Exhibit 99.1
Praxair Reports Fourth-Quarter and Full-Year 2008 Results
DANBURY, Conn.--(BUSINESS WIRE)--January 28, 2009--Praxair, Inc. (NYSE: PX):
- Fourth-quarter adjusted diluted EPS of $1.01, up 3% excluding charges*
- Full- year 2008 adjusted diluted EPS of $4.20, up 16% excluding charges*
- Fourth-quarter sales down 5%. Full-year sales up 15%
- Record operating cash flows in the quarter and for full year
- Return on capital for the year of 15.3%*
- Net share repurchases of $177 million in the fourth quarter, $892 million for full-year 2008
- First-quarter 2009 EPS guidance of 90 cents to 95 cents; full-year $3.80 to $4.20
Praxair, Inc. (NYSE: PX) reported net income of $200 million and diluted earnings per share of 64 cents in the fourth quarter. These results include the impact of a $177 million pre-tax charge, or 37 cents of earnings per share. This charge was primarily related to cost-reduction actions taken to offset sharply lower product volumes resulting from the global economic slowdown.
Excluding this charge, net income was $314 million and diluted earnings per share were $1.01, as compared to $316 million and 98 cents in the prior-year quarter.*
For the full year of 2008, reported net income was $1,211 million and diluted earnings per share were $3.80. Excluding the fourth-quarter charge and a 3-cent impact of a pension settlement charge taken in the first quarter, net income was $1,336 million and diluted earnings per share were $4.20. This represents growth of 14% and 16%, respectively, versus 2007.*
Sales in the fourth quarter were $2,403 million as compared to $2,523 million in the prior-year quarter. Excluding the negative effect of foreign currency translation, sales were 2% above the prior year. Higher product pricing was offset by a sharp decline in volumes beginning in November, due to significant production cutbacks by customers around the world. For the full year of 2008, sales were $10,796 million, up 15% versus 2007, primarily from new business, new plant start-ups and higher pricing.
Operating profit in the fourth quarter was $314 million. Excluding the charge, adjusted operating profit was $491 million as compared to $484 million in the fourth quarter of 2007. The company more than offset the sharp drop in base-business volumes by higher pricing and realized cost reductions. For the full year, reported operating profit was $1,883 million. Excluding the charges in the first and fourth quarters, adjusted operating profit of $2,077 million grew 16% from 2007.* Higher pricing, new business and productivity programs drove the operating leverage.
The company generated record cash flow from operations in both the fourth quarter and for the full year. Fourth-quarter cash flow of $640 million funded $482 million of capital expenditures, largely for new production plants under contract for customers in North and South America, China and India. Also in the fourth quarter, the company repurchased $177 million of stock, net of issuances. Debt levels increased to finance the share repurchases, resulting in a modestly higher debt-to-capital ratio of 53.8%. For the full year, the company generated cash flow from operations of $2,038 million, or 19% of sales. The after-tax return-on-capital ratio and return on equity for the year were 15.3% and 26.8%, respectively.*
Commenting on the results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “As we anticipated, volumes dropped dramatically in November and December as our customers in the electronics, chemicals and metals industries cut production in the face of falling commodity prices and weakening demand. Other end markets, including food and beverage, healthcare, energy and environmental, remained relatively stable.
“Our outlook for 2009 is cautious as we expect the global economy to remain weak. We moved quickly in the fourth quarter to reduce our cost structure and we will continue to drive our costs lower in 2009 by accelerating our productivity initiatives.”
For the first quarter of 2009, Praxair expects diluted earnings per share in the range of 90 cents to 95 cents. This guidance assumes a sequential slowdown in volumes and a negative currency impact of about 8% versus the first quarter of 2008 based on current exchange rates.
For the full year of 2009, Praxair expects sales in the range of $9.5 billion to $10 billion. The company expects diluted earnings per share to be in the range of $3.80 to $4.20. Full-year capital expenditures are expected to be $1.4 billion to $1.5 billion, supporting the current backlog of 42 on-site production plants under contract around the world which will come on-stream and underpin revenue and earnings growth in the 2009-2011 period.
The following provides additional detail on fourth-quarter 2008 results by geographic region and for Praxair Surface Technologies.
In North America, fourth-quarter sales were $1,355 million, 2% below $1,381 million in the fourth quarter of 2007. Excluding the negative effect of currency, sales were 2% above the prior-year quarter. Acquisitions of U.S. packaged gas distributors contributed 2% to sales growth. Strong overall pricing trends and higher sales to energy markets due to strong demand for hydrogen by refiners offset lower volumes in most other end markets, particularly metals, chemicals and electronics. For the full year, sales in North America grew 15%, and 11% excluding the effects of currency translation and natural gas price pass-through. Operating profit was $267 million in the fourth quarter and $1,078 million for the year, representing growth of 5% and 14%, respectively. In both periods, operating profit grew faster than underlying sales due to strong pricing trends and cost savings from productivity programs.**
In Europe, sales in the fourth quarter were $322 million, 9% below the prior year. The translation effects of a weaker euro reduced sales by 6%. Underlying sales were comparable to the prior year as pricing gains were offset by lower volumes. For the year, sales in Europe were $1,502 million, 12% above 2007. Excluding currency effects, sales grew 3% from new business, new applications and higher pricing. Operating profit was $83 million in the quarter, 3% below the prior year due to lower volumes. For the full year, operating profit of $365 million grew 16% from the prior year.**
In South America, fourth-quarter sales were $382 million, 14% below the prior year. Excluding the negative impact of currency translation, sales grew 4% in the quarter. Sales increased to customers in food and beverage, healthcare and general manufacturing markets, but overall growth in the region was mitigated by lower on-site volumes to commodity producers. For the full year, sales were $1,889 million, 18% above 2007 due to strong organic growth and a 6% contribution from currency appreciation. Operating profit in the fourth quarter was $87 million versus $85 million in the prior-year quarter, as higher prices and productivity programs more than offset cost inflation and the impact of lower volumes. Full-year operating profit of $389 million grew 25% from 2007 due primarily to strong organic growth in the first three quarters across all major end markets.**
Sales in Asia were $209 million in the quarter, comparable to the prior year. Excluding currency translation, sales grew 8% from higher sales in all major end markets. For the year, sales in Asia were $891 million, 19% above 2007 from new plant start-ups and growth in merchant liquid sales. Operating profit in the quarter of $34 million was comparable to the prior year and in line with the sales results. For the full year, operating profit grew 23% to $149 million.**
Praxair Surface Technologies had fourth-quarter sales of $135 million, 4% above the prior-year quarter excluding currency impacts. Sales growth was driven by higher sales to energy markets, partially offset by lower sales to aviation and general manufacturing markets. For the full year, sales were $575 million, 10% above 2007. Operating profit was $20 million in the quarter and $96 million for the year. Fourth-quarter profit was below prior year primarily due to lower aerospace coatings volumes.**
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide. The company produces, sells and distributes atmospheric and process gases, and high-performance surface coatings. Praxair products, services and technologies bring productivity and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, metals and others. More information on Praxair is available on the Internet at www.praxair.com.
*See the attachments for calculations of non-GAAP measures related to 2008 operating profit, net income, and diluted earnings per share adjusted to exclude a $17 million pension settlement charge in the first quarter, $11 million after-tax, 3 cents EPS; and a $177 million charge in the fourth quarter, $114 million after-tax, 37 cents EPS. All year-over-year comparisons, including percentage changes, are based on adjusted amounts for 2008 which exclude these charges. The attachments also include calculations of non-GAAP measures related to after-tax return-on-capital; return-on-equity; and debt-to-capital ratios.
**Segment operating profit results and year-over-year comparisons, including percentage changes, exclude the pre-tax charges taken in the first and fourth quarters.
Attachments: Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures
A teleconference on Praxair’s fourth-quarter results is being held this morning, January 28, at 11:00 am Eastern Time. The number is (857) 350-1602 -- Passcode: 85820735. The call also is available as a web cast at www.praxair.com/investors. Materials to be used in the teleconference are available on www.praxair.com/investors.
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of tax, environmental, home healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the projections or estimates contained in the forward-looking statements. The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) in the company’s latest Annual Report on Form 10-K filed with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.
PRAXAIR, INC. AND SUBSIDIARIES | |||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||
(Millions of dollars, except per share data) | |||||||||||||||||
(UNAUDITED) | |||||||||||||||||
Quarter Ended | Year Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2008 | 2007 | 2008 | 2007 | ||||||||||||||
SALES (a) | $ | 2,403 | $ | 2,523 | $ | 10,796 | $ | 9,402 | |||||||||
Cost of sales | 1,418 | 1,493 | 6,495 | 5,557 | |||||||||||||
Selling, general and administrative | 295 | 314 | 1,312 | 1,190 | |||||||||||||
Depreciation and amortization | 206 | 207 | 850 | 774 | |||||||||||||
Research and development | 25 | 26 | 97 | 98 | |||||||||||||
Cost reduction program and other charges (b) | 177 | - | 177 | - | |||||||||||||
Pension settlement charge (c ) | - | - | 17 | - | |||||||||||||
Other income (expense) - net | 32 | 1 | 35 | 3 | |||||||||||||
OPERATING PROFIT | 314 | 484 | 1,883 | 1,786 | |||||||||||||
Interest expense - net | 49 | 50 | 198 | 173 | |||||||||||||
INCOME BEFORE INCOME TAXES | 265 | 434 | 1,685 | 1,613 | |||||||||||||
Income taxes | 67 | 115 | 465 | 419 | |||||||||||||
198 | 319 | 1,220 | 1,194 | ||||||||||||||
Minority interests | (6 | ) | (16 | ) | (45 | ) | (43 | ) | |||||||||
Income from equity investments | 8 | 13 | 36 | 26 | |||||||||||||
NET INCOME | $ | 200 | $ | 316 | $ | 1,211 | $ | 1,177 | |||||||||
PER SHARE DATA | |||||||||||||||||
Basic earnings per share | $ | 0.65 | $ | 1.00 | $ | 3.87 | $ | 3.69 | |||||||||
Diluted earnings per share | $ | 0.64 | $ | 0.98 | $ | 3.80 | $ | 3.62 | |||||||||
Cash dividends | $ | 0.375 | $ | 0.30 | $ | 1.50 | $ | 1.20 | |||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||||||||
Basic shares outstanding (000's) | 307,636 | 316,497 | 312,658 | 318,997 | |||||||||||||
Diluted shares outstanding (000's) | 310,719 | 323,328 | 318,302 | 324,842 | |||||||||||||
(a) | Sales for the 2008 quarter and year-to-date periods decreased $6 million and increased $136 million, respectively, from the contractual pass-through of hydrogen feedstock costs, with minimal impact on operating profit compared to 2007. Sales for the quarter and year-to-date periods decreased $172 million and increased $271 million, respectively, due to currency effects versus 2007. | ||||||||||||||||
(b) | The 2008 quarter and year-to-date periods include cost reduction program and other charges of $177 million ($114 million after-tax and minority interests, or $0.37 per diluted share) which were previously announced on December 10, 2008. The cost reduction actions include a reduction in workforce of approximately 1,675 employees and the closure or sale of underperforming and non-core product lines and businesses resulting in a pre-tax charge of approximately $118 million. In addition, a pre-tax charge of approximately $59 million was recognized primarily related to social tax cases in Brazil. | ||||||||||||||||
(c) | A pension settlement charge of $17 million ($11 million after-tax or $0.03 per diluted share) was recorded in the 2008 first quarter related to lump sum benefit payments made from the U.S. supplemental pension plan to a number of recently retired senior managers, including Praxair's former chairman and chief executive officer. |
PRAXAIR, INC. AND SUBSIDIARIES | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
(Millions of dollars) | |||||
(UNAUDITED) | |||||
December 31, | December 31, | ||||
2008 | 2007 | ||||
ASSETS | |||||
Cash and cash equivalents | $ | 32 | $ | 17 | |
Accounts receivable - net | 1,604 | 1,723 | |||
Inventories | 445 | 474 | |||
Prepaid and other current assets | 220 | 194 | |||
TOTAL CURRENT ASSETS | 2,301 | 2,408 | |||
Property, plant and equipment - net | 7,922 | 7,963 | |||
Goodwill | 1,909 | 1,967 | |||
Other intangibles - net | 121 | 134 | |||
Other long-term assets | 801 | 910 | |||
TOTAL ASSETS | $ | 13,054 | $ | 13,382 | |
LIABILITIES AND EQUITY | |||||
Accounts payable | $ | 820 | $ | 818 | |
Short-term debt | 642 | 788 | |||
Current portion of long-term debt | 674 | 40 | |||
Other current liabilities | 843 | 1,004 | |||
TOTAL CURRENT LIABILITIES | 2,979 | 2,650 | |||
Long-term debt | 3,709 | 3,364 | |||
Other long-term liabilities | 2,055 | 1,905 | |||
TOTAL LIABILITIES | 8,743 | 7,919 | |||
Minority interests | 302 | 321 | |||
Shareholders' equity | 4,009 | 5,142 | |||
TOTAL LIABILITIES AND EQUITY | $ | 13,054 | $ | 13,382 |
PRAXAIR, INC. AND SUBSIDIARIES | |||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||
(Millions of dollars) | |||||||||||||||||
(UNAUDITED) | |||||||||||||||||
Quarter Ended | Year Ended | ||||||||||||||||
December 31, | December 31, | ||||||||||||||||
2008 | 2007 | 2008 | 2007 | ||||||||||||||
OPERATIONS | |||||||||||||||||
Net income | $ | 200 | $ | 316 | $ | 1,211 | $ | 1,177 | |||||||||
Depreciation and amortization | 206 | 207 | 850 | 774 | |||||||||||||
Cost reduction program and other charges, net of payments | 149 | - | 149 | - | |||||||||||||
Accounts receivable | 228 | (1 | ) | 119 | (223 | ) | |||||||||||
Inventory | 43 | (16 | ) | 21 | (71 | ) | |||||||||||
Payables and accruals | (109 | ) | (17 | ) | (73 | ) | 116 | ||||||||||
Pension contributions | (6 | ) | (6 | ) | (20 | ) | (22 | ) | |||||||||
Other | (71 | ) | 104 | (219 | ) | 207 | |||||||||||
Net cash provided by operating activities | 640 | 587 | 2,038 | 1,958 | |||||||||||||
INVESTING | |||||||||||||||||
Capital expenditures | (482 | ) | (402 | ) | (1,611 | ) | (1,376 | ) | |||||||||
Acquisitions | (25 | ) | (127 | ) | (130 | ) | (476 | ) | |||||||||
Divestitures and asset sales | 6 | 6 | 54 | 39 | |||||||||||||
Net cash used for investing activities | (501 | ) | (523 | ) | (1,687 | ) | (1,813 | ) | |||||||||
FINANCING | |||||||||||||||||
Debt increase - net | 167 | 75 | 987 | 795 | |||||||||||||
Purchases of common stock, net of issuances | (177 | ) | (65 | ) | (892 | ) | (636 | ) | |||||||||
Cash dividends | (115 | ) | (94 | ) | (468 | ) | (381 | ) | |||||||||
Excess tax benefit on stock option exercises | 2 | 9 | 54 | 63 | |||||||||||||
Minority interest transactions and other | (5 | ) | 1 | (14 | ) | (11 | ) | ||||||||||
Net cash used for financing activities | (128 | ) | (74 | ) | (333 | ) | (170 | ) | |||||||||
Effect of exchange rate changes on cash and | |||||||||||||||||
cash equivalents | (3 | ) | 1 | (3 | ) | 6 | |||||||||||
Change in cash and cash equivalents | 8 | (9 | ) | 15 | (19 | ) | |||||||||||
Cash and cash equivalents, beginning-of-period | 24 | 26 | 17 | 36 | |||||||||||||
Cash and cash equivalents, end-of-period | $ | 32 | $ | 17 | $ | 32 | $ | 17 |
PRAXAIR, INC. AND SUBSIDIARIES | ||||||||||||||||
SEGMENT INFORMATION | ||||||||||||||||
(Millions of dollars) | ||||||||||||||||
(UNAUDITED) | ||||||||||||||||
Quarter Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
SALES | ||||||||||||||||
North America (a) | $ | 1,355 | $ | 1,381 | $ | 5,939 | $ | 5,185 | ||||||||
Europe (b) | 322 | 354 | 1,502 | 1,345 | ||||||||||||
South America (c) | 382 | 444 | 1,889 | 1,604 | ||||||||||||
Asia (d) | 209 | 210 | 891 | 746 | ||||||||||||
Surface Technologies (e) | 135 | 134 | 575 | 522 | ||||||||||||
Total sales | $ | 2,403 | $ | 2,523 | $ | 10,796 | $ | 9,402 | ||||||||
OPERATING PROFIT | ||||||||||||||||
North America (a) | $ | 267 | $ | 255 | $ | 1,078 | $ | 947 | ||||||||
Europe | 83 | 86 | 365 | 315 | ||||||||||||
South America | 87 | 85 | 389 | 311 | ||||||||||||
Asia | 34 | 34 | 149 | 121 | ||||||||||||
Surface Technologies | 20 | 24 | 96 | 92 | ||||||||||||
Segment operating profit | 491 | 484 | 2,077 | 1,786 | ||||||||||||
Cost reduction program and other charges | (177 | ) | - | (177 | ) | - | ||||||||||
Pension settlement charge | - | - | (17 | ) | - | |||||||||||
Total operating profit | $ | 314 | $ | 484 | $ | 1,883 | $ | 1,786 | ||||||||
(a) | North American 2008 sales for the quarter and year-to-date periods decreased $6 million and increased $136 million, respectively, from the contractual pass-through of hydrogen feedstock costs, with minimal impact on operating profit compared to 2007. Sales for the quarter and year-to-date periods decreased $49 million and increased $31 million, respectively, due to currency effects versus 2007. | |||||||||||||||
(b) | European 2008 sales for the quarter and year-to-date periods decreased $22 million and increased $115 million, respectively, due to currency effects versus 2007. | |||||||||||||||
(c) | South American 2008 sales for the quarter and year-to-date periods decreased $80 million and increased $101 million, respectively, due to currency effects versus 2007. | |||||||||||||||
(d) | Asian 2008 sales for the quarter and year-to-date periods decreased $17 million and $1 million, respectively, due to currency effects versus 2007. | |||||||||||||||
(e) | Surface Technologies 2008 sales for the quarter and year-to-date periods decreased $4 million and increased $25 million, respectively, due to currency effects versus 2007. |
PRAXAIR, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||||||||
QUARTERLY FINANCIAL SUMMARY | |||||||||||||||||||||||||||||||||
(Millions of dollars, except per share data) | |||||||||||||||||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||||||||||||||||
2008 | 2007 | ||||||||||||||||||||||||||||||||
Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||||||||||
FROM THE INCOME STATEMENT | |||||||||||||||||||||||||||||||||
Sales | $ | 2,403 | $ | 2,852 | $ | 2,878 | $ | 2,663 | $ | 2,523 | $ | 2,372 | $ | 2,332 | $ | 2,175 | |||||||||||||||||
Cost of sales | 1,418 | 1,734 | 1,748 | 1,595 | 1,493 | 1,394 | 1,388 | 1,282 | |||||||||||||||||||||||||
Selling, general and administrative | 295 | 341 | 341 | 335 | 314 | 294 | 296 | 286 | |||||||||||||||||||||||||
Depreciation and amortization | 206 | 218 | 216 | 210 | 207 | 196 | 189 | 182 | |||||||||||||||||||||||||
Research and development | 25 | 24 | 24 | 24 | 26 | 24 | 24 | 24 | |||||||||||||||||||||||||
Cost reduction program and other charges | 177 | - | - | - | - | - | - | - | |||||||||||||||||||||||||
Pension settlement charge | - | - | - | 17 | - | - | - | - | |||||||||||||||||||||||||
Other income (expenses) – net | 32 | 9 | (6 | ) | - | 1 | (4 | ) | 4 | 2 | |||||||||||||||||||||||
Operating profit | 314 | 544 | 543 | 482 | 484 | 460 | 439 | 403 | |||||||||||||||||||||||||
Interest expense - net | 49 | 50 | 52 | 47 | 50 | 44 | 41 | 38 | |||||||||||||||||||||||||
Income taxes | 67 | 139 | 137 | 122 | 115 | 106 | 103 | 95 | |||||||||||||||||||||||||
Minority interests | (6 | ) | (11 | ) | (13 | ) | (15 | ) | (16 | ) | (9 | ) | (9 | ) | (9 | ) | |||||||||||||||||
Income from equity investments | 8 | 11 | 8 | 9 | 13 | 4 | 5 | 4 | |||||||||||||||||||||||||
Net income | $ | 200 | $ | 355 | $ | 349 | $ | 307 | $ | 316 | $ | 305 | $ | 291 | $ | 265 | |||||||||||||||||
PER SHARE DATA | |||||||||||||||||||||||||||||||||
Diluted earnings per share | $ | 0.64 | $ | 1.11 | $ | 1.08 | $ | 0.96 | $ | 0.98 | $ | 0.94 | $ | 0.89 | $ | 0.81 | |||||||||||||||||
Cash dividends per share | $ | 0.375 | $ | 0.375 | $ | 0.375 | $ | 0.375 | $ | 0.30 | $ | 0.30 | $ | 0.30 | $ | 0.30 | |||||||||||||||||
Diluted weighted average shares outstanding (000's) | 310,719 | 319,505 | 322,088 | 320,409 | 323,328 | 324,920 | 326,301 | 326,787 | |||||||||||||||||||||||||
FROM THE BALANCE SHEET | |||||||||||||||||||||||||||||||||
Total debt | $ | 5,025 | $ | 4,944 | $ | 4,596 | $ | 4,574 | $ | 4,192 | $ | 4,003 | $ | 3,700 | $ | 3,736 | |||||||||||||||||
Total capital (a) | 9,336 | 10,142 | 10,584 | 10,127 | 9,655 | 9,120 | 8,784 | 8,433 | |||||||||||||||||||||||||
Debt-to-capital ratio (a) | 53.8 | % | 48.7 | % | 43.4 | % | 45.2 | % | 43.4 | % | 43.9 | % | 42.1 | % | 44.3 | % | |||||||||||||||||
FROM THE STATEMENT OF CASH FLOWS | |||||||||||||||||||||||||||||||||
Cash flow from operations | $ | 640 | $ | 630 | $ | 389 | $ | 379 | $ | 587 | $ | 592 | $ | 481 | $ | 298 | |||||||||||||||||
Capital expenditures | 482 | 405 | 380 | 344 | 402 | 360 | 329 | 285 | |||||||||||||||||||||||||
Acquisitions | 25 | 35 | 30 | 40 | 127 | 22 | 31 | 296 | |||||||||||||||||||||||||
Cash dividends | 115 | 117 | 119 | 117 | 94 | 95 | 96 | 96 | |||||||||||||||||||||||||
OTHER INFORMATION | |||||||||||||||||||||||||||||||||
Number of employees | 26,936 | 27,957 | 27,999 | 27,948 | 27,992 | 27,479 | 28,035 | 27,681 | |||||||||||||||||||||||||
After-tax return on capital (ROC) (a) | 14.7 | % | 15.5 | % | 15.4 | % | 14.8 | % | 15.7 | % | 15.5 | % | 15.3 | % | 14.8 | % | |||||||||||||||||
Return on equity (ROE) (a) | 28.2 | % | 26.9 | % | 25.7 | % | 24.6 | % | 25.3 | % | 25.1 | % | 25.0 | % | 23.5 | % | |||||||||||||||||
SEGMENT DATA | |||||||||||||||||||||||||||||||||
SALES | |||||||||||||||||||||||||||||||||
North America | $ | 1,355 | $ | 1,557 | $ | 1,573 | $ | 1,454 | $ | 1,381 | $ | 1,306 | $ | 1,293 | $ | 1,205 | |||||||||||||||||
Europe | 322 | 384 | 406 | 390 | 354 | 325 | 336 | 330 | |||||||||||||||||||||||||
South America | 382 | 527 | 514 | 466 | 444 | 419 | 393 | 348 | |||||||||||||||||||||||||
Asia | 209 | 239 | 232 | 211 | 210 | 190 | 179 | 167 | |||||||||||||||||||||||||
Surface Technologies | 135 | 145 | 153 | 142 | 134 | 132 | 131 | 125 | |||||||||||||||||||||||||
Total sales | $ | 2,403 | $ | 2,852 | $ | 2,878 | $ | 2,663 | $ | 2,523 | $ | 2,372 | $ | 2,332 | $ | 2,175 | |||||||||||||||||
OPERATING PROFIT | |||||||||||||||||||||||||||||||||
North America | $ | 267 | $ | 274 | $ | 275 | $ | 262 | $ | 255 | $ | 244 | $ | 231 | $ | 217 | |||||||||||||||||
Europe | 83 | 96 | 99 | 87 | 86 | 78 | 79 | 72 | |||||||||||||||||||||||||
South America | 87 | 111 | 102 | 89 | 85 | 84 | 76 | 66 | |||||||||||||||||||||||||
Asia | 34 | 38 | 40 | 37 | 34 | 30 | 30 | 27 | |||||||||||||||||||||||||
Surface Technologies | 20 | 25 | 27 | 24 | 24 | 24 | 23 | 21 | |||||||||||||||||||||||||
Segment operating profit | 491 | 544 | 543 | 499 | 484 | 460 | 439 | 403 | |||||||||||||||||||||||||
Cost reduction program and other charges | (177 | ) | - | - | - | - | - | - | - | ||||||||||||||||||||||||
Pension settlement charge | - | - | - | (17 | ) | - | - | - | - | ||||||||||||||||||||||||
Total operating profit | $ | 314 | $ | 544 | $ | 543 | $ | 482 | $ | 484 | $ | 460 | $ | 439 | $ | 403 | |||||||||||||||||
(a) | Non-GAAP measure, see Appendix. |
PRAXAIR, INC. AND SUBSIDIARIES | ||||||||||||||||||||
APPENDIX | ||||||||||||||||||||
NON-GAAP MEASURES | ||||||||||||||||||||
(Millions of dollars, except per share data) | ||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||
The following non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s financing leverage, return on net assets employed and operating performance. Special items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. 2008 adjusted operating profit, net income and diluted EPS are adjusted for the impact of the 2008 fourth quarter cost reduction program and other charges and the 2008 first quarter pension settlement charge which helps investors understand underlying performance on a comparable basis. | ||||||||||||||||||||
2008 | ||||||||||||||||||||
Year | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||
Debt to Capital Ratio - The debt-to-capital ratio is a measure used by investors, financial analysts and management to provide a measure of financial leverage and insights into how the company is financing its operations. | ||||||||||||||||||||
Total debt | $ | 5,025 | $ | 5,025 | $ | 4,944 | $ | 4,596 | $ | 4,574 | ||||||||||
Minority interests | 302 | 302 | 307 | 317 | 344 | |||||||||||||||
Shareholders' equity | 4,009 | 4,009 | 4,891 | 5,671 | 5,209 | |||||||||||||||
Total Capital | $ | 9,336 | $ | 9,336 | $ | 10,142 | $ | 10,584 | $ | 10,127 | ||||||||||
Debt to capital ratio | 53.8 | % | 53.8 | % | 48.7 | % | 43.4 | % | 45.2 | % | ||||||||||
After-tax return on Capital (ROC) - After-tax return on capital is a measure used by investors, financial analysts and management to evaluate the return on net assets employed in the business. ROC measures the after-tax operating profit that the company was able to generate with the investments made by all parties in the business (debt, minority interests and shareholders’ equity). | ||||||||||||||||||||
Adjusted operating profit (a) | $ | 2,077 | $ | 491 | $ | 544 | $ | 543 | $ | 499 | ||||||||||
Less: income taxes | (465 | ) | (67 | ) | (139 | ) | (137 | ) | (122 | ) | ||||||||||
Less: tax benefit on cost reduction program and other charges (b) | (59 | ) | (59 | ) | - | - | - | |||||||||||||
Less: tax benefit on pension settlement charge (c) | (6 | ) | - | - | - | (6 | ) | |||||||||||||
Less: tax benefit on interest expense | (56 | ) | (14 | ) | (14 | ) | (15 | ) | (13 | ) | ||||||||||
Add: income from equity investments | 36 | 8 | 11 | 8 | 9 | |||||||||||||||
Net operating profit after-tax (NOPAT) | $ | 1,527 | $ | 359 | $ | 402 | $ | 399 | $ | 367 | ||||||||||
Beginning capital | $ | 10,142 | $ | 10,584 | $ | 10,127 | $ | 9,655 | ||||||||||||
Ending capital | $ | 9,336 | $ | 10,142 | $ | 10,584 | $ | 10,127 | ||||||||||||
Average capital | $ | 9,739 | $ | 10,363 | $ | 10,356 | $ | 9,891 | ||||||||||||
Average capital - 5 quarter average (d) | $ | 9,969 | ||||||||||||||||||
ROC % | 15.3 | % | 3.7 | % | 3.9 | % | 3.9 | % | 3.7 | % | ||||||||||
ROC % (annualized) | 15.3 | % | 14.7 | % | 15.5 | % | 15.4 | % | 14.8 | % | ||||||||||
Return on Equity (ROE) - Return on 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 that the company was able to generate with the money shareholders have invested. | ||||||||||||||||||||
Adjusted net income (a) | $ | 1,336 | $ | 314 | $ | 355 | $ | 349 | $ | 318 | ||||||||||
Beginning shareholders' equity | $ | 4,891 | $ | 5,671 | $ | 5,209 | $ | 5,142 | ||||||||||||
Ending shareholders' equity | $ | 4,009 | $ | 4,891 | $ | 5,671 | $ | 5,209 | ||||||||||||
Average shareholders' equity | $ | 4,450 | $ | 5,281 | $ | 5,440 | $ | 5,176 | ||||||||||||
Average shareholders' equity - 5 quarter average (d) | $ | 4,984 | ||||||||||||||||||
ROE % | 26.8 | % | 7.1 | % | 6.7 | % | 6.4 | % | 6.1 | % | ||||||||||
ROE % (annualized) | 26.8 | % | 28.2 | % | 26.9 | % | 25.7 | % | 24.6 | % | ||||||||||
2007 | ||||||||||||||||||||
Year | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||
Debt to Capital Ratio - The debt-to-capital ratio is a measure used by investors, financial analysts and management to provide a measure of financial leverage and insights into how the company is financing its operations. | ||||||||||||||||||||
Total debt | $ | 4,192 | $ | 4,192 | $ | 4,003 | $ | 3,700 | $ | 3,736 | ||||||||||
Minority interests | 321 | 321 | 255 | 234 | 230 | |||||||||||||||
Shareholders' equity | 5,142 | 5,142 | 4,862 | 4,850 | 4,467 | |||||||||||||||
Total Capital | $ | 9,655 | $ | 9,655 | $ | 9,120 | $ | 8,784 | $ | 8,433 | ||||||||||
Debt to capital ratio | 43.4 | % | 43.4 | % | 43.9 | % | 42.1 | % | 44.3 | % | ||||||||||
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, minority interests and shareholders’ equity). | ||||||||||||||||||||
Adjusted operating profit (a) | $ | 1,786 | $ | 484 | $ | 460 | $ | 439 | $ | 403 | ||||||||||
Less: income taxes | (419 | ) | (115 | ) | (106 | ) | (103 | ) | (95 | ) | ||||||||||
Less: tax benefit on cost reduction program and other charges (b) | - | - | - | - | - | |||||||||||||||
Less: tax benefit on pension settlement charge (c) | - | - | - | - | - | |||||||||||||||
Less: tax benefit on interest expense | (45 | ) | (13 | ) | (11 | ) | (11 | ) | (10 | ) | ||||||||||
Add: income from equity investments | 26 | 13 | 4 | 5 | 4 | |||||||||||||||
Net operating profit | ||||||||||||||||||||
after-tax (NOPAT) | $ | 1,348 | $ | 369 | $ | 347 | $ | 330 | $ | 302 | ||||||||||
Beginning capital | $ | 9,120 | $ | 8,784 | $ | 8,433 | $ | 7,943 | ||||||||||||
Ending capital | $ | 9,655 | $ | 9,120 | $ | 8,784 | $ | 8,433 | ||||||||||||
Average capital | $ | 9,388 | $ | 8,952 | $ | 8,609 | $ | 8,188 | ||||||||||||
Average capital - 5 quarter average (d) | $ | 8,787 | ||||||||||||||||||
ROC % | 15.3 | % | 3.9 | % | 3.9 | % | 3.8 | % | 3.7 | % | ||||||||||
ROC % (annualized) | 15.3 | % | 15.7 | % | 15.5 | % | 15.3 | % | 14.8 | % | ||||||||||
Return on Equity (ROE) - Return on 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 that the company was able to generate with the money shareholders have invested. | ||||||||||||||||||||
Adjusted net income (a) | $ | 1,177 | $ | 316 | $ | 305 | $ | 291 | $ | 265 | ||||||||||
Beginning shareholders' equity | $ | 4,862 | $ | 4,850 | $ | 4,467 | $ | 4,554 | ||||||||||||
Ending shareholders' equity | $ | 5,142 | $ | 4,862 | $ | 4,850 | $ | 4,467 | ||||||||||||
Average shareholders' equity | $ | 5,002 | $ | 4,856 | $ | 4,659 | $ | 4,511 | ||||||||||||
Average shareholders' equity - 5 quarter average (d) | $ | 4,775 | ||||||||||||||||||
ROE % | 24.6 | % | 6.3 | % | 6.3 | % | 6.2 | % | 5.9 | % | ||||||||||
ROE % (annualized) | 24.6 | % | 25.3 | % | 25.1 | % | 25.0 | % | 23.5 | % |
(a) | 2008 Adjusted Operating profit, Net income and Diluted EPS | ||||||||||||
Year | Fourth Quarter | First Quarter | |||||||||||
2008 | 2008 | 2008 | |||||||||||
Reported operating profit | $ | 1,883 | $ | 314 | $ | 482 | |||||||
Add: cost reduction program and other charges (b) | 177 | 177 | - | ||||||||||
Add: pension settlement charge (c) | 17 | - | 17 | ||||||||||
Adjusted operating profit | $ | 2,077 | $ | 491 | $ | 499 | |||||||
Reported 2007 operating profit | $ | 1,786 | |||||||||||
Percentage change from 2007 | 16 | % | |||||||||||
Reported net income | $ | 1,211 | $ | 200 | $ | 307 | |||||||
Add: cost reduction program and other charges (b) | 114 | 114 | - | ||||||||||
Add: pension settlement charge (c) | 11 | - | 11 | ||||||||||
Adjusted net income | $ | 1,336 | $ | 314 | $ | 318 | |||||||
Reported 2007 net income | $ | 1,177 | |||||||||||
Percentage change from 2007 | 14 | % | |||||||||||
Diluted weighted average shares | 318,302 | 310,719 | 320,409 | ||||||||||
Reported diluted EPS | $ | 3.80 | $ | 0.64 | $ | 0.96 | |||||||
Add: cost reduction program and other charges (b) | 0.37 | 0.37 | - | ||||||||||
Add: pension settlement charge (c) | 0.03 | - | 0.03 | ||||||||||
Adjusted diluted EPS | $ | 4.20 | $ | 1.01 | $ | 0.99 | |||||||
Reported 2007 diluted EPS | $ | 3.62 | $ | 0.98 | |||||||||
Percentage change from 2007 | 16 | % | 3 | % | |||||||||
(b) | The 2008 quarter and year-to-date periods include cost reduction program and other charges of $177 million ($114 million after-tax and minority interests, or $0.37 per diluted share) which were previously announced on December 10, 2008. The cost reduction actions include a reduction in workforce of approximately 1,675 employees and the closure or sale of underperforming and non-core product lines and businesses resulting in a pre-tax charge of approximately $118 million. In addition, a pre-tax charge of approximately $59 million was recognized primarily related to social tax cases in Brazil. | ||||||||||||
(c) | A pension settlement charge of $17 million ($11 million after-tax or $0.03 per diluted share) was recorded in the 2008 first quarter related to lump sum benefit payments made from the U.S. supplemental pension plan to a number of recently retired senior managers, including Praxair's former chairman and chief executive officer. | ||||||||||||
(d) | Effective in 2008, the company changed its methodology for calculating the ROC and ROE to use a five quarter average of the ending capital and shareholders' equity balances, respectively. The company believes using the average ending balances for the previous five quarters more accurately reflects the changes in the capital and shareholders' equity balances over the course of the year. Full year 2007, ROC and ROE calculations have been restated to reflect the current methodology. The methodology used to calculate annualized ROC and ROE on a quarterly basis is unchanged. |
CONTACT:
Praxair, Inc.
Media:
Susan Szita Gore, 203-837-2311
susan_szita-gore@praxair.com
or
Investors
Elizabeth Hirsch, 203-837-2354
liz_hirsch@praxair.com