Price | 162.33 | EPS | 5 | |
Shares | 292 | P/E | 31 | |
MCap | 47,321 | P/FCF | 15 | |
Net Debt | 7,597 | EBIT | 2,528 | |
TEV | 54,918 | TEV/EBIT | 22 | TTM 2018-09-30, in MM, except price, ratios |
10-Q | 2018-09-30 | Filed 2018-11-09 |
10-Q | 2018-06-30 | Filed 2018-07-26 |
10-Q | 2018-03-31 | Filed 2018-04-26 |
10-K | 2017-12-31 | Filed 2018-02-28 |
10-Q | 2017-09-30 | Filed 2017-10-26 |
10-Q | 2017-06-30 | Filed 2017-07-27 |
10-Q | 2017-03-31 | Filed 2017-04-27 |
10-K | 2016-12-31 | Filed 2017-03-01 |
10-Q | 2016-09-30 | Filed 2016-10-27 |
10-Q | 2016-06-30 | Filed 2016-07-28 |
10-Q | 2016-03-31 | Filed 2016-04-29 |
10-K | 2015-12-31 | Filed 2016-02-24 |
10-Q | 2015-09-30 | Filed 2015-10-29 |
10-Q | 2015-06-30 | Filed 2015-07-29 |
10-Q | 2015-03-31 | Filed 2015-04-29 |
10-K | 2014-12-31 | Filed 2015-02-25 |
10-Q | 2014-09-30 | Filed 2014-10-29 |
10-Q | 2014-06-30 | Filed 2014-07-23 |
10-Q | 2014-03-31 | Filed 2014-04-23 |
10-K | 2013-12-31 | Filed 2014-02-25 |
10-Q | 2013-09-30 | Filed 2013-10-30 |
10-Q | 2013-06-30 | Filed 2013-07-24 |
10-Q | 2013-03-31 | Filed 2013-04-24 |
10-K | 2012-12-31 | Filed 2013-02-27 |
10-Q | 2012-06-30 | Filed 2012-07-25 |
10-Q | 2012-03-31 | Filed 2012-04-25 |
10-K | 2011-12-31 | Filed 2012-02-29 |
10-Q | 2011-09-30 | Filed 2011-10-26 |
10-Q | 2011-06-30 | Filed 2011-07-27 |
10-Q | 2011-03-31 | Filed 2011-04-27 |
10-K | 2010-12-31 | Filed 2011-02-23 |
10-Q | 2010-06-30 | Filed 2010-07-28 |
10-Q | 2010-03-31 | Filed 2010-04-28 |
10-K | 2009-12-31 | Filed 2010-02-24 |
8-K | 2018-11-09 | |
8-K | 2018-10-31 | |
8-K | 2018-10-22 | |
8-K | 2018-10-16 | |
8-K | 2018-09-07 | |
8-K | 2018-07-26 | |
8-K | 2018-07-05 | |
8-K | 2018-04-26 | |
8-K | 2018-04-06 | |
8-K | 2018-02-16 | |
8-K | 2018-01-29 | |
8-K | 2018-01-25 |
Note 16. Income Taxes |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
Item 4. Controls and Procedures |
Part II - Other Information |
Item 1. Legal Proceedings |
Item 1A. Risk Factors |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. Defaults Upon Senior Securities |
Item 4. Mine Safety Disclosures |
Item 5. Other Information |
Item 6. Exhibits |
EX-2.1 | px-20180930xex21.htm |
EX-31.01 | px-20180930xex3101.htm |
EX-31.02 | px-20180930xex3102.htm |
EX-32.01 | px-20180930xex3201.htm |
EX-32.02 | px-20180930xex3202.htm |
Balance Sheet | Income Statement | Cash Flow |
---|---|---|
Assets, Equity
|
Rev, G Profit, Net Income
|
Ops, Inv, Fin
|
ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
1-11037 | 06-1249050 | |
(Commission File Number) | (IRS Employer Identification No.) | |
10 Riverview Drive, DANBURY, CT | 06810-6268 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | ý | Accelerated filer | ¨ | ||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ | ||
Emerging growth company | ¨ | ||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ |
INDEX | ||
PART I - FINANCIAL INFORMATION | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
Quarter Ended September 30, | |||||||
2018 | 2017 | ||||||
SALES | $ | 3,024 | $ | 2,922 | |||
Cost of sales, exclusive of depreciation and amortization | 1,714 | 1,652 | |||||
Selling, general and administrative | 294 | 300 | |||||
Depreciation and amortization | 306 | 298 | |||||
Research and development | 23 | 23 | |||||
Transaction costs and other charges | 31 | 14 | |||||
Other income (expense) - net | 13 | (3 | ) | ||||
OPERATING PROFIT | 669 | 632 | |||||
Interest expense - net | 40 | 41 | |||||
Net pension and OPEB cost (benefit), excluding service cost | 6 | 6 | |||||
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS | 623 | 585 | |||||
Income taxes | 156 | 162 | |||||
INCOME BEFORE EQUITY INVESTMENTS | 467 | 423 | |||||
Income from equity investments | 13 | 12 | |||||
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) | 480 | 435 | |||||
Less: noncontrolling interests | (19 | ) | (16 | ) | |||
NET INCOME - PRAXAIR, INC. | $ | 461 | $ | 419 | |||
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS | |||||||
Basic earnings per share | $ | 1.60 | $ | 1.46 | |||
Diluted earnings per share | $ | 1.58 | $ | 1.45 | |||
WEIGHTED AVERAGE SHARES OUTSTANDING (000’s): | |||||||
Basic shares outstanding | 288,093 | 286,467 | |||||
Diluted shares outstanding | 291,513 | 289,216 |
Nine months ended September 30, | |||||||
2018 | 2017 | ||||||
SALES | $ | 9,084 | $ | 8,484 | |||
Cost of sales, exclusive of depreciation and amortization | 5,114 | 4,800 | |||||
Selling, general and administrative | 911 | 895 | |||||
Depreciation and amortization | 928 | 877 | |||||
Research and development | 71 | 69 | |||||
Transaction costs and other charges | 74 | 35 | |||||
Other income (expense) - net | 25 | (3 | ) | ||||
OPERATING PROFIT | 2,011 | 1,805 | |||||
Interest expense - net | 130 | 120 | |||||
Net pension and OPEB cost (benefit), excluding service cost | 10 | (7 | ) | ||||
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS | 1,871 | 1,692 | |||||
Income taxes | 462 | 468 | |||||
INCOME BEFORE EQUITY INVESTMENTS | 1,409 | 1,224 | |||||
Income from equity investments | 42 | 35 | |||||
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) | 1,451 | 1,259 | |||||
Less: noncontrolling interests | (48 | ) | (45 | ) | |||
NET INCOME - PRAXAIR, INC. | $ | 1,403 | $ | 1,214 | |||
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS | |||||||
Basic earnings per share | $ | 4.87 | $ | 4.24 | |||
Diluted earnings per share | $ | 4.82 | $ | 4.21 | |||
WEIGHTED AVERAGE SHARES OUTSTANDING (000’s): | |||||||
Basic shares outstanding | 287,800 | 286,022 | |||||
Diluted shares outstanding | 291,275 | 288,524 |
Quarter Ended September 30, | |||||||
2018 | 2017 | ||||||
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) | $ | 480 | $ | 435 | |||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||
Translation adjustments: | |||||||
Foreign currency translation adjustments | (89 | ) | 204 | ||||
Income taxes | 2 | 19 | |||||
Translation adjustments | (87 | ) | 223 | ||||
Funded status - retirement obligations (Note 11): | |||||||
Retirement program remeasurements | 3 | (9 | ) | ||||
Reclassifications to net income | 22 | 19 | |||||
Income taxes | (5 | ) | (4 | ) | |||
Funded status - retirement obligations | 20 | 6 | |||||
Derivative instruments (Note 6): | |||||||
Current quarter unrealized gain (loss) | — | — | |||||
Reclassifications to net income | — | — | |||||
Income taxes | — | — | |||||
Derivative instruments | — | — | |||||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) | (67 | ) | 229 | ||||
COMPREHENSIVE INCOME (LOSS) (INCLUDING NONCONTROLLING INTERESTS) | 413 | 664 | |||||
Less: noncontrolling interests | (12 | ) | (26 | ) | |||
COMPREHENSIVE INCOME (LOSS) - PRAXAIR, INC. | $ | 401 | $ | 638 |
Nine months ended September 30, | |||||||
2018 | 2017 | ||||||
NET INCOME (INCLUDING NONCONTROLLING INTERESTS) | $ | 1,451 | $ | 1,259 | |||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||
Translation adjustments: | |||||||
Foreign currency translation adjustments | (623 | ) | 520 | ||||
Income taxes | 8 | 77 | |||||
Translation adjustments | (615 | ) | 597 | ||||
Funded status - retirement obligations (Note 11): | |||||||
Retirement program remeasurements | (5 | ) | (29 | ) | |||
Reclassifications to net income | 56 | 39 | |||||
Income taxes | (11 | ) | (4 | ) | |||
Funded status - retirement obligations | 40 | 6 | |||||
Derivative instruments (Note 6): | |||||||
Current period unrealized gain (loss) | — | — | |||||
Reclassifications to net income | — | — | |||||
Income taxes | — | — | |||||
Derivative instruments | — | — | |||||
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) | (575 | ) | 603 | ||||
COMPREHENSIVE INCOME (LOSS) (INCLUDING NONCONTROLLING INTERESTS) | 876 | 1,862 | |||||
Less: noncontrolling interests | (31 | ) | (73 | ) | |||
COMPREHENSIVE INCOME (LOSS) - PRAXAIR, INC. | $ | 845 | $ | 1,789 |
September 30, 2018 | December 31, 2017 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 600 | $ | 617 | |||
Accounts receivable - net | 1,852 | 1,804 | |||||
Inventories | 622 | 614 | |||||
Prepaid and other current assets | 231 | 250 | |||||
TOTAL CURRENT ASSETS | 3,305 | 3,285 | |||||
Property, plant and equipment (less accumulated depreciation of $13,987 in 2018 and $13,819 in 2017) | 11,725 | 12,057 | |||||
Goodwill | 3,201 | 3,233 | |||||
Other intangible assets - net | 513 | 553 | |||||
Other long-term assets | 1,235 | 1,308 | |||||
TOTAL ASSETS | $ | 19,979 | $ | 20,436 | |||
LIABILITIES AND EQUITY | |||||||
Accounts payable | $ | 978 | $ | 972 | |||
Short-term debt | 115 | 238 | |||||
Current portion of long-term debt | 1,582 | 979 | |||||
Other current liabilities | 1,185 | 1,118 | |||||
TOTAL CURRENT LIABILITIES | 3,860 | 3,307 | |||||
Long-term debt | 6,615 | 7,783 | |||||
Other long-term liabilities | 2,754 | 2,824 | |||||
TOTAL LIABILITIES | 13,229 | 13,914 | |||||
Commitments and contingencies (Note 12) | |||||||
Redeemable noncontrolling interests (Note 14) | 15 | 11 | |||||
Praxair, Inc. Shareholders’ Equity: | |||||||
Common stock $0.01 par value, authorized - 800,000,000 shares, issued 2018 and 2017 - 383,230,625 shares | 4 | 4 | |||||
Additional paid-in capital | 4,088 | 4,084 | |||||
Retained earnings | 13,913 | 13,224 | |||||
Accumulated other comprehensive income (loss) (Note 14) | (4,656 | ) | (4,098 | ) | |||
Less: Treasury stock, at cost (2018 - 95,374,388 shares and 2017 - 96,453,634 shares) | (7,117 | ) | (7,196 | ) | |||
Total Praxair, Inc. Shareholders’ Equity | 6,232 | 6,018 | |||||
Noncontrolling interests | 503 | 493 | |||||
TOTAL EQUITY | 6,735 | 6,511 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 19,979 | $ | 20,436 |
Nine months ended September 30, | |||||||
2018 | 2017 | ||||||
OPERATIONS | |||||||
Net income - Praxair, Inc. | $ | 1,403 | $ | 1,214 | |||
Noncontrolling interests | 48 | 45 | |||||
Net income (including noncontrolling interests) | 1,451 | 1,259 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Transaction costs and other charges, net of payments | 35 | 27 | |||||
Depreciation and amortization | 928 | 877 | |||||
Deferred income taxes | (6 | ) | 22 | ||||
Share-based compensation | 40 | 44 | |||||
Working capital: | |||||||
Accounts receivable | (121 | ) | (83 | ) | |||
Inventory | (29 | ) | (11 | ) | |||
Prepaid and other current assets | 3 | (64 | ) | ||||
Payables and accruals | 101 | 11 | |||||
Pension contributions | (17 | ) | (14 | ) | |||
Long-term assets, liabilities and other | (36 | ) | 137 | ||||
Net cash provided by operating activities | 2,349 | 2,205 | |||||
INVESTING | |||||||
Capital expenditures | (1,056 | ) | (972 | ) | |||
Acquisitions, net of cash acquired | (6 | ) | (18 | ) | |||
Divestitures and asset sales | 77 | 22 | |||||
Net cash used for investing activities | (985 | ) | (968 | ) | |||
FINANCING | |||||||
Short-term debt borrowings (repayments) - net | (122 | ) | (353 | ) | |||
Long-term debt borrowings | 2 | 11 | |||||
Long-term debt repayments | (505 | ) | (160 | ) | |||
Issuances of common stock | 70 | 90 | |||||
Purchases of common stock | (2 | ) | (11 | ) | |||
Cash dividends - Praxair, Inc. shareholders | (712 | ) | (675 | ) | |||
Noncontrolling interest transactions and other | (33 | ) | (85 | ) | |||
Net cash provided by (used for) financing activities | (1,302 | ) | (1,183 | ) | |||
Effect of exchange rate changes on cash and cash equivalents | (79 | ) | 29 | ||||
Change in cash and cash equivalents | (17 | ) | 83 | ||||
Cash and cash equivalents, beginning-of-period | 617 | 524 | |||||
Cash and cash equivalents, end-of-period | $ | 600 | $ | 607 |
• | Revenue Recognition – In May 2014, the FASB issued updated guidance on the reporting and disclosure of revenue. Effective January 1, 2018, Praxair has adopted this guidance using the modified retrospective transition method. No material differences in revenue recognition accounting were identified under the new guidance compared with the Company's historic revenue recognition accounting (see Note 15). |
• | Classification of Certain Cash Receipts and Cash Payments – In August 2016, the FASB issued updated guidance on the classification of certain cash receipts and cash payments within the statement of cash flows. The update provides accounting guidance for specific cash flow issues with the objective of reducing diversity in practice. The adoption of this guidance did not have a material impact on the financial statements. |
• | Intra-Entity Asset Transfers – In October 2016, the FASB issued updated guidance for income tax accounting of intra-entity transfers of assets other than inventory. The update requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory in the period when the transfer occurs. The adoption of this guidance did not have a material impact on the financial statements. |
• | Pension Costs - In March 2017, the FASB issued updated guidance on the presentation of net periodic pension cost and net periodic postretirement benefit cost. The new guidance requires the service cost component be reported in the same line item or items as other compensation costs arising from services rendered by employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and not included within operating profit. This guidance was adopted in the first quarter 2018. Accordingly, non-service related components of net periodic pension and postretirement benefit costs were reclassified out of "Operating Profit" to "Net pension and OPEB cost (benefit), excluding service cost" using the practical expedient to use the amounts disclosed in the retirement benefits note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements (see Note 11). |
• | Leases – In February 2016, the FASB issued updated guidance on the accounting and financial statement presentation of leases. The new guidance requires lessees to recognize a right-of-use asset and lease liability for all leases, except those that meet certain scope exceptions, and would require expanded quantitative and qualitative disclosures. This guidance will be effective for Praxair beginning in the first quarter 2019 and requires companies to transition using a modified retrospective approach. Praxair is in the process of implementing the new guidance and will provide updates on the expected impact to Praxair in future filings, as appropriate. |
• | Credit Losses on Financial Instruments – In June 2016, the FASB issued an update on the measurement of credit losses. The guidance introduces a new accounting model for expected credit losses on financial instruments, including trade receivables, based on estimates of current expected credit losses. This guidance will be effective for Praxair beginning in the first quarter 2020, with early adoption permitted beginning in the first quarter 2019 and requires companies to apply the change in accounting on a prospective basis. We are currently evaluating the impact this update will have on our consolidated financial statements. |
• | Simplifying the Test for Goodwill Impairment – In January 2017, the FASB issued updated guidance on the measurement of goodwill. The new guidance eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. The guidance will be effective for Praxair beginning in the first quarter 2020. Praxair does not expect this guidance to have a material impact. |
• | Derivatives and Hedging - In August 2017, the FASB issued updated guidance on accounting for hedging activities. The new guidance changes both the designation and measurement for qualifying hedging relationships and the presentation of hedge results. This guidance will be effective for Praxair beginning in the first quarter 2019, with early adoption optional. Praxair is currently evaluating the impact this update will have on our consolidated financial statements. |
• | Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income – In February 2018, the FASB issued updated guidance which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This new guidance will be effective for Praxair beginning in the first quarter 2019 on a retrospective basis, with early adoption optional. Praxair is currently assessing the impact and timing of adoption. |
(Millions of dollars) | September 30, 2018 | December 31, 2017 | |||||
Inventories | |||||||
Raw materials and supplies | $ | 218 | $ | 224 | |||
Work in process | 54 | 57 | |||||
Finished goods | 350 | 333 | |||||
Total inventories | $ | 622 | $ | 614 |
(Millions of dollars) | September 30, 2018 | December 31, 2017 | |||||
SHORT-TERM | |||||||
Commercial paper and U.S. bank borrowings | $ | 83 | $ | 202 | |||
Other bank borrowings (primarily international) | 32 | 36 | |||||
Total short-term debt | 115 | 238 | |||||
LONG-TERM (a) | |||||||
U.S. borrowings (U.S. dollar denominated unless otherwise noted) | |||||||
1.20% Notes due 2018 (b) | — | 498 | |||||
1.25% Notes due 2018 (b, c) | 475 | 475 | |||||
1.90% Notes due 2019 | 500 | 500 | |||||
4.50% Notes due 2019 | 599 | 599 | |||||
1.50% Euro-denominated notes due 2020 | 694 | 717 | |||||
2.25% Notes due 2020 | 299 | 299 | |||||
4.05% Notes due 2021 | 499 | 498 | |||||
3.00% Notes due 2021 | 498 | 497 | |||||
2.45% Notes due 2022 | 598 | 598 | |||||
2.20% Notes due 2022 | 498 | 498 | |||||
2.70% Notes due 2023 | 498 | 498 | |||||
1.20% Euro-denominated notes due 2024 | 636 | 658 | |||||
2.65% Notes due 2025 | 398 | 397 | |||||
1.625% Euro-denominated notes due 2025 | 574 | 594 | |||||
3.20% Notes due 2026 | 725 | 725 | |||||
3.55% Notes due 2042 | 662 | 662 | |||||
Other | 10 | 12 | |||||
International bank borrowings | 31 | 33 | |||||
Obligations under capital leases | 3 | 4 | |||||
8,197 | 8,762 | ||||||
Less: current portion of long-term debt | (1,582 | ) | (979 | ) | |||
Total long-term debt | 6,615 | 7,783 | |||||
Total debt | $ | 8,312 | $ | 9,000 |
(a) | Amounts are net of unamortized discounts, premiums and/or debt issuance costs as applicable. |
(b) | In March 2018, Praxair repaid $500 million of 1.20% notes that became due. On November 7, 2018, Praxair repaid $475 million of 1.25% notes that became due. |
(c) | September 30, 2018 and December 31, 2017 include a less than $1 million fair value decrease and a less than $1 million increase, respectively, related to hedge accounting. See Note 6 for additional information. |
Fair Value | |||||||||||||||||||||||
Notional Amounts | Assets | Liabilities | |||||||||||||||||||||
(Millions of dollars) | September 30, 2018 | December 31, 2017 | September 30, 2018 | December 31, 2017 | September 30, 2018 | December 31, 2017 | |||||||||||||||||
Derivatives Not Designated as Hedging Instruments: | |||||||||||||||||||||||
Currency contracts: | |||||||||||||||||||||||
Balance sheet items (a) | $ | 2,099 | $ | 2,693 | $ | 16 | $ | 16 | $ | 6 | $ | 16 | |||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||||||||
Currency contracts: | |||||||||||||||||||||||
Balance sheet items (a) | $ | — | $ | 38 | $ | — | $ | — | $ | — | $ | 2 | |||||||||||
Forecasted purchases (a) | 6 | 4 | — | 1 | — | — | |||||||||||||||||
Interest rate contracts: | |||||||||||||||||||||||
Interest rate swaps (a, b) | 475 | 475 | — | — | — | — | |||||||||||||||||
Total Hedges | $ | 481 | $ | 517 | $ | — | $ | 1 | $ | — | $ | 2 | |||||||||||
Total Derivatives | $ | 2,580 | $ | 3,210 | $ | 16 | $ | 17 | $ | 6 | $ | 18 |
(a) | Assets are recorded in prepaid and other current assets, and liabilities are recorded in other current liabilities. |
(b) | On November 7, 2018, Praxair repaid $475 million of 1.25% notes that became due and the associated interest rate swap was settled. |
Year Terminated | Original Gain / (Loss) | Unrecognized Gain / (Loss) (a) | |||||||||||
(Millions of dollars) | September 30, 2018 | December 31, 2017 | |||||||||||
Treasury Rate Locks | |||||||||||||
Underlying debt instrument: | |||||||||||||
$500 million 2.20% fixed-rate notes that mature in 2022 (b) | 2012 | $ | (2 | ) | $ | — | $ | (1 | ) | ||||
$500 million 3.00% fixed-rate notes that mature in 2021 (b) | 2011 | (11 | ) | (3 | ) | (4 | ) | ||||||
$600 million 4.50% fixed-rate notes that mature in 2019 (b) | 2009 | 16 | 1 | 3 | |||||||||
Total - pre-tax | $ | (2 | ) | $ | (2 | ) | |||||||
Less: income taxes | 1 | 1 | |||||||||||
After- tax amounts | $ | (1 | ) | $ | (1 | ) |
(a) | The unrecognized gains / (losses) for the treasury rate locks are shown in accumulated other comprehensive income (“AOCI”) and are being recognized on a straight line basis to interest expense – net over the term of the underlying debt agreements. Refer to the table below summarizing the impact on the company’s consolidated statements of income and AOCI for current period gain (loss) recognition. |
(b) | The notional amount of the treasury rate lock contracts are equal to the underlying debt instrument with the exception of the treasury rate lock contract entered into to hedge the $600 million 4.50% fixed-rate notes that mature in 2019. The notional amount of this contract was $500 million. |
Amount of Pre-Tax Gain (Loss) Recognized in Earnings * | |||||||||||||||
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(Millions of dollars) | 2018 | 2017 | 2018 | 2017 | |||||||||||
Derivatives Not Designated as Hedging Instruments | |||||||||||||||
Currency contracts: | |||||||||||||||
Balance sheet items | |||||||||||||||
Debt-related | $ | 17 | $ | 19 | $ | (15 | ) | $ | 128 | ||||||
Other balance sheet items | 3 | (1 | ) | 4 | 1 | ||||||||||
Total | $ | 20 | $ | 18 | $ | (11 | ) | $ | 129 |
Quarter Ended | |||||||||||||||
Amount of Gain (Loss) Recognized in AOCI | Amount of Gain (Loss) Reclassified from AOCI to the Consolidated Statement of Income | ||||||||||||||
(Millions of dollars) | September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||
Currency contracts: | |||||||||||||||
Balance sheet items | $ | — | $ | (1 | ) | $ | — | $ | — | ||||||
Forecasted purchases | — | 1 | — | — | |||||||||||
Interest rate contracts: | |||||||||||||||
Treasury rate lock contracts | — | — | — | — | |||||||||||
Total - pre tax | $ | — | $ | — | $ | — | $ | — | |||||||
Less: income taxes | — | — | — | — | |||||||||||
Total - Net of Taxes | $ | — | $ | — | $ | — | $ | — |
Nine Months Ended | |||||||||||||||
Amount of Gain (Loss) Recognized in AOCI | Amount of Gain (Loss) Reclassified from AOCI to the Consolidated Statement of Income | ||||||||||||||
(Millions of dollars) | September 30, 2018 | September 30, 2017 | September 30, 2018 | September 30, 2017 | |||||||||||
Currency contracts: | |||||||||||||||
Balance sheet items | $ | — | $ | (1 | ) | $ | — | $ | — | ||||||
Forecasted purchases | — | 1 | — | — | |||||||||||
Interest rate contracts: | |||||||||||||||
Treasury rate lock contracts | — | — | — | — | |||||||||||
Total - pre tax | $ | — | $ | — | $ | — | $ | — | |||||||
Less: income taxes | — | — | — | — | |||||||||||
Total - Net of Taxes | $ | — | $ | — | $ | — | $ | — |
Fair Value Measurements Using | |||||||||||||||||||
Level 1 | Level 2 | Level 3 | |||||||||||||||||
(Millions of dollars) | September 30, 2018 | December 31, 2017 | September 30, 2018 | December 31, 2017 | September 30, 2018 | December 31, 2017 | |||||||||||||
Assets | |||||||||||||||||||
Derivatives | — | — | $ | 16 | $ | 17 | — | — | |||||||||||
Liabilities | |||||||||||||||||||
Derivatives | — | — | $ | 6 | $ | 18 | — | — |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||
Numerator (Millions of dollars) | ||||||||||||||
Net income - Praxair, Inc. | $ | 461 | $ | 419 | $ | 1,403 | $ | 1,214 | ||||||
Denominator (Thousands of shares) | ||||||||||||||
Weighted average shares outstanding | 287,752 | 286,103 | 287,465 | 285,654 | ||||||||||
Shares earned and issuable under compensation plans | 341 | 364 | 335 | 368 | ||||||||||
Weighted average shares used in basic earnings per share | 288,093 | 286,467 | 287,800 | 286,022 | ||||||||||
Effect of dilutive securities | ||||||||||||||
Stock options and awards | 3,420 | 2,749 | 3,475 | 2,502 | ||||||||||
Weighted average shares used in diluted earnings per share | 291,513 | 289,216 | 291,275 | 288,524 | ||||||||||
Basic Earnings Per Share | $ | 1.60 | $ | 1.46 | $ | 4.87 | $ | 4.24 | ||||||
Diluted Earnings Per Share | $ | 1.58 | $ | 1.45 | $ | 4.82 | $ | 4.21 |
(Millions of dollars) | North America | South America | Europe | Asia | Surface Technologies | Total | |||||||||||||||||
Balance, December 31, 2017 | $ | 2,202 | $ | 129 | $ | 698 | $ | 61 | $ | 143 | $ | 3,233 | |||||||||||
Acquisitions | 3 | — | — | — | — | 3 | |||||||||||||||||
Purchase adjustments & other | 12 | — | — | — | — | 12 | |||||||||||||||||
Foreign currency translation | — | (27 | ) | (16 | ) | (1 | ) | (3 | ) | (47 | ) | ||||||||||||
Balance, September 30, 2018 | $ | 2,217 | $ | 102 | $ | 682 | $ | 60 | $ | 140 | $ | 3,201 |
(Millions of dollars) | Customer & License/Use Agreements | Non-compete Agreements | Patents & Other | Total | |||||||||||
Cost: | |||||||||||||||
Balance, December 31, 2017 | $ | 772 | $ | 28 | $ | 52 | $ | 852 | |||||||
Additions | 1 | 1 | — | 2 | |||||||||||
Foreign currency translation | (9 | ) | — | (1 | ) | (10 | ) | ||||||||
Other* | (20 | ) | (5 | ) | — | (25 | ) | ||||||||
Balance, September 30, 2018 | $ | 744 | $ | 24 | $ | 51 | $ | 819 | |||||||
Less: Accumulated amortization | |||||||||||||||
Balance, December 31, 2017 | $ | (260 | ) | $ | (18 | ) | $ | (21 | ) | $ | (299 | ) | |||
Amortization expense | (28 | ) | (3 | ) | (3 | ) | (34 | ) | |||||||
Foreign currency translation | 3 | — | — | 3 | |||||||||||
Other* | 19 | 5 | — | 24 | |||||||||||
Balance, September 30, 2018 | $ | (266 | ) | $ | (16 | ) | $ | (24 | ) | $ | (306 | ) | |||
Net balance at September 30, 2018 | $ | 478 | $ | 8 | $ | 27 | $ | 513 |
(Millions of dollars) | |||
Remaining 2018 | $ | 11 | |
2019 | 43 | ||
2020 | 41 | ||
2021 | 39 | ||
2022 | 38 | ||
Thereafter | 341 | ||
$ | 513 |
Nine months ended September 30, | |||||
2018 | 2017 | ||||
Dividend yield | 2.1 | % | 2.7 | % | |
Volatility | 14.4 | % | 14.0 | % | |
Risk-free interest rate | 2.67 | % | 2.13 | % | |
Expected term years | 5 | 6 |
Number of Options (000’s) | Average Exercise Price | Average Remaining Life | Aggregate Intrinsic Value | |||||||||
Outstanding at January 1, 2018 | 10,787 | $ | 108.70 | |||||||||
Granted | 1,625 | 154.00 | ||||||||||
Exercised | (1,502 | ) | 94.50 | |||||||||
Cancelled or Expired | (63 | ) | 128.91 | |||||||||
Outstanding at September 30, 2018 | 10,847 | 117.34 | 6.2 | $ | 471 | |||||||
Exercisable at September 30, 2018 | 7,143 | $ | 110.46 | 5.0 | $ | 359 |
Performance-Based | Restricted Stock | ||||||||||||
Number of Shares (000’s) | Average Grant Date Fair Value | Number of Shares (000’s) | Average Grant Date Fair Value | ||||||||||
Non-vested at January 1, 2018 | 665 | $ | 113.40 | 264 | $ | 107.56 | |||||||
Granted | — | — | 269 | 144.79 | |||||||||
Vested | (78 | ) | 119.98 | (89 | ) | 116.22 | |||||||
Cancelled and Forfeited | (151 | ) | 110.32 | (17 | ) | 100.23 | |||||||
Non-vested at September 30, 2018 | 436 | $ | 110.02 | 427 | $ | 129.52 |
Quarter Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
Pensions | OPEB | Pensions | OPEB | |||||||||||||||||||||||||||||
(Millions of dollars) | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||
Amount recognized in Operating Profit | ||||||||||||||||||||||||||||||||
Service cost | $ | 12 | $ | 12 | $ | — | $ | — | $ | 36 | $ | 35 | $ | 1 | $ | 2 | ||||||||||||||||
Amount recognized in Net pension and OPEB cost (benefit), excluding service cost | ||||||||||||||||||||||||||||||||
Interest cost | 25 | 25 | 1 | 2 | 76 | 76 | 3 | 4 | ||||||||||||||||||||||||
Expected return on plan assets | (42 | ) | (40 | ) | — | — | (125 | ) | (120 | ) | — | — | ||||||||||||||||||||
Net amortization and deferral | 18 | 17 | — | — | 54 | 51 | (2 | ) | (2 | ) | ||||||||||||||||||||||
Curtailment gain (a) | — | — | — | — | — | — | — | (18 | ) | |||||||||||||||||||||||
Settlement charge | 4 | 2 | $ | — | $ | — | 4 | 2 | $ | — | $ | — | ||||||||||||||||||||
$ | 5 | $ | 4 | $ | 1 | $ | 2 | $ | 9 | $ | 9 | $ | 1 | $ | (16 | ) | ||||||||||||||||
Net periodic benefit cost (benefit) | $ | 17 | $ | 16 | $ | 1 | $ | 2 | $ | 45 | $ | 44 | $ | 2 | $ | (14 | ) |
• | During May 2009, the Brazilian government published Law 11941/2009 instituting a new voluntary amnesty program (“Refis Program”) which allowed Brazilian companies to settle certain federal tax disputes at reduced amounts. During the 2009 third quarter, Praxair decided that it was economically beneficial to settle many of its outstanding federal tax disputes and such disputes were enrolled in the Refis Program, subject to final calculation and review by the Brazilian federal government. The Company recorded estimated liabilities based on the terms of the Refis Program. Since 2009, Praxair has been unable to reach final agreement on the calculations and initiated litigation against the government in an attempt to resolve certain items. Open issues relate to the following matters: (i) application of cash deposits and net operating loss carryforwards to satisfy obligations, and (ii) the amount of tax reductions available under the Refis Program. It is difficult to estimate the timing of resolution of legal matters in Brazil. |
• | At September 30, 2018 the most significant non-income and income tax claims in Brazil, after enrollment in the Refis Program, relate to state VAT tax matters and a federal income tax matter where the taxing authorities are challenging the tax rate that should be applied to income generated by a subsidiary company. The total estimated exposure relating to such claims, including interest and penalties, as appropriate, is approximately $205 million. Praxair has not recorded any liabilities related to such claims based on management judgments, after considering judgments and opinions of outside counsel. Because litigation in Brazil historically takes many years to resolve, it is very difficult to estimate the timing of resolution of these matters; however, it is possible that certain of these matters may be resolved within the near term. The company is vigorously defending against the proceedings. |
• | On September 1, 2010, CADE (Brazilian Administrative Council for Economic Defense) announced alleged anticompetitive activity on the part of five industrial gas companies in Brazil and imposed fines on all five companies. Originally, CADE imposed a civil fine of R$2.2 billion Brazilian reais (US$550 million) against White Martins, the Brazil-based subsidiary of Praxair, Inc. In response to a motion for clarification, the fine was reduced to R$1.7 billion Brazilian reais (US$425 million) due to a calculation error made by CADE. The amount of the fine is subject to indexation using SELIC. On September 2, 2010, Praxair issued a press release and filed a report on Form 8-K rejecting all claims and stating that the fine represents a gross and arbitrary disregard of Brazilian law. |
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(Millions of dollars) | 2018 | 2017 | 2018 | 2017 | |||||||||||
SALES(a) | |||||||||||||||
North America | $ | 1,613 | $ | 1,518 | $ | 4,770 | $ | 4,481 | |||||||
Europe | 425 | 407 | 1,297 | 1,146 | |||||||||||
South America | 329 | 389 | 1,043 | 1,131 | |||||||||||
Asia | 487 | 451 | 1,465 | 1,268 | |||||||||||
Surface Technologies | 170 | 157 | 509 | 458 | |||||||||||
Total sales | $ | 3,024 | $ | 2,922 | $ | 9,084 | $ | 8,484 |
Quarter Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(Millions of dollars) | 2018 | 2017 | 2018 | 2017 | |||||||||||
OPERATING PROFIT | |||||||||||||||
North America | $ | 420 | $ | 386 | $ | 1,258 | $ | 1,121 | |||||||
Europe | 81 | 79 | 248 | 220 | |||||||||||
South America | 57 | 66 | 167 | 178 | |||||||||||
Asia | 110 | 88 | 321 | 243 | |||||||||||
Surface Technologies | 32 | 27 | 91 | 78 | |||||||||||
Segment operating profit | 700 | 646 | 2,085 | 1,840 | |||||||||||
Transaction costs and other charges (Note 2) | (31 | ) | (14 | ) | (74 | ) | (35 | ) | |||||||
Total operating profit | $ | 669 | $ | 632 | $ | 2,011 |