DANBURY, Conn.--(BUSINESS WIRE)--Praxair, Inc. (NYSE:PX) reported second-quarter net income of $467 million and diluted earnings per share of $1.58, 5% and 6% above the prior-year quarter, respectively.
Sales in the second quarter were $3,113 million, 3% above the prior-year quarter, and up 5% excluding foreign currency. Organic sales grew 4% driven by new project start-ups, primarily in North America and Asia, and price across all operating segments. By end-market, sales growth was strongest for metals, energy and food & beverage customers. Acquisitions contributed 1% growth in the quarter.
Operating profit in the second quarter was $697 million, 5% above the prior-year quarter. Excluding negative currency translation impacts, operating profit rose 7% primarily driven by higher pricing and productivity gains. Operating profit as a percentage of sales was a strong 22.4% and EBITDA margin grew to 32.1%.*
Second-quarter cash flow from operations was $847 million and funded capital expenditures of $384 million, primarily for new production plants under long-term contracts with customers. Acquisition expenditures in the quarter were $46 million, primarily related to U.S. packaged gas businesses. The company paid dividends of $190 million and repurchased $140 million of stock, net of issuances. The after-tax return on capital and return on equity for the quarter were 12.6% and 28.3%, respectively.*
Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “Praxair delivered another solid quarter with operating profit growth of 7%, outpacing sales growth of 5%, excluding currency headwinds, despite moderating growth in emerging markets. We achieved superior operating cash flow as a percentage of sales of 27% as a result of our consistent focus on high-quality growth and strong return on capital.
“Sales growth was driven by new projects in North America and Asia, as well as disciplined price execution across all of our operating segments. We grew the base business modestly in North America, Europe and Asia, but this growth was mitigated by weaker South American volumes as a result of negative industrial production in Brazil.
“As we look to the remainder of the year, we don’t anticipate significant economic improvement in the second half. However, Praxair’s relentless focus on operational excellence, project execution and financial discipline will continue to deliver increasing cash flow and earnings per share for our shareholders.”
For the third quarter of 2014, Praxair expects diluted earnings per share in the range of $1.58 to $1.65.
For the full year of 2014, Praxair expects sales in the range of $12.4 billion to $12.7 billion. The company expects diluted earnings per share to be in the range of $6.30 to $6.45, 6% to 9%* above the prior year. This year-over-year growth rate was reduced by approximately 2% negative foreign currency translation impact. Full-year capital expenditures are expected to be about $1.8 billion, and the effective tax rate is forecasted to remain at about 28%.
Following is additional detail on second-quarter 2014 results by segment.
In North America, second-quarter sales were $1,628 million, 5% above the prior-year quarter and up 7% excluding negative currency translation impacts. Organic sales growth was 5% driven primarily by higher pricing and increased sales to the energy end-market as on-site volumes increased from new project start-ups for hydrogen supply to refinery customers. Acquisitions contributed 1% growth. Operating profit of $398 million grew 4% from the prior year due to higher pricing, higher volumes and ongoing productivity initiatives.
In Europe, second-quarter sales were $408 million, up 7% versus the second quarter of 2013. Acquisitions, primarily Dominion Technology Gases, contributed 3% growth. Organic sales growth of 1% came from higher pricing. Operating profit of $78 million increased 13% versus the prior-year quarter, and was driven by positive currency translation, acquisitions and higher price.
In South America, second-quarter sales were $509 million. Sales grew 3% from the prior-year quarter, excluding an 8% negative currency impact, primarily due to higher overall pricing. Operating profit was $113 million, up 1% excluding currency effects, due to higher pricing partially offset by lower volumes in Brazil and cost inflation.
Sales in Asia were $394 million in the quarter, up 4% from the prior year driven by higher pricing and volume growth in India, China, Korea and Thailand. Sales growth came primarily from metals, energy and electronics customers. Operating profit was $76 million, 25% above the prior-year quarter due primarily to higher volumes, price and productivity initiatives.
Praxair Surface Technologies had second-quarter sales of $174 million, 5% above the prior year. Organic sales increased 4% primarily from higher price. Operating profit was $32 million, as compared to $31 million in the prior year, due primarily to higher price.
About Praxair
Praxair, Inc., a Fortune 250 company with 2013 sales of $12 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, metals and many others. More information about Praxair, Inc. is available at www.praxair.com.
*See attachments for calculations of non-GAAP measures.
Attachments: Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary, Non-GAAP Reconciliations and Appendix: Non-GAAP Measures.
A teleconference about Praxair’s second-quarter results is being held this morning, July 23, at 11:00 am Eastern Daylight Time. The number is (617) 399-5137 -- Passcode: 64992155. The call also is available as a webcast live and on-demand at www.praxair.com/investors. Materials to be used in the teleconference are also available on the website.
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; the impact of information technology system failures, network disruptions and breaches in data security; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the projections or estimates contained in the forward-looking statements. Additionally, financial projections or estimates exclude the impact of special items which the company believes are not indicative of ongoing business performance. The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) in the company’s Form 10-K and 10-Q reports filed with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.
| PRAXAIR, INC. AND SUBSIDIARIES | ||||||||||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||||||
| (Millions of dollars, except per share data) | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Quarter Ended | Year to Date | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||||
| SALES | $ | 3,113 | $ | 3,014 | $ | 6,139 | $ | 5,902 | ||||||||||||
| Cost of sales | 1,767 | 1,710 | 3,493 | 3,348 | ||||||||||||||||
| Selling, general and administrative | 335 | 344 | 661 | 681 | ||||||||||||||||
| Depreciation and amortization | 293 | 275 | 578 | 541 | ||||||||||||||||
| Research and development | 24 | 24 | 47 | 48 | ||||||||||||||||
| Venezuela currency devaluation | - | - | - | 23 | ||||||||||||||||
| Other income (expense) - net | 3 | 4 | 12 | 4 | ||||||||||||||||
| OPERATING PROFIT | 697 | 665 | 1,372 | 1,265 | ||||||||||||||||
| Interest expense - net | 43 | 41 | 89 | 81 | ||||||||||||||||
| INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS | 654 | 624 | 1,283 | 1,184 | ||||||||||||||||
| Income taxes | 183 | 174 | 359 | 338 | ||||||||||||||||
| INCOME BEFORE EQUITY INVESTMENTS | 471 | 450 | 924 | 846 | ||||||||||||||||
| Income from equity investments | 10 | 11 | 19 | 21 | ||||||||||||||||
| NET INCOME (INCLUDING NONCONTROLLING INTERESTS) | 481 | 461 | 943 | 867 | ||||||||||||||||
| Less: noncontrolling interests | (14 | ) | (16 | ) | (28 | ) | (31 | ) | ||||||||||||
| NET INCOME - PRAXAIR, INC. | $ | 467 | $ | 445 | $ | 915 | $ | 836 | ||||||||||||
| PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS | ||||||||||||||||||||
| Basic earnings per share | $ | 1.59 | $ | 1.50 | $ | 3.12 | $ | 2.82 | ||||||||||||
| Diluted earnings per share | $ | 1.58 | $ | 1.49 | $ | 3.08 | $ | 2.79 | ||||||||||||
| Cash dividends | $ | 0.65 | $ | 0.60 | $ | 1.30 | $ | 1.20 | ||||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||||||||||||||
| Basic shares outstanding (000's) | 292,945 | 295,668 | 293,570 | 296,136 | ||||||||||||||||
| Diluted shares outstanding (000's) | 295,976 | 298,654 | 296,679 | 299,290 | ||||||||||||||||
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Note: See page 9 for a reconciliation to 2013 adjusted amounts which are non-GAAP. |
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| PRAXAIR, INC. AND SUBSIDIARIES | ||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Millions of dollars) | ||||||||
| (UNAUDITED) | ||||||||
| June 30, | December 31, | |||||||
| 2014 | 2013 | |||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 173 | $ | 138 | ||||
| Accounts receivable - net | 2,075 | 1,892 | ||||||
| Inventories | 542 | 506 | ||||||
| Prepaid and other current assets | 369 | 380 | ||||||
| TOTAL CURRENT ASSETS | 3,159 | 2,916 | ||||||
| Property, plant and equipment - net | 12,552 | 12,278 | ||||||
| Goodwill | 3,270 | 3,194 | ||||||
| Other intangibles - net | 619 | 596 | ||||||
| Other long-term assets | 1,325 | 1,271 | ||||||
| TOTAL ASSETS | $ | 20,925 | $ | 20,255 | ||||
| LIABILITIES AND EQUITY | ||||||||
| Accounts payable | $ | 914 | $ | 921 | ||||
| Short-term debt | 595 | 782 | ||||||
| Current portion of long-term debt | 5 | 3 | ||||||
| Other current liabilities | 1,032 | 958 | ||||||
| TOTAL CURRENT LIABILITIES | 2,546 | 2,664 | ||||||
| Long-term debt | 8,565 | 8,026 | ||||||
| Other long-term liabilities | 2,314 | 2,255 | ||||||
| TOTAL LIABILITIES | 13,425 | 12,945 | ||||||
| REDEEMABLE NONCONTROLLING INTERESTS | 194 | 307 | ||||||
| EQUITY | ||||||||
| Praxair, Inc. shareholders' equity | 6,911 | 6,609 | ||||||
| Noncontrolling interests | 395 | 394 | ||||||
| TOTAL EQUITY | 7,306 | 7,003 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 20,925 | $ | 20,255 | ||||
| PRAXAIR, INC. AND SUBSIDIARIES | ||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||||
| (Millions of dollars) | ||||||||||||||||||||
| (UNAUDITED) | ||||||||||||||||||||
| Quarter Ended | Year to Date | |||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||||||
| OPERATIONS | ||||||||||||||||||||
| Net income - Praxair, Inc. | $ | 467 | $ | 445 | $ | 915 | $ | 836 | ||||||||||||
| Noncontrolling interests | 14 | 16 | 28 | 31 | ||||||||||||||||
| Net income (including noncontrolling interests) | 481 | 461 | 943 | 867 | ||||||||||||||||
| Adjustments to reconcile net income to net cash provided | ||||||||||||||||||||
| by operating activities: | ||||||||||||||||||||
| Venezuela currency devaluation | - | - | - | 23 | ||||||||||||||||
| Depreciation and amortization | 293 | 275 | 578 | 541 | ||||||||||||||||
| Accounts receivable | (33 | ) | (3 | ) | (169 | ) | (164 | ) | ||||||||||||
| Inventory | (17 | ) | (11 | ) | (33 | ) | (27 | ) | ||||||||||||
| Payables and accruals | 84 | (6 | ) | (32 | ) | (6 | ) | |||||||||||||
| Pension contributions | (4 | ) | (38 | ) | (13 | ) | (43 | ) | ||||||||||||
| Deferred income taxes and other | 43 | (101 | ) | 109 | (142 | ) | ||||||||||||||
| Net cash provided by operating activities | 847 | 577 | 1,383 | 1,049 | ||||||||||||||||
| INVESTING | ||||||||||||||||||||
| Capital expenditures | (384 | ) | (522 | ) | (777 | ) | (988 | ) | ||||||||||||
| Acquisitions, net of cash acquired | (46 | ) | (171 | ) | (170 | ) | (1,269 | ) | ||||||||||||
| Divestitures and asset sales | 5 | 7 | 71 | 38 | ||||||||||||||||
| Net cash used for investing activities | (425 | ) | (686 | ) | (876 | ) | (2,219 | ) | ||||||||||||
| FINANCING | ||||||||||||||||||||
| Debt increase (decrease) - net | (100 | ) | 439 | 364 | 1,755 | |||||||||||||||
| Issuances of common stock | 20 | 43 | 69 | 76 | ||||||||||||||||
| Purchases of common stock | (160 | ) | (195 | ) | (446 | ) | (345 | ) | ||||||||||||
| Cash dividends - Praxair, Inc. shareholders | (190 | ) | (177 | ) | (381 | ) | (355 | ) | ||||||||||||
| Excess tax benefit on stock option exercises | 4 | 10 | 24 | 24 | ||||||||||||||||
| Noncontrolling interest transactions and other | 29 | (12 | ) | (111 | ) | (17 | ) | |||||||||||||
| Net cash provided by (used for) financing activities | (397 | ) | 108 | (481 | ) | 1,138 | ||||||||||||||
| Effect of exchange rate changes on cash and | ||||||||||||||||||||
| cash equivalents | 4 | (10 | ) | 9 | (23 | ) | ||||||||||||||
| Change in cash and cash equivalents | 29 | (11 | ) | 35 | (55 | ) | ||||||||||||||
| Cash and cash equivalents, beginning-of-period | 144 | 113 | 138 | 157 | ||||||||||||||||
| Cash and cash equivalents, end-of-period | $ | 173 | $ | 102 | $ | 173 | $ | 102 | ||||||||||||
| PRAXAIR, INC. AND SUBSIDIARIES | |||||||||||||||||
| SEGMENT INFORMATION | |||||||||||||||||
| (Millions of dollars) | |||||||||||||||||
| (UNAUDITED) | |||||||||||||||||
| Quarter Ended | Year to Date | ||||||||||||||||
| June 30, | June 30, | ||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| SALES | |||||||||||||||||
| North America | $ | 1,628 | $ | 1,552 | $ | 3,208 | $ | 3,009 | |||||||||
| Europe | 408 | 382 | 805 | 752 | |||||||||||||
| South America | 509 | 536 | 997 | 1,067 | |||||||||||||
| Asia | 394 | 379 | 786 | 746 | |||||||||||||
| Surface Technologies | 174 | 165 | 343 | 328 | |||||||||||||
| Total sales | $ | 3,113 | $ | 3,014 | $ | 6,139 | $ | 5,902 | |||||||||
| OPERATING PROFIT | |||||||||||||||||
| North America | $ | 398 | $ | 381 | $ | 776 | $ | 739 | |||||||||
| Europe | 78 | 69 | 157 | 131 | |||||||||||||
| South America | 113 | 123 | 226 | 237 | |||||||||||||
| Asia | 76 | 61 | 151 | 124 | |||||||||||||
| Surface Technologies | 32 | 31 | 62 | 57 | |||||||||||||
| Segment operating profit | 697 | 665 | 1,372 | 1,288 | |||||||||||||
| Venezuela currency devaluation | - | - | - | (23 | ) | ||||||||||||
| Total operating profit | $ | 697 | $ | 665 | $ | 1,372 | $ | 1,265 | |||||||||
| PRAXAIR, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||
| QUARTERLY FINANCIAL SUMMARY | |||||||||||||||||||||||||||||||
| (Millions of dollars, except per share data) | |||||||||||||||||||||||||||||||
| (UNAUDITED) | |||||||||||||||||||||||||||||||
| 2014 | 2013 | ||||||||||||||||||||||||||||||
| Q2 | Q1 | Q4 (b) | Q3 (b) | Q2 | Q1 (b) | ||||||||||||||||||||||||||
| FROM THE INCOME STATEMENT | |||||||||||||||||||||||||||||||
| Sales | $ | 3,113 | $ | 3,026 | $ | 3,010 | $ | 3,013 | $ | 3,014 | $ | 2,888 | |||||||||||||||||||
| Cost of sales | 1,767 | 1,726 | 1,699 | 1,697 | 1,710 | 1,638 | |||||||||||||||||||||||||
| Selling, general and administrative | 335 | 326 | 332 | 336 | 344 | 337 | |||||||||||||||||||||||||
| Depreciation and amortization | 293 | 285 | 287 | 281 | 275 | 266 | |||||||||||||||||||||||||
| Research and development | 24 | 23 | 26 | 24 | 24 | 24 | |||||||||||||||||||||||||
| Venezuela currency devaluation and other charges | - | - | - | 9 | - | 23 | |||||||||||||||||||||||||
| Other income (expenses) - net | 3 | 9 | 24 | 4 | 4 | - | |||||||||||||||||||||||||
| Operating profit | 697 | 675 | 690 | 670 | 665 | 600 | |||||||||||||||||||||||||
| Interest expense - net | 43 | 46 | 56 | 41 | 41 | 40 | |||||||||||||||||||||||||
| Income taxes | 183 | 176 | 136 | 175 | 174 | 164 | |||||||||||||||||||||||||
| Income from equity investments | 10 | 9 | 9 | 8 | 11 | 10 | |||||||||||||||||||||||||
| Net income (including noncontrolling interests) | 481 | 462 | 507 | 462 | 461 | 406 | |||||||||||||||||||||||||
| Less: noncontrolling interests | (14 | ) | (14 | ) | (33 | ) | (17 | ) | (16 | ) | (15 | ) | |||||||||||||||||||
| Net income - Praxair, Inc. | $ | 467 | $ | 448 | $ | 474 | $ | 445 | $ | 445 | $ | 391 | |||||||||||||||||||
| PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS | |||||||||||||||||||||||||||||||
| Diluted earnings per share | $ | 1.58 | $ | 1.51 | $ | 1.59 | $ | 1.49 | $ | 1.49 | $ | 1.30 | |||||||||||||||||||
| Cash dividends per share | $ | 0.65 | $ | 0.65 | $ | 0.60 | $ | 0.60 | $ | 0.60 | $ | 0.60 | |||||||||||||||||||
| Diluted weighted average shares outstanding (000's) | 295,976 | 297,253 | 298,225 | 298,357 | 298,654 | 299,700 | |||||||||||||||||||||||||
| FROM THE BALANCE SHEET | |||||||||||||||||||||||||||||||
| Net debt (a) | $ | 8,992 | $ | 9,126 | $ | 8,673 | $ | 8,892 | $ | 9,004 | $ | 8,563 | |||||||||||||||||||
| Capital (a) | $ | 16,492 | $ | 16,319 | $ | 15,983 | $ | 15,757 | $ | 15,548 | $ | 15,344 | |||||||||||||||||||
| Debt-to-capital ratio (a) | 54.5 | % | 55.9 | % | 54.3 | % | 56.4 | % | 57.9 | % | 55.8 | % | |||||||||||||||||||
| FROM THE STATEMENT OF CASH FLOWS | |||||||||||||||||||||||||||||||
| Cash flow from operations | $ | 847 | $ | 536 | $ | 964 | $ | 904 | $ | 577 | $ | 472 | |||||||||||||||||||
| Capital expenditures | 384 | 393 | 516 | 516 | 522 | 466 | |||||||||||||||||||||||||
| Acquisitions | 46 | 124 | 12 | 42 | 171 | 1,098 | |||||||||||||||||||||||||
| Cash dividends | 190 | 191 | 177 | 176 | 177 | 178 | |||||||||||||||||||||||||
| OTHER INFORMATION | |||||||||||||||||||||||||||||||
| After-tax return on capital (ROC) (a) | 12.6 | % | 12.6 | % | 12.8 | % | 12.8 | % | 13.0 | % | 13.3 | % | |||||||||||||||||||
| Return on Praxair, Inc. shareholders' equity (ROE) (a) | 28.3 | % | 28.7 | % | 28.6 | % | 28.4 | % | 28.4 | % | 28.1 | % | |||||||||||||||||||
| Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) (a) | $ | 1,000 | $ | 969 | $ | 986 | $ | 968 | $ | 951 | $ | 899 | |||||||||||||||||||
| Debt-to-adjusted EBITDA ratio (a) | 2.3 | 2.3 | 2.2 | 2.2 | 2.1 | 2.1 | |||||||||||||||||||||||||
| Number of employees | 27,735 | 27,578 | 27,560 | 27,794 | 28,878 | 27,380 | |||||||||||||||||||||||||
| SEGMENT DATA | |||||||||||||||||||||||||||||||
| SALES | |||||||||||||||||||||||||||||||
| North America | $ | 1,628 | $ | 1,580 | $ | 1,567 | $ | 1,588 | $ | 1,552 | $ | 1,457 | |||||||||||||||||||
| Europe | 408 | 397 | 404 | 386 | 382 | 370 | |||||||||||||||||||||||||
| South America | 509 | 488 | 481 | 494 | 536 | 531 | |||||||||||||||||||||||||
| Asia | 394 | 392 | 394 | 385 | 379 | 367 | |||||||||||||||||||||||||
| Surface Technologies | 174 | 169 | 164 | 160 | 165 | 163 | |||||||||||||||||||||||||
| Total sales | $ | 3,113 | $ | 3,026 | $ | 3,010 | $ | 3,013 | $ | 3,014 | $ | 2,888 | |||||||||||||||||||
| OPERATING PROFIT | |||||||||||||||||||||||||||||||
| North America | $ | 398 | $ | 378 | $ | 393 | $ | 406 | $ | 381 | $ | 358 | |||||||||||||||||||
| Europe | 78 | 79 | 75 | 64 | 69 | 62 | |||||||||||||||||||||||||
| South America | 113 | 113 | 115 | 115 | 123 | 114 | |||||||||||||||||||||||||
| Asia | 76 | 75 | 80 | 67 | 61 | 63 | |||||||||||||||||||||||||
| Surface Technologies | 32 | 30 | 27 | 27 | 31 | 26 | |||||||||||||||||||||||||
| Segment operating profit | 697 | 675 | 690 | 679 | 665 | 623 | |||||||||||||||||||||||||
| Venezuela currency devaluation and other charges | - | - | - | (9 | ) | - | (23 | ) | |||||||||||||||||||||||
| Total operating profit | $ | 697 | $ | 675 | $ | 690 | $ | 670 | $ | 665 | $ | 600 | |||||||||||||||||||
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(a) |
Non-GAAP measure, see Appendix. |
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(b) |
2013 includes: (i) a charge of $18 million ($12 million after-tax, or $0.04 per diluted share) related to a bond redemption and an income tax benefit of $40 million ($24 million after non-controlling interests, or $0.08 per diluted share) related to the realignment of Praxair's Italian legal structure, both recorded during the fourth quarter; (ii) a charge of $9 million ($6 million after-tax, or $0.02 per diluted share) related to pension settlement in the third quarter; and (iii) a charge of $23 million ($23 million after-tax, or $0.08 per diluted share), related to the Venezuela currency devaluation in the first quarter. |
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PRAXAIR, INC. AND SUBSIDIARIES
NON-GAAP RECONCILIATIONS
(UNAUDITED)
The following adjusted amounts in 2013 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.
| (Millions of dollars, except per share amounts) | ||||||||||||||||||||||||||||||||||
| Net Income - | ||||||||||||||||||||||||||||||||||
| Operating Profit | Income Taxes | Praxair, Inc. | Diluted EPS | |||||||||||||||||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||||||
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Year to Date June 30, |
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| Reported GAAP amounts | $ | 1,372 | $ | 1,265 | $ | 359 | $ | 338 | $ | 915 | $ | 836 | $ | 3.08 | $ | 2.79 | ||||||||||||||||||
| Non-GAAP adjustment: | ||||||||||||||||||||||||||||||||||
| Venezuela currency devaluation (a) | - | 23 | - | - | - | 23 | - | 0.08 | ||||||||||||||||||||||||||
| Adjusted amounts | $ | 1,372 | $ | 1,288 | $ | 359 | $ | 338 | $ | 915 | $ | 859 | $ | 3.08 | $ | 2.87 | ||||||||||||||||||
| (a) There were no non-GAAP adjustments for the quarters ended June 30, 2014 and 2013. | ||||||||||||||||||||||||||||||||||
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 impact of the 2013 fourth quarter bond redemption and the income tax benefit related to the realignment of Praxair's Italian legal structure, the 2013 third quarter pension settlement, and the 2013 first quarter loss on Venezuela currency devaluation; the 2012 third quarter cost reduction program, pension settlement charge, and an income tax benefit.
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2014 |
2013 | 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||
| Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||||||||||||||||||||||||||
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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. |
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| Debt | $ | 9,165 | $ | 9,270 | $ | 8,811 | $ | 9,026 | $ | 9,106 | $ | 8,676 | $ | 7,362 | $ | 7,136 | $ | 6,995 | $ | 6,856 | |||||||||||||||||||||||||||||||
| Less: cash and cash equivalents | (173 | ) | (144 | ) | (138 | ) | (134 | ) | (102 | ) | (113 | ) | (157 | ) | (108 | ) | (104 | ) | (107 | ) | |||||||||||||||||||||||||||||||
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Net debt |
8,992 | 9,126 | 8,673 | 8,892 | 9,004 | 8,563 | 7,205 | 7,028 | 6,891 | 6,749 | |||||||||||||||||||||||||||||||||||||||||
| Equity and redeemable noncontrolling interests: | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Redeemable noncontrolling interests | 194 | 195 | 307 | 290 | 259 | 255 | 252 | 243 | 232 | 232 | |||||||||||||||||||||||||||||||||||||||||
| Praxair, Inc. shareholders' equity | 6,911 | 6,600 | 6,609 | 6,210 | 5,928 | 6,169 | 6,064 | 6,015 | 5,615 | 5,940 | |||||||||||||||||||||||||||||||||||||||||
| Noncontrolling interests | 395 | 398 | 394 | 365 | 357 | 357 | 357 | 331 | 279 | 327 | |||||||||||||||||||||||||||||||||||||||||
| Total equity and redeemable noncontrolling interests | 7,500 | 7,193 | 7,310 | 6,865 | 6,544 | 6,781 | 6,673 | 6,589 | 6,126 | 6,499 | |||||||||||||||||||||||||||||||||||||||||
| Capital | $ | 16,492 | $ | 16,319 | $ | 15,983 | $ | 15,757 | $ | 15,548 | $ | 15,344 | $ | 13,878 | $ | 13,617 | $ | 13,017 | $ | 13,248 | |||||||||||||||||||||||||||||||
| Debt-to-capital | 54.5 | % | 55.9 | % | 54.3 | % | 56.4 | % | 57.9 | % | 55.8 | % | 51.9 | % | 51.6 | % | 52.9 | % | 50.9 | % | |||||||||||||||||||||||||||||||
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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). |
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| Adjusted operating profit (a) | $ | 697 | $ | 675 | $ | 690 | $ | 679 | $ | 665 | $ | 623 | $ | 616 | $ | 623 | $ | 636 | $ | 627 | |||||||||||||||||||||||||||||||
| Less: adjusted income taxes (a) | (183 | ) | (176 | ) | (182 | ) | (178 | ) | (174 | ) | (164 | ) | (162 | ) | (164 | ) | (169 | ) | (165 | ) | |||||||||||||||||||||||||||||||
| Less: tax benefit on adjusted interest expense (a) | (12 | ) | (13 | ) | (11 | ) | (11 | ) | (11 | ) | (11 | ) | (10 | ) | (10 | ) | (9 | ) | (10 | ) | |||||||||||||||||||||||||||||||
| Add: income from equity investments | 10 | 9 | 9 | 8 | 11 | 10 | 9 | 8 | 10 | 7 | |||||||||||||||||||||||||||||||||||||||||
| Adjusted net operating profit after-tax (NOPAT) | $ | 512 | $ | 495 | $ | 506 | $ | 498 | $ | 491 | $ | 458 | $ | 453 | $ | 457 | $ | 468 | $ | 459 | |||||||||||||||||||||||||||||||
| 4-quarter trailing adjusted NOPAT | $ | 2,011 | $ | 1,990 | $ | 1,953 | $ | 1,900 | $ | 1,859 | $ | 1,836 | |||||||||||||||||||||||||||||||||||||||
| Ending capital (see above) | $ | 16,492 | $ | 16,319 | $ | 15,983 | $ | 15,757 | $ | 15,548 | $ | 15,344 | $ | 13,878 | $ | 13,617 | $ | 13,017 | $ | 13,248 | |||||||||||||||||||||||||||||||
| 5-quarter average ending capital | $ | 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 | % | 12.8 | % | 12.8 | % | 13.0 | % | 13.3 | % | |||||||||||||||||||||||||||||||||||||||
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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. |
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| Adjusted net income - Praxair, Inc. (a) | $ | 467 | $ | 448 | $ | 462 | $ | 451 | $ | 445 | $ | 414 | $ | 414 | $ | 419 | $ | 429 | $ | 419 | |||||||||||||||||||||||||||||||
| 4-quarter trailing adjusted net income - Praxair, Inc. | $ | 1,828 | $ | 1,806 | $ | 1,772 | $ | 1,724 | $ | 1,692 | $ | 1,676 | |||||||||||||||||||||||||||||||||||||||
| Ending Praxair, Inc. shareholders' equity | $ | 6,911 | $ | 6,600 | $ | 6,609 | $ | 6,210 | $ | 5,928 | $ | 6,169 | $ | 6,064 | $ | 6,015 | $ | 5,615 | $ | 5,940 | |||||||||||||||||||||||||||||||
| 5-quarter average Praxair shareholders' equity | $ | 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) | 28.3 | % | 28.7 | % | 28.6 | % | 28.4 | % | 28.4 | % | 28.1 | % | 28.9 | % | 29.2 | % | 29.0 | % | 28.4 | % | |||||||||||||||||||||||||||||||
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Adjusted EBITDA and Debt-to-Adjusted EBITDA Ratio- These measures are used by investors, financial analysts and management to assess a company's ability to meet it's financial obligations. |
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| Adjusted net income - Praxair, Inc. (a) | $ | 467 | $ | 448 | $ | 462 | $ | 451 | $ | 445 | $ | 414 | $ | 414 | $ | 419 | $ | 429 | $ | 419 | |||||||||||||||||||||||||||||||
| Add: adjusted noncontrolling interests (a) | 14 | 14 | 17 | 17 | 16 | 15 | 14 | 12 | 15 | 13 | |||||||||||||||||||||||||||||||||||||||||
| Add: adjusted interest expense - net (a) | 43 | 46 | 38 | 41 | 41 | 40 | 35 | 36 | 33 | 37 | |||||||||||||||||||||||||||||||||||||||||
| Add: adjusted income taxes (a) | 183 | 176 | 182 | 178 | 174 | 164 | 162 | 164 | 169 | 165 | |||||||||||||||||||||||||||||||||||||||||
| Add: depreciation and amortization | 293 | 285 | 287 | 281 | 275 | 266 | 254 | 248 | 247 | 252 | |||||||||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 1,000 | $ | 969 | $ | 986 | $ | 968 | $ | 951 | $ | 899 | $ | 879 | $ | 879 | $ | 893 | $ | 886 | |||||||||||||||||||||||||||||||
| 4-quarter trailing adjusted EBITDA | $ | 3,923 | $ | 3,874 | $ | 3,804 | $ | 3,697 | $ | 3,608 | $ | 3,550 | |||||||||||||||||||||||||||||||||||||||
| Ending net debt (see above) | $ | 8,992 | $ | 9,126 | $ | 8,673 | $ | 8,892 | $ | 9,004 | $ | 8,563 | $ | 7,205 | $ | 7,028 | $ | 6,891 | $ | 6,749 | |||||||||||||||||||||||||||||||
| 5-quarter average net debt | $ | 8,937 | $ | 8,852 | $ | 8,467 | $ | 8,138 | $ | 7,738 | $ | 7,287 | |||||||||||||||||||||||||||||||||||||||
| Debt-to-adjusted EBITDA ratio (5-quarter average net debt / 4-quarter trailing adjusted EBITDA) | 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 the percentage change in Diluted EPS Guidance for the full year 2014 as compared to 2013 Adjusted Diluted EPS. | |
| Fourth | Third | First | Third | ||||||||||||||||||||||||
| Year | Quarter | Quarter | Quarter | Quarter | |||||||||||||||||||||||
| 2013 | 2013 | 2013 | 2013 | 2012 | |||||||||||||||||||||||
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Adjusted Operating Profit and Operating Profit Margin |
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| Reported operating profit | $ | 2,625 | $ | 690 | $ | 670 | $ | 600 | $ | 558 | |||||||||||||||||
| Add: Pension settlement charge | 9 | - | 9 | - | 9 | ||||||||||||||||||||||
| Add: Venezuela currency devaluation | 23 | - | - | 23 | - | ||||||||||||||||||||||
| Add: Cost reduction program | - | - | - | - | 56 | ||||||||||||||||||||||
| Total adjustments | 32 | - | 9 | 23 | 65 | ||||||||||||||||||||||
| Adjusted operating profit | $ | 2,657 | $ | 690 | $ | 679 | $ | 623 | $ | 623 | |||||||||||||||||
| Reported sales | $ | 11,925 | $ | 3,010 | $ | 3,013 | $ | 2,888 | $ | 2,774 | |||||||||||||||||
| Adjusted operating profit margin | 22.3 | % | 22.9 | % | 22.5 | % | 21.6 | % | 22.5 | % | |||||||||||||||||
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Adjusted Interest Expense - net |
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| Reported interest expense - net | $ | 178 | $ | 56 | $ | 41 | $ | 40 | $ | 36 | |||||||||||||||||
| Less: Bond redemption | (18 | ) | (18 | ) | - | - | - | ||||||||||||||||||||
| Adjusted interest expense - net | $ | 160 | $ | 38 | $ | 41 | $ | 40 | $ | 36 | |||||||||||||||||
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Adjusted Income Taxes |
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| Reported income taxes | $ | 649 | $ | 136 | $ | 175 | $ | 164 | $ | 90 | |||||||||||||||||
| Add: Bond redemption | 6 | 6 | - | - | - | ||||||||||||||||||||||
| Add: Income tax benefit | 40 | 40 | - | - | 55 | ||||||||||||||||||||||
| Add: Pension settlement charge | 3 | - | 3 | - | 3 | ||||||||||||||||||||||
| Add: Cost reduction program | - | - | - | - | 16 | ||||||||||||||||||||||
| Total adjustments | 49 | 46 | 3 | - | 74 | ||||||||||||||||||||||
| Adjusted income taxes | $ | 698 | $ | 182 | $ | 178 | $ | 164 | $ | 164 | |||||||||||||||||
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Adjusted Effective Tax Rate |
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| Reported income before income taxes and equity investments | $ | 2,447 | $ | 634 | $ | 629 | $ | 560 | $ | 522 | |||||||||||||||||
| Add: Bond redemption | 18 | 18 | - | - | - | ||||||||||||||||||||||
| Add: Pension settlement charge | 9 | - | 9 | - | 9 | ||||||||||||||||||||||
| Add: Venezuela currency devaluation | 23 | - | - | 23 | - | ||||||||||||||||||||||
| Add: Cost reduction program | - | - | - | - | 56 | ||||||||||||||||||||||
| Total adjustments | 50 | 18 | 9 | 23 | 65 | ||||||||||||||||||||||
| Adjusted income before income taxes and equity investments | $ | 2,497 | $ | 652 | $ | 638 | $ | 583 | $ | 587 | |||||||||||||||||
| Adjusted income taxes (above) | $ | 698 | $ | 182 | $ | 178 | $ | 164 | $ | 164 | |||||||||||||||||
| Adjusted effective tax rate | 28 | % | 28 | % | 28 | % | 28 | % | 28 | % | |||||||||||||||||
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Adjusted Noncontrolling interests |
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| Reported noncontrolling interests | $ | 81 | $ | 33 | $ | 17 | $ | 15 | $ | 10 | |||||||||||||||||
| Less: Income tax benefit | (16 | ) | (16 | ) | - | - | - | ||||||||||||||||||||
| Add: Cost reduction program | - | - | - | - | 2 | ||||||||||||||||||||||
| Total adjustments | (16 | ) | (16 | ) | - | - | 2 | ||||||||||||||||||||
| Adjusted noncontrolling interests | $ | 65 | $ | 17 | $ | 17 | $ | 15 | $ | 12 | |||||||||||||||||
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Adjusted Net Income - Praxair, Inc. |
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| Reported net income - Praxair, Inc. | $ | 1,755 | $ | 474 | $ | 445 | $ | 391 | $ | 430 | |||||||||||||||||
| Add: Bond redemption | 12 | 12 | - | - | - | ||||||||||||||||||||||
| Less: Income tax benefit | (24 | ) | (24 | ) | - | - | (55 | ) | |||||||||||||||||||
| Add: Pension settlement charge | 6 | - | 6 | - | 6 | ||||||||||||||||||||||
| Add: Venezuela currency devaluation | 23 | - | - | 23 | - | ||||||||||||||||||||||
| Add: Cost reduction program | - | - | - | - | 38 | ||||||||||||||||||||||
| Total adjustments | 17 | (12 | ) | 6 | 23 | (11 | ) | ||||||||||||||||||||
| Adjusted net income - Praxair, Inc. | $ | 1,772 | $ | 462 | $ | 451 | $ | 414 | $ | 419 | |||||||||||||||||
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Adjusted Diluted EPS |
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| Reported diluted EPS | $ | 5.87 | $ | 1.59 | $ | 1.49 | $ | 1.30 | $ | 1.43 | |||||||||||||||||
| Add: Bond redemption | 0.04 | 0.04 | - | - | - | ||||||||||||||||||||||
| Less: Income tax benefit | (0.08 | ) | (0.08 | ) | - | - | (0.18 | ) | |||||||||||||||||||
| Add: Pension settlement charge | 0.02 | - | 0.02 | - | 0.02 | ||||||||||||||||||||||
| Add: Venezuela currency devaluation | 0.08 | - | - | 0.08 | - | ||||||||||||||||||||||
| Add: Cost reduction program | - | - | - | - | 0.12 | ||||||||||||||||||||||
| Total adjustments | 0.06 | (0.04 | ) | 0.02 | 0.08 | (0.04 | ) | ||||||||||||||||||||
| Adjusted diluted EPS | $ | 5.93 | $ | 1.55 | $ | 1.51 | $ | 1.38 | $ | 1.39 | |||||||||||||||||
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Full-Year 2014 Diluted EPS Guidance |
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| Full Year 2014 | |||||||||||||||||||||||||||
| Low End | High End | ||||||||||||||||||||||||||
| Diluted EPS guidance | $ | 6.30 | $ | 6.45 | |||||||||||||||||||||||
| 2013 adjusted diluted EPS (see above) | $ | 5.93 | $ | 5.93 | |||||||||||||||||||||||
| Percentage change | 6 | % | 9 | % | |||||||||||||||||||||||
