FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended March 31, 2000
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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 06-1249050
- ------------------------------- -------------------
(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 March 31, 2000, 157,652,803 shares of common stock ($.01 par value) of the
Registrant were outstanding.
<PAGE>
Forward-looking statements
--------------------------
The forward-looking statements contained in this document concerning, among
other things, projected capital and acquisition spending, sales and earnings
growth, volume increases, the impact of new technology in the marketplace, tax
planning initiatives and effective tax rates, the commercial success of
MetFabCity, Inc., the impact and timing of the White Martins tender offer in
Brazil, the impact of economic conditions, including currency movements,
management's assessment of the impact of the Euro Conversion, and market risks
and sensitivity analyses disclosures relating to financial instruments all
involve risks and uncertainties, and are subject to change based on various
factors, including the impact of changes in worldwide and national economies,
foreign currency movements, pricing fluctuations for the company's products,
changes in interest rates, the continued timely development and acceptance of
new products and services, the impact of competitive products and pricing, the
ability to continue to develop potential acquisition opportunities, and the
impact of tax and other legislation and regulation in the jurisdictions in which
the Company operates.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Income - Praxair, Inc. and Subsidiaries
Quarter Ended March 31, 2000 and 1999 (Unaudited)
Condensed Consolidated Balance Sheet - Praxair, Inc. and Subsidiaries
March 31, 2000 (Unaudited) and December 31, 1999
Condensed Consolidated Statement of Cash Flows - Praxair, Inc. and
Subsidiaries Quarter Ended March 31, 2000 and 1999 (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
Item 3. Quantitative and Qualitative Disclosures About Market Risk
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 data)
Quarter Ended
March 31
----------------
2000 1999
------- -------
SALES ..................................... $1,230 $1,118
Cost of sales, exclusive of
depreciation and amortization ........... 722 652
Selling, general and administrative ....... 167 155
Depreciation and amortization ............. 118 113
Research and development .................. 16 16
Other income-net .......................... 6 29
------- -------
OPERATING PROFIT .......................... 213 211
Interest expense .......................... 52 57
------- -------
INCOME BEFORE INCOME TAXES ................ 161 154
Income taxes .............................. 37 35
------- -------
INCOME OF CONSOLIDATED ENTITIES ........... 124 119
Minority interests ........................ (12) (13)
Income from equity investments ............ 2 2
------- -------
INCOME BEFORE ACCOUNTING CHANGE ........... 114 108
Cumulative effect of an accounting change.. - (10)
------- -------
NET INCOME ................................ $ 114 $ 98
======= =======
PER SHARE DATA:
Basic earnings per share:
Before accounting change ................. $ 0.72 $ 0.68
Accounting change ........................ - (.06)
------- -------
Net Income ............................... $ 0.72 $ 0.62
======= =======
Diluted earnings per share:
Before accounting change ................. $ 0.71 $ 0.67
Accounting change ........................ - (.06)
------- -------
Net Income ............................... $ 0.71 $ 0.61
======= =======
Cash dividends per share .................. $ 0.155 $ 0.14
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING (000'S):
Basic shares outstanding .................. 159,433 158,138
Diluted shares outstanding ................ 161,575 161,819
The accompanying notes are an integral part of these financial statements.
<PAGE>
PRAXAIR, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Millions of dollars)
March 31,
2000 December 31,
(Unaudited) 1999
----------- ------------
ASSETS
Cash and cash equivalents ....................... $ 25 $ 76
Accounts receivable ............................. 891 848
Inventories ..................................... 316 310
Prepaid and other ............................... 103 101
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TOTAL CURRENT ASSETS ....................... 1,335 1,335
Property, plant and equipment-net ............... 4,780 4,720
Other assets .................................... 1,684 1,667
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TOTAL ASSETS ............................... $ 7,799 $ 7,722
======= =======
LIABILITIES AND EQUITY
Accounts payable ................................ $ 353 $ 361
Short-term debt ................................. 848 756
Current portion of long-term debt ............... 121 128
Other current liabilities ....................... 459 480
------- -------
TOTAL CURRENT LIABILITIES .................. 1,781 1,725
Long-term debt .................................. 2,107 2,111
Other long-term obligations ..................... 1,149 1,162
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TOTAL LIABILITIES .......................... 5,037 4,998
Minority interests .............................. 371 359
Preferred stock ................................. 75 75
Shareholders' equity ............................ 2,316 2,290
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TOTAL LIABILITIES AND EQUITY ............... $ 7,799 $ 7,722
======= =======
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)
Quarter ended March 31,
-------------------------
2000 1999
----------- -----------
OPERATIONS
Net income ..................................... $ 114 $ 98
Adjustments:
Depreciation and amortization ................ 118 113
Deferred income taxes ........................ 22 10
Working capital .............................. (89) (23)
Long-term assets and liabilities ............. (26) (48)
Other non-cash charges ....................... 10 16
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Net cash provided by operating activities .. 149 166
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INVESTING
Capital expenditures ........................... (159) (141)
Acquisitions ................................... (5) (6)
Divestitures and asset sales ................... 2 82
-------- --------
Net cash used for investing activities ..... (162) (65)
-------- --------
FINANCING
Short-term borrowings-net ...................... 91 (39)
Long-term borrowings ........................... 3 6
Long-term debt repayments ...................... (17) (115)
Minority transactions and other ................ (11) 68
Issuances of common stock ...................... 64 14
Purchases of common stock ...................... (144) (19)
Cash dividends ................................. (24) (22)
-------- --------
Net cash used for financing activities...... (38) (107)
-------- --------
Effect of exchange rate changes on cash and
cash equivalents ............................... - -
-------- --------
Change in cash and cash equivalents .............. (51) (6)
Cash and cash equivalents beginning-of-year....... 76 34
-------- --------
Cash and cash equivalents end-of-period .......... $ 25 $ 28
======== ========
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 the
consolidated financial statements of Praxair, Inc. and subsidiaries in
Praxair's 1999 Annual Report. Certain prior years' amounts have been
reclassified to conform to the current years' presentation.
2. Accounting Change
In accordance with the American Institute of Certified Public
Accountants (AICPA) Statement of Position (SOP) 98-5, "Reporting on the
Costs of Start-Up Activities," Praxair recorded an after-tax charge of
$10 million in the first quarter of 1999 as the cumulative effect of an
accounting change.
3. Special Items
During the first quarter of 2000, Praxair initiated a program to
reposition the Surface Technologies operations as a result of adverse
market conditions in the aerospace original equipment and computer disk
drive markets. Praxair recorded a $5 million charge to other income-net,
including approximately $4 million for employee severance costs and over
$1 million related to other exit costs. The program includes the closure
of two U.S. facilities and headcount reductions of approximately 160
employees located at these facilities and others. As of March 31, 2000,
the cash expenditures charged to this accrual were approximately $1
million and the balance is expected to be paid out within the next year.
At March 31, 2000, the remaining accrual balance related to the 1996 and
1997 special charges was $12 million (see Note 9 to Praxair's 1999
consolidated financial statements).
4. Inventories
The following is a summary of Praxair's consolidated inventories:
(Millions of dollars)
March 31,
2000 December 31,
(Unaudited) 1999
----------- ------------
Raw materials and supplies...... $ 108 $ 104
Work in process................. 55 50
Finished goods.................. 153 156
----- -----
$ 316 $ 310
===== =====
<PAGE>
5. Shareholders' Equity
Changes in Shareholders' Equity were as follows:
(Thousands of shares)
Common Treasury
Stock Issued Stock
------------ ---------
Balance, January 1, 2000................ 164,215 5,168
Common stock activity (a) .............. 1,113 2,507
--------- --------
Balance, March 31, 2000................. 165,328 7,675
========= ========
<TABLE>
<CAPTION>
(Millions of dollars) Accumulated
Additional Other
Common Paid-In Treasury Retained Comprehensive
Stock Capital Stock Earnings Income(Loss) Total
<S> <C> <C> <C> <C> <C> <C>
------ --------- -------- -------- ----------- -------
Balance, January 1, 2000 .... $ 2 $1,613 $(219) $1,722 $(828) $2,290
Net income .................. 114 114
Translation adjustments...... 16 16
-------
Comprehensive income(b) 130
Dividends - common stock..... (24) (24)
Common stock activity (a).... 11 (91) (80)
--- ------ ------ ------- ------ -------
Balance, March 31, 2000 ..... $ 2 $1,624 $(310) $1,812 $(812) $2,316
=== ====== ====== ======= ====== =======
</TABLE>
(a) Relates to issuances of common stock for the Dividend Reinvestment and
Stock Purchase Plan, employee savings and incentive plans, and
issuances/purchases of common stock.
(b) Comprehensive income (loss) for the quarter ended March 31, 1999 was $(253)
million. The loss was mainly caused by the significant currency movements
in Brazil.
During the quarter ended March 31, 2000, Praxair granted options for
2,116,545 shares of common stock having option prices ranging from $33.31
to $53.56 per share (weighted average of $43.74), the closing market
price of Praxair's common stock on the day of the grants. At March 31,
2000 there were 14,283,810 shares under option at prices ranging from
$9.80 to $56.13 per share (weighted average of $34.66) of which options
for 8,111,070 shares were exercisable at prices ranging from $9.80 to
$56.13 per share (weighted average of $29.19). During the quarter ended
March 31, 2000, 480,565 options were exercised.
<PAGE>
6. Debt and Financial Instruments
Debt - The following is a summary of Praxair's outstanding debt at March
31, 2000 and December 31, 1999:
(Millions of dollars) March 31,
2000 December 31,
(Unaudited) 1999
----------- ------------
Short-term:
Commercial paper and U.S. borrowings...... $ 712 $ 632
Canadian borrowings....................... 13 6
South American borrowings................. 67 65
Other international borrowings............ 56 53
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Total short-term debt....................... 848 756
Long-term:
U.S.:
6.25% Notes due 2000..................... 75 75
6.70% Notes due 2001..................... 250 250
6.625% Notes due 2003..................... 75 75
6.75% Notes due 2003..................... 300 300
6.15% Notes due 2003..................... 250 250
6.85% Notes due 2005..................... 150 150
6.90% Notes due 2006..................... 250 250
6.625% Notes due 2007..................... 250 250
8.70% Debentures due 2022
(Redeemable after 2002)............ 300 300
Other borrowings.......................... 32 32
Canadian subsidiary borrowings.............. 179 177
South American subsidiary borrowings........ 72 81
Other international borrowings.............. 45 49
------- -------
2,228 2,239
Less: current portion of long-term debt..... 121 128
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Total long-term debt........................ 2,107 2,111
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Total debt.................................. $3,076 $2,995
======= =======
Praxair has available a $1.5 billion credit agreement which expires in
December 2000 and is used to support commercial paper and other
short-term U.S. bank borrowings. No borrowings were outstanding under
this credit agreement at March 31, 2000 or December 31, 1999.
Financial Instruments - At March 31, 2000, Praxair had $80 million
notional amount of interest rate swap agreements that effectively
convert variable rate debt to fixed rate debt. These agreements mature
in 2001. Praxair is also a party to currency exchange forward contracts
to manage its exposure to changing currency exchange rates. At March 31,
2000 Praxair had $294 million of currency exchange forward contracts
outstanding: $190 million to hedge recorded balance sheet exposures, $13
million to hedge firm commitments (generally for the purchase of
equipment related to construction projects) and $91 million to hedge
future net income. Additionally, there are $50 million notional value of
currency exchange contracts that effectively offset. These contracts all
mature within one year.
<PAGE>
During the quarter ended March 31, 1999, Praxair sold and leased
back certain U.S. distribution equipment for $80 million (see Note
11 to Praxair's 1999 consolidated financial statements).
7. Earnings Per Share
Basic earnings per share is computed by dividing net income for the
period by the weighted average number of Praxair common shares
outstanding. Diluted earnings per share is computed by dividing net
income for the period by the weighted average number of Praxair common
shares outstanding and dilutive common stock equivalents. The difference
between the number of shares used in the basic earnings per share
calculation compared to the diluted earnings per share calculation is
due to the dilutive effect of outstanding stock options. Stock options
for 6,014,880 shares were not included in the computation of diluted
earnings per share for the quarter ended March 31, 2000 (4,564,695
shares in the 1999 first quarter) because the exercise prices were
greater than the average market price of the common stock.
8. 1999 Brazilian Currency Hedge Agreements
In early January 1999, Praxair entered into currency exchange forward
contracts totaling $325 million notional value for estimated Brazilian
net income in 1999 and to hedge a portion of its net investment. The net
income hedge agreements were settled during the first quarter of 1999
resulting in a pre-tax gain of $21 million ($14 million after tax and
minority interest). The net investment hedge contracts were either
closed out or settled in the first quarter of 1999 resulting in a gain
of approximately $60 million (after tax and minority interest) which was
recognized on the balance sheet in the accumulated other comprehensive
income(loss) (cumulative translation adjustment) component of
shareholders' equity. Approximately $50 million related to the settled
investment hedges was received in the first quarter of 1999 and is shown
in the financing section of the condensed consolidated statement of cash
flows under the caption "Minority transactions and other."
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Consolidated Results
(Dollar amounts in millions)
Percent
Quarter Ended March 31, 2000 1999(a) Change
- -------------------------------------- ------ ------- --------
Sales................................. $1,230 $1,118 + 10%
Selling, general and administrative... $ 167 $ 155 + 8%
Depreciation and amortization......... $ 118 $ 113 + 4%
Operating profit...................... $ 213 $ 211 + 1%
Interest expense...................... $ 52 $ 57 - 9%
Income taxes.......................... $ 37 $ 35 + 6%
Effective tax rate.................... 23% 23% -%
Income before accounting change....... $ 114 $ 108 + 6%
Excluding one-time hedge gain in Brazil:
Operating profit...................... $ 213 $ 190 + 12%
Income taxes.......................... $ 37 $ 33 + 12%
Effective tax rate.................... 23% 25% - 2%
Income before accounting change....... $ 114 $ 94 + 21%
(a) The results for the first quarter 1999 include a $21 million operating
profit benefit ($14 million after-tax and minority interests) from net income
hedges in Brazil which do not recur in 2000. The amounts shown above under the
section "Excluding one-time hedge gain in Brazil" exclude the impacts of these
hedge gains.
The sales increase of 10% for the quarter was due primarily to industrial gases
volume growth in North America, Europe, South America and Asia; acquisitions in
the Surface Technologies segment; and price improvements in North and South
America. These increases were partially offset by unfavorable currency
translation impacts, primarily in Europe; and volume declines for Global Supply
Systems business.
Operating profit increased 12% for the quarter, excluding the 1999 one-time
hedge gain in Brazil. This was due primarily to the sales increase described
above and productivity improvements, partly offset by the impact of cost
inflation. As a percentage of sales, selling, general and administrative
expenses were 13.6% in the quarter ended March 31, 2000 as compared to 13.9% in
the 1999 quarter due primarily to productivity improvements, partly offset by
cost inflation, higher business development and incentive plan costs. The
increase in depreciation and amortization expense reflects the impact of new
projects coming on-stream, as well as Surface Technologies acquisitions. Other
income-net decreased by $23 million for the 2000 quarter due primarily to a
non-recurring $21 million hedge gain in Brazil in the 1999 quarter. The 2000
quarter includes a $5 million recovery from the cash settlement of litigation
related to a previously divested business, offset by a $5 million charge
relating to severance and other exit costs in the Surface Technologies segment.
Income before accounting change for the quarter increased $20 million or 21%,
excluding the one-time hedge gain in Brazil. This increase was due principally
to the higher operating profit described above and decreased interest expense.
Interest expense decreased $5 million or 9% due to lower debt levels in South
America and lower interest rates in Brazil. Based on an overall assessment of
Praxair's global tax position and business strategies, the effective tax rate
was lowered to 23% in 2000 from 25% in 1999, excluding the impact of the
Brazilian hedge gain in 1999.
<PAGE>
The number of employees at March 31, 2000 was approximately 23,900 which
reflects a decrease of approximately 200 from December 31, 1999. The decrease is
principally the result of headcount reductions in the Surface Technologies
business and continued productivity improvement initiatives in South America.
Segment Discussion
The following summary of sales and operating profit by segment provides a basis
for the discussion that follows (for a description of Praxair's operating
segments, refer to Note 2 to the consolidated financial statements included in
Praxair's 1999 annual report to shareholders):
(Dollar amounts in millions)
Quarter Ended March 31, Percent
2000 1999 Change
------ ------ -------
SALES
North America $ 722 $ 661 + 9%
South America 186 168 +11%
Europe 130 133 - 2%
Surface Technologies 147 111 +32%
All Other 45 45 -%
------ ------
$1,230 $1,118 +10%
====== ======
OPERATING PROFIT
North America $ 139 $ 121 +15%
South America (a) 39 53 -26%
Europe 32 30 + 7%
Surface Technologies (b) 11 20 -45%
All Other (b) (1) (7) +86%
Corporate (7) (6) -17%
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$ 213 $ 211 + 1%
======= =======
(a) The 1999 quarter includes a one-time $21 million operating profit benefit
from net income hedges in Brazil which do not recur in 2000.
(b) The quarter ended March 31, 2000 for Surface Technologies includes a $5
million charge relating to severance costs and other exit costs (see Note
3 to the condensed consolidated financial statements). The All Other
segment results for the 2000 quarter include a $5 million recovery from
the cash settlement of litigation related to a previously divested
business.
North America
- -------------
Sales for the current quarter increased 9% as compared to the quarter ended
March 31, 1999 reflecting strong sales increases in all geographies - U.S.,
Canada and Mexico. Overall, this increase is due to 6% volume growth, price
improvements of 2% and favorable currency impacts.
Operating profit increased 15% for the quarter primarily due to the increased
sales and benefits of productivity improvements, partly offset by cost inflation
and higher incentive compensation expenses.
<PAGE>
South America
- -------------
Sales for the quarter ended March 31, 2000 increased 11% primarily due to
pricing improvements of about 7% and volume increases of about 6%, partially
offset by unfavorable currency effects.
Operating profit for the quarter ended March 31, 2000 increased $7 million, or
22%, compared to the first quarter 1999 excluding the impact of the net income
hedges in 1999, due to productivity improvement initiatives and the sales
increase, partially offset by cost inflation.
In December 1999, Praxair made a tender offer for the remaining 23.43% of the
shares of White Martins that it does not already own. If all shares are tendered
at the price offered, the total cost would be approximately $250 million
(assuming an exchange rate of 1.80 Reais per U.S. Dollar). The impact on
Praxair's results of operations will be to increase interest expense and
decrease the minority interests' share of income and is not expected to be
significant to Praxair's net income. The tender offer process is now expected to
be completed in early May 2000.
Europe
- ------
Sales for the quarter ended March 31, 2000 decreased 2% as compared to the first
quarter of 1999 due primarily to unfavorable currency translation effects,
partially offset by a 10% sales volume growth which reflects a strong
performance in Spain and Italy. Excluding the currency translation effects,
sales increased by approximately 11% for the quarter ended March 31, 2000 versus
1999.
Operating profit for the quarter ended March 31, 2000 increased 7% as compared
to the first quarter of 1999 due to the sales volume impacts discussed above
partially offset by negative currency translation effects. Excluding the
currency translation effects, operating profit increased by 13% for the quarter
ended March 31, 2000.
Surface Technologies
- --------------------
Recently, Praxair's Surface Technologies business has experienced adverse market
conditions in the aerospace original equipment and computer disk drive markets
which mask good growth in other markets. As a result, operating results and
margins were down significantly from the previous year. Consequently, during the
quarter, Praxair implemented a major program to reposition the business,
including headcount reductions and the closing of two facilities. This program
resulted in a $5 million charge in the 2000 first quarter (see Note 3 to the
condensed consolidated financial statements for additional information related
to this charge).
Sales for the quarter ended March 31, 2000 increased 32% as compared to the
first quarter of 1999 primarily due to the impact of 1999 acquisitions which
added 39% to overall growth, partly offset by price decreases and unfavorable
currency impacts.
Operating profit for the quarter ended March 31, 2000 decreased 20% as compared
to the first quarter of 1999, excluding the $5 million charge for severance and
other exit costs in 2000. This decrease reflects pricing pressures, cost
inflation and negative currency impacts, partly offset by the contribution from
acquisitions.
<PAGE>
All Other
- ---------
Sales for the quarter ended March 31, 2000 as compared to the 1999 period were
flat. Asia experienced 36% sales growth due primarily to volume growth and new
plants coming on stream in China and India. This increase was offset by a
decline in Global Supply System sales due to a decrease in the volume of third
party equipment sales. The level of activity for Global Supply Systems is
reflective of the overall capacity in the industry and local economic
conditions, and is subject to fluctuations from one period to the next.
Operating Profit for the quarter ended March 31, 2000 increased by $6 million as
compared to the first quarter of 1999 due primarily to a $5 million recovery
from the cash settlement of litigation related to a previously divested
business. Improvements in Asia and Global Supply Systems were partly offset by
business development costs primarily related to Praxair's e-business programs,
including MetFabCity, Inc.
<PAGE>
Liquidity, Capital Resources and Other Financial Data
(Millions of dollars)
Quarter Ended March 31, 2000 1999
- -------------------------------------- ------ ------
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES:
Net income plus depreciation
and amortization.................... $ 232 $ 211
Working capital....................... (89) (23)
Other - net........................... 6 (22)
------- -------
Total from operating activities....... $ 149 $ 166
======= =======
INVESTING ACTIVITIES:
Capital expenditures.................. $ (159) $ (141)
Acquisitions.......................... (5) (6)
Divestitures and asset sales.......... 2 82
------- ------
Total used for investing ............. $ (162) $ (65)
======= =======
FINANCING ACTIVITIES:
Debt increases (reductions)........... $ 77 $ (148)
Minority transactions and other....... (11) 68
Issuances (purchases) of stock, net... (80) (5)
Cash dividends........................ (24) (22)
------- -------
Total used for financing.............. $ (38) $ (107)
======= =======
(Dollar amounts in millions)
March 31, December 31,
DEBT-TO-CAPITAL RATIO 2000 1999
- -------------------------------------- --------- ------------
Debt.................................. $3,076 $2,995
Capital*.............................. $5,838 $5,719
Debt-to-capital ratio................. 52.7% 52.4%
*Includes debt, minority interests, preferred stock and shareholders' equity.
Cash Flow From Operations
- -------------------------
Cash flow from operations decreased to $149 million in the first quarter 2000
versus $166 million in 1999, primarily due to higher working capital
requirements reflecting the sales growth and higher payments for incentive
compensation programs in 2000.
Investing
- ---------
Cash flow used for investing in the first quarter of 2000 totaled $162 million,
an increase of $97 million from the 1999 quarter. This increase was due
primarily to lower proceeds from divestitures and asset sales and higher capital
expenditures.
Capital expenditures for the first quarter of 2000 totaled $159 million, up $18
million from the corresponding quarter in 1999. The increase in capital
expenditures is primarily in Canada and Mexico and is a function of timing.
Acquisition expenditures for the first quarter of 2000 totaled $5 million,
essentially flat with the 1999 quarter. Acquisition expenditures for the first
quarter of 2000 include the buyout of a minority interest in South America and
acquisitions in South America and the Surface Technologies business. The 1999
acquisition expenditures related to an acquisition in the Surface Technologies
business.
<PAGE>
Divestiture and asset sales totaled $2 million, a decrease of $80 million from
the 1999 quarter. This change is primarily attributed to the sale leaseback
transaction in the United States during 1999 (see Note 6 to the condensed
consolidated financial statements).
On a worldwide basis, capital and acquisition expenditures for the full year
2000 are expected to be about $800 million. This estimate excludes any impacts
from the White Martins tender offer (see Segment discussion-South America).
Financing
- ---------
At March 31, 2000, Praxair's total debt outstanding was $3,076 million, an
increase of $81 million versus December 31, 1999. This increase is primarily
attributed to share repurchases during the quarter and the operating and
investing activities discussed above. As of March 31, 2000, there were no
borrowings under Praxair's $1.5 billion U.S. bank credit facility.
As scheduled, in April 2000, Praxair redeemed 550,000 outstanding shares of its
7.48% Cumulative Series A Preferred Stock, at a price of $100 per share or a
total redemption value of $55 million. Also, during 2000, Praxair intends to
enter into a new U.S. bank credit facility to replace the existing facility
which expires in December 2000.
Praxair's debt-to-capital ratio increased from 52.4% at December 31, 1999 to
52.7% at March 31, 2000 due to the increase in debt.
Euro Conversion
Refer to Euro Conversion in the Management's Discussion and Analysis section of
Praxair's 1999 Annual Report.
Impact of Recently Issued Accounting Standards
See Note 1 to Praxair's 1999 Annual Report relating to Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities."
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Refer to the Market Risks and Sensitivity Analyses in the Management's
Discussion and Analysis section of Praxair's 1999 Annual Report.
<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 25,
2000. At that meeting, four directors were elected. The vote was as follows:
Election of Directors:
NOMINEE VOTES FOR VOTES WITHHELD
- ------------------------- ----------- --------------
C. Fred Fetterolf 142,391,454 1,399,183
Claire W. Gargalli 142,506,563 1,284,074
G. Jackson Ratcliffe, Jr. 142,545,903 1,244,734
Dennis H. Reilley 142,508,405 1,282,232
In addition to the foregoing elected directors, the terms of office for the
following individuals continue after the meeting:
Alejandro Achaval
Dale F. Frey
Ronald L. Kuehn, Jr.
Raymond W. LeBoeuf
H. William Lichtenberger
Benjamin F. Payton
H. Mitchell Watson, Jr.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
27. Financial Data Schedule
Reports on Form 8-K
No reports on Form 8-K were filed during the first quarter of 2000.
<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: May 2, 2000 By: /s/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.
- -----------------------------------------------------------------------------
27. Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
<PRAXAIR, INC. EXHIBIT 27 FINANCIAL DATA SCHEDULE AS OF MARCH 31,2000>
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 25
<SECURITIES> 0
<RECEIVABLES> 922
<ALLOWANCES> 31
<INVENTORY> 316
<CURRENT-ASSETS> 1335
<PP&E> 8746
<DEPRECIATION> 3966
<TOTAL-ASSETS> 7799
<CURRENT-LIABILITIES> 1781
<BONDS> 2107
75
0
<COMMON> 2
<OTHER-SE> 2314
<TOTAL-LIABILITY-AND-EQUITY> 7799
<SALES> 1230
<TOTAL-REVENUES> 1230
<CGS> 722 <F1>
<TOTAL-COSTS> 722 <F1>
<OTHER-EXPENSES> 118 <F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52
<INCOME-PRETAX> 161
<INCOME-TAX> 37
<INCOME-CONTINUING> 114
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114
<EPS-BASIC> 0.72
<EPS-DILUTED> 0.71
<FN>
<F1>Cost of goods sold and total costs are exclusive of depreciation and
amortization which is shown on the other expense line in the Financial Data
Schedule.
</FN>
</TABLE>
