EX-99.1 2 lin_ex991.htm PRESS RELEASE Blueprint
 
 
Exhibit 99.1
 
Linde Reports Second-Quarter 2019 Results
 
Financial Highlights
 
➢ Sales $7.2 billion, ex. FX +4% versus prior year and +5% sequentially
➢ Operating profit margin 9.3%, adjusted pro forma operating profit margin 18.4%
➢ EPS $0.94, adjusted pro forma EPS $1.83
➢ Raised full-year adjusted pro forma EPS guidance to $6.95 - $7.18*
➢ Increased sale of gas backlog to $4.7 billion
 
Guildford, UK, August 5, 2019 – Linde plc (NYSE: LIN; FWB: LIN) today reported second-quarter income from continuing operations of $513 million and diluted earnings per share of $0.94. Excluding Linde AG purchase accounting impacts and other charges, adjusted pro forma income from continuing operations was $1,000 million, up 11% versus prior year adjusted pro forma and 8% sequentially. Adjusted pro forma earnings per share was $1.83, 12% above the prior year and 8% sequentially.
 
Linde’s sales for the second quarter were $7,204 million. Pro forma sales were $7,179 million, in line with the prior year. Excluding unfavorable currency translation effects, sales increased 4% driven by volume and price each growing 2%. Volume growth was evenly split between base business and project startups while price improved across all geographic segments. Sales sequentially increased 4% driven by 4% higher volumes and 1% price, partially offset by 1% currency headwind.
 
Second quarter reported operating profit of $669 million was 3% below the prior-year quarter, primarily due to the impact of purchase accounting. On an adjusted pro forma basis, operating profit of $1,319 million was 6% above prior year or 10% when excluding unfavorable currency.
 
During the second quarter, the company paid $474 million of dividends and repurchased $498 million of stock, net of issuance.
 
Commenting on the financial results, Chief Executive Officer Steve Angel said, “Linde employees delivered strong financial results by improving operating profit margins to drive 12% EPS growth and securing a record project backlog of $4.7 billion. As we look towards the remainder of the year, I’m confident we will deliver on our commitments to create shareholder value irrespective of the economic environment.”
 
For full-year 2019, Linde expects adjusted pro forma diluted earnings per share to be in the range of $6.95 to $7.18 which represents an increase of 12% to 16% versus prior year. This range includes an estimated currency headwind of 3%.
 
Following is additional detail on second quarter 2019 pro forma results for each segment.
Americas sales of $2,779 million were 4% higher versus prior-year quarter and 3% higher sequentially. Compared with the first quarter of 2019, volume and price increased 3% and 1% respectively, while currency was unfavorable by 1%. Operating profit of $646 million was 23.2% of sales.
 
APAC (Asia Pacific) sales of $1,488 million decreased 2% from prior year but increased 4% sequentially. Excluding negative currency, sales grew 4% versus the prior year and 5% sequentially. Sequentially, price improved 1% and volumes increased 4% primarily driven by seasonal effects in Australia and China. Operating profit of $304 million was 20.4% of sales.
 
EMEA (Europe, Middle East & Africa) sales of $1,673 million were up 1% versus both the prior year and sequentially excluding unfavorable currency. Compared with the first quarter of 2019, volume increased 1% and price was flat. Operating profit of $332 million was 19.8% of sales.
 
Linde Engineering sales were $752 million and operating profit was $99 million or 13.2% of sales. Operating profit grew 27% versus prior year and sequentially due to strong project execution and cost management.
 
A teleconference on Linde’s second-quarter results is being held this morning, August 5, 2019 at 9:00 am Eastern Time. The US Toll-Free Dial-In Number is 1 855 758 5442 and the access code is 7264748. The call is also available as a webcast live and on-demand at www.linde.com/investors. Materials to be used in the teleconference are also available on the website.
 
 
 
 
 
1
 
 
About Linde
Linde is a leading industrial gases and engineering company with 2018 pro forma sales of USD 28 billion (EUR 24 billion). The company employs approximately 80,000 people globally and serves customers in more than 100 countries worldwide. Linde delivers innovative and sustainable solutions to its customers and creates long-term value for all stakeholders. The company is making our world more productive by providing products, technologies and services that help customers improve their economic and environmental performance in a connected world.
 
For more information about the company, please visit www.linde.com
 
Proforma sales and adjusted operating profit and earnings per share are non-GAAP measures prepared on a basis consistent with Article 11 and includes certain non-GAAP adjustments. See pages 9 to 15 for reconciliations.
 
See the attachments for a summary of pro forma, adjusted pro forma and non-GAAP reconciliations and calculations. Adjusted amounts, EBITDA, free cash flow and net debt are non-GAAP measures.
 
*Note: We are providing adjusted pro forma earnings per share (“EPS”) guidance for 2019. This is a non-GAAP financial measure that represents diluted earnings per share from continuing operations (a GAAP measure) but excludes the impact of certain items that we believe are not representative of our underlying business performance. At this time, we cannot provide a reconciliation of the differences between the non-GAAP adjusted pro forma EPS guidance and the corresponding GAAP EPS measure for 2019 without unreasonable effort such as (1) the impact of anticipated asset divestitures and (2) purchase accounting adjustments related to the business combination between Praxair and Linde AG. As such, these variables result in an EPS GAAP range that we believe is too large and variable to be meaningful.
 
Attachments: Summary pro forma and adjusted pro forma reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information and Appendix: 2019 and 2018 pro forma income statement information and non-GAAP Measures.
 
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 ability to successfully integrate the Praxair and Linde AG businesses; regulatory or other limitations and requirements imposed as a result of the business combination of Praxair and Linde AG that could reduce anticipated benefits of the transaction; the risk that Linde plc may be unable to achieve expected synergies or that it may take longer or be more costly than expected to achieve those synergies; 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 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, including the impact of the U.S. Tax Cuts and Jobs Act of 2017; 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 GAAP, IFRS 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, 2018 filed with the SEC on March 18, 2019 which should be reviewed carefully. Please consider Linde plc’s forward-looking statements in light of those risks.
 
 
2
 
 
LINDE PLC AND SUBSIDIARIES
SUMMARY PRO FORMA AND ADJUSTED PRO FORMA RECONCILIATIONS
(UNAUDITED)
 
On October 31, 2018, Praxair, Inc. and Linde AG, combined (the "Merger", or "Business Combination") under Linde plc (the "company"). Praxair, Inc. was the accounting acquirer and as a result historical periods prior to the merger date solely reflect the results of Praxair, Inc.
 
The following adjusted pro forma adjusted amounts are Non-GAAP measures and are intended to supplement investors' understanding of the company's financial statements by providing measures which investors, financial analysts and management use to help evaluate the company's operating performance. Items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these Non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. See the "PRO FORMA INCOME STATEMENT INFORMATION" and "NON GAAP MEASURES AND RECONCILIATIONS" starting on page 9 for additional details relating to the adjustments.
 
(Millions of dollars, except per share amounts)
 
 
 
Sales
 
 
Operating Profit
 
 
Income from Continuing Operations
 
 
Diluted EPS from Continuing Operations
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Quarter Ended June 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported GAAP amounts
 $7,204 
 $3,044 
 $669 
 $689 
 $513 
 $480 
 $0.94 
 $1.65 
Pro forma adjustments
  (25)
  4,134 
  59 
  29 
  48 
  77 
  0.09 
  (0.65)
Non-GAAP adjustments
  — 
  — 
  591 
  528 
  439 
  348 
  0.80 
  0.63 
Adjusted pro forma amounts
 $7,179 
 $7,178 
 $1,319 
 $1,246 
 $1,000 
 $905 
 $1.83 
 $1.63 
 
 
 
Sales
 
 
Operating Profit
 
 
Income from Continuing Operations
 
 
Diluted EPS from Continuing Operations
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Year To Date June 30,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported GAAP amounts
 $14,148 
 $6,027 
 $1,278 
 $1,342 
 $948 
 $942 
 $1.73 
 $3.24 
Pro forma adjustments
  (55)
  8,092 
  118 
  75 
  144 
  124 
  0.27 
  (1.32)
Non-GAAP adjustments
  — 
  — 
  1,145 
  1,035 
  835 
  676 
  1.52 
  1.22 
Adjusted pro forma amounts
 $14,093 
 $14,119 
 $2,541 
 $2,452 
 $1,927 
 $1,742 
 $3.52 
 $3.14 
 
 
 
3
 
 
LINDE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars, except per share data)
(UNAUDITED)
 
 
 
Quarter Ended
 
 
Year To Date
 
 
 
June 30,
 
 
June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SALES
 $7,204 
 $3,044 
 $14,148 
 $6,027 
Cost of sales
  4,280 
  1,706 
  8,396 
  3,367 
Selling, general and administrative
  884 
  307 
  1,763 
  617 
Depreciation and amortization
  1,195 
  311 
  2,418 
  622 
Research and development
  45 
  24 
  91 
  48 
Cost reduction programs and other charges
  141 
  24 
  230 
  43 
Other income (expense) - net
  10 
  17 
  28 
  12 
OPERATING PROFIT
  669 
  689 
  1,278 
  1,342 
Interest expense - net
  10 
  44 
  33 
  90 
Net pension and OPEB cost (benefit), excluding service cost
  (24)
  2 
  (9)
  4 
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY INVESTMENTS
  683 
  643 
  1,254 
  1,248 
Income taxes
  169 
  158 
  309 
  306 
INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY INVESTMENTS
  514 
  485 
  945 
  942 
Income from equity investments
  28 
  14 
  62 
  29 
INCOME FROM CONTINUING OPERATIONS (INCLUDING NONCONTROLLING INTERESTS)
  542 
  499 
  1,007 
  971 
Add: income from discontinued operations, net of tax
  9 
  — 
  98 
  — 
INCOME (INCLUDING NONCONTROLLING INTERESTS)
  551 
  499 
  1,105 
  971 
Less: noncontrolling interests from continuing operations
  (29)
  (19)
  (59)
  (29)
Less: noncontrolling interests from discontinued operations
  — 
  — 
  (7)
  — 
NET INCOME - LINDE PLC
 $522 
 $480 
 $1,039 
 $942 
 
    
    
    
    
NET INCOME - LINDE PLC
    
    
    
    
Income from continuing operations
 $513 
 $480 
 $948 
 $942 
Income from discontinued operations
 $9 
 $— 
 $91 
 $— 
 
    
    
    
    
PER SHARE DATA - LINDE PLC SHAREHOLDERS
    
    
    
    
 
    
    
    
    
Basic earnings per share from continuing operations
 $0.95 
 $1.67 
 $1.74 
 $3.27 
Basic earnings per share from discontinued operations
  0.02 
  — 
  0.17 
  — 
Basic earnings per share
 $0.97 
 $1.67 
 $1.91 
 $3.27 
 
    
    
    
    
Diluted earnings per share from continuing operations
  0.94 
  1.65 
  1.73 
  3.24 
Diluted earnings per share from discontinued operations
  0.02 
  — 
  0.17 
  — 
Diluted earnings per share
 $0.96 
 $1.65 
 $1.90 
 $3.24 
 
    
    
    
    
Cash dividends
 $0.875 
 $0.825 
 $1.75 
 $1.65 
 
    
    
    
    
WEIGHTED AVERAGE SHARES OUTSTANDING
    
    
    
    
Basic shares outstanding (000's)
  542,561 
  287,803 
  544,033 
  287,654 
Diluted shares outstanding (000's)
  546,488 
  290,908 
  547,771 
  290,926 
 
Note: See page 9 for a reconciliation to adjusted amounts which are Non-GAAP.
 
 
4
 
 
LINDE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
(UNAUDITED)
 
 
 
June 30,
 
 
December 31,
 
 
 
2019
 
 
2018
 
ASSETS
 
 
 
 
 
 
Cash and cash equivalents
 $2,686 
 $4,466 
Accounts receivable - net
  4,483 
  4,297 
Contract assets
  405 
  283 
Inventories
  1,708 
  1,651 
Assets held for sale
  283 
  5,498 
Prepaid and other current assets
  1,116 
  1,077 
TOTAL CURRENT ASSETS
  10,681 
  17,272 
Property, plant and equipment - net
  29,540 
  29,717 
Goodwill
  26,947 
  26,874 
Other intangibles - net
  15,804 
  16,223 
Other long-term assets
  4,217 
  3,300 
TOTAL ASSETS
 $87,189 
 $93,386 
 
    
    
LIABILITIES AND EQUITY
    
    
Accounts payable
 $3,358 
 $3,219 
Short-term debt
  1,475 
  1,485 
Current portion of long-term debt
  227 
  1,523 
Contract liabilities
  1,682 
  1,546 
Liabilities of assets held for sale
  11 
  768 
Other current liabilities
  3,768 
  4,415 
TOTAL CURRENT LIABILITIES
  10,521 
  12,956 
Long-term debt
  12,255 
  12,288 
Other long-term liabilities
  11,519 
  11,046 
TOTAL LIABILITIES
  34,295 
  36,290 
 
    
    
REDEEMABLE NONCONTROLLING INTERESTS
  15 
  16 
 
    
    
LINDE PLC SHAREHOLDERS' EQUITY:
    
    
Common stock
  1 
  1 
Additional paid-in capital
  40,157 
  40,151 
Retained earnings
  16,555 
  16,529 
Accumulated other comprehensive income (loss)
  (4,377)
  (4,456)
Less: Treasury stock, at cost
  (1,772)
  (629)
Total Linde plc Shareholders' Equity
  50,564 
  51,596 
Noncontrolling interests
  2,315 
  5,484 
TOTAL EQUITY
  52,879 
  57,080 
TOTAL LIABILITIES AND EQUITY
 $87,189 
 $93,386 
 
 
5
 
 
LINDE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
 
 
 
Quarter Ended
 
 
Year to Date
 
 
 
June 30,
 
 
June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
OPERATIONS
 
 
 
 
 
 
 
 
 
 
 
 
Net income - Linde plc
 $522 
 $480 
 $1,039 
 $942 
Less: income from discontinued operations, net of tax and noncontrolling interests
  (9)
  — 
  (91)
  — 
Add: noncontrolling interests
  29 
  19 
  59 
  29 
Net income (including noncontrolling interests)
 $542 
  499 
 $1,007 
  971 
 
    
    
    
    
Adjustments to reconcile net income to net cash provided by operating activities:
    
    
    
    
Cost reduction programs and other charges, net of payments (a)
  (119)
  1 
  (286)
  15 
Depreciation and amortization
  1,195 
  311 
  2,418 
  622 
Accounts receivable
  (132)
  (65)
  (188)
  (147)
Contract assets and liabilities, net
  (19)
  — 
  (103)
  — 
Inventory
  (41)
  (8)
  (73)
  (10)
Payables and accruals
  (216)
  61 
  (247)
  (6)
Pension contributions
  (25)
  (6)
  (43)
  (10)
Deferred income taxes and other
  (180)
  (3)
  (412)
  43 
Net cash provided by operating activities
 $1,005 
 $790 
 $2,073 
 $1,478 
 
    
    
    
    
INVESTING
    
    
    
    
Capital expenditures
  (865)
  (351)
  (1,708)
  (676)
Acquisitions, net of cash acquired
  12 
  — 
  (140)
  — 
Divestitures and asset sales
  1,234 
  62 
  4,689 
  69 
Net cash used for investing activities
 $381 
 $(289)
 $2,841 
 $(607)
 
    
    
    
    
FINANCING
    
    
    
    
Debt increase (decrease) - net
  (250)
  (277)
  (1,277)
  (492)
Issuances of ordinary shares
  27 
  15 
  55 
  44 
Purchases of ordinary shares
  (525)
  (1)
  (1,250)
  (1)
Cash dividends - Linde plc shareholders
  (474)
  (237)
  (951)
  (474)
Noncontrolling interest transactions and other (b)
  (3,212)
  (16)
  (3,222)
  (22)
Net cash provided by (used for) financing activities
 $(4,434)
 $(516)
 $(6,645)
 $(945)
 
    
    
    
    
DISCONTINUED OPERATIONS
    
    
    
    
Cash provided by operating activities
  7 
  — 
  70 
  — 
Cash provided by investing activities
  (1)
  — 
  (59)
  — 
Cash provided by financing activities
  — 
  — 
  5 
  — 
Net cash provided by (used for) discontinued operations
 $6 
 $— 
 $16 
 $— 
 
    
    
    
    
Effect of exchange rate changes on cash and cash equivalents
  (57)
  (51)
  (49)
  (64)
 
    
    
    
    
Change in cash and cash equivalents
  (3,099)
  (66)
  (1,764)
  (138)
Cash and cash equivalents, beginning-of-period
  5,791 
  545 
  4,466 
  617 
Cash and cash equivalents, including discontinued operations
 $2,692 
 $479 
 $2,702 
 $479 
Cash and cash equivalents of discontinued operations
  (6)
  — 
  (16)
  — 
Cash and cash equivalents, end-of-period
 $2,686 
 $479 
 $2,686 
 $479 
 
(a)
Cost reduction programs and other charges cash outflows for the 2019 quarter were $260 million ($516 million for the six months ended June 31, 2019), reflected in the condensed consolidated statement of cash flows as follows: $141 million ($230 million for the six months ended June 31, 2019) included within "Net income - Linde plc", and $119 million ($286 million of the six months ended June 31, 2019) included within "Adjustments to reconcile net income to net cash provided by operating activities".
(b)
Noncontrolling interest transactions and other for the 2019 second quarter includes approximately $3.2 billion related to the cash merger squeeze-out of the 8% Linde AG shares which were not tendered in the exchange offer.
 
 
6
 
 
LINDE PLC AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)
 
 
 
Reported
 
 
Pro Forma (b)
 
 
 
Quarter Ended June 30,
 
 
Quarter Ended June 30,
 
 
 
2019
 
 
2018 (a)
 
 
2019
 
 
2018 (a)
 
SALES
 
 
 
 
 
 
 
 
 
 
 
 
Americas
 $2,779 
 $1,865 
 $2,779 
 $2,660 
EMEA
  1,673 
  435 
  1,673 
  1,778 
APAC
  1,513 
  460 
  1,488 
  1,517 
Engineering
  752 
  — 
  752 
  778 
Other
  487 
  284 
  487 
  445 
Segment sales
 $7,204 
 $3,044 
 $7,179 
 $7,178 
 
    
    
    
    
OPERATING PROFIT
    
    
    
    
Americas
 $646 
 $510 
 $646 
 $630 
EMEA
  332 
  93 
  332 
  353 
APAC
  310 
  108 
  304 
  271 
Engineering
  99 
  — 
  99 
  78 
Other
  (62)
  2 
  (62)
  (86)
Segment operating profit
 $1,325 
 $713 
 $1,319 
 $1,246 
Cost reduction programs and other charges
  (141)
  (24)
    
    
Purchase accounting impacts - Linde AG
  (515)
  — 
    
    
Total operating profit
 $669 
 $689 
    
    
 
 
 
Reported
 
 
Pro Forma (b)
 
 
 
Year to Date June 30,
 
 
Year to Date June 30,
 
 
 
2019
 
 
2018 (a)
 
 
2019
 
 
2018 (a)
 
SALES
 
 
 
 
 
 
 
 
 
 
 
 
Americas
 $5,485 
 $3,715 
  5,481 
 $5,228 
EMEA
  3,355 
  850 
  3,355 
  3,592 
APAC
  2,965 
  895 
  2,915 
  2,964 
Engineering
  1,388 
  — 
  1,388 
  1,441 
Other
  955 
  567 
  954 
  894 
Segment sales
 $14,148 
 $6,027 
 $14,093 
 $14,119 
 
    
    
    
    
OPERATING PROFIT
    
    
    
    
Americas
 $1,231 
 $993 
 $1,230 
 $1,202 
EMEA
  679 
  180 
  679 
  740 
APAC
  588 
  214 
  577 
  527 
Engineering
  177 
  — 
  177 
  139 
Other
  (121)
  (2)
  (122)
  (156)
Segment operating profit
 $2,554 
 $1,385 
 $2,541 
 $2,452 
Cost reduction programs and other charges
  (230)
  (43)
    
    
Purchase accounting impacts - Linde AG
  (1,046)
  — 
    
    
Total operating profit
 $1,278 
 $1,342 
    
    
 
(a)
As a result of the merger and effective with the lifting of the hold separate order, effective March 1, 2019, new reportable segments were created. All periods presented were recast to conform to the new segment structure.
(b)
See pro forma income statement information starting on page 9.
 
 
7
 
 
LINDE PLC AND SUBSIDIARIES
APPENDIX
QUARTER ENDED JUNE 30, 2019 PRO FORMA INCOME STATEMENT INFORMATION
(Millions of dollars, except per share data)
(UNAUDITED)
 
To assist with a discussion of the 2019 and 2018 results on a comparable basis, certain supplemental unaudited pro forma income statement information is provided on both a consolidated and segment basis. The pro forma information has been prepared on a basis consistent with Article 11 of Regulation S-X, assuming the Merger and merger-related divestitures had been consummated on January 1, 2017. In preparing this pro forma information, the historical financial information has been adjusted to give effect to pro forma adjustments that are (i) directly attributable to the Business Combination and other transactions presented herein, such as the merger-related divestitures, (ii) factually supportable, and (iii) expected to have a continuing impact on the combined entity’s consolidated results. The pro forma information is based on management's assumptions and is presented for illustrative purposes and does not purport to represent what the results of operations would actually have been if the Business Combination and merger-related divestitures had occurred as of the dates indicated or what the results would be for any future periods. Also, the pro forma information does not include the impact of any revenue, cost or other operating synergies that may result from the Business Combination or any related restructuring costs. The unaudited pro forma income statement has been presented for informational purposes only and is not necessarily indicative of what Linde plc's results of operation actually would have been had the Merger been completed on January 1, 2017. In addition, the unaudited pro forma income statement does not purport to project the future operating results of the company.
 
 
 
Pro forma Income Statement Information
 
 
 
 
 
 
Pro forma Adjustments
 
 
 
 
 
 
Linde plc Reported
 
 
Divestitures (a)
 
 
Other  
 
 
Total
 
 
Pro Forma
 
Sales
 $7,204 
 $(25)
 $— 
 $(25)
 $7,179 
Cost of sales, exclusive of depreciation
  4,280 
  (19)
    
  (19)
  4,261 
Selling, general and administrative
  884 
  — 
    
  — 
  884 
As a % of Sales
  12.3%
    
    
    
  12.3%
Depreciation and amortization
  1,195 
    
    
  — 
  1,195 
Research and development
  45 
    
    
  — 
  45 
Cost reduction programs and other charges
  141 
    
  (65)(b)
  (65)
  76 
Other income (expense) - net
  10 
    
    
  — 
  10 
Operating profit
  669 
  (6)
  65 
  59 
  728 
Operating margin
  9.3%
    
    
    
  10.1%
 
    
    
    
    
    
Net pension and OPEB cost (benefit), excluding service costs
  (24)
    
    
  — 
  (24)
Interest expense - net
  10 
    
    
  — 
  10 
Income taxes
  169 
  (2)
  13(c)
  11 
  180 
Effective Tax Rate
  24.7%
    
    
    
  24.3%
Income from equity investments
  28 
    
    
  — 
  28 
Noncontrolling interests from continuing operations
  (29)
    
    
  — 
  (29)
Income from continuing operations
 $513 
 $(4)
 $52 
 $48 
 $561 
Diluted shares outstanding
  546,488 
    
    
  546,488 
  546,488 
Diluted EPS from continuing operations
 $0.94 
    
    
 $0.09 
 $1.03 
 
    
    
    
    
    
SEGMENT SALES
    
    
    
    
    
Americas
 $2,779 
 $— 
 $— 
 $— 
 $2,779 
EMEA
  1,673 
    
    
  — 
  1,673 
APAC
  1,513 
  (25)
    
  (25)
  1,488 
Engineering
  752 
    
    
  — 
  752 
Other
  487 
  — 
    
  — 
  487 
Segment sales
 $7,204 
 $(25)
 $— 
 $(25)
 $7,179 
 
    
    
    
    
    
SEGMENT OPERATING PROFIT
    
    
    
    
    
Americas
 $646 
 $— 
 $— 
 $— 
 $646 
EMEA
  332 
    
    
  — 
  332 
APAC
  310 
  (6)
    
  (6)
  304 
Engineering
  99 
    
    
  — 
  99 
Other
  (62)
  — 
    
  — 
  (62)
Segment operating profit
  1,325 
  (6)
  — 
  (6)
  1,319 
Cost reduction programs and other charges
  (141)
    
    
  — 
  (141)
Purchase accounting impacts - Linde AG
  (515)
    
    
  — 
  (515)
Total operating profit
 $669 
 $(6)
 $— 
 $(6)
 $663 
 
Pro Forma Adjustments:
 
(a)
To eliminate the results of Praxair's merger-related divestitures which are expected to be completed later in 2019.
(b)
To eliminate the transaction costs and other charges related to the Merger.
(c)
To eliminate the income tax impacts of the Other adjustments.
 
 
8
 
 
LINDE PLC AND SUBSIDIARIES
APPENDIX
QUARTER ENDED MARCH 31, 2019 PRO FORMA INCOME STATEMENT INFORMATION
(Millions of dollars, except per share data)
(UNAUDITED)
 
 
 
Quarter to Date March 31, 2019
 
 
 
Pro forma Income Statement Information
 
 
 
 
 
 
Pro forma Adjustments
 
 
 
 
 
 
Linde plc Reported
 
 
Divestitures (a)
 
 
Other
 
 
Total
 
 
Pro Forma
 
Sales
 $6,944 
 $(30)
 $— 
 $(30)
 $6,914 
Cost of sales, exclusive of depreciation
  4,116 
  (22)
  (10)(b)
  (32)
  4,084 
Selling, general and administrative
  879 
  (1)
    
  (1)
  878 
As a % of Sales
  12.7%
    
    
    
  12.7%
Depreciation and amortization
  1,223 
    
    
  — 
  1,223 
Research and development
  46 
    
    
  — 
  46 
Cost reduction programs and other charges
  89 
    
  (56)(c)
  (56)
  33 
Other income (expense) - net
  18 
    
    
  — 
  18 
Operating profit
  609 
  (7)
  66 
  59 
  668 
Operating margin
  8.8%
    
    
    
  9.7%
 
    
    
    
    
    
Net pension and OPEB cost (benefit), excluding service costs
  15 
    
  (51)(d)
  (51)
  (36)
Interest expense - net
  23 
    
    
  — 
  23 
Income taxes
  140 
  (2)
  16(e)
  14 
  154 
Effective Tax Rate
  24.5%
    
    
    
  22.6%
Income from equity investments
  34 
    
    
  — 
  34 
Noncontrolling interests from continuing operations
  (30)
    
    
  — 
  (30)
Income from continuing operations
 $435 
 $(5)
 $101 
 $96 
 $531 
Diluted shares outstanding
  549,147 
    
    
  549,147 
  549,147 
Diluted EPS from continuing operations
 $0.79 
    
    
 $0.18 
 $0.97 
 
    
    
    
    
    
SEGMENT SALES
    
    
    
    
    
Americas
 $2,706 
 $(4)
 $— 
 $(4)
 $2,702 
EMEA
  1,682 
    
    
  — 
  1,682 
APAC
  1,452 
  (25)
    
  (25)
  1,427 
Engineering
  636 
    
    
  — 
  636 
Other
  468 
  (1)
    
  (1)
  467 
Segment sales
 $6,944 
 $(30)
 $— 
 $(30)
 $6,914 
 
    
    
    
    
    
SEGMENT OPERATING PROFIT
    
    
    
    
    
Americas
 $585 
 $(1)
 $— 
 $(1)
 $584 
EMEA
  347 
    
    
  — 
  347 
APAC
  278 
  (5)
    
  (5)
  273 
Engineering
  78 
    
    
  — 
  78 
Other
  (59)
  (1)
    
  (1)
  (60)
Segment operating profit
  1,229 
  (7)
  — 
  (7)
  1,222 
Transaction costs and other charges
  (89)
    
    
  — 
  (89)
Purchase accounting impacts - Linde AG
  (531)
    
    
  — 
  (531)
Total operating profit
 $609 
 $(7)
 $— 
 $(7)
 $602 
 
Pro Forma Adjustments:
(a)
To eliminate the results of Praxair's merger-related divestitures which are expected to be completed later in 2019.
(b)
To eliminate the impact of the inventory step-up recorded in purchase accounting  for the merger. This item is nonrecurring in nature, directly attributable to the Merger and occurred within one year of the transaction.
(c)
To eliminate the transaction costs and other charges related to the Merger.
(d)
To eliminate pension settlement charges related to the Merger.
(e)
To eliminate the income tax impacts of the Other adjustments.
 
 
9
 
 
LINDE PLC AND SUBSIDIARIES
APPENDIX
YEAR TO DATE JUNE 30, 2019 PRO FORMA INCOME STATEMENT INFORMATION
(Millions of dollars, except per share data)
(UNAUDITED)
 
 
 
Pro forma Income Statement Information
 
 
 
 
 
 
Pro forma Adjustments
 
 
 
 
 
 
Linde plc Reported
 
 
Divestitures (a)
 
 
Other  
 
 
Total
 
 
Pro Forma
 
Sales
 $14,148 
 $(55)
 $— 
 $(55)
 $14,093 
Cost of sales, exclusive of depreciation
  8,396 
  (41)
  (10)(b)
  (51)
  8,345 
Selling, general and administrative
  1,763 
  (1)
    
  (1)
  1,762 
As a % of Sales
  12.5%
    
    
    
  12.5%
Depreciation and amortization
  2,418 
    
    
  — 
  2,418 
Research and development
  91 
    
    
  — 
  91 
Cost reduction programs and other charges
  230 
    
  (121)(c)
  (121)
  109 
Other income (expense) - net
  28 
    
    
  — 
  28 
Operating profit
  1,278 
  (13)
  131 
  118 
  1,396 
Operating margin
  9.0%
    
    
    
  9.9%
 
    
    
    
    
    
Net pension and OPEB cost (benefit), excluding service costs
  (9)
    
  (51)(d)
  (51)
  (60)
Interest expense - net
  33 
    
    
  — 
  33 
Income taxes
  309 
  (4)
  29(e)
  25 
  334 
Effective Tax Rate
  24.6%
    
    
    
  23.5%
Income from equity investments
  62 
    
    
  — 
  62 
Noncontrolling interests from continuing operations
  (59)
    
    
  — 
  (59)
Income from continuing operations
 $948 
 $(9)
 $153 
 $144 
 $1,092 
Diluted shares outstanding
  547,771 
    
    
  547,771 
  547,771 
Diluted EPS from continuing operations
 $1.73 
    
    
 $0.27 
 $2.00 
 
    
    
    
    
    
SEGMENT SALES
    
    
    
    
    
Americas
 $5,485 
 $(4)
 $— 
 $(4)
 $5,481 
EMEA
  3,355 
    
    
  — 
  3,355 
APAC
  2,965 
  (50)
    
  (50)
  2,915 
Engineering
  1,388 
    
    
  — 
  1,388 
Other
  955 
  (1)
    
  (1)
  954 
Segment sales
 $14,148 
 $(55)
 $— 
 $(55)
 $14,093 
 
    
    
    
    
    
SEGMENT OPERATING PROFIT
    
    
    
    
    
Americas
 $1,231 
 $(1)
 $— 
 $(1)
 $1,230 
EMEA
  679 
    
    
    
  679 
APAC
  588 
  (11)
    
 $(11)
  577 
Engineering
  177 
    
    
    
  177 
Other
  (121)
  (1)
    
 $(1)
  (122)
Segment operating profit
  2,554 
  (13)
  — 
  (13)
  2,541 
Cost reduction programs and other charges
  (230)
    
    
 $— 
  (230)
Purchase accounting impacts - Linde AG
  (1,046)
    
    
  — 
  (1,046)
Total operating profit
 $1,278 
 $(13)
 $— 
 $(13)
 $1,265 
 
Pro Forma Adjustments:
(a)
To eliminate the results of Praxair's merger-related divestitures which are expected to be completed later in 2019.
(b)
To eliminate the impact of the inventory step-up recorded in purchase accounting  for the merger. This item is nonrecurring in nature, directly attributable to the Merger and occurred within one year of the transaction.
(c)
To eliminate the transaction costs and other charges related to the Merger.
(d)
To eliminate pension settlement charges related to the Merger.
(e)
To eliminate the income tax impacts of the Other adjustments.
 
 
10
 
 
LINDE PLC AND SUBSIDIARIES
APPENDIX
QUARTER ENDED JUNE 30, 2018 PRO FORMA INCOME STATEMENT INFORMATION
(Millions of dollars, except per share data)
(UNAUDITED)
 
 
 
Pro forma Income Statement Information
 
 
 
Pro forma Adjustments
 
 
 
Praxair, Inc. (a)
 
 
Linde AG (b)
 
 
Divestitures (c)
 
 
Purchase Accounting (d)
 
 
Other
 
 
Total
 
 
Pro Forma Linde plc
 
Sales
 $3,044 
 $5,175 
 $(1,015)
 $— 
 $(26)(e)
 $4,134 
 $7,178 
Cost of sales, exclusive of depreciation
  1,706 
  3,247 
  (605)
    
  (26)(e)
  2,616 
  4,322 
Selling, general and administrative
  307 
  741 
  (95)
    
    
  646 
  953 
As a % of Sales
  10.0%
    
    
    
    
    
  13.2%
Depreciation and amortization
  311 
  459 
  (101)
  558 
    
  916 
  1,227 
Research and development
  24 
  26 
    
    
    
  26 
  50 
Cost reduction programs and other charges
  24 
  45 
    
    
  (69)(f)
  (24)
  — 
Other income (expense) - net
  17 
  75 
    
    
    
  75 
  92 
Operating profit
  689 
  732 
  (214)
  (558)
  69 
  29 
  718 
Operating margin
  22.6%
    
    
    
    
    
  10.0%
 
    
    
    
    
    
    
    
Net pension and OPEB cost (benefit), excluding service costs
  2 
  (67)
  — 
    
    
  (67)
  (65)
Interest expense - net
  44 
  34 
  (18)
  (25)
    
  (9)
  35 
Income taxes
  158 
  185 
  (23)
  (129)
  5(g)
  38 
  196 
Effective Tax Rate
  24.6%
    
    
    
    
    
  26.2%
Income from equity investments
  14 
  23 
  (9)
  (16)
    
  (2)
  12 
Noncontrolling interests from continuing operations
  (19)
  (36)
  6 
  42 
    
  12 
  (7)
Income from continuing operations
 $480 
 $567 
 $(176)
 $(378)
 $64 
 $77 
 $557 
Diluted shares outstanding
  290,908 
    
    
    
    
  264,243(h)
  555,151 
Diluted EPS from continuing operations
 $1.65 
    
    
    
    
 $(0.65)(h)
 $1.00 
 
    
    
    
    
    
    
    
SEGMENT SALES
    
    
    
    
    
    
    
Americas
 $1,865 
 $1,312 
 $(498)
 $— 
 $(19)(e)
 $795 
 $2,660 
EMEA
  435 
  1,756 
  (413)
    
  —(e)
  1,343 
  1,778 
APAC
  460 
  1,157 
  (94)
    
  (6)(e)
  1,057 
  1,517 
Engineering
  — 
  778 
  — 
    
  — 
  778 
  778 
Other
  284 
  172 
  (10)
    
  (1)(e)
  161 
  445 
Segment sales
 $3,044 
 $5,175 
 $(1,015)
 $— 
 $(26)
 $4,134 
 $7,178 
 
    
    
    
    
    
    
    
SEGMENT OPERATING PROFIT
    
    
    
    
    
    
    
Americas
 $510 
 $219 
 $(98)
 $— 
 $(1)(i)
 $120 
 $630 
EMEA
  93 
  354 
  (90)
    
  (4)(i)
  260 
  353 
APAC
  108 
  220 
  (24)
    
  (33)(i)
  163 
  271 
Engineering
  — 
  81 
  — 
    
  (3)(i)
  78 
  78 
Other
  2 
  (97)
  (2)
    
  11(i)
  (88)
  (86)
Segment operating profit
  713 
  777 
  (214)
  — 
  (30)
  533 
  1,246 
Cost reduction programs and other charges
  (24)
  (45)
    
    
  69 
  24 
  — 
Total operating profit
 $689 
 $732 
 $(214)
 $— 
 $39 
 $557 
 $1,246 
 
Pro Forma Adjustments:
(a)
To include Praxair, Inc. consolidated results for the quarter ended June 30, 2018. Note that the results include the performance of Praxair's European industrial gases business through December 3, 2018. The adjustments reflect reclassifications to conform to Linde plc's reporting format.
(b)
To include Linde AG consolidated results for the quarter ended June 30, 2018. The adjustments reflect reclassifications to conform to Linde plc's reporting format and adjustments from IFRS to U.S. GAAP.
(c)
To eliminate the results of merger-related divestitures required by regulatory authorities to secure approval for the Merger. These divestitures include the majority of Praxair's European industrial gases business (completed December 3, 2018), a significant portion of Linde AG's America's industrial gases business (completed on March 1, 2019), select assets of Linde AG's South Korean industrial gases business (completed April 30, 2019), as well as certain divestitures of other Praxair and Linde AG businesses in Asia that are currently expected to be sold in 2019.
(d)
To include preliminary purchase accounting adjustments for the period from January 1, 2018 to October 30, 2018 (prior to the Merger). This relates to (i) additional depreciation and amortization related to the increased value of of property, plant and equipment and increased basis of intangible assets, (ii) interest expense impacts related to the fair value of debt, (iii) the tax impacts related to the non-GAAP adjustments above, (iv) income from equity investments equity related to the fair value of equity investments, and (v) noncontrolling interests adjustments related to the fair value adjustments above. Purchase accounting impacts are not included in the definition of segment operating profit; therefore, no pro forma adjustment is required for segment reporting.
(e)
To eliminate sales between Praxair and Linde AG for the period prior to the Merger date at October 31, 2018 (January 1, 2018 to October 30, 2018).
(f)
To eliminate the transaction costs and other charges related to the Merger.
(g)
To reflect the income tax impact of the above pro forma adjustments.
(h)
To reflect the impact on diluted shares outstanding and diluted EPS related to ordinary shares issues to Linde AG shareholders in connection with the Merger.
(i)
To eliminate other (income) charges not included in segment operating profit, primarily related to a gain on a sale of asset in APAC.
 
 
11
 
 
LINDE PLC AND SUBSIDIARIES
APPENDIX
QUARTER ENDED MARCH 31, 2018 PRO FORMA INCOME STATEMENT INFORMATION
(Millions of dollars, except per share data)
(UNAUDITED)
 
 
 
Pro forma Income Statement Information
 
 
 
Pro forma Adjustments
 
 
 
Praxair, Inc. (a)
 
 
Linde AG (b)
 
 
Divestitures (c)
 
 
Purchase Accounting (d)
 
 
Other
 
 
Total
 
 
Pro Forma Linde plc
 
Sales
 $2,983 
 $5,010 
 $(1,027)
 $— 
 $(25)(e)
 $3,958 
 $6,941 
Cost of sales, exclusive of depreciation
  1,661 
  3,105 
  (609)
    
  (25)(e)
  2,471 
  4,132 
Selling, general and administrative
  310 
  704 
  (110)
    
    
  594 
  904 
As a % of Sales
  10.4%
    
    
    
    
    
  13.0%
Depreciation and amortization
  311 
  471 
  (102)
  558 
    
  927 
  1,238 
Research and development
  24 
  26 
    
    
    
  26 
  50 
Cost reduction programs and other charges
  19 
  41 
    
    
  (60)(f)
  (19)
  — 
Other income (expense) - net
  (5)
  87 
    
    
    
  87 
  82 
Operating profit
  653 
  750 
  (206)
  (558)
  60 
  46 
  699 
Operating margin
  21.9%
    
    
    
    
    
  10.1%
 
    
    
    
    
    
    
    
Net pension and OPEB cost (benefit), excluding service costs
  2 
  (39)
  (1)
    
    
  (40)
  (38)
Interest expense - net
  46 
  69 
  (18)
  (25)
    
  26 
  72 
Income taxes
  148 
  171 
  (24)
  (129)
  5(g)
  23 
  171 
Effective Tax Rate
  24.5%
    
    
    
    
  —%
  25.7%
Income from equity investments
  15 
  24 
  (9)
  (16)
    
  (1)
  14 
Noncontrolling interests from continuing operations
  (10)
  (37)
  6 
  42 
    
  11 
  1 
Income from continuing operations
 $462 
 $536 
 $(166)
 $(378)
 $55 
 $47 
 $509 
Diluted shares outstanding
  290,809 
    
    
    
    
  264,342(h)
  555,151 
Diluted EPS from continuing operations
 $1.59 
    
    
    
    
 $(0.67)(h)
 $0.92 
 
    
    
    
    
    
    
    
SEGMENT SALES
    
    
    
    
    
    
    
Americas
 $1,850 
 $1,267 
 $(533)
 $— 
 $(16)(e)
 $718 
 $2,568 
EMEA
  415 
  1,791 
  (393)
    
  1(e)
  1,399 
  1,814 
APAC
  435 
  1,111 
  (92)
    
  (7)(e)
  1,012 
  1,447 
Engineering
  — 
  663 
  — 
    
  — 
  663 
  663 
Other
  283 
  178 
  (9)
    
  (3)(e)
  166 
  449 
Segment sales
 $2,983 
 $5,010 
 $(1,027)
 $— 
 $(25)
 $3,958 
 $6,941 
 
    
    
    
    
    
    
    
SEGMENT OPERATING PROFIT
    
    
    
    
    
    
    
Americas
 $483 
 $192 
 $(97)
 $— 
 $(6)(i)
 $89 
 $572 
EMEA
  87 
  438 
  (82)
    
  (56)(i)
  300 
  387 
APAC
  106 
  182 
  (25)
    
  (7)(i)
  150 
  256 
Engineering
  — 
  63 
  — 
    
  (2)(i)
  61 
  61 
Other
  (4)
  (84)
  (2)
    
  20(i)
  (66)
  (70)
Segment operating profit
  672 
  791 
  (206)
  — 
  (51)
  534 
  1,206 
Transaction costs and other charges
  (19)
  (41)
    
    
  60 
  19 
  — 
Total operating profit
 $653 
 $750 
 $(206)
 $— 
 $9 
 $553 
 $1,206 
 
Pro Forma Adjustments:
(a)
To include Praxair, Inc. consolidated results for the quarter ended March 31, 2018. Note that the results include the performance of Praxair's European industrial gases business through December 3, 2018. The adjustments reflect reclassifications to conform to Linde plc's reporting format.
(b)
To include Linde AG consolidated results for the quarter ended March 31, 2018. The adjustments reflect reclassifications to conform to Linde plc's reporting format and adjustments from IFRS to U.S. GAAP.
(c)
To eliminate the results of merger-related divestitures required by regulatory authorities to secure approval for the Merger. These divestitures include the majority of Praxair's European industrial gases business (completed December 3, 2018), a significant portion of Linde AG's America's industrial gases business (completed on March 1, 2019), select assets of Linde AG's South Korean industrial gases business (completed April 30, 2019), as well as certain divestitures of other Praxair and Linde AG businesses in Asia that are currently expected to be sold in 2019.
(d)
To include preliminary purchase accounting adjustments for the period from January 1, 2018 to October 30, 2018 (prior to the Merger). This relates to (i) additional depreciation and amortization related to the increased value of of property, plant and equipment and increased basis of intangible assets, (ii) interest expense impacts related to the fair value of debt, (iii) the tax impacts related to the non-GAAP adjustments above, (iv) income from equity investments equity related to the fair value of equity investments, and (v) noncontrolling interests adjustments related to the fair value adjustments above. Purchase accounting impacts are not included in the definition of segment operating profit; therefore, no pro forma adjustment is required for segment reporting.
(e)
To eliminate sales between Praxair and Linde AG for the period prior to the Merger date at October 31, 2018 (January 1, 2018 to October 30, 2018).
(f)
To eliminate the transaction costs and other charges related to the Merger.
(g)
To reflect the income tax impact of the above pro forma adjustments.
(h)
To reflect the impact on diluted shares outstanding and diluted EPS related to ordinary shares issues to Linde AG shareholders in connection with the Merger.
(i)
To eliminate other (income) charges not included in segment operating profit, primarily related to a gain on a sale of asset in APAC.
 
 
12
 
 
LINDE PLC AND SUBSIDIARIES
APPENDIX
YEAR TO DATE JUNE 30, 2018 PRO FORMA INCOME STATEMENT INFORMATION
(Millions of dollars, except per share data)
(UNAUDITED)
 
 
 
Pro Forma Income Statement Information
 
 
 
Pro Forma Adjustments
 
 
 
Praxair, Inc. (a)
 
 
Linde AG (b)
 
 
Divestitures (c)
 
 
Purchase Accounting (d)
 
 
Other
 
 
Total
 
 
Pro Forma Linde plc
 
Sales
 $6,027 
 $10,185 
 $(2,042)
 $— 
 $(51)(e)
 $8,092 
 $14,119 
Cost of sales, exclusive of depreciation
  3,367 
  6,352 
  (1,214)
    
  (51)(e)
  5,087 
  8,454 
Selling, general and administrative
  617 
  1,445 
  (205)
    
    
  1,240 
  1,857 
As a % of Sales
  10.2%
  14.2%
    
    
    
    
  13.2%
Depreciation and amortization
  622 
  930 
  (203)
  1,116 
    
  1,843 
  2,465 
Research and development
  48 
  52 
    
    
    
  52 
  100 
Cost reduction programs and other charges
  43 
  86 
    
    
  (129)(f)
  (43)
  — 
Other income (expense) - net
  12 
  162 
    
    
    
  162 
  174 
Operating profit
  1,342 
  1,482 
  (420)
  (1,116)
  129 
  75 
  1,417 
Operating margin
  22.3%
    
    
    
    
    
  10.0%
 
    
    
    
    
    
    
    
Net pension and OPEB cost (benefit), excluding service costs
  4 
  (106)
  (1)
    
    
  (107)
  (103)
Interest expense - net
  90 
  103 
  (36)
  (50)
    
  17 
  107 
Income taxes
  306 
  356 
  (47)
  (258)
  10(g)
  61 
  367 
Effective Tax Rate
  24.5%
    
    
    
    
    
  26.0%
Income from equity investments
  29 
  47 
  (18)
  (32)
    
  (3)
  26 
Noncontrolling interests from continuing operations
  (29)
  (73)
  12 
  84 
    
  23 
  (6)
Income from continuing operations
 $942 
 $1,103 
 $(342)
 $(756)
 $119 
 $124 
 $1,066 
Diluted shares outstanding
  290,926 
    
    
    
    
  264,225(h)
  555,151 
Diluted EPS from continuing operations
 $3.24 
    
    
    
    
 $(1.32)(h)
 $1.92 
 
    
    
    
    
    
    
    
SEGMENT SALES
    
    
    
    
    
    
    
Americas
 $3,715 
 $2,579 
 $(1,031)
 $— 
 $(35)(e)
 $1,513 
 $5,228 
EMEA
  850 
  3,547 
  (806)
    
  1(e)
  2,742 
  3,592 
APAC
  895 
  2,268 
  (186)
    
  (13)(e)
  2,069 
  2,964 
Engineering
  — 
  1,441 
  — 
    
  — 
  1,441 
  1,441 
Other
  567 
  350 
  (19)
    
  (4)(e)
  327 
  894 
Segment sales
 $6,027 
 $10,185 
 $(2,042)
 $— 
 $(51)
 $8,092 
 $14,119 
 
    
    
    
    
    
    
    
SEGMENT OPERATING PROFIT
    
    
    
    
    
    
    
Americas
 $993 
 $411 
 $(195)
 $— 
 $(7)(i)
 $209 
 $1,202 
EMEA
  180 
  792 
  (172)
    
  (60)(i)
  560 
  740 
APAC
  214 
  402 
  (49)
    
  (40)(i)
  313 
  527 
Engineering
  — 
  144 
  — 
    
  (5)(i)
  139 
  139 
Other
  (2)
  (181)
  (4)
    
  31(i)
  (154)
  (156)
Segment operating profit
  1,385 
  1,568 
  (420)
  — 
  (81)
  1,067 
  2,452 
Cost reduction programs and other charges
  (43)
  (86)
    
    
  129 
  43 
  — 
Total operating profit
 $1,342 
 $1,482 
 $(420)
 $— 
 $48 
 $1,110 
 $2,452 
 
Pro Forma Adjustments:
 
(a)
To include Praxair, Inc. consolidated results for the six months ended June 30, 2018. Note that the results include the performance of Praxair's European industrial gases business through December 3, 2018. The adjustments reflect reclassifications to conform to Linde plc's reporting format.
(b)
To include Linde AG consolidated results for the six months ended June 30, 2018. The adjustments reflect reclassifications to conform to Linde plc's reporting format and adjustments from IFRS to U.S. GAAP.
(c)
To eliminate the results of merger-related divestitures required by regulatory authorities to secure approval for the Merger. These divestitures include the majority of Praxair's European industrial gases business (completed December 3, 2018), a significant portion of Linde AG's America's industrial gases business (completed on March 1, 2019), select assets of Linde AG's South Korean industrial gases business (completed April 30, 2019), as well as certain divestitures of other Praxair and Linde AG businesses in Asia that are currently expected to be sold in 2019.
(d)
To include preliminary purchase accounting adjustments for the period from January 1, 2018 to October 30, 2018 (prior to the Merger). This relates to (i) additional depreciation and amortization related to the increased value of of property, plant and equipment and increased basis of intangible assets, (ii) interest expense impacts related to the fair value of debt, (iii) the tax impacts related to the non-GAAP adjustments above, (iv) income from equity investments equity related to the fair value of equity investments, and (v) noncontrolling interests adjustments related to the fair value adjustments above. Purchase accounting impacts are not included in the definition of segment operating profit; therefore, no pro forma adjustment is required for segment reporting.
(e)
To eliminate sales between Praxair and Linde AG for the period prior to the Merger date at October 31, 2018 (January 1, 2018 to October 30, 2018).
(f)
To eliminate the transaction costs and other charges related to the Merger.
(g)
To reflect the income tax impact of the above pro forma adjustments.
(h)
To reflect the impact on diluted shares outstanding and diluted EPS related to ordinary shares issues to Linde AG shareholders in connection with the Merger.
(i)
To eliminate other (income) charges not included in segment operating profit, primarily related to a gain on a sale of asset in APAC.
 
 
13
 
 
LINDE PLC AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES AND RECONCILIATIONS
(Millions of dollars, except per share data)
(UNAUDITED)
 
The following Non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s operating performance and liquidity. Items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these Non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures.
 
 
 
Second Quarter
 
 
First Quarter
 
 
Year to date June 30,
 
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
 
2019
 
 
2018
 
Adjusted Pro Forma Operating Profit and Operating Margin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported operating profit
 $669 
 $689 
 $609 
 $653 
 $1,278 
 $1,342 
Pro forma adjustments (a)
  59 
  29 
  59 
  46 
  118 
  75 
Pro forma
  728 
  718 
  668 
  699 
  1,396 
  1,417 
Non-GAAP Adjustments:
    
    
    
    
    
    
Add: Cost reduction programs and other charges
  76 
  — 
  33 
  - 
  109 
  — 
Less: Net gain on sale of businesses
  — 
  (30)
  — 
  (51)
  — 
  (81)
Add: Purchase accounting impacts - Linde AG (d)
  515 
  558 
  521 
  558 
  1,036 
  1,116 
Total adjustments
  591 
  528 
  554 
  507 
  1,145 
  1,035 
Adjusted pro forma operating profit
 $1,319 
 $1,246 
 $1,222 
 $1,206 
 $2,541 
 $2,452 
 
    
    
    
    
    
    
Reported percentage change
  (2.9)%
    
  (6.7)%
    
  (4.8)%
    
Adjusted pro forma percentage change
  5.9%
    
  1.3%
    
  3.6%
    
 
    
    
    
    
    
    
Reported sales
 $7,204 
 $3,044 
 $6,944 
 $2,983 
 $14,148 
 $6,027 
Pro forma sales (a)
 $7,179 
 $7,178 
 $6,914 
 $6,941 
 $14,093 
 $14,119 
 
    
    
    
    
    
    
Reported operating margin
  9.3%
  22.6%
  8.8%
  21.9%
  9.0%
  22.3%
Pro forma operating margin
  10.1%
  10.0%
  9.7%
  10.1%
  9.9%
  10.0%
Adjusted pro forma operating margin
  18.4%
  17.4%
  17.7%
  17.4%
  18.0%
  17.4%
 
    
    
    
    
    
    
Adjusted Pro Forma Net Pension and OPEB Cost (Benefit), Excluding Service Cost
    
    
    
    
    
    
Reported net pension and OPEB cost (benefit), excluding service cost
 $(24)
 $2 
 $15 
 $2 
 $(9)
 $4 
Pro forma adjustments (a)
  — 
  (67)
  (51)
  (40)
  (51)
  (107)
Pro forma
  (24)
  (65)
  (36)
  (38)
  (60)
  (103)
Non-GAAP Adjustments:
    
    
    
    
    
    
Add: Pension plan reorganization charge - net
  (10)
  — 
  — 
  — 
  (10)
  — 
Total adjustments
  (10)
  — 
  — 
  — 
  (10)
  — 
Adjusted pro forma Net Pension and OPEB cost (benefit), excluding service costs
 $(34)
 $(65)
 $(36)
 $(38)
 $(70)
 $(103)
 
    
    
    
    
    
    
Adjusted Pro Forma Interest Expense - Net
    
    
    
    
    
    
Reported interest expense - net
 $10 
 $44 
 $23 
 $46 
 $33 
 $90 
Pro forma adjustments (a)
  — 
  (9)
  — 
  26 
  — 
  17 
Pro forma
  10 
  35 
  23 
  72 
  33 
  107 
Non-GAAP Adjustments:
    
    
    
    
    
    
Add: Purchase accounting impacts - Linde AG (d)
  25 
  25 
  27 
  25 
  52 
  50 
Total adjustments
  25 
  25 
  27 
  25 
  52 
  50 
Adjusted pro forma interest expense - net
 $35 
 $60 
 $50 
 $97 
 $85 
 $157 
 
    
    
    
    
    
    
Adjusted Pro Forma Income Taxes (b)
    
    
    
    
    
    
Reported income taxes
 $169 
 $158 
 $140 
 $148 
 $309 
 $306 
Pro forma adjustments (a)
  11 
  38 
  14 
  23 
  25 
  61 
Pro forma
  180 
  196 
  154 
  171 
  334 
  367 
Non-GAAP Adjustments:
    
    
    
    
    
    
Add: Purchase accounting impacts - Linde AG (d)
  119 
  129 
  125 
  129 
  244 
  258 
Add: Cost reduction programs and other charges
  15 
  — 
  5 
  (1)
  20 
  (1)
Total adjustments
  134 
  129 
  130 
  128 
  264 
  257 
Adjusted pro forma income taxes
 $314 
 $325 
 $284 
 $299 
 $598 
 $624 
 
 
14
 
 
Adjusted Pro Forma Effective Tax Rate (b)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reported income before income taxes and equity investments
 $683 
 $643 
 $571 
 $605 
 $1,254 
 $1,248 
Pro forma adjustments (a)
  59 
  105 
  110 
  60 
  169 
  165 
Pro forma
 $742 
 $748 
 $681 
 $665 
 $1,423 
 $1,413 
 
    
    
    
    
    
    
Non-GAAP Adjustments:
    
    
    
    
    
    
Add: Purchase accounting impacts - Linde AG (d)
 $490 
 $533 
 $494 
 $533 
 $984 
 $1,066 
Add: Cost reduction programs and other charges
  76 
  — 
  33 
  — 
  109 
  — 
Add: Pension plan reorganization charge - net
  10 
  — 
  — 
  — 
  — 
  10 
Less: Net gain on sale of businesses
  — 
  (30)
  — 
  (51)
  — 
  (81)
Total adjustments
  576 
  503 
  527 
  482 
  1,093 
  985 
Adjusted pro forma income before income taxes and equity investments
 $1,318 
 $1,251 
 $1,208 
 $1,147 
 $2,516 
 $2,398 
 
    
    
    
    
    
    
Reported Income taxes
 $169 
 $158 
 $140 
 $148 
 $309 
 $306 
Reported effective tax rate
  24.7%
  24.6%
  24.5%
  24.5%
  24.6%
  24.5%
 
    
    
    
    
    
    
Adjusted pro forma income taxes
 $314 
 $325 
 $284 
 $299 
 $598 
 $624 
Adjusted pro forma effective tax rate
  23.8%
  26.0%
  23.5%
  26.1%
  23.8%
  26.0%
 
    
    
    
    
    
    
Income from Equity Investments
    
    
    
    
    
    
Reported income from equity investments
 $28 
 $14 
 $34 
 $15 
 $62 
 $29 
Pro forma adjustments (a)
  — 
  (2)
  — 
  (1)
  — 
  (3)
Pro forma
  28 
  12 
  34 
  14 
  62 
  26 
Non-GAAP Adjustments:
    
    
    
    
    
    
Add: Purchase accounting impacts - Linde AG (d)
  14 
  16 
  14 
  16 
  28 
  32 
Total adjustments
  14 
  16 
  14 
  16 
  28 
  32 
Adjusted pro forma income from equity investments
 $42 
 $28 
 $48 
 $30 
 $90 
 $58 
Adjusted Pro Forma Noncontrolling Interests from Continuing Operations
    
    
    
    
    
    
Reported noncontrolling interests from continuing operations
 $(29)
 $(19)
 $(30)
 $(10)
 $(59)
 $(29)
Pro forma adjustments (a)
  — 
  12 
  — 
  11 
  — 
  23 
Pro forma
  (29)
  (7)
  (30)
  1 
  (59)
  (6)
Non-GAAP adjustments:
    
    
    
    
    
    
Add: Purchase accounting impacts - Linde AG (d)
  (17)
  (42)
  (15)
  (42)
  (32)
  (84)
Total adjustments
  (17)
  (42)
  (15)
  (42)
  (32)
  (84)
Adjusted pro forma noncontrolling interests from continuing operations
 $(46)
 $(49)
 $(45)
 $(41)
 $(91)
 $(90)
 
    
    
    
    
    
    
Adjusted Pro Forma Income from Continuing Operations (c)
    
    
    
    
    
    
Reported income from continuing operations
 $513 
 $480 
 $435 
 $462 
 $948 
 $942 
Pro forma adjustments (a)
  48 
  77 
  96 
  47 
  144 
  124 
Pro forma
  561 
  557 
  531 
  509 
  1,092 
  1,066 
 
    
    
    
    
    
    
Non-GAAP adjustments:
    
    
    
    
    
    
Add: Cost reduction programs and other charges
  71 
  — 
  28 
  — 
  99 
  — 
Less: Gain on sale of business
  — 
  (30)
  — 
  (50)
  — 
  (80)
Add: Purchase accounting impacts - Linde AG
  368 
  378 
  368 
  378 
  736 
  756 
Total adjustments
  439 
  348 
  396 
  328 
  835 
  676 
Adjusted pro forma income from continuing operations
 $1,000 
 $905 
 $927 
 $837 
 $1,927 
 $1,742 
 
    
    
    
    
    
    
Adjusted Pro Forma Diluted EPS from Continuing Operations (c)
    
    
    
    
    
    
Reported diluted EPS from continuing operations
 $0.94 
 $1.65 
 $0.79 
 $1.59 
 $1.73 
 $3.24 
Pro forma adjustments (a)
  0.09 
  (0.65)
  0.18 
  (0.67)
  0.27 
  (1.32)
Pro forma
  1.03 
  1.00 
  0.97 
  0.92 
  2.00 
  1.92 
 
    
    
    
    
    
    
Non-GAAP adjustments:
    
    
    
    
    
    
Add: Cost reduction programs and other charges
  0.13 
  — 
  0.05 
  — 
  0.18 
  — 
Less: Gain on sale of business
  — 
  (0.05)
  — 
  (0.09)
  — 
  (0.14)
Add: Purchase accounting impacts - Linde AG
  0.67 
  0.68 
  0.67 
  0.68 
  1.34 
  1.36 
Total adjustments
  0.80 
  0.63 
  0.72 
  0.59 
  1.52 
  1.22 
Adjusted pro forma diluted EPS from continuing operations
 $1.83 
 $1.63 
 $1.69 
 $1.51 
 $3.52 
 $3.14 
 
 
15
 
 
Adjusted Pro Forma EBITDA and % of Sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income from continuing operations
 $513 
 $480 
 $435 
 $462 
 $948 
 $942 
Add: Noncontrolling interests related to continuing operations
  29 
  19 
  30 
  10 
  59 
  29 
Add: Net pension and OPEB cost (benefit), excluding service cost
  (24)
  2 
  15 
  2 
  (9)
  4 
Add: Interest expense
  10 
  44 
  23 
  46 
  33 
  90 
Add: Income taxes
  169 
  158 
  140 
  148 
  309 
  306 
Add: Depreciation and amortization
  1,195 
  311 
  1,223 
  311 
  2,418 
  622 
EBITDA from continuing operations
  1,892 
  1,014 
  1,866 
  979 
  3,758 
  1,993 
Pro forma adjustments:
    
    
    
    
    
    
Add: Linde AG consolidated results
  — 
  1,214 
  — 
  1,245 
  — 
  2,459 
Add: Purchase accounting impacts - Linde AG
  — 
  (16)
  10 
  (16)
  10 
  (32)
Add: Cost reduction programs and other charges
  65 
  69 
  56 
  60 
  121 
  129 
Less: Divestitures
  (6)
  (324)
  (7)
  (317)
  (13)
  (641)
Pro forma adjustments
  59 
  943 
  59 
  972 
  118 
  1,915 
Pro forma EBITDA from continuing operations
  1,951 
  1,957 
  1,925 
  1,951 
  3,876 
  3,908 
Non-GAAP adjustments:
    
    
    
    
    
    
Less: Gain on sale of business
  — 
  (30)
  — 
  (51)
  — 
  (81)
Add: Cost reduction programs and other charges
  76 
  — 
  33 
  — 
  109 
  — 
Add: Purchase accounting impacts - Linde AG
  14 
  16 
  14 
  16 
  28 
  32 
Adjusted pro forma EBITDA from continuing operations
 $2,041 
 $1,943 
 $1,972 
 $1,916 
 $4,013 
 $3,859 
 
    
    
    
    
    
    
Reported sales
 $7,204 
 $3,044 
 $6,944 
 $2,983 
 $14,148 
  6,027 
Pro forma sales
 $7,179 
 $7,178 
 $6,914 
 $6,941 
 $14,093 
  14,119 
% of sales
    
    
    
    
    
    
EBITDA from continuing operations
  26.3%
  33.3%
  26.9%
  32.8%
  26.6%
  33.1%
Pro forma EBITDA from continuing operations
  27.2%
  27.3%
  27.8%
  28.1%
  27.5%
  27.7%
Adjusted pro forma EBITDA from continuing operations
  28.4%
  27.1%
  28.5%
  27.6%
  28.5%
  27.3%
 
(a)
See pro forma Income Statement Information in the preceding sections.
(b)
The income tax expense (benefit) on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense (benefit) and included both current and deferred income tax amounts.
(c)
Net of income taxes which are shown separately in “Adjusted Income Taxes and Effective Tax Rate”.
(d)
The company believes that its non-GAAP measures excluding Purchase accounting impacts - Linde AG are useful to investors because: (i) the business combination was a merger of equals in an all-stock merger transaction, with no cash consideration, (ii) the company is managed on a geographic basis, the results of certain geographies are more heavily impacted by purchase accounting than others, causing results that are not comparable at the reportable segment-level. Therefore, the impacts of purchasing accounting adjustments to each segment vary and are not comparable within the company and when compared to other companies in similar regions, (iii) business management is evaluated and variable compensation is determined based on results excluding purchase accounting impacts, and; (iv) it is important to investors and analysts to understand the purchase accounting impacts to the financial statements.
 
A summary of each of the adjustments made for Purchase accounting impacts - Linde AG are as follows:
 
Adjusted Operating Profit and Margin: The $515 million and $1,046 million purchase accounting adjustments for the quarter and six-months ended June 30, 2019, respectively, includes (i) no adjustment for the quarter and a $10 million adjustment for the six-months ended June 30, 2019 for the increase in cost of sales related to the fair value step up of inventories acquired in the merger (included as a pro forma adjustment), and (ii) a $515 million $1,036 million increase for the quarter and six-months ended June 30, 2019, respectively in depreciation and amortization related to the fair value step up of fixed assets and intangible assets (primarily customer related) acquired in the merger.
 
Adjusted Interest Expense - Net: Relates to the amortization of the fair value of debt acquired in the merger.
 
Adjusted Income Taxes and Effective Tax Rate: Relates to the current and deferred income tax impact on the adjustments discussed above. The income tax expense (benefit) on the non-GAAP pre-tax adjustments was determined using the applicable tax rates for the jurisdictions that were utilized in calculating the GAAP income tax expense (benefit) and included both current and deferred income tax amounts.
 
Adjusted Income from Equity Investments: Represents the amortization of increased fair value on equity investments related to depreciable and amortizable assets.
 
Adjusted Noncontrolling Interests from Continuing Operations: Represents the noncontrolling interests’ ownership portion of the adjustments described above determined on an entity by entity basis.
 
 
 
16
 
 
 
 
 2019
 
 
2018
 
 
 
Q2
 
 
Q1
 
 
Q4
 
 
     
     
     
 
Net Debt - Net debt is a financial liquidity metric used by investors, financial analysts and management to evaluate the ability of a company to repay its debt and is calculated as total debt (excluding purchase accounting impacts) less liquid assets.
 
Debt
 $13,957 
 $14,146 
 $15,296 
Less: Cash and cash equivalents
  (2,686)
  (5,791)
  (4,466)
Net debt
  11,271 
  8,355 
  10,830 
Less: Purchase accounting impacts - Linde AG
  (243)
  (262)
  (291)
Adjusted net debt
 $11,028 
 $8,093 
 $10,539 
 
 
 
 
17