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Return on Equity<br />
Return on equity is a measure used by investors, financial analysts and management to evaluate operating<br />
performance from a <strong>Praxair</strong> shareholder perspective. ROE measures the net income that the company was able to<br />
generate with the money shareholders have invested.<br />
(Dollar amounts in millions)<br />
Year Ended December 31,<br />
2008 2007 2006 2005 2004<br />
Reported income before accounting change .................. $1,211 $1,177 $ 988 $ 732 $ 697<br />
Add: cost reduction program and other charges* .............. 114 — — — —<br />
Add: pension settlement charge** .......................... 11 — — — —<br />
Less: pro forma stock option expense, net of taxes ............. — — — (26) (28)<br />
Add: Repatriation and other income tax charges ............... — — — 92 —<br />
Adjusted income before accounting change .................. $1,336 $1,177 $ 988 $ 798 $ 669<br />
Beginning shareholders’ equity ............................ $5,142 $4,554 $3,902 $3,608 $3,088<br />
First quarter ending shareholders’ equity ..................... $5,209 $4,467 $4,125 $3,651 $3,136<br />
Second quarter ending shareholders’ equity .................. $5,671 $4,850 $4,269 $3,821 $3,181<br />
Third quarter ending shareholders’ equity .................... $4,891 $4,862 $4,494 $3,873 $3,369<br />
Year-end ending shareholders’ equity ....................... $4,009 $5,142 $4,554 $3,902 $3,608<br />
Five-quarter average shareholders’ equity .................... $4,984 $4,775 $4,269 $3,771 $3,276<br />
Return on equity ........................................ 26.8% 24.6% 23.1% 21.2% 20.4%<br />
* 2008 includes the impact of cost reduction program and other charges of $177 million, $114 million<br />
after-tax and minority interests (see Note 2 to the consolidated financial statements).<br />
** 2008 includes a pension settlement charge of $17 million, $11 million after-tax (see Note 17 to the<br />
consolidated financial statements).<br />
Debt-to-Capital Ratio<br />
The debt-to-capital ratio is a measure used by investors, financial analysts and management to provide a<br />
measure of financial leverage and insights into how the company is financing its operations.<br />
(Dollar amounts in millions)<br />
Year Ended December 31,<br />
Total capital<br />
2008 2007 2006 2005 2004<br />
Debt ........................................... $5,025 $4,192 $3,167 $3,447 $3,525<br />
Minority interests ................................ 302 321 222 202 225<br />
Shareholders’ equity .............................. 4,009 5,142 4,554 3,902 3,608<br />
$9,336 $9,655 $7,943 $7,551 $7,358<br />
Debt-to-capital ratio .................................. 53.8% 43.4% 39.9% 45.6% 47.9%<br />
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