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, 2020

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.)
	The Priestley Centre
	10 Priestley Road,
	Surrey Research Park,
	Guildford,		Surrey	GU2 7XY
	United Kingdom
	(Address of principal executive offices) (Zip Code)
	+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 RegulationS-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, 2020, 525,360,032 ordinary shares (€0.001 par value) of the Registrant were outstanding.

1 

INDEX
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Income - Quarters Ended June 30, 2020 and 2019	4
	Consolidated Statements of Income - Six Months Ended June 30, 2020 and 2019	5
	Consolidated Statements of Comprehensive Income - Quarters Ended June 30, 2020 and 2019	6
	Consolidated Statements of Comprehensive Income - Six Months Ended June 30, 2020 and 2019	7
	Condensed Consolidated Balance Sheets - June 30, 2020 and December 31, 2019	8
	Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2020 and 2019	9
	Notes to Condensed Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43
Item 4.	Controls and Procedures	44
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	45
Item 1A.	Risk Factors	45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3.	Defaults Upon Senior Securities	45
Item 4.	Mine Safety Disclosures	45
Item 5.	Other Information	45
Item 6.	Exhibits	46
Signature		47

2 

Forward-looking Statements

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are identified by terms and phrases such as: anticipate, believe, intend, estimate, expect, continue, should, could, may, plan, project, predict, will, potential, forecast, and similar expressions. They are based on management’s reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances, including trade conflicts and tariffs; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics, pandemics such as COVID-19 and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; the impact of potential unusual or non-recurring items; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; the impact of information technology system failures, network disruptions and breaches in data security; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from accounting principles generally accepted in the United States of America, International Financial Reporting Standards or adjusted projections, estimates or other forward-looking statements.

Linde plc assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A. Risk Factors in Linde plc’s Form 10-K for the fiscal year ended December 31, 2019 filed with the SEC on March 2, 2020 and in Item 1A. of Linde plc's Form 10-Q for the period ending March 31, 2020 filed with the SEC on May 7, 2020, which should be reviewed carefully. Please consider Linde plc’s forward-looking statements in light of those risks.

3

LINDE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Millions of dollars, except per share data)

(UNAUDITED) 

	Quarter Ended June 30,
	2020		2019
Sales	6,377		7,204
Cost of sales, exclusive of depreciation and amortization	3,619		4,280
Selling, general and administrative	760		884
Depreciation and amortization	1,124		1,195
Research and development	34		45
Cost reduction programs and other charges	249		141
Other income (expense) - net	—		10
Operating Profit	591		669
Interest expense - net	18		10
Net pension and OPEB cost (benefit), excluding service cost	(45)		(24)
Income From Continuing Operations Before Income Taxes and Equity Investments	618		683
Income taxes on continuing operations	164		169
Income From Continuing Operations Before Equity Investments	454		514
Income from equity investments	29		28
Income From Continuing Operations (Including Noncontrolling Interests)	483		542
Income from discontinued operations, net of tax	—		9
Net Income (Including Noncontrolling Interests)	483		551
Less: noncontrolling interests from continuing operations	(25)		(29)
Less: noncontrolling interest from discontinued operations	—		—
Net Income – Linde plc	$	458	$	522
Net Income – Linde plc
Income from continuing operations	$	458	$	513
Income from discontinued operations	$	—	$	9
Per Share Data – Linde plc Shareholders
Basic earnings per share from continuing operations	$	0.87	$	0.95
Basic earnings per share from discontinued operations	—		0.02
Basic earnings per share	$	0.87	$	0.97
Diluted earnings per share from continuing operations	$	0.87	$	0.94
Diluted earnings per share from discontinued operations	—		0.02
Diluted earnings per share	$	0.87	$	0.96
Weighted Average Shares Outstanding (000’s):
Basic shares outstanding	525,510		542,561
Diluted shares outstanding	529,054		546,488

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

4

LINDE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Millions of dollars, except per share data)

(UNAUDITED) 

	Six Months Ended June 30,
	2020		2019
Sales	$	13,116	$	14,148
Cost of sales, exclusive of depreciation and amortization	7,462		8,396
Selling, general and administrative	1,621		1,763
Depreciation and amortization	2,266		2,418
Research and development	78		91
Cost reduction programs and other charges	380		230
Other income (expense) - net	15		28
Operating Profit	1,324		1,278
Interest expense - net	42		33
Net pension and OPEB cost (benefit), excluding service cost	(90)		(9)
Income From Continuing Operations Before Income Taxes and Equity Investments	1,372		1,254
Income taxes on continuing operations	329		309
Income From Continuing Operations Before Equity Investments	1,043		945
Income from equity investments	46		62
Income From Continuing Operations (Including Noncontrolling Interests)	1,089		1,007
Income from discontinued operations, net of tax	2		98
Net Income (Including Noncontrolling Interests)	1,091		1,105
Less: noncontrolling interests from continuing operations	(60)		(59)
Less: noncontrolling interest from discontinued operations	—		(7)
Net Income – Linde plc	$	1,031	$	1,039
Net Income – Linde plc
Income from continuing operations	$	1,029	$	948
Income from discontinued operations	$	2	$	91
Per Share Data – Linde plc Shareholders
Basic earnings per share from continuing operations	$	1.95	$	1.74
Basic earnings per share from discontinued operations	—		0.17
Basic earnings per share	$	1.95	$	1.91
Diluted earnings per share from continuing operations	$	1.93	$	1.73
Diluted earnings per share from discontinued operations	—		0.17
Diluted earnings per share	$	1.93	$	1.90
Weighted Average Shares Outstanding (000’s):
Basic shares outstanding	528,385		544,033
Diluted shares outstanding	532,112		547,771

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

5 

LINDE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Millions of dollars)

(UNAUDITED)

	Quarter Ended June 30,
	2020		2019
NET INCOME (INCLUDING NONCONTROLLING INTERESTS)	$	483	$	551
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments:
Foreign currency translation adjustments	745		(170)
Reclassification to net income	—		—
Income taxes	(1)		8
Translation adjustments	744		(162)
Funded status - retirement obligations (Note 8):
Retirement program remeasurements	(7)		(32)
Reclassifications to net income	21		23
Income taxes	(9)		1
Funded status - retirement obligations	5		(8)
Derivative instruments (Note 5):
Current unrealized gain (loss)	20		(3)
Reclassifications to net income	26		—
Income taxes	(10)		1
Derivative instruments	36		(2)
Securities:
Current unrealized gain (loss)	—		9
Securities	—		9
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	785		(163)
COMPREHENSIVE INCOME (LOSS) (INCLUDING NONCONTROLLING INTERESTS)	1,268		388
Less: noncontrolling interests	(43)		(8)
COMPREHENSIVE INCOME (LOSS) - LINDE PLC	$	1,225	$	380

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

6

LINDE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Millions of dollars)

(UNAUDITED)

	Six Months Ended June 30,
	2020		2019
NET INCOME (INCLUDING NONCONTROLLING INTERESTS)	$	1,091	$	1,105
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments:
Foreign currency translation adjustments	(1,995)		(47)
Reclassification to net income	—		12
Income taxes	24		5
Translation adjustments	(1,971)		(30)
Funded status - retirement obligations (Note 8):
Retirement program remeasurements	51		(34)
Reclassifications to net income	43		87
Income taxes	(24)		(17)
Funded status - retirement obligations	70		36
Derivative instruments (Note 5):
Current period unrealized gain (loss)	(45)		(20)
Reclassifications to net income	50		—
Income taxes	1		4
Derivative instruments	6		(16)
Securities:
Current year unrealized gain (loss)	—		1
Securities	—		1
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	(1,895)		(9)
COMPREHENSIVE INCOME (LOSS) (INCLUDING NONCONTROLLING INTERESTS)	(804)		1,096
Less: noncontrolling interests	28		22
COMPREHENSIVE INCOME (LOSS) - LINDE PLC	$	(776)	$	1,118

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

7 

LINDE PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Millions of dollars)

(UNAUDITED)

	June 30, 2020		December 31, 2019
Assets
Cash and cash equivalents	$	4,941	$	2,700
Accounts receivable - net	3,994		4,322
Contract assets	226		368
Inventories	1,715		1,697
Assets held for sale	3		125
Prepaid and other current assets	1,194		1,140
Total Current Assets	12,073		10,352
Property, plant and equipment - net	27,693		29,064
Goodwill	26,580		27,019
Other intangible assets - net	15,504		16,137
Other long-term assets	4,006		4,040
Total Assets	$	85,856	$	86,612
Liabilities and equity
Accounts payable	$	2,816	$	3,266
Short-term debt	3,679		1,732
Current portion of long-term debt	2,723		1,531
Contract liabilities	1,693		1,758
Liabilities of assets held for sale	1		2
Other current liabilities	4,183		3,871
Total Current Liabilities	15,095		12,160
Long-term debt	11,078		10,693
Other long-term liabilities	11,746		12,124
Total Liabilities	37,919		34,977
Redeemable noncontrolling interests	13		113
Linde plc Shareholders’ Equity:
Ordinary shares,€0.01 par value, authorized 1,750,000,000 shares, 2020 issued: 552,012,862 ordinary shares; 2019 issued: 552,012,862 ordinary shares	1		1
Additional paid-in capital	40,211		40,201
Retained earnings	16,782		16,842
Accumulated other comprehensive income (loss) (Note 11)	(6,621)		(4,814)
Less: Treasury stock, at cost (2020 – 26,652,830 shares and 2019 – 17,632,318 shares)	(4,836)		(3,156)
Total Linde plc Shareholders’ Equity	45,537		49,074
Noncontrolling interests	2,387		2,448
Total Equity	47,924		51,522
Total Liabilities and Equity	$	85,856	$	86,612

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

8

LINDE PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Millions of dollars)

(UNAUDITED)

	Six Months Ended June 30,
	2020		2019
Increase (Decrease) in Cash and Cash Equivalents
Operations
Net income - Linde plc	$	1,031	$	1,039
Less: Income from discontinued operations, net of tax and noncontrolling interests	(2)		(91)
Add: Noncontrolling interests from continuing operations	60		59
Income from continuing operations (including noncontrolling interests)	1,089		1,007
Adjustments to reconcile net income to net cash provided by operating activities:
Cost reduction programs and other charges, net of payments	239		(286)
Amortization of merger-related inventory step-up	—		10
Depreciation and amortization	2,266		2,418
Deferred income taxes	(261)		(110)
Share-based compensation	75		38
Working capital:
Accounts receivable	(118)		(188)
Inventory	(82)		(73)
Prepaid and other current assets	(48)		(76)
Payables and accruals	(27)		(247)
Contract assets and liabilities, net	71		(103)
Pension contributions	(41)		(43)
Long-term assets, liabilities and other	(52)		(274)
Net cash provided by operating activities	3,111		2,073
Investing
Capital expenditures	(1,586)		(1,708)
Acquisitions, net of cash acquired	(41)		(140)
Divestitures and asset sales, net of cash divested	380		4,689
Net cash provided by (used for) investing activities	(1,247)		2,841
Financing
Short-term debt borrowings (repayments) - net	1,945		(11)
Long-term debt borrowings	1,656		45
Long-term debt repayments	(78)		(1,311)
Issuances of ordinary shares	25		55
Purchases of ordinary shares	(1,828)		(1,250)
Cash dividends - Linde plc shareholders	(1,017)		(951)
Noncontrolling interest transactions and other	(148)		(3,222)
Net cash provided by (used for) financing activities	555		(6,645)
Discontinued Operations
Cash provided by operating activities	—		70
Cash used for investing activities	—		(59)
Cash provided by financing activities	—		5
Net cash provided by discontinued operations	—		16
Effect of exchange rate changes on cash and cash equivalents	(178)		(49)
Change in cash and cash equivalents	2,241		(1,764)
Cash and cash equivalents, beginning-of-period	2,700		4,466
Cash and cash equivalents, including discontinued operations	4,941		2,702
Cash and cash equivalents of discontinued operations	—		(16)
Cash and cash equivalents, end-of-period	$	4,941	$	2,686

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

9

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. Cost Reduction Programs and Other Charges	12
Note 3. Supplemental Information	13
Note 4. Debt	15
Note 5. Financial Instruments	16
Note 6. Fair Value Disclosures	18
Note 7. Earnings Per Share – Linde plc Shareholders	20
Note 8. Retirement Programs	20
Note 9. Commitments and Contingencies	21
Note 10. Segments	22
Note 11. Equity	23
Note 12. Revenue Recognition	24
Note 13. Divestitures	27

10

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 2019 Annual Report on Form 10-K. There have been no material changes to the company’s significant accounting policies during 2020.

Accounting Standards Implemented in 2020

•Credit Losses on Financial Instruments –In June 2016, the FASB issued updated guidance on the measurement of credit losses. The guidance introduces a new accounting model for expected credit losses on financial instruments, including trade receivables, based on estimates of current expected credit losses. This guidance is effective for the company beginning in the first quarter 2020 and requires companies to apply the change in accounting on a modified retrospective basis. The adoption of the guidance had an immaterial impact on the consolidated financial statements.

•Simplifying the Test for Goodwill Impairment – In January 2017, the FASB issued updated guidance on the measurement of goodwill. The new guidance eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. The guidance is effective for the company beginning in the first quarter 2020. The adoption of the guidance had no impact on the consolidated financial statements.

•Fair Value Measurement Disclosures - In August 2018, the FASB issued guidance that modifies the disclosure requirements for fair value measurements. The guidance is effective in fiscal year 2020, with early adoption permitted. Certain amendments must be applied prospectively while other amendments must be applied retrospectively. The adoption of the guidance had an immaterial impact on the consolidated financial statements.

Accounting Standards to be Implemented

•Retirement Benefit Disclosures - In August 2018, the FASB issued guidance that modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. For Linde, the guidance is effective for the year ending December 31, 2020 and must be applied on a retrospective basis. The company is evaluating the impact this guidance will have on the disclosures in the notes to the consolidated financial statements.

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

Other Developments

While the events surrounding the COVID-19 pandemic continued to evolve during the first six months of 2020 Linde's primary focus was, and continues to be, the health and safety of its employees and the needs of its customers. The spread of COVID-19 has caused the company to modify its business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings and events), and the company may take further actions if required by government authorities or that it determines are in the best interests of the company's employees, customers, suppliers and other stakeholders. The ultimate magnitude of COVID-19, including the extent of its impact on the company’s operational results, which could be material, will be determined by the length of time that such circumstances continue, measures taken to prevent its spread, and the demand for the company’s products and services, as well as the effect of governmental and public actions taken in response.

11

2. Cost Reduction Programs and Other Charges

2020 Charges

Cost reduction programs and other charges were $249 million and $380 million for the quarter and six months ended June 30, 2020, respectively ($187 million and $282 million, after tax). The following table summarizes the activities related to the company's cost reduction charges for the quarter and six months ended June 30, 2020:

	Quarter Ended June 30, 2020
(millions of dollars)	Severance costs		Other cost reduction charges		Total cost reduction program related charges		Merger-related and other charges		Total
Americas	$	25	$	8	$	33	$	6	$	39
EMEA	112		4		116		(3)		113
APAC	1		—		1		(5)		(4)
Engineering	7		7		14		7		21
Other	47		2		49		31		80
Total	$	192	$	21	$	213	$	36	$	249
	Six Months Ended June 30, 2020
(millions of dollars)	Severance costs		Other cost reduction charges		Total cost reduction program related charges		Merger-related and other charges		Total
Americas	$	31	$	23	$	54	$	6	$	60
EMEA	138		4		142		—		142
APAC	3		2		5		3		8
Engineering	21		7		28		8		36
Other	57		5		62		72		134
Total	$	250	$	41	$	291	$	89	$	380

Cost Reduction Programs

Total cost reduction program related charges were $213 million and $291 million for the quarter and six months ended June 30, 2020, respectively ($151 million and $207 million after tax).

Severance costs

Severance costs are $192 million and $250 million for the quarter and six months ended June 30, 2020, respectively. As of June 30, 2020 these actions were substantially complete, with the remainder anticipated to be completed by the end of 2021.

Other cost reduction charges

Other cost reduction charges of $21 million and $41 million for the quarter and six months ended June 30, 2020, respectively, are primarily charges related to the execution of the company's synergistic actions including location consolidations and business rationalization projects, software and process harmonization, and associated non-recurring costs.

Merger-related Costs and Other Charges

Linde incurred merger-related costs and other charges which totaled $36 million and $89 million ($36 million and $75 million after tax) for the quarter and six months ended June 30, 2020, respectively.

Cash Requirements

12

The total cash requirements of the cost reduction program and other charges during the six months ended June 30, 2020 are estimated to be approximately $