These results reflect the skill and hard work of Praxair employees around the world who strove constantly to offset slow economic growth in many major markets. They also reflect astute marketing and pricing actions that captured as much benefit as possible from the growth we did achieve. In other parts of this report, we describe examples of individual efforts that display the “can-do” attitude and unmatched professional expertise in many different parts of the organization that is responsible for this superior performance.

Looking ahead, even the rosiest economic forecasts predict that the manufacturing sector, which accounts for the bulk of our customers, is not likely to bounce back as quickly as some sectors. This means that innovation, productivity improvement and capital discipline will continue to be the cornerstones of Praxair’s success for the foreseeable future. These will be supported by our expanded global Six Sigma initiatives, which contributed about half of our $100 million in productivity savings in 2003. Procurement benefits and a dramatic improvement in plant efficiencies worldwide accounts for the other half. In 2004, our packaged gases operations will be the focus of additional productivity-improvement initiatives.

With our balanced approach to capital spending, we will concentrate on projects that earn good returns in our targeted markets and 10 core countries, and on selective programs and acquisitions that can improve our competitive position and provide profitable growth.

Clearly, our biggest challenge over the near term is growth. Over the past three years, our top line reached a plateau as industrial growth slowed. However, during this time we significantly beefed up our hydrogen capabilities; introduced several new products for the semiconductor industry; solidified our position in the fast-growing China and healthcare markets; and launched services and other growth initiatives.

Construction began on two new hydrogen plants on the U.S. Gulf Coast, which are on track to start up in 2004. Refiners’ demand for hydrogen is expected to increase by nearly 20% per year through 2006 based on the need for clean-burning, low-sulfur gasoline and diesel fuels to comply with new Environmental Protection Agency regulations.

Since we began investing in China in 1993, Praxair has established a No. 1 position among industrial gases companies, and our investments there are earning a good rate of return. Based on forecast economic growth, we estimate that our sales in China over the next four years could achieve a cumulative average growth rate of more than 30% per year. To capture those sales, we will focus on the rapidly developing steel, chemical and electronics markets. We invested about $40 million in our China operations during 2003, and this will double in 2004.

In a relatively short period of time, we have made great progress in the North American home healthcare market, carving out a niche in the respiratory and rental home-medical equipment segments. Our strategy is to streamline transaction processing and continue to make highly selective acquisitions as well as start up new operations in certain geographic areas. We anticipate sales to grow between 10% and 20% in 2004.