MRO Magazine

Praxair Reports Second-Quarter 2015 Results


July 29, 2015
By Business Wire News

DANBURY, Conn.

Praxair, Inc. (NYSE:PX) reported second-quarter net income and diluted earnings per share of $308 million and $1.06, respectively. These results include the impact of a $146 million pre-tax charge, or 39 cents of diluted earnings per share. This charge was related to cost reduction actions taken in response to lower volumes resulting from economic slowdown in emerging markets and energy related end-markets. Excluding the charge, adjusted net income and diluted earnings per share were $420 million and $1.45, respectively.*

Praxair’s results in the second quarter, as compared to the prior year, were challenged by negative impacts from foreign currency translation, as the U.S. dollar remained strong against most foreign currencies. Sales in the second quarter were $2,738 million, 12% below the prior-year quarter, primarily due to the impact of negative currency translation of 9% and lower cost pass-through of 2%. Organic sales were 1% lower than the prior-year quarter as positive price and new project contribution were offset by weaker underlying industrial activity in Brazil and China and from weaker metals, energy and manufacturing in the United States.

Reported operating profit in the second quarter was $480 million. Adjusted operating profit of $626 million was 1% below the prior-year quarter, excluding currency effects. Adjusted operating profit as a percentage of sales grew to 22.9% and the adjusted EBITDA margin grew to 33.4% primarily due to price, strong cost control and productivity gains.*

Second-quarter cash flow from operations of $707 million funded $352 million of capital expenditures. Acquisition expenditures in the quarter were $38 million, primarily related to packaged gas businesses in North and South America. The company paid $205 million of dividends and repurchased $217 million of stock, net of issuances. After-tax return on capital and return on equity for the quarter were 12.6% and 30.5%, respectively.*

Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “The second quarter continued to reflect broad-based demand in chemicals, refining and less cyclical end-markets such as healthcare and food and beverage, but revealed further weakening in macro-economic driven demand in South America, China and certain end-markets in the U.S., such as manufacturing and energy. As such, we took actions to better align our organization with these trends.”

“During the second quarter, our employees’ commitment to managing the things within our control enabled Praxair to grow the operating margin to a healthy 23%. Our resilient business model again generated strong operating cash flow of more than $700 million to support our disciplined capital allocation strategy.”

“When the markets recover, and ultimately they will, we expect to be in a strong position to realize highly accretive growth.”

For the third quarter of 2015, Praxair expects diluted earnings per share in the range of $1.42 to $1.49.* This EPS guidance assumes a negative currency translation impact of approximately 12% year-over-year. It also excludes the impact of pension settlement charges expected to be recorded in the third quarter.

For full-year 2015, Praxair expects adjusted diluted earnings per share to be in the range of $5.80 to $5.95, up 3% to 6% ex-currency from 2014.* This EPS guidance assumes a negative currency translation impact of approximately 11% year-over-year. Full-year capital expenditures are expected to be approximately $1.6 billion and the effective tax rate is forecasted to remain at approximately 28%.

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

In North America, second-quarter sales were $1,482 million, down 1% from the prior-year quarter excluding cost-pass through and negative currency translation. Volume growth to food and beverage and refinery customers was more than offset by weaker metals, upstream energy and manufacturing end-markets. Operating profit of $388 million was comparable to the prior-year quarter, excluding currency translation, as price, productivity and cost actions were offset by lower volumes.

In Europe, second-quarter sales were $331 million, 19% below the prior-year quarter. Organic sales were 1% below the prior year as growth in manufacturing, food and beverage and healthcare was offset by lower energy end-market sales in Northern Europe. Operating profit of $63 million was steady with the prior-year quarter, excluding currency translation, as price and productivity offset the impact of lower volumes.

In South America, second-quarter sales were $388 million, 24% below the prior-year quarter. Organic sales, excluding negative currency translation and cost pass-through, grew 3% primarily from higher price which offset lower volumes. Operating profit was $81 million.

Sales in Asia were $387 million in the quarter, 2% above the prior year excluding currency and cost pass-through. Volume growth from new plant start-ups was offset primarily by slowing industrial activity in China. Operating profit was $69 million.

Praxair Surface Technologies had second-quarter sales of $150 million as compared to $174 million in the prior-year quarter. Excluding negative currency translation impact, organic sales were 6% lower. Favorable price and higher aerospace volumes were more than offset by weaker energy end-market sales. Operating profit was $25 million.

*See the attachments for calculations of non-GAAP measures. Second-quarter 2015 results are adjusted to exclude the cost reduction program and other charges.

Attachments: Non-GAAP Reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures.

A teleconference about Praxair’s second-quarter results is being held this morning, July 29, at 11:00 am Eastern Daylight Time. The number is (631) 485-4849 – Conference ID: 72624899. The call is also available as a webcast live and on-demand at www.praxair.com/investors. Materials to be used in the teleconference are also available on the website.

This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; the impact of information technology system failures, network disruptions and breaches in data security; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the projections or estimates contained in the forward-looking statements. Additionally, financial projections or estimates exclude the impact of special items which the company believes are not indicative of ongoing business performance. The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) in the company’s Form 10-K and 10-Q reports filed with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.

About Praxair

Praxair, Inc., a Fortune 250 company with 2014 sales of $12.3 billion, is the largest industrial gases company in North and South America and one of the largest worldwide. The company produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings. Praxair products, services and technologies are making our planet more productive by bringing efficiency and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, primary metals and many others. More information about Praxair, Inc. is available at www.praxair.com.

PRAXAIR, INC. AND SUBSIDIARIES
SUMMARY NON-GAAP RECONCILIATIONS
(UNAUDITED)

               
(Millions of dollars, except per share amounts)
       
SalesOperating ProfitNet Income – Praxair, Inc.Diluted EPS

2015

2014

2015

2014

2015

2014

2015

2014

Quarter Ended June 30

Reported GAAP Amounts $ 2,738 $ 3,113 $ 480 $ 697 $ 308 $ 467 $ 1.06 $ 1.58
Cost reduction program and other charges(a)       146     112     0.39  
Adjusted amounts $ 2,738 $ 3,113 $ 626 $ 697 $ 420 $ 467 $ 1.45 $ 1.58
 

Year To Date June 30

Reported GAAP Amounts $ 5,495 $ 6,139 $ 1,103 $ 1,372 $ 724 $ 915 $ 2.49 $ 3.08
Cost reduction program and other charges(a)       146     112     0.39    
Adjusted amounts $ 5,495 $ 6,139 $ 1,249 $ 1,372 $ 836 $ 915 $ 2.88   $ 3.08
 

(a)

 

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

           
PRAXAIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except per share data)
(UNAUDITED)
 
Quarter EndedYear to Date
June 30,June 30,
2015201420152014
 
SALES $ 2,738 $ 3,113 $ 5,495 $ 6,139
Cost of sales 1,516 1,767 3,046 3,493
Selling, general and administrative 297 335 596 661
Depreciation and amortization 278 293 555 578
Research and development 23 24 47 47
Cost reduction program and other charges 146 146
Other income (expense) – net   2     3     (2 )   12  
OPERATING PROFIT 480 697 1,103 1,372
Interest expense – net   40     43     84     89  
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS 440 654 1,019 1,283
Income taxes   131     183     293     359  
INCOME BEFORE EQUITY INVESTMENTS 309 471 726 924
Income from equity investments   10     10     21     19  
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) 319 481 747 943
Less: noncontrolling interests   (11 )   (14 )   (23 )   (28 )
NET INCOME – PRAXAIR, INC. $ 308   $ 467   $ 724   $ 915  
 
PER SHARE DATA – PRAXAIR, INC. SHAREHOLDERS
 
Basic earnings per share $ 1.07 $ 1.59 $ 2.51 $ 3.12
 
Diluted earnings per share $ 1.06 $ 1.58 $ 2.49 $ 3.08
 
Cash dividends $ 0.715 $ 0.65 $ 1.43 $ 1.30
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic shares outstanding (000’s) 287,939 292,945 288,541 293,570
Diluted shares outstanding (000’s) 290,102 295,976 290,940 296,679
 

Note:

 

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

       
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of dollars)
(UNAUDITED)
 
June 30,December 31,
20152014
ASSETS
Cash and cash equivalents $ 136 $ 126
Accounts receivable – net 1,760 1,796
Inventories 548 551
Prepaid and other current assets   376   366
TOTAL CURRENT ASSETS 2,820 2,839
Property, plant and equipment – net 11,363 11,997
Goodwill 3,065 3,121
Other intangibles – net 582 603
Other long-term assets   1,237   1,242
TOTAL ASSETS $ 19,067 $ 19,802
 
LIABILITIES AND EQUITY
Accounts payable $ 782 $ 864
Short-term debt 532 587
Current portion of long-term debt 2 2
Other current liabilities   930   1,037
TOTAL CURRENT LIABILITIES 2,246 2,490
Long-term debt 8,813 8,669
Other long-term liabilities   2,489   2,457
TOTAL LIABILITIES 13,548 13,616
 
REDEEMABLE NONCONTROLLING INTERESTS 175 176
 
EQUITY
Praxair, Inc. shareholders’ equity 4,964 5,623
Noncontrolling interests   380   387
TOTAL EQUITY   5,344   6,010
TOTAL LIABILITIES AND EQUITY $ 19,067 $ 19,802
 
           
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
 
Quarter EndedYear to Date
June 30,June 30,
2015201420152014
OPERATIONS
Net income – Praxair, Inc. $ 308 $ 467 $ 724 $ 915
Noncontrolling interests   11     14     23     28  
Net income (including noncontrolling interests) 319 481 747 943
 
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 278 293 555 578
Accounts receivable 6 (33 ) (44 ) (169 )
Inventory (9 ) (17 ) (15 ) (33 )
Payables and accruals 3 84 (63 ) (32 )
Pension contributions (1 ) (4 ) (12 ) (13 )
Deferred income taxes and other   (24 )   43     (88 )   109  
Net cash provided by operating activities   707     847     1,215     1,383  
 
INVESTING
Capital expenditures (352 ) (384 ) (749 ) (777 )
Acquisitions, net of cash acquired (38 ) (46 ) (43 ) (170 )
Divestitures and asset sales   238     5     240     71  
Net cash used for investing activities   (152 )   (425 )   (552 )   (876 )
 
FINANCING
Debt increase (decrease) – net (89 ) (100 ) 201 364
Issuances of common stock 17 20 61 69
Purchases of common stock (234 ) (160 ) (469 ) (446 )
Cash dividends – Praxair, Inc. shareholders (205 ) (190 ) (412 ) (381 )
Excess tax benefit on stock option exercises 3 4 17 24
Noncontrolling interest transactions and other   (19 )   29     (25 )   (111 )
Net cash provided by (used for) financing activities (527 ) (397 ) (627 ) (481 )
 
Effect of exchange rate changes on cash and
cash equivalents   (9 )   4     (26 )   9  
 
Change in cash and cash equivalents 19 29 10 35
Cash and cash equivalents, beginning-of-period   117     144     126     138  
 
Cash and cash equivalents, end-of-period $ 136   $ 173   $ 136   $ 173  
 
           
PRAXAIR, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)
 
Quarter EndedYear to Date
June 30,June 30,
2015201420152014
SALES
North America $ 1,482 $ 1,628 $ 2,981 $ 3,208
Europe 331 408 657 805
South America 388 509 789 997
Asia 387 394 758 786
Surface Technologies   150     174   310     343
Consolidated sales $ 2,738   $ 3,113 $ 5,495   $ 6,139
 
OPERATING PROFIT
North America $ 388 $ 398 $ 767 $ 776
Europe 63 78 125 157
South America 81 113 166 226
Asia 69 76 138 151
Surface Technologies   25     32   53     62
Segment operating profit 626 697 1,249 1,372
Cost reduction program and other charges   (146 )     (146 )  
Total operating profit $ 480   $ 697 $ 1,103   $ 1,372
 
               
PRAXAIR, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL SUMMARY
(Millions of dollars, except per share data)
(UNAUDITED)
 
2015  2014
Q2 (b)Q1Q4 (c)Q3Q2Q1
FROM THE INCOME STATEMENT
Sales $ 2,738 $ 2,757 $ 2,990 $ 3,144 $ 3,113 $ 3,026
Cost of sales 1,516 1,530 1,689 1,780 1,767 1,726
Selling, general and administrative 297 299 320 327 335 326
Depreciation and amortization 278 277 291 301 293 285
Research and development 23 24 24 25 24 23
Cost reduction program and other charges 146 138
Other income (expenses) – net   2       (4 )   (3 )           3       9  
Operating profit 480 623 525 711 697 675
Interest expense – net 40 44 79 45 43 46
Income taxes 131 162 145 187 183 176
Income from equity investments   10       11     12       11       10       9  
Net income (including noncontrolling interests) 319 428 313 490 481 462
Less: noncontrolling interests   (11 )     (12 )   (11 )     (13 )     (14 )     (14 )
Net income – Praxair, Inc. $ 308     $ 416   $ 302     $ 477     $ 467     $ 448  
 
PER SHARE DATA – PRAXAIR, INC. SHAREHOLDERS
Diluted earnings per share $ 1.06 $ 1.43 $ 1.03 $ 1.62 $ 1.58 $ 1.51
Cash dividends per share $ 0.715 $ 0.715 $ 0.65 $ 0.65 $ 0.65 $ 0.65
Diluted weighted average shares outstanding (000’s) 290,102 291,652 293,555 295,239 295,976 297,253
 
ADJUSTED AMOUNTS (a)
Operating profit $ 626 $ 623 $ 663 $ 711 $ 697 $ 675
Operating margin 22.9 % 22.6 % 22.2 % 22.6 % 22.4 % 22.3 %
Net Income $ 420 $ 416 $ 460 $ 477 $ 467 $ 448
Diluted earnings per share $ 1.45 $ 1.43 $ 1.57 $ 1.62 $ 1.58 $ 1.51
 
FROM THE BALANCE SHEET
Net debt (a) $ 9,211 $ 9,279 $ 9,132 $ 8,953 $ 8,992 $ 9,126
Capital (a) $ 14,730 $ 14,842 $ 15,318 $ 16,083 $ 16,492 $ 16,319
Debt-to-capital ratio (a) 62.5 % 62.5 % 59.6 % 55.7 % 54.5 % 55.9 %
 
FROM THE STATEMENT OF CASH FLOWS
Cash flow from operations $ 707 $ 508 $ 772 $ 713 $ 847 $ 536
Cash flow used for investing activities $ 152 $ 400 $ 491 $ 436 $ 425 $ 451
Cash flow used for financing activities $ 527 $ 100 $ 260 $ 267 $ 397 $ 84
Capital expenditures 352 397 482 430 384 393
Acquisitions 38 5 15 21 46 124
Cash dividends 205 207 189 189 190 191
 
OTHER INFORMATION
After-tax return on capital (ROC) (a) 12.6 % 12.6 % 12.7 % 12.6 % 12.6 % 12.6 %
Return on Praxair, Inc. shareholders’ equity (ROE) (a) 30.5 % 29.6 % 28.7 % 28.2 % 28.3 % 28.7 %
Adjusted EBITDA (a) $ 914 $ 911 $ 966 $ 1,023 $ 1,000 $ 969
Adjusted EBITDA margin (a) 33.4 % 33.0 % 32.3 % 32.5 % 32.1 % 32.0 %
Debt-to-adjusted EBITDA ratio (a) 2.4 2.3 2.3 2.2 2.3 2.3
Number of employees 27,302 27,680 27,780 27,626 27,735 27,578
 
SEGMENT DATA
SALES
North America $ 1,482 $ 1,499 $ 1,589 $ 1,639 $ 1,628 $ 1,580
Europe 331 326 356 385 408 397
South America 388 401 473 523 509 488
Asia 387 371 407 426 394 392
Surface Technologies   150       160     165       171       174       169  
Total sales $ 2,738     $ 2,757   $ 2,990     $ 3,144     $ 3,113     $ 3,026  
OPERATING PROFIT
North America $ 388 $ 379 $ 388 $ 416 $ 398 $ 378
Europe 63 62 63 71 78 79
South America 81 85 105 118 113 113
Asia 69 69 77 75 76 75
Surface Technologies   25       28     30       31       32       30  
Segment operating profit 626 623 663 711 697 675
Cost reduction program and other charges   (146 )         (138 )                  
Total operating profit $ 480     $ 623     $ 525     $ 711     $ 697     $ 675  
 
(a)   Non-GAAP measure, see Appendix.
 
(b) In the second quarter of 2015, Praxair recorded pre-tax charges totaling $146 million ($112 million after-tax and non-controlling interests, or $0.39 per diluted share) related to cost reduction actions taken in response to lower volumes resulting from economic slowdown in emerging markets and energy related end-markets. The charges by segment are as follows: $62 million in South America; $26 million in North America; $20 million in Europe; and $19 million in each of Asia and Surface Technologies.
 
(c) 2014 includes: (i) a charge of $36 million ($22 million after-tax, or $0.07 per diluted share) related to a bond redemption, (ii) a charge of $7 million ($5 million after-tax, or $0.02 per diluted share) related to pension settlement and (iii) a charge of $131 million ($131 million after-tax, or $0.45 per diluted share), related to a Venezuela currency devaluation. Refer to Notes 2 and 7 to Praxair’s 2014 Annual Report for additional information.
 

PRAXAIR, INC. AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES
(Millions of dollars, except per share data)

The following non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s financial leverage, return on capital and operating performance. Items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. Adjusted amounts exclude the impacts of the 2015 second quarter cost reduction program and other charges, 2014 fourth quarter pension settlement, bond redemption and loss on Venezuela currency devaluation, 2013 fourth quarter bond redemption and the income tax benefit related to the realignment of Praxair’s Italian legal structure, the 2013 third quarter pension settlement, the 2013 first quarter loss on Venezuela currency devaluation.

                       
201520142013
Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1
 

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

Debt-to-Capital Ratio – The debt-to-capital ratio is a measure used by investors, financial analysts and management to provide a measure of financial leverage and insights into how the company is financing its operations.

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

After-tax Return on Capital (ROC) – After-tax return on capital is a measure used by investors, financial analysts and management to evaluate the return on net assets employed in the business. ROC measures the after-tax operating profit that the company was able to generate with the investments made by all parties in the business (debt, noncontrolling interests and Praxair, Inc. shareholders’ equity).

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

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

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

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

 
Adjusted net income – Praxair, Inc. (a) $ 420 $ 416 $ 460 $ 477 $ 467 $ 448 $ 462 $ 451 $ 445 $ 414
Add: adjusted noncontrolling interests (a) 12 12 11 13 14 14 17 17 16 15
Add: adjusted interest expense – net (a) 40 44 43 45 43 46 38 41 41 40
Add: adjusted income taxes (a) 164 162 161 187 183 176 182 178 174 164
Add: depreciation and amortization     278       277     291       301       293       285     287       281       275       266  
Adjusted EBITDA$914$911$966$1,023$1,000$969$986$968$951$899
 
Reported sales $ 2,738 $ 2,757 $ 2,990 $ 3,144 $ 3,113 $ 3,026 $ 3,010 $ 3,013 $ 3,014 $ 2,888
Adjusted EBITDA margin33.4%33.0%32.3%32.5%32.1%32.0%32.8%32.1%31.6%31.1%
 
Ending net debt (see above) $ 9,211 $ 9,279 $ 9,132 $ 8,953 $ 8,992 $ 9,126 $ 8,673 $ 8,892 $ 9,004 $ 8,563
5-quarter average net debt $ 9,113 $ 9,096 $ 8,975 $ 8,927 $ 8,937 $ 8,852 $ 8,467 $ 8,138 $ 7,738 $ 7,287
4-quarter trailing adjusted EBITDA $ 3,814 $ 3,900 $ 3,958 $ 3,978 $ 3,923 $ 3,874 $ 3,804 $ 3,697 $ 3,608 $ 3,550
 
Debt-to-adjusted EBITDA ratio (5-quarter average net debt / 4-quarter trailing adjusted EBITDA)  2.4      2.3    2.3      2.2      2.3      2.3    2.2      2.2      2.1      2.1  
 
(a)   The following table presents adjusted amounts for Operating Profit and Operating Profit Margin, Interest Expense – net, Income Taxes, Effective Tax Rate, Noncontrolling Interests, Net income – Praxair, Inc., and Diluted EPS for the periods presented. Additionally, this table presents cash income taxes and cash interest, net of interest capitalized and excluding the bond redemption costs for 2014 and 2013; and presents the percentage changes in Diluted EPS Guidance for the third quarter and full year 2015 as compared to 2014 Diluted EPS. The adjusted percentages are based on Adjusted diluted EPS amounts, excluding estimated currency impacts.
                   

Year-to-date
June 30,

Second
Quarter

Year

Fourth
Quarter

 Year

Fourth
Quarter

Third
Quarter

First
Quarter

20152015201420142013201320132013

Adjusted Operating Profit and Operating Profit Margin

Reported operating profit $ 1,103 $ 480 $ 2,608 $ 525 $ 2,625 $ 690 $ 670 $ 600
Add: Cost reduction program and other charges 146 146
Add: Pension settlement charge 7 7 9 9
Add: Venezuela currency devaluation           131     131     23             23  
Total adjustments   146     146     138     138     32         9     23  
Adjusted operating profit $ 1,249   $ 626   $ 2,746   $ 663   $ 2,657   $ 690   $ 679   $ 623  
 
Reported percentage change -20 % -31 %
Adjusted percentage change -9 % -10 %
 
Reported sales $ 5,495 $ 2,738 $ 12,273 $ 2,990 $ 11,925 $ 3,010 $ 3,013 $ 2,888
Adjusted operating profit margin 22.7 % 22.9 % 22.4 % 22.2 % 22.3 % 22.9 % 22.5 % 21.6 %
 

Adjusted Interest Expense – net

Reported interest expense – net $ 84 $ 40 $ 213 $ 79 $ 178 $ 56 $ 41 $ 40
Less: Bond redemption           (36 )   (36 )   (18 )   (18 )        
Adjusted interest expense – net $ 84   $ 40   $ 177   $ 43   $ 160   $ 38   $ 41   $ 40  
 

Adjusted Income Taxes

Reported income taxes $ 293 $ 131 $ 691 $ 145 $ 649 $ 136 $ 175 $ 164
Add: Cost reduction program and other charges 33 33
Add: Bond redemption 14 14 6 6
Add: Income tax benefit 40 40
Add: Pension settlement charge           2     2     3         3      
Total adjustments   33     33     16     16     49     46     3      
Adjusted income taxes $ 326   $ 164   $ 707   $ 161   $ 698   $ 182   $ 178   $ 164  
 

Adjusted Effective Tax Rate

Reported income before income taxes and equity investments $ 1,019 $ 440 $ 2,395 $ 446 $ 2,447 $ 634 $ 629 $ 560
Add: Cost reduction program and other charges 146 146
Add: Bond redemption 36 36 18 18
Add: Pension settlement charge 7 7 9 9
Add: Venezuela currency devaluation           131     131     23             23  
Total adjustments   146     146     174     174     50     18     9     23  
Adjusted income before income taxes and equity investments $ 1,165   $ 586   $ 2,569   $ 620   $ 2,497   $ 652   $ 638   $ 583  
 
Adjusted income taxes (above) $ 326 $ 164 $ 707 $ 161 $ 698 $ 182 $ 178 $ 164
Adjusted effective tax rate 28 % 28 % 28 % 26 % 28 % 28 % 28 % 28 %
 

Adjusted Noncontrolling interests

Reported noncontrolling interests $ 23 $ 11 $ 52 $ 11 $ 81 $ 33 $ 17 $ 15
Add: Cost reduction program and other charges 1 1
Less: Income tax benefit                   (16 )   (16 )        
Total adjustments   1     1             (16 )   (16 )        
Adjusted noncontrolling interests $ 24   $ 12   $ 52   $ 11   $ 65   $ 17   $ 17   $ 15  
 

Adjusted Net Income – Praxair, Inc.

Reported net income – Praxair, Inc. $ 724 $ 308 $ 1,694 $ 302 $ 1,755 $ 474 $ 445 $ 391
Add: Cost reduction program and other charges 112 112
Add: Bond redemption 22 22 12 12
Less: Income tax benefit (24 ) (24 )
Add: Pension settlement charge 5 5 6 6
Add: Venezuela currency devaluation           131     131     23             23  
Total adjustments   112     112     158     158     17     (12 )   6     23  
Adjusted net income – Praxair, Inc. $ 836   $ 420   $ 1,852   $ 460   $ 1,772   $ 462   $ 451   $ 414  
 
Reported percentage change -21 % -34 %
Adjusted percentage change -9 % -10 %
 

Adjusted Diluted EPS

Reported diluted EPS $ 2.49 $ 1.06 $ 5.73 $ 1.03 $ 5.87 $ 1.59 $ 1.49 $ 1.30
Add: Cost reduction program and other charges 0.39 0.39
Add: Bond redemption 0.07 0.07 0.04 0.04
Less: Income tax benefit (0.08 ) (0.08 )
Add: Pension settlement charge 0.02 0.02 0.02 0.02
Add: Venezuela currency devaluation           0.45     0.45     0.08             0.08  
Total adjustments   0.39     0.39     0.54     0.54     0.06     (0.04 )   0.02     0.08  
Adjusted diluted EPS $ 2.88   $ 1.45   $ 6.27   $ 1.57   $ 5.93   $ 1.55   $ 1.51   $ 1.38  
 

Cash Income Taxes and Interest

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

Third Quarter and Full-Year 2015 Diluted EPS Guidance*

Third Quarter 2015Full Year 2015
Low End  High EndLow End  High End
 
2015 adjusted diluted EPS guidance $ 1.42 $ 1.49 $ 5.80 $ 5.95
2014 adjusted diluted EPS (see above for full year amounts) $ 1.62 $ 1.62 $ 6.27 $ 6.27
 
Adjusted percentage change -12 % -8 % -8 % -5 %
Adjusted percentage changes, excluding estimated currency impact 0 % 4 % 3 % 6 %
 

*

 

Excludes cost reduction charges recorded in the second quarter and the impact of pension settlement charges expected to be recorded in the third quarter.

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