Praxair Reports Full-Year and Fourth-Quarter 2017 Results

• Full-Year 2017 Highlights

-Sales of $11.4 billion, 9% above prior year
-Record $3.0 billion of operating cash flow, 10% above prior year
-Record free cash flow of $1.7 billion, 32% above prior year
-EPS of $4.32; adjusted EPS of $5.85

• Fourth-Quarter 2017 Highlights

-Sales of $3.0 billion, 12% above prior-year quarter
-Record $0.5 billion of free cash flow, 57% above prior-year quarter
-Backlog $1.5 billion; includes project wins in the U.S. and Asia
-EPS of $0.11; adjusted EPS of $1.52

• Continued Progress on Merger with Linde AG

-Regulatory filings progressing

• Tax Reform Impact

-Fourth-quarter tax charge of $394 million
-Estimated future tax rate 23% - 25%

Praxair, Inc. (NYSE: PX) today reported fourth-quarter net income of $33 million and diluted earnings per share of $0.11. These results include transaction costs of $14 million after-tax related to the proposed merger with Linde AG and a net income tax charge of $394 million related to the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Reform”). The net tax charge reflects the company’s best estimate of Tax Reform and may be adjusted in future periods as required. The impact of these charges was $1.41 of diluted earnings per share. Excluding these two items, adjusted net income was $441 million and diluted earnings per share was $1.52, up 9% and 8%, respectively versus prior year.

Praxair’s sales in the fourth quarter were $2,953 million, 12% above the prior-year quarter. After adjusting for positive currency translation and cost pass-through, sales grew 8%, driven by price attainment and higher volumes across all geographic segments and end-markets.

Reported operating profit in the fourth quarter was $636 million, 6% above the prior-year quarter. Excluding transaction costs, adjusted operating profit was $653 million, 9% above prior-year quarter. Reported and adjusted operating profit margins were 21.5% and 22.1%, respectively. EBITDA margin was 32.3% and adjusted EBITDA margin was 32.9%.

The company generated strong fourth-quarter operating cash flow of $836 million, 28% of sales. After capital expenditures of $339 million, free cash flow was $497 million, up 57% over the prior-year quarter. The company paid $226 million in dividends and decreased net debt by $247 million, sequentially.

For full-year 2017, sales of $11,437 million were up 9% above prior year. Diluted earnings per share were $4.32 and on an adjusted basis, diluted earnings per share were $5.85, up 7% versus prior year.

Full-year operating cash flow was $3,041 million, or 27% of sales. Free cash flow, defined as operating cash flow less capital expenditures, was $1,730 million. The company paid dividends of $901 million and reduced net debt by $608 million.

Commenting on the financial results, Chairman and Chief Executive Officer Steve Angel said, “We had a strong finish to 2017 with 8% EPS growth and record free cash flow in the fourth quarter. The Praxair team delivered on our strategy by successfully executing the project backlog, winning several new onsite projects, and operating safely and efficiently. We have enhanced our business portfolio by increasing exposure to more resilient end-markets while remaining well positioned for the industrial recovery. All of this was accomplished while making significant progress toward our merger with Linde.

“Looking ahead to 2018, we will maintain our focus and leverage the cyclical recovery occurring across several core geographies and end-markets,” continued Angel. “I remain confident in our ability to grow our project backlog with new contract wins, especially in Asia and the U.S. Gulf Coast. And recent tax reform should help stimulate new capital investment in the United States and thus provide additional growth opportunities in our largest market.

“In the second half of 2018, I look forward to the completion of the merger between Praxair and Linde, which will bring together our complementary strengths and highly talented people.”

For first-quarter 2018, Praxair expects diluted earnings per share in the range of $1.53 to $1.58, excluding transaction costs related to the proposed merger. The company’s effective tax rate is estimated to be in the range of 23% to 25%.

Following is additional detail on fourth-quarter 2017 results by segment.

In North America, fourth-quarter sales were $1,542 million, 9% above the prior-year quarter, excluding currency translation. Sales growth was driven primarily by stronger volumes to the downstream energy, manufacturing and electronics end-markets and higher price. Operating profit was $396 million, 10% above the prior-year quarter.

In Europe, fourth-quarter sales were $412 million, 17% above the prior-year quarter. Excluding currency and cost pass-through, sales grew 5% from the prior year due to higher volumes, mainly led by the metals, manufacturing and chemicals end-markets. Operating profit was $80 million, 13% above the prior-year quarter.

In South America, fourth-quarter sales were $370 million, 4% above the prior-year quarter, excluding currency translation. Sales growth was driven mainly by higher volumes to metals and chemicals end-markets and price attainment. Operating profit was $60 million.

Sales in Asia were $470 million in the quarter, up 19% from the prior year. Excluding currency and cost pass-through, sales grew 14% from the prior year, driven by higher volumes in China, Korea and India, project start-ups and 3% price attainment. Operating profit was $90 million, 15% above prior-year quarter.

Praxair Surface Technologies had fourth-quarter sales of $159 million, up 7% above prior-year quarter. Sales growth was driven primarily by aerospace coatings. Operating profit was $27 million.

Adjusted amounts, EBITDA, free cash flow and after-tax return on capital are non-GAAP measures. See the attachments for a summary of non-GAAP reconciliations and calculations of non-GAAP measures.

Attachments: Summary Non-GAAP Reconciliations, Statements of Income, Balance Sheets, Statements of Cash Flows, Segment Information, Quarterly Financial Summary and Appendix: Non-GAAP Measures.

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Forward-looking Statements 
This document contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management’s reasonable expectations and assumptions as of the date the statements are made but involve risks and uncertainties. These risks and uncertainties include, without limitation: the expected timing and likelihood of the completion of the contemplated business combination with Linde AG, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals that could reduce anticipated benefits or cause the parties to abandon the transaction; the occurrence of any event, change or other circumstances that could give rise to the termination of the business combination agreement; the ability to successfully complete the proposed business combination and the exchange offer, regulatory or other limitations imposed as a result of the proposed business combination; the success of the business following the proposed business combination; the ability to successfully integrate the Praxair and Linde businesses; the risk that the combined company may be unable to achieve expected synergies or that it may take longer or be more costly than expected to achieve those synergies; the performance of stock markets generally; developments in worldwide and national economies and other international events and circumstances; changes in foreign currencies and in interest rates; the cost and availability of electric power, natural gas and other raw materials; the ability to achieve price increases to offset cost increases; catastrophic events including natural disasters, epidemics and acts of war and terrorism; the ability to attract, hire, and retain qualified personnel; the impact of changes in financial accounting standards; the impact of changes in pension plan liabilities; the impact of tax, environmental, healthcare and other legislation and government regulation in jurisdictions in which the company operates, including the impact of the U.S. Tax Cuts and Jobs Act of 2017; the cost and outcomes of investigations, litigation and regulatory proceedings; the impact of potential unusual or non-recurring items; continued timely development and market acceptance of new products and applications; the impact of competitive products and pricing; future financial and operating performance of major customers and industries served; the impact of information technology system failures, network disruptions and breaches in data security; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the GAAP or adjusted projections or estimates contained in the forward-looking statements.

The company assumes no obligation to update or provide revisions to any forward-looking statement in response to changing circumstances. The above listed risks and uncertainties are further described in Item 1A (Risk Factors) in the company’s latest Annual Report on Form 10-K filed with the SEC and in the proxy statement/prospectus included in the Registration Statement on Form S-4 (which Registration Statement was declared effective on August 14, 2017) filed by Linde plc with the SEC which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.

About Praxair

Praxair, Inc. is a leading industrial gas company in North and South America and one of the largest worldwide. With market capitalization of approximately $40 billion and 2017 sales of $11 billion, the company employs over 26,000 people globally and has been named to the Dow Jones^® World Sustainability Index for 15 consecutive years. Praxair produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings. Our products, services and technologies are making our planet more productive by bringing efficiency and environmental benefits to a wide variety of industries, including aerospace, chemicals, food and beverage, electronics, energy, healthcare, manufacturing, primary metals and many others. For more information about the company, please visit our website at www.praxair.com.