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Costs Relating to the Protection of the Environment<br />
Environmental protection costs in 2008 included approximately $21 million in capital expenditures and $29<br />
million of expenses. Environmental protection expenditures were approximately $12 million higher in 2008<br />
versus 2007 primarily due to increases in capital projects and increased compliance costs. <strong>Praxair</strong> anticipates that<br />
future annual environmental protection expenditures will be similar to 2008, subject to any significant changes in<br />
existing laws and regulations. Based on historical results and current estimates, management does not believe<br />
that environmental expenditures will have a material adverse effect on the consolidated financial position or on<br />
the consolidated results of operations or cash flows in any given year.<br />
Legal Proceedings<br />
See Note 18 to the consolidated financial statements for information concerning legal proceedings.<br />
Retirement Benefits<br />
The non-cash pension and OPEB funded status liability increased $341 million to $696 million at<br />
December 31, 2008 ($457 million after-tax) from $355 million at December 31, 2007 ($235 million after-tax).<br />
The increase was due primarily to the significant reduction in the fair value of the U.S. pension plans’ assets<br />
during 2008.<br />
Pension contributions were $20 million in 2008 and $22 million in 2007. Estimates of 2009 contributions<br />
are in the range $70 million to $<strong>10</strong>0 million, all of which are required by funding regulations or laws.<br />
<strong>Praxair</strong> assumes an expected return on plan assets for 2009 in the U.S. of 8.25%. In 2009, consolidated<br />
pension expense is expected to be approximately $42 million versus $54 million in 2008 and $50 million in 2007.<br />
Consolidated pension expense in 2008 included a settlement charge of $17 million.<br />
See the Critical Accounting Policies section and Note 17 to the consolidated financial statements for a more<br />
detailed discussion of the company’s retirement benefits.<br />
Insurance<br />
<strong>Praxair</strong> purchases insurance to limit a variety of risks, including those related to workers’ compensation,<br />
third-party liability and property. Currently, the company self-retains the first $5 million per occurrence for<br />
workers’ compensation, general and vehicle liability and retains $2.5 million to $5 million per occurrence at its<br />
various properties worldwide. To mitigate its aggregate loss potential above varying retentions, the company<br />
purchases insurance coverage from highly rated insurance companies at what it believes are reasonable coverage<br />
levels.<br />
At December 31, 2008 and 2007, the company had recorded a total of $39 million and $43 million,<br />
respectively, representing an estimate of the retained liability for the ultimate cost of claims incurred and unpaid<br />
as of the balance sheet dates. The estimated liability is established using statistical analyses and is based upon<br />
historical experience, actuarial assumptions and professional judgment. These estimates are subject to the effects<br />
of trends in loss severity and frequency and are subject to a significant degree of inherent variability. If actual<br />
claims differ from the company’s estimates, they will be adjusted at that time and financial results could be<br />
impacted.<br />
<strong>Praxair</strong> recognizes estimated insurance proceeds relating to damages at the time of loss only to the extent of<br />
incurred losses. Any insurance recoveries for business interruption and for property damages in excess of the net<br />
book value of the property are recognized only when realized.<br />
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