(Archived) Praxair Reports Fourth-Quarter and Full-Year 2009 Results

• Fourth-quarter sales of $2,407 million, in line with prior year. Diluted EPS of $1.09, up 8% from adjusted 2008 diluted EPS of $1.01*
• Full-year sales of $8,956 million, down 17% from 2008. Diluted EPS of $4.01. Adjusted diluted EPS of $3.99, down 5% from 2008 adjusted diluted EPS of $4.20*
• Record operating cash flow in quarter and full year

DANBURY, Conn., January 27, 2010 — Praxair, Inc. (NYSE: PX) reported fourth-quarter net income and diluted earnings per share of $340 million and $1.09, respectively. Net income and earnings per share increased 70% from the prior-year quarter largely due to a cost reduction program charge in the prior-year quarter. Excluding this prior-year charge, net income and diluted earnings per share increased 8%.*

Sales in the fourth quarter were $2,407 million compared to $2,403 million in the previous year. Excluding foreign currency and cost pass-through effects, sales were 4% below the prior-year quarter due to lower volumes. Sales rose 5% sequentially from the third quarter due to moderately higher volumes, positive currency effects, and higher natural gas cost pass-through. Operating profit in the fourth quarter of $512 million was 4% above adjusted operating profit in the prior year as higher pricing and cost reduction offset the impact of lower volumes. Sequentially, operating profit grew from higher volumes and positive foreign currency effects.*

The company generated record cash flow from operations. Fourth-quarter cash flow of $709 million funded $355 million of capital expenditures, largely for new production plants under long-term contracts with customers. The company paid $123 million of dividends and repurchased $64 million of stock, net of issuances. The after-tax return-on-capital ratio and return on equity for the quarter were 14.1%, and 26.2%, respectively.*

For the full year of 2009, reported net income was $1,254 million. Reported diluted earnings per share was $4.01, up 6% from 2008. Adjusted diluted earnings per share, excluding a 2 cent tax benefit, was $3.99, 5% below the prior year excluding the 2008 cost reduction program and pension settlement charges.*

Full-year sales were $8,956 million, down 17% due to lower volumes and negative foreign currency and cost pass-through effects, partially offset by higher pricing. Reported operating profit was $1,575 million. Adjusted operating profit was 9% below 2008 excluding charges in both years, as significant cost reduction and higher pricing mitigated the negative impacts of lower volumes and currency translation.*

For the full year, cash flow from operations was a record $2,168 million, 6% higher than the prior year. Capital expenditures were $1,352 million, moderately below the prior year. The company paid $491 million of dividends and repurchased $141 million of stock, net of issuances. Cash flow also funded acquisitions of $131 million and a modest decrease in debt.

Commenting on the results and business outlook, Chairman and Chief Executive Officer Steve Angel said, "So far, the rate of recovery from the recession has been mixed. Our businesses in Asia and South America are showing strong improvement. However, in North America and Europe our volumes are still sluggish in manufacturing, metal fabrication and non-residential construction markets. While sales to our steel and chemical customers have begun to pick up, they are still well below 2008 levels.

"For 2010, we are cautiously optimistic that growth in the U.S. and Europe will continue to improve, but we expect the climb to be slow and deliberate. We are therefore holding a tight rein on our costs which will give us strong operating leverage as volumes improve. In the emerging economies of Brazil, China and India, we expect our businesses to show strong sales growth in 2010, based on our existing project backlog and the current levels of new project and business development activity. Growth will be driven by starting up new on-site projects, and from application of environmental and energy technologies. Our project backlog currently stands at 40 large projects with a record capital value of over $2 billion."

For the first quarter of 2010, Praxair expects adjusted diluted earnings per share in the range of $1.05 to $1.10.* This guidance excludes the impact of an 8 cent one-time charge resulting from Venezuela currency devaluation, and any potential effect from participation in a tax amnesty program recently announced by the State of Rio de Janeiro, Brazil.

For the full year of 2010, Praxair expects sales in the area of $10 billion. The company expects adjusted diluted earnings per share to be in the range of $4.43 to $4.63,* excluding the 8 cent impact from Venezuela currency devaluation in the first quarter, and any potential effect from the State of Rio de Janeiro tax amnesty program. Full-year capital expenditures are expected to be about $1.4 billion, and the effective tax rate is forecasted to remain at about 28%.

Following is additional detail on fourth-quarter 2009 results by segment.

In North America, fourth-quarter sales were $1,180 million. Excluding the negative effect of cost pass-through, primarily from lower natural gas prices, sales were 7% below the prior year largely attributable to lower sales to chemicals, manufacturing, and energy markets. Operating profit of $261 million was only 2% below the prior year due to significantly lower fixed costs.

In Europe, fourth-quarter sales were $351 million. Excluding positive currency effects, sales were slightly below the prior year due to lower volumes. Operating profit was $76 million in the quarter, compared to $83 million in the prior year due to lower volumes and currency effects.

In South America, fourth-quarter sales were $461 million. Excluding currency effects, sales were 4% below the prior-year quarter due to lower volumes, partially offset by higher pricing. Operating profit was $111 million, 28% above the prior-year period due to currency effects and higher pricing.

Sales in Asia grew sharply to $274 million in the quarter. Excluding currency translation and cost pass-through effects, underlying sales grew 24% from the prior year. Sales growth in the region was primarily driven by higher on-site volumes in China, India and Korea to metals, chemicals, electronics and manufacturing customers and new plant start-ups. Operating profit was $42 million, 24% above the prior-year quarter and 14% higher sequentially.

Praxair Surface Technologies had fourth-quarter sales of $141 million compared to $135 million in the prior-year quarter. Sales growth was attributable to an acquisition, partially offset by currency effects and lower base-business volumes. Sequentially, sales increased $6 million primarily from higher jet engine and industrial coatings volumes. Operating profit increased to $22 million in the quarter versus $20 million in the prior-year period and $18 million in the third quarter.

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.

A teleconference on Praxair's fourth-quarter results is being held this morning, January 27, at 11:00 am Eastern Time. The number is (617) 786-2905 -- Passcode: 83381721. 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.