EX-99.1 2 a6156669ex99_1.htm EXHIBIT 99.1

Exhibit 99.1

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.--(BUSINESS WIRE)--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.

Attachments: Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary, and Appendix: 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 available on 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 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.

 
PRAXAIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (a)
(Millions of dollars, except per share data)
(UNAUDITED)
         
Quarter Ended Year to Date
December 31, December 31,
2009 2008 2009 2008
 
SALES (b) $ 2,407 $ 2,403 $ 8,956 $ 10,796
Cost of sales 1,370 1,418 5,032 6,495
Selling, general and administrative 274 295 1,088 1,312
Depreciation and amortization 223 206 846 850
Research and development 18 25 74 97
Brazil tax amnesty program and other charges (c) - 177 306 194
Other income (expense) - net   (10 )   32     (35 )   35  
OPERATING PROFIT 512 314 1,575 1,883
Interest expense - net   33     49     133     198  
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS 479 265 1,442 1,685
Income taxes (c)   133     67     169     465  
INCOME BEFORE EQUITY INVESTMENTS 346 198 1,273 1,220
Income from equity investments   6     8     24     36  
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) 352 206 1,297 1,256
Less: noncontrolling interests   (12 )   (6 )   (43 )   (45 )
NET INCOME - PRAXAIR, INC. (c) $ 340   $ 200   $ 1,254   $ 1,211  
 
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS (c)
 
Basic earnings per share $ 1.11 $ 0.65 $ 4.08 $ 3.87
 
Diluted earnings per share $ 1.09 $ 0.64 $ 4.01 $ 3.80
 
Cash dividends $ 0.40 $ 0.375 $ 1.60 $ 1.50
 
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic shares outstanding (000's) 307,569 307,636 307,676 312,658
Diluted shares outstanding (000's) 312,624 310,719 312,382 318,302
 
(a) Effective January 1, 2009, Praxair adopted the new noncontrolling interest guidance and reclassified 2008 amounts to conform to the current year presentation. The new guidance requires noncontrolling interests (previously referred to as minority interests) to be included in net income in the consolidated statement of income. Per share data remains unchanged and is based upon "Net Income - Praxair, Inc."
 
(b) Sales for the 2009 quarter and year-to-date periods decreased $54 million and $408 million, respectively, due to lower cost pass-through, with minimal impact on operating profit compared to 2008. Sales increased $142 million for the quarter and decreased $530 million for the year-to-date period, due to currency effects versus 2008.
 
(c) The 2009 year-to-date period includes a net after-tax benefit of $7 million ($306 million pre-tax charge offset by a $313 million tax benefit), or $0.02 per diluted share, related to a third quarter Federal tax amnesty program in Brazil (referred to as the “Refis Program”) and other charges. The 2008 quarter and year-to-date periods include cost reduction program and other charges of $177 million ($114 million after-tax and noncontrolling interests, or $0.37 per diluted share). The 2008 year-to-date period includes a pension settlement charge of $17 million ($11 million after-tax or $0.03 per diluted share). See Appendix.
 
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Millions of dollars)
(UNAUDITED)
     
December 31, December 31,
2009 2008
ASSETS
Cash and cash equivalents $ 45 $ 32
Accounts receivable - net 1,579 1,604
Inventories 377 445
Prepaid and other current assets   222   220
TOTAL CURRENT ASSETS 2,223 2,301
 
Property, plant and equipment - net 8,990 7,922
Goodwill 2,070 1,909
Other intangibles - net 142 121
Other long-term assets   892   801
TOTAL ASSETS $ 14,317 $ 13,054
 
LIABILITIES AND EQUITY
Accounts payable $ 730 $ 820
Short-term debt 227 642
Current portion of long-term debt 71 674
Other current liabilities   785   843
TOTAL CURRENT LIABILITIES 1,813 2,979
 
Long-term debt 4,757 3,709
Other long-term liabilities   2,099   2,055
TOTAL LIABILITIES 8,669 8,743
 
EQUITY (a)
Praxair, Inc. shareholders' equity 5,315 4,009
Noncontrolling Interests   333   302
TOTAL EQUITY   5,648   4,311
TOTAL LIABILITIES AND EQUITY $ 14,317 $ 13,054
 
(a) The new noncontrolling interest guidance requires noncontrolling interests (previously referred to as minority interests) to be classified as a separate component of equity in the consolidated balance sheets. 2008 amounts have been reclassified to conform to the current year presentation.
 
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Millions of dollars)
(UNAUDITED)
         
Quarter Ended Year to Date
December 31, December 31,
2009 2008 2009 2008
OPERATIONS (a)
Net income - Praxair, Inc. $ 340 $ 200 $ 1,254 $ 1,211
Noncontrolling interests   12     6     43     45  
Net income (including noncontrolling interests) 352 206 1,297 1,256
 
Adjustments to reconcile net income to net cash provided
by operating activities:
Brazil tax amnesty program and other charges, net of payments (36 ) 149 234 149
Deferred income taxes 30 (50 ) (221 ) (23 )
Depreciation and amortization 223 206 846 850
Accounts receivable 49 228 39 119
Inventory 21 43 58 21
Payables and accruals 18 (109 ) (178 ) (73 )
Pension contributions (5 ) (6 ) (128 ) (20 )
Other   57     (27 )   221     (241 )
Net cash provided by operating activities   709     640     2,168     2,038  
 
INVESTING
Capital expenditures (355 ) (482 ) (1,352 ) (1,611 )
Acquisitions, net of cash acquired (3 ) (25 ) (131 ) (130 )
Divestitures and asset sales   11     6     31     54  
Net cash used for investing activities   (347 )   (501 )   (1,452 )   (1,687 )
 
FINANCING
Debt (decrease) increase - net (197 ) 167 (62 ) 987
Issuances of common stock 27 9 95 185
Purchases of common stock (91 ) (186 ) (236 ) (1,077 )
Cash dividends - Praxair, Inc. shareholders (123 ) (115 ) (491 ) (468 )
Excess tax benefit on stock option exercises 9 2 23 54
Noncontrolling interest transactions and other   (8 )   (5 )   (40 )   (14 )
Net cash used for financing activities (383 ) (128 ) (711 ) (333 )
 
Effect of exchange rate changes on cash and
cash equivalents   1     (3 )   8     (3 )
 
Change in cash and cash equivalents (20 ) 8 13 15
Cash and cash equivalents, beginning-of-period   65     24     32     17  
 
Cash and cash equivalents, end-of-period $ 45   $ 32   $ 45   $ 32  
 
(a) The new noncontrolling interest guidance requires that the reconciliation of net income to net cash provided by operating activities begin with net income including noncontrolling interests. 2008 amounts have been reclassified to conform to the current year presentation.
       
PRAXAIR, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Millions of dollars)
(UNAUDITED)
 
Quarter Ended Year to Date
December 31, December 31,
2009 2008 2009 2008
SALES
North America (a) $ 1,180 $ 1,355 $ 4,626 $ 5,939
Europe (b) 351 322 1,283 1,502
South America (c) 461 382 1,645 1,889
Asia (d) 274 209 885 891
Surface Technologies (e)   141   135     517     575  
Total sales $ 2,407 $ 2,403   $ 8,956   $ 10,796  
 
OPERATING PROFIT
North America (a) $ 261 $ 267 $ 1,044 $ 1,078
Europe (b) 76 83 268 365
South America (c) 111 87 350 389
Asia (d) 42 34 138 149
Surface Technologies (e)   22   20     81     96  
Segment operating profit 512 491 1,881 2,077
Brazil tax amnesty program and other charges   -   (177 )   (306 )   (194 )
Total operating profit $ 512 $ 314   $ 1,575   $ 1,883  
 
(a) North American 2009 sales for the quarter and year-to-date periods decreased $76 million and $443 million, respectively, due to lower cost pass-through, with minimal impact on operating profit compared to 2008. Sales increased $4 million for the quarter and decreased $201 million for the year-to-date period due to currency effects versus 2008.
 
(b) European 2009 sales for the quarter and year-to-date periods increased $8 million and $9 million, respectively, due to higher cost pass-through, with minimal impact on operating profit compared to 2008. Sales increased $31 million for the quarter and decreased $90 million for the year-to-date period due to currency effects versus 2008.
 
(c) South American 2009 sales for the quarter and year-to-date periods increased $7 million and $17 million, respectively, due to higher cost pass-through, with minimal impact on operating profit compared to 2008. Sales increased $94 million for the quarter and decreased $166 million for the year-to-date period due to currency effects versus 2008.
 
(d) Asian 2009 sales for the quarter and year-to-date periods increased $8 million and $16 million, respectively, due to higher cost pass-through, with minimal impact on operating profit compared to 2008. Sales increased $6 million for the quarter and decreased $51 million for the year-to-date period due to currency effects versus 2008.
 
(e)

Surface Technologies 2009 sales for the quarter and year-to-date periods decreased $1 million and $7 million, respectively, due to lower cost pass-through, with minimal impact on operating profit compared to 2008. Sales increased $7 million for the quarter and decreased $22 million for the year-to-date period due to currency effects versus 2008. On July 1, 2009, Praxair acquired Sermatech International Holdings Corp., which contributed sales of $22 million and $44 million, respectively, in the quarter and year-to-date periods with a minimal impact on operating profit.

 
PRAXAIR, INC. AND SUBSIDIARIES
QUARTERLY FINANCIAL SUMMARY
(Millions of dollars, except per share data)
(UNAUDITED)
                 
2009 2008
Q4 Q3 (b) Q2 Q1 Q4 (b) Q3 Q2 Q1 (b)
FROM THE INCOME STATEMENT
Sales $ 2,407 $ 2,288 $ 2,138 $ 2,123 $ 2,403 $ 2,852 $ 2,878 $ 2,663
Cost of sales 1,370 1,277 1,190 1,195 1,418 1,734 1,748 1,595
Selling, general and administrative 274 284 265 265 295 341 341 335
Depreciation and amortization 223 217 207 199 206 218 216 210
Research and development 18 20 18 18 25 24 24 24
Brazil tax amnesty program and other charges - 306 - - 177 - - 17
Other income (expenses) – net   (10 )     (10 )     (11 )     (4 )   32       9       (6 )     -  
Operating profit 512 174 447 442 314 544 543 482
Interest expense - net 33 32 33 35 49 50 52 47
Income taxes 133 (187 ) 109 114 67 139 137 122
Income from equity investments   6       7       6       5     8       11       8       9  
Net income (including noncontrolling interests) 352 336 311 298 206 366 362 322
Less: noncontrolling interests   (12 )     (11 )     (12 )     (8 )   (6 )     (11 )     (13 )     (15 )
Net income - Praxair, Inc. $ 340     $ 325     $ 299     $ 290   $ 200     $ 355     $ 349     $ 307  
 
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
Diluted earnings per share $ 1.09 $ 1.04 $ 0.96 $ 0.93 $ 0.64 $ 1.11 $ 1.08 $ 0.96
Cash dividends per share $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ 0.375 $ 0.375 $ 0.375 $ 0.375
Diluted weighted average shares outstanding (000's) 312,624 312,182 312,429 311,311 310,719 319,505 322,088 320,409
 
FROM THE BALANCE SHEET
Total debt $ 5,055 $ 5,235 $ 5,107 $ 5,045 $ 5,025 $ 4,944 $ 4,596 $ 4,574
Total capital (a) 10,703 10,642 10,053 9,420 9,336 10,142 10,584 10,127
Debt-to-capital ratio (a) 47.2 % 49.2 % 50.8 % 53.6 % 53.8 % 48.7 % 43.4 % 45.2 %
 
FROM THE STATEMENT OF CASH FLOWS
Cash flow from operations $ 709 $ 547 $ 563 $ 349 $ 640 $ 630 $ 389 $ 379
Capital expenditures 355 334 370 293 482 405 380 344
Acquisitions 3 117 9 2 25 35 30 40
Cash dividends 123 122 123 123 115 117 119 117
 
OTHER INFORMATION
Number of employees 26,164 26,432 26,139 26,533 26,936 27,957 27,999 27,948
After-tax return on capital (ROC) (a) 14.1 % 13.6 % 13.8 % 13.8 % 14.7 % 15.5 % 15.4 % 14.8 %
Return on Praxair, Inc. shareholders' equity (ROE) (a) 26.2 % 26.2 % 27.5 % 28.7 % 28.2 % 26.9 % 25.7 % 24.6 %
 
SEGMENT DATA
SALES
North America $ 1,180 $ 1,162 $ 1,120 $ 1,164 $ 1,355 $ 1,557 $ 1,573 $ 1,454
Europe 351 323 306 303 322 384 406 390
South America 461 436 395 353 382 527 514 466
Asia 274 232 199 180 209 239 232 211
Surface Technologies   141       135       118       123     135       145       153       142  
Total sales $ 2,407     $ 2,288     $ 2,138     $ 2,123   $ 2,403     $ 2,852     $ 2,878     $ 2,663  
OPERATING PROFIT
North America $ 261 $ 263 $ 264 $ 256 $ 267 $ 274 $ 275 $ 262
Europe 76 68 61 63 83 96 99 87
South America 111 94 70 75 87 111 102 89
Asia 42 37 33 26 34 38 40 37
Surface Technologies   22       18       19       22     20       25       27       24  
Segment operating profit 512 480 447 442 491 544 543 499
Brazil tax amnesty program and other charges   -       (306 )     -       -     (177 )     -       -       (17 )
Total operating profit $ 512     $ 174     $ 447     $ 442   $ 314     $ 544     $ 543     $ 482  
 
(a) Non-GAAP measure, see Appendix.
 
(b) The third quarter 2009 includes a charge of $306 million ($7 million after-tax, or $0.02 per diluted share), related to a Federal tax amnesty program in Brazil and other charges; the fourth quarter 2008 includes a charge of $177 million ($114 million after-tax, or $0.37 per diluted share), related to a cost reduction program and other charges; and the first quarter 2008 includes a pension settlement charge of $17 million ($11 million after-tax, or $0.03 per diluted share). See Appendix.
 
PRAXAIR, INC. AND SUBSIDIARIES
APPENDIX
NON-GAAP MEASURES
(Millions of dollars, except per share data)
(UNAUDITED)
                       

The following non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s financing leverage, return on net assets employed and operating performance.  Special items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis.  Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. Adjusted amounts exclude the impact of the 2010 first quarter Venezuelan currency devaluation, the 2009 third quarter Brazil tax amnesty program and other charges, the 2008 fourth quarter cost reduction program and other charges and the 2008 first quarter pension settlement charge which helps investors understand underlying performance on a comparable basis.

 
2009   2008  
Year Q4 Q3 Q2 Q1 Year Q4 Q3 Q2 Q1
 

Debt to Capital Ratio - The debt-to-capital ratio is a measure used by investors, financial analysts and management to provide a measure of financial leverage and insights into how the company is financing its operations.

 
Total debt $ 5,055   $ 5,055   $ 5,235     $ 5,107     $ 5,045   $ 5,025   $ 5,025     $ 4,944     $ 4,596     $ 4,574  
Equity:
Praxair, Inc. shareholders' equity 5,315 5,315 5,085 4,638 4,073 4,009 4,009 4,891 5,671 5,209
Noncontrolling interests   333     333     322       308       302     302     302       307       317       344  
Total equity   5,648     5,648     5,407       4,946       4,375     4,311     4,311       5,198       5,988       5,553  
Total Capital $ 10,703   $ 10,703   $ 10,642     $ 10,053     $ 9,420   $ 9,336   $ 9,336     $ 10,142     $ 10,584     $ 10,127  
 
 
Debt to capital ratio   47.2 %   47.2 %   49.2 %     50.8 %     53.6 %   53.8 %   53.8 %     48.7 %     43.4 %     45.2 %
 

After -tax return on Capital (ROC) - After-tax return on capital is a measure used by investors, financial analysts and management to evaluate the return on net assets employed in the business. ROC measures the after-tax operating profit that the company was able to generate with the investments made by all parties in the business (debt, noncontrolling interests and Praxair, Inc. shareholders’ equity).

 
Adjusted operating profit (a) $ 1,881 $ 512 $ 480 $ 447 $ 442 $ 2,077 $ 491 $ 544 $ 543 $ 499
Less: adjusted income taxes (a) (482 ) $ (133 ) $ (126 ) (109 ) (114 ) (530 ) $ (126 ) $ (139 ) $ (137 ) $ (128 )
Less: tax benefit on interest expense (37 ) (9 ) (9 ) (9 ) (10 ) (56 ) (14 ) (14 ) (15 ) (13 )
Add: income from equity investments   24     6     7       6       5     36     8       11       8       9  
 
Net operating profit after-tax (NOPAT) $ 1,386 $ 376 $ 352 $ 335 $ 323 $ 1,527 $ 359 $ 402 $ 399 $ 367
 
Beginning capital $ 10,642 $ 10,053 $ 9,420 $ 9,336 $ 10,142 $ 10,584 $ 10,127 $ 9,655
Ending capital $ 10,703 $ 10,642 $ 10,053 $ 9,420 $ 9,336 $ 10,142 $ 10,584 $ 10,127
Average capital $ 10,673 $ 10,348 $ 9,737 $ 9,378 $ 9,739 $ 10,363 $ 10,356 $ 9,891
Average capital - 5 quarter average $ 10,031 $ 9,969
 
ROC % 13.8 % 3.5 % 3.4 % 3.4 % 3.4 % 15.3 % 3.7 % 3.9 % 3.9 % 3.7 %
 
ROC % (annualized)   13.8 %   14.1 %   13.6 %   13.8 %   13.8 %   15.3 %   14.7 %   15.5 %   15.4 %   14.8 %
 

Return on Praxair, Inc. Shareholder's equity (ROE) - Return on Praxair, Inc. shareholders' equity is a measure used by investors, financial analysts and management to evaluate operating performance from a Praxair shareholder perspective. ROE measures the net income attributable to Praxair, Inc. that the company was able to generate with the money shareholders have invested.

 
Adjusted net income - Praxair, Inc. (a) $ 1,247 $ 340 $ 318 $ 299 $ 290 $ 1,336 $ 314 $ 355 $ 349 $ 318
 
Beginning Praxair, Inc. shareholders' equity $ 5,085 $ 4,638 $ 4,073 $ 4,009 $ 4,891 $ 5,671 $ 5,209 $ 5,142
Ending Praxair, Inc. shareholders' equity $ 5,315 $ 5,085 $ 4,638 $ 4,073 $ 4,009 $ 4,891 $ 5,671 $ 5,209
Average Praxair, Inc. shareholders' equity $ 5,200 $ 4,862 $ 4,356 $ 4,041 $ 4,450 $ 5,281 $ 5,440 $ 5,176
Average Praxair shareholders' equity - 5 quarter average $ 4,624 $ 4,984
 
ROE % 27.0 % 6.5 % 6.5 % 6.9 % 7.2 % 26.8 % 7.1 % 6.7 % 6.4 % 6.1 %
 

ROE % (annualized)

  27.0 %   26.2 %   26.2 %     27.5 %     28.7 %   26.8 %   28.2 %     26.9 %     25.7 %     24.6 %
 
(a)

Adjusted Operating Profit and Operating Profit Margin, Income Taxes, Effective Tax Rate, Net income - Praxair, Inc. Diluted EPS, and 2010 Diluted EPS Guidance

             
Year Third

Quarter

Year Fourth

Quarter

First

Quarter

2009 2009 2008 2008 2008

Adjusted Operating Profit and Operating Profit Margin

Reported operating profit $ 1,575 $ 174 $ 1,883 $ 314 $ 482
Add: Brazil tax amnesty program and other charges (b) $ 306     306     194     177     17  
Adjusted operating profit $ 1,881   $ 480   $ 2,077   $ 491   $ 499  
 
Reported 2009 fourth quarter operating profit $ 512
Percentage change from 2008 fourth quarter 4 %
Percentage change from 2008 year (9 )%
 
Reported sales $ 8,956 $ 2,288 $ 10,796 $ 2,403 $ 2,663
Adjusted operating profit margin 21 % 21 % 19 % 20 % 19 %
 

Adjusted Income Taxes

Reported income taxes $ 169 $ (187 ) $ 465 $ 67 $ 122
Add: Brazil tax amnesty program and other charges (b)   313     313     65     59     6  
Adjusted income taxes $ 482   $ 126   $ 530   $ 126   $ 128  
 

Adjusted Effective Tax Rate

Reported income before income taxes and equity investments $ 1,442 $ 142 $ 1,685 $ 265 $ 435
Add: Brazil tax amnesty program and other charges (b)   306     306     194     177     17  
Adjusted income before income taxes and equity investments $ 1,748   $ 448   $ 1,879   $ 442   $ 452  
 
Adjusted income taxes (above) $ 482 $ 126 $ 530 $ 126 $ 128
Adjusted effective tax rate 28 % 28 % 28 % 29 % 28 %
 

Adjusted Net Income - Praxair, Inc.

Reported net income - Praxair, Inc. $ 1,254 $ 325 $ 1,211 $ 200 $ 307
Less: Brazil tax amnesty program and other charges (b)   (7 )   (7 )   125     114     11  
Adjusted net income - Praxair, Inc. $ 1,247   $ 318   $ 1,336   $ 314   $ 318  
 
Reported 2009 fourth quarter net income - Praxair, Inc. $ 340
Percentage change from 2008 fourth quarter 8 %
Percentage change from 2008 year (7 )%
 

Adjusted Diluted EPS

Diluted weighted average shares 312,382 312,182 318,302 310,719 320,409
 
Reported diluted EPS $ 4.01 $ 1.04 $ 3.80 $ 0.64 $ 0.96
Less: Brazil tax amnesty program and other charges (b) $ (0.02 )   (0.02 )   0.40     0.37     0.03  
Adjusted diluted EPS $ 3.99   $ 1.02   $ 4.20   $ 1.01   $ 0.99  
 
Reported 2009 fourth quarter diluted EPS $ 1.09
Percentage change from 2008 fourth quarter 8 %
Percentage change from 2008 year (5 )%
 

Adjusted 2010 Diluted EPS Guidance

First Quarter 2010 Full Year 2010
Low End High End Low End High End
Diluted EPS guidance GAAP $ 0.97 $ 1.02 $ 4.35 $ 4.55

Add: Venezuela currency devaluation charge (b)

 

0.08

 

0.08

   

0.08

 

0.08

 

Adjusted diluted EPS guidance

$

1.05

$

1.10

$

4.43

$

4.63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(b) Represent non-GAAP adjustments to eliminate the impact of (i) 2009 third quarter Brazil tax amnesty program and other charges, (ii) 2008 fourth quarter cost reduction program and other charges, (iii) 2008 first quarter pension settlement charge, and (iv) 2010 first quarter Venezuela currency devaluation charge. The company does not believe these items are indicative of on-going business trends and, accordingly, their impacts are excluded from the adjusted non-GAAP amounts so that investors can better evaluate and analyze historical and future business trends on a consistent basis.
 
(i)

The 2009 third quarter and year-to-date periods include a net after-tax benefit of $7 million ($306 million pre- tax charge offset by a $313 million tax benefit), or $0.02 per diluted share, related to a third quarter Federal tax amnesty program in Brazil (referred to as the “Refis Program”) and other charges. The net after-tax benefit includes the impacts of management’s decision to settle numerous outstanding Federal tax cases under the Refis Program (primarily for sales and value-added taxes), the impact of a reversal of remaining valuation allowances on deferred income tax assets for NOL carryforwards of a Brazilian subsidiary and the impact of charges for other Brazilian government-related matters.  These matters resulted in a pre-tax charge of $282 million, an income tax benefit of $329 million, and a net income tax benefit of $47 million. The net income tax benefit is due to the net operating loss carryforward (NOL) utilization to settle interest obligations and reversal of the remaining NOL deferred tax asset valuation allowances.  Other special items include a pre-tax charge of $24 million ($16 million after-tax) for a business restructure in Brazil and a charge of $24 million to income taxes relating to an entity reorganization and other recent developments in North America and Europe.

 
(ii) The 2008 fourth quarter includes cost reduction program and other charges of $177 million ($114 million after-tax and noncontrolling interests, or $0.37 per diluted share). (See Note 2 on page 56 of Praxair's 2008 Annual Report on Form 10-K)
 
(iii) A pension settlement charge of $17 million ($11 million after-tax or $0.03 per diluted share) was recorded in the 2008 first quarter related to lump sum benefit payments made from the U.S. supplemental pension plan to a number of recently retired senior managers, including Praxair's former chairman and chief executive officer. (See Note 17 on page 80 of Praxair's 2008 Annual Report on Form 10-K)
 
(iv)

On January 8, 2010, Venezuela announced a devaluation of the Venezuelan bolivar and created a two tier exchange rate system. Under the new system, a 2.60 exchange rate between the bolivar and US dollar will apply for essential goods while an exchange rate of 4.30 will apply for all remaining sectors, including Praxair's operations. As a result of the devaluation, the company will incur a one-time charge of approximately $0.08 per diluted share in the first quarter of 2010 due primarily to the remeasurement of the local Venezuelan balance sheet to reflect the new official rate of 4.30.

CONTACT:
Praxair, Inc.
Media
Susan Szita Gore, 203-837-2311
susan_szita-gore@praxair.com
or
Investors
Elizabeth Hirsch, 203-837-2354
liz_hirsch@praxair.com