filings.toolsItem 8. Financial Statements and Supplementary Data
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Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and shareholders of Linde plc:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Linde plc and its subsidiaries as of December 31, 2017 and April 18, 2017, and the related consolidated statement of income and comprehensive income, cash flows and equity for the period from April 18, 2017 to December 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and April 18, 2017, and the results of their operations and their cash flows for the period from April 18, 2017 to December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Stamford, CT
March 23, 2018
We have served as the Company's auditor since 2017.
LINDE PLC (Formerly known as Zamalight plc) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In USD)
| December 31, 2017 | Opening Balance April 18, 2017 | ||||||
| ASSETS | |||||||
| CURRENT ASSETS | |||||||
| Cash at banks | $ | 84,862 | $ | — | |||
| Other assets | 9,129,562 | — | |||||
| NON-CURRENT ASSETS | — | — | |||||
| TOTAL ASSETS | $ | 9,214,424 | $ | — | |||
| SHAREHOLDER'S EQUITY AND LIABILITIES | |||||||
| CURRENT LIABILITIES | |||||||
| Accrued liabilities | $ | 1,644,799 | $ | — | |||
| Related party debt (Note 7) | 9,501,470 | — | |||||
| NON CURRENT LIABILITIES | — | — | |||||
| Commitments and contingencies (Note 9) | |||||||
| CAPITAL AND RESERVES | |||||||
| Share Capital (A ordinary shares of €1.00 each, authorized and issued shares - 25,000 shares) | 26,827 | 26,827 | |||||
| Additional paid-in capital | 26,827 | 26,827 | |||||
| Accumulated other comprehensive income | (42,828 | ) | — | ||||
| Receivable from shareholders | (60,025 | ) | (53,654 | ) | |||
| Retained earnings (losses) | (1,882,646 | ) | — | ||||
| TOTAL SHAREHOLDER'S EQUITY | (1,931,845 | ) | — | ||||
| EQUITY AND LIABILITIES | $ | 9,214,424 | $ | — |
The accompanying notes are an integral part of these financial statements.
LINDE PLC (Formerly known as Zamalight plc) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME
(In USD)
| April 18, 2017 - December 31, 2017 | |||
| Other expenses | $ | 1,882,646 | |
| Operating loss | (1,882,646 | ) | |
| Net finance costs | — | ||
| Loss before tax | (1,882,646 | ) | |
| Income tax | — | ||
| Net income (loss) for the period | (1,882,646 | ) | |
| Other comprehensive income | |||
| Other comprehensive income (loss) for the period, net of tax | (42,828 | ) | |
| Total comprehensive loss for the period | $ | (1,925,474 | ) |
| Net income (loss) per share - basic and diluted | $ | (75.31 | ) |
| Weighted average shares outstanding - basic and diluted | 25,000 |
The accompanying notes are an integral part of these financial statements.
LINDE PLC (Formerly known as Zamalight plc) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In USD)
| April 18, 2017 - December 31, 2017 | |||
| OPERATIONS | |||
| Net income (loss) | $ | (1,882,646 | ) |
| Working capital: | |||
| Accrued liabilities | 1,847,848 | ||
| Net cash provided by (used for) operating activities | (34,798 | ) | |
| INVESTING | |||
| Net cash used for investing activities | — | ||
| FINANCING | |||
| Related party debt | 118,140 | ||
| Net cash provided by (used for) financing | 118,140 | ||
| Effect of exchange rate changes on cash | 1,520 | ||
| Cash and cash equivalents, beginning-of-period | — | ||
| Cash and cash equivalents, end-of-period | $ | 84,862 | |
The accompanying notes are an integral part of these financial statements.
LINDE PLC (Formerly known as Zamalight plc) AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EQUITY
(In USD)
| Share capital | Additional Paid in Capital | Accumulated other comprehensive income | Accumulated deficit | Receivables from shareholders | Total equity | |||||||||||||
| Issue of share capital on incorporation - April 18, 2017 | $ | 26,827 | $ | 26,827 | $ | — | $ | — | $ | (53,654 | ) | $ | — | |||||
| Loss for the period | — | — | — | (1,882,646 | ) | — | (1,882,646 | ) | ||||||||||
| Total comprehensive loss for the period - currency translation | — | — | (42,828 | ) | — | (6,371 | ) | (49,199 | ) | |||||||||
| December 31, 2017 | 26,827 | 26,827 | (42,828 | ) | (1,882,646 | ) | (60,025 | ) | (1,931,845 | ) |
The accompanying notes are an integral part of these financial statements.
- Organization and Basis of Presentation
Linde plc, formerly known as Zamalight plc ("Linde plc" or the “Company”), was incorporated as a public limited company under the laws of Ireland on April 18, 2017, by Enceladus Holding Limited ("Enceladus") and Cumberland Corporate Services Limited ("Cumberland"), with an issued share capital of €25,000 ($26,827), comprised of 25,000 A ordinary shares with a nominal value of €1.00 each, and additional paid in capital of €25,000 ($26,827). The A ordinary shares of €1.00 each were initially issued on Linde plc’s incorporation as ordinary shares. These shares were subsequently re-designated as A ordinary shares on July 25, 2017. Zamalight plc was renamed "Linde plc" on July 20, 2017.
The Company is registered in Ireland under the registration number 602527 and with its registered office located at Ten Earlsfort Terrace, Dublin 2, D02 T380 Ireland and principal executive offices at The Priestley Centre, 10 Priestley Road, The Surrey Research Park, Guildford, Surrey GU2 7XY, United Kingdom. The Company was formed on April 18, 2017; accordingly, the financial statements as of that date only comprise the balance sheet (“opening balance sheet”). The Company’s fiscal year ends on December 31, 2017.
The Company was formed in accordance with the requirements of the business combination agreement, dated as of June 1, 2017, as amended (the "business combination agreement"), pursuant to which, among other things, Praxair, Inc., a Delaware corporation (together with its subsidiaries, “Praxair”) and Linde AG, a German stock corporation (together with its subsidiaries, “Linde”) agreed to combine their respective businesses through an all-stock transaction, and become subsidiaries of the Company.
In connection with the proposed business combination, Linde plc filed a Registration Statement on Form S-4 (the "registration statement") which was declared effective by the U. S. Securities and Exchange Commission ("SEC") on August 14, 2017. Linde plc has also filed an offer document with the German Federal Financial Supervisory Authority (Bundesanstalt fuer Finanzdienstleistungsaufsicht) (“BaFin”) which was approved for publication by BaFin on August 14, 2017 and published by Linde plc on August 15, 2017 (the "offer document"). Pursuant to the offer document, Linde plc made an offer to exchange each issued and outstanding no-par value bearer share of Linde AG for 1.540 ordinary shares of Linde plc (the “exchange offer”). In addition, Zamalight Subco, Inc., an indirect wholly-owned Delaware subsidiary of Linde plc, will merge with and into Praxair, Inc., with Praxair, Inc. surviving the merger (the “merger”, and together with the exchange offer, the “business combination” ). In the merger, each share of Praxair, Inc. common stock will be converted into the right to receive one Linde plc ordinary share. Praxair, Inc.’s stockholders approved the merger at Praxair, Inc.’s special meeting held on September 27, 2017 and on November 24, 2017, the tender period for the exchange offer expired with approximately 92% of all Linde AG shares entitled to voting rights being tendered. The parties currently expect the business combination to be completed in the second half of 2018. Upon completion of the business combination, Linde plc will apply to list its ordinary shares on the New York Stock Exchange and the Frankfurt Stock Exchange, and will seek inclusion in the S&P 500 and DAX 30 indices.
Completion of the business combination remains subject to approval by requisite governmental regulators and authorities, including approvals under applicable competition laws.
The business combination agreement, or certain covenants contained therein, may be terminated for, or may terminate as a result of, certain reasons, including, among others, (a) the mutual consent of Praxair, Inc. and Linde AG to termination, (b) a permanent injunction or order by any governmental entity in Ireland, the United Kingdom, Germany or the United States that prohibits or makes illegal the completion of the Business Combination, (c) the occurrence of a change, event, occurrence or effect that has had or is reasonably expected to have a “material adverse change” (as defined in the business combination agreement) on Linde AG or Praxair, Inc. or (d) the failure to obtain approval by requisite governmental regulators and authorities described in the preceding paragraph.
To date, the Company has not conducted any material activities other than those incidental to its formation and the matters contemplated by the business combination agreement such as the incurrence of SEC registration fees and other transaction-related costs (see Note 3 - Subsidiaries). For additional information related to the business combination agreement, please refer to the registration statement.
To the extent that the Company does not have sufficient funds available to satisfy its obligations, Praxair, Inc. will finance any out of pocket expenses incurred by the Company in connection with the business combination agreement and the transactions contemplated by the business combination agreement. If the Business Combination is not completed, any expenses incurred by the Company and/or its affiliates will be shared equally by Praxair, Inc. and Linde AG, to the extent not prohibited by applicable law and as otherwise provided in the business combination agreement.
These financial statements have been prepared in compliance with US GAAP.
The following new accounting standards in the United States issued by the Financial Accounting Standards Board (“FASB”) have not yet been implemented by the Company. The Company will evaluate, when applicable, the impacts of adopting the below standards on future periods:
| • | Revenue Recognition - In May 2014, the FASB issued updated guidance on the reporting and disclosure of revenue. The new guidance requires the evaluation of contracts with customers to determine the recognition of revenue when or as the entity satisfies a performance obligation, and requires expanded disclosures. Subsequently, the FASB has issued amendments to certain aspects of the guidance including the effective date. This guidance is required to be effective beginning in the first quarter 2018 and includes several transition options. |
| • | Leases - In February 2016, the FASB issued updated guidance on the accounting and financial statement presentation of leases. The new guidance requires lessees to recognize a right-of-use asset and lease liability for all leases, except those that meet certain scope exceptions, and would require expanded quantitative and qualitative disclosures. This guidance will be effective beginning in the first quarter 2019 and requires companies to transition using a modified retrospective approach. |
| • | Credit Losses on Financial Instruments - In June 2016, the FASB issued an update 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 will be effective beginning in the first quarter 2020, with early adoption permitted beginning in the first quarter 2019 and requires companies to apply the change in accounting on a prospective basis. |
| • | Classification of Certain Cash Receipts and Cash Payments - In August 2016, the FASB issued updated guidance on the classification of certain cash receipts and cash payments within the statement of cash flows. The update provides accounting guidance for specific cash flow issues with the objective of reducing diversity in practice. This new guidance will be effective beginning in the first quarter 2018 on a retrospective basis, with early adoption optional. |
| • | Intra-Entity Asset Transfers - In October 2016, the FASB issued updated guidance for income tax accounting of intra-entity transfers of assets other than inventory. The update requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory in the period when the transfer occurs. This new guidance will be effective beginning in the first quarter 2018, with early adoption permitted, and should be applied on a modified retrospective basis. |
| • | 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 will be effective beginning in the first quarter 2020 with early adoption permitted. |
| • | Pension Costs - In March 2017, the FASB issued updated guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires the service cost component be reported in the same line item or items as other compensation costs arising from services rendered by employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and not included within operating profit. This guidance will be effective beginning in the first quarter 2018, with early adoption optional, and requires companies to transition using a retrospective approach for the presentation of the service cost component and the other cost components and prospectively for the capitalization of the service cost component. |
| • | Derivatives and Hedging - In August 2017, the FASB issued updated guidance on accounting for hedging activities. The new guidance changes both the designation and measurement for qualifying hedging relationships and the presentation of hedge results. This guidance will be effective beginning in the first quarter 2019, with early adoption optional. |
| • | Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income – In February 2018, the FASB issued updated guidance which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This new guidance will be effective beginning in the first quarter 2019 on a retrospective basis, with early adoption optional. |
- Accounting Policies
Basis of Preparation
The financial statements present the consolidated results and financial position of the Company and its subsidiaries for the period from incorporation being April 18, 2017 to December 31, 2017.
Going Concern
The financial statements have been prepared on a going concern basis, taking account of the facilities available under the cash management agreement (see Note 7).
Currency
Items included in these consolidated financial statements are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The financial information is presented in U.S. Dollars ("USD"). The US Dollar/Euro exchange rate at April 18, 2017 was 0.9319 and at December 31, 2017 was 0.8330.
Consolidation and Subsidiaries
Subsidiaries are all entities over which the Company and its group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases.
The acquisition method of accounting is used to account for business combinations by the group.
Intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash at banks or other highly liquid securities with original maturities of three months or less.
Other Receivables
Other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Other receivables are stated at the lower of amortized cost or recoverable amount. If collection of the amounts is expected in one year or less they are classified as current assets.
Other Provisions
The Company accrues liabilities for non-income tax contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. If new information becomes available or losses are sustained in excess of recorded amounts, adjustments are charged against income at that time. Management does not anticipate that in the aggregate such losses would have a material adverse effect on the Company’s balance sheet or liquidity.
Share Capital
According to article 3 of Linde plc's Articles of Association, the authorized share capital of the Company is €1,775,000 divided into 1,750,000,000 ordinary shares of €0.001 each and 25,000 A ordinary shares of €1.00 each.
As of the opening balance sheet date and as of December 31, 2017, 25,000 A ordinary shares had been issued and 12,500 shares were held by Enceladus which is wholly owned by Praxair, Inc.’s Irish legal counsel Arthur Cox, and 12,500 shares were held by Cumberland which is wholly owned by Linde AG´s Irish legal counsel William Fry, the Company’s shareholders. Furthermore, an additional €25,000 ($26,827) was committed to be paid by the two shareholders.
A ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are capitalized and upon the closing of the associated equity transaction are reclassified to equity as a deduction, net of tax, from the proceeds.
As of December 31, 2017, the Company was not subject to any capital requirements.
Income Taxes
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.
Deferred tax assets are recognized only if it is probable that future taxable amounts will be available to utilize those temporary differences and losses. No deferred tax has been recognized as at December 31, 2017, as the Company has recently been incorporated and therefore does not have any history of income.
- Subsidiaries
The principal subsidiaries of the Company, all of which have been included in these consolidated financial statements, are as follows:
| Name | Country of Incorporation and Principal Place of Business | Proportion of Ownership Interest at | |||
| December 31, 2017 | April 18, 2017 | ||||
| Zamalight Holdco LLC | USA | 100 | % | — | % |
| Zamalight Subco, Inc. | USA | 100 | % | — | % |
| Linde Holding GmbH | Germany | 100 | % | — | % |
| Linde Intermediate Holding AG | Germany | 100 | % | — | % |
On May 26, 2017, the Company formed Zamalight Holdco LLC, a Delaware limited liability company. Immediately following its formation, Zamalight Holdco LLC formed Zamalight Subco, Inc., a Delaware corporation, as a wholly owned U.S. subsidiary of Zamalight Holdco LLC. Upon effectiveness of the Merger, Zamalight Subco, Inc. will merge with and into Praxair, Inc., with Praxair, Inc. surviving the Merger as an indirect wholly-owned subsidiary of the Company.
On July 26, 2017, the Company formed Linde Holding GmbH, a German limited liability company (GmbH), which on July 28, 2017 in turn formed Linde Intermediate Holding AG, a German stock corporation (AG), to facilitate the settlement of the Exchange Offer and a post-completion reorganization with respect to Linde AG.
- Receivables from Shareholders
This relates to a receivable from the two shareholders and comprises two checks of €25,000 each which are being held on behalf of the Company by Praxair, Inc.’s Irish legal counsel. Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value.
- Other Assets
Other assets at December 31, 2017 of $9,129,562 relate to the costs to issue equity securities (SEC registration fee). When the business combination is completed, these costs will be reclassified to additional paid-in capital. In case the business combination is not completed, these costs will be expensed and reimbursed to Linde plc by Praxair, Inc. and Linde AG.
- Accrued Liabilities
Accrued liabilities at December 31, 2017 for the amount of $1,644,799 consist of expenses incurred in connection with the business combination and mainly relate to fees for accounting and advisory services.
- Related Parties
Related parties are the members of the executive bodies of the Company and those companies as described in Note 1.
On July 24, 2017 the Company entered into a cash management agreement with Praxair International Finance UC to finance the Company´s working capital obligations. The total available amount under the facility is €30,000,000. The cash management agreement is Euro denominated and has a variable interest rate of one month EUR LIBOR plus a 0% spread. The cash management agreement terminates on the earlier of the termination date of the business combination agreement or the business day immediately following the closing date of the business combination.
At December 31, 2017, $9,501,470 was outstanding under this facility as follows:
| December 31, 2017 | ||||
| SEC registration fee* | $ | 9,129,562 | ||
| Incorporation of Linde Intermediate Holding AG | 60,025 | |||
| Incorporation of Linde Holding GmbH | 60,025 | |||
| BaFin registration fee* | 120,050 | |||
| All other* | 131,808 | |||
| $ | 9,501,470 |
- Paid directly to the SEC, BaFin and other vendors by Praxair International Finance UC on behalf of Linde plc and treated as a non-cash transaction in the Consolidated Statement of Cash Flows.
- Loss per share
| April 18, 2017 to December 31, 2017 | ||||
| Net income (loss) from continuing operations attributable to the owners of the company | $ | (1,882,646 | ) | |
| Weighted average shares outstanding | 25,000 | |||
| Net income (loss) per share - basic and diluted | $ | (75.31 | ) |
- Commitments and Contingencies
There are no pending legal proceedings or claims against the Company.
- Quarterly Data (Unaudited)
| 2017 | April 18, 2017 - June 30, 2017 | Q3 | Q4 | April 18, 2017 - December 31, 2017 | ||||||||
| Other expenses | $ | 462,640 | $ | 290,825 | $ | 1,129,181 | $ | 1,882,646 | ||||
| Operating loss | (462,640 | ) | (290,825 | ) | (1,129,181 | ) | (1,882,646 | ) | ||||
| Net finance costs | — | — | — | — | ||||||||
| Loss before tax | (462,640 | ) | (290,825 | ) | (1,129,181 | ) | (1,882,646 | ) | ||||
| Income tax | — | — | — | — | ||||||||
| Net income (loss) for the period | (462,640 | ) | (290,825 | ) | (1,129,181 | ) | (1,882,646 | ) | ||||
| Net income (loss) per share - basic and diluted | $ | (18.51 | ) | $ | (11.63 | ) | $ | (45.17 | ) | $ | (75.31 | ) |
| Weighted average shares outstanding - basic and diluted | 25,000 | 25,000 | 25,000 | 25,000 |
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