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Linde plc — Second-Quarter 2018 Teleconference Presentation (company IR deck)
Linde plc (LIN) · 22 slides · Filed Oct 21, 2026
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Slide 1 — Second Quarter 2018
Investor Teleconference Presentation Second Quarter 2018 Praxair, Inc. July 26, 2018
Slide 2 — Forward Looking Statement
2 July 26, 2018 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, 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. Forward Looking Statement
Slide 3 — Praxair, Inc.
3 July 26, 2018 Praxair, Inc. Matthew J. White Senior Vice President and Chief Financial Officer
Slide 4 — 2Q18 Global Trends
4 July 26, 2018 Asia 16% Europe 15% South America 11% North America 52% Double-digit volume growth Strong price attainment More project backlog wins Steady growth Price improvement Industrial activity improving Industrial activity remains weak Weaker currencies US Industrial Production 3% - 4% Strong Chemical and Manufacturing activity Price +2% offsetting inflation Anticipate more project wins in USGC % of 2Q18 Sales 2Q18 Global Trends PST 6% (global) Aviation ramping Industrial recovery
Slide 5 — Timeline to Complete Merger
5 July 26, 2018 Q4 Q2 Q3 Q1 Timeline to Complete Merger Oct 24th Long Stop 2018 Regulatory Process Divestitures Integration Planning 6 remaining approvals required under the BCA Recently cleared Mexico Executed agreements for Europe and Americas packages Working constructively with regulators and asset buyers Accelerating planning activities Collaborative efforts
Slide 6 — Second Quarter Results
July 26, 2018 6 (1)Non-GAAP measures, other than sales and operating cash flow. See Appendix. (2) Diluted EPS attributable to Praxair, Inc. shareholders. (3) Prior periods reclassified in conformance with pension accounting change ASU 2017-07 with no impact to EPS. Second Quarter Results ($ MM) Adj. Second Quarter 2018(1) Adj. First Quarter 2018(1) Adj. Second Quarter 2017(1) Sales $3,061 $2,999 $2,834 Operating Profit(3) $713 $672 $621 Operating Margin(3) 23.3% 22.4% 21.9% EBITDA (3) $1,038 $998 $924 EBITDA Margin (3) 33.9% 33.3% 32.6% Diluted EPS(2) $1.72 $1.65 $1.46 Op. Cash flow $790 $688 $701 Base Capex (209) (225) (217) Available OCF 581 463 484 After–Tax ROC 13.6% 13.0% 12.1% YOY 2Q vs. 1Q Sales Growth +8% + 2% Volume + 5% + 3% Price / Mix + 2% -- Cost pass-thru + 1% + 1% Currency -- - 2% Acq/Div -- -- Base capex includes maintenance, small growth, safety, cost reduction and other non backlog project capex Available OCF = operating cash flow minus base capex YoY Sales +8%, OP +15%, EPS +18% Strong operating cash $0.8B, 26% of sales YoY volume growth across all end-markets Project contribution in N. America and Asia Broad-based price attainment Increased backlog to $1.7B: +$0.3 billion new wins in N. America and Asia Started up CNOOC project in China ROC 13.6%, +150 bps YoY
Slide 7 — 2H Outlook
July 26, 2018 7 2H Outlook Anticipate similar business trends, seasonally adjusted Tax rate 23% - 25% Estimated currency headwind: Major Currency Rates Currency % of Sales 2Q18 Avg. P&L Rate EUR 14% 1.19 BRL 9% 3.60 CAD 7% 1.29 CNY 7% 6.38 MXN 5% 19.36 KRW 4% 1,079.39 Foreign Currency Impact Q1 A Q2 A 2H Estimates + 3% + 0% - 2% to - 4%
Slide 8 — Appendix
July 26, 2018 8 Appendix
Slide 9 — North America
July 26, 2018 9 North America ($ MM) Second Quarter 2018 First Quarter 2018 Second Quarter 2017(1) Sales $1,594 $1,563 $1,505 Segment OP $432 $406 $378 Operating Margin 27.1% 26.0% 25.1% Segment EBITDA 599 568 535 EBITDA Margin 37.6% 36.3% 35.5% YOY 2Q vs. 1Q Sales Growth + 6% + 2% Volume + 4% +2% Price / Mix + 2% -- Cost pass-thru -- -- Currency -- -- Acq/Div -- -- Solid operating leverage YoY Sales +6%, OP +14% YoY volume growth driven by manufacturing, chemicals, food and beverage and project start-ups Price attainment in merchant and packaged gases U.S. manufacturing continues growing, packaged gas business +8% YoY Won new non-cryogenic on-site project Robust project bidding activity in the U.S. Gulf Coast (1) Prior periods reclassified in conformance with pension accounting change ASU 2017-07.
Slide 10 — Asia
July 26, 2018 10 Asia ($ MM) Second Quarter 2018 First Quarter 2018 Second Quarter 2017(1) Sales $502 $476 $422 Segment OP $107 $104 $80 Operating Margin 21.3% 21.8% 19.0% Segment EBITDA 167 166 133 EBITDA Margin 33.3% 34.9% 31.5% YOY 2Q vs. 1Q Sales Growth + 19% + 5% Volume + 11% + 5% Price / Mix + 3% -- Cost pass-thru + 1% + 1% Currency + 4% - 1% Acq/Div -- -- Continued strong operating leverage YoY Sales +19%, OP +34% YoY volumes: + Metals, chemicals and electronics + Manufacturing and project start-ups Sequential volumes driven by metals, electronics and chemicals Strong price attainment Signed two new long-term projects Started up CNOOC project in China (1) Prior periods reclassified in conformance with pension accounting change ASU 2017-07.
Slide 11 — Europe
July 26, 2018 11 Europe ($ MM) Second Quarter 2018 First Quarter 2018 Second Quarter 2017(1) Sales $444 $428 $383 Segment OP $87 $80 $74 Operating Margin 19.6% 18.7% 19.3% Segment EBITDA 137 131 119 EBITDA Margin 30.9% 30.6% 31.2% YOY 2Q vs. 1Q Sales Growth + 16% +4% Volume + 2% + 5% Price / Mix + 3% -- Cost pass-thru + 4% + 2% Currency + 7% - 3% Acq/Div -- -- Solid operating leverage YoY Sales +16%, OP +18% CO2 source disruption negatively impacted margins YoY volume growth in all major end-markets Growth led by Italy and Spain Sequential volume growth led by food & beverage and manufacturing (1) Prior periods reclassified in conformance with pension accounting change ASU 2017-07.
Slide 12 — South America
July 26, 2018 12 South America ($ MM) Second Quarter 2018 First Quarter 2018 Second Quarter 2017(1) Sales $349 $365 $373 Segment OP $56 $54 $64 Operating Margin 16.0% 14.8% 17.2% Segment EBITDA 93 95 102 EBITDA Margin 26.6% 26.0% 27.3% YOY 2Q vs. 1Q Sales Growth - 6% - 4% Volume + 4% + 3% Price / Mix -- + 1% Cost pass-thru -- -- Currency - 10% - 8% Acq/Div -- -- YoY and seq. volume growth driven by metals and healthcare Margins impacted by nationwide trucker’s strike in Brazil Continued outperformance vs. Brazil industrial production Currency headwinds from Argentine peso and Brazilian real (1) Prior periods reclassified in conformance with pension accounting change ASU 2017-07.
Slide 13 — Surface Technologies
July 26, 2018 13 Surface Technologies ($ MM) Second Quarter 2018 First Quarter 2018 Second Quarter 2017(1) Sales $172 $167 $151 Segment OP $31 $28 $25 Operating Margin 18.0% 16.8% 16.6% Segment EBITDA 42 38 35 EBITDA Margin 24.4% 22.8% 23.2% Strong operating leverage YoY Sales +14%, OP +24% Price attainment +2% Volume growth from all end-markets and project start-ups Ramping up coating volumes serving aviation market (1) Prior periods reclassified in conformance with pension accounting change ASU 2017-07.
Slide 14 — 2Q18 Backlog - $1.7B Capital Expenditures
July 26, 2018 14 2Q18 Backlog - $1.7B Capital Expenditures (XXXX) Indicates expected startup year ASU – Air separation unit(s) VPSA – Vacuum pressure swing adsorption TPD – Tons per day SCFD – Standard cubic feet per day North America ~48% Asia ~52% South America Geismar Carbon Monoxide 13MM SCFD (2018) % of backlog capex MEGlobal Oxygen & Nitrogen (2019) Celanese Carbon Monoxide, Oxygen & Nitrogen (2020) Global Foundries 600 TPD ASU (2019) BASF Syngas(2019) Samsung Tangjeong 700 TPD ASU (2018) Europe Samsung Pyeongtaek 9,000 TPD ASU (2020) Samsung Noksan 425 TPD ASU (2019) Huali Microelectronics 600 TPD ASU (2018) Everdisplay 700 TPD ASU (2019) US Methanol Oxygen (2019)
Slide 15 — Global End-Market Trends
July 26, 2018 15 Global End-Market Trends * Excludes impact of currency, natural gas/precious metals cost pass-through and acquisitions/divestitures. 2Q18 Sales Growth* 2Q18 % of Sales YOY Vs. 1Q18 Manufacturing (22%) + 7% + 2% YoY North America, Asia and Europe Metals (17%) + 11% + 2% YoY growth in all geographic segments Energy (11%) + 2% + 5% YoY Asia startup; Seq N. America Chemicals (11%) + 13% + 3% YoY growth N. America, Asia and Europe Food & Bev (9%) + 4% + 7% YoY North America; Seq seasonality Healthcare (8%) + 7% + 5% YoY North and South America, Europe Electronics (9%) + 7% + 3% YoY Asia and North America
Slide 16 — Non-GAAP Measures
July 26, 2018 16 Non-GAAP Measures 2018 2017 2018 2017 (b) 2018 2017 2018 2017 3,061 $ 2,834 $ 689 $ 606 $ 480 $ 406 $ 1.65 $ 1.41 $ — — 24 15 21 15 0.07 0.05 3,061 $ 2,834 $ 713 $ 621 $ 501 $ 421 $ 1.72 $ 1.46 $ 6,060 $ 5,562 $ 1,342 $ 1,173 $ 942 $ 795 $ 3.24 $ 2.76 $ — — 43 21 39 21 0.13 0.07 6,060 $ 5,562 $ 1,385 $ 1,194 $ 981 $ 816 $ 3.37 $ 2.83 $ PRAXAIR, INC. AND SUBSIDIARIES SUMMARY NON-GAAP RECONCILIATIONS (UNAUDITED) The following adjusted amounts are Non-GAAP measures and are intended to supplement investors' understanding of the company's financial statements by providing measures which investors, financial analysts and management use to help evaluate the company's operating performance. Items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these Non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. See the Non-GAAP reconciliations starting on the next page for additional details relating to the Non-GAAP adjustments. (Millions of dollars, except per share amounts) Sales Operating Profit Net Income - Praxair, Inc. Diluted EPS Quarter Ended June 30 Reported GAAP Amounts Transaction costs and other charges (a) Adjusted amounts Year To Date June 30 Reported GAAP Amounts Transaction costs (a) (b) During the first quarter 2018, Praxair adopted accounting guidance on the presentation of net periodic pension and postretirement benefit costs which requires non-service related costs be presented outside of operating profit. As a result, non-service related pension and postretirement benefit costs are now presented in the consolidated statements of income in "Net pension and OPEB cost (benefit), excluding service cost." Prior period information, including segment operating profit, has been reclassified to conform with current year presentation. The adoption of this guidance did not impact "Net Income - Praxair, Inc." Adjusted amounts (a) Charges primarily for transaction costs related to the potential Linde merger.
Slide 17 — Non-GAAP Measures, continued
July 26, 2018 17 Non-GAAP Measures, continued Adjusted Amounts Year-to- date June 30, Second Quarter First Quarter Year Fourth Quarter Third Quarter Second Quarter First Quarter Year Third Quarter First Quarter 2018 2018 2018 2017 2017 2017 2017 2017 2016 2016 2016 j p g p g Profit Margin Reported operating profit 1,342 $ 689 $ 653 $ 2,444 $ 639 $ 632 $ 606 $ 567 $ 2,247 $ 505 $ 554 $ Add: Cost reduction program and other charges, net — — — — — — — — 96 96 — Add: Pension settlement charge — — — — — — — — — — — Add: Transaction costs and other charges 43 24 19 52 17 14 15 6 — — — Total adjustments 43 24 19 52 17 14 15 6 96 96 — Adjusted operating profit 1,385 $ 713 $ 672 $ 2,496 $ 656 $ 646 $ 621 $ 573 $ 2,343 $ 601 $ 554 $ Reported percentage change 14 % 14 % Adjusted percentage change 16 % 15 % Reported sales 6,060 $ 3,061 $ 2,999 $ 11,437 $ 2,953 $ 2,922 $ 2,834 $ 2,728 $ 10,534 $ 2,716 $ 2,509 $ Adjusted operating profit margin 22.9 % 23.3 % 22.4 % 21.8 % 22.2 % 22.1 % 21.9 % 21.0 % 22.2 % 22.1 % 22.1 % Adjusted Interest Expense - net Reported interest expense - net 90 $ 44 $ 46 $ 161 $ 41 $ 41 $ 38 $ 41 $ 190 $ 43 $ 65 $ Less: Bond redemption — — — — — — — — (16) — (16) Adjusted interest expense - net 90 $ 44 $ 46 $ 161 $ 41 $ 41 $ 38 $ 41 $ 174 $ 43 $ 49 $ Adjusted Net Pension and OPEB costs (benefit), excluding service cost Reported net pension and OPEB costs (benefit), excluding service cost 4 $ 2 $ 2 $ (4) $ 3 $ 6 $ 2 $ (15) $ 9 8 — Less: Pension settlement charge — — — (2) — (2) — — (4) (4) — Adjusted net Pension and OPEB costs (benefit), excluding service cost 4 $ 2 $ 2 $ (6) $ 3 $ 4 $ 2 $ (15) $ 5 $ 4 $ — $ Adjusted Income Taxes Reported income taxes 306 $ 158 $ 148 $ 1,026 $ 558 $ 162 $ 157 $ 149 $ 551 $ 120 $ 133 $ Add: Cost reduction program and other charges, net — — — — — — — — 28 28 — Add: Bond redemption — — — — — — — — 6 — 6 Add: Pension settlement charge — — — 1 — 1 — — 1 1 — Add: Tax reform — — — (394) (394) — — — — — — Add: Transaction costs and other charges 5 3 2 4 3 1 — — — — — Total adjustments 5 3 2 (389) (391) 2 — — 35 29 6 Adjusted income taxes 311 $ 161 $ 150 $ 637 $ 167 $ 164 $ 157 $ 149 $ 586 $ 149 $ 139 $ PRAXAIR, INC. AND SUBSIDIARIES APPENDIX NON-GAAP MEASURES (Millions of dollars, except per share data) (UNAUDITED) The following Non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s financial leverage, return on capital and operating performance. Items which the company does not believe to be indicative of on- going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these Non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures. Adjusted amounts exclude the impacts of the 2018 transaction costs and other charges, 2017 transaction costs and other charges, 2017 third quarter pension settlement, 2017 fourth quarter U.S. tax reform, 2016 third quarter cost reduction program and pension settlement, and 2016 first quarter bond redemption.
Slide 18 — Non-GAAP Measures, continued
July 26, 2018 18 Non-GAAP Measures, continued Year-to- date June 30, Second Quarter First Quarter Year Fourth Quarter Third Quarter Second Quarter First Quarter Year Third Quarter First Quarter 2018 2018 2018 2017 2017 2017 2017 2017 2016 2016 2016 Adjusted Effective Tax Rate Reported income before income taxes and equity investments 1,248 $ 643 $ 605 $ 2,287 $ 595 $ 585 $ 566 $ 541 $ 2,048 $ 454 $ 489 $ Add: Cost reduction program and other charges, net — — — — — — — — 96 96 — Add: Bond redemption — — — — — — — — 16 — 16 Add: Pension settlement charge — — — 2 — 2 — — 4 4 — Add: Transaction costs and other charges 43 24 19 52 17 14 15 6 — — — Total adjustments 43 24 19 54 17 16 15 6 116 100 16 Adjusted income before income taxes and equity investments 1,291 $ 667 $ 624 $ 2,341 $ 612 $ 601 $ 581 $ 547 $ 2,164 $ 554 $ 505 $ Reported effective tax rate 24.5 % 24.6 % 24.5 % 44.9 % 93.8 % 27.7 % 27.7 % 27.5 % 26.9 % 26.4 % 27.2 % Adjusted effective tax rate 24.1 % 24.1 % 24.0 % 27.2 % 27.3 % 27.3 % 27.0 % 27.2 % 27.1 % 26.9 % 27.5 % Adjusted Noncontrolling Interests Reported noncontrolling interests 29 $ 19 $ 10 $ 61 $ 16 $ 16 $ 14 $ 15 $ 38 $ 5 $ 10 $ Add: Cost reduction program and other charges, net (1) — (1) — — — — — 5 5 — Total adjustments (1) — (1) — — — — — 5 5 — Adjusted noncontrolling interests 28 $ 19 $ 9 $ 61 $ 16 $ 16 $ 14 $ 15 $ 43 $ 10 $ 10 $ Adjusted Net Income - Praxair, Inc. Reported net income - Praxair, Inc. 942 $ 480 $ 462 $ 1,247 33 419 406 389 1,500 339 356 Add: Cost reduction program and other charges, net 1 — 1 — — — — — 63 63 — Add: Bond redemption — — — — — — — — 10 — 10 Add: Pension settlement charge — — — 1 — 1 — — 3 3 — Add: Tax reform — — — 394 394 — — — — — — Add: Transaction costs and other charges 38 $ 21 17 48 14 13 15 6 — — — Total adjustments 39 21 18 443 408 14 15 6 76 66 10 Adjusted net income - Praxair, Inc. 981 $ 501 $ 480 $ 1,690 $ 441 $ 433 $ 421 $ 395 $ 1,576 $ 405 $ 366 $ Reported percentage change 18 % 18 % Adjusted percentage change 20 % 19 % Adjusted Diluted EPS Reported diluted EPS 3.24 $ 1.65 $ 1.59 $ 4.32 0.11 1.45 1.41 1.35 5.21 1.18 1.24 Add: Cost reduction program and other charges, net — — — — — — — — 0.22 0.22 — Add: Bond redemption — — — — — — — — 0.04 — 0.04 Add: Pension settlement charge — — — — — — — — 0.01 0.01 — Add: Tax reform — — 1.36 1.36 — — — — — — Add: Transaction costs and other charges 0.13 0.07 0.06 0.17 0.05 0.05 0.05 0.02 — — — Total adjustments 0.13 0.07 0.06 1.53 1.41 0.05 0.05 0.02 0.27 0.23 0.04 Adjusted diluted EPS 3.37 $ 1.72 $ 1.65 $ 5.85 $ 1.52 $ 1.50 $ 1.46 $ 1.37 $ 5.48 $ 1.41 $ 1.28 $ Reported percentage change 17 % 17 % Adjusted percentage change 19 % 18 %
Slide 19 — Non-GAAP Measures, continued
July 26, 2018 19 Non-GAAP Measures, continued Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (a) 790 $ 688 $ 836 $ 794 $ 701 $ 710 $ 726 $ 788 $ 706 $ 569 $ (351) (325) (339) (320) (325) (327) (409) (376) (357) (323) Free Cash Flow 439 $ 363 $ 497 $ 474 $ 376 $ 383 $ 317 $ 412 $ 349 $ 246 $ Capex 351 $ 325 $ 339 $ 320 $ 325 $ 327 $ 409 $ 376 $ 357 $ 323 $ Less: backlog capex (a) (142) (100) (96) (70) (108) (94) (140) (147) (126) (115) Base Capex 209 $ 225 $ 243 $ 250 $ 217 $ 233 $ 269 $ 229 $ 231 $ 208 $ Operating cash flow 790 $ 688 $ 836 $ 794 $ 701 $ 710 $ 726 $ 788 $ 706 $ 569 $ Less: base capex (209) (225) (243) (250) (217) (233) (269) (229) (231) (208) Available Operating Cash Flow 581 $ 463 $ 593 $ 544 $ 484 $ 477 $ 457 $ 559 $ 475 $ 361 $ (a) Backlog capex is defined as capital expenditures for projects greater than $5 million with a customer supply contract 8,458 $ 8,842 $ 9,000 $ 9,237 $ 9,367 $ 9,368 $ 9,515 $ 9,842 $ 9,956 $ 9,404 $ (479) (545) (617) (607) (535) (519) (524) (627) (567) (221) Net debt 7,979 8,297 8,383 8,630 8,832 8,849 8,991 9,215 9,389 9,183 Redeemable noncontrolling interests 14 13 11 11 10 10 11 11 12 119 Praxair, Inc. shareholders' equity 6,027 6,368 6,018 6,256 5,807 5,529 5,021 5,245 5,140 4,888 Noncontrolling interests 501 516 493 475 453 436 420 393 407 417 Total equity and redeemable noncontrolling interests 6,542 6,897 6,522 6,742 6,270 5,975 5,452 5,649 5,559 5,424 Capital 14,521 $ 15,194 $ 14,905 $ 15,372 $ 15,102 $ 14,824 $ 14,443 $ 14,864 $ 14,948 $ 14,607 $ Debt-to-capital 54.9 % 54.6 % 56.2 % 56.1 % 58.5 % 59.7 % 62.3 % 62.0 % 62.8 % 62.9 % 2018 2017 2016 Free Cash Flow (FCF) - Free cash flow is a measure used by investors, financial analysts and management to evaluate the ability of a company to pursue opportunities that enhance shareholder value. FCF equals cash flow from operations less capital expenditures. Operating cash flow Less: capital expenditures Net Debt, Capital and Debt-to-Capital Ratio - The debt-to-capital ratio is a measure used by investors, financial analysts and management to provide a measure of financial leverage and insights into how the company is financing its operations. Debt Less: cash and cash equivalents Equity and redeemable noncontrolling interests: Available Operating Cash Flow (AOCF) and Base Capex - Available operating cash flow is a measure used by investors, financial analysts and management to evaluate the ability of a company to pursue opportunities that enhance shareholder value. AOCF measures operating cash flows available after capital expenditures to maintain or replace existing assets (base capex). AOCF equals cash flow from operations less base capex.
Slide 20 — Non-GAAP Measures, continued
July 26, 2018 20 Non-GAAP Measures, continued Q2 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 (a) 480 $ 462 $ 33 $ 419 $ 406 $ 389 $ 406 $ 339 $ 399 $ 356 $ 19 10 16 16 14 15 13 5 10 10 44 46 41 41 38 41 38 43 44 65 (11) (11) (11) (11) (11) (12) (10) (12) (12) (20) 532 $ 507 $ 79 $ 465 $ 447 $ 433 $ 447 $ 375 $ 441 $ 411 $ Add: Cost reduction program and other charges, net — — — — — — — 96 — — Add: Pension settlement charge — — — 2 — — — 4 — — Add: Transaction costs and other charges 24 19 17 14 15 6 — — — — (3) (2) (3) — — — — (29) — — — — 394 — — — — — — — 553 $ 524 $ 487 $ 481 $ 462 $ 439 $ 447 $ 446 $ 441 $ 411 $ 1,583 $ 1,497 $ 1,424 $ 1,792 $ 1,702 $ 1,696 $ 1,674 $ 1,688 $ 1,751 $ 1,658 $ 2,045 $ 1,953 $ 1,869 $ 1,829 $ 1,794 $ 1,773 $ 1,745 $ 1,759 $ 1,769 $ 1,789 $ 14,521 $ 15,194 $ 14,905 $ 15,372 $ 15,102 $ 14,824 $ 14,443 $ 14,864 $ 14,948 $ 14,607 $ 15,019 $ 15,079 $ 14,929 $ 14,921 $ 14,836 $ 14,737 $ 14,570 $ 14,513 $ 14,480 $ 14,451 $ 10.5 % 9.9 % 9.5 % 12.0 % 11.5 % 11.5 % 11.5 % 11.6 % 12.1 % 11.5 % 13.6 % 13.0 % 12.5 % 12.3 % 12.1 % 12.0 % 12.0 % 12.1 % 12.2 % 12.4 % * 480 $ 462 $ 33 $ 419 $ 406 $ 389 $ 406 $ 339 $ 399 $ 356 $ 19 10 16 $ 16 14 15 13 5 10 10 44 46 41 $ 41 38 41 38 43 44 65 2 2 3 6 2 (15) (1) 8 2 — 158 148 558 162 157 149 152 120 146 133 311 311 307 298 292 287 285 284 281 272 1,014 $ 979 $ 958 $ 942 $ 909 $ 866 $ 893 $ 799 $ 882 $ 836 $ Add: Cost reduction program and other charges, net — — — — — — — 96 — — Add: Pension settlement charge — — — — — — — — — — Add: Transaction costs and other charges 24 19 17 14 15 6 — — — — 1,038 $ 998 $ 975 $ 956 $ 924 $ 872 $ 893 $ 895 $ 882 $ 836 $ 3,061 2,999 2,953 2,922 2,834 2,728 2,644 2,716 2,665 2,509 33.1 % 32.6 % 32.4 % 32.2 % 32.1 % 31.7 % 33.8 % 29.4 % 33.1 % 33.3 % 33.9 % 33.3 % 33.0 % 32.7 % 32.6 % 32.0 % 33.8 % 33.0 % 33.1 % 33.3 % After-tax Return on Capital and Adjusted After-tax Return on Capital (ROC)- After-tax return on capital is a measure used by investors, financial analysts and management to evaluate the return on net assets employed in the business. ROC measures the after-tax operating profit that the company was able to generate with the investments made by all parties in the business (debt, noncontrolling interests and Praxair, Inc. shareholders’ equity). Reported net income - Praxair, Inc. Add: noncontrolling interests Add: interest expense - net Less: tax benefit on interest expense - net * 2018 2017 2016 Net operating profit after-tax (NOPAT) Pre-tax Adjustments: Less: income taxes on pre-tax adjustments Add: Tax reform net income tax charge Adjusted NOPAT Adjusted after-tax ROC (4-quarter trailing adjusted NOPAT / 5-quarter average capital) Reported net income - Praxair, Inc. Add: noncontrolling interests 4-quarter trailing NOPAT 4-quarter trailing adjusted NOPAT Ending capital (see above) 5-quarter average ending capital After-tax ROC (4-quarter trailing NOPAT / 5- quarter average capital) EBITDA, Adjusted EBITDA, EBITDA Margin and Adjusted EBITDA Margin - These measures are used by investors, financial analysts and management to assess a company's profitability. (a) 2016 first quarter operating cash flow was restated for the reclassification of $16 million cash payment related to the bond redemption from operating cash flow to financing cash flow on the statement of cash flow pursuant to new accounting guidance adopted in the first quarter of 2018 relating to the classification of certain cash receipts and payments. Tax benefit on interest expense - net is generally presented using the reported effective rate. Adjustments: Adjusted EBITDA Reported sales EBITDA margin Adjusted EBITDA margin Add: interest expense - net Add: net pension and OPEB cost (benefit), excluding service cost Add: income taxes Add: depreciation and amortization EBITDA
Slide 21 — Sustainable Development Highlights
21 July 26, 2018 Sustainable Development Highlights
Slide 22 — For further information, please contact:
July 26, 2018 22 For further information, please contact: INVESTOR RELATIONS Phone: (203) 837-2213 [email protected] www.praxair.com/investors