Praxair Reports Record First Quarter; Raises Full-Year Guidance

Praxair, Inc. (NYSE: PX) reported first quarter net income of $307 million and diluted earnings per share of 96 cents, including the impact of a $17 million or 3 cent pension settlement charge. Excluding the pension charge, net income was $318 million and diluted earnings per share was 99 cents, compared to $265 million and 81 cents, respectively, in the prior-year quarter. This represents net income and earnings per share growth of 20% and 22%, respectively, versus the prior-year quarter.* Sales in the first quarter were a record $2,663 million, up 22% versus $2,175 in the first quarter of 2007. Praxair achieved strong sales growth in every geographic region. Growth came primarily from new business, plant start-ups, and strong pricing trends. Operating profit, excluding the pension settlement charge, was $499 million, 24% above $403 million in the prior-year quarter.* Improved pricing and cost savings from productivity programs contributed to the strong operating leverage. Cash flow from operations was $379 million. Capital expenditures were $344 million, which funded primarily new, contracted on-site supply systems for customers. The company invested $40 million in acquisitions, primarily industrial packaged gas businesses in North America, and spent $227 million repurchasing stock, net of issuances. $838 million of stock repurchases have been completed under the $1 billion repurchase program which the company announced in July 2007. Praxair’s debt-to-capital ratio was 45.2% at the end of the quarter. After-tax return-on-capital ratio was 14.8%, and return-on-equity was 24.6%*. In North America, first-quarter sales reached $1,454 million, 21% above the prior year. Sales grew in all major end markets, led by energy and general manufacturing. Operating profit grew 21% to $262 million. In Europe, sales in the first quarter of $390 million grew 18%. Currency effects contributed 13% to sales growth. Underlying sales growth came primarily from growth in merchant and packaged gases volumes in Spain, Italy, and Germany. First-quarter operating profit of $87 million rose 21% from the prior-year period. In South America, first-quarter sales of $466 million grew 34% versus the prior year quarter due to higher prices and volumes, and favorable currency effects of 19%. Sales growth came primarily from higher sales to metals and manufacturing markets, and new plant start-ups. Operating profit rose 35% to $89 million in the quarter. Sales in Asia grew 26% to $211 million in the quarter primarily attributable to strong volume growth. Sales in China, India, and Korea increased to electronics, chemicals and manufacturing markets. Operating profit in the quarter grew 37% to $37 million from the prior-year period, and the operating margin increased to 17.5%. Praxair Surface Technologies had first-quarter sales of $142 million, 14% above the prior-year quarter. Higher sales to energy markets primarily drove sales growth. Operating profit grew 14% to $24 million from the 2007 quarter. For the second quarter of 2008, Praxair expects diluted earnings per share in the range of $1.02 to $1.06. This represents earnings growth of 15% to 19% above the second quarter of 2007. For the full year of 2008, Praxair expects year-over-year sales growth in the range of 13% to 16%. The company expects diluted earnings per share to be in the range of $4.10 to $4.25, excluding the effect of the first-quarter pension settlement charge. This represents 13% to 17% growth from 2007*. Full-year capital expenditures are expected to be about $1.5 billion, supporting an increasing number of contracts for on-site production plants globally which will come on-stream over the next three years and generate strong revenue and earnings growth. Commenting on the results and business outlook, Chairman and Chief Executive Officer Steve Angel said, "We had a very strong first quarter. Our results show solid organic sales growth in all our major end markets and geographic regions, led by South America and Asia. We are continuing to see strength in energy markets and emerging economies. Demand for industrial gases for environmental applications is growing. As a result, the size of our project backlog is unprecedented. Therefore, we have a positive outlook in a mixed global economy, and expect that our results will continue to reflect strong year-over-year growth in sales and earnings.” Praxair is the largest industrial gases company in North and South America, and one of the largest worldwide, with 2007 sales of $9.4 billion. 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. P-27/08 *See the attachments for calculations of non-GAAP measures related to 2008 operating profit, net income, and diluted earnings per share adjusted to exclude a $17 million pension settlement charge, $11 million after-tax, 3 cents EPS. All year-over-year comparisons, including percentage changes, are based on adjusted amounts for 2008 which exclude the pension settlement charge. The attachments also include calculations of non-GAAP measures related to after-tax return-on-capital; return-on-equity; and debt-to-capital ratios. 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 first-quarter results is being held this morning, April 23, at 11:00 am Eastern Time. The number is (617) 224-4324 -- Passcode: 88781456. 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 (Millions of dollars, except per share data) (UNAUDITED)       Quarter Ended March 31, 2008 2007   SALES (a) $ 2,663 $ 2,175 Cost of sales 1,595 1,282 Selling, general and administrative 335 286 Depreciation and amortization 210 182 Research and development 24 24 Other income (expense) - net (b)   (17)   2 OPERATING PROFIT 482 403 Interest expense - net   47   38 INCOME BEFORE INCOME TAXES 435 365 Income taxes   122   95 313 270 Minority interests (15) (9) Income from equity investments   9   4 NET INCOME $ 307 $ 265   PER SHARE DATA   Basic earnings per share $ 0.98 $ 0.83   Diluted earnings per share $ 0.96 $ 0.81   Cash dividends $ 0.375 $ 0.30   WEIGHTED AVERAGE SHARES OUTSTANDING Basic shares outstanding (000's) 313,936 320,763 Diluted shares outstanding (000's) 320,409 326,787 (a) Sales for the 2008 quarter increased $20 million from the contractual pass-through of hydrogen feedstock costs, with minimal impact on operating profit compared to 2007. Sales for the quarter increased $162 million due to currency effects versus 2007.   (b) Other income (expense) for the 2008 quarter includes a pension settlement charge of $17 million ($11 million after-tax or $0.03 per diluted share). PRAXAIR, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Millions of dollars) (UNAUDITED)     March 31, December 31, 2008 2007 ASSETS Cash and cash equivalents $ 21 $ 17 Accounts receivable - net 1,907 1,723 Inventories 483 474 Prepaid and other current assets   221   194 TOTAL CURRENT ASSETS 2,632 2,408   Property, plant and equipment - net 8,221 7,963 Goodwill 2,040 1,967 Other intangibles - net 140 134 Other long-term assets   967   910 TOTAL ASSETS $ 14,000 $ 13,382   LIABILITIES AND EQUITY Accounts payable $ 888 $ 818 Short-term debt 952 788 Current portion of long-term debt 40 40 Other current liabilities   995   1,004 TOTAL CURRENT LIABILITIES 2,875 2,650   Long-term debt 3,582 3,364 Other long-term liabilities   1,990   1,905 TOTAL LIABILITIES 8,447 7,919   Minority interests 344 321 Shareholders' equity   5,209   5,142 TOTAL LIABILITIES AND EQUITY $ 14,000 $ 13,382 PRAXAIR, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Millions of dollars) (UNAUDITED)     Quarter Ended March 31, 2008 2007 OPERATIONS Net income $ 307 $ 265 Depreciation and amortization 210 182 Accounts receivable (184) (73) Inventory (9) (16) Payables and accruals 58 (72) Pension contributions (11) (11) Other   8   23 Net cash provided by operating activities   379   298   INVESTING Capital expenditures (344) (285) Acquisitions (40) (296) Divestitures and asset sales   16   4 Net cash used for investing activities   (368)   (577)   FINANCING Debt increase (decrease) - net 329 540 Purchases of common stock, net of issuances (227) (186) Cash dividends (117) (96) Excess tax benefit on stock option exercises 5 14 Minority interest transactions and other   1   (3) Net cash (used for) provided by financing activities (9) 269   Effect of exchange rate changes on cash and cash equivalents   2   -   Change in cash and cash equivalents 4 (10) Cash and cash equivalents, beginning-of-period   17   36   Cash and cash equivalents, end-of-period $ 21 $ 26 PRAXAIR, INC. AND SUBSIDIARIES SEGMENT INFORMATION (Millions of dollars) (UNAUDITED)     Quarter Ended March 31, 2008 2007 SALES North America (a) $ 1,454 $ 1,205 Europe (b) 390 330 South America (c) 466 348 Asia (d) 211 167 Surface Technologies (e)   142   125 Total sales $ 2,663 $ 2,175   OPERATING PROFIT North America (a) $ 262 $ 217 Europe 87 72 South America 89 66 Asia 37 27 Surface Technologies   24   21 Segment operating profit 499 403 Pension settlement charge   (17)   - Total operating profit $ 482 $ 403 (a) North American 2008 sales for the quarter increased $20 million from the contractual pass-through of hydrogen feedstock costs, with minimal impact on operating profit compared to 2007. Sales for the quarter increased $36 million due to currency effects versus 2007.   (b) European 2008 sales for the quarter increased $42 million due to currency effects versus 2007.   (c) South American 2008 sales for the quarter increased $65 million due to currency effects versus 2007.   (d) Asian 2008 sales for the quarter increased $10 million due to currency effects versus 2007.   (e) Surface Technologies 2008 sales for the quarter increased $9 million due to currency effects versus 2007. PRAXAIR, INC. AND SUBSIDIARIES QUARTERLY FINANCIAL SUMMARY (Millions of dollars, except per share data) (UNAUDITED)           2008 2007 Q1 Q4 Q3 Q2 Q1 FROM THE INCOME STATEMENT Sales $ 2,663 $ 2,523 $ 2,372 $ 2,332 $ 2,175 Cost of sales 1,595 1,493 1,394 1,388 1,282 Selling, general and administrative 335 314 294 296 286 Depreciation and amortization 210 207 196 189 182 Research and development 24 26 24 24 24 Other income (expenses) – net   (17)   1   (4)   4   2 Operating profit 482 484 460 439 403 Interest expense - net 47 50 44 41 38 Income taxes 122 115 106 103 95 Minority interests (15) (16) (9) (9) (9) Income from equity investments   9   13   4   5   4 Net income $ 307 $ 316 $ 305 $ 291 $ 265   PER SHARE DATA Diluted earnings per share $ 0.96 $ 0.98 $ 0.94 $ 0.89 $ 0.81 Cash dividends per share $ 0.375 $ 0.30 $ 0.30 $ 0.30 $ 0.30 Diluted weighted average shares outstanding (000's) 320,409 323,328 324,920 326,301 326,787   FROM THE BALANCE SHEET Total debt $ 4,574 $ 4,192 $ 4,003 $ 3,700 $ 3,736 Total capital (a) 10,127 9,655 9,120 8,784 8,433 Debt-to-capital ratio (a) 45.2% 43.4% 43.9% 42.1% 44.3%   FROM THE STATEMENT OF CASH FLOWS Cash flow from operations $ 379 $ 587 $ 592 $ 481 $ 298 Capital expenditures 344 402 360 329 285 Acquisitions 40 127 22 31 296 Cash dividends 117 94 95 96 96   OTHER INFORMATION Number of employees 27,948 27,992 27,479 28,035 27,681 After-tax return on capital (ROC) (a) 14.8% 15.7% 15.5% 15.3% 14.8% Return on equity (ROE) (a) 24.6% 25.3% 25.1% 25.0% 23.5%   SEGMENT DATA SALES North America $ 1,454 $ 1,381 $ 1,306 $ 1,293 $ 1,205 Europe 390 354 325 336 330 South America 466 444 419 393 348 Asia 211 210 190 179 167 Surface Technologies   142   134   132   131   125 Total sales $ 2,663 $ 2,523 $ 2,372 $ 2,332 $ 2,175 OPERATING PROFIT North America $ 262 $ 255 $ 244 $ 231 $ 217 Europe 87 86 78 79 72 South America 89 85 84 76 66 Asia 37 34 30 30 27 Surface Technologies   24   24   24   23   21 Segment operating profit 499 484 460 439 403 Pension settlement charge   (17)   -   -   -   - Total operating profit $ 482 $ 484 $ 460 $ 439 $ 403   (a) Non-GAAP measure, see Appendix. PRAXAIR, INC. AND SUBSIDIARIES APPENDIX NON-GAAP MEASURES (Millions of dollars, except per share data) (UNAUDITED)             Definitions of the following non-GAAP measures may not be comparable to similar definitions used by other companies. Praxair believes that its (i) debt-to-capital ratio is appropriate for measuring its financial leverage; (ii) after-tax return on invested capital ratio (ROC) is an appropriate measure for judging performance as it reflects the approximate after-tax profit earned as a percentage of investments by all parties in the business (debt, minority interests and shareholders’ equity); (iii) return on equity ratio (ROE) is an appropriate measure for judging performance for shareholders; and (iv) 2008 adjusted operating profit, net income and diluted EPS which are adjusted for the impact of the 2008 Q1 pension settlement charge helps investors understand underlying performance on a comparable basis.   2008 2008 Q1 Q4 Q3 Q2 Q1 Total Capital Total debt $ 4,574 $ 4,192 $ 4,003 $ 3,700 $ 3,736 Minority interests 344 321 255 234 230 Shareholders' equity   5,209   5,142     4,862     4,850     4,467 Total Capital $ 10,127 $ 9,655   $ 9,120   $ 8,784   $ 8,433   Debt-to-Capital Ratio   45.2%   43.4%     43.9%     42.1%     44.3%     After-Tax Return on Capital (ROC)   Adjusted operating profit (see below) $ 499 $ 484   $ 460 $ 439 $ 403   Less: income taxes (122) (115) (106) (103) (95) Less: tax benefit on pension settlement charge* (6) - - - - Less: tax benefit on interest expense (13) (13) (11) (11) (10) Add: income from equity investments     9   13     4     5     4 Net operating profit after-tax (NOPAT) $ 367 $ 369 $ 347 $ 330 $ 302   Beginning capital $ 9,655 $ 9,120 $ 8,784 $ 8,433 $ 7,943 Ending capital $ 10,127 $ 9,655 $ 9,120 $ 8,784 $ 8,433 Average capital $ 9,891 $ 9,388 $ 8,952 $ 8,609 $ 8,188   ROC % 3.7% 3.9% 3.9% 3.8% 3.7%   ROC % (annualized)     14.8%   15.7%     15.5%     15.3%     14.8%   Return on Equity (ROE)   Adjusted net income (see below) $ 318 $ 316   $ 305 $ 291 $ 265   Beginning shareholders' equity $ 5,142 $ 4,862 $ 4,850 $ 4,467 $ 4,554 Ending shareholders' equity $ 5,209 $ 5,142 $ 4,862 $ 4,850 $ 4,467 Average shareholders' equity $ 5,176 $ 5,002 $ 4,856 $ 4,659 $ 4,511   ROE % 6.1% 6.3% 6.3% 6.2% 5.9%   ROE % (annualized)     24.6%   25.3%     25.1%     25.0%     23.5%   2008 Adjusted Operating profit, Net income and Diluted EPS   First Quarter Full Year 2008 Guidance 2008 2007 Low End   High End Reported operating profit $ 482 $ 403 Add: pension settlement charge*   17   - Adjusted operating profit $ 499 $ 403 Percentage change from Q1 2007 24%   Reported net income $ 307 $ 265 Add: pension settlement charge*   11   - Adjusted net income $ 318 $ 265 Percentage change from Q1 2007 20%   Diluted weighted average shares 320,409 326,787   Reported diluted EPS $ 0.96 $ 0.81 $ 4.07 $ 4.22 Add: pension settlement charge*   0.03   -   0.03     0.03 Adjusted Diluted EPS $ 0.99 $ 0.81 $ 4.10   $ 4.25   Reported 2007 Diluted EPS $ 0.81 $ 3.62 $ 3.62 Percentage change from 2007 22% 13% 17% * 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.