(Archived) Praxair Reports Fourth-Quarter and Full-Year 2008 Results

• 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

DANBURY, Conn., January 28, 2009 — 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.

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 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 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.