Management's Discussion and Analysis cont'd
Liquidity, Capital Resources and Financial Data

(a) Includes repositioning and special charges.
(b) Includes debt, minority interests, preferred stock and shareholders' equity.

Cash Flow from Operations
Cash flow from operations decreased $70 million to $899 million in 2000 from $969 million in 1999. This decrease is mainly due to increased working capital levels in support of sales growth, the 1999 improvement in working capital that was maintained in 2000, and a decrease in tax bene-fits from exercised stock options. In 2000, the repositioning and special charges did not have a significant impact on operating cash flow, however, management anticipates about $54 million will be paid in 2001.

Cash flow from operations increased to $969 million in 1999 from $944 million in 1998. The increase is primarily related to the improvement in working capital requirements; a direct result of Praxair's continuing work process improvement initiatives.

Investing
Cash flow used for investing in 2000 totaled $888 million, an increase of $202 million from 1999. This increase was due to capital expenditures and acquisitions, primarily related to the purchase of minority interests in Brazil (see Segment Discussion-South America).Cash flow used for investing in 1999 totaled $686 million, a decrease of $130 million from 1998. This decrease was due primarily to the net impact of lower capital and acquisition expenditures, partially offset by lower proceeds from divestitures and asset sales.

Capital expenditures for 2000 totaled $704 million an increase of $51 million from 1999 expenditures of $653 million. This was due to an increase in e-commerce investments along with capital expenditure increases in all segments except Surface Technologies. Capital expenditures for 1999 totaled $653 million, down $128 million from 1998. The lower level of capital expenditures reflects the Company's strategy to seek higher returns from its capital spending program, and is primarily due to decreased spending in South America, the United States and Europe, and currency impacts in South America.

Acquisition expenditures for 2000 totaled $290 million, an increase of $154 million from 1999. The increase is due primarily to the buyout of minority interests in Praxair's South American subsidiary for $242 million (see Segment Discussion-South America). 1999 acquisition expenditures totaled $136 million, a decrease of $105 million from 1998. Acquisition expenditures in 1999 were primarily related to acquisitions in the Surface Technologies' business, with other acquisitions in North America, China and India.

Divestitures and asset sales in 2000 totaled $106 million, an increase of $3 million from 1999. The 2000 divestitures primarily relate to the disposal of the precipitated calcium carbonate business in South America. The 1999 amount relates primarily to the sale leaseback transaction in the United States (see Note 12 to the consolidated financial statements).

On a worldwide basis, capital expenditures for the full year 2001 are expected to be in the $600 to $700 million range. Acquisition expenditures will depend on the availability of opportunities at attractive prices.

Financing
At December 31, 2000, Praxair's total debt outstanding was $3,141 million, an increase of $146 million from 1999. As of December 31, 2000, there were no borrowings under Praxair's $1.5 billion U.S. bank credit facilities and Praxair's investment grade credit rating for long-term debt was maintained at A3/BBB+.

In July 2000, Praxair entered into a new $500 million, 364-day revolving credit agreement and a new $1 billion, five-year revolving credit agreement to replace its existing credit agreement. At December 31, 2000, $852 million of short-term borrowings were classified as long-term debt under the terms of the existing credit agreements (see Note 5 to the consolidated financial statements). At December 31, 1999, such borrowings had been classified as short-term because the then existing credit agreement expired within one year. During 1999 and 1998, Praxair sold and leased back certain U.S. distribution and liquid storage equipment for $80 million and $150 million, respectively. The proceeds from the sale of the equipment were used to pay down debt.

In 1999, the "Minority transactions and other" caption includes cash proceeds of approximately $89 million relating to the pre-tax gain on net investment hedges in Brazil (see Note 5 to the consolidated financial statements).

Praxair's debt-to-capital ratio increased to 55.5% at December 31, 2000 from 52.4% at December 31, 1999. This increase is due to the impact of funding the purchases of additional minority interests in Brazil with debt.

Praxair's financing strategy is to secure sufficient funds to support its operations in the United States and around the world using a combination of local borrowings 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 5 to the consolidated financial statements and the section titled "Market Risks and Sensitivity Analysis").