- Solid financial performance
- Sales of $2.8 billion, 6% above
prior-year quarter
- Strong operating cash flow, 25% of
sales
- Free cash flow of $0.4 billion, 8%
above prior-year quarter
- EPS of $1.41, up 1% vs. prior-year
quarter; adjusted EPS of $1.46, up 5%
- Continued focus on execution of our
core strategy
- Volume growth +3%, price attainment
+1% vs. prior-year quarter
- Project start-ups in China, Korea
and Canada
- Backlog $1.4 billion; includes new
project win in U.S. Gulf Coast
- Continued progress on merger with
Linde AG
- Signed definitive Business
Combination Agreement on June 1, 2017
Praxair, Inc. (NYSE: PX) reported second-quarter net income and
diluted earnings per share of $406 million and $1.41, respectively.
These results include transaction costs of $15 million after-tax,
or 5 cents of diluted earnings per share, related to the potential
Linde AG merger. Excluding this charge, adjusted net income and
diluted earnings per share were $421 million and $1.46,
respectively.
Praxair’s sales in the second quarter were $2,834 million, 6%
above the prior-year quarter. Excluding cost pass-through, sales
grew 4%, driven by higher volumes in North America, Europe and
Asia, including new project start-ups, and price attainment. Sales
growth was primarily led by electronics, chemicals, metals, energy
and food and beverage end-markets.
Reported operating profit in the second quarter was $604
million, 3% above the prior-year quarter. Excluding the current
quarter impact of transaction costs, adjusted operating profit was
$619 million, 5% above the prior-year quarter. Reported operating
profit as a percentage of sales was 21.3%. Adjusted operating
profit as a percentage of sales was 21.8%. EBITDA margin was 32.0%
and adjusted EBITDA margin was 32.5%.
The company generated strong second-quarter cash flow from
operations of $701 million, 25% of sales. After capital
expenditures of $325 million, free cash flow was $376 million, up
8% over the prior-year quarter. The company paid $225 million of
dividends.
Commenting on the financial results and business outlook,
Chairman and Chief Executive Officer Steve Angel said, “Our second
quarter results reflect Praxair employees’ ability to execute our
core strategy and deliver high-quality results. Adjusted operating
profit growth of 5% outpaced underlying sales growth of 4%, and
generated strong operating cash flow of 25% of sales.
“The second quarter continued to reflect broad-based demand
across all end-markets, but as anticipated, revealed further
weakness in South America. In addition, we added to our project
backlog another long-term on-site supply agreement with a
petrochemical customer in the U.S. Gulf Coast which will further
strengthen our network in the region. Including this new win, over
80% of our $1.4 billion project backlog now relates to the U.S.
Gulf Coast and we remain confident in our ability to win additional
projects.
“Furthermore, during the second quarter we announced the signing
of a business combination agreement between Praxair and Linde AG.
This was an important milestone toward creating significant value
for our stakeholders. We are currently working closely with
regulators and shareholders to obtain the appropriate approvals and
will provide a more detailed progress update in the coming
months.
“Looking ahead, we are taking a more measured view as we do not
anticipate significant underlying economic improvement in the
second half of the year. In the U.S., aggregate customer demand has
yet to match recent economic expectations and South America,
specifically Brazil, continues to face political challenges that
undermine the economy. Conversely, we expect Europe to remain
stable, Asia to moderately grow and new project start-ups to
contribute towards the latter part of the year. However, regardless
of the economy, Praxair’s relentless focus on operational
excellence and financial discipline will continue to deliver strong
cash flow and earnings per share for our shareholders.”
For the third quarter of 2017, Praxair expects diluted earnings
per share in the range of $1.40 to $1.46, excluding transaction
costs related to the potential merger.
For full-year 2017, Praxair expects adjusted diluted earnings
per share to be in the range of $5.63 to $5.75. This full-year
guidance excludes transaction costs related to the potential
merger. GAAP diluted earnings per share are expected to be in the
range of $5.56 to $5.68 which includes $0.07 per diluted share for
the first and second quarter transaction costs and excludes future
transaction costs related to the potential merger. Full-year
capital expenditures are expected to be approximately $1.4
billion.
Following is additional detail on second-quarter 2017 results by
segment.
In North America, second-quarter sales were $1,505 million, 4%
above the prior-year quarter excluding cost-pass through and
currency. Sales growth was driven primarily by stronger volumes to
chemical, manufacturing and electronic end-markets and higher
price. Operating profit was $378 million, 5% above the prior-year
quarter.
In Europe, second-quarter sales were $383 million, 8% above the
prior-year quarter. Excluding negative currency, sales grew 10%
from the prior-year due to higher volumes including project
start-ups, price and an acquisition primarily related to the carbon
dioxide business largely serving the food and beverage end-market.
Operating profit was $73 million.
In South America, second-quarter sales were $373 million, 4%
above the prior-year quarter. Excluding positive currency
translation and cost pass-through, sales were 3% below the
prior-year quarter due to lower volumes driven by continued weak
macro-economic conditions, largely in manufacturing. Operating
profit was $63 million.
Sales in Asia were $422 million in the quarter, up 7% from the
prior-year. Excluding a prior-year net divestiture, sales grew 11%
driven by higher volumes in China, India and Korea, primarily in
the electronics, metals and chemicals end-markets and price
attainment. Operating profit was $80 million, 19% above the
prior-year quarter.
Praxair Surface Technologies had second-quarter sales of $151
million as compared to $148 million in the prior-year quarter.
Excluding negative currency translation, sales were 4% above the
prior-year period driven by 2% volume growth, largely aerospace
coatings, and 2% growth from acquisitions. Operating profit was $25
million.
About Praxair
Praxair, Inc., a Fortune 300 company with 2016 sales of $11
billion, is a leading industrial gas company in North and South
America and one of the largest worldwide. The company produces,
sells and distributes atmospheric, process and specialty gases, and
high-performance surface coatings. Praxair products, services and
technologies are making our planet more productive by bringing
efficiency and environmental benefits to a wide variety of
industries, including aerospace, chemicals, food and beverage,
electronics, energy, healthcare, manufacturing, primary metals and
many others. More information about Praxair, Inc. is available at
www.praxair.com.
Adjusted amounts, EBITDA, free cash flow and after-tax return on
capital are non-GAAP measures. See the attachments for a summary of
non-GAAP reconciliations and calculations of non-GAAP measures.
Attachments: Summary Non-GAAP Reconciliations, Statements of
Income, Balance Sheets, Statements of Cash Flows, Segment
Information, Quarterly Financial Summary and Appendix: Non-GAAP
Measures.
A teleconference about Praxair’s second-quarter results is being
held this morning, July 27, 2017 at 11:00 am Eastern Time. The
number is (631) 485-4849 – Conference ID: 48847647. The call is
also available as a webcast live and on-demand at
www.praxair.com/investors. Materials to be used in the
teleconference are also available on the website.
Additional Information and Where to Find It
In connection with the proposed business combination between
Praxair, Inc. (“Praxair”) and Linde AG (“Linde”), Linde plc (“New
Holdco”) has filed a Registration Statement on Form S-4 (which
Registration Statement has not yet been declared effective) with
the U.S. Securities and Exchange Commission (“SEC”) that includes
(1) a proxy statement of Praxair that also constitutes a prospectus
for New Holdco and (2) an offering prospectus of New Holdco to be
used in connection with New Holdco’s offer to acquire Linde shares
held by U.S. holders. Once the Registration Statement is declared
effective by the SEC, Praxair will mail the proxy
statement/prospectus to its stockholders in connection with the
vote to approve the merger of Praxair and an indirect wholly-owned
subsidiary of New Holdco, and New Holdco will distribute the
offering prospectus to Linde shareholders in the United States in
connection with New Holdco’s offer to acquire all of the
outstanding shares of Linde. New Holdco will also file an offer
document with the German Federal Financial Supervisory Authority
(Bundesanstalt fuer Finanzdienstleistungsaufsicht) (“BaFin”). The
consummation of the proposed business combination is subject to
regulatory approvals and other customary closing conditions.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND THE OFFER DOCUMENT REGARDING THE PROPOSED
BUSINESS COMBINATION TRANSACTION AND PROPOSED OFFER BECAUSE THEY
CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of
the proxy statement/prospectus and other related documents filed by
Praxair, Linde and New Holdco with the SEC on the SEC’s Web site at
www.sec.gov. The proxy statement/prospectus and other documents
relating thereto may also be obtained for free by accessing
Praxair’s Web site at www.praxair.com. Following approval of its
publication by the BaFin, the offer document will be made available
for free at New Holdco's website at www.lindepraxairmerger.com.
Furthermore, the offer document is expected to be made available at
BaFin's website for free at www.bafin.de.
This document is neither an offer to purchase nor a solicitation
of an offer to sell shares of New Holdco, Praxair or Linde. The
final terms and further provisions regarding the public offer will
be disclosed in the offer document after the publication has been
approved by the BaFin and in documents that will be filed with the
SEC. No money, securities or other consideration is being
solicited, and, if sent in response to the information contained
herein, will not be accepted. The information contained herein
should not be considered as a recommendation that any person should
subscribe for or purchase any securities.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of the U.S. Securities Act of
1933, as amended, and applicable European and German regulations.
The distribution of this document may be restricted by law in
certain jurisdictions and persons into whose possession any
document or other information referred to herein come should inform
themselves about and observe any such restrictions. Any failure to
comply with these restrictions may constitute a violation of the
securities laws of any such jurisdiction. No offering of securities
will be made directly or indirectly, in or into any jurisdiction
where to do so would be inconsistent with the laws of such
jurisdiction.
Participants in Solicitation
Praxair, Linde, New Holdco and their respective directors and
executive officers may be deemed to be participants in the
solicitation of proxies from Praxair’s stockholders in respect of
the proposed business combination. Information regarding the
persons who are, under the rules of the SEC, participants in the
solicitation of the stockholders of Praxair in connection with the
proposed transaction, including a description of their direct or
indirect interests, by security holdings or otherwise, are set
forth in the proxy statement/prospectus filed with the SEC.
Information regarding the directors and executive officers of
Praxair is contained in Praxair’s Annual Report on Form 10-K for
the year ended December 31, 2016 and its Proxy Statement on
Schedule 14A, dated March 15, 2017, which are filed with the SEC
and can be obtained free of charge from the sources indicated
above.
Forward-looking Statements
This document contains “forward-looking
statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. These statements are based on management’s
reasonable expectations and assumptions as of the date the
statements are made but involve risks and uncertainties. These
risks and uncertainties include, without limitation: the expected
timing and likelihood of the completion of the contemplated
business combination with Linde AG, including the timing, receipt
and terms and conditions of any required governmental and
regulatory approvals that could reduce anticipated benefits or
cause the parties to abandon the transaction; the occurrence of any
event, change or other circumstances that could give rise to the
termination of the business combination agreement; the ability to
successfully complete the proposed business combination and the
exchange offer, including satisfying closing conditions; the
success of the business following the proposed business
combination; the ability to successfully integrate the Praxair and
Linde businesses; the possibility that Praxair stockholders may not
approve the business combination agreement or that the requisite
number of Linde shares may not be tendered in the public offer; the
risk that the combined company may be unable to achieve expected
synergies or that it may take longer or be more costly than
expected to achieve those synergies; the performance of stock
markets generally; developments in worldwide and national economies
and other international events and circumstances; changes in
foreign currencies and in interest rates; the cost and availability
of electric power, natural gas and other raw materials; the ability
to achieve price increases to offset cost increases; catastrophic
events including natural disasters, epidemics and acts of war and
terrorism; the ability to attract, hire, and retain qualified
personnel; the impact of changes in financial accounting standards;
the impact of changes in pension plan liabilities; the impact of
tax, environmental, healthcare and other legislation and government
regulation in jurisdictions in which the company operates; the cost
and outcomes of investigations, litigation and regulatory
proceedings; the impact of potential unusual or non-recurring
items; continued timely development and market acceptance of new
products and applications; the impact of competitive products and
pricing; future financial and operating performance of major
customers and industries served; the impact of information
technology system failures, network disruptions and breaches in
data security; and the effectiveness and speed of integrating new
acquisitions into the business. These risks and uncertainties may
cause actual future results or circumstances to differ materially
from the GAAP or adjusted projections or estimates contained in the
forward-looking statements. The company assumes no obligation to
update or provide revisions to any forward-looking statement in
response to changing circumstances. The above listed risks and
uncertainties are further described in Item 1A (Risk Factors) in
the company’s latest Annual Report on Form 10-K filed with the SEC
and in the proxy statement/prospectus and the offering prospectus
included in the Registration Statement on Form S-4 (which
Registration Statement has not yet been declared effective) filed
by New Holdco with the SEC which should be reviewed carefully.
Please consider the company’s forward-looking statements in light
of those risks.
PRAXAIR, INC. AND SUBSIDIARIES SUMMARY NON-GAAP
RECONCILIATIONS (UNAUDITED)
The following adjusted amounts
are Non-GAAP measures and are intended to supplement investors'
understanding of the company's financial statements by providing
measures which investors, financial analysts and management use to
help evaluate the company's operating performance. Items which the
company does not believe to be indicative of on-going business
trends 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. See the
Non-GAAP reconciliations starting on page 11 for additional details
relating to the Non-GAAP adjustments. (Millions of dollars,
except per share amounts)
Sales Operating
Profit Net Income - Praxair, Inc. Diluted EPS
2017
2016
2017
2016
2017
2016
2017
2016
Quarter Ended
June 30
Reported GAAP Amounts $ 2,834 $ 2,665 $ 604 $ 588 $ 406 $ 399 $
1.41 $ 1.39 Transaction costs (a) - -
15 - 15 -
0.05 - Total adjustments -
- 15 - 15
- 0.05 - Adjusted amounts $
2,834 $ 2,665 $ 619 $ 588 $ 421
$ 399 $ 1.46 $ 1.39
Year To Date June
30
Reported GAAP Amounts $ 5,562 $ 5,174 $ 1,186 $ 1,142 $ 795 $ 755 $
2.76 $ 2.63 Transaction costs (a) - - 21 - 21 - 0.07 - Bond
redemption (b) - - -
- - 10 -
0.04 Total adjustments - -
21 - 21 10
0.07 0.04 Adjusted amounts $ 5,562 $
5,174 $ 1,207 $ 1,142 $ 816 $ 765
$ 2.83 $ 2.67 (a) Charges in the 2017 first
and second quarters for transaction costs related to the potential
Linde merger. (b) Charge to interest expense in the 2016 first
quarter related to a bond redemption.
PRAXAIR,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except per share data)
(UNAUDITED)
Quarter Ended Year to Date June 30, June
30, 2017 2016 2017 2016
SALES $ 2,834 $ 2,665 $ 5,562 $ 5,174 Cost of sales 1,598
1,468 3,143 2,849 Selling, general and administrative 308 308 587
582 Depreciation and amortization 292 281 579 553 Research and
development 23 24 46 47 Transaction costs and other charges 15 - 21
- Other income (expense) - net 6 4
- (1 )
OPERATING PROFIT 604 588 1,186
1,142 Interest expense - net 38 44
79 109
INCOME BEFORE INCOME TAXES
AND EQUITY INVESTMENTS 566 544 1,107 1,033 Income taxes
157 146 306 279
INCOME BEFORE EQUITY INVESTMENTS 409 398 801 754 Income from
equity investments 11 11 23
21
NET INCOME (INCLUDING NONCONTROLLING
INTERESTS) 420 409 824 775 Less: noncontrolling interests
(14 ) (10 ) (29 ) (20 )
NET INCOME -
PRAXAIR, INC. $ 406 $ 399 $ 795 $ 755
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
Basic earnings per share $ 1.42 $ 1.40 $ 2.78 $ 2.64
Diluted earnings per share $ 1.41 $ 1.39 $ 2.76 $ 2.63 Cash
dividends $ 0.7875 $ 0.75 $ 1.575 $ 1.50
WEIGHTED AVERAGE
SHARES OUTSTANDING Basic shares outstanding (000's) 286,090
285,702 285,799 285,566 Diluted shares outstanding (000's) 288,535
287,727 288,067 287,426 Note: See page 5 for a
reconciliation to 2017 adjusted amounts which are Non-GAAP.
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Millions of dollars) (UNAUDITED)
June 30, December 31, 2017
2016 ASSETS Cash and cash equivalents $ 535 $ 524
Accounts receivable - net 1,791 1,641 Inventories 568 550 Prepaid
and other current assets 225 165
TOTAL CURRENT ASSETS 3,119 2,880 Property, plant and
equipment - net 11,806 11,477 Goodwill 3,182 3,117 Other
intangibles - net 568 583 Other long-term assets 1,290
1,275
TOTAL ASSETS $ 19,965 $
19,332
LIABILITIES AND EQUITY Accounts payable
$ 900 $ 906 Short-term debt 280 434 Current portion of long-term
debt 910 164 Other current liabilities 953 974
TOTAL CURRENT LIABILITIES 3,043 2,478 Long-term debt
8,177 8,917 Other long-term liabilities 2,475
2,485
TOTAL LIABILITIES 13,695 13,880
REDEEMABLE NONCONTROLLING INTERESTS 10 11
PRAXAIR,
INC. SHAREHOLDERS' EQUITY: Common stock 4 4 Additional paid-in
capital 4,076 4,074 Retained earnings 13,223 12,879 Accumulated
other comprehensive income (loss) (4,244 ) (4,600 ) Less: Treasury
stock, at cost (7,252 ) (7,336 ) Total Praxair, Inc.
Shareholders' Equity 5,807 5,021 Noncontrolling interests
453 420
TOTAL EQUITY 6,260
5,441
TOTAL LIABILITIES AND EQUITY $
19,965 $ 19,332
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions
of dollars) (UNAUDITED) Quarter Ended
Year to Date June 30, June 30, 2017
2016 2017 2016 OPERATIONS Net income -
Praxair, Inc. $ 406 $ 399 $ 795 $ 755 Noncontrolling interests
14 10 29 20
Net income (including noncontrolling interests) 420 409 824 775
Adjustments to reconcile net income to net cash provided by
operating activities: Transaction costs and other charges, net of
payments 11 - 17 - Depreciation and amortization 292 281 579 553
Accounts Receivable (46 ) (41 ) (95 ) (61 ) Inventory (3 ) (1 ) (5
) (8 ) Payables and accruals 18 14 (24 ) (63 ) Pension
contributions (3 ) (4 ) (6 ) (6 ) Deferred income taxes and other
12 48 121 69
Net cash provided by operating activities 701
706 1,411 1,259
INVESTING Capital expenditures (325 ) (357 ) (652 ) (680 )
Acquisitions, net of cash acquired (1 ) (262 ) (2 ) (325 )
Divestitures and asset sales 13 6
17 8 Net cash used for investing
activities (313 ) (613 ) (637 ) (997 )
FINANCING Debt increase (decrease) - net (132 ) 595
(305 ) 690 Issuances of common stock 44 26 70 60 Purchases of
common stock - (51 ) (11 ) (83 ) Cash dividends - Praxair, Inc.
shareholders (225 ) (214 ) (450 ) (428 ) Noncontrolling interest
transactions and other (71 ) (107 ) (84 )
(109 ) Net cash provided by (used for) financing activities
(384 ) 249 (780 ) 130 Effect of exchange rate changes on
cash and cash equivalents 12 4
17 28 Change in cash and cash
equivalents 16 346 11 420 Cash and cash equivalents,
beginning-of-period 519 221 524
147 Cash and cash equivalents,
end-of-period $ 535 $ 567 $ 535 $ 567
PRAXAIR,
INC. AND SUBSIDIARIES SEGMENT INFORMATION (Millions
of dollars) (UNAUDITED) Quarter
Ended Year to Date June 30, June 30,
2017 2016 2017 2016 SALES North
America $ 1,505 $ 1,411 $ 2,963 $ 2,764 Europe 383 355 739 675
South America 373 358 742 669 Asia 422 393 817 769 Surface
Technologies 151 148 301
297 Consolidated sales $ 2,834 $ 2,665 $ 5,562 $
5,174
OPERATING PROFIT North America $ 378 $ 359 $
735 $ 708 Europe 73 68 139 130 South America 63 70 127 125 Asia 80
67 155 130 Surface Technologies 25 24
51 49 Segment operating profit $ 619 $ 588 $ 1,207 $
1,142 Transaction costs and other charges (15 ) -
(21 ) - Total operating profit $ 604 $ 588 $
1,186 $ 1,142
PRAXAIR, INC. AND
SUBSIDIARIES QUARTERLY FINANCIAL SUMMARY (Millions of
dollars, except per share data) (UNAUDITED)
2017 (b) 2016 (c)
Q2 Q1 Q4 Q3 Q2 Q1 FROM
THE INCOME STATEMENT Sales $ 2,834 $ 2,728 $ 2,644 $ 2,716 $
2,665 $ 2,509 Cost of sales 1,598 1,545 1,478 1,533 1,468 1,381
Selling, general and administrative 308 279 272 291 308 274
Depreciation and amortization 292 287 285 284 281 272 Research and
development 23 23 23 22 24 23 Transaction costs and other charges
15 6 - 100 - - Other income (expense) - net 6
(6 ) 13 11 4 (5 )
Operating profit 604 582 - 599 497 588 554 Interest expense - net
38 41 38 43 44 65 Income taxes 157 149 152 120 146 133 Income from
equity investments 11 12 10
10 11 10 Net
income (including noncontrolling interests) 420 404 # 419 344 409
366 Less: noncontrolling interests (14 ) (15 )
(13 ) (5 ) (10 ) (10 ) Net income - Praxair,
Inc. $ 406 $ 389 $ 406 $ 339 $ 399
$ 356 PER SHARE DATA - PRAXAIR, INC.
SHAREHOLDERS Diluted earnings per share $ 1.41 $ 1.35 $ 1.41 $ 1.18
$ 1.39 $ 1.24 Cash dividends per share $ 0.7875 $ 0.7875 $ 0.75 $
0.75 $ 0.75 $ 0.75 Diluted weighted average shares outstanding
(000's) 288,535 287,384 287,956 288,195 287,727 286,665
ADJUSTED AMOUNTS (a) Operating profit $ 619 $ 588 $ 599 $
597 $ 588 $ 554 Operating margin 21.8 % 21.6 % 22.7 % 22.0 % 22.1 %
22.1 % Net Income $ 421 $ 395 $ 406 $ 405 $ 399 $ 366 Diluted
earnings per share $ 1.46 $ 1.37 $ 1.41 $ 1.41 $ 1.39 $ 1.28
FROM THE BALANCE SHEET Net debt (a) $ 8,832 $ 8,849 $ 8,991
$ 9,215 $ 9,389 $ 9,183 Capital (a) $ 15,102 $ 14,824 $ 14,443 $
14,864 $ 14,948 $ 14,607
FROM THE STATEMENT OF CASH
FLOWS Cash flow from operations $ 701 $ 710 $ 726 $ 788 $ 706 $
553 Cash flow provided by (used for) investing activities (313 )
(324 ) (410 ) (363 ) (613 ) (384 ) Cash flow provided by (used for)
financing activities (384 ) (396 ) (411 ) (362 ) 249 (119 ) Capital
expenditures 325 327 409 376 357 323 Acquisitions 1 1 18 20 262 63
Cash dividends 225 225 214 214 214 214
OTHER
INFORMATION After-tax return on capital (ROC) (a) 11.5 % 11.5 %
11.5 % 11.6 % 12.1 % 11.5 % Adjusted after-tax ROC (a) 12.1 % 12.0
% 12.0 % 12.1 % 12.2 % 12.4 % EBITDA (a) 907 881 894 791 880 836
EBITDA margin (a) 32.0 % 32.3 % 33.8 % 29.1 % 33.0 % 33.3 %
Adjusted EBITDA (a) $ 922 $ 887 $ 894 $ 891 $ 880 $ 836 Adjusted
EBITDA margin (a) 32.5 % 32.5 % 33.8 % 32.8 % 33.0 % 33.3 % Number
of employees 26,487 26,420 26,498 26,680 26,896 26,558
SEGMENT DATA SALES North America $ 1,505 $ 1,458 $ 1,397 $
1,431 $ 1,411 $ 1,353 Europe 383 356 351 366 355 320 South America
373 369 352 378 358 311 Asia 422 395 395 391 393 376 Surface
Technologies 151 150 149
150 148 149 Total sales $
2,834 $ 2,728 $ 2,644 $ 2,716 $ 2,665
$ 2,509 OPERATING PROFIT North America $ 378 $ 357 $
359 $ 363 $ 359 $ 349 Europe 73 66 71 72 68 62 South America 63 64
64 68 70 55 Asia 80 75 78 68 67 63 Surface Technologies 25
26 27 26 24
25 Segment operating profit 619 588 599 597
588 554 Transaction costs and other charges (15 ) (6
) - (100 ) - -
Total operating profit $ 604 $ 582 # $ 599 $
497 $ 588 $ 554 (a) Non-GAAP
measure, see Appendix. (b) 2017 includes (i) an after-tax
charge of $6 million ($0.02 per diluted share) in the first quarter
for transaction costs related to the potential Linde merger and
(ii) an after-tax charge of $15 million ($0.05 per diluted share)
in the second quarter for transaction costs related to the
potential Linde merger. (c) 2016 includes (i) a $16 million
charge to interest expense ($10 million after-tax, or $0.04 per
diluted share) in the first quarter related to the redemption of
the $325 million 5.20% notes due 2017, (ii) a pre-tax pension
settlement charge of $4 million ($3 million after-tax, or $0.01 per
diluted share) in the third quarter related to lump sum benefit
payments made from the U.S. supplemental pension plan, and (iii)
pre-tax charges of $96 million ($63 million after-tax and
non-controlling interests, or $0.22 per diluted share) in the third
quarter, primarily related to cost reduction actions.
PRAXAIR, INC. AND SUBSIDIARIES APPENDIX NON-GAAP
MEASURES (Millions of dollars, except per share data)
(UNAUDITED)
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, return on capital and operating
performance. Items which the company does not believe to be
indicative of on-going business trends 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. Adjusted amounts exclude the
impacts of the 2017 first and second quarter transaction costs,
2016 third quarter cost reduction program and pension settlement,
2016 first quarter bond redemption, 2015 third quarter cost
reduction program and pension settlement, and 2015 second quarter
cost reduction program and other charges.
Adjusted
Amounts
Year-to-date June 30,
Second Quarter First Quarter Year Third
Quarter First Quarter Year Third Quarter
Second Quarter
2017 2017 2017 2016 2016
2016 2015 2015 2015
Adjusted
Operating Profit and Operating Profit Margin
Reported operating profit $ 1,186 $ 604 $ 582 $ 2,238 $ 497 $ 554 $
2,321 $ 594 $ 480 Add: Cost reduction program and other charges - -
- 96 96 - 165 19 146 Add: Pension settlement charge - - - 4 4 - 7 7
- Add: Transaction costs 21 15 6
- - - -
- - Total adjustments 21
15 6 100
100 - 172 26
146 Adjusted operating profit $ 1,207 $ 619
$ 588 $ 2,338 $ 597 $ 554 $
2,493 $ 620 $ 626 Reported percentage
change 4 % 3 % Adjusted percentage change 6 % 5 % Reported
sales $ 5,562 $ 2,834 $ 2,728 $ 10,534 $ 2,716 $ 2,509 $ 10,776 $
2,686 $ 2,738 Adjusted operating profit margin 21.7 % 21.8 % 21.6 %
22.2 % 22.0 % 22.1 % 23.1 % 23.1 % 22.9 %
Adjusted Interest
Expense - net
Reported interest expense - net $ 79 $ 38 $ 41 $ 190 $ 43 $ 65 $
161 $ 35 $ 40 Less: Bond redemption - -
- (16 ) - (16 ) -
- - Adjusted interest expense -
net $ 79 $ 38 $ 41 $ 174 $ 43 $
49 $ 161 $ 35 $ 40
Adjusted Income
Taxes
Reported income taxes $ 306 $ 157 $ 149 $ 551 $ 120 $ 133 $ 612 $
156 $ 131 Add: Cost reduction program and other charges - - - 28 28
- 39 6 33 Add: Bond redemption - - - 6 - 6 - - - Add: Pension
settlement charge - - - 1 1 - 2 2 - Add: Transaction costs -
- - - -
- - - -
Total adjustments - - -
35 29 6 41
8 33 Adjusted income taxes $ 306
$ 157 $ 149 $ 586 $ 149 $ 139
$ 653 $ 164 $ 164
Adjusted
Effective Tax Rate
Reported income before income taxes and equity investments $ 1,107
$ 566 $ 541 $ 2,048 $ 454 $ 489 $ 2,160 $ 559 $ 440 Add: Cost
reduction program and other charges - - - 96 96 - 165 19 146 Add:
Bond redemption - - - 16 - 16 - - - Add: Pension settlement charge
- - - 4 4 - 7 7 - Add: Transaction costs 21 15
6 - - -
- - - Total
adjustments 21 15 6
116 100 16 172
26 146 Adjusted income before
income taxes and equity investments $ 1,128 $ 581 $
547 $ 2,164 $ 554 $ 505 $ 2,332
$ 585 $ 586 Reported effective tax rate 27.6 %
27.7 % 27.5 % 26.9 % 26.4 % 27.2 % 28.3 % 27.9 % 29.8 % Adjusted
effective tax rate 27.1 % 27.0 % 27.2 % 27.1 % 26.9 % 27.5 % 28.0 %
28.0 % 28.0 %
Adjusted
Noncontrolling Interests
Reported noncontrolling interests $ 29 $ 14 $ 15 $ 38 $ 5 $ 10 $ 44
$ 12 $ 11 Add: Cost reduction program and other charges -
- - 5 5
- 1 - 1
Total adjustments - - -
5 5 - 1
- 1 Adjusted noncontrolling
interests $ 29 $ 14 $ 15 $ 43 $ 10
$ 10 $ 45 $ 12 $ 12
Adjusted Net
Income - Praxair, Inc.
Reported net income - Praxair, Inc. $ 795 $ 406 $ 389 $ 1,500 $ 339
$ 356 $ 1,547 $ 401 $ 308 Add: Cost reduction program and other
charges - - - 63 63 - 125 13 112 Add: Bond redemption - - - 10 - 10
- - - Add: Pension settlement charge - - - 3 3 - 5 5 - Add:
Transaction costs 21 15 6
- - - -
- - Total adjustments 21
15 6 76 66
10 130 18 112
Adjusted net income - Praxair, Inc. $ 816 $ 421
$ 395 $ 1,576 $ 405 $ 366 $
1,677 $ 419 $ 420 Reported percentage
change 5 % 2 % Adjusted percentage change 7 % 6 %
Adjusted Diluted
EPS
Reported diluted EPS $ 2.76 $ 1.41 $ 1.35 $ 5.21 $ 1.18 $ 1.24 $
5.35 $ 1.40 $ 1.06 Add: Cost reduction program and other charges -
- - 0.22 0.22 - 0.43 0.04 0.39 Add: Bond redemption - - - 0.04 -
0.04 - - - Add: Pension settlement charge - - - 0.01 0.01 - 0.02
0.02 - Add: Transaction costs 0.07 0.05
0.02 - - -
- - - Total adjustments
0.07 0.05 0.02
0.27 0.23 0.04 0.45
0.06 0.39 Adjusted diluted EPS $
2.83 $ 1.46 $ 1.37 $ 5.48 $ 1.41
$ 1.28 $ 5.80 $ 1.46 $ 1.45
Reported percentage change 5 % 1 % Adjusted percentage change 6 % 5
%
Cash Income Taxes
and Interest
Income taxes paid $ 585 $ 420 Interest paid, net of interest
capitalized and excluding bond redemption $ 173 $ 174
Full Year 2017
Diluted EPS Guidance
Full Year 2017 Low End High End 2017
GAAP diluted EPS guidance $ 5.56 $ 5.68 Add: Q1 and Q2 Transaction
costs (excludes future merger transaction costs) 0.07
0.07 2017 adjusted diluted EPS guidance $ 5.63
$ 5.75 2016 adjusted diluted EPS (see above for full year
reconciliation) $ 5.48 $ 5.48 Adjusted
percentage change 3 % 5 %
2017
2016 2015 Q2 Q1 Q4
Q3 Q2 Q1 Q4
Q3 Q2 Q1
Free Cash Flow
(FCF) - Free cash flow is a measure used by
investors, financial analysts and management to evaluate the
ability of a company to pursue opportunities that enhance
shareholder value. FCF equals cash flow from operations less
capital expenditures.
Operating cash flow $ 701 $ 710 $ 726 $ 788 $ 706 $ 553 $
791 $ 676 $ 710 $ 518 Less: capital expenditures (325 )
(327 ) (409 ) (376 )
(357 ) (323 ) (387 ) (405
) (352 ) (397 )
Free Cash Flow
$ 376 $ 383 $ 317
$ 412 $ 349 $ 230
$ 404 $ 271 $ 358
$ 121
Net Debt, Capital
and Debt-to-Capital Ratio - The debt-to-capital ratio is
a measure used by investors, financial analysts and management to
provide a measure of financial leverage and insights into how the
company is financing its operations.
Debt $ 9,367 $ 9,368 $ 9,515 $ 9,842 $ 9,956 $ 9,404 $ 9,231
$ 9,480 $ 9,313 $ 9,360 Less: cash and cash equivalents (535
) (519 ) (524 ) (627 )
(567 ) (221 ) (147 ) (136
) (136 ) (117 ) Net debt 8,832 8,849
8,991 9,215 9,389 9,183 9,084 9,344 9,177 9,243 Equity and
redeemable noncontrolling interests: Redeemable noncontrolling
interests 10 10 11 11 12 119 113 169 175 170 Praxair, Inc.
shareholders' equity 5,807 5,529 5,021 5,245 5,140 4,888 4,389
4,264 4,964 5,018 Noncontrolling interests 453
436 420 393
407 417 404
380 380 375
Total equity and redeemable noncontrolling interests 6,270
5,975 5,452
5,649 5,559 5,424
4,906 4,813 5,519
5,563 Capital $ 15,102 $ 14,824 $
14,443 $ 14,864 $ 14,948 $ 14,607 $ 13,990 $ 14,157 $ 14,696 $
14,806
Debt-to-capital 58.5 %
59.7 % 62.3 %
62.0 % 62.8
% 62.9 % 64.9
% 66.0 %
62.4 % 62.4 %
After-tax Return
on Capital and Adjusted After-tax Return on Capital
(ROC)- After-tax return on capital is a measure used by
investors, financial analysts and management to evaluate the return
on net assets employed in the business. ROC measures the after-tax
operating profit that the company was able to generate with the
investments made by all parties in the business (debt,
noncontrolling interests and Praxair, Inc. shareholders’
equity).
Reported net income - Praxair, Inc. $ 406 $ 389 $ 406 $ 339
$ 399 $ 356 $ 422 $ 401 $ 308 $ 416 Add: noncontrolling interests
14 15 13 5 10 10 9 12 11 12 Add: interest expense - net 38 41 38 43
44 65 42 35 40 44 Less: tax benefit on interest expense - net *
(11 ) (12 ) (10 ) (12 )
(12 ) (20 ) (12 )
(10 ) (11 ) (12 )
Net operating
profit after-tax (NOPAT) $ 447 $
433 $ 447 $ 375 $
441 $ 411 $ 461 $
438 $ 348 $ 460 Pre-tax
Adjustments: Add: Cost reduction program and other charges - - - 96
- - - 19 146 - Add: Pension settlement charge - - - 4 - - - 7 - -
Add: Transaction costs 15 6 - - - - - - - - Less: income taxes on
pre-tax adjustments - - -
(29 ) - -
- (8 ) (33 )
-
Adjusted NOPAT $ 462
$ 439 $ 447 $ 446
$ 441 $ 411 $ 461
$ 456 $ 461 $ 460
4-quarter trailing NOPAT $ 1,702 $ 1,696 $ 1,674 $ 1,688 $ 1,751 $
1,658 $ 1,707 $ 1,616 $ 1,700 $ 1,864 4-quarter trailing adjusted
NOPAT $ 1,794 $ 1,773 $ 1,745 $ 1,759 $ 1,769 $ 1,789 $ 1,838 $
1,879 $ 1,945 $ 1,996 Ending capital (see above) $ 15,102 $
14,824 $ 14,443 $ 14,864 $ 14,948 $ 14,607 $ 13,990 $ 14,157 $
14,696 $ 14,806 5-quarter average ending capital $ 14,836 $ 14,737
$ 14,570 $ 14,513 $ 14,480 $ 14,451 $ 14,587 $ 14,999 $ 15,460 $
15,777
After-tax ROC (4-quarter trailing NOPAT /
5-quarter average capital) 11.5 % 11.5
% 11.5 % 11.6 % 12.1
% 11.5 % 11.7 % 10.8
% 11.0 % 11.8 %
Adjusted after-tax ROC (4-quarter trailing adjusted NOPAT /
5-quarter average capital) 12.1 %
12.0 % 12.0 %
12.1 % 12.2 %
12.4 % 12.6 %
12.5 % 12.6
% 12.7 % * Tax benefit on
interest expense - net is generally presented using the reported
effective rate.
EBITDA, Adjusted
EBITDA, EBITDA Margin and Adjusted EBITDA Margin - These
measures are used by investors, financial analysts and management
to assess a company's profitability.
Reported net income - Praxair, Inc. $ 406 $ 389 $ 406 $ 339
$ 399 $ 356 $ 422 $ 401 $ 308 $ 416 Add: noncontrolling interests
14 15 13 5 10 10 9 12 11 12 Add: interest expense - net 38 41 38 43
44 65 42 35 40 44 Add: income taxes 157 149 152 120 146 133 163 156
131 162 Add: depreciation and amortization 292
287 285 284
281 272 275
276 278 277
EBITDA $ 907 $ 881 $
894 $ 791 $ 880 $
836 $ 911 $ 880 $
768 $ 911 Adjustments: Add: Cost
reduction program and other charges - - - 96 - - - 19 146 - Add:
Pension settlement charge - - - 4 - - - 7 - - Add: Transaction
costs 15 6 -
- - -
- - -
-
Adjusted EBITDA $
922 $ 887 $ 894 $
891 $ 880 $ 836 $
911 $ 906 $ 914 $
911 Reported sales 2,834 2,728 2,644 2,716 2,665
2,509 2,595 2,686 2,738 2,757
EBITDA margin 32.0
% 32.3 % 33.8 % 29.1
% 33.0 % 33.3 % 35.1
% 32.8 % 28.0 % 33.0
% Adjusted EBITDA margin 32.5 %
32.5 % 33.8 % 32.8 %
33.0 % 33.3 % 35.1 %
33.7 % 33.4 % 33.0 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170727005229/en/
Praxair, Inc.Media:Jason Stewart,
203-837-2448jason_stewart@praxair.comorInvestor:Juan Pelaez,
203-837-2213juan_pelaez@praxair.com
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