DANBURY, Conn., January 25, 2006 — Praxair, Inc. (NYSE: PX) reported record fourth-quarter income, before an accounting change, of $220 million and earnings per share of 67 cents, up 22% from the prior year. Reported net income including the adoption of an accounting change was $214 million and diluted earnings per share were 65 cents.
Sales in the fourth quarter rose 13% to $2,020 million, compared to $1,786 million in the 2004 quarter. Operating profit grew 19% to $345 million versus $289 million in last year's period. Sales and operating profit increased in every geographic region.
For the full year of 2005, Praxair reported net income of $726 million, and diluted earnings per share of $2.20. Income before the accounting change and adjusted for an income tax charge taken in the third quarter was $2.50 per diluted share, up 19% from 2004. Full-year sales were $7,656 million, 16% higher than sales in 2004.
Commenting on the fourth quarter results, Dennis H. Reilley, chairman and chief executive officer, said, "We delivered record results in all of our markets through successful implementation of new growth initiatives, while continuing to supply the highest level of service to our customers."
In North America, sales in the fourth quarter of $1,253 million rose 11% from $1,130 million in the year-ago quarter. Higher sales to manufacturing markets, strong oil and gas well services business, strong packaged-gases sales, and favorable pricing comparisons drove the year-over-year sales growth. Operating profit grew 20% to a record $193 million from $161 million a year ago.
In Europe, sales grew 12% to $263 million in the quarter. Excluding currency effects, sales grew 19%, due primarily to the purchase of industrial gas operations in Germany in 2004. Organic business activity remained stable, with 2% overall volume growth in the region. Operating profit grew to $61 million, from $56 million in the year-ago quarter.
In South America, sales of $314 million grew 33% versus the year-ago quarter, and 14% excluding currency effects. Both higher pricing and higher volumes contributed to underlying sales growth. Sales growth came primarily from healthcare and manufacturing markets. Operating profit rose to $56 million from $41 million in last year’s quarter.
Sales in Asia grew 10% to $148 million in the quarter due to strong demand from electronics, manufacturing and food-freezing markets in China, India, Korea, and Thailand. Operating profit rose to $25 million.
Praxair Surface Technologies’ sales in the quarter were $112 million. Operating profit grew to $10 million versus $7 million in the year-ago quarter. Demand for OEM aviation coatings and sales of thermal spray powders continue to be strong.
Praxair reported cash flow from operations of $376 million in the fourth quarter. Capital expenditures were $279 million. The company invested $36 million for acquisitions, primarily the purchase of a North American packaged-gas distributor which complements the company’s national distribution network. The company’s after-tax return-on-capital ratio improved to 13.9% for the quarter.
For the full year of 2006, Praxair expects sales in the range of $8.1 billion to $8.4 billion, operating profit in the range of $1,350 million to $1,425 million, and diluted earnings per share in the range of $2.65 to $2.75. This guidance includes the effect of expensing stock options, which is estimated at about 8 cents per diluted share. Full-year capital expenditures are expected to be in the area of $900 million to $950 million, supporting a robust backlog of new projects across all geographic regions.
For the first quarter of 2006, Praxair expects diluted earnings per share in the range of 61 cents to 65 cents, including an estimated 2 cents reduction in earnings per share due to the impact of expensing stock options. Excluding this stock option expense, expected earnings growth would be 7% to 14% above the 2005 first quarter.
Commenting on Praxair’s business outlook, Reilley said, "We have proven our ability to grow the business while increasing returns on capital. Looking forward, we see expanding opportunities for profitable growth across diverse markets, where our capabilities provide a competitive advantage. Our backlog of projects to come on stream in 2006 and 2007, combined with productivity and pricing initiatives, should continue to sustain strong earnings growth for the foreseeable future."
Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2005 sales of $7.7 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.
*See the attachments for calculations of non-GAAP measures related to net income and earnings per share, adjusted for the impact of a $92 million income tax charge in the 2005 third quarter, after-tax return-on-capital, and debt-to-capital ratios.
Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures
Teleconference presentation on Praxair's 4Q05 results.
A teleconference on Praxair's fourth-quarter results is being held this morning, January 25, at 11:00 am Eastern Time. The number is (617) 213 -8838 – Passcode: 63432374. The call also is available as a web cast at www.praxair.com/investors. Materials to be used in the teleconference are also available.
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; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; the degree of inflation in wages and other compensation; the ability to attain expected operational efficiencies; changes in foreign currencies and interest rates; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; the impact of changes in financial accounting standards; the impact of tax and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of litigation; 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.
Susan Szita Gore