Press Release
Linde Reports First-Quarter 2020 Results
Financial Highlights
➢
Strong operating cash flow of $1.3 billion, up 26% versus prior year
➢
Robust balance sheet with ample liquidity for growth opportunities
➢
Operating profit of $0.7 billion, up 20% versus prior year; adjusted operating profit of $1.4 billion up 11%
➢
Operating profit margin up 210 bps, adjusted operating profit margin up 240 bps versus prior year
➢
EPS of $1.07 up 35% versus prior year, adjusted EPS of $1.89 up 12%
Guildford, UK, May 7, 2020 – Linde plc (NYSE: LIN; FWB: LIN) today reported first-quarter 2020 income from continuing operations of $571 million and diluted earnings per share of $1.07. Excluding Linde AG purchase accounting impacts and other charges, adjusted income from continuing operations was $1,009 million, up 9% versus prior year. Adjusted earnings per share were $1.89, 12% above prior year, or 15% higher when excluding negative currency translation effects.
Linde’s sales for the first quarter were $6,739 million, 1% above prior year, excluding negative currency translation and cost pass-through. Price improved 2% and was attained across all geographic segments, but was partially offset by volume decrease of approximately 1% due mainly to the impact of the COVID-19 pandemic.
First-quarter operating profit was $733 million. Adjusted operating profit of $1,352 million was 11% above prior year or 14% higher when excluding unfavorable currency translation effects.
First-quarter operating cash flow of $1,347 million increased $279 million or 26% over prior year. During the quarter, the company invested $803 million in capital expenditures and returned $2,326 million to shareholders through dividends of $511 million and stock repurchases, net of issuance, of $1,815 million.
Commenting on the financial results, Chief Executive Officer Steve Angel said, “Linde delivered another strong quarter with EPS increasing 15%, excluding currency translation. Furthermore, operating cash flow grew 26% and operating profit margin expanded 240 basis points from prior year.”
“Linde entered 2020 with a very robust balance sheet, $10 billion of contractually secured backlog and significant opportunities to enhance the portfolio and overall business quality – all of which will serve us well during these uncertain times. And, we continue to successfully navigate this crisis through the dedication and hard work of all Linde employees maintaining safe and reliable supply to our customers, including critical medical gases, services and equipment for those afflicted by COVID-19.”
Angel continued, “While it is very difficult to predict the future impact, I have full confidence in our ability to continue to create shareholder value given our resilient business model and inherent opportunities to mitigate macroeconomic headwinds.”
Press Release
First-Quarter 2020 Results by Segment
Americas sales of $2,677 million were 1% below prior-year quarter and down 2% sequentially. Excluding negative currency translation and cost pass-through, sales versus prior year were up 4%. Price increased 2% and volume also grew 2% led mainly by the resilient healthcare and food & beverage end markets. Operating profit of $661 million was 24.7% of sales, up 310 basis points versus prior-year quarter.
APAC (Asia Pacific) sales of $1,336 million were 6% below prior year and decreased 5% sequentially. Excluding negative currency translation, sales versus prior year were down 3%. Price increased 2% but was more than offset by negative volumes driven by customer shutdowns due to the COVID-19 impact, primarily in China, and higher sale of equipment in the prior-year quarter. Operating profit of $281 million was 21.0% of sales, up $8 million and 190 basis points versus prior year.
EMEA (Europe, Middle East & Africa) sales of $1,633 million were down 3% versus prior year and negative 1% sequentially. Excluding unfavorable currency and cost pass-through, sales increased 1% versus prior year. Pricing was up 2% but was partially offset by negative volumes primarily due to weaker manufacturing activity. Operating profit of $355 million was 21.7% of sales, up 110 basis points versus prior-year quarter.
Linde Engineering sales were $608 million and operating profit was $91 million or 15% of sales. Operating profit grew 17% versus prior year due primarily to strong project execution and productivity initiatives.
A teleconference on Linde’s first-quarter 2020 results is being held today at 10:00 am EST. The U.S. Toll-Free Dial-In Number is 1 855 758 5442; the access code is 3688359. The call is also available as a live webcast and on-demand at www.linde.com/investors. Materials to be used in the teleconference are also available on the website.
About Linde
Linde is a leading global industrial gases and engineering company with 2019 sales of $28 billion (€25 billion). We live our mission of making our world more productive every day by providing high-quality solutions, technologies and services which are making our customers more successful and helping to sustain and protect our planet.
The company serves a variety of end markets including chemicals & refining, food & beverage, electronics, healthcare, manufacturing and primary metals. Linde’s industrial gases are used in countless applications, from life-saving oxygen for hospitals to high-purity & specialty gases for electronics manufacturing, hydrogen for clean fuels and much more. Linde also delivers state-of-the-art gas processing solutions to support customer expansion, efficiency improvements and emissions reductions.
For more information about the company and its products and services, please visit www.linde.com
See the attachments for a summary of non-GAAP reconciliations and calculations for adjusted amounts.
Attachments: Summary Non-GAAP Reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information and Appendix: Non-GAAP Measures and Reconciliations.
Press Release
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: that Linde plc may be unable to achieve expected synergies from the business combination of Praxair and Linde AG 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; 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 subsequent filings with the SEC, which should be reviewed carefully. Please consider Linde plc’s forward-looking statements in light of those risks.
Press Release
LINDE PLC AND SUBSIDIARIES
SUMMARY NON-GAAP RECONCILIATIONS
(UNAUDITED)
The following 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 ongoing 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 "NON-GAAP MEASURES AND RECONCILIATIONS" starting on page 9 for additional details relating to the adjustments.
(Millions of dollars, except per share amounts)
| | | | Income from Continuing Operations | Diluted EPS from Continuing Operations |
| | | | | | | | | |
| Quarter Ended March 31 | | | | | | | | |
| Reported GAAP Amounts | $6,739 | $6,944 | $733 | $609 | $571 | $435 | $1.07 | $0.79 |
| Cost reduction program and other charges (a) | — | — | 131 | 89 | 95 | 70 | 0.18 | 0.13 |
| Pension settlement charges (b) | — | — | — | — | — | 51 | — | 0.09 |
| Merger-related divestitures (c) | — | (30) | — | (7) | — | (5) | — | (0.01) |
| Purchase accounting impacts - Linde AG (d) | — | — | 488 | 531 | 343 | 376 | 0.64 | 0.69 |
| Total adjustments | — | (30) | 619 | 613 | 438 | 492 | 0.82 | 0.90 |
| Adjusted amounts | $6,739 | $6,914 | $1,352 | $1,222 | $1,009 | $927 | $1.89 | $1.69 |
(a) To adjust for cost reduction program and other charges.
(b) To adjust for pension settlement charges relates to the merger.
(c) To adjust for the results of Praxair's merger-related divestitures.
(d) To adjust for purchase accounting impacts related to the merger.
Press Release
LINDE PLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Millions of dollars, except per share data)
(UNAUDITED)
| | |
| | |
| | | |
| | | |
| SALES | $6,739 | $6,944 |
| Cost of sales | 3,843 | 4,116 |
| Selling, general and administrative | 861 | 879 |
| Depreciation and amortization | 1,142 | 1,223 |
| Research and development | 44 | 46 |
| Cost reduction programs and other charges | 131 | 89 |
| Other income (expense) - net | 15 | 18 |
| OPERATING PROFIT | 733 | 609 |
| Interest expense - net | 24 | 23 |
| Net pension and OPEB cost (benefit), excluding service cost | (45) | 15 |
| INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND EQUITY INVESTMENTS | 754 | 571 |
| Income taxes | 165 | 140 |
| INCOME FROM CONTINUING OPERATIONS BEFORE EQUITY INVESTMENTS | 589 | 431 |
| Income from equity investments | 17 | 34 |
| INCOME FROM CONTINUING OPERATIONS (INCLUDING NONCONTROLLING INTERESTS) | 606 | 465 |
| Add: income from discontinued operations, net of tax | 2 | 89 |
| INCOME (INCLUDING NONCONTROLLING INTERESTS) | 608 | 554 |
| Less: noncontrolling interests from continuing operations | (35) | (30) |
| Less: noncontrolling interests from discontinued operations | — | (7) |
| NET INCOME - LINDE PLC | $573 | $517 |
| | | |
| NET INCOME - LINDE PLC | | |
| Income from continuing operations | $571 | $435 |
| Income from discontinued operations | $2 | $82 |
| | | |
| PER SHARE DATA - LINDE PLC SHAREHOLDERS | | |
| | | |
| Basic earnings per share from continuing operations | $1.07 | $0.80 |
| Basic earnings per share from discontinued operations | — | 0.15 |
| Basic earnings per share | $1.07 | $0.95 |
| | | |
| Diluted earnings per share from continuing operations | $1.07 | $0.79 |
| Diluted earnings per share from discontinued operations | — | 0.15 |
| Diluted earnings per share | $1.07 | $0.94 |
| | | |
| Cash dividends | $0.963 | $0.875 |
| | | |
| WEIGHTED AVERAGE SHARES OUTSTANDING | | |
| Basic shares outstanding (000's) | 531,215 | 545,554 |
| Diluted shares outstanding (000's) | 534,956 | 549,147 |
Note: See page 9 for a reconciliation to adjusted amounts which are Non-GAAP.
Press Release
LINDE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
(UNAUDITED)
| | | |
| | | |
| ASSETS | | |
| Cash and cash equivalents | $4,014 | $2,700 |
| Accounts receivable - net | 4,084 | 4,322 |
| Contract assets | 311 | 368 |
| Inventories | 1,689 | 1,697 |
| Assets held for sale | 160 | 125 |
| Prepaid and other current assets | 1,255 | 1,140 |
| TOTAL CURRENT ASSETS | 11,513 | 10,352 |
| Property, plant and equipment - net | 27,418 | 29,064 |
| Goodwill | 26,073 | 27,019 |
| Other intangibles - net | 15,339 | 16,137 |
| Other long-term assets | 4,026 | 4,040 |
| TOTAL ASSETS | $84,369 | $86,612 |
| | | |
| LIABILITIES AND EQUITY | | |
| Accounts payable | $2,965 | $3,266 |
| Short-term debt | 4,848 | 1,732 |
| Current portion of long-term debt | 2,006 | 1,531 |
| Contract liabilities | 1,854 | 1,758 |
| Liabilities of assets held for sale | 45 | 2 |
| Other current liabilities | 3,772 | 3,871 |
| TOTAL CURRENT LIABILITIES | 15,490 | 12,160 |
| Long-term debt | 10,021 | 10,693 |
| Other long-term liabilities | 11,615 | 12,124 |
| TOTAL LIABILITIES | 37,126 | 34,977 |
| | | |
| REDEEMABLE NONCONTROLLING INTERESTS | 92 | 113 |
| | | |
| LINDE PLC SHAREHOLDERS' EQUITY: | | |
| Common stock | 1 | 1 |
| Additional paid-in capital | 40,185 | 40,201 |
| Retained earnings | 16,850 | 16,842 |
| Accumulated other comprehensive income (loss) | (7,388) | (4,814) |
| Less: Treasury stock, at cost | (4,872) | (3,156) |
| Total Linde plc shareholders' equity | 44,776 | 49,074 |
| Noncontrolling interests | 2,375 | 2,448 |
| TOTAL EQUITY | 47,151 | 51,522 |
| TOTAL LIABILITIES AND EQUITY | $84,369 | $86,612 |
Press Release
LINDE PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
| | |
| | |
| | | |
| OPERATIONS | | |
| Net income - Linde plc | $573 | $517 |
| Less: income from discontinued operations, net of tax and noncontrolling interests | (2) | (82) |
| Add: noncontrolling interests | 35 | 30 |
| Net income (including noncontrolling interests) | 606 | 465 |
| | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | |
| Cost reduction programs and other charges, net of payments (a) | 40 | (167) |
| Depreciation and amortization | 1,142 | 1,223 |
| Accounts receivable | (109) | (56) |
| Contract assets and liabilities, net | 176 | (84) |
| Inventory | (62) | (32) |
| Payables and accruals | (183) | (31) |
| Pension contributions | (17) | (18) |
| Deferred income taxes and other | (246) | (232) |
| Net cash provided by operating activities | 1,347 | 1,068 |
| | | |
| INVESTING | | |
| Capital expenditures | (803) | (843) |
| Acquisitions, net of cash acquired | (41) | (152) |
| Divestitures and asset sales | 231 | 3,455 |
| Net cash provided by (used for) investing activities | (613) | 2,460 |
| | | |
| FINANCING | | |
| Debt increase (decrease) - net | 3,112 | (1,027) |
| Issuances of ordinary shares | 13 | 28 |
| Purchases of ordinary shares | (1,828) | (725) |
| Cash dividends - Linde plc shareholders | (511) | (477) |
| Noncontrolling interest transactions and other | (27) | (10) |
| Net cash provided by (used for) financing activities | 759 | (2,211) |
| | | |
| DISCONTINUED OPERATIONS | | |
| Cash provided by operating activities | — | 63 |
| Cash provided by investing activities | — | (58) |
| Cash provided by financing activities | — | 5 |
| Net cash provided by (used for) discontinued operations | — | 10 |
| | | |
| Effect of exchange rate changes on cash and cash equivalents | (179) | 8 |
| | | |
| Change in cash and cash equivalents | 1,314 | 1,335 |
| Cash and cash equivalents, beginning-of-period | 2,700 | 4,466 |
| Cash and cash equivalents, including discontinued operations | 4,014 | 5,801 |
| Cash and cash equivalents of discontinued operations | — | (10) |
| Cash and cash equivalents, end-of-period | $4,014 | $5,791 |
(a) Cost reduction programs and other charges cash outflows were $91 million and $256 million for the quarters ended March 31, 2020 and 2019, respectively.
Press Release
LINDE PLC AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)
| | |
| | | |
| SALES | | |
| Americas | $2,677 | $2,702 |
| EMEA | 1,633 | 1,682 |
| APAC | 1,336 | 1,427 |
| Engineering | 608 | 636 |
| Other | 485 | 467 |
| Segment sales | $6,739 | $6,914 |
| Merger-related divestitures (a) | — | 30 |
| Total sales | $6,739 | $6,944 |
| | | |
| | | |
| OPERATING PROFIT | | |
| Americas | $661 | $584 |
| EMEA | 355 | 347 |
| APAC | 281 | 273 |
| Engineering | 91 | 78 |
| Other | (36) | (60) |
| Segment operating profit | $1,352 | $1,222 |
| Cost reduction programs and other charges | (131) | (89) |
| Merger-related divestitures (a) | — | 7 |
| Purchase accounting impacts - Linde AG | (488) | (531) |
| Total operating profit | $733 | $609 |
(a) To adjust for the results of Praxair's merger-related divestitures.
Press Release
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.
| | | |
| | | | | | |
| Adjusted Sales | | | | | |
| Reported Sales | $6,739 | $7,080 | $7,000 | $7,204 | $6,944 |
| Less: Merger-related divestitures (d) | — | (3) | (7) | (25) | (30) |
| Adjusted Sales | $6,739 | $7,077 | $6,993 | $7,179 | $6,914 |
| | | | | | |
| Adjusted Operating Profit and Operating Margin | | | | | |
| Reported operating profit | $733 | $655 | $1,000 | $669 | $609 |
| Less: Merger-related divestitures (d) | — | (1) | (2) | (6) | (7) |
| Add: Cost reduction programs and other charges | 131 | 212 | 125 | 141 | 89 |
| Less: Net gain on sale of businesses | — | — | (164) | — | — |
| Add: Purchase accounting impacts - Linde AG (c) | 488 | 481 | 425 | 515 | 531 |
| Total adjustments | 619 | 692 | 384 | 650 | 613 |
| Adjusted operating profit | $1,352 | $1,347 | $1,384 | $1,319 | $1,222 |
| | | | | | |
| Reported percentage change | 20% | | | | |
| Adjusted percentage change | 11% | | | | |
| | | | | | |
| Reported sales | $6,739 | $7,080 | $7,000 | $7,204 | $6,944 |
| Adjusted sales | $6,739 | $7,077 | $6,993 | $7,179 | $6,914 |
| | | | | | |
| Reported operating margin | 10.9% | 9.3% | 14.3% | 9.3% | 8.8% |
| Adjusted operating margin | 20.1% | 19.0% | 19.8% | 18.4% | 17.7% |
| | | | | | |
| Adjusted Depreciation and amortization | | | | | |
| Reported depreciation and amortization | $1,142 | $1,162 | $1,095 | $1,195 | $1,223 |
| Less: Purchase accounting impacts - Linde AG (c) | (476) | (481) | (423) | (515) | (521) |
| Adjusted depreciation and amortization | $666 | $681 | $672 | $680 | $702 |
| | | | | | |
| | | | | | |
| Adjusted Net Pension and OPEB Cost (Benefit), Excluding Service Cost | | | | | |
| Reported net pension and OPEB cost (benefit), excluding service cost | $(45) | $(25) | $2 | $(24) | $15 |
| Add: Pension settlement charges | — | (6) | (40) | (10) | (51) |
| Adjusted Net Pension and OPEB cost (benefit), excluding service costs | $(45) | $(31) | $(38) | $(34) | $(36) |
| | | | | | |
| Adjusted Interest Expense - Net | | | | | |
| Reported interest expense - net | $24 | $8 | $(3) | $10 | $23 |
| Add: Purchase accounting impacts - Linde AG (c) | 22 | 22 | 22 | 25 | 27 |
| Adjusted interest expense - net | $46 | $30 | $19 | $35 | $50 |
| | | | | | |
| Adjusted Income Taxes (a) | | | | | |
| Reported income taxes | $165 | $162 | $298 | $169 | $140 |
| Add: Purchase accounting impacts - Linde AG (c) | 122 | 105 | 99 | 119 | 127 |
| Add: Cost reduction programs and other charges | 36 | 54 | 1 | 28 | 19 |
| Less: Merger-related divestitures (d) | — | — | (1) | (2) | (2) |
| Less: Net gain on sale of businesses | — | — | (49) | — | — |
| Total adjustments | 158 | 159 | 50 | 145 | 144 |
| Adjusted income taxes | $323 | $321 | $348 | $314 | $284 |
| | | | | | |
| | | | | | |
| Adjusted Effective Tax Rate (a) | | | | | |
| Reported income before income taxes and equity investments | $754 | $672 | $1,001 | $683 | $571 |
| Less: Merger-related divestitures (d) | — | (1) | (2) | (6) | (7) |
| Add: Pension settlement charge | — | 6 | 40 | 10 | 51 |
| Add: Purchase accounting impacts - Linde AG (c) | 466 | 459 | 403 | 490 | 504 |
| Add: Cost reduction programs and other charges | 131 | 212 | 125 | 141 | 89 |
| Less: Net gain on sale of businesses | — | — | (164) | — | — |
| Total adjustments | 597 | 676 | 402 | 635 | 637 |
| Adjusted income before income taxes and equity investments | $1,351 | $1,348 | $1,403 | $1,318 | $1,208 |
| | | | | | |
| Reported Income taxes | $165 | $162 | $298 | $169 | $140 |
| Reported effective tax rate | 21.9% | 24.1% | 29.8% | 24.7% | 24.5% |
| | | | | | |
| Adjusted income taxes | $323 | $321 | $348 | $314 | $284 |
| Adjusted effective tax rate | 23.9% | 23.8% | 24.8% | 23.8% | 23.5% |
Press Release
LINDE PLC AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES AND RECONCILIATIONS
(Millions of dollars, except per share data)
(UNAUDITED)
| Income from Equity Investments | | | | | |
| Reported income from equity investments | $17 | $24 | $28 | $28 | $34 |
| Add: Purchase accounting impacts - Linde AG (c) | 14 | 14 | 15 | 14 | 14 |
| Adjusted income from equity investments | $31 | $38 | $43 | $42 | $48 |
| | | | | | |
| Adjusted Noncontrolling Interests from Continuing Operations | | | | | |
| Reported noncontrolling interests from continuing operations | $(35) | $(27) | $(3) | $(29) | $(30) |
| Add: Cost reduction programs and other charges | — | — | (35) | — | — |
| Add: Purchase accounting impacts - Linde AG (c) | (15) | (14) | (8) | (17) | (15) |
| Total adjustments | (15) | (14) | (43) | (17) | (15) |
| Adjusted noncontrolling interests from continuing operations | $(50) | $(41) | $(46) | $(46) | $(45) |
| | | | | | |
| Adjusted Income from Continuing Operations (b) | | | | | |
| Reported income from continuing operations | $571 | $507 | $728 | $513 | $435 |
| Add: Pension settlement charge | — | 8 | 40 | — | 51 |
| Less: Merger-related divestitures (d) | — | (1) | (2) | (4) | (5) |
| Add: Cost reduction programs and other charges | 95 | 156 | 89 | 123 | 70 |
| Less: Net gain on sale of business | — | — | (115) | — | — |
| Add: Purchase accounting impacts - Linde AG (c) | 343 | 354 | 312 | 368 | 376 |
| Total adjustments | 438 | 517 | 324 | 487 | 492 |
| Adjusted income from continuing operations | $1,009 | $1,024 | $1,052 | $1,000 | $927 |
| | | | | | |
| Adjusted Diluted EPS from Continuing Operations (b) | | | | | |
| Reported diluted EPS from continuing operations | $1.07 | $0.94 | $1.34 | $0.94 | $0.79 |
| Add: Pension settlement charge | — | 0.01 | 0.07 | — | 0.09 |
| Add: Cost reduction programs and other charges | 0.18 | 0.29 | 0.17 | 0.23 | 0.13 |
| Less: Merger-related divestitures (d) | — | — | (0.01) | (0.01) | (0.01) |
| Less: Net gain on sale of business | — | — | (0.21) | — | — |
| Add: Purchase accounting impacts - Linde AG | 0.64 | 0.65 | 0.58 | 0.67 | 0.69 |
| Total adjustments | 0.82 | 0.95 | 0.60 | 0.89 | 0.90 |
| Adjusted diluted EPS from continuing operations | $1.89 | $1.89 | $1.94 | $1.83 | $1.69 |
| | | | | | |
| | | | | | |
| Adjusted EBITDA and % of Sales | | | | | |
| Income from continuing operations | $571 | $507 | $728 | $513 | $435 |
| Add: Noncontrolling interests related to continuing operations | 35 | 27 | 3 | 29 | 30 |
| Add: Net pension and OPEB cost (benefit), excluding service cost | (45) | (25) | 2 | (24) | 15 |
| Add: Interest expense | 24 | 8 | (3) | 10 | 23 |
| Add: Income taxes | 165 | 162 | 298 | 169 | 140 |
| Add: Depreciation and amortization | 1,142 | 1,162 | 1,095 | 1,195 | 1,223 |
| EBITDA from continuing operations | 1,892 | 1,841 | 2,123 | 1,892 | 1,866 |
| Less: Merger-related divestitures (d) | — | (1) | (2) | (6) | (7) |
| Less: Net gain on sale of business | — | — | (164) | — | — |
| Add: Cost reduction programs and other charges | 131 | 212 | 125 | 141 | 89 |
| Add: Purchase accounting impacts - Linde AG | 26 | 14 | 17 | 14 | 24 |
| Total adjustments | 157 | 225 | (24) | 149 | 106 |
| Adjusted EBITDA from continuing operations | $2,049 | $2,066 | $2,099 | $2,041 | $1,972 |
| | | | | | |
| | | | | | |
| Reported sales | $6,739 | $7,080 | $7,000 | $7,204 | $6,944 |
| Adjusted sales | $6,739 | $7,077 | $6,993 | $7,179 | $6,914 |
| % of sales | | | | | |
| EBITDA from continuing operations | 28.1% | 26.0% | 30.3% | 26.3% | 26.9% |
| Adjusted EBITDA from continuing operations | 30.4% | 29.2% | 30.0% | 28.4% | 28.5% |
(a) 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.
(b) Net of income taxes which are shown separately in “Adjusted Income Taxes and Effective Tax Rate”.
(c) 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 and 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 purchase accounting adjustments for the periods presented relate primarily to 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.
(d) To adjust for the results of Praxair's merger-related divestitures.
Press Release
LINDE PLC AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES AND RECONCILIATIONS
(Millions of dollars)
(UNAUDITED)
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 | $16,875 | $13,956 | $13,201 | $13,957 | $14,146 | $15,296 |
| Less: Cash and cash equivalents | (4,014) | (2,700) | (2,120) | (2,686) | (5,791) | (4,466) |
| Net debt | 12,861 | 11,256 | 11,081 | 11,271 | 8,355 | 10,830 |
| Less: Purchase accounting impacts - Linde AG | (170) | (195) | (211) | (243) | (262) | (291) |
| Adjusted net debt | $12,691 | $11,061 | $10,870 | $11,028 | $8,093 | $10,539 |
| Less: Net assets held for sale | (115) | (123) | (223) | (272) | (1,629) | (4,730) |
| Adjusted net debt less net assets held for sale | $12,576 | $10,938 | $10,647 | $10,756 | $6,464 | $5,809 |
| | | | | | | |
| Equity and redeemable noncontrolling interests: | | | | | | |
| Redeemable noncontrolling interests | 92 | 113 | 14 | 15 | 15 | 16 |
| Linde plc shareholders' equity | 44,776 | 49,074 | 48,953 | 50,564 | 51,175 | 51,596 |
| Noncontrolling interests | 2,375 | 2,448 | 2,341 | 2,315 | 5,457 | 5,484 |
| Total equity and redeemable noncontrolling interests | 47,243 | 51,635 | 51,308 | 52,894 | 56,647 | 57,096 |
| | | | | | | |
| Reported capital | 59,989 | 62,768 | 62,166 | 63,893 | 63,373 | 63,196 |
| Adjusted capital | 59,819 | 62,573 | 61,955 | 63,650 | 63,111 | 62,905 |
| | | | | | | |
| Less: Linde AG Goodwill | 24,256 | 24,256 | 24,197 | 24,197 | 24,197 | 24,146 |
| Less: Linde AG Indefinite lived intangibles | 1,868 | 1,868 | 1,868 | 1,868 | 1,868 | 1,648 |
| Adjusted capital | $33,695 | $36,449 | $35,890 | $37,585 | $37,046 | $37,111 |
After-tax Return on Capital and Adjusted After-tax Return on Capital (ROC) - After-tax return on capital is a measure used by investors, financial analysts and management to evaluate the return on net assets employed in the business. ROC measures the after-tax operating profit that the company was able to generate with the investments made by all parties in the business (debt, noncontrolling interests and Linde plc shareholders’ equity).
| Reported income from continuing operations | $571 | $507 | $728 | $513 | $435 | $2,870 |
| Add: noncontrolling interests from continuing operations | 35 | 27 | 3 | 29 | 30 | (33) |
| Add: interest expense - net | 24 | 8 | (3) | 10 | 23 | 72 |
| Less: tax benefit on interest expense - net * | (6) | (2) | 1 | (3) | (6) | (18) |
| Reported NOPAT | $624 | $540 | $729 | $549 | $482 | $2,891 |
| | | | | | | |
| Adjusted income from continuing operations | $1,009 | $1,024 | $1,052 | $1,000 | $927 | $841 |
| Add: adjusted noncontrolling interests from continuing operations | 50 | 41 | 46 | 46 | 45 | 40 |
| Add: adjusted interest expense - net | 46 | 30 | 19 | 35 | 50 | 50 |
| Less: tax benefit on interest expense - net * | (12) | (7) | (5) | (9) | (13) | (13) |
| Adjusted NOPAT | $1,093 | $1,088 | $1,112 | $1,072 | $1,009 | $919 |
| | | | | | | |
| | | | | | | |
| 4-quarter trailing reported NOPAT | $2,442 | $2,300 | | | | |
| 4-quarter trailing adjusted NOPAT | $4,365 | $4,281 | | | | |
| | | | | | | |
| | | | | | | |
| Ending capital (see above) | $59,989 | $62,768 | | | | |
| 5-quarter average ending capital | $62,438 | $63,079 | | | | |
| | | | | | | |
| Ending adjusted capital (see above) | $33,695 | $36,449 | | | | |
| 5-quarter average ending adjusted capital | $36,133 | $36,816 | | | | |
| | | | | | | |
| After-tax ROC (4 quarter reported NOPAT / 5-quarter average ending capital) | 3.9% | 3.6% | | | | |
| Adjusted after-tax ROC (4 quarter trailing adjusted NOPAT / 5-quarter average ending adjusted capital) | 12.1% | 11.6% | | | | |
* Tax benefit on interest expense - net is generally presented using the reported effective rate.
