FORM 10-K - Praxair

Retirement obligations of $373 million include estimates of pension plan contributions and expected future
benefit payments for unfunded pension and postretirement benefits other than pensions (OPEB). Pension plan
contributions are forecast through 2009 only. For purposes of the table, $100 million has been included for 2009
based on the range of $70 million to $100 million. Expected future unfunded pension and OPEB benefit
payments are forecast through 2018. Contribution and unfunded benefit payment estimates are based upon
current valuation assumptions. Estimates of pension contributions after 2009 and unfunded benefit payments
after 2018 are not included in the table because the timing of their resolution cannot be estimated. Retirement
obligations are more fully described in Note 17 to the consolidated financial statements.
Unconditional purchase obligations of $1,341 million represent contractual commitments under various
long- and short-term take-or-pay arrangements with suppliers. These obligations are primarily minimumpurchase
commitments for helium, electricity, natural gas and feedstock used to produce atmospheric gases,
carbon dioxide and hydrogen. During 2008, payments under these contracts totaled $1,153 million, including
$484 million for electricity and $456 million for natural gas. A significant portion of these obligations is passed
on to customers through similar take-or-pay contractual arrangements. Purchase obligations that are not passed
along to customers do not represent a significant risk to Praxair.
Construction commitments of $1,341 million represent outstanding commitments to customers or suppliers
to complete authorized construction projects as of December 31, 2008. A significant portion of Praxair’s capital
spending is related to the construction of new production facilities to satisfy customer commitments which may
take a year or more to complete. Significant commitments include two large hydrogen plants to supply hydrogen
and steam to BP’s refinery complex in Whiting, Indiana and a large hydrogen plant in northern California to
supply Chevron’s Richmond Refinery.
Guarantees and other of $214 million include $70 million relating to Praxair’s contingent obligations under
guarantees of certain debt of unconsolidated affiliates, $108 million relating to put option agreements with
certain affiliated companies and $36 million of various guarantees relating to outstanding receivables and
repurchase agreements. Unconsolidated equity investees had total debt of approximately $489 million at
December 31, 2008, which was non-recourse to Praxair with the exception of the guaranteed portions described
above. The put option agreements are primarily related to majority-owned packaged gas subsidiaries in the
United States and give the minority shareholders the right to require Praxair to purchase their shares at a
predefined price calculation. Praxair has no financing arrangements with closely-held related parties.
Undrawn outstanding letters of credit, bank guarantees and surety bonds valued at approximately $944
million from financial institutions are not included in the table because the timing of their resolution cannot be
estimated. See Note 18 to the consolidated financial statements.
Long-term FIN 48 tax liabilities totaling $305 million, including related interests and penalties, are not
included in the table because the timing of their resolution cannot be estimated. See Note 5 to the consolidated
financial statements for disclosures surrounding uncertain income tax positions under FIN 48.
Also, see Note 18 to the consolidated financial statements for more information concerning commitments
and contingencies.
CRITICAL ACCOUNTING POLICIES
The policies discussed below are considered by management to be critical to understanding Praxair’s
financial statements and accompanying Notes prepared in accordance with accounting principles generally
accepted in the United States (U.S. GAAP). Their application places significant importance on management’s
judgment as a result of the need to make estimates of matters that are inherently uncertain. Praxair’s financial
position, results of operations and cash flows could be materially affected if actual results differ from estimates
made. These policies are determined by management and have been reviewed by Praxair’s Audit Committee.
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