Praxair Reports Third-Quarter 2016 Results

  • Sales of $2.7 billion; EPS of $1.18; adjusted EPS of $1.41
  • Operating cash flow of $0.8 billion; 17% above prior year and 29% of sales
  • Successfully executing strategy:

    -- Increased project backlog to $1.4 billion, added U.S. Gulf Coast long-term contract with MEGlobal

    -- Diversified portfolio with key carbon dioxide acquisitions and joint venture with GE Aviation

    -- Project start-ups in Antwerp and Peru

DANBURY, Conn.--()--Praxair, Inc. (NYSE:PX) reported third-quarter net income and diluted earnings per share of $339 million and $1.18, respectively. These results include the impact of a $100 million pre-tax charge, or 23 cents of diluted earnings per share. This charge was primarily related to cost reduction actions taken in response to weaker underlying industrial activity in the Americas and Asia. Excluding the charge, adjusted net income and diluted earnings per share were $405 million and $1.41, respectively.

Praxair’s sales in the third quarter were $2,716 million, 1% above the prior-year quarter. Excluding negative currency translation of 1%, sales were 2% higher than the prior-year quarter due to growth from acquisitions, largely a carbon dioxide business in Europe, and higher pricing. Overall volumes were comparable to the prior-year quarter. Volume growth from new on-site projects, primarily in South America, Asia and Europe, was offset by lower base business volumes in North and South America, due primarily to weaker manufacturing activity in the U.S. and Brazil.

Reported operating profit in the third quarter was $497 million, 16% below the prior-year quarter. Excluding the current-quarter impact of the charge, adjusted operating profit of $597 million was 4% below the prior-year quarter, which included a 1% headwind from foreign currency translation. Reported operating profit as a percentage of sales was 18.3%. Adjusted operating profit as a percentage of sales was 22.0% and the adjusted EBITDA margin was 32.8%.

Third-quarter cash flow from operations was $788 million, 29% of sales and 17% above the prior-year quarter. Capital expenditures were $376 million and the company paid $214 million of dividends. After-tax return on capital and return on equity for the quarter were 12.1% and 33.3%, respectively.

Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “As anticipated, the third quarter continued to experience mixed results in end-market trends with strong demand in more resilient food, beverage and healthcare markets, but persistent weakness from industrial sectors like manufacturing and upstream energy. In light of these trends, we took additional cost actions in the third quarter to properly align our organization and to accelerate planned acquisition synergies.

“Despite these macro-economic challenges, Praxair employees once again delivered high-quality results this quarter with 17% growth in operating cash flow, and operating and EBITDA margins of 22% and 33%, respectively. Furthermore, we recently added several new long-term, on-site supply contracts to our project backlog, including a large investment in the U.S. Gulf Coast, where bidding activity is strong, and we remain confident in our ability to win additional projects. Praxair employees are successfully implementing our strategy to grow in resilient markets, execute and win new on-site projects, and protect and grow profitability regardless of the economic cycle.”

For the fourth quarter of 2016, Praxair expects diluted earnings per share in the range of $1.36 to $1.43.

For full-year 2016, Praxair expects adjusted diluted earnings per share to be in the range of $5.44 to $5.51. This guidance assumes a negative currency translation impact of approximately 3% year over year. This full-year guidance excludes a bond redemption charge taken in the first quarter and charges primarily related to a cost reduction program in the third quarter. As a result, GAAP diluted earnings per share are expected to be in the range of $5.17 to $5.24. Full-year capital expenditures are expected to be approximately $1.4 billion.

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

In North America, third-quarter sales were $1,431 million, 2% below the prior-year quarter. Excluding negative cost pass-through and currency translation, sales were comparable to the prior-year quarter. Price attainment and volume growth to food and beverage, healthcare and refinery customers were offset by weaker sales to manufacturing, metals and upstream energy end-markets. Operating profit was $363 million.

In Europe, third-quarter sales were $366 million, 8% above the prior-year quarter. Volumes were comparable to the prior year, excluding a prior-year sale of equipment which reduced sales by 1%. Acquisitions contributed 9% growth, primarily related to a carbon dioxide business largely serving the food and beverage end-market. Operating profit of $72 million grew 14% from the prior year, primarily due to acquisitions and cost control.

In South America, third-quarter sales were $378 million, 10% above the prior-year quarter. Sales, excluding positive cost pass-through and currency translation, grew 7% as a result of higher price and new on-site project volumes. Operating profit was $68 million.

Sales in Asia were $391 million in the third quarter, 1% below the prior-year quarter, and 1% higher excluding negative currency impact. Volume growth included new plant start-ups which was partially offset by customer turnarounds. Operating profit was $68 million.

Praxair Surface Technologies third-quarter sales were $150 million, 2% above the prior-year quarter. Cost pass-through and negative currency translation reduced sales by 2%. Underlying sales growth of 3% was driven by favorable price and higher aerospace volumes. Acquisitions contributed 1% growth. Operating profit of $26 million grew 4% from the prior year due to higher price and volumes.

About Praxair

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: 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 27, 2016, at 11:00 am Eastern Time. The number is (631) 485-4849 – Conference ID: 91651900. 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

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 September 30

Reported GAAP Amounts $ 2,716 $ 2,686 $ 497 $ 594 $ 339 $ 401 $ 1.18 $ 1.40
Pension settlement charges (a) - - 4 7 3 5 0.01 0.02
Cost reduction program and other charges (b)   -     -     96     19     63     13     0.22     0.04
Total adjustments   -     -     100     26     66     18     0.23     0.06
Adjusted amounts $ 2,716   $ 2,686   $ 597   $ 620   $ 405   $ 419   $ 1.41   $ 1.46
 

Year To Date September 30

Reported GAAP Amounts $ 7,890 $ 8,181 $ 1,639 $ 1,697 $ 1,094 $ 1,125 $ 3.80 $ 3.88
Pension settlement charges (a) - - 4 7 3 5 0.01 0.02
Cost reduction program and other charges (b) - - 96 165 63 125 0.22 0.43
Bond redemption (c)   -     -     -     -     10     -     0.04     -
Total adjustments   -     -     100     172     76     130     0.27     0.45
Adjusted amounts $ 7,890   $ 8,181   $ 1,739   $ 1,869   $ 1,170   $ 1,255   $ 4.07   $ 4.33
 

(a)

 

Pension settlement charges were recorded in the third quarter of 2016 and 2015 related to lump sum benefit payments made from the U.S. supplemental pension plan.

(b)

Charges in the 2016 third quarter and the 2015 second and third quarters related to the cost reduction program and other charges.

(c)

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

 

       
PRAXAIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except per share data)
(UNAUDITED)
 
Quarter Ended Year to Date
September 30, September 30,
2016 2015 2016 2015
 
SALES $ 2,716 $ 2,686 $ 7,890 $ 8,181
Cost of sales 1,533 1,488 4,382 4,534
Selling, general and administrative 291 281 873 877
Depreciation and amortization 284 276 837 831
Research and development 22 23 69 70
Cost reduction program and other charges 100 26 100 172
Other income (expense) - net   11     2     10     -  
OPERATING PROFIT 497 594 1,639 1,697
Interest expense - net   43     35     152     119  
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS 454 559 1,487 1,578
Income taxes   120     156     399     449  
INCOME BEFORE EQUITY INVESTMENTS 334 403 1,088 1,129
Income from equity investments   10     10     31     31  
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) 344 413 1,119 1,160
Less: noncontrolling interests   (5 )   (12 )   (25 )   (35 )
NET INCOME - PRAXAIR, INC. $ 339   $ 401   $ 1,094   $ 1,125  
 
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
 
Basic earnings per share $ 1.19 $ 1.40 $ 3.83 $ 3.91
 
Diluted earnings per share $ 1.18 $ 1.40 $ 3.80 $ 3.88
 
Cash dividends $ 0.75 $ 0.715 $ 2.25 $ 2.145
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic shares outstanding (000's) 285,858 285,651 285,663 287,578
Diluted shares outstanding (000's) 288,195 287,311 287,727 289,835

 

Note: See page 4 for a reconciliation to 2016 adjusted amounts which are non-GAAP.

   
 
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of dollars)
(UNAUDITED)
 
September 30, December 31,
2016 2015
ASSETS
Cash and cash equivalents $ 627 $ 147
Accounts receivable - net 1,699 1,601
Inventories 538 531
Prepaid and other current assets   398     347  
TOTAL CURRENT ASSETS 3,262 2,626
Property, plant and equipment - net 11,635 10,998
Goodwill 3,163 2,986
Other intangibles - net 595 568
Other long-term assets   1,231     1,141  
TOTAL ASSETS $ 19,886   $ 18,319  
 
LIABILITIES AND EQUITY
Accounts payable $ 867 $ 791
Short-term debt 606 250
Current portion of long-term debt 11 6
Other current liabilities   950     846  
TOTAL CURRENT LIABILITIES 2,434 1,893
Long-term debt 9,225 8,975
Other long-term liabilities   2,578     2,545  
TOTAL LIABILITIES 14,237 13,413
 
REDEEMABLE NONCONTROLLING INTERESTS 11 113
 
PRAXAIR, INC. SHAREHOLDERS' EQUITY:
Common stock 4 4
Additional paid-in capital 4,027 4,005
Retained earnings 12,686 12,229
Accumulated other comprehensive income (loss) (4,211 ) (4,596 )
Less: Treasury stock, at cost   (7,261 )   (7,253 )
Total Praxair, Inc. Shareholders' Equity 5,245 4,389
Noncontrolling interests   393     404  
TOTAL EQUITY   5,638     4,793  
TOTAL LIABILITIES AND EQUITY $ 19,886   $ 18,319  
 

       
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
 
Quarter Ended Year to Date
September 30, September 30,
2016 2015 2016 2015
OPERATIONS
Net income - Praxair, Inc. $ 339 $ 401 $ 1,094 $ 1,125
Noncontrolling interests   5     12     25     35  
Net income (including noncontrolling interests) 344 413 1,119 1,160
 
Adjustments to reconcile net income to net cash provided
by operating activities:
Cost reduction program and other charges, net of payments 93 4 93 139
Depreciation and amortization 284 276 837 831
Accounts receivable 17 (13 ) (44 ) (57 )
Inventory 19 1 11 (14 )
Payables and accruals 69 43 6 (20 )
Pension contributions (2 ) (1 ) (8 ) (13 )
Deferred income taxes and other   (36 )   (47 )   33     (122 )
Net cash provided by operating activities   788     676     2,047     1,904  
 
INVESTING
Capital expenditures (376 ) (405 ) (1,056 ) (1,154 )
Acquisitions, net of cash acquired (20 ) - (345 ) (43 )
Divestitures and asset sales   33     5     41     245  
Net cash used for investing activities   (363 )   (400 )   (1,360 )   (952 )
 
FINANCING
Debt increase (decrease) - net (134 ) 170 556 371
Issuances of common stock 49 13 109 74
Purchases of common stock (50 ) (235 ) (133 ) (704 )
Cash dividends - Praxair, Inc. shareholders (214 ) (203 ) (642 ) (615 )
Excess tax benefit on stock option exercises - 1 - 18
Noncontrolling interest transactions and other   (13 )   (6 )   (122 )   (44 )
Net cash provided by (used for) financing activities (362 ) (260 ) (232 ) (900 )
 
Effect of exchange rate changes on cash and
cash equivalents   (3 )   (16 )   25     (42 )
 
Change in cash and cash equivalents 60 - 480 10
Cash and cash equivalents, beginning-of-period   567     136     147     126  
 
Cash and cash equivalents, end-of-period $ 627   $ 136   $ 627   $ 136  
 

       
PRAXAIR, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)
 
Quarter Ended Year to Date
September 30, September 30,
2016 2015 2016 2015
SALES
North America $ 1,431 $ 1,463 $ 4,195 $ 4,444
Europe 366 338 1,041 995
South America 378 343 1,047 1,132
Asia 391 395 1,160 1,153
Surface Technologies   150     147     447     457  
Consolidated sales $ 2,716   $ 2,686   $ 7,890   $ 8,181  
 
OPERATING PROFIT
North America $ 363 $ 385 $ 1,071 $ 1,152
Europe 72 63 202 188
South America 68 70 193 236
Asia 68 77 198 215
Surface Technologies   26     25     75     78  
Segment operating profit $ 597 $ 620 $ 1,739 $ 1,869
Cost reduction program and other charges   (100 )   (26 )   (100 )   (172 )
Total operating profit $ 497   $ 594   $ 1,639   $ 1,697  
 

           
PRAXAIR, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL SUMMARY
(Millions of dollars, except per share data)
(UNAUDITED)
 
2016 (c) 2015 (d)
Q3 Q2 Q1 Q4 Q3 Q2 Q1
FROM THE INCOME STATEMENT
Sales $ 2,716 $ 2,665 $ 2,509 $ 2,595 $ 2,686 $ 2,738 $ 2,757
Cost of sales 1,533 1,468 1,381 1,426 1,488 1,516 1,530
Selling, general and administrative 291 308 274 275 281 297 299
Depreciation and amortization 284 281 272 275 276 278 277
Research and development 22 24 23 23 23 23 24
Cost reduction program and other charges 100 - - - 26 146 -
Other income (expense) - net   11       4       (5 )   28       2       2       (4 )
Operating profit 497 588 554 - 624 594 480 623
Interest expense - net 43 44 65 42 35 40 44
Income taxes (b) 120 146 133 163 156 131 162
Income from equity investments   10       11       10     12       10       10       11  
Net income (including noncontrolling interests) 344 409 366

 

431 413 319 428
Less: noncontrolling interests   (5 )     (10 )     (10 )   (9 )     (12 )     (11 )     (12 )
Net income - Praxair, Inc. $ 339     $ 399     $ 356   $ 422     $ 401     $ 308     $ 416  
 
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
Diluted earnings per share $ 1.18 $ 1.39 $ 1.24 $ 1.47 $ 1.40 $ 1.06 $ 1.43
Cash dividends per share $ 0.75 $ 0.75 $ 0.75 $ 0.715 $ 0.715 $ 0.715 $ 0.715
Diluted weighted average shares outstanding (000's) 288,195 287,727 286,665 286,856 287,311 290,102 291,652
 
ADJUSTED AMOUNTS (a)
Operating profit $ 597 $ 588 $ 554 $ 624 $ 620 $ 626 $ 623
Operating margin 22.0 % 22.1 % 22.1 % 24.0 % 23.1 % 22.9 % 22.6 %
Net Income $ 405 $ 399 $ 366 $ 422 $ 419 $ 420 $ 416
Diluted earnings per share $ 1.41 $ 1.39 $ 1.28 $ 1.47 $ 1.46 $ 1.45 $ 1.43
 
FROM THE BALANCE SHEET
Net debt (a) $ 9,215 $ 9,389 $ 9,183 $ 9,084 $ 9,344 $ 9,177 $ 9,243
Capital (a) $ 14,864 $ 14,948 $ 14,607 $ 13,990 $ 14,157 $ 14,696 $ 14,806
Debt-to-capital ratio (a) 62.0 % 62.8 % 62.9 % 64.9 % 66.0 % 62.4 % 62.4 %
 
FROM THE STATEMENT OF CASH FLOWS
Cash flow from operations (b) $ 788 $ 706 $ 553 $ 791 $ 676 $ 710 $ 518
Cash flow provided by (used for) investing activities (363 ) (613 ) (384 ) (351 ) (400 ) (152 ) (400 )
Cash flow provided by (used for) financing activities (b) (362 ) 249 (119 ) (410 ) (260 ) (530 ) (110 )
Capital expenditures 376 357 323 387 405 352 397
Acquisitions 20 262 63 39 - 38 5
Cash dividends 214 214 214 204 203 205 207
 
OTHER INFORMATION
After-tax return on capital (ROC) (a) 12.1 % 12.2 % 12.4 % 12.6 % 12.5 % 12.6 % 12.7 %
Return on Praxair, Inc. shareholders' equity (ROE) (a) 33.3 % 34.0 % 34.6 % 34.6 % 32.5 % 30.5 % 29.6 %
Adjusted EBITDA (a) $ 891 $ 880 $ 836 $ 911 $ 906 $ 914 $ 911
Adjusted EBITDA margin (a) 32.8 % 33.0 % 33.3 % 35.1 % 33.7 % 33.4 % 33.0 %
Debt-to-adjusted EBITDA ratio (a) 2.6 2.6 2.6 2.5 2.5 2.4 2.3
Number of employees 26,680 26,896 26,558 26,657 26,989 27,302 27,680
 
SEGMENT DATA
SALES
North America $ 1,431 $ 1,411 $ 1,353 $ 1,421 $ 1,463 $ 1,482 $ 1,499
Europe 366 355 320 325 338 331 326
South America 378 358 311 299 343 388 401
Asia 391 393 376 398 395 387 371
Surface Technologies   150       148       149     152       147       150       160  
Total sales $ 2,716     $ 2,665     $ 2,509   $ 2,595     $ 2,686     $ 2,738     $ 2,757  
OPERATING PROFIT
North America $ 363 $ 359 $ 349 $ 406 $ 385 $ 388 $ 379
Europe 72 68 62 62 63 63 62
South America 68 70 55 55 70 81 85
Asia 68 67 63 74 77 69 69
Surface Technologies   26       24       25     27       25       25       28  
Segment operating profit 597 588 554 624 620 626 623
Cost reduction program and other charges   (100 )     -       -     -       (26 )     (146 )     -  
Total operating profit $ 497     $ 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 (i) a $16 million charge to interest expense ($10 million after-tax, or $0.04 per diluted share) in the first quarter related to the redemption of the $325 million 5.20% notes due 2017, (ii) a pre-tax pension settlement charge of $4 million ($3 million after-tax, or $0.01 per diluted share) in the third quarter related to lump sum benefit payments made from the U.S. supplemental pension plan, and (iii) pre-tax charges of $96 million ($63 million after-tax and non-controlling interests, or $0.22 per diluted share) in the third quarter, primarily related to cost reduction actions. The cost reduction charges by segment are as follows: $43 million in North America; $19 million in Asia; $15 million in Europe; $12 million in South America; and $7 million in Surface Technologies.
 
(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

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 third quarter cost reduction program and pension settlement, 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
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 $ 788 $ 706 $ 553 $ 791 $ 676 $ 710 $ 518 $ 772 $ 713 $ 847 $ 555
Less: capital expenditures   (376 )     (357 )     (323 )   (387 )     (405 )     (352 )     (397 )   (482 )     (430 )     (384 )     (393 )
Free Cash Flow $ 412 $ 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 $ 9,842 $ 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   (627 )     (567 )     (221 )   (147 )     (136 )     (136 )     (117 )   (126 )     (168 )     (173 )     (144 )
Net debt 9,215 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 11 12 119 113 169 175 170 176 190 194 195
Praxair, Inc. shareholders' equity 5,245 5,140 4,888 4,389 4,264 4,964 5,018 5,623 6,552 6,911 6,600
Noncontrolling interests   393       407       417     404       380       380       375     387       388       395       398  
Total equity and redeemable noncontrolling interests   5,649       5,559       5,424     4,906       4,813       5,519       5,563     6,186       7,130       7,500       7,193  
Capital $ 14,864 $ 14,948 $ 14,607 $ 13,990 $ 14,157 $ 14,696 $ 14,806 $ 15,285 $ 16,052 $ 16,459 $ 16,285
 
Debt-to-capital   62.0 %     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) $ 597 $ 588 $ 554 $ 624 $ 620 $ 626 $ 623 $ 663 $ 711 $ 697 $ 675
Less: adjusted income taxes (a) (149 ) (146 ) (139 ) (163 ) (164 ) (164 ) (162 ) (161 ) (187 ) (183 ) (176 )
Less: tax benefit on adjusted interest expense (a) (12 ) (12 ) (14 ) (12 ) (10 ) (11 ) (12 ) (12 ) (13 ) (12 ) (13 )
Add: income from equity investments   10       11       10     12       10       10       11     12       11       10       9  
Adjusted net operating profit after-tax (NOPAT) $ 446 $ 441 $ 411 $ 461 $ 456 $ 461 $ 460 $ 502 $ 522 $ 512 $ 495
4-quarter trailing adjusted NOPAT $ 1,759 $ 1,769 $ 1,789 $ 1,838 $ 1,879 $ 1,945 $ 1,996 $ 2,031 $ 2,035 $ 2,011 $ 1,990
 
Ending capital (see above) $ 14,864 $ 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 $ 14,513 $ 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)   12.1 %     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) $ 405 $ 399 $ 366 $ 422 $ 419 $ 420 $ 416 $ 460 $ 477 $ 467 $ 448
4-quarter trailing adjusted net income - Praxair, Inc. $ 1,592 $ 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 $ 5,245 $ 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 $ 4,785 $ 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)   33.3 %     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) $ 405 $ 399 $ 366 $ 422 $ 419 $ 420 $ 416 $ 460 $ 477 $ 467 $ 448
Add: adjusted noncontrolling interests (a) 10 10 10 9 12 12 12 11 13 14 14
Add: adjusted interest expense - net (a) 43 44 49 42 35 40 44 43 45 43 46
Add: adjusted income taxes (a) 149 146 139 163 164 164 162 161 187 183 176
Add: depreciation and amortization   284       281       272     275       276       278       277     291       301       293       285  
Adjusted EBITDA $ 891 $ 880 $ 836 $ 911 $ 906 $ 914 $ 911 $ 966 $ 1,023 $ 1,000 $ 969
 
Reported sales 2,716 2,665 2,509 2,595 2,686 2,738 2,757 2,990 3,144 3,113 3,026
Adjusted EBITDA margin 32.8 % 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) $ 9,215 $ 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 $ 9,243 $ 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 $ 3,518 $ 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       2.6     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 2014.
 
 

Year-to-date
September 30,

  Third Quarter   First Quarter   Year  

Year-to-date
September 30,

  Third Quarter   Second Quarter   Year   Fourth Quarter
2016 2016 2016 2015 2015 2015 2015 2014 2014

Adjusted Operating Profit and Operating Profit Margin

Reported operating profit $ 1,639 $ 497 $ 554 $ 2,321 $ 1,697 $ 594 $ 480 $ 2,608 $ 525
Add: Cost reduction program and other charges 96 96 - 165 165 19 146 - -
Add: Pension settlement charge 4 4 - 7 7 7 - 7 7
Add: Venezuela currency devaluation   -     -     -     -     -     -     -     131     131  
Total adjustments   100     100     -     172     172     26     146     138     138  
Adjusted operating profit $ 1,739   $ 597   $ 554   $ 2,493   $ 1,869   $ 620   $ 626   $ 2,746   $ 663  
 
Reported percentage change -3 % -16 % -19 %
Adjusted percentage change -7 % -4 % -10 %
 
Reported sales $ 7,890 $ 2,716 $ 2,509 $ 10,776 $ 8,181 $ 2,686 $ 2,738 $ 12,273 $ 2,990
Adjusted operating profit margin 22.0 % 22.0 % 22.1 % 23.1 % 22.8 % 23.1 % 22.9 % 22.4 % 22.2 %
 

Adjusted Interest Expense - net

Reported interest expense - net $ 152 $ 43 $ 65 $ 161 $ 119 $ 35 $ 40 $ 213 $ 79
Less: Bond redemption   (16 )   -     (16 )   -     -     -     -     (36 )   (36 )
Adjusted interest expense - net $ 136   $ 43   $ 49   $ 161   $ 119   $ 35   $ 40   $ 177   $ 43  
 

Adjusted Income Taxes

Reported income taxes $ 399 $ 120 $ 133 $ 612 $ 449 $ 156 $ 131 $ 691 $ 145
Add: Cost reduction program and other charges 28 28 - 39 39 6 33 - -
Add: Bond redemption 6 - 6 - - - - 14 14
Add: Pension settlement charge   1     1     -     2     2     2     -     2     2  
Total adjustments   35     29     6     41     41     8     33     16     16  
Adjusted income taxes $ 434   $ 149   $ 139   $ 653   $ 490   $ 164   $ 164   $ 707   $ 161  
 

Adjusted Effective Tax Rate

Reported income before income taxes and equity investments $ 1,487 $ 454 $ 489 $ 2,160 $ 1,578 $ 559 $ 440 $ 2,395 $ 446
Add: Cost reduction program and other charges 96 96 - 165 165 19 146 - -
Add: Bond redemption 16 - 16 - - - - 36 36
Add: Pension settlement charge 4 4 - 7 7 7 - 7 7
Add: Venezuela currency devaluation   -     -     -     -     -     -     -     131     131  
Total adjustments   116     100     16     172     172     26     146     174     174  
Adjusted income before income taxes and equity investments $ 1,603   $ 554   $ 505   $ 2,332   $ 1,750   $ 585   $ 586   $ 2,569   $ 620  
 
Reported effective tax rate 26.8 % 26.4 % 27.2 % 28.3 % 28.5 % 27.9 % 29.8 % 28.9 % 32.5 %
Adjusted effective tax rate 27.1 % 26.9 %

27.5

%

28.0 % 28.0 % 28.0 % 28.0 % 27.5 % 26.0 %
 

Adjusted Noncontrolling Interests

Reported noncontrolling interests $ 25 $ 5 $ 10 $ 44 $ 35 $ 12 $ 11 $ 52 $ 11
Add: Cost reduction program and other charges   5     5     -     1     1     -     1     -     -  
Total adjustments   5     5     -     1     1     -     1     -     -  
Adjusted noncontrolling interests $ 30   $ 10   $ 10   $ 45   $ 36   $ 12   $ 12   $ 52   $ 11  
 

Adjusted Net Income - Praxair, Inc.

Reported net income - Praxair, Inc. $ 1,094 $ 339 $ 356 $ 1,547 $ 1,125 $ 401 $ 308 $ 1,694 $ 302
Add: Cost reduction program and other charges 63 63 - 125 125 13 112 - -
Add: Bond redemption 10 - 10 - - - - 22 22
Add: Pension settlement charge 3 3 - 5 5 5 - 5 5
Add: Venezuela currency devaluation   -     -     -     -     -     -     -     131     131  
Total adjustments   76     66     10     130     130     18     112     158     158  
Adjusted net income - Praxair, Inc. $ 1,170   $ 405   $ 366   $ 1,677   $ 1,255   $ 419   $ 420   $ 1,852   $ 460  
 
Reported percentage change -3 % -15 % -19 %
Adjusted percentage change -7 % -3 % -10 %
 

Adjusted Diluted EPS

Reported diluted EPS $ 3.80 $ 1.18 $ 1.24 $ 5.35 $ 3.88 $ 1.40 $ 1.06 $ 5.73 $ 1.03
Add: Cost reduction program and other charges 0.22 0.22 - 0.43 0.43 0.04 0.39 - -
Add: Bond redemption 0.04 - 0.04 - - - - 0.07 0.07
Add: Pension settlement charge 0.01 0.01 - 0.02 0.02 0.02 - 0.02 0.02
Add: Venezuela currency devaluation   -     -     -     -     -     -     -     0.45     0.45  
Total adjustments   0.27     0.23     0.04     0.45     0.45     0.06     0.39     0.54     0.54  
Adjusted diluted EPS $ 4.07   $ 1.41   $ 1.28   $ 5.80   $ 4.33   $ 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
 

Fourth Quarter and Full-Year 2016 Diluted EPS Guidance

 
Full Year 2016
Low End   High End
 
2016 GAAP diluted EPS guidance $ 5.17 $ 5.24
Add: bond redemption charge - Q1 0.04 0.04
Add: cost reduction program and other charges - Q3 0.22 0.22
Add: pension settlement - Q3   0.01     0.01
2016 adjusted diluted EPS guidance $ 5.44   $ 5.51
 

Contacts

For Praxair, Inc.
Media:
Jason Stewart, 203-837-2448
or
Investors:
Juan Pelaez, 203-837-2213

Release Summary

Praxair, Inc. (NYSE: PX) reported third-quarter net income and diluted earnings per share of $339 million and $1.18, respectively.

Contacts

For Praxair, Inc.
Media:
Jason Stewart, 203-837-2448
or
Investors:
Juan Pelaez, 203-837-2213