10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2011

OR

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

For the transition period from              to             

PRAXAIR, INC.

(Exact name of registrant as specified in its charter)

DELAWARE

(State or other jurisdiction of incorporation)

1-11037	06-1249050
(Commission File Number)	(IRS Employer Identification No.)
39 OLD RIDGEBURY ROAD, DANBURY, CT	06810-5113
(Address of principal executive offices)	(Zip Code)

(203) 837-2000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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 Exchange Act).    Yes  ¨    No  x

At March 31, 2011, 303,381,463 shares of common stock ($0.01 par value) of the Registrant were outstanding.

INDEX

PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Income - Praxair, Inc. and Subsidiaries Quarters Ended March 31, 2011 and 2010 (Unaudited)	3
	Condensed Consolidated Balance Sheets - Praxair, Inc. and Subsidiaries March 31, 2011 and December 31, 2010 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows - Praxair, Inc. and Subsidiaries Quarters Ended March 31, 2011 and 2010 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements - Praxair, Inc. and Subsidiaries (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	32
Item 4.	Controls and Procedures	32
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Reserved	38
Item 5.	Other Information	38
Item 6.	Exhibits	38
Signature		39

2

PRAXAIR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Millions of dollars, except per share data)

(UNAUDITED)

	Quarter Ended March 31,
	2011			2010
SALES	$	2,702		$	2,428
Cost of sales, exclusive of depreciation and amortization		1,536			1,381
Selling, general and administrative		308			294
Depreciation and amortization		244			228
Research and development		22			18
Venezuela currency devaluation		—			27
Other income (expense) - net		(1	)		(1	)
OPERATING PROFIT		591			479
Interest expense - net		35			32
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS		556			447
Income taxes		156			131
INCOME BEFORE EQUITY INVESTMENTS		400			316
Income from equity investments		9			7
NET INCOME (INCLUDING NONCONTROLLING INTERESTS)		409			323
Less: noncontrolling interests		(11	)		(9	)
NET INCOME - PRAXAIR, INC.	$	398		$	314
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
Basic earnings per share	$	1.31		$	1.02
Diluted earnings per share	$	1.29		$	1.01
Cash dividends per share	$	0.50		$	0.45
WEIGHTED AVERAGE SHARES OUTSTANDING (000’s):
Basic shares outstanding		304,071			306,793
Diluted shares outstanding		308,595			311,159

The accompanying notes are an integral part of these financial statements.

3

PRAXAIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Millions of dollars)

(UNAUDITED)

	March 31, 2011			December 31, 2010
ASSETS
Cash and cash equivalents	$	86		$	39
Accounts receivable - net		1,834			1,664
Inventories		416			399
Prepaid and other current assets		262			276
TOTAL CURRENT ASSETS		2,598			2,378
Property, plant and equipment (less accumulated depreciation of $10,536 at March 31, 2011 and $10,142 at December 31, 2010)		9,784			9,532
Goodwill		2,106			2,066
Other intangible assets - net		129			132
Other long-term assets		1,217			1,166
TOTAL ASSETS	$	15,834		$	15,274
LIABILITIES AND EQUITY
Accounts payable	$	777		$	830
Short-term debt		326			370
Current portion of long-term debt		31			32
Other current liabilities		787			878
TOTAL CURRENT LIABILITIES		1,921			2,110
Long-term debt		5,481			5,155
Other long-term liabilities		1,895			1,864
TOTAL LIABILITIES		9,297			9,129
Commitments and contingencies (Note 11)
Praxair, Inc. Shareholders’ Equity:
Common stock $0.01 par value, authorized - 800,000,000 shares, issued 2011 - 382,681,219 shares and 2010 - 382,623,071 shares		4			4
Additional paid-in capital		3,729			3,702
Retained earnings		7,721			7,475
Accumulated other comprehensive income (loss)		(794	)		(1,018	)
Treasury stock, at cost (2011 - 79,299,755 shares and 2010 - 78,626,501 shares)		(4,495	)		(4,371	)
Total Praxair, Inc. Shareholders’ Equity		6,165			5,792
Noncontrolling interests		372			353
TOTAL EQUITY		6,537			6,145
TOTAL LIABILITIES AND EQUITY	$	15,834		$	15,274

The accompanying notes are an integral part of these financial statements.

4

PRAXAIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Millions of dollars)

(UNAUDITED)

	Quarter Ended March 31,
	2011			2010
OPERATIONS
Net income - Praxair, Inc.	$	398		$	314
Noncontrolling interests		11			9
Net income (including noncontrolling interests)		409			323
Adjustments to reconcile net income to net cash provided by operating activities:
Venezuela currency devaluation, net of payments		—			25
Depreciation and amortization		244			228
Deferred income taxes		34			46
Share-based compensation		14			10
Accounts receivable		(178	)		(84	)
Inventory		(17	)		(2	)
Prepaid and other current assets		(4	)		(5	)
Payables and accruals		(143	)		—
Pension contributions		(8	)		(8	)
Long-term assets, liabilities and other		8			(50	)
Net cash provided by operating activities		359			483
INVESTING
Capital expenditures		(334	)		(288	)
Acquisitions, net of cash acquired		—			(4	)
Divestitures and asset sales		30			8
Net cash used for investing activities		(304	)		(284	)
FINANCING
Short-term debt borrowings (repayments) - net		(46	)		(126	)
Long-term debt borrowings		506			846
Long-term debt repayments		(197	)		(364	)
Issuances of common stock		77			22
Purchases of common stock		(215	)		(90	)
Cash dividends - Praxair, Inc. shareholders		(152	)		(138	)
Excess tax benefit on stock option exercises		18			5
Noncontrolling interest transactions and other		(1	)		(5	)
Net cash ( used for) provided by financing activities		(10	)		150
Effect of exchange rate changes on cash and cash equivalents		2			(18	)
Change in cash and cash equivalents		47			331
Cash and cash equivalents, beginning-of-period		39			45
Cash and cash equivalents, end-of-period	$	86		$	376

The accompanying notes are an integral part of these financial statements.

5

INDEX TO NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Notes to Condensed Consolidated Financial Statements - Praxair, Inc. and Subsidiaries (Unaudited)

Note 1. Summary of Significant Accounting Policies	7
Note 2. Venezuela Currency Devaluation	7
Note 3. Inventories	7
Note 4. Debt	8
Note 5. Financial Instruments	9
Note 6. Fair Value Disclosures	11
Note 7. Earnings Per Share – Praxair, Inc. Shareholders	12
Note 8. Goodwill and Other Intangible Assets	13
Note 9. Share-Based Compensation	14
Note 10. Retirement Programs	16
Note 11. Commitments and Contingencies	16
Note 12. Segments	18
Note 13. Equity	19

6

PRAXAIR, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Summary of Significant Accounting Policies

Presentation of Condensed Consolidated Financial Statements - In the opinion of Praxair, Inc. (Praxair) management, the accompanying condensed consolidated financial statements include all adjustments necessary for a fair presentation of the results for the interim periods presented and such adjustments are of a normal recurring nature. The accompanying condensed consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements of Praxair, Inc. and subsidiaries in Praxair’s 2010 Annual Report on Form 10-K. There have been no material changes to the company’s significant accounting policies during 2011.

Accounting Standards Implemented in 2011

The following standards were effective for Praxair in 2011 and their adoption did not have a significant impact on the condensed consolidated financial statements. Refer to Note 1 to the consolidated financial statements of Praxair’s 2010 Annual Report on Form 10-K for a summary of these standards:

• Disclosures about Fair Value Measurements, and

• Multiple-Deliverable Revenue Arrangements

2. Venezuela Currency Devaluation

On January 8, 2010, Venezuela announced a devaluation of the Venezuelan Bolivar and created a two tier exchange rate system. Effective January 1, 2011, the two tier system was eliminated and a single exchange rate of 4.3 (implying a 50% devaluation) is now required for all transactions including Praxair’s operations. In the first quarter 2010, Praxair recorded a $27 million charge ($26 million after-tax or $ 0.08 per diluted share) due primarily to the remeasurement of the local Venezuelan balance sheet to reflect the new official 4.3 exchange rate.

3. Supplemental Information

Inventories

The following is a summary of Praxair’s consolidated inventories:

(Millions of dollars)	March 31, 2011		December 31, 2010
Inventories
Raw materials and supplies	$	153	$	139
Work in process		51		49
Finished goods		212		211
Total inventories	$	416	$	399

Financing receivables

Financing receivables is not a normal practice for the company. The balance in both periods relates primarily to government receivables in Brazil and other long-term notes receivable from customers, the majority of which are fully reserved. Collectability is reviewed regularly and uncollectible amounts are written-off as appropriate. The net financing receivables balances at March 31, 2011 and December 31, 2010 are $46 million and $51 million, respectively, and are included within the other long-term assets line of the Condensed Consolidated Balance Sheets. The balances at March 31, 2011 and December 31, 2010 are net of credit allowances of $84 million and $77 million, respectively. The fluctuation within this account was due primarily to foreign currency movements.

7

4. Debt

The following is a summary of Praxair’s outstanding debt at March 31, 2011 and December 31, 2010:

(Millions of dollars)	March 31, 2011			December 31, 2010
SHORT-TERM
Commercial paper and U.S. bank borrowings	$	120		$	207
Other bank borrowings (primarily international)		206			163
Total short-term debt		326			370
LONG-TERM
U.S. borrowings
6.375% Notes due 2012 (a, b)		504			505
1.75% Notes due 2012 (a, b)		409			411
3.95% Notes due 2013		350			350
2.125% Notes due 2013(a, b)		515			516
4.375% Notes due 2014(a)		299			299
5.25% Notes due 2014		400			400
4.625% Notes due 2015		500			500
3.25% Notes due 2015(a, b)		415			421
5.375% Notes due 2016		400			400
5.20% Notes due 2017		325			325
4.50% Notes due 2019(a)		597			597
4.05% Notes due 2021(a, c)		498			—
Other		6			6
International bank borrowings		285			448
Obligations under capital lease		9			9
		5,512			5,187
Less: current portion of long-term debt		(31	)		(32	)
Total long-term debt		5,481			5,155
Total debt	$	5,838		$	5,557

(a) Amounts are net of unamortized discounts.

(b) March 31, 2011 and December 31, 2010 include a $45 million and $55 million fair value increase, respectively, related to hedge accounting. See Note 5 for additional information.

(c) On March 4, 2011, Praxair issued $500 million of 4.05% notes due 2021. The proceeds were used to reduce short-term debt, to fund share repurchases under the 2010 share repurchase program and for general corporate purposes.

8

5. Financial Instruments

In its normal operations, Praxair is exposed to market risks relating to fluctuations in interest rates, foreign currency exchange rates, energy costs and to a lesser extent precious metal prices. The objective of financial risk management at Praxair is to minimize the negative impact of such fluctuations on the company’s earnings and cash flows. To manage these risks, among other strategies, Praxair routinely enters into various derivative financial instruments (“derivatives”) including interest-rate swap and treasury rate lock agreements, currency-swap agreements, forward contracts, currency options, and commodity-swap agreements. These instruments are not entered into for trading purposes and Praxair only uses commonly traded and non-leveraged instruments.

There are two types of derivatives that the company enters into: (i) those relating to fair-value exposures, and (ii) those relating to 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 treasury rate lock as hedges for accounting purposes; however, currency contracts are generally not designated as hedges for accounting purposes unless they are related to forecasted transactions. Whether designated as hedges for accounting purposes or not, 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 for accounting purposes 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.

Counterparties to Praxair’s derivatives are major banking institutions with credit ratings of investment grade or better and no collateral is required, and 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.

The following table is a summary of the notional amount and fair value of derivatives outstanding at March 31, 2011 and December 31, 2010 for consolidated subsidiaries:

					Fair Value
(Millions of dollars)	Notional Amounts				Assets				Liabilities
	March 31, 2011		December 31, 2010		March 31, 2011		December 31, 2010		March 31, 2011		December 31, 2010
Derivatives Not Designated as Hedging Instruments:
Currency contracts:
Balance sheet items (a)	$	1,226	$	1,011	$	—	$	2	$	—	$	2
Anticipated net income (b)		137		137		6		10		—		—
Total	$	1,363	$	1,148	$	6	$	12	$	—	$	2
Derivatives Designated as Hedging Instruments:
Interest rate swaps (b)	$	900	$	900	$	31	$	39	$	—		—
Total Derivatives	$	2,263	$	2,048	$	37	$	51	$	—	$	2

(a) Assets are recorded in prepaid and other current assets, and liabilities are recorded in other current liabilities.

(b) Assets are recorded in other long term assets.

9

Currency Contracts

Balance Sheet Items

Foreign currency contracts related to balance sheet items consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currency exchange rates on recorded balance sheet assets and liabilities denominated in currencies other than the functional currency of the related operating unit. The fair value adjustments on these contracts are largely offset by the fair value adjustments recorded on the hedged assets and liabilities.

Anticipated Net Income

The anticipated net income hedge contracts at March 31, 2011 and December 31, 2010 consist of foreign currency options related to anticipated net income in Brazil, Europe and Canada. Over the term of the contracts, the fair value adjustments from net-income hedging contracts are largely offset by the impacts on reported net income resulting from the currency translation process. The accounting rules pertaining to derivatives and hedging do not allow hedges of anticipated net income to be designated as hedging instruments.

Interest Rate Contracts

Interest Rate Swaps

At March 31, 2011, Praxair had the following interest-rate swap agreements outstanding that effectively convert fixed-rate interest to variable-rate interest:

• January 14, 2010 agreement related to the $500 million 2.125% fixed-rate notes that mature in 2013, and

• September 2009 agreement related to the $400 million 3.25% fixed-rate notes that mature in 2015.

These interest rate swap agreements were designated as fair value hedges with the resulting fair value adjustments recognized in earnings along with an equally offsetting charge/benefit to earnings for the changes in the fair value of the underlying debt instruments. At March 31, 2011, $31 million was recognized as an increase in the fair value of these notes ($15 million and $16 million, respectively).

In October 2010, Praxair terminated the interest-rate swap agreements, which were originally entered into on January 4, 2010, on the $400 million 1.75% notes that mature in 2012 and received a $16 million cash payment, including interest receivable of $3 million. The previously recorded debt increase of $13 million will be recognized in earnings as a reduction to interest expense over the remaining term of the underlying debt, or about two years. During 2011, $1 million was recognized as a reduction to interest expense and $10 million remains unrecognized at March 31, 2011 ($11 million at December 31, 2010) and is shown as an increase to long-term debt.

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 and received a $47 million cash payment. The previously recorded 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. During the quarters ended March 31, 2011 and 2010, $1 million was recognized as a reduction to interest expense, respectively, and $4 million remains unrecognized at March 31, 2011 ($5 million at December 31, 2010) and is shown as an increase to long-term debt.

Treasury Rate Locks

In December 2008, Praxair entered into treasury rate lock contracts totaling $500 million notional amount to hedge the cash flow exposure attributable to the changes in the treasury rate portion of the interest rate on a forecasted debt issuance. The treasury rate locks were designated as and accounted for as cash flow hedges. In January 2009, the company settled the treasury rate locks and received a cash payment of $16 million ($10 million net of taxes) which was recorded as a gain in AOCI. On August 13, 2009, Praxair issued $600 million of 4.50% notes due August 2019, which represents the forecasted debt issuance that was originally hedged in December 2008. The gain recorded in AOCI is currently being reclassified to earnings as a decrease to interest expense over the remaining term of these notes.

10

In February 2008, Praxair entered into a treasury rate lock to hedge the cash flow exposure attributable to the $500 million of 4.625% notes issued on March 7, 2008. The treasury rate lock was accounted for as a cash flow hedge with the resulting fair value adjustments recorded in AOCI. The treasury rate lock was settled at a loss of $7 million ($4 million net of taxes) which was recorded in AOCI and is currently being reclassified to earnings as an increase to interest expense over the remaining term of the underlying debt.

The gains (losses) for treasury rate lock contracts are reclassified to earnings as interest expense-net. The amount of gains (losses) reclassified to earnings for the quarters ended March 31, 2011 and 2010 was less than $1 million, respectively. Net gains (losses) of $1 million are expected to be reclassified to earnings over the next twelve months. There was no ineffectiveness.

The following table summarizes the impacts of the Company’s derivatives on the consolidated statement of income for the quarters ended March 31, 2011 and 2010:

	Amount of Pre-Tax Gain (Loss) Recognized in Earnings (a)
(Millions of dollars)	Quarter Ended March 31,
	2011			2010
Derivatives Not Designated as Hedging Instruments
Currency contracts:
Balance sheet items
Debt-related	$	(6	)	$	(6	)
Other balance sheet items		3			—
Anticipated net income		(4	)		—
Total	$	(7	)	$	(6	)

(a) The gains (losses) on balance sheet items are largely offset by gains (losses) recorded on the underlying hedged assets and liabilities. The gains (losses) for the derivatives and the underlying hedged assets and liabilities related to debt items are recorded in the consolidated statement of income as interest expense-net. Other balance sheet items and anticipated net income gains (losses) are recorded in the consolidated statement of income as other income (expense)-net.

There was no pre-tax gain (loss) recognized in AOCI for the quarters ended March 31, 2011 and 2010.

6. Fair Value Disclosures

The fair value hierarchy prioritizes the input to valuation techniques used to measure fair value into three broad levels as follows:

Level 1 – quoted prices in active markets for identical assets or liabilities

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes assets and liabilities measured at fair value on a recurring basis at March 31, 2011:

	Fair Value Measurements Using
(Millions of dollars)	Level 1		Level 2		Level 3		Total
Assets
Derivative assets	$	—	$	37	$	—	$	37
Investments		2		—		—		2
Total	$	2	$	37	$	—	$	39
Liabilities
Derivative liabilities	$	—	$	—	$	—	$	—

11

The fair values of the derivative assets and liabilities are based on market prices obtained from independent brokers or determined using quantitative models that use as their basis readily observable market parameters that are actively quoted and can be validated through external sources, including third-party pricing services, brokers and market transactions. Investments are marketable securities traded on an exchange.

The fair values of cash and cash equivalents, short-term debt, accounts receivable-net, and accounts payable approximate carrying amounts because of the short maturities of these instruments. The fair value of long-term debt is estimated based on the quoted market prices for the same or similar issues. At March 31, 2011, the estimated fair value of Praxair’s long-term debt portfolio was $5,812 million versus a carrying value of $5,512 million. At December 31, 2010, the estimated fair value of Praxair’s long-term debt portfolio was $5,498 million versus a carrying value of $5,187 million. Differences from carrying amounts are attributable to interest-rate changes subsequent to when the debt was issued.

Assets measure at Fair Value on a Non-Recurring Basis

Certain assets are valued at fair value on a non-recurring basis.

During the fourth quarter 2010, Praxair decided to sell the U.S. homecare portion of its North American healthcare business. Accordingly, the net assets of the business were written-down to fair value representing the Company’s best estimate of the cash proceeds that will be realized upon eventual sale or other disposition of the net assets of the business. This resulted in a pre-tax charge to earnings of $58 million during the fourth quarter 2010. The estimated fair value was not significant to the Company’s consolidated financial position. On February 2, 2011, the company announced that it had entered into a definitive agreement for sale of the U.S. homecare business to Apria Healthcare Group Inc. The sale was finalized on March 4, 2011.

7. Earnings Per Share – Praxair, Inc. Shareholders

Basic earnings per share is computed by dividing Net Income – Praxair, Inc. for the period by the weighted average number of Praxair common shares outstanding. Diluted earnings per share is computed by dividing Net Income – Praxair, Inc. for the period by the weighted average number of Praxair common shares outstanding and dilutive common stock equivalents, as follows:

	Quarter Ended March 31,
	2011		2010
Numerator (Millions of dollars)
Net Income - Praxair, Inc.	$	398	$	314
Denominator (Thousands of shares)
Weighted average shares outstanding		303,449		306,144
Shares earned and issuable under compensation plans		622		649
Weighted average shares used in basic earnings per share		304,071		306,793
Effect of dilutive securities
Stock options and awards		4,524		4,366
Weighted average shares used in diluted earnings per share		308,595		311,159
Basic Earnings Per Share	$	1.31	$	1.02
Diluted Earnings Per Share	$	1.29	$	1.01

12

Stock options of 1,630,690 and 3,214,550 were antidilutive and therefore excluded in the computation of diluted earnings per share for the quarters ended March 31, 2011 and 2010, respectively.

8. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the three months ended March 31, 2011 were as follows:

(Millions of dollars)	North America			South America		Europe		Asia		Surface Technologies		Total
Balance, December 31, 2010	$	1,303		$	246	$	343	$	33	$	141	$	2,066
Acquisitions		—			—		—		—		—		—
Purchase adjustments & other		(2	)		—		—		—		—		(2	)
Foreign currency translation		8			6		23		—		5		42
Balance, March 31, 2011	$	1,309		$	252	$	366	$	33	$	146	$	2,106

Impairment tests have been performed annually during the second quarter of each year since the initial adoption of the goodwill accounting standard in 2002, and no impairments were indicated. Also, there were no indicators of impairment through March 31, 2011.

Changes in the carrying amounts of other intangibles for the quarter ended March 31, 2011 were as follows:

(Millions of dollars)	Customer  & License/Use Agreements			Non-compete Agreements			Patents & Other			Total
Cost:
Balance, December 31, 2010	$	166		$	28		$	24		$	218
Additions		—			—			—			—
Foreign currency translation		4			—			—			4
Other		—			(2	)		—			(2	)
Balance, March 31, 2011	$	170		$	26		$	24		$	220
Less: Accumulated amortization
Balance, December 31, 2010	$	(63	)	$	(16	)	$	(7	)	$	(86	)
Amortization expense		(4	)		(1	)		—			(5	)
Foreign currency translation		(2	)		—			—			(2	)
Other		—			2			—			2
Balance, March 31, 2011	$	(69	)	$	(15	)	$	(7	)	$	(91	)
Net balance at March 31, 2011	$	101		$	11		$	17		$	129

13

There are no expected residual values related to these intangible assets. The remaining weighted-average amortization period for intangible asset is approximately 13 years.

Total estimated annual amortization expense is as follows:

(millions of dollars)
Remaining 2011	$	14
2012		18
2013		16
2014		14
2015		14
Thereafter		53
	$	129

9. Share-Based Compensation

Share-based compensation of $14 million ($10 million after tax) and $10 million ($7 million after tax) was recognized during the quarters ended March 31, 2011 and 2010, respectively. The expense was recorded primarily in selling, general and administrative expenses. There was no share-based compensation cost that was capitalized. For further details regarding Praxair’s share-based compensation arrangements and prior year grants, refer to Note 15 to the consolidated financial statements of Praxair’s 2010 Annual Report on Form 10-K.

Stock Options

The weighted-average fair value of options granted during quarter ended March 31, 2011 was $17.70 ($12.55 in 2010) based on the Black-Scholes Options-Pricing model.

The following weighted-average assumptions were used for grants in 2011 and 2010 :

	Quarter Ended March 31,
	2011			2010
Dividend yield		2.0	%		2.4	%
Volatility		22.3	%		20.8	%
Risk-free interest rate		2.2	%		2.5	%
Expected term years		5			5

The following table summarizes option activity under the plans as of March 31, 2011 and changes during the period then ended (averages are calculated on a weighted basis; life in years; intrinsic value expressed in millions):

	Number  of Options (000’s)			Average Exercise Price		Average Remaining Life		Aggregate Intrinsic Value
Outstanding at January 1, 2011		15,895		$	58.68
Granted		1,655			97.82
Exercised		(1,467	)		50.02
Cancelled or Expired		(335	)		81.87
Outstanding at March 31, 2011		15,748			63.08		6.1	$	607
Exercisable at March 31, 2011		12,517		$	57.70		5.3	$	550

14

The aggregate intrinsic value represents the difference between the company’s closing stock price of $101.60 as of March 31, 2011 and the exercise price multiplied by the number of options outstanding as of that date. The total intrinsic value of stock options exercised during the quarter ended March 31, 2011 was $69 million ($21 million during the first quarter of 2010).

Cash received from option exercises under all share-based payment arrangements for the quarter ended March 31, 2011 was $73 million ($18 million during the first quarter of 2010). The cash tax benefit realized from stock option exercises totaled $24 million for the quarter ended March 31, 2011, of which $18 million in excess tax benefits was classified as financing cash flows ($5 million and $5 million for the same time periods in 2010).

As of March 31, 2011, $41 million of unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted-average period of approximately 1.3 years.

Performance-Based and Restricted Stock Awards

During the quarter ended March 31, 2011, the company granted performance-based stock units to employees which vest on the third anniversary of their grant date. The actual number of shares issued in settlement of a vested award can range from zero to 150 percent of the target number of shares granted based upon the company’s attainment of specified performance targets at the end of a three-year period. Compensation expense related to these awards is recognized over the three-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 and the estimated performance that will be achieved. Compensation expense will be adjusted during the three-year performance period based upon the estimated performance levels that will be achieved.

During the quarter ended March 31, 2011, the company granted restricted stock units to employees. The majority of the restricted stock units vest at the end of or ratably over a three-year service period. Compensation expense related to the restricted stock units is recognized on a straight-line basis over the vesting period.

The weighted-average fair value of performance-based stock and restricted stock units granted during the quarter ended March 31, 2011 was $92.06 and $91.55, respectively ($70.99 and $71.12 for the same periods in 2010). This is based on the closing market price of Praxair’s common stock on the grant date adjusted for dividends that will not be paid during the vesting period.

The following table summarizes non-vested performance-based and restricted stock award activity as of March 31, 2011 and changes during the period then ended (shares based on target amounts, averages are calculated on a weighted basis):

	Performance-Based					Restricted Stock
Performance-Based and Restricted Stock Activity	Number of Shares (000’s)			Average Grant Date Fair Value		Number of Shares (000’s)			Average Grant Date Fair Value
Non-vested at January 1, 2011		674		$	62.80		300		$	65.14
Granted		307			92.06		104			91.55
Vested		—			—		(30	)		70.55
Cancelled		(11	)		70.91		(2	)		69.83
Non-vested at March 31, 2011		970		$	71.75		372		$	72.29

15

As of March 31, 2011, based on current estimates of future performance, $50 million of unrecognized compensation cost related to performance-based awards is expected to be recognized through the first quarter of 2013 and $19 million of unrecognized compensation cost related to the restricted stock awards is expected to be recognized through the first quarter of 2017.

10. Retirement Programs

The components of net pension and postretirement benefits other than pensions (OPEB) costs for the quarters ended March 31, 2011 and 2010 are shown below:

	Quarter Ended March 31,
	Pensions						OPEB
(Millions of dollars)	2011			2010			2011			2010
Service cost	$	11		$	10		$	1		$	2
Interest cost		31			30			4			4
Expected return on plan assets		(38	)		(33	)		—			—
Net amortization and deferral		11			8			(2	)		—
Net periodic benefit cost	$	15		$	15		$	3		$	6

Praxair estimates that 2011 contributions to its pension plans will be in the range of $95 to $105 million, of which $8 million have been made through March 31, 2011. On April 6, 2011, Praxair made a cash contribution of $75 million to one of its U.S. pension plans.

11. Commitments and Contingencies

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 significant impact on the company’s reported results of operations in any given period (see Note 17 to the consolidated financial statements of Praxair’s 2010 Annual Report on Form 10-K).

Among such matters are:

• Claims by the Brazilian taxing authorities against several of the company’s Brazilian subsidiaries relating to non-income and income tax matters. During May 2009, the Brazilian government published Law 11941/2009 instituting a new voluntary amnesty program (“Refis Program”) which allowed Brazilian companies to settle certain federal tax disputes at reduced amounts. During the 2009 third quarter, Praxair decided that it was economically beneficial to settle many of its outstanding federal tax disputes and these disputes were enrolled in the Refis Program and settled (see Note 2 to the consolidated financial statements of Praxair’s 2010 Annual Report on Form 10-K). During January 2010, the Brazilian state of Rio de Janeiro (“Rio”) published Law 5647/2010 instituting a new state amnesty program (“Rio Amnesty Program”) which allows Brazilian companies to settle certain disputes with the state of Rio at reduced amounts. During the 2010 first quarter, Praxair decided that it was economically beneficial to settle several of its outstanding disputes with the state of Rio and these disputes were enrolled in the Program and settled. The final settlements related to both the Refis and Rio Amnesty Programs are subject to final calculation and review by the Brazilian federal and Rio state governments, respectively, and the company currently anticipates these reviews will conclude during the next year. Any differences from amounts recorded will be adjusted to income at that time.

16

After enrollment in the amnesty programs, at March 31, 2011 the most significant remaining claims relate to a state VAT tax matter associated with a procedural issue and a federal income tax matter where the taxing authorities are challenging the tax rate that should be applied to income generated by a subsidiary company. The total estimated exposure relating to such claims, including interest and penalties as appropriate, is approximately $185 million. Praxair has not recorded any liabilities related to such claims based on management judgments, after considering judgments and opinions of outside counsel. Because litigation in Brazil historically takes many years to resolve, it is very difficult to estimate the timing of resolution of these matters; however, it is possible that certain of these matters may be resolved within the near term. The company is vigorously defending against the proceedings.

• On September 1, 2010, CADE (Brazilian Administrative Council for Economic Defense) announced alleged anticompetitive activity on the part of five industrial gas companies in Brazil and imposed fines on all five companies. Originally, CADE imposed a civil fine of R$ 2.2 billion Brazilian reais (US$1.3 billion) against White Martins, the Brazil-based subsidiary of Praxair, Inc. In response to a motion for clarification, the fine was reduced to R$1.7 billion Brazilian reais (US$1 billion) due to a calculation error made by CADE. On September 2, 2010, Praxair issued a press release and filed a report on Form 8-K rejecting all claims and stating that the fine represents a gross and arbitrary disregard of Brazilian law.

On October 19, 2010, White Martins filed an annulment petition (“appeal”) with the Federal Court in Brasilia seeking to have the fine against White Martins overturned. In order to suspend payment of the fine pending the completion of the appeal process, Brazilian law required that the company tender a form of guarantee in the amount of the fine as security. Currently, 50% of the guarantee is satisfied by letters of credit with a financial institution and 50% of the guarantee is satisfied by equity of a Brazilian subsidiary.

Praxair strongly believes that the allegations are without merit and that the fine will be annulled during the appeal process. The company further believes that it has strong defenses and will vigorously defend against the allegations and related fine up to such levels of the Federal Courts in Brazil as may be necessary. Because appeals in Brazil historically take many years to resolve, it is very difficult to estimate when the appeal will be finally decided. Based on management judgments, after considering judgments and opinions of outside counsel, no reserve has been recorded for this proceeding as management does not believe that a loss is probable.

• 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, 2010, Praxair was a co-defendant with many other companies in lawsuits alleging personal injury caused by manganese contained in welding fumes. There were a total of 349 individual claimants in these cases, a significant decline since 2005. 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. These claims raise numerous, individual issues that make them generally unsuited for class action status. Separately, various class actions for medical monitoring have been proposed but none have been certified. No reserves have been recorded for these cases as management does not believe that a loss from them is probable or reasonably estimable.

17

12. Segments

Sales and operating profit by segment for the quarters ended March 31, 2011 and 2010 are shown below. For a description of Praxair’s operating segments, refer to Note 18 to the consolidated financial statements of Praxair’s 2010 Annual Report on Form 10-K.

	Quarter Ended March  31,
(Millions of dollars)	2011		2010
SALES(a)
North America	$	1,334	$	1,238
Europe		343		338
South America		558		458
Asia		310		258
Surface Technologies		157		136
	$	2,702	$	2,428
OPERATING PROFIT
North America	$	322	$	277
Europe		65		67
South America		133		109
Asia		46		34
Surface Technologies		25		19
Segment operating profit		591		506
Venezuela currency devaluation (Note 2)		—		(27	)
Total operating profit	$	591	$	479

(a) Intersegment sales, primarily from North America to other segments, were not significant for the quarters ended March 31, 2011 and 2010.

18

13. Equity

A summary of the changes in total equity for the quarters ended March 31, 2011 and 2010 is provided below:

(Millions of dollars)	Quarter Ended March 31,
	2011									2010
Activity	Praxair, Inc. Shareholders’ Equity			Noncontrolling Interests			Total Equity			Praxair, Inc. Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance, beginning of period	$	5,792		$	353		$	6,145		$	5,315		$	333		$	5,648
Net Income		398			11			409			314			9			323
Translation Adjustments		220			10			230			(41	)		(6	)		(47	)
Derivative Instruments, net of less than $1 million taxes in 2011 and net of less than $1 million of taxes in 2010		1						1									—
Funded Status - retirement obligations, net of $1 million taxes in 2011 and $17 million taxes in 2010		3			—			3			(2	)					(2	)
Comprehensive income		622			21			643			271			3			274
Dividends to noncontrolling interests					(3	)		(3	)					(4	)		(4	)
(Purchases) sales of noncontrolling interests (a)					(1	)		(1	)					—			—
Additions to noncontrolling interests					2			2						—			—
Dividends to Praxair, Inc. common stock holders ($0.50 per share in 2011 and $0.45 per share in 2010)		(152	)					(152	)		(138	)					(138	)
Issuances of common stock:								—
For the dividend reinvestment and stock purchase plan		2						2			2						2
For employee savings and incentive plans		77						77			25						25
Purchases of common stock		(210	)					(210	)		(92	)					(92	)
Tax benefit from stock options		20						20			5						5
Share-based compensation		14						14			10						10
Balance, end of period	$	6,165		$	372		$	6,537		$	5,398		$	332		$	5,730

(a) During the 2011 first quarter, Praxair increased its ownership in an Indian subsidiary.

The components of accumulated other comprehensive income (loss) (“AOCI”) are as follows:

(Millions of dollars)	March 31, 2011			December 31, 2010
Cumulative translation adjustments (CTA)	$	(297	)	$	(527	)
Derivative instruments		5			4
Pension/ OPEB funded status obligation		(491	)		(494	)
		(783	)		(1,017	)
Less: noncontrolling interests (CTA)		11			1
AOCI - Praxair, Inc.	$	(794	)	$	(1,018	)

19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Adjusted Amounts and Comparisons

The discussion of consolidated results and outlook in this Management’s Discussion and Analysis (MD&A) is based on adjusted amounts and comparisons with adjusted amounts. Adjusted amounts are non-GAAP measures that supplement an understanding of the company’s financial information by presenting information that investors, financial analysts and management use to help evaluate the company’s performance and ongoing business trends on a comparable basis. See the “Consolidated Results” section of this MD&A for a summary of these adjusted amounts. A reconciliation of reported amounts to adjusted amounts can be found in the “Non-GAAP Financial Measures” section of this MD&A.

Consolidated Results

The following table provides summary data for the quarters ended March 31, 2011 and 2010:

	Quarter Ended March 31,
(Dollar amounts in millions, except per share data)	2011			2010			Variance
Reported Amounts
Sales	$	2,702		$	2,428			11	%
Gross margin (a)	$	1,166		$	1,047			11	%
As a percent of sales		43.2	%		43.1	%
Selling, general and administrative	$	308		$	294			5	%
As a percent of sales		11.4	%		12.1	%
Depreciation and amortization	$	244		$	228			7	%
Venezuela currency devaluation (b)	$	—		$	27
Other income (expense) - net	$	(1	)	$	(1	)
Operating profit	$	591		$	479			23	%
As a percent of sales		21.9	%		19.7	%
Interest expense - net	$	35		$	32			9	%
Effective tax rate		28.1	%		29.3	%
Net income - Praxair, Inc.	$	398		$	314			27	%
Diluted earnings per share	$	1.29		$	1.01			28	%
Diluted shares outstanding		308,595			311,159			—	%
Adjusted Amounts for 2010 (c)
Operating profit	$	591		$	506			17	%
As a percent of sales		21.9	%		20.8	%
Effective tax rate		28.1	%		27.8	%
Net income - Praxair, Inc.	$	398		$	340			17	%
Diluted earnings per share	$	1.29		$	1.09			18	%

(a) Gross margin excludes depreciation and amortization expense.

(b) See Note 2 to the condensed consolidated financial statements.

(c) Adjusted amounts are non-GAAP measures. 2010 adjusted amounts exclude the impact of the Venezuela currency devaluation. Variances are calculated using adjusted amounts, when appropriate. A reconciliation of reported amounts to adjusted amounts can be found in the “Non-GAAP Financial Measures” section of this MD&A. Certain 2011 amounts are included for reference purposes.

20

2010 Venezuela Currency Devaluation

On January 8, 2010, Venezuela announced a devaluation of the Venezuelan Bolivar and created a two tier exchange rate system. Effective January 1, 2011, the two tier system was eliminated and a single exchange rate of 4.3 (implying a 50% devaluation) is now required for all transactions including Praxair’s operations. In the first quarter 2010, Praxair recorded a $27 million charge ($26 million after-tax or $ 0.08 per diluted share) due primarily to the remeasurement of the local Venezuelan balance sheet to reflect the new official 4.3 exchange rate.

Results of Operations

As previously described, references to “adjusted” amounts refer to reported amounts adjusted to exclude the impact of special items and are non-GAAP measures. A reconciliation of reported amounts to adjusted amounts can be found in the “Non-GAAP Financial Measures” section of this MD&A.

	Quarter Ended March 31, 2011 vs. 2010
	% Change
Sales
Volume		8	%
Price/Mix/Other		1	%
Cost pass-through		—	%
Currency		2	%
Acquisitions/ divestitures		—	%
Total sales change		11	%

Sales increased $274 million, or 11%, for the first quarter versus 2010. The underlying increase in sales of 9% reflects higher volumes in all geographies coupled with the impact of higher overall pricing. Sales to the chemicals, metals, electronics and manufacturing end markets showed the strongest growth compared with the prior year. Currency effects added 2% to sales in the quarter.

Gross margin in 2011 improved $119 million, or 11%, for the first quarter versus 2010 primarily due to higher volumes and price. The gross margin percentage increased slightly to 43.2% in 2011, due to higher price.

Selling, general and administrative (SG&A) expenses increased $14 million, or 5%, for the first quarter versus 2010, but decreased as a percentage of sales. The increase in SG&A expenses was due primarily to benefit costs, currency, incentive compensation and other labor costs associated with increased business activity.

Depreciation and amortization expense increased $16 million, or 7%, for the first quarter versus 2010 periods. The increase was due to depreciation associated with new project start-ups and currency impacts.

Other income (expense) – net for the 2011 first quarter was a $1-million expense, consistent with the first quarter of 2010.

Operating profit increased $85 million, or 17%, for the first quarter 2011 versus adjusted operating profit for the same period in 2010. This increase was driven primarily by higher sales volumes, price and lower costs due to ongoing productivity initiatives and cost reductions.

Interest expense – net increased $3 million, or 9%, for the first quarter versus 2010 primarily due to higher debt levels.

The effective tax rate for the first quarter 2011 was 28.1% consistent with the adjusted effective tax rate for the same period in 2010.

Praxair’s significant sources of equity income are in China, Italy, the Middle East, and Norway. Income from equity investments increased $2 million as compared to the same period in 2010. This increase relates primarily to higher earnings in Italy and Norway and the acquisition of ROC in the Middle East.

21

Net income – Praxair, Inc. for the first quarter 2011 increased $58 million, or 17%, as compared to the adjusted net income – Praxair, Inc. for the same period in 2010. The increase was due primarily to higher operating profit partially offset by higher interest and income taxes.

Diluted earnings per share (EPS) for the first quarter 2011 increased $0.20 per diluted share, or 18%, as compared to the adjusted diluted earnings per share for the same period in 2010. The underlying increase in EPS is attributable to an increase in net income – Praxair, Inc. coupled with a lower number of diluted shares outstanding due to the impact of the company’s net repurchases of common stock since 2010.

The number of employees at March 31, 2011 was 25,482, reflecting a decrease of 779 employees from December 31, 2010 primarily due to the U.S. homecare divestiture completed on March 4, 2011.

Segment Discussion

The following summary of sales and operating profit by segment provides a basis for the discussion that follows:

	Quarter ended March 31,
(Dollar amounts in millions)	2011		2010			Variance
SALES
North America	$	1,334	$	1,238			8	%
Europe		343		338			1	%
South America		558		458			22	%
Asia		310		258			20	%
Surface Technologies		157		136			15	%
	$	2,702	$	2,428			11	%
OPERATING PROFIT
North America	$	322	$	277			16	%
Europe		65		67			(3	)%
South America		133		109			22	%
Asia		46		34			35	%
Surface Technologies		25		19			32	%
Segment operating profit		591		506			17	%
Venezuela currency devaluation (Note 2)		—		(27	)
Total operating profit	$	591	$	479

North America

	Quarter Ended March 31, 2011 vs. 2010
		% Change
Sales
Volume		6	%
Price/Mix/Other		1	%
Currency		2	%
Acquisitions/divestitures		(1	)%
Total sales change		8	%

22

Sales increased $96 million, or 8%, in the first quarter versus 2010 primarily due to 6% volume growth as merchant liquid and packaged gases volumes both showed strong growth. Underlying sales, including price, increased 7% due to the strengthening manufacturing, chemicals, metals and energy end-markets. Currency appreciation in Canada and Mexico increased sales by 2%. The U.S. homecare divestiture decreased sales by 1% versus the prior-year quarter.

Operating profit increased $45 million, or 16%, versus 2010. Operating profit grew as a result of higher volumes, price and benefits from ongoing productivity initiatives and cost reductions.

Europe

	Quarter ended March 31, 2011 vs. 2010
		% Change
Sales
Volume		3	%
Cost pass-through		1	%
Currency		(3	) %
Total sales change		1	%

Sales increased $5 million, or 1%, for the first quarter versus 2010. Excluding currency effects, sales increased 4% primarily due to 3% volume growth. Growth was due primarily to higher on-site and merchant volumes in Germany, Italy and Spain.

Operating profit decreased $2 million, or 3%, for the first quarter versus 2010 due to product mix and currency effects, including a net income hedge loss of $2 million (see Note 5 to the condensed consolidated financial statements).

South America

	Quarter ended March 31, 2011 vs. 2010
		% Change
Sales
Volume		10	%
Price/Mix/Other		4	%
Cost pass-through		1	%
Currency		7	%
Total sales change		22	%

Sales increased $100 million, or 22%, for the first quarter versus 2010. Currency appreciation increased sales by 7%. Underlying sales, excluding currency and cost pass-through, grew 14% versus the prior-year quarter. This increase was due to strong volume growth and higher overall pricing to metals, manufacturing and healthcare customers. Onsite, merchant and packaged gases in Brazil all grew versus prior-year.

Operating profit increased $24 million, or 22%, for the first quarter versus 2010. Underlying operating profit grew primarily due to higher volumes and higher pricing. Operating profit for the prior-year quarter included a benefit from a decision to settle certain disputes under a special amnesty program enacted by the State of Rio de Janeiro, which was largely offset by charges in connection with a non-core service business restructuring.

23

Asia

	Quarter ended March 31, 2011 vs. 2010
	% Change
Sales
Volume		14	%
Price/Mix/Other		1	%
Cost pass-through		2	%
Currency		3	%
Total sales change		20	%

Sales increased $52 million, or 20%, for the first quarter versus 2010 largely due to 14% volume growth. Onsite and merchant volumes in China, India and Korea grew from stronger demand for metals, electronics and chemical customers and new plant start-ups. Higher cost pass-through and currency effects increased sales by 5%.

Operating profit increased $12 million, or 35%, for the first quarter versus 2010. Operating profit increased faster than sales due to the effect of higher volumes, price and lower costs due to ongoing productivity initiatives and cost reductions.

Surface Technologies

	Quarter ended March 31, 2011 vs. 2010
	% Change
Sales
Volume/Price		14	%
Cost pass-through		1	%
Total sales change		15	%

Sales increased $21 million, or 15%, for the first quarter versus 2010. Underlying sales increased 14% for the quarter due to higher aviation and industrial coatings volumes.

Operating profit increased $6 million, or 32%, for the first quarter versus 2010. The increase was principally driven by higher volumes.

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):

24

	Percent of YTD 2011 Consolidated Sales (a)			Exchange Rate for Income  Statement				Exchange Rate for Balance Sheet
				First Quarter Average				March  31, 2011		December  31, 2010
Currency				2011		2010
Brazil real		18	%		1.67		1.80		1.63		1.67
Euro		15	%		0.74		0.72		0.72		0.76
Canada dollar		9	%		0.99		1.06		0.98		1.00
Mexico peso		6	%		12.18		12.90		11.97		12.38
China yuan		4	%		6.60		6.83		6.56		6.62
India rupee		2	%		45.36		46.43		44.73		45.10
Korea won		2	%		1,127		1,161		1,109		1,137
Singapore dollar		1	%		1.28		1.40		1.26		1.30
Argentina peso		1	%		4.01		3.84		4.05		3.98
Colombia peso		1	%		1,877		1,946		1,871		1,914
Taiwan dollar		1	%		29.37		32.12		29.49		29.42
Thailand bhat		1	%		30.57		33.15		30.32		30.12
Venezuela bolivar		<1	%		4.30		4.30		4.30		4.30
Japan yen		<1	%		82.31		90.49		82.17		92.65

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

25

Liquidity, Capital Resources and Other Financial Data

The following selected cash flow information provides a basis for the discussion that follows:

(Millions of dollars)	Quarter Ended March  31,
	2011			2010
NET CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income - Praxair, Inc. plus depreciation and amortization	$	642		$	542
Noncontrolling interests		11			9
Net income plus depreciation and amortization (including noncontrolling interests)		653			551
Adjustments to reconcile net income to net cash provided by operating activities:
Venezuela currency devaluation, net of payments		—			25
Working capital		(342	)		(91	)
Pension contributions		(8	)		(8	)
Long-term assets, liabilities and other		56			6
Net cash provided by operating activities	$	359		$	483
INVESTING ACTIVITIES
Capital expenditures		(334	)		(288	)
Acquisitions, net of cash acquired		—			(4	)
Divestitures and asset sales		30			8
Net cash used for investing activities	$	(304	)	$	(284	)
FINANCING ACTIVITIES
Debt increases (reductions) - net		263			356
Issuances (purchases) of common stock - net		(138	)		(68	)
Cash dividends - Praxair, Inc. shareholders		(152	)		(138	)
Excess tax benefit on stock option exercises		18			5
Noncontrolling interest transactions and other		(1	)		(5	)
Net cash (used for) provided by financing activities	$	(10	)	$	150

Cash Flow from Operations

Cash provided by operations of $359 million for first quarter decreased $124 million versus 2010. The decrease was primarily due to working capital changes, which were partially offset by increased net income – Praxair, Inc. plus depreciation and amortization during the current quarter. The working capital changes were primarily due to increased accounts receivable that support higher sales levels and higher incentive compensation payments related to the strong 2010 earnings levels.

Praxair estimates that 2011 contributions to its pension plans will be in the range of $95 to $105 million, of which $8 million have been made through March 31, 2011. On April 6, 2011, Praxair made a cash contribution of $75 million to one of its U.S. pension plans.

In the third quarter 2009, Praxair recorded the net impact related to a Federal tax amnesty program in Brazil (see Note 2 to the consolidated financial statements of Praxair’s 2010 Annual Report on Form 10-K). The program required a cash outlay of $34 million in the 2009 fourth quarter and is expected to require up to an additional $60 million of cash payments in the next twelve months depending on the timing of the Brazilian government consolidation process.

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Investing

Net cash used for investing of $304 million for the first quarter increased $20 million versus 2010. Capital expenditures of $334 million relate largely to new production plants under contract for customers in North and South America, China and India.

Divestitures and asset sales of $30 million increased $22 million versus 2010 primarily due to the sale of the U.S. homecare business which closed on March 4, 2011.

A cash outlay of approximately $70 million is anticipated during the second quarter of 2011 to complete the ROC acquisition.

Financing

Cash used for financing activities was $10 million in 2011 versus cash provided by of $150 million in 2010.

In 2011, net debt increases of $263 million were more than offset by $138 million of net common stock repurchases and $152 million of cash dividends. Net common stock repurchases of $138 million increased $70 million versus 2010. Cash dividends of $152 million increased $14 million from the year ago period to $0.50 per share ($0.45 per share for 2010).

In 2010, net cash provided by financing of $150 million was primarily due to net debt increases of $356 million, partially offset by $68 million of net common stock repurchases and $138 million of cash dividends.

At March 31, 2011, Praxair’s total debt outstanding was $5,838 million, an increase of $281 million from December 31, 2010. On March 4, 2011, Praxair issued $500 million of 4.05% notes due 2021. The proceeds were used to reduce short-term debt, fund share repurchases under the share repurchase program and for general corporate purposes.

The company intends to secure a new credit facility to replace the $1,000 million Senior Unsecured credit facility that is set to expire in December 2011.

Legal Proceedings

See Note 11 to the condensed consolidated financial statements for a description of current legal proceedings.

Non-GAAP Financial Measures

The following non-GAAP measures are intended to supplement investors’ understanding of the company’s financial information by providing measures which investors, financial analysts and management use to help evaluate the company’s financial leverage, return on net assets employed and operating performance. Special items which the company does not believe to be indicative of on-going business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies and are not a substitute for similar GAAP measures.

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The following are the non-GAAP measures presented in the MD&A:

	Quarter Ended March 31,
(Dollar amounts in millions, except per share data)	2011			2010
Debt-to-capital		47.2	%		48.5	%
After-tax return on capital		14.4	%		13.6	%
Return on equity		26.6	%		25.4	%
Adjusted EBITDA	$	844		$	741
Debt-to-adjusted EBITDA		1.7			1.8
	Quarter Ended March 31,
	2011			2010 (a)
Adjusted amounts for 2010:
Operating profit	$	591		$	506
As a percent of sales		21.9	%		20.8	%
Effective tax rate		28.1	%		27.8	%
Net income - Praxair, Inc.	$	398		$	340
Diluted earnings per share	$	1.29		$	1.09

Debt-to-Capital Ratio

The debt-to-capital ratio is a measure used by investors, financial analysts and management to provide a measure of financial leverage and insights into how the company is financing its operations.

	March 31, 2011			December 31, 2010
(Dollar amounts in millions)
Total debt	$	5,838		$	5,557
Equity
Praxair, Inc. shareholders’ equity		6,165			5,792
Noncontrolling interests		372			353
Total equity		6,537			6,145
Total capital	$	12,375		$	11,702
DEBT-TO-CAPITAL RATIO		47.2	%		47.5	%

After-tax Return on Capital (ROC)

After-tax return on capital is a measure used by investors, financial analysts and management to evaluate the return on net assets employed in the business. ROC measures the after-tax operating profit that the company was able to generate with the investments made by all parties in the business (debt, noncontrolling interests and Praxair, Inc. shareholders’ equity).

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	Quarter Ended March 31,
(Dollar amounts in millions)	2011			2010
Operating profit (a)		591		$	506
Less: income taxes (a)		(156	)		(132	)
Less: tax benefit on interest expense*		(10	)		(9	)
Add: equity income		9			7
Net operating profit after-tax (NOPAT)	$	434		$	372
Beginning capital	$	11,702		$	10,703
Ending capital	$	12,375		$	11,134
Average capital	$	12,039		$	10,919
ROC%		3.6	%		3.4	%
ROC% (annualized)		14.4	%		13.6	%

* Tax benefit on interest expense is computed using the effective rate adjusted for non-recurring income tax benefits. The effective tax rate used was 28% for 2011 and 2010.

Return on Praxair, Inc. Shareholders’ Equity (ROE)

Return on Praxair, Inc. shareholders’ equity is a measure used by investors, financial analysts and management to evaluate operating performance from a Praxair shareholder perspective. ROE measures the net income attributable to Praxair, Inc. that the company was able to generate with the money shareholders have invested.

	Quarter Ended March 31,
(Dollar amounts in millions)	2011			2010
Net income - Praxair, Inc. (a)	$	398		$	340
Beginning Praxair, Inc. shareholders’ equity	$	5,792		$	5,315
Ending Praxair, Inc. shareholders’ equity	$	6,165		$	5,398
Average Praxair, Inc. shareholders’ equity	$	5,979		$	5,357
ROE%		6.7	%		6.3	%
ROE% (annualized)		26.6	%		25.4	%

Adjusted EBITDA and Debt-to-Adjusted EBITDA Ratio

These measures are used by investors, financial analysts and management to assess a company’s ability to meet its financial obligations.

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	Quarter Ended March 31,
	2011		2010
(Dollar amounts in millions)
Net Income - Praxair, Inc. (a)	$	398	$	340
Add: noncontrolling interests		11		9
Add: interest expense - net		35		32
Add: income taxes (a)		156		132
Add: depreciation and amortization		244		228
Adjusted EBITDA	$	844	$	741
Beginning total debt	$	5,557	$	5,055
Ending total debt	$	5,838	$	5,404
Average total debt	$	5,698	$	5,230
DEBT-TO-ADJUSTED EBITDA RATIO		6.8		7.1
DEBT-TO-ADJUSTED EBITDA RATIO (annualized)		1.7		1.8

(a) Adjusted Amounts

2010 amounts are adjusted for the impact of the Venezuela currency devaluation. The company does not believe this item is indicative of on-going business trends and, accordingly, the impact is excluded from the reported amounts so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Certain 2011 amounts are included for reference purposes.

	Quarter Ended March 31,
(Dollar amounts in millions, except per share data)	2011			2010
Adjusted Operating Profit and Margin
Reported operating profit	$	591		$	479
Add: Venezuela currency devaluation		—			27
Adjusted operating profit	$	591		$	506
Reported percent change		23	%
Adjusted percent change		17	%
Reported sales	$	2,702		$	2,428
Reported operating profit margin		21.9	%		19.7	%
Adjusted operating profit margin		21.9	%		20.8	%
Adjusted Income Taxes and Effective Tax Rate
Reported income taxes	$	156		$	131
Add: Venezuela currency devaluation		—			1
Adjusted income taxes	$	156		$	132
Reported income before income taxes and equity investments	$	556		$	447
Add: Venezuela currency devaluation		—			27
Adjusted income before income taxes and equity investments	$	556		$	474
Adjusted effective tax rate		28.1	%		27.8	%
Adjusted Net Income - Praxair, Inc.
Reported net income - Praxair, Inc.	$	398		$	314
Add: Venezuela currency devaluation		—			26
Adjusted net income - Praxair, Inc.	$	398		$	340
Reported percent change		27	%
Adjusted percent change		17	%
Adjusted Diluted Earnings Per Share
Reported diluted earnings per share	$	1.29		$	1.01
Add: Venezuela currency devaluation		—			0.08
Adjusted diluted earnings per share	$	1.29		$	1.09
Reported percent change		28	%
Adjusted percent change		18	%

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New Accounting Standards

Refer to Note 1 of the condensed consolidated financial statements for information regarding new accounting standards.

Outlook

For the second quarter of 2011, diluted earnings per share are expected to be in the range of $1.33 to $1.38.

For the full year of 2011, Praxair expects sales of about $11 billion. Reported diluted earnings per share are expected to be in the range of $5.35 to $5.45. Full-year capital expenditures are expected to be in the range of $1.6-1.8 billion supporting the current backlog of projects under contract with customers, which will come on stream in 2011 through 2012.

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

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 changes in pension plan liabilities; the impact of tax, environmental, 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 this report which should be reviewed carefully. Please consider the company’s forward-looking statements in light of those risks.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Refer to Item 7A. to Part II of Praxair’s 2010 Annual Report on Form 10-K for discussion.

Item 4. Controls and Procedures

(a) 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 quarterly 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 required disclosure.

(b) There were no changes in Praxair’s internal control over financial reporting that occurred during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, Praxair’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Praxair, Inc. and Subsidiaries

Item 1. Legal Proceedings

See Note 11 to the condensed consolidated financial statements for a description of current legal proceedings.

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:

General Economic Conditions - Weakening economic conditions in markets in which the company does business may adversely impact the company’s financial results and/or cash flows.

Praxair serves approximately 25 diverse industries across more than 40 countries, which generally leads to financial stability through various business cycles. However, a broad decline in general economic or business conditions in the industries served by its customers could adversely affect the demand for Praxair’s products and impair the ability of our customers to satisfy their obligations to the company, resulting in uncollected receivables and/or unanticipated contract terminations or project delays. 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 the company during these cycles. Additionally, such conditions could impact the utilization of the company’s manufacturing capacity which may require the company to recognize impairment losses on tangible assets such as property, plant and equipment as well as intangible assets such as intellectual property or goodwill.

Cost and Availability of Raw Materials and Energy - Increases in the cost of energy and raw materials and/or disruption in the supply of these materials could result in lost sales or reduced profitability.

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. Large customer contracts typically have escalation and pass-through clauses to recover energy and feedstock costs. Such attempts may not successfully mitigate 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 - The company’s international operations are subject to the risks of doing business abroad and international events and circumstances may adversely impact its business, financial condition or results of operations.

Praxair has substantial international operations which are subject to risks including devaluations 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 and/or expropriation of assets, domestic and international tax laws and compliance with governmental regulations. 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

33

which it can sell its products, reducing the U.S. dollar value of revenue from international operations or otherwise having an adverse effect on its business. In particular, due to recent government actions related to business and currency regulations, there is considerable risk associated with operations in Venezuela (see Note 2 to the condensed consolidated financial statements). At March 31, 2011, Praxair’s sales and net assets in Venezuela were less than 1% of Praxair’s consolidated amounts.

Global Financial Markets Conditions - Macroeconomic factors may impact the company’s ability to obtain financing or increase the cost of obtaining financing which may adversely impact the company’s financial results and/or cash flows.

Volatility and disruption in the U.S. and global credit and equity markets, from time to time, could make it more difficult for Praxair to obtain financing for its operations and/or could 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 certain criteria such as interest coverage and leverage ratios. A decrease in these debt ratings could increase the cost of borrowing or make it more difficult to obtain financing. While the impact of continued volatility in the global credit markets cannot be predicted with certainty, the company believes that it has sufficient operating flexibility, cash reserves, and funding sources to maintain adequate amounts of liquidity to meet its business needs around the world.

Competitor Actions - The inability to effectively compete could adversely impact results of operations.

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 financial results.

Governmental Regulations - The company is subject to a variety of United States and foreign government regulations. Changes in these regulations could have an adverse impact on the business, financial position and results of operations.

The company is subject to regulations in the following areas, among others:

• Environmental protection;

• Domestic and international tax laws and currency controls;

• Safety;

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

• Trade and import/ export restrictions;

• Antitrust matters;

• Global anti-bribery laws; and

• 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. Noncompliance with such laws and regulations could result in penalties or sanctions that could have an adverse impact on the company’s financial results. Environmental protection and healthcare reimbursement legislation are discussed further below.

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, the remediation of contamination, the regulation of greenhouse gas emissions, and other potential climate change initiatives. 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.

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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 Item 7 of Praxair’s 2009 Annual Report on Form 10-K.

Recent legislation in the United States, including the 2010 Patient Protection and Affordable Care Act, contain provisions that will significantly impact government reimbursement of healthcare-related products and services provided by Praxair to its customers. Many provisions are not effective for several years and regulations have either not been issued or their impact is unclear. Therefore, it is not possible to predict the impact on the company’s financial results. Praxair is continuously evaluating and monitoring the impact of this legislation, including any actions that may be appropriate.

Catastrophic Events - Catastrophic events could disrupt the operations of the company and/or its customers and suppliers and may have a significant adverse impact on the results of operations.

The occurrence of catastrophic events or natural disasters such as hurricanes, health epidemics, acts of war or 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 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 company’s financial results.

Retaining Qualified Personnel - The inability to attract and retain qualified personnel may adversely impact the company’s business.

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 financial results.

Technological Advances - If the company 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 specialty 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 - The outcomes of litigation and governmental investigations may affect the company’s financial results.

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

35

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.

Tax Liabilities - Potential tax liabilities could adversely impact the company’s financial position and results of operations.

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 financial results for the period when such determination is made. See Notes 5 and 17 to the consolidated financial statements of Praxair’s 2010 Annual Report on Form 10-K.

Pension Liabilities - Risks related to our pension benefit plans may adversely impact our results of operations and cash flows.

Pension benefits represent significant 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 and asset returns, significant estimates are required to calculate pension expense and liabilities related to the company’s plans. The company utilizes the services of independent actuaries, whose models are used to facilitate these calculations. Several key assumptions are used in the actuarial models to calculate pension expense and liability amounts recorded in the consolidated financial statements. In particular, significant changes in actual investment returns on pension assets, discount rates, or legislative or regulatory changes could impact future results of operations and required pension contributions. For information regarding the potential impacts regarding significant assumptions used to estimate pension expense, including discount rates and the expected long-term rates of return on plan assets. See “Critical Accounting Policies - Pension Benefits” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Praxair’s 2010 Annual Report on Form 10-K.

Operational Risks - Operational risks may adversely impact the company’s business or results of operations.

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 financial results.

Information Technology Systems – The Company may be subject to information technology system failures, network disruptions and breaches in data security.

Praxair utilizes an enterprise resource planning system and other technologies for the exchange of information both within the company and in communicating with third parties. These systems are susceptible to outages due to fire, floods, power loss, telecommunications failures, viruses, break-ins and similar events, or breaches of security. The occurrence of these or other events could disrupt or damage the company’s information technology systems and inhibit the ability to access Praxair’s information systems. Management has taken steps to address these risks and concerns by implementing advanced security technologies, internal controls, network and data center resiliency and recovery processes. Despite these steps, however, a failure of the company’s information technology systems could have a material adverse impact on Praxair’s operations, reputation and financial results.

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Acquisitions - The inability to effectively integrate acquisitions could adversely impact the company’s financial position and results of operations.

Praxair has evaluated, and expects to continue to evaluate, a wide array of potential strategic acquisitions. Many of these acquisitions, 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 impairments of goodwill, any of which could adversely impact the company’s financial results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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 quarter ended March 31, 2011 is provided below:

Period	Total Number of Shares Purchased (Thousands)		Average Price Paid Per Share		Total Numbers of Shares Purchased as Part of Publicly Announced Program (1) (Thousands)		Maximum Number (or approximate dollar value) of Shares that May Yet be Purchased Under the Program (2) (Millions)
January 2011		964	$	92.64		964	$	955
February 2011		607	$	96.79		607	$	896
March 2011		621	$	97.66		621	$	835
First Quarter 2011		2,192	$	95.21		2,192	$	835

(1) On July 28, 2010, the company announced that the company’s board of directors approved the repurchase of an additional $1.5 billion of its common stock which may take place from time to time on the open market (which may include the use of 10b5-1 trading plans) or through negotiated transactions, subject to market and business conditions.

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(2) As of March 31, 2011, the company purchased $665 million of its common stock, pursuant to the 2010 program, leaving an additional $835 million remaining authorized under the 2010 program. The 2010 program does not have any stated expiration date.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Reserved

Item 5. Other Information

None.

Item 6. Exhibits

(a) Exhibits:

12.01	Computation of Ratio of Earnings to Fixed Charges.
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).
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase

* Indicates a management contract or compensatory plan or arrangement.

38

SIGNATURE

Praxair, Inc. and Subsidiaries

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	PRAXAIR, INC.
	(Registrant)
Date: April 27, 2011	By:	/s/    Elizabeth T. Hirsch
		Elizabeth T. Hirsch
		Vice President and Controller
		(On behalf of the Registrant and as Chief Accounting Officer)

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EX-12.01

Exhibit 12.01

RATIO OF EARNINGS TO FIXED CHARGES

Praxair, Inc. and Subsidiaries

(Dollar amounts in millions, except ratios)	Three Months Ended March 31, 2011			Year Ended December 31,
				2010			2009			2008			2007			2006
Pre-tax income from continuing operations before adjustment for noncontrolling interests in consolidated subsidiaries or income or loss from equity investees	$	556		$	1,964		$	1,442		$	1,685		$	1,613		$	1,364
Capitalized interest		(13	)		(62	)		(55	)		(44	)		(35	)		(21	)
Depreciation of capitalized interest		5			18			17			17			15			14
Dividends from less than 50%-owned companies carried at equity		1			9			11			24			8			9
Adjusted pre-tax income from continuing operations before adjustment for noncontrolling interests in consolidated subsidiaries or income or loss from equity investees	$	549		$	1,929		$	1,415		$	1,682		$	1,601		$	1,366
Fixed charges
Interest on long-term and short-term debt	$	35		$	118		$	133		$	198		$	173		$	155
Capitalized interest		13			62			55			44			35			21
Rental expenses representative of an interest factor		10			37			37			37			34			32
Total fixed charges	$	58		$	217		$	225		$	279		$	242		$	208
Adjusted pre-tax income from continuing operations before adjustment for noncontrolling interests in consolidated subsidiaries or income or loss from equity investees plus total fixed charges	$	607		$	2,146		$	1,640		$	1,961		$	1,843		$	1,574
RATIO OF EARNINGS TO FIXED CHARGES		10.5			9.9			7.3			7.0			7.6			7.6

EX-31.01

EXHIBIT 31.01

RULE 13a-14(a) CERTIFICATIONS

Praxair, Inc. and Subsidiaries

I, Stephen F. Angel, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Praxair, Inc.;

2. Based on my knowledge, this quarterly 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 we 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 function):

(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: April 27, 2011	By:	/s/ Stephen F. Angel
		Stephen F. Angel
		Chairman, President Chief Executive Officer
		(principal executive officer)

EX-31.02

EXHIBIT 31.02

RULE 13a-14(a) CERTIFICATIONS

Praxair, Inc. and Subsidiaries

I, James S. Sawyer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Praxair, Inc.;

2. Based on my knowledge, this quarterly 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 we 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 function):

(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: April 27, 2011	By:	/s/ James S. Sawyer
		James S. Sawyer
		Executive Vice President and
		Chief Financial Officer
		(principal financial officer)

EX-32.01

EXHIBIT 32.01

SECTION 1350 CERTIFICATION

Praxair, Inc. and Subsidiaries

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Praxair, Inc. (the “Company”), hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (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: April 27, 2011	By:	/s/ Stephen F. Angel
		Stephen F. Angel
		Chairman, President 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

EXHIBIT 32.02

SECTION 1350 CERTIFICATION

Praxair, Inc. and Subsidiaries

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Praxair, Inc. (the “Company”), hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (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: April 27, 2011	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.