ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the company’s financial condition and results of operations should be read together with its consolidated financial statements and notes to the consolidated financial statements included in Item 8 of this Form 10-K.

Page

Business Overview 19

Executive Summary – Financial Results & Outlook 20

Consolidated Results and Other Information 21

Segment Discussion 27

Liquidity, Capital Resources and Other Financial Data 33

Off-Balance Sheet Arrangements 37

Critical Accounting Policies 37

New Accounting Standards 39

Fair Value Measurements 40

Non-GAAP Financial Measures 40

Supplemental Guarantee Information 44

Table of Contents

BUSINESS OVERVIEW

The company's primary products in its industrial gases business are atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, acetylene). The company also designs, engineers, and builds equipment that produces industrial gases and offers its customers a wide range of gas production and processing services such as olefin plants, natural gas plants, air separation plants, hydrogen and synthesis gas plants and other types of plants.

Linde’s industrial gas operations are managed on a geographical basis and in 2020 83% of sales were generated by Linde's three geographic segments (Americas, EMEA and APAC) and the remaining 17% are related primarily to the Engineering segment, and to a lesser extent Other (see Note 18 to the consolidated financial statements for operating segment details).

Linde serves a diverse group of industries including healthcare, petroleum refining, manufacturing, food, beverage carbonation, fiber-optics, steel making, aerospace, chemicals and water treatment. The diversity of end-markets supports financial stability for Linde in varied business cycles.

Linde generates most of its revenues and earnings in the following geographies where the company has its strongest market positions and where distribution and production operations allow the company to deliver the highest level of service to its customers at the lowest cost.

United States Germany China & Taiwan

Brazil United Kingdom Australia

Mexico Eastern Europe South Korea

Canada India

The company manufactures and distributes its industrial gas products through networks of thousands of production plants, pipeline complexes, distribution centers and delivery vehicles. Major pipeline complexes are primarily located in the United States. These networks are a competitive advantage, providing the foundation of reliable product supply to the company’s customer base. The majority of Linde’s business is conducted through long-term contracts which provide stability in cash flow and the ability to pass through changes in energy and feedstock costs to customers. The company has growth opportunities in all major geographies and in diverse end-markets such as energy, electronics, chemicals, metals, healthcare, food and beverage, and aerospace.

Table of Contents

EXECUTIVE SUMMARY – FINANCIAL RESULTS & OUTLOOK

2020 Year in review

•Sales of $27,243 million were 3% below 2019 sales of $28,228 million. Volumes decreased 2% as growth from project start-ups was more than offset by the global macroeconomic slowdown as a result of the COVID-19 pandemic. Higher pricing across all geographic segments contributed 2% to sales. Unfavorable currency translation, lower cost pass-through and the net impact of acquisitions and divestitures decreased sales by 3%.

•Reported operating profit of $3,322 million was 13% above 2019. Adjusted operating profit of $5,797 million was 10% above 2019. The increase in both reported and adjusted operating profit was primarily driven by higher price and the benefit of cost reduction programs and other charges and productivity initiatives which more than offset the impact of lower volumes.*

•Income from continuing operations of $2,497 million and diluted earnings per share from continuing operations of $4.70 increased from $2,183 million and $4.00, respectively in 2019. Adjusted income from continuing operations of $4,371 million and adjusted diluted earnings per share from continuing operations of $8.23 were 9% and 12%, respectively above 2019 adjusted amounts.*

•Cash flow from operations was $7,429 million, or 27% of sales. Capital expenditures were $3,400 million; dividends paid were $2,028 million; net purchases of ordinary shares of $2,410 million; and debt borrowings, net were $1,313 million.

*A reconciliation of the adjusted amounts can be found in the "Non-GAAP Financial Measures" section in this MD&A.

2021 Outlook

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

Table of Contents

CONSOLIDATED RESULTS AND OTHER INFORMATION

The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the years ended December 31, 2020 and 2019. For the discussion comparing the years ended December 31, 2019 and 2018, refer to Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Form 10-K for the year ended December 31, 2019.

The following table provides summary information for 2020 and 2019. 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.

Reported Amounts

As a percent of sales 56.5 % 59.0 %

Selling, general and administrative $ 3,193 $ 3,457 (8) %

As a percent of sales 11.7 % 12.2 %

Depreciation and amortization $ 4,626 $ 4,675 (1) %

Cost reduction programs and other charges (a) $ 506 $ 567 (11) %

Net gain on sale of businesses (b) $ — $ 164

Net pension and OPEB cost (benefit), excluding service cost $ (177) $ (32) 453 %

Effective tax rate 25.0 % 26.3 %

Income from equity investments $ 85 $ 114 (25) %

Noncontrolling interests from continuing operations $ (125) $ (89) 40 %

Income from continuing operations $ 2,497 $ 2,183 14 %

Diluted earnings per share from continuing operations $ 4.70 $ 4.00 18 %

Adjusted Amounts (c)

Income from continuing operations $ 4,371 $ 4,003 9 %

Diluted earnings per share from continuing operations $ 8.23 $ 7.34 12 %

Other Financial Data (c)

EBITDA from continuing operations $ 8,033 $ 7,722 4 %

As percent of sales 29.5 % 27.4 %

Adjusted EBITDA from continuing operations $ 8,645 $ 8,178 6 %

As percent of sales 31.7 % 29.0 %

________________________

(a)See Note 3 to the consolidated financial statements.

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

(c)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 Financial Measures" section of this MD&A.

Results of Operations

The following table provides a summary of changes in consolidated sales:

Table of Contents

% Change

Factors Contributing to Changes - Sales

Volume (2) %

Price/Mix 2 %

Cost pass-through (1) %

Currency (1) %

Acquisitions/divestitures (1) %

Engineering — %

2020 Compared With 2019

Sales

Reported sales decreased $985 million, or 3%, for the 2020year versus 2019. On an adjusted basis sales decreased $920 million in 2020 compared to 2019.

On a reported and adjusted basis, sales decreased 3%. Volume decreased sales by 2% primarily driven by the impact of the macroeconomic slowdown, partially offset by new project start-ups. Higher pricing across all geographic segments contributed 2% to sales. Currency translation decreased sales by 1%, largely in the Americas, driven by the weakening of the Brazilian real against the U.S. dollar. Cost pass-through decreased sales by 1% with minimal impact on operating profit. The impact of merger-related divestitures decreased sales by $65 million in 2020. These sales have been excluded from the adjusted numbers.

Cost of sales, exclusive of depreciation and amortization

Cost of sales, exclusive of depreciation and amortization, decreased $1,261 million, or 8%, for the year primarily due to lower volumes and the impact of productivity initiatives. Cost of sales, exclusive of depreciation and amortization, was 56.5% and 59.0% of sales, respectively, in 2020 compared to 2019. The decrease as a percentage of sales was due primarily to the impact of cost reduction programs and productivity initiatives and the impact of lower cost pass-through.

Selling, general and administrative expenses

Selling, general and administrative expense ("SG&A") decreased $264 million, or 8%, in 2020 to $3,193 million. SG&A was 11.7% of sales in 2020 versus 12.2% in 2019. Currency impacts decreased SG&A by approximately $34 million in 2020. Excluding currency impacts, underlying SG&A decreased driven by the impact of cost reduction programs and productivity initiatives.

Depreciation and amortization

Reported depreciation and amortization expense decreased $49 million, or 1%, versus 2019. The decrease is primarily due to currency translation impacts.

On an adjusted basis, depreciation and amortization expense decreased $29 million, or 1%, versus 2019. The decrease is primarily due to currency translation impacts which decreased depreciation and amortization by approximately $39 million in 2020 slightly offset by new project start ups primarily in APAC and the Americas.

Cost reduction programs and other charges

Linde recorded cost reduction programs and other charges of $506 million and $567 million for 2020 and 2019, respectively, primarily associated with the company's cost reduction program, which represents charges for achieving synergies and cost efficiencies related to the merger. 2019 also included an asset impairment of approximately $73 million related to a joint venture in APAC resulting from an unfavorable arbitration ruling (see Note 3 to the consolidated financial statements).

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

Operating profit

Reported operating profit increased $389 million in 2020, or 13%. On an adjusted basis, operating profit increased $525 million, or 10%, for 2020 versus 2019.

On a reported basis, operating profit increased $389 million, or 13% in 2020. The increase in the year was driven by higher price and the benefit of cost reduction programs and productivity initiatives. Cost reduction programs and other charges

Table of Contents

were $506 million in 2020 and $567 million in 2019. 2019 also included a $164 million one time net gain on sale of business.

On an adjusted basis, which excludes the impacts of purchase accounting, cost reduction programs and other charges and net gains from merger-related divestitures in 2019, operating profit increased $525 million, or 10%. Operating profit growth was driven by higher price and the benefit of cost reduction programs and productivity initiatives which were partially offset by lower volumes, unfavorable currency impacts and cost inflation. A discussion of operating profit by segment is included in the segment discussion that follows.

Interest expense - net

Reported interest expense – net in 2020 increased $77 million, or 203%, versus 2019 and included a $16 million charge for the early redemption of bonds due in 2021 (see Note 11 to the consolidated financial statements). On an adjusted basis interest expense increased $50 million, or 37% in 2020 as compared to 2019.

On both a reported and adjusted basis, the increase year over year included the impact of unfavorable foreign currency revaluation on unhedged intercompany loans and lower interest income, partially offset by a lower effective borrowing rate.

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

Reported net pension and OPEB cost (benefit), excluding service cost was a benefit of $177 million in 2020 versus a benefit of $32 million in 2019. 2020 included pension settlement charges of $6 million while 2019 included pension settlement charges of $97 million and a net $8 million curtailment charge (see Note 16 to the consolidated financial statements). Excluding the impact of these charges, the net pension and OPEB benefit, excluding service cost increased $46 million in 2020, as the benefit of lower interest cost due to the low discount rate environment more than offset higher amortization of deferred losses.

Effective tax rate

The reported effective tax rate ("ETR") for 2020 was 25.0% versus 26.3% in 2019. The decrease in the reported ETR is primarily due to higher tax benefits from share option exercises and higher tax expense in 2019 related to divestitures.

On an adjusted basis, the ETR for 2020 was 23.8% versus 24.0% in 2019. The decrease in the adjusted ETR is primarily due to higher tax benefits from share option exercises.

Income from equity investments

Reported income from equity investments for 2020 was $85 million as compared to $114 million in 2019. On an adjusted basis, income from equity investments for 2020 was $142 million versus $171 million in 2019. The decrease in the reported and adjusted income from equity investments was primarily driven by unfavorable foreign currency revaluation impacts on an unhedged loan of an investment in EMEA.

Noncontrolling interests from continuing operations

At December 31, 2020, noncontrolling interests from continuing operations consisted primarily of noncontrolling shareholders’ investments in APAC (primarily in China) and surface technologies.

Reported noncontrolling interests from continuing operations increased $36 million to $125 million in 2020 from $89 million in 2019, primarily driven by the noncontrolling interest impact of $33 million for an asset impairment charge in the third quarter 2019 related to a joint venture in APAC.

Adjusted noncontrolling interests from continuing operations increased $8 million in 2020 as compared to 2019.

Income from continuing operations

Reported income from continuing operations increased $314 million, or 14%, primarily due to higher overall operating profit and a lower effective tax rate.

On an adjusted basis, which excludes the impacts of purchase accounting and other non-GAAP adjustments, income from continuing operations increased $368 million, or 9%, in 2020 versus 2019. The increase was primarily due to higher adjusted operating profit partially offset by higher interest expense and lower equity income.

Diluted earnings per share from continuing operations

Reported diluted earnings per share from continuing operations increased $0.70, or 18%, in 2020 as compared to 2019.

Table of Contents

On an adjusted basis, diluted EPS of $8.23 in 2020 increased 12% versus 2019, primarily due to higher income from continuing operations and lower diluted shares outstanding.

Employees

The number of employees at December 31, 2020 was 74,207, a decrease of 5,679 employees from December 31, 2019 primarily driven by cost reduction actions and divestitures.

Other Financial Data

EBITDA increased to $8,033 million in 2020 from $7,722 million in 2019. Adjusted EBITDA from continuing operations increased to $8,645 million for 2020 as compared to $8,178 million in 2019 primarily due to higher income from continuing operations versus the prior year period.

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

Other Comprehensive Income (Loss)

Other comprehensive income for the year ended December 31, 2020 of $157 million resulted primarily from currency translation adjustments of $595 million largely offset by a decrease in the funded status of the company's retirement obligations of $469 million driven by the low discount rate environment. 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, the Chinese yuan and the British pound. See the "Currency" section of the MD&A for exchange rates used for translation purposes and Note 7 to the consolidated financial statements for a summary of the currency translation adjustment component of accumulated other comprehensive income by segment.

Related Party Transactions

The company’s related parties are primarily unconsolidated equity affiliates. The company did not engage in any material transactions involving related parties that included terms or other aspects that differ from those which would be negotiated with independent parties.

Environmental Matters

Linde’s principal operations relate to the production and distribution of atmospheric and other industrial gases, which historically have not had a significant impact on the environment. However, worldwide costs relating to environmental protection may continue to grow due to increasingly stringent laws and regulations, and Linde's ongoing commitment to rigorous internal standards. In addition, Linde may face physical risks from climate change and extreme weather.

Climate Change

Linde operates in jurisdictions that have, or are developing, laws and/or regulations to reduce or mitigate the perceived adverse effects of greenhouse gas ("GHG") emissions and faces a highly uncertain regulatory environment in this area. For example, the U.S. Environmental Protection Agency ("EPA") has promulgated rules requiring reporting of GHG emissions, and Linde and many of its suppliers and customers are subject to these rules. EPA has also promulgated regulations to restrict GHG emissions, including final rules regulating GHG emissions from light-duty vehicles and certain large manufacturing facilities, many of which are Linde suppliers or customers. In addition to these developments in the United States, several other countries worldwide have already implemented carbon taxation or trading systems which impact the company's customers and Linde operations, among those regulations in China, Singapore and the European Union. Among other impacts, such regulations are expected to raise the cost of energy, which is a significant cost for Linde. Nevertheless, Linde's long-term customer contracts routinely provide rights to recover increased electricity, natural gas, and other costs that are incurred by the company as a result of climate change regulation.

Linde anticipates continued growth in its hydrogen business due to increased focus on air quality. Hydrogen production plants and a large number of other manufacturing and electricity-generating plants have been identified in California and the European Union as a source of carbon dioxide emissions and these plants are subject to cap-and-trade regulations in those jurisdictions. Linde believes it will be able to mitigate the costs of these regulations through the terms of its product supply contracts. However, legislation that limits GHG emissions may impact growth by increasing capital, compliance, operating and maintenance costs and/or decreasing demand.

Table of Contents

To manage business risks from current and potential GHG emission regulation as well as physical consequences of climate change, Linde actively monitors current developments, evaluates the direct and indirect business risks, and takes appropriate actions. Among others, actions include: increasing relevant resources and training; maintaining contingency plans; obtaining advice and counsel from expert vendors, insurance providers and industry experts; incorporating GHG provisions in commercial agreements; and conducting regular reviews of the business risks with management. Although there are considerable uncertainties, Linde believes that the business risk from potential regulations can be effectively managed through its commercial contracts. Additionally, Linde does not anticipate any material effects regarding its plant operations or business arising from potential physical risks of climate change.

Linde continuously seeks opportunities to optimize energy use and GHG footprint through research and development in customer applications and rigorous operational energy efficiency, investment in renewable energy, and purchasing hydrogen as a chemical byproduct where feasible. Linde maintains related performance improvement targets and reports progress against these targets regularly to business management and annually to Linde's Board of Directors.

At the same time, Linde may benefit from business opportunities arising from governmental regulation of GHG and other emissions; uncertain costs of energy and certain natural resources; the development of renewable energy alternatives; and new technologies that help extract natural gas, improve air quality, increase energy efficiency and mitigate the impacts of climate change. Linde continues to develop new applications that can lower emissions, including GHG emissions, in Linde's processes and help customers lower energy consumption and increase product throughput. Stricter regulation of water quality in emerging economies such as China provide a growing market for a number of gases, e.g., oxygen for wastewater treatment. Increased concern about drought in areas such as California and Australia may create additional markets for carbon dioxide for desalination. Renewable fuel standards in the European Union and U.S. create a market for second-generation biofuels which use industrial gases such as oxygen, carbon dioxide, and hydrogen.

Costs Relating to the Protection of the Environment

Environmental protection costs in 2020 were not significant. Linde anticipates that future annual environmental protection expenditures will be similar to 2020, subject to any significant changes in existing laws and regulations. Based on historical results and current estimates, management does not believe that environmental expenditures will have a material adverse effect on the consolidated financial position, the consolidated results of operations or cash flows in any given year.

Legal Proceedings

See Note 17 to the consolidated financial statements for information concerning legal proceedings.

Retirement Benefits

Pensions

The net periodic benefit cost (benefit) for the U.S. and international pension plans was a benefit of $28 million in 2020 and costs of $107 million and $24 million in 2019 and 2018, respectively. 2019 net periodic pension cost included pension settlement charges of $97 million related to lump sum payments, which were triggered by either a change in control provision or merger-related divestitures, and a net curtailment charge of $8 million for termination benefits, primarily in connection with a defined benefit pension plan freeze. Settlement charges were $6 million and $14 million for 2020 and 2018, respectively.

The funded status (pension benefit obligation ("PBO") less the fair value of plan assets) for the U.S. plans was a deficit of $436 million and $504 million at December 31, 2020 and 2019, respectively. The funded status for international plans was a deficit of $2,334 million and $1,801 million at December 31, 2020 and 2019, respectively. In the U.S., the benefit from the actual return on assets more than offset the impact of unfavorable liability experience, primarily resulting from the low discount rate environment. For the international plans, the unfavorable impact of lower discount rates outweighed favorable plan asset returns.

Global pension contributions were $91 million in 2020, $94 million in 2019, and $87 million in 2018. At a minimum, Linde contributes to its pension plans to comply with local regulatory requirements (e.g., ERISA in the U.S.). Discretionary contributions in excess of the local minimum requirements are made based on many factors, including long-term projections of the plans' funded status, the economic environment, potential risk of overfunding, pension insurance costs and alternative uses of cash. Changes to these factors can impact the timing of discretionary contributions from year to year. Estimated required contributions for 2021 are currently expected to be in the range of $70 million to $80 million.

Table of Contents

Linde assumes expected returns on plan assets for 2021 of 7.00% and 5.27% for the U.S. and international plans, respectively, which are consistent with the long-term expected returns on its investment portfolios.

Excluding the impact of any settlements, 2021 consolidated pension expense is expected to be a benefit of approximately $36 million. The benefit derived from the expected return on assets assumption for Linde's most significant plans is anticipated to more than offset the expense from service and interest cost accruals and the higher amortization of deferred losses.

Refer to the Critical Accounting Policies section and Note 16 to the consolidated financial statements for a more detailed discussion of the company’s retirement benefits, including a description of the various retirement plans and the assumptions used in the calculation of net periodic benefit cost (benefit) and funded status.

Insurance

Linde purchases insurance to limit a variety of property and casualty risks, including those related to property, business interruption, third-party liability and workers’ compensation. Currently, the company self retains up to $10 million per occurrence for vehicle liability in the United States, $5 million per occurrence for workers' compensation and general liability. In addition, the company self retains risk up to €5 million at its various properties worldwide for property damage resulting from fire, flood and other perils effecting its properties along with a separate €5 million deductible on all business interruption resulting from a major peril loss. To mitigate its aggregate loss potential above these retentions, the company purchases catastrophic insurance coverage from highly rated insurance companies. The company does not currently operate or participate in any captive insurance companies or other non-traditional risk transfer alternatives.

At December 31, 2020 and 2019, the company had recorded a total of $71 million and $66 million, respectively, representing an estimate of the retained liability for the ultimate cost of claims incurred and unpaid as of the balance sheet dates. The estimated liability is established using statistical analysis and is based upon historical experience, actuarial assumptions and professional judgment. These estimates are subject to the effects of trends in loss severity and frequency and are subject to a significant degree of inherent variability. If actual claims differ from the company’s estimates, they will be adjusted at that time and financial results could be impacted.

Linde recognizes estimated insurance proceeds relating to damages at the time of loss only to the extent of incurred losses. Any insurance recoveries for business interruption and for property damages in excess of the net book value of the property are recognized only when realized or pending payments confirmed by its insurance companies.

Table of Contents

SEGMENT DISCUSSION

Linde’s operations consist of two major product lines: industrial gases and engineering. As further described in the following paragraph, Linde’s industrial gases operations are managed on a geographic basis, which represents three of the company's reportable segments - Americas, EMEA (Europe/Middle East/Africa), and APAC (Asia/South Pacific); a fourth reportable segment which represents the company's Engineering business, designs and manufactures equipment for air separation and other industrial gas applications specifically for end customers and is managed on a worldwide basis operating in all geographic segments. Other consists of corporate costs and a few smaller businesses which individually do not meet the quantitative thresholds for separate presentation.

The industrial gases product line centers on the manufacturing and distribution of atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, acetylene). Many of these products are co-products of the same manufacturing process. Linde manufactures and distributes nearly all of its products and manages its customer relationships on a regional basis. Linde’s industrial gases are distributed to various end-markets within a regional segment through one of three basic distribution methods: on-site or tonnage; merchant or bulk; and packaged or cylinder gases. The distribution methods are generally integrated in order to best meet the customer’s needs and very few of its products can be economically transported outside of a region. Therefore, the distribution economics are specific to the various geographies in which the company operates and are consistent with how management assesses performance.

The company’s measure of profit/loss for segment reporting purposes is segment operating profit. Segment operating profit is defined as operating profit excluding purchase accounting impacts of the Linde AG merger, intercompany royalties, and items not indicative of ongoing business trends. This is the manner in which the company’s Chief Operating Decision Maker ("CODM") assesses performance and allocates resources.

The table below presents sales and operating profit information about reportable segments and Other for the years ended December 31, 2020 and 2019.

(Millions of dollars)Year Ended December 31, 2020 2019 Variance

Sales

Merger-related divestitures — 65

Operating Profit

Reconciliation to reported operating profit :

Cost reduction programs and other charges (Note 3) (506) (567)

Merger-related divestitures — 16

Net gain on sale of businesses — 164

Purchase accounting impacts - Linde AG (1,969) (1,952)

Table of Contents

Americas

(Dollar amounts in millions) Variance

As a percent of sales 26.5 % 23.5 %

% Change

Factors Contributing to Changes - Sales

Volume (2) %

Price/Mix 2 %

Cost pass-through (1) %

Currency (3) %

Acquisitions/Divestitures (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 $530 million, or 5%, in 2020 versus 2019. Higher pricing contributed 2% to sales. Lower volumes, primarily related to the manufacturing and metals end markets, of 2%, were partially offset by new project start-ups and higher volumes related to the healthcare end market. Unfavorable currency translation decreased sales by 3%, primarily driven by the weakening of the Brazilian real, Mexican peso and Canadian dollar against the U.S. Dollar. Lower cost past-through, primarily natural gas, decreased sales by 1% with minimal impact on operating profit.

Operating Profit

Operating profit in the Americas segment increased $196 million, or 8%, in 2020 versus 2019. Operating profit increased due primarily to higher pricing and cost reduction and productivity initiatives, partially offset by lower volumes and unfavorable currency translation impacts.

EMEA

(Dollar amounts in millions) Variance

As a percent of sales 22.7 % 20.6 %

Table of Contents

% Change

Factors Contributing to Changes - Sales

Volume (3) %

Price/Mix 2 %

Cost pass-through (1) %

Currency — %

Acquisitions/Divestitures (1) %

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 U.K.

Sales

EMEA segment sales decreased $194 million, or 3%, in 2020 versus 2019. Volumes decreased 3% driven by lower volumes to the manufacturing and metals end-markets. Higher price contributed 2% to sales and cost pass-through decreased sales by 1%. Sales decreased 1% related to the divestiture of a non-core business in Scandinavia.

Operating Profit

Operating Profit for the EMEA segment increased $98 million, or 7%, in 2020 versus 2019 driven primarily by higher price and the impact of cost reduction programs, partially offset by lower volumes.

APAC

(Dollar amounts in millions) Variance

As a percent of sales 22.5 % 20.5 %

% Change

Factors Contributing to Changes - Sales

Volume/Equipment (2) %

Price/Mix 1 %

Cost pass-through (1) %

Currency — %

Acquisitions/Divestitures — %

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

Sales

Sales for the APAC segment decreased $92 million, or 2%, in 2020 versus 2019. Volumes decreased 2% as lower volumes to the manufacturing end-market and a prior year equipment sale more than offset the contribution of new project start-ups. Higher price increased sales by 1%. Cost pass-through decreased sales by 1% with minimal impact on operating profit.

Table of Contents

Operating Profit

Operating profit in the APAC segment increased $93 million, or 8%, in 2020 versus 2019, driven primarily by higher price and the impact of cost reduction programs, partially offset by lower volumes.

Engineering

(Dollar amounts in millions) Variance

As a percent of sales 15.3 % 13.9 %

% Change

Factors Contributing to Changes - Sales

Volume/Price — %

Currency 2 %

Sales

Engineering segment sales increased $52 million, or 2%, in 2020 versus 2019, driven by favorable currency impacts.

Operating profit

Engineering segment operating profit increased $45 million, or 12%, in 2020 versus 2019. The increase in operating profit for the year is due to project execution and the impact of productivity initiatives.

Other

(Dollar amounts in millions) Variance

As a percent of sales (8.5) % (12.6) %

% Change

Factors Contributing to Changes - Sales

Volume/Price (9) %

Cost pass-through 1 %

Currency — %

Acquisitions/Divestitures — %

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

Table of Contents

Sales

Sales for Other decreased $156 million, or 8%, in 2020 versus 2019, primarily due to lower volumes largely due to surface technologies and to a lesser extent helium, partially offset by higher price largely related to helium and cost pass through.

Operating profit

Operating profit in Other increased $93 million, or 38%, in 2020 versus 2019, due primarily to the impact of cost reduction and productivity initiatives.

Table of Contents

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 used in the countries in which the company operates. For most foreign 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):

Percent of 2020 Statements of Income Balance Sheets

Consolidated Average Year Ended December 31, December 31,

Table of Contents

LIQUIDITY, CAPITAL RESOURCES AND OTHER FINANCIAL DATA

(Millions of dollars) Year Ended December 31, 2020 2019

Net Cash Provided by (Used for)

Operating Activities

Non-cash charges (credits):

Add: Cost reduction programs and other charges, net of payments (a) 258 (236)

Add: Amortization of merger-related inventory step-up — 12

Less: Net gain on sale of businesses, net of tax — (108)

Add: Depreciation and amortization 4,626 4,675

Add (Less): Deferred income taxes (369) (303)

Add (Less): non-cash charges and other 285 (32)

Less: Pension contributions (91) (94)

Add (Less): Working capital 364 (160)

Add (Less): Other (266) 93

Net cash provided by operating activities $ 7,429 $ 6,119

Investing Activities

Acquisitions, net of cash acquired (68) (225)

Divestitures and asset sales, net of cash divested 482 5,096

Net cash provided by (used for) investing activities $ (2,986) $ 1,189

Financing Activities

Debt increases (decreases) – net $ 1,313 $ (1,260)

Issuances (purchases) of ordinary shares – net (2,410) (2,586)

Cash dividends – Linde plc shareholders (2,028) (1,891)

Noncontrolling interest transactions and other (220) (3,260)

Net cash (used) for financing activities $ (3,345) $ (8,997)

Effect of exchange rate changes on cash $ (44) $ (77)

Cash and cash equivalents, end-of-period $ 3,754 $ 2,700

____________________

(a)See Note 3 to the consolidated financial statements.

Cash increased $1,054 million in 2020 versus 2019. The primary sources of cash in 2020 were cash flows from operations of $7,429 million, net debt issuances of $1,313 million and proceeds from divestitures and asset sales of $482 million. The primary uses of cash included capital expenditures of $3,400 million, net purchases of ordinary shares of $2,410 million, and cash dividends to shareholders of $2,028 million. Noncontrolling interest transactions and other of $3,260 million in 2019 included a payment of approximately $3.2 billion related to the cash-merger squeeze-out of the 8% of Linde AG shares completed on April 8, 2019 (see Note 14 to the consolidated financial statements).

Table of Contents

Cash Flows From Operations

2020 compared with 2019

Cash flows from operations was $7,429 million, or 27% of sales, an increase of $1,310 million from $6,119 million, or 22% of sales in 2019. The increase was driven by higher net income adjusted for non-cash charges, better working capital management, and lower merger and synergy related cash outflows. Cost reduction programs and other charges of $506 million and $567 million for the years ended December 31, 2020 and 2019 were offset by related cash outflows of $248 million and $803 million, respectively.

Table of Contents

Investing

2020 compared with 2019

Net cash used for investing activities was $2,986 million in 2020 versus net cash provided by investing activities of $1,189 million in 2019. The decrease was primarily driven by lower proceeds from merger-related divestitures, partially offset by lower capital expenditures and acquisitions.

Capital expenditures in 2020 were $3,400 million, a decrease of $282 million from 2019. Capital expenditures during 2020 related primarily to investments in new plant and production equipment for growth. Approximately 41% of the capital expenditures were in the Americas segment with 35% in the APAC segment and the rest primarily in the EMEA segment.

At December 31, 2020, 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.

Acquisition expenditures in 2020 were $68 million, a decrease of $157 million from 2019 and related primarily to acquisitions in the Americas and APAC.

Divestitures and asset sales in 2020 totaled $482 million as compared to $5,096 million in 2019. The 2020 period includes net proceeds from merger-related divestitures of $98 million from the sale of selected assets of Linde China and proceeds of approximately $130 million related to the divestiture of a non-core business in Scandinavia. The 2019 period includes net proceeds from merger-related divestitures of $3.4 billion from the sale of Linde AG's Americas business, $1.2 billion from the sale of Linde South Korea and approximately $200 million each from the sale of the legacy Praxair and legacy Linde India selected assets (see Note 2 to the consolidated financial statements).

Financing

Linde’s financing strategy is to secure long-term committed funding by issuing public notes and debentures and commercial paper backed by a long-term bank credit agreement. Linde’s international operations are funded through a combination of local borrowing and intercompany funding to minimize the total cost of funds and to manage and centralize currency exchange exposures. As deemed necessary, Linde manages its exposure to interest-rate changes through the use of financial derivatives (see Note 12 to the consolidated financial statements and Item 7A. Quantitative and Qualitative Disclosures About Market Risk).

Cash used for financing activities was $3,345 million in 2020 compared to $8,997 million in 2019. Cash provided by debt was $1,313 million in 2020 versus cash used for debt of $1,260 million in 2019 primarily due to bond issuances in 2020 and increased commercial paper borrowings, net of bond repayments. Net purchases of ordinary shares were $2,410 million in 2020 versus $2,586 million in 2019. Cash dividends increased to $2,028 million in 2020 versus $1,891 million in 2019 driven primarily by a 10% increase in dividends per share from $3.50 per share to $3.85 per share. The 2019 period also includes an

Table of Contents

outflow of approximately $3.2 billion relating to the cash-merger squeeze-out of the 8% of Linde AG shares completed on April 8, 2019 (See Note 14 to the consolidated financial statements).

The company believes that it has sufficient operating flexibility, cash reserves, and funding sources to maintain adequate amounts of liquidity to meet its business needs around the world. At December 31, 2020, Linde's credit ratings as reported by Standard & Poor’s and Moody’s were A-1 and P-1 for short-term debt, respectively, and A and A2 for long-term debt, respectively.

Note 11 to the consolidated financial statements includes information with respect to the company’s debt activity in 2020, current debt position, debt covenants and the available credit facilities; and Note 12 includes information relating to derivative financial instruments. Linde's credit facilities are with major financial institutions and are non-cancelable until maturity. Therefore, the company believes the risk of the financial institutions being unable to make required loans under the credit facilities, if requested, to be low. Linde’s major bank credit and long-term debt agreements contain standard covenants. The company was in compliance with these covenants at December 31, 2020 and expects to remain in compliance for the foreseeable future.

The company maintains a $5 billion unsecured and undrawn revolving credit agreement with no associated financial covenants. No borrowings were outstanding under the credit agreement as of December 31, 2020. 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.

Linde’s total net debt outstanding at December 31, 2020 was $12,400 million, $1,144 million higher than $11,256 million at December 31, 2019. The December 31, 2020 net debt balance includes $15,048 million in public securities, $1,106 million representing primarily worldwide bank borrowings, net of $3,754 million of cash. Linde’s global effective borrowing rate was approximately 2% for 2020.

In May 2020, Linde issued €750 million of 0.250% notes due 2027 and €750 million 0.550% notes due 2032. In August, 2020, Linde issued $700 million of 1.100% notes due 2030 and $300 million of 2.000% notes due 2050. In September 2020, the company repaid €1,000 million in 1.75% notes and $300 million of 2.25% notes that became due. In December 2020, the company repaid $500 million of 4.05% notes and $500 million of 3.00% notes that were due in 2021 resulting in a $16 million interest charge (see Note 11 to the consolidated financial statements).

On January 25, 2021, the company’s board of directors approved the additional repurchase of $5.0 billion of its ordinary shares. For additional information related to the share repurchase programs, see Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Table of Contents

OFF-BALANCE SHEET ARRANGEMENTS

As discussed in Note 17 to the consolidated financial statements, at December 31, 2020, Linde had undrawn outstanding letters of credit, bank guarantees and surety bonds entered into in connection with normal business operations and they are not reasonably likely to have a material impact on Linde’s consolidated financial condition, results of operations, or liquidity.

CRITICAL ACCOUNTING POLICIES

The policies discussed below are considered by management to be critical to understanding Linde’s financial statements and accompanying notes prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Their application places significant importance on management’s judgment as a result of the need to make estimates of matters that are inherently uncertain. Linde’s financial position, results of operations and cash flows could be materially affected if actual results differ from estimates made. These policies are determined by management and have been reviewed by Linde’s Audit Committee.

Revenue Recognition

Long-Term Construction Contracts

The company designs and manufactures equipment for air separation and other varied gas production and processing plants manufactured specifically for end customers. Revenue from sale of equipment is generally recognized over time as Linde has an enforceable right to payment for performance completed to date and performance does not create an asset with alternative use. For contracts recognized over time, revenue is recognized primarily using a cost incurred input method. Costs incurred to date relative to total estimated costs at completion are used to measure progress toward satisfying performance obligations. Costs incurred include material, labor, and overhead costs and represent work contributing and proportionate to the transfer of control to the customer. Contract modifications are typically accounted for as part of the existing contract and are recognized as a cumulative adjustment for the inception-to-date effect of such change. We assess performance as progress towards completion is achieved on specific projects, earnings will be impacted by changes to our forecast of revenues and costs on these projects.

Pension Benefits

Pension benefits represent financial obligations that will be ultimately settled in the future with employees who meet eligibility requirements. Because of the uncertainties involved in estimating the timing and amount of future payments, significant estimates are required to calculate pension expense and liabilities related to the company’s plans. The company utilizes the services of independent actuaries, whose models are used to facilitate these calculations.

Several key assumptions are used in actuarial models to calculate pension expense and liability amounts recorded in the financial statements. Management believes the three most significant variables in the models are the expected long-term rate of return on plan assets, the discount rate, and the expected rate of compensation increase. The actuarial models also use assumptions for various other factors, including long-term inflation rates, employee turnover, retirement age, and mortality. Linde management believes the assumptions used in the actuarial calculations are reasonable, reflect the company’s experience and expectations for the future and are within accepted practices in each of the respective geographic locations in which it operates. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors. The sensitivities to each of the key assumptions presented below exclude the impact of special items that occurred during the year.

The weighted-average expected long-term rates of return on pension plan assets were 7.00% for U.S. plans and 5.31% for international plans for the year ended December 31, 2020 (7.27% and 5.15%, respectively at December 31, 2019). The expected long-term rate of return on the U.S. and international plan assets is estimated based on the plans' investment strategy and asset allocation, historical capital market performance and, to a lesser extent, historical plan performance. A 0.50% change in these expected long-term rates of return, with all other variables held constant, would change Linde’s pension expense by approximately $42 million.

The company has consistently used a market-related value of assets rather than the fair value at the measurement date to determine annual pension expense. The market-related value recognizes investment gains or losses over a five-year period. As a result, changes in the fair value of assets from year to year are not immediately reflected in the company’s annual pension expense. Instead, annual pension expense in future periods will be impacted as deferred investment gains or losses

Table of Contents

are recognized in the market-related value of assets over the five-year period. The consolidated market-related value of assets was $9,408 million, or $555 million lower than the fair value of assets of $9,963 million at December 31, 2020. These net deferred investment losses of $555 million will be recognized in the calculation of the market-related value of assets ratably over the next four years and will impact future pension expense. Future actual investment gains or losses will impact the market-related value of assets and, therefore, will impact future annual pension expense in a similar manner.

Discount rates are used to calculate the present value of plan liabilities and pension costs and are determined annually by management. The company measures the service and interest cost components of pension and OPEB expense for significant U.S. and international plans using the spot rate approach. U.S. plans that do not use the spot rate approach continue to determine discount rates by using a cash flow matching model provided by the company's independent actuaries. The model includes a portfolio of corporate bonds graded Aa or better by at least half of the ratings agencies and matches the U.S. plans' projected cash flows to the calculated spot rates. Discount rates for the remaining international plans are based on market yields for high-quality fixed income investments representing the approximate duration of the pension liabilities on the measurement date. Refer to Note 16 to the consolidated financial statements for a summary of the discount rates used to calculate plan liabilities and benefit costs, and to the Retirement Benefits section of the Consolidated Results and Other Information section of this MD&A for a further discussion of 2020 benefit costs. A 0.50% reduction in discount rates, with all other variables held constant, would increase Linde’s pension expense by approximately $42 million whereas a 0.50% increase in discount rates would result in a decrease of $12 million. A 0.50% reduction in discount rates would increase the PBO by approximately $1,054 million whereas a 0.50% increase in discount rates would have a favorable impact to the PBO of approximately $932 million.

The weighted-average expected rate of compensation increase was 3.25% for U.S. plans and 2.55% for international plans at December 31, 2020 (3.25% and 2.46%, respectively, at December 31, 2019). The estimated annual compensation increase is determined by management every year and is based on historical trends and market indices. A 0.50% change in the expected rate of compensation increase, with all other variables held constant, would change Linde’s pension expense by approximately $8 million and would impact the PBO by approximately $70 million.

Asset Impairments

Goodwill and Other Indefinite-Lived Intangibles Assets

At December 31, 2020, the company had goodwill of $28,201 million and $1,992 million of other indefinite-lived intangible assets. Goodwill represents the aggregate of the excess consideration paid for acquired businesses over the fair value of the net assets acquired. Indefinite-lived other intangibles relate to the Linde name.

The company performs a goodwill impairment test annually or more frequently if events or circumstances indicate that an impairment loss may have been incurred.

The impairment tests performed during the fourth quarter of 2020 indicated no impairment. At December 31, 2020, Linde’s enterprise value was approximately $150 billion (outstanding shares multiplied by the year-end stock price plus net debt, and without any control premium) while its total capital was approximately $62 billion.

The impairment test allows an entity to first assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than carrying value. If it is determined that it is more likely than not that the fair value of a reporting unit is less than carrying value then the company will estimate and compare the fair value of its reporting units to their carrying value, including goodwill. Reporting units are determined based on one level below the operating segment level.

Management believes that the quantitative and qualitative factors used to perform its annual goodwill impairment assessment are appropriate and reasonable. Although the 2020 assessment indicated that it is more likely than not that the fair value of each reporting unit exceeded its carrying value, changes in circumstances or conditions affecting this analysis could have a significant impact on the fair value determination, which could then result in a material impairment charge to the company's results of operations. Reporting units with greater concentration of Linde AG assets fair valued during the 2018 Praxair, Inc. and Linde AG merger are at greater risk of impairment in future periods.

Other indefinite-lived intangible assets from Linde AG recently fair valued are evaluated for impairment on an annual basis or more frequently if events and circumstances indicate that an impairment loss may have been incurred, and no impairments were indicated.

See Notes 9 and 10 to the consolidated financial statements.

Table of Contents

Long-Lived Assets

Long-lived assets, including property, plant and equipment and finite-lived other intangible assets, are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an individual asset or asset group may not be recoverable. For purposes of this test, asset groups are determined based upon the lowest level for which there are independent and identifiable cash flows. Based upon Linde's business model an asset group may be a single plant and related assets used to support on-site, merchant and packaged gas customers. Alternatively, the asset group may a collection of distribution related assets (cylinders, distribution centers, and stores) or be a pipeline complex which includes multiple interdependent plants and related assets connected by pipelines within a geographic area used to support the same distribution methods.

Income Taxes

At December 31, 2020, Linde had deferred tax assets of $2,270 million (net of valuation allowances of $243 million), and deferred tax liabilities of $8,706 million. At December 31, 2020, uncertain tax positions totaled $452 million (see Note 1 and Note 5 to the consolidated financial statements). Income tax expense was $847 million for the year ended December 31, 2020, or about 25.0% of pre-tax income (see Note 5 to the consolidated financial statements for additional information related to taxes).

In the preparation of consolidated financial statements, Linde estimates income taxes based on diverse legislative and regulatory structures that exist in various jurisdictions where the company conducts business. Deferred income tax assets and liabilities represent tax benefits or obligations that arise from temporary differences due to differing treatment of certain items for accounting and income tax purposes. Linde evaluates deferred tax assets each period to ensure that estimated future taxable income will be sufficient in character (e.g. capital gain versus ordinary income treatment), amount and timing to result in their recovery. A valuation allowance is established when management determines that it is more likely than not that a deferred tax asset will not be realized to reduce the assets to their realizable value. Considerable judgments are required in establishing deferred tax valuation allowances and in assessing exposures related to tax matters. As events and circumstances change, related reserves and valuation allowances are adjusted to income at that time. Linde’s tax returns are subject to audit and local taxing authorities could challenge the company’s tax positions. The company’s practice is to review tax filing positions by jurisdiction and to record provisions for uncertain income tax positions, including interest and penalties when applicable. Linde believes it records and/or discloses such potential tax liabilities as appropriate and has reasonably estimated its income tax liabilities and recoverable tax assets. If new information becomes available, adjustments are charged or credited against income at that time. Management does not anticipate that such adjustments would have a material adverse effect on the company’s consolidated financial position or liquidity; however, it is possible that the final outcomes could have a material impact on the company’s reported results of operations.

Contingencies

The company accrues liabilities for non-income tax contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized or realizable. If new information becomes available or losses are sustained in excess of recorded amounts, adjustments are charged against income at that time. Management does not anticipate that in the aggregate such losses would have a material adverse effect on the company’s consolidated financial position or liquidity; however, it is possible that the final outcomes could have a material impact on the company’s reported results of operations.

Linde is subject to various claims, legal proceedings and government investigations that arise from time to time in the ordinary course of business. These actions are based upon alleged environmental, tax, antitrust and personal injury claims, among others (see Note 17 to the consolidated financial statements). Such contingencies are significant and the accounting requires considerable management judgments in analyzing each matter to assess the likely outcome and the need for establishing appropriate liabilities and providing adequate disclosures. Linde believes it records and/or discloses such contingencies as appropriate and has reasonably estimated its liabilities.

NEW ACCOUNTING STANDARDS

See Note 1 to the consolidated financial statements for information concerning new accounting standards and the impact of the implementation of these standards on the company’s financial statements.

Table of Contents

FAIR VALUE MEASUREMENTS

Linde does not expect changes in the aggregate fair value of its financial assets and liabilities to have a material impact on the consolidated financial statements. See Note 13 to the consolidated financial statements.

NON-GAAP FINANCIAL MEASURES

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 financial leverage and operating performance. Special 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. 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 in the following reconciliations are presented in this MD&A.

Adjusted Amounts

(Dollar amounts in millions, except per share data)

Adjusted Sales

Less: Merger-related divestitures (d) — (65)

Adjusted Operating Profit and Operating Margin

Reported operating profit $ 3,322 $ 2,933

Less: Merger-related divestitures (d) — (16)

Add: Cost reduction programs and other charges 506 567

Less: Net gain on sale of businesses — (164)

Add: Purchase accounting impacts - Linde AG (c) 1,969 1,952

Adjusted operating profit $ 5,797 $ 5,272

Reported percentage change 13 %

Adjusted percentage change 10 %

Reported operating margin 12.2 % 10.4 %

Adjusted operating margin 21.3 % 18.7 %

Adjusted Depreciation and amortization

Reported depreciation and amortization $ 4,626 $ 4,675

Less: Purchase accounting impacts - Linde AG (c) (1,920) (1,940)

Adjusted depreciation and amortization $ 2,706 $ 2,735

Adjusted Other Income (Expense) - net

Reported Other Income (Expense) - net $ (61) $ 68

Table of Contents

Add: Purchase accounting impacts - Linde AG (c) (49) —

Adjusted Other Income (Expense) - net $ (12) $ 68

Adjusted Net Pension and OPEB Cost (Benefit), Excluding Service Cost

Add: Pension settlement charges (6) (107)

Adjusted Interest Expense - Net

Reported interest expense - net $ 115 $ 38

Add: Purchase accounting impacts - Linde AG (c) 85 96

Less: Bond Redemption (16) —

Adjusted interest expense - net $ 184 $ 134

Adjusted Income Taxes (a)

Reported income taxes $ 847 $ 769

Add: Purchase accounting impacts - Linde AG (c) 399 450

Add: Pension settlement charges 1 26

Add: Cost reduction programs and other charges 130 83

Less: Merger-related divestitures (d) — (5)

Less: Net gain on sale of businesses — (56)

Less: Bond Redemption 4 —

Adjusted Effective Tax Rate (a)

Reported income before income taxes and equity investments $ 3,384 $ 2,927

Less: Merger-related divestitures (d) — (16)

Add: Pension settlement charge 6 107

Add: Purchase accounting impacts - Linde AG (c) 1,884 1,856

Add: Cost reduction programs and other charges 506 567

Less: Bond Redemption 16 —

Less: Net gain on sale of businesses — (164)

Adjusted income before income taxes and equity investments $ 5,796 $ 5,277

Reported Income taxes $ 847 $ 769

Reported effective tax rate 25.0 % 26.3 %

Adjusted effective tax rate 23.8 % 24.0 %

Income from Equity Investments

Reported income from equity investments $ 85 $ 114

Add: Purchase accounting impacts - Linde AG (c) 57 57

Adjusted income from equity investments $ 142 $ 171

Table of Contents

Adjusted Noncontrolling Interests from Continuing Operations

Reported noncontrolling interests from continuing operations $ (125) $ (89)

Add: Cost reduction programs and other charges (4) (35)

Add: Purchase accounting impacts - Linde AG (c) (57) (54)

Total adjustments (61) (89)

Adjusted noncontrolling interests from continuing operations $ (186) $ (178)

Adjusted Income from Continuing Operations (b)

Reported income from continuing operations $ 2,497 $ 2,183

Add: Pension settlement charge 5 81

Less: Merger-related divestitures (d) — (12)

Add: Cost reduction programs and other charges 372 449

Less: Net gain on sale of business — (108)

Add: Purchase accounting impacts - Linde AG (c) 1,485 1,410

Less: Bond Redemption 12 —

Adjusted income from continuing operations $ 4,371 $ 4,003

Adjusted Diluted EPS from Continuing Operations (b)

Reported diluted EPS from continuing operations $ 4.70 $ 4.00

Add: Pension settlement charge 0.01 0.16

Add: Cost reduction programs and other charges 0.70 0.83

Less: Merger-related divestitures (d) — (0.03)

Less: Net gain on sale of business — (0.21)

Less: Bond Redemption 0.02 —

Add: Purchase accounting impacts - Linde AG 2.80 2.59

Adjusted diluted EPS from continuing operations $ 8.23 $ 7.34

Reported percentage change 18 %

Adjusted percentage change 12 %

Adjusted EBITDA and % of Sales

Income from continuing operations $ 2,497 $ 2,183

Add: Noncontrolling interests related to continuing operations 125 89

Add: Net pension and OPEB cost (benefit), excluding service cost (177) (32)

Add: Interest expense 115 38

Add: Depreciation and amortization 4,626 4,675

EBITDA from continuing operations 8,033 7,722

Less: Merger-related divestitures (d) — (16)

Less: Net gain on sale of business — (164)

Add: Cost reduction programs and other charges 506 567

Add: Purchase accounting impacts - Linde AG 106 69

Table of Contents

Adjusted EBITDA from continuing operations $ 8,645 $ 8,178

% of sales

EBITDA from continuing operations 29.5 % 27.4 %

Adjusted EBITDA from continuing operations 31.7 % 29.0 %

(d) To adjust for the results of Praxair's merger-related divestitures.

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.

(Millions of dollars)

Less: cash and cash equivalents (3,754) (2,700)

Less: purchase accounting impacts - Linde AG (121) (195)

Table of Contents

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. (previously Praxair, Inc.) and/or Linde GmbH (previously Linde AG). 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 company has elected to comply with Rule 13-01 of SEC Regulation S-X in advance of the effective date of January 4, 2021, as permitted by the Adopting Release.

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.

Table of Contents

(Millions of dollars)

Transactions with non-guarantor subsidiaries 2,082 3,533

Balance Sheet Data (at period end)

Table of Contents

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Linde is exposed to market risks relating to fluctuations in interest rates and currency exchange rates. The objective of financial risk management at Linde is to minimize the negative impact of interest rate and foreign exchange rate fluctuations on the company’s earnings, cash flows and equity.

To manage these risks, Linde uses various derivative financial instruments, including interest-rate swaps, treasury rate locks, currency swaps, forward contracts, and commodity contracts. Linde only uses commonly traded and non-leveraged instruments. These contracts are entered into primarily with major banking institutions thereby minimizing the risk of credit loss. Also, see Note 1 and Note 12 to the consolidated financial statements for a more complete description of Linde’s accounting policies and use of such instruments.

The following discussion presents the sensitivity of the market value, earnings and cash flows of Linde’s financial instruments to hypothetical changes in interest and exchange rates assuming these changes occurred at December 31, 2020. The range of changes chosen for these discussions reflects Linde’s view of changes which are reasonably possible over a one-year period. Market values represent the present values of projected future cash flows based on interest rate and exchange rate assumptions.

Interest Rate Risk

At December 31, 2020, Linde had debt totaling $16,154 million ($13,956 million at December 31, 2019). For fixed-rate instruments, interest rate changes affect the fair market value but do not impact earnings or cash flows. Conversely, for floating-rate instruments, interest rate changes generally do not affect the fair market value of the instrument but impact future earnings and cash flows, assuming that other factors are held constant. At December 31, 2020, including the impact of derivatives, Linde had fixed-rate debt of $10,365 million and floating-rate debt of $5,789 million, representing 64% and 36%, respectively, of total debt. At December 31, 2019, Linde had fixed-rate debt of $10,799 million and floating-rate debt of $3,157 million, representing 77% and 23%, respectively, of total debt.

Fixed Rate Debt

In order to mitigate interest rate risk, when considered appropriate, interest-rate swaps are entered into as hedges of underlying financial instruments to effectively change the characteristics of the interest rate without actually changing the underlying financial instrument. At December 31, 2020, Linde had fixed-to-floating interest rate swaps outstanding that were designated as hedging instruments of the underlying debt issuances - refer to Note 12 to the consolidated financial statements for additional information. This sensitivity analysis assumes that, holding all other variables constant (such as foreign exchange rates, swaps and debt levels), a one hundred basis point increase in interest rates would decrease the unrealized fair market value of the fixed-rate debt portfolio by approximately $674 million ($473 million in 2019). A one hundred basis point increase in interest rates would result in an approximate $61 million increase to derivative assets recorded.

Variable Rate Debt

At December 31, 2020, the after-tax earnings and cash flows impact of a one hundred basis point increase in interest rates, including offsetting impact of derivatives, on the variable-rate debt portfolio would be approximately $44 million ($48 million in 2019).

Foreign Currency Risk

Linde’s exchange-rate exposures result primarily from its investments and ongoing operations in Latin America (primarily Brazil and Mexico), Europe (primarily Germany, Scandinavia, and the U.K.), Canada, Asia Pacific (primarily Australia and China) and other business transactions such as the procurement of equipment from foreign sources. Linde frequently utilizes currency contracts to hedge these exposures. At December 31, 2020, Linde had a notional amount outstanding of $7,553 million ($9,713 million at December 31, 2019) related to foreign exchange contracts. The majority of these were to hedge recorded balance sheet exposures, primarily intercompany loans denominated in non-functional currencies. See Note 12 to the consolidated financial statements.

Holding all other variables constant, if there were a 10% increase in foreign-currency exchange rates for the portfolio, the fair market value of foreign-currency contracts outstanding at December 31, 2020 would decrease by approximately $99 million and at December 31, 2019 would increase by approximately $194 million, which would be largely offset by an offsetting loss or gain on the foreign-currency fluctuation of the underlying exposure being hedged.

Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Management’s Statement of Responsibility for Financial Statements 48

Management’s Report on Internal Control Over Financial Reporting 48

Report of Independent Registered Public Accounting Firm 49

Audited Consolidated Financial Statements

Consolidated Balance Sheets as as of December 31, 2020 and 2019 53

Notes to Consolidated Financial Statements

Note 1. Summary of Significant Accounting Policies 58

Note 2. Business Combination and Divestitures 61

Note 3. Cost Reduction Programs and Other Charges 64

Note 4. Leases 66

Note 5. Income Taxes 67

Note 6. Earnings Per Share – Linde plc Shareholders 73

Note 7. Supplemental Information 73

Note 8. Property, Plant and Equipment – Net 77

Note 9. Goodwill 77

Note 10. Other Intangible Assets 78

Note 12. Financial Instruments 81

Note 13. Fair Value Disclosures 84

Note 14. Equity and Noncontrolling Interests 85

Note 15. Share-Based Compensation 87

Note 16. Retirement Programs 89

Note 17. Commitments and Contingencies 99

Note 18. Segment Information 100

Note 19. Revenue Recognition 102

Note 20. Subsequent Events 105

Table of Contents

MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS

Linde’s consolidated financial statements are prepared by management, which is responsible for their fairness, integrity and objectivity. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applied on a consistent basis, except for accounting changes as disclosed, and include amounts that are estimates and judgments. All historical financial information in this annual report is consistent with the accompanying financial statements.

Linde maintains accounting systems, including internal accounting controls, monitored by a staff of internal auditors, that are designed to provide reasonable assurance of the reliability of financial records and the protection of assets. The concept of reasonable assurance is based on recognition that the cost of a system should not exceed the related benefits. The effectiveness of those systems depends primarily upon the careful selection of financial and other managers, clear delegation of authority and assignment of accountability, inculcation of high business ethics and conflict-of-interest standards, policies and procedures for coordinating the management of corporate resources, and the leadership and commitment of top management. In compliance with Section 404 of the Sarbanes-Oxley Act of 2002, Linde assessed its internal control over financial reporting and issued a report (see below).

The Audit Committee of the Board of Directors, which consists solely of non-employee directors, is responsible for overseeing the functioning of the accounting system and related controls and the preparation of annual financial statements. The Audit Committee periodically meets with management, internal auditors and the independent accountants to review and evaluate their accounting, auditing and financial reporting activities and responsibilities, including management’s assessment of internal control over financial reporting. The independent registered public accounting firm and internal auditors have full and free access to the Audit Committee and meet with the committee, with and without management present.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Linde’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the company’s principal executive officer and principal financial officer, the company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (often referred to as COSO). Based on this evaluation, management concluded that the company’s internal control over financial reporting was effective as of December 31, 2020.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited and issued their opinion on the effectiveness of the company’s internal control over financial reporting as of December 31, 2020 as stated in their report.

/s/ STEPHEN F. ANGEL /s/ KELCEY E. HOYT

Stephen F. AngelChief Executive Officer Kelcey E. HoytChief Accounting Officer

/s/ MATTHEW J. WHITE

Matthew J. WhiteChief Financial Officer March 1, 2021

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Linde plc

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Linde plc and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Table of Contents

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue Recognition - Estimated Costs at Completion

As described in Note 19 to the consolidated financial statements, $2,851 million of the Company’s total revenues for the year ended December 31, 2020 was generated from the sale of equipment contracts. Sale of equipment contracts are generally comprised of a single performance obligation. Revenue from sale of equipment is generally recognized over time as the Company has an enforceable right to payment for performance completed to date and performance does not create an asset with alternative use. For contracts recognized over time, revenue is recognized primarily using a cost incurred input method. Costs incurred to date relative to total estimated costs at completion are used to measure progress toward satisfying performance obligations. Costs incurred include material, labor, and overhead costs and represent work contributing and proportionate to the transfer of control to the customer.

The principal considerations for our determination that performing procedures relating to revenue recognition - estimated costs at completion is a critical audit matter are (i) the significant judgment by management when developing the estimated costs at completion for the sale of equipment contracts; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to the estimated costs at completion and management’s significant assumptions related to the total estimated material and labor costs; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over developing the estimated costs at completion for the sale of equipment contracts. These procedures also included, among others, evaluating and testing management’s process for developing the estimated costs at completion for the sale of equipment contracts, which included evaluating the reasonableness of management’s significant assumptions related to the total estimated material and labor costs. Evaluating the reasonableness of management’s significant assumptions involved evaluating management’s ability to reasonably estimate costs at completion for the sale of equipment contracts on a sample basis by (i) performing a comparison of the originally estimated and actual costs incurred on similar completed equipment contracts, and (ii) evaluating the timely identification of circumstances that may warrant a modification to estimated costs at completion, including actual costs in excess of estimates. Professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of management’s estimates and significant assumptions related to the total estimated material and labor costs.

/s/ PricewaterhouseCoopers LLP

Stamford, Connecticut

March 1, 2021

We have served as the Company’s or its predecessor’s auditor since 1992.

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME

LINDE PLC AND SUBSIDIARIES

(Dollar amounts in millions, except per share data)

Cost of sales, exclusive of depreciation and amortization 15,383 16,644 9,020

Cost reduction programs and other charges 506 567 309

Net gain on sale of businesses — 164 3,294

Other income (expenses) – net (61) 68 18

Net pension and OPEB cost (benefit), excluding service cost (177) (32) (4)

Income taxes on continuing operations 847 769 817

Income From Continuing Operations Before Equity Investments 2,537 2,158 4,232

Income from equity investments 85 114 56

Income from discontinued operations, net of tax 4 109 117

Net Income (Including Noncontrolling Interests) 2,626 2,381 4,405

Less: noncontrolling interests from continuing operations (125) (89) (15)

Less: noncontrolling interests from discontinued operations — (7) (9)

Net Income – Linde plc

Income from discontinued operations $ 4 $ 102 $ 108

Per Share Data – Linde plc Shareholders

Basic earnings per share from continuing operations $ 4.74 $ 4.03 $ 12.93

Basic earnings per share from discontinued operations 0.01 0.19 0.33

Diluted earnings per share from continuing operations $ 4.70 $ 4.00 $ 12.79

Diluted earnings per share from discontinued operations 0.01 0.19 0.32

Weighted Average Shares Outstanding (000’s):

The accompanying Notes are an integral part of these financial statements.

LIN US Equity

LIN · 10-K · period ended 2020-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

LIN US Equity☆

LIN · 10-K · period ended 2020-12-31

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

LIN US Equity