Linde plc(LIN) - 2023 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents Linde plc's unaudited condensed consolidated financial statements for Q1 2023, encompassing income, balance sheet, and cash flow statements, alongside detailed accounting notes and segment data Consolidated Statements of Income Linde plc reported Q1 2023 sales of $8.193 billion, a slight decrease, while operating profit surged 31% to $1.933 billion, and diluted EPS grew 33% to $3.06 Consolidated Statements of Income - Q1 2023 vs Q1 2022 | Metric | Q1 2023 (Millions USD) | Q1 2022 (Millions USD) | Change | | :--- | :--- | :--- | :--- | | Sales | $8,193 | $8,211 | -0.2% | | Operating Profit | $1,933 | $1,480 | +30.6% | | Net Income – Linde plc | $1,516 | $1,174 | +29.1% | | Diluted EPS | $3.06 | $2.30 | +33.0% | Condensed Consolidated Balance Sheets As of March 31, 2023, total assets reached $80.308 billion, with total liabilities at $38.972 billion, and total equity remaining stable at $41.323 billion Condensed Consolidated Balance Sheet Highlights | Metric | March 31, 2023 (Millions USD) | December 31, 2022 (Millions USD) | | :--- | :--- | :--- | | Total Current Assets | $12,904 | $13,047 | | Total Assets | $80,308 | $79,658 | | Total Current Liabilities | $17,785 | $16,479 | | Total Liabilities | $38,972 | $38,271 | | Total Equity | $41,323 | $41,374 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased to $1.908 billion in Q1 2023, while investing activities used $1.634 billion, and financing activities shifted to a $764 million outflow Cash Flow Summary - Three Months Ended March 31 | Activity | 2023 (Millions USD) | 2022 (Millions USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,908 | $2,000 | | Net cash used for investing activities | $(1,634) | $(665) | | Net cash provided by (used for) financing activities | $(764) | $244 | | Change in cash and cash equivalents | $(474) | $1,641 | Notes to Condensed Consolidated Financial Statements These notes detail significant accounting policies, segment performance, debt, and financial instruments, highlighting the Frankfurt delisting, nexAir acquisition, and ongoing legal contingencies - On March 1, 2023, the company completed an intercompany reorganization, resulting in its delisting from the Frankfurt Stock Exchange and a new holding company on the NYSE[23][24] - The company recorded $18 million in 'Other charges' in Q1 2023, primarily due to the intercompany reorganization, with a $45 million net income tax benefit[27] - On January 5, 2023, Linde acquired the remaining 77% of nexAir, LLC for $859 million, generating $458 million in goodwill[94][101] - As of March 31, 2023, Linde held approximately $1.2 billion in contract liabilities for advance payments related to suspended RusChemAlliance (RCA) engineering projects in Russia[67][68] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2023 financial results, noting flat sales of $8.2 billion, a 16% increase in adjusted operating profit to $2.2 billion, and a 17% rise in adjusted EPS to $3.42, driven by pricing and productivity Consolidated Results Q1 2023 reported sales were flat at $8.193 billion, driven by 8% price attainment offsetting currency and divestiture impacts, while adjusted operating profit increased 16% to $2.206 billion Q1 2023 vs Q1 2022 Performance Summary | Metric | Q1 2023 | Q1 2022 | Variance | | :--- | :--- | :--- | :--- | | Sales | $8,193M | $8,211M | 0% | | Reported Operating Profit | $1,933M | $1,480M | +31% | | Adjusted Operating Profit | $2,206M | $1,905M | +16% | | Reported Diluted EPS | $3.06 | $2.30 | +33% | | Adjusted Diluted EPS | $3.42 | $2.93 | +17% | - Key factors influencing Q1 2023 sales included +8% from Price/Mix, offset by -3% from Currency, -2% from acquisitions/divestitures, -2% from Engineering, and -1% from cost pass-through[112] Segment Discussion Q1 2023 segment performance varied, with Americas sales up 10% to $3.6 billion, EMEA up 1% to $2.2 billion, APAC flat at $1.6 billion, and Engineering sales down 26% to $540 million Sales by Segment (Q1 2023 vs Q1 2022) | Segment | Q1 2023 Sales (Millions USD) | Q1 2022 Sales (Millions USD) | Variance | | :--- | :--- | :--- | :--- | | Americas | $3,551 | $3,241 | +10% | | EMEA | $2,177 | $2,148 | +1% | | APAC | $1,598 | $1,602 | 0% | | Engineering | $540 | $728 | -26% | | Other | $327 | $492 | -34% | Operating Profit by Segment (Q1 2023 vs Q1 2022) | Segment | Q1 2023 Op. Profit (Millions USD) | Q1 2022 Op. Profit (Millions USD) | Variance | | :--- | :--- | :--- | :--- | | Americas | $1,025 | $904 | +13% | | EMEA | $607 | $503 | +21% | | APAC | $423 | $399 | +6% | | Engineering | $149 | $143 | +4% | | Other | $2 | $(44) | +105% | Liquidity, Capital Resources and Other Financial Data Cash from operations decreased 5% to $1.9 billion in Q1 2023, with increased capital expenditures and acquisitions, while financing activities included $846 million in share repurchases and $623 million in dividends - Cash from operations was $1,908 million, a 5% decrease from the prior year, primarily due to higher working capital requirements[159] - Capital expenditures totaled $829 million, an increase from $649 million in Q1 2022[161] - The company repurchased a net $846 million of its ordinary shares and paid $623 million in dividends during the quarter[165][166] - Linde's sale of gas backlog for large projects under construction was approximately $4.2 billion as of March 31, 2023[162] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section confirms no material changes to the company's market risk disclosures compared to its 2022 Annual Report on Form 10-K - There were no material changes to market risk disclosures compared to the 2022 Annual Report on Form 10-K[194] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of Q1 2023, with no material changes to internal control over financial reporting during the quarter - The principal executive and financial officers concluded that the company's disclosure controls and procedures are effective as of the quarter-end[196] - No material changes occurred during the quarter affecting the company's internal control over financial reporting[196] PART II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 9 of the condensed consolidated financial statements for details on current legal proceedings - Details on current legal proceedings are provided in Note 9 to the condensed consolidated financial statements[198] Item 1A. Risk Factors The company reports no material changes to the risk factors previously disclosed in its 2022 Annual Report on Form 10-K - There have been no material changes to the risk factors disclosed in the company's 2022 Annual Report on Form 10-K[199] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2023, Linde repurchased 2.713 million ordinary shares for approximately $890 million, with $4.5 billion remaining under the $10 billion repurchase program Share Repurchases - Q1 2023 | Period | Shares Purchased (Thousands) | Average Price Paid Per Share | | :--- | :--- | :--- | | January 2023 | 358 | $325.21 | | February 2023 | 2,136 | $326.37 | | March 2023 | 219 | $348.26 | | First Quarter 2023 Total | 2,713 | $327.99 | - As of March 31, 2023, $4.5 billion in share repurchases remain authorized under the $10 billion program announced in February 2022, expiring July 31, 2024[200] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, supplemental indentures, and officer certifications - Exhibits filed include the Amended and Restated Memorandum and Articles of Association, supplemental indentures, and certifications under Rule 13a-14(a) and Section 1350[204]