July 28, 2016 - 6:01 AM EDT
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Praxair Reports Second-Quarter 2016 Results

  • Sales of $2.7 billion; EPS of $1.39
  • Operating and EBITDA margins of 22.1% and 33.0%, respectively
  • Strong operating cash flow of $0.7 billion, 26% of sales
  • Completed European carbon dioxide acquisition primarily serving food and beverage end-market and purchased remaining interest in Scandinavian joint venture
  • Return on capital 12.2%; return on equity 34.0%

Praxair, Inc. (NYSE:PX) reported second-quarter net income and diluted earnings per share of $399 million and $1.39, respectively.

Sales in the second quarter were $2,665 million, 3% below the prior-year quarter, primarily due to the impact of negative currency translation of 4% and lower cost pass-through of 1%. Excluding these impacts, sales were 2% higher than the prior-year quarter due to growth from acquisitions and higher pricing. Overall volumes were comparable to the prior-year quarter. Volume growth from new on-site projects, largely in Asia, Europe and South America, was offset by lower base business volumes in the Americas, due primarily to weaker industrial manufacturing activity in the United States and Brazil, and weaker demand in the upstream energy end-market in North America.

Operating profit in the second quarter of $588 million was 23% above the prior-year quarter of $480 million. Excluding the prior-year quarter impact of a charge relating to a cost reduction program, operating profit was 6% lower, and 2% lower excluding currency effects. The operating profit margin as a percentage of sales was 22.1% and the EBITDA margin was 33.0%.

Second-quarter cash flow from operations of $706 million funded $357 million of capital expenditures. Acquisition expenditures in the quarter of $262 million were primarily related to the acquisition of a carbon dioxide business in Europe. In addition, noncontrolling interest expenditures of $107 million were largely attributed to the acquisition of the remaining 34% interest in the company’s Scandinavian industrial gas joint venture. The company paid $214 million of dividends. After-tax return on capital and return on equity for the quarter were 12.2% and 34.0%, respectively.

Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “Praxair’s industrial gas businesses in Asia, Europe and South America grew volumes while benefiting from new on-site project start-ups. However, North America volumes experienced further declines due to weaker upstream energy and U.S. manufacturing activity. Globally, consumer-related end-markets remained healthy and we completed a synergistic European carbon dioxide acquisition that will further expand our food and beverage end-market exposure.

“Praxair’s strategy of optimizing the base business, growing resilient end-markets, executing the project backlog and capitalizing on acquisition and project opportunities continues to drive strong value creation. During the second quarter, these efforts by Praxair employees resulted in robust operating cash flow generation at 26% of sales, and in a mixed macro-economic environment, delivered solid operating and EBITDA margins of 22.1% and 33.0%, respectively.

“As we look to the remainder of the year, while currency translation appears to be less of a headwind at current foreign exchange rates, we do not anticipate significant underlying economic improvement in the second half. Project activity remains strong along the U.S. Gulf Coast, and we continue to expect to grow capital investments with new long-term customer supply contracts to further secure future growth. Praxair’s relentless focus on operational excellence and financial discipline will consistently deliver strong cash flow and earnings per share for our shareholders.”

For the third quarter of 2016, Praxair expects adjusted diluted earnings per share in the range of $1.35 to $1.42, which excludes the impact of pension settlement charges of approximately $0.01 per share expected to be recorded. As a result, GAAP diluted earnings per share is expected to be in the range of $1.34 to $1.41.

For full-year 2016, Praxair expects adjusted diluted earnings per share to be in the range of $5.45 to $5.60. This guidance assumes a negative currency translation impact of approximately 3% year over year. This full-year guidance excludes a $0.05 per share impact of a bond redemption charge taken in the first quarter and a pension settlement expected to be recorded in the third quarter. As a result, GAAP diluted earnings per share is expected to be in the range of $5.40 to $5.55. Full-year capital expenditures are expected to be approximately $1.4 billion.

Following is additional detail on second-quarter 2016 results by segment.

In North America, second-quarter sales were $1,411 million, 5% below the prior-year quarter. Excluding cost pass-through and negative currency translation, sales were 1% lower than the prior-year quarter. Price attainment and volume growth to food and beverage, healthcare and refining customers were more than offset by weaker sales to upstream energy and manufacturing end-markets. Operating profit was $359 million.

In Europe, second-quarter sales were $355 million, 7% above the prior-year quarter. Organic sales grew 4% from the prior year due to higher volumes, including new project start-ups, and higher price. Acquisitions contributed 3% growth, primarily related to a carbon dioxide business largely serving the food and beverage end-market. Operating profit of $68 million grew 8% from the prior year, and 6%, excluding currency translation, from higher price and volumes.

In South America, second-quarter sales were $358 million, 8% below the prior-year quarter. Organic sales, excluding negative currency translation, grew 5% primarily from higher price and new on-site projects. Operating profit was $70 million.

Sales in Asia were $393 million in the quarter, 2% above the prior-year quarter, and 6% higher excluding negative currency impact. Volume growth included new plant start-ups in China and India. Operating profit was $67 million.

Praxair Surface Technologies had second-quarter sales of $148 million as compared to $150 million in the prior-year quarter. Organic sales were 2% lower as favorable price and higher aerospace volumes were more than offset by weaker energy end-market sales. Operating profit was $24 million.

Praxair, Inc., a Fortune 300 company with 2015 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 are non-GAAP measures. 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: Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary, Summary Non-GAAP Reconciliations and Appendix: Non-GAAP Measures.

A teleconference about Praxair’s second-quarter results is being held this morning, July 28, at 11:00 am Eastern Daylight Time. The number is (631) 485-4849 – Conference ID: 45788403. 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; 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 which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.

       
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,
2016 2015 2016 2015
 
SALES $ 2,665 $ 2,738 $ 5,174 $ 5,495
Cost of sales 1,468 1,516 2,849 3,046
Selling, general and administrative 308 297 582 596
Depreciation and amortization 281 278 553 555
Research and development 24 23 47 47
Cost reduction program and other charges - 146 - 146
Other income (expense) - net   4   2   (1)   (2)
OPERATING PROFIT 588 480 1,142 1,103
Interest expense - net   44   40   109   84
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS 544 440 1,033 1,019
Income taxes   146   131   279   293
INCOME BEFORE EQUITY INVESTMENTS 398 309 754 726
Income from equity investments   11   10   21   21
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) 409 319 775 747
Less: noncontrolling interests   (10)   (11)   (20)   (23)
NET INCOME - PRAXAIR, INC. $ 399 $ 308 $ 755 $ 724
 
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
 
Basic earnings per share $ 1.40 $ 1.07 $ 2.64 $ 2.51
 
Diluted earnings per share $ 1.39 $ 1.06 $ 2.63 $ 2.49
 
Cash dividends $ 0.75 $ 0.715 $ 1.50 $ 1.43
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic shares outstanding (000's) 285,702 287,939 285,566 288,541
Diluted shares outstanding (000's) 287,727 290,102 287,426 290,940
 
Note: See page 9 for a reconciliation to 2016 adjusted amounts which are non-GAAP.
 

 
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of dollars)
(UNAUDITED)
   
June 30, December 31,
2016 2015
ASSETS
Cash and cash equivalents $ 567 $ 147
Accounts receivable - net 1,741 1,601
Inventories 559 531
Prepaid and other current assets   396   347
TOTAL CURRENT ASSETS 3,263 2,626
Property, plant and equipment - net 11,578 10,998
Goodwill 3,149 2,986
Other intangibles - net 612 568
Other long-term assets   1,209   1,141
TOTAL ASSETS $ 19,811 $ 18,319
 
LIABILITIES AND EQUITY
Accounts payable $ 870 $ 791
Short-term debt 757 250
Current portion of long-term debt 9 6
Other current liabilities   822   846
TOTAL CURRENT LIABILITIES 2,458 1,893
Long-term debt 9,190 8,975
Other long-term liabilities   2,604   2,545
TOTAL LIABILITIES 14,252 13,413
 
REDEEMABLE NONCONTROLLING INTERESTS 12 113
 
PRAXAIR, INC. SHAREHOLDERS' EQUITY:
Common stock 4 4
Additional paid-in capital 4,005 4,005
Retained earnings 12,559 12,229
Accumulated other comprehensive income (loss) (4,174) (4,596)
Less: Treasury stock, at cost   (7,254)   (7,253)
Total Praxair, Inc. Shareholders' Equity 5,140 4,389
Noncontrolling interests   407   404
TOTAL EQUITY   5,547   4,793
TOTAL LIABILITIES AND EQUITY $ 19,811 $ 18,319
 

       
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
 
Quarter Ended Year to Date
June 30, June 30,
2016 2015 2016 2015
OPERATIONS
Net income - Praxair, Inc. $ 399 $ 308 $ 755 $ 724
Noncontrolling interests   10   11   20   23
Net income (including noncontrolling interests) 409 319 775 747
 
Adjustments to reconcile net income to net cash provided
by operating activities:
Cost reduction program and other charges, net of payments - 135 - 135
Depreciation and amortization 281 278 553 555
Accounts receivable (41) 6 (61) (44)
Inventory (1) (9) (8) (15)
Payables and accruals 14 3 (63) (63)
Pension contributions (4) (1) (6) (12)
Deferred income taxes and other   48   (21)   69   (75)
Net cash provided by operating activities   706   710   1,259   1,228
 
INVESTING
Capital expenditures (357) (352) (680) (749)
Acquisitions, net of cash acquired (262) (38) (325) (43)
Divestitures and asset sales   6   238   8   240
Net cash used for investing activities   (613)   (152)   (997)   (552)
 
FINANCING
Debt increase (decrease) - net 595 (89) 690 201
Issuances of common stock 26 17 60 61
Purchases of common stock (51) (234) (83) (469)
Cash dividends - Praxair, Inc. shareholders (214) (205) (428) (412)
Excess tax benefit on stock option exercises - 3 - 17
Noncontrolling interest transactions and other   (107)   (22)   (109)   (38)
Net cash provided by (used for) financing activities 249 (530) 130 (640)
 
Effect of exchange rate changes on cash and
cash equivalents   4   (9)   28   (26)
 
Change in cash and cash equivalents 346 19 420 10
Cash and cash equivalents, beginning-of-period   221   117   147   126
 
Cash and cash equivalents, end-of-period $ 567 $ 136 $ 567 $ 136
 

 
PRAXAIR, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)
       
Quarter Ended Year to Date
June 30, June 30,
2016 2015 2016 2015
SALES
North America $ 1,411 $ 1,482 $ 2,764 $ 2,981
Europe 355 331 675 657
South America 358 388 669 789
Asia 393 387 769 758
Surface Technologies   148   150   297   310
Consolidated sales $ 2,665 $ 2,738 $ 5,174 $ 5,495
 
OPERATING PROFIT
North America $ 359 $ 388 $ 708 $ 767
Europe 68 63 130 125
South America 70 81 125 166
Asia 67 69 130 138
Surface Technologies   24   25   49   53
Segment operating profit $ 588 $ 626 $ 1,142 $ 1,249
Cost reduction program and other charges   -   (146)   -   (146)
Total operating profit $ 588 $ 480 $ 1,142 $ 1,103
 

           
PRAXAIR, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL SUMMARY
(Millions of dollars, except per share data)
(UNAUDITED)
 
2016 (c) 2015 (d)
Q2 Q1 Q4 Q3 Q2 Q1
FROM THE INCOME STATEMENT
Sales $ 2,665 $ 2,509 $ 2,595 $ 2,686 $ 2,738 $ 2,757
Cost of sales 1,468 1,381 1,426 1,488 1,516 1,530
Selling, general and administrative 308 274 275 281 297 299
Depreciation and amortization 281 272 275 276 278 277
Research and development 24 23 23 23 23 24
Cost reduction program and other charges - - - 26 146 -
Other income (expense) - net   4   (5)   28   2   2   (4)
Operating profit 588 554

 

624 594 480 623
Interest expense - net 44 65 42 35 40 44
Income taxes (b) 146 133 163 156 131 162
Income from equity investments   11   10   12   10   10   11
Net income (including noncontrolling interests) 409 366

 

431 413 319 428
Less: noncontrolling interests   (10)   (10)   (9)   (12)   (11)   (12)
Net income - Praxair, Inc. $ 399 $ 356 $ 422 $ 401 $ 308 $ 416
 
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
Diluted earnings per share $ 1.39 $ 1.24 $ 1.47 $ 1.40 $ 1.06 $ 1.43
Cash dividends per share $ 0.75 $ 0.75 $ 0.715 $ 0.715 $ 0.715 $ 0.715
Diluted weighted average shares outstanding (000's) 287,727 286,665 286,856 287,311 290,102 291,652
 
ADJUSTED AMOUNTS (a)
Operating profit $ 588 $ 554 $ 624 $ 620 $ 626 $ 623
Operating margin 22.1% 22.1% 24.0% 23.1% 22.9% 22.6%
Net Income $ 399 $ 366 $ 422 $ 419 $ 420 $ 416
Diluted earnings per share $ 1.39 $ 1.28 $ 1.47 $ 1.46 $ 1.45 $ 1.43
 
FROM THE BALANCE SHEET
Net debt (a) $ 9,389 $ 9,183 $ 9,084 $ 9,344 $ 9,177 $ 9,243
Capital (a) $ 14,948 $ 14,607 $ 13,990 $ 14,157 $ 14,696 $ 14,806
Debt-to-capital ratio (a) 62.8% 62.9% 64.9% 66.0% 62.4% 62.4%
 
FROM THE STATEMENT OF CASH FLOWS
Cash flow from operations (b) $ 706 $ 553 $ 791 $ 676 $ 710 $ 518
Cash flow used for investing activities 613 384 351 400 152 400
Cash flow (provided by) used for financing activities (b) (249) 119 410 260 530 110
Capital expenditures 357 323 387 405 352 397
Acquisitions 262 63 39 - 38 5
Cash dividends 214 214 204 203 205 207
 
OTHER INFORMATION
After-tax return on capital (ROC) (a) 12.2% 12.4% 12.6% 12.5% 12.6% 12.7%
Return on Praxair, Inc. shareholders' equity (ROE) (a) 34.0% 34.6% 34.6% 32.5% 30.5% 29.6%
Adjusted EBITDA (a) $ 880 $ 836 $ 911 $ 906 $ 914 $ 911
Adjusted EBITDA margin (a) 33.0% 33.3% 35.1% 33.7% 33.4% 33.0%
Debt-to-adjusted EBITDA ratio (a) 2.6 2.6 2.5 2.5 2.4 2.3
Number of employees 26,896 26,558 26,657 26,989 27,302 27,680
 
SEGMENT DATA
SALES
North America $ 1,411 $ 1,353 $ 1,421 $ 1,463 $ 1,482 $ 1,499
Europe 355 320 325 338 331 326
South America 358 311 299 343 388 401
Asia 393 376 398 395 387 371
Surface Technologies   148   149   152   147   150   160
Total sales $ 2,665 $ 2,509 $ 2,595 $ 2,686 $ 2,738 $ 2,757
OPERATING PROFIT
North America $ 359 $ 349 $ 406 $ 385 $ 388 $ 379
Europe 68 62 62 63 63 62
South America 70 55 55 70 81 85
Asia 67 63 74 77 69 69
Surface Technologies   24   25   27   25   25   28
Segment operating profit 588 554 624 620 626 623
Cost reduction program and other charges   -   -   -   (26)   (146)   -
Total operating profit $ 588 $ 554

 

$ 624 $ 594 $ 480 $ 623
 
(a)   Non-GAAP measure, see Appendix.
 
(b) During the second quarter 2016, Praxair adopted the FASB's Accounting Standards Update ("ASU") 2016-09 relating to the accounting for stock compensation. Accordingly, effective with the 2016 second quarter, income taxes and operating cash flows include excess tax benefits related to stock compensation. Additionally, withholding tax payments related to stock compensation are required to be presented as financing versus operating cash flows on a retrospective basis.
 
(c) 2016 includes 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.
 
(d) 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.
 

 

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

2016

2015

2016

2015

2016

2015

2016

2015

Quarter Ended June 30

Reported GAAP Amounts $ 2,665 $ 2,738 $ 588 $ 480 $ 399 $ 308 $ 1.39 $ 1.06
Cost reduction program and other charges (b)   -     -     -     146     -     112   -     0.39
Total adjustments   -     -     -     146     -     112   -     0.39
Adjusted amounts $ 2,665   $ 2,738   $ 588   $ 626   $ 399   $ 420 $ 1.39   $ 1.45
 

Year To Date June 30

Reported GAAP Amounts $ 5,174 $ 5,495 $ 1,142 $ 1,103 $ 755 $ 724 $ 2.63 $ 2.49
Cost reduction program and other charges (b) - - - 146 - 112 - 0.39
Bond redemption (a)   -     -     -     -     10     -   0.04     -
Total adjustments   -     -     -     146     10     112   0.04     0.39
Adjusted amounts $ 5,174   $ 5,495   $ 1,142   $ 1,249   $ 765   $ 836 $ 2.67   $ 2.88
 

(a) $16 million charge to interest expense ($10 million after-tax or $0.04 per diluted share) in the 2016 first quarter related to a bond redemption.

(b) Charges in the 2015 second quarter related to the cost reduction program and other charges.

 
 

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 2016 first quarter bond redemption, 2015 third quarter cost reduction program and pension settlement, 2015 second quarter cost reduction program and other charges, and 2014 fourth quarter pension settlement, bond redemption and loss on Venezuela currency devaluation.

                   

 

2016

2015 2014
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 $ 706 $ 553 $ 791 $ 676 $ 710 $ 518 $ 772 $ 713 $ 847 $ 555
Less: capital expenditures   (357)     (323)   (387)     (405)     (352)     (397)   (482)     (430)     (384)     (393)
Free Cash Flow $ 349 $ 230 $ 404 $ 271 $ 358 $ 121 $ 290 $ 283 $ 463 $ 162
 

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 $ 9,956 $ 9,404 $ 9,231 $ 9,480 $ 9,313 $ 9,360 $ 9,225 $ 9,090 $ 9,132 $ 9,236
Less: cash and cash equivalents   (567)     (221)   (147)     (136)     (136)     (117)   (126)     (168)     (173)     (144)
Net debt 9,389 9,183 9,084 9,344 9,177 9,243 9,099 8,922 8,959 9,092
Equity and redeemable noncontrolling interests:
Redeemable noncontrolling interests 12 119 113 169 175 170 176 190 194 195
Praxair, Inc. shareholders' equity 5,140 4,888 4,389 4,264 4,964 5,018 5,623 6,552 6,911 6,600
Noncontrolling interests   407     417   404     380     380     375   387     388     395     398
Total equity and redeemable noncontrolling interests   5,559     5,424   4,906     4,813     5,519     5,563   6,186     7,130     7,500     7,193
Capital $ 14,948 $ 14,607 $ 13,990 $ 14,157 $ 14,696 $ 14,806 $ 15,285 $ 16,052 $ 16,459 $ 16,285
 
Debt-to-capital   62.8%     62.9%   64.9%     66.0%     62.4%     62.4%   59.5%     55.6%     54.4%     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) $ 588 $ 554 $ 624 $ 620 $ 626 $ 623 $ 663 $ 711 $ 697 $ 675
Less: adjusted income taxes (a) (146) (139) (163) (164) (164) (162) (161) (187) (183) (176)
Less: tax benefit on adjusted interest expense (a) (12) (14) (12) (10) (11) (12) (12) (13) (12) (13)
Add: income from equity investments   11     10   12     10     10     11   12     11     10     9
Adjusted net operating profit after-tax (NOPAT) $ 441 $ 411 $ 461 $ 456 $ 461 $ 460 $ 502 $ 522 $ 512 $ 495
4-quarter trailing adjusted NOPAT $ 1,769 $ 1,789 $ 1,838 $ 1,879 $ 1,945 $ 1,996 $ 2,031 $ 2,035 $ 2,011 $ 1,990
 
Ending capital (see above) $ 14,948 $ 14,607 $ 13,990 $ 14,157 $ 14,696 $ 14,806 $ 15,285 $ 16,052 $ 16,459 $ 16,285
5-quarter average ending capital $ 14,480 $ 14,451 $ 14,587 $ 14,999 $ 15,460 $ 15,777 $ 16,007 $ 16,094 $ 15,987 $ 15,757
 
After-tax ROC (4-quarter trailing NOPAT / 5-quarter average capital)   12.2%     12.4%   12.6%     12.5%     12.6%     12.7%   12.7%     12.6%     12.6%     12.6%
 

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) $ 399 $ 366 $ 422 $ 419 $ 420 $ 416 $ 460 $ 477 $ 467 $ 448
4-quarter trailing adjusted net income - Praxair, Inc. $ 1,606 $ 1,627 $ 1,677 $ 1,715 $ 1,773 $ 1,820 $ 1,852 $ 1,854 $ 1,828 $ 1,806
 
Ending Praxair, Inc. shareholders' equity $ 5,140 $ 4,888 $ 4,389 $ 4,264 $ 4,964 $ 5,018 $ 5,623 $ 6,552 $ 6,911 $ 6,600
5-quarter average Praxair shareholders' equity $ 4,729 $ 4,705 $ 4,852 $ 5,284 $ 5,814 $ 6,141 $ 6,459 $ 6,576 $ 6,452 $ 6,303
 
ROE (4-quarter trailing adjusted net income - Praxair, Inc. / 5-quarter average Praxair shareholders' equity)   34.0%     34.6%   34.6%     32.5%     30.5%     29.6%   28.7%     28.2%     28.3%     28.7%
 

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 profitability.

 
Adjusted net income - Praxair, Inc. (a) $ 399 $ 366 $ 422 $ 419 $ 420 $ 416 $ 460 $ 477 $ 467 $ 448
Add: adjusted noncontrolling interests (a) 10 10 9 12 12 12 11 13 14 14
Add: adjusted interest expense - net (a) 44 49 42 35 40 44 43 45 43 46
Add: adjusted income taxes (a) 146 139 163 164 164 162 161 187 183 176
Add: depreciation and amortization   281     272   275     276     278     277   291     301     293     285
Adjusted EBITDA $ 880 $ 836 $ 911 $ 906 $ 914 $ 911 $ 966 $ 1,023 $ 1,000 $ 969
 
Reported sales 2,665 2,509 2,595 2,686 2,738 2,757 2,990 3,144 3,113 3,026
Adjusted EBITDA margin 33.0% 33.3% 35.1% 33.7% 33.4% 33.0% 32.3% 32.5% 32.1% 32.0%
Ending net debt (see above) $ 9,389 $ 9,183 $ 9,084 $ 9,344 $ 9,177 $ 9,243 $ 9,099 $ 8,922 $ 8,959 $ 9,092
5-quarter average net debt $ 9,236 $ 9,206 $ 9,189 $ 9,157 $ 9,080 $ 9,063 $ 8,943 $ 8,895 $ 8,904 $ 8,819
4-quarter trailing adjusted EBITDA $ 3,533 $ 3,567 $ 3,642 $ 3,697 $ 3,814 $ 3,900 $ 3,958 $ 3,978 $ 3,923 $ 3,874
 

Debt-to-adjusted EBITDA ratio (5-quarter average net debt / 4-quarter trailing adjusted EBITDA)

  2.6     2.6   2.5     2.5     2.4     2.3   2.3     2.2     2.3     2.3
 

 
(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 2016 and 2014.
             

Year-to-date
June 30,

First Quarter Year

Third Quarter

Second
Quarter

Year

Fourth
Quarter

2016 2016 2015 2015 2015 2014 2014

Adjusted Operating Profit and Operating Profit Margin

Reported operating profit $ 1,142 $ 554 $ 2,321 $ 594 $ 480 $ 2,608 $ 525
Add: Cost reduction program and other charges - - 165 19 146 - -
Add: Pension settlement charge - - 7 7 - 7 7
Add: Venezuela currency devaluation   -   -   -   -   -   131   131
Total adjustments   -   -   172   26   146   138   138
Adjusted operating profit $ 1,142 $ 554 $ 2,493 $ 620 $ 626 $ 2,746 $ 663
 
Reported percentage change 4%
Adjusted percentage change -9%
 
Reported sales $ 5,174 $ 2,509 $ 10,776 $ 2,686 $ 2,738 $ 12,273 $ 2,990
Adjusted operating profit margin 22.1% 22.1% 23.1% 23.1% 22.9% 22.4% 22.2%
 

Adjusted Interest Expense - net

Reported interest expense - net $ 109 $ 65 $ 161 $ 35 $ 40 $ 213 $ 79
Less: Bond redemption   (16)   (16)   -   -   -   (36)   (36)
Adjusted interest expense - net $ 93 $ 49 $ 161 $ 35 $ 40 $ 177 $ 43
 

Adjusted Income Taxes

Reported income taxes $ 279 $ 133 $ 612 $ 156 $ 131 $ 691 $ 145
Add: Cost reduction program and other charges - - 39 6 33 - -
Add: Bond redemption 6 6 - - - 14 14
Add: Income tax benefit - - - - - - -
Add: Pension settlement charge   -   -   2   2   -   2   2
Total adjustments   6   6   41   8   33   16   16
Adjusted income taxes $ 285 $ 139 $ 653 $ 164 $ 164 $ 707 $ 161
 

Adjusted Effective Tax Rate

Reported income before income taxes and equity investments $ 1,033 $ 489 $ 2,160 $ 559 $ 440 $ 2,395 $ 446
Add: Cost reduction program and other charges - - 165 19 146 - -
Add: Bond redemption 16 16 - - - 36 36
Add: Pension settlement charge - - 7 7 - 7 7
Add: Venezuela currency devaluation   -   -   -   -   -   131   131
Total adjustments   16   16   172   26   146   174   174
Adjusted income before income taxes and equity investments $ 1,049 $ 505 $ 2,332 $ 585 $ 586 $ 2,569 $ 620
 
Adjusted income taxes (above) $ 285 $ 139 $ 653 $ 164 $ 164 $ 707 $ 161
Adjusted effective tax rate 27% 28% 28% 28% 28% 28% 26%
 

Adjusted Noncontrolling Interests

Reported noncontrolling interests $ 20 $ 10 $ 44 $ 12 $ 11 $ 52 $ 11
Add: Cost reduction program and other charges - - 1 - 1 - -
Less: Income tax benefit   -   -   -   -   -   -   -
Total adjustments   -   -   1   -   1   -   -
Adjusted noncontrolling interests $ 20 $ 10 $ 45 $ 12 $ 12 $ 52 $ 11
 

Adjusted Net Income - Praxair, Inc.

Reported net income - Praxair, Inc. $ 755 $ 356 $ 1,547 $ 401 $ 308 $ 1,694 $ 302
Add: Cost reduction program and other charges - - 125 13 112 - -
Add: Bond redemption 10 10 - - - 22 22
Add: Pension settlement charge - - 5 5 - 5 5
Add: Venezuela currency devaluation   -   -   -   -   -   131   131
Total adjustments   10   10   130   18   112   158   158
Adjusted net income - Praxair, Inc. $ 765 $ 366 $ 1,677 $ 419 $ 420 $ 1,852 $ 460
 
Reported percentage change 4%
Adjusted percentage change -8%
 

Adjusted Diluted EPS

Reported diluted EPS $ 2.63 $ 1.24 $ 5.35 $ 1.40 $ 1.06 $ 5.73 $ 1.03
Add: Cost reduction program and other charges - - 0.43 0.04 0.39 - -
Add: Bond redemption 0.04 0.04 - - - 0.07 0.07
Add: Pension settlement charge - - 0.02 0.02 - 0.02 0.02
Add: Venezuela currency devaluation   -   -   -   -   -   0.45   0.45
Total adjustments   0.04   0.04   0.45   0.06   0.39   0.54   0.54
Adjusted diluted EPS $ 2.67 $ 1.28 $ 5.80 $ 1.46 $ 1.45 $ 6.27 $ 1.57
 

Cash Income Taxes and Interest

Income taxes paid $ 420 $ 606
Interest paid, net of interest capitalized and excluding bond redemption $ 174 $ 174
 

Third Quarter and Full-Year 2016 Diluted EPS Guidance

       
 
Third Quarter 2016 Full Year 2016
Low End   High End Low End   High End
 
2016 GAAP diluted EPS guidance $ 1.34 $ 1.41 $ 5.40 $ 5.55
Add: bond redemption charge - Q1 - - 0.04 0.04
Add: estimated pension settlement impact - Q3   0.01     0.01   0.01     0.01
2016 adjusted diluted EPS guidance $ 1.35 $ 1.42 $ 5.45 $ 5.60
 

Praxair, Inc.
Investors
Kelcey Hoyt, 203-837-2118
[email protected]
or
Media
Jason Stewart, 203-837-2448
[email protected]


Source: Business Wire (July 28, 2016 - 6:01 AM EDT)

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