SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 1-11037
PRAXAIR, INC.
1996 FORM 10-K
Praxair, Inc. Tel. (203) 837-2000
39 Old Ridgebury Road State of incorporation: Delaware
Danbury, Connecticut 06810-5113 IRS identification number: 06-124 9050
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS: REGISTERED ON :
Common Stock ($.01 per value) New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Security Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K [X]
At January 31, 1997, 157,630,505 shares of common stock of Praxair, Inc. were
outstanding. The aggregate market value of common stock held by non-affiliates
at January 31, 1997 was approximately $7,280 million.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the 1996 Annual Report to Shareholders of the Registrant are
incorporated in Parts I, II and IV of this report. Also, portions of the Proxy
Statement of Praxair, Inc., dated March 7, 1997, are incorporated in Part III
of this report.
The Index to Exhibits is located on page 12 of this report.
<PAGE>
FORWARD-LOOKING STATEMENTS
The forward-looking statements contained in this document concerning, among
other things, projected earnings, capital spending, effective tax rates, and
the timing, proceeds and other terms of the disposition of businesses and
assets held for sale, involve risks and uncertainties, and are subject to
change based on various factors, including the impact of changes in worldwide
and national economies, achievement of synergies and cost reductions in the
integration of the recently acquired Liquid Carbonic business of CBI
Industries, Inc., the timing of divestments and the proceeds realized
therefrom, pricing fluctuations in foreign currencies, changes in interest
rates, the continued timely development and acceptance of new products and
processes, the impact of competitive products and pricing, the ability to
achieve tax synergies that will reduce the effective tax rate for the CBI
businesses, and the impact of tax and other legislation and regulation in the
jurisdictions in which the company operates.
<PAGE>
INDEX
PART I
Item 1: Business
Item 2: Properties
Item 3: Legal Proceedings
Item 4: Submission of Matters to a Vote of Security Holders
PART II
Item 5: Market for Registrant's Common Equity and Related Shareholder Matters
Item 6: Selected Financial Data
Item 7: Management's Discussion and Analysis
of Financial Condition and Results of Operations
Item 8: Financial Statements and Supplementary Data
Item 9: Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure
PART III
Item 10: Directors and Executive Officers of the Registrant
Item 11: Executive Compensation
Item 12: Security Ownership of Certain Beneficial Owners and Management
Item 13: Certain Relationships and Related Transactions
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Signatures
Index to Exhibits
<PAGE>
PART I
PRAXAIR, INC. AND SUBSIDIARIES
ITEM 1. BUSINESS
GENERAL - Praxair, Inc. (Praxair or Company) was founded in 1907 and became an
independent publicly-traded company on June 30, 1992. Praxair was the first
company in the United States to produce oxygen from air using a cryogenic
process. Praxair has been, and continues to be, a major technological
innovator in the industrial gases industry and has done much to create value
for its customers by developing new applications for industrial gases and to
open new markets by lowering the cost of supply.
Praxair is the largest industrial gases company in North and South America and
the third largest worldwide. The Company is the world's largest supplier of
carbon dioxide. Praxair's primary products are atmospheric gases (oxygen,
nitrogen, argon, rare gases) and process gases (carbon dioxide, helium,
hydrogen, electronics gases, acetylene). The Company's coatings services
business, operated through Praxair Surface Technologies, supplies
wear-resistant and high-temperature corrosion-resistant metallic and ceramic
coatings and powders. Sales for Praxair were $4,449, $3,146, and $2,711
million for 1996, 1995 and 1994, respectively, with industrial gases accounting
for 91% of sales in 1996, 90% in 1995 and 91% in 1994, and coatings
services/other accounting for the balance.
During 1996, Praxair acquired the common stock of CBI Industries, Inc. (CBI)
(See Note 2 to Consolidated Financial Statements). CBI operated in three major
business segments: Industrial Gases (Liquid Carbonic), Contracting Services
(Chicago Bridge & Iron Company) and Investments (primarily Statia Terminals).
The Industrial Gases segment is the world's largest supplier of carbon dioxide
in its various forms and produces, processes and markets a wide variety of
other industrial/medical and specialty gases, and assembles and sells
industrial gas-related equipment. Praxair determined that the Contracting
Services and Investments segments of CBI are not strategic to the combined
company and, during 1996, sold or took action to sell those businesses.
Additionally, based on an agreement with the U. S. Federal Trade Commission,
Praxair sold four air separation plants operated by Liquid Carbonic in the
United States. The remaining businesses to be sold are accounted for as
acquired assets held for sale.
Gases produced by the Company find wide use in the aerospace, beverage,
chemicals, electronics, environmental remediation, food processing and
preservation, glass, medical, metal fabrication, oil and gas, primary metals,
pulp and paper, and various other industries. By using the gases that Praxair
produces and, in many cases, the proprietary processes that it invents,
customer value is created through improved product quality, increased
productivity, conservation of energy, and the attainment of environmental
improvement objectives. The Company has been and continues to be a major
technological innovator in the industrial gases industry and, working with
customers, has done much to increase the use of its industrial gases to support
the manufacture of other products and for many other uses. Historically,
consumption of industrial gases has increased at approximately 1.5x-2.0x local
GDP growth in countries in which the Company does business.
INDUSTRIAL GASES PRODUCTS AND MANUFACTURING PROCESSES
Atmospheric gases are the highest volume products produced by Praxair. Using
air as its raw material, Praxair produces oxygen, nitrogen and argon through
several air separation processes. As a pioneer in the industrial gases
industry, Praxair has been a leader in developing a wide range of proprietary
and patented applications and supply systems technology. In recent years,
Praxair has developed and commercialized new air separation technologies for
the production of industrial gases and is a recognized leader in this rapidly
growing market segment. These technologies open important new markets and
optimize production capacity for the Company by lowering the cost of supply of
industrial gases. These new technologies include proprietary vacuum pressure
swing adsorption ("VPSA") and membrane separation to produce gaseous oxygen and
nitrogen, respectively.
<PAGE>
PART I (CONT.)
PRAXAIR, INC. AND SUBSIDIARIES
Process gases, including carbon dioxide, carbon monoxide, hydrogen, helium and
acetylene, are produced by different methods than air separation. Most carbon
dioxide is purchased from by-product sources, including chemical plants,
refineries and industrial processes, or from carbon dioxide wells, and is
processed in Praxair's own plants to produce commercial carbon dioxide. Most
of the helium sold by Praxair is derived from certain helium-rich natural gas
streams in the United States, with additional supplies being acquired from
outside the United States. Hydrogen and carbon monoxide are produced by
purifying hydrocarbon sources or by purifying by-product sources obtained from
the chemical and petrochemical industries. Acetylene is typically produced
from calcium carbide and water.
INDUSTRIAL GASES DISTRIBUTION
There are three basic distribution methods for industrial gases: (i) on-site or
tonnage; (ii) merchant liquid; and (iii) packaged or cylinder gases. These
distribution methods are often integrated, with products from all three supply
modes coming from the same plant. The method of supply is generally determined
by the lowest cost means of meeting the customer's needs, depending upon
factors such as volume requirements, purity, pattern of usage, and the form in
which the product is used (as a gas or as a cryogenic liquid).
ON-SITE. Customers that require the largest volumes of product (typically
oxygen, nitrogen and hydrogen) and that have a relatively constant demand
pattern are supplied by cryogenic on-site plants. Praxair constructs plants on
or adjacent to these customers' sites and supplies the product directly to
customers. Because these are usually dedicated plants, the product supply
contracts generally are total requirement contracts, typically having 10-20
year terms and containing minimum purchase requirements and price escalation
provisions. Many of the cryogenic on-site plants also produce liquid products
for the merchant market. New advanced air separation processes allow on-site
delivery to customers with smaller volume requirements. Customers using these
systems usually enter into requirement contracts with terms typically ranging
from 5-15 years.
MERCHANT. The merchant business is generally associated with distributable
liquid oxygen, nitrogen, argon, carbon dioxide, hydrogen and helium.
Atmospheric gases for the merchant business are produced by cryogenic processes
whereas carbon dioxide, hydrogen and helium are produced by other processes as
discussed earlier. The deliveries generally are made from Praxair's plants by
tanker truck to storage containers owned and maintained by Praxair at the
customer's site. Although merchant oxygen and nitrogen generally have a
relatively small distribution radius from the plants at which they are
produced, merchant argon, hydrogen and helium can be shipped much longer
distances. The agreements used in the merchant business are usually three to
five year requirement contracts except for carbon dioxide which typically has
one year requirement contracts.
PACKAGED GASES. Customers requiring small volumes are supplied products in
metal containers called cylinders, usually at medium to high pressure. These
so-called packaged gases include the atmospheric gases, carbon dioxide,
hydrogen, helium and acetylene. Praxair also produces and distributes in
cylinders a wide range of specialty gases and mixtures. Cylinders may be
delivered to the customer's site or picked up by the customer at a packaging
facility or retail store. Packaged gases are generally sold by purchase
orders.
In the United States, most cylinder products are sold along with welding
equipment (hardgoods) by distributors that buy the merchant product from
industrial gases producers and package the product at their own facilities.
Praxair has a large network of independent distributors and owns equity
interests in distributor operations in 26 states in the U.S. and Puerto Rico.
Praxair has acquired independent distributors in various locations in the
United States.
<PAGE>
PART I (CONT.)
PRAXAIR, INC. AND SUBSIDIARIES
SURFACE TECHNOLOGIES
Praxair's surface technologies business provides metallic and ceramic coatings
services for parts and equipment provided by customers. It also provides
aircraft engine and airframe component overhaul services and sells a variety of
specialty powders. The coatings extend wear life at high temperatures and
under corrosive conditions. These coatings are applied at Praxair's facilities
using a variety of thermal spray coatings processes. The coated parts are
finished to the customer's precise specifications before shipment. Customers
for Praxair's surface technologies products and services include the aircraft,
electronics, metal finishing, paper, petrochemical, printing and textile
industries.
INVENTORIES- Praxair carries inventories of merchant and cylinder gases and
coatings materials to supply products to its customers on a reasonable delivery
schedule. On-site plants and pipeline complexes have limited inventory.
Inventories, inventory obsolescence and backlogs are not material to Praxair's
business.
CUSTOMERS-Praxair is not dependent, to a significant extent, upon a single
customer or a few customers.
INTERNATIONAL-Praxair is a global enterprise with slightly over half of its
1996 sales outside of the United States. It conducts industrial gases business
through subsidiary and affiliated companies in Argentina, Australia, Belgium,
Belize, Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, France, Germany,
Indonesia, India, Israel, Italy, Japan, Korea, Mexico, the Netherlands, the
People's Republic of China, Paraguay, Peru, Poland, Portugal, Spain, Thailand,
Turkey, Uruguay and Venezuela. S.I.A.D. (Societa Italiana Acetilene & Derivati
S.p.A.), an Italian company carried at equity, also has established positions
in Austria, Bulgaria, the Czech Republic and Slovenia. Praxair's surface
technologies business has operations in Denmark, France, Germany, Italy, Japan,
Singapore, Switzerland and the United Kingdom.
Praxair's international business is subject to risks customarily encountered in
foreign operations, including fluctuations in foreign currency exchange rates
and controls, import and export controls, and other economic, political and
regulatory policies of local governments. Also, see Note 1 of the section
captioned "Notes to Consolidated Financial Statements" included in Praxair's
1996 Annual Report to Shareholders.
SEASONALITY-Praxair's business is generally not subject to seasonal
fluctuations to any significant extent.
RESEARCH AND DEVELOPMENT-Praxair's research and development is directed toward
developing new and improved methods for the production and distribution of
industrial gases and the development of new markets and applications for these
gases. This results in the frequent introduction of new industrial gas
applications. It has also led to the development of new advanced air
separation process technologies. Research and development for industrial gases
is principally conducted at Tonawanda and Tarrytown, New York; Chicago,
Illinois; Rio de Janeiro, Brazil; Mississauga, Canada and Norwood,
Massachusetts.
Praxair conducts research and development for its surface technologies to
improve the quality and durability of coatings and the use of specialty powders
for new applications and industries. Surface technologies research is
conducted at Indianapolis, Indiana and Okegawa, Japan.
PATENTS AND TRADEMARKS-Praxair owns or licenses a large number of United States
and foreign patents that relate to a wide variety of products and processes.
Praxair's patents expire at various times over the next 20 years. While these
patents and licenses are considered important, Praxair does not consider its
business as a whole to be materially dependent upon any one particular patent
or patent license. Praxair also owns a large number of trademarks.
<PAGE>
PART I (CONT.)
PRAXAIR, INC. AND SUBSIDIARIES
RAW MATERIALS AND ENERGY-Energy is the largest single cost item in the
production and distribution of industrial gases. Principal risks to Praxair's
business and financial performance include shortage of electric power and
natural gas, interruption of supply or increases in price which cannot be
passed through to customers. Praxair has not, historically, experienced
significant difficulties of this nature. Also, Praxair operates a large fleet
of trucks, and any fuel shortage may adversely affect its distribution system.
For carbon dioxide, carbon monoxide, helium, hydrogen, specialty gases and
surface technologies, raw materials are largely purchased from outside sources.
Praxair has contracts or commitments for, or readily available sources of, most
of these raw materials; however, their long term availability and prices are
subject to market conditions.
COMPETITION-Praxair operates within a highly competitive environment. Some of
its competitors are larger in size and capital base than Praxair. Competition
is based on price, product quality, delivery, reliability, technology and
service to customers.
Major competitors in the industrial gases industry both in the United States
and worldwide include The BOC Group p.l.c., L'Air Liquide S.A., Air Products
and Chemicals, Inc., and AGA Aktiebolag.
At a worldwide level, there are no congruent competitors for the surface
technologies business. However, principal domestic competitors are Sermatech
International, Inc., a subsidiary of Teleflex, Inc., and Chemtronics, Inc., a
subsidiary of Interlake, Inc. International competitors in surface
technologies vary from country to country.
EMPLOYEES AND LABOR RELATIONS - As of December 31, 1996, Praxair had 25,271
employees worldwide, excluding employees related to assets held for sale. Of
this number, 8,619 are employed in the United States. Praxair has collective
bargaining agreements with unions at numerous locations throughout the world
which expire at various dates. Praxair considers relations with its employees
to be good.
ENVIRONMENT - Information required by this item is incorporated herein by
reference to the section captioned "Management's Discussion and Analysis -
Costs Relating to the Protection of the Environment" in Praxair's 1996 Annual
Report to Shareholders.
<PAGE>
PART I (CONT.)
PRAXAIR, INC. AND SUBSIDIARIES
ITEM 2. PROPERTIES
Praxair's worldwide headquarters is located in leased office space in Danbury,
Connecticut. Other principal administrative offices are owned in Tonawanda,
New York and Rio de Janeiro, Brazil.
Praxair designs, engineers, manufactures and operates facilities that produce
and distribute industrial gases. These industrial gas production facilities
and certain components are designed and/or manufactured at its facilities in
Tonawanda, New York; Norwood, Massachusetts; and Rio de Janeiro, Brazil.
Praxair's Italian equity affiliate, Societa Italiana Acetilene & Derivati
S.p.A. (S.I.A.D.) also has such capacity.
Praxair owns 257 cryogenic air separation plants worldwide (148 in the United
States); 84 by-product carbon dioxide plants worldwide (20 in the United
States); and 23 hydrogen plants worldwide. No single production facility is
material except for the following complexes:
Number of
SUPPLY SYSTEM CONNECTED PLANTS PRODUCTS PRODUCED
Northern Indiana 10 Air Separation/ Hydrogen
Houston 6 Air Separation
Gulf Coast * 12 Hydrogen/ Carbon Monoxide
Detroit 6 Air Separation/ Hydrogen
Southern Brazil * 2 Air Separation
Northern Spain 3 Air Separation/ Hydrogen
* partially owned and partially leased.
The surface technologies business operates 30 plants located near customers in
Denmark, France, Germany, Italy, Japan, United Kingdom, the United States,
Singapore and Switzerland.
Generally, these facilities are fully utilized and sufficient to meet customer
needs.
With respect to CBI's assets held for sale, Chicago Bridge & Iron Company owns
or leases the properties used to conduct its business. The capacities of these
facilities depend upon the mix of products being manufactured. Its principal
properties are located in California, Georgia, Illinois and Texas in the United
States, and Australia and Canada internationally.
ITEM 3. LEGAL PROCEEDINGS
Information required by this item is incorporated herein by reference to the
section captioned "Notes to Consolidated Financial Statements - Note 14
Commitments and Contingencies" in Praxair's 1996 Annual Report to Shareholders.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Praxair did not submit any matters to a shareholder vote during the fourth
quarter of 1996.
<PAGE>
PART II
PRAXAIR, INC. AND SUBSIDIARIES
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Market, trading, shareholder and dividend information for Praxair's common
stock is incorporated herein by reference to the section captioned "Information
for Investors" in Praxair's 1996 Annual Report to Shareholders.
Praxair's annual dividend on its common stock for 1996 was $0.38 per share. In
January 1997, Praxair's Board of Directors declared a dividend of $0.11 per
share for the first quarter of 1997, or $0.44 per share annualized, which may
be changed as Praxair's earnings and business prospects warrant. The
declaration of dividends is a business decision made by the Board of Directors
based on Praxair's earnings and financial condition and other factors the Board
of Directors considers relevant.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December 31, 1996 is
incorporated herein by reference to the section captioned "Five-year Financial
Summary" in Praxair's 1996 Annual Report to Shareholders. This summary should
be read in conjunction with the Consolidated Financial Statements and related
Notes to Consolidated Financial Statements.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information required by this item is incorporated herein by reference to the
section captioned "Management's Discussion and Analysis" in Praxair's 1996
Annual Report to Shareholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is incorporated herein by reference to the
sections captioned "Consolidated Statement of Income," "Consolidated Balance
Sheet," "Consolidated Statement of Cash Flows," and "Notes to Consolidated
Financial Statements" in Praxair's 1996 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants reportable
under this item.
<PAGE>
PART III
PRAXAIR, INC. AND SUBSIDIARIES
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item is incorporated herein by reference to the
section captioned "Directors and Executive Officers" in Praxair's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 29, 1997.
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item is incorporated herein by reference to the
section captioned "Executive Compensation" in Praxair's Proxy Statement for
the Annual Meeting of Shareholders to be held on April 29, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated herein by reference to the
section captioned "Voting Securities and Principal Holders" in Praxair's Proxy
Statement for the Annual Meeting of Shareholders to be held April 29, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There have been no transactions or relationships since the beginning of 1996
which are reportable under this item.
<PAGE>
PART IV
PRAXAIR, INC. AND SUBSIDIARIES
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
PAGE NO. IN
PRAXAIR'S 1996
ANNUAL REPORT (AR)*
FINANCIAL STATEMENTS
Consolidated Statement of Income for the Years Ended
December 31, 1996, 1995 and 1994 ......................... AR-25
Consolidated Balance Sheet at December 31, 1996 and 1995 .. AR-26
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994 ......................... AR-27
Notes to Consolidated Financial Statements ................ AR-28
Report of Independent Accountants ......................... AR-43
* Incorporated by reference from the indicated pages of the 1996 Annual
Report to Shareholders.
FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted because they are not
applicable or the required information is shown in the financial statements
or notes thereto.
(b) Reports on Form 8-K
On January 23, 1997, Praxair filed a Current Report on Form 8-K dated
January 21, 1997 relating to the authorization of a share repurchase program
and an increase in the quarterly dividend.
(c) Exhibits
Exhibits filed as a part of this Annual Report on Form 10-K are listed in
the Index to Exhibits located on page 11 of this Report.
<PAGE>
SIGNATURES
PRAXAIR, INC. AND SUBSIDIARIES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PRAXAIR, INC.
(Registrant)
Date: March 14, 1997
J. Robert Vipond
VICE PRESIDENT AND CONTROLLER
(ON BEHALF OF THE REGISTRANT
AND AS CHIEF ACCOUNTING OFFICER)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on February 25, 1997.
John A. Clerico Alejandro Achaval Ronald L. Kuehn, Jr.
VICE PRESIDENT, DIRECTOR DIRECTOR
CHIEF FINANCIAL OFFICER
AND DIRECTOR
Edgar G. Hotard John J. Creedon Benjamin F. Payton
PRESIDENT AND DIRECTOR DIRECTOR DIRECTOR
H. William Lichtenberger C. Fred Fetterolf G. Jackson Ratcliffe, Jr.
CHAIRMAN AND CHIEF DIRECTOR DIRECTOR
EXECUTIVE OFFICER AND
DIRECTOR
Dale F. Frey H. Mitchell Watson, Jr.
DIRECTOR DIRECTOR
Claire W. Gargalli
DIRECTOR
<PAGE>
INDEX TO EXHIBITS
PRAXAIR, INC. AND SUBSIDIARIES
EXHIBIT NO. DESCRIPTION
2.01 Agreement and Plan of Merger dated as of December 22, 1995 among
Praxair, Inc., PX Acquisition Corp. and CBI Industries, Inc. (Filed
as Exhibit 2 to the Company's Current Report on Form 8-K dated
December 22, 1995, Filing No. 1-11037, and incorporated herein by
reference).
3.01 Restated Certificate of Incorporation (Filed as Exhibit 3.01 to the
Company's Registration Statement on Form 10, Filing No. 1-11037, and
incorporated herein by reference).
3.02 Amended By Laws of Praxair, Inc. (Filed as Exhibit 3.02 to the
Company's Registration Statement on Form 10, Filing No. 1-11037, and
incorporated herein by reference).
3.03 Certificate of Designations for the 7.48% Cumulative Preferred
Stock, Series A. (Filed on February 7, 1997 as Exhibit 3.3 to
Amendment #1 to the Company's Registration Statement on Form S-3,
Registration No. 333-18141).
3.04 Certificate of Designations for the 6.75% Cumulative Preferred
Stock, Series B. (Filed on February 7, 1997 as Exhibit 3.4 to
Amendment #1 to the Company's Registration Statement on Form S-3,
Registration No. 333-18141).
4.01 Common Stock Certificate (Filed as Exhibit 4.01 to the Company's
Registration Statement on Form 10, Filing No. 1-11037, and
incorporated herein by reference).
4.02 Rights Agreement between the registrant and The Bank of New York as
Rights Agent. (Filed as Exhibit 4.02 to the Company's Registration
Statement on Form 10, Filing No. 1-11037, and incorporated herein by
reference).
4.03 Indenture, dated as of July 15, 1992, between Praxair, Inc. and
Fleet Bank of Connecticut as the ultimate successor trustee to Bank
of America Illinois (formerly Continental Bank, National Association)
(Filed as Exhibit 4 to the Company's Form 10-Q for the quarter
ended June 30, 1992, Filing No. 1-11307, and incorporated herein by
reference).
4.04 Copies of the agreements relating to long-term debt which are not
required to be filed as exhibits to this Annual Report on Form 10-K
will be furnished to the Securities and Exchange Commission upon
request.
4.05 Series A Preferred Stock Certificate. (Filed on February 7, 1997 as
Exhibit 4.3 to Amendment #1 to the Company's Registration Statement
on Form S-3, Registration No. 333-18141).
4.06 Series B Preferred Stock Certificate. (Filed on February 7, 1997 as
Exhibit 4.4 to Amendment #1 to the Company's Registration Statement
on Form S-3, Registration No. 333-18141).
*10.01 1992 Long-Term Incentive Plan (Filed as Exhibit 10.01 to the
Company's Registration Statement on Form 10, Filing No. 1-11037, and
incorporated herein by reference).
*10.01a First Amendment to the 1992 Long-Term Incentive Plan (Filed as
Exhibit 10.01a to the Company's 1993 Annual Report on Form 10-K,
Filing No. 1-11037, and incorporated herein by reference).
<PAGE>
INDEX TO EXHIBITS (CONT.)
PRAXAIR, INC. AND SUBSIDIARIES
EXHIBIT NO. DESCRIPTION
*10.01b Second Amendment to the 1992 Long-Term Incentive Plan(Filed as
Exhibit 10.01b to the Company's 1995 Annual Report on Form 10-K,
Filing No. 1-11037, and incorporated herein by reference).
*10.01c Third Amendment to the 1992 Long-Term Incentive Plan (Filed as
Exhibit 10.01c to the Company's 1995 Annual Report on Form 10-K,
Filing No. 1-11037, and incorporated herein by reference).
*10.01d Fourth Amendment to the 1992 Long-Term Incentive Plan.
*10.02 Severance Compensation Agreement (Filed as Exhibit 10.02 to the
Company's Registration Statement on Form 10, Filing No. 1-11037, and
incorporated herein by reference).
*10.03 1992 Variable Compensation Plan (Filed as Exhibit 10.03 to the
Company's Registration Statement on Form 10, Filing No. 1-11037, and
incorporated herein by reference).
*10.03a First Amendment to the 1992 Variable Compensation Plan (Filed as
Exhibit 10.03a to the Company's 1993 Annual Report on Form 10-K,
Filing No. 1-11037, and incorporated herein by reference).
*10.04 1995 Stock Option Plan for Non-Employee Directors (Filed as Exhibit
10.04 to the Company's Form 10-Q for the Quarter ended March 31,
1995, Filing No. 1-11037, and incorporated herein by reference).
*10.05 Special Severance Protection Program (Filed as Exhibit 10.05 to the
Company's Registration Statement on Form 10, Filing No. 1-11037, and
incorporated herein by reference).
*10.06 Restated Praxair, Inc. Directors' Fees Deferral Plan.
*10.07 Amended and Restated 1993 Praxair Compensation Deferral Program
10.08 Transfer Agreement dated January 1, 1989, between Union Carbide
Corporation and the registrant. (Filed as Exhibit 10.06 to the
Company's Registration Statement on Form 10, Filing No. 1-11037, and
incorporated herein by reference).
10.08a Amendment No. 1 dated as of December 31, 1989, to the Transfer
Agreement (Filed as Exhibit 10.07 to the Company's Registration
Statement on Form 10, Filing No. 1-11037, and incorporated herein by
reference).
10.08b Amendment No. 2 dated as of July 2, 1990, to the Transfer Agreement
(Filed as Exhibit 10.08 to the Company's Registration Statement on
Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.08c Amendment No. 3 dated as of January 2, 1991, to the Transfer
Agreement (Filed as Exhibit 10.09 to the Company's Registration
Statement on Form 10, Filing No. 1-11037, and incorporated herein by
reference).
<PAGE>
INDEX TO EXHIBITS (CONT.)
PRAXAIR, INC. AND SUBSIDIARIES
EXHIBIT NO. DESCRIPTION
10.09 Transfer Agreement dated January 1, 1989, between Union Carbide
Corporation and Union Carbide Coatings Service Corporation (Filed as
Exhibit 10.14 to the Company's Registration Statement on Form 10,
Filing No. 1-11037, and incorporated herein by reference).
10.09a Amendment No. 1 dated as of December 31, 1989, to the Transfer
Agreement (Filed as Exhibit 10.15 to the Company's Registration
Statement on Form 10, Filing No. 1-11037, and incorporated herein by
reference).
10.09b Amendment No. 2 dated as of July 2, 1990, to the Transfer Agreement
(Filed as Exhibit 10.16 to the Company's Registration Statement on
Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.10 Additional Provisions Agreement dated as of June 4, 1992, (Filed as
Exhibit 10.21 to the Company's Registration Statement on Form 10,
Filing No. 1-11037, and incorporated herein by reference).
10.11 Amended and Restated Realignment Indemnification Agreement dated as
of June 4, 1992 (Filed as Exhibit 10.23 to the Company's Registration
Statement on Form 10, Filing No. 1-11037, and incorporated herein by
reference).
10.12 Environmental Management, Services and Liabilities Allocation
Agreement dated as of January 1, 1990 (Filed as Exhibit 10.13 to the
Company's Registration Statement on Form 10, Filing No. 1-11037, and
incorporated herein by reference).
10.12a Amendment No. 1 to the Environmental Management, Services and
Liabilities Allocation Agreement dated as of June 4, 1992 (Filed as
Exhibit 10.22 to the Company's Registration Statement on Form 10,
Filing No. 1-11037, and incorporated herein by reference).
10.13 Danbury Lease-Related Services Agreement dated as of June 4, 1992
(Filed as Exhibit 10.24 to the Company's Registration Statement on
Form 10, Filing No. 1-11037, and incorporated herein by reference).
10.13a First Amendment to Danbury Lease-Related Services Agreement.
(Filed as Exhibit 10.13a to the Company's 1994 Annual Report on Form
10-K, Filing No. 1-11037, and incorporated herein by reference).
10.14 Danbury Lease Agreements, as amended (Filed as Exhibit 10.26 to the
Company's Registration Statement on Form 10, Filing No. 1-11037, and
incorporated herein by reference).
10.14a Second Amendment to Linde Data Center Lease (Danbury) (Filed as
Exhibit 10.14a to the Company's 1993 Annual Report on Form 10-K,
Filing No. 1-11037, and incorporated herein by reference).
10.14b Fourth Amendment to Carbide Center Lease (Filed as Exhibit 10.14b
to the Company's 1993 Annual Report on Form 10-K, Filing No. 1-11037,
and incorporated herein by reference).
10.14c Third Amendment to Linde Data Center Lease. (Filed as Exhibit
10.14c to the Company's 1994 Annual Report on Form 10-K, Filing No.
1-11037, and incorporated herein by reference).
<PAGE>
INDEX TO EXHIBITS (CONT.)
PRAXAIR, INC. AND SUBSIDIARIES
EXHIBIT NO. DESCRIPTION
10.14d Fifth Amendment to Carbide Center Lease. (Filed as Exhibit 10.14d
to the Company's 1994 Annual Report on Form 10-K, Filing No. 1-11037,
and incorporated herein by reference).
10.15 Employee Benefits Agreement dated as of June 4, 1992 (Filed as
Exhibit 10.25 to the Company's Registration Statement on Form 10,
Filing No. 1-11037, and incorporated herein by reference).
10.15a First Amendatory Agreement to the Employee Benefits Agreement.
(Filed as Exhibit 10.15a to the Company's 1994 Annual Report on Form
10-K, Filing No. 1-11037, and incorporated herein by reference).
10.16 Tax Disaffiliation Agreement dated as of June 4, 1992 (Filed as
Exhibit 10.20 to the Company's Registration Statement on Form 10,
Filing No. 1-11037, and incorporated herein by reference).
10.17 Credit Agreement dated as of December 7, 1995, among Praxair, Inc.,
The Banks Party Thereto, Morgan Guaranty Trust Company of New York as
Documentation Agent and Chemical Bank, as Administrative Agent and
Auction Agent. (Filed as Exhibit 10.17 to the Company's 1995 Annual
Report on Form 10-K, Filing No. 1-11037, and incorporated herein by
reference).
*10.18 1996 Praxair, Inc. Senior Executive Performance Award Plan (Filed
as Exhibit 10.19 to the Company's Report on Form 10-Q for the Quarter
ended March 31, 1996, Filing No. 1-11037, and incorporated herein by
reference).
11.01 Computation of Earnings Per Share.
12.01 Computation of Ratio of Earnings to Fixed Charges.
13.01 Praxair's 1996 Annual Report to Shareholders (such report, except
for those portions which are expressly referred to in this Form 10-K,
is furnished for the information of the Commission and is not deemed
"filed" as part of this Form 10-K).
21.01 Subsidiaries of Praxair, Inc.
23.01 Consent of Independent Accountants.
Copies of exhibits incorporated by reference can be obtained from the SEC and
are located in SEC File No. 1-11037.
* Indicates a management contract or compensatory plan or arrangement.
FOURTH AMENDMENT TO THE
1992 PRAXAIR, INC.
LONG TERM INCENTIVE PLAN
- ----------------------------------------------------------
In accordance with Section 12 of the Praxair, Inc. Long Term
Incentive Plan (the "Plan"), the Plan is hereby amended as
follows:
1. Section 11.1 of the Plan is amended in its entirety as
follows:
"11.1 A 'Change in Control of the Corporation' shall be
deemed to occur in the event that any of the following
circumstances have occurred:
(i) individuals who, on October 22, 1996,
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 October 22,
1996, 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 proxy
statement of the Corporation 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 Corporation
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;
(ii) any "person" (as such term is defined in
Section 3(a)(9) of the Securities Exchange Act of 1934 (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" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding
securities eligible to vote for the election of the Board (the
"Company Voting Securities"); provided, however, that the event
described in this paragraph (ii) shall not be deemed to be a
Change in Control by virtue of any of the following
acquisitions: (A) by the Corporation or any Subsidiary, (B) by
any employee benefit plan sponsored or maintained by the
Corporation or Subsidiary, (C) by any underwriter temporarily
holding securities pursuant to an offering of such securities,
(D) pursuant to a Non-Qualifying Transaction (as defined in
paragraph (iii)), or (E) pursuant to any acquisition by
Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including
Executive);
(iii) the consummation of a merger, consolidation,
share exchange or similar form of corporate transaction
involving the Corporation or any of its Subsidiaries that
requires the approval of the Corporation'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
Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, shares
into which such Company 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 Company 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
(iv) The stockholders of the Corporation approve a
plan of complete liquidation or dissolution of the Corporation
or a sale of all or substantially all of the Corporation's
assets.
Notwithstanding the foregoing, a Change in Control of the
Corporation shall not be deemed to occur solely because any
person acquires beneficial ownership of more than 20% of the
Company Voting Securities as a result of the acquisition of
Company Voting Securities by the Corporation which reduces the
number of Company Voting Securities outstanding; provided, that
if after such acquisition by the Corporation such person becomes
the beneficial owner of additional Company Voting Securities
that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in
Control of the Corporation shall then occur."
2. The provisions of this Fourth Amendment shall be effective
as of December 13, 1996.
Signed this _____ day of _________, 1997.
PRAXAIR, INC.
By: Barbara R. Harris
Barbara R. Harris
Vice President
Human Resources
PRAXAIR, INC.
DIRECTOR'S FEES DEFERRAL PLAN
RESTATED
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933.
Originally adopted by the Board: December 2, 1993
Incorporates Amendment No. 1 Adopted: September 9, 1996
Effective: October 1, 1996
PRAXAIR, INC.
DIRECTOR'S FEES DEFERRAL PLAN
Section 1. Purpose, Participation
- ----------------------------------
(a) Purpose: The purpose of this Director's Fees Deferral
Plan (the "Plan") is to enable Praxair, Inc. (the
"Corporation") to attract and retain Directors of outstanding
ability by providing them with a mechanism to defer and
accumulate Director's fees, meaning (1) the retainer, (2) fees
for attendance at meetings of the Board of Directors and Board
committees of the Corporation, (3) fees for additional or
special services as Directors and (4) other compensatory
payments made to Directors by the Corporation in connection with
their service as Directors.
(b) Participation: This Plan extends to Directors of the
Corporation not employed by the Corporation or any subsidiary.
Section 2. Payment of Deferred Amounts
- ---------------------------------------
(a) Deferral Election: At any time prior to the beginning
of a calendar year, a Director may elect that all or any
specified portion of the Director's fees to be earned during
such calendar year be credited to a Director's Cash Account, a
Director's Stock Unit Account and/or a Director's Discounted
Stock Unit Account maintained on such Director's behalf in lieu
of payment (a "Deferral Election"). A Director may also make a
Deferral Election during the 30 days following the date on
which a Director first becomes eligible to receive Director's
fees, although any Deferral Election made pursuant to this
sentence will apply only to all or any specified portion of the
Director's fees earned thereafter. Each Deferral Election must
be submitted to the Secretary of the Corporation in writing, and
will be deemed to authorize deferral to only a Director's Cash
Account except to the extent deferral to a Director's Stock Unit
Account or a Director's Discounted Stock Unit Account is
expressly specified.
(b) Effect of Deferral Election: Pursuant to such
Deferral Election, the Corporation (i) will not pay the
Director's fees covered thereby and (ii) will make payments in
accordance with the Deferral Election and this Section 2.
(c) Payment Commencement Event: At the time of making the
Deferral Election, a Director will designate as a "Payment
Commencement Event" either (1) the termination of the Director's
service as a Director of the Corporation (or any successor) or
(2) the Director's attainment of an age, not to exceed 75,
specified by the Director so long as, with respect to payment of
a Director's Discounted Stock Unit Account, it does not result
in payment prior to the Director's termination of service as a
Director. A Director may also elect that notwithstanding any
other election made by him pursuant to this Section 2, in the
event that the Director terminates service as a Director of the
Corporation within one year following a "Change of Control" (as
defined in Section 5(h)), the Payment Commencement Event for
payments from a deferral account will be the termination of the
Director's service as a Director.
(d) Payment: Payment of amounts deferred pursuant to the
Deferral Election will commence on the last business day of the
calendar quarter in which the Payment Commencement Event (either
as originally designated or as deferred pursuant to clause (1)
of Section 2(e)) occurs. Payments from a deferral account will
be made in a lump sum (in cash or stock as provided in this
Plan) unless a timely election of an installment payment
schedule pursuant to clause (2) of Section 2(e) has been made.
(e) Additional Deferrals: A Director may also (1) elect
to defer the Payment Commencement Event to a later date
specified by the Director (but not later than attainment of age
75), and/or (2), for Payment Commencement Events other than a
Change of Control, elect that (i) payment from the Director's
Cash Account be made in a number of approximately equal annual
cash installments, and/or (ii) payment from the Director's Stock
Unit Account and the Director's Discounted Stock Unit Account be
made in a number of annual installments, each of an
approximately equal number of Stock Units. Such installment
payments shall be made over a period of time specified by the
Director, but not to exceed 15 years. Such elections may be
made at any time until 12 months before the Payment Commencement
Event designated pursuant to Section 2(c) . Each such election
must be submitted to the Secretary of the Corporation in
writing. A Director may make no more than one election pursuant
to clause (1) in any calendar year. An election of an
installment payment schedule pursuant to clause (2) is
irrevocable except as provided in Section 2(g).
(f) Renewal of Elections: Once a Deferral Election and
designation of a Payment Commencement Event has been made, it
will be automatically applied to Director's fees earned in all
subsequent calendar years unless the Director changes or revokes
either such election or designation. Each such change or
revocation must be submitted to the Secretary of the Corporation
in writing. However, except as provided in Section 2(e), each
Deferral Election and designation of Payment Commencement Event
is irrevocable as to Director's fees earned prior to the
calendar year next following any change or revocation.
(g) Renewal of Installment Election: An election of an
installment payment schedule will automatically apply to amounts
credited to a deferral account in each succeeding calendar year
unless, prior to the commencement of such calendar year, the
Director elects to change or revoke such installment payment
schedule election, in which case his/her new election will
control only with respect to amounts credited during calendar
years following such new election.
(h) Disability: In the event a Director becomes disabled,
the payment commencement date and/or payment schedule with
respect to a balance in a deferral account may be accelerated by
the Plan Committee, in its sole discretion. 'Disabled' means
unable to engage in any substantial gainful activity because of
any medically determinable physical or mental impairment which
can be expected to result in death or which has lasted, or can
be expected to last, for a continuous period of six (6) months
or longer.
(i) Death: A Director may designate a beneficiary (and
change such beneficiary, from time to time) for payment of any
balance of the deferral account at the Director's death. Upon a
Director's death, any balance in the deferral account (including
amounts credited to such account as specified in Section 3(b)
and Section 4(b)) will be paid to the deceased Director's
beneficiary at the end of the first calendar quarter which ends
at least 30 days after the Director dies. If no beneficiary has
been designated, the Director's estate will be deemed the
beneficiary, and any payments pursuant to this Section 2(i) will
be paid, either at the end of the first calendar quarter which
ends at least 30 days after appointment of the deceased
Director's legal representative, or such earlier date as may be
determined by the Plan Committee, in its sole discretion.
(j) Mandatory Deferrals: The Board of Directors may,
from time to time, determine that certain payments made to
Directors shall be mandatorily deferred under this Plan. If, in
conjunction with such determination, the Board specifies the
deferral account(s) to which such payment shall be credited or
the Payment Commencement Event applicable to such deferral, then
such specifications shall be applied to the deferral as if the
recipient Director had made a timely Deferral Election with
respect to such payment under Section 2(a) and had designated a
Payment Commencement Event under Section 2(c). With respect to
any such mandatory deferral, the Board may also specify
restrictions on changes or revocations of Deferral Elections (or
deemed Deferral Elections) and Payment Commencement Event
designations under Section 2(f), in which event Section 2(f)
shall be inoperative as to such mandatory deferral to the extent
of the specified restrictions.
Section 3. Credits and Debits to Director's Cash Account
- -----------------------------------------------------------
(a) Principal: The Corporation will create and maintain
on its books a Director's Cash Account for each Director who has
made a Deferral Election to such an account under Section 2(a).
The Corporation will credit to such account the amount of any
Director's fee which would have been paid to the Director, but
which is not pursuant to such Deferral Election, as of the date
the fee would have otherwise been payable.
(b) Interest: At the end of each calendar quarter,
regardless of whether any other credits are then made to the
Director's Cash Account or whether the Director is then a
Director, the Corporation will also credit to the Director's
Cash Account a sum which is equal to the product of (i) the
average daily balance in the Director's Cash Account for the
quarter (without regard to any debits made at the end of such
quarter), times (ii) one-fourth of the annual Base Rate (prime
rate) for corporate borrowers quoted by Morgan Guaranty Trust
Company of New York as of the first business day of the quarter.
(c) Debits: At the end of each calendar quarter, the
Corporation will make a payment if required under the payment
schedule for such Director's Cash Account and will debit the
Director's Cash Account for the amount thereof. Payment with
respect to a Director's Cash Account will be in cash only.
(d) Mid-quarter Payments: If Payment is to be made other
than at the end of a calendar quarter in accordance with a
determination pursuant to Section 2(h) or to Section 2(i),
prior to such payment, the Corporation will credit to the
Director's Cash Account an amount equal to the product of (i)
the average daily balance In the Director's Cash Account for the
period from the beginning of the calendar quarter to the date of
payment (without regard to any debits to be made upon such
payment), times (ii) a fraction of the annual Base Rate (prime
rate) for corporate borrowers quoted by Morgan Guaranty Trust
Company of New York as of the first business day of the quarter,
the numerator of which is the number of days in the period
described in clause (i), and the denominator of which is 365.
Section 4. Credits and Debits to Director's Stock Unit Account
- -----------------------------------------------------------
(a) Stock Units: The Corporation will create and maintain
on its books a Director's Stock Unit Account for each Director
who has made a Deferral Election under Section 2(a) and
expressly specifies deferral to such an account. The
Corporation will credit to such account the number of Stock
Units equal to the number of shares of the Corporation's common
stock that could be purchased with the amount of any Director's
fee which would have been paid to the Director, but which is not
pursuant to such Deferral Election, as of the date the fee would
have otherwise been payable. The number of Stock Units will be
calculated to three decimals by dividing the amount of the
Director's fee as to which a Director's Stock Unit Account
Deferral Election was made by the closing price of the
Corporation's common stock as reported on the New York Stock
Exchange as of the date the fee would have otherwise been
payable.
(b) Dividends: As of the date any dividend is paid to
holders of shares of the Corporation's common stock, each
Director's Stock Unit Account, regardless of whether the
Director is then a Director, will be credited with additional
Stock Units equal to the number of shares of the Corporation's
common stock that could have been purchased with the amount
which would have been paid as dividends on that number of shares
(including fractions of a share to three decimals) of the
Corporation's common stock equal to the number of Stock Units
attributed to such Director's Stock Account as of the record
date applicable to such dividend. The number of additional
Stock Units to be credited will be calculated to three decimals
by dividing the amount which would have been paid as dividends
by the closing price of the Corporation's common stock as
reported on the New York Stock Exchange as of the date the
dividend would have been paid. In the case of dividends paid in
property other than cash, the amount of the dividend shall be
deemed to be the fair market value of the property at the time
of the payment of the dividend, as determined in good faith by
the Plan Committee.
(c) Debits and Calculation of Payments: The Corporation
will debit the Director's Stock Unit Account for Stock Units as
required under the payment schedule for such Director's Stock
Unit Account. Payment with respect to whole Stock Units will be
in shares of the Corporation's common stock only, at the rate of
one share of common stock per Stock Unit. With respect to
fractional Stock Units, payment will be made in cash only, and
calculated by multiplying the fractional number of the Stock
Unit to be debited by the closing price of the Corporation's
common stock as reported on the New York Stock Exchange as of
the last business day of the week preceding the week of the date
the Stock Units are payable. Should payment with respect to
Stock Units be made after the record date, but before the
payment date applicable to a dividend paid to holders of shares
of the Corporation's common stock, Stock Units credited a
Director's Stock Unit Account in consequence of such dividend
payment will be calculated as cash payments and paid within
thirty days of such credit.
(d) Adjustment: If at any time the number of outstanding
shares of the Corporation's common stock is increased as the
result of any stock dividend, stock split, subdivision or
reclassification of shares, the number of Stock Units with which
each Director's Stock Unit Account is credited will be increased
in the same proportion as the outstanding number of shares of
the Corporation's common stock is increased. If the number of
outstanding shares of common stock is decreased as the result of
any combination, reverse stock split or reclassification of
shares, the number of Stock Units with which each Director's
Stock Unit Account is credited will be decreased in the same
proportion as the outstanding number of shares of the
Corporation's common stock is decreased. In the event the
Corporation is consolidated with or merged into any other
corporation and holders of shares of the Corporation's common
stock receive shares of the capital stock of the resulting or
surviving corporation, there shall be credited to each
Director's Stock Unit Account, in lieu of the extant Stock
Units, new Stock Units in an amount equal to the product of the
number of shares of capital stock exchanged for one share of the
Corporation's common stock upon such consolidation or merger,
and the number of Stock Units with which such account then is
credited. If, in such a consolidation or merger, holders of
shares of the Corporation's common stock receive any
consideration other than shares of the capital stock of the
resulting or surviving corporation or its parent corporation,
the Plan Committee will determine any appropriate change in
Director's Stock Unit Accounts.
Section 4A. Credits and Debits to Director's Discounted Stock
Unit Account
- ----------------------------------------------------------
Director's Discounted Stock Unit Accounts shall be
established and administered in the same manner as Director's
Stock Unit Accounts as set forth in Section 4 such that all
references therein to a "Director's Stock Unit" may be
substituted with "Director's Discounted Stock Unit Account";
provided, however, that, in the case of such substitution, the
calculation of Stock Units to be credited upon deferral of a
Director's fee pursuant to Section 4(a) and upon crediting of
dividend equivalents pursuant to Section 4(b) and the last
sentence of Section 4(c) shall be based on the applicable
closing price of the Corporation's common stock less ten percent
(10%).
Section 5. Unfunded Arrangement
- --------------------------------
(a) Neither this Plan nor any deferral account will be
funded; a deferral account and all entries thereto constitute
bookkeeping records only and do not relate to any specific funds
or shares of the Corporation. Payments due with respect to
balances in a deferral account will be made from the general
assets of the Corporation, and the right of any participant to
receive future payments under this Plan's provisions will be an
unsecured claim against such assets.
Section 6. Administration
- --------------------------
(a) Plan Committee: The Plan will be administered by a
Plan Committee, which will be the Public Policy and Nominating
Committee of the Board of Directors of the Corporation, or such
other Committee as may be appointed by the Board of Directors of
the Corporation, and may include Directors who have elected to
participate in the Plan. No member of the Plan Committee will
be liable for any act done or determination made in good faith.
(b) Committee Determination Final: The construction and
interpretation of any provision of the Plan by the Plan
Committee, and a determination by the Plan Committee of the
amount of any deferral account, will be final and conclusive.
(c) Amendments: The Corporation, subject to approval of
its Board of Directors, reserves the right to terminate, modify
or amend this Plan, effective prospectively as of the first day
of any calendar quarter; provided, however, that the Plan will
not be subject to termination, modification or amendment with
respect to any balance of a deferral account and rights
therein, including the right to future interest pursuant to
Section 3(b) and future dividends pursuant to Section 4(b),
unless the affected Director consents.
(d) Non-Alienation: No Director (or estate of a Director)
will have power to transfer, assign, anticipate, mortgage or
otherwise encumber any rights or any amounts payable hereunder;
nor will any such rights or payments be subject to seizure for
the payment of any debts, judgments, alimony, or separate
maintenance, or be transferable by operation of law in the event
of bankruptcy, insolvency, or otherwise.
(e) Expenses: The expenses of administering the Plan will
be borne by the Corporation and not be charged against any
deferral account.
(f) Withholding: The Corporation may deduct from all cash
payments any taxes required to be withheld with respect to such
payments. In order to enable the Corporation to meet any
applicable federal, state or local withholding tax requirements
arising as a result of payments made hereunder in the form of
stock, a Director shall pay the Corporation the amount of tax to
be withheld or may elect to satisfy such obligation by having
the Corporation withhold shares that otherwise would be
delivered to the Director pursuant to the deferral account
payment for which the tax is being withheld, by delivering to
the Corporation other shares of common stock of the Corporation
owned by the Director prior to the payment date, or by making a
payment to the Corporation consisting of a combination of cash
and such shares of common stock. Such an election shall be made
prior to the date to be used to determine the tax to be
withheld. The value of any share of common stock to be withheld
by, or delivered to, the Corporation pursuant to this Section
6(f) shall be the closing price of the Corporation's common
stock as reported on the New York Stock Exchange on the date to
be used to determine the amount of tax to be withheld.
(g) Effect of IRS Determination: If any amounts deferred
pursuant to the Plan are found in a "determination" (within the
meaning of Section 1313(a) of the Internal Revenue Code of 1986,
as amended) to have been includible in gross income by a
Director prior to payment of such amounts from his/her deferral
account, such amounts will be immediately paid to such Director,
notwithstanding elections pursuant to Section 2.
(h) Change of Control: A "Change of Control" will be
deemed to have occurred if:
(i) a change in control of the Corporation would be
required to be reported in response to Item 1 (a) of the Current
Report on Form 8-K, as in effect on the date set forth below ,
pursuant to Sections 13 or 15 (d) of the Exchange Act, whether
or not the Corporation is then subject to such reporting
requirement;
(ii) there is consummated (x) any consolidation or merger
of the Corporation in which the Corporation is not the
continuing or surviving company or pursuant to which shares of
the Corporation's common stock would be converted into cash,
securities or other property, other than a merger of the
Corporation in which the holders of the Corporation's common
stock immediately prior to the merger have the same proportion
and ownership of common stock of the surviving company
immediately after the merger; or (y) any sale, lease, exchange
or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the
Corporation, provided, that the divestiture of less than
substantially all of the assets of the Corporation in one
transaction or a series of related transactions, whether
effected by sale, lease, exchange, spin-off, sale of the stock
or merger of a subsidiary or otherwise, is not a Change in
Control;
(iii) any 'person' within the meaning of Sections 13(d)(3)
and 14(d)(2) of the Securities Exchange Act of 1934, as in
effect on the date set forth below, (x) becomes the 'beneficial
owner' as defined in Rule 13d-3 of more than 20% of the then
outstanding voting securities of the Corporation, otherwise than
through a transaction or transactions arranged by, or
consummated with the prior approval of, the Board; or (y)
acquires by proxy or otherwise the right to vote for the
election of directors, for any merger or consolidation of the
Corporation or for any other matter or question, more than 20%
of the then outstanding voting securities of the Corporation,
otherwise than through an arrangement or arrangements
consummated with the prior approval of the Board;
(iv) if during any period of twenty-four consecutive
months, Present Directors and New Directors cease for any reason
to constitute a majority of the Board. For those purposes,
'Present Directors' means individuals who, at the beginning of
such consecutive twenty-four month period, were members of the
Board of Directors and 'New Directors' means any director whose
election by the Board or whose nomination for election by the
Corporation's stockholders was approved by a vote of at least
two-thirds of the Directors then still in office who were
Present Directors or New Directors; or
(v) any 'person' within the meaning of Sections 13(d)(3)
and 14(d)(2) of the Securities Exchange Act of 1934, as in
effect on the date set forth below, that is the 'beneficial
owner' as defined in Rule 13d-3 of 20% or more of the then
outstanding voting securities of the Corporation commences
soliciting proxies from the Corporation's shareholders.
Notwithstanding the foregoing, Present Directors and New
Directors may, by two-thirds vote of such Directors, declare
that a given transaction is not a Change in Control of the
Corporation for purposes of this Plan.
(i) Stock Unit Status: Stock Units are not, and do not
constitute, shares of the Corporation's common stock, and no
right as a holder of shares of the Corporation's common stock
devolves upon a Director by reason of participation in this Plan.
IN WITNESS WHEREOF, Praxair, Inc. has caused this document
to be executed as of the 1st day of October, 1996.
PRAXAIR, INC.
By: ____D. H. Chaifetz_______
D. H. Chaifetz
Vice President, General
Counsel and Secretary
1993 PRAXAIR COMPENSATION DEFERRAL PROGRAM
RESTATED
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933
Originally adopted by the Board: December 1, 1993
Incorporates Amendments Adopted: January 23, 1995
September 25, 1995
July 22, 1996
TABLE OF CONTENTS
Section 1: Purpose
Section 2: Definitions
Section 3: Administration
Section 4: Eligibility to Participate
Section 5: Election to Participate
Section 6: Payments to Participants and Beneficiaries
Section 7: Beneficiaries
Section 8: Earnings Accurals
Section 9: General Provisions
1993 PRAXAIR COMPENSATION DEFERRAL PROGRAM
SECTION 1: PURPOSE
- -------------------
The purpose of the 1993 Praxair Compensation Deferral Program
(the 'Program') is to provide (i) a procedure by which
recipients may annually elect in advance to defer a portion or
all of their cash awards granted pursuant to the Corporation's
Variable Compensation Plans, the 1992 Praxair, Inc. Long Term
Incentive Plan, the 1996 Praxair, Inc. Senior Executive
Performance Award Plan, and successors to such plans, all as
amended from time to time , (ii) a procedure by which Eligible
Employees may defer all or a portion of their base salary and
(iii) Eligible Employees with matching contributions lost under
the Savings Program because of the limitations imposed under
Section 401(a)(17) of the Code. The Program shall be effective
for amounts payable on or after January 1, 1994; provided that
base salary and cash awards under the 1992 Praxair, Inc. Long
Term Incentive Plan and the 1996 Praxair, Inc. Senior Executive
Performance Award Plan may not be deferred unless and until a
determination is made by the Vice President-Human Resources to
allow such deferrals in the applicable case.
SECTION 2: DEFINITIONS
- ------------------------
2.1: "Beneficiary" means the person, persons or estate
entitled (as determined under Section 7) to receive payment
under the Program following a Participant's death.
2.2: "Change in Control of the Corporation" means the
occurrence of any of the following circumstances:
(1) If a change in control of the Corporation would be
required to be reported in response to item 1(a) of the current
report of Form 8-K, as in effect on the date hereof, pursuant to
Sections 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not the Corporation is
then subject to such reporting requirement;
(2) there shall be consummated: (A) any consolidation or
merger of the Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to which shares
of the Corporation's common stock would be converted into cash,
securities or other property, other than a merger of the
Corporation in which the holders of the Corporation's common
stock immediately prior to the merger have the same proportion
and ownership of common stock of the surviving corporation
immediately after the merger, or (B) any sale, lease, exchange
or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the
Corporation, provided, that the divestiture of less than
substantially all of the assets of the Corporation in one
transaction or a series of related transactions, whether
effected by sale, lease, exchange, spin-off, sale of the stock
or merger of a subsidiary or otherwise, shall not constitute a
Change in Control of the Corporation;
(3) any "person" or "group" within the meaning of Sections
13(d) and 14(d) (2) of the Exchange Act (A) becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange
Act of more than 20% of the then outstanding voting securities
of the Corporation, otherwise than through a transaction or
transactions arranged by, or consummated with the prior approval
of, the Board of Directors of the Corporation, or (B) acquires
by proxy or otherwise the right to vote for the election of
directors, for any merger or consolidation of the Corporation or
for any other matter or question more than 20% of the then
outstanding voting securities of the Corporation, otherwise than
through an arrangement or arrangements consummated with the
prior approval of the Board of Directors of the Corporation;
(4) if during any period of twenty-four consecutive months,
Present Directors and/or New Directors cease for any reason to
constitute a majority of the Board of Directors of the
Corporation. For purposes of this Agreement, "Present
Directors" shall mean individuals who at the beginning of such
consecutive twenty-four month period were members of the Board
and "New Directors" shall mean any director whose election by
the Board of Directors of the Corporation or whose nomination
for election by the Corporation's stockholders was approved by a
vote of at least two-thirds of the Directors then still in
office who were Present Directors or New Directors; or
(5) any "person" or "group" within the meaning of Sections
13(d) and 14(d) of the Exchange Act that is a 'beneficial
owner', as defined in Rule 13d-3 under the Exchange Act, of 20%
or more of the then outstanding voting securities of the
Corporation commences soliciting proxies.
Notwithstanding the foregoing, Present Directors and/or New
Directors may, by two-thirds vote of such Directors, declare
that a given transaction shall not constitute a Change in
Control of the Corporation for purposes of this Program.
2.3: "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
2.4: "Committee" means the Compensation and Management
Development Committee of the Board of Directors of the
Corporation.
2.5: "Corporation" means Praxair, Inc., and any successor
thereof by merger, consolidation or otherwise.
2.6: "Date of Deferral" means (i) with respect to cash
awards granted pursuant to Eligible Plans, the date on which the
Corporation issues checks to recipients for such awards, (ii)
with respect to salary deferral, the date on which the relevant
salary would be paid and (iii) with respect to matching
contributions made by the Corporation pursuant to Section 5.3 of
this Program for a given Service Year, the day following the
date that the Committee determines (for purposes of determining
the Stock Value Rate in accordance with Section 2.18 ) the
common stock value for the matching contribution deferral .
2.7: "Disability" means a Participant's total physical or
mental inability to perform any work for compensation or profit
in any occupation for which the Participant is reasonably
qualified by reason of training, education or ability, and which
inability is adjudged to be permanent, as determined by the Vice
President-Human Resources or his or her designee.
2.8: "Discounted Stock Value Rate" means the Stock Value
Rate except that the applicable value of the Corporation's
common stock determined in accordance with Section 2.18, shall
be reduced by ten (10%) percent
2.9 "Eligible Plan" means any of those incentive plans of
the Corporation listed in clause (i) of Section 1 hereof.
2.10: "Employee" means a person who is an employee of the
Corporation or one of its subsidiary corporations and "Eligible
Employee" means a person who is a participant in one of the
Variable Compensation Plans and whose compensation is included
in the payroll accounts of the Corporation or any U.S.
subsidiary thereof.
2.11: "Exchange Act" means the Securities Exchange Act of
1934.
2.12: "Fixed Income Rate" means the rate of interest for the
Fixed Income Fund under the Corporation's Savings Program, in
effect from time to time.
2.13: "Participant" means an Eligible Employee who (i)
elects in advance under the Program to defer a portion or all of
the Employee's base salary, (ii) elects in advance under the
Program to defer a portion or all of any cash award that may
granted to the Employee pursuant to an Eligible Plan in a
calendar year, and who is in fact subsequently granted such an
award which is payable during said year on the Date of Deferral
or (iii) receives compensation (as defined in Section 1.12 of
the Savings Program) for such calendar year in an amount which
is in excess of such compensation which may be considered under
Section 1.12 of the Savings Program because of the limitations
imposed by Code Section 401(a)(17).
2.14: "Program" means this 1993 Praxair Compensation
Deferral Program.
2.15: "Retirement" means termination of employment with the
right to an immediate retirement benefit under the Corporation's
Retirement Program (or under circumstances which would have
allowed for such an immediate retirement benefit had the
Participant been a participant in the Corporation's Retirement
Program).
2.16 "Savings Program" means The Savings Program for
Employees of Praxair, Inc. and Participating Subsidiary
Companies, as amended from time to time.
2.17: "Service Year" means one of the calendar years on and
after 1993, (i) with respect to which a Variable Compensation
Award may be paid during the following year on the Date of
Deferral or (ii) with respect to which a matching contribution
pursuant to Section 5.3 of this Program may be made during the
following year on the Date of Deferral. .
2.18: "Stock Value Rate" means the difference between the
value of the Corporation's common stock (i) as of the date
amounts credited to the Program are directed, by initial
election or by reallocation, into the Stock Value Rate (or, in
the case of initial deferrals of matching contributions or of
Variable Compensation Awards, the common stock value determined
by the Committee in accordance with the last sentence of this
Article 2.18), and (ii) the relevant date of determination of
the amount of earnings in accordance with Section 8 hereof.
Such value shall include the value of any dividends paid on the
stock during the period for which the Stock Value Rate is being
determined, as if such dividends were reinvested, when payable,
in additional shares of the Corporation's common stock purchased
at the value less five percent (5%) of the Corporation's common
stock on the dividend payable date. Except as provided in the
next sentence, the value of the Corporation's common stock for
purposes of this Section 2.18, shall mean the closing price of
the stock on the New York Stock Exchange on the relevant date of
determination. In January of each calendar year, the Committee
shall determine the common stock value to be used in valuing
deferrals of Variable Compensation Awards and matching
contributions to be awarded in the calendar year for the
previous Service Year.
2.19: "Unforeseen Emergency" means an event beyond the
control of the Participant that would result in severe financial
hardship to the Participant if early withdrawal of the
Participant's cash awards, matching contributions or base
salary deferrals and related earnings (as provided for in
Section 6.1 (c)) were not permitted. Whether a Participant has
an Unforeseen Emergency shall be determined by the Vice
President-Human Resources or his or her designee.
2.20: "Variable Compensation Plans" means the 1992 Praxair,
Inc. Variable Compensation Plan, the Praxair, Inc.
Mid-Management Variable Compensation Plan, and successors to
such plans, all as amended from time to time.
2.21: "Variable Compensation Award" means a variable
compensation award under a Variable Compensation Plan or an
Annual Performance Award under the 1996 Praxair, Inc. Senior
Executive Performance Award Plan.
2.22: "Vice President-Human Resources" means the Vice
President-Human Resources of the Corporation.
SECTION 3: ADMINISTRATION
- -------------------------
The Committee shall supervise the administration and
interpretation of the Program, may establish administrative
regulations to further the purpose of the Program and shall take
any other action necessary to the proper operation of the
Program. All decisions and acts of the Committee shall be final
and binding upon all Participants, their Beneficiaries and all
other persons.
SECTION 4: ELIGIBILITY TO PARTICIPATE
- -------------------------------------
To be eligible to participate in the Program for a given
calendar year, a person must have become an Eligible Employee
not later than the day on or before which Eligible Employees
must make the election provided for in Section 5 for deferral of
cash awards or base salary to be otherwise paid in that calendar
year.
SECTION 5: ELECTION TO PARTICIPATE
- ----------------------------------
5.1: Participation in Program: During each of the years the
Program is in effect, Eligible Employees shall be informed of
the opportunity to participate in the Program. An Eligible
Employee choosing to participate with respect to deferral of
cash awards or base salary must make an election to do so on or
before the day designated by the Vice President-Human Resources
and otherwise in accordance with such procedures as may be
established.
5.2: Effective Date of Participation: (a) After the
designated election date as provided in Section 5.1, a timely
election to defer an award granted pursuant to an Eligible Plan
shall be irrevocable with respect to the calendar year and plan
for which it is made. Participation in this Program with
respect to cash awards shall become effective only on the
applicable Date of Deferral and only if, on such date, the
Eligible Employee receives an award under one of the elected
Eligible Plans (or would have received an award but for an
election to defer under the Program).
(b) An election to defer base salary must be made during the
election period immediately preceding the calendar year in
which services to the Corporation will be performed.
Participation in this Program with respect to base salary shall
become effective only on the first Date of Deferral in said
calendar year and only if, and only so long as , the Eligible
Employee remains employed with the Corporation. A Participant
may suspend his or her election to defer his or her base salary
at any time; provided, however, that such Eligible Employee may
not resume deferrals of base salary until the following calendar
year.
5.3: Corporation Matching Contribution: (a) Without
requiring any election by the Eligible Employee to participate
in the Program, the Corporation shall credit a Participant with
an amount equal to 3.75 % of that portion of a Participant's
previous calendar year compensation (as defined in Section 1.12
of the Savings Program without regard to Code Section
401(a)(17), and without regard to any deferrals under this
Program) which exceeds $150,000. Such $150,000 shall be
adjusted at the same time and in the same manner as the
limitation described in Code Section 401(a)(17).
(b) The Corporation shall credit each Participant with the
amount determined pursuant to subsection (a) of this Section
5.3, in arrears, on the relevant Date of Deferral, provided that
such Participant is employed by the Corporation on the Date of
Deferral. Notwithstanding the foregoing, if the Participant
terminates employment with the Corporation during the Service
Year by reason of death, Disability, Retirement, or termination
by the Corporation other than for cause, then the Corporation
shall credit a Participant on the Date of Deferral with the
amount determined pursuant to subsection (a) of this Section 5.3
even though such Participant is not employed by the Corporation
on said Date of Deferral.
SECTION 6: PAYMENTS TO PARTICIPANTS AND BENEFICIARIES
- -----------------------------------------------------
6.1: Time of Payment: (a) Subject to subsections (b), (c)
and (d) of this Section 6.1, a Participant shall begin to
receive payment of his or her deferrals, and any earnings
accruals credited under Section 8 during the January next
following his or her last day of work prior to Retirement, or,
immediately upon his or her other termination of employment
occuring prior to scheduled retirement. Participants shall be
deemed to have elected to defer all amounts until termination of
employment in accordance with this Article 6.1(a) unless a
contrary election is made pursuant to Article 6.1(b) below.
(b) Notwithstanding any provision in this Program to the
contrary, a Participant may, at the time of an election to defer
either base salary or cash awards granted pursuant to Eligible
Plans, make an irrevocable election to commence payment of any
such amounts deferred under this Program upon a specific future
payment date which is at least one year after the relevant Date
of Deferral or such shorter period as the Committee may approve.
A Participant making such an election shall receive his or her
payment in the January next following said future payment date.
(c) A Participant who has not yet terminated employment, but
has an Unforeseen Emergency, may receive payment of any or all
of his or her deferred base salary, deferred matching
contribution, deferred cash awards and earnings accruals
credited to him or her pursuant to Section 8 of this Program;
provided that the Participant may not receive an amount greater
than the amount necessary to meet the Unforeseen Emergency plus
any amounts necessary to pay federal, state and local income
taxes or penalties reasonably anticipated to result from a
withdrawal under this Section 6.1.
(d) Notwithstanding any provision in this Program to the
contrary, a Participant shall receive payment of his or her
entire account balance under this Program at such time as (i)
the Board of Directors of the Corporation determines that a
Change in Control of the Corporation has occurred and (ii) the
Chief Executive Officer of the Corporation provides written
authorization for such payment. Such payment shall be made in
full within 45 days after the Change in Control of the
Corporation.
6.2 Form of Payments: (a) Subject to paragraphs (b) and (d)
below, payments under this Program shall be made in full in a
single payment.
(b) A Participant may, in lieu of the form of payment
described in paragraph (a), elect that all amounts which have
been deferred to the Participant's termination of employment
under Article 6.1(a) be paid in annual installments over a
period designated by the Participant; provided that
(i) such election is made only one time and is made in
the calendar year of the Participant's date of Retirement; and
(ii) the election receives the consent of the Vice
President Human Resources.
(c) If a Participant dies at any time before having received
any portion of his or her account balance under this Program,
payment of the remaining amounts shall be made in full to the
Participant's Beneficiary in a single payment.
(d) If any distribution otherwise payable under this
Program would be disallowed in any part as a deduction to the
Corporation in accordance with Section 162(m) (or a successor
Section) of the Code, the Committee may determine to pay the
amount of such distribution in installments such that the
Participant or Beneficiary shall receive the maximum amount
permissible in each installment and still preserve the
Corporation's full tax deduction.
6.3: Payment in U.S. Dollars: All payments under this
Program with respect to amounts which (i) at the time of such
payment were accruing at the Fixed Income Rate, or (ii) at the
time of such payment, if such payment is made before January 1,
1997, were accruing at either the Stock Value Rate or the
Discounted Stock Value Rate, shall be made in U.S. dollars.
Effective for any payment to be made on or after January 1,
1997, with respect to amounts which were accruing under either
the Stock Value Rate or the Discounted Stock Value Rate, such
payment shall be made in shares of the common stock of the
Corporation.
6.4: Reduction of Payments: Share Withholding: (a) All
payments under this Program shall be reduced by any and all
amounts that the Corporation is required to withhold pursuant to
applicable law.
(b) In order to enable the Corporation to meet any
applicable federal, state or local tax withholding requirements,
a Participant (or Beneficiary) who is receiving payment in
shares of common stock of the Corporation, may elect to have the
Corporation withhold shares that would otherwise be delivered to
such Participant, or may deliver to the Corporation other shares
of common stock of the Corporation owned by the Participant.
The value of any such shares of common stock so withheld or
delivered shall be the mean of the high and low prices of the
common stock of the Corporation as reported in the New York
Stock Exchange - Composite Transactions on the date of said
payment.
6.5: Additional Deferrals: Notwithstanding Section 6.1, a
Participant who has made an election to defer a cash award or
base salary in accordance with Section 5 hereof may make an
election to further defer such amounts and a Participant may
make an election to further defer corporation matching
contributions credited purusant to Section 5.3; provided such
additional elections are made in accordance with the following
provisions:
(a) The additional deferral election must be made no later
than during the tax year immediately preceding the year the
Participant would otherwise receive payments pursuant to Section
6.1 hereof;
(b) For each original deferral election and for all
corporation matching contributions credited, there may be only
one additional deferral election made pursuant to this Section
6.5; and
(c) The additional deferral must be for a period of at least
two years.
SECTION 7: BENEFICIARIES
- -------------------------
A Participant may at any time and from time to time prior to
death designate one or more Beneficiaries to receive any
payments to be made following the Participant's death. If no
such designation is on file with the Corporation at the time of
a Participant's death, the Participant's Beneficiary shall be
the beneficiary or beneficiaries named in the beneficiary
designation most recently filed by the Participant with the
Corporation under the Corporation's Savings Program. If the
Participant has not effectively designated a beneficiary under
the Savings Program, or if no beneficiary so designated has
survived the Participant, the Participant's Beneficiary shall be
the Participant's surviving spouse, or, if no spouse has
survived the Participant, the estate of the deceased
Participant. If an individual Beneficiary cannot be located for
a period of one year following the Participant's death, despite
mail notification to the Beneficiary's last known address, and
if the Beneficiary has not made a written claim for benefits
within such period to the Vice President-Human Resources, the
Beneficiary shall be treated as having predeceased the
Participant. The Vice President-Human Resources may require
such proof of death and such evidence of the right of any person
to receive all or part of the benefit of a deceased Participant
as the Vice President-Human Resources may consider to be
appropriate. The Vice President-Human Resources may rely upon
any direction by the legal representatives of the estate of a
deceased Participant, without liability to any other person.
SECTION 8: EARNINGS ACCRUALS
- ----------------------------
8.1: General: Each Participant's account balance shall be
credited with earnings from the Date of Deferral through the
date such deferral is paid out, or withdrawn, pursuant to Section
6.1. Earnings under this Section 8.1 shall accrue at the rate
elected in accordance with Section 8.2.
8.2: Earnings Accrual Rate:
(a) Accrual Rates: Earnings accruing in accordance with
Section 8.1 shall accrue at (i) the Fixed Income Rate, (ii) the
Stock Value Rate, (iii) the Discounted Stock Value Rate, or a
combination of the three Rates. An election to use the
Discounted Stock Value Rate shall be effective for not less than
five (5) years. In the case of an election to defer base salary
for the following calendar year at the Discounted Stock Value
Rate, the election shall be effective for a period ending no
earlier than the fifth anniversary of the earliest of (i) July 1
of said calendar year, (ii) the effective date of the
Participant's suspension of base salary deferral pursuant to
Section 5.2(b) herein and (iii) the date of termination of the
Participant's employment with the Corporation, if applicable,
during said calendar year. Notwithstanding the foregoing, if
(i) a Participant has elected under Section 6.1(a) to receive
payment upon termination of employment, and such Participant's
employment is terminated by the Corporation without cause, or
such employment is terminated as a result of Retirement, or (ii)
an Unforeseen Emergency occurs, or (iii) a Change in Control of
the Corporation occurs, or (iv) the Participant dies, then such
Participant may then receive a payout from a Discounted Stock
Value Rate account on the payment date set forth in Sections
6.1(a), 6.1(c), 6.1(d) and 6.2(c) respectively (and all subject
to Section 6.2(d)); even if the applicable minimum five (5)
years period has not yet passed as of said payment date.
(b) Initial Election: Subject to subparagraph (c), a
Participant shall designate at the time of the election to defer
base salary or cash awards granted pursuant to an Eligible Plan
under Section 5, which accrual rate or rates shall apply to
each deferral, provided that such elections must be in 10%
increments. Such elections shall be effective as of the Date of
Deferral. All matching contributions made to a Participant
under Section 5.3 of this Program shall at all times be invested
at the Stock Value Rate.
(c) [Reserved]
(d) Election Changes: A Participant may elect to change the
accrual rate under this Section 8.2 with respect to any or all
previous cash award deferrals or salary deferrals under the
Program from Fixed Income Rate to the Stock Value Rate. Any
election changes made pursuant to this subsection (d) shall be
effective as of January 1st of the calendar year following the
calendar year in which the election change is submitted to the
Corporation in accordance with procedures established by the
Vice President - Human Resources
(e) Special Election Change of Previous Deferrals:
Notwithstanding any provision in subsection (d) to the contrary
(but in addition to any election change rights available under
said subsection), on or before December 15, 1996, a Participant
may, in accordance with the procedures established by the Vice
President - Human Resources, make a one-time election to change
to the Fixed Income Rate any contrary earnings accrual rate
election under this Section 8.2 made with respect to any or all
of his or her previous Variable Compensation Award deferrals
under this Program.
SECTION 9: GENERAL PROVISIONS
- ------------------------------
9.1: Prohibition of Assignment of Transfer: Any assignment,
hypothecation, pledge or transfer of a Participant's or
Beneficiary's right to receive payments under the Program shall
be null and void and shall be disregarded.
9.2: Program Not To Be Funded: The Corporation is not
required to, and will not, for the purpose of funding the
Program, segregate any monies from its general funds, create any
trusts, or make any special deposits, and the right of a
Participant or Beneficiary to receive a payment under the
Program shall be no greater than the right of an unsecured
general creditor of the Corporation.
9.3: Effect of Participation: Neither selection as an
Eligible Employee, nor an election to participate, nor
participation, in the Program, shall entitle an Eligible
Employee to receive a cash award under the any of the Eligible
Plans, or affect the Corporation's right to discharge an
Eligible Employee or a Participant.
9.4: Communications To Be in Writing: All elections,
requests and communications to the Corporation from Participants
and Beneficiaries, and all communications to such persons from
the Corporation, shall be in writing, and in such form and
manner, and within such time, as the Corporation shall determine.
9.5: Absence of Liability: No officer, director or employee
of the Corporation shall be personally liable for any act or
omission to act, under the Program, of any other person, or,
except in circumstances involving bad faith, for such officer's,
director's or employee's own act or omission to act.
9.6: Titles for Reference Only: The titles given herein to
Sections and subsections are for reference only and are not to
be used to interpret the provisions of the Program.
9.7: Connecticut Law To Govern: All questions pertaining to
the construction, regulation, validity and effect of the
provisions of the Program shall be determined in accordance with
Connecticut law.
9.8: Amendment: The Committee may amend the Program at any
time, but no amendment may be adopted which alters the payments
due Participants or Beneficiaries, as of the date of the
amendment, or the times at which payments are due, without the
consent of each Participant affected by the amendment and of
each Beneficiary (of a then deceased Participant) affected by
the amendment. In addition, any amendment which does not
significantly affect the amount of any past or future, benefits
under the Program may be authorized by the Vice President-Human
Resources.
9.9: Program Termination: The Committee may terminate the
Program at any time. In the event of such termination, all
amounts under this Program shall become immediately payable in
accordance with Section 6.2, provided that the Committee, in its
discretion, upon Program termination or at any time thereafter,
may decide to make lump sum payments in lieu of annual payments.
PRAXAIR, INC.
By: Barbara R. Harris
Vice President
Human Resources
PRAXAIR, INC. AND SUBSIDIARIES
EXHIBIT 11.01
COMPUTATION OF EARNINGS PER SHARE
(MILLIONS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995
Net Income $282 $262
Weighted average common shares and
common stock equivalents
(stock options:):
Weighted average common shares
outstanding 152,653,827 138,817,512
Dilutive effect of stock options 6,383,889 5,329,957
159,037,716 144,147,469
Earnings per share $1.77 $1.82
PRAXAIR, INC. AND SUBSIDIARIES
EXHIBIT 12.01
PRAXAIR, INC. AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
(MILLIONS OF DOLLARS, EXCEPT RATIOS)
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994 1993 1992
EARNINGS
Income of consolidated companies
before provision for income taxes $452 $432 $339 $236 $159
Capitalized interest (25) (9) (4) (3) (9)
Depreciation of capitalized interest 9 8 8 9 9
Dividends from less than 50%-owned
companies carried at equity 1 1 - 2 -
Praxair share of income (loss) before
provision for income taxes of
50%-owned companies carried at equity 16 15 8 10 8
Total earnings, net of fixed charges $453 $447 $351 $254 $167
FIXED CHARGES
Interest on long-term
and short-term debt $195 $116 $108 $105 $117
Capitalized interest 25 9 4 3 9
Rental expenses representative of an
interest factor 23 10 11 12 11
Praxair share of fixed charges of
50%-owned companies carried at equity 3 4 2 7 7
Total fixed charges $246 $139 $125 $127 $144
Total adjusted earnings available for
payment of fixed charges $699 $586 $476 $381 $311
RATIO OF EARNINGS TO FIXED CHARGES 2.8 4.2 3.8 3.0 2.2
INDEX TO FINANCIAL STATEMENTS
AND INFORMATION
Five-Year Financial Summary 18
Management's Discussion and Analysis 19
Consolidated Statement of Income 25
Consolidated Balance Sheet 26
Consolidated Statement of Cash Flows 27
Notes to Consolidated Financial Statements 28
NOTE 1. Summary of Significant
Accounting Policies 28
NOTE 2. 1996 Acquisition of CBI Industries,
Inc. (CBI) 29
NOTE 3. CBI Integration Charges 30
NOTE 4. Segment Data 31
NOTE 5. Income Taxes 31
NOTE 6. Debt and Financial Instruments 32
NOTE 7. Shareholders' Equity 34
NOTE 8. Preferred Stock 35
NOTE 9. Supplementary Income
Statement Information 36
NOTE 10.Incentive Plans and Stock Options 36
NOTE 11.Supplementary Balance
Sheet Information 38
NOTE 12.Retirement Programs 39
NOTE 13.Leases 40
NOTE 14.Commitments and Contingencies 41
NOTE 15.Quarterly Data (Unaudited) 41
Management's Statement of Responsibility
for Financial Statements 42
Report of Independent Accountants 43
Information for Investors 44
Making Our Planet More Productive 17
<PAGE>
FIVE-YEAR FINANCIAL SUMMARY
<TABLE>
<CAPTION>
Year ended December 31, 1996(a) 1995 1994 1993(b) 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FROM THE INCOME STATEMENT
Sales $ 4,449 $ 3,146 $ 2,711 $ 2,438 $ 2,604
Cost of sales 2,564 1,777 1,507 1,387 1,450
Selling, general and administrative 688 496 409 392 407
Depreciation and amortization 420 279 273 262 257
Research and development 72 61 58 58 62
CBI integration charges 85 -- -- -- --
Other income (expenses) - net 27 15 (17) 2 (152)
- ----------------------------------------------------------------------------------------------------------------------------------
Operating profit 647 548 447 341 276
Interest expense 195 116 108 105 117
- ----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 452 432 339 236 159
Income taxes 110 122 82 48 37
- ----------------------------------------------------------------------------------------------------------------------------------
Income of consolidated entities 342 310 257 188 122
Minority interests (68) (50) (61) (49) (45)
Income from equity investments 8 2 7 4 7
- ----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes 282 262 203 143 84
Cumulative effect of accounting changes(c) -- -- -- (25) (144)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 282 $ 262 $ 203 $ 118 $ (60)
Net income (loss) excluding CBI integration charges $ 335 $ 262 $ 203 $ 118 $ (60)
==================================================================================================================================
Per share:(d)
Income before cumulative effect of accounting changes $ 1.77 $ 1.82 $ 1.45 $ 1.06 $ .64
Cumulative effect of accounting changes(c) -- -- -- (.19) (1.10)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 1.77 $ 1.82 $ 1.45 $ .87 $ (.46)
Net income (loss) excluding CBI integration charges $ 2.11 $ 1.82 $ 1.45 $ .87 $ (.46)
- ----------------------------------------------------------------------------------------------------------------------------------
Cash dividends(d) $ .38 $ .32 $ .28 $ .25 $ .125
Weighted average shares (000's)(d) 159,038 144,147 139,991 135,131 131,567
==================================================================================================================================
CAPITAL
Total debt $ 3,265 $ 1,318 $ 1,265 $ 1,360 $ 1,452
Minority interests 493 408 371 345 401
Preferred stock 75 -- -- -- --
Shareholders' equity 1,924 1,121 839 635 544
- ----------------------------------------------------------------------------------------------------------------------------------
Total capital $ 5,757 $ 2,847 $ 2,475 $ 2,340 $ 2,397
==================================================================================================================================
OTHER INFORMATION AND RATIOS
Operating profit as a percentage of sales 14.5% 17.4% 16.5% 14.0% 10.6%
Return on average shareholders' equity(e) 22.0% 26.7% 27.6% 25.0% 16.0%
Capital expenditures and investments $ 3,333 $ 802 $ 385 $ 350 $ 367
Total assets $ 7,538 $ 4,134 $ 3,520 $ 3,255 $ 3,344
Shares outstanding at year-end (000's) 157,489 140,536 137,863 134,450 131,060
Debt-to-capital ratio 56.7% 46.3% 51.1% 58.1% 60.6%
Number of employees 25,271 18,222 17,780 16,766 18,592
- ----------------------------------------------------------------------------------------------------------------------------------
(Millions of dollars, except per share data)
<FN>
(a)Effective in 1996, results reflect the acquisition of CBI Industries, Inc
(see note 2 to the financial statements). Capital expenditures and
investments include $735 million of debt assumed in the CBI acquisition.
Number of employees excludes assets held for sale.
(b)1993 results reflect a revision in the accounting for translation effects in
Brazil. The change reduces reported sales and certain operating expense line
items. Prior years' financial statements have not been restated.
(c)Required changes in accounting for postemployment benefits in 1993 and
postretirement benefits and income taxes in 1992.
(d)Share information and earnings per share prior to June 30, 1992 (the date
Praxair became a public company) have been determined on a pro forma basis
using the capital structure of Praxair's former parent. Cash dividends
represent dividends paid after June 30, 1992.
(e)1996 excludes non-recurring charges for the integration of CBI Industries,
Inc. ($53 million after tax and minority interests). 1993 and 1992 are based
on income before cumulative effect of accounting changes. Shareholders'
equity and capital have been retroactively adjusted as of January 1, 1993 and
1992 for the cumulative effect of accounting changes.
</FN>
</TABLE>
18 Making Our Planet More Productive
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
During 1996, Praxair acquired CBI Industries, Inc. (CBI) for $2.2 billion,
including assumed debt of $735 million. The following discussion of Praxair's
consolidated and geographic segment results as it relates to the comparison of
1996 to 1995 is based upon the unaudited pro forma consolidated results of
operations reflecting the CBI acquisition as though it had occurred at January
1, 1995 (see note 2 to the financial statements).
CONSOLIDATED RESULTS
The following provides summary data for 1996, 1995 pro forma (unaudited) and
actual, and 1994:
<TABLE>
<CAPTION>
1995
-------------------
Pro
Year Ended December 31, 1996 Forma Actual 1994
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 4,449 $ 4,109 $ 3,146 $ 2,711
Selling, general and
administrative $ 688 $ 690 $ 496 $ 409
Depreciation and
amortization $ 420 $ 395 $ 279 $ 273
Operating profit $ 647 $ 576 $ 548 $ 447
Interest expense $ 195 $ 219 $ 116 $ 108
Effective tax rate 24% 29% 28% 24%
Net Income $ 282 $ 190 $ 262 $ 203
Net Income per share $ 1.77 $ 1.32 $ 1.82 $ 1.45
Number of employees 25,271* 25,562* 18,222 17,780
- ---------------------------------------------------------------------------------
Excluding CBI special charges:
Operating profit $ 732 $ 630 $ 548 $ 447
Net income $ 335 $ 223 $ 262 $ 203
Net Income per share $ 2.11 $ 1.55 $ 1.82 $ 1.45
- ---------------------------------------------------------------------------------
(Millions of dollars, except per share data)
* Excludes employees related to assets held for sale.
</TABLE>
Praxair's 1996 results reflect strong product demand in our major markets and
significant productivity improvements. Sales increased 8% versus the 1995 pro
forma amount and operating profit increased 16%, excluding the 1996 and 1995 CBI
special charges (see notes 2 and 3 to the financial statements). Net income was
$335 million, excluding the 1996 CBI integration charges, or $2.11 per share, a
36% increase over the $223 million or $1.55 per share in 1995 on a pro forma
basis.
1996 compared with 1995.
The 1996 sales growth of 8%, as compared to the 1995 pro forma amount, was
primarily due to increased sales volumes and the effect of newly acquired and
recently consolidated packaged gases and Surface Technologies subsidiaries.
Additionally, merchant, packaged gases and carbon dioxide prices were up in all
geographic segments. Surface Technologies posted record sales, increasing 21% to
$311 million, primarily due to volume growth and acquisitions.
The sales growth along with productivity gains were primarily responsible
for the 16% increase in Operating profit as compared to the 1995 pro forma
amount (both excluding the CBI special charges). Increased depreciation and
amortization reflected new projects coming on-stream which contributed to the
sales growth, as well as goodwill associated with packaged gases and surface
technologies acquisitions. Selling, general and administrative expenses
decreased slightly primarily due to productivity improvements and cost synergies
associated with the integration of the Liquid Carbonic business, mostly offset
by the increases due to the newly acquired subsidiaries. Selling, general and
administrative expenses as a percentage of sales, excluding the newly acquired
subsidiaries, declined 8% as compared to the 1995 pro forma amount.
Interest expense decreased in 1996 versus the 1995 pro forma amount,
primarily due to lower interest rates and the issuance of 12.6 million shares of
Praxair common stock at the end of the first quarter of 1996, the proceeds of
which were used to lower debt levels. The 1996 effective tax rate was 24% (26%
excluding the taxes associated with the 1996 CBI integration charges), a
decrease of 5% from the effective tax rate of the 1995 pro forma period. The
decrease is due primarily to tax planning initiatives which are expected to
maintain Praxair's effective tax rate at approximately 26% for the next two
years.
Net Income excluding the CBI special charges increased 50% over the 1995
pro forma amount due principally to higher operating profit, lower interest
expense and a lower effective tax rate.
The number of employees at December 31, 1996 was 25,271 which, when
adjusted for acquisitions other than CBI, reflects a decrease of approximately
1,250 from December 31, 1995. The decrease is principally the result of
Praxair's worldwide productivity improvement initiatives and the integration of
the Liquid Carbonic business, mainly in South America, the United States and
Canada, partly offset by new acquisitions.
1995 compared with 1994.
Strong industrial gases demand, new acquisitions, and recently consolidated
subsidiaries contributed to the significant sales growth for 1995. Worldwide
pricing improved by 2% and sales on higher volumes grew 8% for the year. Newly
acquired and recently consolidated subsidiaries contributed 8% of the sales
growth. Surface Technologies sales increased 28% to $258 million, primarily due
to volume growth and the impact of acquisitions.
Making Our Planet More Productive 19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The sales growth and productivity gains were primarily responsible for the 23%
increase in operating profit. The operating margin comparisons for Surface
Technologies remained strong.
Net Income increased principally due to higher operating profit and lower
minority share of income, partially offset by a higher effective tax rate and
higher interest expense.
The number of employees at December 31, 1995, when adjusted for
acquisitions and a recently consolidated subsidiary, reflects a decrease of
approximately 500 from December 31, 1994. The decrease is principally the result
of Praxair's continuing worldwide productivity improvement initiatives primarily
in Brazil.
SEGMENT DISCUSSION
This summary of Sales, Operating profit and Operating profit excluding CBI
special charges by geographic segment provides a basis for the discussion that
follows:
1995
-------------------
Pro
Year Ended December 31, 1996 Forma Actual 1994
- -----------------------------------------------------------------------
SALES:
United States $ 2,157 $ 1,929 $ 1,569 $ 1,242
South America 990 957 667 595
Europe 613 557 494 432
Canada, Mexico, Asia
and Other 689 666 416 442
- -----------------------------------------------------------------------
Total $ 4,449 $ 4,109 $ 3,146 $ 2,711
=======================================================================
OPERATING PROFIT:
United States $ 322 $ 239 $ 285 $ 206
South America 190 193 137 139
Europe 113 98 90 69
Canada, Mexico, Asia
and Other 52 83 53 49
Corporate (30) (37) (17) (16)
- -----------------------------------------------------------------------
Total $ 647 $ 576 $ 548 $ 447
=======================================================================
OPERATING PROFIT,
EXCLUDING CBI
SPECIAL CHARGES:
United States $ 359 $ 288 $ 285 $ 206
South America 203 194 137 139
Europe 117 98 90 69
Canada, Mexico, Asia
and Other 80 85 53 49
Corporate (27) (35) (17) (16)
- -----------------------------------------------------------------------
Total $ 732 $ 630 $ 548 $ 447
=======================================================================
(Millions of dollars)
UNITED STATES
The sales increase for 1996 of 12%, as compared to the 1995 pro forma amounts,
is primarily due to strong volume growth and the effect of newly acquired and
recently consolidated packaged gases and Surface Technologies subsidiaries. U.S.
industrial gases volumes increased 7%, while merchant liquid pricing increased
2% and carbon dioxide pricing increased 8%. Strong volume growth and the effect
of new acquisitions and a recently consolidated subsidiary primarily accounted
for the 26% sales increase for 1995 compared to 1994. Higher industrial gases
volumes increased sales by 9%, while merchant pricing improved 2% for the year.
New acquisitions and a recently consolidated subsidiary contributed 15% of the
sales growth.
Operating profit improved 25% for 1996 as compared to the 1995 pro forma
amounts (both excluding the CBI special charges). The improvement is due
primarily to the increased sales and the realization of synergies related to the
integration of the Liquid Carbonic business. Operating margin for 1996 versus
1995 pro forma amounts increased to 16.6% from 14.9%. Operating profit improved
$79 million or 38% for 1995 compared to 1994 due to the increased sales,
continued productivity improvement efforts and the impact of a $15 million
charge in 1994 related to productivity improvement programs, partly offset by
higher Selling, general and administrative expenses (primarily due to newly
acquired and recently consolidated subsidiaries) and increased profit sharing
costs. Excluding the impact of the 1994 productivity improvement program
charges, operating profit improvement was $64 million or 31%. Operating margin
for 1995 versus 1994 increased to 18.2% from 17.8% after excluding the impact of
the 1994 productivity improvement program charges. Also affecting the
comparisons for both periods was an increase in the U.S. business portfolio of
Packaged Gases businesses which are characterized by lower operating margins and
higher capital turnover.
Making Our Planet More Productive 20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
U.S. Packaged Gases Business
Praxair's strategy for its Packaged Gases business in the U.S. was advanced in
1996 with the creation of a separate organization to focus on the smaller
volume, more service-intensive parts of the industrial gases business, including
packaged, medical, specialty gases, and hardgoods (both consumables and
equipment). The business strategy is focused on cash flow growth through
efficient operations, selective acquisitions, and product and service
extensions. Operational efficiencies are gained by systematically applying best
practices throughout our network of Packaged Gases businesses. Praxair has made,
and continues to pursue, acquisitions of independent distributors, primarily
within or adjacent to territories currently served in the U.S. New products and
services will extend the industrial gases and distribution capabilities of the
business into related markets that bring additional value to customers.
On a consolidated basis, Sales and Operating profit for 1996 were $441
million and $49 million, respectively, an increase of $190 million and $20
million, respectively, over the 1995 period. The increase is attributable to the
acquisition of Liquid Carbonic, together with 16 other acquisitions of
independent distributors nationwide and the consolidation of Jacksonville
Welding Supply, Inc., previously accounted for as an equity investment. On a
consolidated basis, Sales and Operating profit for 1995 were $251 million and
$29 million, respectively, an increase of $171 million and $22 million,
respectively, over the 1994 period. During 1995, Praxair acquired 9 distributors
and began consolidating the results of its subsidiary, GenEx, Ltd. The
consolidation and acquisitions are primarily responsible for the sales and
operating profit increases.
The following information presents unaudited historical operating results
and other information for Praxair's U.S. Packaged Gases business for 1996, 1995,
and 1994.
Year ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------
INCOME STATEMENT:
Sales(a) $ 441 $ 251 $ 80
Selling, general and administrative $ 83 $ 55 $ 18
Depreciation and amortization $ 24 $ 10 $ 4
Operating profit $ 49 $ 29 $ 7
OTHER INFORMATION:
Net cash provided by operating
activities before interest expense $ 45 $ 26 $ 8
Capital expenditures $ 12 $ 13 $ 4
Investments (1996 excludes
Liquid Carbonic) $ 115 $ 95 $ 21
Capital $ 395 $ 187 $ 116
Number of employees 2,470 1,445 1,037
- ---------------------------------------------------------------------------
(Millions of dollars, except number of employees)
(a) At December 31, 1996 the U.S. Packaged Gases business has an equity
investment, Gas Tech Inc., which is located in the mid-western United
States. For 1996, Gas Tech Inc. had Sales of approximately $80 million.
SOUTH AMERICA
Praxair's South American operations are conducted by its majority-owned
subsidiary, S.A. White Martins (White Martins), which is the largest industrial
gases company in Brazil. Historically, Brazil has been a hyperinflationary
economy which can produce unusual results in the statement of income due
principally to gaps between inflation and currency devaluation. The Company
manages its Brazilian operations with a focus on U.S. dollar results. During the
second half of 1994, the Brazilian government implemented a new economic plan
which has significantly reduced inflation. These currency movements affect the
comparability of 1995 and 1994 results.
Sales for 1996 as compared to the 1995 pro forma results increased 3%
primarily due to sales volume growth. The Sales increase for 1995 of 12% was
primarily due to sales volume growth and overall pricing improvement. The Sales
growth in 1995 as compared to 1994 is primarily due to the high levels of
economic activity in the first half of 1995 coupled with the contribution from
important new on-site supply contracts, partly offset by lower economic activity
and unfavorable currency translation effects in the second half of the year.
Operating profit for 1996 as compared to the 1995 pro forma results,
excluding the CBI special charges, increased slightly and 1995 was essentially
unchanged as compared to 1994.
EUROPE
Sales for 1996 increased 10% as compared to the 1995 pro forma amounts due
primarily to volume growth, the effect of newly acquired subsidiaries, improved
merchant and packaged gases pricing in Southern Europe and improved Surface
Technologies results. Sales for 1995 increased 14% primarily due to 4% volume
growth and improved merchant and packaged gases pricing in Southern Europe.
Operating profit (excluding the CBI special charges) increased 19% as
compared to the 1995 pro forma period due primarily to the sales growth and
continued productivity improvements. Operating profit for 1995 increased 30%
reflective of the sales growth and continued productivity improvements.
Making Our Planet More Productive 21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
CANADA, MEXICO, ASIA AND OTHER
Sales increased 3% in 1996 as compared to the 1995 pro forma amounts due to
volume growth in Mexico and Asia. The comparability of Sales for 1995 versus
1994 is impacted by the 1994 sale of an air separation plant to a customer in
Canada for $23 million, and unfavorable currency translation effects in Mexico.
Excluding these, sales increased $66 million in 1995 due to improved pricing in
Mexico, sales volume growth and new acquisitions.
Operating Profit for 1996 compared to the 1995 pro forma amounts (excluding
the CBI special charges) decreased $5 million primarily due to higher business
development expenses in Asia and an increase in technology costs, which more
than offset the sales growth. Operating Profit for 1995 versus 1994 increased
primarily due to the volume growth.
Selling, General and Administrative Expenses
In 1996, selling, general and administrative expenses were $688 million, a $2
million decrease from the 1995 pro forma amount. The decrease is primarily due
to cost improvements associated with the integration of the Liquid Carbonic
business, largely offset by newly acquired and recently consolidated
subsidiaries. Selling, general and administrative expenses as a percentage of
sales declined to 15.5% in 1996 from 16.8% in 1995 on a pro forma basis.
In 1995, selling, general and administrative expenses were $496 million, an
$87 million increase from 1994. The increase is primarily due to newly acquired
and recently consolidated subsidiaries along with higher profit sharing and
other performance-based incentive compensation costs partially offset by
worldwide productivity improvement efforts. Excluding the newly acquired and
recently consolidated subsidiaries, selling, general and administrative expenses
would have increased $41 million from 1994.
Other income (expenses) - net
In 1996, Other income (expenses) - net improved $5 million over the 1995 pro
forma amount of $22 million due primarily to currency and the 1995 productivity
improvement charges partly offset by non-recurring credits in 1995.
In 1995, other income (expenses) - net improved significantly from 1994 due
principally to income from the sale of the Linde name trademark and a favorable
settlement of a social contribution tax issue in Brazil, partly offset by an
accrual for future lease payments on excess office space in the U.S.
Interest Expense
The 1996 interest expense decreased $24 million from the 1995 pro forma amounts
due primarily to lower interest rates and the issuance of 12.6 million shares of
Praxair common stock at the end of the first quarter of 1996, the proceeds of
which were used to lower debt levels.
Interest expense increased $8 million in 1995 to $116 million principally
due to higher effective interest rates and higher debt levels.
Income Taxes
The effective tax rate was 24% (26% excluding the tax benefit associated with
the 1996 CBI integration charges), a decrease of 5% from the effective tax rate
of the 1995 pro forma period. The decrease is due primarily to tax planning
initiatives.
The effective tax rate for 1995 was 28% which includes a $6 million charge
relating to the revaluation of deferred tax assets due to a reduction in the
Brazilian statutory tax rate. Excluding the $6 million charge, the effective tax
rate for 1995 is 27% which is consistent with the 1994 annual effective tax
rate, after excluding an $8 million non-recurring tax benefit in Brazil.
Minority Interests
On December 31, 1996, minority interests consisted primarily of minority
shareholders' investments in three affiliates: S. A. White Martins (Brazil),
Rivoira S.p.A. (Italy) and Praxair Korea. Additionally, Praxair records the
dividends on preferred stock in minority interests. Minority shareholders' share
of income for 1996 was $68 million, an increase of $3 million as compared to the
1995 pro forma amount of $65 million. This increase was primarily due to the
recording of $6 million of preferred stock dividends and the increased results
in South America mostly offset by the decreased minority position in White
Martins (see note 2 to the financial statements).
In January 1995, Praxair acquired most of the remaining shares of its
Mexican affiliate that it did not already own. Minority shareholders' share of
income for 1995 was $50 million, down from $61 million in 1994 due primarily to
a decrease in net income in South America and the reduced minority position in
Mexico.
22 Making Our Planet More Productive
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Income from Equity Investments
Praxair's more significant equity investments are in the United States, Belgium,
India, Italy, Spain, Turkey and China. Praxair's share of net income from
corporate equity investments increased $3 million from $5 million in the 1995
pro forma results primarily due to improved equity company results in the United
States and Europe.
Praxair's share of net income from equity investments decreased $5 million
in 1995 from $7 million in 1994, due to the consolidation of GenEx Ltd., a U.S.
packaged gases company previously held as an equity company.
Costs Relating to the Protection of the Environment
Praxair's principal operations relate to the production and distribution of
atmospheric and other industrial gases which historically have not had a
significant impact on the environment. However, worldwide costs relating to
environmental protection may continue to grow due both to increasingly stringent
laws and regulations and to Praxair's ongoing commitment to rigorous internal
standards. Environmental protection costs for Praxair in 1996 were approximately
$8 million of capital expenditures and $19 million of expenses. Included in the
expenses were approximately $2 million for remedial projects. Praxair
anticipates that future environmental protection expenditures will approximate
the level of those in 1996 and will not have a material adverse effect on the
consolidated financial position of Praxair or on the consolidated results of
operations in a given year.
Commitments and Contingencies
See Note 14 to the financial statements for information concerning commitments
and contingencies.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL DATA
Cash Flow from Operations
Cash flow from operations decreased slightly in 1996 versus 1995 from $611
million to $606 million. The decrease reflects one-time after-tax cash payments
made in 1996 related to the acquisition of CBI for integration charges,
antitrust litigation settlements and other non-recurring payments totaling $75
million. Excluding these charges, operating cash flow increased $70 million due
to increased net income, depreciation and amortization expense, deferred taxes
and other non-cash charges, partly offset by cash outflows from long-term assets
and liabilities and working capital.
Cash flow from operations in 1995 was $611 million, an increase of $63 million
from 1994. This increase reflects cash inflows from higher net income, deferred
taxes and lower working capital requirements, partly offset by increased
long-term assets and liabilities and other non-cash charges. Working capital
decreased slightly over the 1994 period primarily due to lower scheduled
payments on accounts payable and other current liabilities mostly offset by
higher receivables and inventory required to support the sales growth.
Investing
Cash flow used for investing in 1996 totaled $2,334 million (excluding $735
million of debt assumed in the CBI acquisition), an increase of $1,614 million
from 1995. This increase was due primarily to the acquisition of CBI and higher
construction expenditures partly offset by proceeds from the sale of businesses
held for sale (see note 2 to the financial statements).
Construction expenditures for 1996 totaled $893 million, up $293 million
from 1995. The increase is primarily in the United States and South America with
additional growth taking place in Europe and Asia. In the United States, Praxair
com-pleted construction of a liquid nitrogen facility in Alabama and large air
separation plants in Texas, South Carolina, Iowa, Illinois, Louisiana, Indiana
and Ohio. Internationally, capital expenditures increased in South America
primarily from new growth, while the increase in Asia was primarily due to an
air separation plant being completed and placed into operation in Yeochun, Korea
and the addition of Thailand operations. In Europe, construction continued on
several plants in Spain and an air separation plant was completed in
Obernkirchen, Germany. Approximately 50% of capital expenditures over the last
three years were in the United States and, in 1996, more than two-thirds of
capital expenditures went for business growth, with the balance tied to
maintaining current strong market positions and improving operating efficiency.
Investment expenditures for 1996 totaled $1,705 million predominately due
to the acquisition of CBI ($260 million excluding CBI). Also included are
minority share purchases in South America, acquisitions of 18 independent
packaged gases distributors in the United States and Canada, Surface
Technologies companies in the United States and Germany, and other investments
in Europe (Israel, Germany and Italy). Additionally, Asian partnerships expanded
in India, China, Indonesia and Japan.
On a worldwide basis, construction and investment expenditures for the full
year 1997 are expected to be approximately $1 billion primarily from new growth
opportunities in the United States, South America, Europe, and Asia and the
continuation of Praxair's packaged gases and Surface Technologies acquisition
strategies.
Making Our Planet More Productive 23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Financing
At December 31, 1996, Praxair's total debt outstanding was $3,265 million, an
increase of $1,947 million over 1995. This increase is due primarily to the CBI
acquisition and increased capital expenditures, partially offset by the sale of
common stock and proceeds from the sale of certain acquired CBI assets that were
not strategic to Praxair. Praxair's debt-to-capital ratio increased from 46.3%
at December 31, 1995 to 56.7% as of December 31, 1996 due to the CBI
acquisition. During 1996, Praxair terminated CBI's $300 million revolving credit
facility, reduced the commitments under its U.S. credit facility from $2.5
billion to $1.5 billion and consolidated Praxair's and CBI's Canadian credit
facilities. At December 31, 1996, there were no borrowings under Praxair's $1.5
billion U.S. bank credit facility. Praxair's investment grade credit rating for
long-term debt was maintained at A3/BBB+.
As described in Note 2 to the financial statements, Praxair acquired the
common stock of CBI Industries, Inc. for $2.2 billion, including assumed debt of
$735 million. The funds used to consummate the acquisition initially came from
short-term borrowings of Praxair, primarily commercial paper. During 1996 and as
a result of the increased acquisition debt, Praxair undertook a program to
adjust its capital structure and short-term/long-term debt mix to appropriate
levels. In March, Praxair issued 12.6 million shares of common stock and used
the proceeds of $462 million to repay short-term borrowings. In June, Praxair
terminated CBI's ESOP and the ESOP redeemed $80 million of Senior ESOP Notes
which were due through 2002. During April, Praxair issued $250 million of 6.70%
non-redeemable Notes due 2001 and in November, issued an additional $250 million
of 6.90% non-redeemable Notes due 2006. The proceeds from the Notes were
primarily used to repay outstanding commercial paper and other short-term debt,
and for general corporate purposes.
As discussed in Note 2 to the financial statements, during 1996 Praxair sold
four air separation plants in the United States, the CBI terminals business, and
another small business acquired from CBI for $191 million (after-tax and
repayment of debt and lease obligations) and has filed a registration statement
with the Securities and Exchange Commission (SEC) for the initial public
offering of Chicago Bridge & Iron Company which is expected to be completed in
early 1997. The proceeds from the completed transactions were used by Praxair to
repay outstanding commercial paper and other short-term debt.
Praxair's financing strategy is to secure sufficient funds to support its
operations in the United States and around the world. Praxair sources the
funding through a combination of local borrowing and intercompany lending in
order to minimize the total cost of funds and to manage and centralize currency
exchange exposures. Praxair manages its exposure to interest rate changes
through the use of financial derivatives (see Note 6 to the financial
statements).
RAW MATERIALS AND MARKETS
Energy is the single largest cost item in the production and distribution of
industrial gases. For some products, such as carbon dioxide, helium, hydrogen,
specialty gases and surface coatings and powders, raw materials are largely
purchased from outside sources. Praxair generally has contracts or commitments
for, or readily available sources of, these raw materials.
Praxair's industrial gases are used by a diverse group of customers in a
variety of industries including metal fabrication, primary metals, chemicals,
medical, food processing, electronics, beverage, aerospace, petroleum refining,
pulp and paper, oil and gas, glass, and numerous other markets. By using the
gases Praxair produces and, in many cases, the proprietary processes that it
invents, customers benefit through improved product quality, increased
productivity, lower operating costs, conservation of energy and the attainment
of environmental improvement objectives. Praxair has a large number of customers
and no single customer accounts for a significant portion of Praxair's annual
sales. Aircraft engines are Surface Technologies' primary market, but it also
serves the printing, textile, chemical and primary metals markets.
Aircraft-engine and airframe-component overhaul services are another offering.
24 Making Our Planet More Productive
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES $ 4,449 $ 3,146 $ 2,711
Cost of sales, exclusive of depreciation and amortization 2,564 1,777 1,507
Selling, general and administrative 688 496 409
Depreciation and amortization 420 279 273
Research and development 72 61 58
CBI integration charges 85 -- --
Other income (expenses) - net 27 15 (17)
==========================================================================================
OPERATING PROFIT 647 548 447
Interest expense 195 116 108
- ------------------------------------------------------------------------------------------
INCOME BEFORE TAXES 452 432 339
Income taxes 110 122 82
- ------------------------------------------------------------------------------------------
INCOME OF CONSOLIDATED ENTITIES 342 310 257
Minority interests (68) (50) (61)
Income from equity investments 8 2 7
- ------------------------------------------------------------------------------------------
NET INCOME $ 282 $ 262 $ 203
==========================================================================================
NET INCOME PER SHARE $ 1.77 $ 1.82 $ 1.45
==========================================================================================
(Millions of dollars, except per share data)
The accompanying notes are an integral part of these financial statements.
</TABLE>
Making Our Planet More Productive 25
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 63 $ 15
Accounts receivable 914 617
Inventories 312 228
Assets held for sale - net 287 --
Prepaid and other current assets 90 70
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 1,666 930
Property, plant and equipment - net 4,269 2,737
Equity investments 195 152
Other assets 1,408 315
- ---------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 7,538 $ 4,134
=========================================================================================================
LIABILITIES AND EQUITY
Accounts payable $ 408 $ 272
Short-term debt 1,520 349
Current portion of long-term debt 42 36
Accrued taxes 69 64
Other current liabilities 511 308
- ---------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 2,550 1,029
Long-term debt 1,703 933
Other long-term obligations 535 381
Deferred credits 258 262
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 5,046 2,605
=========================================================================================================
Minority interests 493 408
Preferred stock 75 --
Shareholders' equity:
Common stock $.01 par value, authorized 500,000,000 shares,
issued 157,501,453 shares in 1996
and 140,624,292 shares in 1995 2 1
Additional paid-in capital 1,350 752
Retained earnings 698 474
Translation and other (126) (105)
Less: Treasury stock, at cost (12,496 shares in 1996 and 88,723 shares in 1995) -- (1)
- ---------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,924 1,121
- ---------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY $ 7,538 $ 4,134
=========================================================================================================
The accompanying notes are an integral part of these financial statements. (Millions of dollars)
</TABLE>
26 Making Our Planet More Productive
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
OPERATIONS
Net income $ 282 $ 262 $ 203
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 420 279 273
CBI integration charges 37 -- --
Deferred income taxes 48 42 27
Gain on sale of fixed assets (4) 1 --
Working capital:
Accounts receivable (121) (48) (66)
Inventories (4) (52) (11)
Prepaid and other 25 (12) (13)
Payables and accruals 9 118 63
CBI acquisition payments (75) -- --
Long-term assets and liabilities (60) (18) 28
Other non-cash charges 49 39 44
- ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 606 611 548
- ------------------------------------------------------------------------------------------------------------------------
INVESTING
Capital expenditures (893) (600) (326)
Investments (1,705) (202) (59)
Divestitures and asset sales 264 82 23
- ------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (2,334) (720) (362)
- ------------------------------------------------------------------------------------------------------------------------
FINANCING
Short-term borrowings (repayments) - net 1,114 3 (36)
Long-term borrowings 602 201 130
Long-term debt repayments (489) (154) (247)
Minority transactions and other 4 (10) (22)
Issuances of common stock 611 111 71
Purchases of common stock (7) (45) (8)
Dividends (58) (45) (37)
- ------------------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by financing activities 1,777 61 (149)
- ------------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents (1) -- (8)
- ------------------------------------------------------------------------------------------------------------------------
Change in cash and cash equivalents 48 (48) 29
Cash and cash equivalents, beginning-of-year 15 63 34
- ------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end-of-year $ 63 $ 15 $ 63
========================================================================================================================
SUPPLEMENTAL DATA:
Acquired debt from CBI Industries, Inc. $ 735 $ -- $ --
Taxes paid $ 59 $ 74 $ 44
Interest paid $ 241 $ 120 $ 92
========================================================================================================================
The accompanying notes are an integral part of these financial statements. (Millions of dollars)
</TABLE>
Making Our Planet More Productive 27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
Praxair, Inc. (Praxair or Company) was founded in 1907 and became an independent
publicly traded company on June 30, 1992. Praxair is the largest industrial
gases company in North and South America, and one of the largest worldwide. The
Company is also the world's largest supplier of carbon dioxide. Praxair
produces, sells and distributes atmospheric, process and specialty gases, and
high-performance surface coatings to a diverse group of industries including
metal fabrication, primary metals, chemicals, medical, electronics, oil and gas,
aerospace, food processing, glass, and pulp and paper.
Principles of Consolidation
The consolidated financial statements include the accounts of all significant
subsidiaries where control exists. Equity investments generally consist of
20-50% owned operations. Operations less than 20% owned are generally carried at
cost. Pre-tax income from equity investments which are partnerships is included
in Other income (expenses) - net with related taxes included in Income taxes.
Partnership net assets are reported as equity investments in the balance sheet.
Praxair does not allocate corporate costs to its equity investments. Significant
intercompany transactions are eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. While
actual results could differ, management believes such estimates to be
reasonable.
Cash and Cash Equivalents
Cash equivalents are considered to be highly liquid securities with original
maturities of three months or less.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
generally using the last-in, first-out (LIFO) method for certain U.S. operations
and the average cost method for most other operations.
Property, Plant and Equipment - net
Property, plant and equipment are carried at cost, net of accumulated
depreciation. Depreciation is calculated on the straight-line method over the
estimated useful lives of the assets. Praxair generally uses accelerated
depreciation methods for tax purposes where appropriate.
Effective January 1, 1996, Praxair adopted Statement of Accounting
Standards (SFAS) No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of. The adoption produced no effect on the
Company's financial position or results of operations.
Foreign Currency Translation
For international subsidiaries where the local currency is the functional
currency, translation gains and losses are accumulated as a separate component
of shareholders' equity. For international subsidiaries operating in
hyperinflationary economies, the U.S. dollar is the functional currency and
translation gains and losses are included in income.
Financial Instruments
Praxair enters into various derivative financial instruments to manage its
exposure to fluctuating interest and currency exchange rates. Such instruments
include interest rate swap, forward rate and cap agreements, and currency
exchange forward and option contracts. These instruments are not entered into
for trading purposes and are generally held to maturity. Praxair only uses
commonly traded and non-leveraged instruments.
Interest rate swap agreements involve the exchange of fixed and floating
interest payments without the exchange of the underlying principal amounts. The
differential to be paid or received is recognized as an adjustment to interest
expense. Interest rate cap agreements are purchased to reduce the impact of
interest rate changes on floating rate debt. The premiums paid are amortized to
interest expense over the terms of the agreements. The notional amounts of
interest rate swap and cap agreements do not exceed the underlying debt
principal amounts.
Currency exchange forward and option contracts are generally entered into
to hedge recorded balance sheet amounts related to international operations and
firm commitments that create currency exposures. Gains and losses on hedges of
assets and liabilities are recognized in income as offsets to the gains and
losses from the underlying hedged amounts; gains and losses on hedges of net
investments are reported on the balance sheet as part of the cumulative
translation adjustment to equity; and gains and losses on hedges of firm
commitments are recorded on the balance sheet and included in the basis of the
underlying transaction. Forward exchange contracts that cover exposures which do
not qualify as hedges are recorded in income on a mark-to-market basis.
28 Making Our Planet More Productive
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Praxair uses the following methods and assumptions to estimate the fair value of
each class of financial instrument. Due to their nature, the carrying value of
cash, short-term investments and short-term debt, receivables and payables
approximates fair value. The fair value of long-term debt is estimated based on
the quoted market prices for the same or similar issues. The fair value of
interest rate swaps and currency exchange contracts are estimated based on
market prices obtained from dealer quotes. Such quotes represent the estimated
amount Praxair would receive or pay to terminate the agreements taking into
consideration current rates and the credit worthiness of the counterparties.
(See Note 6).
Patents, Trademarks And Goodwill
Amounts paid for patents and the excess of the purchase price over the fair
value of the net assets of acquired operations (goodwill) are recorded as Other
assets. Patents are amortized over their remaining useful lives, while
trademarks and goodwill are amortized over the estimated period of benefit, up
to forty years. Praxair periodically evaluates the recoverability of patents,
trademarks and goodwill by assessing whether the unamortized balance can be
recovered over its remaining life through cash flows generated by underlying
tangible assets.
Research And Development
Research and development costs are charged to expense as incurred.
Income Taxes
Deferred income taxes are recorded for the temporary differences between the
financial statement and tax bases of assets and liabilities using current tax
rates.
Retirement Programs
Most Praxair employees worldwide are covered by various pension plans. The cost
of pension benefits under these plans is determined using the "projected unit
credit" actuarial cost method. Funding of pension plans varies and is in
accordance with local laws and practices.
Praxair accrues the cost of retiree life and health insurance benefits
during the employees' service period when such benefits are earned.
Postemployment Benefits
Praxair recognizes the estimated cost of future benefits provided to former and
inactive employees after employment but before retirement in accordance with
SFAS No. 112, Employers' Accounting for Postemployment Benefits.
Stock-Based Compensation
Effective in 1996, Praxair adopted SFAS No. 123, Accounting for Stock-Based
Compensation, and continues to account for incentive plans and stock options
using the provisions of Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees. Pro forma information required by SFAS No. 123 is
included in Note 10.
Earnings Per Share
Earnings per share is computed by dividing net income for the period by the
weighted average number of Praxair common shares outstanding and common stock
equivalents. Weighted average shares and common stock equivalents used to
compute earnings per share amounts were 159,037,716, 144,147,469, and
139,991,371 shares in 1996, 1995, and 1994, respectively.
Reclassifications
Certain prior years' amounts have been reclassified to conform to the current
year's presentation.
NOTE 2
1996 ACQUISITION OF CBI INDUSTRIES, INC. (CBI)
Acquisition
On January 12, 1996, Praxair acquired approximately 94% of the
outstanding shares of CBI common stock and on March 13, 1996 acquired the
remaining common stock outstanding. The total purchase price for CBI's common
stock was $2.2 billion including assumed debt of $735 million, amounts paid or
to be paid in respect of executive compensation agreements, CBI's outstanding
stock options and ESOP debt, and transaction expenses. The funds used to
consummate the acquisition initially came from short-term borrowings of Praxair,
primarily commercial paper.
Historically, CBI operated in three major business segments: Industrial
Gases (Liquid Carbonic), Contracting Services (Chicago Bridge & Iron Company)
and Investments (primarily Statia Terminals). CBI's Industrial Gases segment is
the world's largest supplier of carbon dioxide in its various forms and
produces, processes and markets a wide variety of other industrial/medical and
specialty gases, and assembles and sells industrial gas-related equipment.
During 1996, Liquid Carbonic was completely integrated with Praxair's
operations. Praxair determined that the Contracting Services and Investments
segments of CBI were not strategic to the combined company and, during 1996,
sold or took actions to sell these businesses (see below for a summary of Assets
held for sale).
The purchase price for the common stock of CBI has been allocated to the
assets and liabilities of Liquid Carbonic based on appraisals, valuations and
other studies; and to assets held for sale based on estimated net realizable
values, as adjusted. These allocations will continue to be adjusted in early
1997 to reflect the amounts of actual proceeds, earnings and carrying
Making Our Planet More Productive 29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
costs for businesses held for sale; and appraisals, valuations and other
studies. The goodwill associated with the CBI acquisition, representing the
costs in excess of the fair value of net assets acquired (shown on the balance
sheet in Other assets), is being amortized on a straight line basis over forty
years. The results of Liquid Carbonic's operations have been included in the
consolidated financial statements effective January 1, 1996.
Pro forma information
The following table provides the unaudited pro forma consolidated results of
operations for the year ended December 31, 1995, reflecting the acquisition as
though it had occurred at January 1, 1995. The 1995 pro forma amounts are based
upon the historical consolidated financial statements of Praxair and CBI
combined and adjusted to give effect to the acquisition using the purchase
method of accounting and to eliminate the operations and interest carrying costs
related to acquired businesses to be sold.
This unaudited pro forma financial information is not necessarily
indicative of the results of the combined company that would have occurred had
the acquisition occurred at the beginning of 1995 nor are they necessarily
indicative of future operating results.
1995 Pro Forma Results (unaudited)*
- ---------------------------------------------------------
Sales $4,109
Operating profit $ 576
Net income $ 190
Net income per share $ 1.32
- ---------------------------------------------------------
(Millions of dollars, except per share data)
* Pro forma results include an operating profit charge of $54 million ($33
million after tax or $.23 per share) principally relating to legal,
environmental and other matters of CBI's Liquid Carbonic business.
In order to align Praxair's South American operations after the CBI acquisition,
effective April 1, 1996, Praxair merged its Liquid Carbonic South American
subsidiaries into Praxair's 54%-owned subsidiary, S.A. White Martins, in
exchange for additional common shares in White Martins. The transaction, valued
at $728 million, increased Praxair's ownership in White Martins to 69.3%. This
transaction did not significantly impact Praxair's consolidated results of
operations or financial position.
Assets Held for Sale
The operations related to assets held for sale have been eliminated from
Praxair's consolidated financial statements and the remaining assets and
liabilities to be sold are shown in the consolidated balance sheet at December
31, 1996 as Assets held for sale - net at amounts equal to estimated net
realizable values adjusted for anticipated earnings, interest and other carrying
costs until sale. During 1996, Praxair sold four of Liquid Carbonic's air
separation plants (based on an agreement with the U.S. Federal Trade
Commission), Statia Terminals, Inc. and a small business that was part of CBI's
Investments segment. The remaining Assets held for sale at December 31, 1996
relate primarily to Chicago Bridge & Iron Company and three businesses that were
part of CBI's Contracting segment. A registration statement has been filed with
the SEC for the initial public offering of Chicago Bridge & Iron Company which
is expected to be completed in early 1997. The sale of the other businesses is
expected to be completed in early 1997. Upon sale, any difference between the
actual after-tax proceeds received and the carrying value of the assets sold
will be recorded as an adjustment to the original purchase price allocation. The
following table provides summary data for activity during 1996 related to these
businesses:
Assets Held for Sale - Net
- --------------------------------------------------------------------------------
Assets held for sale - net, date of acquisition $ 476
Add: Interest carrying costs 17
Less: Net income of operations held for sale (15)
After-tax proceeds from sale of businesses (191)
- --------------------------------------------------------------------------------
Assets held for sale - net, December 31, 1996 $ 287
================================================================================
(Millions of dollars)
NOTE 3
CBI INTEGRATION CHARGES
In March 1996, Praxair recorded a charge of $85 million pre-tax ($53 million
after tax benefits of $30 million and minority interests of $2 million) for
severance-related and other exit costs, primarily lease termination costs,
associated with the integration of the Liquid Carbonic business of CBI and
Praxair.
The severance-related costs are for payments for the termination of Praxair
and CBI employees due to synergies related to integrating the operations of the
two companies, primarily manufacturing and product distribution, sales and
marketing, and administrative functions. The original integration plan called
for the termination of approximately 1,600 employees, of which 1,465 separations
have occurred as of December 31, 1996. The other exit costs are primarily
related to estimated net costs associated with lease commitments for surplus
office and production space.
The following table summarizes 1996 charges against the accrual:
Initial 1996 Remaining
CBI Integration Accrual Accrual Charges Accrual
- --------------------------------------------------------------
Severance $50 $29 $21
Other exit costs 35 10 25
- --------------------------------------------------------------
$85 $39 $46
=============================================================
(Millions of dollars)
30 Making Our Planet More Productive
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4
SEGMENT DATA
Praxair operates principally in the industrial gases business. The following is
a summary of sales, operating profit and total assets by geographic segment.
Transfers between geographic segments were not significant.
Year Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------
SALES:
United States $ 2,157 $ 1,569 $ 1,242
South America 990 667 595
Europe 613 494 432
Canada, Mexico, Asia and Other 689 416 442
- ------------------------------------------------------------------------
Total Sales $ 4,449 $ 3,146 $ 2,711
========================================================================
OPERATING PROFIT:(a)
United States $ 322 $ 285 $ 206
South America 190 137 139
Europe 113 90 69
Canada, Mexico, Asia and Other 52 53 49
Corporate (30) (17) (16)
- ------------------------------------------------------------------------
Total Operating Profit $ 647 $ 548 $ 447
========================================================================
TOTAL ASSETS:
United States $ 3,102 $ 1,869 $ 1,548
South America 2,177 993 831
Europe 955 741 631
Canada, Mexico, Asia and Other 1,304(b) 531 510
- ------------------------------------------------------------------------
Total Assets $ 7,538 $ 4,134 $ 3,520
========================================================================
(Millions of dollars)
(a)During 1996, Praxair recorded an operating profit charge of $85 million
related to CBI integration costs. The following are the operating profit
impacts, by geographic segment for this charge.
- --------------------------------------------------
United States $37
South America 13
Europe 4
Canada, Mexico, Asia and Other 28
Corporate 3
- --------------------------------------------------
Total Operating Profit $85
==================================================
(Millions of dollars)
(b) Includes $287 million related to Assets held for sale - net.
NOTE 5
INCOME TAXES
Pre-tax income applicable to U.S. and foreign operations is as follows:
Year Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------------
United States $154 $188 $107
Foreign 298 244 232
- ---------------------------------------------------------------------------
Total income before income taxes $452 $432 $339
===========================================================================
(Millions of dollars)
The following is an analysis of the provision for income taxes:
Year Ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------
CURRENT TAX EXPENSE
U.S. Federal $ 15 $ 48 $ 32
State and local 5 9 7
Foreign 42 23 16
- -------------------------------------------------------------------------
Total current 62 80 55
- -------------------------------------------------------------------------
DEFERRED TAX EXPENSE
U.S. Federal 39 14 (2)
State and Local -- -- (1)
Foreign 9 28 30
- -------------------------------------------------------------------------
Total deferred 48 42 27
- -------------------------------------------------------------------------
Total income taxes $ 110 $ 122 $ 82
=========================================================================
(Millions of dollars)
Net deferred tax liabilities are comprised of the following:
December 31, 1996 1995
- -------------------------------------------------------------------
DEFERRED TAX LIABILITIES
Fixed assets $405 $257
State and local 9 11
Other 156 132
- -------------------------------------------------------------------
Total deferred tax liabilities 570 400
- -------------------------------------------------------------------
DEFERRED TAX ASSETS
Benefit plans and related 160 115
Inventory 15 13
Alternative minimum tax 18 4
Loss carryforwards - gross 40 32
Other 138 68
- -------------------------------------------------------------------
371 232
- -------------------------------------------------------------------
Less: Valuation allowances 11 10
- -------------------------------------------------------------------
Total deferred tax assets 360 222
- -------------------------------------------------------------------
NET DEFERRED TAX LIABILITIES $210 $178
===================================================================
(Millions of dollars)
Making Our Planet More Productive 31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
An analysis of the difference between the provision for income taxes and the
amount computed by applying the U.S. statutory income tax rate to pre-tax income
follows (amounts are in millions of dollars and percentages are of pre-tax
income):
<TABLE>
<CAPTION>
Year Ended December 31, 1996 1995 1994
- --------------------------------------------------------------------------------------------
$ % $ % $ %
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
U.S. statutory income tax rate 158 35.0 151 35.0 119 35.0
State and local taxes 3 0.7 5 1.2 4 1.2
U.S. tax credits (1) (0.2) (1) (0.2) (1) (0.3)
Foreign taxes (51) (11.4) (30) (6.9) (38) (11.2)
Other - net 1 0.2 (3) (0.9) (2) (0.5)
- --------------------------------------------------------------------------------------------
Provision for income tax 110 24.3 122 28.2 82 24.2
============================================================================================
</TABLE>
The valuation allowances increased $1 million during 1996 and 1995, and
decreased $6 million during 1994, all relating to foreign net operating loss
carryforwards activity. At December 31, 1996, Praxair has approximately $29
million of foreign net operating loss carryforwards that expire principally
through 2000, for which the deferred tax asset has been fully reserved by
valuation allowances.
In December 1996, the top marginal tax rate in Brazil was increased from
30.6% to 33%, effective for 1997 and beyond. The effect of this tax rate change
was immaterial. In 1995, income taxes include a $6 million charge related to the
decrease in Brazil's top marginal income tax rate from 43% to 30.6%. In 1994,
income taxes include a $2 million credit related to the effect of the change
increasing the top marginal income tax rate in Brazil from 35% to 43%.
Provision has not been made for additional Federal or foreign taxes on
$1,188 million of undistributed earnings of foreign subsidiaries that are
planned to be reinvested indefinitely. These earnings could become subject to
additional tax if they were remitted as dividends, loaned to Praxair, or upon
sale of the subsidiary's stock. It is not practicable to estimate the amount or
timing of the additional tax, if any, that might eventually be payable on the
foreign earnings.
NOTE 6
DEBT AND FINANCIAL INSTRUMENTS
Debt
The following is a summary of Praxair's outstanding debt at December 31, 1996
and 1995:
Debt 1996 1995
- -----------------------------------------------------------------------
SHORT-TERM
Commercial paper $ 880 $ 118
Other U.S. bank borrowings 318 106
Canadian borrowings 167 64
South American borrowings 106 29
Other International borrowings 49 32
- -----------------------------------------------------------------------
Total Short-term Debt 1,520 349
- -----------------------------------------------------------------------
LONG-TERM
U.S.:
6.75% Notes due 2003 300 300
8.70% Debentures due 2022
(Redeemable after 2002) 300 300
6.70% Notes due 2001 250 --
6.90% Notes due 2006 250 --
6.85% Notes due 2005 150 150
6.25% Notes due 2000 75 --
6.625% Notes due 2003 75 --
Other borrowings 65 26
Canadian subsidiary borrowings 90 90
South American subsidiary borrowings 109 35
Other International borrowings 36 46
Obligations under capital leases 45 22
- -----------------------------------------------------------------------
1,745 969
Less: Current portion of long-term debt 42 36
- -----------------------------------------------------------------------
Total Long-term Debt 1,703 933
- -----------------------------------------------------------------------
Total Debt $3,265 $1,318
=======================================================================
(Millions of dollars)
32 Making Our Planet More Productive
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31,1996, Praxair has available a 5-year, $1.5 billion credit
agreement used to support commercial paper borrowings. No borrowings were
outstanding under this credit agreement at December 31, 1996 and 1995. The
average interest rate on commercial paper and other U.S. bank borrowings was
5.6% during 1996 and 6.1% during 1995. Praxair's worldwide average short-term
interest rate was 5.8% during 1996 and 9.0% during 1995.
Praxair's major bank credit and long-term debt agreements contain various
covenants which may, among other things, restrict the ability of Praxair to
merge with another entity, incur or guarantee debt, sell or transfer certain
assets, create liens against assets, enter into sale and leaseback agreements,
or pay dividends and make other distributions beyond certain limits. These
agreements also require Praxair to meet leverage, net worth and interest
coverage ratios. At December 31, 1996, Praxair was in compliance with all such
covenants.
Payments due on long-term debt in the five years following 1996 are: 1997,
$42 million; 1998, $39 million; 1999, $94 million; 2000, $102 million and 2001,
$334 million. At December 31, 1996, $30 million of Praxair's assets (principally
international fixed assets) were pledged as security for long-term debt
including the current portion of long-term debt.
At December 31, 1996, the estimated fair value of Praxair's long-term debt
portfolio was $1,760 million ($1,023 million at December 31, 1995) versus a
carrying value of $1,745 million ($969 million at December 31, 1995). These
differences are attributable to interest rates changes subsequent to when the
debt was issued.
Financial Instruments
Praxair has entered into various interest rate swap and cap agreements that are
used to manage exposure to interest rate changes. Fixed rate swaps are used to
convert floating rate debt into fixed rate debt. Forward starting fixed rate
swaps are generally used to extend coverage of existing swaps and increase the
period for which floating rate debt is converted to fixed rate debt. Floating
rate swaps are used to convert fixed rate debt into floating rate debt. Interest
rate caps are used to limit the impact of rising interest rates on short-term
floating rate debt. The fair market value of these swaps and caps approximated
their carrying amounts at December 31, 1996 and 1995. The following table is a
summary of the notional amount of interest rate swap and cap agreements at
December 31, 1996 and 1995:
December 31, 1996 1995
- --------------------------------------------------------
MATURING WITHIN ONE YEAR
Fixed Rate Swaps $950* $200
Floating Rate Swaps $ 15 --
Caps $200 --
MATURING BETWEEN 1-3 YEARS:
Fixed Rate Swaps $ 20 --
Caps -- $200
Floating Rate Swaps $150 $165
MATURING BETWEEN 3-5 YEARS:
Fixed Rate Swaps $ 80 --
- --------------------------------------------------------
(Millions of dollars)
* Also, the expiration dates for $600 million of these swaps have effectively
been extended to later dates within the one-year maturity period through the
use of forward starting fixed rate swaps.
Praxair is also a party to currency exchange forward contracts to manage its
exposure to changing currency exchange rates. At December 31, 1996 and 1995,
respectively, Praxair had $262 million and $284 million of currency exchange
forward contracts outstanding: $239 million to hedge recorded balance sheet
exposures ($214 million in 1995), $23 million to hedge firm commitments
generally for the purchase of equipment related to construction projects ($13
million in 1995) and in 1995 only, $57 million to hedge other operating
exposures that are accounted for on a mark-to-market basis. These contracts
mature within 1 year. At December 31, 1996 and 1995, the fair market value of
currency exchange contracts approximated their carrying amounts and the deferred
gains and losses on these contracts were not material.
Counterparties to interest rate derivative contracts, and currency exchange
forward contracts are major financial institutions with credit ratings of
investment grade or better and no collateral is required. There are no
significant risk concentrations. Management believes the risk of incurring
losses related to credit risk is remote and any losses would be immaterial.
Making Our Planet More Productive 33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7
SHAREHOLDERS' EQUITY
Changes in Shareholders' equity were as follows:
<TABLE>
<CAPTION>
Unearned
Additional Perfor- Cumulative
Common Stock Paid-In Retained mance Translation Treasury Stock
Shareholders' Equity Shares Amounts Capital Earnings Stock Adjustment Shares Amounts Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 134,450 $ 1 $ 625 $ 91 $ (8) $ (74) -- $ -- 635
Net income 203 203
Dividends on common stock
($.28 per share) (37) (37)
Issuances of common stock:
For the Dividend Reinvestment
and Stock Purchase plan 110 1 1
For employee savings and
incentive plans 3,677 67 3 70
Purchases of common stock 374 (8) (8)
Translation adjustments (25) (25)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 138,237 $ 1 $ 693 $ 257 $ (5) $ (99) 374 $ (8) $ 839
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 262 262
Dividends on common stock
($.32 per share) (45) (45)
Issuances of common stock:
For the Dividend Reinvestment
and Stock Purchase plan 107 1 1
For employee savings and
incentive plans 2,280 58 1 (2,284) 52 111
Purchases of common stock 1,999 (45) (45)
Translation adjustments (2) (2)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 140,624 $ 1 $ 752 $ 474 $ (4) $ (101) 89 $ (1) $ 1,121
- ------------------------------------------------------------------------------------------------------------------------------------
Net income 282 282
Dividends on common stock
($.38 per share) (58) (58)
Issuances of common stock:
Public Offering 12,650 1 461 462
For the Dividend Reinvestment
and Stock Purchase plan 83 2 2
For employee savings and
incentive plans 4,144 135 4 (264) 8 147
Purchases of common stock 187 (7) (7)
Translation adjustments (25) (25)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 157,501 $ 2 $ 1,350 $ 698 $ -- $ (126) 12 $ -- $ 1,924
====================================================================================================================================
(Millions of dollars, shares in thousands)
</TABLE>
34 Making Our Planet More Productive
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1996 there were 500,000,000 shares of common stock authorized
(par value $.01 per share) of which 157,501,453 shares were issued and
157,488,957 were outstanding. During 1996, Praxair sold 12,650,000 shares of
common stock in a public offering.
The Board of Directors of Praxair declared a dividend distribution of one
common stock purchase right (a "Right") for each share of Praxair's Common Stock
outstanding at the close of business on June 30, 1992. The holders of any
additional shares of Praxair's common stock issued after June 30, 1992 and
before the redemption or expiration of the Rights are also entitled to one Right
for each such additional share. Each Right entitles the registered holders,
under certain circumstances, to purchase from Praxair one share of Praxair's
common stock at $47.33 (subject to adjustment). At no time will the Rights have
any voting power.
The Rights may not be exercised until 10 days after a person or group
acquires 15 percent or more of Praxair's common stock, or announces a tender
offer that, if consummated, would result in 15 percent or more ownership of
Praxair's common stock. Separate Rights certificates will not be issued and the
Rights will not be traded separately from the stock until then.
Should an acquirer become the beneficial owner of 15 percent or more of
Praxair's common stock (other than as approved by Praxair's Board of Directors)
and under certain additional circumstances, Praxair Rightholders (other than the
acquirer) would have the right to buy common stock in Praxair, or in the
surviving enterprise if Praxair is acquired, having a value of two times the
exercise price then in effect. Also, Praxair's Board of Directors may exchange
the Rights (other than the acquirer's Rights which will have become void), in
whole or in part, at an exchange ratio of one share of Praxair common stock
(and/or other securities, cash or other assets having equal value) per Right
(subject to adjustment).
The Rights will expire on June 30, 2002, unless exchanged or redeemed prior
to that date. The redemption price is $.001 per Right. Praxair's Board of
Directors may redeem the Rights by a majority vote at any time prior to the 20th
day following public announcement that a person or group has acquired 15 percent
of Praxair's common stock. Under certain circumstances, the decision to redeem
requires the concurrence of a majority of the independent directors.
NOTE 8
PREFERRED STOCK
At December 31, 1996, there were 25,000,000 shares of preferred stock (par value
$.01 per share) authorized, of which, 750,000 shares were issued and
outstanding. The outstanding preferred shares were issued in December 1996 when
PX Merger Corp. was merged into CBI. At that time, each outstanding share of CBI
preferred stock was exchanged for a share of Praxair preferred stock having the
same terms. Each series of preferred stock ranks on parity with the other, and
no dividends may be paid on Praxair common stock unless preferred stock
dividends have been paid. The preferred stock has limited voting rights.
Following is a summary of each series of preferred stock outstanding:
Series A Preferred Stock
There are 550,000 outstanding shares of Praxair 7.48% Cumulative Preferred
Stock, Series A which are entitled to receive cumulative annual dividends of
$7.48 per share, payable quarterly. The Series A Preferred Stock is mandatorily
redeemable on, but not prior to, April 1, 2000 at a price of $100 per share and
has a liquidation preference of $100 per share.
Series B Preferred Stock
There are 200,000 outstanding shares of Praxair 6.75% Cumulative Preferred
Stock, Series B which are entitled to receive cumulative annual dividends of
$6.75 per share, payable quarterly. The Series B Preferred Stock is mandatorily
redeemable on, but not prior to, September 5, 2002 at a price of $100 per share
and has a liquidation preference of $100 per share.
Making Our Planet More Productive 35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9
SUPPLEMENTARY INCOME STATEMENT INFORMATION
Year Ended December 31, 1996 1995 1994
- -------------------------------------------------------------
SELLING, GENERAL AND
ADMINISTRATIVE
Selling $ 331 $ 236 $ 203
General and administrative 357 260 206
- -------------------------------------------------------------
$ 688 $ 496 $ 409
=============================================================
OTHER INCOME
(EXPENSES) - NET
Investment income $ 6 $ 4 $ 6
Currency 3 (4) --
Partnership income 8 10 9
Productivity improvement
programs(a) -- (14) (16)
Other 10 19(b) (16)
- -------------------------------------------------------------
$ 27 $ 15 $ (17)
=============================================================
INTEREST EXPENSE
Interest incurred on debt $ 220 $ 125 $ 112
Interest capitalized (25) (9) (4)
- -------------------------------------------------------------
$ 195 $ 116 $ 108
=============================================================
MINORITY INTERESTS
Minority interests $ (62) $ (50) $ (61)
Preferred stock dividends (6) -- --
- -------------------------------------------------------------
$ (68) $ (50) $ (61)
=============================================================
(Millions of dollars)
(a)Relates primarily to employee severance costs in Brazil in 1995 and in the
U.S. and Europe in 1994.
(b)Includes income from the Linde name sale and a favorable settlement of a
social contribution tax issue in Brazil; partly offset by an accrual for
future lease payments on excess office space in the U.S.
NOTE 10
INCENTIVE PLANS AND STOCK OPTIONS
The 1992 Praxair Long-Term Incentive Plan (the "1992 Plan") provides for
granting nonqualified or incentive stock options, stock grants, performance
awards, and other stock-related incentives for key employees. Awards may be made
under the 1992 Plan through the year 2001.
Under the 1992 Plan, the total number of shares available for options or
stock grants shall not exceed one percent of the number of shares outstanding on
the first day of each year, plus any shares that were available but not used in
a prior year up to two percent of the total number of shares outstanding on the
first day of the year of the grant. Option prices are equal to the closing price
of Praxair's common stock on the date of the grant. The options issued under the
1992 Plan become exercisable only after one or more years, and the option term
can be no more than ten years.
In 1996, the Board of Directors approved the 1996 Praxair, Inc. Performance
Incentive Plan (the "1996 Plan") that provides for granting nonqualified or
incentive stock options, stock grants, performance awards and other
stock-related incentives for Praxair employees other than officers and
directors, employees subject to Section 16 of the Securities Exchange Act of
1934 and employees subject to Section 162(m) of the Internal Revenue Code. Under
the 1996 Plan, the number of shares of stock available for options or grants in
each calendar year is limited to two percent of the total number of shares of
common stock outstanding as of the first day of the year plus any carryover
shares from prior years that were not granted up to a maximum of four percent of
the shares of common stock that were outstanding on the first day of the year.
Options granted under the 1996 Plan have terms and conditions identical to those
that may be granted under the 1992 Plan.
In 1992, Praxair issued performance stock to corporate officers and other
key employees which become fully vested on February 1, 1997 since the cumulative
15 percent per year net income growth target for the five-year period was
achieved. During 1994 the performance stock plan was modified to provide
incentive for management to achieve net income growth beyond the original 15%
per year target. Under the modification, participants earned additional cash
payments equal to 87% of the value of the original performance stock grant. The
pre-tax compensation expense related to this performance stock plan was $23
million in 1996 ($19 million in 1995 and $5 million in 1994).
Effective January 1, 1997, Praxair initiated a new three-year executive
compensation plan by granting 932,000 performance share equivalents (payable in
Praxair common stock) and 1,108,000 stock options (the stock options were
granted on October 22, 1996 with an exercise price of $46.125 per share) to
corporate officers and other key employees. The performance share equivalents
will fully vest on January 1, 2000, provided
36 Making Our Planet More Productive
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
that Praxair meets its three-year cumulative 15 percent per year earnings per
share growth target for the period. The number of actual performance share
equivalents that vest is governed by a sliding scale based on cumulative
earnings per share achieved over the three-year period with no maximum. The
stock options become exercisable on January 1, 2000. The plan will be accounted
for as a variable plan under APB Opinion No. 25.
The following table summarizes the changes in outstanding shares under
option and performance stock grants and performance stock equivalents for 1996,
1995 and 1994 (Shares in thousands):
<TABLE>
<CAPTION>
Stock Options
Average Perfor-
Exercise mance
Activity Options Price Stock(a)
- ----------------------------------------------------------------
<S> <C> <C> <C>
Outstanding at
December 31, 1993 13,149 $ 13.96 653
- ----------------------------------------------------------------
Granted 959 19.45 51
Exercised (1,706) 13.39 --
Cancelled or expired (117) 16.25 (73)
- ----------------------------------------------------------------
Outstanding at
December 31, 1994 12,285 14.45 631
- ----------------------------------------------------------------
Granted 1,422 21.14 9
Exercised (2,224) 13.94 --
Cancelled or expired (54) 18.68 (4)
- ----------------------------------------------------------------
Outstanding at
December 31, 1995 11,429 15.36 636
- ----------------------------------------------------------------
Granted 2,615 40.52 6
Exercised (2,478) 14.99 --
Cancelled or expired (89) 33.19 (3)
- ----------------------------------------------------------------
Outstanding at
December 31, 1996(b) 11,477 21.03 639
- ----------------------------------------------------------------
Options exercisable at:
December 31, 1994 9,969 13.75
December 31, 1995 8,671 13.99
December 31, 1996(b) 7,275 14.20
================================================================
<FN>
(a)The weighted-average price per share on the date the performance stock was
granted was $41.83 in 1996 and ($25.18 in 1995 and $19.76 in 1994).
(b)The following table summarizes information about options outstanding and
exercisable at December 31, 1996 (shares in thousands, life in years):
</FN>
</TABLE>
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------------- -------------------------------------
Average Range of Average Average
Year of Remain- Exercise Exercise Exercise
Grant ing Life Options Prices Price Options Price
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
To 6/92* 3.3 4,891 $ 9.80-16.63 $13.06 4,891 $13.06
7/92-12/93 5.9 1,876 $15.50-17.13 $15.84 1,876 $15.84
1994 7.4 743 $17.88-23.63 $19.43 498 $18.88
1995 8.1 1,420 $20.25-29.88 $21.14 10 $29.63
1996 9.5 2,547 $34.13-47.75 $40.59 0 0
----------------------------------------------------------------------------------------------------
6.0 11,477 $ 9.80-47.75 $21.03 7,275 $14.20
====================================================================================================
<FN>
* Options issued at 6/30/92, the day Praxair became a public company.
</FN>
</TABLE>
Pro forma information:
SFAS No. 123 requires Praxair to disclose pro forma net income and pro forma
earnings per share amounts as if compensation expense was recognized for options
granted after 1994. Using this approach, pro forma net income and earnings per
share in 1996 would be $8 million and $.05 lower, respectively versus reported
amounts ($3 million and $.02 lower, respectively in 1995). The weighted average
fair value of options granted during 1996 was $13.52 ($7.26 in 1995). These
values, which were used as a basis for the pro forma disclosures, were estimated
using the Black-Scholes Options-Pricing Model with the following assumptions
used for grants in 1996 and 1995, respectively; dividend yield of 1.0% and 1.3%,
volatility of 30% in both years; risk-free interest rate of 6.1% and 7.7%; and
an expected term of 5 years for both years.
These pro forma disclosures may not be representative of the effects for
future years since options vest over several years and options granted prior to
1995 are not considered in these disclosures. Also, additional awards generally
are made each year.
Making Our Planet More Productive 37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11
SUPPLEMENTARY BALANCE SHEET INFORMATION
December 31, 1996 1995
- ------------------------------------------------------------------
ACCOUNTS RECEIVABLE
Trade $ 835 $ 568
Other 110 71
- ------------------------------------------------------------------
945 639
Less: Allowance for doubtful accounts(a) 31 22
- ------------------------------------------------------------------
$ 914 $ 617
==================================================================
INVENTORIES(b)
Raw materials and supplies $ 118 $ 86
Work in process 40 54
Finished goods 154 88
- ------------------------------------------------------------------
$ 312 $ 228
==================================================================
PROPERTY, PLANT AND
EQUIPMENT - NET
Land and improvements $ 183 $ 142
Buildings 477 360
Machinery and equipment 6,126 4,711
Construction in progress and other 722 445
- ------------------------------------------------------------------
7,508 5,658
Less: Accumulated depreciation 3,239 2,921
- ------------------------------------------------------------------
$ 4,269 $ 2,737
==================================================================
OTHER ASSETS
Patents, trademarks and goodwill(c) $ 1,173 $ 174
Deposits(d) 40 30
Investments at cost 4 6
Other 191 105
- ------------------------------------------------------------------
$ 1,408 $ 315
==================================================================
OTHER CURRENT LIABILITIES
Accrued accounts payable $ 160 $ 122
Payrolls 125 82
Employee benefits and related 72 23
CBI Integration charges 24 --
Accrued interest payable 41 35
Other 89 46
- ------------------------------------------------------------------
$ 511 $ 308
==================================================================
OTHER LONG-TERM OBLIGATIONS
Employee benefits and related $ 463 $ 358
CBI Integration charges 22 --
Other(d) 50 23
- ------------------------------------------------------------------
$ 535 $ 381
==================================================================
DEFERRED CREDITS
Income taxes(e) $ 213 $ 195
Other 45 67
- ------------------------------------------------------------------
$ 258 $ 262
==================================================================
CUMULATIVE FOREIGN
CURRENCY TRANSLATION
ADJUSTMENT
Europe $ (10) $ 2
Canada, Mexico, Asia and Other (116) (103)
- ------------------------------------------------------------------
$ (126) $ (101)
==================================================================
(Millions of dollars)
(a) Provisions to the allowance for doubtful accounts were $6 million, $5
million and $2 million in 1996, 1995 and 1994 respectively.
(b) Approximately 31% and 37% of total inventories were valued using the LIFO
method at December 31, 1996 and 1995, respectively. If inventories had been
valued at current costs, they would have been approximately $23 million and
$21 million higher than reported at December 31, 1996 and 1995.
(c) Net of accumulated amortization of $73 million in 1996 and $39 million in
1995.
(d) $79 million and $84 million of Other assets and Other long-term obligations
in Brazil have been offset in 1996 and 1995, respectively.
(e) Deferred income taxes related to current items are included in Prepaid and
other current assets in the amount of $3 million in 1996 and $17 million in
1995.
38 Making Our Planet More Productive
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12
RETIREMENT PROGRAMS
Pensions
Praxair has two main U.S. retirement programs which are non-contributory defined
benefit plans, the Praxair Retirement Program and the CBI Retirement Program
(see Note 2). Pension benefits for both are based predominantly on years of
service, age and compensation levels prior to retirement. Pension coverage for
employees of Praxair's international subsidiaries generally is provided by those
companies through separate plans. Obligations under such plans are typically
provided for by depositing funds with trustees, under insurance policies, or by
book reserves.
The components of net pension cost for 1996, 1995 and 1994 and the funded status
as of December 31, 1996 and 1995 for Praxair's domestic retirement programs and
significant international plans are shown to the right.
Year Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------
NET PENSION COST
Service cost - benefits earned
during the period $ 36 $ 26 $ 24
Interest on projected benefit
obligation 53 43 35
Actual (return) loss on
plan assets (80) (134) 6
Net amortization and deferral 25 92 (46)
- ---------------------------------------------------------------
$ 34 $ 27 $ 19
===============================================================
(Millions of dollars)
<TABLE>
<CAPTION>
U.S. Plans International Plans
---------------------------- -------------------------------------
Overfunded Underfunded Overfunded Underfunded
--------------- ----------- --------------- ---------------
December 31, 1996 1995 1996(a) 1996 1995 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
FUNDED STATUS
Accumulated benefit obligation:
Vested benefits $(301) $(290) $ (90) $(123) $(103) $ (59) $ (44)
Non-vested benefits (37) (38) (6) (3) (2) (39) (35)
- ----------------------------------------------------------------------------------------------------------------------------
$(338) $(328) $ (96) $(126) $(105) $ (98) $ (79)
============================================================================================================================
Projected benefit obligation $(431) $(414) $(108) $(145) $(125) $(147) $(120)
- ----------------------------------------------------------------------------------------------------------------------------
Plan assets at fair value, primarily common
stocks and fixed income securities 415 377 93 194 153 64 49
- ----------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (in excess of) less
than plan assets (16) (37) (15) 49 28 (83) (71)
Unamortized net (asset) obligation at transition (5) (7) -- (11) (11) 10 8
Unamortized prior service cost 9 11 -- 3 4 10 10
Unrecognized (gains) losses - net (28) (1) (12) (26) (7) -- 2
- ----------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) pension obligation $ (40) $ (34) $ (27) $ 15 $ 14 $ (63) $ (51)
============================================================================================================================
(Millions of dollars)
<FN>
(a) Related to the CBI Retirement Program.
</FN>
</TABLE>
The significant actuarial assumptions used, were as follows:
<TABLE>
<CAPTION>
U.S. Plans International Plans
--------------------------- -----------------------------
Year Ended December 31, 1996 1995 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rate for determining the projected benefit obligation 7.5% 7% 8.5% 4-9% 4-8.5% 5.5-9%
Rate of increase in compensation levels 4.75% 4.25% 5.75% 3-7% 3-6.5% 3.5-7%
Expected long-term rate of return on plan assets 9.5% 9.5% 9.5% 5.5-9.5% 5.5-9.5% 6-10%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Making Our Planet More Productive 39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Postretirement Benefits Other Than Pensions
Praxair provides health care and life insurance benefits to certain eligible
retired employees. These benefits are provided through various insurance
companies and health care providers. Praxair is obligated to make payments for a
portion of postretirement benefits related to retirees of Praxair's former
parent. As part of the CBI acquisition (see Note 2), Praxair assumed
responsibility for health care and life insurance benefit obligations for CBI's
retired employees. Praxair does not currently fund its postretirement benefits
obligations.
The components of net periodic postretirement benefit cost for 1996, 1995
and 1994 and the funded status as of December 31, 1996 and 1995 were as follows:
Year Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------
NET PERIODIC
POST-RETIREMENT BENEFIT COST
Service cost - benefits earned
during the year $ 7 $ 5 $ 6
Interest on accumulated post-
retirement benefit obligation 14 14 13
Actual return on plan asset (1) (2) --
Net amortization and deferral (9) (7) (9)
- --------------------------------------------------------------
$ 11 $ 10 $ 10
==============================================================
(Millions of dollars)
December 31, 1996 1995
- -------------------------------------------------------------------------
FUNDED STATUS
Accumulated postretirement benefit
obligation attributed to:
Retirees $(185) $(150)
Fully eligible active plan participants (30) (24)
Other active plan participants (15) (23)
- -------------------------------------------------------------------------
(230)(a) (197)
Plan assets at fair value, primarily common
stocks and fixed income securities 9 10
Unrecognized prior service cost (19) (30)
Unrecognized (gains) losses - net (3) --
- -------------------------------------------------------------------------
Accrued postretirement benefit obligation $(243) $(217)
=========================================================================
(Millions of dollars)
(a) Includes $28 million related to the CBI Plan at the acquisition date.
For 1996 measurement purposes, an 8.5% annual rate of increase in the per capita
cost of covered health care benefits was assumed for 1996, gradually reducing to
5.0% in 2004 and thereafter. For 1995 and 1994 measurement purposes, the annual
rate of increase was gradually reducing to 4.5% and 6.0%, respectively. This
health care cost trend rate assumption has a significant effect on the amounts
reported. To illustrate the effect, increasing the assumed health care cost
trend rates by one percentage point would increase the accumulated
postretirement benefit obligation by $11 million as of December 31, 1996 ($11
million and $6 million as of December 31, 1995 and 1994), and the aggregate of
the service and interest cost components of net periodic postretirement benefit
cost by $1 million in 1996, 1995 and 1994. Under the CBI plan, retiree health
care benefits are provided under an established formula which limits costs based
on prior years of service of retired employees. Other significant actuarial
assumptions used to calculate the accumulated postretirement benefit obligation
were the same as those used for the U.S. pension plan (see above).
NOTE 13
LEASES
For operating leases, primarily involving manufacturing and distribution
equipment and office space, noncancelable commitments extending for more than
one year will require the following future minimum payments at December 31,
1996:
Lease Payments
- ----------------------------------------------------------------
1997 $59 2000 $32
- ----------------------------------------------------------------
1998 $46 2001 $35
- ----------------------------------------------------------------
1999 $38 After 2001 $230
- ----------------------------------------------------------------
(Millions of dollars)
Included in these totals are $70 million of lease commitments to Praxair's
former parent company, principally for office space. Praxair is also
contingently required to pay certain Canadian lease obligations of the former
parent company in the event of a default totaling approximately $20 million ($27
million Canadian). If such payment is required, Praxair has a legal right to set
off any such amounts paid against other amounts it owes to the former parent
company for lease commitments.
Total lease and rental expenses under operating leases were $70 million in
1996, $37 million in 1995 and $34 million in 1994. The present value of the
future lease payments under operating leases, is approximately $256 million at
December 31, 1996.
40 Making Our Planet More Productive
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14
COMMITMENTS AND CONTINGENCIES
In the normal course of business, Praxair is involved in legal proceedings and
claims with both private and governmental parties. These cover a variety of
items, including product liability and environmental matters. In some of these
cases, the remedies that may be sought or damages claimed are substantial. While
it is impossible at this time to determine with certainty the ultimate outcome
of any of these cases, in the opinion of management, they will not have a
material adverse effect on the consolidated financial position of Praxair or on
the consolidated results of operations in a given year. Should any losses be
sustained in connection with any of these cases in excess of provisions
therefore, they will be charged to income in the future.
In September 1996, Praxair was named as a defendant in a four count lawsuit
filed by Airgas, Inc., a competitor, in the Philadelphia Court of Common Pleas
alleging essentially that Praxair breached an oral contract with Airgas by
acquiring CBI Industries, Inc. without allowing Airgas to participate in the
acquisition. The complaint also contains allegations of conversion, fraud and
quantum meruit. Praxair believes that the complaint is totally without merit and
intends to defend itself vigorously.
Praxair's 60%-owned Italian subsidiary has entered into two unconditional
long-term purchase agreements, signed in 1989 and 1992, for oxygen and nitrogen
to be used to supply existing merchant liquid customers. Obligations in
connection with financing under these agreements total $39 million ($25 million
on a present value basis), with annual obligations of $5 million over the next
three years and $3 million over the succeeding two years. Total purchases of
product in 1996, 1995 and 1994, including other amounts purchased under these
agreements, were $9 million, $9 million and $8 million, respectively.
At December 31, 1996, the estimated cost of completing authorized
construction projects in the normal course of business is approximately $310
million.
NOTE 15
QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1996 1Q 2Q 3Q 4Q Year
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $ 1,090 1,093 1,115 1,151 $ 4,449
Cost of sales $ 629 631 637 667 $ 2,564
Depreciation and amortization $ 101 105 107 107 $ 420
Operating profit $ 82(a) 177 190 198 $ 647(a)
- ----------------------------------------------------------------------------------------------------
Net income $ 17(a) 81 88 96 $ 282(a)
- ----------------------------------------------------------------------------------------------------
Net Income per share $ .11 $ .50 $ .54 $ .59 $ 1.77
Weighted average shares (000's) 148,438 161,680 162,316 163,473 159,038
====================================================================================================
(Millions of dollars, except per share data)
1995 1Q 2Q 3Q 4Q Year
- ----------------------------------------------------------------------------------------------------
Sales $ 756 788 795 807 $ 3,146
Cost of sales $ 422 439 456 460 $ 1,777
Depreciation and amortization $ 70 71 70 68 $ 279
Operating profit $ 134 141 136 137 $ 548
- ----------------------------------------------------------------------------------------------------
Net income $ 65 67 64 66 $ 262
- ----------------------------------------------------------------------------------------------------
Net Income per share $ .46 $ .47 $ .44 $ .45 $ 1.82
Weighted average shares (000's) 141,941 142,517 144,832 145,988 144,147
====================================================================================================
(Millions of dollars, except per share data)
<FN>
(a) Operating profit and Net income for the first quarter and year of 1996
include a charge of $85 million and $53 million, respectively, for
severance-related, lease termination and other exit costs associated with
the integration of the industrial gases businesses of CBI and Praxair (see
Note 3).
</FN>
</TABLE>
Making Our Planet More Productive 41
<PAGE>
MANAGEMENT'S STATEMENT OF RESPONSIBILITY FOR FINANCIAL STATEMENTS
Praxair's financial statements are prepared by management, which is responsible
for their fairness, integrity and objectivity. The accompanying financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis except for accounting changes as
disclosed and, accordingly, include amounts that are estimates and judgments.
All historical financial information in this annual report is consistent with
the accompanying financial statements.
Praxair maintains accounting systems, including internal accounting
controls monitored by a staff of internal auditors, that are designed to provide
reasonable assurance of the reliability of financial records and the protection
of assets. The concept of reasonable assurance is based on recognition that the
cost of a system should not exceed the related benefits. The effectiveness of
those systems depends primarily upon the careful selection of financial and
other managers, clear delegation of authority and assignment of accountability,
inculcation of high business ethics and conflict-of-interest standards, policies
and procedures for coordinating the management of corporate resources and the
leadership and commitment of top management.
Praxair's financial statements are audited by Price Waterhouse LLP,
independent accountants, in accordance with generally accepted auditing
standards. These standards provide for a review of Praxair's internal accounting
controls to the extent they deem appropriate in order to issue their opinion on
the financial statements.
The Audit Committee of the Board of Directors, which consists solely of
non-employee directors, is responsible for overseeing the functioning of the
accounting system and related controls and the preparation of annual financial
statements. The Audit Committee periodically meets with management, internal
auditors and the independent accountants to review and evaluate their
accounting, auditing and financial reporting activities and responsibilities.
The independent accountants and internal auditors have full and free access to
the Audit Committee and meet with the Committee, with and without management
present.
/s/ H. William Lichtenberger /s/ John A. Clerico /s/ J. Robert Vipond
H. William Lichtenberger John A. Clerico J. Robert Vipond
Chairman and Vice President and Vice President
Chief Executive Officer Chief Financial Officer and Controller
Danbury, Connecticut
February 7, 1997
42 Making Our Planet More Productive
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
To the Board of Directors and Shareholders of Praxair, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and of cash flows present fairly, in all
material respects, the financial position of Praxair, Inc. and its subsidiaries
at December 31, 1996 and 1995, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Stamford, Connecticut
February 7, 1997
Making Our Planet More Productive 43
<PAGE>
INFORMATION FOR INVESTORS
COMMON STOCK INFORMATION
Praxair lists its common stock for trading on the New York Stock Exchange under
the stock symbol, "PX." Unlisted trading privileges also have been granted by
the Pacific, Cincinnati and Midwest Stock Exchanges. There were 38,901
shareholders of record as of December 31, 1996.
SHAREHOLDER RETURNS
Closing high and low stock prices and dividends are presented below:
High Low Dividends
- ----------------------------------------------------------
1996
Fourth quarter $ 49.375 $ 43.125 $ 0.095
Third quarter $ 43.375 $ 36.500 $ 0.095
Second quarter $ 42.250 $ 37.125 $ 0.095
First quarter $ 39.875 $ 31.750 $ 0.095
- ----------------------------------------------------------
1995
Fourth quarter $ 33.875 $ 24.375 $ 0.08
Third quarter $ 28.750 $ 24.875 $ 0.08
Second quarter $ 25.250 $ 22.250 $ 0.08
First quarter $ 23.250 $ 19.875 $ 0.08
- ----------------------------------------------------------
1994
Fourth quarter $ 24.250 $ 19.125 $ 0.07
Third quarter $ 24.375 $ 19.250 $ 0.07
Second quarter $ 20.750 $ 17.250 $ 0.07
First quarter $ 19.250 $ 16.375 $ 0.07
- ----------------------------------------------------------
DIVIDEND POLICY
Dividends on Praxair's common stock are declared by the Board of Directors and,
when declared, usually will be paid during the sixth week after the close of the
fiscal quarter. It is the company's objective to pay dividends consistent with
the reinvestment of earnings necessary for long-term growth.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Shareholders holding shares registered in their name may increase their
investment in Praxair shares through the Dividend Reinvestment and Stock
Purchase Plan without payment of any brokerage commission. Full details
concerning this plan may be obtained from The Bank of New York.
Earnings per share*
- ---------------------------------
1996 $ 2.11+
1995 $ 1.82
1994 $ 1.45
1993 $ 1.06
1992 $ 0.64
- ---------------------------------
* Before cumulative effect of accounting changes
+ Before CBI integration charges
SHAREHOLDER INFORMATION
The annual report is the principal means of communicating Praxair's business
strategies and financial performance to its shareholders. Additional information
on corporate governance matters is provided in the proxy statement prepared in
conjunction with Praxair's annual meeting. Also, Praxair's 1996 annual report on
Form 10-K, which incorporates parts of this annual report by reference and is
filed with the U.S. Securities and Exchange Commission, provides certain
additional information.
Praxair Investor Relations is responsible for shareholder communications
and welcomes shareholder inquiries about Praxair, either by telephone or in
writing.
The Bank of New York is Praxair's stock transfer agent and registrar, and
maintains shareholder records. Shareholders needing information about account
records, stock certificates, change of address and dividend payments should
contact:
The Bank of New York
Shareholder Relations, Department 11E
P.O. Box 11258
Church Street Station
New York, NY 10286-1258
800-524-4458 or, outside the U.S., (212) 815-5800
The annual report, proxy statement and filings with the U.S. Securities and
Exchange Commission can be obtained upon request to The Bank of New York or:
Investor Relations
Praxair, Inc.
39 Old Ridgebury Road
Danbury, CT 06810-5113
(203) 837-2210
ANNUAL MEETING OF SHAREHOLDERS
The 1997 annual meeting of shareholders of Praxair, Inc. will be held at 9:30
a.m. on Tuesday, April 29, 1997 at Hilton Inn and Towers, 18 Old Ridgebury Road,
Danbury, Connecticut.
GENERAL CORPORATE INFORMATION
For general information about Praxair, its products and services, write or call:
Corporate Communications
Praxair, Inc.
39 Old Ridgebury Road
Danbury, CT 06810-5113
800-PRAXAIR or, outside the U.S., (716) 879-4077
Visit Praxair Online on the World Wide Web:
http://www.praxair.com
44 Making Our Planet More Productive
<PAGE>
BOARD OF DIRECTORS
[GRAPHICS OMITTED]
From Left: Alejandro Achaval, John A. Clerico, John J. Creedon, C. Fred
Fetterolf, Dale F. Frey, Claire W. Gargalli, Edgar G. Hotard, Ronald L. Kuehn,
Jr., H. William Lichtenberger, Benjamin F. Payton, G. Jackson Ratcliffe, Jr., H.
Mitchell Watson, Jr.
Alejandro Achaval
Director, Argentine National Institute
of Technology; former Vice Chairman &
Chief Executive Officer, IPAKO
Industrias Petroquimicas Argentinas S.A.
Audit; Finance & Pension Committees
John A. Clerico
Vice President & Chief Financial
Officer, Praxair, Inc.
Finance & Pension Committee
John J. Creedon
Consultant and Director of various
corporations; former President & Chief
Executive Officer, Metropolitan Life
Insurance Company
Finance & Pension (Chairman);
Compensation & Management Development
Committees
C. Fred Fetterolf
Director of various corporations; former
President & Chief Operating Officer,
Aluminum Company of America
Audit (Chairman); Public Policy & Nominating
Committees
Dale F. Frey
Director of various corporations; former
Vice President, General Electric
Company; former Chairman & President,
General Electric Investment Corporation
Finance & Pension; Public Policy &
Nominating Committees
Claire W. Gargalli
Vice Chairman, Diversified Search
Companies
Finance & Pension; Compensation & Management
Development Committees
Edgar G. Hotard
President, Praxair, Inc.
Finance & Pension Committee
Ronald L. Kuehn, Jr.
Chairman, President & Chief Executive
Officer, Sonat Inc.
Audit; Compensation & Management
Development (Chairman) Committees
H. William Lichtenberger
Chairman & Chief Executive Officer,
Praxair, Inc.
Public Policy & Nominating Committee
Benjamin F. Payton
President, Tuskegee University
Audit; Public Policy & Nominating Committees
G. Jackson Ratcliffe, Jr.
Chairman, President & Chief Executive
Officer, Hubbell Incorporated
Compensation & Management Development;
Public Policy & Nominating (Chairman)
Committees
H. Mitchell Watson, Jr.
President, Sigma Group of America
Audit; Compensation & Management Development
Committees
Making Our Planet More Productive 45
<PAGE>
OFFICERS, REGIONAL MANAGEMENT AND ADVISORY COUNCIL
OFFICERS
Leonard M. Baker
Vice President, Technology
Paul J. Bilek
President, North American Industrial Gases,
and President, Praxair Canada
Felix de Bulhoes
Chairman, S.A. White Martins
David H. Chaifetz
Vice President, General Counsel & Secretary
John A. Clerico
Vice President & Chief Financial Officer
Michael E. DeDomenico
President, Praxair Europe
Ivan Garcia
Chief Executive Officer, S.A. White Martins
Jesus E. Gonzalez
Vice President, North American On-Site Gases,
and President, Praxair Mexico
Barbara R. Harris
Vice President, Human Resources
Bradley J. Holcomb
Vice President, Global Procurement
& Materials Management
Edgar G. Hotard
President
Thomas W. von Krannichfeldt
President, Praxair Surface
Technologies, Inc.
H. William Lichtenberger
Chairman & Chief Executive Officer
Sunil Mattoo
Vice President, Marketing
Nigel D. Muir
Vice President, Communications & Public Relations
Jose R. Rivero
President, Praxair Distribution, Inc.
(North American Packaged Gases)
James S. Sawyer
Vice President & Treasurer
Donald W. Terry
Vice President, Carbon Dioxide Product & Services
William M. Therrien
Vice President, Engineering &
Supply Systems
J. Robert Vipond
Vice President & Controller
REGIONAL MANAGEMENT
SOUTH AMERICA
Domingos Bulus
Assistant Director, Andean Treaty Countries
Albino Carneiro
Assistant Director, South Cone Countries
Ricardo Malfitano
Officer, Industrial Gases, Brazil
EUROPE & MIDDLE EAST
Franco Mazzali
Managing Director, Italy and Middle East
Jean-Michel Tiard
Managing Director, Western Europe and Poland
Gabriel Toledo
Managing Director, Spain and Turkey
CANADA
Michael J. Douglas
Managing Director, Praxair Canada
MEXICO
Cesar Guajardo
Managing Director, Praxair Mexico
PUERTO RICO
Robert P. Sheehan
President, Praxair Puerto Rico
ASIA
James F. Fuchs
Vice President, Asia
V. Thad Evans
Managing Director, Praxair Japan, and President,
Praxair Iwatani Electronics Gases
Brian Evison
Managing Director, Praxair Indonesia and Praxair Australia
K.H. Lee
President, Praxair Korea
Brent Lok
President, Praxair Greater China
Indrajit Mookerjee
Managing Director, Praxair India
Kitti Prapasuchart
Managing Director, Praxair Thailand
SOUTH AMERICAN ADVISORY COUNCIL
H. William Lichtenberger
Chairman
Felix de Bulhoes
Deputy Chairman
Ricardo Cilliones
President, Grupo Mayaguez, Peru
Enzo Debernardi
Senior Consultant and Advisor, Paraguay
Ivan Garcia
Chief Executive Officer, S.A. White Martins, Brazil
Isaac Gilinski
President, Bancol SA, Colombia
Agostino Rocca
President and CEO, Organizacion Techint, Argentina
Paolo Rocca
Executive Vice President, Siderca, Argentina
Mario Henrique Simonsen
Vice President, Fundacao Getulio Vargas, Brazil
Benjamin Steinbruch
Chairman, Companhia Siderurgica Nacional, Brazil
46 Making Our Planet More Productive
<PAGE>
PRAXAIR LOCATIONS WORLDWIDE
WORLD HEADQUARTERS
Praxair, Inc.
39 Old Ridgebury Road
Danbury, CT 06810-5113
1-800-PRAXAIR
(716) 879-4077 (from outside the U.S.)
Praxair Surface Technologies, Inc.
Indianapolis, IN
(317) 240-2500
(affiliates in Denmark, France, Germany,
Italy, Switzerland, United Kingdom,
Japan and Singapore)
NORTH AMERICA
Praxair, Inc.
Danbury, CT, USA
1-800-PRAXAIR
(716) 879-4077 (from outside the U.S.)
Praxair Mexico S.A. de C.V.
Mexico City, Mexico
52 (5) 627-9500
Praxair Canada Inc.
Mississauga, Ontario
(905) 803-1600
SOUTH AMERICA
S.A. White Martins
Rio de Janeiro, Brazil
55 (21) 211.6232
Argentina, Bolivia, Chile, Colombia,
Ecuador, Paraguay, Peru, Uruguay,
Venezuela
CENTRAL AMERICA/CARIBBEAN
Praxair Puerto Rico
Gurabo, PR
(787) 258-7200
Belize, Costa Rica
EUROPE
Praxair N.V.
Zaventem (Brussels), Belgium
32 (2) 716.0580
Austria, Croatia, Czech Republic,
France, Germany, Israel, Italy, The
Netherlands, Poland, Portugal, Slovenia,
Spain, Turkey
ASIA
Praxair Asia, Inc.
Singapore
(65) 224.1355
Australia, India, Indonesia, Japan,
People's Republic of China, South Korea,
Thailand
The forward-looking statements contained in this document concerning, among
other things, projected earnings, capital spending, effective tax rates, and the
timing, proceeds and other terms of the disposition of businesses and assets
held for sale, involve risks and uncertainties, and are subject to change based
on various factors, including the impact of changes in worldwide and national
economies, achievement of synergies and cost reductions in the integration of
the recently acquired Liquid Carbonic business of CBI Industries, Inc., the
timing of divestments and the proceeds realized therefrom, pricing fluctuations
in foreign currencies, changes in interest rates, the continued timely
development and acceptance of new products and processes, the impact of
competitive products and pricing, the ability to achieve tax synergies that will
reduce the effective tax rate for the CBI businesses, and the impact of tax and
other legislation and regulation in the jurisdictions in which the company
operates.
Design: R.L. Marciniak, Inc. Photography: Location - David Mendelsohn
Portraits - Wendy Barrows Typography: Ginny Doyle
Printing: The Hennegan Company
This annual report is printed on recycled paper.
EXHIBIT 21.01
-------------
Place of Incorporation
----------------------
Accent Cay Holdings Inc. British Virgin Island
Adirondack Insurance Company Vermont
Altair Gases and Equipment, Inc. Delaware
Amko Service Company Ohio
Arabian CBI Tank Manufacturing Co. Ltd. Saudi Arabia
Arfin, S.A. Argentina
Agro-Forest, S.A. Chile
Asian Surface Technologies Pte. Ltd. Singapore
Carbonatos Andinos S.A. Argentina
Carborio Industria E. Comercio, Lta. Brazil
Catalana de Gases Medicinales S.L. Spain
CBI Company Ltd. Delaware
CBI Constructors Limited United Kingdom
CBI Constructors Pty. Ltd. Australia
CBI Constructors Pty. Ltd. (PNG) New Guinea
CBI Constructors S.A. (PTY.) Ltd. South Africa
CBI Eastern Anstalt Liechtenstein
CBI Holdings U.K. Limited United Kingdom
CBI Investments, Inc. Delaware
CBI (Malaisia) Sdn. Bhd. Malaysia
CBI Na-Con, Inc. Texas
CBI Overseas, Inc. Delaware
CBI (Philippines) Inc. Philippines
CBI Services, Inc. Delaware
CBI Venezolana, S.A. Venezuela
Chameleon Finance Company B.V. The Netherlands
Chi Bridge Holdings, Inc. Delaware
Chicago Bridge & Iron Company Delaware
Chicago Bridge & Iron Company (1) Illinois
Chicago Bridge & Iron Company N.V. The Netherlands
CILBRAS - Empresa Brasileira de Cilindros Ltda. Brazil
Coatec Gesellschaft Fur Oberflachentechnik GmbH Germany
Companhia Nacional de Calcareos e Derivados - CONCAL Brazil
Companhia Nacional de Carbureto Brazil
Companhia Nacional de Oxigenio S.A. Portugal
Cooperheat, Inc. New Jersey
Corfinar S.A. Argentina
Cryo Teruel S.A. Portugal
Cumnock Properties, Inc. Delaware
Derivados Quimicos Naturales S.A. De c.v. Mexico
Distribudora Mexicana de Criogenicos S.A. de C.V. Mexico
(1) In addition, Chicago Bridge & Iron Company has multiple
other consolidated subsidiaries providing similar contracting
services outside the United States, the number of which changes
from time to time depending upon business opportunities and work
locations. None of these other multiple consolidated
subsidiaries constitutes a significant subsidiary.
EXHIBIT 21.01
(cont'd.)
Place of Incorporation
----------------------
Empresa De Mineracao Marium Ltda. Brazil
Ershigs, Inc. Washington
Euro Cantley S.A. Colombia
Euro Silver S/A Uruguay
Euro Vitoria S/A Uruguay
Fabrica de Oxigeno Miller Hermanos, S.A. Costa Rica
Fairmac Realty Corp. Delaware
Fibre Making Processes, Inc. Illinois
Frios Industrias Argentinas S.A. Argentina
Gas Carbonico S.A. de C.V. Mexico
Gases de Ensenada S/A Argentina
Gases International, Inc. Delaware
Gases Tachira, C.A. Venezuela
GASOX - Goias Oxigenio Ltda. Brazil
Gisapar Participacoes e Empreendimentos Ltda. Brazil
Groupo Praxair S.A. de C.V. Mexico
Hielo Secco Bolivia Bolivia
Horton CBI Limited Canada
Horton Services, Inc. Canada
Ibis Investments, Inc. Delaware
IMOX Industria E Comercio Ltda. Brazil
Industrial Gases, Inc. Delaware
Innovative Membrane Systems, Inc. Delaware
Intercorp Mexico S.A. de C.V. Mexico
International Cryogenic Equipment Corporation Delaware
Jacksonville Welding Supply, Inc. Florida
Julio Pastafiglia & Cia. S.A. Argentina
Kelvin Finance Company Ireland
L C Industries, Inc. Delaware
Liquid Carbonic Company, Ltd. United Kingdom
Liquid Carbonic Argentina S.A.I.C. Argentina
Liquid Carbonic Corporation Delaware
Liquid Carbonic de Chile, S.A. Chile
Liquid Carbonic Del Norte, S.A. Mexico
Liquid Carbonic Del Paraguay S.A. Paraguay
Liquid Carbonic do Ceara Ltd. Brazil
Liquid Carbonic Do Nordeste, S.A. Brazil
Liquid Carbonic Industries Corporation Delaware
Liquid Carboinc Industrias S.A. Brazil
Liquid Carbonic LNG International, Inc. Delaware
Liquid Carbonic Noroeste Ltda. Brazil
Liquid Carbonic of Oklahoma, Inc. Oklahoma
Liquid Carbonico Colombiana S.A. Colombia
Liquid Carbonico Pucallpa Peru
Liquidgas S.A. Colombia
Liquid Natural Gas de Mexico S.A. de C.V. Mexico
Liquid Quimica Mexicana, S.A. de C.V. Mexico
Liquid Quimica S.A. Brazil
EXHIBIT 21.01
(cont'd.)
Place of Incorporation
----------------------
Maxima Air Separation Center Limited Israel
Med-O-Gen Inc. Canada
Medigas Iberica S.A. Spain
Miller Hermanos S.A. Costa Rica
Mineracao Mira Serra Ltda Brazil
Minerosul Industria e Comercio Ltda. Brazil
Monte Bravo S.A. Uruguay
MQS Inspection, Inc. Delaware
Nitropet, S.A. Mexico
Oak Brook International Insurance Co. Ltd. Bermuda
Operadora Perinorte, S.A. de C.V. Mexico
Organoquimica, S.A. Colombia
Oxiacet Ltda. Colombia
Oxiazuay Ltda. Ecuador
Oxiambato Ltda. Ecuador
Oxigenos de Colombia Efese S.A. Colombia
Oxigenus S.A. Spain
Oximesa S.A. Spain
Oximinas Ltda. Brazil
P. T. Praxair Indonesia Indonesia
Praxair Asia, Inc. Delaware
Praxair Argentina, S.A. Argentina
Praxair Australia Pty. Ltd. Australia
Praxair B.V. The Netherlands
Praxair BCEEP Carbon Dioxide, Inc. China
Praxair Belize, Ltd. Belize
Praxair Bolivia, S.A. Bolivia
Praxair Canada Inc. Canada
Praxair Comercio e Participacos Ltda. Brazil
Praxair Costa Rica, S.A. Costa Rica
Praxair Deer Park Cogen, Inc. Delaware
Praxair Distribution, Inc. Delaware
Praxair Energy Resources, Inc. Delaware
Praxair Energy Services, Inc. Delaware
Praxair Espana, S.A. Spain
Praxair Foreign Sales Corporation Virgin Islands
Praxair G.m.b.H. Germany
Praxair Gmbh & Co., KG Germany
Praxair Holding N.V. Belgium
Praxair Hydrogen Supply, Inc. Delaware
Praxair Iberica, S.A. Spain
Praxair India Private Limited India
Praxair Iwatani Electronics Gases Co. Japan
Praxair K.K. Japan
Praxair Korea Company Limited Republic South Korea
Praxair Mexico, S.A. de C.V. Mexico
Praxair N.V. Belgium
EXHIBIT 21.01
(cont'd.)
Place of Incorporation
-----------------------
Praxair Pacific Limited Mauritius
Praxair Polska, SP. Z O.O Poland
Praxair Paraguay S.R.L. Paraguay
Praxair Peru S.A. Peru
Praxair Produccion, S.A. Spain
Praxair Production N.V. Belgium
Praxair Products Inc. Canada
Praxair Puerto Rico, Inc. Delaware
Praxair (Shanghai) Co., Ltd. China
Praxair S.A. Argentina
Praxair S.A. France
Praxair S.p.A. Italy
Praxair S. T. Technology, Inc. Delaware
Praxair Services et Systemes S.A. France
Praxair Services G.m.b.H. Germany
Praxair Shanghai Meishan Inc. China
Praxair Surface Technologies A/S Denmark
Praxair Surface Technologies (Europe) S.A. Switzerland
Praxair Surface Technologies G.m.b.H. Germany
Praxair Surface Technologies, Inc. Delaware
Praxair Surface Technologies K.K. Japan
Praxair Surface Technologies Limited United Kingdom
Praxair Surface Technologies Pte. Ltd. Singapore
Praxair Surface Technologies S.A. France
Praxair Surface Technologies S.p.A. Italy
Praxair Technology, Inc. Delaware
Praxair (Thailand) Company, Ltd. Thailand
Praxair Uruguay S/A Uruguay
Praxair Venezuela, S.A. Venezuela
Precigas Gases Industriais S.A. Brazil
Products Especiales Quimicos, S.A. Mexico
Pulver do Nordeste Ltda. Brazil
Pyromet Group, Inc. Indiana
Pyromet Corporation Oklahoma
Pyromet Enterprises, Inc. Ohio
Pyromet, Inc. California
Quimica Industrial Bara Do Pirai S.A. Brazil
Rapidox Gases Industriais Ltda. Brazil
Rivoira S.p.A. Italy
S.A. Juan B. Pezza Limitada Argentina
S. A. White Martins Brazil
Servicios Ejecutivos Linde, S.A. de C.V. Mexico
Specialty International Chemicals, Inc. Delaware
Tetimpar Empreedimentos e Participacoes S.A. Brazil
Tianjin Praxair Inc. China
Transportes Flamingo S/A Peru
UCISCO Canada Inc. Canada
UCISCO, Inc. Texas
Unigases Comercial Ltda. Brazil
Wall Chemicals, Inc. Illinois
Westair Cryogenics Company Delaware
White Martins Administracao, Investimentos e
Fomento Comercial Ltda. Brazil
White Martins de Columbia S.A. Colombia
White Martins e Companhia Comercio e Servicos Brazil
White Martins Gases Industriais do Nordeste S.A. Brazil
White Martins Gases Industriais do Norte S.A. Brazil
White Martins Gases Industriais S.A. Brazil
White Martins Soldagem Ltda. Brazil
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (Nos.
333-18141, 333-304, 33-93444, and 33-48480) and in the Registration
Statement on Form S-8 (Nos. 333-18111, 333-18113, 33-92868, 33-87274,
33-48479, and 33-48478) of Praxair, Inc. of our report dated February 7,
1997 appearing on page 43 of the Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K.
PRICE WATERHOUSE LLP
Stamford, Connecticut
March 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 63
<SECURITIES> 0
<RECEIVABLES> 945
<ALLOWANCES> 31
<INVENTORY> 312
<CURRENT-ASSETS> 1666
<PP&E> 7508
<DEPRECIATION> 3239
<TOTAL-ASSETS> 7538
<CURRENT-LIABILITIES> 2550
<BONDS> 1703
75
0
<COMMON> 2
<OTHER-SE> 1922
<TOTAL-LIABILITY-AND-EQUITY> 7538
<SALES> 4449
<TOTAL-REVENUES> 4449
<CGS> 2564<F1>
<TOTAL-COSTS> 2564<F1>
<OTHER-EXPENSES> 420<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 195
<INCOME-PRETAX> 452
<INCOME-TAX> 110
<INCOME-CONTINUING> 342
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 282
<EPS-PRIMARY> 1.77
<EPS-DILUTED> 0
<FN>
<F1>Cost of Goods Sold and Total Costs are exclusive of depreciation and
amortization which is shown on the Other Expense line in the Financial Data
Schedule.
</FN>
</TABLE>
