(Archived) Praxair Reports First-Quarter 2017 Results

• Strong financial performance
  • Sales of $2.7 billion, 9% above prior-year quarter
  • Operating cash flow of $0.7 billion, 28% above prior-year quarter
  • EPS of $1.35, up 9% vs. prior-year quarter; adjusted EPS of $1.37, up 7%
• Successful execution of our core strategy
  • Volume growth of 4% vs. prior-year quarter, driven by North America, Europe and Asia
  • Resilient end-markets rise to 28% of sales
  • Backlog $1.5 billion; includes recently announced Celanese project win in U.S. Gulf Coast
• Continued progress toward definitive merger agreement with Linde AG

DANBURY, Conn., April 27, 2017 – Praxair, Inc. (NYSE: PX) reported first-quarter net income and diluted earnings per share of $389 million and $1.35, respectively. These results include transaction costs of $6 million after-tax, or 2 cents of diluted earnings per share, related to the potential Linde AG merger. Excluding this charge, adjusted net income and diluted earnings per share were $395 million and $1.37, respectively.

Praxair’s sales in the first quarter were $2,728 million, 9% above the prior-year quarter, up 6% excluding higher cost pass-through and positive currency translation effect. Sales growth was primarily driven by higher volumes in North America, Europe and Asia and included new project start-ups. By end-market, sales growth was led by metals, downstream energy, chemicals and electronics.

Reported operating profit in the first quarter was $582 million, 5% above the prior-year quarter. Excluding the current quarter impact of transaction costs, adjusted operating profit was $588 million, 6% above the prior-year quarter. Reported operating profit as a percentage of sales was 21.3%. Adjusted operating profit as a percentage of sales was 21.6% and the adjusted EBITDA margin was 32.5%.

First-quarter cash flow from operations was $710 million, 28% above the prior-year quarter. Capital expenditures were $327 million and the company paid $225 million of dividends.

Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “Praxair employees once again delivered high-quality results through the execution of our core strategy. First quarter sales grew 9% versus prior year, primarily driven by higher organic volumes across all end-markets. By geographic segment, volume growth was attained in North America, Europe and Asia, partially offset by South America due to the challenging economic environment in Brazil. Furthermore, we maintained strong margins and increased our operating cash flow 28% year-over-year.

“While our employees maintain their relentless focus on executing our strategy, we have made significant progress on the potential merger with Linde AG and are working toward reaching a definitive agreement as soon as practicable.

“As we look to the remainder of the year, we anticipate improved base volume growth in-line with the current macro-economic environment. New project opportunities, specifically in the U.S. Gulf Coast, continue to be a bright spot as bidding activity remains robust. Based on our competitive advantage in the region, we remain confident in our ability to win additional projects.

“The combination of our execution culture and highly talented employees will enable Praxair to continually deliver high-quality results.”

For the second quarter of 2017, Praxair expects diluted earnings per share in the range of $1.38 to $1.43, excluding transaction costs related to the potential merger.

For full-year 2017, Praxair expects adjusted diluted earnings per share to be in the range of $5.55 to $5.80. This full-year guidance excludes transaction costs related to the potential merger. GAAP diluted earnings per share are expected to be in the range of $5.53 to $5.78 and exclude transaction costs incurred after the first quarter. Full-year capital expenditures are expected to be approximately $1.4 billion.

Following is additional detail on first-quarter 2017 results by segment.

In North America, first-quarter sales were $1,458 million, 5% above the prior-year quarter excluding higher cost-pass through. Sales growth was driven primarily by stronger volumes to downstream energy, metals, chemicals, food and beverage and healthcare end-markets and higher price. Acquisitions contributed 1% growth, primarily packaged gas distributors. Operating profit was $357 million.

In Europe, first-quarter sales were $356 million, 11% above the prior-year quarter. Excluding negative currency and positive cost pass-through, sales grew 13% from the prior year due to higher volumes including project start-ups, and acquisitions primarily related to the carbon dioxide business largely serving the food and beverage end-market. Operating profit of $66 million grew 10% from the prior-year, excluding negative currency translation impact.

In South America, first-quarter sales were $369 million, 19% above the prior-year quarter. Excluding positive currency translation, sales grew 1% due to higher price. Volume growth from project start-ups was offset by continued negative underlying base volumes in Brazil, primarily the manufacturing end-market. Operating profit was $64 million.

Sales in Asia were $395 million in the quarter, up 5% from the prior-year. Excluding currency, cost pass-through and a prior-year net divestiture, sales grew 8%, driven by higher volumes in China, India and Korea, primarily to the electronics, metals and chemicals end-markets. Operating profit was $75 million.

Praxair Surface Technologies had first-quarter sales of $150 million as compared to $149 million in the prior-year quarter. Excluding negative currency translation, sales were 3% above the prior-year period driven by favorable price and higher aerospace volumes, partially offset by weaker sales to the energy end-markets. Operating profit was $26 million.

Adjusted amounts are non-GAAP measures. Additionally, measures such as EBITDA, free cash flow, after-tax return on capital, return on equity and debt-to-capital are also non-GAAP measures. See the attachments for a summary of non-GAAP reconciliations and calculations of non-GAAP measures.

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

A teleconference about Praxair’s first-quarter results is being held this morning, April 27, 2017 at 11:00 am Eastern Time. The number is (631) 485-4849 – Conference ID: 88420720. The call is also available as a webcast live and on-demand at www.praxair.com/investors. Materials to be used in the teleconference are also available on the website.

Additional Information and Where to Find It 

Should Praxair, Inc. (“Praxair”) and Linde AG (“Linde”) proceed with the proposed business combination transaction, Praxair and Linde expect that a newly formed holding company (“New Holdco”) will file a Registration Statement on Form S-4 or Form F-4 with the U.S. Securities and Exchange Commission (“SEC”) that will include (1) a proxy statement of Praxair that will also constitute a prospectus for New Holdco and (2) an offering prospectus of New Holdco to be used in connection with New Holdco’s offer to acquire Linde shares held by U.S. holders. When available, Praxair will mail the proxy statement/prospectus to its stockholders in connection with the vote to approve the merger of Praxair and a wholly-owned subsidiary of New Holdco, and New Holdco will distribute the offering prospectus to Linde shareholders in the United States in connection with New Holdco’s offer to acquire all of the outstanding shares of Linde. Should Praxair and Linde proceed with the proposed business combination transaction, Praxair and Linde also expect that New Holdco will file an offer document with the German Federal Financial Supervisory Authority (Bundesanstalt fuer Finanzdienstleistungsaufsicht) (“BaFin”). There can be no assurance that a binding definitive agreement will be reached between Praxair and Linde, and the consummation of any binding transaction will be subject to regulatory approvals and other customary closing conditions.

INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND THE OFFER DOCUMENT REGARDING THE PROPOSED BUSINESS COMBINATION TRANSACTION AND PROPOSED OFFER IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of the proxy statement/prospectus (if and when it becomes available) and other related documents filed by Praxair, Linde and New Holdco with the SEC on the SEC’s Web site at www.sec.gov. The proxy statement/prospectus (if and when it becomes available) and other documents relating thereto may also be obtained for free by accessing Praxair’s Web site at www.praxair.com. Following approval by the BaFin, the offer document will be made available at BaFin’s Web site at www.bafin.de. The offer document (if and when it becomes available) and other documents relating thereto may also be obtained for free by accessing Linde’s Web site at www.linde.com.

This document is neither an offer to purchase nor a solicitation of an offer to sell shares of New Holdco, Praxair or Linde. The final terms and further provisions regarding the public offer will be disclosed in the offer document after the publication has been approved by the BaFin and in documents that will be filed with the SEC. No money, securities or other consideration is being solicited, and, if sent in response to the information contained herein, will not be accepted. The information contained herein should not be considered as a recommendation that any person should subscribe for or purchase any securities.

No offering of securities shall be made except by means of a prospectus meeting the requirements of the U.S. Securities Act of 1933, as amended, and applicable European and German regulations. The distribution of this document may be restricted by law in certain jurisdictions and persons into whose possession any document or other information referred to herein come should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. No offering of securities will be made directly or indirectly, in or into any jurisdiction where to do so would be inconsistent with the laws of such jurisdiction.

Participants in Solicitation 

Praxair, Linde, New Holdco and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Praxair’s stockholders in respect of the proposed business combination. Information regarding the persons who are, under the rules of the SEC, participants in the solicitation of the stockholders of Praxair in connection with the proposed transaction, including a description of their direct or indirect interests, by security holdings or otherwise, will be set forth in the proxy statement/prospectus if and when it is filed with the SEC. Information regarding the directors and executive officers of Praxair is contained in Praxair’s Annual Report on Form 10-K for the year ended December 31, 2016 and its Proxy Statement on Schedule 14A, dated March 15, 2017, which are filed with the SEC and can be obtained free of charge from the sources indicated above.

Forward-looking Statements

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 expected timing and likelihood of the entry into or the completion of the contemplated business combination with Linde AG, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals that could reduce anticipated benefits or cause the parties not to enter into, or to abandon the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the proposed business combination agreement; the ability to successfully complete the proposed business combination and the exchange offer, including satisfying closing conditions; the success of the business following the proposed business combination; the ability to successfully integrate the Praxair and Linde businesses; the possibility that Praxair stockholders may not approve the proposed business combination agreement or that the requisite number of Linde shares may not be tendered in the public offer; the risk that the combined company may be unable to achieve expected synergies or that it may take longer or be more costly than expected to achieve those synergies; 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; the impact of potential unusual or non-recurring items; 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 GAAP or adjusted 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.