Filed by Praxair, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Companies:
Praxair, Inc.
(Commission File No.: 001-11037)
Linde AG
Commission File No. for Registration Statement on Form S-4: 333-218485
October 26, 2017
| PRAXAIR | Media Contact: | Investor Contact: | ||
| NEWS RELEASE | Lisa Esneault (203) 837-2448 | Juan Pelaez (203) 837-2213 | ||
| lisa_esneault@praxair.com | juan_pelaez@praxair.com |
Praxair Reports Third-Quarter 2017 Results
| • | Solid financial performance |
| • | Sales of $2.9 billion, 8% above prior-year quarter |
| • | $0.8 billion of operating cash flow or 27% of sales |
| • | Record free cash flow of $0.5 billion, 15% above prior-year quarter |
| • | EPS of $1.45; adjusted EPS of $1.50 |
| • | Raised full-year adjusted EPS guidance |
| • | Execution of our core strategy |
| • | Volume growth +5%, price attainment +1% vs. prior-year quarter |
| • | Backlog $1.5 billion; includes four new project wins in the U.S. and Asia |
| • | Continued progress on merger with Linde AG |
| • | Strong Praxair shareholder support in favor of merger with Linde AG; 99% of votes cast approved the deal |
| • | German offer minimum acceptance threshold lowered to 60%; offer period extended through November 7, 2017 |
DANBURY, Conn., October 26, 2017 – Praxair, Inc. (NYSE: PX) reported third-quarter net income and diluted earnings per share of $419 million and $1.45, respectively. These results include transaction and other costs of $14 million after-tax, or 5 cents of diluted earnings per share, primarily related to the proposed merger with Linde AG. Excluding this charge, adjusted net income and diluted earnings per share were $433 million and $1.50, respectively.
Praxair’s sales in the third quarter were $2,922 million, 8% above the prior-year quarter. After adjusting for positive currency translation and cost pass-through, sales grew 6%, driven by higher volumes across all geographic segments including new project start-ups, growth in all end-markets, and price attainment.
Reported operating profit in the third quarter was $626 million, 26% above the prior-year quarter. Excluding the impact of transaction and other costs, adjusted operating profit was $642 million, 8% above prior-year quarter. Reported operating profit as a percentage of sales was 21.4% and adjusted operating profit as a percentage of sales was 22.0%. EBITDA margin was 32.0% and adjusted EBITDA margin was 32.6%.
The company generated strong third-quarter cash flow from operations of $794 million, 27% of sales. After capital expenditures of $320 million, free cash flow was $474 million, up 15% over the prior-year quarter. The company paid $225 million in dividends and net debt decreased by $202 million.
Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “Praxair employees delivered another strong quarter with operating profit growing 8% and record free cash flow of $ 0.5 billion.
“The third quarter extended prior trends with growing demand in North America, Europe and Asia, but continued weakness in South America. Furthermore, our backlog grew to $1.5 billion with the addition of four new long-term on-site supply agreements in the U.S. and Asia. Most of this backlog supports the significant energy and petrochemical expansions in the U.S. Gulf Coast although we continue to see more opportunities in Asia, especially in the electronics end-market. We remain confident in our ability to win additional projects as these markets continue to develop.
“Additionally, during the third quarter, Praxair shareholders approved our business combination with Linde AG with 99% of votes cast in favor of the merger. Currently, the business combination remains subject to the satisfaction of all other transaction closing conditions, including successfully completing Linde plc’s exchange offer for Linde AG shares, and the receipt of all regulatory approvals.”
For fourth-quarter 2017, Praxair expects diluted earnings per share in the range of $1.45 to $1.50, excluding transaction costs related to the proposed merger.
For full-year 2017, Praxair expects adjusted diluted earnings per share to be in the range of $5.78 to $5.83, with the midpoint up $0.12 versus prior guidance. This range excludes transaction costs related to the proposed merger and a pension settlement charge. Full-year capital expenditures are expected to be approximately $1.4 billion.
Following is additional detail on third-quarter 2017 results by segment.
In North America, third-quarter sales were $1,518 million, 4% above the prior-year quarter excluding cost-pass through and currency translation. Sales growth was driven mainly by stronger volumes to the electronics, aerospace, metals and food & beverage end-markets and higher price. Operating profit was $386 million, 6% above the prior-year quarter.
In Europe, third-quarter sales were $407 million, 11% above the prior-year quarter. Excluding currency and cost pass-through, sales grew 5% from the prior-year due to higher volumes, primarily led by the metals, food & beverage and manufacturing end-markets and higher price. Operating profit was $78 million, 8% above the prior-year quarter.
In South America, third-quarter sales were $389 million, 3% above the prior-year quarter. Excluding positive currency translation, sales increased 2% versus the prior-year driven by higher volumes to chemicals and metals end-markets and project start-ups. Operating profit was $63 million.
Sales in Asia were $451 million in the quarter, up 15% from the prior-year driven by higher volumes in China, Korea and India, project start-ups and 2% price attainment, driven mostly by China. Operating profit was $88 million, 29% above the prior-year quarter.
Praxair Surface Technologies had third-quarter sales of $157 million, up 4% excluding positive currency impact. Sales growth was driven primarily by aerospace coatings. Operating profit was $27 million.
Praxair, Inc. is a leading industrial gas company in North and South America and one of the largest worldwide. With market capitalization of approximately $40 billion and 2016 sales of $11 billion, the company employs over 26,000 people globally and has been named to the Dow Jones® World Sustainability Index for 15 consecutive years. Praxair produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings. Our 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. For more information about the company, please visit our website at www.praxair.com.
Page 2 of 12
Adjusted amounts, EBITDA, free cash flow and after-tax return on capital are non-GAAP measures. See the attachments for a summary of non-GAAP reconciliations and calculations of non-GAAP measures.
Attachments: Summary Non-GAAP Reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures.
A teleconference about Praxair’s third-quarter results is being held this morning, October 26, 2017 at 11:00 am Eastern Time. The number is (631) 485-4849 – Conference ID: 96035710. 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.
Additional Information and Where to Find It
In connection with the proposed business combination between Praxair, Inc. (“Praxair”) and Linde AG (“Linde”), Linde plc has filed a Registration Statement on Form S-4 (which Registration Statement was declared effective on August 14, 2017) with the SEC that includes (1) a proxy statement of Praxair that also constitutes a prospectus for Linde plc and (2) an offering prospectus of Linde plc to be used in connection with Linde plc’s offer to acquire Linde shares held by U.S. holders. Praxair has mailed the proxy statement/prospectus to its stockholders in connection with the vote to approve the merger of Praxair and an indirect wholly-owned subsidiary of Linde plc, and Linde plc has distributed the offering prospectus to Linde shareholders in the United States in connection with Linde plc’s offer to acquire all of the outstanding shares of Linde. Linde plc has also filed an offer document with the German Federal Financial Supervisory Authority (Bundesanstalt fuer Finanzdienstleistungsaufsicht) (“BaFin”) which was approved for publication by BaFin on August 14, 2017, published by Linde plc on August 15, 2017, and amended by Linde plc on October 23, 2017 (the “offer document”). Praxair’s stockholders approved the merger at Praxair’s special meeting held on September 27, 2017. The consummation of the proposed business combination remains subject to regulatory approvals and other customary closing conditions.
INVESTORS AND SECURITY HOLDERS OF LINDE ARE URGED TO READ THE OFFER DOCUMENT REGARDING THE PROPOSED BUSINESS COMBINATION TRANSACTION AND OFFER BECAUSE IT CONTAINS IMPORTANT INFORMATION. You may obtain a free copy of documents filed by Praxair, Linde and Linde plc with the SEC on the SEC’s Web site at www.sec.gov. The offer document is available for free at Linde plc’s Web site at www.lindepraxairmerger.com. Furthermore, the offer document is available at BaFin’s Web site for free at www.bafin.de. You may also obtain a copy of the offer document from Deutsche Bank Aktiengesellschaft, Taunusanlage 12, 60325 Frankfurt am Main, Germany for distribution free of charge (also available from Deutsche Bank Aktiengesellschaft via e-mail to dct.tender-offers@db.com or by telefax to +49 69 910 38794).
This document is neither an offer to purchase nor a solicitation of an offer to sell shares of Linde plc, Praxair or Linde. The final terms and further provisions regarding the public offer are disclosed in the offer document and in documents filed with the SEC. No money, securities or other consideration is being solicited, and, if sent in response to the information contained herein, will not be accepted. The information contained herein should not be considered as a recommendation that any person should subscribe for or purchase any securities.
No offering of securities shall be made except by means of a prospectus meeting the requirements of the U.S. Securities Act of 1933, as amended, and applicable European and German regulations. The distribution of this document may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Subject to the exceptions described in the offer document and to any exceptions potentially granted by the respective regulatory authorities, no offering of securities will be made directly or indirectly in any jurisdiction where to do so would be a violation of the respective national laws.
Page 3 of 12
Forward-looking Statements
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 expected timing and likelihood of the completion of the contemplated business combination with Linde AG, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals that could reduce anticipated benefits or cause the parties to abandon the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the business combination agreement; the ability to successfully complete the proposed business combination and the exchange offer, including satisfying closing conditions; the success of the business following the proposed business combination; the ability to successfully integrate the Praxair and Linde businesses; the possibility that the requisite number of Linde shares may not be tendered in the public offer; the risk that the combined company may be unable to achieve expected synergies or that it may take longer or be more costly than expected to achieve those synergies; the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; the impact of potential unusual or non-recurring items; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; the impact of information technology system failures, network disruptions and breaches in data security; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the GAAP or adjusted projections or estimates contained in the forward-looking statements. The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) in the company’s latest Annual Report on Form 10-K filed with the SEC and in the proxy statement/prospectus and the offering prospectus included in the Registration Statement on Form S-4 (which Registration Statement was declared effective on August 14, 2017) filed by Linde plc with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.
# # #
This document is only controlled while on the Praxair, Inc. website and a copy of this controlled version is available for download. Praxair cannot assure the integrity or accuracy of any version of this document after it has been downloaded or removed from our website.
Page 4 of 12
PRAXAIR, INC. AND SUBSIDIARIES
SUMMARY NON-GAAP RECONCILIATIONS
(UNAUDITED)
The following adjusted amounts are Non-GAAP measures and are intended to supplement investors’ understanding of the company’s financial statements by providing measures which investors, financial analysts and management use to help evaluate the company’s operating performance. Items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these Non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. See the Non-GAAP reconciliations starting on page 11 for additional details relating to the Non-GAAP adjustments.
| (Millions of dollars, except per share amounts) | ||||||||||||||||||||||||||||||||
| Sales | Operating Profit | Net Income - Praxair, Inc. | Diluted EPS | |||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
| Quarter Ended September 30 |
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| Reported GAAP Amounts |
$ | 2,922 | $ | 2,716 | $ | 626 | $ | 497 | $ | 419 | $ | 339 | $ | 1.45 | $ | 1.18 | ||||||||||||||||
| Transaction costs (a) |
— | — | 14 | — | 13 | — | 0.05 | — | ||||||||||||||||||||||||
| Pension settlement charges (b) |
— | — | 2 | 4 | 1 | 3 | — | 0.01 | ||||||||||||||||||||||||
| Cost reduction program and other charges (c) |
— | — | — | 96 | — | 63 | — | 0.22 | ||||||||||||||||||||||||
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| Total adjustments |
— | — | 16 | 100 | 14 | 66 | 0.05 | 0.23 | ||||||||||||||||||||||||
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| Adjusted amounts |
$ | 2,922 | $ | 2,716 | $ | 642 | $ | 597 | $ | 433 | $ | 405 | $ | 1.50 | $ | 1.41 | ||||||||||||||||
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| Year To Date September 30 |
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| Reported GAAP Amounts |
$ | 8,484 | $ | 7,890 | $ | 1,812 | $ | 1,639 | $ | 1,214 | $ | 1,094 | $ | 4.21 | $ | 3.80 | ||||||||||||||||
| Transaction costs (a) |
— | — | 35 | — | 34 | — | 0.12 | — | ||||||||||||||||||||||||
| Pension settlement charges (b) |
— | — | 2 | 4 | 1 | 3 | — | 0.01 | ||||||||||||||||||||||||
| Cost reduction program and other charges (c) |
— | — | — | 96 | — | 63 | — | 0.22 | ||||||||||||||||||||||||
| Bond redemption (d) |
— | — | — | — | — | 10 | — | 0.04 | ||||||||||||||||||||||||
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| Total adjustments |
— | — | 37 | 100 | 35 | 76 | 0.12 | 0.27 | ||||||||||||||||||||||||
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| Adjusted amounts |
$ | 8,484 | $ | 7,890 | $ | 1,849 | $ | 1,739 | $ | 1,249 | $ | 1,170 | $ | 4.33 | $ | 4.07 | ||||||||||||||||
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| (a) | Charges in the 2017 first, second and third quarters for transaction costs related to the potential Linde merger. |
| (b) | Pension settlement charges were recorded in the third quarter of 2017 related to lump sum benefit payments made from an international pension plan and in the third quarter of 2016 related to lump sum benefit payments made from the U.S. supplemental pension plan. |
| (c) | Charges in the 2016 third quarter related to the cost reduction program and other charges. |
| (d) | Charge to interest expense in the 2016 first quarter related to a bond redemption. |
Page 5 of 12
PRAXAIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Millions of dollars, except per share data)
(UNAUDITED)
| Quarter Ended September 30, |
Year to Date September 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| SALES |
$ | 2,922 | $ | 2,716 | $ | 8,484 | $ | 7,890 | ||||||||
| Cost of sales |
1,652 | 1,533 | 4,795 | 4,382 | ||||||||||||
| Selling, general and administrative |
304 | 291 | 891 | 873 | ||||||||||||
| Depreciation and amortization |
298 | 284 | 877 | 837 | ||||||||||||
| Research and development |
23 | 22 | 69 | 69 | ||||||||||||
| Transaction costs and other charges |
16 | 100 | 37 | 100 | ||||||||||||
| Other income (expense) - net |
(3 | ) | 11 | (3 | ) | 10 | ||||||||||
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| OPERATING PROFIT |
626 | 497 | 1,812 | 1,639 | ||||||||||||
| Interest expense - net |
41 | 43 | 120 | 152 | ||||||||||||
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| INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS |
585 | 454 | 1,692 | 1,487 | ||||||||||||
| Income taxes |
162 | 120 | 468 | 399 | ||||||||||||
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| INCOME BEFORE EQUITY INVESTMENTS |
423 | 334 | 1,224 | 1,088 | ||||||||||||
| Income from equity investments |
12 | 10 | 35 | 31 | ||||||||||||
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| NET INCOME (INCLUDING NONCONTROLLING INTERESTS) |
435 | 344 | 1,259 | 1,119 | ||||||||||||
| Less: noncontrolling interests |
(16 | ) | (5 | ) | (45 | ) | (25 | ) | ||||||||
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| NET INCOME - PRAXAIR, INC. |
$ | 419 | $ | 339 | $ | 1,214 | $ | 1,094 | ||||||||
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| PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS |
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| Basic earnings per share |
$ | 1.46 | $ | 1.19 | $ | 4.24 | $ | 3.83 | ||||||||
| Diluted earnings per share |
$ | 1.45 | $ | 1.18 | $ | 4.21 | $ | 3.80 | ||||||||
| Cash dividends |
$ | 0.7875 | $ | 0.75 | $ | 2.36 | $ | 2.25 | ||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING |
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| Basic shares outstanding (000’s) |
286,467 | 285,858 | 286,022 | 285,663 | ||||||||||||
| Diluted shares outstanding (000’s) |
289,216 | 288,195 | 288,524 | 287,727 | ||||||||||||
Note: See page 5 for a reconciliation to 2017 adjusted amounts which are Non-GAAP.
Page 6 of 12
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of dollars)
(UNAUDITED)
| September 30, 2017 |
December 31, 2016 |
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| ASSETS |
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| Cash and cash equivalents |
$ | 607 | $ | 524 | ||||||||||||
| Accounts receivable - net |
1,809 | 1,641 | ||||||||||||||
| Inventories |
587 | 550 | ||||||||||||||
| Prepaid and other current assets |
240 | 165 | ||||||||||||||
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| TOTAL CURRENT ASSETS |
3,243 | 2,880 | ||||||||||||||
| Property, plant and equipment - net |
11,992 | 11,477 | ||||||||||||||
| Goodwill |
3,234 | 3,117 | ||||||||||||||
| Other intangibles - net |
563 | 583 | ||||||||||||||
| Other long-term assets |
1,343 | 1,275 | ||||||||||||||
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| TOTAL ASSETS |
$ | 20,375 | $ | 19,332 | ||||||||||||
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| LIABILITIES AND EQUITY |
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| Accounts payable |
$ | 947 | $ | 906 | ||||||||||||
| Short-term debt |
84 | 434 | ||||||||||||||
| Current portion of long-term debt |
910 | 164 | ||||||||||||||
| Other current liabilities |
981 | 974 | ||||||||||||||
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| TOTAL CURRENT LIABILITIES |
2,922 | 2,478 | ||||||||||||||
| Long-term debt |
8,243 | 8,917 | ||||||||||||||
| Other long-term liabilities |
2,468 | 2,485 | ||||||||||||||
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| TOTAL LIABILITIES |
13,633 | 13,880 | ||||||||||||||
| REDEEMABLE NONCONTROLLING INTERESTS |
11 | 11 | ||||||||||||||
| PRAXAIR, INC. SHAREHOLDERS’ EQUITY: |
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| Common stock |
4 | 4 | ||||||||||||||
| Additional paid-in capital |
4,091 | 4,074 | ||||||||||||||
| Retained earnings |
13,417 | 12,879 | ||||||||||||||
| Accumulated other comprehensive income (loss) |
(4,025 | ) | (4,600 | ) | ||||||||||||
| Less: Treasury stock, at cost |
(7,231 | ) | (7,336 | ) | ||||||||||||
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| Total Praxair, Inc. Shareholders’ Equity |
6,256 | 5,021 | ||||||||||||||
| Noncontrolling interests |
475 | 420 | ||||||||||||||
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| TOTAL EQUITY |
6,731 | 5,441 | ||||||||||||||
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| TOTAL LIABILITIES AND EQUITY |
$ | 20,375 | $ | 19,332 | ||||||||||||
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Page 7 of 12
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
| Quarter Ended September 30, |
Year to Date September 30, |
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| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| OPERATIONS |
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| Net income - Praxair, Inc. |
$ | 419 | $ | 339 | $ | 1,214 | $ | 1,094 | ||||||||
| Noncontrolling interests |
16 | 5 | 45 | 25 | ||||||||||||
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| Net income (including noncontrolling interests) |
435 | 344 | 1,259 | 1,119 | ||||||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Transaction costs and other charges, net of payments |
10 | 93 | 27 | 93 | ||||||||||||
| Depreciation and amortization |
298 | 284 | 877 | 837 | ||||||||||||
| Accounts Receivable |
12 | 17 | (83 | ) | (44 | ) | ||||||||||
| Inventory |
(6 | ) | 19 | (11 | ) | 11 | ||||||||||
| Payables and accruals |
35 | 69 | 11 | 6 | ||||||||||||
| Pension contributions |
(8 | ) | (2 | ) | (14 | ) | (8 | ) | ||||||||
| Deferred income taxes and other |
18 | (36 | ) | 139 | 33 | |||||||||||
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| Net cash provided by operating activities |
794 | 788 | 2,205 | 2,047 | ||||||||||||
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| INVESTING |
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| Capital expenditures |
(320 | ) | (376 | ) | (972 | ) | (1,056 | ) | ||||||||
| Acquisitions, net of cash acquired |
(16 | ) | (20 | ) | (18 | ) | (345 | ) | ||||||||
| Divestitures and asset sales |
5 | 33 | 22 | 41 | ||||||||||||
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| Net cash used for investing activities |
(331 | ) | (363 | ) | (968 | ) | (1,360 | ) | ||||||||
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| FINANCING |
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| Debt increase (decrease) - net |
(197 | ) | (134 | ) | (502 | ) | 556 | |||||||||
| Issuances of common stock |
20 | 49 | 90 | 109 | ||||||||||||
| Purchases of common stock |
— | (50 | ) | (11 | ) | (133 | ) | |||||||||
| Cash dividends - Praxair, Inc. shareholders |
(225 | ) | (214 | ) | (675 | ) | (642 | ) | ||||||||
| Noncontrolling interest transactions and other |
(1 | ) | (13 | ) | (85 | ) | (122 | ) | ||||||||
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| Net cash provided by (used for) financing activities |
(403 | ) | (362 | ) | (1,183 | ) | (232 | ) | ||||||||
| Effect of exchange rate changes on cash and cash equivalents |
12 | (3 | ) | 29 | 25 | |||||||||||
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| Change in cash and cash equivalents |
72 | 60 | 83 | 480 | ||||||||||||
| Cash and cash equivalents, beginning-of-period |
535 | 567 | 524 | 147 | ||||||||||||
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| Cash and cash equivalents, end-of-period |
$ | 607 | $ | 627 | $ | 607 | $ | 627 | ||||||||
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Page 8 of 12
PRAXAIR, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)
| Quarter Ended September 30, |
Year to Date September 30, |
|||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| SALES |
||||||||||||||||
| North America |
$ | 1,518 | $ | 1,431 | $ | 4,481 | $ | 4,195 | ||||||||
| Europe |
407 | 366 | 1,146 | 1,041 | ||||||||||||
| South America |
389 | 378 | 1,131 | 1,047 | ||||||||||||
| Asia |
451 | 391 | 1,268 | 1,160 | ||||||||||||
| Surface Technologies |
157 | 150 | 458 | 447 | ||||||||||||
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| Consolidated sales |
$ | 2,922 | $ | 2,716 | $ | 8,484 | $ | 7,890 | ||||||||
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| OPERATING PROFIT |
||||||||||||||||
| North America |
$ | 386 | $ | 363 | $ | 1,121 | $ | 1,071 | ||||||||
| Europe |
78 | 72 | 217 | 202 | ||||||||||||
| South America |
63 | 68 | 190 | 193 | ||||||||||||
| Asia |
88 | 68 | 243 | 198 | ||||||||||||
| Surface Technologies |
27 | 26 | 78 | 75 | ||||||||||||
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| Segment operating profit |
$ | 642 | $ | 597 | $ | 1,849 | $ | 1,739 | ||||||||
| Transaction costs and other charges |
(16 | ) | (100 | ) | (37 | ) | (100 | ) | ||||||||
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|||||||||
| Total operating profit |
$ | 626 | $ | 497 | $ | 1,812 | $ | 1,639 | ||||||||
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Page 9 of 12
PRAXAIR, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL SUMMARY
(Millions of dollars, except per share data)
(UNAUDITED)
| 2017 (b) | 2016 (c) | |||||||||||||||||||||||||||
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||||||
| FROM THE INCOME STATEMENT |
||||||||||||||||||||||||||||
| Sales |
$ | 2,922 | $ | 2,834 | $ | 2,728 | $ | 2,644 | $ | 2,716 | $ | 2,665 | $ | 2,509 | ||||||||||||||
| Cost of sales |
1,652 | 1,598 | 1,545 | 1,478 | 1,533 | 1,468 | 1,381 | |||||||||||||||||||||
| Selling, general and administrative |
304 | 308 | 279 | 272 | 291 | 308 | 274 | |||||||||||||||||||||
| Depreciation and amortization |
298 | 292 | 287 | 285 | 284 | 281 | 272 | |||||||||||||||||||||
| Research and development |
23 | 23 | 23 | 23 | 22 | 24 | 23 | |||||||||||||||||||||
| Transaction costs and other charges |
16 | 15 | 6 | — | 100 | — | — | |||||||||||||||||||||
| Other income (expense) - net |
(3 | ) | 6 | (6 | ) | 13 | 11 | 4 | (5 | ) | ||||||||||||||||||
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| Operating profit |
626 | 604 | 582 | 599 | 497 | 588 | 554 | |||||||||||||||||||||
| Interest expense - net |
41 | 38 | 41 | 38 | 43 | 44 | 65 | |||||||||||||||||||||
| Income taxes |
162 | 157 | 149 | 152 | 120 | 146 | 133 | |||||||||||||||||||||
| Income from equity investments |
12 | 11 | 12 | 10 | 10 | 11 | 10 | |||||||||||||||||||||
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| Net income (including noncontrolling interests) |
435 | 420 | 404 | 419 | 344 | 409 | 366 | |||||||||||||||||||||
| Less: noncontrolling interests |
(16 | ) | (14 | ) | (15 | ) | (13 | ) | (5 | ) | (10 | ) | (10 | ) | ||||||||||||||
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| Net income - Praxair, Inc. |
$ | 419 | $ | 406 | $ | 389 | $ | 406 | $ | 339 | $ | 399 | $ | 356 | ||||||||||||||
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| PER SHARE DATA -PRAXAIR, INC. SHAREHOLDERS |
||||||||||||||||||||||||||||
| Diluted earnings per share |
$ | 1.45 | $ | 1.41 | $ | 1.35 | $ | 1.41 | $ | 1.18 | $ | 1.39 | $ | 1.24 | ||||||||||||||
| Cash dividends per share |
$ | 0.7875 | $ | 0.7875 | $ | 0.7875 | $ | 0.75 | $ | 0.75 | $ | 0.75 | $ | 0.75 | ||||||||||||||
| Diluted weighted average shares outstanding (000’s) |
289,216 | 288,535 | 287,384 | 287,956 | 288,195 | 287,727 | 286,665 | |||||||||||||||||||||
| ADJUSTED AMOUNTS (a) |
||||||||||||||||||||||||||||
| Operating profit |
$ | 642 | $ | 619 | $ | 588 | $ | 599 | $ | 597 | $ | 588 | $ | 554 | ||||||||||||||
| Operating margin |
22.0 | % | 21.8 | % | 21.6 | % | 22.7 | % | 22.0 | % | 22.1 | % | 22.1 | % | ||||||||||||||
| Net Income |
$ | 433 | $ | 421 | $ | 395 | $ | 406 | $ | 405 | $ | 399 | $ | 366 | ||||||||||||||
| Diluted earnings per share |
$ | 1.50 | $ | 1.46 | $ | 1.37 | $ | 1.41 | $ | 1.41 | $ | 1.39 | $ | 1.28 | ||||||||||||||
| FROM THE BALANCE SHEET |
||||||||||||||||||||||||||||
| Net debt (a) |
$ | 8,630 | $ | 8,832 | $ | 8,849 | $ | 8,991 | $ | 9,215 | $ | 9,389 | $ | 9,183 | ||||||||||||||
| Capital (a) |
$ | 15,372 | $ | 15,102 | $ | 14,824 | $ | 14,443 | $ | 14,864 | $ | 14,948 | $ | 14,607 | ||||||||||||||
| FROM THE STATEMENT OF CASH FLOWS |
||||||||||||||||||||||||||||
| Cash flow from operations |
$ | 794 | $ | 701 | $ | 710 | $ | 726 | $ | 788 | $ | 706 | $ | 553 | ||||||||||||||
| Cash flow provided by (used for) investing activities |
(331 | ) | (313 | ) | (324 | ) | (410 | ) | (363 | ) | (613 | ) | (384 | ) | ||||||||||||||
| Cash flow provided by (used for) financing activities |
(403 | ) | (384 | ) | (396 | ) | (411 | ) | (362 | ) | 249 | (119 | ) | |||||||||||||||
| Capital expenditures |
320 | 325 | 327 | 409 | 376 | 357 | 323 | |||||||||||||||||||||
| Acquisitions |
16 | 1 | 1 | 18 | 20 | 262 | 63 | |||||||||||||||||||||
| Cash dividends |
225 | 225 | 225 | 214 | 214 | 214 | 214 | |||||||||||||||||||||
| OTHER INFORMATION |
||||||||||||||||||||||||||||
| After-tax return on capital (ROC) (a) |
12.0 | % | 11.5 | % | 11.5 | % | 11.5 | % | 11.6 | % | 12.1 | % | 11.5 | % | ||||||||||||||
| Adjusted after-tax ROC (a) |
12.3 | % | 12.1 | % | 12.0 | % | 12.0 | % | 12.1 | % | 12.2 | % | 12.4 | % | ||||||||||||||
| EBITDA (a) |
$ | 936 | $ | 907 | $ | 881 | $ | 894 | $ | 791 | $ | 880 | $ | 836 | ||||||||||||||
| EBITDA margin (a) |
32.0 | % | 32.0 | % | 32.3 | % | 33.8 | % | 29.1 | % | 33.0 | % | 33.3 | % | ||||||||||||||
| Adjusted EBITDA (a) |
$ | 952 | $ | 922 | $ | 887 | $ | 894 | $ | 891 | $ | 880 | $ | 836 | ||||||||||||||
| Adjusted EBITDA margin (a) |
32.6 | % | 32.5 | % | 32.5 | % | 33.8 | % | 32.8 | % | 33.0 | % | 33.3 | % | ||||||||||||||
| Number of employees |
26,531 | 26,487 | 26,420 | 26,498 | 26,680 | 26,896 | 26,558 | |||||||||||||||||||||
| SEGMENT DATA |
||||||||||||||||||||||||||||
| SALES |
||||||||||||||||||||||||||||
| North America |
$ | 1,518 | $ | 1,505 | $ | 1,458 | $ | 1,397 | $ | 1,431 | $ | 1,411 | $ | 1,353 | ||||||||||||||
| Europe |
407 | 383 | 356 | 351 | 366 | 355 | 320 | |||||||||||||||||||||
| South America |
389 | 373 | 369 | 352 | 378 | 358 | 311 | |||||||||||||||||||||
| Asia |
451 | 422 | 395 | 395 | 391 | 393 | 376 | |||||||||||||||||||||
| Surface Technologies |
157 | 151 | 150 | 149 | 150 | 148 | 149 | |||||||||||||||||||||
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| Total sales |
$ | 2,922 | $ | 2,834 | $ | 2,728 | $ | 2,644 | $ | 2,716 | $ | 2,665 | $ | 2,509 | ||||||||||||||
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| OPERATING PROFIT |
||||||||||||||||||||||||||||
| North America |
$ | 386 | $ | 378 | $ | 357 | $ | 359 | $ | 363 | $ | 359 | $ | 349 | ||||||||||||||
| Europe |
78 | 73 | 66 | 71 | 72 | 68 | 62 | |||||||||||||||||||||
| South America |
63 | 63 | 64 | 64 | 68 | 70 | 55 | |||||||||||||||||||||
| Asia |
88 | 80 | 75 | 78 | 68 | 67 | 63 | |||||||||||||||||||||
| Surface Technologies |
27 | 25 | 26 | 27 | 26 | 24 | 25 | |||||||||||||||||||||
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|||||||||||||||
| Segment operating profit |
642 | 619 | 588 | 599 | 597 | 588 | 554 | |||||||||||||||||||||
| Transaction costs and other charges |
(16 | ) | (15 | ) | (6 | ) | — | (100 | ) | — | — | |||||||||||||||||
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| Total operating profit |
$ | 626 | $ | 604 | $ | 582 | $ | 599 | $ | 497 | $ | 588 | $ | 554 | ||||||||||||||
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| (a) | Non-GAAP measure, see Appendix. |
| (b) | 2017 includes (i) an after-tax charge of $6 million ($0.02 per diluted share) in the first quarter for transaction costs related to the potential Linde merger, (ii) an after- tax charge of $15 million ($0.05 per diluted share) in the second quarter for transaction costs related to the potential Linde merger, (iii) a pre-tax charge of $14 million ($13 million after-tax or $0.05 per diluted share) in the third quarter for transaction costs related to the potential Linde merger and (iv) a pension settlement charge of $2 million ($1 million after-tax) related to lump sum benefit payments made from an international pension plan. |
| (c) | 2016 includes (i) a $16 million charge to interest expense ($10 million after-tax, or $0.04 per diluted share) in the first quarter related to the redemption of the $325 million 5.20% notes due 2017, (ii) a pre-tax pension settlement charge of $4 million ($3 million after-tax, or $0.01 per diluted share) in the third quarter related to lump sum benefit payments made from the U.S. supplemental pension plan, and (iii) pre-tax charges of $96 million ($63 million after-tax and non-controlling interests, or $0.22 per diluted share) in the third quarter, primarily related to cost reduction actions. |
Page 10 of 12
PRAXAIR, INC. AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES
(Millions of dollars, except per share data)
(UNAUDITED)
The following Non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s financial leverage, return on capital and operating performance. Items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these Non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. Adjusted amounts exclude the impacts of the 2017 first, second and third quarter transaction costs, 2017 third quarter pension settlement, 2016 third quarter cost reduction program and pension settlement, 2016 first quarter bond redemption, 2015 third quarter cost reduction program and pension settlement, and 2015 second quarter cost reduction program and other charges.
Adjusted Amounts
| Year-to-date September 30, |
Third Quarter |
Second Quarter |
First Quarter |
Year | Year-to-date September 30, |
Third Quarter |
First Quarter |
Year | Year-to-date September 30, |
Third Quarter |
Second Quarter |
|||||||||||||||||||||||||||||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | 2015 | |||||||||||||||||||||||||||||||||||||
| Adjusted Operating Profit and Operating Profit Margin |
||||||||||||||||||||||||||||||||||||||||||||||||
| Reported operating profit |
$ | 1,812 | $ | 626 | $ | 604 | $ | 582 | $ | 2,238 | $ | 1,639 | $ | 497 | $ | 554 | $ | 2,321 | $ | 1,697 | $ | 594 | $ | 480 | ||||||||||||||||||||||||
| Add: Cost reduction program and other charges |
— | — | — | — | 96 | 96 | 96 | — | 165 | 165 | 19 | 146 | ||||||||||||||||||||||||||||||||||||
| Add: Pension settlement charge |
2 | 2 | — | — | 4 | 4 | 4 | — | 7 | 7 | 7 | — | ||||||||||||||||||||||||||||||||||||
| Add: Transaction costs |
35 | 14 | 15 | 6 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
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| Total adjustments |
37 | 16 | 15 | 6 | 100 | 100 | 100 | — | 172 | 172 | 26 | 146 | ||||||||||||||||||||||||||||||||||||
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| Adjusted operating profit |
$ | 1,849 | $ | 642 | $ | 619 | $ | 588 | $ | 2,338 | $ | 1,739 | $ | 597 | $ | 554 | $ | 2,493 | $ | 1,869 | $ | 620 | $ | 626 | ||||||||||||||||||||||||
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| Reported percentage change |
11 | % | 26 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Adjusted percentage change |
6 | % | 8 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Reported sales |
$ | 8,484 | $ | 2,922 | $ | 2,834 | $ | 2,728 | $ | 10,534 | $ | 7,890 | $ | 2,716 | $ | 2,509 | $ | 10,776 | $ | 8,181 | $ | 2,686 | $ | 2,738 | ||||||||||||||||||||||||
| Adjusted operating profit margin |
21.8 | % | 22.0 | % | 21.8 | % | 21.6 | % | 22.2 | % | 22.0 | % | 22.0 | % | 22.1 | % | 23.1 | % | 22.8 | % | 23.1 | % | 22.9 | % | ||||||||||||||||||||||||
| Adjusted Interest Expense - net |
||||||||||||||||||||||||||||||||||||||||||||||||
| Reported interest expense - net |
$ | 120 | $ | 41 | $ | 38 | $ | 41 | $ | 190 | $ | 152 | $ | 43 | $ | 65 | $ | 161 | $ | 119 | $ | 35 | $ | 40 | ||||||||||||||||||||||||
| Less: Bond redemption |
— | — | — | — | (16 | ) | (16 | ) | — | (16 | ) | — | — | — | — | |||||||||||||||||||||||||||||||||
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| Adjusted interest expense - net |
$ | 120 | $ | 41 | $ | 38 | $ | 41 | $ | 174 | $ | 136 | $ | 43 | $ | 49 | $ | 161 | $ | 119 | $ | 35 | $ | 40 | ||||||||||||||||||||||||
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| Adjusted Income Taxes |
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| Reported income taxes |
$ | 468 | $ | 162 | $ | 157 | $ | 149 | $ | 551 | $ | 399 | $ | 120 | $ | 133 | $ | 612 | $ | 449 | $ | 156 | $ | 131 | ||||||||||||||||||||||||
| Add: Cost reduction program and other charges |
— | — | — | — | 28 | 28 | 28 | — | 39 | 39 | 6 | 33 | ||||||||||||||||||||||||||||||||||||
| Add: Bond redemption |
— | — | — | — | 6 | 6 | — | 6 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Add: Pension settlement charge |
1 | 1 | — | — | 1 | 1 | 1 | — | 2 | 2 | 2 | — | ||||||||||||||||||||||||||||||||||||
| Add: Transaction costs |
1 | 1 | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
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| Total adjustments |
2 | 2 | — | — | 35 | 35 | 29 | 6 | 41 | 41 | 8 | 33 | ||||||||||||||||||||||||||||||||||||
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| Adjusted income taxes |
$ | 470 | $ | 164 | $ | 157 | $ | 149 | $ | 586 | $ | 434 | $ | 149 | $ | 139 | $ | 653 | $ | 490 | $ | 164 | $ | 164 | ||||||||||||||||||||||||
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| Adjusted Effective Tax Rate |
||||||||||||||||||||||||||||||||||||||||||||||||
| Reported income before income taxes and equity investments |
$ | 1,692 | $ | 585 | $ | 566 | $ | 541 | $ | 2,048 | $ | 1,487 | $ | 454 | $ | 489 | $ | 2,160 | $ | 1,578 | $ | 559 | $ | 440 | ||||||||||||||||||||||||
| Add: Cost reduction program and other charges |
— | — | — | — | 96 | 96 | 96 | — | 165 | 165 | 19 | 146 | ||||||||||||||||||||||||||||||||||||
| Add: Bond redemption |
— | — | — | — | 16 | 16 | — | 16 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Add: Pension settlement charge |
2 | 2 | — | — | 4 | 4 | 4 | — | 7 | 7 | 7 | — | ||||||||||||||||||||||||||||||||||||
| Add: Transaction costs |
35 | 14 | 15 | 6 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
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| Total adjustments |
37 | 16 | 15 | 6 | 116 | 116 | 100 | 16 | 172 | 172 | 26 | 146 | ||||||||||||||||||||||||||||||||||||
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| Adjusted income before income taxes and equity investments |
$ | 1,729 | $ | 601 | $ | 581 | $ | 547 | $ | 2,164 | $ | 1,603 | $ | 554 | $ | 505 | $ | 2,332 | $ | 1,750 | $ | 585 | $ | 586 | ||||||||||||||||||||||||
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| Reported effective tax rate |
27.7 | % | 27.7 | % | 27.7 | % | 27.5 | % | 26.9 | % | 26.8 | % | 26.4 | % | 27.2 | % | 28.3 | % | 28.5 | % | 27.9 | % | 29.9 | % | ||||||||||||||||||||||||
| Adjusted effective tax rate |
27.2 | % | 27.3 | % | 27.0 | % | 27.2 | % | 27.1 | % | 27.1 | % | 26.9 | % | 27.5 | % | 28.0 | % | 28.0 | % | 28.0 | % | 28.0 | % | ||||||||||||||||||||||||
| Adjusted Noncontrolling Interests |
||||||||||||||||||||||||||||||||||||||||||||||||
| Reported noncontrolling interests |
$ | 45 | $ | 16 | $ | 14 | $ | 15 | $ | 38 | $ | 25 | $ | 5 | $ | 10 | $ | 44 | $ | 35 | $ | 12 | $ | 11 | ||||||||||||||||||||||||
| Add: Cost reduction program and other charges |
— | — | — | — | 5 | 5 | 5 | — | 1 | 1 | — | 1 | ||||||||||||||||||||||||||||||||||||
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| Total adjustments |
— | — | — | — | 5 | 5 | 5 | — | 1 | 1 | — | 1 | ||||||||||||||||||||||||||||||||||||
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| Adjusted noncontrolling interests |
$ | 45 | $ | 16 | $ | 14 | $ | 15 | $ | 43 | $ | 30 | $ | 10 | $ | 10 | $ | 45 | $ | 36 | $ | 12 | $ | 12 | ||||||||||||||||||||||||
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| Adjusted Net Income - Praxair, Inc. |
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| Reported net income - Praxair, Inc. |
$ | 1,214 | $ | 419 | $ | 406 | $ | 389 | $ | 1,500 | $ | 1,094 | $ | 339 | $ | 356 | $ | 1,547 | $ | 1,125 | $ | 401 | $ | 308 | ||||||||||||||||||||||||
| Add: Cost reduction program and other charges |
— | — | — | — | 63 | 63 | 63 | — | 125 | 125 | 13 | 112 | ||||||||||||||||||||||||||||||||||||
| Add: Bond redemption |
— | — | — | — | 10 | 10 | — | 10 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Add: Pension settlement charge |
1 | 1 | — | — | 3 | 3 | 3 | — | 5 | 5 | 5 | — | ||||||||||||||||||||||||||||||||||||
| Add: Transaction costs |
34 | 13 | 15 | 6 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
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| Total adjustments |
35 | 14 | 15 | 6 | 76 | 76 | 66 | 10 | 130 | 130 | 18 | 112 | ||||||||||||||||||||||||||||||||||||
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| Adjusted net income - Praxair, Inc. |
$ | 1,249 | $ | 433 | $ | 421 | $ | 395 | $ | 1,576 | $ | 1,170 | $ | 405 | $ | 366 | $ | 1,677 | $ | 1,255 | $ | 419 | $ | 420 | ||||||||||||||||||||||||
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| Reported percentage change |
11 | % | 24 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Adjusted percentage change |
7 | % | 7 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Adjusted Diluted EPS |
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| Reported diluted EPS |
$ | 4.21 | $ | 1.45 | $ | 1.41 | $ | 1.35 | $ | 5.21 | $ | 3.80 | $ | 1.18 | $ | 1.24 | $ | 5.35 | $ | 3.88 | $ | 1.40 | $ | 1.06 | ||||||||||||||||||||||||
| Add: Cost reduction program and other charges |
— | — | — | — | 0.22 | 0.22 | 0.22 | — | 0.43 | 0.43 | 0.04 | 0.39 | ||||||||||||||||||||||||||||||||||||
| Add: Bond redemption |
— | — | — | — | 0.04 | 0.04 | — | 0.04 | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Add: Pension settlement charge |
— | — | — | — | 0.01 | 0.01 | 0.01 | — | 0.02 | 0.02 | 0.02 | — | ||||||||||||||||||||||||||||||||||||
| Add: Transaction costs |
0.12 | 0.05 | 0.05 | 0.02 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
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| Total adjustments |
0.12 | 0.05 | 0.05 | 0.02 | 0.27 | 0.27 | 0.23 | 0.04 | 0.45 | 0.45 | 0.06 | 0.39 | ||||||||||||||||||||||||||||||||||||
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| Adjusted diluted EPS |
$ | 4.33 | $ | 1.50 | $ | 1.46 | $ | 1.37 | $ | 5.48 | $ | 4.07 | $ | 1.41 | $ | 1.28 | $ | 5.80 | $ | 4.33 | $ | 1.46 | $ | 1.45 | ||||||||||||||||||||||||
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| Reported percentage change |
11 | % | 23 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Adjusted percentage change |
6 | % | 6 | % | ||||||||||||||||||||||||||||||||||||||||||||
| Cash Income Taxes and Interest |
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| Income taxes paid |
$ | 585 | $ | 420 | ||||||||||||||||||||||||||||||||||||||||||||
| Interest paid, net of interest capitalized and excluding bond redemption |
$ | 173 | $ | 174 | ||||||||||||||||||||||||||||||||||||||||||||
Full Year 2017 Diluted EPS Guidance
| Full Year 2017 | ||||||||
| Low End | High End | |||||||
| 2017 GAAP diluted EPS guidance |
$ | 5.66 | $ | 5.71 | ||||
| Add: Q1, Q2 and Q3 Transaction costs (excludes future merger transaction costs) |
0.12 | 0.12 | ||||||
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| 2017 adjusted diluted EPS guidance |
$ | 5.78 | $ | 5.83 | ||||
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| 2016 adjusted diluted EPS (see above for full year reconciliation) |
$ | 5.48 | $ | 5.48 | ||||
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| Adjusted percentage change |
5 | % | 6 | % | ||||
Page 11 of 12
| 2017 | 2016 | 2015 | ||||||||||||||||||||||||||||||||||||||||||
| Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | ||||||||||||||||||||||||||||||||||
| Free Cash Flow (FCF) - Free cash flow is a measure used by investors, financial analysts and management to evaluate the ability of a company to pursue opportunities that enhance shareholder value. FCF equals cash flow from operations less capital expenditures. |
| |||||||||||||||||||||||||||||||||||||||||||
| Operating cash flow |
$ | 794 | $ | 701 | $ | 710 | $ | 726 | $ | 788 | $ | 706 | $ | 553 | $ | 791 | $ | 676 | $ | 710 | $ | 518 | ||||||||||||||||||||||
| Less: capital expenditures |
(320 | ) | (325 | ) | (327 | ) | (409 | ) | (376 | ) | (357 | ) | (323 | ) | (387 | ) | (405 | ) | (352 | ) | (397 | ) | ||||||||||||||||||||||
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| Free Cash Flow |
$ | 474 | $ | 376 | $ | 383 | $ | 317 | $ | 412 | $ | 349 | $ | 230 | $ | 404 | $ | 271 | $ | 358 | $ | 121 | ||||||||||||||||||||||
| Net Debt, Capital and 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 |
$ | 9,237 | $ | 9,367 | $ | 9,368 | $ | 9,515 | $ | 9,842 | $ | 9,956 | $ | 9,404 | $ | 9,231 | $ | 9,480 | $ | 9,313 | $ | 9,360 | ||||||||||||||||||||||
| Less: cash and cash equivalents |
(607 | ) | (535 | ) | (519 | ) | (524 | ) | (627 | ) | (567 | ) | (221 | ) | (147 | ) | (136 | ) | (136 | ) | (117 | ) | ||||||||||||||||||||||
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| Net debt |
8,630 | 8,832 | 8,849 | 8,991 | 9,215 | 9,389 | 9,183 | 9,084 | 9,344 | 9,177 | 9,243 | |||||||||||||||||||||||||||||||||
| Equity and redeemable noncontrolling interests: |
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| Redeemable noncontrolling interests |
11 | 10 | 10 | 11 | 11 | 12 | 119 | 113 | 169 | 175 | 170 | |||||||||||||||||||||||||||||||||
| Praxair, Inc. shareholders’ equity |
6,256 | 5,807 | 5,529 | 5,021 | 5,245 | 5,140 | 4,888 | 4,389 | 4,264 | 4,964 | 5,018 | |||||||||||||||||||||||||||||||||
| Noncontrolling interests |
475 | 453 | 436 | 420 | 393 | 407 | 417 | 404 | 380 | 380 | 375 | |||||||||||||||||||||||||||||||||
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| Total equity and redeemable noncontrolling interests |
6,742 | 6,270 | 5,975 | 5,452 | 5,649 | 5,559 | 5,424 | 4,906 | 4,813 | 5,519 | 5,563 | |||||||||||||||||||||||||||||||||
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| Capital |
$ | 15,372 | $ | 15,102 | $ | 14,824 | $ | 14,443 | $ | 14,864 | $ | 14,948 | $ | 14,607 | $ | 13,990 | $ | 14,157 | $ | 14,696 | $ | 14,806 | ||||||||||||||||||||||
| Debt-to-capital |
56.1 | % | 58.5 | % | 59.7 | % | 62.3 | % | 62.0 | % | 62.8 | % | 62.9 | % | 64.9 | % | 66.0 | % | 62.4 | % | 62.4 | % | ||||||||||||||||||||||
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| After-tax Return on Capital and Adjusted 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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| Reported net income - Praxair, Inc. |
$ | 419 | $ | 406 | $ | 389 | $ | 406 | $ | 339 | $ | 399 | $ | 356 | $ | 422 | $ | 401 | $ | 308 | $ | 416 | ||||||||||||||||||||||
| Add: noncontrolling interests |
16 | 14 | 15 | 13 | 5 | 10 | 10 | 9 | 12 | 11 | 12 | |||||||||||||||||||||||||||||||||
| Add: interest expense - net |
41 | 38 | 41 | 38 | 43 | 44 | 65 | 42 | 35 | 40 | 44 | |||||||||||||||||||||||||||||||||
| Less: tax benefit on interest expense - net * |
(11 | ) | (11 | ) | (12 | ) | (10 | ) | (12 | ) | (12 | ) | (20 | ) | (12 | ) | (10 | ) | (11 | ) | (12 | ) | ||||||||||||||||||||||
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| Net operating profit after-tax (NOPAT) |
$ | 465 | $ | 447 | $ | 433 | $ | 447 | $ | 375 | $ | 441 | $ | 411 | $ | 461 | $ | 438 | $ | 348 | $ | 460 | ||||||||||||||||||||||
| Pre-tax Adjustments: |
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| Add: Cost reduction program and other charges |
— | — | — | — | 96 | — | — | — | 19 | 146 | — | |||||||||||||||||||||||||||||||||
| Add: Pension settlement charge |
2 | — | — | — | 4 | — | — | — | 7 | — | — | |||||||||||||||||||||||||||||||||
| Add: Transaction costs |
14 | 15 | 6 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
| Less: income taxes on pre-tax adjustments |
— | — | — | — | (29 | ) | — | — | — | (8 | ) | (33 | ) | — | ||||||||||||||||||||||||||||||
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| Adjusted NOPAT |
$ | 481 | $ | 462 | $ | 439 | $ | 447 | $ | 446 | $ | 441 | $ | 411 | $ | 461 | $ | 456 | $ | 461 | $ | 460 | ||||||||||||||||||||||
| 4-quarter trailing NOPAT |
$ | 1,792 | $ | 1,702 | $ | 1,696 | $ | 1,674 | $ | 1,688 | $ | 1,751 | $ | 1,658 | $ | 1,707 | $ | 1,616 | $ | 1,700 | $ | 1,864 | ||||||||||||||||||||||
| 4-quarter trailing adjusted NOPAT |
$ | 1,829 | $ | 1,794 | $ | 1,773 | $ | 1,745 | $ | 1,759 | $ | 1,769 | $ | 1,789 | $ | 1,838 | $ | 1,879 | $ | 1,945 | $ | 1,996 | ||||||||||||||||||||||
| Ending capital (see above) |
$ | 15,372 | $ | 15,102 | $ | 14,824 | $ | 14,443 | $ | 14,864 | $ | 14,948 | $ | 14,607 | $ | 13,990 | $ | 14,157 | $ | 14,696 | $ | 14,806 | ||||||||||||||||||||||
| 5-quarter average ending capital |
$ | 14,921 | $ | 14,836 | $ | 14,737 | $ | 14,570 | $ | 14,513 | $ | 14,480 | $ | 14,451 | $ | 14,587 | $ | 14,999 | $ | 15,460 | $ | 15,777 | ||||||||||||||||||||||
| After-tax ROC (4-quarter trailing NOPAT / 5-quarter average capital) |
12.0 | % | 11.5 | % | 11.5 | % | 11.5 | % | 11.6 | % | 12.1 | % | 11.5 | % | 11.7 | % | 10.8 | % | 11.0 | % | 11.8 | % | ||||||||||||||||||||||
| Adjusted after-tax ROC (4-quarter trailing adjusted NOPAT / 5-quarter average capital) |
12.3 | % | 12.1 | % | 12.0 | % | 12.0 | % | 12.1 | % | 12.2 | % | 12.4 | % | 12.6 | % | 12.5 | % | 12.6 | % | 12.7 | % | ||||||||||||||||||||||
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| * Tax benefit on interest expense - net is generally presented using the reported effective rate. |
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| EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin- These measures are used by investors, financial analysts and management to assess a company’s profitability. |
| |||||||||||||||||||||||||||||||||||||||||||
| Reported net income - Praxair, Inc. |
$ | 419 | $ | 406 | $ | 389 | $ | 406 | $ | 339 | $ | 399 | $ | 356 | $ | 422 | $ | 401 | $ | 308 | $ | 416 | ||||||||||||||||||||||
| Add: noncontrolling interests |
16 | 14 | 15 | 13 | 5 | 10 | 10 | 9 | 12 | 11 | 12 | |||||||||||||||||||||||||||||||||
| Add: interest expense - net |
41 | 38 | 41 | 38 | 43 | 44 | 65 | 42 | 35 | 40 | 44 | |||||||||||||||||||||||||||||||||
| Add: income taxes |
162 | 157 | 149 | 152 | 120 | 146 | 133 | 163 | 156 | 131 | 162 | |||||||||||||||||||||||||||||||||
| Add: depreciation and amortization |
298 | 292 | 287 | 285 | 284 | 281 | 272 | 275 | 276 | 278 | 277 | |||||||||||||||||||||||||||||||||
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| EBITDA |
$ | 936 | $ | 907 | $ | 881 | $ | 894 | $ | 791 | $ | 880 | $ | 836 | $ | 911 | $ | 880 | $ | 768 | $ | 911 | ||||||||||||||||||||||
| Adjustments: |
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| Add: Cost reduction program and other charges |
— | — | — | — | 96 | — | — | — | 19 | 146 | — | |||||||||||||||||||||||||||||||||
| Add: Pension settlement charge |
2 | — | — | — | 4 | — | — | — | 7 | — | — | |||||||||||||||||||||||||||||||||
| Add: Transaction costs |
14 | 15 | 6 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
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| Adjusted EBITDA |
$ | 952 | $ | 922 | $ | 887 | $ | 894 | $ | 891 | $ | 880 | $ | 836 | $ | 911 | $ | 906 | $ | 914 | $ | 911 | ||||||||||||||||||||||
| Reported sales |
2,922 | 2,834 | 2,728 | 2,644 | 2,716 | 2,665 | 2,509 | 2,595 | 2,686 | 2,738 | 2,757 | |||||||||||||||||||||||||||||||||
| EBITDA margin |
32.0 | % | 32.0 | % | 32.3 | % | 33.8 | % | 29.1 | % | 33.0 | % | 33.3 | % | 35.1 | % | 32.8 | % | 28.0 | % | 33.0 | % | ||||||||||||||||||||||
| Adjusted EBITDA margin |
32.6 | % | 32.5 | % | 32.5 | % | 33.8 | % | 32.8 | % | 33.0 | % | 33.3 | % | 35.1 | % | 33.7 | % | 33.4 | % | 33.0 | % | ||||||||||||||||||||||
Page 12 of 12