Praxair Inc. (PX) filed Quarterly Report for the period ended 2009-09-30.
Praxair is one of the largest industrial gases companies in North and South America. Praxair's primary products for its industrial gases business are atmospheric gases and process gases. The company's surface technology segment operated through Praxair Surface Technologies Inc. supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders. The company also designs engineers and builds equipment that produces industrial gases through its global supply systems. Praxair Inc. has a market cap of $25.01 billion; its shares were traded at around $81.53 with a P/E ratio of 20.3 and P/S ratio of 2.3. The dividend yield of Praxair Inc. stocks is 2%. Praxair Inc. had an annual average earning growth of 7.3% over the past 10 years.
Highlight of Business Operations:
In the third quarter 2009, Praxair recorded a pre-tax charge of $306 million (net after-tax benefit of $7 million or $0.02 per diluted share), related to a recently announced Federal tax amnesty program in Brazil (referred to as “Refis Program”) and other charges. The $306 million charges to operating profit reflect the settlement of non-income tax disputes, reserves taken for Brazilian government receivables and a state tax matter, and the write-down of an idle manufacturing plant and related assets in Brazil. There is a $313 million income tax benefit primarily because the Refis Program allows for a portion of the settlement obligations to be satisfied with income tax net operating loss carryforwards (NOLs) and because the company had previously fully reserved these NOL deferred income tax assets.
A pension settlement charge of $17 million ($11 million after-tax or $0.03 per diluted share) was recorded in the first quarter of 2008 for net unrecognized actuarial losses 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.
Other income (expense) – net was a $10-million expense and a $25-million expense for the quarter and nine months ended September 30, 2009, respectively. The 2009 quarter and nine-month periods included $2 million and $17 million of currency related net losses, respectively, primarily related to net income hedges. The 2008 quarter and nine-month periods included currency related net gains of $13 million and $6 million, respectively, primarily related to net income hedges (see Note 5 to the condensed consolidated financial statements).
Operating profit decreased $370 million, or 68%, for the third quarter and decreased $506 million, or 32%, for the nine months ended September 30, 2009 versus the respective 2008 periods. Excluding the impact of the Brazil tax amnesty program and other charges in the quarter and nine-month periods ended September 30, 2009 and 2008, operating profit decreased $64 million, or 12%, for the quarter and decreased $217 million, or 14%, for the nine-month period. This decrease was driven by the negative impact of currency and lower sales volumes partially offset by cost savings. Excluding the impact of the Brazil tax amnesty program and other charges in 2009 and 2008, operating profit as a percentage of sales improved to 21.0% and 20.9% in the quarter and year-to-date periods, respectively, versus 19.1% and 18.9% in the respective 2008 periods. This improvement is a result of significant cost reductions and pricing.
Net income – Praxair, Inc. decreased $30 million, or 8%, for the third quarter and decreased $97 million, or 10%, for the nine months ended September 30, 2009 versus the respective 2008 periods. Excluding the impact of the Brazil tax amnesty program and other charges in the 2009 and 2008 nine-month periods, net income – Praxair, Inc. decreased $37 million, or 10%, and decreased $115 million, or 11%, for the nine-month period. The decrease in both periods was due to lower operating profit partially offset by lower interest expense.
Diluted earnings per share (EPS) decreased $0.07 per diluted share, or 6% for the third quarter and decreased $0.22 per diluted share, or 7% for the nine months ended September 30, 2009 versus the respective 2008 periods. Excluding the impact of the Brazil tax amnesty program and other charges in 2009 and 2008, EPS decreased $0.09 per diluted share, or 8%, and decreased $0.27 per diluted share, or 8%, for the quarter and nine-month periods, respectively. The underlying decrease in EPS is in line with the decrease in net income – Praxair, Inc. partially offset by the impact of the company’s net repurchases of common stock during 2008.
PX is in the portfolios of PRIMECAP Management, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, Dodge & Cox.
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