Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations ("MD&A")

Non-GAAP Measures

Throughout MD&A, the company provides adjusted operating results from continuing operations exclusive of certain items such as cost reduction programs and other charges, net gains on sale of businesses, purchase accounting impacts of the Linde AG merger and pension settlement charges. Adjusted amounts are non-GAAP measures which are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management find useful in evaluating the company’s operating performance. Items which the company does not believe to be indicative of on-going business performance are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. In addition, operating results from continuing operations, excluding these items, is important to management's development of annual and long-term employee incentive compensation plans. 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.

The non-GAAP measures and reconciliations are separately included in a later section in the MD&A titled "Non-GAAP Measures and Reconciliations."

Consolidated Results

The following table provides summary information for the quarters and six months ended June 30, 2022 and 2021. The reported amounts are GAAP amounts from the Consolidated Statements of Income. The adjusted amounts are intended to supplement investors' understanding of the company's financial information and are not a substitute for GAAP measures:

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars, except per share data)			2022						2021						Variance						2022						2021						Variance
Sales			$	8,457					$	7,584					12		%				$	16,668					$	14,827					12		%
Cost of sales, exclusive of depreciation and amortization			$	4,940					$	4,194					18		%				$	9,738					$	8,248					18		%
As a percent of sales			58.4		%				55.3		%										58.4		%				55.6		%
Selling, general and administrative			$	771					$	822					(6)		%				$	1,573					$	1,609					(2)		%
As a percent of sales			9.1		%				10.8		%										9.4		%				10.9		%
Depreciation and amortization			$	1,091					$	1,171					(7)		%				$	2,203					$	2,337					(6)		%
Russia-Ukraine conflict and other charges (b)			$	993					$	204					387		%				$	989					$	196					405		%
Other income (expense) - net			$	(36)					$	(17)					(112)		%				$	(24)					$	(13)					(85)		%
Operating profit			$	589					$	1,142					(48)		%				$	2,069					$	2,355					(12)		%
Operating margin			7.0		%				15.1		%										12.4		%				15.9		%
Interest expense - net			$	5					$	18					(72)		%				$	14					$	38					(63)		%
Net pension and OPEB cost (benefit), excluding service cost			$	(62)					$	(49)					27		%				$	(126)					$	(98)					29		%
Effective tax rate			44.3		%				28.5		%										30.0		%				24.9		%
Income from equity investments			$	50					$	37					35		%				$	94					$	80					18		%
Noncontrolling interests from continuing operations			$	(38)					$	(36)					6		%				$	(74)					$	(74)					—		%
Income from continuing operations			$	372					$	840					(56)		%				$	1,546					$	1,819					(15)		%
Diluted earnings per share from continuing operations			$	0.74					$	1.60					(54)		%				$	3.04					$	3.46					(12)		%
Diluted shares outstanding			505,269						523,723						(4)		%				508,432						525,380						(3)		%
Number of employees			72,438						71,736						1		%				72,438						71,736						1		%
Adjusted Amounts (a)
Operating profit			$	1,988					$	1,837					8		%				$	3,893					$	3,525					10		%
Operating margin			23.5		%				24.2		%										23.4		%				23.8		%
Effective tax rate			24.5		%				24.6		%										24.4		%				24.3		%
Income from continuing operations			$	1,566					$	1,415					11		%				$	3,066					$	2,727					12		%
Diluted earnings per share from continuing operations			$	3.10					$	2.70					15		%				$	6.03					$	5.19					16		%
Other Financial Data (a)
EBITDA from continuing operations			$	1,730					$	2,350					(26)		%				$	4,366					$	4,772					(9)		%
As percent of sales			20.5		%				31.0		%										26.2		%				32.2		%
Adjusted EBITDA from continuing operations			$	2,746					$	2,585					6		%				$	5,409					$	5,023					8		%
As percent of sales			32.5		%				34.1		%										32.5		%				33.9		%

(a) Adjusted Amounts and Other Financial Data are non-GAAP performance measures. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliations" section of this MD&A.

(b) See Note 2 to the condensed consolidated financial statements.

Reported

In the second quarter of 2022, Linde's sales were $8,457 million, 12% above prior year, primarily driven by 7% price attainment and 2% higher volumes. Cost pass-through, representing the contractual billing of energy cost variances primarily to onsite customers, increased sales by 7% in the quarter, with minimal impact on operating profit. Currency translation decreased sales by 5% in the second quarter of 2022 as compared to 2021.

Reported operating profit for the second quarter of 2022 of $589 million, or 7.0% of sales, was 48% below prior year. The reported year-over-year decrease was primarily due to charges relating to the deconsolidation and impairment of Russian subsidiaries resulting from the ongoing war in Ukraine and related sanctions (see Note 2 to the condensed consolidated financial statements) partially offset by higher price and productivity initiatives. The reported effective tax rate ("ETR") was 44.3% in the second quarter 2022 versus 28.5% in the second quarter 2021, driven primarily by the non-deductibility of the

charges related to the deconsolidation and impairment of Linde's Russian subsidiaries partially offset by the reversal of a related deferred tax liability. Diluted earnings per share from continuing operations ("EPS") was $0.74, or 54% below EPS of $1.60 in the second quarter of 2021 primarily due to lower income from continuing operations, partially offset by lower diluted shares outstanding.

Adjusted

In the second quarter of 2022, adjusted operating profit of $1,988 million, or 23.5% of sales, was 8% higher as compared to 2021 driven by higher price and productivity initiatives, partially offset by inflation. The adjusted ETR was 24.5% in the second quarter 2022 versus 24.6% in the 2021 quarter. On an adjusted basis, EPS was $3.10, 15% above the 2021 adjusted EPS of $2.70, driven by higher adjusted income from continuing operations and lower diluted shares outstanding.

Outlook

Linde provides quarterly updates on operating results, material trends that may affect financial performance, and financial guidance via quarterly earnings releases and investor teleconferences. These updates are available on the company’s website, www.linde.com, but are not incorporated herein.

Results of operations

The changes in consolidated sales compared to the prior year are attributable to the following:

			Quarter Ended June 30, 2022 vs. 2021						Six Months Ended June 30, 2022 vs. 2021
			% Change						% Change
Factors Contributing to Changes - Sales
Volume			2		%				2		%
Price/Mix			7		%				6		%
Cost pass-through			7		%				7		%
Currency			(5)		%				(4)		%
Acquisitions/divestitures			—		%				—		%
Engineering			1		%				1		%
			12		%				12		%

Sales

Sales increased $873 million, or 12%, for the second quarter of 2022 and increased $1,841 million, or 12% for the six months ended June 30, 2022 versus the respective 2021 periods. Volume growth in all end markets except healthcare and project startups increased sales by 2% in the quarter and year-to-date period. Higher pricing across all geographic segments contributed 7% to sales in the quarter and 6% in the year-to-date period. Currency translation decreased sales by 5% in the quarter and 4% in the year-to-date period, largely in EMEA and APAC, driven by the weakening of the Euro, Australian dollar and British pound against the U.S. dollar. Cost pass-through increased sales by 7% in the quarter and 7% in the year-to-date period with minimal impact on operating profit.

Cost of sales, exclusive of depreciation and amortization

Cost of sales, exclusive of depreciation and amortization increased $746 million, or 18%, for the second quarter of 2022 and increased $1,490 million, or 18% for the six months ended June 30, 2022 primarily due to inflation and higher volumes, partially offset by productivity initiatives and currency impacts. Cost of sales, exclusive of depreciation and amortization was 58.4% and 58.4% of sales, respectively, for the second quarter and six months ended June 30, 2022 versus 55.3% and 55.6% of sales for the respective 2021 periods. The increase as a percentage of sales in the quarter and for the six months ended June 30, 2022 was due primarily to higher cost pass-through.

Selling, general and administrative expenses

Selling, general and administrative expense ("SG&A") decreased $51 million, or 6%, for the second quarter of 2022 and decreased $36 million, or 2%, for the six months ended June 30, 2022. SG&A was 9.1% of second quarter sales and 9.4% of sales for the six months ended June 30, 2022 versus 10.8% and 10.9% for the respective 2021 periods. Currency impacts decreased SG&A by approximately $32 million and $50 million for the quarter and six months ended June 30, 2022, respectively. Excluding currency impacts, underlying SG&A decreased in the second quarter of 2022 driven primarily by lower incentive compensation and increased for the six months ended June 30, 2022 due primarily to higher costs.

Depreciation and amortization

Reported depreciation and amortization expense decreased $80 million, or 7%, for the second quarter of 2022 and decreased $134 million, or 6%, for the six months ended June 30, 2022. The decrease is related primarily to lower depreciation and amortization of intangible assets acquired in the merger and currency impacts.

On an adjusted basis, depreciation and amortization decreased $2 million, for the second quarter of 2022 and increased $4 million, for the year-to-date period. Currency impacts decreased depreciation and amortization by $29 million and $45 million, for the quarter and six months ended June 30, 2022, respectively. Excluding currency, underlying depreciation and amortization increased primarily due to new project start ups.

Russia-Ukraine conflict and other charges

Russia-Ukraine conflict and other charges were $993 million and $989 million for the second quarter and six months ended June 30, 2022, respectively, and $204 million and $196 million for the respective 2021 periods. 2022 charges relate primarily to the deconsolidation and impairment of Russian subsidiaries resulting from the ongoing war in Ukraine and related sanctions. 2021 charges relate to cost reduction program and other charges, primarily severance (see Note 2 to the condensed consolidated financial statements).

On an adjusted basis, these costs have been excluded in both periods.

Operating profit

On a reported basis, operating profit decreased $553 million, or 48%, for the second quarter of 2022 and decreased $286 million, or 12%, for the six months ended June 30, 2022. The decrease was primarily due to Russia-Ukraine conflict and other charges, which more than offset growth from higher pricing and productivity initiatives and lower depreciation and amortization driven by merger related intangible assets.

On an adjusted basis, which excludes the impacts of purchase accounting and Russia-Ukraine conflict and other charges, operating profit increased $151 million, or 8% in the 2022 quarter and increased $368 million, or 10%, for the six months ended June 30, 2022. Operating profit growth was driven by higher pricing and productivity initiatives which more than offset inflation during the period. A discussion of operating profit by segment is included in the segment discussion that follows.

Interest expense - net

Reported interest expense - net decreased $13 million for the second quarter of 2022 and decreased $24 million for the six months ended June 30, 2022. On an adjusted basis, interest expense decreased $19 million for the second quarter of 2022 and decreased $38 million for the six months ended June 30, 2022 versus the respective 2021 periods. The decrease in both periods was driven by a lower effective borrowing rate and higher interest income on cash deposits.

Net pension and OPEB cost (benefit), excluding service cost

Reported net pension and OPEB cost (benefit), excluding service cost was a benefit of $62 million and $126 million for the quarter and six months ended June 30, 2022, respectively, versus a benefit of $49 million and $98 million for the respective 2021 periods. The increase in benefit primarily relates to lower amortization of deferred losses, partially offset by higher interest cost reflective of the higher discount rate environment year-over-year.

Effective tax rate

The reported effective tax rate ("ETR") for the quarter and six months ended June 30, 2022 was 44.3% and 30.0%, respectively, versus 28.5% and 24.9% for the respective 2021 periods. The increase is primarily related to the net tax expense resulting from the deconsolidation and impairment of the company’s business in Russia, driven predominantly by the non-deductibility of the impairment charges partially offset by the reversal of a related deferred tax liability. For the quarter and six months ended June 30, 2021, the ETR included net tax charges of $38 million primarily related to $81 million of expense due to a tax rate increase in the United Kingdom partially offset by a tax settlement benefit of $33 million (see Note 2 to the condensed consolidated financial statements).

On an adjusted basis, the ETR for the quarter and six months ended June 30, 2022 was 24.5% and 24.4%, respectively, versus 24.6% and 24.3% for the respective 2021 periods.

Income from equity investments

Reported income from equity investments for the second quarter of 2022 and six months ended June 30, 2022 was $50 million and $94 million, respectively, versus $37 million and $80 million for the respective 2021 periods. On an adjusted basis, income from equity investments for the second quarter and six months ended June 30, 2022 was $69 million and $133 million, respectively, versus $56 million and $118 million in the prior year respective periods. The increase on both basis was primarily driven by the overall performance of investments in APAC.

Noncontrolling interests from continuing operations

At June 30, 2022, noncontrolling interests from continuing operations consisted primarily of non-controlling shareholders' investments in APAC (primarily China).

Reported noncontrolling interests from continuing operations increased $2 million for the second quarter of 2022 and was flat for the six months ended June 30, 2022, versus the respective 2021 periods.

Income from continuing operations

Reported income from continuing operations decreased $468 million, or 56%, for the second quarter of 2022 and decreased $273 million, or 15%, for the six months ended June 30, 2022 versus the respective 2021 periods, primarily due to lower overall operating profit.

On an adjusted basis, which excludes the impacts of purchase accounting and Russia-Ukraine conflict and other charges, income from continuing operations increased $151 million, or 11%, for the quarter and increased $339 million, or 12%, for the six months ended June 30, 2022 versus the respective 2021 periods. The increase was driven by higher overall adjusted operating profit.

Diluted earnings per share from continuing operations

Reported diluted earnings per share from continuing operations decreased $0.86, or 54%, for the second quarter of 2022 and decreased $0.42, or 12%, for the six months ended June 30, 2022 versus the comparable 2021 periods. The decrease was primarily due to lower income from continuing operations, partially offset by lower diluted shares outstanding.

On an adjusted basis, diluted EPS for the second quarter of 2022 increased $0.40, or 15%, and increased $0.84, or 16% for the six months ended June 30, 2022 versus the respective 2021 periods. The increase was primarily due to higher adjusted income from continuing operations and lower diluted shares outstanding.

Employees

The number of employees at June 30, 2022 was 72,438, an increase of 702 employees from June 30, 2021, driven primarily by the Americas.

Other Financial Data

EBITDA was $1,730 million for the second quarter of 2022 as compared to $2,350 million in the respective 2021 period. EBITDA was $4,366 million for the six months ended June 30, 2022 as compared to $4,772 million in the respective 2021 period. The decrease in both periods was driven by lower income from continuing operations plus depreciation and amortization versus the prior periods.

Adjusted EBITDA from continuing operations increased to $2,746 million for the second quarter 2022 from $2,585 million in the respective 2021 period. Adjusted EBITDA from continuing operations increased to $5,409 million from $5,023 million for the six months ended June 30, 2022 as compared to the respective 2021 period primarily due to higher adjusted income from continuing operations plus depreciation and amortization versus the prior period.

See the "Non-GAAP Measures and Reconciliations" section for definitions and reconciliations of these adjusted non-GAAP measures to reported GAAP amounts.

Other Comprehensive Income (Loss)

Other comprehensive losses for the second quarter of 2022 and six months ended June 30, 2022 were $1,545 million and $1,447 million, respectively, resulting primarily from currency translation adjustments of $1,699 million and $1,651 million during the quarter and year-to-date periods, respectively. The translation adjustments reflect the impact of translating local currency foreign subsidiary financial statements to U.S. dollars, and are largely driven by the movement of the U.S. dollar against major currencies including the Euro, British pound and the Chinese yuan. See the "Currency" section of the MD&A for exchange rates used for translation purposes and Note 11 to the condensed consolidated financial statements for a summary of the currency translation adjustment component of accumulated other comprehensive income by segment.

Segment Discussion

The following summary of sales and operating profit by segment provides a basis for the discussion that follows. Linde plc evaluates the performance of its reportable segments based on operating profit, excluding items not indicative of ongoing business trends. The reported amounts are GAAP amounts from the Consolidated Statements of Income.

			Quarter Ended June 30,									Six Months Ended June 30,
(Millions of dollars)			2022			2021			Variance			2022			2021			Variance
SALES
Americas			$	3,518		$	3,020		16		%	$	6,759		$	5,860		15		%
EMEA			2,144			1,875			14		%	4,292			3,674			17		%
APAC			1,651			1,544			7		%	3,253			2,980			9		%
Engineering			644			646			—		%	1,372			1,320			4		%
Other			500			499			—		%	992			993			—		%
Total sales			$	8,457		$	7,584		12		%	$	16,668		$	14,827		12		%
SEGMENT OPERATING PROFIT
Americas			$	910		$	871		4		%	$	1,814		$	1,666		9		%
EMEA			536			487			10		%	1,039			938			11		%
APAC			426			389			10		%	825			740			11		%
Engineering			105			108			(3)		%	248			217			14		%
Other			11			(18)			161		%	(33)			(36)			8		%
Segment operating profit			$	1,988		$	1,837		8		%	$	3,893		$	3,525		10		%
Reconciliation to reported operating profit:
Russia-Ukraine conflict and other charges (Note 2)			(993)			(204)						(989)			(196)
Purchase accounting impacts - Linde AG			(406)			(491)						(835)			(974)
Total operating profit			$	589		$	1,142					$	2,069		$	2,355

Americas

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars)			2022						2021						Variance						2022						2021						Variance
Sales			$	3,518					$	3,020					16		%				$	6,759					$	5,860					15		%
Operating profit			$	910					$	871					4		%				$	1,814					$	1,666					9		%
As a percent of sales			25.9		%				28.8		%										26.8		%				28.4		%

			Quarter Ended June 30, 2022 vs. 2021						Six Months Ended June 30, 2021 vs. 2020
			% Change						% Change
Factors Contributing to Changes - Sales
Volume			3		%				4		%
Price/Mix			6		%				5		%
Cost pass-through			7		%				6		%
Currency			—		%				—		%
Acquisitions/divestitures			—		%				—		%
			16		%				15		%

The Americas segment includes Linde's industrial gases operations in approximately 20 countries including the United States, Canada, Mexico, and Brazil.

Sales

Sales for the Americas segment increased $498 million, or 16%, for the second quarter and increased $899 million, or 15%, for the six months ended June 30, 2022 versus the respective 2021 periods. Higher pricing contributed 6% to sales in the quarter and 5% in the year-to-date period. Higher volumes increased sales by 3% for the second quarter and increased 4% for the six months ended June 30, 2022, driven by higher demand across all end markets except healthcare, led by chemicals and energy and manufacturing. Cost pass-through increased sales by 7% for the second quarter and increased 6% for the six months ended June 30, 2022 with minimal impact on operating profit. The impact of currency translation in the quarter and year-to-date period was not significant.

Operating profit

Operating profit in the Americas segment increased $39 million, or 4%, in the second quarter and increased $148 million, or 9%, for the six months ended June 30, 2022 versus the respective 2021 periods, driven primarily by higher pricing and continued productivity initiatives which more than offset inflation during the quarter and year-to-date period. The 2022 second quarter includes a one-time charge that is negatively impacting operating margin by approximately 100 basis points.

EMEA

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars)			2022						2021						Variance						2022						2021						Variance
Sales			$	2,144					$	1,875					14		%				$	4,292					$	3,674					17		%
Operating profit			$	536					$	487					10		%				$	1,039					$	938					11		%
As a percent of sales			25.0		%				26.0		%										24.2		%				25.5		%

			Quarter Ended June 30, 2022 vs. 2021						Six Months Ended June 30, 2022 vs. 2021
			% Change						% Change
Factors Contributing to Changes - Sales
Volume			(1)		%				(1)		%
Price/Mix			12		%				11		%
Cost pass-through			14		%				15		%
Currency			(11)		%				(8)		%
Acquisitions/divestitures			—		%				—		%
			14		%				17		%

The EMEA segment includes Linde's industrial gases operations in approximately 45 European, Middle Eastern and African countries including Germany, France, Sweden, the Republic of South Africa, and the United Kingdom.

Sales

EMEA segment sales increased by $269 million, or 14%, in the second quarter and increased $618 million, or 17%, for the six months ended June 30, 2022 as compared to the respective 2021 periods. Cost pass-through contributed 14% to sales in the quarter and 15% in the year-to-date period, with minimal impact on operating profit, while higher price attainment increased sales by 12% in the quarter and 11% in the year-to-date period. Volumes decreased 1% in both quarter and year to date period. Currency translation decreased sales by 11% in the quarter and 8% in the year-to-date period, due largely to the weakening of the Euro and British pound against the U.S. Dollar.

Linde has deconsolidated its Russian gas business as of June 30, 2022 which contributed $70 million and $128 million to sales in the second quarter and six months ended June 30, 2022, respectively (see Note 2 to the condensed consolidated financial statements). Sales in Ukraine are immaterial.

Operating Profit

Operating profit for the EMEA segment increased by $49 million, or 10%, in the second quarter and increased $101 million, or 11%, for the six months ended June 30, 2022 as compared to the respective 2021 periods, driven largely by higher pricing and continued productivity initiatives which more than offset inflation during the quarter and year-to-date period.

APAC

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars)			2022						2021						Variance						2022						2021						Variance
Sales			$	1,651					$	1,544					7		%				$	3,253					$	2,980					9		%
Operating profit			$	426					$	389					10		%				$	825					$	740					11		%
As a percent of sales			25.8		%				25.2		%										25.4		%				24.8		%

			Quarter Ended June 30, 2022 vs. 2021						Six Months Ended June 30,
			% Change						% Change
Factors Contributing to Changes - Sales
Volume/Equipment			3		%				5		%
Price/Mix			5		%				4		%
Cost pass-through			4		%				4		%
Currency			(5)		%				(4)		%
Acquisitions/divestitures			—		%				—		%
			7		%				9		%

The APAC segment includes Linde's industrial gases operations in approximately 20 Asian and South Pacific countries and regions including China, Australia, India, and South Korea.

Sales

Sales for the APAC segment increased $107 million, or 7%, for the second quarter and increased $273 million, or 9%, for the six months ended June 30, 2022 versus the respective 2021 periods. Volumes increased 3% in the quarter and 5% in the year-to-date period driven by project start-ups in the electronics and chemicals and energy end markets. Higher pricing contributed 5% to sales in the quarter and 4% to sales in the year-to-date period. Cost pass-through contributed 4% to sales in the quarter and year-to-date period with minimal impact on operating profit. Currency translation decreased sales by 5% in quarter and 4% in the year-to-date period driven primarily by the weakening of the Australian dollar, Korean won and Chinese Yuan against the U.S. Dollar.

Operating profit

Operating profit in the APAC segment increased $37 million, or 10%, in the second quarter and increased $85 million , or 11%, for the six months ended June 30, 2022 versus the respective 2021 periods driven by higher volumes and pricing and continued productivity initiatives which more than offset the impact of inflation during the quarter and year-to-date period.

Engineering

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars)			2022						2021						Variance						2022						2021						Variance
Sales			$	644					$	646					—		%				$	1,372					$	1,320					4		%
Operating profit			$	105					$	108					(3)		%				$	248					$	217					14		%
As a percent of sales			16.3		%				16.7		%										18.1		%				16.4		%

			Quarter Ended June 30, 2022 vs. 2021						Six Months Ended June 30, 2022 vs. 2021
			% Change						% Change
Factors Contributing to Changes - Sales
Volume			10		%				11		%
Currency			(10)		%				(7)		%
			—		%				4		%

Sales

Engineering segment sales decreased $2 million in the second quarter and increased $52 million, or 4%, in the six months ended June 30, 2022 as compared to the respective 2021 periods driven primarily by project timing, offset by currency impacts which decreased sales by 10% in the quarter and 7% in the year-to-date period.

Projects for Russia that are currently sanctioned represent approximately $300 million and $650 million of the Engineering segment sales during the second quarter and six months ended June 30, 2022.

Operating profit

Engineering segment operating profit decreased, $3 million, or 3%, in the second quarter and increased $31 million, or 14%, for the six months ended June 30, 2022 as compared to the respective 2021 periods driven primarily by project timing.

Other

			Quarter Ended June 30,																		Six Months Ended June 30,
(Millions of dollars)			2022						2021						Variance						2022						2021						Variance
Sales			$	500					$	499					—		%				$	992					$	993					—		%
Operating profit (loss)			$	11					$	(18)					161		%				$	(33)					$	(36)					8		%
As a percent of sales			2.2		%				(3.6)		%										(3.3)		%				(3.6)		%

			Quarter Ended June 30, 2022 vs. 2021						Six Months Ended June 30, 2022 vs. 2021
			% Change						% Change
Factors Contributing to Changes - Sales
Volume/price			6		%				3		%
Cost pass-through			—		%				1		%
Currency			(6)		%				(4)		%
Acquisitions/divestitures			—		%				—		%
			—		%				—		%

Other consists of corporate costs and a few smaller businesses including: Surface Technologies, GIST and global helium wholesale; which individually do not meet the quantitative thresholds for separate presentation.

Sales

Sales for Other increased $1 million for the second quarter and decreased $1 million for the six months ended June 30, 2022 versus the respective 2021 periods. Currency translation decreased sales by 6% in the quarter and decreased 4% in the year-to-date period. Underlying sales increased 6% in the quarter and 3% for the year-to-date period driven by higher aviation and electronic sales in the coatings business. Cost pass-through increased sales by 1% in the year-to-date period.

Operating profit

Operating profit in Other increased $29 million, or 161% in the second quarter and increased $3 million, or 8%, in the six months ended June 30, 2022 versus the respective 2021 periods, due primarily to lower corporate costs in the quarter which were largely offset by higher sourcing costs in the global helium business in the year-to-date period.

Currency

The results of Linde's non-U.S. operations are translated to the company’s reporting currency, the U.S. dollar, from the functional currencies. For most operations, Linde uses the local currency as its functional currency. There is inherent variability and unpredictability in the relationship of these functional currencies to the U.S. dollar and such currency movements may materially impact Linde's results of operations in any given period.

To help understand the reported results, the following is a summary of the significant currencies underlying Linde's consolidated results and the exchange rates used to translate the financial statements (rates of exchange expressed in units of local currency per U.S. dollar):

			Percentage of YTD 2022 Consolidated Sales						Exchange Rate for Income Statement												Exchange Rate for Balance Sheet
			Year-To-Date Average												June 30,						December 31,
Currency			2022						2021						2022						2021
Euro			22		%				0.91						0.83						0.95						0.88
Chinese yuan			8		%				6.47						6.47						6.70						6.36
British pound			7		%				0.77						0.72						0.82						0.74
Australian dollar			4		%				1.39						1.30						1.45						1.38
Brazilian real			4		%				5.06						5.38						5.26						5.58
Canadian dollar			3		%				1.27						1.25						1.29						1.26
Korean won			3		%				1,231						1,117						1,299						1,189
Mexican peso			2		%				20.26						20.18						20.12						20.53
Indian rupee			2		%				76.17						73.32						78.98						74.34
South African rand			2		%				15.39						14.53						16.28						15.94
Swedish krona			1		%				9.58						8.41						10.22						9.05
Thailand bhat			1		%				33.69						30.80						35.30						33.40

Liquidity, Capital Resources and Other Financial Data

The following selected cash flow information provides a basis for the discussion that follows:

(Millions of dollars)			Six months ended June 30,
			2022						2021
NET CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income (including noncontrolling interests)			$	1,620					$	1,893
Non-cash charges (credits):
Add: Depreciation and amortization			2,203						2,337
Add: Deferred income taxes			(221)						(78)
Add: Share-based compensation			51						63
Add: Russia-Ukraine conflict and other charges, net of payments (a)			922						95
Net income adjusted for non-cash charges			4,575						4,310
Less: Working capital			(497)						(360)
Less: Pension contributions			(19)						(28)
Other			74						14
Net cash provided by operating activities			$	4,133					$	3,936
INVESTING ACTIVITIES
Capital expenditures			(1,475)						(1,506)
Acquisitions, net of cash acquired			(49)						(31)
Divestitures and asset sales			17						77
Net cash provided by (used for) investing activities			$	(1,507)					$	(1,460)
FINANCING ACTIVITIES
Debt increase (decrease) - net			2,760						314
Issuances (purchases) of common stock - net			(3,307)						(2,050)
Cash dividends - Linde plc shareholders			(1,177)						(1,102)
Noncontrolling interest transactions and other			(35)						(277)
Net cash provided by (used for) financing activities			$	(1,759)					$	(3,115)
Effect of exchange rate changes on cash and cash equivalents			$	(35)					$	22
Cash and cash equivalents, end-of-period			$	3,655					$	3,137

(a) See Note 2 to the condensed consolidated financial statements.

Cash Flow from Operations

Cash provided by operations of $4,133 million for the six months ended June 30, 2022 increased $197 million, or 5%, versus 2021. The increase was driven primarily by higher net income adjusted for non-cash charges, partially offset by higher working capital requirements. Russia-Ukraine conflict and other charges were $989 million and $196 million, respectively, for the six months ended June 30, 2022 and 2021. Related cash outflows were $67 million and $101 million for the same respective periods.

Linde estimates that total 2022 required contributions to its pension plans will be in the range of $40 million to $50 million, of which $19 million has been made through June 30, 2022.

As of June 30, 2022, Linde has approximately $1.9 billion recorded in contract liabilities within the condensed consolidated balance sheet related to engineering projects in Russia. Any obligation to satisfy the related residual contract liabilities may have an adverse effect on Linde’s cash flows.

Investing

Net cash used for investing of $1,507 million for the six months ended June 30, 2022 increased $47 million versus 2021, as higher acquisition spend and lower proceeds from asset disposals and divestitures were largely offset by lower capital expenditures.

Capital expenditures for the six months ended June 30, 2022 were $1,475 million, $31 million lower than the prior year.

At June 30, 2022, Linde's sale of gas backlog of large projects under construction was approximately $3.6 billion. This represents the total estimated capital cost of large plants under construction.

Acquisitions for the six months ended June 30, 2022 and 2021 were $49 million and $31 million, respectively, and related primarily to acquisitions in EMEA. Divestitures and asset sales for the six months ended June 30, 2022 and 2021 were $17 million and $77 million, respectively.

Financing

Cash used by financing activities was $1,759 million for the six months ended June 30, 2022 as compared to cash used for financing activities of $3,115 million for the six months ended June 30, 2021. Cash provided by debt was $2,760 million versus $314 million in 2021 driven by higher commercial paper borrowings and debt issuances in 2022. In January 2022, Linde repaid €1.0 billion of 0.250% notes that became due. In March 2022, Linde issued €500 million of 1.000% notes due 2027, €750 million of 1.375% notes due 2031, and €800 million of 1.625% notes due 2035. In May 2022, Linde repaid $500 million of 2.20% notes due in August 2022.

Net purchases of ordinary shares were $3,307 million in 2022 versus $2,050 million in 2021. On February 28, 2022, the company’s Board of Directors approved the additional repurchase of $10.0 billion of its ordinary shares. For additional information related to the share repurchase programs, see Part II Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Cash dividends of $1,177 million increased $75 million from 2021 driven primarily by a 10% increase in quarterly dividends per share from $1.06 per share to $1.17 per share, partially offset by lower shares outstanding. Cash used for Noncontrolling interest transactions and other was $35 million for the six months ended June 30, 2022 versus cash used of $277 million for the respective 2021 period due to the settlement of the buyout of minority interests in the Republic of South Africa in January of 2021.

The company continues to believe it has sufficient operating flexibility, cash, and funding sources to meet its business needs around the world. The company had $3.7 billion of cash as of June 30, 2022, and has a $5 billion unsecured and undrawn revolving credit agreement with no associated financial covenants. No borrowings were outstanding under the credit agreement as of June 30, 2022. The company does not anticipate any limitations on its ability to access the debt capital markets and/or other external funding sources and remains committed to its strong ratings from Moody’s and Standard & Poor’s.

Legal Proceedings

See Note 9 to the condensed consolidated financial statements.

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.

			Quarter Ended June 30,						Six Months Ended June 30,
			2022						2021			2022			2021
Adjusted Operating Profit and Operating Margin
Reported operating profit			$	589					$	1,142		$	2,069		$	2,355
Add: Russia-Ukraine conflict and other charges			993						204			989			196
Add: Purchase accounting impacts - Linde AG (c)			406						491			835			974
Total adjustments			1,399						695			1,824			1,170
Adjusted operating profit			$	1,988					$	1,837		$	3,893		$	3,525
Reported percentage change			(48)		%				93		%	(12)		%	78		%
Adjusted percentage change			8		%				39		%	10		%	32		%
Reported sales			$	8,457					$	7,584		$	16,668		$	14,827
Reported operating margin			7.0		%				15.1		%	12.4		%	15.9		%
Adjusted operating margin			23.5		%				24.2		%	23.4		%	23.8		%
Adjusted Depreciation and amortization
Reported depreciation and amortization			$	1,091					$	1,171		$	2,203		$	2,337
Less: Purchase accounting impacts - Linde AG (c)			(401)						(479)			(819)			(957)
Adjusted depreciation and amortization			$	690					$	692		$	1,384		$	1,380
Adjusted Other Income (Expense) - net
Reported Other Income (Expense) - net			$	(36)					$	(17)		$	(24)		$	(13)
Less: Purchase accounting impacts - Linde AG (c)			(5)						(12)			(16)			(17)
Adjusted Other Income (Expense) - net			$	(31)					$	(5)		$	(8)		$	4
Adjusted Net Pension and OPEB Cost (Benefit), Excluding Service Cost
Reported net pension and OPEB cost (benefit), excluding service cost			$	(62)					$	(49)		$	(126)		$	(98)
Add: Pension settlement charges			—						—			—			—
Adjusted Net Pension and OPEB cost (benefit), excluding service costs			$	(62)					$	(49)		$	(126)		$	(98)
Adjusted Interest Expense - Net
Reported interest expense - net			$	5					$	18		$	14		$	38
Add: Purchase accounting impacts - Linde AG (c)			9						15			19			33
Adjusted interest expense - net			$	14					$	33		$	33		$	71

Adjusted Income Taxes (a)
Reported income taxes			$	286					$	334		$	655		$	602
Add: Purchase accounting impacts - Linde AG (c)			108						116			216			234
Add: Pension settlement charges			—						—			—			—
Add: Russia-Ukraine conflict and other charges			104						6			101			26
Total adjustments			212						122			317			260
Adjusted income taxes			$	498					$	456		$	972		$	862
Adjusted Effective Tax Rate (a)
Reported income before income taxes and equity investments			$	646					$	1,173		$	2,181		$	2,415
Add: Pension settlement charge			—						—			—			—
Add: Purchase accounting impacts - Linde AG (c)			397						476			816			941
Add: Russia-Ukraine conflict and other charges			993						204			989			196
Total adjustments			1,390						680			1,805			1,137
Adjusted income before income taxes and equity investments			$	2,036					$	1,853		$	3,986		$	3,552
Reported Income taxes			$	286					$	334		$	655		$	602
Reported effective tax rate			44.3		%				28.5		%	30.0		%	24.9		%
Adjusted income taxes			$	498					$	456		$	972		$	862
Adjusted effective tax rate			24.5		%				24.6		%	24.4		%	24.3		%
Income from Equity Investments
Reported income from equity investments			$	50					$	37		$	94		$	80
Add: Purchase accounting impacts - Linde AG (c)			—						—			—			—
Add: Russia-Ukraine conflict and other charges (e)			19						19			39			38
Adjusted income from equity investments			$	69					$	56		$	133		$	118
Adjusted Noncontrolling Interests from Continuing Operations
Reported noncontrolling interests from continuing operations			$	(38)					$	(36)		$	(74)		$	(74)
Add: Purchase accounting impacts - Linde AG (c)			(3)						(2)			(7)			(7)
Adjusted noncontrolling interests from continuing operations			$	(41)					$	(38)		$	(81)		$	(81)
Adjusted Income from Continuing Operations (b)
Reported income from continuing operations			$	372					$	840		$	1,546		$	1,819
Add: Pension settlement charge			—						—			—			—
Add: Russia-Ukraine conflict and other charges			889						198			888			170
Add: Purchase accounting impacts - Linde AG (c)			305						377			632			738
Total adjustments			1,194						575			1,520			908
Adjusted income from continuing operations			$	1,566					$	1,415		$	3,066		$	2,727

Adjusted Diluted EPS from Continuing Operations (b)
Reported diluted EPS from continuing operations			$	0.74					$	1.60		$	3.04		$	3.46
Add: Pension settlement charge			—						—			—			—
Add: Russia-Ukraine conflict and other charges			1.76						0.38			1.75			0.32
Add: Purchase accounting impacts - Linde AG (c)			0.60						0.72			1.24			1.41
Total adjustments			2.36						1.10			2.99			1.73
Adjusted diluted EPS from continuing operations			$	3.10					$	2.70		$	6.03		$	5.19
Reported percentage change			(54)		%				84		%	(12)		%	79		%
Adjusted percentage change			15		%				42		%	16		%	37		%
Adjusted EBITDA and % of Sales
Income from continuing operations			$	372					$	840		$	1,546		$	1,819
Add: Noncontrolling interests related to continuing operations			38						36			74			74
Add: Net pension and OPEB cost (benefit), excluding service cost			(62)						(49)			(126)			(98)
Add: Interest expense			5						18			14			38
Add: Income taxes			286						334			655			602
Add: Depreciation and amortization			1,091						1,171			2,203			2,337
EBITDA from continuing operations			$	1,730					$	2,350		$	4,366		$	4,772
Add: Russia-Ukraine conflict and other charges			993						204			989			196
Add: Purchase accounting impacts - Linde AG (c)			23						31			54			55
Total adjustments			1,016						235			1,043			251
Adjusted EBITDA from continuing operations			$	2,746					$	2,585		$	5,409		$	5,023
Reported sales			$	8,457					$	7,584		$	16,668		$	14,827
% of sales
EBITDA from continuing operations			20.5		%				31.0		%	26.2		%	32.2		%
Adjusted EBITDA from continuing operations			32.5		%				34.1		%	32.5		%	33.9		%

(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 Adjusted 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 purchase 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 and the allocation of fair value step-up for ongoing Linde AG asset disposals (reflected in Other Income/(Expense)). 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.
(e) Impairment charge related to a joint venture in the APAC segment.

Net Debt and Adjusted Net Debt

Net debt is a financial liquidity measure used by investors, financial analysts and management to evaluate the ability of a company to repay its debt. Purchase accounting impacts have been excluded as they are non-cash and do not have an impact on liquidity.

			June 30, 2022						December 31, 2021
(Millions of dollars)
Debt			$	16,043					$	14,207
Less: cash and cash equivalents			(3,655)						(2,823)
Net debt			12,388						11,384
Less: purchase accounting impacts - Linde AG			(38)						(61)
Adjusted net debt			$	12,350					$	11,323

Supplemental Guarantee Information

On June 6, 2020, the company filed a Form S-3 Registration Statement with the SEC ("the Registration Statement").

Linde plc may offer debt securities, preferred shares, depositary shares and ordinary shares under the Registration Statement, and debt securities exchangeable for or convertible into preferred shares, ordinary shares or other debt securities. Debt securities of Linde plc may be guaranteed by Linde Inc and/or Linde GmbH. Linde plc may provide guarantees of debt securities offered by its wholly owned subsidiaries Linde Inc. or Linde Finance under the Registration Statement.

Linde Inc. is a wholly owned subsidiary of Linde plc. Linde Inc. may offer debt securities under the Registration Statement. Debt securities of Linde Inc. will be guaranteed by Linde plc, and such guarantees by Linde plc may be guaranteed by Linde GmbH. Linde Inc. may also provide (i) guarantees of debt securities offered by Linde plc under the Registration Statement and (ii) guarantees of the guarantees provided by Linde plc of debt securities of Linde Finance offered under the Registration Statement.

Linde Finance B.V. is a wholly owned subsidiary of Linde plc. Linde Finance may offer debt securities under the Registration Statement. Linde plc will guarantee debt securities of Linde Finance offered under the Registration Statement. Linde GmbH and Linde Inc. may guarantee Linde plc’s obligations under its downstream guarantee.

Linde GmbH is a wholly owned subsidiary of Linde plc. Linde GmbH may provide (i) guarantees of debt securities offered by Linde plc under the Registration Statement and (ii) upstream guarantees of downstream guarantees provided by Linde plc of debt securities of Linde Inc. or Linde Finance offered under the Registration Statement.

In September 2019, Linde plc provided downstream guarantees of all of the pre-business combination Linde Inc. and Linde Finance notes, and Linde GmbH and Linde Inc., respectively, provided upstream guarantees of Linde plc’s downstream guarantees.

For further information about the guarantees of the debt securities registered under the Registration Statement (including the ranking of such guarantees, limitations on enforceability of such guarantees and the circumstances under which such guarantees may be released), see “Description of Debt Securities – Guarantees” and “Description of Debt Securities – Ranking” in the Registration Statement, which subsections are incorporated herein by reference.

The following tables present summarized financial information for Linde plc, Linde Inc., Linde GmbH and Linde Finance on a combined basis, after eliminating intercompany transactions and balances between them and excluding investments in and equity in earnings from non-guarantor subsidiaries.

(Millions of dollars)
Statement of Income Data			Six Months Ended June 30, 2022						Twelve Months Ended December 31, 2021
Sales			$	4,373					$	7,767
Operating profit			300						973
Net income			75						721
Transactions with non-guarantor subsidiaries			721						2,067
Balance Sheet Data (at period end)
Current assets (a)			$	7,607					$	5,826
Long-term assets (b)			13,849						15,928
Current liabilities (c)			10,846						8,853
Long-term liabilities (d)			43,887						42,860
(a) From current assets above, amount due from non-guarantor subsidiaries			$	4,974					$	4,209
(b) From long-term assets above, amount due from non-guarantor subsidiaries			1,872						3,257
(c) From current liabilities above, amount due to non-guarantor subsidiaries			1,498						1,304
(d) From long-term liabilities above, amount due to non-guarantor subsidiaries			29,453						28,142