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 September 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 September 30, 2022, 494,379,532 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 September 30, 2022 and 2021	4
	Consolidated Statements of Income - Nine Months Ended September 30, 2022 and 2021	5
	Consolidated Statements of Comprehensive Income - Quarters Ended September 30, 2022 and 2021	6
	Consolidated Statements of Comprehensive Income - Nine Months Ended September 30, 2022 and 2021	7
	Condensed Consolidated Balance Sheets - September 30, 2022 and December 31, 2021	8
	Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 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

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 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.

3    

LINDE PLC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Millions of dollars, except per share data)

(UNAUDITED) 

	Quarter Ended September 30,
	2022		2021
Sales	$	8,797	$	7,668
Cost of sales, exclusive of depreciation and amortization	5,285		4,368
Selling, general and administrative	770		793
Depreciation and amortization	1,045		1,163
Research and development	35		36
Russia-Ukraine conflict and other charges	15		26
Other income (expense) - net	(34)		10
Operating Profit	1,613		1,292
Interest expense - net	18		8
Net pension and OPEB cost (benefit), excluding service cost	(53)		(45)
Income From Continuing Operations Before Income Taxes and Equity Investments	1,648		1,329
Income taxes on continuing operations	391		321
Income From Continuing Operations Before Equity Investments	1,257		1,008
Income from equity investments	43		1
Income From Continuing Operations (Including Noncontrolling Interests)	1,300		1,009
Income from discontinued operations, net of tax	—		1
Net Income (Including Noncontrolling Interests)	1,300		1,010
Less: noncontrolling interests from continuing operations	(27)		(31)
Net Income – Linde plc	$	1,273	$	979
Net Income – Linde plc
Income from continuing operations	$	1,273	$	978
Income from discontinued operations	$	—	$	1
Per Share Data – Linde plc Shareholders
Basic earnings per share from continuing operations	$	2.56	$	1.90
Basic earnings per share from discontinued operations	—		—
Basic earnings per share	$	2.56	$	1.90
Diluted earnings per share from continuing operations	$	2.54	$	1.88
Diluted earnings per share from discontinued operations	—		—
Diluted earnings per share	$	2.54	$	1.88
Weighted Average Shares Outstanding (000’s):
Basic shares outstanding	497,186		515,169
Diluted shares outstanding	501,151		520,079

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) 

	Nine Months Ended September 30,
	2022		2021
Sales	$	25,465	$	22,495
Cost of sales, exclusive of depreciation and amortization	15,023		12,616
Selling, general and administrative	2,343		2,402
Depreciation and amortization	3,248		3,500
Research and development	107		105
Russia-Ukraine conflict and other charges	1,004		222
Other income (expense) - net	(58)		(3)
Operating Profit	3,682		3,647
Interest expense - net	32		46
Net pension and OPEB cost (benefit), excluding service cost	(179)		(143)
Income From Continuing Operations Before Income Taxes and Equity Investments	3,829		3,744
Income taxes on continuing operations	1,046		923
Income From Continuing Operations Before Equity Investments	2,783		2,821
Income from equity investments	137		81
Income From Continuing Operations (Including Noncontrolling Interests)	2,920		2,902
Income from discontinued operations, net of tax	—		3
Net Income (Including Noncontrolling Interests)	2,920		2,905
Less: noncontrolling interests from continuing operations	(101)		(105)
Net Income – Linde plc	$	2,819	$	2,800
Net Income – Linde plc
Income from continuing operations	$	2,819	$	2,797
Income from discontinued operations	$	—	$	3
Per Share Data – Linde plc Shareholders
Basic earnings per share from continuing operations	$	5.62	$	5.39
Basic earnings per share from discontinued operations	—		0.01
Basic earnings per share	$	5.62	$	5.40
Diluted earnings per share from continuing operations	$	5.57	$	5.34
Diluted earnings per share from discontinued operations	—		0.01
Diluted earnings per share	$	5.57	$	5.35
Weighted Average Shares Outstanding (000’s):
Basic shares outstanding	501,743		518,802
Diluted shares outstanding	506,012		523,662

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 September 30,
	2022		2021
NET INCOME (INCLUDING NONCONTROLLING INTERESTS)	$	1,300	$	1,010
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments:
Foreign currency translation adjustments	(1,769)		(823)
Reclassification to net income	24		—
Income taxes	2		4
Translation adjustments	(1,743)		(819)
Funded status - retirement obligations (Note 8):
Retirement program remeasurements	66		52
Reclassifications to net income	24		43
Income taxes	(19)		(28)
Funded status - retirement obligations	71		67
Derivative instruments (Note 5):
Current unrealized gain (loss)	60		64
Reclassifications to net income	(54)		(25)
Income taxes	(2)		(10)
Derivative instruments	4		29
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	(1,668)		(723)
COMPREHENSIVE INCOME (LOSS) (INCLUDING NONCONTROLLING INTERESTS)	(368)		287
Less: noncontrolling interests	15		(18)
COMPREHENSIVE INCOME (LOSS) - LINDE PLC	$	(353)	$	269

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)

	Nine Months Ended September 30,
	2022		2021
NET INCOME (INCLUDING NONCONTROLLING INTERESTS)	$	2,920	$	2,905
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments:
Foreign currency translation adjustments	(3,279)		(1,068)
Reclassification to net income	(110)		(52)
Income taxes	(5)		(4)
Translation adjustments	(3,394)		(1,124)
Funded status - retirement obligations (Note 8):
Retirement program remeasurements	188		53
Reclassifications to net income	62		130
Income taxes	(47)		(53)
Funded status - retirement obligations	203		130
Derivative instruments (Note 5):
Current unrealized gain (loss)	170		104
Reclassifications to net income	(74)		(30)
Income taxes	(20)		(18)
Derivative instruments	76		56
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	(3,115)		(938)
COMPREHENSIVE INCOME (LOSS) (INCLUDING NONCONTROLLING INTERESTS)	(195)		1,967
Less: noncontrolling interests	(30)		(95)
COMPREHENSIVE INCOME (LOSS) - LINDE PLC	$	(225)	$	1,872

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

7    

LINDE PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Millions of dollars)

(UNAUDITED)

	September 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	3,756	$	2,823
Accounts receivable - net	4,599		4,499
Contract assets	104		134
Inventories	1,855		1,733
Prepaid and other current assets	889		970
Total Current Assets	11,203		10,159
Property, plant and equipment - net	22,586		26,003
Goodwill	24,565		27,038
Other intangible assets - net	11,810		13,802
Other long-term assets	4,159		4,603
Total Assets	$	74,323	$	81,605
Liabilities and equity
Accounts payable	$	3,067	$	3,503
Short-term debt	3,179		1,163
Current portion of long-term debt	1,551		1,709
Contract liabilities	2,902		2,940
Other current liabilities	4,362		4,328
Total Current Liabilities	15,061		13,643
Long-term debt	10,608		11,335
Other long-term liabilities	9,715		11,186
Total Liabilities	35,384		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	40,011		40,180
Retained earnings	19,845		18,710
Accumulated other comprehensive income (loss) (Note 11)	(8,094)		(5,048)
Less: Treasury shares, at cost (2022 – 57,633,330 shares and 2021 – 43,331,983 shares)	(14,135)		(9,808)
Total Linde plc Shareholders’ Equity	37,628		44,035
Noncontrolling interests	1,298		1,393
Total Equity	38,926		45,428
Total Liabilities and Equity	$	74,323	$	81,605

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)

	Nine Months Ended September 30,
	2022		2021
Increase (Decrease) in Cash and Cash Equivalents
Operations
Net income - Linde plc	$	2,819	$	2,800
Less: Income from discontinued operations, net of tax and noncontrolling interests	—		(3)
Add: Noncontrolling interests from continuing operations	101		105
Income from continuing operations (including noncontrolling interests)	2,920		2,902
Adjustments to reconcile net income to net cash provided by operating activities:
Russia-Ukraine conflict and other charges, net of payments	909		83
Depreciation and amortization	3,248		3,500
Deferred income taxes	(412)		(184)
Share-based compensation	78		95
Working capital:
Accounts receivable	(572)		(539)
Inventory	(300)		(77)
Prepaid and other current assets	(111)		(25)
Payables and accruals	376		131
Contract assets and liabilities, net	369		530
Pension contributions	(44)		(32)
Long-term assets, liabilities and other	308		108
Net cash provided by operating activities	6,769		6,492
Investing
Capital expenditures	(2,237)		(2,247)
Acquisitions, net of cash acquired	(110)		(31)
Divestitures, net of cash divested and asset sales	140		147
Net cash provided by (used for) investing activities	(2,207)		(2,131)
Financing
Short-term debt borrowings (repayments) - net	2,229		369
Long-term debt borrowings	2,291		2,260
Long-term debt repayments	(1,725)		(821)
Issuances of ordinary shares	24		39
Purchases of ordinary shares	(4,478)		(3,251)
Cash dividends - Linde plc shareholders	(1,758)		(1,648)
Noncontrolling interest transactions and other	(62)		(319)
Net cash provided by (used for) financing activities	(3,479)		(3,371)
Effect of exchange rate changes on cash and cash equivalents	(150)		(44)
Change in cash and cash equivalents	933		946
Cash and cash equivalents, beginning-of-period	2,823		3,754
Cash and cash equivalents, end-of-period	$	3,756	$	4,700

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. 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

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 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.

2. Russia-Ukraine Conflict and Other Charges

2022 Charges

Other charges were $15 million (benefit of $10 million, after tax) for the quarter ended September 30, 2022 and primarily related to the sale of the GIST business. Total Russia-Ukraine conflict and other charges were $1,004 million ($878 million, after tax and noncontrolling interests) for the nine months ended September 30, 2022, largely attributable to the Russia-Ukraine conflict.

The following tables summarize the company's pre-tax charges for the nine months ended September 30, 2022:

	Nine Months Ended September 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	—		—		—		29		29
Engineering	54		112		166		(9)		157
Other	—		—		—		31		31
Total	$	787	$	114	$	901	$	103	$	1,004

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 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 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) during the second quarter.

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 as it continues to develop divestiture options. 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.

11    

Other Russia related charges

Other charges related specifically to the Russia-Ukraine conflict were $114 million ($84 million after tax) for the nine months ended September 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 $15 million for the quarter ended September 30, 2022, primarily related to the sale of the GIST business. On September 30, 2022, Linde completed the sale of its GIST business. The total consideration for the sale was $292 million, $184 million of which was paid in cash with the remaining $108 million to be paid in future periods. The sale of the GIST business resulted in a loss of $21 million (benefit of $3 million, after tax) recorded within the Russia-Ukraine conflict and other charges in the consolidated statement of income.

Merger related and other charges were $103 million for the nine months ended September 30, 2022, 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 nine months ended September 30, 2022 are expected to be immaterial. Liabilities accrued 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 nine months ended September 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 nine months ended September 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		30		16		46		57		1,004
Less: Cash payments / receipts			(99)		(15)		(114)		19		(95)
Less: Non-cash charges	(901)		—		(7)		(7)		(76)		(984)
Foreign currency translation and other	—		(41)		(5)		(46)		(3)		(49)
Balance, September 30, 2022	$	—	$	274	$	27	$	301	$	28	$	329

2021 Charges

Cost reduction programs and other charges were $26 million and $222 million for the quarter and nine months ended September 30, 2021, respectively ($58 million and $228 million after tax).

Total cost reduction program related charges were $29 million and $277 million ($25 million and $209 million after tax), for the quarter and nine months ended September 30, 2021, respectively. These expenses consisted primarily of severance charges of $20 million and $228 million and other charges of $9 million and $49 million for the quarter and nine months ended September 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 benefits of $3 million and $55 million for the quarter and nine months ended September 30, 2021, respectively (charge of $33 million and a benefit of $19 million, after tax). The 2021 year-to-date pre-tax benefit was primarily due to a $52 million gain triggered by a joint venture deconsolidation in the APAC segment.

In addition, the nine months ended September 30, 2021 include net income tax charges of $38 million, 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.

12    

The quarter and nine months ended September 30, 2021 also include an impairment charge of $35 million ($35 million, after tax) related to a joint venture in the APAC segment. The charge is shown within income from equity investments on the consolidated statements of income.

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.

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 $4,574 million and $4,425 million at September 30, 2022 and December 31, 2021, respectively, and gross receivables aged greater than one year were $285 million and $329 million at September 30, 2022 and December 31, 2021, respectively. Other receivables were $117 million and $150 million at September 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 $4,599 million at September 30, 2022 and $4,499 million at December 31, 2021. Allowances for expected credit losses were $377 million at September 30, 2022 and $405 million at December 31, 2021.  Provisions for expected credit losses were $112 million and $101 million for the nine months ended September 30, 2022 and 2021, respectively. The allowance activity in the nine months ended September 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)	September 30, 2022		December 31, 2021
Inventories
Raw materials and supplies	$	477	$	399
Work in process	321		334
Finished goods	1,057		1,000
Total inventories	$	1,855	$	1,733

13    

4. Debt

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

(Millions of dollars)	September 30, 2022		December 31, 2021
SHORT-TERM
Commercial paper	$	2,954	$	278
Other bank borrowings (primarily non U.S.)	225		885
Total short-term debt	3,179		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)	642		759
5.875% GBP denominated notes due 2023 (b)	345		432
1.20% Euro denominated notes due 2024	539		625
1.875% Euro denominated notes due 2024 (b)	298		356
2.65% Notes due 2025	399		399
1.625% Euro denominated notes due 2025	487		565
0.00% Euro denominated notes due 2026	689		799
3.20% Notes due 2026	725		725
3.434% Notes due 2026	198		197
1.652% Euro denominated notes due 2027	80		94
0.250% Euro denominated notes due 2027	734		850
1.00% Euro denominated notes due 2027 (d)	488		—
1.00% Euro denominated notes due 2028 (b)	689		879
1.10% Notes due 2030	696		696
1.90% Euro denominated notes due 2030	102		118
1.375% Euro denominated notes due 2031 (d)	728		—
0.550% Euro denominated notes due 2032	730		847
0.375% Euro denominated notes due 2033	487		565
1.625% Euro denominated notes due 2035 (d)	773		—
3.55% Notes due 2042	665		664
2.00% Notes due 2050	296		296
1.00% Euro denominated notes due 2051	679		788
Non U.S borrowings	180		243
Other	10		10
	12,159		13,044
Less: current portion of long-term debt	(1,551)		(1,709)
Total long-term debt	10,608		11,335
Total debt	$	15,338	$	14,207

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

(b)September 30, 2022 and December 31, 2021 included a cumulative $46 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 September 30, 2022.

5. 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 September 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 September 30, 2022 and December 31, 2021 for consolidated subsidiaries:

					Fair Value
	Notional Amounts				Assets (a)				Liabilities (a)
(Millions of dollars)	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
Derivatives Not Designated as Hedging Instruments:
Currency contracts:
Balance sheet items	$	3,237	$	4,427	$	36	$	22	$	17	$	17
Forecasted transactions	471		537		11		6		25		11
Cross-currency swaps	60		148		1		21		2		4
Total	$	3,768	$	5,112	$	48	$	49	$	44	$	32
Derivatives Designated as Hedging Instruments:
Currency contracts:
Forecasted transactions	323		758		10		14		4		3
Commodity contracts	N/A		N/A		20		49		2		—
Interest rate swaps	784		1,251		—		24		59		—
Total Hedges	$	1,107	$	2,009	$	30	$	87	$	65	$	3
Total Derivatives	$	4,875	$	7,121	$	78	$	136	$	109	$	35

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(a)Amounts as at September 30, 2022 and December 31, 2021 included current assets of $72 million and $101 million which are recorded in prepaid and other current assets; long-term assets of $6 million and $35 million which are recorded in other long-term assets; current liabilities of $42 million and $27 million which are recorded in other current liabilities; and long-term liabilities of $67 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 used 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 used 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 September 30, 2022, Linde has €7.5 billion ($7.5 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 $1,191 million (deferred gain of $512 million and $1,051 million recorded for the quarter and nine months ended September 30, 2022).

As of September 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 statements 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).

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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 September 30,		Nine Months Ended September 30,
(Millions of dollars)	2022	2021	2022	2021
Derivatives Not