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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 March 31, 2021
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 number001-38730
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 1483 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 classTrading 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 March 31, 2021, 520,208,493 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)
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
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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 actual future results or circumstances to differ materially from accounting principles generally accepted in the United States of America, International Financial Reporting Standards or adjusted projections, estimates or other forward-looking statements.

Linde plc assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A. Risk Factors in Linde plc’s Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 1, 2021, which should be reviewed carefully. Please consider Linde plc’s forward-looking statements in light of those risks.









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LINDE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except per share data)
(UNAUDITED) 

 Quarter Ended March 31,
 20212020
Sales$7,243 $6,739 
Cost of sales, exclusive of depreciation and amortization4,054 3,843 
Selling, general and administrative787 861 
Depreciation and amortization1,166 1,142 
Research and development35 44 
Cost reduction programs and other charges (8)131 
Other income (expense) - net4 15 
Operating Profit1,213 733 
Interest expense - net20 24 
Net pension and OPEB cost (benefit), excluding service cost(49)(45)
Income From Continuing Operations Before Income Taxes and Equity Investments1,242 754 
Income taxes on continuing operations268 165 
Income From Continuing Operations Before Equity Investments974 589 
Income from equity investments43 17 
Income From Continuing Operations (Including Noncontrolling Interests)1,017 606 
Income from discontinued operations, net of tax1 2 
Net Income (Including Noncontrolling Interests)1,018 608 
Less: noncontrolling interests from continuing operations (38)(35)
Less: noncontrolling interest from discontinued operations   
Net Income – Linde plc$980 $573 
Net Income – Linde plc
Income from continuing operations $979 $571 
Income from discontinued operations$1 $2 
Per Share Data – Linde plc Shareholders
Basic earnings per share from continuing operations$1.87 $1.07 
Basic earnings per share from discontinued operations  
Basic earnings per share $1.87 $1.07 
Diluted earnings per share from continuing operations$1.86 $1.07 
Diluted earnings per share from discontinued operations   
Diluted earnings per share$1.86 $1.07 
Weighted Average Shares Outstanding (000’s):
Basic shares outstanding522,459 531,215 
Diluted shares outstanding526,927 534,956 

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 March 31,
 20212020
NET INCOME (INCLUDING NONCONTROLLING INTERESTS)$1,018 $608 
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments:
Foreign currency translation adjustments(657)(2,740)
Reclassification to net income (Note 13)
(52) 
Income taxes(6)25 
Translation adjustments(715)(2,715)
Funded status - retirement obligations (Note 8):
Retirement program remeasurements20 58 
Reclassifications to net income43 22 
Income taxes(23)(15)
Funded status - retirement obligations40 65 
Derivative instruments (Note 5):
Current unrealized gain (loss)21 (65)
Reclassifications to net income(2)24 
Income taxes(5)11 
Derivative instruments14 (30)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)(661)(2,680)
COMPREHENSIVE INCOME (LOSS) (INCLUDING NONCONTROLLING INTERESTS)357 (2,072)
Less: noncontrolling interests(32)71 
COMPREHENSIVE INCOME (LOSS) - LINDE PLC$325 $(2,001)

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)
 
March 31, 2021December 31, 2020
Assets
Cash and cash equivalents$4,096 $3,754 
Accounts receivable - net4,139 4,167 
Contract assets 137 162 
Inventories1,695 1,729 
Prepaid and other current assets1,065 1,112 
Total Current Assets11,132 10,924 
Property, plant and equipment - net26,934 28,711 
Goodwill27,472 28,201 
Other intangible assets - net14,559 16,184 
Other long-term assets4,896 4,209 
Total Assets$84,993 $88,229 
Liabilities and equity
Accounts payable$2,945 $3,095 
Short-term debt3,276 3,251 
Current portion of long-term debt2,524 751 
Contract liabilities1,863 1,769 
Other current liabilities4,419 4,874 
Total Current Liabilities15,027 13,740 
Long-term debt9,950 12,152 
Other long-term liabilities12,383 12,755 
Total Liabilities37,360 38,647 
Redeemable noncontrolling interests13 13 
Linde plc Shareholders’ Equity:
Ordinary shares,€0.001 par value, authorized 1,750,000,000 shares, 2021 issued: 552,012,862 ordinary shares; 2020 issued: 552,012,862 ordinary shares
1 1 
Additional paid-in capital40,192 40,202 
Retained earnings17,563 17,178 
Accumulated other comprehensive income (loss) (Note 11)
(5,345)(4,690)
Less: Treasury shares, at cost (2021 – 31,804,369 shares and 2020 – 28,718,333 shares)
(6,201)(5,374)
Total Linde plc Shareholders’ Equity46,210 47,317 
Noncontrolling interests1,410 2,252 
Total Equity47,620 49,569 
Total Liabilities and Equity $84,993 $88,229 

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)
Three Months Ended March 31,
20212020
Increase (Decrease) in Cash and Cash Equivalents
Operations
Net income - Linde plc$980 $573 
Less: Income from discontinued operations, net of tax and noncontrolling interests(1)(2)
Add: Noncontrolling interests from continuing operations38 35 
Income from continuing operations (including noncontrolling interests)1,017 606 
Adjustments to reconcile net income to net cash provided by operating activities:
Cost reduction programs and other charges, net of payments(76)40 
Depreciation and amortization1,166 1,142 
Deferred income taxes(65)(107)
Share-based compensation29 43 
Working capital:
Accounts receivable(178)(109)
Inventory(60)(62)
Prepaid and other current assets(64)(92)
Payables and accruals69 (183)
    Contract assets and liabilities, net191 176 
Pension contributions(12)(17)
Long-term assets, liabilities and other92 (90)
Net cash provided by operating activities2,109 1,347 
Investing
Capital expenditures(762)(803)
Acquisitions, net of cash acquired(10)(41)
Divestitures and asset sales, net of cash divested21 231 
Net cash provided by (used for) investing activities(751)(613)
Financing
Short-term debt borrowings (repayments) - net704 3,149 
Long-term debt borrowings34 16 
Long-term debt repayments(57)(53)
Issuances of ordinary shares17 13 
Purchases of ordinary shares(868)(1,828)
Cash dividends - Linde plc shareholders(553)(511)
Noncontrolling interest transactions and other(247)(27)
Net cash provided by (used for) financing activities(970)759 
Effect of exchange rate changes on cash and cash equivalents(46)(179)
Change in cash and cash equivalents342 1,314 
Cash and cash equivalents, beginning-of-period3,754 2,700 
Cash and cash equivalents, end-of-period$4,096 $4,014 
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)
 
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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 2020 Annual Report on Form 10-K. There have been no material changes to the company’s significant accounting policies during 2021.
Accounting Standards Implemented in 2021

Income Taxes - Simplifying the Accounting for Income Taxes - In December 2019, the FASB issued guidance which simplifies the accounting for income taxes by removing several exceptions in the current standard and adds guidance to reduce complexity in certain areas, such as requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date, evaluating whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction and allocating taxes to members of a consolidated group. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The adoption of this standard did not materially impact the company's consolidated financial statements.

Accounting Standards to be Implemented

Reference Rate Reform - In March 2020, the FASB issued guidance related to reference rate reform which provides practical expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions that the reference London Interbank Offered Rate (“LIBOR”) and other interbank offered rates. This update is applicable to our contracts and hedging relationships that reference LIBOR and other interbank offered rates. The amendments may be applied to impacted contracts and hedges prospectively through December 31, 2022. We are currently evaluating the impact of this guidance on our consolidated financial statements.

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

2. Cost Reduction Programs and Other Charges

2021 Charges

Cost reduction programs and other charges were a benefit of $8 million for the three months ended March 31, 2021 (benefit of $28 million, after tax). The following table summarizes the activities related to the company's cost reduction charges for the three months ended March 31, 2021:
Quarter Ended March 31, 2021
(millions of dollars)Severance costsOther cost reduction chargesTotal cost reduction program related chargesMerger-related and other chargesTotal
Americas$3 $2 $5 $ $5 
EMEA13 7 20  20 
APAC2 2 4 (53)(49)
Engineering7  7  7 
Other1 7 8 1 9 
Total$26 $18 $44 $(52)$(8)



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Cost Reduction Programs

Total cost reduction program related charges were $44 million for the three months ended March 31, 2021 ($34 million, after tax).

Severance costs

Severance costs were $26 million for the three months ended March 31, 2021. As of March 31, 2021, the majority of the actions have been taken, with the remaining actions anticipated to be completed by the end of the fiscal year.

Other cost reduction charges

Other cost reduction charges of $18 million for the three months ended March 31, 2021 are primarily charges 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 Costs and Other Charges

Merger-related costs and other charges were a benefit of $52 million (benefit of $62 million, after tax) for the three months ended March 31, 2021, primarily due to a $52 million gain triggered by a joint venture deconsolidation in the APAC segment (see Note 13), and other tax adjustments.

Cash Requirements

The total cash requirements of the cost reduction program and other charges during the three months ended March 31, 2021 are estimated to be approximately $24 million and are expected to be paid through 2022. Total cost reduction programs and other charges, net of payments in the condensed consolidated statements of cash flows for the three months ended March 31, 2021 also reflects the impact of cash payments of liabilities, including merger-related tax liabilities, accrued as of December 31, 2020.

The following table summarizes the activities related to the company's cost reduction related charges for the three months ended March 31, 2021:
(millions of dollars)Severance costsOther cost reduction chargesTotal cost reduction program related chargesMerger-related and other chargesTotal
Balance, December 31, 2020$283 $22 $305 $64 $369 
2021 Cost Reduction Programs and Other Charges26 18 44 (52)(8)
Less: Cash payments(54)(1)(55)(4)(59)
Less: Non-cash charges / benefits (13)(13)52 39 
Foreign currency translation and other(4) (4)(3)(7)
Balance, March 31, 2021$251 $26 $277 $57 $334 

2020 Charges

Cost reduction programs and other charges were $131 million for the three months ended March 31, 2020 ($95 million, after tax). Total cost reduction program related charges were $78 million ($56 million, after tax), which consisted primarily of severance charges of $58 million, largely in the EMEA and Engineering segments. Merger-related and other charges were $53 million ($39 million, after tax).

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.

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3. 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 $4,125 million and $4,169 million at March 31, 2021 and December 31, 2020 respectively and gross receivables aged greater than one year were $338 million and $358 million at March 31, 2021 and December 31, 2020 respectively. Other receivables were $122 million and $111 million at March 31, 2021 and December 31, 2020, 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 $4,139 million at March 31, 2021 and $4,167 million at December 31, 2020. Allowances for expected credit losses were $446 million at March 31, 2021 and $471 million at December 31, 2020.  Provisions for expected credit losses were $39 million and $46 million for the three months ended March 31, 2021 and 2020, respectively. The allowance activity in the three months ended March 31, 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)March 31,
2021
December 31,
2020
Inventories
Raw materials and supplies$364 $411 
Work in process 347 337 
Finished goods984 981 
Total inventories$1,695 $1,729 
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4. Debt
The following is a summary of Linde's outstanding debt at March 31, 2021 and December 31, 2020:
(Millions of dollars)March 31,
2021
December 31,
2020
SHORT-TERM
Commercial paper$1,979 $2,527 
Other borrowings (primarily non U.S.)1,297 724 
Total short-term debt3,276 3,251 
LONG-TERM (a)
(U.S. dollar denominated unless otherwise noted)
3.875% Euro denominated notes due 2021 (b)
709 748 
0.250% Euro denominated notes due 2022 (b)
1,178 1,226 
2.45% Notes due 2022
600 599 
2.20% Notes due 2022
499 499 
2.70% Notes due 2023
499 499 
2.00% Euro denominated notes due 2023 (b)
795 832 
5.875% GBP denominated notes due 2023 (b)
455 460 
1.20% Euro denominated notes due 2024
644 671 
1.875% Euro denominated notes due 2024 (b)
372 389 
2.65% Notes due 2025
399 398 
1.625% Euro denominated notes due 2025
583 607 
3.20% Notes due 2026
725 725 
3.434% Notes due 2026
196 196 
1.652% Euro denominated notes due 2027
96 100 
0.250% Euro denominated notes due 2027
877 914 
1.00% Euro denominated notes due 2028 (b)
918 966 
1.10% Notes due 2030
696 696 
1.90% Euro denominated notes due 2030
122 127 
0.550% Euro denominated notes due 2032
873 909 
3.55% Notes due 2042
664 664 
2.00% Notes due 2050
296 296 
Non U.S. borrowings268 372 
Other10 10 
12,474 12,903 
Less: current portion of long-term debt(2,524)(751)
Total long-term debt9,950 12,152 
Total debt$15,750 $16,154 
 
(a)Amounts are net of unamortized discounts, premiums and/or debt issuance costs as applicable.
(b)March 31, 2021 and December 31, 2020 included a cumulative $62 million and $79 million adjustment to carrying value, respectively, related to hedge accounting of interest rate swaps. Refer to Note 5 for additional information.

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 March 31, 2021.

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5. Financial Instruments
In its normal operations, Linde is exposed to market risks relating to fluctuations in interest rates, foreign currency exchange rates, 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 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 March 31, 2021, 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 March 31, 2021 and December 31, 2020 for consolidated subsidiaries:
   Fair Value
 Notional AmountsAssets (a)Liabilities (a)
(Millions of dollars)March 31,
2021
December 31,
2020
March 31,
2021
December 31,
2020
March 31,
2021
December 31,
2020
Derivatives Not Designated as Hedging Instruments:
Currency contracts:
Balance sheet items$6,002 $6,470 $26 $72 $32 $48 
Forecasted transactions 705 823 6 16 9 12 
Cross-currency swaps194 260 23 24 6 7 
Commodity contracts N/AN/A2 1 N/AN/A
Total $6,901 $7,553 $57 $113 $47 $67 
Derivatives Designated as Hedging Instruments:
Currency contracts:
       Forecasted transactions309 355 5 20 6 14 
Commodity contracts N/AN/A29 3 N/AN/A
Interest rate swaps1,859 1,923 50 64   
Total Hedges$2,168 $2,278 $84 $87 $6 $14 
Total Derivatives$9,069 $9,831 $141 $200 $53 $81 
 
(a)March 31, 2021 and December 31, 2020 included current assets of $67 million and $110 million which are recorded in prepaid and other current assets; long-term assets of $74 million and $90 million which are recorded in other long-term assets; current liabilities of $42 million and $70 million which are recorded in other current liabilities; and long-term liabilities of $11 million and $11 million which are recorded in other long-term liabilities.
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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, and to a more limited extent bonds, 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. To reduce the extent of this 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 Hedge

As of March 31, 2021, Linde has €2.3 billion ($2.7 billion) intercompany Euro-denominated credit facility loans and intercompany loans which are designated as hedges of the net investment positions in foreign operations. Since hedge inception, the deferred loss recorded within the cumulative translation adjustment component of AOCI in the condensed consolidated balance sheets and the consolidated statements of comprehensive income is $137 million (deferred gain of $75 million recorded during the three months ended March 31, 2021).

As of March 31, 2021, exchange rate movements relating to previously designated hedges that remain in AOCI is a gain of $73 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. The notional value of outstanding interest rate swaps of Linde with maturity dates from 2021 through 2028 was $1,859 million at March 31, 2021 and $1,923 million at December 31, 2020 (see Note 4 for further information).

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Terminated Treasury Rate Locks
The unrecognized aggregated losses related to terminated treasury rate lock contracts on the underlying $500 million 2.20% fixed-rate notes that mature in 2022 at March 31, 2021 and December 31, 2020 were immaterial in both periods. The unrecognized gains / (losses) for the treasury rate locks are shown in AOCI and are being recognized on a straight line basis to interest expense – net over the term of the underlying debt agreements.

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)
Recognized in Earnings *
 Quarter Ended March 31,
(Millions of dollars)20212020
Derivatives Not Designated as Hedging Instruments
Currency contracts:
Balance sheet items
Debt-related$19 $(5)
Other balance sheet items4 (41)
Total$23 $(46)

* 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 immaterial for the three months ended March 31, 2021. Net losses expected to be reclassified to earnings during the next twelve months are also not material.

6. 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 1Level 2Level 3
(Millions of dollars)March 31,
2021
December 31,
2020
March 31,
2021
December 31,
2020
March 31,
2021
December 31,
2020
Assets
Derivative assets$ $ $141 $200 $ $ 
Investments and securities*20 21   45 47 
                 Total
$20 $21 $141 $200 45 $47 
Liabilities
Derivative liabilities$ $ $53 $81 $ $ 
* Investments and securities are recorded in prepaid and other current assets and other long-term assets in the company's condensed consolidated balance sheets.
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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 within the Americas. 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.

The below summarizes the changes in level 3 investments and securities for the three months ended March 31, 2021. Gains (losses) recognized in earnings are recorded to interest expense - net in the company's consolidated statements of income.

The level 3 investments and securities as of December 31, 2020 was $47 million. During the quarter period the balance decreased $2 million related to foreign currency movements. The balance as of March 31, 2021 was $45 million.

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 March 31, 2021, the estimated fair value of Linde’s long-term debt portfolio was $12,746 million versus a carrying value of $12,474 million. At December 31, 2020, the estimated fair value of Linde’s long-term debt portfolio was $13,611 million versus a carrying value of $12,903 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.

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7. 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 March 31,
 20212020
Numerator (Millions of dollars)
Income from continuing operations $979 $571 
Income from discontinued operations1 2 
Net Income – Linde plc$980 $573 
Denominator (Thousands of shares)
Weighted average shares outstanding522,103 530,952 
Shares earned and issuable under compensation plans356 263 
Weighted average shares used in basic earnings per share522,459 531,215 
Effect of dilutive securities
Stock options and awards4,468 3,741 
Weighted average shares used in diluted earnings per share
526,927 534,956 
Basic earnings per share from continuing operations$1.87 $1.07 
Basic earnings per share from discontinued operations  
Basic Earnings Per Share$1.87 $1.07 
Diluted earnings per share from continuing operations$1.86 $1.07 
Diluted earnings per share from discontinued operations  
Diluted Earnings Per Share$1.86 $1.07 
There were no antidilutive shares for any period presented.

8. Retirement Programs
The components of net pension and postretirement benefits other than pensions (“OPEB”) costs for the quarters ended March 31, 2021 and 2020 are shown below:
 Quarter Ended March 31,
 PensionsOPEB
(Millions of dollars)2021202020212020
Amount recognized in Operating Profit
Service cost$40 $37 $ $1 
Amount recognized in Net pension and OPEB cost (benefit), excluding service cost
Interest cost38 52 1 1 
Expected return on plan assets(131)(120)  
Net amortization and deferral44 23 (1)(1)
(49)(45)  
 Net periodic benefit cost (benefit)$(9)$(8)$ $1 

Linde estimates that 2021 required contributions to its pension plans will be in the range of $70 million to $80 million, of which $12 million have been made through March 31, 2021.
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9. 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 2020 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 March 31, 2021 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 $190 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 R$2.2 billion Brazilian reais ($386 million) on White Martins, the Brazil-based subsidiary of Praxair, Inc. The fine was reduced to R$1.7 billion Brazilian reais ($298 million) due to a calculation error made by CADE. 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 R$237 million Brazilian reais ($42 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 R$188 million Brazilian reais ($33 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, and 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.

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10. Segments

For a description of Linde plc's operating segments, refer to Note 18 to the consolidated financial statements on Linde plc's 2020 Annual Report on Form 10-K.
The table below presents sales and operating profit information about reportable segments and Other for the quarters ended March 31, 2021 and 2020.
  
Quarter Ended March 31,
(Millions of dollars)20212020
SALES(a)
Americas$2,840 $2,677 
EMEA1,799 1,633 
APAC1,436 1,336 
Engineering674 608 
Other494 485 
Total sales$7,243 $6,739 

  
Quarter Ended March 31,
(Millions of dollars)20212020
SEGMENT OPERATING PROFIT
Americas$795 $661 
EMEA451 355 
APAC351 281 
Engineering109 91 
Other(18)(36)
Segment operating profit1,688 1,352 
Cost reduction programs and other charges (Note 2)
8 (131)
Purchase accounting impacts - Linde AG(483)(488)
Total operating profit$1,213 $733 
 
(a)Sales reflect external sales only. Intersegment sales, primarily from Engineering to the industrial gases segments, were not material.

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11. Equity
Equity
A summary of the changes in total equity for the quarters ended March 31, 2021 and 2020 is provided below:
Quarter Ended March 31,
(Millions of dollars)20212020
ActivityLinde plc
Shareholders’
Equity
Noncontrolling
Interests
Total
Equity
Linde plc
Shareholders’
Equity
Noncontrolling
Interests
Total
Equity
Balance, beginning of period$47,317 $2,252 $49,569 $49,074 $2,448 $51,522 
Net income (a)980 38 1,018