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 October 29, 2015 - 6:01 AM EDT
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Praxair Reports Third-Quarter 2015 Results

  • Sales of $2.7 billion, adjusted EPS of $1.46
  • Adjusted EBITDA and operating margins grew to 33.7% and 23.1%, respectively
  • Strong operating cash flow of $0.7 billion; $0.4 billion returned to shareholders through dividends and net share repurchases
  • After-tax return on capital 12.5%; return on equity 32.5%
  • Adjusted EPS guidance: 2015 full year $5.78 to $5.85 and 4Q15 $1.45 to $1.52

Praxair, Inc. (NYSE: PX) reported third-quarter net income and diluted earnings per share of $401 million and $1.40, respectively. These results include the impact of a $26 million pre-tax charge ($18 million after-tax) or 6 cents of diluted earnings per share, related to cost reduction actions and a pension settlement charge. Excluding the charge, adjusted net income and diluted earnings per share were $419 million and $1.46, respectively.

Praxair’s results in the third quarter were challenged by negative impacts from foreign currency translation, as the U.S. dollar strengthened against most foreign currencies versus the prior year. Sales in the third quarter were $2,686 million, 15% below the prior-year quarter, primarily due to the impacts of negative currency translation and lower cost pass-through which reduced sales by 11% and 2%, respectively. Organic sales were lower than the prior-year quarter as growth from positive price and new project start-ups were offset by weaker underlying industrial activity in Brazil and China and in the metals, energy and manufacturing end-markets in North America.

Reported operating profit in the third quarter was $594 million. Adjusted operating profit of $620 million was 2% below the prior-year quarter, excluding currency effects. Adjusted operating profit as a percentage of sales grew to a record 23.1% and the adjusted EBITDA margin grew to a record 33.7% primarily due to higher pricing, strong cost control and productivity gains.

Third-quarter cash flow from operations of $676 million funded $405 million of capital expenditures. The company paid $203 million of dividends and repurchased $222 million of stock, net of issuances. After-tax return on capital and return on equity for the quarter were 12.5% and 32.5%, respectively.

Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “As anticipated, third-quarter macroeconomic trends remained weak in North and South America. New project start-ups in Asia and Europe as well as solid demand in the less-cyclical end-markets of food, beverage and healthcare contributed positively to volumes.

“Our employees excel at protecting and growing profitability regardless of the economic cycle. The incremental cost actions we have taken during the second and third quarters as well as ongoing operational excellence resulted in a record operating margin. Cash flow generation remained strong with operating cash flow at 25% of sales and we again returned more than $400 million to shareholders.

“While we are expecting macro-economic conditions will remain challenging, we will continue to drive long-term growth through our strategy of building geographic density through high-return capital projects, synergistic acquisitions and continued growth in more defensive end-markets.”

For the fourth quarter of 2015, Praxair expects diluted earnings per share in the range of $1.45 to $1.52. This EPS guidance assumes a negative currency translation impact of approximately 11% year over year.

For full-year 2015, Praxair expects adjusted diluted earnings per share to be in the range of $5.78 to $5.85, up 3% to 4% ex-currency from 2014. This EPS guidance assumes a negative currency translation impact of approximately 11% versus 2014. Full-year capital expenditures are expected to be approximately $1.6 billion and the effective tax rate is forecasted to remain at approximately 28%.

Following is additional detail on third-quarter 2015 results by segment.

In North America, third-quarter sales were $1,463 million, 3% below the prior-year quarter excluding cost-pass through and negative currency translation. Volume growth to food and beverage and healthcare customers was more than offset by lower volumes to metals, energy and manufacturing end-markets. Operating profit of $385 million was 2% lower than the prior-year quarter, excluding currency translation, as price, productivity and cost actions were more than offset by lower volumes.

In Europe, third-quarter sales were $338 million, 12% below the prior-year quarter. Organic sales were 3% above the prior year primarily driven by new project contribution. Operating profit of $63 million grew 4% from the prior year, excluding currency translation, due to solid operating leverage on volume growth.

In South America, third-quarter sales were $343 million, 34% below the prior-year quarter. Sales, excluding negative currency translation, were steady as higher price and acquisitions were offset by lower volumes. Operating profit was $70 million.

Sales in Asia were $395 million in the quarter, 7% below the prior-year quarter. Excluding negative currency translation, cost pass-through and the sale of equipment to a joint venture in the prior-year quarter, sales grew 7%. Organic growth included new project start-ups in China, Korea and India for chemical, electronics and metals customers. Operating profit of $77 million was 9% above the prior year quarter, excluding currency translation.

Praxair Surface Technologies had third-quarter sales of $147 million as compared to $171 million in the prior-year quarter. Excluding negative currency translation impact, organic sales were 7% lower than the prior-year period. Favorable price was more than offset by weaker sales to the energy end-market. Operating profit was $25 million.

Praxair, Inc., a Fortune 250 company with 2014 sales of $12.3 billion, is the largest industrial gases 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 are non-GAAP measures. Third-quarter and full-year 2015 results are adjusted to exclude the impacts of cost reduction charges and the third quarter is also adjusted to eliminate a pension settlement charge. Additionally, measures such as EBITDA, free cash flow, after-tax return on capital, return on equity and debt-to-capital are also 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 third-quarter results is being held this morning, October 29, at 11:00 am Eastern Daylight Time. The number is (631) 485-4849 – Conference ID: 46550993. 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.

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 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; 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 projections or estimates contained in the forward-looking statements. Additionally, financial projections or estimates exclude the impact of special items which the company believes are not indicative of ongoing business performance. 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 Form 10-K and 10-Q reports filed 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 10 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

2015

 

2014

2015

 

2014

2015

 

2014

2015

 

2014

Quarter Ended September 30

Reported GAAP Amounts $ 2,686 $ 3,144 $ 594 $ 711 $ 401 $ 477 $ 1.40 $ 1.62
Pension settlement charge (a) - - 7 - 5 - 0.02 -
Cost reduction program and other charges (b)   -     -     19     -     13     -     0.04     -
Total adjustments   -     -     26     -     18     -     0.06     -
Adjusted amounts $ 2,686   $ 3,144   $ 620   $ 711   $ 419   $ 477   $ 1.46   $ 1.62
 

Year To Date September 30

Reported GAAP Amounts $ 8,181 $ 9,283 $ 1,697 $ 2,083 $ 1,125 $ 1,392 $ 3.88 $ 4.70
Pension settlement charge (a) - - 7 - 5 - 0.02 -
Cost reduction program and other charges(b)   -     -     165     -     125     -     0.43     -
Total adjustments   -     -     172     -     130     -     0.45     -
Adjusted amounts $ 8,181   $ 9,283   $ 1,869   $ 2,083   $ 1,255   $ 1,392   $ 4.33   $ 4.70

 

 
(a) A pension settlement charge was recorded in the 2015 third quarter related to lump sum benefit payments made from the U.S. supplemental pension plan.
(b) Cost reduction program and other charges were recorded in the 2015 second and third quarters.
 

 

PRAXAIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except per share data)
(UNAUDITED)

 

   

Quarter Ended
September 30,

 

Year to Date
September 30,

2015   2014 2015   2014
 
SALES $ 2,686 $ 3,144 $ 8,181 $ 9,283
Cost of sales 1,488 1,780 4,534 5,273
Selling, general and administrative 281 327 877 988
Depreciation and amortization 276 301 831 879
Research and development 23 25 70 72
Cost reduction program and other charges 26 - 172 -
Other income (expense) - net   2   -   -   12
OPERATING PROFIT 594 711 1,697 2,083
Interest expense - net   35   45   119   134
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS 559 666 1,578 1,949
Income taxes   156   187   449   546
INCOME BEFORE EQUITY INVESTMENTS 403 479 1,129 1,403
Income from equity investments   10   11   31   30
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) 413 490 1,160 1,433
Less: noncontrolling interests   (12)   (13)   (35)   (41)
NET INCOME - PRAXAIR, INC. $ 401 $ 477 $ 1,125 $ 1,392
 
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
 
Basic earnings per share $ 1.40 $ 1.63 $ 3.91 $ 4.75
 
Diluted earnings per share $ 1.40 $ 1.62 $ 3.88 $ 4.70
 
Cash dividends $ 0.715 $ 0.65 $ 2.145 $ 1.95
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic shares outstanding (000's) 285,651 292,170 287,578 293,103
Diluted shares outstanding (000's) 287,311 295,239 289,835 296,240
 

Note: See page 4 for a reconciliation to 2015 adjusted amounts which are non-GAAP.

 

PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of dollars)
(UNAUDITED)

 

 

September 30,
2015

 

December 31,
2014

ASSETS
Cash and cash equivalents $ 136 $ 126
Accounts receivable - net 1,690 1,796
Inventories 526 551
Prepaid and other current assets   374   366
TOTAL CURRENT ASSETS 2,726 2,839
Property, plant and equipment - net 10,970 11,997
Goodwill 2,997 3,121
Other intangibles - net 567 603
Other long-term assets   1,196   1,242
TOTAL ASSETS $ 18,456 $ 19,802
 
LIABILITIES AND EQUITY
Accounts payable $ 750 $ 864
Short-term debt 458 587
Current portion of long-term debt 2 2
Other current liabilities   912   1,037
TOTAL CURRENT LIABILITIES 2,122 2,490
Long-term debt 9,057 8,669
Other long-term liabilities   2,464   2,457
TOTAL LIABILITIES 13,643 13,616
 
REDEEMABLE NONCONTROLLING INTERESTS 169 176
 
PRAXAIR, INC. SHAREHOLDERS' EQUITY:
Common stock 4 4
Additional paid-in capital 3,998 3,994
Retained earnings 11,966 11,461
Accumulated other comprehensive income (loss) (4,456) (3,185)
Less: Treasury stock, at cost   (7,248)   (6,651)
Total Praxair, Inc. Shareholders' Equity 4,264 5,623
Noncontrolling interests   380   387
TOTAL EQUITY   4,644   6,010
TOTAL LIABILITIES AND EQUITY $ 18,456 $ 19,802
 

 

PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)

 

 

 

 

 

Quarter Ended
September 30,

Year to Date
September 30,

2015   2014 2015   2014
OPERATIONS
Net income - Praxair, Inc. $ 401 $ 477 $ 1,125 $ 1,392
Noncontrolling interests   12   13   35   41
Net income (including noncontrolling interests) 413 490 1,160 1,433
 
Adjustments to reconcile net income to net cash provided
by operating activities:
Cost reduction program and other charges, net of payments 4 - 139 -
Depreciation and amortization 276 301 831 879
Accounts receivable (13) 25 (57) (144)
Inventory 1 (19) (14) (52)
Payables and accruals 43 29 (20) (3)
Pension contributions (1) (1) (13) (14)
Deferred income taxes and other   (47)   (112)   (135)   (3)
Net cash provided by operating activities   676   713   1,891   2,096
 
INVESTING
Capital expenditures (405) (430) (1,154) (1,207)
Acquisitions, net of cash acquired - (21) (43) (191)
Divestitures and asset sales   5   15   245   86
Net cash used for investing activities   (400)   (436)   (952)   (1,312)
 
FINANCING
Debt increase (decrease) - net 170 30 371 394
Issuances of common stock 13 16 74 85
Purchases of common stock (235) (116) (704) (562)
Cash dividends - Praxair, Inc. shareholders (203) (189) (615) (570)
Excess tax benefit on stock option exercises 1 4 18 28
Noncontrolling interest transactions and other   (6)   (12)   (31)   (123)
Net cash provided by (used for) financing activities (260) (267) (887) (748)
 
Effect of exchange rate changes on cash and
cash equivalents   (16)   (15)   (42)   (6)
 
Change in cash and cash equivalents - (5) 10 30
Cash and cash equivalents, beginning-of-period   136   173   126   138
 
Cash and cash equivalents, end-of-period $ 136 $ 168 $ 136 $ 168
 

 

PRAXAIR, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)

 

   

Quarter Ended
September 30,

 

Year to Date
September 30,

2015   2014 2015   2014
SALES
North America $ 1,463 $ 1,639 $ 4,444 $ 4,847
Europe 338 385 995 1,190
South America 343 523 1,132 1,520
Asia 395 426 1,153 1,212
Surface Technologies   147   171   457   514
Consolidated sales $ 2,686 $ 3,144 $ 8,181 $ 9,283
 
OPERATING PROFIT
North America $ 385 $ 416 $ 1,152 $ 1,192
Europe 63 71 188 228
South America 70 118 236 344
Asia 77 75 215 226
Surface Technologies   25   31   78   93
Segment operating profit 620 711 1,869 2,083
Cost reduction program and other charges   (26)   -   (172)   -
Total operating profit $ 594 $ 711 $ 1,697 $ 2,083
 

 

PRAXAIR, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL SUMMARY
(Millions of dollars, except per share data)
(UNAUDITED)

 

  2015 (b)   2014 (c)
Q3   Q2   Q1 Q4   Q3   Q2   Q1
FROM THE INCOME STATEMENT
Sales $ 2,686 $ 2,738 $ 2,757 $ 2,990 $ 3,144 $ 3,113 $ 3,026
Cost of sales 1,488 1,516 1,530 1,689 1,780 1,767 1,726
Selling, general and administrative 281 297 299 320 327 335 326
Depreciation and amortization 276 278 277 291 301 293 285
Research and development 23 23 24 24 25 24 23
Cost reduction program and other charges 26 146 - 138 - - -
Other income (expenses) - net   2     2     (4)   (3)     -     3     9
Operating profit 594 480 623 525 711 697 675
Interest expense - net 35 40 44 79 45 43 46
Income taxes 156 131 162 145 187 183 176
Income from equity investments   10     10     11   12     11     10     9
Net income (including noncontrolling interests) 413 319 428 313 490 481 462
Less: noncontrolling interests   (12)     (11)     (12)   (11)     (13)     (14)     (14)
Net income - Praxair, Inc. $ 401   $ 308   $ 416 $ 302   $ 477   $ 467   $ 448
 
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
Diluted earnings per share $ 1.40 $ 1.06 $ 1.43 $ 1.03 $ 1.62 $ 1.58 $ 1.51
Cash dividends per share $ 0.715 $ 0.715 $ 0.715 $ 0.65 $ 0.65 $ 0.65 $ 0.65
Diluted weighted average shares outstanding (000's) 287,311 290,102 291,652 293,555 295,239 295,976 297,253
 
ADJUSTED AMOUNTS (a)
Operating profit $ 620 $ 626 $ 623 $ 663 $ 711 $ 697 $ 675
Operating margin 23.1% 22.9% 22.6% 22.2% 22.6% 22.4% 22.3%
Net Income $ 419 $ 420 $ 416 $ 460 $ 477 $ 467 $ 448
Diluted earnings per share $ 1.46 $ 1.45 $ 1.43 $ 1.57 $ 1.62 $ 1.58 $ 1.51
 
FROM THE BALANCE SHEET
Net debt (a) $ 9,381 $ 9,211 $ 9,279 $ 9,132 $ 8,953 $ 8,992 $ 9,126
Capital (a) $ 14,194 $ 14,730 $ 14,842 $ 15,318 $ 16,083 $ 16,492 $ 16,319
Debt-to-capital ratio (a) 66.1% 62.5% 62.5% 59.6% 55.7% 54.5% 55.9%
 
FROM THE STATEMENT OF CASH FLOWS
Cash flow from operations $ 676 $ 707 $ 508 $ 772 $ 713 $ 847 $ 536
Cash flow used for investing activities 400 152 400 491 436 425 451
Cash flow used for financing activities 260 527 100 260 267 397 84
Capital expenditures 405 352 397 482 430 384 393
Acquisitions - 38 5 15 21 46 124
Cash dividends 203 205 207 189 189 190 191
 
OTHER INFORMATION
After-tax return on capital (ROC) (a) 12.5% 12.6% 12.6% 12.7% 12.6% 12.6% 12.6%
Return on Praxair, Inc. shareholders' equity (ROE) (a) 32.5% 30.5% 29.6% 28.7% 28.2% 28.3% 28.7%
Adjusted EBITDA (a) $ 906 $ 914 $ 911 $ 966 $ 1,023 $ 1,000 $ 969
Adjusted EBITDA margin (a) 33.7% 33.4% 33.0% 32.3% 32.5% 32.1% 32.0%
Debt-to-adjusted EBITDA ratio (a) 2.5 2.4 2.3 2.3 2.2 2.3 2.3
Number of employees 26,989 27,302 27,680 27,780 27,626 27,735 27,578
 
SEGMENT DATA
SALES
North America $ 1,463 $ 1,482 $ 1,499 $ 1,589 $ 1,639 $ 1,628 $ 1,580
Europe 338 331 326 356 385 408 397
South America 343 388 401 473 523 509 488
Asia 395 387 371 407 426 394 392
Surface Technologies   147   150   160   165   171   174   169
Total sales $ 2,686   $ 2,738   $ 2,757 $ 2,990   $ 3,144   $ 3,113   $ 3,026
OPERATING PROFIT
North America $ 385 $ 388 $ 379 $ 388 $ 416 $ 398 $ 378
Europe 63 63 62 63 71 78 79
South America 70 81 85 105 118 113 113
Asia 77 69 69 77 75 76 75
Surface Technologies   25     25     28   30     31     32     30
Segment operating profit 620 626 623 663 711 697 675
Cost reduction program and other charges   (26)   (146)   -   (138)   -   -   -
Total operating profit $ 594   $ 480   $ 623 $ 525   $ 711   $ 697   $ 675
 
 
(a) Non-GAAP measure, see Appendix.
 
(b) 2015 includes (i) a pre-tax pension settlement charge of $7 million ($5 million after-tax, or $0.02 per diluted share) in the third quarter related to lump sum benefit payments made from the U.S. supplemental pension plan, and (ii) pre-tax charges of $19 million ($13 million after-tax, or $0.04 per diluted share) in the third quarter and $146 million ($112 million after-tax and non-controlling interests, or $0.39 per diluted share) in the second quarter, primarily related to cost reduction actions taken in response to lower volumes resulting from economic slowdown in emerging markets and energy related end-markets. The cost reduction charges by segment are as follows: $67 million in South America; $34 million in North America; $25 million in Asia; $20 million in Europe; and $19 million in Surface Technologies.
 
(c) 2014 includes: (i) a charge of $36 million ($22 million after-tax, or $0.07 per diluted share) related to a bond redemption, (ii) a charge of $7 million ($5 million after-tax, or $0.02 per diluted share) related to pension settlement and (iii) a charge of $131 million ($131 million after-tax, or $0.45 per diluted share), related to a Venezuela currency devaluation. Refer to Notes 2 and 7 to Praxair's 2014 Annual Report for additional information.
 

 

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 2015 third quarter cost reduction program and pension settlement, 2015 second quarter cost reduction program and other charges, 2014 fourth quarter pension settlement, bond redemption and loss on Venezuela currency devaluation, 2013 fourth quarter bond redemption and the income tax benefit related to the realignment of Praxair's Italian legal structure, the 2013 third quarter pension settlement, and the 2013 first quarter loss on Venezuela currency devaluation.

 

 

2015   2014   2013
  Q3   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 $ 676 $ 707 $ 508 $ 772 $ 713 $ 847 $ 536 $ 964 $ 904 $ 577 $ 472
Less: capital expenditures   (405)     (352)     (397)   (482)     (430)     (384)     (393)   (516)     (516)     (522)     (466)
Free Cash Flow $ 271 $ 355 $ 111 $ 290 $ 283 $ 463 $ 143 $ 448 $ 388 $ 55 $ 6
 

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 $ 9,517 $ 9,347 $ 9,396 $ 9,258 $ 9,121 $ 9,165 $ 9,270 $ 8,811 $ 9,026 $ 9,106 $ 8,676
Less: cash and cash equivalents   (136)     (136)     (117)   (126)     (168)     (173)     (144)   (138)     (134)     (102)     (113)
Net debt 9,381 9,211 9,279 9,132 8,953 8,992 9,126 8,673 8,892 9,004 8,563
Equity and redeemable noncontrolling interests:
Redeemable noncontrolling interests 169 175 170 176 190 194 195 307 290 259 255
Praxair, Inc. shareholders' equity 4,264 4,964 5,018 5,623 6,552 6,911 6,600 6,609 6,210 5,928 6,169
Noncontrolling interests   380     380     375   387     388     395     398   394     365     357     357
Total equity and redeemable noncontrolling interests   4,813     5,519     5,563   6,186     7,130     7,500     7,193   7,310     6,865     6,544     6,781
Capital $ 14,194 $ 14,730 $ 14,842 $ 15,318 $ 16,083 $ 16,492 $ 16,319 $ 15,983 $ 15,757 $ 15,548 $ 15,344
 
Debt-to-capital   66.1%     62.5%     62.5%   59.6%     55.7%     54.5%     55.9%   54.3%     56.4%     57.9%     55.8%
 

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).

 
Adjusted operating profit (a) $ 620 $ 626 $ 623 $ 663 $ 711 $ 697 $ 675 $ 690 $ 679 $ 665 $ 623
Less: adjusted income taxes (a) (164) (164) (162) (161) (187) (183) (176) (182) (178) (174) (164)
Less: tax benefit on adjusted interest expense (a) (10) (11) (12) (12) (13) (12) (13) (11) (11) (11) (11)
Add: income from equity investments   10     10     11   12     11     10     9   9     8     11     10
Adjusted net operating profit after-tax (NOPAT) $ 456 $ 461 $ 460 $ 502 $ 522 $ 512 $ 495 $ 506 $ 498 $ 491 $ 458
4-quarter trailing adjusted NOPAT $ 1,879 $ 1,945 $ 1,996 $ 2,031 $ 2,035 $ 2,011 $ 1,990 $ 1,953 $ 1,900 $ 1,859 $ 1,836
 
Ending capital (see above) $ 14,194 $ 14,730 $ 14,842 $ 15,318 $ 16,083 $ 16,492 $ 16,319 $ 15,983 $ 15,757 $ 15,548 $ 15,344
5-quarter average ending capital $ 15,033 $ 15,493 $ 15,811 $ 16,039 $ 16,127 $ 16,020 $ 15,790 $ 15,302 $ 14,829 $ 14,281 $ 13,821
 
After-tax ROC (4-quarter trailing NOPAT / 5-quarter average capital)   12.5%     12.6%     12.6%   12.7%     12.6%     12.6%     12.6%   12.8%     12.8%     13.0%     13.3%
 

Return on Praxair, Inc. Shareholders' Equity (ROE) - Return on Praxair, Inc. shareholders' equity is a measure used by investors, financial analysts and management to evaluate operating performance from a Praxair shareholder perspective. ROE measures the net income attributable to Praxair, Inc. that the company was able to generate with the money shareholders have invested.

 
Adjusted net income - Praxair, Inc. (a) $ 419 $ 420 $ 416 $ 460 $ 477 $ 467 $ 448 $ 462 $ 451 $ 445 $ 414
4-quarter trailing adjusted net income - Praxair, Inc. $ 1,715 $ 1,773 $ 1,820 $ 1,852 $ 1,854 $ 1,828 $ 1,806 $ 1,772 $ 1,724 $ 1,692 $ 1,676
 
Ending Praxair, Inc. shareholders' equity $ 4,264 $ 4,964 $ 5,018 $ 5,623 $ 6,552 $ 6,911 $ 6,600 $ 6,609 $ 6,210 $ 5,928 $ 6,169
5-quarter average Praxair shareholders' equity $ 5,284 $ 5,814 $ 6,141 $ 6,459 $ 6,576 $ 6,452 $ 6,303 $ 6,196 $ 6,077 $ 5,958 $ 5,961
 
ROE (4-quarter trailing adjusted net income - Praxair, Inc. / 5-quarter average Praxair shareholders' equity)   32.5%     30.5%     29.6%   28.7%     28.2%     28.3%     28.7%   28.6%     28.4%     28.4%     28.1%
 

Adjusted EBITDA, Adjusted EBITDA Margin and Debt-to-Adjusted EBITDA Ratio- These measures are used by investors, financial analysts and management to assess a company's ability to meet its financial obligations.

 
Adjusted net income - Praxair, Inc. (a) $ 419 $ 420 $ 416 $ 460 $ 477 $ 467 $ 448 $ 462 $ 451 $ 445 $ 414
Add: adjusted noncontrolling interests (a) 12 12 12 11 13 14 14 17 17 16 15
Add: adjusted interest expense - net (a) 35 40 44 43 45 43 46 38 41 41 40
Add: adjusted income taxes (a) 164 164 162 161 187 183 176 182 178 174 164
Add: depreciation and amortization     276     278     277   291     301     293     285   287     281     275     266
Adjusted EBITDA $ 906 $ 914 $ 911 $ 966 $ 1,023 $ 1,000 $ 969 $ 986 $ 968 $ 951 $ 899
 
Reported sales $ 2,686 $ 2,738 $ 2,757 $ 2,990 $ 3,144 $ 3,113 $ 3,026 $ 3,010 $ 3,013 $ 3,014 $ 2,888
Adjusted EBITDA margin 33.7% 33.4% 33.0% 32.3% 32.5% 32.1% 32.0% 32.8% 32.1% 31.6% 31.1%
 
Ending net debt (see above) $ 9,381 $ 9,211 $ 9,279 $ 9,132 $ 8,953 $ 8,992 $ 9,126 $ 8,673 $ 8,892 $ 9,004 $ 8,563
5-quarter average net debt $ 9,191 $ 9,113 $ 9,096 $ 8,975 $ 8,927 $ 8,937 $ 8,852 $ 8,467 $ 8,138 $ 7,738 $ 7,287
4-quarter trailing adjusted EBITDA $ 3,697 $ 3,814 $ 3,900 $ 3,958 $ 3,978 $ 3,923 $ 3,874 $ 3,804 $ 3,697 $ 3,608 $ 3,550
 
Debt-to-adjusted EBITDA ratio (5-quarter average net debt / 4-quarter trailing adjusted EBITDA)   2.5     2.4     2.3   2.3     2.2     2.3     2.3   2.2     2.2     2.1     2.1
 

 
(a) The following table presents adjusted amounts for Operating Profit and Operating Profit Margin, Interest Expense - net, Income Taxes, Effective Tax Rate, Noncontrolling Interests, Net income - Praxair, Inc., and Diluted EPS for the periods presented. Additionally, this table presents cash income taxes and cash interest, net of interest capitalized and excluding the bond redemption costs for 2014 and 2013; and presents the percentage changes in Diluted EPS Guidance for the fourth quarter and full year 2015 as compared to 2014 Diluted EPS on both a GAAP and adjusted basis. The adjusted percentages are based on Adjusted diluted EPS amounts, excluding estimated currency impacts .
 
                 
 

Year-to-date
September 30,

Third Quarter

Second
Quarter

Year

Fourth
Quarter

Year

Fourth
Quarter

Third Quarter First

Quarter

  2015   2015   2015   2014   2014   2013   2013   2013   2013

Adjusted Operating Profit and Operating Profit Margin

Reported operating profit $ 1,697 $ 594 $ 480 $ 2,608 $ 525 $ 2,625 $ 690 $ 670 $ 600
Add: Cost reduction program and other charges 165 19 146 - - - - - -
Add: Pension settlement charge 7 7 - 7 7 9 - 9 -
Add: Venezuela currency devaluation   -   -   -   131   131   23   -   -   23
Total adjustments   172   26   146   138   138   32   -   9   23
Adjusted operating profit $ 1,869 $ 620 $ 626 $ 2,746 $ 663 $ 2,657 $ 690 $ 679 $ 623
 
Reported percentage change -19% -16%
Adjusted percentage change -10% -13%
 
Reported sales $ 8,181 $ 2,686 $ 2,738 $ 12,273 $ 2,990 $ 11,925 $ 3,010 $ 3,013 $ 2,888
Adjusted operating profit margin 22.8% 23.1% 22.9% 22.4% 22.2% 22.3% 22.9% 22.5% 21.6%
 

Adjusted Interest Expense - net

Reported interest expense - net $ 119 $ 35 $ 40 $ 213 $ 79 $ 178 $ 56 $ 41 $ 40
Less: Bond redemption   -   -   -   (36)   (36)   (18)   (18)   -   -
Adjusted interest expense - net $ 119 $ 35 $ 40 $ 177 $ 43 $ 160 $ 38 $ 41 $ 40
 

Adjusted Income Taxes

Reported income taxes $ 449 $ 156 $ 131 $ 691 $ 145 $ 649 $ 136 $ 175 $ 164
Add: Cost reduction program and other charges 39 6 33 - - - - - -
Add: Bond redemption - - - 14 14 6 6 - -
Add: Income tax benefit - - - - - 40 40 - -
Add: Pension settlement charge   2   2   -   2   2   3   -   3   -
Total adjustments   41   8   33   16   16   49   46   3   -
Adjusted income taxes $ 490 $ 164 $ 164 $ 707 $ 161 $ 698 $ 182 $ 178 $ 164
 

Adjusted Effective Tax Rate

Reported income before income taxes and equity investments $ 1,578 $ 559 $ 440 $ 2,395 $ 446 $ 2,447 $ 634 $ 629 $ 560
Add: Cost reduction program and other charges 165 19 146 - - - - - -
Add: Bond redemption - - - 36 36 18 18 - -
Add: Pension settlement charge 7 7 - 7 7 9 - 9 -
Add: Venezuela currency devaluation   -   -   -   131   131   23   -   -   23
Total adjustments   172   26   146   174   174   50   18   9   23
Adjusted income before income taxes and equity investments $ 1,750 $ 585 $ 586 $ 2,569 $ 620 $ 2,497 $ 652 $ 638 $ 583
 
Adjusted income taxes (above) $ 490 $ 164 $ 164 $ 707 $ 161 $ 698 $ 182 $ 178 $ 164
Adjusted effective tax rate 28% 28% 28% 28% 26% 28% 28% 28% 28%
 

Adjusted Noncontrolling interests

Reported noncontrolling interests $ 35 $ 12 $ 11 $ 52 $ 11 $ 81 $ 33 $ 17 $ 15
Add: Cost reduction program and other charges 1 - 1 - - - - - -
Less: Income tax benefit   -   -   -   -   -   (16)   (16)   -   -
Total adjustments   1   -   1   -   -   (16)   (16)   -   -
Adjusted noncontrolling interests $ 36 $ 12 $ 12 $ 52 $ 11 $ 65 $ 17 $ 17 $ 15
 

Adjusted Net Income - Praxair, Inc.

Reported net income - Praxair, Inc. $ 1,125 $ 401 $ 308 $ 1,694 $ 302 $ 1,755 $ 474 $ 445 $ 391
Add: Cost reduction program and other charges 125 13 112 - - - - - -
Add: Bond redemption - - - 22 22 12 12 - -
Less: Income tax benefit - - - - - (24) (24) - -
Add: Pension settlement charge 5 5 - 5 5 6 - 6 -
Add: Venezuela currency devaluation   -   -   -   131   131   23   -   -   23
Total adjustments   130   18   112   158   158   17   (12)   6   23
Adjusted net income - Praxair, Inc. $ 1,255 $ 419 $ 420 $ 1,852 $ 460 $ 1,772 $ 462 $ 451 $ 414
 
Reported percentage change -19% -16%
Adjusted percentage change -10% -12%
 

Adjusted Diluted EPS

Reported diluted EPS $ 3.88 $ 1.40 $ 1.06 $ 5.73 $ 1.03 $ 5.87 $ 1.59 $ 1.49 $ 1.30
Add: Cost reduction program and other charges 0.43 0.04 0.39 - - - - - -
Add: Bond redemption - - - 0.07 0.07 0.04 0.04 - -
Less: Income tax benefit - - - - - (0.08) (0.08) - -
Add: Pension settlement charge 0.02 0.02 - 0.02 0.02 0.02 - 0.02 -
Add: Venezuela currency devaluation   -   -   -   0.45   0.45   0.08   -   -   0.08
Total adjustments   0.45   0.06   0.39   0.54   0.54   0.06   (0.04)   0.02   0.08
Adjusted diluted EPS $ 4.33 $ 1.46 $ 1.45 $ 6.27 $ 1.57 $ 5.93 $ 1.55 $ 1.51 $ 1.38
 

Cash Income Taxes and Interest

Income taxes paid $ 606 $ 532
Interest paid, net of interest capitalized and excluding bond redemption $ 174 $ 166
 

 

Fourth Quarter and Full-Year 2015 Diluted EPS Guidance*

  Fourth Quarter 2015   Full Year 2015
Low End   High End Low End   High End
   
2015 adjusted diluted EPS guidance $ 1.45 $ 1.52 $ 5.78 $ 5.85
2014 adjusted diluted EPS (see above for full year amounts) $ 1.57 $ 1.57 $ 6.27 $ 6.27
 
Adjusted percentage change -8% -3% -8% -7%
Adjusted percentage changes, excluding estimated currency impact 3% 8% 3% 4%
 

* Excludes cost reduction charges recorded in the second and third quarter and the pension settlement charge recorded in the third quarter.

For Praxair, Inc.
Investors
Kelcey Hoyt, 203-837-2118
kelcey_hoyt@praxair.com
or
Media
Jason Stewart, 203-837-2448
jason_stewart@praxair.com


Source: Business Wire (October 29, 2015 - 6:01 AM EDT)

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