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--Adjusted diluted EPS of $1.02 up 6% from second quarter* --Strong cash flow from operations of $547 million --Fourth-quarter diluted EPS guidance of $1.05 to $1.10; full-year adjusted diluted EPS of $3.96 to $4.01* Praxair, Inc. (NYSE:PX) reported third-quarter net income and diluted earnings per share of $325 million and $1.04, respectively. These results include a net after-tax benefit of $7 million, or 2 cents of diluted earnings per share, resulting from a $306 million pre-tax charge, and $313 million of income tax benefits, related primarily to a Brazilian government tax amnesty program. Excluding these items, net income was $318 million and diluted earnings per share were $1.02, as compared to $355 million and $1.11 in the prior-year quarter.* Sales in the third quarter were $2,288 million, 20% below $2,852 million in the third quarter of 2008. Excluding the negative effects of foreign currency and cost pass-through, underlying sales were 9% lower due to 11% lower volumes partially offset by 2% higher overall pricing. Sequentially, sales rose 7% from the 2009 second quarter. Reported operating profit in the third quarter was $174 million. Excluding the above-mentioned charge, adjusted operating profit was $480 million, 12% below the prior-year period and 7% above the second quarter. Adjusted operating margin was 21% in the current quarter, up from 19.1% in the prior year as cost reductions and pricing more than offset volume declines.* The company generated strong cash flow from operations of $547 million in the quarter which funded $334 million of capital expenditures, supporting primarily the construction of new on-site production plants for customers under long-term contracts. Acquisition expenditures were $117 million, primarily for the purchase of Sermatech International Holdings Corp. which was announced on July 1, 2009 and closed during the quarter. The company paid $122 million of dividends. The after-tax return-on-capital ratio and return on equity for the quarter were 13.6%, and 26.2%, respectively.* Commenting on the results and business outlook, Chairman and Chief Executive Officer Steve Angel said, "Business conditions stabilized globally during the quarter. Our base business volumes improved from the second quarter in all our geographic regions. The strongest pick-up was in Asia and South America, where government stimulus programs have increased domestic demand and industrial production. To a lesser extent, volumes in North America and Europe also improved from the 2009 second quarter, due primarily to increased production by our metals, chemicals and electronics customers. Overall demand from general manufacturing markets in these regions remains relatively weak and has yet to show meaningful signs of recovery. "We continue to hold a tight rein on costs. Our cost reduction and productivity programs have offset a substantial amount of the impact of lower volumes compared to last year. Our lower cost base will therefore give us significant operating leverage as volumes improve." For the fourth quarter of 2009, Praxair expects diluted earnings per share in the range of $1.05 to $1.10. For the full year of 2009, Praxair expects sales to be about $9 billion. The company expects adjusted diluted earnings per share to be in the range of $3.96 to $4.01.* Full-year capital expenditures are expected to be about $1.4 billion. Following is additional detail on third-quarter 2009 results by geographic region and for Praxair Surface Technologies. In North America, third-quarter sales were $1,162 million, 25% below the third quarter of 2008. Excluding the negative effect of currency and cost pass-through, underlying sales declined 12% due to lower volumes, partially offset by higher overall pricing. Higher refinery hydrogen volumes were offset by lower volumes to chemicals, metals, and general manufacturing markets. Compared to the second quarter of 2009, sales grew 4% primarily due to higher volumes to chemicals and steel customers. Despite 13% lower volumes compared to the prior year, operating profit of $263 million declined only 4% due to significantly lower costs. In Europe, third-quarter sales were $323 million, 16% below the prior year. Excluding currency effects, sales were 8% below the prior year due to lower volumes in manufacturing and metals markets. Operating profit was $68 million in the quarter, compared to $96 million in the prior-year quarter due to lower volumes and currency effects. Compared to the 2009 second quarter, sales and operating profit both improved. In South America, third-quarter sales were $436 million, 17% below the prior-year period. Excluding currency effects, sales were 6% below the prior-year quarter. Operating profit in the third quarter was $94 million, 15% below the prior-year period due to lower volumes partially offset by higher pricing levels. As compared to the second quarter, sales and operating profit ex-currency effects both improved from moderately higher volumes and cost reduction. Sales in Asia were $232 million in the quarter, 3% below the third quarter of 2008. Excluding currency translation effects, underlying sales grew 3% from the prior-year quarter and 15% from the second quarter of 2009. Sales growth in the region came from higher on-site and liquid volumes in China, India, and Korea and was broad-based across most industrial end markets. Operating profit was $37 million, 3% below the prior-year quarter but 12% higher sequentially. Praxair Surface Technologies had third-quarter sales of $135 million versus $145 million in the prior-year quarter. Excluding currency effects and the sales contribution from the Sermatech acquisition, sales were 17% below the prior-year quarter. Higher coatings volumes for jet engines and natural gas turbines were more than offset by lower coatings volumes for industrial gas turbines and for general manufacturing markets in the U.S. and Europe. Operating profit was $18 million in the quarter versus $25 million in the prior-year period and $19 million in the second quarter, reflecting lower overall volumes and acquisition integration expenses. Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2008 sales of $10.8 billion. The company produces, sells and distributes atmospheric and process gases, and high-performance surface coatings. Praxair products, services and technologies bring productivity and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, metals and others. More information on Praxair is available on the Internet at www.praxair.com. *See the attachments for calculations of non-GAAP measures related to third-quarter operating profit, incomes taxes, net income, and diluted earnings per share, adjusted to exclude the impact of the Brazil tax amnesty program and other charges which resulted in a net after-tax benefit of $7 million, or 2 cents of diluted earnings per share; and after-tax return-on-capital; return-on-equity; and debt-to-capital ratios. Attachments: Non-GAAP Reconciliation -- Brazil Tax Amnesty Program and Other Charges, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures A teleconference on Praxair's third-quarter results is being held this morning, October 28, at 11:00 am Eastern Time. The number is (617) 614-3449 -- Passcode: 51428025. The call also is available as a web cast at www.praxair.com/investors. Materials to be used in the teleconference are available on www.praxair.com/investors. 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 tax, environmental, home 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; 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. 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. Non-GAAP Reconciliation - Brazil Tax Amnesty Program and Other
Charges
The following is a reconciliation of 2009 third quarter reported
GAAP amounts to Adjusted Non-GAAP amounts. The Non-GAAP adjustments
eliminate the impacts of a net after-tax benefit of $7 million, or
$0.02 per diluted share, related to a recently announced Federal tax
amnesty program in Brazil (referred to as "Refis Program") and other
charges. The company believes these adjustments are not indicative
of ongoing business trends, and accordingly, the non-GAAP measures
are presented so that investors can evaluate and analyze historical
and future business trends on a consistent basis, and in line with
how management evaluates performance and trends.
(Millions of dollars) Operating Income Net Diluted
Profit Taxes Income EPS
As Reported - GAAP $ 174 $ (187 ) $ 325 $ 1.04
Non-GAAP Adjustments:
Brazil Refis Program, NOL and Other Brazil Government Matters 282 329 (47 ) (0.15 )
Brazil Business Restructure 24 8 16 0.05
Tax Adjustments - (24 ) 24 0.08
Total Non-GAAP Adjustments 306 313 (7 ) (0.02 )
Adjusted Non-GAAP* $ 480 $ 126 $ 318 $ 1.02
* See Appendix for Non-GAAP calculations
Pursuant to the Refis Program, the company intends to settle certain
non-income tax and income tax disputes with the Brazilian government
at substantial discounts. The $306 million charges to operating
profit reflects the settlement of non-income tax disputes, reserves
taken for Brazilian government receivables and a state tax matter,
and the write-down of an idle manufacturing plant and related assets
in Brazil. There is a $313 million income tax benefit primarily
because the Refis Program allows for a portion of the settlement
obligations to be satisfied with income tax net operating loss
carryforwards (NOLs) and because the company had previously fully
reserved these NOL deferred income tax assets.
Although the Refis Program has no cash impact in the 2009 third
quarter, management expects there will be up to $90 million of
incremental cash outflow in the 2009 fourth quarter.
PRAXAIR, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME (a)
(Millions of dollars, except
per share data)
(UNAUDITED)
Quarter Ended Year to Date
September 30, September 30,
2009 2008 2009 2008
SALES (b) $ 2,288 $ 2,852 $ 6,549 $ 8,393
Cost of sales 1,277 1,734 3,662 5,077
Selling, general and administrative 284 341 814 1,017
Depreciation and amortization 217 218 623 644
Research and development 20 24 56 72
Brazil tax amnesty program and other charges (c) 306 - 306 17
Other income (expense) - net (10 ) 9 (25 ) 3
OPERATING PROFIT 174 544 1,063 1,569
Interest expense - net 32 50 100 149
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS 142 494 963 1,420
Income taxes (c) (187 ) 139 36 398
INCOME BEFORE EQUITY INVESTMENTS 329 355 927 1,022
Income from equity investments 7 11 18 28
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) 336 366 945 1,050
Less: noncontrolling interests (11 ) (11 ) (31 ) (39 )
NET INCOME - PRAXAIR, INC. (c) $ 325 $ 355 $ 914 $ 1,011
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS (c)
Basic earnings per share $ 1.06 $ 1.13 $ 2.97 $ 3.22
Diluted earnings per share $ 1.04 $ 1.11 $ 2.93 $ 3.15
Cash dividends $ 0.40 $ 0.375 $ 1.20 $ 1.125
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic shares outstanding (000's) 307,360 313,749 307,712 314,332
Diluted shares outstanding (000's) 312,182 319,505 312,185 320,719
(a) Effective January 1, 2009, Praxair adopted the new noncontrolling
interest guidance under Accounting Standards Codification 810 (ASC
810), "Consolidation" and reclassified 2008 amounts to conform to
the current year presentation. ASC 810 requires noncontrolling
interests (previously referred to as minority interests) to be
included in net income in the consolidated statement of income. Per
share data remains unchanged and is based upon "Net Income -
Praxair, Inc."
(b) Sales for the 2009 quarter and year-to-date periods decreased $151
million and $354 million, respectively, due to lower cost
pass-through, with minimal impact on operating profit compared to
2008. Sales for the quarter and year-to-date period decreased $160
million and $672 million, respectively, due to currency effects
versus 2008.
(c) The 2009 quarter and year-to-date periods include a net after-tax
benefit of $7 million ($306 million pre-tax charge offset by a $313
million tax benefit), or $0.02 per diluted share, related to a
recently announced Federal tax amnesty program in Brazil (referred
to as the "Refis Program") and other charges. The 2008 year-to-date
period includes a pension settlement charge of $17 million ($11
million after-tax or $0.03 per diluted share). See Appendix.
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
BALANCE SHEETS
(Millions of dollars)
(UNAUDITED)
September 30, December 31,
2009 2008
ASSETS
Cash and cash equivalents $ 65 $ 32
Accounts receivable - net 1,629 1,604
Inventories 398 445
Prepaid and other current assets 207 220
TOTAL CURRENT ASSETS 2,299 2,301
Property, plant and equipment - net 8,807 7,922
Goodwill 2,057 1,909
Other intangibles - net 144 121
Other long-term assets 864 801
TOTAL ASSETS $ 14,171 $ 13,054
LIABILITIES AND EQUITY
Accounts payable $ 717 $ 820
Short-term debt 242 642
Current portion of long-term debt 266 674
Other current liabilities 810 843
TOTAL CURRENT LIABILITIES 2,035 2,979
Long-term debt 4,727 3,709
Other long-term liabilities 2,002 2,055
TOTAL LIABILITIES 8,764 8,743
EQUITY (a)
Praxair, Inc. shareholders' equity 5,085 4,009
Noncontrolling Interests 322 302
TOTAL EQUITY 5,407 4,311
TOTAL LIABILITIES AND EQUITY $ 14,171 $ 13,054
(a) ASC 810 requires noncontrolling interests (previously referred to as
minority interests) to be classified as a separate component of
equity in the consolidated balance sheets. 2008 amounts have been
reclassified to conform to the current year presentation.
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
Quarter Ended Year to Date
September 30, September 30,
2009 2008 2009 2008
OPERATIONS (a)
Net income - Praxair, Inc. $ 325 $ 355 $ 914 $ 1,011
Noncontrolling interests 11 11 31 39
Net income (including noncontrolling interests) (b) 336 366 945 1,050
Adjustments to reconcile net income to net cash provided by
operating activities:
Brazil tax amnesty program and other charges (b) 306 - 306 17
Deferred income taxes (b) (280 ) 16 (251 ) 27
Depreciation and amortization 217 218 623 644
Accounts receivable (57 ) 160 (10 ) (109 )
Inventory 18 11 37 (22 )
Payables and accruals (b) 42 (59 ) (232 ) 36
Pension contributions (114 ) (1 ) (123 ) (14 )
Other 79 (81 ) 164 (231 )
Net cash provided by operating activities 547 630 1,459 1,398
INVESTING
Capital expenditures (334 ) (405 ) (997 ) (1,129 )
Acquisitions, net of cash acquired (117 ) (35 ) (128 ) (105 )
Divestitures and asset sales 7 2 20 48
Net cash used for investing activities (444 ) (438 ) (1,105 ) (1,186 )
FINANCING
Debt (decrease) increase - net 78 464 135 820
Issuances of common stock 31 22 68 176
Purchases of common stock (60 ) (559 ) (145 ) (891 )
Cash dividends - Praxair, Inc. shareholders (122 ) (117 ) (368 ) (353 )
Excess tax benefit on stock option exercises 8 8 14 52
Noncontrolling interest transactions and other (10 ) (9 ) (32 ) (9 )
Net cash used for financing activities (75 ) (191 ) (328 ) (205 )
Effect of exchange rate changes on cash and cash equivalents 4 (4 ) 7 -
Change in cash and cash equivalents 32 (3 ) 33 7
Cash and cash equivalents, beginning-of-period 33 27 32 17
Cash and cash equivalents, end-of-period $ 65 $ 24 $ 65 $ 24
(a) ASC 810 requires that the reconciliation of net income to net cash
provided by operating activities begin with net income including
noncontrolling interests. 2008 amounts have been reclassified to
conform to the current year presentation.
(b) The Brazil tax amnesty program and other charges had no cash flow
impact in the 2009 third quarter and year-to-date periods and is
reflected in the condensed consolidated statement of cash flows as
follows:
Net income $ 7
Adjustments to net income:
Brazil tax amnesty program and other charges 306
Deferred income taxes (363 )
Payables and accruals 50
Net operating cash flow impact $ -
PRAXAIR, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions
of dollars)
(UNAUDITED)
Quarter Ended Year to Date
September 30, September 30,
2009 2008 2009 2008
SALES
North America (a) $ 1,162 $ 1,557 $ 3,446 $ 4,584
Europe (b) 323 384 932 1,180
South America (c) 436 527 1,184 1,507
Asia (d) 232 239 611 682
Surface Technologies (e) 135 145 376 440
Total sales $ 2,288 $ 2,852 $ 6,549 $ 8,393
OPERATING PROFIT
North America (a) $ 263 $ 274 $ 783 $ 811
Europe (b) 68 96 192 282
South America (c) 94 111 239 302
Asia (d) 37 38 96 115
Surface Technologies (e) 18 25 59 76
Segment operating profit 480 544 1,369 1,586
Brazil tax amnesty program and other charges (306 ) - (306 ) (17 )
Total operating profit $ 174 $ 544 $ 1,063 $ 1,569
(a) North American 2009 sales for the quarter and year-to-date periods
decreased $160 million and $367 million, respectively, due to lower
cost pass-through, with minimal impact on operating profit compared
to 2008. Sales for the quarter and year-to-date periods decreased
$54 million and $205 million, respectively, due to currency effects
versus 2008.
(b) European 2009 sales for the quarter and year-to-date periods
increased $5 million and $1 million, respectively, due to higher
cost pass-through, with minimal impact on operating profit compared
to 2008. Sales for the quarter and year-to-date periods decreased
$29 million and $123 million, respectively, due to currency effects
versus 2008.
(c) South American 2009 sales for the quarter and year-to-date periods
increased $4 million and $10 million, respectively, due to higher
cost pass-through, with minimal impact on operating profit compared
to 2008. Sales for the quarter and year-to-date periods decreased
$56 million and $260 million, respectively, due to currency effects
versus 2008.
(d) Asian 2009 sales for the quarter and year-to-date periods increased
$2 million and $8 million, respectively, due to higher cost
pass-through, with minimal impact on operating profit compared to
2008. Sales for the quarter and year-to-date periods decreased $14
million and $55 million, respectively, due to currency effects
versus 2008.
(e) Surface Technologies 2009 sales for the quarter and year-to-date
periods decreased $2 million and $6 million, respectively, due to
lower cost pass-through, with minimal impact on operating profit
compared to 2008. Sales for the quarter and year-to-date periods
decreased $7 million and $29 million, respectively, due to currency
effects versus 2008. On July 1, 2009, Praxair acquired Sermatech
International Holdings Corp., which contributed sales of $22 million
in the quarter and nine months ended September 30, 2009 with a
minimal impact on operating profit.
PRAXAIR, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL
SUMMARY
(Millions of dollars, except per share data)
(UNAUDITED)
2009 2008
Q3 (b) Q2 Q1 Q4 (b) Q3 Q2 Q1 (b)
FROM THE INCOME STATEMENT
Sales $ 2,288 $ 2,138 $ 2,123 $ 2,403 $ 2,852 $ 2,878 $ 2,663
Cost of sales 1,277 1,190 1,195 1,418 1,734 1,748 1,595
Selling, general and administrative 284 265 265 295 341 341 335
Depreciation and amortization 217 207 199 206 218 216 210
Research and development 20 18 18 25 24 24 24
Brazil tax amnesty program and other charges 306 - - 177 - - 17
Other income (expenses) - net (10 ) (11 ) (4 ) 32 9 (6 ) -
Operating profit 174 447 442 314 544 543 482
Interest expense - net 32 33 35 49 50 52 47
Income taxes (187 ) 109 114 67 139 137 122
Income from equity investments 7 6 5 8 11 8 9
Net income (including noncontrolling interests) 336 311 298 206 366 362 322
Less: noncontrolling interests (11 ) (12 ) (8 ) (6 ) (11 ) (13 ) (15 )
Net income - Praxair, Inc. $ 325 $ 299 $ 290 $ 200 $ 355 $ 349 $ 307
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
Diluted earnings per share $ 1.04 $ 0.96 $ 0.93 $ 0.64 $ 1.11 $ 1.08 $ 0.96
Cash dividends per share $ 0.40 $ 0.40 $ 0.40 $ 0.375 $ 0.375 $ 0.375 $ 0.375
Diluted weighted average shares outstanding (000's) 312,182 312,429 311,311 310,719 319,505 322,088 320,409
FROM THE BALANCE SHEET
Total debt $ 5,235 $ 5,107 $ 5,045 $ 5,025 $ 4,944 $ 4,596 $ 4,574
Total capital (a) 10,642 10,053 9,420 9,336 10,142 10,584 10,127
Debt-to-capital ratio (a) 49.2 % 50.8 % 53.6 % 53.8 % 48.7 % 43.4 % 45.2 %
FROM THE STATEMENT OF CASH FLOWS
Cash flow from operations $ 547 $ 563 $ 349 $ 640 $ 630 $ 389 $ 379
Capital expenditures 334 370 293 482 405 380 344
Acquisitions 117 9 2 25 35 30 40
Cash dividends 122 123 123 115 117 119 117
OTHER INFORMATION
Number of employees 26,432 26,139 26,533 26,936 27,957 27,999 27,948
After-tax return on capital (ROC) (a) 13.6 % 13.8 % 13.8 % 14.7 % 15.5 % 15.4 % 14.8 %
Return on Praxair, Inc. shareholders' equity (ROE) (a) 26.2 % 27.5 % 28.7 % 28.2 % 26.9 % 25.7 % 24.6 %
SEGMENT DATA
SALES
North America $ 1,162 $ 1,120 $ 1,164 $ 1,355 $ 1,557 $ 1,573 $ 1,454
Europe 323 306 303 322 384 406 390
South America 436 395 353 382 527 514 466
Asia 232 199 180 209 239 232 211
Surface Technologies 135 118 123 135 145 153 142
Total sales $ 2,288 $ 2,138 $ 2,123 $ 2,403 $ 2,852 $ 2,878 $ 2,663
OPERATING PROFIT
North America $ 263 $ 264 $ 256 $ 267 $ 274 $ 275 $ 262
Europe 68 61 63 83 96 99 87
South America 94 70 75 87 111 102 89
Asia 37 33 26 34 38 40 37
Surface Technologies 18 19 22 20 25 27 24
Segment operating profit 480 447 442 491 544 543 499
Brazil tax amnesty program and other charges (306 ) - - (177 ) - - (17 )
Total operating profit $ 174 $ 447 $ 442 $ 314 $ 544 $ 543 $ 482
(a) Non-GAAP measure, see Appendix.
(b) The third quarter 2009 includes a charge of $306 million ($7 million
after-tax, or $0.02 per diluted share), related to a Federal tax
amnesty program in Brazil and other charges; the fourth quarter 2008
includes a charge of $177 million ($114 million after-tax, or $0.37
per diluted share), related to a cost reduction program and other
charges; and the first quarter 2008 includes a pension settlement
charge of $17 million ($11 million after-tax, or $0.03 per diluted
share). See Appendix.
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 financing leverage,
return on net assets employed and operating performance. Special
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 impact of the 2009 third quarter Brazil
tax amnesty program and other charges, the 2008 fourth quarter cost
reduction program and other charges and the 2008 first quarter
pension settlement charge which helps investors understand
underlying performance on a comparable basis.
2009 2008
Q3 Q2 Q1 Q4 Q3 Q2 Q1
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.
Total debt $ 5,235 $ 5,107 $ 5,045 $ 5,025 $ 4,944 $ 4,596 $ 4,574
Equity:
Praxair, Inc. shareholders' equity 5,085 4,638 4,073 4,009 4,891 5,671 5,209
Noncontrolling interests 322 308 302 302 307 317 344
Total equity 5,407 4,946 4,375 4,311 5,198 5,988 5,553
Total Capital $ 10,642 $ 10,053 $ 9,420 $ 9,336 $ 10,142 $ 10,584 $ 10,127
Debt to capital ratio 49.2 % 50.8 % 53.6 % 53.8 % 48.7 % 43.4 % 45.2 %
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) $ 480 $ 447 $ 442 $ 491 $ 544 $ 543 $ 499
Less: adjusted income taxes (a) $ (126 ) (109 ) (114 ) $ (126 ) $ (139 ) $ (137 ) $ (128 )
Less: tax benefit on interest expense (9 ) (9 ) (10 ) (14 ) (14 ) (15 ) (13 )
Add: income from equity investments 7 6 5 8 11 8 9
Net operating profit after-tax (NOPAT) $ 352 $ 335 $ 323 $ 359 $ 402 $ 399 $ 367
Beginning capital $ 10,053 $ 9,420 $ 9,336 $ 10,142 $ 10,584 $ 10,127 $ 9,655
Ending capital $ 10,642 $ 10,053 $ 9,420 $ 9,336 $ 10,142 $ 10,584 $ 10,127
Average capital $ 10,348 $ 9,737 $ 9,378 $ 9,739 $ 10,363 $ 10,356 $ 9,891
ROC % 3.4 % 3.4 % 3.4 % 3.7 % 3.9 % 3.9 % 3.7 %
ROC % (annualized) 13.6 % 13.8 % 13.8 % 14.7 % 15.5 % 15.4 % 14.8 %
Return on Praxair, Inc.
Shareholder's 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) $ 318 $ 299 $ 290 $ 314 $ 355 $ 349 $ 318
Beginning Praxair, Inc. shareholders' equity $ 4,638 $ 4,073 $ 4,009 $ 4,891 $ 5,671 $ 5,209 $ 5,142
Ending Praxair, Inc. shareholders' equity $ 5,085 $ 4,638 $ 4,073 $ 4,009 $ 4,891 $ 5,671 $ 5,209
Average Praxair, Inc. shareholders' equity $ 4,862 $ 4,356 $ 4,041 $ 4,450 $ 5,281 $ 5,440 $ 5,176
ROE % 6.5 % 6.9 % 7.2 % 7.1 % 6.7 % 6.4 % 6.1 %
ROE % (annualized) 26.2 % 27.5 % 28.7 % 28.2 % 26.9 % 25.7 % 24.6 %
(a) Adjusted Operating Profit and
Operating Profit Margin, Income Taxes, Effective Tax Rate, Net
income - Praxair, Inc., Diluted EPS and Full-Year Diluted EPS
Guidance
Third Fourth First
Quarter Quarter Quarter
2009 2008 2008
Adjusted Operating Profit and
Operating Profit Margin
Reported operating profit $ 174 $ 314 $ 482
Add: Brazil tax amnesty program and other charges (b) 306 177 17
Adjusted operating profit $ 480 $ 491 $ 499
Reported sales $ 2,288 $ 2,403 $ 2,663
Adjusted operating profit margin 21 % 20 % 19 %
Adjusted Income Taxes
Reported income taxes (187 ) $ 67 $ 122
Add: Brazil tax amnesty program and other charges (b) 313 59 6
Adjusted income taxes $ 126 $ 126 $ 128
Adjusted Effective Tax Rate
Reported income before income taxes and equity investments $ 142 $ 265 $ 435
Add: Brazil tax amnesty program and other charges (b) 306 177 17
Adjusted income before income taxes and equity investments $ 448 $ 442 $ 452
Adjusted income taxes (above) $ 126 $ 126 $ 128
Adjusted effective tax rate 28 % 29 % 28 %
Adjusted Net Income - Praxair,
Inc.
Reported net income - Praxair, Inc. $ 325 $ 200 $ 307
Less: Brazil tax amnesty program and other charges (b) (7 ) 114 11
Adjusted net income - Praxair, Inc. $ 318 $ 314 $ 318
Adjusted Diluted EPS
Diluted weighted average shares 312,182 310,719 320,409
Reported diluted EPS $ 1.04 $ 0.64 $ 0.96
Less: Brazil tax amnesty program and other charges (b) (0.02 ) 0.37 0.03
Adjusted diluted EPS $ 1.02 $ 1.01 $ 0.99
Reported 2009 second quarter diluted EPS $ 0.96
Percentage change from the 2009 second quarter 6 %
Adjusted Full-Year 2009 Diluted Low End High End
EPS Guidance
Expected full-year 2009 diluted EPS $ 3.98 $ 4.03
Less: Brazil tax amnesty program and other charges (b(i)) (0.02 ) (0.02 )
Adjusted expected full-year 2009 EPS $ 3.96 $ 4.01
Reported 2008 diluted EPS $ 3.80 $ 3.80
Add: cost reduction program and other charges (b (ii)) 0.37 0.37
Add: pension settlement charge (b (iii)) 0.03 0.03
Adjusted full-year 2008 diluted EPS $ 4.20 $ 4.20
Percentage change from 2008 -6 % -5 %
(b) Represent non-GAAP adjustments to eliminate the impact of (i) 2009
third quarter Brazil tax amnesty program and other charges, (ii)
2008 fourth quarter cost reduction program and other charges, and
(iii) 2008 first quarter pension settlement charge. The company does
not believe these items are indicative of on-going business trends
and, accordingly, their impacts are excluded from the adjusted
non-GAAP amounts so that investors can better evaluate and analyze
historical and future business trends on a consistent basis.
(i) The 2009 quarter and year-to-date periods include a net after-tax
benefit of $7 million ($306 million pre-tax charge offset by a
$313 million tax benefit), or $0.02 per diluted share, related to
a recently announced Federal tax amnesty program in Brazil
(referred to as the "Refis Program") and other charges. The net
after-tax benefit includes the impacts of management's decision to
settle numerous outstanding Federal tax cases under the Refis
Program (primarily for sales and value-added taxes), the impact of
a reversal of remaining valuation allowances on deferred income
tax assets for NOL carryforwards of a Brazilian subsidiary and the
impact of charges for other Brazilian government-related
matters.These matters resulted in a pre-tax charge of $282
million, an income tax benefit of $329 million, and a net income
tax benefit of $47 million. The net income tax benefit is due to
the net operating loss carryforward (NOL) utilization to settle
interest obligations and reversal of the remaining NOL deferred
tax asset valuation allowances.Other special items include a
pre-tax charge of $24 million ($16 million after-tax) for a
business restructure in Brazil and a charge of $24 million to
income taxes relating to an entity reorganization and other recent
developments in North America and Europe.
(ii) The 2008 fourth quarter includes cost reduction program and other
charges of $177 million ($114 million after-tax and noncontrolling
interests, or $0.37 per diluted share). (See Note 2 on page 56 of
Praxair's Annual Report on Form 10-K)
(iii) A pension settlement charge of $17 million ($11 million after-tax or
$0.03 per diluted share) was recorded in the 2008 first quarter
related to lump sum benefit payments made from the U.S. supplemental
pension plan to a number of recently retired senior managers,
including Praxair's former chairman and chief executive officer.
(See Note 17 on page 80 of Praxair's Annual Report on Form 10-K)
SOURCE: Praxair, Inc. Praxair, Inc. Susan Szita Gore, 203-837-2311 (Media) susan_szita-gore@praxair.com Elizabeth Hirsch, 203-837-2354 (Investors) liz_hirsch@praxair.com For full details on Praxair Inc (PX) click here. Praxair Inc (PX) has Short Term PowerRatings of 6. Details on Praxair Inc (PX) Short Term PowerRatings is available at This Link.
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