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

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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 exclusive of certain items such as Cost reduction program and other charges, 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, 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 nine months ended September 30, 2024 and 2023. 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 September 30,Nine Months Ended September 30,
(Millions of dollars, except per share data)20242023Variance20242023Variance
Sales$8,356$8,1552%$24,723$24,5521%
Cost of sales, exclusive of depreciation and amortization$4,356$4,3141%$12,823$13,061(2)%
As a percent of sales52.1%52.9%51.9%53.2%
Selling, general and administrative$823$8082%$2,523$2,4632%
As a percent of sales9.8%9.9%10.2%10.0%
Depreciation and amortization$960$959—%$2,867$2,867—%
Cost reduction program and other charges$145$27,150%$145$42245%
Other income (expense) - net$51$16219%$111$(16)794%
Operating profit$2,086$2,0522%$6,365$5,9966%
Operating margin25.0%25.2%25.7%24.4%
Interest expense - net$68$4070%$203$12957%
Net pension and OPEB cost (benefit), excluding service cost$(45)$(35)29%$(144)$(125)15%
Effective tax rate24.1%23.8%23.3%22.6%
Income from equity investments$38$41(7)%$131$1282%
Noncontrolling interests$(53)$(36)47%$(128)$(109)17%
Net Income – Linde plc$1,550$1,565(1)%$4,840$4,6564%
Diluted earnings per share$3.22$3.191%$10.02$9.436%
Diluted shares outstanding480,898491,076(2)%483,186493,567(2)%
Number of employees65,59666,442(1)%65,59666,442(1)%
Adjusted Amounts (a)
Operating profit$2,477$2,3067%$7,240$6,7987%
Operating margin29.6%28.3%29.3%27.7%
Effective tax rate23.6%23.7%23.3%23.8%
Net Income – Linde plc$1,896$1,7836%$5,576$5,2366%
Diluted earnings per share$3.94$3.639%$11.54$10.619%
Other Financial Data (a)
EBITDA$3,084$3,0521%$9,363$8,9914%
As percent of sales36.9%37.4%37.9%36.6%
Adjusted EBITDA$3,253$3,0746%$9,575$9,0965%
As percent of sales38.9%37.7%38.7%37.0%

(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.

Reported

In the third quarter of 2024, Linde's sales were $8,356 million, $201 million above prior year. The increase in sales was driven by 2% higher price attainment. Engineering increased sales by 2% in the quarter. Volumes were flat in the quarter versus the 2023 respective period, as base volume declines were largely offset by new project start-ups. Currency translation decreased sales by 1% in the quarter driven primarily by the weakening of the Brazilian real and Mexican peso against the U.S. Dollar. Cost pass-through, representing the contractual billing of energy cost variances primarily to onsite customers, decreased sales by 1% in the quarter, with minimal impact on operating profit.

Reported operating profit for the third quarter of 2024 of $2,086 million, or 25.0% of sales, was 2% above prior year. The reported year-over-year increase was primarily driven by higher pricing and productivity initiatives which more than offset

adverse impacts from cost inflation, cost reduction program and other charges and currency translation. The reported effective tax rate ("ETR") was 24.1% in the third quarter 2024 versus 23.8% in the third quarter 2023. Diluted earnings per share ("EPS") was $3.22, or 1% above EPS of $3.19 in the third quarter of 2023, primarily due to lower diluted shares outstanding partially offset by lower net income - Linde plc.

Adjusted

In the third quarter of 2024, adjusted operating profit of $2,477 million, or 29.6% of sales, was 7% higher as compared to 2023, driven by higher pricing, and productivity initiatives, partially offset by cost inflation and currency translation. The adjusted ETR was 23.6% in the third quarter 2024 versus 23.7% in the 2023 quarter. On an adjusted basis, EPS was $3.94, 9% above the 2023 adjusted EPS of $3.63, driven by higher adjusted net income - Linde plc 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 September 30, 2024 vs. 2023Nine Months Ended September 30, 2024 vs. 2023
% Change% Change
Factors Contributing to Changes - Sales
Volume—%—%
Price/Mix2%2%
Cost pass-through(1)%(1)%
Currency(1)%(1)%
Acquisitions/divestitures—%—%
Engineering2%1%
2%1%

Sales

Sales increased $201 million or 2% for the third quarter of 2024 and increased $171 million, or 1% for the nine months ended September 30, 2024 versus the respective 2023 periods. Higher pricing contributed 2% to sales in both the quarter and year-to-date periods. Engineering increased sales by 2% in the quarter and 1% in the year-to-date period. Currency translation decreased sales by 1% in the quarter primarily driven by weakening of the Brazilian real and Mexican peso, partially offset by a strengthening of the Euro against the U.S. Dollar. Currency translation decreased sales by 1% in the year-to-date period driven primarily by the weakening of the Brazilian real, Chinese yuan, and Korean won. Cost pass-through decreased sales by 1% in both the quarter and year-to-date periods, with minimal impact on operating profit. Volumes were flat in both the quarter and year-to-date periods versus the respective 2023 periods, as base volume declines were largely offset by new project start-ups.

Cost of sales, exclusive of depreciation and amortization

Cost of sales, exclusive of depreciation and amortization increased $42 million, or 1%, for the third quarter of 2024 primarily due to higher Engineering sales and decreased $238 million, or 2% for the nine months ended September 30, 2024 primarily due to lower cost pass-through and productivity gains which more than offset cost inflation. Cost of sales, exclusive of depreciation and amortization was 52.1% and 51.9% of sales, respectively, for the third quarter and nine months ended September 30, 2024 versus 52.9% and 53.2% for the respective 2023 periods. The decrease as a percentage of sales in the quarter was primarily due to higher pricing and lower cost pass-through.

Selling, general and administrative expenses

Selling, general and administrative expense ("SG&A") increased $15 million, or 2%, for the third quarter of 2024 and increased $60 million or 2% for the nine months ended September 30, 2024 driven by higher costs. SG&A was 9.8% and 10.2% of third quarter and nine months ended September 30, 2024 sales, respectively versus 9.9% and 10.0% of the respective 2023 periods.

Depreciation and amortization

Reported depreciation and amortization expense increased $1 million for the third quarter of 2024 and remained flat for the nine months ended September 30, 2024.

On an adjusted basis, depreciation and amortization increased $10 million, for the third quarter of 2024 and increased $33 million for the year-to-date period driven by new project start ups.

Cost reduction program and other charges

Cost reduction program and other charges were $145 million for the quarter and nine months ended September 30, 2024 and $2 million and $42 million for the respective 2023 periods. 2024 includes severance charges of $148 million and $165 million for

the quarter and year to date periods, other cost reduction charges of $40 million and $23 million for the quarter and year to date periods, and other benefit of $43 million for the quarter and year to date periods related to a divestiture in APAC.

Other income (expense) - net

Reported other income (expense) - net was a benefit of $51 million for the third quarter of 2024 and $111 million for the year-to-date period, including a benefit of $36 million related to a settlement with a supplier in the Americas, recognized during the third quarter, and $43 million in insurance recoveries, primarily within the Other segment, recognized during the first quarter.

Operating profit

On a reported basis, operating profit increased $34 million, or 2%, for the third quarter of 2024 and increased $369 million, or 6%, for the nine months ended September 30, 2024. The increase in the quarter and year-to-date periods of 2024 was primarily due to higher pricing, savings from productivity initiatives and, which more than offset the adverse impacts of cost inflation, cost reduction program and other charges and currency.

On an adjusted basis, which excludes the impacts of merger-related purchase accounting as well as cost reduction programs and other charges, operating profit increased $171 million, or 7% in the third quarter of 2024 and increased $442 million, or 7% for the nine months ended September 30, 2024. Operating profit growth was driven by higher pricing and productivity initiatives, which more than offset the effects of cost inflation and currency during the quarter and year-to-date periods of 2024. A discussion of operating profit by segment is included in the segment discussion that follows.

Interest expense - net

Reported interest expense - net increased $28 million for the third quarter of 2024 and increased $74 million for the nine months ended September 30, 2024. The increase in both periods was driven primarily by higher interest rates on debt.

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

Reported net pension and OPEB cost (benefit), excluding service cost were benefits of $45 million and $144 million for the quarter and nine months ended September 30, 2024, respectively, versus $35 million and $125 million for the respective 2023 periods. The increase in the benefit primarily relates to higher expected return on assets and lower amortization of deferred losses year-over-year.

Effective tax rate

The reported effective tax rate ("ETR") for the quarter and nine months ended September 30, 2024 was 24.1% and 23.3% versus 23.8% and 22.6% for the respective 2023 periods. The increase in the quarter rate is primarily related to tax effects of cost reduction program and other charges. The increase in the year to date rate is primarily related to a prior year benefit from a net decrease in the company’s uncertain tax positions and a tax refund, partially offset by tax benefits from a repatriation in the current year. Effective January 1, 2024, Linde is subject to the 15% global minimum tax rate provisions of the OECD’s framework for Pillar Two, the implementation of which did not have a significant impact on the effective tax rate for the quarter or year-to-date periods.

On an adjusted basis, the ETR for the quarter and nine months ended September 30, 2024 was 23.6% and 23.3% versus 23.7% and 23.8% for the respective 2023 periods. The decrease in the year-to-date rate is primarily due to tax benefits from a repatriation.

Income from equity investments

Reported income from equity investments for the third quarter and nine months ended September 30, 2024 was $38 million and $131 million versus $41 million and $128 million for the respective 2023 periods.

On an adjusted basis, income from equity investments for the third quarter and nine months ended September 30, 2024 was $56 million and $185 million versus $59 million and $182 million for the respective 2023 periods.

Noncontrolling interests

At September 30, 2024, noncontrolling interests consisted primarily of non-controlling shareholders' investments in APAC (primarily China). Reported noncontrolling interests income was $53 million and $128 million for the third quarter and nine months ended September 30, 2024 and included the impact of a divestiture in the APAC segment. Noncontrolling interest was $36 million and $109 million for the the respective 2023 periods.

Net Income – Linde plc

Reported net income - Linde plc decreased $15 million, or 1%, for the third quarter of 2024 and increased $184 million, or 4%, for the nine months ended September 30, 2024 versus the respective 2023 periods. The decrease for the third quarter of 2024 was primarily driven by higher cost reduction program and other charges. The increase for nine months was driven by higher operating profit.

On an adjusted basis, which excludes the impacts of purchase accounting and cost reduction program and other charges, net income - Linde plc increased $113 million, or 6%, for the third quarter of 2024 and increased $340 million, or 6%, for the nine months ended September 30, 2024 versus the respective 2023 periods. The increase was driven by higher adjusted operating profit.

Diluted earnings per share

Reported diluted earnings per share increased $0.03, or 1%, for the third quarter of 2024 primarily due to lower diluted shares outstanding partially offset by lower net income. Reported diluted earnings increased $0.59, or 6%, for the nine months ended September 30, 2024 versus the respective 2023 periods. The increase is due to higher net income - Linde plc and lower diluted shares outstanding.

On an adjusted basis, diluted EPS increased $0.31 and $0.93 for the third quarter and nine months ended September 30, 2024, or 9% respectively. The increase is primarily due to higher adjusted net income - Linde plc and lower diluted shares outstanding.

Employees

The number of employees at September 30, 2024 was 65,596, a decrease of 846 employees from September 30, 2023 including the impact of ongoing cost reduction programs and a divestiture in APAC.

Other Financial Data

EBITDA was $3,084 million for the third quarter of 2024 as compared to $3,052 million in the respective 2023 period. EBITDA was $9,363 million for the nine months ended September 30, 2024 as compared to $8,991 million in the respective 2023 period. The increase was driven by higher operating profit versus prior year.

Adjusted EBITDA increased to $3,253 million for the third quarter 2024 from $3,074 million in the respective 2023 period. Adjusted EBITDA was $9,575 million for the nine months ended September 30, 2024 as compared to $9,096 million in the respective 2023 period. The higher EBITDA was primarily due to higher adjusted operating profit versus the respective prior periods.

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 income for the third quarter of 2024 was $764 million and loss for the nine months ended September 30, 2024 was $250 million. The income in the quarter and loss for the year-to-date period resulted primarily from currency translation adjustments of $773 million and $245 million, 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 10 to the condensed consolidated financial statements for a summary of the currency translation adjustment component of accumulated other comprehensive income (loss) 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 September 30,Nine Months Ended September 30,
(Millions of dollars)20242023Variance20242023Variance
SALES
Americas$3,618$3,629—%$10,833$10,7211%
EMEA2,1112,105—%6,2936,442(2)%
APAC1,7161,6395%4,9644,9201%
Engineering61146731%1,6941,50213%
Other300315(5)%939967(3)%
Total sales$8,356$8,1552%$24,723$24,5521%
SEGMENT OPERATING PROFIT
Americas$1,153$1,0747%$3,400$3,1697%
EMEA70363411%2,0941,87112%
APAC4974598%1,4181,3545%
Engineering108116(7)%304372(18)%
Other1623(30)%2432(25)%
Segment operating profit$2,477$2,3067%$7,240$6,7987%
Reconciliation to reported operating profit:
Cost reduction program and other charges(145)(2)(145)(42)
Purchase accounting impacts - Linde AG(246)(252)(730)(760)
Total operating profit$2,086$2,052$6,365$5,996

Americas

Quarter Ended September 30,Nine Months Ended September 30,
(Millions of dollars)20242023Variance20242023Variance
Sales$3,618$3,629—%$10,833$10,7211%
Operating profit$1,153$1,0747%$3,400$3,1697%
As a percent of sales31.9%29.6%31.4%29.6%
Quarter Ended September 30, 2024 vs. 2023Nine Months Ended September 30, 2024 vs. 2023
% Change% Change
Factors Contributing to Changes - Sales
Volume1%—%
Price/Mix2%3%
Cost pass-through(1)%(1)%
Currency(3)%(1)%
Acquisitions/divestitures1%—%
—%1%

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 decreased $11 million in the third quarter and increased $112 million, or 1%, for the nine months ended September 30, 2024 versus the respective 2023 periods. Higher pricing contributed 2% to sales in the quarter and 3% in the year-to-date period. Volumes increased 1% in the third quarter and remained flat year-to-date largely due to project start-ups. Cost pass-through decreased sales 1% in the third quarter and year-to-date period with minimal impact on operating profit. Currency translation decreased sales by 3% in third quarter and 1% in the year-to-date period driven primarily by the weakening of the Brazilian real and Mexican peso against the U.S. Dollar.

Operating profit

Operating profit in the Americas segment increased $79 million, or 7%, in the third quarter and increased $231 million, or 7%, for the nine months ended September 30, 2024 versus the respective 2023 periods, driven primarily by higher pricing, continued productivity initiatives and a settlement gain with a supplier, which more than offset cost inflation.

EMEA

Quarter Ended September 30,Nine Months Ended September 30,
(Millions of dollars)20242023Variance20242023Variance
Sales$2,111$2,105—%$6,293$6,442(2)%
Operating profit$703$63411%$2,094$1,87112%
As a percent of sales33.3%30.1%33.3%29.0%
Quarter Ended September 30, 2024 vs. 2023Nine Months Ended September 30, 2024 vs. 2023
% Change% Change
Factors Contributing to Changes - Sales
Volume(1)%(1)%
Price/Mix4%3%
Cost pass-through(3)%(4)%
Currency—%—%
Acquisitions/divestitures—%—%
—%(2)%

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

Sales

EMEA segment sales were flat in the third quarter and decreased $149 million, or 2%, for the nine months ended September 30, 2024 compared to the respective 2023 periods. Higher price attainment increased sales by 4% in the quarter and 3% in the year-to-date period. Currency translation was flat in the third quarter and nine months ended September 30, 2024. Cost pass-through decreased sales by 3% in the quarter and 4% in the year-to-date period with minimal impact on operating profit. Volumes decreased sales by 1% in the quarter and year-to-date periods, primarily driven by the manufacturing and chemicals and energy end markets.

Operating Profit

Operating profit for the EMEA segment increased by $69 million, or 11%, in the third quarter and increased by $223 million, or 12%, for the nine months ended September 30, 2024 compared to the respective 2023 periods. The increase in operating profit in the third quarter and year-to-date period was driven primarily by higher pricing and continued productivity initiatives, partially offset by cost inflation and lower volumes.

APAC

Quarter Ended September 30,Nine Months Ended September 30,
(Millions of dollars)20242023Variance20242023Variance
Sales$1,716$1,6395%$4,964$4,9201%
Operating profit$497$4598%$1,418$1,3545%
As a percent of sales29.0%28.0%28.6%27.5%
Quarter Ended September 30, 2024 vs. 2023Nine Months Ended September 30, 2024 vs. 2023
% Change% Change
Factors Contributing to Changes - Sales
Volume/Equipment3%2%
Price/Mix—%—%
Cost pass-through1%—%
Currency1%(2)%
Acquisitions/divestitures—%1%
5%1%

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 $77 million, or 5%, in the third quarter and increased $44 million, or 1%, for the nine months ended September 30, 2024 versus the respective 2023 periods. Volumes increased 3% in the quarter and increased 2%

for year-to-date period including project start-ups in the electronics end market. Currency translation increased sales by 1%, in the quarter primarily driven by strengthening of the Australian dollar and Chinese yuan against the U.S. dollar and decreased 2% for the year-to-date period driven primarily by the weakening of the Australian dollar, Korean won and Chinese yuan against the U.S. dollar. Cost pass-through increased sales 1% in the third quarter and was flat in the year-to-date period. Pricing was flat in the quarter and year-to-date period.

Operating profit

Operating profit in the APAC segment increased $38 million, or 8%, in the third quarter driven primarily by productivity initiatives, which more than offset cost inflation. Operating profit increased $64 million, or 5%, in the nine months ended September 30, 2024 versus 2023 period, driven primarily by continued productivity initiatives, which more than offset cost inflation.

Engineering

Quarter Ended September 30,Nine Months Ended September 30,
(Millions of dollars)20242023Variance20242023Variance
Sales$611$46731%$1,694$1,50213%
Operating profit$108$116(7)%$304$372(18)%
As a percent of sales17.7%24.8%17.9%24.8%
Quarter Ended September 30, 2024 vs. 2023Nine Months Ended September 30, 2024 vs. 2023
% Change% Change
Factors Contributing to Changes - Sales
Currency1%—%
Other30%13%
31%13%

Sales

Engineering segment sales increased $144 million, or 31%, in the third quarter and increased 192 million, or 13%, in the nine months ended September 30, 2024 as compared to the respective 2023 periods driven by project timing. Currency translation increased sales by 1% in the quarter, primarily driven by the strengthening of the Euro against the U.S. dollar. Currency translation for the year-to-date period was flat.

Operating profit

Engineering segment operating profit decreased $8 million, or 7%, in the third quarter and decreased $68 million or 18%, in the nine months ended September 30, 2024 compared to the respective 2023 period due to prior year's benefit from higher margin on lawful wind down of projects subject to sanctions in Russia.

Other

Quarter Ended September 30,Nine Months Ended September 30,
(Millions of dollars)20242023Variance20242023Variance
Sales$300$315(5)%$939$967(3)%
Operating profit (loss)$16$23(30)%$24$32(25)%
As a percent of sales5.3%7.3%2.6%3.3%
Quarter Ended September 30, 2024 vs. 2023Nine Months Ended September 30, 2024 vs. 2023
% Change% Change
Factors Contributing to Changes - Sales
Volume/price(6)%(3)%
Cost pass-through1%—%
Currency—%—%
Acquisitions/divestitures—%—%
(5)%(3)%

Other consists of corporate costs and a few smaller businesses including Linde Advanced Material Technologies (LAMT) and global helium wholesale, which individually do not meet the quantitative thresholds for separate presentation.

Sales

Sales for Other decreased $15 million for the third quarter and decreased $28 million for the nine months ended September 30, 2024 versus the respective 2023 periods. Underlying sales decreased 6% in the quarter and 3% in the year-to-date periods primarily due to lower volumes in global helium and LAMT. The impact of currency translation was flat in the quarter and year-to-date periods.

Operating profit

Operating profit in Other decreased $7 million in the third quarter and decreased $8 million, or 25%, in the nine months ended September 30, 2024 versus the respective 2023 periods. The decrease in the quarter was driven by higher costs due to helium, which was partially offset by an insurance recovery for the LAMT coatings 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 periods.

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 2024 Consolidated SalesExchange Rate for Income StatementExchange Rate for Balance Sheet
Year-To-Date AverageSeptember 30,December 31,
Currency2024202320242023
Euro18%0.920.920.900.92
Chinese yuan8%7.207.037.027.10
British pound5%0.780.800.750.79
Australian dollar4%1.511.501.451.47
Brazilian real4%5.235.005.454.86
Mexican peso3%17.6717.7819.6916.97
Canadian dollar3%1.361.351.351.32
Korean won3%1,3521,3011,3151,288
Indian rupee2%83.4182.0683.8083.21
South African rand1%18.4618.3417.2718.36
Swedish krona1%10.5010.5910.1610.07
Thailand bhat1%35.6834.5132.1734.14

Liquidity, Capital Resources and Other Financial Data

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

(Millions of dollars)Nine Months Ended September 30,
20242023
NET CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income (including noncontrolling interests)$4,968$4,765
Non-cash charges (credits):
Add: Depreciation and amortization2,8672,867
Add: Deferred income taxes(308)(172)
Add: Share-based compensation120102
Add: Cost reduction program and other charges, net of payments52(91)
Net income adjusted for non-cash charges7,6997,471
Less: Working capital(916)(535)
Less: Pension contributions(29)(35)
Other(140)(323)
Net cash provided by (used for) operating activities$6,614$6,578
INVESTING ACTIVITIES
Capital expenditures(3,247)(2,636)
Acquisitions, net of cash acquired(175)(842)
Divestitures, net of cash divested and asset sales15434
Net cash provided by (used for) investing activities$(3,268)$(3,444)
FINANCING ACTIVITIES
Debt increase (decrease) - net2,628227
Issuances (purchases) of common stock - net(3,120)(2,900)
Cash dividends - Linde plc shareholders(1,996)(1,866)
Noncontrolling interest transactions and other(261)(81)
Net cash provided by (used for) financing activities$(2,749)$(4,620)
Effect of exchange rate changes on cash and cash equivalents$(74)$(56)
Cash and cash equivalents, end-of-period$5,187$3,894

Cash Flow from Operations

Cash provided by operations of $6,614 million for the nine months ended September 30, 2024 increased $36 million, or 1% versus 2023. The increase was driven primarily by higher net income adjusted for non-cash charges, partially offset by higher net working capital requirements including lower inflows from contract liabilities from engineering customer advance payments and higher cash taxes.

Linde estimates that total 2024 required contributions to its pension plans will be in the range of approximately $30 million to $40 million, of which $29 million has been made through September 30, 2024.

Investing

Net cash used for investing activities of $3,268 million for the nine months ended September 30, 2024 decreased $176 million versus 2023, due to lower acquisitions, net of cash acquired, and higher divestiture proceeds, net of cash provided, largely offset by higher capital expenditures.

Capital expenditures for the nine months ended September 30, 2024 were $3,247 million, $611 million higher than the prior year due primarily to investments in new plant and production equipment for backlog growth requirements.

At September 30, 2024, Linde's sale of gas backlog of large projects under construction was approximately $7.0 billion. This represents the total estimated capital cost of large plants under construction.

Acquisitions, net of cash acquired were $175 million for the nine months ended September 30, 2024 and relate primarily to packaged gas businesses in the Americas. Acquisitions, net of cash acquired were $842 million, for the nine months ended September 30, 2023 and related primarily to the acquisition of nexAir in the Americas.

Divestitures, net of cash divested and asset sales for the nine months ended September 30, 2024 were $154 million primarily related to $69 million in net proceeds for a divestiture in APAC and settlement with a supplier in the Americas. 2023 divestitures, net of cash divested and asset sales were $34 million.

Financing

Cash used for financing activities was $2,749 million for the nine months ended September 30, 2024 as compared to $4,620 million for the nine months ended September 30, 2023. Cash provided by debt was $2,628 million in 2024 versus $227 million in 2023, driven primarily by higher net debt issuances. In February 2024, Linde repaid €550 million of 1.20% notes that became due and issued €700 million of 3.00% notes due in 2028, €850 million of 3.20% notes due in 2031 and €700 million of 3.40% notes due in 2036. In May 2024, Linde repaid €300 million of 1.875% notes that became due. In June 2024, Linde issued €750 million of 3.375% notes due in 2030, €750 million of 3.500% notes due in 2034 and €700 million of 3.75% notes due in 2044.

Net purchases of ordinary shares were $3,120 million in 2024 versus $2,900 million in 2023. 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 $1,996 million increased $130 million from 2023 driven primarily by a 9% increase in quarterly dividends per share from $1.275 per share to $1.39 per share, partially offset by lower shares outstanding. Cash used for Noncontrolling interest transactions and other was $261 million for the nine months ended September 30, 2024 versus cash used of $81 million for the respective 2023 period.

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 $5.2 billion of cash as of September 30, 2024, and has a $5 billion and a $1.5 billion unsecured and undrawn revolving credit agreement with no associated financial covenants. No borrowings were outstanding under the credit agreements as of September 30, 2024. 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 8 to the condensed consolidated financial statements.

NON-GAAP MEASURES AND RECONCILIATIONS

(Millions of dollars, except per share data)

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 September 30,Nine Months Ended September 30,
2024202320242023
Adjusted Operating Profit and Operating Margin
Reported operating profit$2,086$2,052$6,365$5,996
Add: Cost reduction program and other charges145214542
Add: Pension settlement charges————
Add: Purchase accounting impacts - Linde AG (c)246252730760
Total adjustments391254875802
Adjusted operating profit$2,477$2,306$7,240$6,798
Reported percentage change2%6%
Adjusted percentage change7%7%
Reported sales$8,356$8,155$24,723$24,552
Reported operating margin25.0%25.2%25.7%24.4%
Adjusted operating margin29.6%28.3%29.3%27.7%
Adjusted Depreciation and amortization
Reported depreciation and amortization$960$959$2,867$2,867
Less: Purchase accounting impacts - Linde AG (c)(240)(249)(717)(750)
Adjusted depreciation and amortization$720$710$2,150$2,117
Adjusted Other Income (Expense) - net
Reported Other Income (Expense) - net$51$16$111$(16)
Add: Purchase accounting impacts - Linde AG (c)(6)(3)(13)(10)
Adjusted Other Income (Expense) - net$57$19$124$(6)
Adjusted Net Pension and OPEB Cost (Benefit), Excluding Service Cost
Reported net pension and OPEB cost (benefit), excluding service cost$(45)$(35)$(144)$(125)
Add: Pension settlement charges(6)(12)(6)(12)
Adjusted Net Pension and OPEB cost (benefit), excluding service costs$(51)$(47)$(150)$(137)
Adjusted Interest Expense - Net
Reported interest expense - net$68$40$203$129
Add: Purchase accounting impacts - Linde AG (c)—2315
Adjusted interest expense - net$68$42$206$144
Adjusted Income Taxes (a)
Reported income taxes$498$487$1,469$1,355
Add: Purchase accounting impacts - Linde AG (c)6059176183
Quarter Ended September 30,Nine Months Ended September 30,
2024202320242023
Add: Pension settlement charges1212
Add: Cost reduction program and other charges21—2679
Total adjustments8261203264
Adjusted income taxes$580$548$1,672$1,619
Adjusted Effective Tax Rate (a)
Reported income before income taxes and equity investments$2,063$2,047$6,306$5,992
Add: Pension settlement charge612612
Add: Purchase accounting impacts - Linde AG (c)246250727745
Add: Cost reduction program and other charges145214542
Total adjustments397264878799
Adjusted income before income taxes and equity investments$2,460$2,311$7,184$6,791
Reported Income taxes$498$487$1,469$1,355
Reported effective tax rate24.1%23.8%23.3%22.6%
Adjusted income taxes$580$548$1,672$1,619
Adjusted effective tax rate23.6%23.7%23.3%23.8%
Income from Equity Investments
Reported income from equity investments$38$41$131$128
Add: Purchase accounting impacts - Linde AG (c)18185454
Adjusted income from equity investments$56$59$185$182
Adjusted Noncontrolling Interests
Reported noncontrolling interests$(53)$(36)$(128)$(109)
Add: Purchase accounting impacts - Linde AG (c)(3)(3)(9)(9)
Add: Cost reduction program and other charges16—16—
Total adjustments13(3)7(9)
Adjusted noncontrolling interests$(40)$(39)$(121)$(118)
Adjusted Net Income - Linde plc (b)
Reported net income$1,550$1,565$4,840$4,656
Add: Pension settlement charge510510
Add: Cost reduction program and other charges1402135(37)
Add: Purchase accounting impacts - Linde AG (c)201206596607
Total adjustments346218736580
Adjusted net income - Linde plc$1,896$1,783$5,576$5,236
Quarter Ended September 30,Nine Months Ended September 30,
2024202320242023
Adjusted Diluted EPS (b)
Reported diluted EPS$3.22$3.19$10.02$9.43
Add: Pension settlement charge0.010.020.010.02
Add: Cost reduction program and other charges0.29—0.28(0.07)
Add: Purchase accounting impacts - Linde AG (c)0.420.421.231.23
Total adjustments0.720.441.521.18
Adjusted diluted EPS$3.94$3.63$11.54$10.61
Reported percentage change1%6%
Adjusted percentage change9%9%
Adjusted EBITDA and % of Sales
Net Income - Linde plc$1,550$1,565$4,840$4,656
Add: Noncontrolling interests5336128109
Add: Net pension and OPEB cost (benefit), excluding service cost(45)(35)(144)(125)
Add: Interest expense6840203129
Add: Income taxes4984871,4691,355
Add: Depreciation and amortization9609592,8672,867
EBITDA$3,084$3,052$9,363$8,991
Add: Cost reduction program and other charges145214542
Add: Purchase accounting impacts - Linde AG (c)24206763
Total adjustments16922212105
Adjusted EBITDA$3,253$3,074$9,575$9,096
Reported sales$8,356$8,155$24,723$24,552
% of sales
EBITDA36.9%37.4%37.9%36.6%
Adjusted EBITDA as a % of Sales38.9%37.7%38.7%37.0%
(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 2018 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: Represents the noncontrolling interests’ ownership portion of the adjustments described above determined on an entity by entity basis.

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.

September 30, 2024December 31, 2023
(Millions of dollars)
Debt$22,262$19,373
Less: cash and cash equivalents(5,187)(4,664)
Net debt17,07514,709
Less: purchase accounting impacts - Linde AG(4)(7)
Adjusted net debt$17,071$14,702

Supplemental Guarantee Information

On May 3, 2023, 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 pre-existing Linde Inc. and Linde Finance notes, and Linde GmbH and Linde Inc., respectively, provided upstream guarantees of Linde plc’s downstream guarantees.

Linde plc has filed a base prospectus with the Luxembourg Stock Exchange for a €15.0 billion debt issuance program, under which Linde plc may offer debt securities. Linde Inc. and Linde GmbH have provided to Linde plc upstream guarantees in relation to debt securities of Linde plc offered under the European debt program.

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 DataNine Months Ended September 30, 2024Twelve Months Ended December 31, 2023
Sales$5,865$8,143
Operating profit1,1401,656
Net income(216)735
Transactions with non-guarantor subsidiaries2,3133,004
Balance Sheet Data (at period end)
Current assets (a)$10,083$4,423
Long-term assets (b)14,08313,833
Current liabilities (c)9,56410,882
Long-term liabilities (d)68,40756,546
(a) From current assets above, amount due from non-guarantor subsidiaries$6,743$1,753
(b) From long-term assets above, amount due from non-guarantor subsidiaries694816
(c) From current liabilities above, amount due to non-guarantor subsidiaries2,0031,684
(d) From long-term liabilities above, amount due to non-guarantor subsidiaries47,33739,458

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