DANBURY, Conn.--(BUSINESS WIRE)--Praxair, Inc. (NYSE:PX) reported second-quarter net income and diluted earnings per share of $308 million and $1.06, respectively. These results include the impact of a $146 million pre-tax charge, or 39 cents of diluted earnings per share. This charge was related to cost reduction actions taken in response to lower volumes resulting from economic slowdown in emerging markets and energy related end-markets. Excluding the charge, adjusted net income and diluted earnings per share were $420 million and $1.45, respectively.*
Praxair’s results in the second quarter, as compared to the prior year, were challenged by negative impacts from foreign currency translation, as the U.S. dollar remained strong against most foreign currencies. Sales in the second quarter were $2,738 million, 12% below the prior-year quarter, primarily due to the impact of negative currency translation of 9% and lower cost pass-through of 2%. Organic sales were 1% lower than the prior-year quarter as positive price and new project contribution were offset by weaker underlying industrial activity in Brazil and China and from weaker metals, energy and manufacturing in the United States.
Reported operating profit in the second quarter was $480 million. Adjusted operating profit of $626 million was 1% below the prior-year quarter, excluding currency effects. Adjusted operating profit as a percentage of sales grew to 22.9% and the adjusted EBITDA margin grew to 33.4% primarily due to price, strong cost control and productivity gains.*
Second-quarter cash flow from operations of $707 million funded $352 million of capital expenditures. Acquisition expenditures in the quarter were $38 million, primarily related to packaged gas businesses in North and South America. The company paid $205 million of dividends and repurchased $217 million of stock, net of issuances. After-tax return on capital and return on equity for the quarter were 12.6% and 30.5%, respectively.*
Commenting on the financial results and business outlook, Chairman and Chief Executive Officer Steve Angel said, “The second quarter continued to reflect broad-based demand in chemicals, refining and less cyclical end-markets such as healthcare and food and beverage, but revealed further weakening in macro-economic driven demand in South America, China and certain end-markets in the U.S., such as manufacturing and energy. As such, we took actions to better align our organization with these trends.”
“During the second quarter, our employees’ commitment to managing the things within our control enabled Praxair to grow the operating margin to a healthy 23%. Our resilient business model again generated strong operating cash flow of more than $700 million to support our disciplined capital allocation strategy.”
“When the markets recover, and ultimately they will, we expect to be in a strong position to realize highly accretive growth.”
For the third quarter of 2015, Praxair expects diluted earnings per share in the range of $1.42 to $1.49.* This EPS guidance assumes a negative currency translation impact of approximately 12% year-over-year. It also excludes the impact of pension settlement charges expected to be recorded in the third quarter.
For full-year 2015, Praxair expects adjusted diluted earnings per share to be in the range of $5.80 to $5.95, up 3% to 6% ex-currency from 2014.* This EPS guidance assumes a negative currency translation impact of approximately 11% year-over-year. Full-year capital expenditures are expected to be approximately $1.6 billion and the effective tax rate is forecasted to remain at approximately 28%.
Following is additional detail on second-quarter 2015 results by segment.
In North America, second-quarter sales were $1,482 million, down 1% from the prior-year quarter excluding cost-pass through and negative currency translation. Volume growth to food and beverage and refinery customers was more than offset by weaker metals, upstream energy and manufacturing end-markets. Operating profit of $388 million was comparable to the prior-year quarter, excluding currency translation, as price, productivity and cost actions were offset by lower volumes.
In Europe, second-quarter sales were $331 million, 19% below the prior-year quarter. Organic sales were 1% below the prior year as growth in manufacturing, food and beverage and healthcare was offset by lower energy end-market sales in Northern Europe. Operating profit of $63 million was steady with the prior-year quarter, excluding currency translation, as price and productivity offset the impact of lower volumes.
In South America, second-quarter sales were $388 million, 24% below the prior-year quarter. Organic sales, excluding negative currency translation and cost pass-through, grew 3% primarily from higher price which offset lower volumes. Operating profit was $81 million.
Sales in Asia were $387 million in the quarter, 2% above the prior year excluding currency and cost pass-through. Volume growth from new plant start-ups was offset primarily by slowing industrial activity in China. Operating profit was $69 million.
Praxair Surface Technologies had second-quarter sales of $150 million as compared to $174 million in the prior-year quarter. Excluding negative currency translation impact, organic sales were 6% lower. Favorable price and higher aerospace volumes were more than offset by weaker energy end-market sales. Operating profit was $25 million.
*See the attachments for calculations of non-GAAP measures. Second-quarter 2015 results are adjusted to exclude the cost reduction program and other charges.
Attachments: Non-GAAP Reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures.
A teleconference about Praxair’s second-quarter results is being held this morning, July 29, at 11:00 am Eastern Daylight Time. The number is (631) 485-4849 – Conference ID: 72624899. The call is also available as a webcast live and on-demand at www.praxair.com/investors. Materials to be used in the teleconference are also available on the website.
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; the impact of information technology system failures, network disruptions and breaches in data security; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the projections or estimates contained in the forward-looking statements. Additionally, financial projections or estimates exclude the impact of special items which the company believes are not indicative of ongoing business performance. The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) in the company’s Form 10-K and 10-Q reports filed with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.
About Praxair
Praxair, Inc., a Fortune 250 company with 2014 sales of $12.3 billion, is the largest industrial gases company in North and South America and one of the largest worldwide. The company produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings. Praxair products, services and technologies are making our planet more productive by bringing efficiency and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, primary metals and many others. More information about Praxair, Inc. is available at www.praxair.com.
PRAXAIR, INC. AND SUBSIDIARIES
SUMMARY NON-GAAP
RECONCILIATIONS
(UNAUDITED)
(Millions of dollars, except per share amounts) | ||||||||||||||||||||||||||||
Sales | Operating Profit | Net Income - Praxair, Inc. | Diluted EPS | |||||||||||||||||||||||||
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
|||||||||||||||||||||
Quarter Ended June 30 |
||||||||||||||||||||||||||||
Reported GAAP Amounts | $ | 2,738 | $ | 3,113 | $ | 480 | $ | 697 | $ | 308 | $ | 467 | $ | 1.06 | $ | 1.58 | ||||||||||||
Cost reduction program and other charges(a) | - | - | 146 | - | 112 | - | 0.39 | - | ||||||||||||||||||||
Adjusted amounts | $ | 2,738 | $ | 3,113 | $ | 626 | $ | 697 | $ | 420 | $ | 467 | $ | 1.45 | $ | 1.58 | ||||||||||||
Year To Date June 30 |
||||||||||||||||||||||||||||
Reported GAAP Amounts | $ | 5,495 | $ | 6,139 | $ | 1,103 | $ | 1,372 | $ | 724 | $ | 915 | $ | 2.49 | $ | 3.08 | ||||||||||||
Cost reduction program and other charges(a) | - | - | 146 | - | 112 | - | 0.39 | - | ||||||||||||||||||||
Adjusted amounts | $ | 5,495 | $ | 6,139 | $ | 1,249 | $ | 1,372 | $ | 836 | $ | 915 | $ | 2.88 | $ | 3.08 | ||||||||||||
(a) |
Charges in the 2015 second quarter related to the cost reduction program and other charges. |
PRAXAIR, INC. AND SUBSIDIARIES | |||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||
(Millions of dollars, except per share data) | |||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||
Quarter Ended | Year to Date | ||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||
2015 | 2014 | 2015 | 2014 | ||||||||||||||||
SALES | $ | 2,738 | $ | 3,113 | $ | 5,495 | $ | 6,139 | |||||||||||
Cost of sales | 1,516 | 1,767 | 3,046 | 3,493 | |||||||||||||||
Selling, general and administrative | 297 | 335 | 596 | 661 | |||||||||||||||
Depreciation and amortization | 278 | 293 | 555 | 578 | |||||||||||||||
Research and development | 23 | 24 | 47 | 47 | |||||||||||||||
Cost reduction program and other charges | 146 | - | 146 | - | |||||||||||||||
Other income (expense) - net | 2 | 3 | (2 | ) | 12 | ||||||||||||||
OPERATING PROFIT | 480 | 697 | 1,103 | 1,372 | |||||||||||||||
Interest expense - net | 40 | 43 | 84 | 89 | |||||||||||||||
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS | 440 | 654 | 1,019 | 1,283 | |||||||||||||||
Income taxes | 131 | 183 | 293 | 359 | |||||||||||||||
INCOME BEFORE EQUITY INVESTMENTS | 309 | 471 | 726 | 924 | |||||||||||||||
Income from equity investments | 10 | 10 | 21 | 19 | |||||||||||||||
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) | 319 | 481 | 747 | 943 | |||||||||||||||
Less: noncontrolling interests | (11 | ) | (14 | ) | (23 | ) | (28 | ) | |||||||||||
NET INCOME - PRAXAIR, INC. | $ | 308 | $ | 467 | $ | 724 | $ | 915 | |||||||||||
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS | |||||||||||||||||||
Basic earnings per share | $ | 1.07 | $ | 1.59 | $ | 2.51 | $ | 3.12 | |||||||||||
Diluted earnings per share | $ | 1.06 | $ | 1.58 | $ | 2.49 | $ | 3.08 | |||||||||||
Cash dividends | $ | 0.715 | $ | 0.65 | $ | 1.43 | $ | 1.30 | |||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING | |||||||||||||||||||
Basic shares outstanding (000's) | 287,939 | 292,945 | 288,541 | 293,570 | |||||||||||||||
Diluted shares outstanding (000's) | 290,102 | 295,976 | 290,940 | 296,679 | |||||||||||||||
Note: |
See page 4 for a reconciliation to 2015 adjusted amounts which are non-GAAP. |
PRAXAIR, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Millions of dollars) | ||||||||
(UNAUDITED) | ||||||||
June 30, | December 31, | |||||||
2015 | 2014 | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 136 | $ | 126 | ||||
Accounts receivable - net | 1,760 | 1,796 | ||||||
Inventories | 548 | 551 | ||||||
Prepaid and other current assets | 376 | 366 | ||||||
TOTAL CURRENT ASSETS | 2,820 | 2,839 | ||||||
Property, plant and equipment - net | 11,363 | 11,997 | ||||||
Goodwill | 3,065 | 3,121 | ||||||
Other intangibles - net | 582 | 603 | ||||||
Other long-term assets | 1,237 | 1,242 | ||||||
TOTAL ASSETS | $ | 19,067 | $ | 19,802 | ||||
LIABILITIES AND EQUITY | ||||||||
Accounts payable | $ | 782 | $ | 864 | ||||
Short-term debt | 532 | 587 | ||||||
Current portion of long-term debt | 2 | 2 | ||||||
Other current liabilities | 930 | 1,037 | ||||||
TOTAL CURRENT LIABILITIES | 2,246 | 2,490 | ||||||
Long-term debt | 8,813 | 8,669 | ||||||
Other long-term liabilities | 2,489 | 2,457 | ||||||
TOTAL LIABILITIES | 13,548 | 13,616 | ||||||
REDEEMABLE NONCONTROLLING INTERESTS | 175 | 176 | ||||||
EQUITY | ||||||||
Praxair, Inc. shareholders' equity | 4,964 | 5,623 | ||||||
Noncontrolling interests | 380 | 387 | ||||||
TOTAL EQUITY | 5,344 | 6,010 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 19,067 | $ | 19,802 | ||||
PRAXAIR, INC. AND SUBSIDIARIES | ||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||||||||
(Millions of dollars) | ||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||
Quarter Ended | Year to Date | |||||||||||||||||
June 30, | June 30, | |||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||||
OPERATIONS | ||||||||||||||||||
Net income - Praxair, Inc. | $ | 308 | $ | 467 | $ | 724 | $ | 915 | ||||||||||
Noncontrolling interests | 11 | 14 | 23 | 28 | ||||||||||||||
Net income (including noncontrolling interests) | 319 | 481 | 747 | 943 | ||||||||||||||
Adjustments to reconcile net income to net cash provided | ||||||||||||||||||
by operating activities: | ||||||||||||||||||
Cost reduction program and other charges, net of payments | 135 | - | 135 | - | ||||||||||||||
Depreciation and amortization | 278 | 293 | 555 | 578 | ||||||||||||||
Accounts receivable | 6 | (33 | ) | (44 | ) | (169 | ) | |||||||||||
Inventory | (9 | ) | (17 | ) | (15 | ) | (33 | ) | ||||||||||
Payables and accruals | 3 | 84 | (63 | ) | (32 | ) | ||||||||||||
Pension contributions | (1 | ) | (4 | ) | (12 | ) | (13 | ) | ||||||||||
Deferred income taxes and other | (24 | ) | 43 | (88 | ) | 109 | ||||||||||||
Net cash provided by operating activities | 707 | 847 | 1,215 | 1,383 | ||||||||||||||
INVESTING | ||||||||||||||||||
Capital expenditures | (352 | ) | (384 | ) | (749 | ) | (777 | ) | ||||||||||
Acquisitions, net of cash acquired | (38 | ) | (46 | ) | (43 | ) | (170 | ) | ||||||||||
Divestitures and asset sales | 238 | 5 | 240 | 71 | ||||||||||||||
Net cash used for investing activities | (152 | ) | (425 | ) | (552 | ) | (876 | ) | ||||||||||
FINANCING | ||||||||||||||||||
Debt increase (decrease) - net | (89 | ) | (100 | ) | 201 | 364 | ||||||||||||
Issuances of common stock | 17 | 20 | 61 | 69 | ||||||||||||||
Purchases of common stock | (234 | ) | (160 | ) | (469 | ) | (446 | ) | ||||||||||
Cash dividends - Praxair, Inc. shareholders | (205 | ) | (190 | ) | (412 | ) | (381 | ) | ||||||||||
Excess tax benefit on stock option exercises | 3 | 4 | 17 | 24 | ||||||||||||||
Noncontrolling interest transactions and other | (19 | ) | 29 | (25 | ) | (111 | ) | |||||||||||
Net cash provided by (used for) financing activities | (527 | ) | (397 | ) | (627 | ) | (481 | ) | ||||||||||
Effect of exchange rate changes on cash and | ||||||||||||||||||
cash equivalents | (9 | ) | 4 | (26 | ) | 9 | ||||||||||||
Change in cash and cash equivalents | 19 | 29 | 10 | 35 | ||||||||||||||
Cash and cash equivalents, beginning-of-period | 117 | 144 | 126 | 138 | ||||||||||||||
Cash and cash equivalents, end-of-period | $ | 136 | $ | 173 | $ | 136 | $ | 173 | ||||||||||
PRAXAIR, INC. AND SUBSIDIARIES | ||||||||||||||||
SEGMENT INFORMATION | ||||||||||||||||
(Millions of dollars) | ||||||||||||||||
(UNAUDITED) | ||||||||||||||||
Quarter Ended | Year to Date | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
SALES | ||||||||||||||||
North America | $ | 1,482 | $ | 1,628 | $ | 2,981 | $ | 3,208 | ||||||||
Europe | 331 | 408 | 657 | 805 | ||||||||||||
South America | 388 | 509 | 789 | 997 | ||||||||||||
Asia | 387 | 394 | 758 | 786 | ||||||||||||
Surface Technologies | 150 | 174 | 310 | 343 | ||||||||||||
Consolidated sales | $ | 2,738 | $ | 3,113 | $ | 5,495 | $ | 6,139 | ||||||||
OPERATING PROFIT | ||||||||||||||||
North America | $ | 388 | $ | 398 | $ | 767 | $ | 776 | ||||||||
Europe | 63 | 78 | 125 | 157 | ||||||||||||
South America | 81 | 113 | 166 | 226 | ||||||||||||
Asia | 69 | 76 | 138 | 151 | ||||||||||||
Surface Technologies | 25 | 32 | 53 | 62 | ||||||||||||
Segment operating profit | 626 | 697 | 1,249 | 1,372 | ||||||||||||
Cost reduction program and other charges | (146 | ) | - | (146 | ) | - | ||||||||||
Total operating profit | $ | 480 | $ | 697 | $ | 1,103 | $ | 1,372 | ||||||||
PRAXAIR, INC. AND SUBSIDIARIES | |||||||||||||||||||||||||||
QUARTERLY FINANCIAL SUMMARY | |||||||||||||||||||||||||||
(Millions of dollars, except per share data) | |||||||||||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||||||||||
2015 | 2014 | ||||||||||||||||||||||||||
Q2 (b) | Q1 | Q4 (c) | Q3 | Q2 | Q1 | ||||||||||||||||||||||
FROM THE INCOME STATEMENT | |||||||||||||||||||||||||||
Sales | $ | 2,738 | $ | 2,757 | $ | 2,990 | $ | 3,144 | $ | 3,113 | $ | 3,026 | |||||||||||||||
Cost of sales | 1,516 | 1,530 | 1,689 | 1,780 | 1,767 | 1,726 | |||||||||||||||||||||
Selling, general and administrative | 297 | 299 | 320 | 327 | 335 | 326 | |||||||||||||||||||||
Depreciation and amortization | 278 | 277 | 291 | 301 | 293 | 285 | |||||||||||||||||||||
Research and development | 23 | 24 | 24 | 25 | 24 | 23 | |||||||||||||||||||||
Cost reduction program and other charges | 146 | - | 138 | - | - | - | |||||||||||||||||||||
Other income (expenses) - net | 2 | (4 | ) | (3 | ) | - | 3 | 9 | |||||||||||||||||||
Operating profit | 480 | 623 | 525 | 711 | 697 | 675 | |||||||||||||||||||||
Interest expense - net | 40 | 44 | 79 | 45 | 43 | 46 | |||||||||||||||||||||
Income taxes | 131 | 162 | 145 | 187 | 183 | 176 | |||||||||||||||||||||
Income from equity investments | 10 | 11 | 12 | 11 | 10 | 9 | |||||||||||||||||||||
Net income (including noncontrolling interests) | 319 | 428 | 313 | 490 | 481 | 462 | |||||||||||||||||||||
Less: noncontrolling interests | (11 | ) | (12 | ) | (11 | ) | (13 | ) | (14 | ) | (14 | ) | |||||||||||||||
Net income - Praxair, Inc. | $ | 308 | $ | 416 | $ | 302 | $ | 477 | $ | 467 | $ | 448 | |||||||||||||||
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS | |||||||||||||||||||||||||||
Diluted earnings per share | $ | 1.06 | $ | 1.43 | $ | 1.03 | $ | 1.62 | $ | 1.58 | $ | 1.51 | |||||||||||||||
Cash dividends per share | $ | 0.715 | $ | 0.715 | $ | 0.65 | $ | 0.65 | $ | 0.65 | $ | 0.65 | |||||||||||||||
Diluted weighted average shares outstanding (000's) | 290,102 | 291,652 | 293,555 | 295,239 | 295,976 | 297,253 | |||||||||||||||||||||
ADJUSTED AMOUNTS (a) | |||||||||||||||||||||||||||
Operating profit | $ | 626 | $ | 623 | $ | 663 | $ | 711 | $ | 697 | $ | 675 | |||||||||||||||
Operating margin | 22.9 | % | 22.6 | % | 22.2 | % | 22.6 | % | 22.4 | % | 22.3 | % | |||||||||||||||
Net Income | $ | 420 | $ | 416 | $ | 460 | $ | 477 | $ | 467 | $ | 448 | |||||||||||||||
Diluted earnings per share | $ | 1.45 | $ | 1.43 | $ | 1.57 | $ | 1.62 | $ | 1.58 | $ | 1.51 | |||||||||||||||
FROM THE BALANCE SHEET | |||||||||||||||||||||||||||
Net debt (a) | $ | 9,211 | $ | 9,279 | $ | 9,132 | $ | 8,953 | $ | 8,992 | $ | 9,126 | |||||||||||||||
Capital (a) | $ | 14,730 | $ | 14,842 | $ | 15,318 | $ | 16,083 | $ | 16,492 | $ | 16,319 | |||||||||||||||
Debt-to-capital ratio (a) | 62.5 | % | 62.5 | % | 59.6 | % | 55.7 | % | 54.5 | % | 55.9 | % | |||||||||||||||
FROM THE STATEMENT OF CASH FLOWS | |||||||||||||||||||||||||||
Cash flow from operations | $ | 707 | $ | 508 | $ | 772 | $ | 713 | $ | 847 | $ | 536 | |||||||||||||||
Cash flow used for investing activities | $ | 152 | $ | 400 | $ | 491 | $ | 436 | $ | 425 | $ | 451 | |||||||||||||||
Cash flow used for financing activities | $ | 527 | $ | 100 | $ | 260 | $ | 267 | $ | 397 | $ | 84 | |||||||||||||||
Capital expenditures | 352 | 397 | 482 | 430 | 384 | 393 | |||||||||||||||||||||
Acquisitions | 38 | 5 | 15 | 21 | 46 | 124 | |||||||||||||||||||||
Cash dividends | 205 | 207 | 189 | 189 | 190 | 191 | |||||||||||||||||||||
OTHER INFORMATION | |||||||||||||||||||||||||||
After-tax return on capital (ROC) (a) | 12.6 | % | 12.6 | % | 12.7 | % | 12.6 | % | 12.6 | % | 12.6 | % | |||||||||||||||
Return on Praxair, Inc. shareholders' equity (ROE) (a) | 30.5 | % | 29.6 | % | 28.7 | % | 28.2 | % | 28.3 | % | 28.7 | % | |||||||||||||||
Adjusted EBITDA (a) | $ | 914 | $ | 911 | $ | 966 | $ | 1,023 | $ | 1,000 | $ | 969 | |||||||||||||||
Adjusted EBITDA margin (a) | 33.4 | % | 33.0 | % | 32.3 | % | 32.5 | % | 32.1 | % | 32.0 | % | |||||||||||||||
Debt-to-adjusted EBITDA ratio (a) | 2.4 | 2.3 | 2.3 | 2.2 | 2.3 | 2.3 | |||||||||||||||||||||
Number of employees | 27,302 | 27,680 | 27,780 | 27,626 | 27,735 | 27,578 | |||||||||||||||||||||
SEGMENT DATA | |||||||||||||||||||||||||||
SALES | |||||||||||||||||||||||||||
North America | $ | 1,482 | $ | 1,499 | $ | 1,589 | $ | 1,639 | $ | 1,628 | $ | 1,580 | |||||||||||||||
Europe | 331 | 326 | 356 | 385 | 408 | 397 | |||||||||||||||||||||
South America | 388 | 401 | 473 | 523 | 509 | 488 | |||||||||||||||||||||
Asia | 387 | 371 | 407 | 426 | 394 | 392 | |||||||||||||||||||||
Surface Technologies | 150 | 160 | 165 | 171 | 174 | 169 | |||||||||||||||||||||
Total sales | $ | 2,738 | $ | 2,757 | $ | 2,990 | $ | 3,144 | $ | 3,113 | $ | 3,026 | |||||||||||||||
OPERATING PROFIT | |||||||||||||||||||||||||||
North America | $ | 388 | $ | 379 | $ | 388 | $ | 416 | $ | 398 | $ | 378 | |||||||||||||||
Europe | 63 | 62 | 63 | 71 | 78 | 79 | |||||||||||||||||||||
South America | 81 | 85 | 105 | 118 | 113 | 113 | |||||||||||||||||||||
Asia | 69 | 69 | 77 | 75 | 76 | 75 | |||||||||||||||||||||
Surface Technologies | 25 | 28 | 30 | 31 | 32 | 30 | |||||||||||||||||||||
Segment operating profit | 626 | 623 | 663 | 711 | 697 | 675 | |||||||||||||||||||||
Cost reduction program and other charges | (146 | ) | - | (138 | ) | - | - | - | |||||||||||||||||||
Total operating profit | $ | 480 | $ | 623 | $ | 525 | $ | 711 | $ | 697 | $ | 675 | |||||||||||||||
(a) | Non-GAAP measure, see Appendix. | |
(b) | In the second quarter of 2015, Praxair recorded pre-tax charges totaling $146 million ($112 million after-tax and non-controlling interests, or $0.39 per diluted share) related to cost reduction actions taken in response to lower volumes resulting from economic slowdown in emerging markets and energy related end-markets. The charges by segment are as follows: $62 million in South America; $26 million in North America; $20 million in Europe; and $19 million in each of Asia and Surface Technologies. | |
(c) | 2014 includes: (i) a charge of $36 million ($22 million after-tax, or $0.07 per diluted share) related to a bond redemption, (ii) a charge of $7 million ($5 million after-tax, or $0.02 per diluted share) related to pension settlement and (iii) a charge of $131 million ($131 million after-tax, or $0.45 per diluted share), related to a Venezuela currency devaluation. Refer to Notes 2 and 7 to Praxair's 2014 Annual Report for additional information. | |
PRAXAIR, INC. AND SUBSIDIARIES
APPENDIX
NON-GAAP
MEASURES
(Millions of dollars, except per share data)
The following non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s financial leverage, return on capital and operating performance. Items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. Adjusted amounts exclude the impacts of the 2015 second quarter cost reduction program and other charges, 2014 fourth quarter pension settlement, bond redemption and loss on Venezuela currency devaluation, 2013 fourth quarter bond redemption and the income tax benefit related to the realignment of Praxair's Italian legal structure, the 2013 third quarter pension settlement, the 2013 first quarter loss on Venezuela currency devaluation.
2015 | 2014 | 2013 | ||||||||||||||||||||||||||||||||||||||||
Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |||||||||||||||||||||||||||||||||
Free Cash Flow (FCF) - Free cash flow is a measure used by investors, financial analysts and management to evaluate the ability of a company to pursue opportunities that enhance shareholder value. FCF equals cash flow from operations less capital expenditures. |
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Operating cash flow | $ | 707 | $ | 508 | $ | 772 | $ | 713 | $ | 847 | $ | 536 | $ | 964 | $ | 904 | $ | 577 | $ | 472 | ||||||||||||||||||||||
Less: capital expenditures | (352 | ) | (397 | ) | (482 | ) | (430 | ) | (384 | ) | (393 | ) | (516 | ) | (516 | ) | (522 | ) | (466 | ) | ||||||||||||||||||||||
Free Cash Flow | $ | 355 | $ | 111 | $ | 290 | $ | 283 | $ | 463 | $ | 143 | $ | 448 | $ | 388 | $ | 55 | $ | 6 | ||||||||||||||||||||||
Debt-to-Capital Ratio - The debt-to-capital ratio is a measure used by investors, financial analysts and management to provide a measure of financial leverage and insights into how the company is financing its operations. |
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Debt | $ | 9,347 | $ | 9,396 | $ | 9,258 | $ | 9,121 | $ | 9,165 | $ | 9,270 | $ | 8,811 | $ | 9,026 | $ | 9,106 | $ | 8,676 | ||||||||||||||||||||||
Less: cash and cash equivalents | (136 | ) | (117 | ) | (126 | ) | (168 | ) | (173 | ) | (144 | ) | (138 | ) | (134 | ) | (102 | ) | (113 | ) | ||||||||||||||||||||||
Net debt | 9,211 | 9,279 | 9,132 | 8,953 | 8,992 | 9,126 | 8,673 | 8,892 | 9,004 | 8,563 | ||||||||||||||||||||||||||||||||
Equity and redeemable noncontrolling interests: | ||||||||||||||||||||||||||||||||||||||||||
Redeemable noncontrolling interests | 175 | 170 | 176 | 190 | 194 | 195 | 307 | 290 | 259 | 255 | ||||||||||||||||||||||||||||||||
Praxair, Inc. shareholders' equity | 4,964 | 5,018 | 5,623 | 6,552 | 6,911 | 6,600 | 6,609 | 6,210 | 5,928 | 6,169 | ||||||||||||||||||||||||||||||||
Noncontrolling interests | 380 | 375 | 387 | 388 | 395 | 398 | 394 | 365 | 357 | 357 | ||||||||||||||||||||||||||||||||
Total equity and redeemable noncontrolling interests | 5,519 | 5,563 | 6,186 | 7,130 | 7,500 | 7,193 | 7,310 | 6,865 | 6,544 | 6,781 | ||||||||||||||||||||||||||||||||
Capital | $ | 14,730 | $ | 14,842 | $ | 15,318 | $ | 16,083 | $ | 16,492 | $ | 16,319 | $ | 15,983 | $ | 15,757 | $ | 15,548 | $ | 15,344 | ||||||||||||||||||||||
Debt-to-capital | 62.5 | % | 62.5 | % | 59.6 | % | 55.7 | % | 54.5 | % | 55.9 | % | 54.3 | % | 56.4 | % | 57.9 | % | 55.8 | % | ||||||||||||||||||||||
After-tax Return on Capital (ROC) - After-tax return on capital is a measure used by investors, financial analysts and management to evaluate the return on net assets employed in the business. ROC measures the after-tax operating profit that the company was able to generate with the investments made by all parties in the business (debt, noncontrolling interests and Praxair, Inc. shareholders’ equity). |
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Adjusted operating profit (a) | $ | 626 | $ | 623 | $ | 663 | $ | 711 | $ | 697 | $ | 675 | $ | 690 | $ | 679 | $ | 665 | $ | 623 | ||||||||||||||||||||||
Less: adjusted income taxes (a) | (164 | ) | (162 | ) | (161 | ) | (187 | ) | (183 | ) | (176 | ) | (182 | ) | (178 | ) | (174 | ) | (164 | ) | ||||||||||||||||||||||
Less: tax benefit on adjusted interest expense (a) | (11 | ) | (12 | ) | (12 | ) | (13 | ) | (12 | ) | (13 | ) | (11 | ) | (11 | ) | (11 | ) | (11 | ) | ||||||||||||||||||||||
Add: income from equity investments | 10 | 11 | 12 | 11 | 10 | 9 | 9 | 8 | 11 | 10 | ||||||||||||||||||||||||||||||||
Adjusted net operating profit after-tax (NOPAT) | $ | 461 | $ | 460 | $ | 502 | $ | 522 | $ | 512 | $ | 495 | $ | 506 | $ | 498 | $ | 491 | $ | 458 | ||||||||||||||||||||||
4-quarter trailing adjusted NOPAT | $ | 1,945 | $ | 1,996 | $ | 2,031 | $ | 2,035 | $ | 2,011 | $ | 1,990 | $ | 1,953 | $ | 1,900 | $ | 1,859 | $ | 1,836 | ||||||||||||||||||||||
Ending capital (see above) | $ | 14,730 | $ | 14,842 | $ | 15,318 | $ | 16,083 | $ | 16,492 | $ | 16,319 | $ | 15,983 | $ | 15,757 | $ | 15,548 | $ | 15,344 | ||||||||||||||||||||||
5-quarter average ending capital | $ | 15,493 | $ | 15,811 | $ | 16,039 | $ | 16,127 | $ | 16,020 | $ | 15,790 | $ | 15,302 | $ | 14,829 | $ | 14,281 | $ | 13,821 | ||||||||||||||||||||||
After-tax ROC (4-quarter trailing NOPAT / 5-quarter average capital) | 12.6 | % | 12.6 | % | 12.7 | % | 12.6 | % | 12.6 | % | 12.6 | % | 12.8 | % | 12.8 | % | 13.0 | % | 13.3 | % | ||||||||||||||||||||||
Return on Praxair, Inc. Shareholders' Equity (ROE) - Return on Praxair, Inc. shareholders' equity is a measure used by investors, financial analysts and management to evaluate operating performance from a Praxair shareholder perspective. ROE measures the net income attributable to Praxair, Inc. that the company was able to generate with the money shareholders have invested. |
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Adjusted net income - Praxair, Inc. (a) | $ | 420 | $ | 416 | $ | 460 | $ | 477 | $ | 467 | $ | 448 | $ | 462 | $ | 451 | $ | 445 | $ | 414 | ||||||||||||||||||||||
4-quarter trailing adjusted net income - Praxair, Inc. | $ | 1,773 | $ | 1,820 | $ | 1,852 | $ | 1,854 | $ | 1,828 | $ | 1,806 | $ | 1,772 | $ | 1,724 | $ | 1,692 | $ | 1,676 | ||||||||||||||||||||||
Ending Praxair, Inc. shareholders' equity | $ | 4,964 | $ | 5,018 | $ | 5,623 | $ | 6,552 | $ | 6,911 | $ | 6,600 | $ | 6,609 | $ | 6,210 | $ | 5,928 | $ | 6,169 | ||||||||||||||||||||||
5-quarter average Praxair shareholders' equity | $ | 5,814 | $ | 6,141 | $ | 6,459 | $ | 6,576 | $ | 6,452 | $ | 6,303 | $ | 6,196 | $ | 6,077 | $ | 5,958 | $ | 5,961 | ||||||||||||||||||||||
ROE (4-quarter trailing adjusted net income - Praxair, Inc. / 5-quarter average Praxair shareholders' equity) | 30.5 | % | 29.6 | % | 28.7 | % | 28.2 | % | 28.3 | % | 28.7 | % | 28.6 | % | 28.4 | % | 28.4 | % | 28.1 | % | ||||||||||||||||||||||
Adjusted EBITDA, Adjusted EBITDA Margin and Debt-to-Adjusted EBITDA Ratio - These measures are used by investors, financial analysts and management to assess a company's ability to meet its financial obligations. |
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Adjusted net income - Praxair, Inc. (a) | $ | 420 | $ | 416 | $ | 460 | $ | 477 | $ | 467 | $ | 448 | $ | 462 | $ | 451 | $ | 445 | $ | 414 | ||||||||||||||||||||||
Add: adjusted noncontrolling interests (a) | 12 | 12 | 11 | 13 | 14 | 14 | 17 | 17 | 16 | 15 | ||||||||||||||||||||||||||||||||
Add: adjusted interest expense - net (a) | 40 | 44 | 43 | 45 | 43 | 46 | 38 | 41 | 41 | 40 | ||||||||||||||||||||||||||||||||
Add: adjusted income taxes (a) | 164 | 162 | 161 | 187 | 183 | 176 | 182 | 178 | 174 | 164 | ||||||||||||||||||||||||||||||||
Add: depreciation and amortization | 278 | 277 | 291 | 301 | 293 | 285 | 287 | 281 | 275 | 266 | ||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 914 | $ | 911 | $ | 966 | $ | 1,023 | $ | 1,000 | $ | 969 | $ | 986 | $ | 968 | $ | 951 | $ | 899 | ||||||||||||||||||||||
Reported sales | $ | 2,738 | $ | 2,757 | $ | 2,990 | $ | 3,144 | $ | 3,113 | $ | 3,026 | $ | 3,010 | $ | 3,013 | $ | 3,014 | $ | 2,888 | ||||||||||||||||||||||
Adjusted EBITDA margin | 33.4 | % | 33.0 | % | 32.3 | % | 32.5 | % | 32.1 | % | 32.0 | % | 32.8 | % | 32.1 | % | 31.6 | % | 31.1 | % | ||||||||||||||||||||||
Ending net debt (see above) | $ | 9,211 | $ | 9,279 | $ | 9,132 | $ | 8,953 | $ | 8,992 | $ | 9,126 | $ | 8,673 | $ | 8,892 | $ | 9,004 | $ | 8,563 | ||||||||||||||||||||||
5-quarter average net debt | $ | 9,113 | $ | 9,096 | $ | 8,975 | $ | 8,927 | $ | 8,937 | $ | 8,852 | $ | 8,467 | $ | 8,138 | $ | 7,738 | $ | 7,287 | ||||||||||||||||||||||
4-quarter trailing adjusted EBITDA | $ | 3,814 | $ | 3,900 | $ | 3,958 | $ | 3,978 | $ | 3,923 | $ | 3,874 | $ | 3,804 | $ | 3,697 | $ | 3,608 | $ | 3,550 | ||||||||||||||||||||||
Debt-to-adjusted EBITDA ratio (5-quarter average net debt / 4-quarter trailing adjusted EBITDA) | 2.4 | 2.3 | 2.3 | 2.2 | 2.3 | 2.3 | 2.2 | 2.2 | 2.1 | 2.1 | ||||||||||||||||||||||||||||||||
(a) | The following table presents adjusted amounts for Operating Profit and Operating Profit Margin, Interest Expense - net, Income Taxes, Effective Tax Rate, Noncontrolling Interests, Net income - Praxair, Inc., and Diluted EPS for the periods presented. Additionally, this table presents cash income taxes and cash interest, net of interest capitalized and excluding the bond redemption costs for 2014 and 2013; and presents the percentage changes in Diluted EPS Guidance for the third quarter and full year 2015 as compared to 2014 Diluted EPS. The adjusted percentages are based on Adjusted diluted EPS amounts, excluding estimated currency impacts. |
Year-to-date |
Second |
Year |
Fourth |
Year |
Fourth |
Third |
First |
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2015 | 2015 | 2014 | 2014 | 2013 | 2013 | 2013 | 2013 | |||||||||||||||||||||||||||
Adjusted Operating Profit and Operating Profit Margin |
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Reported operating profit | $ | 1,103 | $ | 480 | $ | 2,608 | $ | 525 | $ | 2,625 | $ | 690 | $ | 670 | $ | 600 | ||||||||||||||||||
Add: Cost reduction program and other charges | 146 | 146 | - | - | - | - | - | - | ||||||||||||||||||||||||||
Add: Pension settlement charge | - | - | 7 | 7 | 9 | - | 9 | - | ||||||||||||||||||||||||||
Add: Venezuela currency devaluation | - | - | 131 | 131 | 23 | - | - | 23 | ||||||||||||||||||||||||||
Total adjustments | 146 | 146 | 138 | 138 | 32 | - | 9 | 23 | ||||||||||||||||||||||||||
Adjusted operating profit | $ | 1,249 | $ | 626 | $ | 2,746 | $ | 663 | $ | 2,657 | $ | 690 | $ | 679 | $ | 623 | ||||||||||||||||||
Reported percentage change | -20 | % | -31 | % | ||||||||||||||||||||||||||||||
Adjusted percentage change | -9 | % | -10 | % | ||||||||||||||||||||||||||||||
Reported sales | $ | 5,495 | $ | 2,738 | $ | 12,273 | $ | 2,990 | $ | 11,925 | $ | 3,010 | $ | 3,013 | $ | 2,888 | ||||||||||||||||||
Adjusted operating profit margin | 22.7 | % | 22.9 | % | 22.4 | % | 22.2 | % | 22.3 | % | 22.9 | % | 22.5 | % | 21.6 | % | ||||||||||||||||||
Adjusted Interest Expense - net |
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Reported interest expense - net | $ | 84 | $ | 40 | $ | 213 | $ | 79 | $ | 178 | $ | 56 | $ | 41 | $ | 40 | ||||||||||||||||||
Less: Bond redemption | - | - | (36 | ) | (36 | ) | (18 | ) | (18 | ) | - | - | ||||||||||||||||||||||
Adjusted interest expense - net | $ | 84 | $ | 40 | $ | 177 | $ | 43 | $ | 160 | $ | 38 | $ | 41 | $ | 40 | ||||||||||||||||||
Adjusted Income Taxes |
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Reported income taxes | $ | 293 | $ | 131 | $ | 691 | $ | 145 | $ | 649 | $ | 136 | $ | 175 | $ | 164 | ||||||||||||||||||
Add: Cost reduction program and other charges | 33 | 33 | - | - | - | - | - | - | ||||||||||||||||||||||||||
Add: Bond redemption | - | - | 14 | 14 | 6 | 6 | - | - | ||||||||||||||||||||||||||
Add: Income tax benefit | - | - | - | - | 40 | 40 | - | - | ||||||||||||||||||||||||||
Add: Pension settlement charge | - | - | 2 | 2 | 3 | - | 3 | - | ||||||||||||||||||||||||||
Total adjustments | 33 | 33 | 16 | 16 | 49 | 46 | 3 | - | ||||||||||||||||||||||||||
Adjusted income taxes | $ | 326 | $ | 164 | $ | 707 | $ | 161 | $ | 698 | $ | 182 | $ | 178 | $ | 164 | ||||||||||||||||||
Adjusted Effective Tax Rate |
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Reported income before income taxes and equity investments | $ | 1,019 | $ | 440 | $ | 2,395 | $ | 446 | $ | 2,447 | $ | 634 | $ | 629 | $ | 560 | ||||||||||||||||||
Add: Cost reduction program and other charges | 146 | 146 | - | - | - | - | - | - | ||||||||||||||||||||||||||
Add: Bond redemption | - | - | 36 | 36 | 18 | 18 | - | - | ||||||||||||||||||||||||||
Add: Pension settlement charge | - | - | 7 | 7 | 9 | - | 9 | - | ||||||||||||||||||||||||||
Add: Venezuela currency devaluation | - | - | 131 | 131 | 23 | - | - | 23 | ||||||||||||||||||||||||||
Total adjustments | 146 | 146 | 174 | 174 | 50 | 18 | 9 | 23 | ||||||||||||||||||||||||||
Adjusted income before income taxes and equity investments | $ | 1,165 | $ | 586 | $ | 2,569 | $ | 620 | $ | 2,497 | $ | 652 | $ | 638 | $ | 583 | ||||||||||||||||||
Adjusted income taxes (above) | $ | 326 | $ | 164 | $ | 707 | $ | 161 | $ | 698 | $ | 182 | $ | 178 | $ | 164 | ||||||||||||||||||
Adjusted effective tax rate | 28 | % | 28 | % | 28 | % | 26 | % | 28 | % | 28 | % | 28 | % | 28 | % | ||||||||||||||||||
Adjusted Noncontrolling interests |
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Reported noncontrolling interests | $ | 23 | $ | 11 | $ | 52 | $ | 11 | $ | 81 | $ | 33 | $ | 17 | $ | 15 | ||||||||||||||||||
Add: Cost reduction program and other charges | 1 | 1 | - | - | - | - | - | - | ||||||||||||||||||||||||||
Less: Income tax benefit | - | - | - | - | (16 | ) | (16 | ) | - | - | ||||||||||||||||||||||||
Total adjustments | 1 | 1 | - | - | (16 | ) | (16 | ) | - | - | ||||||||||||||||||||||||
Adjusted noncontrolling interests | $ | 24 | $ | 12 | $ | 52 | $ | 11 | $ | 65 | $ | 17 | $ | 17 | $ | 15 | ||||||||||||||||||
Adjusted Net Income - Praxair, Inc. |
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Reported net income - Praxair, Inc. | $ | 724 | $ | 308 | $ | 1,694 | $ | 302 | $ | 1,755 | $ | 474 | $ | 445 | $ | 391 | ||||||||||||||||||
Add: Cost reduction program and other charges | 112 | 112 | - | - | - | - | - | - | ||||||||||||||||||||||||||
Add: Bond redemption | - | - | 22 | 22 | 12 | 12 | - | - | ||||||||||||||||||||||||||
Less: Income tax benefit | - | - | - | - | (24 | ) | (24 | ) | - | - | ||||||||||||||||||||||||
Add: Pension settlement charge | - | - | 5 | 5 | 6 | - | 6 | - | ||||||||||||||||||||||||||
Add: Venezuela currency devaluation | - | - | 131 | 131 | 23 | - | - | 23 | ||||||||||||||||||||||||||
Total adjustments | 112 | 112 | 158 | 158 | 17 | (12 | ) | 6 | 23 | |||||||||||||||||||||||||
Adjusted net income - Praxair, Inc. | $ | 836 | $ | 420 | $ | 1,852 | $ | 460 | $ | 1,772 | $ | 462 | $ | 451 | $ | 414 | ||||||||||||||||||
Reported percentage change | -21 | % | -34 | % | ||||||||||||||||||||||||||||||
Adjusted percentage change | -9 | % | -10 | % | ||||||||||||||||||||||||||||||
Adjusted Diluted EPS |
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Reported diluted EPS | $ | 2.49 | $ | 1.06 | $ | 5.73 | $ | 1.03 | $ | 5.87 | $ | 1.59 | $ | 1.49 | $ | 1.30 | ||||||||||||||||||
Add: Cost reduction program and other charges | 0.39 | 0.39 | - | - | - | - | - | - | ||||||||||||||||||||||||||
Add: Bond redemption | - | - | 0.07 | 0.07 | 0.04 | 0.04 | - | - | ||||||||||||||||||||||||||
Less: Income tax benefit | - | - | - | - | (0.08 | ) | (0.08 | ) | - | - | ||||||||||||||||||||||||
Add: Pension settlement charge | - | - | 0.02 | 0.02 | 0.02 | - | 0.02 | - | ||||||||||||||||||||||||||
Add: Venezuela currency devaluation | - | - | 0.45 | 0.45 | 0.08 | - | - | 0.08 | ||||||||||||||||||||||||||
Total adjustments | 0.39 | 0.39 | 0.54 | 0.54 | 0.06 | (0.04 | ) | 0.02 | 0.08 | |||||||||||||||||||||||||
Adjusted diluted EPS | $ | 2.88 | $ | 1.45 | $ | 6.27 | $ | 1.57 | $ | 5.93 | $ | 1.55 | $ | 1.51 | $ | 1.38 | ||||||||||||||||||
Cash Income Taxes and Interest |
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Income taxes paid | $ | 606 | $ | 532 | ||||||||||||||||||||||||||||||
Interest paid, net of interest capitalized and excluding bond redemption | $ | 174 | $ | 166 | ||||||||||||||||||||||||||||||
Third Quarter and Full-Year 2015 Diluted EPS Guidance* |
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Third Quarter 2015 | Full Year 2015 | |||||||||||||||||
Low End | High End | Low End | High End | |||||||||||||||
2015 adjusted diluted EPS guidance | $ | 1.42 | $ | 1.49 | $ | 5.80 | $ | 5.95 | ||||||||||
2014 adjusted diluted EPS (see above for full year amounts) | $ | 1.62 | $ | 1.62 | $ | 6.27 | $ | 6.27 | ||||||||||
Adjusted percentage change | -12 | % | -8 | % | -8 | % | -5 | % | ||||||||||
Adjusted percentage changes, excluding estimated currency impact | 0 | % | 4 | % | 3 | % | 6 | % | ||||||||||
* |
Excludes cost reduction charges recorded in the second quarter and the impact of pension settlement charges expected to be recorded in the third quarter. |