Share-Based Compensation

3 Months Ended

Mar. 31, 2012

Share-based Compensation [Abstract]

Share Based Compensation

8. Share-Based Compensation

Share-based compensation of $17 million ($11 million after tax) and $14 million ($10 million after tax) was recognized during the quarters ended March 31, 2012 and 2011, 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 2011Annual Report on Form 10-K.

Stock Options

The weighted-average fair value of options granted duringthree months ended March 31, 2012 was $17.46 ($17.70 in 2011)based on the Black-Scholes Options-Pricing model.The decrease in grant date fair value year-over-year is attributable to the impact of lower interest rates partially offset by increases in Praxair's stock price.

The following weighted-average assumptions were used for grants in 2012 and 2011 :
	Quarter Ended March 31,
	2012	2011
Dividend yield	2.0%	2.0%
Volatility	22.5%	22.3%
Risk-free interest rate	0.86%	2.2%
Expected term years	5	5

The following table summarizes option activity under the plans as of March 31, 2012 and changes during the three months period then ended (averages are calculated on a weighted basis; life in years; intrinsic value expressed in millions):
			Average	Aggregate
	Number of	Average	Remaining	Intrinsic
	Options (000's)	Exercise Price	Life	Value
Outstanding at January 1, 2012	13,540	$65.30
Granted	1,635	109.67
Exercised	(1,294)	53.00
Cancelled or Expired	(11)	99.26
Outstanding at March 31, 2012	13,870	71.65	6.0	$596
Exercisable at March 31, 2012	10,722	$63.06	5.1	$553

The aggregate intrinsic value represents the difference between the company's closing stock price of $114.64 as of March 31,2012 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 was $74million($69million during the same time period in 2011).

Cash received from option exercises under all share-based payment arrangements for the quarter was $69 million($73million for the same time period in 2011). The cash tax benefit realized from share-based compensation totaled $46million, of which $32 million in excess tax benefits was classified as financing cash flows for the three months ended March 31,2012 ($24 millionand $18million for the same period in2011).

As of March 31,2012, $44 million of unrecognized compensation cost related to non-vested stock options is expected to be recognized over a weighted-average period of approximately 1.2 years.

Performance-Based and Restricted Stock Awards

During the threemonths ended March 31,2012, 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.

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 units granted during the quarterended March 31, 2012was $103.16($92.06for the same periods in 2011).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, 2012 and changes during the three months then ended (shares based on target amounts, averages are calculated on a weighted basis):
	Performance-Based		Restricted Stock
	Number of	Average	Number of	Average
	Shares	Grant Date	Shares	Grant Date
	(000's)	Fair Value	(000's)	Fair Value
Non-vested at January 1, 2012	962	$71.58	340	$75.51
Granted (a)	401	103.16	-	-
Vested	(507)	56.30	(87)	61.20
Cancelled	(2)	89.37	(7)	75.82
Non-vested at March 31, 2012	854	$88.86	246	$80.61

• Performance-based stock unit grants during 2012 include 120 thousand shares relating to the actual payout of the 2009 PSU grants. The original grant date fair value of these shares was $56.02, the cost of which was expensed in prior periods.

As of March 31,2012, based on current estimates of future performance, $51 million of unrecognized compensation cost related to performance-based awards is expected to be recognized through the first quarter of 2015 and $10 million of unrecognized compensation cost related to the restricted stock awards is expected to be recognized through the first quarter of 2017.

In April 2012 the company granted 89 thousandrestricted stock units to employees at a weighted average grant date fair value of $108.54