01—Abstract
Summary
Summary of the 10-K filed March 18, 2019. Cited figures are marked; the original filing is the authoritative source.
Linde plc's 2018 10-K filing details the transformative business combination with Praxair, Inc. and Linde AG, completed on October 31, 2018, establishing Linde as a global leader in the industrial gases industry.
The company reported significant increases in sales and operating profit, largely driven by the merger. Despite the complexities of integrating the two entities and executing necessary divestitures to satisfy antitrust requirements, Linde demonstrated strong underlying sales growth from volume and pricing. Key financial highlights include a substantial increase in sales and operating profit, supported by operational improvements and strategic advantages from the merger.
The company has a robust backlog of large projects, indicating future growth potential. Linde also remains committed to returning capital to shareholders, with substantial share repurchase programs in place.
Investors should note the significant goodwill recognized from the merger and the ongoing integration efforts, which present both opportunities for synergy realization and potential risks. The company's financial position appears solid, with ample liquidity and a strong credit rating, though it is exposed to market risks such as currency fluctuations and energy price volatility.
02—Key points
Key Highlights
- Completed the transformative merger with Praxair, Inc. and Linde AG on October 31, 2018, creating the world's largest industrial gas company.
- Reported a 30% increase in sales to $14.9 billion in 2018, driven by the merger (24% contribution) and underlying sales growth of 6% (volume and price).
- Operating profit significantly increased by 115% to $5.2 billion, with adjusted operating profit up 19% year-over-year, reflecting merger synergies and operational performance.
- Income from continuing operations surged to $4.3 billion, with diluted EPS from continuing operations at $12.79, a substantial increase from $1.25 billion and $4.32 respectively in 2017.
- Ended 2018 with $4.5 billion in cash and cash equivalents, a significant increase from $0.6 billion in 2017, largely due to merger-related cash inflows and divestitures.
- Announced a $1.0 billion share repurchase program in December 2018, with an additional $6.0 billion program approved in January 2019.
- The company has a substantial backlog of $3.5 billion in large projects under construction, indicating a positive outlook for future growth.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed March 18, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $14.84B$11.36B | +30.6% |
| R&D Expenses | $113.00M$93.00M | +21.5% |
| SG&A Expenses | $1.63B$1.21B | +35.0% |
| Operating Income | $5.25B$2.44B | +114.7% |
| Interest Expense | $297.00M$230.00M | +29.1% |
| Net Income | $4.38B$1.25B | +251.3% |
| EPS (Basic) | $13.26$4.36 | +204.1% |
| EPS (Diluted) | $13.11$4.32 | +203.5% |
| Shares Outstanding (Basic) | 330.40M286.26M | +15.4% |
| Shares Outstanding (Diluted) | 334.13M289.11M | +15.6% |
05—Questions
Frequently Asked Questions
What was the primary driver of Linde's significant sales and profit increase in 2018?
The primary driver was the completion of the merger of equals with Praxair, Inc. and Linde AG on October 31, 2018. This business combination significantly expanded Linde's global footprint and operational scale, contributing substantially to sales and enabling realization of synergies.
What are the key risks and challenges associated with the Praxair-Linde AG merger?
The integration of two large, complex organizations presents significant challenges, including aligning strategies, unifying offerings, coordinating IT and administrative systems, managing cultural differences, and addressing potential unforeseen liabilities. The company also had to complete substantial divestitures to satisfy regulatory approvals, which adds another layer of complexity.
How did the merger impact Linde's financial statements and reporting?
Praxair was determined to be the accounting acquirer, so Praxair's historical financial statements were considered Linde's historical statements. Linde AG's results are included from the merger date forward, with purchase accounting adjustments applied. This resulted in a significant increase in assets, liabilities, goodwill, and reported revenue for 2018, with significant merger-related transaction costs also impacting earnings.
What is Linde's outlook for 2019, and what are the key indicators mentioned?
Linde's outlook for 2019 is supported by its backlog of large projects under construction, which stood at $3.5 billion at the end of 2018. These projects are primarily in the energy, chemical, and electronics sectors, and are expected to drive future sales growth across key geographies.
06—Continue