolidated Financial Statements - Linde plc and Subsidiaries (Unaudited)

Note 1. Summary of Significant Accounting Policies 11
Note 2. Russia-Ukraine Conflict and Other Charges 11
Note 3. Supplemental Information 13
Note 4. Debt 14
Note 5. Financial Instruments 14
Note 6. Fair Value Disclosures 16
Note 7. Earnings Per Share – Linde plc Shareholders 17
Note 8. Retirement Programs 18
Note 9. Commitments and Contingencies 18
Note 10. Segments 19
Note 11. Equity 21
Note 12. Revenue Recognition 22
Note 13. Subsequent Events 25

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  1. Summary of Significant Accounting Policies

Presentation of Condensed Consolidated Financial Statements - In the opinion of Linde management, the accompanying condensed consolidated financial statements include all adjustments necessary for a fair presentation of the results for the interim periods presented and such adjustments are of a normal recurring nature. The accompanying condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements of Linde plc and subsidiaries in Linde's 2021 Annual Report on Form 10-K. There have been no material changes to the company’s significant accounting policies during 2022.

Reclassifications – Certain prior periods' amounts have been reclassified to conform to the current year’s presentation.

  1. Russia-Ukraine conflict and Other Charges

2022 Charges

Russia-Ukraine conflict and other charges were $993 million and $989 million ($889 million and $888 million, after tax and noncontrolling interests) for the quarter and six months ended June 30, 2022, respectively.

The following tables summarize the company's pre-tax charges for the quarter and six months ended June 30, 2022:

Quarter Ended June 30, 2022
(millions of dollars) Russia deconsolidation charges Other Russia related charges Total Russia charges Merger-related and other charges Total
Americas $ — $ — $ — $ 3 $ 3
EMEA 733 2 735 49 784
APAC — — — 28 28
Engineering 54 112 166 166
Other — — 12 12
Total $ 787 $ 114 $ 901 $ 92 $ 993
Six Months Ended June 30, 2022
--- --- --- --- --- --- --- --- --- --- ---
(millions of dollars) Russia deconsolidation charges Other Russia related charges Total Russia charges Merger-related and other charges Total
Americas $ — $ — $ — $ 3 $ 3
EMEA 733 2 735 49 784
APAC — — — 24 24
Engineering 54 112 166 — 166
Other — — 12 12
Total $ 787 $ 114 $ 901 $ 88 $ 989

Russia-Ukraine Conflict

Deconsolidation of Russian entities

In response to the Russian invasion of Ukraine, multiple jurisdictions, including Europe and the U.S., have imposed several tranches of economic sanctions on Russia. As a result, Linde has reassessed its ability to control its Russian subsidiaries and determined that as of June 30, 2022 it can no longer exercise control over these entities. As such, Linde has deconsolidated its Russian gas and engineering business entities as of June 30, 2022. The deconsolidation of the company's Russian gas and engineering business entities resulted in a loss of $787 million ($730 million after tax) for the quarter and six months ended June 30, 2022.

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The fair value of Linde’s Russian subsidiaries was determined using a probability weighted discounted cash flow model, which resulted in the recognition of a $407 million loss on deconsolidation when compared to the carrying value of the entities. This loss is recorded within Russia-Ukraine conflict and other charges in the consolidated statements of income.

Upon deconsolidation an investment was recorded, which represents the fair value of net assets. The company did not receive any consideration, cash or otherwise, as part of the deconsolidation. Linde will maintain its interest in its Russian subsidiaries and will continue to comply with sanctions and government restrictions. The investment will be monitored for impairment in future periods.

Receivables, primarily loans receivable, with newly deconsolidated entities were reassessed for collectability resulting in a write-off of approximately $380 million.

Other Russia related charges

Other charges related specifically to the Russia-Ukraine conflict were $114 million ($84 million after tax) for the quarter and six months ended June 30, 2022, and are primarily comprised of impairments of assets which are maintained by international entities in support of the Russian business.

Merger-related and other charges

Merger related and other charges were $92 million and $88 million ($75 million and $74 million, after tax) for the quarter and six months ended June 30, 2022, respectively, primarily related to the impairment of an equity method investment in the EMEA segment.

Cash Requirements

The total cash requirements of the Russia-Ukraine conflict and other charges incurred during the six months ended June 30, 2022 are expected to be immaterial. Liabilities accrued from prior periods are expected to be paid through 2023. Russia-Ukraine conflict and other charges, net of payments in the condensed consolidated statements of cash flows for the six months ended June 30, 2022 also reflects the impact of cash payments of liabilities accrued as of December 31, 2021.

The following table summarizes the activities related to the company's Russia-Ukraine conflict and other charges for the six months ended June 30, 2022:

(millions of dollars) Total Russia charges Severance costs Other cost reduction charges Total cost reduction program related charges Merger-related and other charges Total
Balance, December 31, 2021 $ — $ 384 $ 38 $ 422 $ 31 $ 453
2022 Russia-Ukraine conflict and other charges 901 24 14 38 50 989
Less: Cash payments / receipts — (64) (6) (70) 3 (67)
Less: Non-cash charges (901) — (7) (7) (54) (962)
Foreign currency translation and other — (25) (4) (29) (1) (30)
Balance, June 30, 2022 $ — $ 319 $ 35 $ 354 $ 29 $ 383

2021 Charges

Cost reduction programs and other charges were $204 million and $196 million for the quarter and six months ended June 30, 2021, respectively ($198 million and $170 million after tax).

Total cost reduction program related charges were $204 million and $248 million ($150 million and $184 million after tax), for the quarter and six months ended June 30, 2021, respectively, which consisted primarily of severance charges of $182 million and $208 million and other charges of $22 million and $40 million for the quarter and six months ended June 30, 2021, respectively, related to the execution of the company's synergistic actions including location consolidations and business rationalization projects, process harmonization, and associated non-recurring costs.

Merger-related and other charges were flat during the quarter ended June 30, 2021 and a benefit of $52 million for the six months ended June 30, 2021 (charge of $48 million and a benefit of $14 million, after tax). The pre-tax benefit was primarily due to a $52 million gain triggered by a joint venture deconsolidation in the APAC segment.

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In addition, the quarter and six months ended June 30, 2021 include net income tax charges of $48 million and $38 million, respectively, primarily related to (i) $81 million of expense due to the revaluation of a net deferred tax liability resulting from a tax rate increase in the United Kingdom enacted in the current quarter, and (ii) a tax settlement benefit of $33 million.

Classification in the condensed consolidated financial statements

The costs are shown within operating profit in a separate line item on the consolidated statements of income. On the condensed consolidated statements of cash flows, the impact of these costs, net of cash payments, is shown as an adjustment to reconcile net income to net cash provided by operating activities. In Note 10 Segments, Linde excluded these costs from its management definition of segment operating profit; a reconciliation of segment operating profit to consolidated operating profit is shown within the segment operating profit table.

  1. Supplemental Information

Receivables

Linde applies loss rates that are lifetime expected credit losses at initial recognition of the receivables. These expected loss rates are based on an analysis of the actual historical default rates for each business, taking regional circumstances into account. If necessary, these historical default rates are adjusted to reflect the impact of current changes in the macroeconomic environment using forward-looking information. The loss rates are also evaluated based on the expectations of the responsible management team regarding the collectability of the receivables. Gross trade receivables aged less than one year were $4,809 million and $4,425 million at June 30, 2022 and December 31, 2021, respectively, and gross receivables aged greater than one year were $283 million and $329 million at June 30, 2022 and December 31, 2021, respectively. Other receivables were $107 million and $150 million at June 30, 2022 and December 31, 2021, respectively. Receivables aged greater than one year are generally fully reserved unless specific circumstances warrant exceptions, such as those backed by federal governments.

Accounts receivable net of reserves were $4,803 million at June 30, 2022 and $4,499 million at December 31, 2021. Allowances for expected credit losses were $396 million at June 30, 2022 and $405 million at December 31, 2021.  Provisions for expected credit losses were $67 million and $71 million for the six months ended June 30, 2022 and 2021, respectively. The allowance activity in the six months ended June 30, 2022 and 2021 related to write-offs of uncollectible amounts, net of recoveries and currency movements is not material.

Inventories

The following is a summary of Linde's consolidated inventories:

(Millions of dollars) June 30,<br>2022 December 31,<br>2021
Inventories
Raw materials and supplies $ 460 $ 399
Work in process 321 334
Finished goods 1,005 1,000
Total inventories $ 1,786 $ 1,733

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  1. Debt

The following is a summary of Linde's outstanding debt at June 30, 2022 and December 31, 2021:

(Millions of dollars) June 30,<br>2022 December 31,<br>2021
SHORT-TERM
Commercial paper $ 2,974 $ 278
Other bank borrowings (primarily non U.S.) 241 885
Total short-term debt 3,215 1,163
LONG-TERM (a)
(U.S. dollar denominated unless otherwise noted)
0.250% Euro denominated notes due 2022 (b) (c) — 1,137
2.20% Notes due 2022 (e) — 500
2.70% Notes due 2023 500 500
2.00% Euro denominated notes due 2023 (b) 691 759
5.875% GBP denominated notes due 2023 (b) 381 432
1.20% Euro denominated notes due 2024 576 625
1.875% Euro denominated notes due 2024 (b) 322 356
2.65% Notes due 2025 399 399
1.625% Euro denominated notes due 2025 521 565
0.00% Euro denominated notes due 2026 736 799
3.20% Notes due 2026 725 725
3.434% Notes due 2026 198 197
1.652% Euro denominated notes due 2027 86 94
0.250% Euro denominated notes due 2027 785 850
1.00% Euro denominated notes due 2027 (d) 522 —
1.00% Euro denominated notes due 2028 (b) 761 879
1.10% Notes due 2030 696 696
1.90% Euro denominated notes due 2030 109 118
1.375% Euro denominated notes due 2031 (d) 778 —
0.550% Euro denominated notes due 2032 781 847
0.375% Euro denominated notes due 2033 521 565
1.625% Euro denominated notes due 2035 (d) 828 —
3.55% Notes due 2042 664 664
2.00% Notes due 2050 296 296
1.00% Euro denominated notes due 2051 726 788
Non U.S borrowings 216 243
Other 10 10
12,828 13,044
Less: current portion of long-term debt (1,651) (1,709)
Total long-term debt 11,177 11,335
Total debt $ 16,043 $ 14,207

(a)Amounts are net of unamortized discounts, premiums and/or debt issuance costs as applicable.

(b)June 30, 2022 and December 31, 2021 included a cumulative $19 million and $42 million adjustment to carrying value, respectively, related to hedge accounting of interest rate swaps. Refer to Note 5.

(c)In January 2022, Linde repaid €1.0 billion of 0.250% notes that became due.

(d)In March 2022, Linde issued €500 million of 1.000% notes due 2027, €750 million of 1.375% notes due 2031, and €800 million of 1.625% notes due 2035.

(e)In May 2022, Linde repaid $500 million of 2.20% notes due in August 2022. There was no impact to interest within the consolidated statements of income.

The company maintains a $5 billion unsecured revolving credit agreement with a syndicate of banking institutions that expires March 26, 2024. There are no financial maintenance covenants contained within the credit agreement. No borrowings were outstanding under the credit agreement as of June 30, 2022.

  1. Financial Instruments

In its normal operations, Linde is exposed to market risks relating to fluctuations in interest rates, foreign currency exchange rates, and energy and commodity costs. The objective of financial risk management at Linde is to minimize the negative impact of such fluctuations on the company’s earnings and cash flows. To manage these risks, among other strategies, Linde routinely enters into various derivative financial instruments (“derivatives”) including interest-rate swap and treasury rate lock agreements, currency-swap agreements, forward contracts, currency options, and commodity-swap agreements. These instruments are not entered into for trading purposes and Linde only uses commonly traded and non-leveraged instruments.

There are three types of derivatives that the company enters into: (i) those relating to fair-value exposures, (ii) those relating to cash-flow exposures, and (iii) those relating to foreign currency net investment exposures. Fair-value exposures relate to recognized assets or liabilities, and firm commitments; cash-flow exposures relate to the variability of future cash flows associated with recognized assets or liabilities, or forecasted transactions; and net investment exposures relate to the impact of foreign currency exchange rate changes on the carrying value of net assets denominated in foreign currencies.

When a derivative is executed and hedge accounting is appropriate, it is designated as either a fair-value hedge, cash-flow hedge, or a net investment hedge. Currently, Linde designates all interest-rate and treasury-rate locks as hedges for accounting purposes; however, cross-currency contracts are generally not designated as hedges for accounting purposes. Certain currency contracts related to forecasted transactions are designated as hedges for accounting purposes. Whether designated as hedges for accounting purposes or not, all derivatives are linked to an appropriate underlying exposure. On an ongoing basis, the company assesses the hedge effectiveness of all derivatives designated as hedges for accounting purposes to determine if they continue to be highly effective in offsetting changes in fair values or cash flows of the underlying hedged items. If it is determined that the hedge is not highly effective through the use of a qualitative assessment, then hedge accounting will be discontinued prospectively.

Counterparties to Linde's derivatives are major banking institutions with credit ratings of investment grade or better. The company has Credit Support Annexes ("CSAs") in place for certain entities with its principal counterparties to minimize potential default risk and to mitigate counterparty risk. Under the CSAs, the fair values of derivatives for the purpose of interest rate and currency management are collateralized with cash on a regular basis. As of June 30, 2022, the impact of such collateral posting arrangements on the fair value of derivatives was insignificant. Management believes the risk of incurring losses on derivative contracts related to credit risk is remote and any losses would be immaterial.

The following table is a summary of the notional amount and fair value of derivatives outstanding at June 30, 2022 and December 31, 2021 for consolidated subsidiaries:

Fair Value
Notional Amounts Assets (a) Liabilities (a)
(Millions of dollars) June 30,<br>2022 December 31,<br>2021 June 30,<br>2022 December 31,<br>2021 June 30,<br>2022 December 31,<br>2021
Derivatives Not Designated as Hedging Instruments:
Currency contracts:
Balance sheet items $ 3,237 $ 4,427 $ 12 $ 22 $ 15 $ 17
Forecasted transactions 829 537 11 6 23 11
Cross-currency swaps 66 148 — 21 2 4
Total $ 4,132 $ 5,112 $ 23 $ 49 $ 40 $ 32
Derivatives Designated as Hedging Instruments:
Currency contracts:
Forecasted transactions 335 758 6 14 3 3
Commodity contracts N/A N/A 43 49 — —
Interest rate swaps 839 1,251 — 24 36 —
Total Hedges $ 1,174 $ 2,009 $ 49 $ 87 $ 39 $ 3
Total Derivatives $ 5,306 $ 7,121 $ 72 $ 136 $ 79 $ 35

(a)Amounts as at June 30, 2022 and December 31, 2021 included current assets of $69 million and $101 million which are recorded in prepaid and other current assets; long-term assets of $3 million and $35 million which are recorded in other long-term assets; current liabilities of $32 million and $27 million which are recorded in other current liabilities; and long-term liabilities of $47 million and $8 million which are recorded in other long-term liabilities.

Balance Sheet Items

Foreign currency contracts related to balance sheet items consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currency exchange rates on recorded balance sheet assets and liabilities denominated in currencies other than the functional currency of the related operating unit. Certain forward currency contracts are entered into to protect underlying monetary assets and liabilities denominated in foreign currencies from foreign exchange risk and are not designated as hedging instruments. For balance sheet items that are not designated as hedging instruments, the fair value adjustments on these contracts are offset by the fair value adjustments recorded on the underlying monetary assets and liabilities.

Forecasted Transactions

Foreign currency contracts related to forecasted transactions consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currency exchange rates on (1) forecasted purchases of capital-related equipment and services, (2) forecasted sales, or (3) other forecasted cash flows denominated in currencies other than the functional currency of the related operating units. For forecasted transactions that are designated as cash flow hedges, fair value adjustments are recorded to accumulated other comprehensive income ("AOCI") with deferred amounts reclassified to earnings over the same time period as the income statement impact of the associated forecasted transaction. For forecasted transactions that do not qualify for cash flow hedging relationships, fair value adjustments are recorded directly to earnings.

Cross-Currency Swaps

Cross-currency interest rate swaps are entered into to limit the foreign currency risk of future principal and interest cash flows associated with intercompany loans denominated in non-functional currencies. The fair value adjustments on the cross-currency swaps are recorded to earnings, where they are offset by fair value adjustments on the underlying intercompany loan or bond.

Commodity Contracts

Commodity contracts are entered into to manage the exposure to fluctuations in commodity prices, which arise in the normal course of business from its procurement transactions. Commodity price fluctuations are largely covered through contractual pass through to customers. To reduce the extent of the remaining risk, Linde enters into a limited number of electricity, natural gas, and propane gas derivatives. For forecasted transactions that are designated as cash flow hedges, fair value adjustments are recorded to accumulated other comprehensive income ("AOCI") with deferred amounts reclassified to earnings over the same time period as the income statement impact of the associated purchase.

Net Investment Hedges

As of June 30, 2022, Linde has €7.5 billion ($8.0 billion) Euro-denominated notes and intercompany loans that are designated as hedges of the net investment positions in foreign operations. Since hedge inception, the deferred gain recorded within the cumulative translation adjustment component of AOCI in the condensed consolidated balance sheets and the consolidated statements of comprehensive income is $679 million (deferred gain of $415 million and $539 million recorded for the quarter and six months ended June 30, 2022).

As of June 30, 2022, Linde has exchange rate movements relating to previously designated hedges that remain in AOCI at a loss of $42 million. These movements will remain in AOCI, until appropriate, such as upon sale or liquidation of the related foreign operations at which time amounts will be reclassified to the consolidated statement of income.

Interest Rate Swaps

Linde uses interest rate swaps to hedge the exposure to changes in the fair value of financial assets and financial liabilities as a result of interest rate changes. These interest rate swaps effectively convert fixed-rate interest exposures to variable rates; fair value adjustments are recognized in earnings along with an equally offsetting charge/benefit to earnings for the changes in the fair value of the underlying financial asset or financial liability (See Note 4).

Derivatives' Impact on Consolidated Statements of Income

The following table summarizes the impact of the company’s derivatives on the consolidated statements of income:

Amount of Pre-Tax Gain (Loss)<br>Recognized in Earnings *
Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2022 2021 2022 2021
Derivatives Not Designated as Hedging Instruments
Currency contracts:
Balance sheet items
Debt-related $ (41) $ 10 $ 10 $ 29
Other balance sheet items 4 3 (8) 7
Total $ (37) $ 13 $ 2 $ 36

* The gains (losses) on balance sheet items are offset by gains (losses) recorded on the underlying hedged assets and liabilities. Accordingly, the gains (losses) for the derivatives and the underlying hedged assets and liabilities related to debt items are recorded in the consolidated statements of income as interest expense-net. Other balance sheet items and anticipated net income gains (losses) are generally recorded in the consolidated statements of income as other income (expenses)-net.

The amounts of gain or loss recognized in AOCI and reclassified to the consolidated statement of income was not material for the quarter and six months ended June 30, 2022 and 2021, respectively. Net impacts expected to be reclassified to earnings during the next twelve months are also not material.

  1. Fair Value Disclosures

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:

Level 1 – quoted prices in active markets for identical assets or liabilities

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes assets and liabilities measured at fair value on a recurring basis:

Fair Value Measurements Using
Level 1 Level 2 Level 3
(Millions of dollars) June 30,<br>2022 December 31,<br>2021 June 30,<br>2022 December 31,<br>2021 June 30,<br>2022 December 31,<br>2021
Assets
Derivative assets $ — $ — $ 72 $ 136 $ — $ —
Investments and securities* 26 42 — — 15 20
Total $ 26 $ 42 $ 72 $ 136 15 $ 20
Liabilities
Derivative liabilities $ — $ — $ 79 $ 35 $ — $ —

* Investments and securities are recorded in prepaid and other current assets and other long-term assets in the company's condensed consolidated balance sheets.

Level 1 investments and securities are marketable securities traded on an exchange. Level 2 investments are based on market prices obtained from independent brokers or determined using quantitative models that use as their basis readily observable market parameters that are actively quoted and can be validated through external sources, including third-party pricing services, brokers and market transactions. Level 3 investments and securities consist of a venture fund. For the valuation, Linde uses the net asset value received as part of the fund's quarterly reporting, which for the most part is not based on quoted prices in active markets. In order to reflect current market conditions, Linde proportionally adjusts these by observable market data (stock exchange prices) or current transaction prices.

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Changes in level 3 investments and securities were immaterial.

The fair value of cash and cash equivalents, short-term debt, accounts receivable-net, and accounts payable approximate carrying value because of the short-term maturities of these instruments.

The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues. Long-term debt is categorized within either Level 1 or Level 2 of the fair value hierarchy depending on the trading volume of the issues and whether or not they are actively quoted in the market as opposed to traded through over-the-counter transactions. At June 30, 2022, the estimated fair value of Linde’s long-term debt portfolio was $11,344 million versus a carrying value of $12,828 million. At December 31, 2021, the estimated fair value of Linde’s long-term debt portfolio was $13,219 million versus a carrying value of $13,044 million. Differences between the carrying value and the fair value are attributable to fluctuations in interest rates subsequent to when the debt was issued and relative to stated coupon rates.

  1. Earnings Per Share – Linde plc Shareholders

Basic and diluted earnings per share is computed by dividing Income from continuing operations, Income from discontinued operations and Net income – Linde plc for the period by the weighted average number of either basic or diluted shares outstanding, as follows:

Quarter Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Numerator (Millions of dollars)
Income from continuing operations $ 372 $ 840 $ 1,546 $ 1,819
Income from discontinued operations — 1 $ — 2
Net Income – Linde plc $ 372 $ 841 $ 1,546 $ 1,821
Denominator (Thousands of shares)
Weighted average shares outstanding 500,535 518,552 503,626 520,314
Shares earned and issuable under compensation plans 499 398 467 377
Weighted average shares used in basic earnings per share 501,034 518,950 504,093 520,691
Effect of dilutive securities
Stock options and awards 4,235 4,773 4,339 4,689
Weighted average shares used in diluted earnings per share 505,269 523,723 508,432 525,380
Basic earnings per share from continuing operations $ 0.74 $ 1.62 $ 3.07 $ 3.49
Basic earnings per share from discontinued operations — — $ — $ —
Basic Earnings Per Share $ 0.74 $ 1.62 $ 3.07 $ 3.49
Diluted earnings per share from continuing operations $ 0.74 $ 1.60 $ 3.04 $ 3.46
Diluted earnings per share from discontinued operations — — $ — $ —
Diluted Earnings Per Share $ 0.74 $ 1.60 $ 3.04 $ 3.46

There were no antidilutive shares for any period presented.

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  1. Retirement Programs

The components of net pension and postretirement benefits other than pensions (“OPEB”) costs for the quarter and six months ended June 30, 2022 and 2021 are shown below:

Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2022 2021 2022 2021
Amount recognized in Operating Profit
Service cost $ 32 $ 39 $ 65 $ 79
Amount recognized in Net pension and OPEB cost (benefit), excluding service cost
Interest cost 51 38 104 77
Expected return on plan assets (132) (131) (268) (262)
Net amortization and deferral 19 44 38 87
(62) (49) (126) (98)
Net periodic benefit cost (benefit) $ (30) $ (10) $ (61) $ (19)

Components of net periodic benefit expense for other post-retirement plans for the quarter and six months ended June 30, 2022 and 2021 were not material.

Linde estimates that 2022 required contributions to its pension plans will be in the range of $40 million to $50 million, of which $19 million have been made through June 30, 2022.

  1. Commitments and Contingencies

Contingent Liabilities

Linde is subject to various lawsuits and government investigations that arise from time to time in the ordinary course of business. These actions are based upon alleged environmental, tax, antitrust and personal injury claims, among others. Linde has strong defenses in these cases and intends to defend itself vigorously. It is possible that the company may incur losses in connection with some of these actions in excess of accrued liabilities. Management does not anticipate that in the aggregate such losses would have a material adverse effect on the company’s consolidated financial position or liquidity; however, it is possible that the final outcomes could have a significant impact on the company’s reported results of operations in any given period (see Note 17 to the consolidated financial statements of Linde's 2021 Annual Report on Form 10-K).

Significant matters are:

•During 2009, the Brazilian government published Law 11941/2009 instituting a new voluntary amnesty program (“Refis Program”) which allowed Brazilian companies to settle certain federal tax disputes at reduced amounts. During 2009, the company decided that it was economically beneficial to settle many of its outstanding federal tax disputes and such disputes were enrolled in the Refis Program, subject to final calculation and review by the Brazilian federal government. The company recorded estimated liabilities based on the terms of the Refis Program. Since 2009, Linde has been unable to reach final agreement on the calculations and initiated litigation against the government in an attempt to resolve certain items. Open issues relate to the following matters: (i) application of cash deposits and net operating loss carryforwards to satisfy obligations and (ii) the amount of tax reductions available under the Refis Program. It is difficult to estimate the timing of resolution of legal matters in Brazil.

•At June 30, 2022 the most significant non-income and income tax claims in Brazil, after enrollment in the Refis Program, relate to state VAT tax matters and a federal income tax matter where the taxing authorities are challenging the tax rate that should be applied to income generated by a subsidiary company. The total estimated exposure relating to such claims, including interest and penalties, as appropriate, is approximately $215 million. Linde has not recorded any liabilities related to such claims based on management judgments, after considering judgments and opinions of outside counsel. Because litigation in Brazil historically takes many years to resolve, it is very difficult to estimate the timing of resolution of these matters; however, it is possible that certain of these matters may be resolved within the near term. The company is vigorously defending against the proceedings.

•On September 1, 2010, CADE (Brazilian Administrative Council for Economic Defense) announced alleged anticompetitive activity on the part of five industrial gas companies in Brazil and imposed fines. Originally, CADE imposed a civil fine of $2.2 billion Brazilian reais ($419 million) on White Martins, the Brazil-based subsidiary of Linde Inc. The fine was reduced to $1.7 billion Brazilian reais ($323 million) due to a calculation error made by CADE.

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The fine against White Martins was overturned by the Ninth Federal Court of Brasilia. CADE appealed this decision, and the Federal Court of Appeals rejected CADE's appeal and confirmed the decision of the Ninth Federal Court of Brasilia. CADE has filed an appeal with the Superior Court of Justice and a decision is pending.

Similarly, on September 1, 2010, CADE imposed a civil fine of $237 million Brazilian reais ($45 million) on Linde Gases Ltda., the former Brazil-based subsidiary of Linde AG, which was divested to MG Industries GmbH on March 1, 2019 and with respect to which Linde provided a contractual indemnity. The fine was reduced to $188 million Brazilian reais ($36 million) due to a calculation error made by CADE. The fine against Linde Gases Ltda. was overturned by the Seventh Federal Court in Brasilia. CADE appealed this decision, and the Federal Court of Appeals rejected CADE's appeal and confirmed the decision of the Seventh Federal Court of Brasilia. CADE filed an appeal with the Superior Court of Justice which was denied. In parallel, CADE filed (i) an appeal with the Supreme Court of Justice, which was denied, and (ii) a subsequent appeal to a panel of the Supreme Court of Justice where a final decision is pending.

Linde has strong defenses and is confident that it will prevail on appeal and have the fines overturned. Linde strongly believes that the allegations of anticompetitive activity against our current and former Brazilian subsidiaries are not supported by valid and sufficient evidence. Linde believes that this decision will not stand up to judicial review and deems the possibility of cash outflows to be extremely unlikely. As a result, no reserves have been recorded as management does not believe that a loss from this case is probable.

•On and after April 23, 2019 former shareholders of Linde AG filed appraisal proceedings at the District Court (Landgericht) Munich I (Germany), seeking an increase of the cash consideration paid in connection with the previously completed cash merger squeeze-out of all of Linde AG’s minority shareholders for €189.46 per share. Any such increase would apply to all 14,763,113 Linde AG shares that were outstanding on April 8, 2019, when the cash merger squeeze-out was completed. The period for plaintiffs to file claims expired on July 9, 2019. The company believes the consideration paid was fair and that the claims lack merit, and no reserve has been established. We cannot estimate the timing of resolution.

  1. Segments

For a description of Linde plc's operating segments, refer to Note 18 to the consolidated financial statements on Linde plc's 2021 Annual Report on Form 10-K.

The table below presents sales and operating profit information about reportable segments and Other for the quarter and six months ended June 30, 2022 and 2021.

Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2022 2021 2022 2021
SALES(a)
Americas $ 3,518 $ 3,020 $ 6,759 $ 5,860
EMEA 2,144 1,875 4,292 3,674
APAC 1,651 1,544 3,253 2,980
Engineering 644 646 1,372 1,320
Other 500 499 992 993
Total sales $ 8,457 $ 7,584 $ 16,668 $ 14,827

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Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2022 2021 2022 2021
SEGMENT OPERATING PROFIT
Americas $ 910 $ 871 $ 1,814 $ 1,666
EMEA 536 487 1,039 938
APAC 426 389 825 740
Engineering 105 108 248 217
Other 11 (18) (33) (36)
Segment operating profit 1,988 1,837 3,893 3,525
Russia-Ukraine conflict and other charges (Note 2) (993) (204) (989) (196)
Purchase accounting impacts - Linde AG (406) (491) (835) (974)
Total operating profit $ 589 $ 1,142 $ 2,069 $ 2,355

(a)Sales reflect external sales only. Intersegment sales, primarily from Engineering to the industrial gases segments, were $246 million and $477 million for the quarter and six months ended June 30, 2022, respectively, and $234 million and $423 million for the respective 2021 periods.

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  1. Equity

Equity

A summary of the changes in total equity for the quarter and six months ended June 30, 2022 and 2021 is provided below:

Quarter Ended June 30,
(Millions of dollars) 2022 2021
Activity Linde plc<br>Shareholders’<br>Equity Noncontrolling<br>Interests Total<br>Equity Linde plc<br>Shareholders’<br>Equity Noncontrolling<br>Interests Total<br>Equity
Balance, beginning of period $ 42,963 $ 1,414 $ 44,377 $ 46,210 $ 1,410 $ 47,620
Net income (a) 372 38 410 841 36 877
Other comprehensive income (loss) (1,528) (17) (1,545) 437 9 446
Noncontrolling interests:
Additions (reductions) (b) — (53) (53) — 7 7
Dividends and other capital changes — (29) (29) — (24) (24)
Dividends to Linde plc ordinary share holders ($1.17 per share in 2022 and $1.06 per share in 2021) (585) — (585) (549) — (549)
Issuances of ordinary shares:
For employee savings and incentive plans 7 — 7 (9) — (9)
Purchases of ordinary shares (1,572) — (1,572) (1,187) — (1,187)
Share-based compensation 17 — 17 34 — 34
Balance, end of period $ 39,674 $ 1,353 $ 41,027 $ 45,777 $ 1,438 $ 47,215
Six Months Ended June 30,
--- --- --- --- --- --- --- --- --- --- --- --- ---
(Millions of dollars) 2022 2021
Activity Linde plc<br>Shareholders’<br>Equity Noncontrolling<br>Interests Total<br>Equity Linde plc<br>Shareholders’<br>Equity Noncontrolling<br>Interests Total<br>Equity
Balance, beginning of period $ 44,035 $ 1,393 $ 45,428 $ 47,317 $ 2,252 $ 49,569
Net income (a) 1,546 74 1,620 1,821 74 1,895
Other comprehensive income (loss) (1,418) (29) (1,447) (218) 3 (215)
Noncontrolling interests:
Additions (reductions) (b) — (49) (49) — (846) (846)
Dividends and other capital changes — (36) (36) — (45) (45)
Dividends to Linde plc ordinary share holders ($2.34 per share in 2022 and $2.12 per share in 2021) (1,177) — (1,177) (1,102) — (1,102)
Issuances of ordinary shares:
For employee savings and incentive plans (39) — (39) (11) — (11)
Purchases of ordinary shares (3,324) — (3,324) (2,093) — (2,093)
Share-based compensation 51 — 51 63 — 63
Balance, end of period $ 39,674 $ 1,353 $ 41,027 $ 45,777 $ 1,438 $ 47,215

(a) Net income for noncontrolling interests excludes net income related to redeemable noncontrolling interests which is not significant for the quarter and six months ended June 30, 2022 and 2021 and which is not part of total equity.

(b) Additions (reductions) for noncontrolling interests for the quarter and six months ended June 30, 2022 includes the impact of deconsolidating the company's Russian gas and engineering business entities (refer to Note 2). Additions (reductions) for noncontrolling interests for the six months ended June 30, 2021 includes the impact from the deconsolidation of a joint venture with operations in APAC.

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The components of AOCI are as follows:

June 30, December 31,
(Millions of dollars) 2022 2021
Cumulative translation adjustment - net of taxes:
Americas $ (3,928) $ (3,985)
EMEA (1,384) 94
APAC (683) 154
Engineering (338) 24
Other 718 (280)
(5,615) (3,993)
Derivatives - net of taxes 147 75
Pension / OPEB (net of $276 million and $305 million tax benefit in June 30, 2022 and December 31, 2021, respectively) (998) (1,130)
$ (6,466) $ (5,048)
  1. Revenue Recognition

Revenue is accounted for in accordance with ASC 606. Revenue is recognized as control of goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled to receive in exchange for the goods or services.

Contracts with Customers

Linde serves a diverse group of industries including healthcare, chemicals and energy, manufacturing, metals and mining, food and beverage, and electronics.

Industrial Gases

Within each of the company’s geographic segments for industrial gases, there are three basic distribution methods: (i) on-site or tonnage; (ii) merchant or bulk liquid; and (iii) packaged or cylinder gases. The distribution method used by Linde to supply a customer is determined by many factors, including the customer’s volume requirements and location. The distribution method generally determines the contract terms with the customer and, accordingly, the revenue recognition accounting practices. Linde's primary products in its industrial gases business are atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, acetylene). These products are generally sold through one of the three distribution methods.

Following is a description of each of the three industrial gases distribution methods and the respective revenue recognition policies:

On-site. Customers that require the largest volumes of product and that have a relatively constant demand pattern are supplied by cryogenic and process gas on-site plants. Linde constructs plants on or adjacent to these customers’ sites and supplies the product directly to customers by pipeline. Where there are large concentrations of customers, a single pipeline may be connected to several plants and customers. On-site product supply contracts generally are total requirement contracts with terms typically ranging from 10-20 years and contain minimum purchase requirements and price escalation provisions. Many of the cryogenic on-site plants also produce liquid products for the merchant market. Therefore, plants are typically not dedicated to a single customer. Additionally, Linde is responsible for the design, construction, operations and maintenance of the plants and our customers typically have no involvement in these activities. Advanced air separation processes also allow on-site delivery to customers with smaller volume requirements.

The company’s performance obligations related to on-site customers are satisfied over time as customers receive and obtain control of the product. Linde has elected to apply the practical expedient for measuring progress towards the completion of a performance obligation and recognizes revenue as the company has the right to invoice each customer, which generally corresponds with product delivery. Accordingly, revenue is recognized when product is delivered to the customer and the company has the right to invoice the customer in accordance with the contract terms. Consideration in these contracts is generally based on pricing which fluctuates with various price indices. Variable components of consideration exist within on-site contracts but are considered constrained.

Merchant. Merchant deliveries generally are made from Linde's plants by tanker trucks to storage containers at the customer's site. Due to the relatively high distribution cost, merchant oxygen and nitrogen generally have a relatively small distribution

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radius from the plants at which they are produced. Merchant argon, hydrogen and helium can be shipped much longer distances. The customer agreements used in the merchant business are usually three-to seven-year supply agreements based on the requirements of the customer. These contracts generally do not contain minimum purchase requirements or volume commitments.

The company’s performance obligations related to merchant customers are generally satisfied at a point in time as the customers receive and obtain control of the product. Revenue is recognized when product is delivered to the customer and the company has the right to invoice the customer in accordance with the contract terms. Any variable components of consideration within merchant contracts are constrained; however, this consideration is not significant.

Packaged Gases. Customers requiring small volumes are supplied products in containers called cylinders, under medium to high pressure. Linde distributes merchant gases from its production plants to company-owned cylinder filling plants where cylinders are then filled for distribution to customers. Cylinders may be delivered to the customer’s site or picked up by the customer at a packaging facility or retail store. Linde invoices the customer for the industrial gases and the use of the cylinder container(s). The company also sells hardgoods and welding equipment purchased from independent manufacturers. Packaged gases are generally sold under one to three-year supply contracts and purchase orders and do not contain minimum purchase requirements or volume commitments.

The company’s performance obligations related to packaged gases are satisfied at a point in time. Accordingly, revenue is recognized when product is delivered to the customer or when the customer picks up product from a packaged gas facility or retail store and the company has the right to payment from the customer in accordance with the contract terms. Any variable consideration is constrained and will be recognized when the uncertainty related to the consideration is resolved.

Linde Engineering

The company designs and manufactures equipment for air separation and other industrial gas applications manufactured specifically for end customers. Sale of equipment contracts are generally comprised of a single performance obligation. Revenue from sale of equipment is generally recognized over time as Linde has an enforceable right to payment for performance completed to date and performance does not create an asset with alternative use. For contracts recognized over time, revenue is recognized primarily using a cost incurred input method. Costs incurred to date relative to total estimated costs at completion are used to measure progress toward satisfying performance obligations. Costs incurred include material, labor, and overhead costs and represent work contributing and proportionate to the transfer of control to the customer. Contract modifications are typically accounted for as part of the existing contract and are recognized as a cumulative adjustment for the inception-to-date effect of such change.

Contract Assets and Liabilities

Contract assets and liabilities result from differences in timing of revenue recognition and customer invoicing. Contract assets primarily relate to sale of equipment contracts for which revenue is recognized over time. The balance represents unbilled revenue which occurs when revenue recognized under the measure of progress exceeds amounts invoiced to customers. Customer invoices may be based on the passage of time, the achievement of certain contractual milestones or a combination of both criteria. Contract liabilities include advance payments or right to consideration prior to performance under the contract. Contract liabilities are recognized as revenue as performance obligations are satisfied under contract terms. Linde has contract assets of  $78 million and $134 million at June 30, 2022 and December 31, 2021, respectively. Total contract liabilities are $3,806 million at June 30, 2022 (current of $2,933 million and $873 million within other long-term liabilities in the condensed consolidated balance sheets). As of June 30, 2022 Linde has approximately $1.9 billion recorded in contract liabilities related to engineering projects subject to sanctions in Russia. Total contract liabilities were $3,699 million at December 31, 2021 (current contract liabilities of $2,940 million and $759 million in other long-term liabilities in the condensed consolidated balance sheets). Revenue recognized for the six months ended June 30, 2022 that was included in the contract liability at December 31, 2021 was $913 million. Contract assets and liabilities primarily relate to the Linde Engineering business.

Payment Terms and Other

Linde generally receives payment after performance obligations are satisfied, and customer prepayments are not typical for the industrial gases business. Payment terms vary based on the country where sales originate and local customary payment practices. Linde does not offer extended financing outside of customary payment terms. Amounts billed for sales and use taxes, value-added taxes, and certain excise and other specific transactional taxes imposed on revenue producing transactions are presented on a net basis and are not included in sales within the consolidated statement of income. Additionally, sales returns and allowances are not a normal practice in the industry and are not significant.

Disaggregated Revenue Information

As described above and in Note 18 to Linde plc's 2021 Annual Report on Form 10-K, the company manages its industrial gases business on a geographic basis, while the Engineering and Other businesses are generally managed on a global basis.

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Furthermore, the company believes that reporting sales by distribution method by reportable geographic segment best illustrates the nature, timing, type of customer, and contract terms for its revenues, including terms and pricing.

The following tables show sales by distribution method at the consolidated level and for each reportable segment and Other for the six months ended June 30, 2022 and June 30, 2021.

(Millions of dollars) Quarter Ended June 30, 2022
Sales Americas EMEA APAC Engineering Other Total %
Merchant $ 941 $ 634 $ 562 $ — $ 40 $ 2,177 26 %
On-Site 1,049 610 631 — — 2,290 27 %
Packaged Gas 1,473 884 389 — 9 2,755 33 %
Other 55 16 69 644 451 1,235 15 %
Total $ 3,518 $ 2,144 $ 1,651 $ 644 $ 500 $ 8,457 100 % (Millions of dollars) Quarter Ended June 30, 2021
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Sales Americas EMEA APAC Engineering Other Total %
Merchant $ 821 $ 556 $ 551 $ — $ 43 $ 1,971 26 %
On-Site 774 396 582 — — 1,752 23 %
Packaged Gas 1,369 912 392 — 6 2,679 35 %
Other 56 11 19 646 450 1,182 16 %
Total $ 3,020 $ 1,875 $ 1,544 $ 646 $ 499 $ 7,584 100 % (Millions of dollars) Six Months Ended June 30, 2022
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Sales Americas EMEA APAC Engineering Other Total %
Merchant $ 1,815 $ 1,248 $ 1,078 $ — $ 79 $ 4,220 25 %
On-Site 1,931 1,241 1,286 — — 4,458 27 %
Packaged Gas 2,906 1,775 750 — 16 5,447 33 %
Other 107 28 139 1,372 897 2,543 15 %
Total $ 6,759 $ 4,292 $ 3,253 $ 1,372 $ 992 $ 16,668 100 %
(Millions of dollars) Six Months Ended June 30, 2021
Sales Americas EMEA APAC Engineering Other Total %
Merchant $ 1,592 $ 1,087 $ 1,035 $ — $ 95 $ 3,809 26 %
On-Site 1,463 788 1,134 — — 3,385 23 %
Packaged Gas 2,701 1,772 753 — 12 5,238 35 %
Other 104 27 58 1,320 886 2,395 16 %
Total $ 5,860 $ 3,674 $ 2,980 $ 1,320 $ 993 $ 14,827 100 %

Remaining Performance Obligations

As described above, Linde's contracts with on-site customers are under long-term supply arrangements which generally require the customer to purchase their requirements from Linde and also have minimum purchase requirements. Additionally, plant sales from the Linde Engineering business are primarily contracted on a fixed price basis. The company estimates the consideration related to future minimum purchase requirements and plant sales was approximately $51 billion (excludes Russian projects which are impacted by sanctions, refer to footnote 2). This amount excludes all on-site sales above minimum purchase requirements, which can be significant depending on customer needs. In the future, actual amounts will be different due to impacts from several factors, many of which are beyond the company’s control including, but not limited to, timing of newly signed, terminated and renewed contracts, inflationary price escalations, currency exchange rates, and pass-through costs related to natural gas and electricity. The actual duration of long-term supply contracts ranges up to twenty years. The company estimates that approximately half of the revenue related to minimum purchase requirements will be earned in the next five years

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and the remaining thereafter.

  1. Subsequent Events

In July 2022 Linde signed an agreement for the sale of its GIST business. Under the terms of the agreement, the agreed sale price is approximately $275 million, plus potential additional earnouts. The divestment of this non-core business is expected to be completed in the second half of 2022, pending regulatory approvals.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")

Non-GAAP Measures

Throughout MD&A, the company provides adjusted operating results from continuing operations exclusive of certain items such as cost reduction programs and other charges, net gains on sale of businesses, purchase accounting impacts of the Linde AG merger and pension settlement charges. Adjusted amounts are non-GAAP measures which are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management find useful in evaluating the company’s operating performance. Items which the company does not believe to be indicative of on-going business performance are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. In addition, operating results from continuing operations, excluding these items, is important to management's development of annual and long-term employee incentive compensation plans. 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.

The non-GAAP measures and reconciliations are separately included in a later section in the MD&A titled "Non-GAAP Measures and Reconciliations."

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Consolidated Results

The following table provides summary information for the quarters and six months ended June 30, 2022 and 2021. The reported amounts are GAAP amounts from the Consolidated Statements of Income. The adjusted amounts are intended to supplement investors' understanding of the company's financial information and are not a substitute for GAAP measures:

Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars, except per share data) 2022 2021 Variance 2022 2021 Variance
Sales $ 8,457 $ 7,584 12 % $ 16,668 $ 14,827 12 %
Cost of sales, exclusive of depreciation and amortization $ 4,940 $ 4,194 18 % $ 9,738 $ 8,248 18 %
As a percent of sales 58.4 % 55.3 % 58.4 % 55.6 %
Selling, general and administrative $ 771 $ 822 (6) % $ 1,573 $ 1,609 (2) %
As a percent of sales 9.1 % 10.8 % 9.4 % 10.9 %
Depreciation and amortization $ 1,091 $ 1,171 (7) % $ 2,203 $ 2,337 (6) %
Russia-Ukraine conflict and other charges (b) $ 993 $ 204 387 % $ 989 $ 196 405 %
Other income (expense) - net $ (36) $ (17) (112) % $ (24) $ (13) (85) %
Operating profit $ 589 $ 1,142 (48) % $ 2,069 $ 2,355 (12) %
Operating margin 7.0 % 15.1 % 12.4 % 15.9 %
Interest expense - net $ 5 $ 18 (72) % $ 14 $ 38 (63) %
Net pension and OPEB cost (benefit), excluding service cost $ (62) $ (49) 27 % $ (126) $ (98) 29 %
Effective tax rate 44.3 % 28.5 % 30.0 % 24.9 %
Income from equity investments $ 50 $ 37 35 % $ 94 $ 80 18 %
Noncontrolling interests from continuing operations $ (38) $ (36) 6 % $ (74) $ (74) — %
Income from continuing operations $ 372 $ 840 (56) % $ 1,546 $ 1,819 (15) %
Diluted earnings per share from continuing operations $ 0.74 $ 1.60 (54) % $ 3.04 $ 3.46 (12) %
Diluted shares outstanding 505,269 523,723 (4) % 508,432 525,380 (3) %
Number of employees 72,438 71,736 1 % 72,438 71,736 1 %
Adjusted Amounts (a)
Operating profit $ 1,988 $ 1,837 8 % $ 3,893 $ 3,525 10 %
Operating margin 23.5 % 24.2 % 23.4 % 23.8 %
Effective tax rate 24.5 % 24.6 % 24.4 % 24.3 %
Income from continuing operations $ 1,566 $ 1,415 11 % $ 3,066 $ 2,727 12 %
Diluted earnings per share from continuing operations $ 3.10 $ 2.70 15 % $ 6.03 $ 5.19 16 %
Other Financial Data (a)
EBITDA from continuing operations $ 1,730 $ 2,350 (26) % $ 4,366 $ 4,772 (9) %
As percent of sales 20.5 % 31.0 % 26.2 % 32.2 %
Adjusted EBITDA from continuing operations $ 2,746 $ 2,585 6 % $ 5,409 $ 5,023 8 %
As percent of sales 32.5 % 34.1 % 32.5 % 33.9 %

(a) Adjusted Amounts and Other Financial Data are non-GAAP performance measures. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliations" section of this MD&A.

(b) See Note 2 to the condensed consolidated financial statements.

Reported

In the second quarter of 2022, Linde's sales were $8,457 million, 12% above prior year, primarily driven by 7% price attainment and 2% higher volumes. Cost pass-through, representing the contractual billing of energy cost variances primarily to onsite customers, increased sales by 7% in the quarter, with minimal impact on operating profit. Currency translation decreased sales by 5% in the second quarter of 2022 as compared to 2021.

Reported operating profit for the second quarter of 2022 of $589 million, or 7.0% of sales, was 48% below prior year. The reported year-over-year decrease was primarily due to charges relating to the deconsolidation and impairment of Russian subsidiaries resulting from the ongoing war in Ukraine and related sanctions (see Note 2 to the condensed consolidated financial statements) partially offset by higher price and productivity initiatives. The reported effective tax rate ("ETR") was 44.3% in the second quarter 2022 versus 28.5% in the second quarter 2021, driven primarily by the non-deductibility of the

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charges related to the deconsolidation and impairment of Linde's Russian subsidiaries partially offset by the reversal of a related deferred tax liability. Diluted earnings per share from continuing operations ("EPS") was $0.74, or 54% below EPS of $1.60 in the second quarter of 2021 primarily due to lower income from continuing operations, partially offset by lower diluted shares outstanding.

Adjusted

In the second quarter of 2022, adjusted operating profit of $1,988 million, or 23.5% of sales, was 8% higher as compared to 2021 driven by higher price and productivity initiatives, partially offset by inflation. The adjusted ETR was 24.5% in the second quarter 2022 versus 24.6% in the 2021 quarter. On an adjusted basis, EPS was $3.10, 15% above the 2021 adjusted EPS of $2.70, driven by higher adjusted income from continuing operations and lower diluted shares outstanding.

Outlook

Linde provides quarterly updates on operating results, material trends that may affect financial performance, and financial guidance via quarterly earnings releases and investor teleconferences. These updates are available on the company’s website, www.linde.com, but are not incorporated herein.

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Results of operations

The changes in consolidated sales compared to the prior year are attributable to the following:

Quarter Ended June 30, 2022 vs. 2021 Six Months Ended June 30, 2022 vs. 2021
% Change % Change
Factors Contributing to Changes - Sales
Volume 2 % 2 %
Price/Mix 7 % 6 %
Cost pass-through 7 % 7 %
Currency (5) % (4) %
Acquisitions/divestitures — % — %
Engineering 1 % 1 %
12 % 12 %

Sales

Sales increased $873 million, or 12%, for the second quarter of 2022 and increased $1,841 million, or 12% for the six months ended June 30, 2022 versus the respective 2021 periods. Volume growth in all end markets except healthcare and project startups increased sales by 2% in the quarter and year-to-date period. Higher pricing across all geographic segments contributed 7% to sales in the quarter and 6% in the year-to-date period. Currency translation decreased sales by 5% in the quarter and 4% in the year-to-date period, largely in EMEA and APAC, driven by the weakening of the Euro, Australian dollar and British pound against the U.S. dollar. Cost pass-through increased sales by 7% in the quarter and 7% in the year-to-date period with minimal impact on operating profit.

Cost of sales, exclusive of depreciation and amortization

Cost of sales, exclusive of depreciation and amortization increased $746 million, or 18%, for the second quarter of 2022 and increased $1,490 million, or 18% for the six months ended June 30, 2022 primarily due to inflation and higher volumes, partially offset by productivity initiatives and currency impacts. Cost of sales, exclusive of depreciation and amortization was 58.4% and 58.4% of sales, respectively, for the second quarter and six months ended June 30, 2022 versus 55.3% and 55.6% of sales for the respective 2021 periods. The increase as a percentage of sales in the quarter and for the six months ended June 30, 2022 was due primarily to higher cost pass-through.

Selling, general and administrative expenses

Selling, general and administrative expense ("SG&A") decreased $51 million, or 6%, for the second quarter of 2022 and decreased $36 million, or 2%, for the six months ended June 30, 2022. SG&A was 9.1% of second quarter sales and 9.4% of sales for the six months ended June 30, 2022 versus 10.8% and 10.9% for the respective 2021 periods. Currency impacts decreased SG&A by approximately $32 million and $50 million for the quarter and six months ended June 30, 2022, respectively. Excluding currency impacts, underlying SG&A decreased in the second quarter of 2022 driven primarily by lower incentive compensation and increased for the six months ended June 30, 2022 due primarily to higher costs.

Depreciation and amortization

Reported depreciation and amortization expense decreased $80 million, or 7%, for the second quarter of 2022 and decreased $134 million, or 6%, for the six months ended June 30, 2022. The decrease is related primarily to lower depreciation and amortization of intangible assets acquired in the merger and currency impacts.

On an adjusted basis, depreciation and amortization decreased $2 million, for the second quarter of 2022 and increased $4 million, for the year-to-date period. Currency impacts decreased depreciation and amortization by $29 million and $45 million, for the quarter and six months ended June 30, 2022, respectively. Excluding currency, underlying depreciation and amortization increased primarily due to new project start ups.

Russia-Ukraine conflict and other charges

Russia-Ukraine conflict and other charges were $993 million and $989 million for the second quarter and six months ended June 30, 2022, respectively, and $204 million and $196 million for the respective 2021 periods. 2022 charges relate primarily to the deconsolidation and impairment of Russian subsidiaries resulting from the ongoing war in Ukraine and related sanctions. 2021 charges relate to cost reduction program and other charges, primarily severance (see Note 2 to the condensed consolidated financial statements).

On an adjusted basis, these costs have been excluded in both periods.

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Operating profit

On a reported basis, operating profit decreased $553 million, or 48%, for the second quarter of 2022 and decreased $286 million, or 12%, for the six months ended June 30, 2022. The decrease was primarily due to Russia-Ukraine conflict and other charges, which more than offset growth from higher pricing and productivity initiatives and lower depreciation and amortization driven by merger related intangible assets.

On an adjusted basis, which excludes the impacts of purchase accounting and Russia-Ukraine conflict and other charges, operating profit increased $151 million, or 8% in the 2022 quarter and increased $368 million, or 10%, for the six months ended June 30, 2022. Operating profit growth was driven by higher pricing and productivity initiatives which more than offset inflation during the period. A discussion of operating profit by segment is included in the segment discussion that follows.

Interest expense - net

Reported interest expense - net decreased $13 million for the second quarter of 2022 and decreased $24 million for the six months ended June 30, 2022. On an adjusted basis, interest expense decreased $19 million for the second quarter of 2022 and decreased $38 million for the six months ended June 30, 2022 versus the respective 2021 periods. The decrease in both periods was driven by a lower effective borrowing rate and higher interest income on cash deposits.

Net pension and OPEB cost (benefit), excluding service cost

Reported net pension and OPEB cost (benefit), excluding service cost was a benefit of $62 million and $126 million for the quarter and six months ended June 30, 2022, respectively, versus a benefit of $49 million and $98 million for the respective 2021 periods. The increase in benefit primarily relates to lower amortization of deferred losses, partially offset by higher interest cost reflective of the higher discount rate environment year-over-year.

Effective tax rate

The reported effective tax rate ("ETR") for the quarter and six months ended June 30, 2022 was 44.3% and 30.0%, respectively, versus 28.5% and 24.9% for the respective 2021 periods. The increase is primarily related to the net tax expense resulting from the deconsolidation and impairment of the company’s business in Russia, driven predominantly by the non-deductibility of the impairment charges partially offset by the reversal of a related deferred tax liability. For the quarter and six months ended June 30, 2021, the ETR included net tax charges of $38 million primarily related to $81 million of expense due to a tax rate increase in the United Kingdom partially offset by a tax settlement benefit of $33 million (see Note 2 to the condensed consolidated financial statements).

On an adjusted basis, the ETR for the quarter and six months ended June 30, 2022 was 24.5% and 24.4%, respectively, versus 24.6% and 24.3% for the respective 2021 periods.

Income from equity investments

Reported income from equity investments for the second quarter of 2022 and six months ended June 30, 2022 was $50 million and $94 million, respectively, versus $37 million and $80 million for the respective 2021 periods. On an adjusted basis, income from equity investments for the second quarter and six months ended June 30, 2022 was $69 million and $133 million, respectively, versus $56 million and $118 million in the prior year respective periods. The increase on both basis was primarily driven by the overall performance of investments in APAC.

Noncontrolling interests from continuing operations

At June 30, 2022, noncontrolling interests from continuing operations consisted primarily of non-controlling shareholders' investments in APAC (primarily China).

Reported noncontrolling interests from continuing operations increased $2 million for the second quarter of 2022 and was flat for the six months ended June 30, 2022, versus the respective 2021 periods.

Income from continuing operations

Reported income from continuing operations decreased $468 million, or 56%, for the second quarter of 2022 and decreased $273 million, or 15%, for the six months ended June 30, 2022 versus the respective 2021 periods, primarily due to lower overall operating profit.

On an adjusted basis, which excludes the impacts of purchase accounting and Russia-Ukraine conflict and other charges, income from continuing operations increased $151 million, or 11%, for the quarter and increased $339 million, or 12%, for the six months ended June 30, 2022 versus the respective 2021 periods. The increase was driven by higher overall adjusted operating profit.

Diluted earnings per share from continuing operations

Reported diluted earnings per share from continuing operations decreased $0.86, or 54%, for the second quarter of 2022 and decreased $0.42, or 12%, for the six months ended June 30, 2022 versus the comparable 2021 periods. The decrease was primarily due to lower income from continuing operations, partially offset by lower diluted shares outstanding.

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On an adjusted basis, diluted EPS for the second quarter of 2022 increased $0.40, or 15%, and increased $0.84, or 16% for the six months ended June 30, 2022 versus the respective 2021 periods. The increase was primarily due to higher adjusted income from continuing operations and lower diluted shares outstanding.

Employees

The number of employees at June 30, 2022 was 72,438, an increase of 702 employees from June 30, 2021, driven primarily by the Americas.

Other Financial Data

EBITDA was $1,730 million for the second quarter of 2022 as compared to $2,350 million in the respective 2021 period. EBITDA was $4,366 million for the six months ended June 30, 2022 as compared to $4,772 million in the respective 2021 period. The decrease in both periods was driven by lower income from continuing operations plus depreciation and amortization versus the prior periods.

Adjusted EBITDA from continuing operations increased to $2,746 million for the second quarter 2022 from $2,585 million in the respective 2021 period. Adjusted EBITDA from continuing operations increased to $5,409 million from $5,023 million for the six months ended June 30, 2022 as compared to the respective 2021 period primarily due to higher adjusted income from continuing operations plus depreciation and amortization versus the prior period.

See the "Non-GAAP Measures and Reconciliations" section for definitions and reconciliations of these adjusted non-GAAP measures to reported GAAP amounts.

Other Comprehensive Income (Loss)

Other comprehensive losses for the second quarter of 2022 and six months ended June 30, 2022 were $1,545 million and $1,447 million, respectively, resulting primarily from currency translation adjustments of $1,699 million and $1,651 million during the quarter and year-to-date periods, respectively. The translation adjustments reflect the impact of translating local currency foreign subsidiary financial statements to U.S. dollars, and are largely driven by the movement of the U.S. dollar against major currencies including the Euro, British pound and the Chinese yuan. See the "Currency" section of the MD&A for exchange rates used for translation purposes and Note 11 to the condensed consolidated financial statements for a summary of the currency translation adjustment component of accumulated other comprehensive income by segment.

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Segment Discussion

The following summary of sales and operating profit by segment provides a basis for the discussion that follows. Linde plc evaluates the performance of its reportable segments based on operating profit, excluding items not indicative of ongoing business trends. The reported amounts are GAAP amounts from the Consolidated Statements of Income.

Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2022 2021 Variance 2022 2021 Variance
SALES
Americas $ 3,518 $ 3,020 16 % $ 6,759 $ 5,860 15 %
EMEA 2,144 1,875 14 % 4,292 3,674 17 %
APAC 1,651 1,544 7 % 3,253 2,980 9 %
Engineering 644 646 — % 1,372 1,320 4 %
Other 500 499 — % 992 993 — %
Total sales $ 8,457 $ 7,584 12 % $ 16,668 $ 14,827 12 %
SEGMENT OPERATING PROFIT
Americas $ 910 $ 871 4 % $ 1,814 $ 1,666 9 %
EMEA 536 487 10 % 1,039 938 11 %
APAC 426 389 10 % 825 740 11 %
Engineering 105 108 (3) % 248 217 14 %
Other 11 (18) 161 % (33) (36) 8 %
Segment operating profit $ 1,988 $ 1,837 8 % $ 3,893 $ 3,525 10 %
Reconciliation to reported operating profit:
Russia-Ukraine conflict and other charges (Note 2) (993) (204) (989) (196)
Purchase accounting impacts - Linde AG (406) (491) (835) (974)
Total operating profit $ 589 $ 1,142 $ 2,069 $ 2,355

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Americas

Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2022 2021 Variance 2022 2021 Variance
Sales $ 3,518 $ 3,020 16 % $ 6,759 $ 5,860 15 %
Operating profit $ 910 $ 871 4 % $ 1,814 $ 1,666 9 %
As a percent of sales 25.9 % 28.8 % 26.8 % 28.4 %
Quarter Ended June 30, 2022 vs. 2021 Six Months Ended June 30, 2021 vs. 2020
--- --- --- --- ---
% Change % Change
Factors Contributing to Changes - Sales
Volume 3 % 4 %
Price/Mix 6 % 5 %
Cost pass-through 7 % 6 %
Currency — % — %
Acquisitions/divestitures — % — %
16 % 15 %

The Americas segment includes Linde's industrial gases operations in approximately 20 countries including the United States, Canada, Mexico, and Brazil.

Sales

Sales for the Americas segment increased $498 million, or 16%, for the second quarter and increased $899 million, or 15%, for the six months ended June 30, 2022 versus the respective 2021 periods. Higher pricing contributed 6% to sales in the quarter and 5% in the year-to-date period. Higher volumes increased sales by 3% for the second quarter and increased 4% for the six months ended June 30, 2022, driven by higher demand across all end markets except healthcare, led by chemicals and energy and manufacturing. Cost pass-through increased sales by 7% for the second quarter and increased 6% for the six months ended June 30, 2022 with minimal impact on operating profit. The impact of currency translation in the quarter and year-to-date period was not significant.

Operating profit

Operating profit in the Americas segment increased $39 million, or 4%, in the second quarter and increased $148 million, or 9%, for the six months ended June 30, 2022 versus the respective 2021 periods, driven primarily by higher pricing and continued productivity initiatives which more than offset inflation during the quarter and year-to-date period. The 2022 second quarter includes a one-time charge that is negatively impacting operating margin by approximately 100 basis points.

EMEA

Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2022 2021 Variance 2022 2021 Variance
Sales $ 2,144 $ 1,875 14 % $ 4,292 $ 3,674 17 %
Operating profit $ 536 $ 487 10 % $ 1,039 $ 938 11 %
As a percent of sales 25.0 % 26.0 % 24.2 % 25.5 %

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Quarter Ended June 30, 2022 vs. 2021 Six Months Ended June 30, 2022 vs. 2021
% Change % Change
Factors Contributing to Changes - Sales
Volume (1) % (1) %
Price/Mix 12 % 11 %
Cost pass-through 14 % 15 %
Currency (11) % (8) %
Acquisitions/divestitures — % — %
14 % 17 %

The EMEA segment includes Linde's industrial gases operations in approximately 45 European, Middle Eastern and African countries including Germany, France, Sweden, the Republic of South Africa, and the United Kingdom.

Sales

EMEA segment sales increased by $269 million, or 14%, in the second quarter and increased $618 million, or 17%, for the six months ended June 30, 2022 as compared to the respective 2021 periods. Cost pass-through contributed 14% to sales in the quarter and 15% in the year-to-date period, with minimal impact on operating profit, while higher price attainment increased sales by 12% in the quarter and 11% in the year-to-date period. Volumes decreased 1% in both quarter and year to date period. Currency translation decreased sales by 11% in the quarter and 8% in the year-to-date period, due largely to the weakening of the Euro and British pound against the U.S. Dollar.

Linde has deconsolidated its Russian gas business as of June 30, 2022 which contributed $70 million and $128 million to sales in the second quarter and six months ended June 30, 2022, respectively (see Note 2 to the condensed consolidated financial statements). Sales in Ukraine are immaterial.

Operating Profit

Operating profit for the EMEA segment increased by $49 million, or 10%, in the second quarter and increased $101 million, or 11%, for the six months ended June 30, 2022 as compared to the respective 2021 periods, driven largely by higher pricing and continued productivity initiatives which more than offset inflation during the quarter and year-to-date period.

APAC

Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2022 2021 Variance 2022 2021 Variance
Sales $ 1,651 $ 1,544 7 % $ 3,253 $ 2,980 9 %
Operating profit $ 426 $ 389 10 % $ 825 $ 740 11 %
As a percent of sales 25.8 % 25.2 % 25.4 % 24.8 %
Quarter Ended June 30, 2022 vs. 2021 Six Months Ended June 30,
--- --- --- --- ---
% Change % Change
Factors Contributing to Changes - Sales
Volume/Equipment 3 % 5 %
Price/Mix 5 % 4 %
Cost pass-through 4 % 4 %
Currency (5) % (4) %
Acquisitions/divestitures — % — %
7 % 9 %

The APAC segment includes Linde's industrial gases operations in approximately 20 Asian and South Pacific countries and regions including China, Australia, India, and South Korea.

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Sales

Sales for the APAC segment increased $107 million, or 7%, for the second quarter and increased $273 million, or 9%, for the six months ended June 30, 2022 versus the respective 2021 periods. Volumes increased 3% in the quarter and 5% in the year-to-date period driven by project start-ups in the electronics and chemicals and energy end markets. Higher pricing contributed 5% to sales in the quarter and 4% to sales in the year-to-date period. Cost pass-through contributed 4% to sales in the quarter and year-to-date period with minimal impact on operating profit. Currency translation decreased sales by 5% in quarter and 4% in the year-to-date period driven primarily by the weakening of the Australian dollar, Korean won and Chinese Yuan against the U.S. Dollar.

Operating profit

Operating profit in the APAC segment increased $37 million, or 10%, in the second quarter and increased $85 million , or 11%, for the six months ended June 30, 2022 versus the respective 2021 periods driven by higher volumes and pricing and continued productivity initiatives which more than offset the impact of inflation during the quarter and year-to-date period.

Engineering

Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2022 2021 Variance 2022 2021 Variance
Sales $ 644 $ 646 — % $ 1,372 $ 1,320 4 %
Operating profit $ 105 $ 108 (3) % $ 248 $ 217 14 %
As a percent of sales 16.3 % 16.7 % 18.1 % 16.4 %
Quarter Ended June 30, 2022 vs. 2021 Six Months Ended June 30, 2022 vs. 2021
--- --- --- --- ---
% Change % Change
Factors Contributing to Changes - Sales
Volume 10 % 11 %
Currency (10) % (7) %
— % 4 %

Sales

Engineering segment sales decreased $2 million in the second quarter and increased $52 million, or 4%, in the six months ended June 30, 2022 as compared to the respective 2021 periods driven primarily by project timing, offset by currency impacts which decreased sales by 10% in the quarter and 7% in the year-to-date period.

Projects for Russia that are currently sanctioned represent approximately $300 million and $650 million of the Engineering segment sales during the second quarter and six months ended June 30, 2022.

Operating profit

Engineering segment operating profit decreased, $3 million, or 3%, in the second quarter and increased $31 million, or 14%, for the six months ended June 30, 2022 as compared to the respective 2021 periods driven primarily by project timing.

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Other

Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2022 2021 Variance 2022 2021 Variance
Sales $ 500 $ 499 — % $ 992 $ 993 — %
Operating profit (loss) $ 11 $ (18) 161 % $ (33) $ (36) 8 %
As a percent of sales 2.2 % (3.6) % (3.3) % (3.6) % Quarter Ended June 30, 2022 vs. 2021 Six Months Ended June 30, 2022 vs. 2021
--- --- --- --- ---
% Change % Change
Factors Contributing to Changes - Sales
Volume/price 6 % 3 %
Cost pass-through — % 1 %
Currency (6) % (4) %
Acquisitions/divestitures — % — %
— % — %

Other consists of corporate costs and a few smaller businesses including: Surface Technologies, GIST and global helium wholesale; which individually do not meet the quantitative thresholds for separate presentation.

Sales

Sales for Other increased $1 million for the second quarter and decreased $1 million for the six months ended June 30, 2022 versus the respective 2021 periods. Currency translation decreased sales by 6% in the quarter and decreased 4% in the year-to-date period. Underlying sales increased 6% in the quarter and 3% for the year-to-date period driven by higher aviation and electronic sales in the coatings business. Cost pass-through increased sales by 1% in the year-to-date period.

Operating profit

Operating profit in Other increased $29 million, or 161% in the second quarter and increased $3 million, or 8%, in the six months ended June 30, 2022 versus the respective 2021 periods, due primarily to lower corporate costs in the quarter which were largely offset by higher sourcing costs in the global helium business in the year-to-date period.

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Currency

The results of Linde's non-U.S. operations are translated to the company’s reporting currency, the U.S. dollar, from the functional currencies. For most operations, Linde uses the local currency as its functional currency. There is inherent variability and unpredictability in the relationship of these functional currencies to the U.S. dollar and such currency movements may materially impact Linde's results of operations in any given period.

To help understand the reported results, the following is a summary of the significant currencies underlying Linde's consolidated results and the exchange rates used to translate the financial statements (rates of exchange expressed in units of local currency per U.S. dollar):

Percentage of YTD 2022 Consolidated Sales Exchange Rate for<br>Income Statement Exchange Rate for<br>Balance Sheet
Year-To-Date Average June 30, December 31,
Currency 2022 2021 2022 2021
Euro 22 % 0.91 0.83 0.95 0.88
Chinese yuan 8 % 6.47 6.47 6.70 6.36
British pound 7 % 0.77 0.72 0.82 0.74
Australian dollar 4 % 1.39 1.30 1.45 1.38
Brazilian real 4 % 5.06 5.38 5.26 5.58
Canadian dollar 3 % 1.27 1.25 1.29 1.26
Korean won 3 % 1,231 1,117 1,299 1,189
Mexican peso 2 % 20.26 20.18 20.12 20.53
Indian rupee 2 % 76.17 73.32 78.98 74.34
South African rand 2 % 15.39 14.53 16.28 15.94
Swedish krona 1 % 9.58 8.41 10.22 9.05
Thailand bhat 1 % 33.69 30.80 35.30 33.40

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Liquidity, Capital Resources and Other Financial Data

The following selected cash flow information provides a basis for the discussion that follows:

(Millions of dollars) Six months ended June 30,
2022 2021
NET CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income (including noncontrolling interests) $ 1,620 $ 1,893
Non-cash charges (credits):
Add: Depreciation and amortization 2,203 2,337
Add: Deferred income taxes (221) (78)
Add: Share-based compensation 51 63
Add: Russia-Ukraine conflict and other charges, net of payments (a) 922 95
Net income adjusted for non-cash charges 4,575 4,310
Less: Working capital (497) (360)
Less: Pension contributions (19) (28)
Other 74 14
Net cash provided by operating activities $ 4,133 $ 3,936
INVESTING ACTIVITIES
Capital expenditures (1,475) (1,506)
Acquisitions, net of cash acquired (49) (31)
Divestitures and asset sales 17 77
Net cash provided by (used for) investing activities $ (1,507) $ (1,460)
FINANCING ACTIVITIES
Debt increase (decrease) - net 2,760 314
Issuances (purchases) of common stock - net (3,307) (2,050)
Cash dividends - Linde plc shareholders (1,177) (1,102)
Noncontrolling interest transactions and other (35) (277)
Net cash provided by (used for) financing activities $ (1,759) $ (3,115)
Effect of exchange rate changes on cash and cash equivalents $ (35) $ 22
Cash and cash equivalents, end-of-period $ 3,655 $ 3,137

(a) See Note 2 to the condensed consolidated financial statements.

Cash Flow from Operations

Cash provided by operations of $4,133 million for the six months ended June 30, 2022 increased $197 million, or 5%, versus 2021. The increase was driven primarily by higher net income adjusted for non-cash charges, partially offset by higher working capital requirements. Russia-Ukraine conflict and other charges were $989 million and $196 million, respectively, for the six months ended June 30, 2022 and 2021. Related cash outflows were $67 million and $101 million for the same respective periods.

Linde estimates that total 2022 required contributions to its pension plans will be in the range of $40 million to $50 million, of which $19 million has been made through June 30, 2022.

As of June 30, 2022, Linde has approximately $1.9 billion recorded in contract liabilities within the condensed consolidated balance sheet related to engineering projects in Russia. Any obligation to satisfy the related residual contract liabilities may have an adverse effect on Linde’s cash flows.

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Investing

Net cash used for investing of $1,507 million for the six months ended June 30, 2022 increased $47 million versus 2021, as higher acquisition spend and lower proceeds from asset disposals and divestitures were largely offset by lower capital expenditures.

Capital expenditures for the six months ended June 30, 2022 were $1,475 million, $31 million lower than the prior year.

At June 30, 2022, Linde's sale of gas backlog of large projects under construction was approximately $3.6 billion. This represents the total estimated capital cost of large plants under construction.

Acquisitions for the six months ended June 30, 2022 and 2021 were $49 million and $31 million, respectively, and related primarily to acquisitions in EMEA. Divestitures and asset sales for the six months ended June 30, 2022 and 2021 were $17 million and $77 million, respectively.

Financing

Cash used by financing activities was $1,759 million for the six months ended June 30, 2022 as compared to cash used for financing activities of $3,115 million for the six months ended June 30, 2021. Cash provided by debt was $2,760 million versus $314 million in 2021 driven by higher commercial paper borrowings and debt issuances in 2022. In January 2022, Linde repaid €1.0 billion of 0.250% notes that became due. In March 2022, Linde issued €500 million of 1.000% notes due 2027, €750 million of 1.375% notes due 2031, and €800 million of 1.625% notes due 2035. In May 2022, Linde repaid $500 million of 2.20% notes due in August 2022.

Net purchases of ordinary shares were $3,307 million in 2022 versus $2,050 million in 2021. On February 28, 2022, the company’s Board of Directors approved the additional repurchase of $10.0 billion of its ordinary shares. For additional information related to the share repurchase programs, see Part II Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Cash dividends of $1,177 million increased $75 million from 2021 driven primarily by a 10% increase in quarterly dividends per share from $1.06 per share to $1.17 per share, partially offset by lower shares outstanding. Cash used for Noncontrolling interest transactions and other was $35 million for the six months ended June 30, 2022 versus cash used of $277 million for the respective 2021 period due to the settlement of the buyout of minority interests in the Republic of South Africa in January of 2021.

The company continues to believe it has sufficient operating flexibility, cash, and funding sources to meet its business needs around the world. The company had $3.7 billion of cash as of June 30, 2022, and has a $5 billion unsecured and undrawn revolving credit agreement with no associated financial covenants. No borrowings were outstanding under the credit agreement as of June 30, 2022. The company does not anticipate any limitations on its ability to access the debt capital markets and/or other external funding sources and remains committed to its strong ratings from Moody’s and Standard & Poor’s.

Legal Proceedings

See Note 9 to the condensed consolidated financial statements.

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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.

Quarter Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Adjusted Operating Profit and Operating Margin
Reported operating profit $ 589 $ 1,142 $ 2,069 $ 2,355
Add: Russia-Ukraine conflict and other charges 993 204 989 196
Add: Purchase accounting impacts - Linde AG (c) 406 491 835 974
Total adjustments 1,399 695 1,824 1,170
Adjusted operating profit $ 1,988 $ 1,837 $ 3,893 $ 3,525
Reported percentage change (48) % 93 % (12) % 78 %
Adjusted percentage change 8 % 39 % 10 % 32 %
Reported sales $ 8,457 $ 7,584 $ 16,668 $ 14,827
Reported operating margin 7.0 % 15.1 % 12.4 % 15.9 %
Adjusted operating margin 23.5 % 24.2 % 23.4 % 23.8 %
Adjusted Depreciation and amortization
Reported depreciation and amortization $ 1,091 $ 1,171 $ 2,203 $ 2,337
Less: Purchase accounting impacts - Linde AG (c) (401) (479) (819) (957)
Adjusted depreciation and amortization $ 690 $ 692 $ 1,384 $ 1,380
Adjusted Other Income (Expense) - net
Reported Other Income (Expense) - net $ (36) $ (17) $ (24) $ (13)
Less: Purchase accounting impacts - Linde AG (c) (5) (12) (16) (17)
Adjusted Other Income (Expense) - net $ (31) $ (5) $ (8) $ 4
Adjusted Net Pension and OPEB Cost (Benefit), Excluding Service Cost
Reported net pension and OPEB cost (benefit), excluding service cost $ (62) $ (49) $ (126) $ (98)
Add: Pension settlement charges — — — —
Adjusted Net Pension and OPEB cost (benefit), excluding service costs $ (62) $ (49) $ (126) $ (98)
Adjusted Interest Expense - Net
Reported interest expense - net $ 5 $ 18 $ 14 $ 38
Add: Purchase accounting impacts - Linde AG (c) 9 15 19 33
Adjusted interest expense - net $ 14 $ 33 $ 33 $ 71

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Adjusted Income Taxes (a)
Reported income taxes $ 286 $ 334 $ 655 $ 602
Add: Purchase accounting impacts - Linde AG (c) 108 116 216 234
Add: Pension settlement charges — — — —
Add: Russia-Ukraine conflict and other charges 104 6 101 26
Total adjustments 212 122 317 260
Adjusted income taxes $ 498 $ 456 $ 972 $ 862
Adjusted Effective Tax Rate (a)
Reported income before income taxes and equity investments $ 646 $ 1,173 $ 2,181 $ 2,415
Add: Pension settlement charge — — — —
Add: Purchase accounting impacts - Linde AG (c) 397 476 816 941
Add: Russia-Ukraine conflict and other charges 993 204 989 196
Total adjustments 1,390 680 1,805 1,137
Adjusted income before income taxes and equity investments $ 2,036 $ 1,853 $ 3,986 $ 3,552
Reported Income taxes $ 286 $ 334 $ 655 $ 602
Reported effective tax rate 44.3 % 28.5 % 30.0 % 24.9 %
Adjusted income taxes $ 498 $ 456 $ 972 $ 862
Adjusted effective tax rate 24.5 % 24.6 % 24.4 % 24.3 %
Income from Equity Investments
Reported income from equity investments $ 50 $ 37 $ 94 $ 80
Add: Purchase accounting impacts - Linde AG (c) — — — —
Add: Russia-Ukraine conflict and other charges (e) 19 19 39 38
Adjusted income from equity investments $ 69 $ 56 $ 133 $ 118
Adjusted Noncontrolling Interests from Continuing Operations
Reported noncontrolling interests from continuing operations $ (38) $ (36) $ (74) $ (74)
Add: Purchase accounting impacts - Linde AG (c) (3) (2) (7) (7)
Adjusted noncontrolling interests from continuing operations $ (41) $ (38) $ (81) $ (81)
Adjusted Income from Continuing Operations (b)
Reported income from continuing operations $ 372 $ 840 $ 1,546 $ 1,819
Add: Pension settlement charge — — — —
Add: Russia-Ukraine conflict and other charges 889 198 888 170
Add: Purchase accounting impacts - Linde AG (c) 305 377 632 738
Total adjustments 1,194 575 1,520 908
Adjusted income from continuing operations $ 1,566 $ 1,415 $ 3,066 $ 2,727

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Adjusted Diluted EPS from Continuing Operations (b)
Reported diluted EPS from continuing operations $ 0.74 $ 1.60 $ 3.04 $ 3.46
Add: Pension settlement charge — — — —
Add: Russia-Ukraine conflict and other charges 1.76 0.38 1.75 0.32
Add: Purchase accounting impacts - Linde AG (c) 0.60 0.72 1.24 1.41
Total adjustments 2.36 1.10 2.99 1.73
Adjusted diluted EPS from continuing operations $ 3.10 $ 2.70 $ 6.03 $ 5.19
Reported percentage change (54) % 84 % (12) % 79 %
Adjusted percentage change 15 % 42 % 16 % 37 %
Adjusted EBITDA and % of Sales
Income from continuing operations $ 372 $ 840 $ 1,546 $ 1,819
Add: Noncontrolling interests related to continuing operations 38 36 74 74
Add: Net pension and OPEB cost (benefit), excluding service cost (62) (49) (126) (98)
Add: Interest expense 5 18 14 38
Add: Income taxes 286 334 655 602
Add: Depreciation and amortization 1,091 1,171 2,203 2,337
EBITDA from continuing operations $ 1,730 $ 2,350 $ 4,366 $ 4,772
Add: Russia-Ukraine conflict and other charges 993 204 989 196
Add: Purchase accounting impacts - Linde AG (c) 23 31 54 55
Total adjustments 1,016 235 1,043 251
Adjusted EBITDA from continuing operations $ 2,746 $ 2,585 $ 5,409 $ 5,023
Reported sales $ 8,457 $ 7,584 $ 16,668 $ 14,827
% of sales
EBITDA from continuing operations 20.5 % 31.0 % 26.2 % 32.2 %
Adjusted EBITDA from continuing operations 32.5 % 34.1 % 32.5 % 33.9 % (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 Adjusted 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 purchase 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.<br><br>A summary of each of the adjustments made for Purchase accounting impacts - Linde AG are as follows:<br><br>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 and the allocation of fair value step-up for ongoing Linde AG asset disposals (reflected in Other Income/(Expense)).<br><br>Adjusted Interest Expense - Net: Relates to the amortization of the fair value of debt acquired in the merger.<br><br>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.<br><br>Adjusted Income from Equity Investments: Represents the amortization of increased fair value on equity investments related to depreciable and amortizable assets.<br><br>Adjusted Noncontrolling Interests from Continuing Operations: Represents the noncontrolling interests’ ownership portion of the adjustments described above determined on an entity by entity basis.
(e) Impairment charge related to a joint venture in the APAC segment.

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Net Debt and Adjusted Net Debt

Net debt is a financial liquidity measure used by investors, financial analysts and management to evaluate the ability of a company to repay its debt. Purchase accounting impacts have been excluded as they are non-cash and do not have an impact on liquidity.

June 30,<br>2022 December 31,<br>2021
(Millions of dollars)
Debt $ 16,043 $ 14,207
Less: cash and cash equivalents (3,655) (2,823)
Net debt 12,388 11,384
Less: purchase accounting impacts - Linde AG (38) (61)
Adjusted net debt $ 12,350 $ 11,323

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Supplemental Guarantee Information

On June 6, 2020, the company filed a Form S-3 Registration Statement with the SEC ("the Registration Statement").

Linde plc may offer debt securities, preferred shares, depositary shares and ordinary shares under the Registration Statement, and debt securities exchangeable for or convertible into preferred shares, ordinary shares or other debt securities. Debt securities of Linde plc may be guaranteed by Linde Inc and/or Linde GmbH. Linde plc may provide guarantees of debt securities offered by its wholly owned subsidiaries Linde Inc. or Linde Finance under the Registration Statement.

Linde Inc. is a wholly owned subsidiary of Linde plc. Linde Inc. may offer debt securities under the Registration Statement. Debt securities of Linde Inc. will be guaranteed by Linde plc, and such guarantees by Linde plc may be guaranteed by Linde GmbH. Linde Inc. may also provide (i) guarantees of debt securities offered by Linde plc under the Registration Statement and (ii) guarantees of the guarantees provided by Linde plc of debt securities of Linde Finance offered under the Registration Statement.

Linde Finance B.V. is a wholly owned subsidiary of Linde plc. Linde Finance may offer debt securities under the Registration Statement. Linde plc will guarantee debt securities of Linde Finance offered under the Registration Statement. Linde GmbH and Linde Inc. may guarantee Linde plc’s obligations under its downstream guarantee.

Linde GmbH is a wholly owned subsidiary of Linde plc. Linde GmbH may provide (i) guarantees of debt securities offered by Linde plc under the Registration Statement and (ii) upstream guarantees of downstream guarantees provided by Linde plc of debt securities of Linde Inc. or Linde Finance offered under the Registration Statement.

In September 2019, Linde plc provided downstream guarantees of all of the pre-business combination Linde Inc. and Linde Finance notes, and Linde GmbH and Linde Inc., respectively, provided upstream guarantees of Linde plc’s downstream guarantees.

For further information about the guarantees of the debt securities registered under the Registration Statement (including the ranking of such guarantees, limitations on enforceability of such guarantees and the circumstances under which such guarantees may be released), see “Description of Debt Securities – Guarantees” and “Description of Debt Securities – Ranking” in the Registration Statement, which subsections are incorporated herein by reference.

The following tables present summarized financial information for Linde plc, Linde Inc., Linde GmbH and Linde Finance on a combined basis, after eliminating intercompany transactions and balances between them and excluding investments in and equity in earnings from non-guarantor subsidiaries.

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(Millions of dollars)
Statement of Income Data Six Months Ended June 30, 2022 Twelve Months Ended December 31, 2021
Sales $ 4,373 $ 7,767
Operating profit 300 973
Net income 75 721
Transactions with non-guarantor subsidiaries 721 2,067
Balance Sheet Data (at period end)
Current assets (a) $ 7,607 $ 5,826
Long-term assets (b) 13,849 15,928
Current liabilities (c) 10,846 8,853
Long-term liabilities (d) 43,887 42,860
(a) From current assets above, amount due from non-guarantor subsidiaries $ 4,974 $ 4,209
(b) From long-term assets above, amount due from non-guarantor subsidiaries 1,872 3,257
(c) From current liabilities above, amount due to non-guarantor subsidiaries 1,498 1,304
(d) From long-term liabilities above, amount due to non-guarantor subsidiaries 29,453 28,142

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Refer to Item 7A. to Part II of Linde's 2021 Annual Report on Form 10-K for discussion.

Item 4. Controls and Procedures

(a)Based on an evaluation of the effectiveness of Linde's disclosure controls and procedures, which was made under the supervision and with the participation of management, including Linde's principal executive officer and principal financial officer, the principal executive officer and principal financial officer have each concluded that, as of the end of the quarterly period covered by this report, such disclosure controls and procedures are effective in ensuring that information required to be disclosed by Linde in reports that it files under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and accumulated and communicated to management including Linde's principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

(b)There were no changes in Linde's internal control over financial reporting that occurred during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, Linde's internal control over financial reporting.

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PART II - OTHER INFORMATION

Linde plc and Subsidiaries

Item 1. Legal Proceedings

See Note 9 to the condensed consolidated financial statements for a description of current legal proceedings.

Item 1A. Risk Factors

Through the quarterly period covered by this report, there have been no material changes to the risk factors disclosed in Item 1A to Part I of Linde's Annual Report on Form 10-K for the year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities- Certain information regarding purchases made by or on behalf of the company or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of its ordinary shares during the quarter ended June 30, 2022 is provided below:

Period Total Number<br><br>of Shares<br><br>Purchased<br><br>(Thousands) Average<br>Price Paid<br>Per Share Total Numbers of Shares<br><br>Purchased as Part of<br><br>Publicly Announced<br><br>Program (1,2)<br><br>(Thousands) Approximate Dollar<br><br>Value of Shares that<br><br>May Yet be Purchased<br><br>Under the Program (1)<br><br>(Millions)
April 2022 1,535 $ 316.40 1,535 $ 8,257
May 2022 2,196 $ 310.10 2,196 $ 7,576
June 2022 1,323 $ 305.97 1,323 $ 7,171
Second Quarter 2022 5,054 $ 310.93 5,054 $ 7,171

(1) On February 28, 2022, the company's board of directors approved the repurchase of $10.0 billion of its ordinary shares ("2022 program") which could take place from time to time on the open market (and could include the use of 10b5-1 trading plans), subject to market and business conditions. The 2022 program has a maximum repurchase amount of 15% of outstanding shares, began on March 1, 2022 and expires on July 31, 2024.

As of June 30, 2022, the company repurchased $2.8 billion of its ordinary shares pursuant to the 2022 program. As of June 30, 2022, $7.2 billion of share repurchases remain authorized under the 2022 program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

(a) Exhibits
31.01 Rule 13a-14(a) Certification
31.02 Rule 13a-14(a) Certification
32.01 Section 1350 Certification (such certifications are furnished for the information of the Commission and shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act).
32.02 Section 1350 Certification (such certifications are furnished for the information of the Commission and shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act).
101.INS XBRL Instance Document: The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase

*Indicates a management contract or compensatory plan or arrangement.

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SIGNATURE

Linde plc and Subsidiaries

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 thereunto duly authorized.

Linde plc
(Registrant)
Date: July 28, 2022 By: /s/ Kelcey E. Hoyt
Kelcey E. Hoyt
Chief Accounting Officer

48

Document

RULE 13a-14(a) CERTIFICATIONS

Linde plc and Subsidiaries

EXHIBIT 31.01

I, Sanjiv Lamba, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Linde plc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

July 28, 2022 By: /s/ Sanjiv Lamba
Sanjiv Lamba
Chief Executive Officer

Document

RULE 13a-14(a) CERTIFICATIONS

Linde plc and Subsidiaries

EXHIBIT 31.02

I, Matthew J. White, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Linde plc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

July 28, 2022 By: /s/ Matthew J. White
Matthew J. White
Chief Financial Officer

Document

SECTION 1350 CERTIFICATION

Linde plc and Subsidiaries

EXHIBIT 32.01

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Linde plc (the “Company”), hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

July 28, 2022 By: /s/ Sanjiv Lamba
Sanjiv Lamba
Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by 18 U.S.C. § 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Document

SECTION 1350 CERTIFICATION

Linde plc and Subsidiaries

EXHIBIT 32.02

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Linde plc (the “Company”), hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

July 28, 2022 By: /s/ Matthew J. White
Matthew J. White
Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by 18 U.S.C. § 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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