PRAXAIR INC (Form: 10-Q, Received: 04/23/2014 13:31:50)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

For the quarterly period ended March 31, 2014



¨	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 ý 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 ý 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	ý	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 ý

At March 31, 2014 , 292,934,765 shares of common stock ($0.01 par value) of the Registrant were outstanding.

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INDEX

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Income - Praxair, Inc. and Subsidiaries Quarters Ended March 31, 2014 and 2013 (Unaudited)	3

	Consolidated Statements of Comprehensive Income - Praxair, Inc. and Subsidiaries Quarters Ended March 31, 2014 and 2013 (Unaudited)	4

	Condensed Consolidated Balance Sheets - Praxair, Inc. and Subsidiaries March 31, 2014 and December 31, 2013 (Unaudited)	5

	Condensed Consolidated Statements of Cash Flows - Praxair, Inc. and Subsidiaries Three Months Ended March 31, 2014 and 2013 (Unaudited)	6

	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	21

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41

Item 4.	Controls and Procedures	41

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 3.	Defaults Upon Senior Securities	46

Item 4.	Mine Safety Disclosures	46

Item 5.	Other Information	46

Item 6.	Exhibits	47

Signature		48

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PRAXAIR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Millions of dollars, except per share data)

(UNAUDITED)



	Quarter Ended March 31,
	2014			2013
SALES	$	3,026		$	2,888
Cost of sales, exclusive of depreciation and amortization	1,726			1,638
Selling, general and administrative	326			337
Depreciation and amortization	285			266
Research and development	23			24
Venezuela currency devaluation	—			23
Other income (expense) - net	9			—
OPERATING PROFIT	675			600
Interest expense - net	46			40
INCOME BEFORE INCOME TAXES AND EQUITY INVESTMENTS	629			560
Income taxes	176			164
INCOME BEFORE EQUITY INVESTMENTS	453			396
Income from equity investments	9			10
NET INCOME (INCLUDING NONCONTROLLING INTERESTS)	462			406
Less: noncontrolling interests	(14		)	(15		)
NET INCOME - PRAXAIR, INC.	$	448		$	391
PER SHARE DATA - PRAXAIR, INC. SHAREHOLDERS
Basic earnings per share	$	1.52		$	1.32
Diluted earnings per share	$	1.51		$	1.30
Cash dividends per share	$	0.65		$	0.60
WEIGHTED AVERAGE SHARES OUTSTANDING (000’s):
Basic shares outstanding	294,195			296,604
Diluted shares outstanding	297,253			299,700

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

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PRAXAIR, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Millions of dollars)

(UNAUDITED)



	Quarter Ended March 31,
	2014			2013
NET INCOME (INCLUDING NONCONTROLLING INTERESTS)	$	462		$	406

OTHER COMPREHENSIVE INCOME (LOSS)
Translation adjustments:
Foreign currency translation adjustments	(20		)	(18		)
Reclassifications to net income	(3		)	—
Income taxes	(9		)	(1		)
Translation adjustments	(32		)	(19		)
Funded status - retirement obligations (Note 14):
Retirement program remeasurements	2			4
Reclassifications to net income (Note 11)	13			22
Income taxes	(5		)	(8		)
Funded status - retirement obligations	10			18
Derivative instruments (Note 6):
Current quarter unrealized gain (loss)	3			—
Reclassifications to net income	—			1
Income taxes	(1		)	—
Derivative instruments	2			1
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)	(20		)	—

COMPREHENSIVE INCOME (INCLUDING NONCONTROLLING INTERESTS)	442			406
Less: noncontrolling interests	(12		)	(7		)
COMPREHENSIVE INCOME - PRAXAIR, INC.	$	430		$	399

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

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PRAXAIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Millions of dollars)

(UNAUDITED)



	March 31, 2014			December 31, 2013
ASSETS
Cash and cash equivalents	$	144		$	138
Accounts receivable - net	2,027			1,892
Inventories	520			506
Prepaid and other current assets	358			380
TOTAL CURRENT ASSETS	3,049			2,916
Property, plant and equipment (less accumulated depreciation of $11,859 in 2014 and $11,753 in 2013)	12,326			12,278
Goodwill	3,243			3,194
Other intangible assets - net	612			596
Other long-term assets	1,308			1,271
TOTAL ASSETS	$	20,538		$	20,255
LIABILITIES AND EQUITY
Accounts payable	$	879		$	921
Short-term debt	701			782
Current portion of long-term debt	5			3
Other current liabilities	849			958
TOTAL CURRENT LIABILITIES	2,434			2,664
Long-term debt	8,564			8,026
Other long-term liabilities	2,347			2,255
TOTAL LIABILITIES	13,345			12,945
Commitments and contingencies (Note 12)
Redeemable noncontrolling interests (Note 14)	195			307
Praxair, Inc. Shareholders’ Equity:
Common stock $0.01 par value, authorized - 800,000,000 shares, issued - 383,230,625 shares for both periods	4			4
Additional paid-in capital	3,943			3,970
Retained earnings	10,784			10,528
Accumulated other comprehensive income (loss)	(1,998		)	(1,981		)
Treasury stock, at cost (2014 - 90,295,860 shares and 2013 - 89,096,761 shares)	(6,133		)	(5,912		)
Total Praxair, Inc. Shareholders’ Equity	6,600			6,609
Noncontrolling interests	398			394
TOTAL EQUITY	6,998			7,003
TOTAL LIABILITIES AND EQUITY	$	20,538		$	20,255

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

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PRAXAIR, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Millions of dollars)

(UNAUDITED)



	Three Months Ended March 31,
	2014			2013
OPERATIONS
Net income - Praxair, Inc.	$	448		$	391
Noncontrolling interests	14			15
Net income (including noncontrolling interests)	462			406
Adjustments to reconcile net income to net cash provided by operating activities:
Venezuela currency devaluation	—			23
Depreciation and amortization	285			266
Deferred income taxes	23			1
Share-based compensation	15			17
Working capital:
Accounts receivable	(136		)	(161		)
Inventory	(16		)	(16		)
Prepaid and other current assets	20			(6		)
Payables and accruals	(116		)	—
Pension contributions	(9		)	(5		)
Long-term assets, liabilities and other	8			(53		)
Net cash provided by operating activities	536			472
INVESTING
Capital expenditures	(393		)	(466		)
Acquisitions, net of cash acquired	(124		)	(1,098		)
Divestitures and asset sales	66			31
Net cash used for investing activities	(451		)	(1,533		)
FINANCING
Short-term debt borrowings (repayments) - net	(80		)	(60		)
Long-term debt borrowings	847			1,403
Long-term debt repayments	(303		)	(27		)
Issuances of common stock	49			33
Purchases of common stock	(286		)	(150		)
Cash dividends - Praxair, Inc. shareholders	(191		)	(178		)
Excess tax benefit on share-based compensation	20			14
Noncontrolling interest transactions and other	(140		)	(5		)
Net cash (used for) provided by financing activities	(84		)	1,030
Effect of exchange rate changes on cash and cash equivalents	5			(13		)
Change in cash and cash equivalents	6			(44		)
Cash and cash equivalents, beginning-of-period	138			157
Cash and cash equivalents, end-of-period	$	144		$	113

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

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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	8

Note 2. 2013 Venezuela Currency Devaluation	8

Note 3. Acquisitions	8

Note 4. Supplemental Information	9

Note 5. Debt	10

Note 6. Financial Instruments	11

Note 7. Fair Value Disclosures	13

Note 8. Earnings Per Share – Praxair, Inc. Shareholders	14

Note 9. Goodwill and Other Intangible Assets	15

Note 10. Share-Based Compensation	15

Note 11. Retirement Programs	17

Note 12. Commitments and Contingencies	17

Note 13. Segments	18

Note 14. Equity and Redeemable Noncontrolling Interests	19

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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 2013 Annual Report on Form 10-K. There have been no material changes to the company’s significant accounting policies during 2014 .

Accounting Standards Implemented in 2014

The following standards were effective for Praxair in 2014 and their adoption did not have a significant impact on the condensed consolidated financial statements:

•

Accounting for Cumulative Translation Adjustment – In March 2013, the Financial Accounting Standards Board ("FASB") issued updated guidance on the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity, or as a result of acquisitions achieved in stages. The adoption of this guidance did not have a significant impact on the condensed consolidated financial statements.

•

Presentation of Unrecognized Tax Benefits – In July 2013, the FASB issued updated guidance on the presentation of unrecognized tax benefits. The new guidance requires an entity to present certain unrecognized tax benefits, or a portion thereof, as a reduction to the related deferred tax asset, primarily for loss and tax credit carryforwards. The adoption of this guidance did not have a significant impact on the condensed consolidated financial statements.

Accounting Standards to be Implemented

•

Reporting Discontinued Operations – In April 2014, the FASB issued updated guidance on the reporting and disclosures of discontinued operations. The new guidance requires that the disposal of a component of an entity be reported as discontinued operations only if the action represents a strategic shift that will have a major effect on an entity’s operations and financial results, and would require expanded disclosures. This guidance will be effective for Praxair beginning in the first quarter 2015.

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

2. 2013 Venezuela Currency Devaluation

On February 8, 2013, Venezuela announced a devaluation of the Venezuelan Bolivar from 4.30 to 6.30 (a 32% devaluation), effective on February 13, 2013. In the first quarter 2013 Praxair recorded a $23 million pre-tax charge ( $23 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 6.30 exchange rate.

3. Acquisitions

2014 Acquisitions

During the three months ended March 31, 2014 Praxair had acquisitions totaling $124 million . These consisted of the acquisition of Messer’s industrial gases business in Italy, several packaged gas businesses in North and South America, and an equity investment in the Middle East. These transactions resulted in goodwill and other intangible assets of $43 million and $29 million , respectively (see Note 9).

2013 Acquisitions

NuCO ₂

On March 1, 2013 Praxair acquired 100% of NuCO ₂ Inc. ("NuCO ₂ ") for $1,095 million . NuCO ₂ is the leading national provider of beverage carbonation solutions in the United States to the restaurant and hospitality industries with 162,000

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customer locations and 900 employees, and with 2012 sales of approximately $230 million . The NuCO ₂ micro-bulk beverage carbonation solution is the service model of choice for quick service restaurants and convenience stores offering fountain beverages and represents an extension of Praxair's core industrial gas business.

The acquisition of NuCO ₂ was accounted for as a business combination. Following the acquisition date, 100% of NuCO ₂ 's results were consolidated in the North America business segment. For the three months ended March 31, 2014 and 2013, Praxair's consolidated income statement includes sales of $63 million and $20 million , respectively, related to NuCO ₂ . Pro forma results for the three months ended March 31, 2013 have not been included as the impact of the acquisition is not material to the consolidated statements of income.

The following table summarizes the fair value of identifiable assets acquired and liabilities assumed in the acquisition of NuCO ₂ as of the acquisition dat e. Purchase accounting has been finalized and adjustments made subsequent to the acquisition date were not significant.



(Millions of dollars)	March 1, 2013
Trade receivables, net	$	17
Property, plant and equipment	199
Intangible assets	374
Deferred income taxes	(85		)
Other assets and (liabilities)	(28		)
Goodwill	618
Purchase price	$	1,095

The identifiable intangible assets primarily consist of customer relationships that will be amortized over their estimated useful life of 25 years . The deferred income taxes relate primarily to property, plant and equipment, intangibles and operating loss carryforwards. The goodwill resulting from the acquisition is attributable to (i) expected growth from market penetration into the quick service restaurants, convenience stores and themed restaurant chains in the United States and select international markets as we leverage Praxair's customer and distribution networks worldwide, and (ii) cost synergies related to the procurement of raw materials, distribution-related expenses and administrative costs as we integrate and rationalize administration tasks and leverage Praxair's purchasing scale. The goodwill is not deductible for income tax purposes.

4. Supplemental Information

Inventories

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



(Millions of dollars)	March 31, 2014		December 31, 2013
Inventories
Raw materials and supplies	$	173	$	167
Work in process	62		58
Finished goods	285		281
Total inventories	$	520	$	506

Long-term receivables

Long-term receivables are not material and are largely reserved. Such long-term receivables are included within other long-term assets in the condensed consolidated balance sheets and totaled $42 million and $36 million at March 31, 2014 and December 31, 2013 , respectively. These amounts are net of reserves of $54 million and $51 million , respectively. The amounts in both periods relate primarily to government receivables in Brazil and other long-term notes receivable from customers. Collectability is reviewed regularly and uncollectible amounts are written-off as appropriate. The account balance changes during 2014 were primarily the result of currency fluctuations, additional receivables and reserves.

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5. Debt

The following is a summary of Praxair’s outstanding debt at March 31, 2014 and December 31, 2013 :



(Millions of dollars)	March 31, 2014			December 31, 2013
SHORT-TERM
Commercial paper and U.S. bank borrowings	$	617		$	712
Other bank borrowings (primarily international)	84			70
Total short-term debt	701			782
LONG-TERM
U.S. borrowings (U.S. dollar denominated unless otherwise noted)
4.375% Notes due 2014 (e)	—			300
4.625% Notes due 2015 (d)	500			500
3.25% Notes due 2015 (a, b)	416			418
0.75% Notes due 2016	400			400
5.375% Notes due 2016	400			400
5.20% Notes due 2017	325			325
1.05% Notes due 2017	400			400
1.20% Notes due 2018	500			500
1.25% Notes due 2018 (a, b)	479			478
4.50% Notes due 2019 (a)	598			598
1.90% Notes due 2019	500			500
1.50% Euro-denominated notes due 2020 (a, c)	822			—
4.05% Notes due 2021 (a)	498			498
3.00% Notes due 2021 (a)	497			497
2.45% Notes due 2022 (a)	598			598
2.20% Notes due 2022 (a)	499			499
2.70% Notes due 2023 (a)	498			498
3.55% Notes due 2042 (a)	466			466
Other	5			5

International bank borrowings (d)	159			140
Obligations under capital leases	9			9
	8,569			8,029
Less: current portion of long-term debt	(5		)	(3		)
Total long-term debt	8,564			8,026
Total debt	$	9,270		$	8,811


(a)	Amounts are net of unamortized discounts.


(b)	March 31, 2014 and December 31, 2013 include a $20 million and $22 million fair value increase, respectively, related to hedge accounting. See Note 6 for additional information.

(c)

During the quarter ended March 31, 2014 , Praxair issued the €600 million 1.50% Euro-denominated notes due 2020. This debt issuance has been designated as a hedge of the net investment position in European operations where the Euro is the functional currency (see Note 6). The proceeds of this debt issuance were used for general corporate purposes, including acquisitions, repayment of debt and share repurchases under the company's share repurchase program.


(d)	Classified as long-term because of the company’s intent to refinance this debt on a long-term basis and the availability of such financing under the terms of an existing $2 billion long-term credit facility.


(e)	In March 2014, Praxair repaid $300 million of 4.375% notes that became due.

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6. 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 three types of derivatives that the company enters into: (i) those relating to fair-value exposures, (ii) those relating to cash-flow exposures, and (iii) those relating to foreign currency net investment exposures. Fair-value exposures relate to recognized assets or liabilities, and firm commitments; cash-flow exposures relate to the variability of future cash flows associated with recognized assets or liabilities, or forecasted transactions; and net investment exposures relate to the impact of foreign currency exchange rate changes on the carrying value of net assets denominated in foreign currencies.

When a derivative is executed and hedge accounting is appropriate, it is designated as either a fair-value hedge, cash-flow hedge, or a net investment hedge. Currently, Praxair designates all interest-rate and treasury-rate locks 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, 2014 and December 31, 2013 for consolidated subsidiaries:



					Fair Value
	Notional Amounts				Assets				Liabilities
(Millions of dollars)	March 31, 2014		December 31, 2013		March 31, 2014		December 31, 2013		March 31, 2014		December 31, 2013
Derivatives Not Designated as Hedging Instruments:
Currency contracts:
Balance sheet items (a)	$	2,008	$	2,197	$	7	$	4	$	1	$	14
Derivatives Designated as Hedging Instruments:
Currency contracts:
Forecasted purchases (a)	$	—	$	5	$	—	$	—	$	—	$	—
Interest rate contracts:
Interest rate swaps (b)	875		875		20		22		—		—
Total	$	875	$	880	$	20	$	22	$	—	$	—
Total Derivatives	$	2,883	$	3,077	$	27	$	26	$	1	$	14


(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.

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 offset by the fair value adjustments recorded on the hedged assets and liabilities.

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Anticipated Net Income

Historically Praxair has entered into anticipated net income hedge contracts consisting of foreign currency options and forwards related primarily to anticipated net income in Brazil, Europe and Canada. There were no anticipated net income hedges outstanding as of March 31, 2014 and December 31, 2013 . 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 currency translation. The accounting rules pertaining to derivatives and hedging do not allow hedges of anticipated net income to be designated as hedging instruments.

Forecasted Purchases

Foreign currency contracts related to forecasted purchases consist of forward contracts entered into to manage the exposure to fluctuations in foreign-currency exchange rates on forecasted purchases of capital-related equipment and services denominated in currencies other than the functional currency of the related operating units. These forward contracts were designated and accounted for as cash flow hedges.

Net Investment Hedge

Praxair has designated the €600 million ( $822 million as of March 31, 2014 ) 1.50% Euro-denominated notes due 2020, as a hedge of the net investment position in its European operations. This Euro-denominated debt instrument reduces the company's exposure to changes in the currency exchange rate on investments in foreign subsidiaries with Euro functional currencies. Since the time the Euro-denominated notes were issued in March 2014, exchange rate movements have reduced long-term debt by $5 million ( $3 million after tax), with the offsetting gain shown within the cumulative translation component of AOCI in the condensed consolidated balance sheets and the condensed consolidated statements of comprehensive income.

Interest Rate Contracts

Outstanding Interest Rate Swaps

At March 31, 2014 , Praxair had $875 million notional amount of interest-rate swap agreements outstanding related to the $400 million 3.25% fixed-rate notes that mature in 2015 and to the $475 million 1.25% notes that mature 2018, which effectively convert fixed-rate interest to variable-rate interest. These 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 instrument. At March 31, 2014 , $20 million was recognized as an increase in the fair value of these notes ( $22 million at December 31, 2013 ).

Terminated Interest Rate Swap

During 2010, Praxair entered into a $500 million notional amount of interest-rate swap agreement that effectively converted fixed-rate interest to variable-rate interest on the $500 million 2.125% notes that matured in 2013. This swap agreement was terminated in 2011, and Praxair received a $18 million cash payment. This $18 million gain was recognized in earnings as a reduction to interest expense over the remaining term of the underlying debt. During the quarter ended March 31, 2013, $2 million was recognized as a reduction to interest expense.

Terminated Treasury Rate Locks

The following table summarizes the unrecognized gains (losses) related to terminated treasury rate lock contracts:



	Year Terminated	Original Gain / (Loss)			Unrecognized Gain / (Loss) (a)
(Millions of dollars)	Year Terminated	Original Gain / (Loss)			March 31, 2014			December 31, 2013
Treasury Rate Locks
Underlying debt instrument:
$500 million 2.20% fixed-rate notes that mature in 2022 (b)	2012	$	(2	)	$	(2	)	$	(2	)
$500 million 3.00% fixed-rate notes that mature in 2021 (b)	2011	(11		)	(9		)	(9		)
$600 million 4.50% fixed-rate notes that mature in 2019 (b)	2009	16			10			10
$500 million 4.625% fixed-rate notes that mature in 2015 (b)	2008	(7		)	(1		)	(1		)
Total - pre-tax					$	(2	)	$	(2	)
Less: income taxes					1			1
After- tax amounts					$	(1	)	$	(1	)

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(a)

The unrecognized gains / (losses) for the treasury rate locks are shown in accumulated other comprehensive income (“AOCI”) and are being recognized on a straight line basis to interest expense – net over the term of the underlying debt agreements. The cash received or paid was reflected within the noncontrolling interest transactions and other in the financing section of the condensed consolidated statements of cash flows. Refer to the table below summarizing the impact on the company’s consolidated statements of income and AOCI for current period gain (loss) recognition.


(b)	The notional amount of the treasury rate lock contracts are equal to the underlying debt instrument with the exception of the treasury rate lock contract entered into to hedge the $600 million 4.50% fixed-rate notes that mature in 2019. The notional amount of this contract was $500 million .

The following tables summarize the impacts of the company’s derivatives on the consolidated statements of income and AOCI:



	Amount of Pre-Tax Gain (Loss) Recognized in Earnings *
	Quarter Ended March 31,
(Millions of dollars)	2014		2013
Derivatives Not Designated as Hedging Instruments
Currency contracts:
Balance sheet items
Debt-related	$	17	$	34
Other balance sheet items	3		(7		)
Total	$	20	$	27

* The gains (losses) on balance sheet items are 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 statements of income as interest expense-net. Other balance sheet items and anticipated net income gains (losses) are recorded in the consolidated statements of income as other income (expenses)-net.



	Quarter Ended
	Amount of Gain (Loss) Recognized in AOCI					Amount of Gain (Loss) Reclassified from AOCI to the Consolidated Statement of Income
(Millions of dollars)	March 31, 2014			March 31, 2013		March 31, 2014		March 31, 2013
Derivatives Designated as Hedging Instruments *
Net investment hedge:
Foreign currency forward	$	(6	)	$	—	$	—	$	—
Interest rate contracts:
Treasury rate lock contracts	—			—		—		1
Total - pre tax	$	(6	)	$	—	$	—	$	1
Less: income taxes	2			—		—		—
Total - Net of Taxes	$	(4	)	$	—	$	—	$	1

* The gains (losses) on net investment hedges are recorded as a component of AOCI within foreign currency translation adjustments in the condensed consolidated balance sheets and the condensed consolidated statements of comprehensive income. The gains (losses) on treasury rate locks are recorded as a component of AOCI within derivative instruments in the condensed consolidated balance sheets and the condensed consolidated statements of comprehensive income. There was no ineffectiveness for these instruments during 2014 or 2013 . The gains (losses) on net investment hedges are reclassified to earnings only when the related currency translation adjustments are required to be reclassified, usually upon sale or liquidation of the investment. The gains (losses) for interest rate contracts are reclassified to earnings as interest expense –net on a straight-line basis over the remaining maturity of the underlying debt. Net losses of less than $1 million are expected to be reclassified to earnings during the next twelve months.

7. 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)

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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:



	Fair Value Measurements Using
	Level 1		Level 2				Level 3
(Millions of dollars)	March 31, 2014	December 31, 2013	March 31, 2014		December 31, 2013		March 31, 2014	December 31, 2013
Assets
Derivatives	—	—	$	27	$	26	—	—
Liabilities
Derivatives	—	—	$	1	$	14	—	—

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 similar issues, which is deemed a level 2 measurement. At March 31, 2014 , the estimated fair value of Praxair’s long-term debt portfolio was $8,603 million versus a carrying value of $8,569 million . At December 31, 2013 , the estimated fair value of Praxair’s long-term debt portfolio was $7,976 million versus a carrying value of $8,029 million . Differences from carrying amounts are attributable to interest-rate changes subsequent to when the debt was issued.

8. 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,
	2014		2013
Numerator (Millions of dollars)
Net income - Praxair, Inc.	$	448	$	391
Denominator (Thousands of shares)
Weighted average shares outstanding	293,692		296,075
Shares earned and issuable under compensation plans	503		529
Weighted average shares used in basic earnings per share	294,195		296,604
Effect of dilutive securities
Stock options and awards	3,058		3,096
Weighted average shares used in diluted earnings per share	297,253		299,700
Basic Earnings Per Share	$	1.52	$	1.32
Diluted Earnings Per Share	$	1.51	$	1.30

There were no antidilutive stock options for the quarter ended March 31, 2014 . Stock options of 855 were antidilutive and therefore excluded in the computation of diluted earnings per share for the quarter ended March 31, 2013 .

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9. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the quarter ended March 31, 2014 were as follows:



(Millions of dollars)	North America			South America		Europe			Asia		Surface Technologies		Total
Balance, December 31, 2013	$	2,117		$	166	$	743		$	24	$	144	$	3,194
Acquisitions (Note 3)	22			4		17			—		—		43
Purchase adjustments & other	1			—		(5		)	—		5		1
Foreign currency translation	(6		)	7		4			—		—		5
Balance, March 31, 2014	$	2,134		$	177	$	759		$	24	$	149	$	3,243

Praxair has performed its goodwill impairment tests annually during the second quarter of each year, and historically has determined that the fair value of each of its reporting units was substantially in excess of its carrying value (refer to Note 1 to the consolidated financial statements of Praxair's 2013 Annual Report on Form 10-K). As a result, no impairment was recorded. There were no indicators of impairment through March 31, 2014 .

Changes in the carrying amounts of other intangibles for the quarter ended March 31, 2014 were as follows:



(Millions of dollars)	Customer & License/Use Agreements			Non-compete Agreements			Patents & Other			Total
Cost:
Balance, December 31, 2013	$	661		$	31		$	43		$	735
Additions (Note 3)	24			5			—			29
Foreign currency translation	(2		)	—			—			(2		)
Other *	(1		)	(3		)	4			—
Balance, March 31, 2014	$	682		$	33		$	47		$	762
Less: Accumulated amortization
Balance, December 31, 2013	$	(118	)	$	(16	)	$	(5	)	$	(139	)
Amortization expense	(9		)	(1		)	(1		)	(11		)
Foreign currency translation	—			—			—			—
Other *	1			3			(4		)	—
Balance, March 31, 2014	$	(126	)	$	(14	)	$	(10	)	$	(150	)
Net balance at March 31, 2014	$	556		$	19		$	37		$	612

* Other primarily relates to the write-off of fully amortized assets and purchase accounting adjustments.

There are no expected residual values related to these intangible assets. The remaining weighted-average amortization period for intangible assets is approximately 19 years .

Total estimated annual amortization expense is as follows:



(Millions of dollars)
Remaining 2014	$	32
2015	47
2016	44
2017	38
2018	34
Thereafter	417
	$	612

10. Share-Based Compensation

Share-based compensation of $15 million ( $10 million after-tax) and $17 million ( $11 million after-tax) was recognized during the quarters ended March 31, 2014 and 2013 , respectively. The expense was recorded primarily in selling, general and

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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 2013 Annual Report on Form 10-K.

Stock Options

The weighted-average fair value of options granted during the quarter ended March 31, 2014 was $14.62 ( $16.31 in 2013 ) based on the Black-Scholes Options-Pricing model. The decrease in grant date fair value year-over-year is primarily attributable to the decrease in volatility which was partially offset by increases in Praxair's stock price and risk-free interest rate.

The following weighted-average assumptions were used to value the grants in 2014 and 2013 :



	Three Months Ended March 31,
	2014		2013
Dividend yield	2.0	%	2.2	%
Volatility	15.2	%	21.7	%
Risk-free interest rate	1.57	%	0.76	%
Expected term years	5		5

The following table summarizes option activity under the plans as of March 31, 2014 and changes during the three months 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, 2014	11,161		$	81.42
Granted	1,292		128.80
Exercised	(723	)	62.14
Cancelled or Expired	(22	)	79.44
Outstanding at March 31, 2014	11,708		87.85		5.8	$	505
Exercisable at March 31, 2014	9,052		$	78.64	4.9	$	474

The aggregate intrinsic value represents the difference between the company’s closing stock price of $130.97 as of March 31, 2014 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, 2014 was $49 million ( $29 million during the same time period in 2013 ).

Cash received from option exercises under all share-based payment arrangements for the quarter ended March 31, 2014 was $45 million ( $29 million for the same time period in 2013 ). The cash tax benefit realized from share-based compensation totaled $34 million for the quarter ended March 31, 2014 , of which $20 million in excess tax benefits was classified as financing cash flows for the three months ended March 31, 2014 ( $26 million cash tax benefit for the same period in 2013 of which $14 million represented excess tax benefit for the three months ended March 31, 2013 ).

As of March 31, 2014 , $34 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 three months ended March 31, 2014 , the company granted performance-based stock units to employees which vest principally based 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 200 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 three months ended March 31, 2014 , the company also granted restricted stock units to employees. The majority of the restricted stock units vest at the end of a three -year service period. Compensation expense related to the restricted stock units is recognized on a straight-line basis over the vesting period.

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The weighted-average fair value of performance-based stock and restricted stock units granted during the quarter ended March 31, 2014 was $121.16 and $121.20 , respectively, ( $103.46 and $104.19 for the same period in 2013 ). 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, 2014 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 Shares (000’s)		Average Grant Date Fair Value		Number of Shares (000’s)		Average Grant Date Fair Value
Non-vested at January 1, 2014	867		$	99.55	337		$	100.41
Granted (a)	328		121.16		76		121.20
Vested	(338	)	92.06		(85	)	92.24
Cancelled	(4	)	107.32		(3	)	80.08
Non-vested at March 31, 2014	853		$	109.13	325		$	107.62


(a)	Performance-based stock unit grants during 2014 include 49 thousand shares relating to the actual payout of the 2011 PSU grants in 2014.

As of March 31, 2014 , based on current estimates of future performance, $59 million of unrecognized compensation cost related to performance-based awards is expected to be recognized through the first quarter of 2017 and $21 million of unrecognized compensation cost related to the restricted stock awards is expected to be recognized primarily through the first quarter of 2017 .

11. Retirement Programs

The components of net pension and postretirement benefits other than pensions (“OPEB”) costs for the quarters ended March 31, 2014 and 2013 are shown below:



	Quarter Ended March 31,
	Pensions						OPEB
(Millions of dollars)	2014			2013			2014			2013
Service cost	$	13		$	13		$	1		$	1
Interest cost	31			29			3			3
Expected return on plan assets	(40		)	(38		)	—			—
Net amortization and deferral	15			23			(2		)	(1		)
Net periodic benefit cost	$	19		$	27		$	2		$	3

Praxair estimates that 2014 contributions to its pension plans will be in the area of $25 million , of which $9 million have been made through March 31, 2014 .

12. Commitments and Contingencies

Contingent Liabilities

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 2013 Annual Report on Form 10-K).

Among such matters are:

•

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 such disputes were enrolled in the Refis Program, subject to final calculation and review by the Brazilian federal government. The Company recorded estimated liabilities based on the terms of the Refis Program. Since 2009,

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Praxair has generally been unable to reach final agreement on the calculations and recently initiated litigation against the government in an attempt to resolve certain items. Open issues relate to the following matters: (i) application of cash deposits and net operating loss carryforwards to satisfy obligations, (ii) the amount of tax reductions available under the Refis Program, and (iii) income tax deductibility of payments. Although it is difficult to estimate the timing of resolution of legal matters in Brazil, it is possible that individual disputed matters may be resolved during the next year.

•

At March 31, 2014 the most significant non-income and income tax claims in Brazil, after enrollment in the Refis Program, relate to state VAT tax matters associated with procedural issues 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 $193 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$972 million ) 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$751 million ) due to a calculation error made by CADE. The amount of the fine is subject to indexation using SELIC. 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 entirely 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 entirely overturned 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.

13. Segments

Sales and operating profit by segment for the quarters ended March 31, 2014 and 2013 are shown below. For a description of Praxair’s operating segments, refer to Note 18 to the consolidated financial statements of Praxair’s 2013 Annual Report on Form 10-K.



	Quarter Ended March 31,
(Millions of dollars)	2014		2013
SALES ^(a)
North America	$	1,580	$	1,457
Europe	397		370
South America	488		531
Asia	392		367
Surface Technologies	169		163
Total sales	$	3,026	$	2,888

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	Quarter Ended March 31,
(Millions of dollars)	2014		2013
OPERATING PROFIT
North America	$	378	$	358
Europe	79		62
South America	113		114
Asia	75		63
Surface Technologies	30		26
Segment operating profit	675		623
Venezuela currency devaluation (Note 2)	—		(23		)
Total operating profit	$	675	$	600


(a)	Intersegment sales, primarily from North America to other segments, were not significant for the quarters ended March 31, 2014 and 2013 .

14. Equity and Redeemable Noncontrolling Interests

Equity

A summary of the changes in total equity for the quarters ended March 31, 2014 and 2013 is provided below:



	Quarter Ended March 31,
(Millions of dollars)	2014									2013
Activity	Praxair, Inc. Shareholders’ Equity			Noncontrolling Interests			Total Equity			Praxair, Inc. Shareholders’ Equity			Noncontrolling Interests			Total Equity
Balance, beginning of period	$	6,609		$	394		$	7,003		$	6,064		$	357		$	6,421
Net income (a)	448			10			458			391			10			401
Other comprehensive income (loss)	(17		)	(3		)	(20		)	3			(3		)	—
Noncontrolling interests:
Additions (reductions) (b)	(24		)	—			(24		)	—			(6		)	(6		)
Dividends and other capital changes	—			(3		)	(3		)	—			(1		)	(1		)
Redemption value adjustments	(1		)	—			(1		)	(5		)	—			(5		)
Dividends to Praxair, Inc. common stock holders ($0.65 per share in 2014 and $0.60 per share in 2013)	(191		)	—			(191		)	(178		)	—			(178		)
Issuances of common stock:
For the dividend reinvestment and stock purchase plan	1			—			1			2			—			2
For employee savings and incentive plans	33			—			33			17			—			17
Purchases of common stock	(293		)	—			(293		)	(156		)	—			(156		)
Tax benefit from share-based compensation	20			—			20			14			—			14
Share-based compensation	15			—			15			17			—			17
Balance, end of period	$	6,600		$	398		$	6,998		$	6,169		$	357		$	6,526


(a)	Net income for noncontrolling interests excludes Net income related to redeemable noncontrolling interests of $4 million for the quarter ended March 31, 2014 ( $5 million for the same time period in 2013 ), which is not part of total equity (see redeemable noncontrolling interests section below).


(b)	Praxair increased its ownership in certain consolidated subsidiaries. The difference between the purchase price and the related noncontrolling interests was recorded as a decrease in Praxair's additional paid-in-capital.

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The components of AOCI are as follows:



	March 31,			December 31,
(Millions of dollars)	2014			2013
Cumulative translation adjustment - net of taxes
North America	$	(373	)	$	(315	)
South America	(1,125		)	(1,179		)
Europe	(68		)	(63		)
Asia	—			21
Surface Technologies	29			28
	(1,537		)	(1,508		)
Derivatives - net of taxes	(2		)	(4		)
Pension / OPEB funded status obligation - net of taxes	(459		)	(469		)
	$	(1,998	)	$	(1,981	)

Redeemable Noncontrolling Interests

Noncontrolling interests with redemption features, such as put/sell options, that are not solely within the Company’s control (“redeemable noncontrolling interests”) are reported separately in the consolidated balance sheets at the greater of carrying value or redemption value. For redeemable noncontrolling interests that are not yet exercisable, Praxair calculates the redemption value by accreting the carrying value to the redemption value over the period until exercisable. If the redemption value is greater than the carrying value, any increase is adjusted directly to equity and does not impact net income.

Redeemable noncontrolling interests include Yara Praxair, a joint venture in Scandinavia, and two packaged gas distributors in the United States where the noncontrolling interests have put options. In Scandinavia, the noncontrolling shareholder has the right to sell its shares to Praxair starting in 2015 for a period of 4 years at a formula price. Praxair also obtained the right to purchase the shares held by the noncontrolling shareholder starting in 2017 for a period of 2 years, also at a formula price.

The following is a summary of the changes in redeemable noncontrolling interests for the quarters ended March 31, 2014 and 2013 :



(Millions of dollars)	2014			2013
Balance, January 1,	$	307		$	252
Net income	4			5
Distributions to noncontrolling interest	(6		)	(2		)
Redemption value adjustments/accretion	1			5
Foreign currency translation and other	1			(5		)
Purchase of noncontrolling interest *	(112		)	—
Balance, March 31,	$	195		$	255

* In January 2014, Praxair acquired the redeemable noncontrolling interests related to Praxair Distribution Mid-Atlantic, LLC. The cash payment is shown in the financing section of the condensed consolidated statements of cash flows under the caption "Noncontrolling interest transactions and other".

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

Consolidated Results

Praxair reported strong first-quarter results. Excluding negative currency translation effects which reduced overall sales by 4%, sales grew 9% from the first quarter of 2013 due to volume growth, higher overall pricing and acquisitions. Volume growth of 4% was primarily driven by new project start-ups in North America and Asia. Acquisitions in North America and Europe contributed 2% growth. Operating profit was 12% above reported operating profit in the prior year. Operating profit was 8% above 2013's adjusted operating profit and grew 12% ex-currency effects. Operating profit growth was primarily due to higher volumes, pricing, and acquisitions. On a reported basis, net income and diluted earnings per share were 15% and 16% above the prior-year quarter. Net income and earnings per share grew 8% and 9%, respectively, versus 2013's adjusted results. Diluted earnings per share grew faster than net income due to a lower outstanding share count. Cash flow from operations was strong at $536 million , 14% above the prior year.

Outlook

Diluted earnings per share for the second quarter of 2014 are expected to be in the range of $1.55 to $1.60.

Diluted earnings per share for the full year of 2014 are expected to be in the range of $6.30 to $6.50.

For the full year of 2014 , Praxair expects sales in the area of $12.4 to $12.8 billion. Full-year capital expenditures are expected to be about $1.8 billion.

The company’s core business is to build, own, and operate industrial gas plants in order to supply atmospheric and process gases to customers. As such, Praxair believes that its backlog is one indicator of future sales growth. At March 31, 2014 , Praxair’s backlog of 30 large projects under construction was $2.0 billion. This represents the total estimated capital cost of large plants under construction. About 35% of this project backlog is in North America and approximately 30% is in Asia, which includes projects in China, India and Korea. The rest is in Europe, primarily Russia, and South America. The projects will serve customers in the energy, chemical, manufacturing, electronics and metals markets.

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.

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The following table provides summary data for the quarters ended March 31, 2014 and 2013 :



	Quarter Ended March 31,
(Dollar amounts in millions, except per share data)	2014			2013			Variance
Reported Amounts
Sales	$	3,026		$	2,888		5	%
Cost of sales, exclusive of depreciation and amortization	$	1,726		$	1,638		5	%
Gross margin (a)	$	1,300		$	1,250		4	%
As a percent of sales	43.0		%	43.3		%
Selling, general and administrative	$	326		$	337		(3	)%
As a percent of sales	10.8		%	11.7		%
Depreciation and amortization	$	285		$	266		7	%
Venezuela currency devaluation (b)	$	—		$	23
Other income (expense) - net	$	9		$	—
Operating profit	$	675		$	600		12	%
As a percent of sales	22.3		%	20.8		%
Interest expense - net	$	46		$	40		15	%
Effective tax rate	28.0		%	29.3		%
Income from equity investments	$	9		$	10		(10	)%
Noncontrolling interests	$	(14	)	$	(15	)	(7	)%
Net income - Praxair, Inc.	$	448		$	391		15	%
Diluted earnings per share	$	1.51		$	1.30		16	%
Diluted shares outstanding	297,253			299,700			(1	)%
2013 Adjusted Amounts (c)
Operating profit	$	675		$	623		8	%
As a percent of sales	22.3		%	21.6		%
Effective tax rate	28.0		%	28.1		%
Net income - Praxair, Inc.	$	448		$	414		8	%
Diluted earnings per share	$	1.51		$	1.38		9	%


(a)	Gross margin excludes depreciation and amortization expense.


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


(c)	Adjusted amounts 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.

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Results of Operations

The changes in consolidated sales and operating profit compared to the prior year is attributable to the following:



	Quarter Ended March 31, 2014 vs. 2013
	% Change
	Sales		Operating Profit
Factors Contributing to Changes
Volume	4	%	3	%
Price	2	%	9	%
Cost pass-through	1	%	—	%
Currency	(4	)%	(4	)%
Acquisitions/divestitures	2	%	3	%
Other	—	%	1	%
Reported	5	%	12	%
Venezuela currency devaluation	—	%	(4	)%
Adjusted	5	%	8	%

The following tables provide sales by end-market and distribution method:



	Quarter Ended March 31,
	% of Sales				% Change
	2014		2013		Organic Sales*
Sales by End Markets
Manufacturing	23	%	25	%	1	%
Metals	17	%	18	%	4	%
Energy	13	%	12	%	12	%
Chemicals	11	%	10	%	12	%
Electronics	7	%	8	%	(1	)%
Healthcare	8	%	8	%	3	%
Food & Beverage	8	%	7	%	7	%
Aerospace	3	%	3	%	4	%
Other	10	%	9	%	12	%
	100	%	100	%


*	Excludes impact of currency, natural gas/precious metals cost pass-through and acquisitions/divestitures.



	Quarter Ended March 31,
	% of Sales
	2014		2013
Sales by Distribution Method**
On- Site	30	%	26	%
Merchant	33	%	34	%
Packaged Gas	28	%	31	%
Other	9	%	9	%
	100	%	100	%

** Prior years' amounts have been reclassified to conform to current year's presentation.

Sales increased $138 million, or 5%, in the first quarter ended March 31, 2014 versus the respective 2013 period, and increased 9% excluding currency translation impacts. Underlying sales grew 6% from higher pricing and volume growth driven by higher

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on-site volumes from new project start-ups primarily in North America and Asia. By end-market, sales growth was strongest to energy, chemicals, and food and beverage customers, as compared to the prior-year quarter.

Gross margin increased $50 million, or 4%, for the quarter ended March 31, 2014 versus the comparable 2013 quarter, primarily due to higher sales.

Selling, general and administrative expenses ("SG&A") decreased $11 million , or 3% , for the three months ended March 31, 2014 versus the comparable 2013 period. Currency effects reduced SG&A expense by $11 million and pension expense decreased $9 million due to a decrease in the amortization of net actuarial losses. Acquisitions increased SG&A by $9 million. Excluding these impacts, SG&A was flat versus the prior year period.

Depreciation and amortization expense increased $19 million , or 7% , for the three months ended March 31, 2014 versus the respective 2013 period. Depreciation and amortization increased $17 million in the quarter due to new project start-ups across all geographic segments. Acquisitions in North America and Europe increased depreciation and amortization expense $9 million in the quarter while currency effects reduced depreciation and amortization expense by $9 million.

Other income (expense) – net was a $9 million benefit for the quarter ended March 31, 2014 . Other income was higher in 2013 primarily due to higher asset sales in South America.

Reported operating profit increased $ 75 million , or 12%, for the first quarter of 2014. As discussed above, the increase in operating profit was driven by higher pricing, volumes and acquisitions; partially offset by higher depreciation and amortization. A discussion of operating profit by segment is included in the segment discussion that follows.

Interest expense - net increased $6 million , or 15% , for the quarter ended March 31, 2014 versus the respective 2013 period. Interest expense increased $7 million due to higher overall debt levels, $10 million due to lower capitalized interest and $2 million due to lower amortization of interest rate swap gains. These increases were partially offset by lower interest rates, which reduced interest expense by $13 million.

The reported effective tax rate for the three months ended March 31, 2014 and 2013 was 28.0% and 29.3%, respectively. The adjusted effective tax rate for the three months ended March 31, 2013 was approximately 28.1%.

Income from equity investments for the quarter ended March 31, 2014 and 2013 were $9 million and $10 million, respectively. Praxair’s significant equity investments are in the United States, China, Italy, and the Middle East.

Noncontrolling interests decreased $1 million for the quarter ended March 31, 2014 versus the respective period in 2013 . The decrease is primarily attributable to the purchase of the remaining noncontrolling interest in a U.S. packaged gas distributor in the first quarter 2014. Noncontrolling interests primarily relate to investments in Asia (primarily China and India), Europe (primarily Italy and Scandinavia), and North America (primarily within the U.S. packaged gas business).

Reported net income-Praxair, Inc. increased $ 57 million , or 15% , for the quarter ended March 31, 2014 versus the respective 2013 period. Adjusted net income-Praxair, Inc. increased $ 34 million , or 8% due primarily to higher operating profit partially offset by higher interest and income tax expenses.

Reported diluted earnings per share ("EPS") of $1.51 in the first quarter of 2014 increased $0.21 per diluted share, or 16% from $1.30 in the respective 2013 period. EPS increased $0.13 per diluted share, or 9% from adjusted diluted EPS of $1.38 in 2013. The increase in reported and adjusted EPS in both periods is attributable to higher net income - Praxair, Inc. during the quarter and the reduction in the number of diluted shares outstanding as a result of the company's net repurchases of common stock.

Other comprehensive loss at March 31, 2014 of $20 million includes negative currency adjustments of $32 million, a positive adjustment of $10 million related to the funded status of retirement obligations and a positive adjustment of $2 million related to derivative instruments. The negative currency adjustments reflect the impact of translating foreign subsidiary balance sheets to U.S. dollars using exchange rates as of March 31, 2014 .

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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)	2014		2013			Variance
SALES
North America	$	1,580	$	1,457		8	%
Europe	397		370			7	%
South America	488		531			(8	)%
Asia	392		367			7	%
Surface Technologies	169		163			4	%
	$	3,026	$	2,888		5	%
OPERATING PROFIT
North America	$	378	$	358		6	%
Europe	79		62			27	%
South America	113		114			(1	)%
Asia	75		63			19	%
Surface Technologies	30		26			15	%
Segment operating profit	675		623			8	%
Venezuela currency devaluation (Note 2)	—		(23		)
Total operating profit	$	675	$	600		12	%

North America



	Quarter Ended March 31,
	2014			2013			Variance
Sales	$	1,580		$	1,457		8	%
Cost of sales, exclusive of depreciation and amortization	870			772
Gross margin	710			685
Operating expenses	183			194
Depreciation and amortization	149			133
Operating profit	$	378		$	358		6	%
Margin %	23.9		%	24.6		%



	Quarter Ended March 31, 2014 vs. 2013
	% Change
	Sales		Operating Profit
Factors Contributing to Changes
Volume	4	%	2	%
Price	1	%	4	%
Cost pass-through	2	%	—	%
Currency	(2	)%	(3	)%
Acquisitions/divestitures	3	%	4	%
Other	—	%	(1	)%
	8	%	6	%

The following tables provide sales by end-market and distribution method:

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	Quarter Ended March 31,
	% of Sales				% Change
	2014		2013		Organic Sales
Sales by End Markets
Manufacturing	30	%	31	%	1	%
Metals	12	%	14	%	—	%
Energy	20	%	17	%	19	%
Chemicals	11	%	11	%	11	%
Electronics	3	%	4	%	(8	)%
Healthcare	7	%	7	%	1	%
Food & Beverage	8	%	6	%	1	%
Aerospace	1	%	1	%	10	%
Other	8	%	9	%	10	%
	100	%	100	%



	Quarter Ended March 31,
	% of Sales
	2014		2013
Sales by Distribution Method
On- Site	32	%	26	%
Merchant	35	%	36	%
Packaged Gas	32	%	36	%
Other	1	%	2	%
	100	%	100	%

The North America segment includes Praxair's industrial gases operations in the United States, Canada and Mexico.

North America segment sales increased $123 million, or 8%, in the quarter as compared to the prior year and 10% ex-currency translation impacts. Underlying sales growth was 5%, driven primarily by higher sales to the energy end-market as on-site volumes increased from new project start-ups for hydrogen supply to refinery customers in the United States and higher pricing. Sales also grew to the chemicals and manufacturing end-markets. Acquisitions, primarily NuCO2, added 3% sales growth and contributed to higher sales to the food and beverage end-market. Higher cost pass-through, primarily higher natural gas prices passed through to hydrogen customers, increased sales by 2%. North American packaged gas sales grew from the prior year due to growth in the US business. The decrease in packaged gas sales as a percentage of total sales for the segment is due to strong growth in on-site sales due to new hydrogen project start-ups.

North America segment operating profit increased $20 million, or 6%, in the quarter as compared to the prior year and 9% ex-currency translation impacts. Higher pricing and acquisitions drove the increase in operating profit. Depreciation and amortization increased $16 million quarter over quarter primarily due to acquisitions and new project start-ups.

Europe



	Quarter Ended March 31,
	2014			2013			Variance %
Sales	$	397		$	370		7	%
Cost of sales, exclusive of depreciation and amortization	218			213
Gross margin	179			157
Operating expenses	57			54
Depreciation and amortization	43			41
Operating profit	$	79		$	62		27	%
Margin %	19.9		%	16.8		%

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	Quarter Ended March 31, 2014 vs. 2013
	% Change		% Change
	Sales		Operating Profit
Factors Contributing to Changes
Volume	1	%	4	%
Price	1	%	8	%
Cost pass-through	(2	)%	—	%
Currency	2	%	3	%
Acquisitions/divestitures	5	%	6	%
Other	—	%	6	%
	7	%	27	%

The following tables provide sales by end-market and distribution method:



	Quarter Ended March 31,
	% of Sales				% Change
	2014		2013		Organic Sales
Sales by End Markets
Manufacturing	23	%	23	%	5	%
Metals	16	%	17	%	(5	)%
Energy	6	%	4	%	(20	)%
Chemicals	16	%	16	%	(3	)%
Electronics	7	%	8	%	—	%
Healthcare	11	%	12	%	(1	)%
Food & Beverage	9	%	9	%	7	%
Aerospace	1	%	—	%	62	%
Other	11	%	11	%	9	%
	100	%	100	%



	Quarter Ended March 31,
	% of Sales
	2014		2013
Sales by Distribution Method
On- Site	19	%	20	%
Merchant	35	%	34	%
Packaged Gas	43	%	42	%
Other	3	%	4	%
	100	%	100	%

Europe segment sales of $397 million increased $27 million, or 7%, from the prior-year quarter. Cost pass-through reduced sales in the quarter by 2% due to reduced energy costs, primarily in Germany and Spain. Excluding the effects of lower cost pass-through and the positive effects of currency translation, sales grew 7%, primarily from acquisitions and modestly higher pricing and volumes. Pricing increased, primarily in Germany, and volumes grew in Germany, Scandinavia and Russia.

Europe segment operating profit increased by $ 17 million , or 27% , quarter over quarter. Higher pricing and volumes increased operating profit by 12%. Acquisitions and currency translation contributed 6% and 3% growth, respectively. Operating profit also benefited from energy credits of $5 million in Italy.

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South America



	Quarter Ended March 31,
	2014			2013			Variance
Sales	$	488		$	531		(8	)%
Cost of sales, exclusive of depreciation and amortization	276			300
Gross margin	212			231
Operating expenses	56			69
Depreciation and amortization	43			48
Operating profit	$	113		$	114		(1	)%
Margin %	23.2		%	21.5		%



	Quarter Ended March 31, 2014 vs. 2013
	% Change		% Change
	Sales		Operating Profit
Factors Contributing to Changes
Volume	2	%	3	%
Price	5	%	25	%
Cost pass-through	—	%	—	%
Currency	(15	)%	(17	)%
Acquisitions/divestitures	—	%	—	%
Other	—	%	(12	)%
	(8	)%	(1	)%

The following tables provide sales by end-market and distribution method:



	Quarter Ended March 31,
	% of Sales				% Change Organic Sales
	2014		2013		% Change Organic Sales
Sales by End Markets
Manufacturing	21	%	22	%	1	%
Metals	29	%	29	%	9	%
Energy	2	%	4	%	5	%
Chemicals	9	%	6	%	20	%
Electronics	—	%	—	%	—	%
Healthcare	16	%	16	%	7	%
Food & Beverage	13	%	12	%	17	%
Aerospace	—	%	—	%	—	%
Other	10	%	11	%	(5	)%
	100	%	100	%



	Quarter Ended March 31,
	% of Sales
	2014		2013
Sales by Distribution Method
On- Site	27	%	25	%
Merchant	42	%	42	%
Packaged Gas	28	%	31	%
Other	3	%	2	%
	100	%	100	%

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South America segment sales in the first quarter decreased $43 million or 8% versus the prior-year quarter. Excluding unfavorable currency translation impacts, underlying sales grew 7% primarily from higher pricing. Volumes were higher to merchant, packaged gas and on-site customers. Sales growth came from most major end-markets including metals, manufacturing, chemicals, healthcare and food and beverage.

Segment operating profit decreased $1 million, or 1% , in the first quarter . Excluding negative currency effects, operating profit increased 16%, driven by higher volumes and higher pricing. The strong operating leverage was due primarily to higher pricing, and also volume growth, across the region. Operating profit also included a gain on an asset sale in Brazil. These increases were partially offset by inflationary costs escalation. Depreciation and amortization was comparable to the prior year as the start up of new on-site production facilities was more than offset by currency impacts.

Refer to the "Currency" section of this Management's Discussion and Analysis for a discussion of the currency environment in Venezuela.

Asia



	Quarter Ended March 31,
	2014			2013			Variance
Sales	$	392		$	367		7	%
Cost of sales, exclusive of depreciation and amortization	251			246
Gross margin	141			121
Operating expenses	27			24
Depreciation and amortization	39			34
Operating profit	$	75		$	63		19	%
Margin %	19.1		%	17.2		%



	Quarter Ended March 31, 2014 vs. 2013
	% Change		% Change
	Sales		Operating Profit
Factors Contributing to Changes
Volume	9	%	10	%
Price	2	%	12	%
Cost pass-through	(2	)%	—	%
Currency	(2	)%	(2	)%
Acquisitions/divestitures	—	%	—	%
Other	—	%	(1	)%
	7	%	19	%

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The following tables provide sales by end-market and distribution method:



	Quarter Ended March 31,
	% of Sales				% Change Organic Sales
	2014		2013		% Change Organic Sales
Sales by End Markets
Manufacturing	10	%	11	%	(6	)%
Metals	27	%	27	%	11	%
Energy	2	%	—	%	**
Chemicals	12	%	13	%	(2	)%
Electronics	32	%	35	%	3	%
Healthcare	1	%	1	%	22	%
Food & Beverage	2	%	3	%	(9	)%
Aerospace	—	%	—	%	—	%
Other	14	%	10	%	51	%
	100	%	100	%

** - not meaningful as base year is zero



	Quarter Ended March 31,
	% of Sales
	2014		2013
Sales by Distribution Method
On- Site	51	%	46	%
Merchant	28	%	29	%
Packaged Gas	12	%	11	%
Other	9	%	14	%
	100	%	100	%

Asia segment sales increased $25 million , or 7% , in the first quarter as compared to the prior year. Excluding negative currency impacts, primarily the devaluation of the Indian rupee partially offset by appreciation of the Chinese yuan, sales grew 9%. Strong volume growth of 9% was primarily driven by new project start-ups in China, India and Korea. Price contributed to a 2% increase in sales and was primarily due to higher helium and rare gas pricing. Cost pass-through related to the contractual pass through of precious metals and power costs decreased sales by 2% , with minimal impact on operating profit. By end-market, the strongest sales growth came from metals, energy and chemicals customers. Strong growth in on-site volumes due to new plant start-ups accounted for the increase in on-site sales as a percentage of total segment sales.

Asia segment operating profit increased $12 million , or 19% for the first quarter 2014 as compared to the prior year. The impacts of higher volumes and pricing were partially offset by the negative currency impacts and higher costs. Operating expenses were $3 million higher than the prior year quarter primarily due to inflationary increases in salary and other benefit costs. Depreciation and amortization expense increased $5 million as compared to the prior-year quarter primarily due to new plant start-ups.

Surface Technologies



	Quarter Ended March 31,
	2014			2013			Variance
Sales	$	169		$	163		4	%
Cost of sales, exclusive of depreciation and amortization	111			107
Gross margin	58			56
Operating expenses	17			20
Depreciation and amortization	11			10
Operating profit	$	30		$	26		15	%
Margin %	17.8		%	16.0		%

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	Quarter Ended March 31, 2014 vs. 2013
	% Change		% Change
	Sales		Operating Profit
Factors Contributing to Changes
Volume/Price	3	%	2	%
Cost pass-through	—	%	—	%
Currency	1	%	1	%
Acquisitions/divestitures	—	%	—	%
Other	—	%	12	%
	4	%	15	%

The following table provides sales by end-market:



	Quarter Ended March 31,
	% of Sales				% Change
	2014		2013		Organic Sales
Sales by End Markets
Manufacturing	13	%	13	%	(3	)%
Metals	8	%	8	%	9	%
Energy	27	%	28	%	(3	)%
Chemicals	2	%	2	%	(10	)%
Electronics	1	%	1	%	—	%
Healthcare	—	%	—	%	—	%
Food & Beverage	3	%	3	%	(1	)%
Aerospace	33	%	34	%	1	%
Other	13	%	11	%	14	%
	100	%	100	%

Surface Technologies segment sales increased $6 million , or 4% , in the quarter versus the prior-year period. Underlying sales increased 3% from higher sales to aviation markets, partially offset by lower sales to energy markets. Currency increased sales by 1% primarily due to a stronger Euro and British pound partially offset by a weaker Japanese yen versus the U.S. dollar.

Surface Technologies segment operating profit increased $4 million , or 15% , for the three months ended March 31, 2014 versus the respective 2013 periods. Operating profit leverage came from higher volume, pricing and productivity gains which more than offset cost inflation.

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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. 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):



	Percentage of YTD 2014 Consolidated Sales (a)		Exchange Rate for Income Statement		Exchange Rate for Balance Sheet
			Year-To-Date Average		March 31,	December 31,
Currency			2014	2013	2014	2013
Brazilian real	13	%	2.36	2.00	2.26	2.34
Euro	13	%	0.73	0.76	0.73	0.73
Canadian dollar	8	%	1.10	1.01	1.11	1.06
Mexican peso	6	%	13.24	12.64	13.06	13.04
Chinese yuan	5	%	6.10	6.26	6.22	6.05
Korean won	3	%	1,070	1,085	1,065	1,050
Indian rupee	2	%	61.79	54.17	59.89	61.80
Singapore dollar	1	%	1.27	1.24	1.26	1.26
Argentine peso	1	%	7.60	5.02	8.00	6.52
Colombian peso	<1%		2,005	1,792	1,969	1,927
Russian ruble	<1%		35.06	30.40	35.17	32.87
Taiwanese dollar	<1%		30.29	29.48	30.49	29.81
Thailand bhat	<1%		32.65	29.80	32.42	32.71
Venezuelan bolivar fuerte (b)	<1%		6.3	5.3	6.3	6.3


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

(b)

Effective March 24, 2014, the Venezuelan government introduced a new exchange control market-based mechanism (referred to as “SICAD 2”) which may allow companies to obtain U.S. dollars for any purpose, including dividend remittances. Through March 31, 2014, SICAD 2 market-based transactions were limited and it is not clear whether the Company will be able to exchange Venezuelan bolivar fuerte ("VEF") to U.S. dollars to pay its foreign denominated obligations and/or to make dividend and royalty remittances. Therefore, Praxair has continued to use the official 6.3 exchange rate for remeasurement purposes and will continue to monitor current developments. At March 31, 2014 the SICAD 2 rate was 50.86 VEF per U.S. dollar. In Venezuela, Praxair’s 2013 sales were approximately $80 million and at March 31, 2014 Praxair’s net asset position was approximately $120 million, including $ 40 million of VEF nominated cash. If the VEF devalued from the current official 6.3 rate, it would result in a charge to earnings in the period of devaluation. Based on its March 31, 2014 balance sheet, Praxair estimates that it would incur a pre-tax charge of approximately $12 million for every 10% devaluation of the VEF versus the U.S. dollar.

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Liquidity, Capital Resources and Other Financial Data

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



(Millions of dollars)	Three Months Ended March 31,
	2014			2013
NET CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net income - Praxair, Inc. plus depreciation and amortization	$	733		$	657
Noncontrolling interests	14			15
Net income plus depreciation and amortization (including noncontrolling interests)	747			672
Adjustments to reconcile net income to net cash provided by operating activities:
Venezuela currency devaluation (a)	—			23
Deferred income taxes	23			1
Working capital	(248		)	(183		)
Pension contributions	(9		)	(5		)
Other - net	23			(36		)
Net cash provided by operating activities	$	536		$	472
INVESTING ACTIVITIES
Capital expenditures	(393		)	(466		)
Acquisitions, net of cash acquired	(124		)	(1,098		)
Divestitures and asset sales	66			31
Net cash used for investing activities	$	(451	)	$	(1,533	)
FINANCING ACTIVITIES
Debt increases (reductions) - net	464			1,316
Issuances (purchases) of common stock - net	(237		)	(117		)
Cash dividends - Praxair, Inc. shareholders	(191		)	(178		)
Excess tax benefit on share-based compensation	20			14
Noncontrolling interest transactions and other	(140		)	(5		)
Net cash (used for) provided by financing activities	$	(84	)	$	1,030


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

Cash Flow from Operations

Cash provided by operations of $536 million for the three months ended March 31, 2014 increased $64 million , or 14%, versus 2013 . The increase was primarily due to higher net income plus depreciation and amortization expense, and higher deferred taxes. These factors were partially offset by higher working capital requirements primarily due to the timing of payments for interest and taxes.

Praxair estimates that total 2014 contributions to its pension plans will be in the area of $ 25 million , of which $ 9 million have been made through March 31, 2014 . At a minimum, Praxair contributes to its pension plans to comply with local regulatory requirements (e.g., ERISA in the United States). Discretionary contributions in excess of the local minimum requirements are made based on many factors, including long-term projections of the plans' funded status, the economic environment, potential risk of overfunding, pension insurance costs and alternative uses of the cash. Changes to these factors can impact the amount and timing of discretionary contributions from year to year.

Investing

Net cash used for investing of $451 million for the three months ended March 31, 2014 decreased $1,082 million versus 2013 primarily due to the acquisition of NuCO ₂ in 2013.

Capital expenditures for the three months ended March 31, 2014 were $393 million , a decrease of $73 million compared to the prior year. During the quarter approximately 40% and 20% of capital expenditures were in North America and Asia, respectively.

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Acquisitions in the quarter of $124 million included the acquisition of Messer’s industrial gases business in Italy, several packaged gas businesses in North and South America, and an equity investment in the Middle East. (see Note 3 to the condensed consolidated financial statements).

For the three months ended March 31, 2014 Divestitures and asset sales was $66 million , primarily due to the sale of Praxair's industrial gas business in France.

Financing

Cash used for financing activities was $84 million for the three -month period. Net debt increased by $464 million primarily to fund acquisitions and net repurchases of common stock. Cash dividends increased $13 million due to an increase in dividends per share to $0.65 from $0.60 . In 2014, noncontrolling interest transactions and other includes the purchase of the redeemable noncontrolling interests of Praxair Distribution Mid-Atlantic, LLC (see Note 14 to the condensed consolidated financial statements).

In March 2014, Praxair issued €600 million ( $822 million ) of 1.50% Euro-denominated notes due 2020, and repaid $300 million of 4.375% notes that became due.

Other Financial Data

Praxair's debt to capital ratio was 55.9% at March 31, 2014 versus 54.3% at December 31, 2013. This increase is attributable to higher debt levels, primarily to fund acquisitions and net purchases of common stock.

After-tax return on capital ("ROC") decreased to 12.6% for the four-quarter trailing period ended March 31, 2014 versus 13.3% for the 2013 period. This decrease reflects higher debt levels due primarily to acquisitions and net purchases of common stock.

Return on equity ("ROE") for the four-quarter trailing period ended March 31, 2014 remained strong at 28.7% .

See the "Non-GAAP Financial Measures" section below for definitions and reconciliations of these non-GAAP measures to reported GAAP amounts.

Legal Proceedings

See Note 12 to the condensed consolidated financial statements.

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.

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



	March 31,
(Dollar amounts in millions, except per share data)	2014		2013
Debt-to-capital	55.9	%	54.3	%	¹
After-tax return on capital	12.6	%	13.3	%
Return on equity	28.7	%	28.1	%
Debt-to-adjusted EBITDA	2.3		2.1

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	Quarter Ended March 31,
	2014			2013
2013 Adjusted amounts: ²
Operating profit	$	675		623
As a percent of sales	22.3		%	21.6	%
Effective tax rate	28.0		%	28.1	%
Net income - Praxair, Inc.	$	448		414
Diluted earnings per share	$	1.51		1.38


1	As of December 31, 2013 .


2	The adjusted amounts for 2013 do not include the impact of the first quarter Venezuela currency devaluation of $23 million ($23 million net of tax). See Note 2 to the condensed consolidated financial statements.

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, 2014			December 31, 2013
(Dollar amounts in millions)
Debt	$	9,270		$	8,811
Less: cash and cash equivalents	(144		)	(138		)
Net debt	9,126			8,673
Equity and redeemable noncontrolling interests
Redeemable noncontrolling interests	195			307
Praxair, Inc. shareholders’ equity	6,600			6,609
Noncontrolling interests	398			394
Total equity and redeemable noncontrolling interests	7,193			7,310
Capital	$	16,319		$	15,983
DEBT-TO-CAPITAL RATIO	55.9		%	54.3		%

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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).



	2014									2013
	Four Quarter Trailing			Three Months Ended			Nine Months Ended			Four Quarter Trailing			Three Months Ended			Nine Months Ended
	Four Quarter Trailing			March 31, 2014			December 31, 2013			Four Quarter Trailing			March 31, 2013			December 31, 2012
(Dollar amounts in millions)
Adjusted operating profit (see below)	$	2,709		$	675		$	2,034		$	2,498		$	623		$	1,875
Less: adjusted income taxes (see below)	(710		)	(176		)	(534		)	(659		)	(164		)	(495		)
Less: tax benefit on interest expense*	(46		)	(13		)	(33		)	(40		)	(11		)	(29		)
Add: equity income	37			9			28			37			10			27
Net operating profit after-tax (NOPAT)	$	1,990		$	495		$	1,495		$	1,836		$	458		$	1,378
Capital:
March 31st, 2014 & 2013	$	16,319								$	15,344
December 31st, 2013 & 2012	$	15,983								$	13,878
September 30th, 2013 & 2012	$	15,757								$	13,617
June 30th, 2013 & 2012	$	15,548								$	13,017
March 31st, 2013 & 2012	$	15,344								$	13,248
Five-quarter average	$	15,790								$	13,821
After-tax ROC	12.6		%							13.3		%


*	Tax benefit on interest expense is computed using the effective rate. The effective tax rate used was 28% for 2014 and 2013 .

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.



	2014							2013
	Four Quarter Trailing			Three Months Ended		Nine Months Ended		Four Quarter Trailing			Three Months Ended		Nine Months Ended
	Four Quarter Trailing			March 31, 2014		December 31, 2013		Four Quarter Trailing			March 31, 2013		December 31, 2012
(Dollar amounts in millions)
Adjusted Net income - Praxair, Inc. (see below)	$	1,806		$	448	$	1,358	$	1,676		$	414	$	1,262
Praxair, Inc. shareholders’ equity
March 31st, 2014 & 2013	$	6,600						$	6,169
December 31st, 2013 & 2012	$	6,609						$	6,064
September 30th, 2013 & 2012	$	6,210						$	6,015
June 30th, 2013 & 2012	$	5,928						$	5,615
March 31st, 2013 & 2012	$	6,169						$	5,940
Five-quarter average	$	6,303						$	5,961
ROE	28.7		%					28.1		%

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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.



	2014						2013
	Four Quarter Trailing		Three Months Ended		Nine Months Ended		Four Quarter Trailing		Three Months Ended		Nine Months Ended
	Four Quarter Trailing		March 31, 2014		December 31, 2013		Four Quarter Trailing		March 31, 2013		December 31, 2012
(Dollar amounts in millions)
Adjusted net income - Praxair, Inc. (see below)	$	1,806	$	448	$	1,358	$	1,676	$	414	$	1,262
Add: adjusted noncontrolling interest (see below)	64		14		50		56		15		41
Add: interest expense - net	166		46		120		144		40		104
Add: adjusted income taxes (see below)	710		176		534		659		164		495
Add: depreciation and amortization	1,128		285		843		1,015		266		749
Adjusted EBITDA	$	3,874	$	969	$	2,905	$	3,550	$	899	$	2,651
Net Debt:
March 31st, 2014 & 2013	$	9,126					$	8,563
December 31st, 2013 & 2012	$	8,673					$	7,205
September 30th, 2013 & 2012	$	8,892					$	7,028
June 30th, 2013 & 2012	$	9,004					$	6,891
March 31st, 2013 & 2012	$	8,563					$	6,749
Five-quarter average	$	8,852					$	7,287
DEBT-TO-ADJUSTED EBITDA RATIO	2.3						2.1

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Adjusted Amounts

Adjusted amounts for the quarter ended March 31, 2013 exclude the impact of the Venezuela currency devaluation. Adjusted amounts for the nine months ended December 31, 2013 exclude the impact of the pension settlement charge, the bond redemption charge and income tax benefit. Adjusted amounts for the nine month period ended December 31, 2012 exclude the impact of the pension settlement charge, cost reduction program and income tax benefit. The company does not believe these items are 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. For a description of these items, refer to Notes 2, 5 & 11 to the consolidated financial statements of Praxair’s 2013 Annual Report on Form 10-K.

Certain amounts for 2014 have been included for reference purposes and to facilitate the calculations contained herein.



	Quarter Ended March 31,					Nine Months Ended December 31, 2013
(Dollar amounts in millions, except per share data)	2014			2013		2013			2012
Adjusted Operating Profit
Reported operating profit	$	675		$	600	$	2,025		$	1,810
Add: Venezuela currency devaluation	—			23		—			—
Add: Pension settlement charge	—			—		9			9
Add: Cost reduction program	—			—		—			56
Total adjustments	—			23		9			65
Adjusted operating profit	$	675		$	623	$	2,034		$	1,875
Reported percent change	12		%
Adjusted percent change	8		%
Adjusted Interest Expense
Reported interest expense	$	46		$	40	$	138		$	104
Less: Bond redemption	—			—		(18		)	—
Total adjustments	—			—		(18		)	—
Adjusted interest expense	$	46		$	40	$	120		$	104
Adjusted Income Taxes and Effective Tax Rate
Reported income taxes	$	176		$	164	$	485		$	421
Add: Bond redemption	—			—		6			—
Add: Income tax benefit	—			—		40			55
Add: Pension settlement charge	—			—		3			3
Add: Venezuela currency devaluation	—			—		—			—
Add: Cost reduction program	—			—		—			16
Total adjustments	—			—		49			74
Adjusted income taxes	$	176		$	164	$	534		$	495

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	Quarter Ended March 31,						Nine Months Ended December 31,
(Dollar amounts in millions, except per share data)	2014			2013			2013			2012
Adjusted Effective Tax Rate
Reported income before income taxes and equity investments	$	629		$	560		$	1,887		$	1,706
Add: Bond redemption	—			—			18			—
Add: Pension settlement charge	—			—			9			9
Add: Venezuela currency devaluation	—			23			—			—
Add: Cost reduction program	—			—			—			56
Total adjustments	—			23			27			65
Adjusted income before income taxes and equity investments	$	629		$	583		$	1,914		$	1,771
Adjusted effective tax rate	28.0		%	28.1		%	27.9		%	28.0		%
Adjusted Noncontrolling Interests
Reported noncontrolling interests	$	14		$	15		$	66		$	39
Less: Income tax benefit	—			—			(16		)	—
Add: Cost reduction program	—			—			—			2
Total adjustments	—			—			(16		)	2
Adjusted Noncontrolling Interests	$	14		$	15		$	50		$	41
Adjusted Net Income - Praxair, Inc.
Reported net income - Praxair, Inc.	$	448		$	391		$	1,364		$	1,273
Add: Bond redemption	—			—			12			—
Less: Income tax benefit	—			—			(24		)	(55		)
Add: Pension settlement charge	—			—			6			6
Add: Venezuela currency devaluation	—			23			—			—
Add: Cost reduction program	—			—			—			38
Total adjustments	—			23			(6		)	(11		)
Adjusted net income - Praxair, Inc.	$	448		$	414		$	1,358		$	1,262
Reported percent change	15		%
Adjusted percent change	8		%



Adjusted Diluted Earnings Per Share
Reported diluted earnings per share	$	1.51		$	1.30
Add: Bond redemption	—			—
Less: Income tax benefit	—			—
Add: Pension settlement charge	—			—
Add: Venezuela currency devaluation	—			0.08
Add: Cost reduction program	—			—
Total adjustments	—			0.08
Adjusted diluted earnings per share	$	1.51		$	1.38
Reported percent change	16		%
Adjusted percent change	9		%

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Percentage Change in Full - Year 2014 Diluted EPS Guidance



	Low End			High End
2014 Diluted EPS guidance	$	6.30		$	6.50
2013 adjusted diluted EPS (see 2013 Annual Report on Form 10-K)	$	5.93		$	5.93
Percentage change from 2013 adjusted amounts	6		%	10		%

Contractual Obligations Update

In its 2013 Annual Report on Form 10-K on page 93, Praxair disclosed unconditional purchase obligations which included a multi-year contract for the purchase of silane. Since the contract was signed, the market for silane has not developed as expected and prices have decreased due to lower demand from photovoltaics markets, primarily in Asia. At March 31, 2014 the total purchase obligation for this contract is $153 million , and current selling prices and estimated future demand for silane are in excess of its contractual purchase obligations. The company is continuously monitoring market developments.

New Accounting Standards

Refer to Note 1 of the condensed consolidated financial statements.

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; the impact of information technology system failures, network disruptions and breaches in data security; and the effectiveness and speed of integrating new acquisitions into the business. These risks and uncertainties may cause actual future results or circumstances to differ materially from the 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 2013 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 12 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 50 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, electronics, 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 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 government actions related to business and currency regulations, there is considerable risk associated with operations in Venezuela (see Management’s Discussion and Analysis - Currency). At March 31, 2014, Praxair’s sales and net assets in Venezuela were less than 1% of Praxair’s consolidated amounts. Also, the Company is monitoring developments regarding the collectability of government receivables from healthcare sales to public hospitals in Spain and Italy where economic conditions have been challenging and uncertain. Historically, collection of such government receivables has extended well beyond the contractual terms of sale; however,

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payment has historically been received. At March 31, 2014 government receivables in Spain and Italy totaled $83 million ($82 million at December 31, 2013).

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 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;


•	Healthcare reimbursement regulations; and

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.

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 2012 Annual Report on Form 10-K.

Catastrophic Events - Catastrophic event s 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.

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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. As a result of these efforts, the company develops new and proprietary technologies and employs necessary measures to protect such technologies within the global geographies in which the company operates. These technologies help Praxair to create a competitive advantage and to provide a platform for the company to grow its business at greater percentages than the rate of industrial production growth in such geographies. If Praxair’s research and development activities do not keep pace with competitors or if it does not create new technologies that benefit customers, 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 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 2012 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

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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 2012 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 ("IT") failures, network disruptions and breaches in data security.

Praxair relies on IT systems and networks for business and operational activities, and also stores and processes sensitive business and proprietary information in these systems and networks. These systems are susceptible to outages due to fire, floods, power loss, telecommunications failures, viruses, break-ins and similar events, or breaches of security. 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, operational failures and breaches of security from increasingly sophisticated cyber threats could lead to the loss or disclosure of confidential information, result in regulatory actions and have a material adverse impact on Praxair's operations, reputation and financial results.

Acquisitions and Joint Ventures - The inability to effectively integrate acquisitions or collaborate joint venture partners 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 and joint ventures. 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 and joint ventures 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.

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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, 2014 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)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Program (2) (Millions)
January 2014	534	$	129.18	534	$	1,838
February 2014	893	$	126.82	893	$	1,725
March 2014	842	$	131.49	842	$	1,614
First Quarter 2014	2,269	$	129.11	2,269	$	1,614

(1)

On January 24, 2012, the company’s board of directors approved the repurchase of an additional $1.5 billion of its common stock (2012 program) which could take place from time to time on the open market (which could include the use of 10b5-1 trading plans) or through negotiated transactions, subject to market and business conditions. The 2012 program does not have any stated expiration date. As of March 31, 2014 , the Company purchased $1,386 million of its common stock pursuant to the 2012 program, leaving an additional $114 million remaining authorized under the 2012 program.

(2)

On January 28, 2014, the Company’s board of directors approved the repurchase of $1.5 billion of its common stock ("2014 program") which could take place from time to time on the open market (which could include the use of 10b5-1 trading plans) or through negotiated transactions, subject to market and business conditions. The 2014 program does not have any stated expiration date. The 2014 program is in addition to the 2012 program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits



(a)	Exhibits

*	10.01	Amended and Restated 2009 Praxair, Inc. Long Term Incentive Plan effective April 22, 2014 is filed herewith.

	10.02	Terms Agreement dated March 4, 2014 among the Company, Credit Suisse Securities (Europe) Limited, Deutsche Bank AG, London Branch and HSBC Bank plc, as representatives of the underwriters named therein for the issuance and sale of Euro 600,000,000 aggregate principal amount of 1.500% notes due March 11, 2020, was filed as Exhibit 1 to the Company's Current Report on Form 8-K dated March 5, 2014 and is incorporated herein by reference.

	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.

Table of Contents

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 23, 2014		By: /s/ Elizabeth T. Hirsch

		Elizabeth T. Hirsch
		Vice President and Controller
		(On behalf of the Registrant
		and as Chief Accounting Officer)

Praxair, Inc. and Subsidiaries

EXHIBIT 10.01

Amended and Restated

2009 Praxair, Inc.
Long Term Incentive Plan

Effective April 22, 2014

Table of Contents


Article 1.	Establishment, Purpose, and Duration 2


Article 2.	Definitions 2


Article 3.	Administration 9


Article 4.	Shares Subject to this Plan and Maximum Awards 10


Article 5.	Eligibility and Participation 12


Article 6.	Stock Options 12


Article 7.	Stock Appreciation Rights 14


Article 8.	Restricted Stock Grants 15


Article 9.	Performance Units 17


Article 10.	Other Stock-Based Awards 18


Article 11.	Transferability of Awards 19


Article 12.	Performance Measures 20


Article 13.	Dividend Equivalents 22


Article 14.	Termination of Employment or Service as a Director 22


Article 15.	Rights of Participants 22


Article 16.	Change in Control 23


Article 17.	Amendment, Modification, Suspension, and Termination 24


Article 18.	Tax Withholding; No Liability with Respect to Tax

Qualification or Adverse Tax Treatment 24


Article 19.	Successors 25


Article 20.	General Provisions 25

Amended and Restated
2009 Praxair, Inc.
Long Term Incentive Plan


Article 1.	Establishment, Purpose, and Duration

1.1 Establishment . Praxair, Inc., a Delaware corporation (hereinafter referred to as the “Company”), hereby amends and restates its 2009 Praxair, Inc. Long Term Incentive Plan (the Amended and Restated 2009 Praxair, Inc. Long Term Incentive Plan, hereinafter referred to as the “Plan”), as set forth in this document.

This Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights (“SARs”), Restricted Stock, Restricted Stock Units, Performance Units, and Other Stock-Based Awards.

This Plan was originally adopted by the Board on February 24, 2009, became effective upon shareholder approval on April 28, 2009 and was subsequently amended, effective as of April 27, 2010, January 25, 2011 and October 23, 2012. This amendment and restatement of the Plan was adopted by the Board on January 28, 2014 and shall become effective upon shareholder approval on April 22, 2014 (the “Effective Date”) and shall remain in effect as provided in Section 1.3 hereof.

1.2 Purpose of this Plan . The purpose of this Plan is to provide a means whereby Employees develop personal involvement in the financial success of the Company, and to encourage them to devote their best efforts to the business of the Company, thereby advancing the interests of the Company and its shareholders. A further purpose of this Plan is to provide a means through which the Company may attract and retain able Employees and to provide a means whereby those individuals can acquire and maintain stock ownership, thereby strengthening their concern for the welfare of the Company. This Plan also provides a means of compensating Directors in the form of equity as a complement to other elements of the Directors’ overall compensation program and to align their interests with those of the Company’s shareholders.

1.3 Duration of this Plan . Unless sooner terminated as provided herein, this Plan shall terminate April 22, 2024. After this Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and this Plan’s terms and conditions.


Article 2.	Definitions

Whenever used in this Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter of the word shall be capitalized.


2.1	“Acquisition Awards” has the meaning set forth in Section 4.2.


2.2	“Administrator” has the meaning set forth in Section 3.4.


2.3	“Award” means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, SARs, Restricted Stock, Restricted Stock Units, Performance Units, or Other Stock-Based Awards, in each case subject to the terms of this Plan.

2.4

“Award Agreement” means either (a) a written agreement entered into by the Company and a Participant setting forth the terms and provisions applicable to an Award granted under this Plan, or (b) a written or electronic statement issued by the Company to a Participant describing the terms and provisions of such Award, including any amendment or modification thereof. The Committee may provide for the use of electronic, Internet or other non-paper Award Agreements, and the use of electronic, Internet or other non-paper means for the acceptance thereof and actions thereunder by a Participant.


2.5	“Beneficial Owner” or “Beneficial Ownership” shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.


2.6	“Board” means the Board of Directors of the Company.


2.7	“Change in Control” means the occurrence of any one of the following events with respect to the Company:

(a)

individuals who, on January 1, 2014, constitute the Board (the “Incumbent Directors”) cease, for any reason, to constitute at least a majority of the Board, provided that any person becoming a director subsequent to January 1, 2014, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the Company proxy statement in which such person is named as a nominee for director, without objection to such nomination) shall be an Incumbent Director; provided, however, that no individual elected or nominated as a director of the Company initially as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board shall be deemed an Incumbent Director;

(b)

any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a Beneficial Owner, directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then outstanding securities eligible to vote for the election of the Board (the “Praxair Voting Securities”); provided, however, that the event

described in this Subsection 2.7(b) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by the Company or any of its subsidiaries; (B) by any employee benefit plan sponsored or maintained by the Company or any of its subsidiaries; (C) by any underwriter temporarily holding securities pursuant to an offering of such securities; or (D) pursuant to a Non-Qualifying Transaction (as defined in Subsection 2.7(c));

(c)

the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the Company or any of its subsidiaries that requires the approval of the Company’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than 50% of the total voting power of (x) the corporation resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has Beneficial Ownership of 100% of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is represented by Praxair Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, shares into which such Praxair Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Praxair Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan sponsored or maintained by the Surviving Corporation or the Parent Corporation), is or becomes the Beneficial Owner, directly or indirectly, of 20% or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”); or


(d)	the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or a sale or disposition of all or substantially all of the Company’s assets.

Notwithstanding the foregoing, to the extent an Award is subject to Code Section 409A, the Committee shall have the discretion to define Change in Control for such Award in a manner which complies with such Code Section.


2.8	“Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any successor or similar provision.

2.9

“Committee” means, with respect to Awards granted to (a) Employees, the Compensation and Management Development Committee of the Board, and (b) Directors, the Governance and Nominating Committee of the Board, and in each case, any other committee designated by the Board to administer this Plan with respect to Employee or Director Awards. The Committee shall consist of not less than two directors. However, if a member of the Committee is not an “outside director” within the meaning of Code Section 162(m) or is not a “non-employee director” within the meaning of Rule 16b‑3 under the Exchange Act, the Committee may, from time to time, delegate some or all of its functions under the Plan to a committee or subcommittee composed of members that meet the relevant requirements. The term “Committee” includes any such committee or subcommittee, to the extent of the Compensation and Management Development Committee’s delegation, or the Governance and Nominating Committee’s delegation, as the case may be. If the Committee does not exist or cannot function for any reason, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee, other than any actions required to be carried out by a committee of at least two “outside directors” or “non-employee directors”.


2.10	“Company” means Praxair, Inc., a Delaware corporation, and any successor thereto as provided in Article 18 herein.

2.11

“Covered Employee” means any Employee who is or may become a “Covered Employee,” as defined in Code Section 162(m), and who is designated, either as an individual Employee or class of Employees, by the Committee within the shorter of (a) ninety (90) days after the beginning of the Performance Period, or (b) the period prior to the date twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered Employee” under this Plan for such applicable Performance Period.


2.12	“Director” means any director of the Company who is not an Employee.


2.13	“Effective Date” has the meaning set forth in Section 1.1.

2.14

“Employee” means any individual performing services for the Company or a Subsidiary and designated as an employee of the Company or its Subsidiaries on the payroll records thereof. An Employee shall not include any individual during any period he or she is classified or treated by the Company or its Subsidiary as an independent contractor, a consultant, or any employee of an employment, consulting, or temporary agency or any other entity other than the Company or its Subsidiary, without regard to whether such individual is subsequently determined to have been,

or is subsequently retroactively reclassified as a common-law employee of the Company or its Subsidiary during such period.


2.15	“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor act thereto.

2.16

“Fair Market Value” or “FMV” means, in respect of any date on or as of which a determination thereof is being or to be made, the closing market price of a Share reported on the New York Stock Exchange Composite Transactions tape on such date, or, if no Shares were traded on such date, on the next preceding day on which sales of Shares were reported on the New York Stock Exchange Composite Transactions tape.


2.17	“Grant Date” means the date an Award is granted to a Participant pursuant to the Plan.


2.18	“Grant Price” means the price established at the time of grant of a SAR pursuant to Article 7, used to determine whether there is any payment due upon exercise of the SAR.


2.19	“Incentive Stock Option” or “ISO” means an Option to purchase Shares granted under Article 6 to an Employee that is designated as an Incentive Stock Option and that is intended to meet the requirements of Code Section 422, or any successor provision.


2.20	“Insider” shall mean an individual who is, on the relevant date, an executive officer of the Company or a more than ten percent (10%) Beneficial Owner of any class of the Company’s equity securities that is registered pursuant to Section 12 of the Exchange Act, as determined by the Board in accordance with Section 16 of the Exchange Act.

2.21

“Market Price” means, in respect of any date on or as of which a determination thereof is being or to be made, the average of the high and low prices of a Share reported on the New York Stock Exchange Composite Transactions tape on such date, or, if no Shares were traded on such date, on the next preceding day on which sales of Shares were reported on the New York Stock Exchange Composite Transactions tape.


2.22	“Nonqualified Stock Option” or “NQSO” means an Option that is not intended to meet the requirements of Code Section 422, or that otherwise does not meet such requirements.


2.23	“ Officer ” means an Employee who is either (a) an“executive officer” (within the meaning of Rule 3b-7 of the Exchange Act), or (b) an “officer” elected by the Board

and holding a position with a Company salary level of 18 or higher (or the future equivalent thereof).


2.24	“Option” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6.


2.25	“Option Price” means the price at which a Share may be purchased by a Participant pursuant to an Option.


2.26	“Other Stock-Based Award” means an equity-based or equity-related Award not otherwise described by the terms of this Plan, granted pursuant to Article 10.


2.27	“Participant” means any Employee or a Director to whom an Award is granted.

2.28

“Performance-Based Compensation” means compensation under an Award that is intended to satisfy the requirements of Code Section 162(m) for certain performance-based compensation paid to Covered Employees. Any Award granted hereunder that is intended to be Performance-Based Compensation within the meaning of Code Section 162(m) shall be subject to the terms and provisions of this Plan and not the Praxair, Inc. Plan for Determining Performance-Based Awards Under Section 162(m).


2.29	“Performance Goal” means, with respect to any applicable Award to an Employee, the one or more targets, goals or levels of attainment required to be achieved in terms of the specified Performance Measures during the specified Performance Period, as set forth in the related Award Agreement.

2.30

“Performance Measures” means: (a) with respect to any Award to an Employee intended to qualify as Performance-Based Compensation, any one or more of the measures described in Article 12 on which the Performance Goals are based and which are approved by the Company’s shareholders pursuant to this Plan in order to qualify Awards as Performance-Based Compensation; and (b) with respect to any other Award, such performance measures as determined by the Committee in its sole discretion and set forth in the applicable Award Agreement for purposes of determining the applicable Performance Goal.


2.31	“Performance Period” means the period of time during which the Performance Goals must be met in order to determine the degree of payout and/or vesting with respect to an Award granted to an Employee.


2.32	“Performance Unit” means an Award to an Employee under Article 9 herein and subject to the terms of this Plan, denominated in Units, the value of which at the time it is payable is determined as a function of the extent to which corresponding Performance Goal(s) has been achieved during the applicable Performance Period.


2.33	“Plan” means this Amended and Restated 2009 Praxair, Inc. Long Term Incentive Plan.


2.34	“Restricted Stock ” means Shares issued pursuant to a Restricted Stock Grant under Article 8, so long as the Shares remain subject to the restrictions and conditions specified in the Award Agreement pursuant to which such Restricted Stock Grant is made.


2.35	“Restricted Stock Grant” means an Award of Restricted Stock or Restricted Stock Units made pursuant to the provisions of Article 8.


2.36	“Restricted Stock Unit” means a Unit issued pursuant to a Restricted Stock Grant under Article 8 so long as the Units remain subject to the restrictions and conditions specified in the Award Agreement.


2.37	“Restriction Period” means the period when Restricted Stock or Restricted Stock Units are subject to a substantial risk of forfeiture (based on the passage of time, the achievement of Performance Goals, or upon the occurrence of other events as determined by the Committee, in its discretion), as provided in Article 8.


2.38	“Share” means a share of common stock of the Company, $0.01 par value per share or any security issued by the Company in substitution or exchange therefor or in lieu thereof.


2.39	“Share Equivalent” means a Unit (or fraction thereof, if authorized by the Committee) substantially equivalent to a hypothetical Share, credited to the Participant and having a value at any time equal to the FMV of a Share (or fraction thereof) at such time.


2.40	“Stock Appreciation Right” or “ SAR ” means an Award, designated as a SAR, pursuant to the terms of Article 7 herein.

2.41

“Subsidiary” means any corporation or other entity, whether domestic or foreign, in which the Company has or obtains, directly or indirectly, a proprietary interest of fifty percent (50%) or greater by reason of stock ownership or otherwise; provided, however, that (a) for purposes of determining whether any Employee can be a Participant with respect to any Award of Incentive Stock Option, the term “Subsidiary” has the meaning given to such term in Code Section 424, as interpreted by the regulations thereunder and applicable law; and (b) for purposes of determining whether any individual may be a Participant with respect to any Award of Options or SARs that are intended to be exempt from Code Section 409A, the term “Subsidiary” means any corporation or other entity to which the Company is an “eligible issuer of service recipient stock” within the meaning of Code Section 409A.


2.42	“Unit” means a bookkeeping entry used by the Company to record and account for the grant or settlement of an Award until such time as the Award is paid, canceled, forfeited or terminated, as the case may be, which, except as otherwise specified by the Committee, shall be equal to one Share Equivalent.


Article 3.	Administration

3.1 General . The Committee shall be responsible for administering this Plan, subject to this Article 3 and the other provisions of this Plan. The Committee may employ attorneys, consultants, accountants, agents, and other individuals, any of whom may be an Employee, and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations of any such individuals. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Participants, the Company, and all other interested individuals.

3.2 Authority of the Committee . The Committee shall have full and exclusive discretionary power to interpret the terms and the intent of this Plan and any Award Agreement or other agreement or document ancillary to, or in connection with, this Plan, to determine eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering this Plan as the Committee may deem necessary or proper. Such authority shall include, but not be limited to, (a) selecting Participants, (b) establishing all Award terms and conditions, including the terms and conditions set forth in Award Agreements, (c) granting Awards as an alternative to or as the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, (d) construing any ambiguous provision of the Plan or any Award Agreement, (e) determining whether, to what extent and under what circumstances and method or methods (1) Awards may be (A) settled in cash, Shares, other securities, other Awards or other property, (B) exercised or (C) canceled, forfeited or suspended, (2) Shares, other securities, other Awards or other property, and other amounts payable with respect to an Award may be deferred either automatically or at the election of the Participant thereof or of the Committee, and (3) Awards may be settled by the Company or any of its designees, and (f) subject to Article 16 adopting modifications and amendments to this Plan or any Award Agreement, including, without limitation, any that are necessary to comply with the laws, rules or regulations of the countries and other jurisdictions in which the Company and/or its Subsidiaries operate or to accelerate the time or times at which the Award becomes vested, unrestricted or may be exercised.

3.3 Delegation. The Committee may delegate to one or more of its members or to one or more officers of the Company, and/or its Subsidiaries or to one or more agents or advisors, such administrative duties or powers as it may deem advisable, and the Committee or any individuals to whom it has delegated duties or powers as aforesaid may employ one or more individuals to render advice with respect to any responsibility the Committee or such individuals may have under this Plan. The Committee may, by resolution, authorize the Chief Executive Officer of the Company (the “CEO”) or any other officer of the Company, to do one or both of the following on the same basis as can the Committee: (a) designate Employees to be recipients of Awards

and (b) determine the size of any such Awards; provided, however, (i) the Committee shall not delegate such responsibilities for any Awards to be granted to an Employee who is considered an Insider; (ii) the resolution providing such authorization sets forth the total number of Awards the CEO or officer may grant; and (iii) the CEO or officer, as applicable, shall report periodically to the Committee regarding the nature and scope of the Awards granted pursuant to the authority delegated.

3.4 Indemnification. No member of the Committee or any person to whom administrative duties or powers have been delegated in accordance with Section 3.3 (each, an “Administrator”) will have any liability to any person (including any Participant) for any action taken or omitted or any determination made in good faith with respect to the Plan or any Award. Each Administrator will be indemnified and held harmless by the Company against and from any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or incurred by such Administrator in connection with or resulting from any action, suit or proceeding to which such Administrator may be a party or in which such Administrator may be involved by reason of any action taken or omitted to be taken under the Plan or any Award Agreement and against and from any and all amounts paid by such Administrator, with the Company’s approval, in settlement thereof, or paid by such Administrator in satisfaction of any judgment in any such action, suit or proceeding against such Administrator, provided that the Company will have the right, at its own expense, to assume and defend any such action, suit or proceeding and, once the Company gives notice of its intent to assume the defense, the Company will have sole control over such defense with counsel of the Company’s choice. To the extent any taxable expense reimbursement under this paragraph is subject to Section 409A of the Code, (a) the amount thereof eligible in one taxable year shall not affect the amount eligible in any other taxable year; (b) in no event shall any expenses be reimbursed after the last day of the taxable year following the taxable year in which the Administrator incurred such expenses; and (c) in no event shall any right to reimbursement be subject to liquidation or exchange for another benefit. The foregoing right of indemnification will not be available to an Administrator to the extent that a court of competent jurisdiction in a final judgment or other final adjudication, in either case, not subject to further appeal, determines that the acts or omissions of such Administrator giving rise to the indemnification claim resulted from such Administrator’s bad faith, fraud or willful misconduct. The foregoing right of indemnification will not be exclusive of any other rights of indemnification to which an Administrator may be entitled under the Company’s certificate of incorporation or by-laws, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such persons or hold them harmless.


Article 4.	Shares Subject to this Plan and Maximum Awards

4.1 Number of Shares Available for Awards . Subject to adjustment as provided in Section 4.5, the maximum number of Shares which may be issued pursuant to Awards under this Plan on or after the Effective Date shall be 8,000,000 Shares (the “Share Authorization”). The Shares available for issuance under this Plan may be authorized and unissued Shares or treasury Shares. The maximum number of Shares of the Share Authorization that may be issued pursuant to ISOs under this Plan shall be 8,000,000 Shares. The maximum number of Shares of the Share

Authorization that may be issued under this Plan pursuant to Awards other than Options or SARs shall be 2,600,000 Shares.

4.2 Share Usage. Shares subject to an Award that expires according to its terms or is forfeited, terminated, canceled or surrendered, in each case, without having been exercised or settled, or can be paid only in cash, will be available again for grant under the Plan, without reducing the number of Shares that are available for Awards under the Plan. In no event shall (a) any Shares subject to an Option that is cancelled upon the exercise of a tandem SAR, (b) any Shares subject to an Award that are surrendered in payment of the exercise price of an Option or in payment of the taxes associated with an Award, (c) any Shares subject to a SAR that are not issued in connection with the stock settlement of the SAR upon exercise thereof, or (d) any Shares repurchased by the Company using Option proceeds, become available for grant under the Plan pursuant to this Section. Shares subject to awards that are assumed, converted or substituted under the Plan as a result of the Company’s acquisition of another company (including by way of merger, combination or similar transaction) (“Acquisition Awards”) will not count against the Share Authorization. Available shares under a stockholder approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for Awards under the Plan and do not reduce the Share Authorization, subject to applicable stock exchange requirements.

4.3 Annual Award Limits. The following limits (each an “Annual Award Limit” and, collectively, “Annual Award Limits”), as adjusted pursuant to Section 4.5, shall apply to grants of Awards to Employees under this Plan, whether or not such Awards are intended to qualify as Performance-Based Compensation:


(a)	Options and SARS : The maximum aggregate number of Shares subject to Options, SARs or any combination thereof granted in any one calendar year to any one Participant shall be 2,000,000 (with tandem Options and SARs being counted only once with respect to this limit).

(b)

Other Awards Intended to be Performance-Based Compensation : The maximum aggregate number of Shares subject to Awards of Restricted Stock, Restricted Stock Units, Performance Units or Other Stock-Based Compensation that are intended to be Performance-Based Compensation granted in any one calendar year to any one Participant shall be 300,000 Shares or, in the event such Award is payable in cash, the equivalent cash value thereof on the first day of the performance period to which such Award relates, as determined by the Committee.

4.4 Director Awards. In order to retain and compensate Directors for their services, and to strengthen the alignment of their interests with those of the shareholders of the Company, the Plan permits the grant of stock-based awards to Directors. Aggregate Awards to any one Director in respect of any calendar year, solely with respect to his or her service as a Director, may not exceed $750,000 based on the Fair Market Value of stock-based Awards, determined as of the Grant Date.

4.5 Adjustments in Authorized Shares . In the event of any corporate event or transaction such as a merger, consolidation, reorganization, recapitalization, separation, partial or complete liquidation, stock dividend, other distribution of cash or property (other than normal cash dividends) to shareholders of the Company, stock split, reverse stock split, split up, spin-off, combination of Shares, exchange of Shares, dividend in kind, or other like change in capital structure affecting the number or type of outstanding Shares, the Committee, in order to prevent dilution or enlargement of Participants’ rights under this Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under this Plan or under particular forms of Awards, the number and kind of Shares subject to outstanding Awards (including, without limitation, the substitution of other securities, cash or property in lieu thereof), the Option Price or Grant Price applicable to outstanding Awards, the Annual Award Limits, and other value determinations applicable to outstanding Awards.

To further reflect any of the foregoing events, transactions or adjustments, the Committee, in its sole discretion, may also make adjustments in the terms of any Awards under this Plan and may modify any other terms of outstanding Awards, including modifications of Performance Goals and changes in the length of Performance Periods, as it deems necessary or appropriate. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and binding on Participants under this Plan.

Subject to the provisions of Article 16 and notwithstanding anything else herein to the contrary, without affecting the number of Shares reserved or available hereunder, the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate (including, but not limited to, a conversion of equity awards into Awards under this Plan in a manner consistent with FASB ASC Topic 718).


Article 5.	Eligibility and Participation

Only Employees and Directors shall be eligible to participate in this Plan. Subject to the provisions of this Plan, the designated Committee may, from time to time, select those Employees or Directors to whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible by law, and the amount of each Award; provided, however, that no Award made to a Director shall be subject to or conditioned upon the attainment of any Performance Goal.


Article 6.	Stock Options

6.1 Grant of Options . Subject to the terms and provisions of this Plan, Options may be granted to Participants in such number, and upon such terms, and at any time and from time to

time as shall be determined by the Committee, in its sole discretion. Options may be granted in addition to, or in tandem with or independent of, SARs or any other Awards under the Plan.

6.2 Award Agreement . Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the term of the Option, the number of Shares to which the Option pertains, the conditions, including any Performance Goals, upon which an Option shall become vested and exercisable, and such other terms and conditions as the Committee shall determine which are not inconsistent with the terms of this Plan. The Award Agreement also shall specify whether the Option is intended to be an ISO or an NQSO. To the extent that an Award Agreement does not specify whether the Option is intended to be an ISO or an NQSO, such Option shall be an NQSO.

6.3 Option Price . The Option Price for each grant of an Option under this Plan shall be determined by the Committee in its sole discretion and shall be specified in the Award Agreement; provided, however, the Option Price (other than the Option Price of Acquisition Awards) must be at least equal to 100% of the FMV of the Shares as determined on the Grant Date.

6.4 Term of Options . Each Option granted to a Participant shall expire at such time as the Committee shall determine at the time of grant; provided, however, no Option shall be exercisable later than the day before the tenth (10 ^th ) anniversary of its Grant Date.

6.5 Exercise of Options . Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant. Except upon a Change in Control and in certain limited situations (including, but not limited to, the death or disability of the Participant): (a) Awards of Options subject solely to the continued service of the Participant shall become exercisable no earlier than three (3) years after the Grant Date, provided that such Option may partially vest after no less than one (1) year following such Grant Date; and (b) any other Award of Options shall become exercisable no earlier than one (1) year after the Grant Date.

6.6 Payment . Options granted under this Article 6 shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares.

A condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering (either by actual delivery or attestation) previously acquired Shares having an aggregate Market Price at the time of exercise equal to the Option Price (provided that the Shares that are tendered may be subject to a minimum holding period, as determined by the Committee in its discretion, prior to their tender

to satisfy the Option Price if acquired under this Plan or any other compensation plan maintained by the Company or have been purchased on the open market); (c) by having the Company withhold Shares that otherwise would be delivered to the exerciser pursuant to the exercise of the

Option having a value equaling the aggregate Option Price due; (d) by a cashless (broker-assisted) exercise; (e) by a combination of (a), (b), (c) and/or (d); or (f) any other method approved or accepted by the Committee in its sole discretion.

Subject to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment (including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry Shares, or upon the Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s).

Unless otherwise determined by the Committee, all payments under all of the methods indicated above shall be paid in United States dollars.

6.7 Notification of Disqualifying Disposition . If any Participant shall make any disposition of Shares issued pursuant to the exercise of an ISO under the circumstances described in Code Section 421(b) (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof.


Article 7.	Stock Appreciation Rights

7.1 Grant of SARs . Subject to the terms and conditions of this Plan, SARs may be granted to Participants at any time and from time to time as shall be determined by the Committee, in its sole discretion. Subject to the terms and conditions of this Plan, the Committee shall have complete discretion in determining the number of SARs granted to each Participant and, consistent with the provisions of this Plan, in determining the terms and conditions pertaining to such SARs. SARs may be granted under the Plan alone, in tandem with, in addition to or independent of, Options or any other Awards under the Plan.

7.2 SAR Agreement . Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the SAR, the number of Shares to which the SAR pertains, the conditions, including any Performance Goals, upon which the SAR shall become vested and exercisable, and such other terms and conditions as the Committee shall determine, which are not inconsistent with the terms of this Plan.

7.3 Term of SAR . The term of a SAR granted under this Plan shall be determined by the Committee, in its sole discretion, and specified in the SAR Award Agreement; provided, however, no SAR shall be exercisable later than the tenth (10 ^th ) anniversary of its Grant Date.

7.4 Grant Price . The Grant Price for each Award of a SAR shall be determined by the Committee and shall be specified in the Award Agreement; provided, however, the Grant Price

must be at least equal to 100% of the FMV of the Shares as determined on the Grant Date (other than the Grant Price of Acquisition Awards).

7.5 Exercise of SARs . SARs granted under this Article 7 shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant or for each Participant. Except upon a Change in Control and in certain limited situations (including, but not limited to, the death or disability of the Participant): (a) Awards of SARs subject solely to the continued service of the Participant shall become exercisable no earlier than three (3) years after the Grant Date provided that such SAR may partially vest after no less than one (1) year following such Grant Date; and (b) any other Award of SARs shall become exercisable no earlier than one (1) year after the Grant Date. The Committee may provide that a SAR shall be automatically exercised on one or more specified dates.

7.6 Payment of SARs . Upon the exercise of a SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:


(a)	The excess of the FMV of a Share on the date of exercise over the Grant Price; by


(b)	The number of Shares with respect to which the SAR is exercised.

At the discretion of the Committee, the payment upon exercise of a SAR may be in cash, Shares, or any combination thereof, or in any other manner approved by the Committee in its sole discretion. The Committee’s determination regarding the form of SAR payout shall be set forth in the Award Agreement pertaining to the grant of the SAR.


Article 8.	Restricted Stock Grants

8.1 Grant of Restricted Stock or Restricted Stock Units . Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Restricted Stock Grants to Participants in such amounts as the Committee shall determine. A Restricted Stock Grant is the issue of Shares or Units in the name of a Participant subject to such terms and conditions as the Committee shall deem appropriate, including, without limitation, restrictions on the sale, assignment, transfer or other disposition of such Shares or Units and the requirement that the Participant forfeit such Shares or Units back to the Company (a) upon termination of employment of an Employee or termination of service as a Director for specified reasons within a specified period of time; (b) if any specified Performance Goals are not achieved during a specified Performance Period; or (c) if such other conditions as the Committee may specify are not satisfied.

8.2 Restricted Stock or Restricted Stock Unit Agreement . Each Restricted Stock Grant shall be evidenced by an Award Agreement that shall specify the Restriction Period(s), the number of Shares of Restricted Stock and/or Restricted Stock Units granted, the conditions and

restrictions imposed upon the Restricted Stock Grant, and such other provisions as the Committee shall determine which are not inconsistent with the terms of this Plan.

8.3 Restriction Period . Each Restricted Stock Grant shall provide that in order for a Participant to receive unrestricted Shares or payment in settlement of a Restricted Stock Unit, the Participant must remain an Employee or a Director, as the case may be, for a period of time specified by the Committee in the Award Agreement. The Committee may also establish one or more Performance Goals that are required to be achieved during one or more Performance Periods within the Restriction Period as a condition to the lapse of restrictions of Awards to Employees. Except upon a Change in Control and in certain limited situations (including, but not limited to, the death or disability of the Participant): (a) Except as provided in clause (c) of this Section 8.3, Awards of Restricted Stock and/or Restricted Stock Units subject solely to the continued service of the Participant shall have a Restriction Period of not less than three (3) years from the Grant Date; (b) Awards to Employees of Restricted Stock and/or Restricted Stock Units subject to the achievement of one or more Performance Goals shall have a minimum Restriction Period of one (1) year; and (c) Awards of Restricted Stock and/or Restricted Stock Units subject solely to the continued service of a Director shall have such Restriction Period as the Committee shall determine; provided, however, that the aggregate number of Shares subject to Restricted Stock or Restricted Stock Unit Awards granted to Directors under clause (c) of this Section 8.3 with a vesting period of less than three (3) years shall not exceed five percent (5%) of the 2,600,000 Share Authorization under Section 4.1 of this Plan applicable to Awards other than Options or SARs, as may be adjusted from time to time pursuant to the provisions of this Plan. The Committee may provide for the lapse of restrictions in installments during the Restriction Period.

8.4 Restrictions . During the Restriction Period, the Participant may not sell, assign, transfer, pledge, hypothecate, encumber or otherwise dispose of or realize on the Shares or Units subject to the Restricted Stock Grant. Unless otherwise directed by the Committee, (i) all certificates representing Shares of Restricted Stock will be held in custody by the Company until all restrictions thereon have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such Shares, or (ii) all uncertificated Shares of Restricted Stock will be held at the Company’s transfer agent in book entry form with appropriate restrictions relating to the transfer of such Shares of Restricted Stock. The Committee may, in its sole discretion, include such other restrictions and conditions as it may deem appropriate.

8.5 Payment . Subject to Section 12.4 below, if applicable, upon expiration of the Restriction Period and if all conditions have been satisfied and any applicable Performance Goals attained, the Shares of Restricted Stock will be made available to the Participant or the Restricted Stock Units will be vested in the account of the Participant, free of all restrictions, provided that the Committee may, in its discretion, require (a) the further deferral of any Restricted Stock Grant beyond the initially specified Restriction Period; (b) that the Restricted Stock or Restricted Stock Units be retained by the Company; and (c) that the Participant receive a cash payment in lieu of unrestricted Shares or Units.

8.6 Rights as a Shareholder . Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, the Participant shall have, with respect to shares of Restricted Stock, all of the rights of a shareholder of the Company, including the right to vote the

shares and receive any dividends paid thereon. Any such dividends shall be reinvested on the dividend payment date in additional Shares of Restricted Stock under the Restricted Stock Grant and shall be subject to the restrictions and other terms and conditions set forth therein. A Participant shall not have, with respect to Restricted Stock Units, any voting or other rights of a shareholder of the Company; provided, however, that if determined by the Committee and set forth in the Participant’s Award Agreement, the Participant shall have the right to receive Dividend Equivalents in accordance with the provisions of Article 13.

8.7 Section 83(b) Election . The Committee may provide in an Award Agreement that the Award of Restricted Stock is conditioned upon the Participant making or refraining from making an election with respect to the Award under Code Section 83(b). If a Participant makes an election pursuant to Code Section 83(b) concerning a Restricted Stock Award, the Participant shall be required to file promptly a copy of such election with the Company.

8.8 Restricted Stock Grants Intended to be Performance-Based Compensation . Restricted Stock Grant that is intended to be Performance-Based Compensation shall also be subject to the terms and conditions of Article 12 below and the termination provisions in the Award Agreement shall comply with the requirements of Code Section 162(m) (including any regulations, rulings, notices and procedures thereunder).


Article 9.	Performance Units

9.1 Grant of Performance Units . Subject to the terms and provisions of this Plan, the Committee, at any time and from time to time, may grant Performance Units to Employees in such amounts and upon such terms as the Committee shall determine. Each Performance Unit shall represent the prospective contingent right to receive payment based upon Company and/or Subsidiary performance over a specified Performance Period. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant and need not be equivalent to the value of a Share Equivalent. At the time of grant, the Committee, in its sole discretion, shall establish the Performance Period, Performance Measures, Performance Goals and such other terms and conditions applicable to such Award. The number of Shares and/or the amount of cash or other consideration earned in settlement of a Performance Unit shall be determined at the end of the Performance Period. Any Performance Unit that is intended to be Performance-Based Compensation shall also be subject to the terms and conditions of Article 12 below and the termination provisions in the Award Agreement shall comply with the requirements of Code Section 162(m) (including any regulations, rulings, notices and procedures thereunder).

9.2 Earning of Performance Units . Each Performance Unit Award Agreement shall provide that in order for an Employee to receive a payment in settlement of the Award, the Company must achieve certain Performance Goals over a designated Performance Period, with

attainment of one or more Performance Goals determined using one or more specific Performance Measures. The Performance Goals and the Performance Period shall be established by the Committee in its sole discretion; provided, however, that except upon a Change in Control

and in certain limited situations (including, but not limited to, the death or disability of the Participant), the Performance Period must have a minimum duration of one (1) year. The Committee shall establish one or more Performance Measures for each Performance Period for determining the portion of the Performance Unit Award, which will be earned or forfeited, based on the extent to which the Performance Goals are achieved or exceeded. Such Performance Goals may include minimum, maximum and target levels of performance, with the size of the payment payable in settlement of the Performance Unit Award based on the level attained.

9.3 Form of Performance Unit Award. Performance Unit Awards shall be made on such terms and conditions not inconsistent with the Plan, and in such form or forms, as the Committee may, from time to time, approve. Performance Units may be awarded alone, in addition to, or independent of other Awards under the Plan. Subject to the terms of the Plan, the Committee shall, in its discretion, determine the number of Units subject to each Performance Unit Award made to an Employee and may impose different terms and conditions on any particular Performance Unit Award made to any Employee. The Performance Goals, Performance Period or Periods, Performance Measures and other terms and conditions applicable to any Performance Unit Award shall be set forth in the relevant Award Agreement.

9.4 Payment of Performance Units . Subject to the terms of this Plan and the applicable Award Agreement, after the later of the date the applicable Performance Period has ended or the date on which any other terms and conditions applicable to such Performance Unit Award have been satisfied, the holder of Performance Units shall be entitled to receive payout of the value and number of Performance Units earned by the Employee over the Performance Period, to be determined as a function of the extent to which the corresponding Performance Goals have been achieved. Subject to Section 12.4 below, if applicable, such payment shall be as determined by the Committee and as evidenced in the Award Agreement. Subject to the terms of this Plan, the Committee, in its sole discretion, may pay earned Performance Units in the form of Shares, cash, any combination thereof, or any other form as designated by the Committee in its sole discretion, equal to the value of the earned Performance Units at the close of the applicable Performance Period, or at such other time as specified in the Award Agreement. Any Shares paid in settlement of such Performance Units may be granted subject to any restrictions deemed appropriate by the Committee. The determination of the Committee with respect to the form of payout of such Awards shall be set forth in the applicable Award Agreement.


Article 10.	Other Stock-Based Awards

10.1 Other Stock-Based Awards . The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including, subject to the limitations below, the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment in cash or otherwise of amounts

based on the value of Shares and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States. Notwithstanding any provision in this Plan to the contrary, Awards of unrestricted Shares shall

only be made in lieu of salary and/or cash bonuses/variable compensation paid to Employees or cash fees paid to Directors.

10.2 Value of Other Stock-Based Awards . Each Other Stock-Based Award shall be expressed in terms of Shares or Units, as determined by the Committee. The Committee may, in its discretion, establish Performance Goals with respect to any Other Stock-Based Awards. If the Committee exercises its discretion to establish Performance Goals, the number and/or value of Other Stock-Based Awards that will be paid out to the Participant may depend on the extent to which the Performance Goals are met.

10.3 Payment of Other Stock-Based Awards . Payment, if any, with respect to an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash or Shares as the Committee determines.

10.4 Other Stock-Based Awards Intended to be Performance-Based Compensation . Any Other Stock-Based Award that is intended to be Performance-Based Compensation shall also be subject to the terms and conditions of Article 12 below and the termination provisions in the Award Agreement shall comply with the requirements of Code Section 162(m) (including any regulations, rulings, notices and procedures thereunder).


Article 11.	Transferability of Awards

No Award under the Plan, and no right or interest therein, shall be (a) assignable, alienable, pledgable or transferable by a Participant, except by will or the laws of descent and distribution, or (b) subject to any obligation, or the lien or claims of any creditor, of any Participant, or (c) subject to any lien, encumbrance or claim of any party made in respect of or through any Participant, however arising. During the lifetime of a Participant, Options and SARs are exercisable only by, Shares issued upon the exercise of Options and SARs or in settlement of other Awards will be issued only to, and other payments in settlement of any Award will be payable only to, the Participant or his or her legal representative. Notwithstanding the foregoing, the Committee may, in its sole discretion and on and subject to such terms and conditions as it shall deem appropriate, which terms and conditions shall be set forth in the related Award Agreement: (i) authorize a Participant to transfer all or a portion of any Nonqualified Stock Option or SAR, as the case may be, granted to such Participant, provided that in no event shall any transfer be made to any person or persons other than such Participant’s spouse, children or grandchildren, or a trust or partnership for the exclusive benefit of one or more such persons, which transfer must be made as a gift and without any consideration; and (ii) provide for the transferability of a particular grant or Award pursuant to a domestic relations order. All other transfers and any retransfer by any permitted transferee are prohibited and any such purported transfer shall be null and void. Each Nonqualified Stock Option or SAR which becomes the subject of a permitted transfer (and the Participant to whom it was granted by the Company)

shall continue to be subject to the same terms and conditions as were in effect immediately prior to such permitted transfer. The Participant shall remain responsible to the Company for the payment of all withholding taxes incurred as a result of any exercise of such Option or SAR. In

no event shall any permitted transfer of an Option, SAR or other grant or Award create any right in any party in respect of any Option, SAR or other grant or Award, other than the rights of the qualified transferee in respect of such Option, SAR or other Award specified in the related Award Agreement.


Article 12.	Performance Measures

12.1 Performance Measures . The Performance Goals upon which the payment or vesting of an Award to a Covered Employee that is intended to qualify as Performance-Based Compensation shall be limited to the following Performance Measures:


(a)	Net earnings or net income (before or after taxes);


(b)	Earnings per share (basic or diluted);


(c)	Net sales;


(d)	Revenue growth;


(e)	Operating profit;


(f)	Return measures (including, but not limited to, return on assets, capital, invested capital, equity, sales, or revenue);


(g)	Cash flow (including, but not limited to, operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment);


(h)	Earnings before or after taxes, interest, depreciation, and/or amortization;


(i)	Gross or operating margins;


(j)	Productivity ratios;


(k)	Share price (including, but not limited to, growth measures and total shareholder return);


(l)	Expense targets;


(m)	Margins;


(n)	Operating efficiency;


(o)	Market share;


(p)	Working capital targets;


(q)	Economic value added or EVA (net operating profit after tax minus the sum of capital multiplied by the cost of capital); and


(r)	Objective safety measures.

Any Performance Measure(s) may be used to measure the performance of the Company and/or its Subsidiary as a whole or any business unit of the Company and/or its Subsidiary or any combination thereof, as the Committee may deem appropriate, or any of the above Performance Measures as compared to the performance of a group of comparator companies, or published or special index that the Committee, in its sole discretion, deems appropriate, or the Committee may select Share price as a Performance Measure as compared to various stock market indices. The Committee also has the authority to provide in an Award Agreement for accelerated vesting

of any Award based on the achievement of Performance Goals pursuant to the Performance Measures specified in this Article 12, subject to compliance with Section 162(m) of the Code, to the extent an Award is intended to be Performance-Based Compensation.

Except as otherwise expressly provided in the Plan or an Award Agreement, all financial terms are used as defined under Generally Accepted Accounting Principles or such other objective accounting principles, as may be designated by the Committee.

12.2 Establishment of the Performance Period, Performance Goals and Formula. Except as otherwise required under applicable law, rule or regulation, a Participant’s Award that is intended to be Performance-Based Compensation shall be determined based on the attainment of written objective Performance Goals approved by the Committee for a Performance Period established by the Committee (i) while the outcome for that Performance Period is substantially uncertain and (ii) no more than 90 days after the commencement of the Performance Period to which the Performance Goal relates or, if less, the number of days which is equal to 25% of the relevant Performance Period. At the same time as the Performance Goals are established, the Committee will prescribe a formula to determine the amount of Performance-Based Compensation under the Award that may be payable based upon the level of attainment of the Performance Goals during the Performance Period.

12.3 Evaluation of Performance . The Committee may provide at the time of any such Award that any evaluation of performance may include or exclude any of the following events that occurs during a Performance Period: (a) asset write-downs and impairments; (b) gain/loss on sale of assets; (c) litigation or claim judgments or settlements (including insurance proceeds); (d) the effect of changes in tax laws, accounting principles, or other laws or provisions affecting reported results; (e) any reorganization and restructuring programs; (f) extraordinary nonrecurring items as described in FASB ASC Topic 105 (or such other applicable accounting principle, as may be designated by the Committee) and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to shareholders and/or other public filings for the applicable year; (g) acquisitions or divestitures; (h) foreign exchange gains and losses; and (i) the effect of any materially adverse and unforeseen market conditions beyond the control of the Company and its Subsidiaries, Employees, officers and directors. To the extent such inclusions or exclusions affect Awards to Covered Employees that are intended to be Performance-Based Compensation, they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.

12.4 Adjustment of Performance-Based Compensation . Awards that are intended to qualify as Performance-Based Compensation may not be adjusted upward. The Committee shall retain the discretion to adjust such Awards downward, either on a formula or discretionary basis or any combination, as the Committee determines.

12.5 Committee Discretion . In the event that the Committee determines that it is advisable to grant Awards that shall not qualify as Performance-Based Compensation, the

Committee may make such grants without satisfying the requirements of Code Section 162(m) and base vesting on Performance Measures other than those set forth in Section 12.1.


Article 13.	Dividend Equivalents

Any Participant selected by the Committee may be granted dividend equivalents based on the dividends declared on Shares or Share Equivalents that are subject to any Award (other than Options and SARs), to be credited as of dividend payment dates, during the period between the date the Award is granted and the date the Award is exercised, vests, settled or expires, as determined by the Committee (“Dividend Equivalents”). Except as otherwise provided in the Plan or the applicable Award Agreement, such Dividend Equivalents shall be converted to cash or additional Shares or Share Equivalents by such formula, at such time and subject to such limitations as may be determined by the Committee; provided, however, that in no event shall any Dividend Equivalents become payable earlier than the date on which the underlying Award becomes vested and payable.


Article 14.	Termination of Employment or Service as a Director

14.1 Stock Options and SARs . Each Award Agreement shall set forth the extent to which the Participant shall have the right to exercise an Option or SAR following termination of, as the case may be, (a) an Employee’s employment with the Company and/or its Subsidiaries or (b) a Director’s service as a director of the Company. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Options and SARs issued under this Plan, and may reflect distinctions based on the reasons for termination.

14.2 Restricted Stock Grant, Performance Units and Other Stock-Based Awards . The Award Agreement for each Restricted Stock Grant, Performance Unit and Other Stock-Based Award shall set forth the extent to which such Award shall vest and/or may be forfeited upon termination of, as the case may be, (a) the Employee’s employment with the Company and/or its Subsidiaries or (b) Director’s service as a director of the Company. Such provisions shall be determined in the sole discretion of the Committee, shall be included in the Award Agreement entered into with each Participant, need not be uniform among all such Awards, and may reflect distinctions based on the reasons for termination. Notwithstanding the foregoing, to the extent a Restricted Stock grant, Performance Unit or Other Stock-Based Award is intended to be Performance-Based Compensation, the termination provisions in the Award Agreement shall comply with the requirements of Code Section 162(m) (including any regulations, rulings, notices and procedures thereunder).


Article 15.	Rights of Participants

15.1 Employment . Nothing in this Plan or an Award Agreement shall interfere with or limit in any way the right of the Company and/or its Subsidiaries, to terminate any Employee’s employment at any time or for any reason not prohibited by law, nor confer upon any Employee

any right to continue his employment, or upon any Director a right to continue to serve as a Director, for any specified period of time.

Neither an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company and/or its Subsidiaries for an Employee or a contract for service as a director with the Company for a Director and, accordingly, subject to Article 16, this Plan and the benefits hereunder may be terminated at any time in the sole and exclusive discretion of the Committee without giving rise to any liability on the part of the Company and/or its Subsidiaries.

15.2 Participation . No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award.

15.3 Rights as a Shareholder . Except as otherwise provided herein, a Participant shall have none of the rights of a shareholder with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.


Article 16.	Change in Control

The Committee, in its sole discretion, may specify in the applicable Award Agreement the effect, if any, of a Change in Control on any Award held by a Participant, including the adjustment or other treatment of Performance Goals; provided, however, that any such provision included in an Award Agreement granted to a Participant who is at the time an Officer shall specify that if (i) a Change in Control occurs and (ii) within two (2) years thereafter (or such other period of time following the Change in Control specified in the applicable Award Agreement), such Officer’s employment with the Company (or an applicable Subsidiary) or any successor thereto is terminated without “cause” (as defined in the applicable Award Agreement) or if the Officer terminates employment for “good reason” (as defined in the applicable Award Agreement), then such Award shall become partially or fully vested (including the lapsing of restrictions and conditions) and, as applicable, exercisable as of the date of such termination of employment.

Notwithstanding the foregoing, the Committee may, in its sole discretion, determine in connection with a Change in Control that any or all outstanding Awards granted under the Plan, whether or not exercisable, will be canceled and terminated and that in connection with such cancellation and termination, the holder of such Award may receive for each Share subject to such Awards a cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment) equal to the difference, if any, between the consideration received by shareholders of the Company in respect of a Share in connection with such transaction and the purchase price per share, if any, under the Award, multiplied by the number of Shares subject to such Award; provided that if such product is zero or less, the Award will be canceled and terminated without payment therefor.


Article 17.	Amendment, Modification, Suspension, and Termination

17.1 Amendment, Modification, Suspension, and Termination . Subject to Section 17.2, the Board may, at any time and from time to time, alter, amend, modify, suspend, or terminate this Plan and any Award Agreement in whole or in part without approval of the Company’s shareholders, unless such approval is necessary to comply with applicable laws, including the Exchange Act and the Code, or the rules and regulations of any securities exchange on which the Shares are listed. In no event may the Board amend the Plan without the prior approval of the Company’s shareholders to (a) increase the maximum number of Shares which may be issued pursuant to the Plan; (b) increase any limitation set forth in the Plan on the number of Shares which may be issued, or the aggregate value of Awards which may be made, in respect of any type of Award to any single Participant during any specified period; (c) change the class of individuals eligible to participate in the Plan; (d) reduce the minimum Option Price or the minimum SAR Grant Price as set forth in Sections 6.3 and 7.4; or (e) reduce the minimum vesting period, Restriction Period or Performance Period requirements applicable to Awards under the Plan. Furthermore, except as provided in Sections 4.5 and 16.1, in no event may the terms of a previously granted Option or SAR be amended to reduce its Option Price or Grant Price, as applicable, or to cancel the Award in exchange for cash or an Option, SAR, or other Award with an Option Price, Grant Price or other exercise price that is less than the Option Price or Grant Price, as applicable, of the original Option or SAR, without obtaining approval of the Company’s shareholders.

17.2 Awards Previously Granted . Notwithstanding any other provision of this Plan to the contrary (other than Section 17.3), no termination, amendment, suspension, or modification of this Plan or an Award Agreement shall adversely affect in any material way any Award previously granted under this Plan, without the written consent of the Participant holding such Award.

17.3 Amendment to Conform to Law . Notwithstanding any other provision of this Plan to the contrary, the Board may amend the Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or an Award Agreement to any present or future law relating to plans of this or similar nature and to the administrative regulations and rulings promulgated thereunder. By accepting an Award under this Plan, a Participant agrees to any amendment made pursuant to this Section 17.3 to any Award granted under the Plan without further consideration or action.


Article 18.	Tax Withholding; No Liability with Respect to Tax Qualification or Adverse Tax Treatment

All Awards under the Plan will be made subject to any applicable withholding for taxes of any kind. The Company shall have the right to deduct from any amount payable under the Plan, including delivery of Shares to be made under the Plan, all federal, state, city, local or foreign taxes of any kind required by law to be withheld with respect to such payment and to take such other actions as may be necessary in the opinion of the Company to satisfy all obligations for the

payment of such taxes. The Company shall have the right to require a Participant to pay cash to satisfy withholding taxes as a condition to the payment of any amount (whether in cash or Shares) under the Plan.

Notwithstanding anything to the contrary contained herein, in no event shall the Company be liable to a Participant on account of an Award’s failure to (a) qualify for favorable United States or foreign tax treatment or (b) avoid adverse tax treatment under United States or foreign law, including, without limitation, Section 409A of the Code.


Article 19.	Successors

All obligations of the Company under this Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.


Article 20.	General Provisions

20.1 Forfeiture Events and Clawback . The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include, but shall not be limited to, any Participant’s fraud resulting in the restatement of the Company’s published earnings, termination of an Employee’s employment or a Director’s service as a director for cause, termination of the Participant’s provision of services to the Company and/or its Subsidiary, violation of material Company and/or Subsidiary policies, breach of noncompetition, confidentiality, or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the business or reputation of the Company and/or its Subsidiaries. In addition, Awards shall be subject to the clawback or recapture policy, if any, that the Company may adopt from time to time to the extent provided in such policy and, in accordance with such policy, may be subject to the requirement that the Awards be repaid to the Company after they have been distributed or paid to the Participant.

20.2 Legend; Restrictions on Share Transferability; Stock Ownership Policy . The certificates for Shares may include any legend, which the Committee deems appropriate to reflect any restrictions on transfer of such Shares. The Committee may impose such restrictions on any Shares acquired pursuant to an Award as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such Shares are then listed and/or traded, or under any blue sky or state securities laws applicable to such Shares. In addition, as applicable, each Participant shall at all times be subject to compliance with the Company’s Executive Stock Ownership Policy, as in effect from time to time, with respect to each Award.

20.3 Gender and Number . Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular, and the singular shall include the plural.

20.4 Severability . In the event any provision of this Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of this Plan, and this Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

20.5 Requirements of Law . The granting of Awards and the issuance of Shares under this Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

20.6 Delivery of Title . The Company shall have no obligation to issue or deliver evidence of title for Shares issued under this Plan prior to:


(a)	Obtaining any approvals from governmental agencies that the Company determines are necessary or advisable; and


(b)	Completion of any registration or other qualification of the Shares under any applicable national or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable.

20.7 Inability to Obtain Authority . The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

20.8 Investment Representations . The Committee may require any individual receiving Shares pursuant to an Award under this Plan to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention to sell or distribute such Shares.

20.9 Employees or Directors Based Outside of the United States . Notwithstanding any provision of this Plan to the contrary, in order to comply with the laws in other countries in which the Company and/or its Subsidiaries operate or have Employees or in which Directors may reside, the Committee, in its sole discretion, shall have the power and authority to:


(a)	Determine which Subsidiaries shall be covered by this Plan;


(b)	Determine which Employees or Directors outside the United States are eligible to participate in this Plan;


(c)	Modify the terms and conditions of any Award granted to Employees or Directors outside the United States to comply with applicable foreign laws;


(d)	Establish subplans and modify exercise procedures and other terms and procedures, to the extent such actions may be necessary or advisable. Any subplans and modifications to Plan terms and procedures established under this Section 20.9 by the Committee shall be attached to this Plan document as appendices; and


(e)	Take any action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary local government regulatory exemptions or approvals.

Notwithstanding the above, the Committee may not take any actions hereunder, and no Awards shall be granted, that would violate applicable law.

20.10 Uncertificated Shares . To the extent that this Plan provides for issuance of certificates to reflect the transfer of Shares, the transfer of such Shares may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the rules of any stock exchange.

20.11 Unfunded Plan . Participants shall have no right, title, or interest whatsoever in or to any investments that the Company, and/or its Subsidiaries may make to aid it in meeting its obligations under this Plan. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other individual. To the extent that any individual acquires a right to receive payments from the Company and/or its Subsidiaries under this Plan, such right shall be no greater than the right of an unsecured general creditor of the Company or a Subsidiary, as the case may be. All payments to be made hereunder shall be paid from the general funds of the Company or a Subsidiary, as the case may be, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in this Plan.

20.12 No Fractional Shares . No fractional Shares shall be issued or delivered pursuant to this Plan or any Award. To the extent settlement or payout of an Award would result in a fractional Share being issuable, the number of Shares subject to settlement or payout under such Award shall be rounded down to the nearest whole Share and any rights to any fractional Shares (or payment therefor) shall be forfeited.

20.13 Section 409A of the Code; Deferrals. The Committee shall have full authority to give effect to any statement in an Award Agreement to the effect that an Award is intended to be “deferred compensation” subject to Section 409A, to be exempt from Section 409A or to have other intended treatment under Section 409A and/or other provision of the Code. To the extent necessary to give effect to this authority, in the case of any conflict or potential inconsistency between the Plan and a provision of any Award or Award Agreement with respect to the subject matter of this section, the Plan shall govern. With respect to any Award made under the Plan that is intended to be “deferred compensation” subject to Section 409A: (a) references to

termination of the Participant’s employment will mean the Participant’s “separation from service” with the Company or any applicable Subsidiary within the meaning of Section 409A; (b) any payment to be made with respect to such Award in connection with the Participant’s separation from service with the Company or any applicable Subsidiary that would be subject to the limitations in Section 409A(a)(2)(b) of the Code shall be delayed until six months after the Participant’s separation from service (or earlier death) in accordance with the requirements of Section 409A; (c) to the extent necessary to comply with Section 409A, any cash, other securities, other Awards or other property that the Company may deliver in lieu of Shares in respect of an Award shall not have the effect of deferring delivery or payment beyond the date on which such delivery or payment would occur with respect to the Shares that would otherwise have been deliverable (unless the Committee elects a later date for this purpose in accordance with the requirements of Section 409A); (d) if the Award includes a “series of installment payments” (within the meaning of Section 1.409A-2(b)(2)(iii) of the regulations promulgated under the Code), the Participant’s right to the series of installment payments shall be treated as a right to a series of separate payments and not as a right to a single payment; and (e) if the Award includes “dividend equivalents” (within the meaning of Section 1.409A-3(e) of the regulations promulgated under the Code), the Participant’s right to the dividend equivalents shall be treated separately from the right to other amounts under the Award.

To the extent permitted by Code Section 409A, the Committee may, whether at the time of grant or at any time thereafter prior to payment or settlement, require a Participant to defer, or permit (subject to such conditions as the Committee may from time to time establish) a Participant to elect to defer, receipt of all or any portion of any payment of cash or Shares that would otherwise be due to such Participant in payment or settlement of any Award under the Plan. If any such deferral is required by the Committee (or is elected by the Participant with the permission of the Committee), the Committee shall establish rules and procedures for payment of such deferrals. The Committee may provide for the payment or crediting of interest, at such rate or rates as it shall in its discretion deem appropriate, on such deferred amounts credited in cash and the payment or crediting of Dividend Equivalents in respect of deferred amounts credited in Share Equivalents or Restricted Stock Units. Deferred amounts may be paid in a lump sum or in installments in the manner and to the extent permitted, and in accordance with rules and procedures established by the Committee. This Section shall not apply to any grant of Options or SARs that are intended to be exempt from Code Section 409A.

20.14 Nonexclusivity of this Plan . The adoption of this Plan shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant or Participants.

20.15 No Constraint on Corporate Action. Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or a Subsidiary’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or a Subsidiary to take any action which such entity deems to be necessary or appropriate.

20.16 Governing Law . The Plan and each Award Agreement shall be governed by the laws of the State of Connecticut, excluding any conflict of laws or choice of law rule or principle that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction. Unless otherwise provided in the Award Agreement, recipients of an Award under this Plan are deemed to submit to the exclusive jurisdiction and venue of the federal or state courts of Connecticut, to resolve any and all issues that may arise out of or relate to this Plan or any related Award Agreement.

20.17 Right of Offset . Except with respect to Awards that are intended to be “deferred compensation” subject to Section 409A, the Company will have the right to offset against its obligation to deliver Shares (or cash, other securities or other property) under the Plan or any Award Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans, repayment obligations under any Awards, or amounts repayable to the Company pursuant to tax equalization, housing, automobile or other employee programs) that the Participant then owes to the Company and any amounts the Committee otherwise deems appropriate pursuant to any tax equalization policy or agreement.

20.18 No Third Party Beneficiaries. Except as expressly provided therein, neither the Plan nor any Award Agreement will confer on any person other than the Company and the Participant of any Award any rights or remedies thereunder. The exculpation and indemnification provisions of Section 3.4 will inure to the benefit of an Administrator’s estate and beneficiaries and legatees.

20.19 Plan Headings. The headings in the Plan are for the purpose of convenience only and are not intended to define or limit the construction of the provisions hereof.




RATIO OF EARNINGS TO FIXED CHARGES

				Praxair, Inc. and Subsidiaries
										Exhibit 12.01

	Three Months Ended March 31,			Year Ended December 31,
(Dollar amounts in millions, except ratios)	2014			2013			2012			2011			2010

Pre-tax income from continuing operations before adjustment for
noncontrolling interests in consolidated subsidiaries or income or
loss from equity investees	$	629		$	2,447		$	2,296		$	2,323		$	1,964
Capitalized interest	(10		)	(69		)	(70		)	(62		)	(62		)
Depreciation of capitalized interest	5			20			20			22			18
Dividends from less than 50%-owned companies carried at equity	—			10			7			6			9
Adjusted pre-tax income from continuing operations before adjustment
for noncontrolling interests in consolidated subsidiaries or income
or loss from equity investees	$	624		$	2,408		$	2,253		$	2,289		$	1,929
Fixed charges
Interest on long-term and short-term debt	$	46		$	178		$	141		$	145		$	118
Capitalized interest	10			69			70			62			62
Rental expenses representative of an interest factor	11			43			39			38			37
Total fixed charges	$	67		$	290		$	250		$	245		$	217

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	$	691		$	2,698		$	2,503		$	2,534		$	2,146
RATIO OF EARNINGS TO FIXED CHARGES	10.3			9.3			10.0			10.3			9.9

RULE 13a-14(a) CERTIFICATIONS

Praxair, Inc. and Subsidiaries

EXHIBIT 31.01

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.



April 23, 2014		By: /s/ Stephen F. Angel

		Stephen F. Angel
		Chairman, President
		Chief Executive Officer
		(principal executive officer)

RULE 13a-14(a) CERTIFICATIONS

Praxair, Inc. and Subsidiaries

EXHIBIT 31.02

I, Matthew J. White, 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.



April 23, 2014		By: /s/ Matthew J. White

		Matthew J. White
		Senior Vice President and
		Chief Financial Officer
		(principal financial officer)

SECTION 1350 CERTIFICATION

Praxair, Inc. and Subsidiaries

EXHIBIT 32.01

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Praxair, Inc. (the “Company”), hereby certifies that the Company’s quarterly report on Form 10-Q for the quarter ended March 31, 2014 (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.



April 23, 2014		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.

SECTION 1350 CERTIFICATION

Praxair, Inc. and Subsidiaries

EXHIBIT 32.02



April 23, 2014		By: /s/ Matthew J. White

		Matthew J. White
		Senior 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.