10-QPeriod: Q1 FY2019

LINDE PLC Quarterly Report for Q1 Ended Mar 31, 2019

Filed May 10, 2019For Securities:LIN

Summary

Linde plc's first quarter 2019 10-Q filing reflects the significant impact of its merger with Praxair, which closed on October 31, 2018. While reported sales surged 133% due to the consolidation of the acquired entity, reported operating profit and EPS declined significantly due to merger-related costs, purchase accounting impacts, and a higher share count. However, a pro forma and adjusted pro forma analysis reveals a more stable underlying performance. Pro forma sales were flat year-over-year, indicating that underlying operational trends were largely consistent, while adjusted pro forma operating profit and EPS showed modest growth of 1% and 12%, respectively. The company is actively managing its balance sheet, indicated by substantial debt repayments and significant share repurchases under newly approved programs. Strategic divestitures related to anti-trust approvals are ongoing, with the sale of Linde AG's Americas business contributing $3.4 billion in cash during the quarter. The company's backlog for large projects under construction stands at $3.5 billion, signaling future revenue potential, primarily in the electronics, chemicals, and energy sectors. Management emphasizes the importance of pro forma and adjusted pro forma metrics for a comparable view of performance, given the transformative nature of the merger. Investors should focus on these non-GAAP measures to assess operational trends and the integration progress.

Financial Highlights

52 data points
Beta

Revenue

$6.94B

Net Income

$517.00M

7.4% Net Margin

EPS (Diluted)

$0.94

Total Assets

$91.64B

Cash & Equivalents

$5.79B

Free Cash Flow

$225.00M

Financial Statements
Beta
Revenue$6.94B
R&D Expenses$46.00M
SG&A Expenses$879.00M
Operating Income$609.00M
Net Income$517.00M
EPS (Basic)$0.95
EPS (Diluted)$0.94
Shares Outstanding (Basic)545.55M
Shares Outstanding (Diluted)549.15M

Key Highlights

  • 1The merger between Linde plc (formerly Linde AG) and Praxair was completed on October 31, 2018, significantly impacting reported financial results for Q1 2019.
  • 2Reported sales increased 133% to $6,944 million due to the merger, while reported operating profit decreased 7% to $609 million and reported diluted EPS from continuing operations fell 50% to $0.79.
  • 3Pro forma sales were flat year-over-year at $6,914 million, indicating stable underlying performance before merger accounting impacts.
  • 4Adjusted pro forma operating profit increased 1% to $1,222 million, and adjusted pro forma diluted EPS from continuing operations increased 12% to $1.69, suggesting positive operational momentum.
  • 5The company generated significant cash from investing activities ($2,460 million) driven by $3,455 million in divestitures and asset sales, primarily the sale of Linde AG's Americas business.
  • 6Linde plc repaid $1,027 million in net debt and repurchased $697 million of its shares during the quarter under new buyback programs.
  • 7The backlog for large projects under construction was $3.5 billion as of March 31, 2019, indicating future growth potential.

Frequently Asked Questions

The significant increase in reported sales is a direct result of the business combination with Praxair, which closed in late 2018. However, reported earnings per share have declined due to several factors, including substantial merger-related transaction costs, purchase accounting impacts (like increased depreciation and amortization from fair value adjustments), and a higher number of outstanding shares following the merger.

The pro forma and adjusted pro forma financial information is crucial because the reported results for Q1 2019 include the full combined entity, while Q1 2018 only reflects Praxair's standalone results. Pro forma figures assume the merger occurred at the beginning of 2017, providing a more comparable basis for year-over-year performance analysis. Adjusted pro forma figures further exclude specific merger-related costs and purchase accounting impacts, offering a clearer view of the ongoing operational performance and trends.

The company generated substantial cash from operating activities ($1,068 million) in the quarter. Notably, it received $3,455 million from divestitures, including the significant sale of Linde AG's Americas business. On the financing side, Linde plc repaid $1,027 million in net debt and repurchased $697 million of its ordinary shares under new, substantial share repurchase programs, indicating a focus on deleveraging and returning capital to shareholders.

The company's backlog of large projects under construction was $3.5 billion as of March 31, 2019. These projects are primarily focused on supplying customers in the electronics, chemicals, and energy end-markets, with the APAC and Americas regions representing the largest portions of this backlog. This backlog serves as an indicator of future sales growth.