UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 1-11037
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Praxair, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 06-124-9050
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
39 Old Ridgebury Road, Danbury, CT 06810-5113
- - --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(203) 837-2000
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Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
At June 30, 1996, 155,670,270 shares of common stock ($.01 par value) of the
Registrant were outstanding.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income - Praxair, Inc. and Subsidiaries
Quarter and Six Months Ended June 30, 1996 and 1995 (Unaudited)
Condensed Consolidated Balance Sheet - Praxair, Inc. and Subsidiaries
June 30, 1996 (Unaudited) and December 31, 1995
Condensed Consolidated Statement of Cash Flows - Praxair, Inc. and
Subsidiaries Six Months Ended June 30, 1996 and 1995 (Unaudited)
Notes to Condensed Consolidated Financial Statements - Praxair, Inc.
and Subsidiaries (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signature
Exhibit Index
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PRAXAIR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
(Millions of dollars, except per share)
Quarter Ended Six Months Ended
June 30, June 30,
---------------- ---------------
1996 1995 1996 1995
------- ------- ------- ------
SALES $1,093 $ 788 $2,183 $1,544
Cost of sales, exclusive of
depreciation and amortization ....... 631 439 1,260 861
Selling, general and administrative ... 168 123 348 239
Depreciation and amortization ......... 105 71 206 141
Research and development .............. 18 15 35 29
CBI integration charges ............... - - 85 -
Other expenses-net .................... (6) (1) (10) (1)
------- ------- ------- -------
OPERATING PROFIT ...................... 177 141 259 275
Interest expense ...................... 49 32 99 59
------- ------- ------- -------
INCOME BEFORE INCOME TAXES ............ 128 109 160 216
Income taxes .......................... 35 30 37 59
------- ------- ------- -------
INCOME OF CONSOLIDATED ENTITIES ....... 93 79 123 157
Minority interests .................... (14) (12) (29) (25)
Income from equity investments ........ 2 - 4 -
------- ------- ------- -------
NET INCOME ............................ $ 81 $ 67 $ 98 $ 132
PER SHARE:
Net Income ............................ $ 0.50 $ 0.47 $ 0.63 $ 0.93
Cash dividends ........................ $ 0.095 $ 0.08 $ 0.19 $ 0.16
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
June 30,
1996 December 31,
(Unaudited) 1995
----------- ------------
ASSETS
Cash and cash equivalents ....................... $ 56 $ 15
Accounts receivable ............................. 847 617
Inventories ..................................... 320 228
Assets held for sale - net ...................... 477 -
Prepaid and other ............................... 106 70
-------- --------
TOTAL CURRENT ASSETS ....................... 1,806 930
Property, plant and equipment-net ............... 4,013 2,737
Other assets (including goodwill) ............... 1,406 467
-------- --------
TOTAL ASSETS ............................... $ 7,225 $ 4,134
LIABILITIES AND EQUITY
Accounts payable ................................ $ 315 $ 272
Short-term debt ................................. 1,852 349
Current portion of long-term debt ............... 47 36
Other current liabilities ....................... 595 372
-------- --------
TOTAL CURRENT LIABILITIES .................. 2,809 1,029
Long-term debt .................................. 1,395 933
Other long-term obligations ..................... 753 643
-------- --------
TOTAL LIABILITIES .......................... 4,957 2,605
Minority interests .............................. 577 408
Shareholders' equity ............................ 1,691 1,121
-------- --------
TOTAL LIABILITIES AND EQUITY ............... $ 7,225 $ 4,134
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Millions of dollars)
Six months ended June 30,
-------------------------
1996 1995
----------- -----------
OPERATIONS
Cash received from customers ................... $ 2,105 $ 1,500
Cash paid to employees, suppliers and other .... (1,730) (1,205)
Interest paid-net .............................. (112) (44)
Income taxes paid .............................. (34) (50)
-------- --------
Net cash provided by operating activities .. 229 201
-------- --------
INVESTING
Capital expenditures ........................... (437) (243)
Investments .................................... (1,542) (145)
Divestitures and asset sales ................... 11 8
-------- --------
Net cash used for investing activities ..... (1,968) (380)
-------- --------
FINANCING
Short-term borrowings-net ...................... 1,446 38
Long-term borrowings ........................... 280 179
Long-term debt repayments ...................... (470) (45)
Minority transactions and other ................ 19 (12)
Issuances of common stock ...................... 541 47
Purchases of common stock ...................... (7) (34)
Cash dividends ................................. (29) (22)
-------- --------
Net cash used for financing activities ..... 1,780 151
-------- --------
Effect of exchange rate changes on cash and
cash equivalents ............................... - -
-------- --------
Change in cash and cash equivalents .............. 41 (28)
Cash and cash equivalents beginning-of-year....... 15 63
-------- --------
Cash and cash equivalents end-of-period .......... $ 56 $ 35
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRAXAIR INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Presentation of Condensed Consolidated Financial Statements
In the opinion of Praxair, Inc. (Praxair) management, the accompanying
condensed consolidated financial statements include all adjustments
necessary for a fair presentation of the results for the interim periods
presented. These adjustments consisted of only normal recurring
adjustments. The accompanying condensed consolidated financial statements
should be read in conjunction with the Notes to Financial Statements of
Praxair, Inc. and subsidiaries in Praxair's 1995 Annual Report.
2. 1996 Acquisition of CBI Industries, Inc. (CBI)
On January 12, 1996, Praxair acquired approximately 94% of the outstanding
shares of CBI common stock and on March 13, 1996 Praxair acquired the
remaining common stock outstanding. The total purchase price for CBI's
common stock was approximately $1.45 billion after taking into account
amounts paid or to be paid in respect of executive compensation
agreements, CBI's outstanding stock options and ESOP debt, and transaction
expenses. The funds used to consummate the acquisition initially came
from short-term borrowings of Praxair, primarily commercial paper.
Historically, CBI has operated in three major business segments:
Industrial Gases (Liquid Carbonic), Contracting Services (Chicago Bridge
and Iron) and Investments (primarily Statia Terminals). Because the
Contracting Services and Investments businesses of CBI are not considered
strategic to the combined company, Praxair intends to sell these
businesses. Additionally, based on an agreement with the U.S. Federal
Trade Commission on antitrust matters relating to the Acquisition, Praxair
will sell four air separation plants operated by CBI's Liquid Carbonic
segment in the United States. It is Praxair's intention to complete these
sales within a year (see the last paragraph of this footnote for progress
made on these sales). Accordingly, the assets, liabilities, debt and
operations related to these businesses have been eliminated from the
historical consolidated financial statements and are shown in the
unaudited combined condensed balance sheet at June 30, 1996 as Assets held
for sale - net at amounts equal to estimated net realizable values
adjusted for anticipated earnings, interest and other carrying costs until
sale.
<PAGE>
The purchase price for the common stock of CBI has been allocated to
assets and liabilities of CBI based on CBI's current estimated net
realizable values, earnings and carrying costs related to businesses held
for sale. These allocations will be adjusted based on the amounts of
actual proceeds, earnings and carrying costs for businesses held for sale,
and appraisals, valuations and other studies which will be conducted over
the next several months. Praxair has recorded approximately $750 million
as goodwill, representing the costs in excess of the fair value of net
assets acquired (shown on the balance sheet in Other assets), which is
being amortized on a straight line basis over forty years. The results of
CBI's operations have been included in the consolidated financial
statements effective January 1, 1996.
The following table provides the unaudited pro forma consolidated results
of operations for the quarter and six-months ended June 30, 1995,
reflecting the acquisition as though it had occurred at January 1, 1995.
The 1995 pro forma amounts are based upon the historical consolidated
financial statements of Praxair and CBI combined and adjusted to give
effect to the acquisition using the purchase method of accounting and to
eliminate the operations and interest carrying costs related to acquired
businesses to be sold. This unaudited pro forma financial information is
not necessarily indicative of the results of the combined company that
would have occurred had the acquisition occurred at the beginning of 1995
nor are they necessarily indicative of future operating results.
(Millions of dollars, except per share data)
Period Ended June 30, 1995
--------------------------
Quarter Six Months
------- ----------
SALES................................. $1,024 $2,021
Cost of sales, exclusive of
depreciation and amortization...... 578 1,149
Selling, general and administrative... 168 330
Depreciation and amortization......... 99 195
Research and development.............. 17 33
Other (income) expenses-net........... (3) (5)
------- -------
OPERATING PROFIT...................... 165 319
Interest expense...................... 59 109
------- -------
INCOME BEFORE INCOME TAXES............ 106 210
Income taxes.......................... 34 67
------- -------
INCOME OF CONSOLIDATED ENTITIES....... 72 143
Minority interests.................... (15) (32)
Income from equity investments........ 1 1
------- -------
NET INCOME............................ $ 58 $ 112
NET INCOME PER SHARE.................. $ 0.41 $ 0.79
<PAGE>
As described above, Praxair intends to sell CBI's Contracting Services and
Investments businesses and four air separation plants operated by CBI's
Liquid Carbonic segment in the United States. Accordingly, the net assets
related to these businesses are shown in the unaudited condensed balance
sheet at June 30, 1996 as Assets held for sale - net at amounts equal to
estimated net realizable values adjusted for anticipated earnings,
interest and other carrying costs until sale. Upon sale, any difference
between the actual after-tax proceeds received and the carrying value of
the assets sold will be recorded as an adjustment to the original purchase
price allocation. The following provides summary data for activity during
the six months ended June 30, 1996 related to these businesses
(Millions of dollars)
Assets held for sale - net, date of acquisition... $ 476
Add: Interest carrying costs and other........... 8
Less: Net income of operations held for sale...... (7)
------
Assets held for sale - net, June 30, 1996......... $ 477
On July 23, 1996, Praxair announced that AGA AB, of Stockholm, Sweden, has
agreed to purchase, for about $200 million pre-tax, five air separation
plants (four in the United States and one in Spain). The sale of the four
U.S. plants (which are included in Praxair's June 30, 1996 balance sheet
as Assets held for sale - net) is required by the U.S. Federal Trade
Commission (FTC) and is also subject to FTC approval. The after-tax
proceeds from the sale will be used by Praxair to repay outstanding
short-term debt and will reduce the Assets held for sale - net balance.
3. CBI Integration Charges
In March 1996, Praxair recorded a charge of $85 million pre-tax ($53
million after tax benefits of $30 million and minority interests of $2
million) for severance-related, lease termination and other exit costs
associated with the integration of the industrial gases businesses of CBI
and Praxair.
The severance-related costs are for payments that will be made to Praxair
and CBI employees who will be terminated because of synergies related to
integrating the operations of the two companies, primarily manufacturing
and product distribution, sales and marketing, and administrative
functions. The other exit costs are primarily related to estimated net
costs associated with lease commitments for surplus office and production
space.
<PAGE>
The following table summarizes, by segment, the number of separations and
the amounts of severance-related benefits, and other exit costs (primarily
lease termination costs) involved in the integration plan and recorded in
the first quarter of 1996.
(Millions of dollars, except number of employees to be separated)
Integration Charge
--------------------------
Employee Other Exit
Separations Severance Costs Total
----------- --------- ---------- -----
United States.................... 390 $18 $19 $37
South America.................... 530 12 1 13
Europe........................... 100 4 - 4
Canada, Mexico, Asia and Other... 460 13 15 28
Corporate........................ 120 3 - 3
----- --- --- ---
1,600 $50 $35 $85
Through June 30, 1996, actual separations totaled approximately 700
employees and at June 30, 1996, the remaining accrual balance was $71
million.
4. Inventories
The following is a summary of Praxair's consolidated inventories:
(Millions of dollars)
June 30,
1996 December 31,
(Unaudited) 1995
----------- ------------
Raw materials and supplies...... $ 115 $ 86
Work in process................. 62 54
Finished goods.................. 143 88
----- -----
$ 320 $ 228
5. Shareholders' Equity
Changes in Shareholders' Equity were as follows:
(Thousands of shares)
Common Treasury
Stock Stock
------ --------
Balance, January 1, 1996........... 140,624 89
Common stock issuance (a).......... 12,650 -
Other Common stock activity (b)... 2,407 (78)
------- ----
Balance, June 30, 1996............. 155,681 11
<PAGE>
(Millions of dollars)
Additional Cumulative
Common Paid-In Retained Translation Treasury
Stock Capital Earnings Adjustment Stock Total
------ ---------- -------- ----------- ------ -------
Balance, January 1, 1996..$ 1 $ 748 $ 474 $ (101) $(1) $1,121
Net income................ 98 98
Dividends - common stock.. (29) (29)
Common stock issuance (a). 1 461 462
Other Common stock
activity (b)............ 73 1 74
Translation adjustments... (35) (35)
------ ---------- -------- ----------- ------ -------
Balance, June 30, 1996....$ 2 $1,282(c) $ 543 $ (136) $ - $1,691
(a) During the quarter ended March 31, 1996, Praxair sold 12,650,000 shares of
common stock in a public offering.
(b) Relates to issuances of common stock for the Dividend Reinvestment and
Stock Purchase Plan, and employee savings and incentive plans, and
purchases of common stock.
(c) Net of unearned performance stock of $3 million.
During the quarter and six months ended June 30, 1996, Praxair granted
options for 196,300 and 852,050 shares, respectively, of common stock
having option prices ranging from $34.13 to $40.88 per share, the closing
market price of Praxair's common stock on the day of the grants. At June
30, 1996, there were 10,657,585 shares under option at prices ranging from
$9.80 to $40.88 per share (weighted average of $17.05) of which options
for 7,429,935 shares were exercisable at prices ranging from $9.80 to
$23.63 per share (weighted average of $14.03). During the quarter and six
months ended June 30, 1996, 449,615 and 1,607,810 options were
exercised, respectively.
6. Earnings Per Share
Earnings per share is computed by dividing net income for the period by
the weighted average number of common shares outstanding and common stock
equivalents. Weighted average common shares and common stock equivalents
used to compute earnings per share amounts were as follows:
Quarter ended June 30, 1996................. 161,680,019
Quarter ended June 30, 1995................. 142,517,000
Six-months ended June 30, 1996.............. 155,080,980
Six-months ended June 30, 1995.............. 142,243,415
<PAGE>
7. Debt and Financial Instruments
Debt - The following is a summary of Praxair's outstanding debt at June 30,
1996 and December 31, 1995. The changes relate primarily to the
acquisition of CBI (see Note 2) and the sale of common stock (see Note 5):
(Millions of dollars)
June 30, December 31,
1996 1995
-------- ------------
Current
Short-term debt:
Commercial paper...................... $1,188 $ 118
Other U.S. bank borrowings............ 316 106
International borrowings.............. 348 125
Current portion of long-term debt....... 47 36
------ ------
Total Current Debt...................... 1,899 385
Long-term
6.75% Notes due 2003.................... 300 300
8.70% Debentures due 2022............... 300 300
6.70% Notes due 2001.................... 250 -
6.85% Notes due 2005.................... 150 150
Canadian subsidiary borrowings.......... 91 90
Brazilian subsidiary borrowings......... 83 35
Other borrowings........................ 268 94
------ ------
1,442 969
Less: Current portion of long-term debt.. 47 36
------ ------
Total Long-term Debt..................... 1,395 933
------ ------
Total Debt............................... $3,294 $1,318
During the first quarter 1996, Praxair received $462 million from the
issuance of common stock and used the proceeds to pay down short-term debt
(see note 5).
On April 15, 1996, Praxair issued $250 million of 6.70%
non-redeemable Notes due 2001 with interest payable semi-annually. The
proceeds from the Notes was used to repay outstanding commercial paper.
On June 28, 1996, Praxair redeemed $80 million of Senior ESOP Notes which
were due through 2002. The Notes had been used to finance CBI's ESOP which
was terminated. Also in the second quarter 1996, Praxair terminated CBI's
$300 million credit facility.
Financial Instruments - At June 30, 1996, the notional amount of interest
rate derivatives outstanding was $1,865 million ($565 million at December
31,1995). Activity for the six month period ended June 30,1996 includes
the addition of $1,400 million of interest rate swaps that mature within
1 year and convert variable to fixed rate debt; $100 million of swaps
acquired in the CBI acquisition that mature through 2001 and convert
variable to fixed rate debt; and $200 million of swaps that matured during
the period.
<PAGE>
At June 30, 1996, Praxair had $238 million of currency exchange forward
contracts outstanding ($284 million at December 31, 1995), primarily to
hedge balance sheet exposures. These contracts generally mature within a
year.
8. Reorganization of Praxair's South American Operations
In order to align its South American operations after the CBI acquisition
(see Note 2), effective April 1, 1996, Praxair merged its Liquid Carbonic
South American subsidiaries into Praxair's 54%-owned subsidiary, S.A.
White Martins (SAWM), in exchange for additional common shares in SAWM.
The transaction, valued at $728 million, increased Praxair's ownership in
SAWM to approximately 69.3%. The transaction did not significantly
impact Praxair's consolidated results of operations or financial position.
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
During the quarter ended March 31, 1996, Praxair acquired 100% of the common
stock of CBI Industries, Inc. (CBI) for approximately $2.25 billion, including
assumed debt of approximately $800 million (see note 2 to the financial
statements). Also, during the quarter ended March 31, 1996, Praxair recorded a
charge of $85 million pre-tax ($53 million after a tax benefit of $30 million
and minority interests of $2 million) primarily for severance-related and lease
termination costs associated with the integration of the industrial gases
businesses of CBI and Praxair (see note 3 to the financial statements).
The following discussion of Praxair's consolidated and geographic segments
results compares the quarter and six months ended June 30, 1996 and the quarter
and six months ended June 30, 1995 based upon the unaudited pro forma
consolidated results of operations reflecting the CBI acquisition as though it
had occurred at January 1, 1995.
<PAGE>
Consolidated Results
The following provides summary data for the quarter and six months ended June
30, 1996 and 1995.
(Millions of dollars, except percent)
Percent
Change
--------1995------ versus
Quarter Ended June 30, 1996 Pro forma Actual Pro Forma
- - ---------------------- ------ --------- ------ ---------
Sales.......................... $1,093 $1,024 $ 788 + 7%
Operating profit............... $ 177 $ 165 $ 141 + 7%
Interest expense............... $ 49 $ 59 $ 32 - 17%
Effective tax rate............. 27% 32% 28% - 5%
Net income..................... $ 81 $ 58 $ 67 + 40%
(Millions of dollars, except percent)
Percent
Change
--------1995------ versus
Six Months Ended June 30, 1996 Pro forma Actual Pro Forma
- - ------------------------- ------ --------- ------ ---------
Sales.......................... $2,183 $2,021 $1,544 + 8%
Operating profit............... $ 259 $ 319 $ 275
Operating profit, excluding
CBI integration charges...... $ 344 $ 319 $ 275 + 8%
Interest expense............... $ 99 $ 109 $ 59 - 9%
Effective tax rate............. 23% 32% 27%
Effective tax rate, excluding
CBI integration charges...... 27% 32% 27% - 5%
Net income..................... $ 98 $ 112 $ 132
Net income, excluding
CBI integration charges...... $ 151 $ 112 $ 132 + 35%
The sales growth of 7% for the quarter and 8% for the six month period was
predominately due to increased sales volumes, increased pricing, and the effect
of newly acquired and recently consolidated packaged gases' and Surface
Technologies' subsidiaries partly offset by unfavorable currency translation
effects. Merchant and packaged gases prices were up in most geographic
segments. Surface Technologies posted record sales, increasing 14% for the
quarter (15% for the six month period), excluding currency and acquisitions.
The sales growth along with productivity gains were primarily responsible for
the increase in Operating profit to $177 million for the quarter and $344 for
the six month period (excluding the CBI integration charges). Increased
depreciation and amortization reflected new projects coming on-stream which
contributed to the sales growth, as well as goodwill associated with packaged
gases and surface technologies acquisitions. Selling, general and
administrative expenses increased primarily due to newly acquired subsidiaries
along with higher incentive compensation expenses due to the strong performance
of Praxair stock at the end of the quarter, partially offset by cost
improvements. However, Selling, general and administrative expenses as a
percentage of sales declined due to productivity improvements and cost
synergies associated with the integration of the Liquid Carbonic
business.Worldwide currency translation effects for the quarter and six month
period reduced operating profit by $4 million and $9 million, respectively,
primarily in Brazil and Mexico.
<PAGE>
Interest expense decreased versus the 1995 pro forma amounts, primarily due to
the issuance of 12.6 million shares of Praxair common stock at the end of the
first quarter of 1996, the proceeds of which were used to lower debt levels.
The effective tax rate for the quarter and six month period (excluding the tax
benefit associated with the first quarter of 1996 CBI integration charges) was
27%, a 5% decrease from the 1995 pro forma effective tax rate. This decrease
is due primarily to planned tax synergies and is consistent with Praxair's 1995
effective tax rate.
Net Income for the quarter and six month periods (excluding the first quarter
of 1996 CBI integration charges) increased over the 1995 pro forma amounts due
principally to higher operating profit, lower interest expense and a lower
effective tax rate. Worldwide currency translation effects decreased net
income for the quarter and six month period by $2 million and $4 million,
respectively, or $.01 and $.02 per share.
The number of employees at June 30, 1996 was 25,130 (excluding employees of the
operations held for sale) which, when adjusted for acquisitions other than CBI,
reflects a decrease of approximately 900 from December 31, 1995. The decrease
is principally the result of Praxair's worldwide productivity improvement
initiatives and the integration of Liquid Carbonic, predominately in South
America and the United States.
<PAGE>
Segment Discussion
This summary of Sales, Operating profit and Operating profit, excluding CBI
integration charges by geographic segment provides a basis for the discussion
that follows:
(Millions of dollars)
-Quarter Ended June 30,- Six Months Ended June 30,
-------1995------- --------1995------
1996 Pro Forma Actual 1996 Pro Forma Actual
----- --------- ------ ----- --------- ------
SALES
United States....... $ 529 $ 477 $ 388 $1,051 $ 932 $ 753
South America....... 241 235 169 484 483 340
Europe.............. 153 143 127 308 276 246
Canada, Mexico,
Asia and Other... 170 169 104 340 330 205
------- ------- ------ ------- ------- -------
$1,093 $1,024 $ 788 $2,183 $2,021 $1,544
(Millions of dollars)
-Quarter Ended June 30,- Six Months Ended June 30,
-------1995------- --------1995------
1996 Pro Forma Actual 1996 Pro Forma Actual
----- --------- ------ ----- --------- ------
OPERATING PROFIT
United States....... $ 90 $ 73 $ 70 $ 132 $ 139 $ 137
South America....... 46 50 37 81 100 72
Europe.............. 32 28 26 57 54 50
Canada, Mexico,
Asia and Other... 16 21 12 7 41 24
Corporate........... (7) (7) (4) (18) (15) (8)
------- ------- ------ ------- ------- -------
$ 177 $ 165 $ 141 $ 259 $ 319 $ 275
(Millions of dollars)
-Quarter Ended June 30,- Six Months Ended June 30,
--------1995------ --------1995------
1996 Pro Forma Actual 1996 Pro Forma Actual
----- --------- ------ ----- --------- ------
OPERATING PROFIT
excluding 1996 CBI integration charges
United States....... $ 90 $ 73 $ 70 $ 169 $ 139 $ 137
South America....... 46 50 37 94 100 72
Europe.............. 32 28 26 61 54 50
Canada, Mexico,
Asia and Other... 16 21 12 35 41 24
Corporate........... (7) (7) (4) (15) (15) (8)
------- ------- ------ ------- ------- -------
$ 177 $ 165 $ 141 $ 344 $ 319 $ 275
<PAGE>
United States
Strong volume growth and the effect of newly acquired and recently consolidated
package gases' and Surface Technologies' subsidiaries accounted for the sales
increase for the quarter and six months ended June 30, 1996. For the quarter,
U.S. industrial gases volumes increased 8%, while merchant liquid pricing
increased 2%.
Operating profit improved 23% for the quarter with the operating margin
increasing to 17.0% from 15.3% in the second quarter of 1995. Operating profit
for the six month period, excluding the first quarter of 1996 CBI integration
charge, improved 22% as compared to the 1995 period. The improvement is due
primarily to the increased sales, cost improvements and a $2 million increase
in technology cost allocations to the Canada, Mexico, Asia and Other segment
within Praxair, partly offset by higher incentive compensation expenses due to
the strong performance of Praxair stock in the quarter. Also affecting the
results was an increase in the U.S. business portfolio of Package Gases'
businesses which are characterized by lower operating margins and lower capital
requirements.
South America
Sales for the quarter ended June 30, 1996 increased 3% primarily due to pricing
improvement and sales volume growth partly offset by unfavorable currency
translation effects ($17 million). Sales for the six months ended June 30,
1996 were flat over the 1995 period primarily due to the offsetting effect of
the pricing improvement, sales volume growth and unfavorable currency
translation effects ($40 million). Excluding the currency translation effects
for the quarter and six months ended June 30, 1996, sales grew by 10% and 8%,
respectively, over the 1995 periods.
Operating profit for the quarter and six months ended June 30, 1996 (excluding
the first quarter of 1996 CBI integration charges) decreased 8% and 6%,
respectively, as compared to the 1995 periods. This was due to unfavorable
currency translation effects and higher energy and distribution costs partly
offset by the pricing improvement and volume growth. Excluding the currency
translation impact, operating profit for the quarter and six months ended June
30, 1996 decreased by 2% and increased by 1%, respectively, as compared to the
1995 periods.
Europe
Sales for the quarter and six months ended June 30, 1996 increased 7% and 12%,
respectively, as compared to the 1995 periods due primarily to improved
merchant and packaged gases pricing in Southern Europe and improved surface
technologies results, including acquisitions.
Operating profit for the quarter and six months ended June 30, 1996 (excluding
the first quarter of 1996 CBI integration charges) increased 14% and 13%,
respectively, as compared to the 1995 periods due primarily to the sales
growth and continued productivity improvements.
<PAGE>
Canada, Mexico, Asia and Other
Sales for the quarter and six months ended June 30, 1996 increased 1% and 3%,
respectively, as compared to the 1995 periods due to volume growth in Mexico
and Asia and pricing improvement in Mexico partly offset by unfavorable
currency translation effects, primarily in Mexico. Excluding the currency
translation effects, sales for the quarter and six months ended June 30, 1996
increased 4% and 7%, respectively, as compared to the 1995 periods.
Operating Profit for the quarter and six months ended June 30, 1996 (excluding
the first quarter of 1996 CBI integration charges) decreased 23% and 15%,
respectively, as compared to the 1995 periods primarily due to a $2 million
increase in technology cost allocations from the United States segment within
Praxair, unfavorable currency translation effects and higher business
development expenses in Asia, which more than offset the sales growth.
<PAGE>
Liquidity, Capital Resources and other Financial Data
Cash Flow From Operations
Cash flow from operations in the first six months of 1996 increased by $28
million from $201 million to $229 million. This increase reflects increased
cash received from customers due to sales growth and lower working capital
requirements, partly offset by higher payments to employees and suppliers and
increased interest on higher debt. Working capital decreased as compared to
the 1995 period as a result of lower inventory and increased other current
liabilities related to the CBI integration charges.
Investing
Cash flow used for investing in the first six months of 1996 totaled $1,968
million, an increase of $1,588 million from 1995. This increase was due
primarily to the acquisition of CBI (see note 3 to the financial statements)
and higher construction expenditures.
Construction expenditures for the first six months of 1996 totaled $437
million, up $194 million from the corresponding period in 1995. The increase
is primarily in the United States and South America. On a worldwide basis,
construction expenditures for the full year 1996 are expected to be more than
$800 million with most of the increase over 1995 expected to continue to be in
the United States and South America.
Investment expenditures for the first six months of 1996 totaled $1,542 million
predominately due to the acquisition of CBI ($97 million excluding CBI). Also
included are minority share purchases and acquisitions of independent packaged
gases distributors and a Surface Technologies company in the United States,
investments in Europe (Israel and Italy), South America, and Asia. Investment
expenditures for the full year 1996 are expected to be over $150 million
(excluding the acquisition of CBI), reflecting Praxair's packaged gases and
Surface Technologies acquisition strategies, as well as increasing ownership of
affiliates through minority share purchases and continued geographic expansion
initiatives.
Financing
At December 31, 1995, Praxair's total debt outstanding was $1,318 million. Due
to the CBI acquisition and increased capital expenditures, partially offset by
the sale of common stock, debt increased by $1,976 million to $3,294 million at
June 30, 1996. Praxair's debt-to-capital ratio increased from 46% at December
31, 1995 to 59% as of June 30, 1996. As of June 30, 1996, there were no
borrowings under Praxair's $2.5 billion U. S. bank credit facility and in
April, Praxair terminated CBI's $300 million revolving credit facility.
During the six months ended June 30, 1996, Praxair issued 12.6 million shares
of common stock and used the proceeds of $462 million to repay short-term
borrowings.
On April 15, 1996, Praxair issued $250 million of 6.70% non-redeemable Notes
due 2001 with interest payable semi-annually. The proceeds from the Notes was
used to repay outstanding commercial paper.
<PAGE>
As discussed in Note 2 to the financial statements, on July 23, 1996, Praxair
announced that AGA AB, of Stockholm, Sweden, has agreed to purchase, for about
$200 million, five air separation plants (four of which are subject to FTC
approval) which are included in Praxair's June 30, 1996 balance sheet as Assets
held for sale - net. The after-tax proceeds from the sale will be used by
Praxair to repay outstanding short-term debt.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of the Shareholders of Praxair, Inc. was held on April 17,
1996. At that meeting, four directors were elected. In addition, the
shareholders approved the 1996 Praxair, Inc. Senior Executive Performance Award
Plan and an amendment to the 1992 Praxair, Inc. Long Term Incentive Plan. A
shareholder proposal which had been submitted for inclusion in the
Corporation's Proxy Statement was not presented for action at the meeting. The
vote on each matter was as follows:
Election of Directors:
NOMINEE VOTES FOR VOTES WITHHELD
- - ------- ----------- --------------
John A. Clerico 115,119,679 548,675
John J. Creedon 115,035,897 632,457
Dale F. Frey 115,070,232 598,122
Benjamin F. Payton 114,984,996 683,358
Approval of an amendment to the 1992 Praxair, Inc. Long Term Incentive Plan:
VOTES FOR VOTES AGAINST ABSTENTIONS BROKER NON-VOTES
- - ----------- ------------- ----------- ----------------
108,593,126 4,381,589 688,377 2,005,262
Approval of the 1996 Praxair, Inc. Senior Executive Performance Award Plan:
VOTES FOR VOTES AGAINST ABSTENTIONS BROKER NON-VOTES
- - ----------- ------------- ----------- ----------------
105,268,620 7,478,031 916,441 2,005,262
Item 6. Exhibits and Reports on Form 8-K
Exhibits
11. Computation of Earnings per Share
27. Financial Data Schedule
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRAXAIR, INC.
-------------
(Registrant)
Date: August 7, 1996 By: J. ROBERT VIPOND
------------------------ -----------------------------
J. ROBERT VIPOND
Vice President and Controller
(On behalf of the Registrant
and as Chief Accounting Officer)
<PAGE>
Exhibit Index
-------------
Exhibit No.
- - -----------------------------------------------------------------------------
11. Computation of Earnings per Share
27. Financial Data Schedule
Exhibit 11
PRAXAIR, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(Millions of dollars except share and per share amounts)
Quarter ended June 30, Six Months ended June 30,
------------------------ -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
Net income $ 81 $ 67 $ 98 $ 132
Weighted average common
shares and common
stock equivalents:
Weighted average common
shares outstanding 155,307,282 137,938,933 148,734,209 137,874,432
Dilutive effect of
convertible debt 154,378 154,378 154,378 154,378
Dilutive effect of
stock options 6,218,360 4,423,689 6,192,393 4,214,605
----------- ----------- ----------- -----------
161,680,019 142,517,000 155,080,980 142,243,415
Earnings per share $ 0.50 $ 0.47 $ 0.63 $ 0.93
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