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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from             to
Commission file number 001-38730
LINDE PLC
(Exact name of registrant as specified in its charter)
Ireland
98-1448883
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
The Priestley Centre
10 Priestley Road,
Surrey Research Park,
Guildford, Surrey  GU2 7XY
United Kingdom
(Address of principal executive offices) (Zip Code)
+44 14 83 242200
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading symbol(s)   Name of each exchange on which registered
Ordinary shares (€0.001 nominal value per share) LIN   New York Stock Exchange

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer   Accelerated filer  
Non-accelerated filer   Smaller reporting company  
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No 
At June 30, 2020, 525,360,032 ordinary shares (€0.001 par value) of the Registrant were outstanding.

INDEX
PART I - FINANCIAL INFORMATION  
Item 1.
Financial Statements (unaudited)
4
5
6
7
8
9
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

Forward-looking Statements

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

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









3


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

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

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

4

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



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

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




6

LINDE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Millions of dollars)
(UNAUDITED)
  Six Months Ended June 30,
  2020 2019
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) $ 1,091    $ 1,105   
OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments:
Foreign currency translation adjustments (1,995)   (47)  
Reclassification to net income —    12   
Income taxes 24     
Translation adjustments (1,971)   (30)  
Funded status - retirement obligations (Note 8):
Retirement program remeasurements 51    (34)  
Reclassifications to net income 43    87   
Income taxes (24)   (17)  
Funded status - retirement obligations 70    36   
Derivative instruments (Note 5):
Current period unrealized gain (loss) (45)   (20)  
Reclassifications to net income 50    —   
Income taxes    
Derivative instruments   (16)  
   Securities:
Current year unrealized gain (loss) —     
Securities —     
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) (1,895)   (9)  
COMPREHENSIVE INCOME (LOSS) (INCLUDING NONCONTROLLING INTERESTS) (804)   1,096   
Less: noncontrolling interests 28    22   
COMPREHENSIVE INCOME (LOSS) - LINDE PLC $ (776)   $ 1,118   
The accompanying notes are an integral part of these financial statements.



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

The accompanying notes are an integral part of these financial statements.
8

LINDE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
Six Months Ended June 30,
2020 2019
Increase (Decrease) in Cash and Cash Equivalents
Operations
Net income - Linde plc $ 1,031    $ 1,039   
Less: Income from discontinued operations, net of tax and noncontrolling interests (2)   (91)  
Add: Noncontrolling interests from continuing operations 60    59   
Income from continuing operations (including noncontrolling interests) 1,089    1,007   
Adjustments to reconcile net income to net cash provided by operating activities:
Cost reduction programs and other charges, net of payments 239    (286)  
Amortization of merger-related inventory step-up —    10   
Depreciation and amortization 2,266    2,418   
Deferred income taxes (261)   (110)  
Share-based compensation 75    38   
Working capital:
Accounts receivable (118)   (188)  
Inventory (82)   (73)  
Prepaid and other current assets (48)   (76)  
Payables and accruals (27)   (247)  
    Contract assets and liabilities, net 71    (103)  
Pension contributions (41)   (43)  
Long-term assets, liabilities and other (52)   (274)  
Net cash provided by operating activities 3,111    2,073   
Investing
Capital expenditures (1,586)   (1,708)  
Acquisitions, net of cash acquired (41)   (140)  
Divestitures and asset sales, net of cash divested 380    4,689   
Net cash provided by (used for) investing activities (1,247)   2,841   
Financing
Short-term debt borrowings (repayments) - net 1,945    (11)  
Long-term debt borrowings 1,656    45   
Long-term debt repayments (78)   (1,311)  
Issuances of ordinary shares 25    55   
Purchases of ordinary shares (1,828)   (1,250)  
Cash dividends - Linde plc shareholders (1,017)   (951)  
Noncontrolling interest transactions and other (148)   (3,222)  
Net cash provided by (used for) financing activities 555    (6,645)  
Discontinued Operations
Cash provided by operating activities —    70   
Cash used for investing activities —    (59)  
Cash provided by financing activities —     
Net cash provided by discontinued operations —    16   
Effect of exchange rate changes on cash and cash equivalents (178)   (49)  
Change in cash and cash equivalents 2,241    (1,764)  
Cash and cash equivalents, beginning-of-period 2,700    4,466   
Cash and cash equivalents, including discontinued operations 4,941    2,702   
Cash and cash equivalents of discontinued operations —    (16)  
Cash and cash equivalents, end-of-period $ 4,941    $ 2,686   
The accompanying notes are an integral part of these financial statements.
9

INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Notes to Condensed Consolidated Financial Statements - Linde plc and Subsidiaries (Unaudited)
 
10

1. Summary of Significant Accounting Policies
Presentation of Condensed Consolidated Financial Statements - In the opinion of Linde management, the accompanying condensed consolidated financial statements include all adjustments necessary for a fair presentation of the results for the interim periods presented and such adjustments are of a normal recurring nature. The accompanying condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements of Linde plc and subsidiaries in Linde's 2019 Annual Report on Form 10-K. There have been no material changes to the company’s significant accounting policies during 2020.
Accounting Standards Implemented in 2020

Credit Losses on Financial Instruments –In June 2016, the FASB issued updated guidance on the measurement of credit losses. The guidance introduces a new accounting model for expected credit losses on financial instruments, including trade receivables, based on estimates of current expected credit losses. This guidance is effective for the company beginning in the first quarter 2020 and requires companies to apply the change in accounting on a modified retrospective basis. The adoption of the guidance had an immaterial impact on the consolidated financial statements.
Simplifying the Test for Goodwill Impairment – In January 2017, the FASB issued updated guidance on the measurement of goodwill. The new guidance eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. The guidance is effective for the company beginning in the first quarter 2020. The adoption of the guidance had no impact on the consolidated financial statements.
Fair Value Measurement Disclosures - In August 2018, the FASB issued guidance that modifies the disclosure requirements for fair value measurements. The guidance is effective in fiscal year 2020, with early adoption permitted. Certain amendments must be applied prospectively while other amendments must be applied retrospectively. The adoption of the guidance had an immaterial impact on the consolidated financial statements.

Accounting Standards to be Implemented

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

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

Other Developments

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



11

2. Cost Reduction Programs and Other Charges

2020 Charges

Cost reduction programs and other charges were $249 million and $380 million for the quarter and six months ended June 30, 2020, respectively ($187 million and $282 million, after tax). The following table summarizes the activities related to the company's cost reduction charges for the quarter and six months ended June 30, 2020:
Quarter Ended June 30, 2020
(millions of dollars) Severance costs Other cost reduction charges Total cost reduction program related charges Merger-related and other charges Total
Americas $ 25    $   $ 33    $   $ 39   
EMEA 112      116    (3)   113   
APAC   —      (5)   (4)  
Engineering     14      21   
Other 47      49    31    80   
Total $ 192    $ 21    $ 213    $ 36    $ 249   
Six Months Ended June 30, 2020
(millions of dollars) Severance costs Other cost reduction charges Total cost reduction program related charges Merger-related and other charges Total
Americas $ 31    $ 23    $ 54    $   $ 60   
EMEA 138      142    —    142   
APAC          
Engineering 21      28      36   
Other 57      62    72    134   
Total $ 250    $ 41    $ 291    $ 89    $ 380   

Cost Reduction Programs

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

Severance costs

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

Other cost reduction charges

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

Merger-related Costs and Other Charges

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

Cash Requirements

12

The total cash requirements of the cost reduction program and other charges during the six months ended June 30, 2020 are estimated to be approximately $296 million and are expected to be paid through 2022. Total cost reduction programs and other charges, net of payments in the condensed consolidated statements of cash flows for the six months ended June 30, 2020 also reflects the impact of cash payments of liabilities, including merger-related tax liabilities, accrued as of December 31, 2019.

The following table summarizes the activities related to the company's cost reduction related charges for the six months ended June 30, 2020:
(millions of dollars) Severance costs Other cost reduction charges Total cost reduction program related charges Merger-related and other charges Total
Balance, December 31, 2019 $ 117    $ 16    $ 133    $ 67    $ 200   
2020 Cost Reduction Programs and Other Charges 250    41    291    89    380   
Less: Cash payments (64)   (13)   (77)   (37)   (114)  
Less: Non-cash charges —    (24)   (24)   (64)   (88)  
Foreign currency translation and other          
Balance, June 30, 2020 $ 304    $ 21    $ 325    $ 57    $ 382   

2019 Charges

Cost reduction programs and other charges were $141 million and $230 million for the quarter and six months ended June 30, 2019, respectively ($113 million and $194 million after tax), including merger-related costs of $65 million and $121 million for the quarter and six months ended June 30, 2019, respectively ($52 million and $105 million after tax) and synergy-related charges, primarily severance, of $76 million and $109 million for the quarter and six months ended June 30, 2019, respectively ($61 million and $89 million after tax).

Classification in the condensed consolidated financial statements

The costs are shown within operating profit in a separate line item on the consolidated statements of income. On the condensed consolidated statement 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
For trade receivables an expected credit loss approach was adopted as of January 1, 2020. 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 critically 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 $3,982 million and $4,390 million at June 30, 2020 and December 31, 2019 respectively and gross receivables aged greater than one year were $302 million and $249 million at June 30, 2020 and December 31, 2019 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 $3,994 million at June 30, 2020 and $4,322 million at December 31, 2019. Allowances for expected credit losses were $416 million at June 30, 2020 and $306 million at December 31, 2019.  Provisions for expected credit losses were $95 million and $111 million for the six months ended June 30, 2020 and 2019, respectively. The allowance activity in the six months ended June 30, 2020 related to write-offs of uncollectible amounts, net of recoveries and currency movements is not material.





13

Inventories
The following is a summary of Linde's consolidated inventories:
(Millions of dollars) June 30,
2020
December 31,
2019
Inventories
Raw materials and supplies $ 387    $ 396   
Work in process 359    331   
Finished goods 969    970   
Total inventories $ 1,715    $ 1,697   
14

4. Debt
The following is a summary of Linde's outstanding debt at June 30, 2020 and December 31, 2019:
(Millions of dollars) June 30,
2020
December 31,
2019
SHORT-TERM
Commercial paper and U.S. bank borrowings $ 2,944    $ 996   
Other bank borrowings (primarily international) 735    736   
Total short-term debt 3,679    1,732   
LONG-TERM (a)
(U.S. dollar denominated unless otherwise noted)
2.25% Notes due 2020
300    300   
1.75% Euro denominated notes due 2020 (b)
1,129    1,137   
0.634% Euro denominated notes due 2020
57    56   
4.05% Notes due 2021
500    499   
3.875% Euro denominated notes due 2021 (b)
700    711   
3.00% Notes due 2021
499    499   
0.250% Euro denominated notes due 2022 (b)
1,130    1,129   
2.45% Notes due 2022
599    599   
2.20% Notes due 2022
499    499   
2.70% Notes due 2023
499    499   
2.00% Euro denominated notes due 2023 (b)
772    776   
5.875% GBP denominated notes due 2023 (b)
423    456   
1.20% Euro denominated notes due 2024
616    615   
1.875% Euro denominated notes due 2024 (b)
360    361   
2.65% Notes due 2025
398    398   
1.625% Euro denominated notes due 2025
557    556   
3.20% Notes due 2026
725    725   
3.434% Notes due 2026
196    196   
1.652% Euro denominated notes due 2027
93    93   
0.250% Euro denominated notes due 2027 (c)
840    —   
1.00% Euro denominated notes due 2028 (b)
886    872   
1.90% Euro denominated notes due 2030
117    118   
0.550% Euro denominated notes due 2032 (c)
835    —   
3.55% Notes due 2042
664    662   
Other 10    10   
International bank borrowings 257    309   
Obligations under finance leases 140    149   
13,801    12,224   
Less: current portion of long-term debt (2,723)   (1,531)  
Total long-term debt 11,078    10,693   
Total debt $ 17,480    $ 13,956   
 
(a)Amounts are net of unamortized discounts, premiums and/or debt issuance costs as applicable.
(b)June 30, 2020 and December 31, 2019 included a cumulative $18 million and $38 million adjustment to carrying value, respectively, related to hedge accounting of interest rate swaps. Refer to Note 5 for additional information.
(c)In May 2020, Linde issued €750 million of 0.250% notes due 2027 and €750 million 0.550% notes due 2032.

The company maintains a $5 billion unsecured revolving credit agreement with a syndicate of banking institutions that expires March 26, 2024. There are no financial maintenance covenants contained within the credit agreement. No borrowings were outstanding under the credit agreement as of June 30, 2020.

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5. Financial Instruments
In its normal operations, Linde is exposed to market risks relating to fluctuations in interest rates, foreign currency exchange rates, energy and commodity costs. The objective of financial risk management at Linde is to minimize the negative impact of such fluctuations on the company’s earnings and cash flows. To manage these risks, among other strategies, Linde routinely enters into various derivative financial instruments (“derivatives”) including interest-rate swap and treasury rate lock agreements, currency-swap agreements, forward contracts, currency options, and commodity-swap agreements. These instruments are not entered into for trading purposes and Linde only uses commonly traded and non-leveraged instruments.
There are three types of derivatives that the company enters into: (i) those relating to fair-value exposures, (ii) those relating to cash-flow exposures, and (iii) those relating to foreign currency net investment exposures. Fair-value exposures relate to recognized assets or liabilities, and firm commitments; cash-flow exposures relate to the variability of future cash flows associated with recognized assets or liabilities, or forecasted transactions; and net investment exposures relate to the impact of foreign currency exchange rate changes on the carrying value of net assets denominated in foreign currencies.
When a derivative is executed and hedge accounting is appropriate, it is designated as either a fair-value hedge, cash-flow hedge, or a net investment hedge. Currently, Linde designates all interest-rate and treasury-rate locks as hedges for accounting purposes; however, cross-currency contracts are generally not designated as hedges for accounting purposes. Certain currency contracts related to forecasted transactions are designated as hedges for accounting purposes. Whether designated as hedges for accounting purposes or not, all derivatives are linked to an appropriate underlying exposure. On an ongoing basis, the company assesses the hedge effectiveness of all derivatives designated as hedges for accounting purposes to determine if they continue to be highly effective in offsetting changes in fair values or cash flows of the underlying hedged items. If it is determined that the hedge is not highly effective through the use of a qualitative assessment, then hedge accounting will be discontinued prospectively.
Counterparties to Linde's derivatives are major banking institutions with credit ratings of investment grade or better. The company has Credit Support Annexes ("CSAs") in place with their principal counterparties to minimize potential default risk and to mitigate counterparty risk. Under the CSAs, the fair values of derivatives for the purpose of interest rate and currency management are collateralized with cash on a regular basis. As of June 30, 2020, the impact of such collateral posting arrangements on the fair value of derivatives was insignificant. Management believes the risk of incurring losses on derivative contracts related to credit risk is remote and any losses would be immaterial.
The following table is a summary of the notional amount and fair value of derivatives outstanding at June 30, 2020 and December 31, 2019 for consolidated subsidiaries:
      Fair Value
  Notional Amounts Assets (a) Liabilities (a)
(Millions of dollars) June 30,
2020
December 31,
2019
June 30,
2020
December 31,
2019
June 30,
2020
December 31,
2019
Derivatives Not Designated as Hedging Instruments:
Currency contracts:
Balance sheet items $ 6,866    $ 7,936    $ 41    $ 62    $ 87    $ 37   
Forecasted transactions 494    748    10    14    15    15   
Cross-currency swaps 981    1,029    44    35    38    40   
Commodity contracts N/A N/A   —    —    —   
Total $ 8,341    $ 9,713    $ 96    $ 111    $ 140    $ 92   
Derivatives Designated as Hedging Instruments:
Currency contracts:
Balance sheet items $ —    $ 27    $ —    $   $ —    $  
       Forecasted transactions 283    464        12     
Commodity contracts N/A N/A —         
Interest rate swaps 1,892    1,908    52    39    —    —   
Total Hedges $ 2,175    $ 2,399    $ 55    $ 56    $ 16    $  
Total Derivatives $ 10,516    $ 12,112    $ 151    $ 167    $ 156    $ 99   
 
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(a)Current assets of $53 million are recorded in prepaid and other current assets; long-term assets of $98 million are recorded in other long-term assets; current liabilities of $112 million are recorded in other current liabilities; and long-term liabilities of $44 million 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 purchase. For forecasted transactions that do not qualify for cash flow hedging relationships, fair value adjustments are recorded directly to earnings.

Cross-Currency Swaps

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

Commodity Contracts

Commodity contracts are entered into to manage the exposure to fluctuations in commodity prices, which arise in the normal course of business from its procurement transactions. To reduce the extent of this risk, Linde enters into a limited number of electricity, natural gas, and propane gas derivatives. The fair value adjustments for the majority of these contracts are recorded to AOCI and are eventually offset by the income statement impact of the underlying commodity purchase.

Net Investment Hedge

As of June 30, 2020, Linde has €3.2 billion ($3.6 billion) intercompany Euro-denominated credit facility loans and intercompany loans which are designated as hedges of the net investment positions in foreign operations. Since hedge inception, exchange rate movements have increased the credit facility loan and intercompany loans by $85 million, with the offsetting loss shown within the cumulative translation component of AOCI in the condensed consolidated balance sheets and the consolidated statements of comprehensive income.

Linde had previously designated Euro-denominated debt instruments as net investment hedges to reduce the company's exposure to changes in the currency exchange rate on investments in foreign subsidiaries with Euro functional currencies. Exchange rate movements of $206 million relating to the previously designated Euro-denominated debt incurred in the financial periods of 2019 and prior will remain in AOCI, until appropriate, such as upon sale or liquidation of the related foreign operations at which time amounts will be reclassified to the consolidated statement of income. Exchange rate movements related to the Euro-denominated debt occurring after de-designation are shown in the consolidated statement of income.

Interest Rate Swaps

Linde uses interest rate swaps to hedge the exposure to changes in the fair value of financial assets and financial liabilities as a result of interest rate changes. These interest rate swaps effectively convert fixed-rate interest exposures to variable rates; fair value adjustments are recognized in earnings along with an equally offsetting charge/benefit to earnings for the changes in the
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fair value of the underlying financial asset or financial liability. The notional value of outstanding interest rate swaps of Linde with maturity dates from 2020 through 2028 was $1,892 million at June 30, 2020 and $1,908 million at December 31, 2019 (see Note 6 for further information).

Terminated Treasury Rate Locks
The unrecognized aggregated losses related to terminated treasury rate lock contracts on the underlying $500 million 3.00% fixed-rate notes that mature in 2021 and the $500 million 2.20% fixed-rate notes that mature in 2022 at June 30, 2020 and December 31, 2019 were immaterial in both periods. The unrecognized gains / (losses) for the treasury rate locks are shown in AOCI and are being recognized on a straight line basis to interest expense – net over the term of the underlying debt agreements.

Derivatives' Impact on Consolidated Statements of Income

The following table summarizes the impact of the company’s derivatives on the consolidated statements of income:
  Amount of Pre-Tax Gain (Loss)
Recognized in Earnings *
  Quarter Ended June 30, Six Months Ended June 30,
(Millions of dollars) 2020 2019 2020 2019
Derivatives Not Designated as Hedging Instruments
Currency contracts:
Balance sheet items
Debt-related $ 37    $ (125)   $ 32    $ 69   
Other balance sheet items (29)     (70)    
Total $   $ (121)   $ (38)   $ 71   

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

The amounts of gain or loss recognized in AOCI and reclassified to the consolidated statement of income was immaterial for both the quarter and six months ended June 30, 2020. Net losses expected to be reclassified to earnings during the next twelve months are also not material.

The gains (losses) on net investment hedges are recorded as a component of AOCI within foreign currency translation adjustments in the condensed consolidated balance sheets and the condensed consolidated statements of comprehensive income. The gains (losses) on treasury rate locks are recorded as a component of AOCI within derivative instruments in the condensed consolidated balance sheets and the condensed consolidated statements of comprehensive income. The gains (losses) on net investment hedges are reclassified to earnings only when the related currency translation adjustments are required to be reclassified, usually upon sale or liquidation of the investment. The gains (losses) for interest rate contracts are reclassified to earnings as interest expense –net on a straight-line basis over the remaining maturity of the underlying debt.




6. Fair Value Disclosures
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as follows:
Level 1 – quoted prices in active markets for identical assets or liabilities
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

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Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table summarizes assets and liabilities measured at fair value on a recurring basis:
  Fair Value Measurements Using
  Level 1 Level 2 Level 3
(Millions of dollars) June 30,
2020
December 31,
2019
June 30,
2020
December 31,
2019
June 30,
2020
December 31,
2019
Assets
Derivative assets $ —    $ —    $ 151    $ 167    $ —    $ —   
Investments and securities* 21    18    —    —    30    28   
                 Total
$ 21    $ 18    $ 151    $ 167    $ 30    $ 28   
Liabilities
Derivative liabilities $ —    $ —    $ 156    $ 99    $ —    $ —   

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

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

The following table summarizes the changes in level 3 investments and securities for the six months ended June 30, 2020. Gains (losses) recognized in earnings are recorded to interest expense - net in the company's consolidated statements of income.
(Millions of dollars) 2020
Balance at January 1 $ 28   
Additions —   
Gains (losses) recognized in earnings  
Balance at June 30 $ 30   

The fair value of cash and cash equivalents, short-term debt, accounts receivable-net, and accounts payable approximate carrying value because of the short-term maturities of these instruments.
The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues. Long-term debt is categorized within either Level 1 or Level 2 of the fair value hierarchy depending on the trading volume of the issues and whether or not they are actively quoted in the market as opposed to traded through over-the-counter transactions. At June 30, 2020, the estimated fair value of Linde’s long-term debt portfolio was $14,223 million versus a carrying value of $13,801 million. At December 31, 2019, the estimated fair value of Linde’s long-term debt portfolio was $12,375 million versus a carrying value of $12,224 million. As Linde AG's assets and liabilities were measured at estimated fair value as of the merger date, differences between the carrying value and the fair value are insignificant; remaining differences are attributable to fluctuations in interest rates subsequent to when the debt was issued and relative to stated coupon rates.

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7. Earnings Per Share – Linde plc Shareholders
Basic and diluted earnings per share is computed by dividing Income from continuing operations, Income from discontinued operations and Net income – Linde plc for the period by the weighted average number of either basic or diluted shares outstanding, as follows:
  Quarter Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
Numerator (Millions of dollars)
Income from continuing operations $ 458    $ 513    $ 1,029    $ 948   
Income from discontinued operations —        91   
Net Income – Linde plc $ 458    $ 522    $ 1,031    $ 1,039   
Denominator (Thousands of shares)
Weighted average shares outstanding 525,238    542,356    528,118    543,834   
Shares earned and issuable under compensation plans 272    205    267    199   
Weighted average shares used in basic earnings per share 525,510    542,561    528,385    544,033   
Effect of dilutive securities
Stock options and awards 3,544    3,927    3,727    3,738   
Weighted average shares used in diluted earnings per share
529,054    546,488    532,112    547,771   
Basic earnings per share from continuing operations $ 0.87    $ 0.95    $ 1.95    $ 1.74   
Basic earnings per share from discontinued operations —    0.02    —    0.17   
Basic Earnings Per Share $ 0.87    $ 0.97    $ 1.95    $ 1.91   
Diluted earnings per share from continuing operations $ 0.87    $ 0.94    $ 1.93    $ 1.73   
Diluted earnings per share from discontinued operations —    0.02    —    0.17   
Diluted Earnings Per Share $ 0.87    $ 0.96    $ 1.93    $ 1.90   
There were no antidilutive shares for any period presented.
8. Retirement Programs
The components of net pension and postretirement benefits other than pensions (“OPEB”) costs for the quarter and six months ended June 30, 2020 and 2019 are shown below:
  Quarter Ended June 30, Six Months Ended June 30,
  Pensions OPEB Pensions OPEB
(Millions of dollars) 2020 2019 2020 2019 2020 2019 2020 2019
Amount recognized in Operating Profit
Service cost $ 36    $ 39    $ —    $ —    $ 73    $ 78    $   $  
Amount recognized in Net pension and OPEB cost (benefit), excluding service cost
Interest cost 50    65        102    133       
Expected return on plan assets (118)   (113)   —    —    (238)   (232)   —    —   
Net amortization and deferral 22    14    (1)   (1)   45    28    (2)   (2)  
Curtailment and termination benefits (a) —    10    —    —    —    10    —    —   
Settlement charge (b) —    —    —    —    —    51    —    —   
(46)   (24)     —    (91)   (10)   &nbs