DANBURY, Conn., July 23, 2003 — Praxair, Inc. (NYSE: PX) reported second- quarter 2003 net income of $150 million and diluted earnings per share of 91 cents, both unchanged from the prior-year. Net income for the quarter included a $6 million net gain, 4 cents per share, resulting from an income tax benefit and the recognition of currency hedge losses related to future quarters. Last year's quarterly earnings included a net gain of 7 cents per share, resulting from a litigation settlement and currency hedge gains related to future quarters. Excluding these items, diluted earnings per share were 87 cents as compared to 84 cents in the prior-year period.*
Sales for the quarter were $1,401 million compared to $1,307 million in 2002. Sales grew 7% on a reported basis, and 4% excluding the impact of changes in natural gas price and currency. Operating profit was $223 million compared to $244 million in the prior year. Excluding the special items in both periods, operating profit was in line with the prior-year.
"Praxair performed well during the quarter, given the soft global economy," said Dennis H. Reilley, chairman and chief executive officer. "The actions we have taken to strengthen our market position in hydrogen, healthcare, electronics and Asia are taking hold and beginning to deliver profitable growth. Overall customer demand, however, remains soft, particularly in the U.S. manufacturing, chemical, automobile and aerospace markets. We are continuing to carefully manage costs and capital spending to deliver growing earnings during the downturn and to increase operating leverage when the economy recovers."
In North America, reported sales of $893 million grew 5% from the prior year. Excluding the pass-through effect of higher natural gas prices, sales grew 2%. The growth in sales came from higher pricing overall and new business gained in the healthcare market. Overall volume was relatively unchanged due to the soft economy. Segment operating profit of $135 million was lower than a year ago, primarily as a result of higher energy costs.
In Europe, sales increased 17% to $175 million and operating profit increased 21% to $41 million. The year-over-year increase was attributable to currency appreciation partially offset by a divestiture. South America sales grew 8% to $185 million, but excluding the effect of currency devaluation, sales grew 23% from both higher volume and improved pricing. Operating profit declined to $26 million as a result of currency devaluation and the effects of hedging. Asia's segment sales grew 16% to $92 million, and operating profit grew 15% to $15 million due to strong volume growth in China and Thailand.
Praxair Surface Technologies' sales were unchanged at $99 million, but operating profit declined to $6 million due to weak market conditions and restructuring costs.
Cash flow from operations for the quarter was $276 million. Capital expenditures were $154 million, excluding the purchase of leased assets. During the quarter the company issued $300 million of five-year bonds at 2.75%, and $350 million of 10-year bonds at 3.95%. The proceeds of these debt issues were used to refinance commercial paper, and purchase $339 million of leased assets, to lower overall financing costs. The company's debt-to-capital ratio* decreased to 49.2%. After-tax return on capital* improved to 12.9%, from 12.6% in the first quarter due to higher operating profit and a lower effective tax rate.* The purchase of the leased assets reduced after-tax return on capital by 0.4% in the quarter, and will have a 0.8% effect in future quarters.
For the third quarter of 2003, Praxair expects sales growth in the area of 8% versus last year's third quarter, and diluted earnings per share of 88 cents to 92 cents. For the full year, earnings guidance is $3.45 to $3.60 per diluted share.
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2002 sales of $5.1 billion. 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.
* Non-GAAP Measures; see Quarterly Financial Summary and Appendix: Non-GAAP Measures.
|Praxair 2Q03 Earnings Release Tables (50 KB)||Statement of Income, Balance Sheet, Cash Flow Statement, Segment Information, Quarterly Financial Summary and Non-GAAP Measures|
|Praxair 2Q03 Teleconference Presentation (162 KB)||Teleconference Presentation on Praxair's 2Q03 results.|
A teleconference on Praxair's second-quarter 2003 results is being held this morning, July 23, at 10:00 am Eastern Standard Time. The number is (706) 634-0777. The call also is available as a web cast.Materials to be used in the teleconference are available on www.praxair.com/investors.
Forward-Looking Statements: The forward-looking statements contained in this announcement concerning demand for products and services, the expected macroeconomic environment, sales and earnings growth, and other financial goals involve risks and uncertainties, and are subject to change based on various factors. These include the impact of changes in worldwide and national economies, the cost and availability of electric power, natural gas and other materials, development of operational efficiencies, changes in foreign currencies, changes in interest rates, the continued timely development and acceptance of new products and processes, the impact of competitive products and pricing, and the impact of tax and other legislation and regulation in the jurisdictions in which the company operates.