Cost Reduction Programs and Other Charges (Notes)

12 Months Ended

Dec. 31, 2020

Restructuring and Related Activities [Abstract]

Cost reduction programs and other charges

COST REDUCTION PROGRAMS AND OTHER CHARGES

Cost reduction programs and other charges were $506 million, $567 million, and $309 million for the 12 months ended December 31, 2020, 2019, and 2018, respectively. After tax and noncontrolling interests, charges were $372 million, $444 million, and $306 million for the same respective periods.

The following tables provide a summary of the pre-tax charges by reportable segment for the years ended December 31, 2020 and December 31, 2019.


	Year Ended December 31, 2020
(millions of dollars)	Severance costs		Other cost reduction charges		Total cost reduction program related charges		Merger related and other charges		Total
Americas	$	35	$	24	59		13		$	72
EMEA	131		21		152		3		155
APAC	7		2		9		3		12
Engineering	38		28		66		4		70
Other	87		18		105		92		197
Total	$	298	$	93	$	391	$	115	$	506


	Year Ended December 31, 2019
(millions of dollars)	Severance costs		Other cost reduction charges		Total cost reduction program related charges		Merger related and other charges		Total
Americas	$	36	$	20	56		34		$	90
EMEA	105		16		121		21		142
APAC	40		10		50		72		122
Engineering	1		12		13		(9)		4
Other	22		42		64		145		209
Total	$	204	$	100	$	304	$	263	$	567

Cost Reduction Programs

In 2019, Linde initiated a cost reduction program, which represents charges of achieving synergies and cost efficiencies expected from the merger of Praxair and Linde AG (see Note 2). Total charges related to the cost reduction programs were $391 million ($277 million, after tax and noncontrolling interests) and $304 million ($233 million, after tax) for the years ended December 31, 2020 and December 31, 2019, respectively.

Severance costs

During the year ended December 31, 2020, severance costs of $298 million were recorded for the elimination of approximately 3,100 positions. Severance costs of $204 million for the year ended December 31, 2019 were recorded for the elimination of approximately 2,400 positions. As of December 31, 2020, the majority of the actions have been taken, with the remaining actions anticipated to be completed within the next 12 months.

Other cost reduction charges

Other cost reduction charges were $93 million and $100 million for the years ended December 31, 2020 and December 31, 2019, respectively. These amounts primarily represent 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

Merger-related costs and other charges were $115 million ($95 million, after tax), $263 million ($211 million, after tax and noncontrolling interests), and $309 million ($306 million, after tax and noncontrolling interests) for the years ended December 31, 2020, 2019, and 2018, respectively. 2019 includes 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. 2018 includes other charges of $73 million comprised of the following; (i) a $40 million charge ($40 million, after-tax) related to an unfavorable development related to a supplier contract in China, (ii) restructuring charges of $21 million ($18 million, after-tax) and (iii) a $12 million charge ($12 million, after-tax) associated with the transition to hyper-inflationary accounting in Argentina.

Cash Requirements

Total cash requirements of the cost reduction program and other charges during the twelve months ended December 31, 2020 are estimated to be approximately $390 million, of which $221 million was paid through December 31, 2020.

Remaining cash requirements are expected to be paid through 2023. Total cost reduction programs and other charges, net of payments in the consolidated statements of cash flows for the twelve months ended December 31, 2020 and 2019 also reflect the impact of cash payments of liabilities, including merger-related tax liabilities, accrued as of December 31, 2019 and 2018, respectively.

The following table summarizes the activities related to the company's cost reduction programs and other charges during 2019 and 2020:


(millions of dollars)	Severance costs		Other cost reduction charges		Total cost reduction program related charges		Merger related and other charges		Total
2019 Cost Reduction Programs and Other Charges	$	204	$	100	304		$	263	$	567
Less: Cash payments	(91)		(57)		(148)		(112)		(260)
Less: Non-cash charges	—		(21)		(21)		(78)		(99)
Foreign currency translation and other	4		(6)		(2)		(6)		(8)
Balance, December 31, 2019	$	117	$	16	$	133	$	67	$	200
2020 Cost Reduction Programs and Other Charges	298		93		391		115		506
Less: Cash payments	(156)		(20)		(176)		(45)		(221)
Less: Non-cash charges	—		(68)		(68)		(82)		(150)
Foreign currency translation and other	24		1		25		9		34
Balance, December 31, 2020	$	283	$	22	$	305	$	64	$	369

Classification in the consolidated financial statements

The pre-tax charges for each year are shown within operating profit in a separate line item on the consolidated statements of income. In the consolidated balance sheets, reductions in assets are recorded against the carrying value of the related assets and unpaid amounts are recorded as other current or long-term liabilities (see Note 7). On the consolidated statements of cash flows, the pre-tax impact of these charges, net of cash payments, is shown as an adjustment to reconcile net income to net cash provided by operating activities. In Note 18 Segment Information, Linde excluded these charges 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.