Cost Reduction Programs and Other Charges

9 Months Ended

Sep. 30, 2020

Restructuring and Related Activities [Abstract]

Cost Reduction Programs and Other Charges

2020 Charges

Cost reduction programs and other charges were $48 million and $428 million for the quarter and nine months ended September 30, 2020, respectively ($36 million and $318 million, after tax). The following table summarizes the activities related to the company's cost reduction charges for the quarter and nine months ended September 30, 2020:


	Quarter Ended September 30, 2020
(millions of dollars)	Severance costs		Other cost reduction charges		Total cost reduction program related charges		Merger-related and other charges		Total
Americas	$	2	$	—	$	2	$	6	$	8
EMEA	17		4		21		5		26
APAC	2		—		2		—		2
Engineering	1		(1)		—		—		—
Other	9		5		14		(2)		12
Total	$	31	$	8	$	39	$	9	$	48

	Nine Months Ended September 30, 2020
(millions of dollars)	Severance costs		Other cost reduction charges		Total cost reduction program related charges		Merger-related and other charges		Total
Americas	$	33	$	23	$	56	$	12	$	68
EMEA	155		8		163		5		168
APAC	5		2		7		3		10
Engineering	22		6		28		8		36
Other	66		10		76		70		146
Total	$	281	$	49	$	330	$	98	$	428

Cost Reduction Programs

Total cost reduction program related charges were $39 million and $330 million for the quarter and nine months ended September 30, 2020, respectively ($29 million and $236 million, after tax).

Severance costs

Severance costs were $31 million and $281 million for the quarter and nine months ended September 30, 2020, respectively. As of September 30, 2020 these actions were substantially complete, with the remainder anticipated to be completed during 2021.

Other cost reduction charges

Other cost reduction charges of $8 million and $49 million for the quarter and nine months ended September 30, 2020, respectively, are primarily charges related to the execution of the company's synergistic actions including location consolidations and business rationalization projects, software and process harmonization, and associated non-recurring costs.

Merger-related Costs and Other Charges

Linde incurred merger-related costs and other charges which totaled $9 million and $98 million ($7 million and $82 million, after tax) for the quarter and nine months ended September 30, 2020, respectively.

Cash Requirements

The total cash requirements of the cost reduction program and other charges during the nine months ended September 30, 2020 are estimated to be approximately $338 million and are expected to be paid through 2022. Total cost reduction programs and other charges, net of payments in the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 also reflects the impact of cash payments of liabilities, including merger-related tax liabilities, accrued as of December 31, 2019.

The following table summarizes the activities related to the company's cost reduction related charges for the nine months ended September 30, 2020:


(millions of dollars)	Severance costs		Other cost reduction charges		Total cost reduction program related charges		Merger-related and other charges		Total




Balance, December 31, 2019	$	117	$	16	$	133	$	67	$	200
2020 Cost Reduction Programs and Other Charges	281		49		330		98		428
Less: Cash payments	(103)		(13)		(116)		(45)		(161)
Less: Non-cash charges	—		(32)		(32)		(71)		(103)
Foreign currency translation and other	8		1		9		4		13
Balance, September 30, 2020	$	303	$	21	$	324	$	53	$	377

2019 Charges

Cost reduction programs and other charges were $125 million and $355 million for the quarter and nine months ended September 30, 2019, respectively ($90 million and $284 million, after tax), including merger-related and other charges of $92 million and $213 million for the quarter and nine months ended September 30, 2019, respectively ($64 million and $169 million, after tax and noncontrolling interest) and synergy-related charges, primarily severance, of $33 million and $142 million for the quarter and nine months ended September 30, 2019, respectively ($26 million and $115 million, after tax). Merger-related and other charges for the third quarter and nine month period include other charges for an asset impairment related to a joint venture in APAC of approximately $73 million ($42 million, after tax and noncontrolling interests) resulting from an unfavorable arbitration ruling.

Classification in the condensed consolidated financial statements

The costs are shown within operating profit in a separate line item on the consolidated statements of income. On the condensed consolidated statement of cash flows, the impact of these costs, net of cash payments, is shown as an adjustment to reconcile net income to net cash provided by operating activities. In Note 10 - Segments, Linde excluded these costs from its management definition of segment operating profit; a reconciliation of segment operating profit to consolidated operating profit is shown within the segment operating profit table.