To our shareholders and employees: Despite significant turmoil in the global economic environment during 1998, Praxair was able to deliver steady improvement in its operating results:



Total return on Praxair stock, after outperforming the S&P 500 in recent years, declined in 1998. The lower stock price reflected primarily the financial community's concerns about Praxair’s exposure in Brazil and the impact of the Asian economic crisis on key U.S. markets, such as steel. We also weathered a strike at General Motors and power disruptions across the U.S. during the summer, which lowered sales and increased costs.

Through growth programs at key customers and aggressive productivity-improvement initiatives, Praxair was able to offset most — but not all — of the earnings impact from these factors. Since economic conditions in 1999 are not likely to get any easier, we have adjusted our strategies accordingly and are determined to regain momentum toward steady earnings growth.


Financial Highlights


Year Ended December 31, 1998 1997 1996

For the Year:
Sales $ 4,833 $ 4,735 $ 4,449
Operating profit(a) 885 848 732
Income(a) 425 422 335
Diluted income per share(a) 2.60 2.57 2.11
Return on average shareholders’ equity(a) 19 % 21 % 22 %
Capital expenditures and acquisitions(b) $ 1,022 $ 1,003 $ 3,333
At year end:
Debt-to-capital ratio 53 % 55 % 57 %
Number of employees 24,834 25,388 25,271

(Dollar amounts in millions, except per share data)

(a)Results exclude non-recurring special charges and tax credits and are before the cumulative effect of an accounting change in 1997.
(b)1996 acquisitions include $2.2 billion associated with the CBI acquisition.

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