ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
1-11037 | 06-1249050 | |
(Commission File Number) | (IRS Employer Identification No.) | |
39 OLD RIDGEBURY ROAD, DANBURY, CT | 06810-5113 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ý | Accelerated filer | ¨ | ||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ |
INDEX | ||
PART I - FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
Quarter Ended June 30, | |||||||
2014 | 2013 | ||||||
SALES | $ | 3,113 | $ | 3,014 | |||
Cost of sales, exclusive of depreciation and amortization | 1,767 | 1,710 | |||||
Selling, general and administrative | 335 | 344 | |||||
Depreciation and amortization | 293 | 275 | |||||
Research and development | 24 | 24 | |||||
Other income (expense) - net | 3 | 4 | |||||
OPERATING PROFIT | 697 | 665 | |||||
Interest expense - net | 43 | 41 | |||||
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS | 654 | 624 | |||||
Income taxes | 183 | 174 | |||||
INCOME BEFORE EQUITY INVESTMENTS | 471 | 450 | |||||
Income from equity investments | 10 | 11 | |||||
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) | 481 | 461 | |||||
Less: noncontrolling interests | (14 | ) | (16 | ) | |||
NET INCOME - PRAXAIR, INC. | $ | 467 | $ | 445 | |||
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS | |||||||
Basic earnings per share | $ | 1.59 | $ | 1.50 | |||
Diluted earnings per share | $ | 1.58 | $ | 1.49 | |||
Cash dividends per share | $ | 0.65 | $ | 0.60 | |||
WEIGHTED AVERAGE SHARES OUTSTANDING (000’s): | |||||||
Basic shares outstanding | 292,945 | 295,668 | |||||
Diluted shares outstanding | 295,976 | 298,654 |
Six Months Ended June 30, | |||||||
2014 | 2013 | ||||||
SALES | $ | 6,139 | $ | 5,902 | |||
Cost of sales, exclusive of depreciation and amortization | 3,493 | 3,348 | |||||
Selling, general and administrative | 661 | 681 | |||||
Depreciation and amortization | 578 | 541 | |||||
Research and development | 47 | 48 | |||||
Venezuela currency devaluation | — | 23 | |||||
Other income (expense) - net | 12 | 4 | |||||
OPERATING PROFIT | 1,372 | 1,265 | |||||
Interest expense - net | 89 | 81 | |||||
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS | 1,283 | 1,184 | |||||
Income taxes | 359 | 338 | |||||
INCOME BEFORE EQUITY INVESTMENTS | 924 | 846 | |||||
Income from equity investments | 19 | 21 | |||||
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) | 943 | 867 | |||||
Less: noncontrolling interests | (28 | ) | (31 | ) | |||
NET INCOME - PRAXAIR, INC. | $ | 915 | $ | 836 | |||
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS | |||||||
Basic earnings per share | $ | 3.12 | $ | 2.82 | |||
Diluted earnings per share | $ | 3.08 | $ | 2.79 | |||
Cash dividends per share | $ | 1.30 | $ | 1.20 | |||
WEIGHTED AVERAGE SHARES OUTSTANDING (000’s): | |||||||
Basic shares outstanding | 293,570 | 296,136 | |||||
Diluted shares outstanding | 296,679 | 299,290 |
Quarter Ended June 30, | |||||||
2014 | 2013 | ||||||
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) | $ | 481 | $ | 461 | |||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||
Translation adjustments: | |||||||
Foreign currency translation adjustments | 164 | (413 | ) | ||||
Income taxes | (6 | ) | 20 | ||||
Translation adjustments | 158 | (393 | ) | ||||
Funded status - retirement obligations (Note 11): | |||||||
Retirement program remeasurements | (18 | ) | (14 | ) | |||
Reclassifications to net income | 14 | 23 | |||||
Income taxes | 1 | (1 | ) | ||||
Funded status - retirement obligations | (3 | ) | 8 | ||||
Derivative instruments (Note 6): | |||||||
Reclassifications to net income | — | (1 | ) | ||||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) | 155 | (386 | ) | ||||
COMPREHENSIVE INCOME (INCLUDING NONCONTROLLING INTERESTS) | 636 | 75 | |||||
Less: noncontrolling interests | (13 | ) | (10 | ) | |||
COMPREHENSIVE INCOME - PRAXAIR, INC. | $ | 623 | $ | 65 |
Six Months Ended June 30, | |||||||
2014 | 2013 | ||||||
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) | $ | 943 | $ | 867 | |||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||
Translation adjustments: | |||||||
Foreign currency translation adjustments | 144 | (431 | ) | ||||
Reclassifications to net income | (3 | ) | — | ||||
Income taxes | (15 | ) | 19 | ||||
Translation adjustments | 126 | (412 | ) | ||||
Funded status - retirement obligations (Note 11): | |||||||
Retirement program remeasurements | (16 | ) | (10 | ) | |||
Reclassifications to net income | 27 | 45 | |||||
Income taxes | (4 | ) | (9 | ) | |||
Funded status - retirement obligations | 7 | 26 | |||||
Derivative instruments (Note 6): | |||||||
Current period unrealized gain | 3 | — | |||||
Income taxes | (1 | ) | — | ||||
Derivative instruments | 2 | — | |||||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) | 135 | (386 | ) | ||||
COMPREHENSIVE INCOME (INCLUDING NONCONTROLLING INTERESTS) | 1,078 | 481 | |||||
Less: noncontrolling interests | (25 | ) | (17 | ) | |||
COMPREHENSIVE INCOME - PRAXAIR, INC. | $ | 1,053 | $ | 464 |
June 30, 2014 | December 31, 2013 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 173 | $ | 138 | |||
Accounts receivable - net | 2,075 | 1,892 | |||||
Inventories | 542 | 506 | |||||
Prepaid and other current assets | 369 | 380 | |||||
TOTAL CURRENT ASSETS | 3,159 | 2,916 | |||||
Property, plant and equipment (less accumulated depreciation of $12,191 in 2014 and $11,753 in 2013) | 12,552 | 12,278 | |||||
Goodwill | 3,270 | 3,194 | |||||
Other intangible assets - net | 619 | 596 | |||||
Other long-term assets | 1,325 | 1,271 | |||||
TOTAL ASSETS | $ | 20,925 | $ | 20,255 | |||
LIABILITIES AND EQUITY | |||||||
Accounts payable | $ | 914 | $ | 921 | |||
Short-term debt | 595 | 782 | |||||
Current portion of long-term debt | 5 | 3 | |||||
Other current liabilities | 1,032 | 958 | |||||
TOTAL CURRENT LIABILITIES | 2,546 | 2,664 | |||||
Long-term debt | 8,565 | 8,026 | |||||
Other long-term liabilities | 2,314 | 2,255 | |||||
TOTAL LIABILITIES | 13,425 | 12,945 | |||||
Commitments and contingencies (Note 12) | |||||||
Redeemable noncontrolling interests (Note 14) | 194 | 307 | |||||
Praxair, Inc. Shareholders’ Equity: | |||||||
Common stock $0.01 par value, authorized - 800,000,000 shares, issued - 383,230,625 shares for both periods | 4 | 4 | |||||
Additional paid-in capital | 3,961 | 3,970 | |||||
Retained earnings | 11,060 | 10,528 | |||||
Accumulated other comprehensive income (loss) | (1,845 | ) | (1,981 | ) | |||
Treasury stock, at cost (2014 - 91,198,889 shares and 2013 - 89,096,761 shares) | (6,269 | ) | (5,912 | ) | |||
Total Praxair, Inc. Shareholders’ Equity | 6,911 | 6,609 | |||||
Noncontrolling interests | 395 | 394 | |||||
TOTAL EQUITY | 7,306 | 7,003 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 20,925 | $ | 20,255 |
Six Months Ended June 30, | |||||||
2014 | 2013 | ||||||
OPERATIONS | |||||||
Net income - Praxair, Inc. | $ | 915 | $ | 836 | |||
Noncontrolling interests | 28 | 31 | |||||
Net income (including noncontrolling interests) | 943 | 867 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Venezuela currency devaluation | — | 23 | |||||
Depreciation and amortization | 578 | 541 | |||||
Deferred income taxes | 17 | 99 | |||||
Share-based compensation | 28 | 34 | |||||
Working capital: | |||||||
Accounts receivable | (169 | ) | (164 | ) | |||
Inventory | (33 | ) | (27 | ) | |||
Prepaid and other current assets | 36 | (164 | ) | ||||
Payables and accruals | (32 | ) | (6 | ) | |||
Pension contributions | (13 | ) | (43 | ) | |||
Long-term assets, liabilities and other | 28 | (111 | ) | ||||
Net cash provided by operating activities | 1,383 | 1,049 | |||||
INVESTING | |||||||
Capital expenditures | (777 | ) | (988 | ) | |||
Acquisitions, net of cash acquired | (170 | ) | (1,269 | ) | |||
Divestitures and asset sales | 71 | 38 | |||||
Net cash used for investing activities | (876 | ) | (2,219 | ) | |||
FINANCING | |||||||
Short-term debt borrowings (repayments) - net | (186 | ) | 602 | ||||
Long-term debt borrowings | 858 | 2,088 | |||||
Long-term debt repayments | (308 | ) | (935 | ) | |||
Issuances of common stock | 69 | 76 | |||||
Purchases of common stock | (446 | ) | (345 | ) | |||
Cash dividends - Praxair, Inc. shareholders | (381 | ) | (355 | ) | |||
Excess tax benefit on share-based compensation | 24 | 24 | |||||
Noncontrolling interest transactions and other | (111 | ) | (17 | ) | |||
Net cash (used for) provided by financing activities | (481 | ) | 1,138 | ||||
Effect of exchange rate changes on cash and cash equivalents | 9 | (23 | ) | ||||
Change in cash and cash equivalents | 35 | (55 | ) | ||||
Cash and cash equivalents, beginning-of-period | 138 | 157 | |||||
Cash and cash equivalents, end-of-period | $ | 173 | $ | 102 |
• | Accounting for Cumulative Translation Adjustment – In March 2013, the Financial Accounting Standards Board ("FASB") issued updated guidance on the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity, or as a result of acquisitions achieved in stages. The adoption of this guidance did not have a significant impact on the condensed consolidated financial statements. |
• | Presentation of Unrecognized Tax Benefits – In July 2013, the FASB issued updated guidance on the presentation of unrecognized tax benefits. The new guidance requires an entity to present certain unrecognized tax benefits, or a portion thereof, as a reduction to the related deferred tax asset, primarily for loss and tax credit carryforwards. The adoption of this guidance did not have a significant impact on the condensed consolidated financial statements. |
• | Reporting Discontinued Operations – In April 2014, the FASB issued updated guidance on the reporting and disclosures of discontinued operations. The new guidance requires that the disposal of a component of an entity be reported as discontinued operations only if the action represents a strategic shift that will have a major effect on an entity’s operations and financial results, and would require expanded disclosures. This guidance will be effective for Praxair beginning in the first quarter 2015, with early adoption optional. |
• | Revenue Recognition – In May 2014, the FASB issued updated guidance on the reporting and disclosure of revenue recognition. The new guidance requires the evaluation of contracts with customers to determine the recognition of revenue when or as the entity satisfies a performance obligation, and would require expanded disclosures. This guidance will be effective for Praxair beginning in the first quarter 2017 and includes several transition options. Praxair is in the early stages of reviewing the new guidance and will provide updates on the expected impact to Praxair in future filings, as determined. |
• | Accounting for Share-based Compensation - In June 2014, the FASB issued updated guidance on the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. Praxair does not expect this requirement to have a significant impact on the consolidated financial statements. This guidance will be effective for Praxair beginning in the first quarter 2016, with early adoption optional. |
(Millions of dollars) | March 1, 2013 | |||
Trade receivables, net | $ | 17 | ||
Property, plant and equipment | 199 | |||
Intangible assets | 374 | |||
Deferred income taxes | (85 | ) | ||
Other assets and (liabilities) | (28 | ) | ||
Goodwill | 618 | |||
Purchase price | $ | 1,095 |
(Millions of dollars) | June 30, 2014 | December 31, 2013 | |||||
Inventories | |||||||
Raw materials and supplies | $ | 165 | $ | 167 | |||
Work in process | 64 | 58 | |||||
Finished goods | 313 | 281 | |||||
Total inventories | $ | 542 | $ | 506 |
(Millions of dollars) | June 30, 2014 | December 31, 2013 | |||||
SHORT-TERM | |||||||
Commercial paper and U.S. bank borrowings | $ | 515 | $ | 712 | |||
Other bank borrowings (primarily international) | 80 | 70 | |||||
Total short-term debt | 595 | 782 | |||||
LONG-TERM | |||||||
U.S. borrowings (U.S. dollar denominated unless otherwise noted) | |||||||
4.375% Notes due 2014 (e) | — | 300 | |||||
4.625% Notes due 2015 (d) | 500 | 500 | |||||
3.25% Notes due 2015 (a, b) | 413 | 418 | |||||
0.75% Notes due 2016 | 400 | 400 | |||||
5.375% Notes due 2016 | 400 | 400 | |||||
5.20% Notes due 2017 | 325 | 325 | |||||
1.05% Notes due 2017 | 400 | 400 | |||||
1.20% Notes due 2018 | 500 | 500 | |||||
1.25% Notes due 2018 (a, b) | 482 | 478 | |||||
4.50% Notes due 2019 (a) | 598 | 598 | |||||
1.90% Notes due 2019 | 500 | 500 | |||||
1.50% Euro-denominated notes due 2020 (a, c) | 818 | — | |||||
4.05% Notes due 2021 (a) | 498 | 498 | |||||
3.00% Notes due 2021 (a) | 497 | 497 | |||||
2.45% Notes due 2022 (a) | 598 | 598 | |||||
2.20% Notes due 2022 (a) | 499 | 499 | |||||
2.70% Notes due 2023 (a) | 498 | 498 | |||||
3.55% Notes due 2042 (a) | 466 | 466 | |||||
Other | 5 | 5 | |||||
International bank borrowings (d) | 164 | 140 | |||||
Obligations under capital leases | 9 | 9 | |||||
8,570 | 8,029 | ||||||
Less: current portion of long-term debt | (5 | ) | (3 | ) | |||
Total long-term debt | 8,565 | 8,026 | |||||
Total debt | $ | 9,165 | $ | 8,811 |
(a) | Amounts are net of unamortized discounts. |
(b) | June 30, 2014 and December 31, 2013 include a $20 million and $22 million fair value increase, respectively, related to hedge accounting. See Note 6 for additional information. |
(c) | For the six months ended June 30, 2014, Praxair issued €600 million 1.50% Euro-denominated notes due 2020. This debt issuance has been designated as a hedge of the net investment position in European operations where the Euro is the functional currency (see Note 6). The proceeds of this debt issuance were used for general corporate purposes, including acquisitions, repayment of debt and share repurchases under the company's share repurchase program. |
(d) | Classified as long-term because of the company’s intent to refinance this debt on a long-term basis and the availability of such financing under the terms of an existing $2 billion long-term credit facility. |
(e) | In March 2014, Praxair repaid $300 million of 4.375% notes that became due. |
Fair Value | |||||||||||||||||||||||
Notional Amounts | Assets | Liabilities | |||||||||||||||||||||
(Millions of dollars) | June 30, 2014 | December 31, 2013 | June 30, 2014 | December 31, 2013 | June 30, 2014 | December 31, 2013 | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments: | |||||||||||||||||||||||
Currency contracts: | |||||||||||||||||||||||
Balance sheet items (a) | $ | 2,234 | $ | 2,197 | $ | 14 | $ | 4 | $ | 5 | $ | 14 | |||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||||||||
Currency contracts: | |||||||||||||||||||||||
Forecasted purchases (a) | $ | — | $ | 5 | $ | — | $ | — | $ | — | $ | — | |||||||||||
Interest rate contracts: | |||||||||||||||||||||||
Interest rate swaps (b) | 875 | 875 | 20 | 22 | — | — | |||||||||||||||||
Total | $ | 875 | $ | 880 | $ | 20 | $ | 22 | $ | — | $ | — | |||||||||||
Total Derivatives | $ | 3,109 | $ | 3,077 | $ | 34 | $ | 26 | $ | 5 | $ | 14 |
(a) | Assets are recorded in prepaid and other current assets, and liabilities are recorded in other current liabilities. |
(b) | Assets are recorded in other long term assets. |
Year Terminated | Original Gain / (Loss) | Unrecognized Gain / (Loss) (a) | |||||||||||
(Millions of dollars) | June 30, 2014 | December 31, 2013 | |||||||||||
Treasury Rate Locks | |||||||||||||
Underlying debt instrument: | |||||||||||||
$500 million 2.20% fixed-rate notes that mature in 2022 (b) | 2012 | $ | (2 | ) | $ | (2 | ) | $ | (2 | ) | |||
$500 million 3.00% fixed-rate notes that mature in 2021 (b) | 2011 | (11 | ) | (9 | ) | (9 | ) | ||||||
$600 million 4.50% fixed-rate notes that mature in 2019 (b) | 2009 | 16 | 10 | 10 | |||||||||
$500 million 4.625% fixed-rate notes that mature in 2015 (b) | 2008 | (7 | ) | (1 | ) | (1 | ) | ||||||
Total - pre-tax | $ | (2 | ) | $ | (2 | ) | |||||||
Less: income taxes | 1 | 1 | |||||||||||
After- tax amounts | $ | (1 | ) | $ | (1 | ) |
(a) | The unrecognized gains / (losses) for the treasury rate locks are shown in accumulated other comprehensive income (“AOCI”) and are being recognized on a straight line basis to interest expense – net over the term of the underlying debt agreements. The cash received or paid was reflected within the noncontrolling interest transactions and other in the financing section of the condensed consolidated statements of cash flows. Refer to the table below summarizing the impact on the company’s consolidated statements of income and AOCI for current period gain (loss) recognition. |
(b) | The notional amount of the treasury rate lock contracts are equal to the underlying debt instrument with the exception of the treasury rate lock contract entered into to hedge the $600 million 4.50% fixed-rate notes that mature in 2019. The notional amount of this contract was $500 million. |
Amount of Pre-Tax Gain (Loss) Recognized in Earnings * | |||||||||||||||
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(Millions of dollars) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Derivatives Not Designated as Hedging Instruments | |||||||||||||||
Currency contracts: | |||||||||||||||
Balance sheet items | |||||||||||||||
Debt-related | $ | 24 | $ | (40 | ) | $ | 29 | $ | (6 | ) | |||||
Other balance sheet items | 1 | (3 | ) | 4 | (10 | ) | |||||||||
Total | $ | 25 | $ | (43 | ) | $ | 33 | $ | (16 | ) |
Quarter Ended | |||||||||||
Amount of Gain (Loss) Recognized in AOCI | Amount of Gain (Loss) Reclassified from AOCI to the Consolidated Statement of Income | ||||||||||
(Millions of dollars) | June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | |||||||
Derivatives Designated as Hedging Instruments * | |||||||||||
Interest rate contracts: | |||||||||||
Treasury rate lock contracts | — | — | — | (1 | ) |
Six Months Ended | |||||||||||||||
Amount of Gain (Loss) Recognized in AOCI | Amount of Gain (Loss) Reclassified from AOCI to the Consolidated Statement of Income | ||||||||||||||
(Millions of dollars) | June 30, 2014 | June 30, 2013 | June 30, 2014 | June 30, 2013 | |||||||||||
Derivatives Designated as Hedging Instruments * | |||||||||||||||
Net investment hedge: | |||||||||||||||
Foreign currency forward | $ | (6 | ) | $ | — | $ | — | $ | — | ||||||
Less: income taxes | 2 | — | — | — | |||||||||||
Total - Net of Taxes | $ | (4 | ) | $ | — | $ | — | $ | — |
Fair Value Measurements Using | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||
(Millions of dollars) | June 30, 2014 | December 31, 2013 | June 30, 2014 | December 31, 2013 | June 30, 2014 | December 31, 2013 | |||||||||||||
Assets | |||||||||||||||||||
Derivatives | — | — | $ | 34 | $ | 26 | — | — | |||||||||||
Liabilities | |||||||||||||||||||
Derivatives | — | — | $ | 5 | $ | 14 | — | — |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Numerator (Millions of dollars) | |||||||||||||||
Net income - Praxair, Inc. | $ | 467 | $ | 445 | $ | 915 | $ | 836 | |||||||
Denominator (Thousands of shares) | |||||||||||||||
Weighted average shares outstanding | 292,434 | 295,143 | 293,063 | 295,609 | |||||||||||
Shares earned and issuable under compensation plans | 511 | 525 | 507 | 527 | |||||||||||
Weighted average shares used in basic earnings per share | 292,945 | 295,668 | 293,570 | 296,136 | |||||||||||
Effect of dilutive securities | |||||||||||||||
Stock options and awards | 3,031 | 2,986 | 3,109 | 3,154 | |||||||||||
Weighted average shares used in diluted earnings per share | 295,976 | 298,654 | 296,679 | 299,290 | |||||||||||
Basic Earnings Per Share | $ | 1.59 | $ | 1.50 | $ | 3.12 | $ | 2.82 | |||||||
Diluted Earnings Per Share | $ | 1.58 | $ | 1.49 | $ | 3.08 | $ | 2.79 |
(Millions of dollars) | North America | South America | Europe | Asia | Surface Technologies | Total | |||||||||||||||||
Balance, December 31, 2013 | $ | 2,117 | $ | 166 | $ | 743 | $ | 24 | $ | 144 | $ | 3,194 | |||||||||||
Acquisitions (Note 3) | 41 | 4 | 17 | — | — | 62 | |||||||||||||||||
Purchase adjustments & other | — | — | (5 | ) | — | 5 | — | ||||||||||||||||
Foreign currency translation | — | 14 | (1 | ) | — | 1 | 14 | ||||||||||||||||
Balance, June 30, 2014 | $ | 2,158 | $ | 184 | $ | 754 | $ | 24 | $ | 150 | $ | 3,270 |
(Millions of dollars) | Customer & License/Use Agreements | Non-compete Agreements | Patents & Other | Total | |||||||||||
Cost: | |||||||||||||||
Balance, December 31, 2013 | $ | 661 | $ | 31 | $ | 43 | $ | 735 | |||||||
Additions (Note 3) | 39 | 7 | — | 46 | |||||||||||
Foreign currency translation | (1 | ) | — | — | (1 | ) | |||||||||
Other * | — | (3 | ) | 4 | 1 | ||||||||||
Balance, June 30, 2014 | $ | 699 | $ | 35 | $ | 47 | $ | 781 | |||||||
Less: Accumulated amortization | |||||||||||||||
Balance, December 31, 2013 | $ | (118 | ) | $ | (16 | ) | $ | (5 | ) | $ | (139 | ) | |||
Amortization expense | (18 | ) | (3 | ) | (2 | ) | (23 | ) | |||||||
Foreign currency translation | — | — | — | — | |||||||||||
Other * | 1 | 3 | (4 | ) | — | ||||||||||
Balance, June 30, 2014 | $ | (135 | ) | $ | (16 | ) | $ | (11 | ) | $ | (162 | ) | |||
Net balance at June 30, 2014 | $ | 564 | $ | 19 | $ | 36 | $ | 619 |
(Millions of dollars) | |||
Remaining 2014 | $ | 27 | |
2015 | 47 | ||
2016 | 46 | ||
2017 | 37 | ||
2018 | 33 | ||
Thereafter | 429 | ||
$ | 619 |
Six Months Ended June 30, | |||||
2014 | 2013 | ||||
Dividend yield | 2.0 | % | 2.2 | % | |
Volatility | 15.2 | % | 21.7 | % | |
Risk-free interest rate | 1.57 | % | 0.76 | % | |
Expected term years | 5 | 5 |
Number of Options (000’s) | Average Exercise Price | Average Remaining Life | Aggregate Intrinsic Value | |||||||||
Outstanding at January 1, 2014 | 11,161 | $ | 81.42 | |||||||||
Granted | 1,293 | 128.80 | ||||||||||
Exercised | (953 | ) | 63.65 | |||||||||
Cancelled or Expired | (38 | ) | 94.29 | |||||||||
Outstanding at June 30, 2014 | 11,463 | 88.20 | 5.7 | $ | 512 | |||||||
Exercisable at June 30, 2014 | 8,827 | $ | 78.92 | 4.7 | $ | 476 |
Performance-Based | Restricted Stock | ||||||||||||
Number of Shares (000’s) | Average Grant Date Fair Value | Number of Shares (000’s) | Average Grant Date Fair Value | ||||||||||
Non-vested at January 1, 2014 | 867 | $ | 99.55 | 337 | $ | 100.41 | |||||||
Granted (a) | 328 | 121.16 | 90 | 122.73 | |||||||||
Vested | (338 | ) | 92.06 | (104 | ) | 95.61 | |||||||
Cancelled | (9 | ) | 107.52 | (11 | ) | 101.23 | |||||||
Non-vested at June 30, 2014 | 848 | $ | 109.14 | 312 | $ | 108.38 |
(a) | Performance-based stock unit grants during 2014 include 49 thousand shares relating to the actual payout of the 2011 PSU grants in 2014. |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||||
Pensions | OPEB | Pensions | OPEB | ||||||||||||||||||||||||||||
(Millions of dollars) | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |||||||||||||||||||||||
Service cost | $ | 13 | $ | 15 | $ | 1 | $ | 1 | $ | 26 | $ | 28 | $ | 2 | $ | 2 | |||||||||||||||
Interest cost | 31 | 29 | 3 | 3 | 62 | 58 | 6 | 6 | |||||||||||||||||||||||
Expected return on plan assets | (40 | ) | (38 | ) | — | — | (80 | ) | (76 | ) | — | — | |||||||||||||||||||
Net amortization and deferral | 16 | 24 | (2 | ) | (1 | ) | 31 | 47 | (4 | ) | (2 | ) | |||||||||||||||||||
Net periodic benefit cost | $ | 20 | $ | 30 | $ | 2 | $ | 3 | $ | 39 | $ | 57 | $ | 4 | $ | 6 |
• | During May 2009, the Brazilian government published Law 11941/2009 instituting a new voluntary amnesty program (“Refis Program”) which allowed Brazilian companies to settle certain federal tax disputes at reduced amounts. During the 2009 third quarter, Praxair decided that it was economically beneficial to settle many of its outstanding federal tax disputes and such disputes were enrolled in the Refis Program, subject to final calculation and review by the Brazilian federal government. The Company recorded estimated liabilities based on the terms of the Refis Program. Since 2009, Praxair has generally been unable to reach final agreement on the calculations and recently initiated litigation against the government in an attempt to resolve certain items. Open issues relate to the following matters: (i) application of cash deposits and net operating loss carryforwards to satisfy obligations, (ii) the amount of tax reductions available under the Refis Program, and (iii) income tax deductibility of payments. Although it is difficult to estimate the timing of resolution of legal matters in Brazil, it is possible that individual disputed matters may be resolved during the next year. |
• | At June 30, 2014 the most significant non-income and income tax claims in Brazil, after enrollment in the Refis Program, relate to state VAT tax matters associated with procedural issues and a federal income tax matter where the taxing authorities are challenging the tax rate that should be applied to income generated by a subsidiary company. The total estimated exposure relating to such claims, including interest and penalties, as appropriate, is approximately $200 million. Praxair has not recorded any liabilities related to such claims based on management judgments, after considering judgments and opinions of outside counsel. Because litigation in Brazil historically takes many years to resolve, it is very difficult to estimate the timing of resolution of these matters; however, it is possible that certain of these matters may be resolved within the near term. The company is vigorously defending against the proceedings. |
• | On September 1, 2010, CADE (Brazilian Administrative Council for Economic Defense) announced alleged anticompetitive activity on the part of five industrial gas companies in Brazil and imposed fines on all five companies. Originally, CADE imposed a civil fine of R$2.2 billion Brazilian reais (US$999 million) against White Martins, the Brazil-based subsidiary of Praxair, Inc. In response to a motion for clarification, the fine was reduced to R$1.7 billion Brazilian reais (US$772 million) due to a calculation error made by CADE. The amount of the fine is subject to indexation using SELIC. On September 2, 2010, Praxair issued a press release and filed a report on Form 8-K rejecting all claims and stating that the fine represents a gross and arbitrary disregard of Brazilian law. |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(Millions of dollars) | 2014 | 2013 | 2014 | 2013 | |||||||||||
SALES(a) | |||||||||||||||
North America | $ | 1,628 | $ | 1,552 | $ | 3,208 | $ | 3,009 | |||||||
Europe | 408 | 382 | 805 | 752 | |||||||||||
South America | 509 | 536 | 997 | 1,067 | |||||||||||
Asia | 394 | 379 | 786 | 746 | |||||||||||
Surface Technologies | 174 | 165 | 343 | 328 | |||||||||||
Total sales | $ | 3,113 | $ | 3,014 | $ | 6,139 | $ | 5,902 |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||
(Millions of dollars) | 2014 | 2013 | 2014 | 2013 | |||||||||||
OPERATING PROFIT | |||||||||||||||
North America | $ | 398 | $ | 381 | $ | 776 | $ | 739 | |||||||
Europe | 78 | 69 | 157 | 131 | |||||||||||
South America | 113 | 123 | 226 | 237 | |||||||||||
Asia | 76 | 61 | 151 | 124 | |||||||||||
Surface Technologies | 32 | 31 | 62 | 57 | |||||||||||
Segment operating profit | 697 | 665 | 1,372 | 1,288 | |||||||||||
Venezuela currency devaluation (Note 2) | — | — | — | (23 | ) | ||||||||||
Total operating profit | $ | 697 | $ | 665 | $ | 1,372 | $ | 1,265 |
(a) | Intersegment sales, primarily from North America to other segments, were not significant for the quarters and six months ended June 30, 2014 and 2013. |
Quarter Ended June 30, | |||||||||||||||||||||||
(Millions of dollars) | 2014 | 2013 | |||||||||||||||||||||
Activity | Praxair, Inc. Shareholders’ Equity | Noncontrolling Interests | Total Equity | Praxair, Inc. Shareholders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||
Balance, beginning of period | $ | 6,600 | $ | 398 | $ | 6,998 | $ | 6,169 | $ | 357 | $ | 6,526 | |||||||||||
Net income (a) | 467 | 10 | 477 | 445 | 9 | 454 | |||||||||||||||||
Other comprehensive income (loss) | 153 | 2 | 155 | (386 | ) | — | (386 | ) | |||||||||||||||
Noncontrolling interests: | |||||||||||||||||||||||
Additions (reductions) (b) | — | 3 | 3 | — | — | — | |||||||||||||||||
Dividends and other capital changes | — | (18 | ) | (18 | ) | — | (9 | ) | (9 | ) | |||||||||||||
Redemption value adjustments | — | — | — | (8 | ) | — | (8 | ) | |||||||||||||||
Dividends to Praxair, Inc. common stock holders ($0.65 per share in 2014 and $0.60 per share in 2013) | (190 | ) | — | (190 | ) | (177 | ) | — | (177 | ) | |||||||||||||
Issuances of common stock: | |||||||||||||||||||||||
For the dividend reinvestment and stock purchase plan | 2 | — | 2 | 1 | — | 1 | |||||||||||||||||
For employee savings and incentive plans | 19 | — | 19 | 43 | — | 43 | |||||||||||||||||
Purchases of common stock | (157 | ) | — | (157 | ) | (187 | ) | — | (187 | ) | |||||||||||||
Tax benefit from share-based compensation | 4 | — | 4 | 11 | — | 11 | |||||||||||||||||
Share-based compensation | 13 | — | 13 | 17 | — | 17 | |||||||||||||||||
Balance, end of period | $ | 6,911 | $ | 395 | $ | 7,306 | $ | 5,928 | $ | 357 | $ | 6,285 |
Six Months Ended June 30, | |||||||||||||||||||||||
(Millions of dollars) | 2014 | 2013 | |||||||||||||||||||||
Activity | Praxair, Inc. Shareholders’ Equity | Noncontrolling Interests | Total Equity | Praxair, Inc. Shareholders’ Equity | Noncontrolling Interests | Total Equity | |||||||||||||||||
Balance, beginning of period | $ | 6,609 | $ | 394 | $ | 7,003 | $ | 6,064 | $ | 357 | $ | 6,421 | |||||||||||
Net income (a) | 915 | 20 | 935 | 836 | 19 | 855 | |||||||||||||||||
Other comprehensive loss | 136 | (1 | ) | 135 | (383 | ) | (3 | ) | (386 | ) | |||||||||||||
Noncontrolling interests: | |||||||||||||||||||||||
Additions (reductions) (b) | (24 | ) | 3 | (21 | ) | — | — | — | |||||||||||||||
Dividends and other capital changes | — | (21 | ) | (21 | ) | — | (16 | ) | (16 | ) | |||||||||||||
Redemption value adjustments | (1 | ) | — | (1 | ) | (13 | ) | — | (13 | ) | |||||||||||||
Dividends to Praxair, Inc. common stock holders ($1.30 per share in 2014 and $1.20 per share in 2013) | (381 | ) | — | (381 | ) | (355 | ) | — | (355 | ) | |||||||||||||
Issuances of common stock: | |||||||||||||||||||||||
For the dividend reinvestment and stock purchase plan | 3 | — | 3 | 3 | — | 3 | |||||||||||||||||
For employee savings and incentive plans | 52 | — | 52 | 60 | — | 60 | |||||||||||||||||
Purchases of common stock | (450 | ) | — | (450 | ) | (343 | ) | — | (343 | ) | |||||||||||||
Tax benefit from share-based compensation | 24 | — | 24 | 25 | — | 25 | |||||||||||||||||
Share-based compensation | 28 | — | 28 | 34 | — | 34 | |||||||||||||||||
Balance, end of period | $ | 6,911 | $ | 395 | $ | 7,306 | $ | 5,928 | $ | 357 | $ | 6,285 |
(a) | Net income for noncontrolling interests excludes Net income related to redeemable noncontrolling interests of $4 million and $8 million for the quarter and six months ended June 30, 2014 ($7 million and $12 million for the same time periods in 2013, respectively), which is not part of total equity (see redeemable noncontrolling interests section below). |
(b) | Praxair increased its ownership in certain consolidated subsidiaries. The difference between the purchase price and the related noncontrolling interests was recorded as a decrease in Praxair's additional paid-in-capital. |
June 30, | December 31, | ||||||
(Millions of dollars) | 2014 | 2013 | |||||
Cumulative translation adjustment - net of taxes | |||||||
North America | $ | (310 | ) | $ | (315 | ) | |
South America | (1,060 | ) | (1,179 | ) | |||
Europe | (77 | ) | (63 | ) | |||
Asia | 34 | 21 | |||||
Surface Technologies | 32 | 28 | |||||
(1,381 | ) | (1,508 | ) | ||||
Derivatives - net of taxes | (2 | ) | (4 | ) | |||
Pension / OPEB funded status obligation - net of taxes | (462 | ) | (469 | ) | |||
$ | (1,845 | ) | $ | (1,981 | ) |
(Millions of dollars) | 2014 | 2013 | |||||
Balance, January 1, | $ | 307 | $ | 252 | |||
Net income | 8 | 12 | |||||
Distributions to noncontrolling interest | (8 | ) | (7 | ) | |||
Redemption value adjustments/accretion | 1 | 13 | |||||
Foreign currency translation and other | (2 | ) | (11 | ) | |||
Purchase of noncontrolling interest * | (112 | ) | — | ||||
Balance, June 30, | $ | 194 | $ | 259 |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
(Dollar amounts in millions, except per share data) | 2014 | 2013 | Variance | 2014 | 2013 | Variance | |||||||||||||||
Reported Amounts | |||||||||||||||||||||
Sales | $ | 3,113 | $ | 3,014 | 3 | % | $ | 6,139 | $ | 5,902 | 4 | % | |||||||||
Cost of sales, exclusive of depreciation and amortization | $ | 1,767 | $ | 1,710 | 3 | % | $ | 3,493 | $ | 3,348 | 4 | % | |||||||||
Gross margin (a) | $ | 1,346 | $ | 1,304 | 3 | % | $ | 2,646 | $ | 2,554 | 4 | % | |||||||||
As a percent of sales | 43.2 | % | 43.3 | % | 43.1 | % | 43.3 | % | |||||||||||||
Selling, general and administrative | $ | 335 | $ | 344 | (3 | )% | $ | 661 | $ | 681 | (3 | )% | |||||||||
As a percent of sales | 10.8 | % | 11.4 | % | 10.8 | % | 11.5 | % | |||||||||||||
Depreciation and amortization | $ | 293 | $ | 275 | 7 | % | $ | 578 | $ | 541 | 7 | % | |||||||||
Venezuela currency devaluation (b) | $ | — | $ | — | $ | — | $ | 23 | |||||||||||||
Other income (expense) - net | $ | 3 | $ | 4 | $ | 12 | $ | 4 | |||||||||||||
Operating profit | $ | 697 | $ | 665 | 5 | % | $ | 1,372 | $ | 1,265 | 8 | % | |||||||||
As a percent of sales | 22.4 | % | 22.1 | % | 22.3 | % | 21.4 | % | |||||||||||||
Interest expense - net | $ | 43 | $ | 41 | 5 | % | $ | 89 | $ | 81 | 10 | % | |||||||||
Effective tax rate | 28.0 | % | 27.9 | % | 28.0 | % | 28.5 | % | |||||||||||||
Income from equity investments | $ | 10 | $ | 11 | (9 | )% | $ | 19 | $ | 21 | (10 | )% | |||||||||
Noncontrolling interests | $ | (14 | ) | $ | (16 | ) | (13 | )% | $ | (28 | ) | $ | (31 | ) | (10 | )% | |||||
Net income - Praxair, Inc. | $ | 467 | $ | 445 | 5 | % | $ | 915 | $ | 836 | 9 | % | |||||||||
Diluted earnings per share | $ | 1.58 | $ | 1.49 | 6 | % | $ | 3.08 | $ | 2.79 | 10 | % | |||||||||
Diluted shares outstanding | 295,976 | 298,654 | (1 | )% | 296,679 | 299,290 | (1 | )% | |||||||||||||
2013 Adjusted Amounts (c) | |||||||||||||||||||||
Operating profit | $ | 697 | $ | 665 | 5 | % | $ | 1,372 | $ | 1,288 | 7 | % | |||||||||
As a percent of sales | 22.4 | % | 22.1 | % | 22.3 | % | 21.8 | % | |||||||||||||
Effective tax rate | 28.0 | % | 27.9 | % | 28.0 | % | 28.0 | % | |||||||||||||
Net income - Praxair, Inc. | $ | 467 | $ | 445 | 5 | % | $ | 915 | $ | 859 | 7 | % | |||||||||
Diluted earnings per share | $ | 1.58 | $ | 1.49 | 6 | % | $ | 3.08 | $ | 2.87 | 7 | % |
(a) | Gross margin excludes depreciation and amortization expense. |
(b) | See Note 2 to the consolidated financial statements. |
(c) | Adjusted amounts are non-GAAP measures which exclude the impact of the Venezuela currency devaluation in the first quarter 2013 (see Note 2 to the condensed consolidated financial statements). A reconciliation of reported amounts to adjusted amounts can be found in the “Non-GAAP Financial Measures” section of this MD&A. |
Quarter Ended June 30, 2014 vs. 2013 | Six Months Ended June 30, 2014 vs. 2013 | ||||||||||
% Change | % Change | ||||||||||
Sales | Operating Profit | Sales | Operating Profit | ||||||||
Factors Contributing to Changes | |||||||||||
Volume | 3 | % | — | % | 3 | % | 1 | % | |||
Price | 1 | % | 7 | % | 2 | % | 8 | % | |||
Cost pass-through | — | % | — | % | 1 | % | — | % | |||
Currency | (2 | )% | (2 | )% | (3 | )% | (3 | )% | |||
Acquisitions/divestitures | 1 | % | 1 | % | 1 | % | 2 | % | |||
Other | — | % | (1 | )% | — | % | — | % | |||
Reported | 3 | % | 5 | % | 4 | % | 8 | % | |||
Venezuela currency devaluation | — | % | — | % | — | % | (1 | )% | |||
Adjusted | 3 | % | 5 | % | 4 | % | 7 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
% of Sales | % Change | % of Sales | % Change | ||||||||||||||
2014 | 2013 | Organic Sales* | 2014 | 2013 | Organic Sales* | ||||||||||||
Sales by End Markets | |||||||||||||||||
Manufacturing | 24 | % | 24 | % | 2 | % | 24 | % | 25 | % | 1 | % | |||||
Metals | 17 | % | 17 | % | 5 | % | 17 | % | 18 | % | 5 | % | |||||
Energy | 14 | % | 12 | % | 17 | % | 14 | % | 11 | % | 17 | % | |||||
Chemicals | 10 | % | 11 | % | (3 | )% | 10 | % | 11 | % | 2 | % | |||||
Electronics | 7 | % | 8 | % | (1 | )% | 7 | % | 8 | % | (1 | )% | |||||
Healthcare | 8 | % | 8 | % | 2 | % | 8 | % | 8 | % | 3 | % | |||||
Food & Beverage | 8 | % | 8 | % | 8 | % | 8 | % | 7 | % | 7 | % | |||||
Aerospace | 3 | % | 3 | % | (2 | )% | 3 | % | 3 | % | 1 | % | |||||
Other | 9 | % | 9 | % | 3 | % | 9 | % | 9 | % | 7 | % | |||||
100 | % | 100 | % | 100 | % | 100 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||
% of Sales | % of Sales | ||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||
Sales by Distribution Method** | |||||||||||
On- Site | 29 | % | 26 | % | 29 | % | 26 | % | |||
Merchant | 34 | % | 35 | % | 34 | % | 34 | % | |||
Packaged Gas | 29 | % | 30 | % | 29 | % | 30 | % | |||
Other | 8 | % | 9 | % | 8 | % | 10 | % | |||
100 | % | 100 | % | 100 | % | 100 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
(Dollar amounts in millions) | 2014 | 2013 | Variance | 2014 | 2013 | Variance | |||||||||||||||
SALES | |||||||||||||||||||||
North America | $ | 1,628 | $ | 1,552 | 5 | % | $ | 3,208 | $ | 3,009 | 7 | % | |||||||||
Europe | 408 | 382 | 7 | % | 805 | 752 | 7 | % | |||||||||||||
South America | 509 | 536 | (5 | )% | 997 | 1,067 | (7 | )% | |||||||||||||
Asia | 394 | 379 | 4 | % | 786 | 746 | 5 | % | |||||||||||||
Surface Technologies | 174 | 165 | 5 | % | 343 | 328 | 5 | % | |||||||||||||
$ | 3,113 | $ | 3,014 | 3 | % | $ | 6,139 | $ | 5,902 | 4 | % | ||||||||||
OPERATING PROFIT | |||||||||||||||||||||
North America | $ | 398 | $ | 381 | 4 | % | $ | 776 | $ | 739 | 5 | % | |||||||||
Europe | 78 | 69 | 13 | % | 157 | 131 | 20 | % | |||||||||||||
South America | 113 | 123 | (8 | )% | 226 | 237 | (5 | )% | |||||||||||||
Asia | 76 | 61 | 25 | % | 151 | 124 | 22 | % | |||||||||||||
Surface Technologies | 32 | 31 | 3 | % | 62 | 57 | 9 | % | |||||||||||||
Segment operating profit | 697 | 665 | 5 | % | 1,372 | 1,288 | 7 | % | |||||||||||||
Venezuela currency devaluation (Note 2) | — | — | — | (23 | ) | ||||||||||||||||
Total operating profit | $ | 697 | $ | 665 | 5 | % | $ | 1,372 | $ | 1,265 | 8 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2014 | 2013 | Variance | 2014 | 2013 | Variance | ||||||||||||||||
Sales | $ | 1,628 | $ | 1,552 | 5 | % | $ | 3,208 | $ | 3,009 | 7 | % | |||||||||
Cost of sales, exclusive of depreciation and amortization | 896 | 843 | 1,766 | 1,615 | |||||||||||||||||
Gross margin | 732 | 709 | 1,442 | 1,394 | |||||||||||||||||
Operating expenses | 182 | 189 | 365 | 383 | |||||||||||||||||
Depreciation and amortization | 152 | 139 | 301 | 272 | |||||||||||||||||
Operating profit | $ | 398 | $ | 381 | 4 | % | $ | 776 | $ | 739 | 5 | % | |||||||||
Margin % | 24.4 | % | 24.5 | % | 24.2 | % | 24.6 | % |
Quarter Ended June 30, 2014 vs. 2013 | Six Months Ended June 30, 2014 vs. 2013 | ||||||||||
% Change | % Change | ||||||||||
Sales | Operating Profit | Sales | Operating Profit | ||||||||
Factors Contributing to Changes | |||||||||||
Volume | 4 | % | 1 | % | 4 | % | 1 | % | |||
Price | 1 | % | 5 | % | 1 | % | 5 | % | |||
Cost pass-through | 1 | % | — | % | 2 | % | — | % | |||
Currency | (2 | )% | (2 | )% | (2 | )% | (2 | )% | |||
Acquisitions/divestitures | 1 | % | — | % | 2 | % | 2 | % | |||
Other | — | % | — | % | — | % | (1 | )% | |||
5 | % | 4 | % | 7 | % | 5 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
% of Sales | % Change | % of Sales | % Change | ||||||||||||||
2014 | 2013 | Organic Sales | 2014 | 2013 | Organic Sales | ||||||||||||
Sales by End Markets | |||||||||||||||||
Manufacturing | 30 | % | 30 | % | 3 | % | 30 | % | 31 | % | 2 | % | |||||
Metals | 11 | % | 12 | % | (2 | )% | 12 | % | 13 | % | (1 | )% | |||||
Energy | 21 | % | 17 | % | 21 | % | 20 | % | 17 | % | 20 | % | |||||
Chemicals | 10 | % | 11 | % | (2 | )% | 10 | % | 10 | % | 4 | % | |||||
Electronics | 4 | % | 5 | % | (3 | )% | 4 | % | 5 | % | (4 | )% | |||||
Healthcare | 7 | % | 7 | % | 1 | % | 7 | % | 7 | % | 1 | % | |||||
Food & Beverage | 8 | % | 9 | % | 4 | % | 8 | % | 7 | % | 3 | % | |||||
Aerospace | 1 | % | 1 | % | (4 | )% | 1 | % | 1 | % | 2 | % | |||||
Other | 8 | % | 8 | % | 10 | % | 8 | % | 9 | % | 10 | % | |||||
100 | % | 100 | % | 100 | % | 100 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||
% of Sales | % of Sales | ||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||
Sales by Distribution Method | |||||||||||
On- Site | 31 | % | 27 | % | 31 | % | 27 | % | |||
Merchant | 35 | % | 37 | % | 35 | % | 36 | % | |||
Packaged Gas | 32 | % | 35 | % | 32 | % | 35 | % | |||
Other | 2 | % | 1 | % | 2 | % | 2 | % | |||
100 | % | 100 | % | 100 | % | 100 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2014 | 2013 | Variance % | 2014 | 2013 | Variance % | ||||||||||||||||
Sales | $ | 408 | $ | 382 | 7 | % | $ | 805 | $ | 752 | 7 | % | |||||||||
Cost of sales, exclusive of depreciation and amortization | 230 | 216 | 448 | 429 | |||||||||||||||||
Gross margin | 178 | 166 | 357 | 323 | |||||||||||||||||
Operating expenses | 58 | 56 | 115 | 110 | |||||||||||||||||
Depreciation and amortization | 42 | 41 | 85 | 82 | |||||||||||||||||
Operating profit | $ | 78 | $ | 69 | 13 | % | $ | 157 | $ | 131 | 20 | % | |||||||||
Margin % | 19.1 | % | 18.1 | % | 19.5 | % | 17.4 | % |
Quarter Ended June 30, 2014 vs. 2013 | Six Months Ended June 30, 2014 vs. 2013 | ||||||||||
% Change | % Change | % Change | % Change | ||||||||
Sales | Operating Profit | Sales | Operating Profit | ||||||||
Factors Contributing to Changes | |||||||||||
Volume | — | % | 4 | % | — | % | 4 | % | |||
Price | 1 | % | 5 | % | 1 | % | 6 | % | |||
Cost pass-through | (1 | )% | — | % | (1 | )% | — | % | |||
Currency | 4 | % | 5 | % | 3 | % | 4 | % | |||
Acquisitions/divestitures | 3 | % | 3 | % | 4 | % | 5 | % | |||
Other | — | % | (4 | )% | — | % | 1 | % | |||
7 | % | 13 | % | 7 | % | 20 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
% of Sales | % Change | % of Sales | % Change | ||||||||||||||
2014 | 2013 | Organic Sales | 2014 | 2013 | Organic Sales | ||||||||||||
Sales by End Markets | |||||||||||||||||
Manufacturing | 21 | % | 21 | % | 6 | % | 22 | % | 22 | % | 6 | % | |||||
Metals | 16 | % | 16 | % | 5 | % | 16 | % | 17 | % | — | % | |||||
Energy | 8 | % | 5 | % | 7 | % | 7 | % | 4 | % | (5 | )% | |||||
Chemicals | 15 | % | 17 | % | (11 | )% | 15 | % | 17 | % | (7 | )% | |||||
Electronics | 6 | % | 7 | % | (2 | )% | 7 | % | 7 | % | — | % | |||||
Healthcare | 11 | % | 11 | % | (5 | )% | 11 | % | 11 | % | (3 | )% | |||||
Food & Beverage | 9 | % | 9 | % | 8 | % | 9 | % | 9 | % | 7 | % | |||||
Aerospace | 1 | % | 1 | % | (29 | )% | 1 | % | 1 | % | 2 | % | |||||
Other | 13 | % | 13 | % | (3 | )% | 12 | % | 12 | % | 3 | % | |||||
100 | % | 100 | % | 100 | % | 100 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||
% of Sales | % of Sales | ||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||
Sales by Distribution Method | |||||||||||
On- Site | 18 | % | 19 | % | 19 | % | 20 | % | |||
Merchant | 36 | % | 34 | % | 35 | % | 34 | % | |||
Packaged Gas | 43 | % | 43 | % | 43 | % | 42 | % | |||
Other | 3 | % | 4 | % | 3 | % | 4 | % | |||
100 | % | 100 | % | 100 | % | 100 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||
2014 | 2013 | Variance | 2014 | 2013 | Variance | ||||||||||||||
Sales | $ | 509 | $ | 536 | (5 | )% | 997 | 1,067 | (7 | )% | |||||||||
Cost of sales, exclusive of depreciation and amortization | 279 | 296 | 555 | 596 | |||||||||||||||
Gross margin | 230 | 240 | 442 | 471 | |||||||||||||||
Operating expenses | 71 | 71 | 127 | 140 | |||||||||||||||
Depreciation and amortization | 46 | 46 | 89 | 94 | |||||||||||||||
Operating profit | $ | 113 | $ | 123 | (8 | )% | 226 | 237 | (5 | )% | |||||||||
Margin % | 22.2 | % | 22.9 | % | 22.7 | % | 22.2 | % |
Quarter Ended June 30, 2014 vs. 2013 | Six Months Ended June 30, 2014 vs. 2013 | ||||||||||
% Change | % Change | % Change | % Change | ||||||||
Sales | Operating Profit | Sales | Operating Profit | ||||||||
Factors Contributing to Changes | |||||||||||
Volume | (1 | )% | (11 | )% | — | % | (4 | )% | |||
Price | 3 | % | 14 | % | 4 | % | 19 | % | |||
Cost pass-through | 1 | % | — | % | 1 | % | — | % | |||
Currency | (8 | )% | (9 | )% | (12 | )% | (13 | )% | |||
Acquisitions/divestitures | — | % | — | % | — | % | — | % | |||
Other | — | % | (2 | )% | — | % | (7 | )% | |||
(5 | )% | (8 | )% | (7 | )% | (5 | )% |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
% of Sales | % Change Organic Sales | % of Sales | % Change Organic Sales | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Sales by End Markets | |||||||||||||||||
Manufacturing | 21 | % | 21 | % | (2 | )% | 21 | % | 22 | % | (1 | )% | |||||
Metals | 29 | % | 29 | % | 3 | % | 29 | % | 29 | % | 6 | % | |||||
Energy | 2 | % | 3 | % | 6 | % | 2 | % | 3 | % | 5 | % | |||||
Chemicals | 9 | % | 8 | % | 2 | % | 9 | % | 8 | % | 10 | % | |||||
Electronics | — | % | — | % | — | % | — | % | — | % | — | % | |||||
Healthcare | 17 | % | 17 | % | 6 | % | 17 | % | 16 | % | 7 | % | |||||
Food & Beverage | 12 | % | 11 | % | 19 | % | 13 | % | 11 | % | 17 | % | |||||
Aerospace | — | % | — | % | — | % | — | % | — | % | — | ||||||
Other | 10 | % | 11 | % | (10 | )% | 9 | % | 11 | % | (8 | )% | |||||
100 | % | 100 | % | 100 | % | 100 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||
% of Sales | % of Sales | ||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||
Sales by Distribution Method | |||||||||||
On- Site | 26 | % | 25 | % | 26 | % | 25 | % | |||
Merchant | 42 | % | 43 | % | 42 | % | 42 | % | |||
Packaged Gas | 30 | % | 31 | % | 29 | % | 31 | % | |||
Other | 2 | % | 1 | % | 3 | % | 2 | % | |||
100 | % | 100 | % | 100 | % | 100 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2014 | 2013 | Variance | 2014 | 2013 | Variance | ||||||||||||||||
Sales | $ | 394 | $ | 379 | 4 | % | $ | 786 | $ | 746 | 5 | % | |||||||||
Cost of sales, exclusive of depreciation and amortization | 250 | 250 | 501 | 496 | |||||||||||||||||
Gross margin | 144 | 129 | 285 | 250 | |||||||||||||||||
Operating expenses | 26 | 30 | 53 | 54 | |||||||||||||||||
Depreciation and amortization | 42 | 38 | 81 | 72 | |||||||||||||||||
Operating profit | $ | 76 | $ | 61 | 25 | % | $ | 151 | $ | 124 | 22 | % | |||||||||
Margin % | 19.3 | % | 16.1 | % | 19.2 | % | 16.6 | % |
Quarter Ended June 30, 2014 vs. 2013 | Six Months Ended June 30, 2014 vs. 2013 | ||||||||||
% Change | % Change | % Change | % Change | ||||||||
Sales | Operating Profit | Sales | Operating Profit | ||||||||
Factors Contributing to Changes | |||||||||||
Volume | 5 | % | 11 | % | 6 | % | 11 | % | |||
Price | 1 | % | 2 | % | 1 | % | 7 | % | |||
Cost pass-through | (1 | )% | — | % | (1 | )% | — | % | |||
Currency | (1 | )% | (1 | )% | (1 | )% | (1 | )% | |||
Acquisitions/divestitures | — | % | — | % | — | % | — | % | |||
Other | — | % | 13 | % | — | % | 5 | % | |||
4 | % | 25 | % | 5 | % | 22 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
% of Sales | % Change Organic Sales | % of Sales | % Change Organic Sales | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
Sales by End Markets | |||||||||||||||||
Manufacturing | 10 | % | 13 | % | (15 | )% | 10 | % | 12 | % | (11 | )% | |||||
Metals | 29 | % | 26 | % | 21 | % | 28 | % | 26 | % | 16 | % | |||||
Energy | 2 | % | — | % | ** | 2 | % | — | % | ** | |||||||
Chemicals | 12 | % | 13 | % | (2 | )% | 12 | % | 13 | % | (2 | )% | |||||
Electronics | 33 | % | 33 | % | 3 | % | 33 | % | 34 | % | 3 | % | |||||
Healthcare | 1 | % | 1 | % | 17 | % | 1 | % | 1 | % | 19 | % | |||||
Food & Beverage | 2 | % | 3 | % | 4 | % | 2 | % | 3 | % | (3 | )% | |||||
Aerospace | — | % | — | % | (6 | )% | — | % | — | % | 1 | % | |||||
Other | 11 | % | 11 | % | 2 | % | 12 | % | 11 | % | 25 | % | |||||
100 | % | 100 | % | 100 | % | 100 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||
% of Sales | % of Sales | ||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||
Sales by Distribution Method | |||||||||||
On- Site | 48 | % | 47 | % | 50 | % | 47 | % | |||
Merchant | 29 | % | 29 | % | 29 | % | 29 | % | |||
Packaged Gas | 13 | % | 12 | % | 12 | % | 11 | % | |||
Other | 10 | % | 12 | % | 9 | % | 13 | % | |||
100 | % | 100 | % | 100 | % | 100 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||
2014 | 2013 | Variance | 2014 | 2013 | Variance | ||||||||||||||||
Sales | $ | 174 | $ | 165 | 5 | % | $ | 343 | $ | 328 | 5 | % | |||||||||
Cost of sales, exclusive of depreciation and amortization | 112 | 105 | 223 | 212 | |||||||||||||||||
Gross margin | 62 | 60 | 120 | 116 | |||||||||||||||||
Operating expenses | 19 | 18 | 36 | 38 | |||||||||||||||||
Depreciation and amortization | 11 | 11 | 22 | 21 | |||||||||||||||||
Operating profit | $ | 32 | $ | 31 | 3 | % | $ | 62 | $ | 57 | 9 | % | |||||||||
Margin % | 18.4 | % | 18.8 | % | 18.1 | % | 17.4 | % |
Quarter Ended June 30, 2014 vs. 2013 | Six Months Ended June 30, 2014 vs. 2013 | ||||||||||
% Change | % Change | % Change | % Change | ||||||||
Sales | Operating Profit | Sales | Operating Profit | ||||||||
Factors Contributing to Changes | |||||||||||
Volume/Price | 4 | % | 3 | % | 3 | % | 2 | % | |||
Cost pass-through | — | % | — | % | — | % | — | % | |||
Currency | 2 | % | — | % | 2 | % | 1 | % | |||
Acquisitions/divestitures | (1 | )% | — | % | — | % | — | % | |||
Other | — | % | — | % | — | % | 6 | % | |||
5 | % | 3 | % | 5 | % | 9 | % |
Quarter Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
% of Sales | % Change | % of Sales | % Change | ||||||||||||||
2014 | 2013 | Organic Sales | 2014 | 2013 | Organic Sales | ||||||||||||
Sales by End Markets | |||||||||||||||||
Manufacturing | 14 | % | 13 | % | 8 | % | 13 | % | 13 | % | 3 | % | |||||
Metals | 8 | % | 8 | % | 8 | % | 8 | % | 8 | % | 9 | % | |||||
Energy | 27 | % | 29 | % | (5 | )% | 27 | % | 29 | % | (4 | )% | |||||
Chemicals | 2 | % | 2 | % | (9 | )% | 2 | % | 2 | % | (10 | )% | |||||
Electronics | 1 | % | 1 | % | — | % | 1 | % | — | % | — | % | |||||
Healthcare | — | % | — | % | — | % | — | % | — | % | — | % | |||||
Food & Beverage | 3 | % | 3 | % | — | % | 3 | % | 3 | % | (1 | )% | |||||
Aerospace | 33 | % | 34 | % | 1 | % | 33 | % | 34 | % | 1 | % | |||||
Other | 12 | % | 10 | % | 12 | % | 13 | % | 11 | % | 13 | % | |||||
100 | % | 100 | % | 100 | % | 100 | % |
Percentage of YTD 2014 Consolidated Sales (a) | Exchange Rate for Income Statement | Exchange Rate for Balance Sheet | ||||||||||||
Year-To-Date Average | June 30, | December 31, | ||||||||||||
Currency | 2014 | 2013 | 2014 | 2013 | ||||||||||
Brazilian real | 13 | % | 2.29 | 2.03 | 2.20 | 2.34 | ||||||||
Euro | 13 | % | 0.73 | 0.76 | 0.73 | 0.73 | ||||||||
Canadian dollar | 8 | % | 1.10 | 1.02 | 1.07 | 1.06 | ||||||||
Mexican peso | 6 | % | 13.11 | 12.56 | 12.97 | 13.04 | ||||||||
Chinese yuan | 5 | % | 6.17 | 6.21 | 6.20 | 6.05 | ||||||||
Indian rupee | 3 | % | 60.79 | 55.01 | 60.19 | 61.80 | ||||||||
Korean won | 3 | % | 1,049 | 1,104 | 1,012 | 1,050 | ||||||||
Singapore dollar | <1% | 1.26 | 1.24 | 1.25 | 1.26 | |||||||||
Argentine peso | <1% | 7.82 | 5.13 | 8.13 | 6.52 | |||||||||
Colombian peso | <1% | 1,958 | 1,827 | 1,881 | 1,927 | |||||||||
Russian ruble | <1% | 35.01 | 31.02 | 33.98 | 32.87 | |||||||||
Taiwanese dollar | <1% | 30.21 | 29.66 | 29.89 | 29.81 | |||||||||
Thailand bhat | <1% | 32.55 | 29.84 | 32.44 | 32.71 | |||||||||
Venezuelan bolivar fuerte (b) | <1% | 6.30 | 5.68 | 6.30 | 6.30 |
(a) | Certain Surface Technologies segment sales are included in European, Indian and Brazilian sales. |
(b) | Effective March 24, 2014, the Venezuelan government introduced a new exchange control market-based mechanism (referred to as “SICAD 2”) which may allow companies to obtain U.S. dollars for any purpose, including dividend remittances. Through June 30, 2014, SICAD 2 market-based transactions were limited and it is not clear whether the Company will be able to exchange Venezuelan bolivar fuerte ("VEF") to U.S. dollars to pay its foreign denominated obligations and/or to make dividend and royalty remittances. Therefore, Praxair has continued to use the official 6.3 exchange rate for remeasurement purposes and will continue to monitor current developments. At June 30, 2014 the SICAD 2 rate was 49.98 VEF per U.S. dollar. In Venezuela, Praxair’s 2014 year-to-date sales were approximately $52 million and at June 30, 2014 Praxair’s net asset position was approximately $120 million, including $47 million of VEF nominated cash. If the VEF devalued from the current official 6.3 rate or if the Company determined that it was more appropriate to use another exchange rate for translation purposes, it would result tin a charge to earnings in the period of devaluation. Based on its June 30, 2014 balance sheet, Praxair estimates that it would incur a pre-tax charge of approximately $12 million for every 10% devaluation of the VEF versus the U.S. dollar. |
(Millions of dollars) | Six Months Ended June 30, | ||||||
2014 | 2013 | ||||||
NET CASH PROVIDED BY (USED FOR): | |||||||
OPERATING ACTIVITIES | |||||||
Net income - Praxair, Inc. plus depreciation and amortization | $ | 1,493 | $ | 1,377 | |||
Noncontrolling interests | 28 | 31 | |||||
Net income plus depreciation and amortization (including noncontrolling interests) | 1,521 | 1,408 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Venezuela currency devaluation (a) | — | 23 | |||||
Deferred income taxes | 17 | 99 | |||||
Working capital | (198 | ) | (361 | ) | |||
Pension contributions | (13 | ) | (43 | ) | |||
Other - net | 56 | (77 | ) | ||||
Net cash provided by operating activities | $ | 1,383 | $ | 1,049 | |||
INVESTING ACTIVITIES | |||||||
Capital expenditures | (777 | ) | (988 | ) | |||
Acquisitions, net of cash acquired | (170 | ) | (1,269 | ) | |||
Divestitures and asset sales | 71 | 38 | |||||
Net cash used for investing activities | $ | (876 | ) | $ | (2,219 | ) | |
FINANCING ACTIVITIES | |||||||
Debt increases (reductions) - net | 364 | 1,755 | |||||
Issuances (purchases) of common stock - net | (377 | ) | (269 | ) | |||
Cash dividends - Praxair, Inc. shareholders | (381 | ) | (355 | ) | |||
Excess tax benefit on share-based compensation | 24 | 24 | |||||
Noncontrolling interest transactions and other | (111 | ) | (17 | ) | |||
Net cash (used for) provided by financing activities | $ | (481 | ) | $ | 1,138 |
(a) | See Note 2 to the condensed consolidated financial statements. |
June 30, | ||||||
(Dollar amounts in millions, except per share data) | 2014 | 2013 | ||||
Debt-to-capital | 54.5 | % | 54.3 | % | 1 | |
After-tax return on capital | 12.6 | % | 13.0 | % | ||
Return on equity | 28.3 | % | 28.4 | % | ||
Debt-to-adjusted EBITDA | 2.3 | 2.1 |
Six Months Ended June 30, | ||||||
2014 | 2013 | |||||
2013 Adjusted amounts: 2 | ||||||
Operating profit | $ | 1,372 | 1,288 | |||
As a percent of sales | 22.3 | % | 21.8 | % | ||
Effective tax rate | 28.0 | % | 28.0 | % | ||
Net income - Praxair, Inc. | $ | 915 | 859 | |||
Diluted earnings per share | $ | 3.08 | 2.87 |
1 | As of December 31, 2013. |
2 | The adjusted amounts for 2013 exclude the impact of the first quarter Venezuela currency devaluation of $23 million ($23 million net of tax). See Note 2 to the condensed consolidated financial statements. |
June 30, 2014 | December 31, 2013 | ||||||
(Dollar amounts in millions) | |||||||
Debt | $ | 9,165 | $ | 8,811 | |||
Less: cash and cash equivalents | (173 | ) | (138 | ) | |||
Net debt | 8,992 | 8,673 | |||||
Equity and redeemable noncontrolling interests | |||||||
Redeemable noncontrolling interests | 194 | 307 | |||||
Praxair, Inc. shareholders’ equity | 6,911 | 6,609 | |||||
Noncontrolling interests | 395 | 394 | |||||
Total equity and redeemable noncontrolling interests | 7,500 | 7,310 | |||||
Capital | $ | 16,492 | $ | 15,983 | |||
DEBT-TO-CAPITAL RATIO | 54.5 | % | 54.3 | % |
2014 | 2013 | ||||||||||||||||||||||
Four Quarter Trailing | Six Months Ended | Six Months Ended | Four Quarter Trailing | Six Months Ended | Six Months Ended | ||||||||||||||||||
June 30, 2014 | December 31, 2013 | June 30, 2013 | December 31, 2012 | ||||||||||||||||||||
(Dollar amounts in millions) | |||||||||||||||||||||||
Adjusted operating profit (see below) | $ | 2,741 | $ | 1,372 | $ | 1,369 | $ | 2,527 | $ | 1,288 | $ | 1,239 | |||||||||||
Less: adjusted income taxes (see below) | (719 | ) | (359 | ) | (360 | ) | (664 | ) | (338 | ) | (326 | ) | |||||||||||
Less: tax benefit on interest expense* | (47 | ) | (25 | ) | (22 | ) | (42 | ) | (22 | ) | (20 | ) | |||||||||||
Add: equity income | 36 | 19 | 17 | 38 | 21 | 17 | |||||||||||||||||
Net operating profit after-tax (NOPAT) | $ | 2,011 | $ | 1,007 | $ | 1,004 | $ | 1,859 | $ | 949 | $ | 910 | |||||||||||
Capital: | |||||||||||||||||||||||
June 30th | $ | 16,492 | $ | 15,548 | |||||||||||||||||||
March 31st | $ | 16,319 | $ | 15,344 | |||||||||||||||||||
December 31st, 2013 & 2012 | $ | 15,983 | $ | 13,878 | |||||||||||||||||||
September 30th, 2013 & 2012 | $ | 15,757 | $ | 13,617 | |||||||||||||||||||
June 30th, 2013 & 2012 | $ | 15,548 | $ | 13,017 | |||||||||||||||||||
Five-quarter average | $ | 16,020 | $ | 14,281 | |||||||||||||||||||
After-tax ROC | 12.6 | % | 13.0 | % |
* | Tax benefit on interest expense is computed using the effective rate. The effective tax rate used was 28% for 2014 and 2013. |
2014 | 2013 | ||||||||||||||||||||||
Four Quarter Trailing | Six Months Ended | Six Months Ended | Four Quarter Trailing | Six Months Ended | Six Months Ended | ||||||||||||||||||
June 30, 2014 | December 31, 2013 | June 30, 2013 | December 31, 2012 | ||||||||||||||||||||
(Dollar amounts in millions) | |||||||||||||||||||||||
Adjusted Net income - Praxair, Inc. (see below) | $ | 1,828 | $ | 915 | $ | 913 | $ | 1,692 | $ | 859 | $ | 833 | |||||||||||
Praxair, Inc. shareholders’ equity | |||||||||||||||||||||||
June 30th | $ | 6,911 | $ | 5,928 | |||||||||||||||||||
March 31st | $ | 6,600 | $ | 6,169 | |||||||||||||||||||
December 31st, 2013 & 2012 | $ | 6,609 | $ | 6,064 | |||||||||||||||||||
September 30th, 2013 & 2012 | $ | 6,210 | $ | 6,015 | |||||||||||||||||||
June 30th, 2013 & 2012 | $ | 5,928 | $ | 5,615 | |||||||||||||||||||
Five-quarter average | $ | 6,452 | $ | 5,958 | |||||||||||||||||||
ROE | 28.3 | % | 28.4 | % |
2014 | 2013 | ||||||||||||||||||||||
Four Quarter Trailing | Six Months Ended | Six Months Ended | Four Quarter Trailing | Six Months Ended | Six Months Ended | ||||||||||||||||||
June 30, 2014 | December 31, 2013 | June 30, 2013 | December 31, 2012 | ||||||||||||||||||||
(Dollar amounts in millions) | |||||||||||||||||||||||
Adjusted net income - Praxair, Inc. (see below) | $ | 1,828 | $ | 915 | $ | 913 | $ | 1,692 | $ | 859 | $ | 833 | |||||||||||
Add: adjusted noncontrolling interest (see below) | 62 | 28 | 34 | 57 | 31 | 26 | |||||||||||||||||
Add: interest expense - net | 168 | 89 | 79 | 152 | 81 | 71 | |||||||||||||||||
Add: adjusted income taxes (see below) | 719 | 359 | 360 | 664 | 338 | 326 | |||||||||||||||||
Add: depreciation and amortization | 1,146 | 578 | 568 | 1,043 | 541 | 502 | |||||||||||||||||
Adjusted EBITDA | $ | 3,923 | $ | 1,969 | $ | 1,954 | $ | 3,608 | $ | 1,850 | $ | 1,758 | |||||||||||
Net Debt: | |||||||||||||||||||||||
June 30th | $ | 8,992 | $ | 9,004 | |||||||||||||||||||
March 31st | $ | 9,126 | $ | 8,563 | |||||||||||||||||||
December 31st, 2013 & 2012 | $ | 8,673 | $ | 7,205 | |||||||||||||||||||
September 30th, 2013 & 2012 | $ | 8,892 | $ | 7,028 | |||||||||||||||||||
June 30th, 2013 & 2012 | $ | 9,004 | $ | 6,891 | |||||||||||||||||||
Five-quarter average | $ | 8,937 | $ | 7,738 | |||||||||||||||||||
DEBT-TO-ADJUSTED EBITDA RATIO | 2.3 | 2.1 |
Six Months Ended June 30, | Six Months Ended December 31, | ||||||||||||||
(Dollar amounts in millions, except per share data) | 2014 | 2013 | 2013 | 2012 | |||||||||||
Adjusted Operating Profit | |||||||||||||||
Reported operating profit | $ | 1,372 | $ | 1,265 | $ | 1,360 | $ | 1,174 | |||||||
Add: Venezuela currency devaluation | — | 23 | — | — | |||||||||||
Add: Pension settlement charge | — | — | 9 | 9 | |||||||||||
Add: Cost reduction program | — | — | — | 56 | |||||||||||
Total adjustments | — | 23 | 9 | 65 | |||||||||||
Adjusted operating profit | $ | 1,372 | $ | 1,288 | $ | 1,369 | $ | 1,239 | |||||||
Reported percent change | 8 | % | |||||||||||||
Adjusted percent change | 7 | % | |||||||||||||
Adjusted Interest Expense | |||||||||||||||
Reported interest expense | $ | 89 | $ | 81 | $ | 97 | $ | 71 | |||||||
Less: Bond redemption | — | — | (18 | ) | — | ||||||||||
Total adjustments | — | — | (18 | ) | — | ||||||||||
Adjusted interest expense | $ | 89 | $ | 81 | $ | 79 | $ | 71 | |||||||
Adjusted Income Taxes and Effective Tax Rate | |||||||||||||||
Reported income taxes | $ | 359 | $ | 338 | $ | 311 | $ | 252 | |||||||
Add: Bond redemption | — | — | 6 | — | |||||||||||
Add: Income tax benefit | — | — | 40 | 55 | |||||||||||
Add: Pension settlement charge | — | — | 3 | 3 | |||||||||||
Add: Venezuela currency devaluation | — | — | — | — | |||||||||||
Add: Cost reduction program | — | — | — | 16 | |||||||||||
Total adjustments | — | — | 49 | 74 | |||||||||||
Adjusted income taxes | $ | 359 | $ | 338 | $ | 360 | $ | 326 |
Six Months Ended June 30, | Six Months Ended December 31, | ||||||||||||||
(Dollar amounts in millions, except per share data) | 2014 | 2013 | 2013 | 2012 | |||||||||||
Adjusted Effective Tax Rate | |||||||||||||||
Reported income before income taxes and equity investments | $ | 1,283 | $ | 1,184 | $ | 1,263 | $ | 1,103 | |||||||
Add: Bond redemption | — | — | 18 | — | |||||||||||
Add: Pension settlement charge | — | — | 9 | 9 | |||||||||||
Add: Venezuela currency devaluation | — | 23 | — | — | |||||||||||
Add: Cost reduction program | — | — | — | 56 | |||||||||||
Total adjustments | — | 23 | 27 | 65 | |||||||||||
Adjusted income before income taxes and equity investments | $ | 1,283 | $ | 1,207 | $ | 1,290 | $ | 1,168 | |||||||
Adjusted effective tax rate | 28.0 | % | 28.0 | % | 27.9 | % | 27.9 | % | |||||||
Adjusted Noncontrolling Interests | |||||||||||||||
Reported noncontrolling interests | $ | 28 | $ | 31 | $ | 50 | $ | 24 | |||||||
Less: Income tax benefit | — | — | (16 | ) | — | ||||||||||
Add: Cost reduction program | — | — | — | 2 | |||||||||||
Total adjustments | — | — | (16 | ) | 2 | ||||||||||
Adjusted Noncontrolling Interests | $ | 28 | $ | 31 | $ | 34 | $ | 26 | |||||||
Adjusted Net Income - Praxair, Inc. | |||||||||||||||
Reported net income - Praxair, Inc. | $ | 915 | $ | 836 | $ | 919 | $ | 844 | |||||||
Add: Bond redemption | — | — | 12 | — | |||||||||||
Less: Income tax benefit | — | — | (24 | ) | (55 | ) | |||||||||
Add: Pension settlement charge | — | — | 6 | 6 | |||||||||||
Add: Venezuela currency devaluation | — | 23 | — | — | |||||||||||
Add: Cost reduction program | — | — | — | 38 | |||||||||||
Total adjustments | — | 23 | (6 | ) | (11 | ) | |||||||||
Adjusted net income - Praxair, Inc. | $ | 915 | $ | 859 | $ | 913 | $ | 833 | |||||||
Reported percent change | 9 | % | |||||||||||||
Adjusted percent change | 7 | % |
Adjusted Diluted Earnings Per Share | |||||||
Reported diluted earnings per share | $ | 3.08 | $ | 2.79 | |||
Add: Bond redemption | — | — | |||||
Less: Income tax benefit | — | — | |||||
Add: Pension settlement charge | — | — | |||||
Add: Venezuela currency devaluation | — | 0.08 | |||||
Add: Cost reduction program | — | — | |||||
Total adjustments | — | 0.08 | |||||
Adjusted diluted earnings per share | $ | 3.08 | $ | 2.87 | |||
Reported percent change | 10 | % | |||||
Adjusted percent change | 7 | % |
Low End | High End | ||||||
2014 Diluted EPS guidance | $ | 6.30 | $ | 6.45 | |||
2013 adjusted diluted EPS (see 2013 Annual Report on Form 10-K) | $ | 5.93 | $ | 5.93 | |||
Percentage change from 2013 adjusted amounts | 6 | % | 9 | % |
(a) | Based on an evaluation of the effectiveness of Praxair’s disclosure controls and procedures, which was made under the supervision and with the participation of management, including Praxair’s principal executive officer and principal financial officer, the principal executive officer and principal financial officer have each concluded that, as of the end of the quarterly period covered by this report, such disclosure controls and procedures are effective in ensuring that information required to be disclosed by Praxair in reports that it files under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and accumulated and communicated to management including Praxair’s principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure. |
(b) | There were no changes in Praxair’s internal control over financial reporting that occurred during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, Praxair’s internal control over financial reporting. |
• | Environmental protection; |
• | Domestic and international tax laws and currency controls; |
• | Safety; |
• | Securities laws (e.g., SEC and generally accepted accounting principles in the United States); |
• | Trade and import/ export restrictions; |
• | Antitrust matters; |
• | Global anti-bribery laws; and |
• | Healthcare reimbursement regulations. |
• | The need to implement or remediate controls, procedures and policies appropriate for a larger public company at companies that prior to the acquisition lacked these controls, procedures and policies; |
• | Diversion of management time and focus from operating existing business to acquisition integration challenges; |
• | Cultural challenges associated with integrating employees from the acquired company into the existing organization; |
• | The need to integrate each company’s accounting, management information, human resource and other administrative systems to permit effective management; |
• | Difficulty with the assimilation of acquired operations and products; |
• | Failure to achieve targeted synergies; and |
• | Inability to retain key employees and business relationships of acquired companies. |
Period | Total Number of Shares Purchased (Thousands) | Average Price Paid Per Share | Total Numbers of Shares Purchased as Part of Publicly Announced Program (1) (Thousands) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (2) (Millions) | |||||||||
April 2014 | 443 | $ | 129.50 | 443 | $ | 1,556 | |||||||
May 2014 | 427 | $ | 130.62 | 427 | $ | 1,500 | |||||||
June 2014 | 336 | $ | 131.85 | 336 | $ | 1,455 | |||||||
Second Quarter 2014 | 1,206 | $ | 130.55 | 1,206 | $ | 1,455 |
(1) | During the quarter ended June 30, 2014, the Company repurchased shares of its common stocks pursuant to the following two stock repurchase programs previously approved by the Board of Directors: (a) a $1.5 billion repurchase program announced on January 24, 2012 (2012 program), and (b) a $1.5 billion repurchase program announced on January 28, 2014 (2014 program). Repurchases could take place under both of these programs from time to time on the open market (which could include the use of 10b5-1 trading plans) or through negotiated transactions, subject to market and business conditions. The 2012 and 2014 programs do not have any stated expiration date. |
(2) | During the second quarter, the Company completed the purchase of its common stock pursuant to the 2012 program and purchased $45 million of its common stock pursuant to the 2014 program, leaving an additional $1,455 million remaining authorized under the 2014 program. |
(a) | Exhibits | ||
12.01 | Computation of Ratio of Earnings to Fixed Charges. | ||
31.01 | Rule 13a-14(a) Certification | ||
31.02 | Rule 13a-14(a) Certification | ||
32.01 | Section 1350 Certification (such certifications are furnished for the information of the Commission and shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act). | ||
32.02 | Section 1350 Certification (such certifications are furnished for the information of the Commission and shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act). | ||
101.INS | XBRL Instance Document | ||
101.SCH | XBRL Taxonomy Extension Schema | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase |
PRAXAIR, INC. | |||
(Registrant) | |||
Date: July 23, 2014 | By: /s/ Elizabeth T. Hirsch | ||
Elizabeth T. Hirsch | |||
Vice President and Controller | |||
(On behalf of the Registrant | |||
and as Chief Accounting Officer) |
RATIO OF EARNINGS TO FIXED CHARGES | |||||||||||||||||||
Praxair, Inc. and Subsidiaries | |||||||||||||||||||
Exhibit 12.01 | |||||||||||||||||||
Six Months Ended June 30, | Year Ended December 31, | ||||||||||||||||||
(Dollar amounts in millions, except ratios) | 2014 | 2013 | 2012 | 2011 | 2010 | ||||||||||||||
Pre-tax income from continuing operations before adjustment for | |||||||||||||||||||
noncontrolling interests in consolidated subsidiaries or income or | |||||||||||||||||||
loss from equity investees | $ | 1,283 | $ | 2,447 | $ | 2,296 | $ | 2,323 | $ | 1,964 | |||||||||
Capitalized interest | (19 | ) | (69 | ) | (70 | ) | (62 | ) | (62 | ) | |||||||||
Depreciation of capitalized interest | 10 | 20 | 20 | 22 | 18 | ||||||||||||||
Dividends from less than 50%-owned companies carried at equity | 3 | 10 | 7 | 6 | 9 | ||||||||||||||
Adjusted pre-tax income from continuing operations before adjustment | |||||||||||||||||||
for noncontrolling interests in consolidated subsidiaries or income | |||||||||||||||||||
or loss from equity investees | $ | 1,277 | $ | 2,408 | $ | 2,253 | $ | 2,289 | $ | 1,929 | |||||||||
Fixed charges | |||||||||||||||||||
Interest on long-term and short-term debt | $ | 89 | $ | 178 | $ | 141 | $ | 145 | $ | 118 | |||||||||
Capitalized interest | 19 | 69 | 70 | 62 | 62 | ||||||||||||||
Rental expenses representative of an interest factor | 23 | 43 | 39 | 38 | 37 | ||||||||||||||
Total fixed charges | $ | 131 | $ | 290 | $ | 250 | $ | 245 | $ | 217 | |||||||||
Adjusted pre-tax income from continuing operations before adjustment | |||||||||||||||||||
for noncontrolling interests in consolidated subsidiaries or income or | |||||||||||||||||||
loss from equity investees plus total fixed charges | $ | 1,408 | $ | 2,698 | $ | 2,503 | $ | 2,534 | $ | 2,146 | |||||||||
RATIO OF EARNINGS TO FIXED CHARGES | 10.7 | 9.3 | 10.0 | 10.3 | 9.9 |
1. | I have reviewed this quarterly report on Form 10-Q of Praxair, Inc.; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent function): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
July 23, 2014 | By: /s/ Stephen F. Angel | ||
Stephen F. Angel | |||
Chairman, President | |||
Chief Executive Officer | |||
(principal executive officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Praxair, Inc.; |
2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent function): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
July 23, 2014 | By: /s/ Matthew J. White | ||
Matthew J. White | |||
Senior Vice President and | |||
Chief Financial Officer | |||
(principal financial officer) |
July 23, 2014 | By: /s/ Stephen F. Angel | ||
Stephen F. Angel | |||
Chairman, President | |||
Chief Executive Officer | |||
(principal executive officer) |
July 23, 2014 | By: /s/ Matthew J. White | ||
Matthew J. White | |||
Senior Vice President and | |||
Chief Financial Officer | |||
(principal financial officer) |
Equity and Redeemable Noncontrolling Interests Equity (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified |
3 Months Ended | 6 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2014
|
Jun. 30, 2013
|
Jun. 30, 2014
|
Jun. 30, 2013
|
Mar. 31, 2014
|
Dec. 31, 2013
|
Mar. 31, 2013
|
Dec. 31, 2012
|
|||||||||
Net Income (Loss) Attributable to Redeemable Noncontrolling Interest | $ 4 | $ 7 | $ 8 | $ 12 | ||||||||||||
Cumulative translation adjustment - net of taxes | (1,381) | (1,381) | (1,508) | |||||||||||||
Derivatives - net of taxes | (2) | (2) | (4) | |||||||||||||
Pension / OPEB funded status obligation - net of taxes | (462) | (462) | (469) | |||||||||||||
Accumulated other comprehensive income (loss) | (1,845) | (1,845) | (1,981) | |||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Total Praxair, Inc. Shareholders’ Equity | 6,911 | 6,911 | 6,609 | |||||||||||||
Noncontrolling interests | 395 | 395 | 394 | |||||||||||||
Total Equity | 7,306 | 7,306 | 7,003 | |||||||||||||
Other comprehensive income (loss) | 155 | (386) | 135 | (386) | ||||||||||||
Dividends to Praxair, Inc common stock, per share | $ 0.65 | $ 0.60 | $ 1.30 | $ 1.20 | ||||||||||||
Redemption value adjustments | (1) | (13) | ||||||||||||||
Praxair, Inc. Shareholders’ Equity
|
||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Total Praxair, Inc. Shareholders’ Equity | 6,911 | 5,928 | 6,911 | 5,928 | 6,600 | 6,609 | 6,169 | 6,064 | ||||||||
Net income | 467 | 445 | 915 | 836 | ||||||||||||
Other comprehensive income (loss) | 153 | (386) | 136 | (383) | ||||||||||||
Dividends to Praxair, Inc. common stock holders | (190) | (177) | (381) | (355) | ||||||||||||
For the dividend reinvestment and stock purchase plan | 2 | 1 | 3 | 3 | ||||||||||||
Redemption value adjustments | (8) | (1) | (13) | |||||||||||||
For employee savings and incentive plans | 19 | 43 | 52 | 60 | ||||||||||||
Purchases of common stock | (157) | (187) | (450) | (343) | ||||||||||||
Tax benefit from share-based compensation | 4 | 11 | 24 | 25 | ||||||||||||
Share-based compensation | 13 | 17 | 28 | 34 | ||||||||||||
Additions (reductions) to noncontrolling interests | (24) | [1] | ||||||||||||||
Noncontrolling Interests
|
||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Noncontrolling interests | 395 | 357 | 395 | 357 | 398 | 394 | 357 | 357 | ||||||||
Net income | 10 | [2] | 9 | [2] | 20 | [2] | 19 | [2] | ||||||||
Other comprehensive income (loss) | 2 | (1) | (3) | |||||||||||||
Dividends and Other Capital Changes to Noncontrolling Interests | (18) | (9) | (21) | (16) | ||||||||||||
Additions (reductions) to noncontrolling interests | 3 | 3 | ||||||||||||||
Total Equity
|
||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||
Total Equity | 7,306 | 6,285 | 7,306 | 6,285 | 6,998 | 7,003 | 6,526 | 6,421 | ||||||||
Net income | 477 | [2] | 454 | [2] | 935 | [2] | 855 | [2] | ||||||||
Other comprehensive income (loss) | 155 | (386) | 135 | (386) | ||||||||||||
Dividends and Other Capital Changes to Noncontrolling Interests | (18) | (9) | (21) | (16) | ||||||||||||
Dividends to Praxair, Inc. common stock holders | (190) | (177) | (381) | (355) | ||||||||||||
For the dividend reinvestment and stock purchase plan | 2 | 1 | 3 | 3 | ||||||||||||
Redemption value adjustments | (8) | (1) | (13) | |||||||||||||
For employee savings and incentive plans | 19 | 43 | 52 | 60 | ||||||||||||
Purchases of common stock | (157) | (187) | (450) | (343) | ||||||||||||
Tax benefit from share-based compensation | 4 | 11 | 24 | 25 | ||||||||||||
Share-based compensation | 13 | 17 | 28 | 34 | ||||||||||||
Additions (reductions) to noncontrolling interests | 3 | [1] | (21) | [1] | ||||||||||||
Praxair, Inc. Shareholders’ Equity
|
||||||||||||||||
Accumulated other comprehensive income (loss) | (1,845) | (1,845) | (1,981) | |||||||||||||
North America Segment
|
||||||||||||||||
Cumulative translation adjustment - net of taxes | (310) | (310) | (315) | |||||||||||||
South America Segment
|
||||||||||||||||
Cumulative translation adjustment - net of taxes | (1,060) | (1,060) | (1,179) | |||||||||||||
Europe Segment
|
||||||||||||||||
Cumulative translation adjustment - net of taxes | (77) | (77) | (63) | |||||||||||||
Asia Segment
|
||||||||||||||||
Cumulative translation adjustment - net of taxes | 34 | 34 | 21 | |||||||||||||
Surface Technologies Segment
|
||||||||||||||||
Cumulative translation adjustment - net of taxes | $ 32 | $ 32 | $ 28 | |||||||||||||
|
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