(Archived) Praxair Reports Third-Quarter 2013 Results

• Sales of $3.0 billion, 9% above prior-year quarter
• EPS $1.49; adjusted EPS of $1.51, up 9% versus prior year*
• Record operating cash flow of $0.9 billion; capex of $0.5 billion
• Started hydrogen supply to Valero Saint Charles (135mm scfd capacity)
• Full-year 2013 adjusted EPS guidance of $5.90 to $5.95*
• Fourth-quarter EPS guidance of $1.52 to $1.57, up 10% to 14% above prior year

DANBURY, Conn., October 30, 2013 -- Praxair, Inc. (NYSE: PX) reported third-quarter net income and diluted earnings per share of $445 million and $1.49, respectively. These results include the impact of a pension settlement charge of $9 million pre-tax, or 2 cents of diluted earnings per share. Excluding this item, adjusted net income and diluted earnings per share were $451 million and $1.51, 8% and 9% above the prior-year quarter, respectively.*

Sales in the third quarter were $3,013 million, 9% above the prior-year quarter. Organic sales increased 7% with growth across all geographic segments. On-site sales in North America and Asia had strong growth, driven by new project start-ups, including refinery hydrogen supply. South American organic sales reflect higher price and growth including the metals, manufacturing and healthcare end markets. Acquisitions in North America and Europe contributed 3% growth in the quarter. Sales were steady sequentially from the second quarter due primarily to higher volumes from new project start-ups offset by weaker currency translation.

Reported operating profit in the third quarter was $670 million. Adjusted operating profit was $679 million, up 9% compared to the prior-year quarter. The increase was driven by higher overall volumes, higher pricing and acquisitions, partially offset by negative currency translation effects. Adjusted operating profit as a percentage of sales was 22.5%.*

The company generated record cash flow from operations in the quarter of $904 million. Operating cash flow funded $516 million of capital expenditures, primarily for new production plants under long-term contracts with customers. The company paid dividends of $176 million and repurchased $81 million of stock, net of issuances. The debt-to-capital ratio was 56.4% and debt-to-adjusted EBITDA was 2.2x. The after-tax return on capital and return on equity for the quarter were 12.8% and 28.4%, respectively.*

Commenting on the financial results and business outlook, Chairman, President and Chief Executive Officer Steve Angel said, “On-site project start-ups in Asia and North America, including refinery hydrogen supply, drove solid volume growth in the quarter. We are beginning to reap the benefits of capital projects contracted after the recession, but just coming on stream now. In addition, the results of our relentless approach to operational excellence and contract management are reflected in the quarter’s record operating cash flow and continued strong industry-leading operating margin.

We are cautious about volume growth in our base business in the fourth quarter as we do not expect much growth, if any, in industrial production in North America and Europe. Brazil is stabilizing and growth in China and the rest of Asia continues to be solid.”

For the fourth quarter of 2013, Praxair expects diluted earnings per share in the range of $1.52 to $1.57. For the full year of 2013, the company expects diluted earnings per share to be in the range of $5.80 to $5.85 and adjusted diluted earnings per share to be in the range of $5.90 to $5.95. Praxair expects full-year sales in the area of $12 billion. Full-year capital expenditures are expected to be about $1.9 billion, and the adjusted effective tax rate is forecasted to remain at about 28%.*

Following is additional detail on third-quarter 2013 results by segment.

In North America, third-quarter sales were $1,588 million up 14% from the prior-year quarter. Organic sales growth of 7% was driven by strong growth to the energy end market, primarily driven by hydrogen project start-ups for refinery customers. The acquisitions of NuCO2 and packaged gas distributors contributed 6% growth. Operating profit of $406 million grew 9% from the prior year primarily due to higher volumes from project start-ups, acquisitions and higher price.

In Europe, third-quarter sales were $386 million, 10% above the prior-year quarter. Acquisitions of Dominion Technology Gases and Volgograd Oxygen Factory contributed 5% growth. Underlying sales, excluding currency translation and cost pass-through, were up 1% versus the prior-year quarter due to higher pricing and project start-ups offset by lower base volumes, primarily in Southern Europe. Operating profit of $64 million, increased 7%, compared to the prior-year quarter, due to price attainment, acquisitions, currency and productivity savings.

In South America, third-quarter sales were $494 million, 4% below the prior-year quarter. Underlying sales, excluding negative currency translation, grew 6% with solid growth in the metals, manufacturing and healthcare end markets. Operating profit was $115 million, up 3% versus the prior-year period, due to higher price and higher volumes.

Sales in Asia were $385 million in the quarter, up 8% from the prior-year quarter, driven by higher on-site sales in China, Korea and India, including new plant start-ups. Sales growth came primarily from metals, chemicals and energy customers. Operating profit was $67 million.

Praxair Surface Technologies had third-quarter sales of $160 million, 2% above the prior-year quarter. Sales grew 1%, excluding positive currency impact, as favorable pricing offset weaker volumes of military aviation coatings. Operating profit of $27 million grew 8% from the prior-year period due to productivity savings, lower costs from previous restructuring actions, and higher pricing.

Praxair, Inc., a Fortune 250 company with 2012 sales of $11 billion, is the largest industrial gases company in North and South America and one of the largest worldwide. The company produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings. Praxair 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, metals and many others. More information about Praxair, Inc. is available at www.praxair.com.

*See the attachments for calculations of non-GAAP measures. Non-GAAP adjustments for 2013 relate to the impact of the first-quarter Venezuela currency devaluation charge and third-quarter pension settlement charge. Non-GAAP adjustments for 2012 relate to third-quarter cost reduction charges, a pension settlement charge and an income tax benefit.

Attachments: Non-GAAP Reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures.

A teleconference on Praxair’s third-quarter results is being held this morning, October 30, at 11:00 am Eastern Time. The number is (617) 399-3481 -- Passcode: 67079324. The call also is available as a web-cast at www.praxair.com/investors. Materials to be used in the teleconference are also available at www.praxair.com/investors.

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 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; 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 projections or estimates contained in the forward-looking statements. Additionally, financial projections or estimates exclude the impact of special items which the company believes are not indicative of ongoing business performance. 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 Form 10-K and 10-Q reports filed with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.