10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2007

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-11037

Praxair, Inc.

Praxair, Inc.
39 Old Ridgebury Road	State of incorporation: Delaware
Danbury, Connecticut 06810-5113 Tel. (203) 837-2000	IRS identification number: 06-124 9050

Securities registered pursuant to Section 12(b) of the Act: Title of each class:	Registered on:
Common Stock ($0.01 par value)	New York Stock Exchange
Common Stock Purchase Rights	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨     No  x

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  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x    Accelerated filer  ¨    Non- accelerated filer  ¨    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the voting and non-voting common stock held by non-affiliates as of June 29, 2007, was approximately $23 billion (based on the closing sale price of the stock on that date as reported on the New York Stock Exchange).

At January 31, 2008, 313,255,356 shares of common stock of Praxair, Inc. were outstanding.

Documents incorporated by reference:

Portions of the 2007 Annual Report to Shareholders of the Registrant are incorporated in Parts I, II and IV of this report. Also, portions of the Proxy Statement of Praxair, Inc., for its 2008 Annual Meeting of Shareholders, are incorporated in Part III of this report.

The Index to Exhibits is located on page 18 of this report.

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 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 tax, environmental, home healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; 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; 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 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) which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.

INDEX

		PAGE
Part I
Item 1:	Business	2
Item 1a:	Risk Factors	6
Item 1b:	Unresolved Staff Comments	9
Item 2:	Properties	10
Item 3:	Legal Proceedings	11
Item 4:	Submission of Matters to a Vote of Security Holders	11
Part II
Item 5:	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	12
Item 6:	Selected Financial Data	12
Item 7:	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 7a:	Quantitative and Qualitative Disclosures About Market Risk	13
Item 8:	Financial Statements and Supplementary Data	13
Item 9:	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	13
Item 9a:	Controls and Procedures	13
Item 9b:	Other Information	13
Part III
Item 10:	Directors, Executive Officers and Corporate Governance	14
Item 11:	Executive Compensation	14
Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	15
Item 13:	Certain Relationships and Related Transactions and Director Independence	15
Item 14:	Principal Accounting Fees and Services	15
Part IV
Item 15:	Exhibits and Financial Statement Schedules	16
Signatures		17
Index to Exhibits		18

PART I

Praxair, Inc. and Subsidiaries

Item 1. Business

General

Praxair, Inc. (Praxair or Company) was founded in 1907 and became an independent publicly traded company in 1992. Praxair was the first company in the United States to produce oxygen from air using a cryogenic process and continues to be a major technological innovator in the industrial gases industry.

Praxair is the largest industrial gas supplier in North and South America, is rapidly growing in Asia, and has strong, well-established businesses in Europe. Praxair's primary products for its industrial gases business are atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, acetylene). The Company also designs, engineers, and builds equipment that produces industrial gases for internal use and external sale. The Company's surface technologies segment, operated through Praxair Surface Technologies, Inc., supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders. Sales for Praxair were $9,402 million, $8,324 million and $7,656 million for 2007, 2006 and 2005, respectively. Refer to Note 18 of the section captioned “Notes to Consolidated Financial Statements” in Praxair’s 2007 Annual Report to Shareholders for additional information related to Praxair’s reportable segments.

Praxair serves approximately 25 industries as diverse as healthcare and petroleum refining; computer-chip manufacturing and beverage carbonation; fiber-optics and steel making; and aerospace, chemicals and water treatment. In 2007, 94% of sales were generated in four regional segments (North America, Europe, South America and Asia) primarily from the sale of industrial gases with the balance generated from the surface technologies segment. Praxair provides a competitive advantage to its customers by continuously developing new products and applications, which allow them to improve their productivity, energy efficiency and environmental performance.

Industrial Gases Products and Manufacturing Processes

Atmospheric gases are the highest volume products produced by Praxair. Using air as its raw material, Praxair produces oxygen, nitrogen and argon through several air separation processes of which cryogenic air separation is the most prevalent. As a pioneer in the industrial gases industry, Praxair is a leader in developing a wide range of proprietary and patented applications and supply systems technology, including small cryogenic nitrogen plants. Praxair also led the development and commercialization of non-cryogenic air separation technologies for the production of industrial gases. These technologies open important new markets and optimize production capacity for the Company by lowering the cost of supplying industrial gases. These technologies include proprietary vacuum pressure swing adsorption (“VPSA”) and membrane separation to produce gaseous oxygen and nitrogen, respectively. Praxair also manufactures precious metal and ceramic sputtering targets used primarily in the production of semiconductors.

Process gases, including carbon dioxide, hydrogen, carbon monoxide, helium and acetylene are produced by methods other than air separation. Most carbon dioxide is purchased from by-product sources, including chemical plants, refineries and industrial processes and is recovered from carbon dioxide wells. Carbon dioxide is processed in Praxair's plants to produce commercial carbon dioxide. Hydrogen and carbon monoxide are produced by either steam methane reforming of natural gas or by purifying by-product sources obtained from the chemical and petrochemical industries. Most of the helium sold by Praxair is sourced from certain helium-rich natural gas streams in the United States, with additional supplies being acquired from outside the United States. Acetylene is typically produced from calcium carbide and water or purchased as a chemical by-product.

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Industrial Gases Distribution

There are three basic distribution methods for industrial gases: (i) on-site or tonnage; (ii) merchant liquid; and (iii) packaged or cylinder gases. These distribution methods are often integrated, with products from all three supply modes coming from the same plant. The method of supply is generally determined by the lowest cost means of meeting the customer's needs, depending upon factors such as volume requirements, purity, pattern of usage, and the form in which the product is used (as a gas or as a cryogenic liquid).

On-site. Customers that require the largest volumes of product (typically oxygen, nitrogen and hydrogen) and that have a relatively constant demand pattern are supplied by cryogenic and process gas on-site plants. Praxair constructs plants on or adjacent to these customers' sites and supplies the product directly to customers by pipeline. Because these are usually dedicated plants, the product supply contracts generally are total requirement contracts with terms typically ranging from 10-20 years and containing minimum purchase requirements and price escalation provisions. Many of the cryogenic on-site plants also produce liquid products for the merchant market. New advanced air separation processes allow on-site delivery to customers with smaller volume requirements. Customers using these systems usually enter into requirement contracts with terms typically ranging from 5-15 years.

Merchant. The merchant business is generally associated with distributable liquid oxygen, nitrogen, argon, carbon dioxide, hydrogen and helium. The deliveries generally are made from Praxair's plants by tanker trucks to storage containers owned or leased and maintained by Praxair or the customer at the customer's site. Due to distribution cost, merchant oxygen and nitrogen generally have a relatively small distribution radius from the plants at which they are produced. Merchant argon, hydrogen and helium can be shipped much longer distances. The agreements used in the merchant business are usually three-to five-year requirement contracts, except for carbon dioxide, which typically has one-year requirement contracts in the United States.

Packaged Gases. Customers requiring small volumes are supplied products in metal containers called cylinders, under medium to high pressure. Packaged gases include atmospheric gases, carbon dioxide, hydrogen, helium and acetylene. Praxair also produces and distributes in cylinders a wide range of specialty gases and mixtures. Cylinders may be delivered to the customer's site or picked up by the customer at a packaging facility or retail store. Packaged gases are generally sold by purchase orders.

A substantial amount of the cylinder gases sold in the United States is distributed by independent distributors that buy merchant gases in liquid form and repackage the products in their facilities. These businesses also distribute welding equipment purchased from independent manufacturers. Over time, Praxair has acquired several independent industrial gases and welding products distributors at various locations in the United States and continues to sell merchant gases to other independent distributors. Between its own distribution business, joint ventures and sales to independent distributors, Praxair is represented in 48 states, the District of Columbia and Puerto Rico.

Surface technologies

Praxair’s surface technologies segment supplies wear-resistant and high-temperature corrosion-resistant metallic and ceramic coatings and powders to the aircraft, printing, textile, plastics, primary metals, petrochemical and other industries. It also manufactures a complete line of electric arc, plasma and high-velocity oxygen fuel spray equipment as well as arc and flame wire equipment used for the application of wear resistant coatings. The coatings extend wear life and are applied at Praxair's facilities using a variety of thermal spray coatings processes. The coated parts are finished to the customer's precise specifications before shipment.

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Praxair, Inc. and Subsidiaries

Inventories—Praxair carries inventories of merchant and cylinder gases, hardgoods and coatings materials to supply products to its customers on a reasonable delivery schedule. On-site plants and pipeline complexes have limited inventory. Inventory obsolescence and backlogs are not material to Praxair's business.

Customers—Praxair is not dependent upon a single customer or a few customers.

International—Praxair is a global enterprise with approximately 56% of its 2007 sales outside of the United States. It conducts industrial gases business through subsidiary and affiliated companies in Argentina, Belgium, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, France, Germany, India, Israel, Italy, Japan, South Korea, Malaysia, Mexico, the Netherlands, the People's Republic of China, Paraguay, Peru, Portugal, Spain, Taiwan, Thailand, Uruguay and Venezuela. S.I.A.D. (Societa Italiana Acetilene & Derivati S.p.A.), an Italian company accounted for as an equity company, also has established positions in Austria, Bulgaria, Croatia, the Czech Republic, Hungary, Romania and Slovenia. Praxair's surface technologies segment has operations in Brazil, China, France, Germany, India, Italy, Japan, Singapore, South Korea, Taiwan, Spain, Switzerland and the United Kingdom.

Praxair's international business is subject to risks customarily encountered in foreign operations, including fluctuations in foreign currency exchange rates and controls, import and export controls, and other economic, political and regulatory policies of local governments. Also, see Note 1 of the section captioned “Notes to Consolidated Financial Statements,” and the section captioned “Management's Discussion and Analysis—Market Risks and Sensitivity Analyses” in Praxair's 2007 Annual Report to Shareholders.

Seasonality—Praxair's business is generally not subject to seasonal fluctuations to any significant extent.

Research and Development—Praxair's research and development is directed toward developing new and improved methods for the production and distribution of industrial gases and the development of new markets and applications for these gases. This results in the frequent introduction of new industrial gas applications, and the development of new advanced air separation process technologies. Research and development for industrial gases is principally conducted at Tonawanda, New York; Burr Ridge, Illinois; Rio de Janeiro, Brazil; and Shanghai, China.

Praxair conducts research and development for its surface technologies to improve the quality and durability of coatings and the use of specialty powders for new applications and industries. Surface technologies research is conducted at Indianapolis, Indiana.

Patents and Trademarks—Praxair owns or licenses a large number of United States and foreign patents that relate to a wide variety of products and processes. Praxair's patents expire at various times over the next 20 years. While these patents and licenses are considered important, Praxair does not consider its business as a whole to be materially dependent upon any one particular patent or patent license. Praxair also owns a large number of trademarks.

Raw Materials and Energy Costs—Energy is the single largest cost item in the production and distribution of industrial gases. Most of Praxair’s energy requirements are in the form of electricity, natural gas and diesel fuel for distribution.

The supply of energy has not been a significant issue in the geographic areas where the company conducts business. However, the outcome of regional energy situations or new energy situations is unpredictable and may pose unforeseen future risks.

For carbon dioxide, carbon monoxide, helium, hydrogen, specialty gases and surface technologies, raw materials are largely purchased from outside sources. Praxair has contracts or commitments for, or readily available sources of, most of these raw materials; however, their long-term availability and prices are subject to market conditions.

Competition—Praxair operates within a highly competitive environment. Some of its competitors are larger in size and capital base than Praxair. Competition is based on price, product quality, delivery, reliability, technology and service to customers.

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Praxair, Inc. and Subsidiaries

Major competitors in the industrial gases industry both in the United States and worldwide include Air Products and Chemicals, Inc., Airgas Inc., L'Air Liquide S.A., and Linde AG. Principal domestic competitors for the surface technologies business are Chromalloy Gas Turbine Corporation, a subsidiary of Sequa Corporation, Sermatech International, Inc., a subsidiary of Teleflex, Inc., and Chemtronics, Inc., a subsidiary of GKN p.l.c. International competitors in surface technologies vary from country to country.

Employees and Labor Relations—As of December 31, 2007, Praxair had 27,992 employees worldwide. Of this number, 12,018 are employed in the United States. Praxair has collective bargaining agreements with unions at numerous locations throughout the world, which expire at various dates. Praxair considers relations with its employees to be good.

Environment—Information required by this item is incorporated herein by reference to the section captioned “Management's Discussion and Analysis—Environmental Matters” in Praxair's 2007 Annual Report to Shareholders.

Available Information—The Company makes its periodic and current reports available, free of charge, on or through its website, www.praxair.com, as soon as practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (SEC). Investors may also access from the Company website other investor information such as press releases and presentations. Information on the Company’s website is not incorporated by reference herein.

In addition, the public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room located at 100 F Street NE, Washington, D.C. 20549. The public may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website, www.sec.gov, that contains reports, proxy information statements and other information regarding issuers that file electronically.

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Praxair, Inc. and Subsidiaries

Item 1a. Risk Factors

Due to the size and geographic reach of the Company’s operations, a wide range of factors, many of which are outside of the Company’s control, could materially affect the Company’s future operations and financial performance. Management believes the following risks may significantly impact the Company:

External factors

Significant external factors include:

• General economic conditions;

• Cost and availability of raw materials and energy;

• International events and circumstances;

• Macroeconomic factors;

• Competitor actions;

• Governmental regulations; and

• Catastrophic events.

General Economic Conditions

Although Praxair serves approximately 25 diverse industries across more than 30 countries, which generally leads to financial stability through various business cycles, demand for Praxair’s products would be adversely affected by a broad decline in general economic or business conditions in the industries served by its customers. In addition, many of the Company’s customers are in businesses that are cyclical in nature, such as the chemicals, metals and refining industries. Downturns in these industries may adversely impact Praxair’s financial position, results of operations and cash flows.

Cost and Availability of Raw Materials and Energy

Energy is the single largest cost item in the production and distribution of industrial gases. Most of Praxair’s energy requirements are in the form of electricity, natural gas and diesel fuel for distribution. Praxair attempts to minimize the financial impact of variability in these costs through the management of customer contracts, which typically have escalation and pass-through clauses for the Company’s larger contracts. Such attempts may not successfully mitigate the impact of cost variability which could negatively impact its financial condition or results of operations. The supply of energy has not been a significant issue in the geographic areas where it conducts business. However, regional energy conditions are unpredictable and may pose future risk.

For carbon dioxide, carbon monoxide, helium, hydrogen, specialty gases and surface technologies, raw materials are largely purchased from outside sources. Praxair has contracts or commitments for, or readily available sources of, most of these raw materials; however, their long-term availability and prices are subject to market conditions. A disruption in supply of such raw materials could impact the Company’s ability to meet contractual supply commitments.

International Events and Circumstances

Praxair has substantial international operations, which are subject to the risks of doing business abroad, including fluctuations in currency exchange rates, transportation delays and interruptions, political and economic instability and disruptions, restrictions on the transfer of funds, the imposition of duties and tariffs, import and export controls, changes in governmental policies, labor unrest, possible nationalization of assets, and current and changing regulatory environments. These events could have an adverse effect on the international operations in the future by reducing the demand for its products, decreasing the prices at which it can sell its products or otherwise having an adverse effect on its business, financial condition or results of operations.

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Praxair, Inc. and Subsidiaries

Macroeconomic factors

Changes in U.S. and global financial and equity markets, including market disruptions and significant interest rate fluctuations, may make it more difficult for Praxair to obtain financing for its operations or increase the cost of obtaining financing. In addition, the Company's borrowing costs can be affected by short and long-term debt ratings assigned by independent rating agencies which are based, in significant part, on the Company’s performance as measured by subjective credit criteria such as interest coverage and leverage ratios. A decrease in these ratings could increase the cost of borrowing or make it more difficult to obtain financing.

Competitor Actions

Praxair operates within a highly competitive environment worldwide. Competition is based on price, product quality, delivery, reliability, technology and service to customers. Competitors’ behavior related to these areas could potentially have significant impacts on the Company’s operations.

Governmental Regulations

Praxair’s operations are subject to a variety of United States and foreign government regulations. These regulations include those related to the following areas, among others:

• Environmental protection, including laws regulating greenhouse gas emissions and other potential climate-change legislation (see the section captioned “Management’s Discussion and Analysis – Environmental Matters” in Praxair’s 2007 Annual Report to Shareholders);

• Domestic and international tax laws and currency controls;

• Transportation;

• Safety;

• Securities laws (e.g., SEC and generally accepted accounting principles in the United States);

• Patents;

• Trade restrictions;

• Antitrust matters; and

• Home healthcare reimbursement regulations.

Changes in these or other regulatory areas may impact the Company’s profitability, may require the Company to spend additional resources to comply with the regulations, or may restrict the Company’s ability to compete effectively in the marketplace.

Catastrophic events

The occurrence of catastrophic events ranging from natural disasters such as hurricanes, to epidemics such as health epidemics, to acts of war and terrorism, could disrupt or delay the Company’s ability to produce and distribute its products to customers and could potentially expose the Company to third-party liability claims. In addition, such events could impact the Company’s customers and suppliers resulting in temporary or long-term customer outages and/or the limitation of supply of energy and other raw materials used in normal business operations. These situations are outside the Company’s control and may have a significant adverse impact on the results of operations.

Internal Factors

Significant internal factors include:

• Retaining qualified personnel;

• Technological advances;

• Litigation and governmental investigations;

• Environmental laws and regulations;

• Tax liabilities;

• Operational risks; and

• Acquisitions.

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Praxair, Inc. and Subsidiaries

Retaining qualified personnel

If Praxair fails to attract, hire and retain qualified personnel, the Company may not be able to develop, market or sell its products or successfully manage its business. Praxair is dependent upon its highly skilled, experienced and efficient workforce to be successful. Much of Praxair’s competitive advantage is based on the expertise and experience of its key personnel regarding its marketing, technology, manufacturing and distribution infrastructure, systems and products. The inability to attract and hire qualified individuals or the loss of key employees in very skilled areas could have a negative effect on the Company’s business, results of operations and financial condition.

Technological advances

If Praxair fails to keep pace with technological advances in the industry or if new technology initiatives do not become commercially accepted, customers may not continue to buy the Company’s products and results of operations could be adversely affected. Praxair’s research and development is directed toward developing new and improved methods for the production and distribution of industrial gases and the development of new markets and applications for the use of these gases. This results in the frequent introduction of new industrial gas applications and the development of new advanced air separation process technologies. The Company also conducts research and development for its surface technologies to improve the quality and durability of coatings and the use of speciality powders for new applications and industries. The results of these research and development activities help Praxair to create a competitive advantage and provide a platform for the Company to grow its business at greater percentages than the rate of industrial production growth in the geographies where it operates. If Praxair’s research and development activities did not keep pace with competitors or if it did not create new applications that benefit customers, then the Company’s future results of operations could be adversely affected.

Litigation and governmental investigations

Praxair is subject to various lawsuits and governmental investigations arising out of the normal course of business that may result in adverse outcomes. These actions are based upon alleged environmental, tax, antitrust and personal injury claims, among others. Adverse outcomes in some or all of the claims pending may result in significant monetary damages or injunctive relief that could adversely affect its ability to conduct business. While management currently believes that resolving all of these matters, individually or in the aggregate, will not have a material adverse impact on the Company’s financial position or liquidity, the litigation and other claims Praxair faces are subject to inherent uncertainties and management’s view of these matters may change in the future. There exists the possibility of a material adverse impact on the Company’s results of operations for the period in which the effect of an unfavorable final outcome becomes probable and reasonably estimable.

Environmental laws and regulations

Praxair is subject to various environmental and occupational health and safety laws and regulations, including those governing the discharge of pollutants into the air or water, the storage, handling and disposal of chemicals, hazardous substances and wastes, and the remediation of contamination. Violations of these laws could result in substantial penalties, third party claims for property damage or personal injury, or sanctions. The Company may also be subject to liability for the investigation and remediation of environmental contamination at properties that it owns or operates and at other properties where Praxair or its predecessors have operated or arranged for the disposal of hazardous wastes. Although management does not believe that any such liabilities will have a material adverse impact on its financial position and results of operations, management cannot provide assurance that such costs will not increase in the future or will not become material. See the section captioned “Management’s Discussion and Analysis – Environmental Matters” in Praxair’s 2007 Annual Report to Shareholders.

Tax liabilities

Praxair is subject to income and other taxes in both the United States and numerous foreign jurisdictions. The determination of the Company’s worldwide provision for income taxes and other tax liabilities requires judgment and is based on diverse legislative and regulatory structures that exist in the various jurisdictions where the Company operates. Although management believes its estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in its financial statements and may materially affect the Company’s results of operations for the period when such determination is made. See the section captioned “Notes to Consolidated Financials Statements – Note 17 Commitments and Contingencies” in Praxair’s 2007 Annual Report to Shareholders.

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Praxair, Inc. and Subsidiaries

Operational risks

Praxair’s operating results are dependent on the continued operation of its production facilities and its ability to meet customer contract requirements and other needs. Insufficient or excess capacity threatens the Company’s ability to generate competitive profit margins and may expose the Company to liabilities related to contract commitments. Operating results are also dependent on the Company’s ability to complete new construction projects on time, on budget and in accordance with performance requirements. Failure to do so may expose the business to loss of revenue, potential litigation and loss of business reputation.

Also inherent in the management of the Company’s production facilities and delivery systems, including storage, vehicle transportation and pipelines, are operational risks that require continuous training, oversight and control. Material operating failures at production, storage facilities or pipelines, including fire, toxic release and explosions, or the occurrence of vehicle transportation accidents could result in loss of life, damage to the environment, loss of production and/or extensive property damage, all of which may negatively impact the Company’s results of operations, cash flows and reputation.

Acquisitions

Praxair has evaluated, and expects to continue to evaluate, a wide array of potential strategic transactions. Many of these transactions, if consummated, could be material to its financial condition and results of operations. In addition, the process of integrating an acquired company, business or group of assets may create unforeseen operating difficulties and expenditures. Although historically the Company has been successful with its acquisition strategy and execution, the areas where the Company may face risks include:

• The need to implement or remediate controls, procedures and policies appropriate for a larger public company at companies that prior to the acquisition lacked these controls, procedures and policies;

• Diversion of management time and focus from operating existing business to acquisition integration challenges;

• Cultural challenges associated with integrating employees from the acquired company into the existing organization;

• The need to integrate each company’s accounting, management information, human resource and other administrative systems to permit effective management;

• Difficulty with the assimilation of acquired operations and products;

• Failure to achieve targeted synergies; and

• Inability to retain key employees and business relationships of acquired companies.

Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries. Also, the anticipated benefit of the Company’s acquisitions may not materialize. Future acquisitions or dispositions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could adversely impact the Company’s financial condition.

Item 1b. Unresolved Staff Comments

Praxair has received no written SEC staff comments regarding any of its Exchange Act reports which were issued 180 days or more preceding the end of its 2007 fiscal year and that remain unresolved.

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Item 2. Properties

Praxair's worldwide headquarters are located in leased office space in Danbury, Connecticut. Other principal administrative offices are owned in Tonawanda, New York, and leased in Rio de Janeiro, Brazil, Shanghai, China and Madrid, Spain.

Praxair designs, engineers, manufactures and operates facilities that produce and distribute industrial gases. These industrial gas production facilities and certain components are designed and/or manufactured at its facilities in Tonawanda, New York; Burr Ridge, Illinois; and Rio de Janeiro, Brazil. Praxair's Italian equity affiliate, Societa Italiana Acetilene & Derivati S.p.A. (S.I.A.D.), also has such capacity.

Due to the nature of Praxair’s industrial gas products, it is generally uneconomical to transport them distances of greater than 200 miles from the production facility. As a result, Praxair operates a significant number of production facilities spread throughout the geographic regions where the company has operations.

The following is a description of production facilities for Praxair by segment. No significant portion of these assets was leased at December 31, 2007. Generally, these facilities are fully utilized and are sufficient to meet our manufacturing needs.

North America

The North America segment operates production facilities in the U.S., Canada and Mexico, approximately 260 of which are cryogenic air separation plants, hydrogen plants and carbon dioxide plants. There are five major pipeline complexes in North America located in Northern Indiana, Houston, along the Gulf Coast of Texas, Detroit and Louisiana. Also located throughout North America are packaged gas facilities, specialty gas plants, helium plants and other smaller plant facilities.

Europe

The Europe segment has production facilities primarily in Italy, Spain, Germany, the Benelux region and France which include more than 50 cryogenic air separation plants. There are three major pipeline complexes in Europe located in Northern Spain and the Rhine and Saar regions of Germany. These pipeline complexes are primarily supported by cryogenic air separation plants. Also located throughout Europe are specialty gas plants, packaged gas facilities and other smaller plant facilities.

South America

The South America segment operates more than 40 cryogenic air separation plants, primarily located in Brazil. Many of these plants support a major pipeline complex in Southern Brazil. Also located throughout South America are carbon dioxide plants, packaged gas facilities and other smaller plant facilities.

Asia

The Asia segment has production facilities located primarily in China, Korea and India which include more than 25 cryogenic air separation plants. Also located throughout Asia are noncryogenic air separation, carbon dioxide, hydrogen, packaged gas and other production facilities.

Surface technologies

The surface technologies segment provides coating services and manufactures coating equipment at approximately 40 sites. The majority of these sites are located in the United States and Europe, with smaller operations in Asia and Brazil.

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Item 3. Legal Proceedings

Information required by this item is incorporated herein by reference to the section captioned “Notes to Consolidated Financial Statements - Note 17 Commitments and Contingencies” in Praxair's 2007 Annual Report to Shareholders.

Item 4. Submission of Matters to a Vote of Security Holders

Praxair did not submit any matters to a shareholder vote during the fourth quarter of 2007.

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Praxair, Inc. and Subsidiaries

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market, trading, shareholder and dividend information for Praxair's common stock is incorporated herein by reference to the section captioned “Investor Information” in Praxair's 2007 Annual Report to Shareholders.

On October 28, 2003, Praxair’s Board of Directors declared a two-for-one split of the Company’s common stock. The stock split was effected in the form of a stock dividend of one additional share for each share owned by stockholders of record on December 5, 2003, and each share held in treasury as of the record date.

Praxair's annual dividend on its common stock for 2007 was $1.20 per share. On January 22, 2008, Praxair's Board of Directors declared a dividend of $0.375 per share for the first quarter of 2008, or $1.50 per share annualized, which may be changed as Praxair's earnings and business prospects warrant. The declaration of dividends is a business decision made by the Board of Directors based on Praxair's earnings and financial condition and other factors the Board of Directors considers relevant.

Purchases of Equity Securities—Certain information regarding purchases made by or on behalf of the Company or any affiliated purchaser (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934, as amended) of its common stock during the three months ended December 31, 2007 is provided below:

Period	Total Number of Shares Purchased (Thousands)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) (Thousands)	Maximum Number (or approximate dollar value) of Shares that May Yet be Purchased Under the Programs(2)
October 2007	488	$	82.52	488	$    557,592
November 2007	1,247		82.54	1,247	454,665
December 2007	—		—	—	454,665
Fourth Quarter 2007	1,735	$	82.53	1,735	$    454,665

(1) On July 25, 2007, the Company announced that the Company's Board of Directors approved a new share repurchase program pursuant to which the Company may repurchase up to $1 billion of shares of its common stock from time to time at prices and on terms satisfactory to the Company.

(2) As of December 31, 2007, the Company had purchased $545 million of its common stock, pursuant to the 2007 program, leaving an additional $455 million remaining authorized for purchase under the 2007 program. The 2007 program does not have any stated expiration date.

Item 6. Selected Financial Data

Information required by this item is incorporated herein by reference to the sections captioned “Five-Year Financial Summary” and “Non-GAAP Financial Measures” in Praxair's 2007 Annual Report to Shareholders. These items should be read in conjunction with the Consolidated Financial Statements and related Notes to Consolidated Financial Statements.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Information required by this item is incorporated herein by reference to the section captioned “Management's Discussion and Analysis” in Praxair's 2007 Annual Report to Shareholders.

12

PART II (Continued)

Praxair, Inc. and Subsidiaries

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

Information required by this item is incorporated herein by reference to the section captioned “Management's Discussion and Analysis” in Praxair's 2007 Annual Report to Shareholders.

Item 8. Financial Statements and Supplementary Data

Information required by this item is incorporated herein by reference to the sections captioned “Consolidated Statements of Income,” “Consolidated Balance Sheets,” “Consolidated Statements of Cash Flows,” “Consolidated Statements of Shareholders' Equity” and “Notes to Consolidated Financial Statements” in Praxair's 2007 Annual Report to Shareholders.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9a. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Based on an evaluation of the effectiveness of Praxair’s disclosure controls and procedures, which was made under the supervision and with the participation of management, including Praxair’s principal executive officer and principal financial officer, the principal executive officer and principal financial officer have each concluded that, as of the end of the annual period covered by this report, such disclosure controls and procedures are effective in ensuring that information required to be disclosed by Praxair in reports that it files under the Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and accumulated and communicated to management including Praxair’s principal executive officer and principal financial officer, to allow timely decisions regarding disclosure.

Management’s Report on Internal Control Over Financial Reporting

Praxair’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the Company’s principal executive officer and principal financial officer, Praxair conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (often referred to as COSO). Based on this evaluation, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2007.

This evaluation did not include the internal control over financial reporting related to the following acquisitions completed during 2007: Linde AG’s industrial gas business in Mexico, Mittler Supply, Inc. and the majority-owned packaged gas subsidiary GT&S, Inc. Total assets and sales for these acquisitions represent 2.3% and 0.9%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2007 (see Note 3 to the consolidated financial statements incorporated by reference in Item 8).

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has issued their opinion on the Company’s internal control over financial reporting as of December 31, 2007 as stated in their report incorporated by reference in Item 15.

Changes in Internal Control over Financial Reporting

There were no changes in Praxair's internal control over financial reporting that occurred during the fourth quarter of 2007 that have materially affected, or are reasonably likely to materially affect, Praxair's internal control over financial reporting.

Item 9b. Other Information

None.

13

PART III

Praxair, Inc. and Subsidiaries

Item 10. Directors, Executive Officers and Corporate Governance

Certain information required by this item is incorporated herein by reference to the sections captioned “The Board of Directors”, “Executive Officers” and “Corporate Governance And Board Practices-Section 16(a) Beneficial Ownership Reporting Compliance” in Praxair's Proxy Statement for the Annual Meeting of Shareholders to be held on April 22, 2008.

Identification of the Audit Committee

Praxair has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 as amended (the “Exchange Act”). The members of that Audit Committee are Raymond W. LeBoeuf, Chairman, Ira D. Hall, Ronald L. Kuehn, Jr., Larry D. McVay and H. Mitchell Watson, Jr.

Audit Committee Financial Expert

The Praxair Board of Directors has determined that each of, Raymond W. LeBoeuf, Ira D. Hall, Ronald L. Kuehn, Jr. and H. Mitchell Watson, Jr is an “audit committee financial expert” as defined by Item 401(h) of Regulation S-K of the Exchange Act and is independent within the meaning of Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act.

Code of Ethics

Praxair has adopted a code of ethics that applies to the Company's directors and all employees, including its Chief Executive Officer, Chief Financial Officer, and Controller. This code of ethics has been approved by the Praxair Board of Directors and is named the “Compliance with Laws and Business Integrity and Ethics Policy”. To assist employees and directors in complying with this code of ethics, management, from time to time, develops specific standards implementing certain provisions of the code which standards are contained in Praxair's “Standards of Business Integrity.” Both documents are posted on the Company's public website, www.praxair.com.

Item 11. Executive Compensation

Information required by this item is incorporated herein by reference to the sections captioned “Executive Compensation” and “Director Compensation” in Praxair's Proxy Statement for the Annual Meeting of Shareholders to be held on April 22, 2008.

14

PART III (Continued)

Praxair, Inc. and Subsidiaries

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plans Information – The table below provides information as of December 31, 2007 about Company stock that may be issued upon the exercise of options, warrants and rights granted to employees or members of Praxair's Board of Directors under present and former equity compensation plans, including plans approved by shareholders and one plan which has not been approved by shareholders, the 1996 Praxair, Inc. Performance Incentive Plan (the 1996 Plan). The equity compensation plan not approved by shareholders was terminated in March 2001 and directors and officers of the Company were not eligible to participate in that plan. Shareholder approval of that plan was not required under applicable NYSE rules. The 1996 Plan provided for granting nonqualified or incentive stock options, stock grants, performance awards and other stock related incentives for key employees. The exercise price under the 1996 Plan was equal to the closing price of Praxair’s common stock on the date of grant. Options that were granted under this plan became exercisable after one or more years after the date of grant and the option term was no more than ten years.

EQUITY COMPENSATION PLANS TABLE
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)		Weighted- average exercise price of outstanding options, warrants and rights (b)		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by shareholders	17,090,748	(1)	$	44.85	10,417,111
Equity compensation plans not approved by shareholders	2,484,211		$	21.60	—
Total	19,574,959		$	41.90	10,417,111

(1) This amount includes 22,952 restricted shares and 70,520 performance shares. Up to an additional 70,520 performance shares could be issued if performance goals are achieved at the maximum specified targets. See Note 15 of the section captioned “Notes to Consolidated Financial Statements” in Praxair's 2007 Annual Report to Shareholders.

Certain information required by this item regarding the beneficial ownership of the Company’s common stock is incorporated herein by reference to the section captioned “Share Ownership” in Praxair’s Proxy Statement for the Annual Meeting of Shareholders to be held on April 22, 2008.

Item 13. Certain Relationships and Related Transactions and Director Independence

Information required by this item is incorporated herein by reference to the sections captioned “Corporate Governance And Board Practices—Review, Approval or Ratification of Transactions with Related Persons,” “Corporate Governance And Board Practices—Certain Relationships and Transactions” and “Corporate Governance And Board Practices—Director Independence” in Praxair’s Proxy Statement for the Annual Meeting of Shareholders to be held on April 22, 2008.

Item 14. Principal Accounting Fees and Services

Information required by this item is incorporated herein by reference to the section captioned “The Independent Auditor” in Praxair's Proxy Statement for the Annual Meeting of Shareholders to be held on April 22, 2008.

15

PART IV

Praxair, Inc. and Subsidiaries

Item 15. Exhibits and Financial Statement Schedules

(a) Documents filed as part of this report

(1) Financial Statements

	Page No. in Praxair's 2007 Annual Report (AR)*
Consolidated Statements of Income for the Years Ended December 31, 2007, 2006, and 2005	AR-26
Consolidated Balance Sheets at December 31, 2007 and 2006	AR-27
Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006, and 2005	AR-28
Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2007, 2006, and 2005	AR-29
Notes to Consolidated Financial Statements	AR-45 to AR-69
Report of Independent Registered Public Accounting Firm	AR-71

* Incorporated by reference to the indicated pages of the 2007 Annual Report to Shareholders. With the exception of this information and the information incorporated in Items 3, 5, 6, 7, 7A and 8, the 2007 Annual Report to Shareholders is not to be deemed filed as part of this Annual Report on Form 10-K.

(2) Financial Statement Schedules

All financial statement schedules have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

(3) Exhibits

Exhibits filed as a part of this annual report on Form 10-K are listed in the Index to Exhibits located on page 18 of this Report.

16

SIGNATURES

Praxair, Inc. and Subsidiaries

Pursuant to the requirements of Section 13 or 15(d) 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: February 26, 2008	By:	/s/ Patrick M. Clark
		Patrick M. Clark
		Vice President and Controller
		(On behalf of the Registrant and as Chief Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on February 26, 2008.

/s/ Stephen F. Angel	/s/ James S. Sawyer	/s/ Edward G. Galante
Stephen F. Angel	James S. Sawyer	Edward G. Galante
Chairman, President,	Executive Vice President and	Director
Chief Executive Officer and Director	Chief Financial Officer
/s/ Claire W. Gargalli	/s/ Ira D. Hall	/s/ Ronald L. Kuehn, Jr.
Claire W. Gargalli	Ira D. Hall	Ronald L. Kuehn, Jr.
Director	Director	Director
/s/ Raymond W. LeBoeuf	/s/ Larry D. McVay	/s/ Wayne T. Smith
Raymond W. LeBoeuf	Larry D. McVay	Wayne T. Smith
Director	Director	Director
/s/ H. Mitchell Watson, Jr.	/s/ Robert L. Wood
H. Mitchell Watson, Jr.	Robert L. Wood
Director	Director

17

INDEX TO EXHIBITS

Praxair, Inc. and Subsidiaries

Exhibit No.	Description
3.01	Restated Certificate of Incorporation of Praxair, Inc. as filed with the Secretary of State of the State of Delaware on May 8, 2006 (Filed as Exhibit 3.01 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, Filing No. 1-11037, and incorporated herein by reference).
3.02	Amended and Restated By-Laws of Praxair, Inc. (Filed as Exhibit 3.02 to the Company’s Current Report on Form 8-K dated December 12, 2007, Filing No. 1-11037, and incorporated herein by reference).
3.03	Certificate of Designations for the 7.48% Cumulative Preferred Stock, Series A (Filed on February 7, 1997 as Exhibit 3.3 to Amendment #1 to the Company’s Registration Statement on Form S-3, Registration No. 333-18141).
3.04	Certificate of Designations for the 6.75% Cumulative Preferred Stock, Series B (Filed on February 7, 1997 as Exhibit 3.4 to Amendment #1 to the Company’s Registration Statement on Form S-3, Registration No. 333-18141).
4.01	Common Stock Certificate (Filed as Exhibit 4.01 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
4.02	Stockholder Protection Rights Agreement, dated as of May 3, 2004, between the registrant and Registrar and Transfer Company as Rights Agent (Filed on April 29, 2004 as Exhibit (1) to the Company’s Registration Statement on Form 8-A, Filing No. 1-11037, and incorporated herein by reference).
4.03	Indenture, dated as of July 15, 1992, between Praxair, Inc. and U.S. Bank National Association, as the ultimate successor trustee to Bank of America, Illinois (formerly Continental Bank, National Association (Filed as Exhibit 4 to the Company’s Current Report on Form 8-K dated March 19, 2007, Filing No. 1-11037, and incorporated herein by reference).
4.04	Copies of the agreements relating to long-term debt which are not required to be filed as exhibits to this Annual Report on Form 10-K will be furnished to the Securities and Exchange Commission upon request.
4.05	Series A Preferred Stock Certificate (Filed on February 7, 1997 as Exhibit 4.3 to Amendment #1 to the Company’s Registration Statement on Form S-3, Registration No. 333-18141).
4.06	Series B Preferred Stock Certificate (Filed on February 7, 1997 as Exhibit 4.4 to Amendment #1 to the Company’s Registration Statement on Form S-3, Registration No. 333-18141).
*10.01	Amended and Restated 2002 Praxair, Inc. Long Term Incentive Plan (Filed as Exhibit 10.01 to the Company’s 2003 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.01a	First amendment, dated as of October 24, 2006, to the Amended and Restated 2002 Praxair, Inc. Long Term Incentive Plan (Filed as Exhibit 10.01a to the Company’s 2006 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.01b	Second amendment, dated as of January 23, 2007, to the Amended and Restated 2002 Praxair, Inc. Long Term Incentive Plan (Filed as Exhibit 10.01b to the Company’s 2006 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.01c	Form of Standard Option Award under the 2002 Praxair, Inc. Long Term Incentive Plan is filed herewith.
*10.01d	Form of Transferable Option Award under the 2002 Praxair, Inc. Long Term Incentive Plan is filed herewith.
*10.01e	Form of Performance Share Award under the 2002 Praxair, Inc. Long Term Incentive Plan (Filed as Exhibit 10.01e to the Company’s 2006 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.02	Form of Executive Severance Compensation Agreement (Filed as Exhibit 10.02 to the Company’s 2003 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.03	2002 Praxair, Inc. Variable Compensation Plan (Filed as Exhibit 10.03 to the Company’s 2001 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.03a	First Amendment, dated as of December 12, 2005, to the 2002 Praxair, Inc. Variable Compensation Plan. (Filed as Exhibit 10.03a to the Company’s 2005 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.04	Amended and Restated 1995 Stock Option Plan for Non-Employee Directors (Filed as Exhibit 10.04 to the Company’s 2003 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).

18

INDEX TO EXHIBITS (Continued)

Praxair, Inc. and Subsidiaries

Exhibit No.	Description
*10.04a	First Amendment, dated as of October 24, 2006, to the Amended and Restated 1995 Stock Option Plan for Non-Employee Directors (Filed as Exhibit 10.04a to the Company’s 2006 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.04b	2005 Equity Compensation Plan for Non-Employee Directors of Praxair, Inc. (Filed as Exhibit 10.04 to the Company’s Current Report on Form 8-K dated April 29, 2005, Filing No. 1-11037, and incorporated herein by reference).
*10.04c	First Amendment, dated as of October 24, 2006, to the 2005 Equity Compensation Plan for Non-Employee Directors of Praxair, Inc. (Filed as Exhibit 10.04c to the Company’s 2006 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.04d	Form of Option Award under the 2005 Equity Compensation Plan for Non-employee Directors of Praxair, Inc (Filed as Exhibit 10.04a to the Company’s Form 10-Q for the quarter ended June 30, 2005, Filing No. 1-11037, and incorporated herein by reference).
*10.05	Special Severance Protection Program (Filed as Exhibit 10.05 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
*10.06	Amended and Restated Praxair, Inc. Directors’ Fees Deferral Plan (Filed as Exhibit 10.06 to the Company’s Current Report on Form 8-K dated January 25, 2005, Filing No. 1-11037, and incorporated herein by reference).
*10.06a	Fourth Amendment to the Praxair Inc. Directors’ Fees Deferral Plan (Filed as Exhibit 10.06a to the Company’s Current Report on Form 8-K dated April 29, 2005, Filing 1-11037, and incorporated herein by reference).
*10.07	Amended and Restated 1993 Praxair Compensation Deferral Program (Filed as Exhibit 10.07 to the Company’s 1996 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.07a	First Amendment, dated as of April 1, 2001, to the Amended and Restated 1993 Praxair Compensation Deferral Program (Filed as Exhibit 10.07a to the Company’s 2001 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
*10.07b	Second Amendment, dated as of October 28, 2003, to the Amended and Restated 1993 Praxair Compensation Deferral Program (Filed as Exhibit 10.07b to the Company’s 2003 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.08	Transfer Agreement dated January 1, 1989, between Union Carbide Corporation and the registrant (Filed as Exhibit 10.06 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.08a	Amendment No. 1 dated as of December 31, 1989, to the Transfer Agreement (Filed as Exhibit 10.07 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.08b	Amendment No. 2 dated as of July 2, 1990, to the Transfer Agreement (Filed as Exhibit 10.08 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).

19

INDEX TO EXHIBITS (Continued)

Praxair, Inc. and Subsidiaries

Exhibit No.	Description
10.08c	Amendment No. 3 dated as of January 2, 1991, to the Transfer Agreement (Filed as Exhibit 10.09 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.09	Transfer Agreement dated January 1, 1989, between Union Carbide Corporation and Union Carbide Coatings Service Corporation (Filed as Exhibit 10.14 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.09a	Amendment No. 1 dated as of December 31, 1989, to the Transfer Agreement (Filed as Exhibit 10.15 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.09b	Amendment No. 2 dated as of July 2, 1990, to the Transfer Agreement (Filed as Exhibit 10.16 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.10	Additional Provisions Agreement dated as of June 4, 1992 (Filed as Exhibit 10.21 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.11	Amended and Restated Realignment Indemnification Agreement dated as of June 4, 1992 (Filed as Exhibit 10.23 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.12	Environmental Management, Services and Liabilities Allocation Agreement dated as of January 1, 1990 (Filed as Exhibit 10.13 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.12a	Amendment No. 1 to the Environmental Management, Services and Liabilities Allocation Agreement dated as of June 4, 1992 (Filed as Exhibit 10.22 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.13	Danbury Lease-Related Services Agreement dated as of June 4, 1992 (Filed as Exhibit 10.24 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.13a	First Amendment to Danbury Lease-Related Services Agreement (Filed as Exhibit 10.13a to the Company’s 1994 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.14	Danbury Lease Agreements, as amended (Filed as Exhibit 10.26 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).

20

INDEX TO EXHIBITS (Continued)

Praxair, Inc. and Subsidiaries

Exhibit No.	Description
10.14a	Second Amendment to Linde Data Center Lease (Danbury) (Filed as Exhibit 10.14a to the Company’s 1993 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.14b	Fourth Amendment to Carbide Center Lease (Filed as Exhibit 10.14b to the Company’s 1993 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.14c	Third Amendment to Linde Data Center Lease (Filed as Exhibit 10.14c to the Company’s 1994 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.14d	Fifth Amendment to Carbide Center Lease (Filed as Exhibit 10.14d to the Company’s 1994 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.14e	Sixth Amendment to Carbide Center Lease (Filed as Exhibit 10.14e to the Company’s 2004 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.15	Employee Benefits Agreement dated as of June 4, 1992 (Filed as Exhibit 10.25 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.15a	First Amendatory Agreement to the Employee Benefits Agreement (Filed as Exhibit 10.15a to the Company’s 1994 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.16	Tax Disaffiliation Agreement dated as of June 4, 1992 (Filed as Exhibit 10.20 to the Company’s Registration Statement on Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.17	Credit Agreement dated as of December 23, 2004 among Praxair, Inc., The Eligible Subsidiaries Referred to Therein, The Lenders Listed Therein, JP Morgan Chase Bank, N. A., as Administrative Agent, Bank of America, N. A., as Syndication Agent, and Citibank, N. A. and Credit Suisse First Boston as Co-Documentation Agents (Filed as Exhibit 10.17 to the Company’s 2004 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.17a	Amendment No. 1, dated February 15, 2006, to Credit Agreement, dated as of December 23, 2004 (referenced as Exhibit 10.17) (Filed as Exhibit 10.17a to the Company’s 2005 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.17b	Extension Agreement, dated October 18, 2006, to Credit Agreement, dated as of December 23, 2004 (Filed as Exhibit 10.17b to the Company’s 2006 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).

21

INDEX TO EXHIBITS (Continued)

Praxair, Inc. and Subsidiaries

Exhibit No.	Description
10.18	Facility Agreement dated as of November 29, 2004 among Praxair Euroholding, S. L., an indirect wholly-owned subsidiary of the Company, as Borrower, Praxair, Inc., as Guarantor, The Lenders Party Thereto, Citigroup Global Markets, Inc., as Syndication Agent and ABN AMRO Bank N. V., as Administrative Agent and Documentation Agent (Filed as Exhibit 10.18 to the Company’s 2004 Annual Report on Form 10-K, Filing No. 1-11037, and incorporated herein by reference).
10.18a	Amendment No. 1 to Facility Agreement (Filed as Exhibit 10.18a to the Company’s Current Report on Form 8-K dated March 1, 2005, Filing No. 1-11037, and incorporated herein by reference).
*10.19	Praxair, Inc. Plan for Determining Performance-Based Awards Under Section 162(M) (included as Appendix 4 to the Company’s definitive proxy statement for its 2006 annual meeting of shareholders filed on March 21, 2006 and incorporated herein by reference).
*10.20	Service Credit Arrangement for Stephen F. Angel dated May 23, 2007 was filed as Exhibit 10.20 to the Company’s Form 8-K filed on May 24, 2007 and is incorporated herein by reference.
12.01	Computation of Ratio of Earnings to Fixed Charges.
13.01	Financial Section (pages 26 to 75) of Praxair’s 2007 Annual Report to Shareholders (such information, except for those portions which are expressly referred to in this Form 10-K, is furnished for the information of the Commission and is not deemed “filed” as part of this Form 10-K).
21.01	Subsidiaries of Praxair, Inc.
23.01	Consent of Independent Registered Public Accounting Firm.
31.01	Rule 13a-14(a) Certification
31.02	Rule 13a-14(a) Certification
32.01	Section 1350 Certification (such certifications are furnished for the information of the Commission and shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act).
32.02	Section 1350 Certification (such certifications are furnished for the information of the Commission and shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act).

Copies of exhibits incorporated by reference can be obtained from the SEC and are located in SEC File No. 1-11037.

* Indicates a management contract or compensatory plan or arrangement.

22

EX-10.01C

Exhibit 10.01c

Form of Standard OPTION AWARD

UNDER THE

2002 PRAXAIR, INC.

LONG TERM INCENTIVE PLAN

This Award, made as of the          day of                          (the “Grant Date”) by PRAXAIR, INC., a Delaware corporation, having an office at 39 Old Ridgebury Road, Danbury, Connecticut 06810-5113 (hereinafter called the “Corporation”).

W I T N E S S E T H:

The Corporation hereby grants to                          (hereinafter called the “Participant”), as of the Grant Date, a non-qualified stock option to purchase                      shares of the common stock of the Corporation (par value of $.01 per share) at $             per share upon the following terms and conditions:

1. Vesting. Except as otherwise provided in this Award and subject to the provisions of paragraph 3, this option may be exercised only on or after                  [insert time vesting schedule or insert the terms of any performance-based vesting, including without limitation, vesting based upon the Corporation’s achievement of certain financial goals, such as earnings per share, total shareholder return, net income, revenue or other criteria] [in no event less than three years following the date of grant, provided that the option may partially vest after no less than one year so long as the entire grant does not vest fully until at least three years have elapsed from the date of grant]. The option may be exercised only in a whole number of shares. In the event that the option is not evenly divisible by three, the remaining amount shall be added to the last vesting period. Notwithstanding the foregoing, the entire option shall become immediately vested and exercisable upon the occurrence of either the Participant’s death or a Change in Control.

2. Expiration. Except as otherwise provided herein, this option shall expire on the tenth anniversary of the Grant Date.

3. Exercisability.

(a) This option shall be exercisable by the Participant only while the Participant is in active employment with the Corporation or a Subsidiary or Affiliate of the Corporation and shall be immediately forfeited upon the effective date of the Participant’s termination of employment with the Corporation or a Subsidiary or Affiliate of the Corporation, except that this option shall continue to be exercisable:

(i) at any time prior to its expiration date in the case of the Participant’s Disability or Retirement; provided, however, that following the Participant’s Disability or Retirement, this option shall only become vested and exercisable in accordance with paragraph 1; and provided further, that in the event of the Participant’s Retirement prior to [one year from the date of grant], this option shall never become vested and exercisable and shall be immediately forfeited upon the effective date of the Participant’s Retirement;

(ii) during a three-year period commencing on the date of the Participant’s termination of employment by the Corporation or a Subsidiary or Affiliate of the Corporation other than for cause provided, however, that following such termination of the Participant’s employment other than for cause, this option shall only become vested and exercisable in accordance with paragraph 1 above; and provided further, that, except as otherwise determined by the Corporation’s Chief Executive Officer or his designee, in the event of the Participant’s termination of employment by the Corporation or a Subsidiary or Affiliate of the Corporation other than for cause prior to [one year from the date of grant], this option shall never become vested and exercisable and shall be immediately forfeited upon the effective date of such termination of the Participant’s employment;

Page 1

(iii) during a three-year period commencing on the date of the Participant’s death;

(iv) during a three-year period commencing on the date of termination of the Participant’s employment, by the Participant or by the Corporation or a Subsidiary or Affiliate of the Corporation, other than for cause, within two years after a Change in Control, or

(v) otherwise as the Committee may determine, if the Committee decides that it is in the best interests of the Corporation to permit individual exceptions.

(b) In no event may this option be exercised on or after its expiration date.

(c) An individual who is employed by a Subsidiary or Affiliate of the Corporation shall be deemed to have terminated employment for purposes of this Award at such time as the Corporation and its Subsidiaries own, either directly or indirectly, less than 50% of the employing Subsidiary’s or Affiliate’s total financial interests or combined voting power.

4. Transferability. This option is not transferable other than (a) in the event of the Participant’s death, in which case this option shall be transferred pursuant to the beneficiary designation then on file with the Corporation, or, in the absence of such a beneficiary designation, by will or the laws of descent and distribution, or (b) in the event of a beneficiary’s or distributee’s death, this option shall be transferred to his/her estate and may be exercised only by the executor or administrator of such estate. In either of the foregoing events, this option may be exercised by the executor or administrator of the Participant’s estate, by the Participant’s beneficiary or distributee(s), or by the executor or administrator of the beneficiary’s or distributee’s estate, as applicable, within the time limitations provided in paragraphs 1, 2 and 3 hereof.

5. Exercise of Option.

(a) Notice of Exercise. This option may be exercised at the office of the Corporation in Danbury, Connecticut (or at such other location as determined by the Corporation) with respect to a part or all of the shares covered by the option and then exercisable by giving notice to the Corporation (or its designee as communicated from time to time) of the exercise of the option.

(b) Exercise Price Payment. The option price for the shares for which this option is exercised shall be paid by the exerciser not later than ten business days after the date of exercise, (i) in cash, (ii) in whole shares of common stock of the Corporation owned by the exerciser prior to exercising the option, (iii) by having the Corporation withhold shares that would otherwise be delivered to the exerciser pursuant to the exercise of the option, or (iv) in a combination of cash and delivery of whole shares, or cash and the withholding of shares. The value of any share of common stock delivered or withheld in payment of the option price shall be its Market Price on the date the option is exercised. Notwithstanding the foregoing, the Corporation may refuse to allow payment by any method other than cash if the Corporation determines that allowing such payment would result in the imposition of variable accounting on the Corporation.

(c) Taxes. To enable the Corporation to meet any applicable federal, state or local withholding tax requirements arising as a result of the exercise of the option, the exerciser shall pay the Corporation the amount of tax to be withheld, if any, (i) in cash, (ii) in whole shares of common stock of the Corporation owned by the exerciser prior to exercising the option, (iii) for exercises by the Participant only, by having the Corporation withhold shares that would otherwise be delivered to the Participant pursuant to the exercise of the option (but only to cover the minimum legally required tax withholding), or (iv) in a combination of cash and a delivery of whole shares. The value of any share of common stock so delivered or withheld shall be the Market Price on the date used to determine the amount of tax to be withheld. The Corporation reserves the right to (i) disapprove a Participant’s election to utilize any of the alternatives under this paragraph (c), and (ii) to delay the completion of any exercise of this option until the applicable withholding tax has been paid.

(d) Delivery of Shares. Upon the exercise of an option with respect to a part or all of the shares in the manner and within the time herein provided, the Corporation shall issue and deliver to the exerciser, or to the exerciser’s dividend reinvestment account, the number of shares of its common stock with respect to which the option was exercised. However, if an option is exercised after the death of the Participant,

Page 2

beneficiary or distributee, then the Corporation shall have the right, in lieu of issuing and delivering shares of stock, of returning the option payment to the exerciser and paying to such person the amount by which the Market Price on the date of exercise exceeds the option price with respect to the number of shares for which the option was exercised.

6. Terms and Conditions. This option is awarded pursuant to the Plan and is subject to all of the terms and conditions of the Plan which terms and conditions shall control in the event of any conflict with this Award.

7. Applicable Law. This Award shall be interpreted and construed in accordance with the laws of the State of Connecticut.

8. Definitions.

(a) “Change in Control” means a change in control of the Corporation as defined in the Plan.

(b) “Committee” means the Compensation and Management Development Committee of the Board of Directors of the Corporation or any other Committee which such Board of Directors appoints to administer the Plan.

(c) “Corporation” means Praxair, Inc.

(d) “Disability” means a Participant’s inability to engage in any substantial gainful activity because of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of six (6) months or longer.

(e) “Market Price” means the mean of the high and low prices of the common stock of the Corporation as reported in the New York Stock Exchange Composite Transactions on the specified date (or on the next preceding day such stock was traded on a stock exchange included in the New York Stock Exchange—Composite Transactions if it was not traded on any such exchange on the specified date).

(f) “Plan” means the 2002 Praxair, Inc. Long Term Incentive Plan, as amended and restated as of February 24, 2004, and as further amended from time to time.

(g) “Retirement” means termination of employment with the Corporation or a Subsidiary or Affiliate, other than for cause, with the right under the Corporation’s Retirement Program to receive a non-actuarially reduced pension immediately upon separation from service. Provided, however, that if the Participant is employed by a foreign Affiliate of the Corporation and/or is not eligible to participate in the Corporation’s Retirement Program, Retirement means termination of employment with the Corporation or a Subsidiary or Affiliate, other than for cause, after (i) attaining age 65, (ii) attaining age 62 and completing at least 10 years of employment with the Corporation, or (iii) having accumulated 85 points, where each year of the Participant’s age and each year of employment with the Corporation count for one point.

9. Notwithstanding any other provision of this Award, the Committee may, in its sole discretion, cancel, rescind, suspend, withhold, or otherwise limit or restrict this Award, and/or recover any gains realized by the Participant in connection with this Award, in the event of any actions by the Participant determined by the Committee to (a) constitute a conflict of interest with the Corporation, (b) be prejudicial to the Corporation’s interests, or (c) violate any non-compete agreement or obligation of the Participant to the Corporation, any confidentiality agreement or obligation of the Participant to the Corporation, the Corporation’s applicable policies, or the Participant’s terms and conditions of employment.

IN WITNESS WHEREOF, the Corporation has caused this instrument to be executed by its proper officer hereunto duly authorized, as of the day and year first hereinabove written.

PRAXAIR, INC.

By:

Page 3

EX-10.01D

Exhibit 10.01d

Form of Transferable OPTION AWARD

UNDER THE

2002 PRAXAIR, INC.

LONG TERM INCENTIVE PLAN

This Award, made as of the          day of                      (the “Grant Date”) by PRAXAIR, INC., a Delaware corporation, having an office at 39 Old Ridgebury Road, Danbury, Connecticut 06810-5113 (hereinafter called the “Corporation”).

W I T N E S S E T H:

The Corporation hereby grants to                      (hereinafter called the “Participant”), as of the Grant Date, a non-qualified stock option to purchase                      shares of the common stock of the Corporation (par value of $.01 per share) at $             per share upon the following terms and conditions:

1. Vesting. Except as otherwise provided in this Award and subject to the provisions of paragraph 3, this option may be exercised only on or after                  [insert time vesting schedule or insert the terms of any performance-based vesting, including without limitation, vesting based upon the Corporation’s achievement of certain financial goals, such as earnings per share, total shareholder return, net income, revenue or other criteria] [in no event less than three years following the date of grant, provided that the option may partially vest after no less than one year so long as the entire grant does not vest fully until at least three years have elapsed from the date of grant]. The option may be exercised only in a whole number of shares. In the event that the option is not evenly divisible by three, the remaining amount shall be added to the last vesting period. Notwithstanding the foregoing, the entire option shall become immediately vested and exercisable upon the occurrence of either the Participant’s death or a Change in Control.

2. Expiration. Except as otherwise provided herein, this option shall expire on the tenth anniversary of the Grant Date.

3. Exercisability.

(a) This option shall be exercisable by the Participant only while the Participant is in active employment with the Corporation or a Subsidiary or Affiliate of the Corporation and shall be immediately forfeited upon the effective date of the Participant’s termination of employment with the Corporation or a Subsidiary or Affiliate of the Corporation, except that this option shall continue to be exercisable:

(i) at any time prior to its expiration date in the case of the Participant’s Disability or Retirement; provided, however, that following the Participant’s Disability or Retirement, this option shall only become vested and exercisable in accordance with paragraph 1; and provided further, that in the event of the Participant’s Retirement prior to [one year from the date of grant], this option shall never become vested and exercisable and shall be immediately forfeited upon the effective date of the Participant’s Retirement;

(ii) during a three-year period commencing on the date of the Participant’s termination of employment by the Corporation or a Subsidiary or Affiliate of the Corporation other than for cause provided, however, that following such termination of the Participant’s employment other than for cause, this option shall only become vested and exercisable in accordance with paragraph 1 above; and provided further, that, except as otherwise determined by the Corporation’s Chief Executive Officer or his designee, in the event of the Participant’s termination of employment by the Corporation or a Subsidiary or Affiliate of the Corporation other than for cause prior to [one year from the date of grant], this option shall never become vested and exercisable and shall be immediately forfeited upon the effective date of such termination of the Participant’s employment;

Page 1

(iii) during a three-year period commencing on the date of the Participant’s death;

(iv) during a three-year period commencing on the date of termination of the Participant’s employment, by the Participant or by the Corporation or a Subsidiary or Affiliate of the Corporation, other than for cause, within two years after a Change in Control, or

(v) otherwise as the Committee may determine, if the Committee decides that it is in the best interests of the Corporation to permit individual exceptions.

(b) In no event may this option be exercised on or after its expiration date.

(c) An individual who is employed by a Subsidiary or Affiliate of the Corporation shall be deemed to have terminated employment for purposes of this Award at such time as the Corporation and its Subsidiaries own, either directly or indirectly, less than 50% of the employing Subsidiary’s or Affiliate’s total financial interests or combined voting power.

4. Transferability. This option is not transferable other than;

(a) in the case of the Participant’s death, pursuant to the beneficiary designation then on file with the Corporation, or, in the absence of such a beneficiary designation, by will or the laws of descent and distribution (in such event, this option may be exercised by the executor or administrator of the Participant’s estate or by the Participant’s distributee(s) within the time limitations provided in paragraphs 1, 2 and 3 hereof); or

(b) if the Participant has met the Corporation’s stock ownership guidelines applicable to him/her at the time of such proposed transfer, by the Participant in whole or in parts to;

(i) the Participant’s spouse, children (including by adoption), stepchildren or grandchildren (“immediate family members”),

(ii) a partnership in which such immediate family members are the only partners, or

(iii) a trust for the exclusive benefit of such immediate family members; or

(c) in the case of a transferee’s, beneficiary’s or distributee’s death, to his/her estate, in which case this option may be exercised only by the executor or administrator of such estate and shall not be subject to further transfer.

5. Transfer of Option.

(a) Any transfer of this option, in whole or in part, is subject to acceptance by the Corporation in its sole discretion and shall be effected according to such procedures as the Vice President, Human Resources may establish.

(b) The provisions of this Award, including without limitation, paragraphs 3 and 6(c) relating to the Participant, shall apply to this option notwithstanding any transfer to a third party.

6. Exercise of Option.

(a) Notice of Exercise. This option may be exercised at the office of the Corporation in Danbury, Connecticut (or at such other location as determined by the Corporation) with respect to a part or all of the shares covered by the option and then exercisable by giving notice to the Corporation (or its designee as communicated from time to time) of the exercise of the option.

(b) Exercise Price Payment. The option price for the shares for which this option is exercised shall be paid by the exerciser not later than ten business days after the date of exercise, (i) in cash, (ii) in whole shares of common stock of the Corporation owned by the exerciser prior to exercising the option, (iii) by having the Corporation withhold shares that would otherwise be delivered to the exerciser pursuant to the exercise of the option, or (iv) in a combination of cash and delivery of whole shares, or cash and the withholding of shares. The value of any share of common stock delivered or withheld in payment of the

Page 2

option price shall be its Market Price on the date the option is exercised. Notwithstanding the foregoing, the Corporation may refuse to allow payment by any method other than cash if the Corporation determines that allowing such payment would result in the imposition of variable accounting on the Corporation.

(c) Taxes. To enable the Corporation to meet any applicable federal, state or local withholding tax requirements arising as a result of the exercise of the option, the exerciser shall pay the Corporation the amount of tax to be withheld, if any, (i) in cash, (ii) in whole shares of common stock of the Corporation owned by the exerciser prior to exercising the option, (iii) for exercises by the Participant only, by having the Corporation withhold shares that would otherwise be delivered to the Participant pursuant to the exercise of the option (but only to cover the minimum legally required tax withholding), or (iv) in a combination of cash and a delivery of whole shares. The value of any share of common stock so delivered or withheld shall be the Market Price on the date used to determine the amount of tax to be withheld. The Corporation reserves the right to (i) disapprove a Participant’s election to utilize any of the alternatives under this paragraph (c), and (ii) to delay the completion of any exercise of this option until the applicable withholding tax has been paid.

(d) Delivery of Shares. Upon the exercise of an option with respect to a part or all of the shares in the manner and within the time herein provided, the Corporation shall issue and deliver to the exerciser, or to the exerciser’s dividend reinvestment account, the number of shares of its common stock with respect to which the option was exercised. However, if an option is exercised after the death of the Participant, beneficiary or distributee, then the Corporation shall have the right, in lieu of issuing and delivering shares of stock, of returning the option payment to the exerciser and paying to such person the amount by which the Market Price on the date of exercise exceeds the option price with respect to the number of shares for which the option was exercised.

7. Terms and Conditions. This option is awarded pursuant to the Plan and is subject to all of the terms and conditions of the Plan which terms and conditions shall control in the event of any conflict with this Award.

8. Applicable Law. This Award shall be interpreted and construed in accordance with the laws of the State of Connecticut.

9. Definitions.

(a) “Change in Control” means a change in control of the Corporation as defined in the Plan.

(b) “Committee” means the Compensation and Management Development Committee of the Board of Directors of the Corporation or any other Committee which such Board of Directors appoints to administer the Plan.

(c) “Corporation” means Praxair, Inc.

(d) “Disability” means a Participant’s inability to engage in any substantial gainful activity because of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous period of six (6) months or longer.

(e) “Market Price” means the mean of the high and low prices of the common stock of the Corporation as reported in the New York Stock Exchange Composite Transactions on the specified date (or on the next preceding day such stock was traded on a stock exchange included in the New York Stock Exchange—Composite Transactions if it was not traded on any such exchange on the specified date).

(f) “Plan” means the 2002 Praxair, Inc. Long Term Incentive Plan, as amended and restated as of February 24, 2004, and as further amended from time to time.

(g) “Retirement” means termination of employment with the Corporation or a Subsidiary or Affiliate, other than for cause, with the right under the Corporation’s Retirement Program to receive a non-actuarially reduced pension immediately upon separation from service. Provided, however, that if the Participant is employed by a foreign Affiliate of the Corporation and/or is not eligible to participate in the

Page 3

Corporation’s Retirement Program, Retirement means termination of employment with the Corporation or a Subsidiary or Affiliate, other than for cause, after (i) attaining age 65, (ii) attaining age 62 and completing at least 10 years of employment with the Corporation, or (iii) having accumulated 85 points, where each year of the Participant’s age and each year of employment with the Corporation count for one point.

10. The Corporation’s grant of this option to the Participant pursuant to this Award, and the Participant’s eligibility for any right, payment, issue or award with respect to this option, are contingent on the Participant’s execution and filing with the Corporation, or the employing Subsidiary, as applicable, of a non-compete agreement in a form, and within a timeframe, acceptable to the Corporation or the employing Subsidiary.

11. Notwithstanding any other provision of this Award, the Committee may, in its sole discretion, cancel, rescind, suspend, withhold, or otherwise limit or restrict this Award, and/or recover any gains realized by the Participant in connection with this Award, in the event of any actions by the Participant determined by the Committee to (a) constitute a conflict of interest with the Corporation, (b) be prejudicial to the Corporation’s interests, or (c) violate any non-compete agreement or obligation of the Participant to the Corporation, any confidentiality agreement or obligation of the Participant to the Corporation, the Corporation’s applicable policies, or the Participant’s terms and conditions of employment.

IN WITNESS WHEREOF, the Corporation has caused this instrument to be executed by its proper officer hereunto duly authorized, as of the day and year first hereinabove written.

PRAXAIR, INC.

By:

Page 4

EX-12.01

RATIO OF EARNINGS TO FIXED CHARGES

Praxair, Inc. and Subsidiaries

Exhibit 12.01

(Dollar amounts in millions, except ratios)	Year Ended December 31,
	2007			2006			2005			2004			2003
Pre-tax income from continuing operations before adjustment for minority interests in consolidated subsidiaries or income or loss from equity investees	$	1,613		$	1,364		$	1,130		$	948		$	771
Capitalized interest		(35	)		(21	)		(11	)		(7	)		(9	)
Depreciation of capitalized interest		15			14			14			13			12
Dividends from less than 50%-owned companies carried at equity		8			9			17			11			19
Adjusted pre-tax income from continuing operations before adjustment for minority interests in consolidated subsidiaries or income or loss from equity investees	$	1,601		$	1,366		$	1,150		$	965		$	793
Fixed charges
Interest on long-term and short-term debt	$	173		$	155		$	163		$	155		$	151
Capitalized interest		35			21			11			7			9
Rental expenses representative of an interest factor		34			32			32			29			31
Preferred stock dividend requirements of consolidated subsidiaries		—			—			—			1			—
Total fixed charges		242			208			206			192			191
Less: preferred stock dividend requirements of consolidated subsidiaries		—			—			—			(1	)		—
Total fixed charges less preferred stock dividends	$	242		$	208		$	206		$	191		$	191
Adjusted pre-tax income from continuing operations before adjustment for minority interests in consolidated subsidiaries or income or loss from equity investees plus total fixed charges less preferred stock dividends	$	1,843		$	1,574		$	1,356		$	1,157		$	984
Less: preferred stock dividend requirements of consolidated subsidiaries		—			—			—			(1	)		—
Total earnings less preferred stock dividends	$	1,843		$	1,574		$	1,356		$	1,156		$	984
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS		7.6			7.6			6.6			6.0			5.2
RATIO OF EARNINGS TO FIXED CHARGES		7.6			7.6			6.6			6.1			5.2

EX-13.01

Exhibit 13.01

FINANCIAL TABLE OF CONTENTS

AUDITED CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Statements of Income	26
Consolidated Balance Sheets	27
Consolidated Statements of Cash Flows	28
Consolidated Statements of Shareholders’ Equity	29
MANAGEMENT’S DISCUSSION AND ANALYSIS
Business Overview	30
Executive Summary – Financial Results & Outlook	30
Consolidated Results	31
Segment Discussion	33
Liquidity, Capital Resources and Financial Data	37
Critical Accounting Policies	41
New Accounting Standards	43
Market Risks and Sensitivity Analyses	43
Forward-Looking Statements	44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies	45
Note 2. Change in Accounting Principle	48
Note 3. Acquisitions	48
Note 4. Leases	49
Note 5. Income Taxes	49
Note 6. Earnings per Share	52
Note 7. Supplemental Information	52
Note 8. Property, Plant and Equipment – Net	54
Note 9. Goodwill	54
Note 10. Other Intangible Assets	55
Note 11. Debt	56
Note 12. Financial Instruments	57
Note 13. Shareholders’ Equity	57
Note 14. Preferred Stock	58
Note 15. Share-Based Compensation	58
Note 16. Retirement Programs	60
Note 17. Commitments and Contingencies	65
Note 18. Segment Information	67
Note 19. Quarterly Data	69
MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS	70
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING	70
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	71
FIVE-YEAR FINANCIAL SUMMARY	72
NON-GAAP FINANCIAL MEASURES	73
INVESTOR INFORMATION	75

25

CONSOLIDATED STATEMENTS OF INCOME PRAXAIR, INC. AND SUBSIDIARIES

(Dollar amounts in millions, except per share data)
YEAR ENDED DECEMBER 31,	2007			2006			2005
SALES	$	9,402		$	8,324		$	7,656
Cost of sales, exclusive of depreciation and amortization		5,557			4,968			4,641
Selling, general and administrative		1,190			1,086			987
Depreciation and amortization		774			696			665
Research and development		98			87			80
Other income (expenses) – net		3			32			10
OPERATING PROFIT		1,786			1,519			1,293
Interest expense – net		173			155			163
INCOME BEFORE TAXES		1,613			1,364			1,130
Income taxes		419			355			376
		1,194			1,009			754
Minority interests		(43	)		(31	)		(37	)
Income from equity investments		26			10			15
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE		1,177			988			732
Cumulative effect of change in accounting principle (Note 2)		—			—			(6	)
NET INCOME	$	1,177		$	988		$	726
PER SHARE DATA
Basic earnings per share
Income before cumulative effect of change in accounting principle	$	3.69		$	3.05		$	2.26
Cumulative effect of change in accounting principle		—			—			(0.02	)
Net income	$	3.69		$	3.05		$	2.24
Diluted earnings per share
Income before cumulative effect of change in accounting principle	$	3.62		$	3.00		$	2.22
Cumulative effect of change in accounting principle		—			—			(0.02	)
Net income	$	3.62		$	3.00		$	2.20
WEIGHTED AVERAGE SHARES OUTSTANDING (000’S)
Basic shares outstanding		318,997			323,495			323,765
Diluted shares outstanding		324,842			329,293			329,685

The accompanying Notes on pages 45 to 69 are an integral part of these financial statements.

26

CONSOLIDATED BALANCE SHEETS PRAXAIR, INC. AND SUBSIDIARIES

(Dollar amounts in millions, except per share data)
DECEMBER 31,	2007			2006
ASSETS
Cash and cash equivalents	$	17		$	36
Accounts receivable – net		1,723			1,456
Inventories		474			381
Prepaid and other current assets		194			186
TOTAL CURRENT ASSETS		2,408			2,059
Property, plant and equipment – net		7,963			6,694
Equity investments		387			218
Goodwill		1,967			1,613
Other intangible assets – net		134			71
Other long-term assets		523			447
TOTAL ASSETS	$	13,382		$	11,102
LIABILITIES AND EQUITY
Accounts payable	$	818		$	682
Short-term debt		788			130
Current portion of long-term debt		40			56
Accrued taxes		309			295
Other current liabilities		695			595
TOTAL CURRENT LIABILITIES		2,650			1,758
Long-term debt		3,364			2,981
Other long-term liabilities		1,048			931
Deferred credits		857			656
TOTAL LIABILITIES		7,919			6,326
Commitments and contingencies (Note 17)
Minority interests		321			222
Shareholders’ equity
Common stock $0.01 par value, authorized – 800,000,000 shares, issued 2007 – 373,144,668 shares and 2006 – 367,644,882 shares		4			4
Additional paid-in capital		3,074			2,729
Retained earnings		5,325			4,687
Accumulated other comprehensive income (loss)		(672	)		(1,127	)
Less: Treasury stock, at cost (2007 – 57,656,517 shares and 2006 – 46,784,036 shares)		(2,589	)		(1,739	)
TOTAL SHAREHOLDERS’ EQUITY		5,142			4,554
TOTAL LIABILITIES AND EQUITY	$	13,382		$	11,102

The accompanying Notes on pages 45 to 69 are an integral part of these financial statements.

27

CONSOLIDATED STATEMENTS OF CASH FLOWS PRAXAIR, INC. AND SUBSIDIARIES

(Millions of dollars)
YEAR ENDED DECEMBER 31,	2007			2006			2005
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATIONS
Net income	$	1,177		$	988		$	726
Adjustments to reconcile net income to net cash provided by operating activities:
Change in accounting principle (Note 2)		—			—			6
Depreciation and amortization		774			696			665
Deferred income taxes		37			90			200
Share-based compensation		42			42			—
Non-cash charges and other		(18	)		(6	)		1
Working capital
Accounts receivable		(223	)		(90	)		(165	)
Inventories		(71	)		(15	)		(41	)
Prepaid and other current assets		(1	)		1			(23	)
Payables and accruals		116			207			332
Pension contributions		(22	)		(126	)		(140	)
Long-term assets, liabilities and other		147			(35	)		(86	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		1,958			1,752			1,475
INVESTING
Capital expenditures		(1,376	)		(1,100	)		(877	)
Acquisitions (Note 3)		(476	)		(14	)		(44	)
Divestitures and asset sales		39			126			34
NET CASH USED FOR INVESTING ACTIVITIES		(1,813	)		(988	)		(887	)
FINANCING
Short-term debt borrowings (repayments) – net		524			(338	)		(232	)
Long-term debt borrowings		831			490			453
Long-term debt repayments		(560	)		(530	)		(224	)
Issuances of common stock		323			267			242
Purchases of common stock		(959	)		(487	)		(396	)
Cash dividends		(381	)		(323	)		(233	)
Excess tax benefit on stock option exercises		63			29			—
Minority interest transactions and other		(11	)		(13	)		(48	)
NET CASH USED FOR FINANCING ACTIVITIES		(170	)		(905	)		(438	)
Effect of exchange rate changes on cash and cash equivalents		6			4			(2	)
Change in cash and cash equivalents		(19	)		(137	)		148
Cash and cash equivalents, beginning-of-year		36			173			25
Cash and cash equivalents, end-of-year	$	17		$	36		$	173
SUPPLEMENTAL DATA
Taxes paid	$	262		$	190		$	127
Interest paid	$	209		$	168		$	175

The accompanying Notes on pages 45 to 69 are an integral part of these financial statements.

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY PRAXAIR, INC. AND SUBSIDIARIES

(Dollar amounts in millions, except per share data, shares in thousands)	COMMON STOCK		ADDITIONAL PAID-IN CAPITAL	RETAINED EARNINGS	ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (NOTE 7)	TREASURY STOCK		TOTAL
ACTIVITY	SHARES	AMOUNTS				SHARES	AMOUNTS
Balance, December 31, 2004	359,791	$4	$2,314	$3,529	$(1,180)	36,170	$(1,059)	$3,608
Net income				726				726
Translation adjustments					(28)			(28)
Minimum pension liability, net of $25 million taxes					(49)			(49)
Comprehensive income								649
Dividends on common stock ($0.72 per share)				(233)				(233)
Issuances of common stock
For the dividend reinvestment and stock purchase plan	88		4					4
For employee savings and incentive plans	3,834		143			(3,216)	101	244
Purchases of common stock						8,420	(398)	(398)
Tax benefit from stock options			28					28
Balance, December 31, 2005	363,713	$4	$2,489	$4,022	$(1,257)	41,374	$(1,356)	$3,902
Net income				988				988
Translation adjustments					175			175
Minimum pension liability, net of $89 million taxes					139			139
Comprehensive income								1,302
Dividends on common stock ($1.00 per share)				(323)				(323)
Issuances of common stock
For the dividend reinvestment and stock purchase plan	91		5					5
For employee savings and incentive plans	3,841		155			(3,113)	107	262
Purchases of common stock						8,523	(490)	(490)
Tax benefit from stock options			38					38
Share-based compensation			42					42
Initial funded status – SFAS No. 158, net of $111 million taxes (Note 16)					(184)			(184)
Balance, December 31, 2006	367,645	$4	$2,729	$4,687	$(1,127)	46,784	$(1,739)	$4,554
Net income				1,177				1,177
Translation adjustments					438			438
Derivative instruments					1			1
Funded status – retirement obligations, net of $11 million taxes (Note 16)					16			16
Comprehensive income								1,632
FIN 48 initial adoption (Note 5)				(158)				(158)
Dividends on common stock ( $1.20 per share)				(381)				(381)
Issuances of common stock
For the dividend reinvestment and stock purchase plan	82		6					6
For employee savings and incentive plans	5,418		220			(2,483)	103	323
Purchases of common stock						13,356	(953)	(953)
Tax benefit from stock options			77					77
Share – based compensation			42					42
Balance, December 31, 2007	373,145	$4	$3,074	$5,325	$(672)	57,657	$(2,589)	$5,142

The accompanying Notes on pages 45 to 69 are an integral part of these financial statements.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

BUSINESS OVERVIEW

Praxair is the largest industrial gases supplier in North and South America, is rapidly growing in Asia, and has strong, well-established businesses in Europe. The company’s primary products are oxygen, hydrogen, nitrogen, argon, carbon dioxide, helium, electronic gases and a wide range of specialty gases. Praxair Surface Technologies supplies high-performance coatings that protect metal parts from wear, corrosion and high heat. In 2007, 94% of sales were generated in four regional segments (North America, Europe, South America, and Asia) primarily from the sale of industrial gases. The Surface technologies segment generated the remaining 6% of sales.

Praxair serves approximately 25 industries as diverse as healthcare and petroleum refining; computer-chip manufacturing and beverage carbonation; fiber-optics and steel making; and aerospace, chemicals and water treatment. The diversity of end markets creates financial stability for Praxair in varied business cycles.

Praxair focuses its operational and growth strategies on the following 11 core geographies where the company has its strongest market positions and where distribution and production operations allow the company to deliver the highest level of service to its customers at the lowest cost.

NORTH AMERICA	SOUTH AMERICA	EUROPE	ASIA
United States	Brazil	Spain	China
Canada		Italy	India
Mexico		Germany/Benelux	Thailand
			Korea

Praxair manufactures and distributes its products through a network of hundreds of production plants, pipeline complexes, distribution centers and delivery vehicles. Major pipeline complexes are located in the United States, Brazil, Spain and Germany. These networks are a competitive advantage, providing the foundation of reliable product supply to the company’s customer base. The majority of Praxair’s business is conducted through long-term contracts which provide stability in cash flow and the ability to pass through changes in energy costs to customers. The company has significant growth opportunities including: hydrogen for refining; oxygen for healthcare; nitrogen and carbon dioxide for oil and gas production; and high purity gases for the semiconductor manufacturing industry.

EXECUTIVE SUMMARY – FINANCIAL RESULTS & OUTLOOK

Praxair delivered strong financial results in 2007, reporting record sales, earnings and operating cash flow. Sales growth was driven by volume growth and higher pricing. Strong sales growth to the global manufacturing, energy and metals markets came from the start-up of new supply systems and new applications technologies, many of which help Praxair’s customers improve their energy efficiency, reduce environmental emissions, or improve productivity. Operating profit and net income grew at a faster pace than sales primarily as a result of the company’s focus on pricing, fixed-cost management, and productivity programs.

2007 YEAR IN REVIEW

• Sales up 13% to $9,402 million versus $8,324 million in 2006, reflecting strong sales growth from new business and higher pricing. Acquisitions and currency also contributed favorably to sales growth.

• Operating profit of $1,786 million, an 18% increase over $1,519 million in 2006, reflecting growth from new business, higher pricing and cost savings from productivity initiatives.

• Net income of $1,177 million and diluted earnings per share of $3.62.

• Cash flow from operations of $1,958 million, a 12% increase over $1,752 million in 2006.

• Capital expenditures of $1,376 million to support record project backlog; core business acquisitions of $476 million.

2008 OUTLOOK

• Sales growth of 10% to 14% versus 2007.

• Diluted earnings per share in the range of $3.97 to $4.17, including the impact of a pension settlement charge in the first quarter ($11 million after-tax or $0.03 per diluted share, see Note 16 to the consolidated financial statements).

• Effective tax rate in the range of 26% to 28%.

• Capital expenditures of about $1.4 billion.

        The above guidance should be read in conjunction with the section entitled “Forward-Looking Statements” on page 44.

Praxair provides quarterly updates on operating results, material trends that may affect financial performance, and financial earnings guidance via earnings releases and investor teleconferences. These materials are available on the company’s website, www.praxair.com, but are not incorporated herein.

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CONSOLIDATED RESULTS

The following table provides summary data for 2007, 2006, and 2005:

(Millions of dollars)										VARIANCE
YEAR ENDED DECEMBER 31,	2007			2006			2005			2007 VS. 2006		2006 VS. 2005
Sales	$	9,402		$	8,324		$	7,656		13	%	9	%
Gross margin (a)	$	3,845		$	3,356			3,015		15	%	11	%
As a percent of sales		40.9	%		40.3	%		39.4	%
Selling, general and administrative	$	1,190		$	1,086		$	987		10	%	10	%
As a percent of sales		12.7	%		13.0	%		12.9	%
Depreciation and amortization	$	774		$	696		$	665		11	%	5	%
Other income (expenses) – net	$	3		$	32		$	10
Operating profit	$	1,786		$	1,519		$	1,293		18	%	17	%
Interest expense – net	$	173		$	155		$	163		12	%	(5	%)
Effective tax rate		26.0	%		26.0	%		33.3	%
Income (b)	$	1,177		$	988		$	732		19	%	35	%
Number of employees		27,992			27,042			27,306		4	%	(1	%)

(a) Gross margin excludes depreciation and amortization expense.

(b) 2005 income is before the cumulative effect of a change in accounting principle. It includes a $92 million, or $0.28 per diluted share, income tax charge for the repatriation of foreign earnings pursuant to the American Jobs Creation Act of 2004 and other tax adjustments.

2007 COMPARED WITH 2006

	% CHANGE FROM PRIOR YEAR
SALES	2007		2006
Volume	4	%	4	%
Price	3	%	4	%
Acquisitions/divestitures	2	%	—
Currency	4	%	2	%
Natural gas	—		(1	%)
Total sales change	13	%	9	%

Sales in 2007 increased $1,078 million, or 13%, versus 2006. Sales grew in all geographies, led by growth in Asia and South America from new business and project start-ups, and continued volume growth in North America. Volume growth of 4% reflects strong volumes to the manufacturing, energy, and metals end-markets. Higher pricing contributed 3% to sales growth. Currency appreciation, primarily in Europe and South America, increased sales by 4%. Acquisitions and divestitures contributed 2%. The pass-through of natural gas costs to on-site hydrogen customers was neutral for the year.

Gross margin in 2007 improved $489 million, or 15%, versus 2006. The increases in the gross margin percentage to 40.9% was due primarily to higher pricing and cost efficiency and productivity programs which outpaced underlying inflationary cost pressures.

Selling, general and administrative (SG&A) expenses in 2007 were $1,190 million, or 12.7% of sales, versus $1,086 million, or 13.0% of sales, for 2006. The decrease in SG&A as a percentage of sales was due to realized benefits from productivity initiatives.

Depreciation and amortization expense in 2007 increased $78 million, or 11%, versus 2006. The increase was principally due to new plant start-ups and currency effects.

Other income (expenses) – net in 2007 was a $3-million benefit versus a $32-million benefit in 2006. See Note 7 to the consolidated financial statements for a summary of the major components of Other income (expense) – net.

Operating profit in 2007 increased $267 million, or 18%, versus 2006. The increase was principally driven by new business, higher pricing, and the continued impact of focused productivity initiatives.

Interest expense – net in 2007 increased $18 million, or 12%, versus 2006 as a result of higher debt balances primarily used to finance acquisitions and common stock repurchases. The increase in interest incurred on outstanding debt was partially reduced by interest capitalized relating to higher capital expenditures.

The effective income tax rate for 2007 and 2006 was 26%.

At December 31, 2007, minority interests consisted principally of minority shareholders’ investments in Asia (primarily in China and India), Europe (primarily in Italy), and North America (primarily within Praxair Distribution). The increase in minority interests of $12 million in 2007 was primarily due to increased minority interest income in Italy and the formation of a new majority-owned packaged gas distribution subsidiary with GT&S, Inc. (see Note 3 to the consolidated financial statements).

Praxair’s significant equity investments are in Italy, Norway, the United States and China. The company’s share of net income from equity investments increased $16 million

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in 2007 primarily related to higher earnings in its investments in Italy and China.

Income in 2007 increased $189 million, or 19%, versus 2006. Operating profit growth was the primary driver of the net income improvement.

The number of employees at December 31, 2007 was 27,992, an increase of 950 employees from December 31, 2006, primarily due to acquisitions completed in 2007.

2006 COMPARED WITH 2005

Sales in 2006 increased $668 million, or 9%, versus 2005. Underlying sales growth was 10%, excluding the impact of lower natural gas costs passed through in hydrogen prices which decreased sales by $87 million, or 1%, with a minimum impact in operating profit. Sales grew year over year from volume growth in all geographic regions and higher overall pricing. Volume growth of 4% was driven by new business activity in Asia, North America and South America in the manufacturing, electronics, and metals end-markets. Price increases of 4% were predominantly realized in North America and South America due to pricing actions and the pass-through of higher power costs and surcharges. The impacts of currency, primarily in South America, Canada and Asia, favorably impacted sales growth by 2%.

Gross margin in 2006 improved $341 million, or 11%, versus 2005. The 90 basis point increase in the gross margin percentage to 40.3% was primarily due to a larger proportion of growth in atmospheric gases sales which have higher average gross margins versus hydrogen sales, realized price increases and cost reduction programs which continued to outpace underlying inflationary cost pressures.

Selling, general and administrative expenses in 2006 were $1,086 million, or 13.0% of sales, versus $987 million, or 12.9% of sales, for 2005. 2006 included stock option expense of $39 million versus 2005 which did not include stock option expense. Including pro forma stock option expense of $37 million in 2005, selling, general and administrative expenses were 13.4% of sales. The underlying decrease in selling, general and administrative expense as a percentage of sales was due to realized benefits from the company’s focus on fixed-cost management and productivity initiatives.

Depreciation and amortization expense in 2006 increased $31 million, or 5%, versus 2005. The increase was principally due to higher capital spending and currency effects.

Other income (expenses) – net in 2006 was a $32-million benefit compared to a $10-million benefit in 2005. See Note 7 to the consolidated financial statements for a summary of the major components of Other income (expenses) – net.

Operating profit in 2006 increased $226 million, or 17%, versus 2005. Stock option expense reduced operating profit by $42 million in 2006. Including pro forma stock option expense of $40 million in 2005, underlying operating profit increased $266 million, or 21%. Increased sales volumes, pricing and the continued impact of productivity programs were the primary drivers of growth.

Interest expense – net in 2006 decreased $8 million, or 5%, versus 2005 due to the capitalization of interest related to higher capital expenditures on the company’s backlog of projects which are expected to come on-stream over the next three years.

The effective income tax rate for 2006 was 26.0% versus 33.3% in 2005. 2005 income taxes included an income tax charge of $92 million for the repatriation of foreign earnings and other tax adjustments, and a net $9 million income tax benefit in Europe principally related to a tax legislation change (see Note 5 to the consolidated financial statements). Excluding these tax items, the underlying effective tax rate was approximately 26% in 2005.

At December 31, 2006, minority interests consisted principally of minority shareholders’ investments in Asia (primarily in China and India), Europe (primarily in Italy) and North America (primarily within Praxair Distribution). The decrease in minority interests of $6 million in 2006 was primarily in Italy.

Praxair’s significant equity investments are in Italy, the United States and China. The company’s share of net income from corporate equity investments decreased $5 million in 2006 primarily due to a decrease in Italy and the divestiture of a Turkish joint venture in July 2006.

Income in 2006 increased $256 million, or 35%, from 2005. Stock option expense reduced income by $28 million in 2006. Income in 2005 included the impact of the $92 million income tax charge. Excluding the impact of the income tax charge in 2005 and including pro forma stock option expense of $26 million for 2005, income increased $190 million, or 24%. Operating profit growth was the primary driver of the income improvement.

The number of employees at December 31, 2006 was 27,042, reflecting a decrease of 264 employees from December 31, 2005, primarily due to the divestiture of the aviation service business.

CHANGE IN ACCOUNTING PRINCIPLE

In 2005, Praxair completed its assessment of conditional asset retirement obligations required for the adoption of FASB Interpretation No. (FIN) 47, “Accounting for Conditional Asset Retirement Obligations.” The assessment resulted in the recognition obligations for assets currently in use. As a result,

32

a $6 million non-cash transition charge to earnings was recorded as a cumulative effect of a change in accounting principle. See Note 2 to the consolidated financial statements.

RELATED PARTY TRANSACTIONS

The company’s related parties are primarily unconsolidated equity affiliates. The company did not engage in any material transactions involving related parties that included terms or other aspects that differ from those which would be negotiated with independent parties.

ENVIRONMENTAL MATTERS

Praxair’s principal operations relate to the production and distribution of atmospheric and other industrial gases, which historically have not had a significant impact on the environment. However, worldwide costs relating to environmental protection may continue to grow due to increasingly stringent laws and regulations, and Praxair’s ongoing commitment to rigorous internal standards.

Climate Change

There is increasing political attention being paid to greenhouse gas emissions. In the United States, laws regulating such emissions have been enacted in California and New Jersey, and bills are being considered in other states. Regional state initiatives have been implemented that will regulate greenhouse gas emissions from fossil-fuel-driven power plants and some federal legislative proposals also focus on such power plants. As a large user of electricity, Praxair is aware of potential cost implications that may arise from such regulatory controls. However, Praxair’s customer contracts routinely provide rights to recover increased electricity costs incurred by Praxair.

Hydrogen production plants have been identified under California law as a source of carbon dioxide emissions and these plants may become subject to proposed federal climate-change legislation. Hydrogen is essential to refineries which use it to remove sulfur from transportation fuels in order to meet ambient air quality standards. It is possible that limits or offset requirements may be applied to such plants’ carbon dioxide emissions at some future time, but it is premature to judge the impact of prospective legislative or regulatory proposals or to try to quantify potential costs to the company.

Regulation of greenhouse gas emissions may also provide Praxair with business opportunities. Praxair continues to develop new applications technologies that help its customers lower energy consumption and lower emissions in their own processes.

Costs Relating to the Protection of the Environment

Environmental protection costs in 2007 included approximately $16 million in capital expenditures and $22 million of expenses. Environmental protection expenditures were approximately $2 million higher in 2007 versus 2006 primarily due to increases in capital projects and increased compliance costs. Praxair anticipates that future annual environmental protection expenditures will be similar to 2007, subject to any significant changes in existing laws and regulations. Based on historical results and current estimates, management does not believe that environmental expenditures will have a material adverse effect on the consolidated financial position or on the consolidated results of operations or cash flows in any given year.

LEGAL PROCEEDINGS

See Note 17 to the consolidated financial statements for information concerning legal proceedings.

SEGMENT DISCUSSION

The following summary of sales and operating profit by segment provides a basis for the discussion that follows (for additional information concerning Praxair’s segments, see Note 18 to the consolidated financial statements):

(Millions of dollars)							VARIANCE
YEAR ENDED DECEMBER 31,	2007		2006		2005		2007 VS. 2006		2006 VS. 2005
SALES
North America	$	5,185	$	4,696	$	4,429	10	%	6	%
Europe		1,345		1,163		1,088	16	%	7	%
South America		1,604		1,348		1,123	19	%	20	%
Asia		746		636		543	17	%	17	%
Surface technologies		522		481		473	9	%	2	%
	$	9,402	$	8,324	$	7,656	13	%	9	%
OPERATING PROFIT
North America	$	947	$	822	$	685	15	%	20	%
Europe		315		266		263	18	%	1	%
South America		311		252		202	23	%	25	%
Asia		121		111		95	9	%	17	%
Surface technologies		92		68		48	35	%	42	%
	$	1,786	$	1,519	$	1,293	18	%	17	%

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NORTH AMERICA

	% CHANGE FROM PRIOR YEAR
SALES	2007		2006
Volume	3	%	2	%
Price	3	%	5	%
Acquisitions/divestitures	3	%	—
Currency	1	%	1	%
Natural gas	—		(2	%)
Total North America sales change	10	%	6	%

The North America segment includes Praxair’s industrial and packaged gases operations in the U.S., Canada and Mexico.

Sales for 2007 increased $489 million, or 10%, versus 2006. Higher pricing increased sales by 3% due to pricing actions to recover higher costs. Volume growth was 3% due to higher on-site, merchant liquid and packaged gases volumes primarily to the energy and general manufacturing end-markets. Higher sales to the healthcare, electronics and food and beverage markets also contributed to volume growth. Currency appreciation in Canada contributed 1% to sales. Acquisitions contributed 3% to sales. The pass-through of natural gas costs to on-site hydrogen customers was neutral to sales for the year.

Operating profit for 2007 increased $125 million, or 15%, versus 2006. Volume growth, realized price increases and the continued impact of cost-reduction programs were the primary drivers of the strong operating profit growth.

During 2007, Praxair acquired Linde AG’s industrial gas business in Mexico, Mittler Supply, Inc., an independent packaged gas distributor with operations across the midwestern United States, and completed the acquisition of several smaller packaged gas distributors in North America. In addition, Praxair formed a new majority-owned packaged gas distribution subsidiary with GT&S, Inc. (see Note 3 to the consolidated financial statements).

Sales for 2006 increased $267 million, or 6%, versus 2005. Underlying sales growth was 8% excluding the impact of lower natural gas costs passed through in hydrogen prices which decreased sales by $87 million, or 2%, with a minimal impact on operating profit. Pricing increased sales by 5% due to the contractual pass-through of higher power costs to on-site customers, surcharges for higher power and transportation fuel costs for merchant and packaged gases, and the impact of general pricing actions. Volume contributed to 2% growth reflecting strong sales to the metals, manufacturing and electronics end-markets which was offset by lower energy market on-site volumes due to a customer outage on the U.S. Gulf Coast. Currency contributed 1% to sales growth.

Operating profit in 2006 increased $137 million, or 20%, versus 2005. 2006 included $24 million of stock option expense. Including pro forma stock option expense of $23 million in 2005, underlying operating profit increased $160 million, or 24%. Increased sales volumes to the metals, electronics and manufacturing markets and productivity programs were the primary drivers to the significant operating profit growth.

EUROPE

	% CHANGE FROM PRIOR YEAR
SALES	2007		2006
Volume	4	%	4	%
Price	3	%	3	%
Currency	9	%	—
Total Europe sales change	16	%	7	%

Praxair’s European industrial gases business is primarily in Italy, Spain, Germany and the Benelux region.

Sales for 2007 increased $182 million, or 16%, versus 2006. Volume growth of 4% was due to new business in Spain and Germany and strong homecare and packaged gas sales in Spain. Realized price increases of 3% included the pass-through of higher energy and power costs. Currency appreciation contributed 9% to sales growth.

Operating profit for 2007 increased $49 million, or 18%, versus 2006. Operating profit growth was driven by increased sales volumes, the continued impact of cost-reduction programs and currency appreciation.

In November 2007, Praxair acquired a 50% interest in the industrial gases business of Yara International ASA of Norway. This joint venture, Yara Praxair AS, is accounted for as an equity investment in the consolidated financial statements. Also, in August 2007, Praxair reached an agreement to sell its majority interest in Maxima Air Separation Center Ltd. with operations in Israel. In 2007, this business had sales of $27 million. Praxair anticipates the sale to close in 2008.

Sales for 2006 increased $75 million, or 7%, versus 2005 due to sales volume growth of 4% and 3% higher pricing. Volume growth was due to strong on-site and merchant demand in Germany, Spain, Italy and Western Europe in the manufacturing and metals markets as well as in Spain’s homecare business.

Operating profit for 2006 increased $3 million, or 1%, versus 2005. 2006 included $5 million of stock option expense. Including pro forma stock option expense of $4 million in 2005, underlying operating profit increased $7 million, or 3%. The underlying increase was due to productivity and cost reduction initiatives and pricing which outpaced inflationary pressures.

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SOUTH AMERICA

	% CHANGE FROM PRIOR YEAR
SALES	2007		2006
Volume	6	%	5	%
Price	6	%	4	%
Currency	10	%	9	%
Equipment sale	(3	%)	2	%
Total South America sales change	19	%	20	%

Praxair’s South American industrial gases operations are conducted by its subsidiary, White Martins Gases Industriais Ltda. (White Martins), the largest industrial gases company in Brazil. White Martins also manages Praxair’s operations in Argentina, Bolivia, Chile, Colombia, Paraguay, Peru, Uruguay and Venezuela.

Sales for 2007 increased $256 million, or 19%, versus 2006. 2006 included an equipment sale to a Venezuela customer. Excluding the equipment sale in 2006 and currency appreciation, sales increased 12%, primarily due to higher sales in the manufacturing, metals and food and beverage markets and realized price increases.

Operating profit in 2007 increased $59 million, or 23%, versus 2006. Increased volumes, the continued impact of cost-reduction programs, and higher pricing, which outpaced inflationary pressures, all contributed to operating profit growth. Currency also contributed to operating profit growth in 2007.

Sales for 2006 increased $225 million, or 20%, versus 2005. The favorable impact of currency increased sales by 9%. Excluding the impact of currency, sales grew 11% primarily due to higher volumes due to new plant start-ups and increased sales to the metals, manufacturing and healthcare markets. An equipment sale to a Venezuela customer contributed 2% to sales growth.

Operating profit in 2006 increased $50 million, or 25%, versus 2005. 2006 included $6 million of stock option expense. Including pro forma stock option expense of $5 million in 2005, underlying operating profit increased $55 million, or 28%. Increased volumes and cost-reduction programs outpaced inflationary pressures contributing 8% and 17% to operating profit growth, respectively. Currency also contributed to operating profit growth in 2006.

ASIA

	% CHANGE FROM PRIOR YEAR
SALES	2007		2006
Volume	11	%	15	%
Currency	6	%	2	%
Total Asia sales change	17	%	17	%

The Asia segment includes Praxair’s industrial gases operations in China, India, Korea and Thailand, with smaller operations in Japan, Malaysia and Taiwan.

Sales for 2007 increased $110 million, or 17%, versus 2006. Excluding the impact of currency appreciation, sales increased 11% due to strong sales to the electronics, metals and manufacturing markets in China, India and Korea.

Operating profit for 2007 increased $10 million, or 9%, versus 2006. Increased sales volumes and productivity initiatives were the primary drivers of operating profit growth partially offset by increased operating costs due to the ramp-up in staffing to support new projects expected to start up over the next several years.

Sales for 2006 increased $93 million, or 17%, versus 2005. Sales growth was principally due to new plant start-ups and strong volumes of gases and materials to electronics customers as demand from the semiconductor and LCD markets was strong. Higher sales to the metals markets in China and India also contributed to volume growth. Pricing was neutral as favorable pricing trends in atmospheric gases were offset by lower pricing for electronics specialty gases and materials. Favorable currency movements improved sales by 2%.

Operating profit for 2006 increased $16 million, or 17%, versus 2005. 2006 included $4 million of stock option expense. Including pro forma stock option expense of $4 million in 2005, underlying operating profit increased $20 million, or 22%. Increased sales volumes and productivity initiatives were the primary drivers of operating profit growth.

SURFACE TECHNOLOGIES

	% CHANGE FROM PRIOR YEAR
SALES	2007		2006
Volume/price	11	%	9	%
Acquisitions/divestiture	(7	%)	(7	%)
Currency	5	%	—
Total Surface technologies sales change	9	%	2	%

Surface technologies provides high-performance coatings and thermal-spray powders in the U.S. and Europe, with smaller operations in Asia and Brazil.

Sales for 2007 increased $41 million, or 9%, versus 2006. Sales increased 16% excluding the impact of the divestiture of its aviation services business in July 2006. The strong sales growth was primarily due to higher volumes of industrial coatings for power turbines and OEM aircraft engine parts and realized price increases. Currency appreciation, primarily in Europe, contributed 5% to sales growth.

Operating profit for 2007 increased $24 million, or 35%, versus 2006. 2006 included a gain of $7 million from the aviation services divestiture. Excluding the gain from the aviation services divestiture in 2006, underlying operating profit increased $31 million, or 51%. The increase was principally driven by volume growth as well as the favorable benefits of ongoing cost reduction actions and pricing actions to offset increasing raw material costs.

In July 2006, Praxair completed the sale of its aviation services business, which contributed full year 2005 sales of approximately $67 million to the Surface technologies segment.

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Sales for 2006 increased $8 million, or 2%, versus 2005. Excluding the impact of the aviation services divestiture in the third quarter, underlying sales increased 9% for the year. Volume growth of 4% was driven by higher coatings volumes for OEM aircraft engine parts, industrial power turbines in the U.S. and Europe and oil field service components. Realized price increases contributed 5% to sales growth.

Operating profit for 2006 increased $20 million, or 42%, versus 2005. 2006 included a gain of $7 million from the aviation services divestiture and $3 million of stock option expense. Excluding the gain on the sale of a business in 2006 and including pro forma stock option expense of $4 million in 2005, underlying operating profit increased $17 million, or 39%. The increase was principally driven by higher pricing and volume growth as well as the favorable benefits of ongoing cost reduction actions.

CURRENCY

The results of Praxair’s non-U.S. operations are translated to the company’s reporting currency, the U.S. dollar, from the functional currencies used in the countries in which the company operates. For most foreign operations, Praxair uses the local currency as its functional currency. There is inherent variability and unpredictability in the relationship of these functional currencies to the U.S. dollar and such currency movements may materially impact Praxair’s results of operations in any given period.

To help understand the reported results, the following is a summary of the significant currencies underlying Praxair’s consolidated results and the exchange rates used to translate the financial statements (rates of exchange expressed in units of local currency per U.S. dollar):

CURRENCY	PERCENT OF 2007 CONSOLIDATED SALES (a)		INCOME STATEMENT			BALANCE SHEET
			AVERAGE YEAR ENDED DECEMBER 31,			DECEMBER 31,
			2007	2006	2005	2007	2006
Brazilian real	15	%	1.94	2.17	2.43	1.77	2.14
European euro	13	%	0.73	0.80	0.80	0.69	0.76
Canadian dollar	9	%	1.08	1.14	1.21	0.98	1.16
Mexican peso	5	%	10.96	10.91	10.96	10.87	10.88
Chinese RMB	2	%	7.63	7.98	8.20	7.31	7.81
Indian rupee	2	%	41.48	45.38	44.02	39.44	44.38
Korean won	2	%	930	959	1,027	941	930
Argentinean peso	1	%	3.12	3.08	2.92	3.15	3.06
Venezuelan bolivar	1	%	2,150	2,150	2,107	2,150	2,150

(a) Certain Surface technologies segment sales are included in European and Brazilian sales.

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LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL DATA

(Millions of dollars)
YEAR ENDED DECEMBER 31,	2007			2006			2005
NET CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net income plus depreciation and amortization and change in accounting principle	$	1,951		$	1,684		$	1,397
Working capital		(179	)		103			103
Pension contributions		(22	)		(126	)		(140	)
Other – net		208			91			115
Total provided by operating activities	$	1,958		$	1,752		$	1,475
INVESTING ACTIVITIES
Capital expenditures	$	(1,376	)	$	(1,100	)	$	(877	)
Acquisitions		(476	)		(14	)		(44	)
Divestitures and asset sales		39			126			34
Total used for investing	$	(1,813	)	$	(988	)	$	(887	)
FINANCING ACTIVITIES
Debt increases (reductions) – net	$	795		$	(378	)	$	(3	)
Issuances (purchases) of stock – net		(636	)		(220	)		(154	)
Cash dividends		(381	)		(323	)		(233	)
Excess tax benefit on stock option exercises		63			29			—
Minority transactions and other		(11	)		(13	)		(48	)
Total used for financing	$	(170	)	$	(905	)	$	(438	)
OTHER FINANCIAL DATA (a)
Debt-to-capital ratio		43.4	%		39.9	%		45.6	%
After-tax return on capital		15.3	%		14.6	%		12.8	%

(a) Non-GAAP measures. See the Non-GAAP Financial Measures on page 73 for definitions and reconciliations to reported amounts.

CASH FLOW FROM OPERATIONS

2007 COMPARED WITH 2006

Cash flow from operations increased $206 million to $1,958 million in 2007 from $1,752 million in 2006. The increase was principally a result of higher net income and lower pension contributions compared with 2006, partially offset by working capital growth related to the strong sales increase and increased income tax payments.

Cash Flow From Operations

(Millions of dollars)

2006 COMPARED WITH 2005

Cash flow from operations increased $277 million to $1,752 million in 2006 from $1,475 million in 2005. The growth is a result of the strong cash flow generated from the improved operating profits on higher sales and continued focus on the management of working capital which grew at a slower pace than sales. Pension contributions were $126 million in 2006.

INVESTING

2007 COMPARED WITH 2006

Net cash used for investing activities of $1,813 million in 2007 increased $825 million versus 2006. The increase was primarily due to higher capital expenditures and acquisitions.

Capital Expenditures

(Millions of dollars)

(a) $983 million includes the purchase of previously leased assets for $339 million ($644 million excluding leased asset purchases).

Capital expenditures in 2007 were $1,376 million, an increase of $276 million from 2006. This increase reflects new investment in customer on-site supply systems supported by long-term customer contracts primarily in North America, South America and Asia.

Acquisition expenditures in 2007 were $476 million, an increase of $462 million from 2006 levels primarily due to the acquisitions of

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Linde AG’s industrial gas business in Mexico and Mittler Supply Inc., an independent packaged gas distributor in the United States in the first quarter of 2007, and the acquisition of a 50% interest in the industrial gas business of Yara International ASA of Norway in the fourth quarter of 2007 (see Note 3 to the consolidated financial statements).

Divestitures and asset sales in 2007 totaled $39 million, a decrease of $87 million from 2006. 2006 included the proceeds from the divestiture of the aviation services business and a Turkish joint venture.

On a worldwide basis, capital expenditures for 2008 are expected to be about $1,400 million. By region, over half of forecasted capital expenditures will be for projects in North America, the largest of which are energy-related. The second largest region for investment is Asia with a concentration of projects in China, India and Korea primarily to fund supply systems for customers in the electronics, metals and chemicals markets. In addition, Praxair will also be investing in a number of growth projects in South America.

2006 COMPARED WITH 2005

Net cash used for investing activities of $988 million in 2006 increased $101 million versus 2005. The increase was largely due to $223 million of higher capital expenditures in 2006 partially offset by increased proceeds from divestitures and asset sales in 2006.

Capital expenditures in 2006 were $1,100 million, an increase of $223 million from 2005. This increase reflects investments in new projects primarily in North America and Asia which will come on-stream over the next three years.

Acquisition expenditures in 2006 were $14 million, a decrease of $30 million from 2005 levels.

Divestitures and asset sales in 2006 totaled $126 million, an increase of $92 million from 2005, primarily due to cash received from the divestiture of the aviation services business and a Turkish joint venture in 2006.

FINANCING

Praxair’s financing strategy is to secure long-term committed funding at attractive interest rates by issuing U.S. public notes and debentures and commercial paper backed by a standby long-term bank credit agreement. Its international operations are funded through a combination of local borrowing and inter-company funding to minimize the total cost of funds and to manage and centralize currency exchange exposures. As deemed necessary, Praxair manages its exposure to interest-rate changes through the use of financial derivatives(see Note 12 to the consolidated financial statements and the section entitled “Market Risks and Sensitivity Analyses” on page 43). The current United States credit environment has not had, and is not expected to have, a significant adverse impact on liquidity.

Debt-to-Capital Ratio

On July 25, 2007, the company’s board of directors approved a $1 billion share repurchase program authorizing the company to repurchase shares from time to time on the open market or through negotiated transactions, subject to market and business conditions. Share repurchases under this program will be financed by available cash and debt. As of December 31, 2007, $545 million of common stock repurchases had been completed under this program.

At December 31, 2007, Praxair’s total debt outstanding was $4,192 million, $1,025 million higher than $3,167 million at December 31, 2006. The increase in debt was primarily to finance acquisitions, capital expenditures and common stock repurchases during 2007. The December 31, 2007 debt balance includes $3,083 million in public securities and $1,109 million representing primarily worldwide bank borrowings. At December 31, 2007, Praxair was in compliance with its borrowing covenants and its global effective borrowing rate was approximately 6%. See Note 11 to the consolidated financial statements for additional information on the company’s indebtedness.

Cash used for financing activities was $170 million in 2007 compared to $905 million in 2006. This decrease was primarily due to net debt borrowings of $795 million offset by increased common stock repurchases in connection with the Company’s announced $1 billion share repurchase program. Also, dividend payments increased $58 million to $1.20 per share compared to $1.00 per share in 2006, an increase of 20%.

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OTHER FINANCIAL DATA

The following discussion includes non-GAAP measures that may not be comparable to similar definitions used by other companies. Praxair believes that its debt-to-capital ratio is appropriate for measuring its financial leverage. The company believes that its after-tax return on invested capital ratio is an appropriate measure for judging performance as it reflects the approximate after-tax profit earned as a percentage of investments by all parties in the business (debt, minority interests and shareholders’ equity). See the Non-GAAP Financial Measures on page 73 for definitions and reconciliation of these two non-GAAP measures to reported amounts.

Praxair’s debt-to-capital ratio increased to 43.4% at December 31, 2007 versus 39.9% at December 31, 2006. The increase is attributed to higher debt levels slightly offset by an increase in shareholders’ equity due to 2007 net income.

After-tax return on capital increased to 15.3% at December 31, 2007 versus 14.6% at December 31, 2006 due primarily to strong earnings growth partially offset by an increase in average capital year over year.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

The following table sets forth Praxair’s material contractual obligations and other commercial commitments as of December 31, 2007:

(Million of dollars)	DUE OR EXPIRING BY DECEMBER 31,
	2008		2009		2010		2011		2012		THEREAFTER	TOTAL
Debt obligations
Debt and capitalized lease maturities	$	828	$	686	$	23	$	5	$	523	$2,127	$	4,192
Contractual interest on long-term debt		149		137		107		105		81	200		779
Operating leases		84		67		54		36		27	71		339
Retirement obligations		84		35		36		36		37	190		418
Unconditional purchase obligations		361		220		155		135		110	273		1,254
Construction commitments		834		476		76		—		—	—		1,386
Guarantees and other		95		59		68		—		—	27		249
Total Contractual Obligations	$	2,435	$	1,680	$	519	$	317	$	778	$2,888	$	8,617

Debt and capitalized lease maturities of $4,192 million are more fully described in Note 11 to the consolidated financial statements and are included on the company’s balance sheet as long- and short-term liabilities. $550 million of notes due in 2008 and $100 million of commercial paper are reflected in thereafter due to the company’s intent and ability to refinance this debt on a long-term basis.

Contractual interest on long-term debt of $779 million represents interest the company is contracted to pay on outstanding long-term debt and capital lease obligations, calculated on a basis consistent with planned debt maturities. At December 31, 2007, Praxair had fixed-rate debt of $2,552 million and floating-rate debt of $1,640 million. The rate assumed for floating-rate debt was the rate in effect at December 31, 2007.

Obligations under operating leases of $339 million represent non-cancelable contractual obligations primarily for manufacturing and distribution equipment and office space. See Note 4 to the consolidated financial statements for further details.

Retirement obligations of $418 million include estimates of pension plan contributions and expected future benefit payments for unfunded pension and postretirement benefits other than pensions (OPEB). Pension plan contributions are forecast through 2008 only. Expected future unfunded pension and OPEB benefit payments are forecast through 2017. Contribution and unfunded benefit payment estimates are based upon current valuation assumptions. Estimates of pension contributions after 2008 and unfunded benefit payments after 2017 are not included in the table because the timing of their resolution cannot be estimated. Retirement obligations are more fully described in Note 16 to the consolidated financial statements.

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Unconditional purchase obligations of $1,254 million represent contractual commitments under various long- and short-term take-or-pay arrangements with suppliers. These obligations are primarily minimum-purchase commitments for helium, electricity, natural gas and feedstock used to produce atmospheric gases, carbon dioxide and hydrogen. During 2007, payments under these contracts totaled $973 million, including $406 million for electricity and $404 million for natural gas. A significant portion of these obligations is passed on to customers through similar take-or-pay contractual arrangements. Purchase obligations that are not passed along to customers do not represent a significant risk to Praxair.

Construction commitments of $1,386 million represent outstanding commitments to customers or suppliers to complete authorized construction projects as of December 31, 2007. A significant portion of Praxair’s capital spending is related to the construction of new production facilities to satisfy customer commitments which may take a year or more to complete. Significant commitments include a large hydrogen plant in northern California to supply Chevron’s Richmond Refinery and a project with Jiangsu SOPO (Group) Co., Ltd in China to build an air separation unit to support their coal gasification project.

Guarantees and other of $249 million include $85 million relating to Praxair’s contingent obligations under guarantees of certain debt of unconsolidated affiliates, $105 million relating to put option agreements with certain affiliated companies and $59 million of various guarantees relating to outstanding receivables and repurchase agreements. Unconsolidated equity investees had total debt of approximately $520 million at December 31, 2007, which was non-recourse to Praxair with the exception of the guaranteed portions described above. The put option agreements are primarily related to majority-owned packaged gas subsidiaries in the United States and give the minority shareholders the right to require Praxair to purchase their shares at a predefined price calculation. Praxair has no financing arrangements with closely-held related parties.

FIN 48 tax liabilities totaling $305 million, including related interests and penalties, are not included in the table because the timing of their resolution cannot be estimated. See Note 5 to the consolidated financial statements for disclosures surrounding uncertain income tax positions under FIN 48.

Also, see Note 17 to the consolidated financial statements for more information concerning commitments and contingencies.

RETIREMENT BENEFITS

The non-cash pension and OPEB funded status liability decreased $27 million to $355 million at December 31, 2007 ($235 million after-tax) from $382 million at December 31, 2006 ($251 million after-tax).

Pension contributions were $22 million in 2007 and $126 million in 2006. Estimates of 2008 contributions are approximately $20 million, all of which is required by funding regulations or laws.

Praxair assumes an expected return on plan assets for 2008 in the U.S. of 8.25%. In 2008, consolidated pension expense is expected to be approximately $59 million, including a settlement charge of $17 million (see Note 16 to the consolidated financial statements) versus $50 million in 2007 and $56 million in 2006.

INSURANCE

Praxair purchases insurance to limit a variety of risks, including those related to workers’ compensation, third-party liability and property. Currently, the company self-retains the first $5 million per occurrence for workers’ compensation and general liability and retains $1 million to $5 million per occurrence for its various properties worldwide. To mitigate its aggregate loss potential above varying retentions, the company purchases insurance coverage from highly rated insurance companies at what it believes are reasonable coverage levels.

At December 31, 2007 and 2006, the company had recorded a total of $43 million and $47 million, respectively, representing an estimate of the retained liability for the ultimate cost of claims incurred and unpaid as of the balance sheet dates. The estimated liability is established using statistical analyses and is based upon historical experience, actuarial assumptions and professional judgment. These estimates are subject to the effects of trends in loss severity and frequency and are subject to a significant degree of inherent variability. If actual claims differ from the company’s estimates, financial results could be impacted.

Praxair recognizes estimated insurance proceeds relating to damages at the time of loss only to the extent of incurred losses. Any insurance recoveries for business interruption and for property damages in excess of the net book value of the property are recognized only when realized.

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CRITICAL ACCOUNTING POLICIES

The policies discussed below are considered by management to be critical to understanding Praxair’s financial statements and accompanying Notes prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP). Their application places significant importance on management’s judgment as a result of the need to make estimates of matters that are inherently uncertain. Praxair’s financial position, results of operations and cash flows could be materially affected if actual results differ from estimates made. These policies are determined by management and have been reviewed by Praxair’s Audit Committee.

DEPRECIABLE LIVES OF PROPERTY, PLANT AND EQUIPMENT

Praxair’s net property, plant and equipment at December 31, 2007 was $7,963 million, representing 60% of the company’s consolidated total assets. Depreciation expense for the year ended December 31, 2007 was $754 million, or 10% of total operating costs. Management judgment is required in the determination of the estimated depreciable lives that are used to calculate the annual depreciation expense and accumulated depreciation.

Property, plant and equipment are recorded at cost and depreciated over the assets’ estimated useful lives on a straight-line basis for financial reporting purposes. The estimated useful life represents the projected period of time that the asset will be productively employed by the company and is determined by management based on many factors, including historical experience with similar assets, technological life cycles, geographic locations and contractual supply relationships with on-site customers. Circumstances and events relating to these assets, such as on-site contract modifications, are monitored to ensure that changes in asset lives or impairments (see “Asset Impairment” below) are identified and prospective depreciation expense or impairment expense is adjusted accordingly. Praxair’s largest asset values relate to cryogenic air-separation production plants with average depreciable lives of 15 years.

Based upon the assets as of December 31, 2007, if depreciable lives of machinery and equipment, on average, were increased or decreased by one year, annual depreciation expense would be decreased by approximately $34 million or increased by approximately $38 million, respectively.

PENSION BENEFITS

Pension benefits represent financial obligations that will be ultimately settled in the future with employees who meet eligibility requirements. Because of the uncertainties involved in estimating the timing and amount of future payments, significant estimates are required to calculate pension expense and liabilities related to the company’s plans. The company utilizes the services of several independent actuaries, whose models are used to facilitate these calculations.

Several key assumptions are used in actuarial models to calculate pension expense and liability amounts recorded in the financial statements. Management believes the three most significant variables in the models are the expected long-term rate of return on plan assets, the discount rate, and the expected rate of compensation increase. The actuarial models also use assumptions for various other factors, including employee turnover, retirement age, and mortality. Praxair management believes the assumptions used in the actuarial calculations are reasonable, reflect the company’s experience and expectations for the future and are within accepted practices in each of the respective geographic locations in which it operates. Actual results in any given year will often differ from actuarial assumptions because of economic and other factors.

The weighted-average expected long-term rates of return on pension plan assets were 8.25% for U.S. plans and 8.70% for international plans for the year ended December 31, 2007 (8.25% and 8.30%, respectively, at December 31, 2006). These rates are determined annually by management based on a weighted average of current and historical market trends, historical and expected portfolio performance and the current and expected portfolio mix of investments. A 0.50% change in these expected long-term rates of return, with all other variables held constant, would change Praxair’s pension expense by approximately $8 million.

The weighted-average discount rates for pension plan liabilities were 6.20% for U.S. plans and 6.85% for international plans at December 31, 2007 (5.88% and 6.00%, respectively, at December 31, 2006). These rates are used to calculate the present value of plan liabilities and are determined annually by management. The discount rate for the U.S. plan is established utilizing a bond matching model provided by the company’s independent actuaries. The portfolio of bonds includes only Moody’s Aa-graded corporate bonds and matches the U.S. plan’s projected cash flows to the spot rates and calculates the single equivalent discount rate which produces the same present value. The discount rates for the international plans are based on market yields for high-quality fixed income investments representing the approximate duration of the

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pension liabilities on the measurement date. A 0.50% change in discount rates, with all other variables held constant, would change Praxair’s pension expense by approximately $10 million and would impact the projected benefit obligation (PBO) by approximately $112 million.

The weighted-average expected rate of compensation increase was 3.50% for U.S. plans and 3.00% for international plans at December 31, 2007 and 2006. The estimated annual compensation increase is determined by management every year and is based on historical trends and market indices. A 0.50% change in the expected rate of compensation increase, with all other variables held constant, would change Praxair’s pension expense by approximately $4 million and would impact the PBO by approximately $23 million.

ASSET IMPAIRMENT

Goodwill

At December 31, 2007, the company had goodwill of $1,967 million, which represents the aggregate of the excess purchase price for acquired businesses over the fair value of the net assets acquired.

The company performs a goodwill impairment test annually in the second quarter or more frequently if events or circumstances indicate that an impairment loss may have been incurred. The impairment test requires that the company estimate and compare the fair value of its reporting units to their carrying value. Fair value is determined through the use of projected future cash flows, multiples of earnings and sales and other factors.

Such analysis requires the use of certain future market assumptions and discount factors, which are subjective in nature. Estimated values can be affected by many factors beyond the company’s control such as business and economic trends, government regulation, and technological changes. Management believes that the assumptions used to determine fair value are appropriate and reasonable. However, changes in circumstances or conditions affecting these assumptions could have a significant impact on the fair value determination, which could then result in a material impairment charge to the company’s results of operations.

See Note 9 to consolidated financial statements for disclosures concerning the carrying value of goodwill.

Property, Plant and Equipment

Property, plant and equipment is tested for impairment whenever events or changes in circumstances indicate that the carrying amount of an individual asset or asset group may not be recoverable. To assess recoverability, the company compares the estimated undiscounted future cash flows expected to be generated from the asset or asset group to the carrying amount of the asset or asset group. If the undiscounted future cash flows are less than the carrying amount of the asset or asset group, an impairment charge reducing the carrying amount to fair value is required. Fair value is determined based on the most appropriate valuation technique, including discounted cash flows. This analysis requires management to make various subjective estimates and assumptions, including the amount of projected future cash flows related to the asset or asset group, the useful life over which cash flows will occur and the asset’s residual value, if any.

INCOME TAXES

At December 31, 2007, Praxair had deferred tax assets of $519 million (net of valuation allowances of $341 million), and deferred tax liabilities of $1,165 million. Income tax expense was $419 million for the year ended December 31, 2007.

Effective January 1 2007, the Company adopted FIN 48 which provides a comprehensive model for the recognition, measurement and disclosure in financial statements of uncertain income tax positions that a Company has taken or expects to take on a tax return (see Notes 1 and 5 to the consolidated financial statements).

In the preparation of consolidated financial statements, Praxair estimates income taxes based on diverse legislative and regulatory structures that exist in various jurisdictions where the company conducts business. Deferred income tax assets and liabilities represent tax benefits or obligations that arise from temporary differences due to differing treatment of certain items for accounting and income tax purposes. Praxair evaluates deferred tax assets each period to ensure that estimated future taxable income will be sufficient in character (e.g. capital gain versus ordinary income treatment), amount and timing to result in their recovery. A valuation allowance is established when management determines that it is more likely than not that a deferred tax asset will not be realized to reduce the assets to their realizable value. Considerable judgments are required in establishing deferred tax valuation allowances and in assessing probable exposures related to tax matters. As events and circumstances change, related reserves and valuation allowances are adjusted to income at that time. Praxair’s tax returns are subject to audit and local taxing authorities could challenge the

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company’s tax positions. The company’s practice is to review tax filing positions by jurisdiction and to record provisions for uncertain income tax provisions as required by FIN 48, including interest and penalties when applicable. Praxair believes it records and/or discloses such potential tax liabilities as appropriate and has reasonably estimated its income tax liabilities and recoverable tax assets. If new information becomes available, adjustments are charged against income at that time. Management does not anticipate that such adjustments would have a material adverse effect on the company’s consolidated financial position or liquidity; however, it is possible that the final outcomes could have a material impact on the company’s reported results of operations.

CONTINGENCIES

In accordance with SFAS No. 5, “Accounting for Contingencies,” the company accrues liabilities for non-income tax contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. If new information becomes available or losses are sustained in excess of recorded amounts, adjustments are charged against income at that time. Management does not anticipate that in the aggregate such losses would have a material adverse effect on the company’s consolidated financial position or liquidity; however, it is possible that the final outcomes could have a material impact on the company’s reported results of operations.

Praxair is subject to various claims, legal proceedings and government investigations that arise from time to time in the ordinary course of business. These actions are based upon alleged environmental, tax, antitrust and personal injury claims, among others (see Note 17 to the consolidated financial statements). Such contingencies are significant and the accounting requires considerable management judgments in analyzing each matter to assess the likely outcome and the need for establishing appropriate liabilities and providing adequate disclosures. Praxair believes it records and/or discloses such potential contingencies as appropriate and has reasonably estimated its liabilities.

NEW ACCOUNTING STANDARDS

See Notes 1 and 2 to the consolidated financial statements for information concerning new accounting standards and the impact of the implementation of these standards on the company’s financial statements.

MARKET RISKS AND SENSITIVITY ANALYSES

Praxair is exposed to market risks relating to fluctuations in interest rates and currency exchange rates. The objective of financial risk management at Praxair is to minimize the negative impact of interest rate and foreign exchange rate fluctuations on the company’s earnings, cash flows and equity.

To manage these risks, Praxair uses various derivative financial instruments, including interest-rate swaps, currency swaps, forward contracts, currency options and commodity contracts. Praxair only uses commonly traded and non-leveraged instruments. These contracts are entered into primarily with major banking institutions thereby minimizing the risk of credit loss. Also, see Notes 1 and 12 to the consolidated financial statements for a more complete description of Praxair’s accounting policies and use of such instruments.

The following discussion presents the sensitivity of the market value, earnings and cash flows of Praxair’s financial instruments to hypothetical changes in interest and exchange rates assuming these changes occurred at December 31, 2007. The range of changes chosen for these discussions reflect Praxair’s view of changes which are reasonably possible over a one-year period. Market values represent the present values of projected future cash flows based on interest rate and exchange rate assumptions.

INTEREST RATE AND DEBT SENSITIVITY ANALYSIS

At December 31, 2007, Praxair had debt totaling $4,192 million ($3,167 million at December 31, 2006). There were no interest-rate swap agreements outstanding at December 31, 2007 and 2006. When considered necessary, interest-rate swaps are entered into as hedges of underlying financial instruments to effectively change the characteristics of the interest rate without actually changing the underlying financial instrument. For fixed-rate instruments, interest-rate changes affect the fair market value but do not impact earnings or cash flows. Conversely, for floating-rate instruments, interest-rate changes generally do not affect the fair market value but impact future earnings and cash flows, assuming other factors are held constant.

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At December 31, 2007, Praxair had fixed-rate debt of $2,552 million and floating-rate debt of $1,640 million, representing 61% and 39%, respectively, of total debt. At December 31, 2006, Praxair had fixed-rate debt of $2,378 million and floating-rate debt of $789 million, representing 75% and 25%, respectively, of total debt. Holding other variables constant (such as foreign exchange rates, swaps and debt levels), a one-percentage-point decrease in interest rates would increase the unrealized fair market value of the fixed-rate debt by approximately $116 million ($84 million in 2006). At December 31, 2007 and 2006, the after-tax earnings and cash flows impact for the subsequent year resulting from a one-percentage-point increase in interest rates would be approximately $11 million and $5 million, respectively, holding other variables constant.

EXCHANGE RATE SENSITIVITY ANALYSIS

Praxair’s exchange-rate exposures result primarily from its investments and ongoing operations in South America (primarily Brazil, Argentina and Colombia), Europe (primarily Italy, Spain and Germany), Canada, Mexico, Asia (primarily China, India, Korea, Malaysia and Thailand) and other business transactions such as the procurement of equipment from foreign sources. Among other techniques, Praxair utilizes foreign exchange forward contracts and options to hedge these exposures. At December 31, 2007, Praxair had $776 million notional amount ($758 million at December 31, 2006) of foreign exchange contracts of which $606 million ($758 million in 2006) were to hedge recorded balance-sheet exposures and $170 million were to hedge anticipated net income (none at December 31, 2006).

Holding other variables constant, if there were a 10% adverse change in foreign-currency exchange rates for the portfolio, the fair market value of foreign-currency contracts outstanding at December 31, 2007 and 2006 would decrease by approximately $8 million and $40 million, respectively, which would be offset by an equal but offsetting gain or loss on the foreign-currency fluctuation of the underlying exposure being hedged.

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 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 tax, environmental, home healthcare and other legislation and government regulation in jurisdictions in which the company operates; the cost and outcomes of investigations, litigation and regulatory proceedings; 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; 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 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 which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations – Praxair, Inc. and its subsidiaries (Praxair or company) comprise one of the largest industrial gases companies worldwide, and the largest in North and South America. Praxair produces, sells and distributes atmospheric, process and specialty gases, and high-performance surface coatings to a diverse group of industries including aerospace, chemicals, electronics, energy, food and beverage, healthcare, manufacturing and metals.

Principles of Consolidation – The consolidated financial statements include the accounts of all significant subsidiaries where control exists and, in limited situations, variable-interest entities where the company is the primary beneficiary. Equity investments generally consist of 20% to 50% owned operations where the company exercises significant influence. Operations less than 20% owned, where the company does not exercise significant influence, are generally carried at cost. Pre-tax income from equity investments that are partnerships or limited-liability corporations (LLC) is included in Other income (expenses) – net with related taxes included in Income taxes. Remaining equity earnings are reported as Income from equity investments, net of income taxes. Partnership and LLC net assets are reported as Equity investments in the balance sheet. Significant inter-company transactions are eliminated and any significant related-party transactions have been disclosed.

Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. While actual results could differ, management believes such estimates to be reasonable.

Revenue Recognition – Revenue is recognized when: a firm sales agreement exists; product is shipped or services are provided to customers; and collectibility of a fixed or determinable sales price is reasonably assured. Sales returns and allowances are not a normal practice in the industry and are de minimis.

A small portion of the company’s revenues relate to long-term construction contracts and are generally recognized using the percentage-of-completion method. Under this method, revenues from sales of major equipment, such as large air-separation facilities, are recognized based primarily on cost incurred to date compared with total estimated cost. Changes to total estimated cost and anticipated losses, if any, are recognized in the period determined.

For contracts that contain multiple products and/or services, amounts assigned to each component are based on its objectively determined fair value, such as the sales price for the component when it is sold separately or competitor prices for similar components.

Certain of the company’s customer contracts qualify for lease accounting treatment under EITF Issue 01-8, “Determining Whether an Arrangement Contains a Lease.” The associated revenue streams are classified as rental revenue and are not significant.

Amounts billed for shipping and handling fees are recorded as sales, generally on FOB destination terms, and costs incurred for shipping and handling are recorded as cost of sales.

Amounts billed for sales and use taxes, value-added taxes, and certain excise and other specific transactional taxes imposed on revenue producing transactions are presented on a net basis and are not included in sales in the consolidated statement of income.

Cash Equivalents – Cash equivalents are considered to be highly liquid securities with original maturities of three months or less.

Inventories – Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for certain U.S. operations and the average-cost method for most other operations.

Property, Plant and Equipment – Net – Property, plant and equipment are carried at cost, net of accumulated depreciation. The company capitalizes interest as part of the cost of constructing major facilities (see Note 7). Depreciation is calculated on the straight-line method based on the estimated useful lives of the assets, which range from 3 years to 40 years (see Note 8). Praxair uses accelerated depreciation methods for tax purposes where appropriate. Maintenance of property, plant and equipment is generally expensed as incurred.

The company performs a test for impairment whenever events or changes in circumstances indicate that the carrying amount of an individual asset or asset group may not be recoverable. Should projected undiscounted future cash flows be less than the carrying amount of the asset or asset group, an impairment charge reducing the carrying amount to fair value is required. Fair value is determined based on the most appropriate valuation technique, including discounted cash flows.

Asset-Retirement Obligations – An asset-retirement obligation is recognized in the period in which sufficient information exists to determine the fair value of the liability with a corresponding increase to the carrying amount of the related property, plant and equipment which is then depreciated over its useful life. The liability is initially measured at discounted fair value and

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then accretion expense is recorded in each subsequent period. The company’s asset-retirement obligations are primarily associated with its on-site long-term supply arrangements where the company has built a facility on land leased from the customer and is obligated to remove the facility at the end of the contract term. The company’s asset-retirement obligations are not material to its financial statements.

Foreign Currency Translation – For most foreign operations, the local currency is the functional currency and translation gains and losses are reported as part of the Accumulated other comprehensive income (loss) component of Shareholders’ equity as a cumulative translation adjustment (see Note 7). For other foreign operations, the U.S. dollar is the functional currency and translation gains and losses are included in income.

Financial Instruments – Praxair enters into various derivative financial instruments to manage its exposure to fluctuating interest and currency exchange rates and energy costs. Such instruments primarily include interest-rate swap agreements; currency swap; forward contracts; currency options; and commodity-swap agreements. These instruments are not entered into for trading purposes. Praxair only uses commonly traded and non-leveraged instruments. There are two types of derivatives the company enters into: hedges of fair-value exposures and hedges of cash-flow exposures. Fair-value exposures relate to recognized assets or liabilities, and firm commitments; while cash-flow exposures relate to the variability of future cash flows associated with recognized assets or liabilities, or forecasted transactions.

When a derivative is executed and hedge accounting is appropriate, it is designated as either a fair-value hedge or a cash-flow hedge. Currently, Praxair designates all interest-rate and commodity-swap agreements as hedges; however, currency contracts are generally not designated as hedges for accounting purposes. All derivatives are linked to an appropriate underlying exposure. On an ongoing basis, the company assesses the hedge effectiveness of all derivatives designated as hedges to determine if they continue to be highly effective in offsetting changes in fair values or cash flows of the underlying hedged items. If it is determined that the hedge is not highly effective, then hedge accounting will be discontinued prospectively.

Changes in the fair value of derivatives designated as fair-value hedges are recognized in earnings as an offset to the change in the fair values of the underlying exposures being hedged. The changes in fair value of derivatives that are designated as cash-flow hedges are deferred in accumulated other comprehensive income (loss) and are recognized in earnings as the underlying hedged transaction occurs. Any ineffectiveness is recognized in earnings immediately. Derivatives that are entered into for risk-management purposes and are not designated as hedges (primarily related to anticipated net income and currency derivatives other than for firm commitments) are recorded at their fair market values and recognized in current earnings.

The company recognizes the changes in the fair value associated with currency contracts as follows: hedges of debt instruments are recorded in interest expense and generally offset the underlying hedged items. Hedges of other balance-sheet exposures, commodity contracts, forecasted transactions, lease obligations, firm commitments and anticipated future net income are recognized in Other income (expenses) – net and generally offset the underlying hedged items. Hedges of net investments in foreign subsidiaries are recognized in the cumulative translation adjustment component of Accumulated other comprehensive income (loss) on the consolidated balance sheet to offset translation gains and losses associated with the hedged net investment.

Praxair uses the following methods and assumptions to estimate the fair value of each class of financial instrument. The fair value of interest-rate swaps and currency-exchange contracts is estimated based on market prices obtained from independent dealer or market quotes. The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues. Due to their nature, the carrying value of cash, short-term investments and short-term debt, receivables and payables approximates fair value.

Goodwill – Acquisitions are accounted for using the purchase method which requires allocation of the purchase price to assets acquired and liabilities assumed based on estimated fair values. Any excess of the purchase price over the fair value of the assets and liabilities acquired is recorded as goodwill (see Note 9). Allocations of the purchase price are based on preliminary estimates and assumptions at the date of acquisition. Allocations are subject to revision based on final information received, including appraisals and other analyses which support underlying estimates.

Goodwill is reviewed annually in the second quarter or more frequently if events or circumstances indicate that an impairment may have occurred. The impairment test requires that the company estimate and compare the fair value of its reporting units to their carrying value. Fair value is determined through the use of projected future cash flows, multiples of earnings and sales and other factors.

Other Intangible Assets – Customer and license/use agreements, non-compete agreements and patents and other intangibles are amortized over the estimated period of benefit (see Note 10). The determination of the estimated period of benefit will be dependent upon the use and underlying characteristics of the intangible asset. Praxair evaluates the recoverability of its

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intangible assets subject to amortization when facts and circumstances indicate that the carrying value of the asset may not be recoverable. If the carrying value is not recoverable, impairment is measured as the amount by which the carrying value exceeds its estimated fair value. Fair value is generally estimated based on either appraised value or other valuation techniques.

Income Taxes – Deferred income taxes are recorded for the temporary differences between the financial statement and tax bases of assets and liabilities using currently enacted tax rates. Valuation allowances are established against deferred tax assets whenever circumstances indicate that it is more likely than not that such assets will not be realized in future periods.

Effective January 1 2007, the company adopted FASB Interpretation No. (FIN) 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement 109”, which provides a comprehensive model for the recognition, measurement and disclosure in financial statements of uncertain income tax positions that a company has taken or expects to take on a tax return. Under FIN 48, the company can recognize the benefit of an income tax position only if it is more likely than not (greater than 50%) that the tax position will be sustained upon tax examination, based solely on the technical merits of the tax position. Otherwise, no benefit can be recognized. The tax benefits recognized are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Additionally, the company accrues interest and related penalties, if applicable, on all tax exposures for which reserves have been established consistent with jurisdictional tax laws. Interest and penalties are classified as income tax expense in the financial statements. See Note 5 for additional information relating to the adoption of FIN 48 and required disclosures.

Prior to 2007, in accordance with SFAS No. 5, the provision for income taxes included probable exposures for tax matters and related interest and penalties when assessed, if applicable.

Retirement Benefits – Most Praxair employees participate in a form of defined benefit or contribution retirement plan, and additionally certain employees are eligible to participate in various post-employment health care and life insurance benefit plans. The cost of such benefits is recognized over the employees’ expected service period to the Company in accordance with the applicable accounting standards. The funded status of the plans is recorded as an asset or liability in the consolidated balance sheets in accordance with SFAS No. 158. Funding of retirement benefits varies and is in accordance with local laws and practices. See Note 16 for additional information relating to retirement programs.

Share-based Compensation – In 2006, the company adopted Statement of Financial Accounting Standard (SFAS) No. 123 (revised 2004), “Share-Based Payment” and related interpretations (SFAS No. 123R) which require the measurement and recognition of compensation expense for all share-based awards to employees and directors based on their fair value. The company has granted share-based awards which consist of stock options, restricted stock and performance-based stock. Share-based compensation expense is generally recognized on a straight-line basis over the stated vesting period. For stock awards granted to full-retirement-eligible employees, compensation expense is recognized over the period from the grant date to the date retirement eligibility is achieved. For performance-based awards, compensation expense is recognized only if it is probable that the performance condition will be achieved.

The company adopted SFAS No. 123R using the modified prospective transition method and, accordingly, prior periods have not been restated to reflect the impact of expensing stock options. Share-based compensation expense is recorded for all new and unvested stock option awards that are expected to vest over the service period beginning on January 1, 2006.

Prior to 2006, the company accounted for share-based awards using the intrinsic value method under Accounting Principles Board Opinion No. 25 (APB 25), “Accounting for Stock Issued to Employees”. Accordingly, prior to 2006, stock option expense was not recognized in net income as the exercise price of options granted was equal to the market value of the stock at the date of grant. Pro forma net income and earnings per share amounts as if stock option expense had been recognized based on fair value for 2005 are provided in Note 15.

See Note 15 for additional disclosures relating to share-based compensation.

RECENTLY ISSUED ACCOUNTING STANDARDS

ACCOUNTING STANDARDS IMPLEMENTED IN 2007

Effective January 1, 2007, the company adopted FIN 48, which clarifies the accounting for uncertainty in income taxes recognized in accordance with FASB Statement No. 109, “Accounting for Income Taxes” (SFAS 109). See Note 5 for information relating to the implementation of this interpretation and other required disclosures pertaining to uncertain tax positions.

ACCOUNTING STANDARDS TO BE IMPLEMENTED

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which provides a single definition of fair value, and requires additional disclosure about the use of fair value to measure assets and liabilities. In February 2008, the FASB issued FASB Staff Position (FSP) No. 157-2 which delays the effective date of SFAS No. 157 until January 1, 2009 for Praxair for all non-financial assets and liabilities, except those that are recognized and disclosed at fair value in the financial statements on a recurring basis. SFAS No. 157 is effective on January 1, 2008 for Praxair for financial assets and liabilities as well as those non-financial assets and liabilities excluded from the deferral above. The company is currently in the process of evaluating the impact of this standard on the consolidated financial statements.

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In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115”. This statement permits companies, at their option, to choose to measure many financial instruments and certain other items at fair value. If the option to use fair value is chosen, the standard requires additional disclosures related to the fair value measurements included in the financial statements. This statement is effective on January 1, 2008 for Praxair and the company is currently in the process of evaluating the impact of this standard on the consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (R), “Business Combinations”, which will change the way the Company accounts for business combinations. The more significant changes under this standard will require: more assets acquired and liabilities assumed to be measured at fair value as of the acquisition date; all acquisition related costs to be expensed; and contingent liabilities to be remeasured at fair value in each reporting period. This standard also requires additional disclosures by the acquirer. This standard is effective on a prospective basis on January 1, 2009 for Praxair and the company is currently in the process of evaluating the impact of this standard on the consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling interests in Consolidated Financial Statements”, which requires noncontrolling interests (currently referred to as minority interests) in subsidiaries to be classified as a separate component of equity in the consolidated financial statements. Also, the amount of net income attributable to the noncontrolling interests will be included in consolidated net income on the face of the statement of income. This standard is effective on January 1, 2009 for Praxair and the company is currently in the process of evaluating the impact of this standard on the consolidated financial statements.

In December 2007, the Emerging Issues Task Force (“EITF”) ratified EITF 07-1, “Accounting for Collaborative Arrangements”. This issue addresses the accounting for collaborative arrangements in which no legal entity is created. The EITF requires revenues and costs under a collaborative arrangement to be reported on a gross basis if the entity is a principal to an arrangement or on a net basis if the entity is an agent and requires specific disclosures for material arrangements. This EITF is effective for Praxair on January 1, 2009. Praxair is currently in the process of evaluating the impact of this interpretation on the consolidated financial statements.

Reclassifications – Certain prior years’ amounts have been reclassified to conform to the current year’s presentation.

NOTE 2. CHANGE IN ACCOUNTING PRINCIPLE

Effective December 31, 2005, Praxair adopted FIN 47, “Accounting for Conditional Asset Retirement Obligations,” which provides guidance on when a company has sufficient information to reasonably estimate an asset-retirement obligation’s fair value as required under SFAS 143, “Accounting for Asset Retirement Obligations.” Under FIN 47, uncertainty as to the timing and/or method of settlement of a conditional asset-retirement obligation should be factored into the measurement of the liability when sufficient information exists. At December 31, 2005, the company recognized transition amounts for existing asset-retirement obligation liabilities, associated capitalizable costs and accumulated depreciation to date. An after-tax transition charge of $6 million was recorded as the cumulative effect of a change in accounting principle for the year ended December 31, 2005.

NOTE 3. ACQUISITIONS

The results of operations of these businesses have been included in Praxair’s consolidated statements of income since their respective dates of acquisition.

In March 2007, Praxair acquired Linde AG’s industrial gas business in Mexico and Mittler Supply, Inc., an independent packaged gas distributor with operations across the midwestern United States. The aggregate purchase price for these acquisitions was $297 million and resulted in the recognition of $160 million of goodwill and $44 million of intangible assets, primarily consisting of customer and license/use agreements. In addition, in November 2007, Praxair formed a new majority-owned packaged gas distribution subsidiary in the Mid-Atlantic region of the United States by contributing portions of its current operations and acquiring an independent distributor, GT&S, Inc. This was a non-monetary transaction and, therefore, is not reflected in the consolidated statement of cash flows. The transaction resulted in the recognition of approximately $59 million in goodwill and $16 million in intangible assets, primarily consisting of customer and license/use agreements. The transaction also resulted in an increase of $59 million in Minority Interests and $82 million in short-term debt. These acquisitions will strengthen Praxair’s presence and ability to serve customers in their respective geographies.

On November 30, 2007, Praxair acquired a 50% interest in the industrial gases business of Yara International ASA of Norway for $117 million. This joint venture, Yara Praxair Holding AS, represents Praxair’s entry into the Scandinavian market and is accounted for as an equity investment in the consolidated financial statements.

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On December 31, 2005, Praxair acquired the packaged gas business and facilities of Constar LLC for a purchase price of $31 million. The acquisition resulted in approximately $14 million of goodwill, adjusted for the final purchase price allocation. The business includes 10 facilities in Georgia, Tennessee and South Carolina which fill and distribute high-pressure industrial, medical and specialty-gas cylinders and other gas containers. Constar also operates several retail stores for the sale of welding and related equipment, supplies and services. The acquisition facilitated Praxair’s expansion into a new geography and strengthened the company’s ability to serve customers throughout North America.

Other acquisitions in 2007, 2006 and 2005 were not significant.

NOTE 4. LEASES

In the normal course of its business, Praxair enters into various leases as the lessee, primarily involving manufacturing and distribution equipment and office space. Non-cancelable operating lease commitments extending for more than one year require future minimum payments totaling $339 million at December 31, 2007 as follows: 2008, $84 million; 2009, $67 million; 2010, $54 million; 2011, $36 million; 2012, $27 million and $71 million thereafter. The present value of these future lease payments under operating leases is approximately $282 million. Total lease and rental expenses under operating leases were $105 million in 2007, $97 million in 2006, and $96 million in 2005. Capital leases are not significant and are included in property, plant and equipment – net. Related obligations are included in debt.

Praxair’s leases where it is the lessor are not significant.

NOTE 5. INCOME TAXES

Pre-tax income applicable to U.S. and foreign operations is as follows:

(Millions of dollars)
YEAR ENDED DECEMBER 31,	2007		2006		2005
United States	$	491	$	424	$	304
Foreign		1,122		940		826
Total income before income taxes	$	1,613	$	1,364	$	1,130

The following is an analysis of the provision for income taxes:

(Millions of dollars)
YEAR ENDED DECEMBER 31,	2007		2006		2005
CURRENT TAX EXPENSE
U.S. Federal	$	140	$	77	$	56
State and local		12		11		10
Foreign		230		177		110
		382		265		176
DEFERRED TAX EXPENSE
U.S. Federal		8		52		79
Foreign (a)		29		38		121
		37		90		200
TOTAL INCOME TAXES	$	419	$	355	$	376

(a) 2005 includes $67 million related to valuation allowance adjustments, primarily in Brazil.

An analysis of the difference between the provision for income taxes and the amount computed by applying the U.S. statutory income tax rate to pre-tax income follows:

(Dollar amounts in millions)
YEAR ENDED DECEMBER 31,	2007					2006					2005
U.S. statutory income tax rate	$	565		35.0	%	$	477		35.0	%	$	395		35.0	%
State and local taxes – net of federal benefit		7		0.5	%		7		0.5	%		4		0.4	%
U.S. tax credits and deductions(a)		(11	)	-0.7	%		(10	)	-0.7	%		(8	)	-0.7	%
Foreign tax rate differentials(b)		(133	)	-8.2	%		(114	)	-8.4	%		(103	)	-9.1	%
Repatriation and other foreign tax adjustments(c)		(3	)	-0.2	%		—		—			92		8.1	%
Tax audit settlements(d)		—		—			(5	)	-0.4	%		(1	)	-0.1	%
Other – net		(6	)	-0.4	%		—		—			(3	)	-0.3	%
Provision for income taxes	$	419		26.0	%	$	355		26.0	%	$	376		33.3	%

(a) U.S. tax credits and deductions relate to research and experimentation tax credits, export tax credits and manufacturing deductions.

(b) Includes foreign tax rate differentials and various tax incentives primarily in Europe, Asia and South America. Additionally, in 2007 and 2005, respectively, net income tax benefits of $12 million and $9 million were recorded in Europe, related to tax rate changes, and other adjustments. Other tax rate changes were not significant.

(c) The tax charge in 2005 is related to the repatriation of foreign earnings pursuant to the American Jobs Creation Act of 2004 ($67 million) and other foreign tax adjustments made to tax reserves and valuation allowances ($25 million).

(d) The tax audit settlements represent non-recurring benefits resulting from the settlement of various tax matters in the U.S.

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Net deferred tax liabilities included in the consolidated balance sheet are comprised of the following:

(Millions of dollars)
DECEMBER 31,	2007			2006
DEFERRED TAX LIABILITIES
Fixed assets	$	922		$	867
Exchange gains		131			86
Goodwill		47			39
Other		65			47
	$	1,165		$	1,039
DEFERRED TAX ASSETS
Carryforwards	$	401		$	352
Benefit plans and related(a)		233			210
Exchange losses		41			38
Research and development(b)		—			36
Inventory		9			10
Other		176			148
		860			794
Less: Valuation allowances		(341	)		(266	)
	$	519		$	528
NET DEFERRED TAX LIABILITIES	$	646		$	511
Recorded in the consolidated balance sheets as:
Current deferred tax assets, net (Note 7)	$	86		$	87
Long-term deferred tax liabilities, net (Note 7)		732			598
	$	646		$	511

(a) Includes deferred taxes of $120 million and $131 million in 2007 and 2006, respectively, related to pension/OPEB funded status.

(b) U.S. R&D credits were fully utilized in 2007.

Praxair evaluates deferred tax assets quarterly to ensure that estimated future taxable income will be sufficient in character (e.g., capital gain versus ordinary income treatment), amount and timing to result in their recovery. After considering the positive and negative evidence, a valuation allowance is established when management determines that it is more likely than not (i.e., greater than 50% likelihood) that a deferred tax asset will not be realized to reduce the assets to their realizable value. Considerable judgment is required in establishing deferred tax valuation allowances. At December 31, 2007, Praxair had $401 million of deferred tax assets relating to net operating losses and tax credits (primarily foreign). Of this amount, $278 million relates to NOLs (primarily in one Brazilian subsidiary) for which Praxair has a 100% valuation allowance. The valuation allowances are required because management has determined, based on financial projections and available tax strategies, which management anticipates will continue to eliminate future taxable income, that it is unlikely that any of the NOLs will be utilized in the foreseeable future. The remaining $123 million of carryforwards, $74 million U.S. and $49 million foreign, expire through 2027 and 2016, respectively, and have $63 million of valuation allowances recorded. If events or circumstances change valuation allowances would be adjusted at that time resulting in an income tax benefit or charge. The carryforwards and valuation allowance increases in 2007 are primarily related to currency movements and tax filings.

A provision has not been made for additional U.S. Federal or foreign taxes at December 31, 2007 on $3.1 billion of undistributed earnings of foreign subsidiaries because Praxair intends to reinvest these funds indefinitely to support foreign growth opportunities. It is not practicable to estimate the unrecognized deferred tax liability on these undistributed earnings. These earnings could become subject to additional tax if they are remitted as dividends, loaned to Praxair, or upon sale of the subsidiary’s stock.

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FIN 48 - UNCERTAIN TAX POSITIONS

Effective January 1, 2007, the company adopted FIN 48 which provides a comprehensive model for the recognition, measurement and disclosure in financial statements of uncertain tax positions that a company has taken or expects to take on a tax return. The adoption of FIN 48 resulted in a non-cash transition charge of $158 million, recorded as a reduction to beginning retained earnings. The transition adjustment relates primarily to tax positions related to foreign operations where the original tax benefit related to periods prior to 2002.

As of December 31, 2007, the company has unrecognized income tax benefits totaling $289 million which are primarily recorded as other long-term liabilities in the consolidated balance sheets (see Note 7). Unrecognized income tax benefits represent income tax positions taken on income tax returns but not yet recognized in the consolidated financial statements. If recognized, essentially all of the unrecognized tax benefits and related interest and penalties would be recorded as a benefit to income tax expense on the consolidated statement of income. Any changes in accounting estimates resulting from new developments with respect to uncertain income tax positions will be recorded as appropriate. The company does not currently anticipate significant changes in the amount of unrecognized income tax benefits over the next year.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(Millions of dollars)
Unrecognized income tax benefits, January 1, 2007	$	309
Additions for tax positions of prior years		19
Reductions for tax positions of prior years		(6	)
Additions for current year tax position years		14
Reductions for settlements with taxing authorities (a)		(81	)
Foreign currency translation		34
Unrecognized income tax benefits, December 31, 2007	$	289

(a) Settlements are uncertain tax positions that were effectively settled with the taxing authorities, including positions where the Company has agreed to amend its tax returns to eliminate the uncertainty.

Interest and penalties on tax reserves of $20 million were recognized for the year ended December 31, 2007 and were classified as income tax expense in the consolidated statement of income. As of December 31, 2007, the company had $57 million of accrued interest and penalties which were recorded in other long-term liabilities in the consolidated balance sheets (see Note 7).

As of December 31, 2007, the company remained subject to examination in the following major tax jurisdictions for the Tax years as indicated below:

MAJOR TAX JURISDICTIONS	OPEN YEARS
North America
United States	2005 through 2007
Canada	2000 through 2007
Mexico	2002 through 2007
Europe
Germany	2004 through 2007
Italy	2003 through 2007
Spain	1997 through 2007
South America
Brazil	1998 through 2007
Asia
China	2007
India	1999 through 2007
Korea	2002 through 2007
Thailand	2003 through 2007

The company is currently undergoing an IRS audit for its 2005 and 2006 tax years in the United States. During 2006, the IRS completed its audit and issued its final assessment related to Praxair’s U.S. Federal income tax returns for the 2003 and 2004 tax years, resulting in an immaterial adjustment to the consolidated financial statements.

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NOTE 6. 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, as follows:

	2007		2006		2005
NUMERATOR (MILLIONS OF DOLLARS)
Income before cumulative effect of change in accounting principle	$	1,177	$	988	$	732
Cumulative effect of change in accounting principle		—		—		(6	)
Net income	$	1,177	$	988	$	726
DENOMINATOR (THOUSANDS OF SHARES)
Weighted average shares outstanding		317,991		322,444		322,658
Shares earned and issuable under compensation plans		1,006		1,051		1,107
Weighted average shares used in basic earnings per share		318,997		323,495		323,765
Effect of dilutive securities
Convertible debt		—		—		146
Performance-based stock awards		105		—		—
Employee stock options		5,740		5,798		5,774
Weighted average shares used in diluted earnings per share		324,842		329,293		329,685
BASIC EARNINGS PER COMMON SHARE
Income before cumulative effect of change in accounting principle	$	3.69	$	3.05	$	2.26
Net income	$	3.69	$	3.05	$	2.24
DILUTED EARNINGS PER COMMON SHARE
Income before cumulative effect of change in accounting principle	$	3.62	$	3.00	$	2.22
Net income	$	3.62	$	3.00	$	2.20

Stock options of 5,540, 1,000 and 74,200 shares were excluded in the computation of diluted earnings per share for the years ended December 31, 2007, 2006 and 2005, respectively, because the exercise prices were greater than the average market price of the common stock for the respective period.

NOTE 7. SUPPLEMENTAL INFORMATION

INCOME STATEMENT

(Millions of dollars)
YEAR ENDED DECEMBER 31,	2007			2006			2005
SELLING, GENERAL AND ADMINISTRATIVE
Selling	$	547		$	503		$	475
General and administrative(a)		643			583			512
	$	1,190		$	1,086		$	987
DEPRECIATION AND AMORTIZATION
Depreciation	$	754		$	681		$	649
Amortization of other intangibles (Note 10)		20			15			16
	$	774		$	696		$	665
OTHER INCOME (EXPENSES) – NET
Net income hedges (Note 12)	$	(16	)	$	—		$	(5	)
Other currency		3			(3	)		1
Partnership income		25			30			23
Severance expense		(11	)		(15	)		(10	)
Gain on divestitures		11			14			—
Insurance recoveries		—			15			—
St. Louis distribution facility fire		—			—			(8	)
Customer obligation settlement		—			—			20
U.S. Gulf Coast hurricanes impact		—			—			(16	)
Other – net		(9	)		(9	)		5
	$	3		$	32		$	10
INTEREST EXPENSE – NET
Interest incurred on debt	$	213		$	181		$	179
Interest capitalized		(35	)		(21	)		(11	)
Amortization of swap termination costs (Note 12)		(5	)		(5	)		(5	)
	$	173		$	155		$	163

(a) 2007 and 2006 include share-based compensation expense under SFAS No. 123R of $40 million and $39 million, respectively. 2005 does not include share-based compensation as the company was accounting for stock options under APB 25 which did not require the recognition of share-based compensation in net income.

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BALANCE SHEET

(Millions of dollars)
DECEMBER 31,	2007			2006
ACCOUNTS RECEIVABLE
Trade	$	1,715		$	1,461
Other		114			90
		1,829			1,551
Less: allowance for doubtful accounts(a)		(106	)		(95	)
	$	1,723		$	1,456
INVENTORIES(b)
Raw materials and supplies	$	129		$	104
Work in process		61			50
Finished goods		284			227
	$	474		$	381
PREPAID AND OTHER CURRENT ASSETS
Deferred income taxes (Note 5)	$	86		$	87
Prepaid		54			49
Other		54			50
	$	194		$	186
OTHER LONG-TERM ASSETS
Pension assets (Note 16)	$	116		$	102
Insurance contracts(c)		80			77
Long-term receivables		118			97
Deposits		56			42
Investments carried at cost		13			12
Deferred charges		13			14
Other		127			103
	$	523		$	447
OTHER CURRENT LIABILITIES
Accrued expenses	$	238		$	190
Payrolls		185			161
Pension and postretirement (Note 16)		73			42
Interest payable		28			32
Employee benefit accrual		20			28
Severance		15			12
Insurance reserves		12			15
Other		124			115
	$	695		$	595
OTHER LONG-TERM LIABILITIES
Pension and postretirement (Note 16)	$	490		$	515
FIN 48 tax liabilities(d)		248			—
FIN 48 interest and penalties(d)		57			—
Insurance reserves		31			32
Other(d)		222			384
	$	1,048		$	931
DEFERRED CREDITS
Deferred income taxes (Note 5)	$	732		$	598
Other		125			58
	$	857		$	656
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Cumulative translation adjustment
North America	$	(22	)	$	(120	)
South America(e)		(521	)		(759	)
Europe		23			(12	)
Asia		36			(10	)
Surface technologies		47			26
		(437	)		(875	)
Derivatives – net of taxes		—			(1	)
Pension/OPEB funded status obligation (net of $120 million and $131 million taxes in 2007 and 2006, respectively)		(235	)		(251	)
	$	(672	)	$	(1,127	)

(a) Provisions to the allowance for doubtful accounts were $53 million, $52 million and $36 million in 2007, 2006, and 2005, respectively. The remaining allowance activity in each period related primarily to write-offs of uncollectible amounts, net of recoveries and currency movements.

(b) Approximately 13% and 15% of total inventories were valued using the LIFO method at December 31, 2007 and 2006, respectively. If inventories had been valued at current costs, they would have been approximately $17 million and $19 million higher than reported at December 31, 2007 and 2006, respectively.

(c) Consists primarily of insurance contracts and other investments to be utilized for non-qualified pension and OPEB obligations (see Note 16).

(d) FIN 48 became effective in 2007 (see Notes 1 and 5). In 2006, related long-term tax liabilities are reported in Other.

(e) Consists primarily of currency translation adjustments in Brazil and Argentina.

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NOTE 8. PROPERTY, PLANT AND EQUIPMENT – NET

Significant classes of property, plant and equipment are as follows:

(Millions of dollars)
DECEMBER 31,	2007			2006
Machinery and equipment	$	13,834		$	11,989
Buildings		898			783
Construction in progress and other		1,156			858
Land and land improvements		288			267
		16,176			13,897
Less: accumulated depreciation		(8,213	)		(7,203	)
	$	7,963		$	6,694

Machinery and equipment includes production plants, tanks, cylinders, transportation equipment and other assets that have useful lives of 3 years to 30 years. Buildings have useful lives of 25 years to 40 years and land improvements have useful lives of up to 20 years.

NOTE 9. GOODWILL

Changes in the carrying amount of goodwill for the years ended December 31, 2007 and 2006 were as follows:

(Millions of dollars)	NORTH AMERICA		SOUTH AMERICA		EUROPE		ASIA		SURFACE TECHNOLOGIES	TOTAL
BALANCE, DECEMBER 31, 2005	$	991	$	161	$	293	$	26	$  74	$	1,545
Acquisitions		4		2		—		—	—		6
Purchase adjustments		3		—		—		—	—		3
Foreign currency translation		—		18		31		3	5		57
Other		—		—		2		—	—		2
BALANCE, DECEMBER 31, 2006	$	998	$	181	$	326	$	29	$  79	$	1,613
Acquisitions (Note 3)		237		1		—		—	—		238
Purchase adjustments		1		—		2		—	—		3
Foreign currency translation		24		43		36		4	6		113
BALANCE, DECEMBER 31, 2007	$	1,260	$	225	$	364	$	33	$  85	$	1,967

The annual impairment tests required by SFAS No. 142, “Goodwill and Other Intangible Assets,” for 2007, 2006 and 2005 were performed during the second quarter of each year and no impairments were indicated.

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NOTE 10. OTHER INTANGIBLE ASSETS

The following is a summary of Praxair’s other intangible assets at December 31, 2007 and 2006:

(Millions of dollars) FOR THE YEAR ENDED DECEMBER 31, 2007	CUSTOMER AND LICENSE/USE AGREEMENTS		NON- COMPETE AGREEMENTS		PATENTS AND OTHER		TOTAL
Cost:
Balance, December 31, 2006	$   72		$   39		$  16		$	127
Additions (Note 3)	73		7		—			80
Foreign currency translation	4		2		—			6
Other	(2	)	(15	)	2			(15	)
Balance, December 31, 2007	147		33		18			198
Less: accumulated amortization:
Balance, December 31, 2006	(26	)	(24	)	(6	)		(56	)
Amortization expense	(10	)	(9	)	(1	)		(20	)
Foreign currency translation	(2	)	(1	)	—			(3	)
Other	2		15		(2	)		15
Balance, December 31, 2007	(36	)	(19	)	(9	)		(64	)
Net balance at December 31, 2007	$111		$   14		$    9		$	134

(Millions of dollars) FOR THE YEAR ENDED DECEMBER 31, 2006	CUSTOMER AND LICENSE/USE AGREEMENTS		NON- COMPETE AGREEMENTS		PATENTS AND OTHER		TOTAL
Cost:
Balance, December 31, 2005	$   71		$   38		$  17		$	126
Additions	5		2		—			7
Foreign currency translation	2		1		—			3
Other	(6	)	(2	)	(1	)		(9	)
Balance, December 31, 2006	72		39		16			127
Less: accumulated amortization:
Balance, December 31, 2005	(22	)	(18	)	(5	)		(45	)
Amortization expense	(6	)	(8	)	(1	)		(15	)
Foreign currency translation	(1	)	—		—			(1	)
Other	3		2		—			5
Balance, December 31, 2006	(26	)	(24	)	(6	)		(56	)
Net balance at December 31, 2006	$   46		$   15		$  10		$	71

There are no expected residual values related to these intangible assets. Amortization expense for the years ended December 31, 2007, 2006 and 2005 was $20 million, $15 million and $16 million, respectively. The remaining weighted-average amortization period for intangible assets is approximately 11 years. Total estimated annual amortization expense is as follows: 2008, $19 million; 2009, $17 million; 2010, $15 million; 2011, $13 million; 2012, $11 million and $59 million thereafter.

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NOTE 11. DEBT

The following is a summary of Praxair’s outstanding debt at December 31, 2007 and 2006:

(Millions of dollars)	2007			2006
SHORT-TERM
Commercial paper and U.S. bank borrowings	$	214		$	9
European borrowings		19			—
Canadian borrowings		325			—
South American borrowings		37			35
Asian borrowings		182			79
Other international borrowings		11			7
Total short-term debt		788			130
LONG-TERM
U.S. Borrowings
Commercial Paper(c)		100			—
4.75% Notes due 2007(c)		—			250
6.625% Notes due 2007(c)		—			250
6.50% Notes due 2008(c)		250			250
2.75% Notes due 2008(a, c)		300			299
6.375% Notes due 2012(a, b)		519			524
3.95% Notes due 2013(a)		349			349
5.25% Notes due 2014(a)		399			—
5.375% Notes due 2016(a)		399			399
5.20% Notes due 2017(a)		325			—
Other		3			8
European borrowings		656			590
South American borrowings		80			83
Asian borrowings		10			21
Other international borrowings		6			4
Obligations under capital lease		8			10
		3,404			3,037
Less: current portion of long-term debt		(40	)		(56	)
Total long-term debt		3,364			2,981
Total debt	$	4,192		$	3,167

^(a) Amounts are net of unamortized discounts.

^(b) December 31, 2007 and 2006 include a $20 million and $25 million fair value increase, respectively, related to SFAS 133 hedge accounting (see Note 12).

^(c) Classified as long-term because of the Company’s intent to refinance this debt on a long-term basis and the availability of such financing under the terms of existing agreements.

During 2007, Praxair repaid $250 million of $4.75% Notes and $250 million of 6.625% Notes that were due on July 16, 2007 and October 15, 2007, respectively. The repayments were initially funded through the issuance of commercial paper. On March 15, 2007, Praxair issued $325 million of 5.20% Notes due 2017 and on November 13, 2007, Praxair issued $400 million of 5.25% Notes due 2014. The proceeds were used to refinance existing debt and for general corporate purposes.

The company has a $400-million revolving credit facility in Europe and a $200-million revolving credit facility in Canada with a syndicate of international banks that expires in November 2012. At December 31, 2007, $174 million was outstanding against the facility in Canada and there was no balance outstanding against the facility in Europe. At December 31, 2006, there were no balances outstanding against either facility. The company has the ability to draw against each facility in one of four currencies in amounts not to exceed the then U.S. dollar equivalent of $400 million and $200 million, respectively.

The company has a €450-million borrowing facility with a syndicate of international banks that expires in 2009. As of December 31, 2007, the amount outstanding against this facility was €450 million, or $656 million (€450 million, or $590 million at December 31, 2006). The weighted-average interest rate on this facility at December 31, 2007 was 4.8% (3.6% at December 31, 2006).

The company has a $1-billion senior unsecured credit facility with a syndicate of banks that expires in 2011. No borrowings were outstanding under the credit agreement at December 31, 2007 or 2006. Associated fees were not significant in each of the past three years.

At December 31, 2007, $550 million of notes due in 2008 as well as $100 million in commercial paper have been classified as long-term because of the company’s intent to refinance this debt on a long-term basis and the availability of such financing under the terms of its credit agreements.

As of December 31, 2007 and 2006, the weighted-average interest rate of short-term borrowings outstanding was 6.4% and 7.2%, respectively.

Praxair’s major bank credit and long-term debt agreements contain various covenants which may, among other things, restrict the ability of Praxair to merge with another entity, incur or guarantee debt, sell or transfer certain assets, create liens against assets, enter into sale and leaseback agreements, or pay dividends and make other distributions beyond certain limits. These agreements also require Praxair to meet a leverage ratio as defined in the agreements. The company is in compliance with all financial debt covenants.

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Expected maturities on long-term debt are as follows: 2008, $40 million; 2009, $686 million; 2010, $23 million; 2011, $5 million; 2012, $523 million and $2,127 million thereafter. At December 31, 2007, $285 million of Praxair’s assets (principally international fixed assets) were pledged as collateral for $76 million of long-term debt, including the current portion of long-term debt.

At December 31, 2007, the estimated fair value of Praxair’s long-term debt portfolio was $3,437 million versus a carrying value of $3,404 million. At December 31, 2006, the estimated fair value of Praxair’s long-term debt portfolio was $3,027 million versus a carrying value of $3,037 million. These differences are attributable to interest-rate changes subsequent to when the debt was issued.

NOTE 12. FINANCIAL INSTRUMENTS

The following table is a summary of the notional amount of currency derivatives outstanding at December 31, 2007 and 2006 (all maturities within one year):

(Millions of dollars)	2007		2006
Currency contracts
Balance sheet items	$	606	$	758
Anticipated net income		170		—
	$	776	$	758

At December 31, 2007, the fair value of all derivative contracts has been recorded in the consolidated balance sheet as $4 million in current assets and $13 million in current liabilities ($3 million in current assets and $3 million in current liabilities at December 31, 2006).

CURRENCY CONTRACTS

Praxair enters into currency-exchange forward contracts and options to manage its exposure to fluctuations in foreign-currency exchange rates. The anticipated net income hedges outstanding at December 31, 2007 related to hedges of a portion of 2008 anticipated net income in Brazil, Europe and Canada. Other income (expenses) – net includes a loss of $16 million, no impact, and a loss of $5 million in 2007, 2006, and 2005, respectively, as a result of net-income hedging contracts (see Note 7).

Counterparties to currency-exchange forward contracts and options are primarily major banking institutions with credit ratings of investment grade or better and no collateral is required. There are no significant risk concentrations. Management believes the risk of incurring losses on derivative contracts related to credit risk is remote and any losses would be immaterial.

INTEREST RATE SWAPS

There were no interest rate swap agreements outstanding at December 31, 2007 and 2006.

During 2002, Praxair entered into and terminated $500 million notional amount of interest-rate swap agreements that effectively converted fixed-rate interest to variable-rate interest on the $500 million 6.375% notes that mature in April 2012. The termination resulted in a cash gain of $47 million, which Praxair recognized in earnings and was equally offset with a charge to earnings for the changes in the fair value of the underlying debt instrument. This debt increase of $47 million is being recognized in earnings as a reduction to interest expense over the remaining term of the underlying debt, or about ten years. For the year ended December 31, 2007, $5 million was recognized in earnings as a reduction to interest expense ($5 million during each of the years ended December 31, 2006 and 2005) and $20 million remains unrecognized at December 31, 2007 ($25 million at December 31, 2006) (see Note 11).

NOTE 13. SHAREHOLDERS’ EQUITY

At December 31, 2007 and 2006, there were 800,000,000 shares of common stock authorized (par value $0.01 per share) of which 373,144,668 shares were issued and 315,488,151 were outstanding at December 31, 2007 and 367,644,882 shares were issued and 320,860,846 shares were outstanding at December 31, 2006.

In 2004, the board of directors of Praxair declared a dividend of one purchase right (a Right) for each share of Praxair’s common stock held of record at the close of business on April 30, 2004; and that dividend was paid on May 3, 2004. On May 3, 2004, all prior Rights then outstanding expired. In addition, one Right is deemed to be delivered with and attached to each share of Praxair’s common stock issued after April 30, 2004 and before the redemption or expiration of the Rights. Each Right entitles its registered holder, when exercised under certain circumstances, to purchase for $150.00 (subject to adjustment and referred to as the “Exercise Price”) certain securities or assets of Praxair or a surviving entity. The Rights will expire on May 2, 2009, unless exchanged or redeemed prior to that date or unless extended by action of Praxair’s stockholders prior to that date. The redemption price is $0.001 per Right.

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The Rights may not be exercised until at least 10 days (or a later date determined by the board of directors) after a person or group acquires 20 percent or more of Praxair’s common stock, or commences a tender offer that, if consummated, would result in 20 percent or more ownership of Praxair’s common stock. Separate Rights certificates will not be issued and the Rights will not be traded separately from the stock until such time. At no time will a Right confer any voting power to its holder.

Should an acquirer become the beneficial owner of 20 percent or more of Praxair’s common stock (other than as approved by Praxair’s board of directors) and under certain additional circumstances, Praxair Right-holders (other than the acquirer) would have the right to buy common stock in Praxair, or in the surviving entity if Praxair is acquired, having a value of two times the Exercise Price then in effect, for an amount in cash equal to the Exercise Price then in effect. Alternatively, Praxair’s board of directors may elect to exchange all of the Rights (other than the acquirer’s Rights which will have become void) at an exchange ratio of one share of Praxair common stock (and/or other securities, cash or other assets having equal value) per Right (subject to adjustment). Also, under certain circumstances, each Right may entitle the holder to purchase one one-hundredth share of preferred stock or such amount of preferred stock as may be substituted for each share of common stock issuable upon the exercise or exchange of a Right.

Praxair’s board of directors may redeem the Rights by a majority vote at any time prior to the 10th day following public announcement that a person or group has acquired 20 percent of Praxair’s common stock, or the date on which a person or group acquires such 20 percent. In addition, under circumstances of a “qualifying offer” as defined in the agreement by which the Rights were issued (the Stockholder Protection Rights Agreement as approved by Praxair’s shareholders at the April 27, 2004 Annual Meeting of Shareholders) the Rights may be redeemed upon the vote, at a special meeting, in favor of such redemption by shareholders representing a majority of the shares then outstanding.

NOTE 14. PREFERRED STOCK

At December 31, 2007 and 2006, there were 25,000,000 shares of preferred stock (par value $0.01 per share) authorized, of which no shares were issued and outstanding. Praxair’s board of directors may from time to time authorize the issuance of one or more series of preferred stock and, in connection with the creation of such series, determine the characteristics of each such series including, without limitation, the preference and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions of the series.

NOTE 15. SHARE-BASED COMPENSATION

The company adopted SFAS No. 123R effective January 1, 2006. As a result, share-based compensation of $42 million, $28 million after tax (or $0.09 for both basic and diluted earnings per share) was recognized for 2007 and 2006. The expense was primarily recorded in selling, general and administrative expenses and no share-based compensation cost was capitalized. No share-based compensation was recognized in 2005.

SUMMARY OF PLANS

Effective in 2002, the board of directors and shareholders of the company adopted the 2002 Praxair, Inc. Long-Term Incentive Plan (the 2002 Plan), which replaced the 1992 Praxair, Inc. Long-Term Incentive Plan and the 1996 Praxair, Inc. Performance Incentive Plan. Under the 2002 Plan, the initial aggregate number of shares available for option and other equity grants was limited to a total of 15,800,000 shares. In April 2004, the shareholders approved an increase to the aggregate number of shares available for option and other equity grants under the 2002 Plan to 31,600,000 shares. As of December 31, 2007, 10,044,831 shares remained available for equity grants under this Plan. The 2002 Plan provides for the granting of nonqualified and incentive stock options, stock grants and performance awards and further provides that the aggregate number of shares granted as restricted stock or pursuant to performance awards may not exceed 20% of the total shares available under the Plan. The 2002 Plan also provides calendar year per-participant limits on grants of options, restricted stock and performance awards. Both officer and non-officer employees are eligible for awards under the 2002 Plan.

In 2005, the board of directors and shareholders of the company adopted the 2005 Equity Compensation Plan for Non-Employee Directors of Praxair, Inc. (the 2005 Plan) which replaced the 1995 Stock Option Plan for Non-Employee Directors. Under the 2005 Plan, the aggregate number of shares available for option and other equity grants is limited to a total of 500,000 shares. As of December 31, 2007, 372,280 shares remained available for equity grants under the 2005 Plan. All non-employee directors of the company are eligible for grants under the 2005 Plan.

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Exercise prices for options granted under the 2002 and 2005 Plans may not be less than the closing market price of the company’s common stock on the date of grant and granted options may not be repriced or exchanged without shareholder approval. Options granted under the 2002 and 2005 Plans may become partially exercisable after a minimum of one year after the date of grant but may not become fully exercisable until at least three years have elapsed from the date of grant, and have a maximum duration of ten years. Options granted under predecessor plans had similar terms.

The company has the ability to repurchase shares on the open market to satisfy share option exercises and issues shares from treasury stock upon the exercise of certain stock options.

STOCK OPTION FAIR VALUE

The company utilizes the Black-Scholes Options-Pricing Model to determine the fair value of stock options under SFAS No. 123R consistent with that used for pro forma disclosures in prior years. Management is required to make certain assumptions with respect to selected model inputs, including anticipated changes in the underlying stock price (i.e., expected volatility) and option exercise activity (i.e., expected life). Expected volatility is based on the historical volatility of the company’s stock over the most recent period commensurate with the estimated expected life of the company’s stock options and other factors. The expected life of options granted, which represents the period of time that the options are expected to be outstanding, is based primarily on historical exercise experience. The expected dividend yield is based on the company’s most recent history and expectation of dividend payouts. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for a period commensurate with the estimated expected life. If factors change and result in different assumptions in the application of SFAS No. 123R in future periods, the stock option expense that the company records for future grants may differ significantly from what the company has recorded in the current period.

The weighted-average fair value of options granted during 2007 was $10.97 ($10.85 in 2006 and $10.16 in 2005) based on the Black-Scholes Options-Pricing model. The following weighted-average assumptions were used for grants in 2007, 2006 and 2005:

YEAR ENDED DECEMBER 31,	2007		2006		2005
Dividend yield	2.0	%	1.9	%	1.6	%
Volatility	15.3	%	17.6	%	22.7	%
Risk-free interest rate	4.5	%	4.7	%	3.9	%
Expected term years	5		5		5

STOCK OPTION ACTIVITY

The following table summarizes option activity under the plans for 2007 (options are expressed in thousands; averages are calculated on a weighted basis; life in years; intrinsic value expressed in millions):

	NUMBER OF OPTIONS		AVERAGE EXERCISE PRICE		AVERAGE REMAINING LIFE	AGGREGATE INTRINSIC VALUE
ACTIVITY
Outstanding at January 1, 2007	21,771		$	35.28
Granted	3,817			61.50
Exercised	(5,772	)		29.43
Cancelled or expired	(334	)		47.04
Outstanding at December 31, 2007	19,482			41.85	6.4	$  913
Exercisable at December 31, 2007	11,920		$	32.90	5.1	$  665

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The aggregate intrinsic value represents the difference between the company’s closing stock price of $88.71 as of December 31, 2007 and the exercise price multiplied by the number of options outstanding as of that date. The total intrinsic value of stock options exercised during 2007 was $242 million ($121 million and $93 million for 2006 and 2005, respectively).

Cash received from option exercises under all share-based payment arrangements for 2007 was $170 million. The cash tax benefit realized from stock option exercises totaled $77 million for 2007, of which $63 million in excess tax benefits was classified as financing cash flows.

As of December 31, 2007, $39 million of unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted-average period of approximately 1.4 years.

PERFORMANCE-BASED AND RESTRICTED STOCK AWARDS

In February 2007, the company granted performance-based stock awards under the 2002 Plan to senior level executives with a target payout of 70,520 shares that vest based on the second anniversary of their date of grant. The actual number of shares issued in settlement of a vested award can range from zero to 200 percent of the target number of shares granted based upon the company’s attainment of specified performance targets over a two-year performance beginning on January 1, 2007. Compensation expense related to these awards is recognized over the two-year performance period based on the fair value of the closing market price of the Company’s common stock on the date of the grant ($61.47 per share) and the estimated performance that will be achieved. In addition, the Company had previously granted restricted stock to certain key employees that vest after a designated service period ranging from two to ten years.

The following table summarizes nonvested performance-based and restricted stock award activity as of December 31, 2007 and changes during the period then ended (averages are calculated on a weighted basis):

PERFORMANCE-BASED AND RESTRICTED STOCK ACTIVITY	NUMBER OF SHARES (000’S)		AVERAGE GRANT DATE FAIR VALUE
Nonvested at January 1, 2007	66		$	21.35
Granted	71			61.47
Vested	(27	)		21.01
Forfeited	(17	)		19.72
Nonvested at December 31, 2007	93		$	53.00

As of December 31, 2007, $4 million of unrecognized compensation cost related to performance-based awards is expected to be recognized on a straight-line basis through 2009 and less than $1 million of unrecognized compensation cost related to the restricted stock awards is expected to be recognized on a straight-line basis through 2011.

PRO FORMA INFORMATION UNDER SFAS 123 FOR 2005

The following table illustrates the effect on net income and earnings per share as if the fair value recognition provisions had been applied to all outstanding and unvested awards in the prior year comparable period:

(Dollar amounts in millions, except per share data)
YEAR ENDED DECEMBER 31,	2005
NET INCOME
As reported	$	726
Less: total stock-based employee compensation expense determined under fair value based method for all awards (net of $14 million taxes)		(26	)
Pro forma net income	$	700
BASIC EARNINGS PER SHARE
As reported	$	2.24
Pro forma	$	2.16
DILUTED EARNINGS PER SHARE
As reported	$	2.20
Pro forma	$	2.12

NOTE 16. RETIREMENT PROGRAMS

Pensions – Praxair has two main U.S. retirement programs which are non-contributory defined benefit plans: the Praxair Pension Plan and the CBI Pension Plan. The latter program benefits primarily former employees of CBI Industries, Inc. which Praxair acquired in 1996. Effective July 1, 2002, the Praxair Pension Plan was amended to give participating employees a one-time choice to remain covered by the old formula or to elect coverage under a new formula. The old formula is based predominantly on years of service, age and compensation levels prior to retirement, while the new formula provides for an annual contribution to an individual account which grows with interest each year at a predetermined rate. Also, this new formula applies to all new employees hired after April 30, 2002

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into businesses adopting this plan. U.S. pension plan assets are comprised of a diversified mix of investments, including domestic and international corporate equities, government securities and corporate debt securities. In addition, Praxair has several plans that provide supplementary retirement benefits primarily to higher level employees that are unfunded and are nonqualified for federal tax purposes. Pension coverage for employees of certain of Praxair’s international subsidiaries generally is provided by those companies through separate plans. Obligations under such plans are primarily provided for through diversified investment portfolios, with some smaller plans provided for under insurance policies or by book reserves.

Praxair’s U.S. packaged gases business has a defined contribution plan. Company contributions to this plan are calculated as a percentage of salary based on age plus service. Praxair’s U.S. healthcare business sponsors a defined contribution plan which provides for a matching contribution as well as a company contribution that is not dependent on employee contributions. In both plans, U.S. employees may supplement the company contributions up to the maximum allowable by IRS regulations. Certain international subsidiaries of the company also sponsor defined contribution plans where contributions are determined under various formulas. The cost for these defined contribution plans was $14 million in 2007, $13 million in 2006, and $11 million in 2005 (the cost is not included in the tables that follow).

U.S. employees other than those in the packaged gases and healthcare businesses are eligible to participate in a defined contribution savings plan. Employees may contribute up to 40% of their compensation, subject to the maximum allowable by IRS regulations. Company contributions to this plan are calculated on a graduated scale based on employee contributions to the plan. The cost for this plan was $15 million in 2007, $14 million in 2006 and $13 million in 2005 (the cost is not included in the tables that follow).

Postretirement Benefits Other Than Pensions (OPEB) – Praxair provides health care and life insurance benefits to certain eligible retired employees. These benefits are provided through various insurance companies and healthcare providers. Praxair is also obligated to make payments for a portion of postretirement benefits related to retirees of Praxair’s former parent. Additionally, as part of the CBI acquisition in 1996, Praxair assumed responsibility for healthcare and life insurance benefit obligations for CBI’s retired employees. All postretirement healthcare programs have cost caps that limit the company’s exposure to future cost increases. In addition, as part of the retirement elections made for July 1, 2002, all current employees were given the choice of maintaining coverage in the current retiree medical design, or to move to a design whereby coverage would be provided, but with no Praxair subsidy whatsoever. Also, all new employees hired after April 30, 2002 into a business adopting these plans will not receive a company subsidy. Praxair does not currently fund its postretirement benefits obligations. Praxair retiree plans may be changed or terminated by Praxair at any time for any reason with no liability to current or future retirees.

Praxair uses a measurement date of December 31 for its pension and other post-retirement benefits plans.

PENSION AND POSTRETIREMENT BENEFIT COSTS

The components of net pension and OPEB costs for 2007, 2006 and 2005 are shown below:

(Millions of dollars)	PENSIONS									OPEB
YEAR ENDED DECEMBER 31,	2007			2006			2005			2007			2006			2005
NET BENEFIT COST
Service cost	$	42		$	43		$	35		$	6		$	7		$	6
Interest cost		111			98			91			15			15			16
Expected return on assets		(129	)		(116	)		(102	)		—			—			—
Net amortization and deferral		26			31			20			(1	)		(1	)		(1	)
Net periodic benefit cost	$	50		$	56		$	44		$	20		$	21		$	21

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FUNDED STATUS

The changes in benefit obligation and plan assets for Praxair’s pension and OPEB programs, including reconciliation of the funded status of the plans to amounts recorded in the consolidated balance sheet, as of December 31, 2007 and 2006 are shown below:

(Millions of dollars)	PENSIONS
	2007						2006						OPEB
YEAR ENDED DECEMBER 31,	U.S.			INTL			U.S.			INTL			2007			2006
CHANGE IN BENEFIT OBLIGATION (PBO)
Benefit obligation, January 1	$	1,264		$	519		$	1,242		$	417		$	267		$	265
Service cost		28			14			28			15			6			7
Interest cost		75			36			70			28			15			15
Participant contributions		—			—			—			—			8			8
Plan amendment		—			(5	)		—			—			—			(7	)
Actuarial loss (gain)		(1	)		(23	)		(12	)		47			(28	)		3
Benefits paid		(59	)		(31	)		(58	)		(22	)		(26	)		(26	)
Curtailment / settlement		—			(1	)		—			(1	)		—			—
Acquisition / divestiture		—			1			(6	)		—			—			(1	)
Currency translation		—			64			—			35			8			3
Benefit obligation, December 31	$	1,307		$	574		$	1,264		$	519		$	250		$	267
Accumulated benefit obligation (ABO)	$	1,242		$	530		$	1,200		$	473
CHANGE IN PLAN ASSETS
Fair value of plan assets, January 1	$	1,116		$	479		$	929		$	401			—			—
Actual return on plan assets		70			10			125			65			—			—
Company contributions		—			22			109			17			—			—
Benefits paid from plan assets		(50	)		(31	)		(47	)		(22	)		—			—
Currency translation		—			68			—			18			—			—
Fair value of plan assets, December 31	$	1,136		$	548		$	1,116		$	479			—			—
FUNDED STATUS, END OF YEAR	$	(171	)	$	(26	)	$	(148	)	$	(40	)	$	(250	)	$	(267	)
RECORDED IN THE BALANCE SHEET
Other long-term assets	$	6		$	110		$	1		$	101		$	—		$	—
Other current liabilities		(35	)		(13	)		(9	)		(11	)		(25	)		(22	)
Other long-term liabilities		(142	)		(123	)		(140	)		(130	)		(225	)		(245	)
Net amount recognized, December 31	$	(171	)	$	(26	)	$	(148	)	$	(40	)	$	(250	)	$	(267	)
AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) CONSIST OF:
Net actuarial loss (gain)	$	279		$	86		$	288		$	71		$	3		$	28
Prior service cost (credit)		(3	)		(8	)		(4	)		2			(2	)		(3	)
Deferred tax benefit		(97	)		(12	)		(99	)		(14	)		(11	)		(18	)
Amount recognized in accumulated other comprehensive income (loss) (Note 7)	$	179		$	66		$	185		$	59		$	(10	)	$	7

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The amounts in accumulated other comprehensive income (loss) that are expected to be recognized as components of net periodic benefit cost during 2008 are as follows (in millions):

	PENSION		OPEB
Net actuarial loss	$	19	$	—
Prior service cost (credit)		1		(2	)
	$	20	$	(2	)

The following table provides information for pension plans where the accumulated benefit obligation exceeds the fair value of the plan assets:

(Millions of dollars),	PENSIONS
	2007				2006
YEAR ENDED DECEMBER 31,	U.S.		INTL		U.S.*		INTL
OBLIGATION IN EXCESS OF PLAN ASSETS
Projected benefit obligation (PBO)	$	1,181	$	364	$	93	$	343
Accumulated benefit obligation (ABO)	$	1,115	$	341	$	89	$	313
Fair value of plan assets	$	1,003	$	230		—	$	202

* In 2006, plan assets related to the two main U.S. retirement programs exceeded the ABO by a total of $5 million and were therefore excluded from the table above.

ASSUMPTIONS

The assumptions used to determine the benefit obligations and the net benefit cost for the pension and OPEB plans are shown below:

	PENSIONS
	U.S.				INTL				OPEB
	2007		2006		2007		2006		2007		2006
WEIGHTED AVERAGE ASSUMPTIONS USED TO DETERMINE BENEFIT OBLIGATIONS AT DECEMBER 31,
Discount rate	6.20	%	5.88	%	6.85	%	6.00	%	6.20	%	5.88	%
Rate of increase in compensation levels	3.50	%	3.50	%	3.00	%	3.00	%	N/A		N/A
WEIGHTED AVERAGE ASSUMPTIONS USED TO DETERMINE NET PERIODIC BENEFIT COST FOR YEARS ENDED DECEMBER 31,
Discount rate	5.88	%	5.62	%	6.00	%	6.00	%	5.88	%	5.62	%
Rate of increase in compensation levels	3.50	%	3.25	%	3.00	%	3.00	%	N/A		N/A
Expected long-term rate of return on plan assets(a)	8.25	%	8.25	%	8.70	%	8.30	%	N/A		N/A

(a) For 2008, the expected long-term rate of return on plan assets will be 8.25% for the U.S. plans. Expected weighted average returns for international plans will vary. These rates are determined annually by management based on a weighted average of current and historical market trends, historical and expected portfolio performance and the current and expected portfolio mix of investments.

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	OPEB
ASSUMED HEALTHCARE COST TREND RATES	2008		2007
Healthcare cost trend assumed	8.00	%	9.00	%
Rate to which the cost to trend rate is assumed to decline (the ultimate trend rate)	5.00	%	5.00	%
Year that the rate reaches the ultimate trend rate	2011		2011

These healthcare-cost trend rate assumptions have an impact on the amounts reported. However, cost caps limit the impact on net OPEB benefit cost in the U.S. To illustrate the effect, a one-percentage point change in assumed healthcare cost trend rates would have the following effects:

	ONE-PERCENTAGE POINT
(Millions of dollars)	INCREASE		DECREASE
Effect on the total of service and interest cost components of net OPEB benefit cost	$	—	$	—
Effect on OPEB benefit obligation	$	5	$	(5	)

PENSION PLAN ASSETS

Praxair’s U.S. and international pension plans’ weighted-average asset allocation at December 31, 2007 and 2006, and the target allocation range for 2007, by asset category are as follows:

	U.S.					INTL
ASSET CATEGORY	TARGET	2007		2006		TARGET	2007		2006
Equity securities (a)	60%-80%	64	%	64	%	30%-60%	40	%	46	%
Debt securities	20%-40%	36	%	35	%	40%-70%	60	%	53	%
Real estate	0%	0	%	0	%	0%	0	%	1	%
Other (b)	0%	0	%	1	%	0%	0	%	0	%

(a) Equity securities do not include any Praxair common stock.

(b) Primarily consists of cash equivalents and short-term investments.

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The investments of the U.S. pension plan are managed to meet the future expected benefit liabilities of the plan over the long term by investing in diversified portfolios consistent with prudent diversification and historical and expected capital market returns. When Praxair became an independent, publicly traded company in 1992, its former parent retained all liabilities for its term-vested and retired employees. Praxair’s plan received assets and retained pension liabilities for its own active employee base. Therefore, the liabilities under the Praxair U.S. pension plan mature at a later date compared to pension funds of other similar companies. Investment strategies are reviewed by the board of directors and investment performance is tracked against appropriate benchmarks.

The international pension plans are managed individually based on diversified investment portfolios, with different target asset allocations that vary for each plan.

CONTRIBUTIONS

Pension contributions were $22 million in 2007 and $126 million in 2006. Estimates of 2008 contributions are approximately $20 million, all of which is required by funding regulations or laws.

ESTIMATED FUTURE BENEFIT PAYMENTS

The following table presents estimated future benefit payments, net of participant contributions:

(Millions of dollars)	PENSIONS
YEAR ENDED DECEMBER 31,	U.S.		INTL		OPEB(a)
2008 (b)	$	96	$	30	$	21
2009	$	71	$	30	$	20
2010	$	76	$	32	$	20
2011	$	82	$	32	$	21
2012	$	87	$	35	$	21
2013 - 2017	$	520	$	183	$	99

(a) Estimated future benefit payments are net of expected Medicare subsidy receipts of $29 million over the next ten years.

(b) U.S. increase due to 2008 pension settlements.

2008 PENSION SETTLEMENTS

In 2007, a number of senior managers, including Praxair’s former chairman and chief executive officer, retired. These retirees are covered by the U.S. supplemental pension plan which provides for a lump sum benefit payment option. Under certain circumstances, such lump sum payments must be accounted for as a settlement of the related pension obligation, but only when paid. Accordingly, Praxair recorded a settlement charge related to net unrecognized actuarial losses of approximately $17 million ($11 million after-tax or $0.03 per diluted share) in January 2008 when cash payments were made.

NOTE 17. COMMITMENTS AND CONTINGENCIES

In accordance with SFAS No. 5, “Accounting for Contingencies,” the company accrues non income-tax liabilities for contingencies when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. Uncertain income tax positions are accounted for in accordance with FIN 48 (see Note 5). In the event any losses are sustained in excess of accruals, they will be charged against income at that time. Commitments represent obligations, such as those for future purchases of goods or services, that are not yet recorded on the company’s balance sheet as liabilities. The company records liabilities for commitments when incurred (i.e., when the goods or services are received).

Praxair is subject to various lawsuits and government investigations that arise from time to time in the ordinary course of business. These actions are based upon alleged environmental, tax, antitrust and personal injury claims, among others. Praxair has strong defenses in these cases and intends to defend itself vigorously. It is possible that the company may incur losses in connection with some of these actions in excess of accrued liabilities. Management does not anticipate that in the aggregate such losses would have a material adverse effect on the company’s consolidated financial position or liquidity; however, it is possible that the final outcomes could have a material impact on the company’s reported results of operations in any given period.

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Among such matters are:

— Claims brought by welders alleging that exposure to manganese contained in welding fumes caused neurological injury. Praxair has never manufactured welding consumables. Such products were manufactured prior to 1985 by a predecessor company of Praxair. As of December 31, 2007, Praxair was a co-defendant with many other companies in 483 lawsuits alleging personal injury caused by manganese contained in welding fumes. There were a total of 2,400 individual claimants in these cases. The cases were pending in several state and federal courts. The federal cases have been transferred to the U.S. District Court for the Northern District of Ohio for coordinated pretrial proceedings. The plaintiffs seek unspecified compensatory and, in most instances, punitive damages. In the past, Praxair has either been dismissed from the cases with no payment or has settled a few cases for nominal amounts. There are seven proposed class actions seeking medical monitoring on behalf of welders. None of the class actions have been certified; the judge overseeing the federal cases denied a motion for a medical monitoring class action. No reserves have been recorded for these cases as management does not believe that a loss from them is probable or reasonably estimable.

— An investigation by Spanish prosecutors relating to income tax credits generated by certain of the company’s Spanish subsidiaries prior to 2002 totaling approximately $174 million. These tax positions relate to statutory interpretation matters and are under criminal investigation, although some have previously been the subject of civil tax proceedings. In accordance with the requirements of FIN 48, Praxair had previously recorded a full liability, including interest, for these tax positions and management does not believe penalties are likely or reasonably estimable at this time. The company believes it has strong defenses and is vigorously defending against the proceeding.

— Claims brought by the Brazilian taxing authorities against several of the company’s Brazilian subsidiaries primarily relating to various social taxes. Such cases originated from 1988 to 1999 which was a period of hyperinflation in Brazil. During this period, the company, along with other taxpayers, challenged the legality of various Brazilian tax law changes that were designed to increase tax revenues by various means, including modifying the basis upon which a tax was levied, increasing the tax rates, and shortening payment due dates. These cases are primarily associated with disagreements on the amount of taxes assessed and the appropriate index to use to inflation-adjust amounts that were over or under paid during this period. The total estimated potential liability for such claims, including interest, is approximately $245 million. Praxair has recorded liabilities totaling $196 million related to such claims based on management judgments, after considering judgments and opinions of outside counsel.

The following table sets forth Praxair’s material commitments and contractual obligations as of December 31, 2007, excluding leases, tax liabilities under FIN 48, debt, OPEB and long-term pension obligations which are summarized elsewhere in the financial statements (see Notes 4, 5, 11, and 16):

(Millions of dollars)	UNCONDITIONAL
EXPIRING THROUGH	PURCHASE		CONSTRUCTION		GUARANTEES
DECEMBER 31,	OBLIGATIONS		COMMITMENTS		AND OTHER
2008	$	361	$	834	$	95
2009		220		476		59
2010		155		76		68
2011		135		—		—
2012		110		—		—
Thereafter		273		—		27
	$	1,254	$	1,386	$	249

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Unconditional purchase obligations of $1,254 million represent contractual commitments under various long- and short-term, take-or-pay arrangements with suppliers and are not included on Praxair’s balance sheet. These obligations are primarily minimum purchase commitments for helium, electricity, natural gas and feedstock used to produce atmospheric gases, carbon dioxide and hydrogen. During 2007, payments under these contracts totaled $973 million, including $406 million for electricity and $404 million for natural gas. A significant portion of these risks is passed on to customers through similar take-or-pay contractual arrangements. Purchase obligations which are not passed along to customers do not represent a significant risk to Praxair.

Construction commitments of $1,386 million represent outstanding commitments to customers or suppliers to complete authorized construction projects as of December 31, 2007. A significant portion of Praxair’s capital spending is related to the construction of new production facilities to satisfy customer commitments which may take a year or more to complete.

Guarantees and other of $249 million include $85 million related to Praxair’s contingent obligations under guarantees of certain debt of unconsolidated affiliates, $105 million related to put option agreements with certain affiliated companies and $59 million of various guarantees relating to outstanding receivables and repurchase agreements. Unconsolidated equity investees had total debt of approximately $520 million at December 31, 2007, which was non-recourse to Praxair with the exception of the guaranteed portions described above. The put option agreements are primarily related to majority-owned packaged gas subsidiaries in the United States and give the minority shareholders the right to require Praxair to purchase their shares at a predefined price. Praxair has no financing arrangements with closely-held related parties.

At December 31, 2007, Praxair had undrawn outstanding letters of credit, bank guarantees and surety bonds valued at approximately $1,110 million from financial institutions. These related primarily to customer contract performance guarantees (including plant construction in connection with certain on-site contracts), self-insurance claims and other commercial and governmental requirements, including foreign litigation matters.

NOTE 18. SEGMENT INFORMATION

The company’s operations are organized into five reportable segments, four of which have been determined on a geographic basis of segmentation: North America, Europe, South America and Asia. In addition, Praxair operates its worldwide surface technologies business through its wholly-owned subsidiary, Praxair Surface Technologies, Inc., which represents the fifth reportable segment.

Praxair’s operations consist of two major product lines: industrial gases and surface technologies. The industrial gases product line centers on the manufacturing and distribution of atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, acetylene). Many of these products are co-products of the same manufacturing process. Praxair manufactures and distributes nearly all of its products and manages its customer relationships on a regional basis. Praxair’s industrial gases are distributed to various end markets within a regional segment through one of three basic distribution methods: on-site or tonnage; merchant liquid; and packaged or cylinder gases. The distribution methods are generally integrated in order to best meet the customer’s needs and very few of its products can be economically transported outside of a region. Therefore, the distribution economics are specific to the various geographies in which the company operates and are consistent with how management assesses performance.

Praxair evaluates the performance of its reportable segments based primarily on operating profit, excluding inter-company royalties and special charges. Sales are determined based on the country in which the legal subsidiary is domiciled. Corporate and globally managed expenses, and research and development costs relating to Praxair’s global industrial gases business, are allocated to operating segments based on sales. Long-lived assets include property, plant and equipment, other intangible assets and goodwill.

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The table below presents information about reportable segments for the years ended December 31, 2007, 2006 and 2005.

(Millions of dollars)	2007		2006		2005
SALES (a)
North America	$	5,185	$	4,696	$	4,429
Europe		1,345		1,163		1,088
South America		1,604		1,348		1,123
Asia		746		636		543
Surface technologies (b)		522		481		473
	$	9,402	$	8,324	$	7,656
OPERATING PROFIT
North America	$	947	$	822	$	685
Europe		315		266		263
South America		311		252		202
Asia		121		111		95
Surface technologies (b)		92		68		48
	$	1,786	$	1,519	$	1,293
TOTAL ASSETS (c)
North America	$	6,591	$	5,549	$	5,500
Europe		2,301		1,921		1,706
South America		2,580		2,030		1,764
Asia		1,388		1,124		977
Surface technologies		522		478		544
	$	13,382	$	11,102	$	10,491
DEPRECIATION AND AMORTIZATION
North America	$	405	$	380	$	373
Europe		120		105		101
South America		132		106		91
Asia		85		72		63
Surface technologies		32		33		37
	$	774	$	696	$	665
CAPITAL EXPENDITURES AND ACQUISITIONS
North America (Note 3)	$	1,085	$	625	$	517
Europe (Note 3)		251		119		107
South America		226		189		154
Asia		244		141		126
Surface technologies		46		40		17
	$	1,852	$	1,114	$	921
SALES BY MAJOR COUNTRY
United States	$	4,093	$	3,761	$	3,610
Brazil		1,351		1,111		939
Other – foreign		3,958		3,452		3,107
	$	9,402	$	8,324	$	7,656
LONG-LIVED ASSETS BY MAJOR COUNTRY
United States	$	3,980	$	3,489	$	3,457
Brazil		1,497		1,191		1,010
Other – foreign		4,587		3,698		3,267
	$	10,064	$	8,378	$	7,734

(a) Sales reflect external sales only. Intersegment sales, primarily from North America to other segments, were not significant.

(b) On July 3, 2006, Praxair completed the sale of its aviation services business, which contributed full year 2005 sales of approximately $80 million ($67 million of which was reflected in the Surface technologies segment).

(c) Includes equity investments as of December 31 as follows:

(Millions of dollars)	2007		2006		2005
North America	$	61	$	56	$	54
Europe(*)		273		124		126
Asia		53		38		38
	$	387	$	218	$	218

^(*) 2007 includes the Yara Praxair AS joint venture in Norway formed in November (see Note 3).

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NOTE 19. QUARTERLY DATA (UNAUDITED)

(Dollar amounts in millions, except per share data)
2007	1Q		2Q		3Q		4Q		YEAR
SALES	$	2,175	$	2,332	$	2,372	$	2,523	$	9,402
Cost of sales, exclusive of depreciation and amortization	$	1,282	$	1,388	$	1,394	$	1,493	$	5,557
Depreciation and amortization	$	182	$	189	$	196	$	207	$	774
Operating profit	$	403	$	439	$	460	$	484	$	1,786
Net income	$	265	$	291	$	305	$	316	$	1,177
BASIC PER SHARE DATA
Net income	$	0.83	$	0.91	$	0.96	$	1.00	$	3.69
Weighted average shares (000’s)		320,763		320,213		318,513		316,497		318,997
DILUTED PER SHARE DATA
Net income	$	0.81	$	0.89	$	0.94	$	0.98	$	3.62
Weighted average shares (000’s)		326,787		326,301		324,920		323,328		324,842

2006	1Q		2Q		3Q		4Q		YEAR
SALES	$	2,026	$	2,076	$	2,099	$	2,123	$	8,324
Cost of sales, exclusive of depreciation and amortization	$	1,207	$	1,238	$	1,259	$	1,264	$	4,968
Depreciation and amortization	$	171	$	174	$	173	$	178	$	696
Operating profit	$	352	$	382	$	392	$	393	$	1,519
Net income	$	225	$	247	$	247	$	269	$	988
BASIC PER SHARE DATA
Net income	$	0.69	$	0.76	$	0.76	$	0.83	$	3.05
Weighted average shares (000’s)		323,804		323,519		323,582		323,077		323,495
DILUTED PER SHARE DATA
Net income	$	0.68	$	0.75	$	0.75	$	0.82	$	3.00
Weighted average shares (000’s)		330,043		329,880		329,498		329,508		329,293

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MANAGEMENT’S STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS

Praxair’s consolidated financial statements are prepared by management, which is responsible for their fairness, integrity and objectivity. The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America applied on a consistent basis, except for accounting changes as disclosed, and include amounts that are estimates and judgments. All historical financial information in this annual report is consistent with the accompanying financial statements.

Praxair maintains accounting systems, including internal accounting controls, monitored by a staff of internal auditors, that are designed to provide reasonable assurance of the reliability of financial records and the protection of assets. The concept of reasonable assurance is based on recognition that the cost of a system should not exceed the related benefits. The effectiveness of those systems depends primarily upon the careful selection of financial and other managers, clear delegation of authority and assignment of accountability, inculcation of high business ethics and conflict-of-interest standards, policies and procedures for coordinating the management of corporate resources, and the leadership and commitment of top management. In compliance with Section 404 of the Sarbanes-Oxley Act of 2002, Praxair assessed its internal control over financial reporting and issued a report (see below).

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has completed an integrated audit of Praxair’s 2007, 2006 and 2005 consolidated financial statements and of its internal control over financial reporting as of December 31, 2007 in accordance with the standards of the Public Company Accounting Oversight Board (United States) as stated in their report appearing on page 71.

The Audit Committee of the Board of Directors, which consists solely of non-employee directors, is responsible for overseeing the functioning of the accounting system and related controls and the preparation of annual financial statements. The Audit Committee periodically meets with management, internal auditors and the independent accountants to review and evaluate their accounting, auditing and financial reporting activities and responsibilities, including management’s assessment of internal control over financial reporting. The independent registered public accounting firm and internal auditors have full and free access to the Audit Committee and meet with the committee, with and without management present.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Praxair’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of management, including the company’s principal executive officer and principal financial officer, the company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (often referred to as COSO). Based on this evaluation, management concluded that the company’s internal control over financial reporting was effective as of December 31, 2007.

This evaluation did not include the internal control over financial reporting related to the following acquisitions completed during 2007: Linde AG’s industrial gas business in Mexico, Mittler Supply, Inc. and the majority-owned packaged gas subsidiary GT&S, Inc. Total assets and sales for these acquisitions represent 2.3% and 0.9%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2007 (see Note 3).

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has issued their opinion on the Company’s internal control over financial reporting as of December 31, 2007 as stated in their report appearing on page 71.

STEPHEN F. ANGEL

Chairman, President and Chief Executive Officer

JAMES S. SAWYER

Executive Vice President and Chief Financial Officer

PATRICK M. CLARK

Vice President and Controller

Danbury, Connecticut

February 26, 2008

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND

SHAREHOLDERS PRAXAIR, INC:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Praxair, Inc. and its subsidiaries at December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on these financial statements, and on the Company’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Notes 1 and 2 to the consolidated financial statements, the Company has changed the manner in which it accounts for conditional asset retirement obligations in 2005, share-based payments and retirement benefits in 2006 and the manner in which it accounts for uncertain tax positions in 2007.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Linde AG’s industrial gas business in Mexico; Mittler Supply, Inc; and the majority-owned packaged gas subsidiary GT&S, Inc. from its assessment of internal control over financial reporting as of December 31, 2007 because they were acquired by the Company in purchase business combinations during 2007. We have also excluded Linde AG’s industrial gas business in Mexico; Mittler Supply, Inc.; and the majority-owned packaged gas subsidiary GT&S, Inc. from our audit of internal control over financial reporting. These businesses’ aggregated total assets and total revenues represent 2.3% and 0.9%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2007.

PRICEWATERHOUSECOOPERS

Stamford, Connecticut

February 26, 2008

71

FIVE-YEAR FINANCIAL SUMMARY

(DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,	2007			2006			2005(a)			2004			2003
FROM THE INCOME STATEMENT
Sales	$	9,402		$	8,324		$	7,656		$	6,594		$	5,613
Cost of sales, exclusive of depreciation and amortization		5,557			4,968			4,641			3,987			3,328
Selling, general and administrative		1,190			1,086			987			869			766
Depreciation and amortization		774			696			665			578			517
Research and development		98			87			80			77			75
Other income (expenses) – net		3			32			10			20			(5	)
Operating profit		1,786			1,519			1,293			1,103			922
Interest expense – net		173			155			163			155			151
Income before taxes		1,613			1,364			1,130			948			771
Income taxes		419			355			376			232			174
		1,194			1,009			754			716			597
Minority interests		(43	)		(31	)		(37	)		(30	)		(24	)
Income from equity investments		26			10			15			11			12
Income before cumulative effect of change in accounting principle		1,177			988			732			697			585
Cumulative effect of change in accounting principle(b)		—			—			(6	)		—			—
Net income	$	1,177		$	988		$	726		$	697		$	585
PER SHARE DATA(c)
Basic earnings per share:
Income before cumulative effect of change in accounting principle	$	3.69		$	3.05		$	2.26		$	2.14		$	1.79
Net income	$	3.69		$	3.05		$	2.24		$	2.14		$	1.79
Diluted earnings per share:
Income before cumulative effect of change in accounting principle	$	3.62		$	3.00		$	2.22		$	2.10		$	1.77
Net income	$	3.62		$	3.00		$	2.20		$	2.10		$	1.77
Cash dividends per share	$	1.20		$	1.00		$	0.72		$	0.60		$	0.46
WEIGHTED AVERAGE SHARES OUTSTANDING (000’S)(c)
Basic shares outstanding		318,997			323,495			323,765			325,891			326,388
Diluted shares outstanding		324,842			329,293			329,685			331,403			330,991
OTHER INFORMATION AND RATIOS
Total debt	$	4,192		$	3,167		$	3,447		$	3,525		$	2,816
Capital expenditures(d)	$	1,376		$	1,100		$	877		$	668		$	983
Acquisitions(e)	$	476		$	14		$	44		$	929		$	73
Cash flow from operations	$	1,958		$	1,752		$	1,475		$	1,243		$	1,137
Total assets at year end	$	13,382		$	11,102		$	10,491		$	9,878		$	8,305
Return on equity(f)		24.3	%		23.4	%		21.3	%		20.0	%		20.5	%
After-tax return on capital(f)		15.3	%		14.6	%		12.8	%		12.1	%		12.3	%
Debt-to-capital ratio(f)		43.4	%		39.9	%		45.6	%		47.9	%		46.2	%
Shares outstanding at year end (000’s)(c)		315,488			320,861			322,339			323,621			326,086
Number of employees		27,992			27,042			27,306			27,020			25,438

^(a) Amounts include a $92 million income tax charge, or $0.28 per diluted share, recorded in the 2005 third quarter related to the repatriation of foreign earnings pursuant to the American Jobs Creation Act of 2004 and other tax adjustments.

^(b) 2005 net income includes the cumulative effect of accounting change relating to the implementation of a new accounting standard for asset retirement obligations.

^(c) Per share data, weighted average and total shares outstanding have been adjusted, where applicable, to reflect the December 15, 2003 two-for-one stock split which was effected as a stock dividend.

^(d) Capital expenditures for 2003 include the purchase of previously leased assets for $339 million.

^(e) Acquisitions for 2007 include the acquisitions of Linde AG’s industrial gas business in Mexico and Mittler Supply for an aggregate purchase price of $295 million as well as the acquisition of a 50% interest in the industrial gases business of Yara International ASA for $117 million (see Note 3 to the consolidated financial statements); for 2004, it includes the acquisition of HCS for $245 million and the German acquisition in December for $667 million.

^(f) Non-GAAP measure. See the Non-GAAP Financial Measures on page 73 for definitions and reconciliation to reported amounts.

72

NON-GAAP FINANCIAL MEASURES

The company presents the following non-GAAP financial measures on pages 37, 39 and 72 of this annual report:

(Dollar Amounts In Millions, Except Per Share Data)
YEAR ENDED DECEMBER 31,	2007		2006		2005		2004		2003
After-tax return on capital	15.3	%	14.6	%	12.8	%	12.1	%	12.3	%
Return on equity	24.3	%	23.4	%	21.3	%	20.0	%	20.5	%
Debt-to-capital	43.4	%	39.9	%	45.6	%	47.9	%	46.2	%

AFTER-TAX RETURN ON CAPITAL

After-tax return on capital is defined as after-tax adjusted operating profit plus income from equity investments, divided by average capital, and excluding special items. Capital is comprised of total debt, minority interests, shareholders’ equity and preferred stock. Praxair’s definition of after-tax return on capital may not be comparable to similar definitions used by other companies. The company believes that its after-tax return on invested capital is an appropriate measure for judging performance as it reflects the approximate after-tax profit earned as a percentage of investments by all parties in the business (debt, minority interests, preferred stock and shareholders’ equity).

(Dollar amounts in millions)
YEAR ENDED DECEMBER 31,	2007			2006			2005			2004			2003
Reported operating profit	$	1,786		$	1,519		$	1,293		$	1,103		$	922
Less: pro forma stock option expense		—			—			(40	)		(42	)		(42	)
Adjusted operating profit		1,786			1,519			1,253			1,061			880
Less: adjusted taxes
Reported income taxes		419			355			376			232			174
Less: tax benefit on pro forma stock option expense		—			—			(14	)		(14	)		(14	)
Less: Repatriation and other income tax charges		—			—			(92	)		—			—
Adjusted taxes		(419	)		(355	)		(270	)		(218	)		(160	)
Less: tax benefit on interest expense(a)		(45	)		(41	)		(42	)		(39	)		(36	)
Add: equity income		26			10			15			11			12
Net operating profit after tax (NOPAT)	$	1,348		$	1,133		$	956		$	815		$	696
Beginning capital	$	7,943		$	7,551		$	7,358		$	6,099		$	5,252
Ending capital	$	9,655		$	7,943		$	7,551		$	7,358		$	6,099
Average capital	$	8,799		$	7,747		$	7,455		$	6,729		$	5,676
After-tax return on capital(b)		15.3	%		14.6	%		12.8	%		12.1	%		12.3	%

^(a) Tax benefit on interest expense is computed using the effective rate adjusted for non-recurring income tax benefits and charges. The effective rates used were as follows: 2007, 26%; 2006, 26%; 2005, 26%; 2004, 25%; and 2003, 24%.

^(b) After-tax return on capital was reduced by 0.6% in 2004 due to the German acquisition in December.

73

RETURN ON EQUITY

Return on equity is defined as income before changes in accounting principles, excluding special items, divided by average shareholders’ equity. Praxair’s definition of return on equity may not be comparable to similar definitions used by other companies. The company believes that its return on equity is an appropriate measure for judging performance for shareholders.

(Dollar amounts in millions)
YEAR ENDED DECEMBER 31,	2007			2006			2005			2004			2003
Reported income before accounting change	$	1,177		$	988		$	732		$	697		$	585
Less: pro forma stock option expense, net of taxes		—			—			(26	)		(28	)		(28	)
Add: Repatriation and other income tax charges		—			—			92			—			—
Adjusted income before accounting change	$	1,177		$	988		$	798		$	669		$	557
Beginning shareholders’ equity	$	4,554		$	3,902		$	3,608		$	3,088		$	2,340
Ending shareholders’ equity	$	5,142		$	4,554		$	3,902		$	3,608		$	3,088
Average shareholders’ equity	$	4,848		$	4,228		$	3,755		$	3,348		$	2,714
Return on equity		24.3	%		23.4	%		21.3	%		20.0	%		20.5	%

DEBT-TO-CAPITAL RATIO

Debt-to-capital ratio is defined as debt divided by total capital. Total capital consists of debt, minority interests and shareholders’ equity. Praxair’s definition of debt-to-capital may not be comparable to similar definitions used by other companies. The company believes that debt-to-capital is appropriate for measuring its financial leverage.

(Dollar amounts in millions)
YEAR ENDED DECEMBER 31,	2007			2006			2005			2004			2003
Total capital	$	4,192		$	3,167		$	3,447		$	3,525		$	2,816
Debt		321			222			202			225			195
Minority interests		5,142			4,554			3,902			3,608			3,088
Shareholders’ equity	$	9,655		$	7,943		$	7,551		$	7,358		$	6,099
Debt-to-capital ratio		43.4	%		39.9	%		45.6	%		47.9	%		46.2	%

74

INVESTOR INFORMATION

Elizabeth T. Hirsch, Director, Investor Relations

Praxair, Inc.

39 Old Ridgebury Road

Danbury, Connecticut 06810-5113

e-mail: investor_relations@praxair.com

(203) 837-2210

INVESTOR INFORMATION AT WWW.PRAXAIR.COM/INVESTORS

— Annual reports	— Press release
— Calendar	— Quarterly earnings
— Disclosure practices	— Stock information
— FAQs	— Investor package
— Financial news & information	— Presentations
— Five-year financials	— SEC filings
— Earnings guidance	— Sustainability report

COMMON STOCK LISTING (SYMBOL: PX)

New York Stock Exchange

OTHER STOCK EXCHANGES TRADING PRAXAIR STOCK

Cincinnati, Midwest, Pacific

NUMBER OF SHAREHOLDERS

There were 19,097 shareholders of record as of December 31, 2007.

DIVIDEND POLICY

Dividends on Praxair’s common stock are usually declared and paid quarterly. Praxair’s objective is to continue quarterly dividends and consider annual dividend increases in conjunction with continued growth in earnings per share. However, the declaration of dividends is a decision made by the Praxair Board of Directors based on Praxair’s earnings, financial condition and other factors the board considers relevant.

STOCK TRANSFER AGENT AND STOCK RECORD KEEPING

Registrar and Transfer Company is Praxair’s stock transfer agent and registrar, and maintains shareholder records. For information about account records, stock certificates, change of address and dividend payments, contact:

1-800-368-5948 or info@rtco.com

website address: http://www.rtco.com

BY MAIL, ADDRESS SHAREHOLDER INQUIRIES TO:

Shareholder Relations Department

Registrar and Transfer Company

10 Commerce Drive

Cranford, New Jersey 07016

DIVIDEND REINVESTMENT PLAN

Praxair provides investors a convenient, low-cost program that allows dividends to be automatically reinvested into additional shares of Praxair common stock and allows purchases of additional shares of Praxair common stock without commissions. Contact Shareholder Relations at Registrar and Transfer Company for full details at the address above.

COMPLIANCE WITH NYSE CORPORATE GOVERNANCE LISTING STANDARDS

As required by New York Stock Exchange rules, on May 9, 2007, the company submitted to the NYSE an unqualified CEO annual certification of compliance with NYSE’s Corporate Governance Listing Standards. Praxair expects to do so again within 30 days after the annual meeting of shareholders.

Praxair has also filed with its annual report on Form 10-K for 2007 the CEO and CFO certifications (regarding the quality of the company’s financial statements and its disclosure controls and procedures) required by §302 of the Sarbanes-Oxley Act of 2002 (as implemented by Securities and Exchange Commission Rule 13a-14(a) of the Securities Exchange Act of 1934).

ANNUAL SHAREHOLDERS MEETING

The 2008 annual meeting of shareholders of Praxair, Inc. will be held at 9:30 a.m. on Tuesday, April 22, 2008 at the Sheraton Danbury, 18 Old Ridgebury Road, Danbury, Connecticut.

NYSE QUARTERLY STOCK PRICE AND DIVIDEND INFORMATION

MARKET PRICE	TRADING HIGH		TRADING LOW		CLOSE		DIVIDEND PER SHARE
2007
First Quarter	$	65.00	$	58.32	$	62.96	$	0.30
Second Quarter	$	74.27	$	62.34	$	71.99	$	0.30
Third Quarter	$	84.13	$	68.10	$	83.76	$	0.30
Fourth Quarter	$	91.99	$	78.43	$	88.71	$	0.30
2006
First Quarter	$	57.44	$	50.65	$	55.15	$	0.25
Second Quarter	$	57.60	$	50.76	$	54.00	$	0.25
Third Quarter	$	60.08	$	51.60	$	59.16	$	0.25
Fourth Quarter	$	63.70	$	57.20	$	59.33	$	0.25
2005
First Quarter	$	48.50	$	41.06	$	47.86	$	0.18
Second Quarter	$	49.42	$	43.48	$	46.60	$	0.18
Third Quarter	$	51.74	$	44.55	$	47.93	$	0.18
Fourth Quarter	$	54.31	$	45.80	$	52.96	$	0.18

Praxair and the Flowing Airstream design, AOD, CoJet, Grab’n Go, I-SO, MixFlo, Medipure, StarSolver, and UpTime are trademarks or registered trade-marks of Praxair Technology, Inc. in the United States and/or other countries.

^© 2008 Praxair Technology, Inc. All rights reserved.

75

EX-21.01

SUBSIDIARIES OF PRAXAIR, INC.

Praxair, Inc. and Subsidiaries

EXHIBIT 21.01

The following is a list of the Company’s subsidiaries, including unconsolidated affiliates, as of December 31, 2007.

	Place of Incorporation
3R Associati S.p.A.	Italy
640733 British Columbia Ltd.	British Columbia
A. I. C. E. Reti S.c.a.r.l.	Italy
Accent Cay Holdings Inc.	British Virgin Islands
Agas Servizi S.r.l.	Italy
Ambuthirtha Power Pvt. Ltd.	India
American Home Oxygen and Hospital Equipment, Inc.	Florida
AMKO Service Company	Ohio
Andaluza de Gases S.A.	Spain
Antwerpse Chemische Bedrijven (LCB) N. V.	Belgium
Argim Ltd.	Israel
Arroweld Italia S.p.A.	Italy
Asistencia Tecnologica Medioambiental, S.A.	Spain
Asistir Ltda.	Colombia
Augusta Company Limited	Thailand
Beijing Praxair Huashi Carbon Dioxide Co., Ltd.	China
Beijing Praxair, Inc.	China
Bieffe Saldatura S.r.l.	Italy
Calizas Elycar, S.L.	Spain
Cane Welding Supply Ltd.	Canada
Carbitalia S.p.A.	Italy
Carbonorte S.L.	Spain
Carburo del Cinca, S.A.	Spain
Caring Medical Supply Corp.	Pennsylvania
Carolina Home Care, Inc.	South Carolina
Casa di cura Villa Erbosa S.p.A.	Italy
CBI Investments, Inc.	Delaware
Chanceller Servicos de Lavanderia Industrial Ltda.	Brazil
Chemgas S.r.l.	Italy
Cliffside Helium, L.L.C.	Delaware
Cliffside Refiners, L.P.	Delaware
Clifford F. Schultze & Co.	Illinois
Coatec Gesellschaft für Oberflächenveredelung mbH & Co. KG	Germany
Compressions Gas Tecnic S.r.l.	Italy
Coan Service S.r.l.	Italy
Consorcio Gemini	Brazil
Ltd.	British Columbia

SUBSIDIARIES OF PRAXAIR, INC. (Continued)

Praxair, Inc. and Subsidiaries

EXHIBIT 21.01

	Place of Incorporation
Consorgas S.r.l.	Italy
Consorzio Tuscia Energia	Italy
Constructors Lix da Cuna S.A.	Brazil
Consultora Rynuter S. A.	Uruguay
Craig Home Care, Inc.	Texas
Cryo Teruel S.A.	Spain
Cylmaint N.V.	Belgium
D'Angelo S.p.A.	Italy
Dayvault's Home Medical, Inc.	North Carolina
Distribuidora Mexicana de Criogénicos, S.A. de C.V.	Mexico
Doctors Choice Home Medical Equipment of Largo, Inc.	Florida
Domolife S.r.l.	Italy
Dryce Italia S.r.l.	Italy
EIVA AS	Norway
EIVA EIENDOM AS	Norway
ESA S.r.l.	Italy
Eubask, S. L.	Spain
FAS S.r.l.	Italy
Ferrygas, S.A.	Spain
Flarco S.r.l.	Italy
Fred E. McGilberry & Associates, Inc.	Texas
Gas Lucchetta S.r.l.	Italy
Gas Tecnici Foligno S.r.l.	Italy
Gascarbo SAIC	Argentina
Gases de Ensenada S.A.	Argentina
Gases Tachira S.A.	Venezuela
Gases Valles del Tuy S.A.	Venezuela
General Gas S.r.l. Current	Italy
Globos Properties S.a.r.l.	Luxembourg
GNL Gemini Comercializacao e Logistica de Gas Ltda.	Brazil
Grenslandgas G.m.b.H.	Germany
Grupo Praxair, S. de R.L. de C.V.	Mexico
HCS Holdings, Inc.	Delaware
Helium Centre Pte. Ltd.	Singapore
Hielo Seco Srl.	Bolivia
Home Care Medical, Inc.	Florida
Home Care Supply, Inc.	Delaware
Home Care Supply, L.L.C.	Texas
Home Hospital Services, Inc.	Texas
Hobart Industrial Gases and Supplies, Inc.	Indiana
I.T.A. S.r.l.	Italy
Iberica del Carbonico S.A. (Ibercasa)	Spain

SUBSIDIARIES OF PRAXAIR, INC. (Continued)

Praxair, Inc. and Subsidiaries

EXHIBIT 21.01

	Place of Incorporation
IGAT - Industria Gas Tecnici S.p.A.	Italy
Industria Paraguaya de Gases S.A.	Paraguay
Industrias Reunidas de Plastico e Mineracao S. A.	Brazil
Ingemedical Ltda.	Colombia
Integrar Comercio e Servicos Industriais Ltda.	Brazil
International Cryogenic Equipment Corporation	Delaware
Istragas Gas Tecnici e Petroliferi D.o.o.	Slovenia
Italargon S.r.l.	Italy
Jalopy Shoppe, Inc.	Texas
Jamaica Oxygen & Acetylene Limited	Jamaica
Jindal Praxair Oxygen Company Private Limited	India
Julio Pastafiglia & Cia. S.A.	Argentina
Kelvin Finance Company Limited	Ireland
Korea Liquid Carbonic Co., Ltd.	Korea
Kosmoid Finance	Ireland
Kosmoid Finance (UK) Limited	United Kingdom
Kunshan Praxair Co., Ltd.	China
L. Clausen & Cia. Srl	Argentina
Lake County Medical Gas, Inc.	Illinois
Lida S.A.S.	France
Liquid Carbonic Corporation	Delaware
Liquid Carbonic del Paraguay S.A.	Paraguay
Liquid Carbonic LNG International, Inc.	Delaware
Liquid Carbonic of Oklahoma, Inc.	Oklahoma
Liquid Ltda.	Brazil
Liquido Carbonico Colombiana S.A.	Colombia
Lo-Cost Gas Ltd.	British Columbia
M-R Medical, Inc.	Texas
Magaldi Gas Tecnici S.r.l.	Italy
Magaldi Life S.r.l.	Italy
Malaysian Industrial Gas Company Sdn. Bhd.	Malaysia
Mathews Chemical & Supply Co.	California
Maxima Air Separation Center Limited	Israel
Maxima Medical Ltd.	Israel
McGaughey-Cresswell-Mann, Inc.	Texas
Medi-Rents Business Trust	Massachusetts
Medi-Rents of Maine, Inc.	Massachusetts
Medi-Rents, Inc.	Massachusetts

SUBSIDIARIES OF PRAXAIR, INC. (Continued)

Praxair, Inc. and Subsidiaries

EXHIBIT 21.01

	Place of Incorporation
Medical Center Pharmacy of Boston, Inc.	Massachusetts
Medical Gases S. R. L	Argentina
Medigas Italia S.r.l.	Italy
MetFabCity Inc.	Delaware
Neotex Solucoes Ambientais Ltda.	Brazil
Newbridge Surgical Supplies, Inc.	New York
Nitraco N.V.	Belgium
Nitrogen Services, Inc.	Delaware
Nitropet, S.A. de C.V.	Mexico
Novigas - Consorzio con Attivita Esterna	Italy
Nuova Illafor S.r.l.	Italy
Nupharm, Inc.	Texas
O2 Investments, Inc.	Texas
O3 Investments, Inc.	Virginia
Old Danford S.A.	Uruguay
Oriol S.r.l.	Italy
Orobie Energia S.c.r.l.	Italy
Oxigeno del Norte S.A.	Spain
Oxigenos Camatagua, C. A.	Venezuela
Oxigenos de Colombia Ltda.	Colombia
Oximesa S.L.	Spain
Oxinorte Operaciones S.A.	Spain
Oxirent Argentina S. A.	Argentina
Oxygene Industriel Girardin, Inc.	Canada
P.T. Maharani Praxair Cilegon (MPC)	Indonesia
Panservice S.r.l.	Italy
Pittsburg Production, LLC	Delaware
Praxair & M. I. Services France S.a. r. l.	France
Praxair & M.I. Services, S.r.l.	Italy
Praxair (Beijing) Semiconductor Gases Co., Ltd.	China
Praxair (China) Investment Co., Ltd.	Peoples Republic of China
Praxair (Guangzhou) Industrial Gases Co., Ltd.	China
Praxair (Huizhou) Industrial Gases Limited	China
Praxair (Nanjing) Carbon Dioxide Co., Ltd.	China
Praxair (Nanjing) Gases Co., Ltd.	China
Praxair (Shanghai) Co., Ltd.	China
Praxair (Shanghai) Semiconductor Gases Co., Ltd.	China
Praxair (Shanghai) Trading Co., Ltd.	China
Praxair (Thailand) Company Limited	Thailand
Praxair (Wuhan), Inc.	China

SUBSIDIARIES OF PRAXAIR, INC. (Continued)

Praxair, Inc. and Subsidiaries

EXHIBIT 21.01

	Place of Incorporation
Praxair (Yueyang) Co., Ltd.	Peoples Republic of China
Praxair Alberta Ltd.	Alberta
Praxair Alberta Partnership	Alberta
Praxair Argentina S.R.L.	Argentina
Praxair Asia, Inc.	Delaware
Praxair Australia Pty Limited	Australia
Praxair B.V.	Netherlands
Praxair Bolivia Ltda.	Bolivia
Praxair Canada Inc.	Canada
Praxair Carbondioxide Private Limited	India
Praxair Chemax Semiconductor Materials Co. Ltd.	Taiwan
Praxair Chile Ltda.	Chile
Praxair Costa Rica, S.A.	Costa Rica
Praxair Deer Park Cogen, Inc.	Delaware
Praxair Deutschland GmbH & Co. KG	Germany
Praxair Deutschland Holding GMBH & Co. KG	Germany
Praxair Distribuciones, S.C.A.	Venezuela
Praxair Distribution Southeast, LLC	Delaware
Praxair Distribution, Inc.	Delaware
Praxair do Brasil Ltda.	Brazil
Praxair e Companhia - Comércio e Serviços	Portugal
Praxair E-Services Private Limited	India
Praxair Employees Association of Danbury, Inc.	Connecticut
Praxair Energy Resources, Inc.	Delaware
Praxair Energy Services, Inc.	Delaware
Praxair España, S.L.	Spain
Praxair Euroholding, S. L.	Spain
Praxair Europe Finance-Consultadoria e Projectos Lda.	Portugal
Praxair Fray Bentos S.C.A.	Uruguay
Praxair Free Trade Zone Costa Rica, Ltd.	Costa Rica
Praxair Gases Alberta Ltd.	Alberta
Praxair GmbH	Germany
Praxair Healthcare Services of Indiana, LLC	Delaware
Praxair Healthcare Services, Inc.	Delaware
Praxair Holding Company	Nova Scotia
Praxair Holding Latinoamerica, S.L.	Spain
Praxair Holding N.V.	Belgium
Praxair Holdings International, Inc.	Delaware
Praxair Hungary Kft	Hungary
Praxair Hydrogen Supply, Inc.	Delaware
Praxair Iberica, S.A.	Spain
Praxair India Private Limited	India

SUBSIDIARIES OF PRAXAIR, INC. (Continued)

Praxair, Inc. and Subsidiaries

EXHIBIT 21.01

	Place of Incorporation
Praxair Industrias S. de R.L. de C.V.	Mexico
Praxair Industriegase GmbH & Co. KG	Germany
Praxair Industriegase Verwaltungs GmbH	Germany
Praxair International Finance	Ireland
Praxair Investments B.V.	Netherlands
Praxair K.K.	Japan
Praxair Korea Company, Limited	Korea
Praxair Latin America Holdings LLC	Delaware
Praxair Luxembourg Finance S.a.r.l.	Luxembourg
Praxair Management Services, Inc.	Delaware
Praxair Maritime Company	Nova Scotia
Praxair Mexico, S. de R.L. de C.V.	Mexico
Praxair Mexico Holdings S. de R.L. de C.V.	Mexico
Praxair MRC S.A.S.	France
Praxair N.V.	Belgium
Praxair Pacific Ltd.	Mauritius
Praxair Paraguay S.R.L.	Paraguay
Praxair Partnership	Delaware
Praxair PC Partnership - Association Praxair PC	Canada
Praxair Peru S.R.L.	Peru
Praxair Philippines, Inc.	Philippines
Praxair PHP S.A.S.	France
Praxair Plainfield, Inc.	Delaware
Praxair Polska Sp. z o.o.	Poland
Praxair Portugal Gases S.A.	Portugal
Praxair Produccion España, S.L.	Spain
Praxair Puerto Rico B. V.	Netherlands
Praxair Puerto Rico LLC	Delaware
Praxair Qingdao Co., Ltd.	Peoples Republic of China
Praxair S.A.S.	France
Praxair S.r.l.	Italy
Praxair S.T. Technology, Inc.	Delaware
Praxair Sante SAS	France
Praxair Services (UK) Limited	United Kingdom
Praxair Services Canada Inc.	Ontario
Praxair Services GmbH & Co. KG	Germany
Praxair Services, Inc.	Texas
Praxair Shanghai Meishan Inc.	China
Praxair Shaogang (Guangdong) Co., Ltd.	China
Praxair Shaogang Co., Ltd.	China
Praxair Sixon (Anhui) Industrial Gases Co., Ltd.	China
Praxair Soldadura S.L.	Spain

SUBSIDIARIES OF PRAXAIR, INC. (Continued)

Praxair, Inc. and Subsidiaries

EXHIBIT 21.01

	Place of Incorporation
Praxair Sudamerica S.L.	Spain
Praxair Surface Holdings SARL	France
Praxair Surface Technologies (Europe) S.A.	Switzerland
Praxair Surface Technologies Co., Ltd.	Korea
Praxair Surface Technologies do Brasil Ltda.	Brazil
Praxair Surface Technologies España, S.A.	Spain
Praxair Surface Technologies G.m.b.H.	Germany
Praxair Surface Technologies K.K.	Japan
Praxair Surface Technologies Limited	United Kingdom
Praxair Surface Technologies Mexico, S.A. de C.V.	Mexico
Praxair Surface Technologies Pte. Ltd.	Singapore
Praxair Surface Technologies S.A.S.	France
Praxair Surface Technologies S.r.L.	Italy
Praxair Surface Technologies, Inc.	Delaware
Praxair Taiwan Co., Ltd.	Taiwan
Praxair Technology Solutions, Inc.	Delaware
Praxair Technology, Inc.	Delaware
Praxair UK Limited	United Kingdom
Praxair Uruguay Ltda.	Uruguay
Praxair Venezuela Sociedade en Comandita por Acciones	Venezuela
Praxair Verwaltungs GmbH	Germany
Praxair-Ozone, Inc.	Delaware
Praxair.com GmbH	Switzerland
Premetal S.r.l.	Italy
Prerreducidos Vizcaya AIE.	Spain
Prerreducidos Bizkaia 1, S.A.	Spain
Production Praxair Canada Inc.	Canada
Productos Especiales Quimicos, S.A. de C.V.	Mexico
Pyronics S.A.	Belgio
Quality Health Systems, Inc.	New York
Quimica Basica, S.A.	Spain
R.S.L.S. con S.a.r.l. (name change from R.S.B. S.c.r.l.)	Italy
Rapidox Gases Industriais Ltda.	Brazil
Ravenna Servizi Industriali S.C.p.A.	Italy
RBG Comercio de Metais Ltda.	Brazil
Rettifiche F.C.F. S.r.l.	Italy
Rhee (Beheer) B.V.	Netherlands
Rivoira S.p.A.	Italy
Rivoira Siad Servizi S. Con S.A.R.L.	Italy
Safex AS	Norway
S. E. B. S.c.r.l.	Italy
S.B.S. Bakeware Technologies S.L.	Spain
Sauerstoff und Stickstoffrohrleitungs	Germany

SUBSIDIARIES OF PRAXAIR, INC. (Continued)

Praxair, Inc. and Subsidiaries

EXHIBIT 21.01

	Place of Incorporation
Seoul Cold Air Products Co., Ltd.	Korea
SGX Services Inc.	Ontario
Shanghai Chemical Industry Park Industrial Gases Co., Ltd.	China
Shanghai Praxair Baosteel, Inc.	China
Shanghai Praxair-Yidian Inc.	China
SIAD Austria GmbH	Austria
SIAD Bulgaria ood	Bulgaria
SIAD Czech spol. s r.o.	Czech Republic
SIAD Healthcare S.p.A.	Italy
SIAD Hungary KFT	Hungary
SIAD Macchine Impianti S.p.A.	Italy
SIAD Romania s.r.l.	Rumania
SIAD Servizi S.r.l.	Italy
SIAD Slovakia spol. s r.o.	Slovakia
Sinopal Pte. Ltd.	Singapore
Smeding B. V.	Netherlands
Sociedade Portuguesa de Oxigenio Ltda.	Portugal
Societa Azionaria Miniere Anidride Carbonica S.A.M.A.C.	Italy
S.p.A.
Societa Italiana Acetilene e Derivati S.p.A.	Italy
Soudobeam S. A.	Belgium
Stabiagas ASA S.r.l.	Italy
Summania S.r.l.	Italy
Suncoast Medical Oxygen, Inc.	Florida
Sure/Arc Welding Supply (1977) Ltd.	Canada
TAFA Incorporated	Delaware
Tecno Project Industriale S.r.l.	Italy
Tecnoservizi Ambientali S.r.l.	Italy
Thai Carbonic Company, Ltd.	Thailand
The Infusion Network of Louisiana, Inc.	Louisiana
Tianjin Praxair, Inc.	China
Tongling Praxair Co., Ltd.	China
Topaz Consultora S.A.	Uruguay
Tradewinds Insurance Limited	Bermuda
Praxair Precision Components, Inc.	Arizona
Tri-Parish Rental, Inc.	Louisiana
Vidum Simonsen AS	Norway
Vinyard Engine Systems, Inc.	Nevada
Waldron and Kern, Inc.	Texas
Welco-CGI Gas Technologies, LLC	Delaware
Wescott Enterprises, Inc.	South Carolina
Westair Cryogenics Company	Delaware

SUBSIDIARIES OF PRAXAIR, INC. (Continued)

Praxair, Inc. and Subsidiaries

EXHIBIT 21.01

	Place of Incorporation
Westair Cryogenics Holding Company	Delaware
Westair Gas and Equipment, L.P.	Texas
White Martins de Camacari S.A.	Bahia
White Martins e Companhia - Comércio e Serviços	Portugal
White Martins e White Martins Comércio e Serviços	Portugal
White Martins Gases Industriais do Nordeste S.A.	Brazil
White Martins Gases Industriais do Norte S.A.	Brazil
White Martins Gases Industriais Ltda.	Brazil
White Martins Investimentos Ltda.	Brazil
White Martins Steel Commercial Ltda.	Brazil
Withrow Oxygen Service, Inc.	California
WMTM Equipamentos de Gases Ltda.	Brazil
Yara Praxair AB	Denmark
Yara Praxair A/S	Denmark
Yara Praxair AS	Norway
Yara Praxair Holding AS	Norway
Yara Praxair Holding Danmark A/S	Denmark

EX-23.01

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Praxair, Inc. and Subsidiaries

EXHIBIT 23.01

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 33-48480, 33-93444, 333-304, 333-18141, 333-40003, 333-57386, 333-102020 and 333-139328) and in the Registration Statements on Form S-8 (No. 33-48479, 33-48478, 33-87274, 33-92868, 33-18111, 333-18113, 333-33801, 333-64608, 333-81248, 333-97191, 333-115191, 333-115192 and 333-124618) of Praxair, Inc. of our report dated February 26, 2008 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Stamford, Connecticut

February 26, 2008

EX-31.01

RULE 13a-14(a) CERTIFICATIONS

Praxair, Inc. and Subsidiaries

EXHIBIT 31.01

I, Stephen F. Angel, certify that:

1. I have reviewed this Annual Report on Form 10-K of Praxair, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting ; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	February 26, 2008	By:	/s/ Stephen F. Angel
			Stephen F. Angel
			Chairman, President Chief Executive Officer (principal executive officer)

EX-31.02

RULE 13a-14(a) CERTIFICATIONS

Praxair, Inc. and Subsidiaries

EXHIBIT 31.02

I, James S. Sawyer, certify that:

1. I have reviewed this Annual Report on Form 10-K of Praxair, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report.

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date:	February 26, 2008	By:	/s/ James S. Sawyer
			James S. Sawyer
			Executive Vice President and Chief Financial Officer (principal financial officer)

EX-32.01

SECTION 1350 CERTIFICATION

Praxair, Inc. and Subsidiaries

EXHIBIT 32.01

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Praxair, Inc. (the “Company”), hereby certifies that the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	February 26, 2008	By:	/s/ Stephen F. Angel
			Stephen F. Angel
			Chairman, President and Chief Executive Officer (principal executive officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by 18 U.S.C. § 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.02

SECTION 1350 CERTIFICATION

Praxair, Inc. and Subsidiaries

EXHIBIT 32.02

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Praxair, Inc. (the “Company”), hereby certifies that the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	February 26, 2008	By:	/s/ James S. Sawyer
			James S. Sawyer
			Executive Vice President and Chief Financial Officer (principal financial officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.

A signed original of this written statement required by 18 U.S.C. § 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.