Note  1 -- Summary of Significant Accounting Policies Note  2 -- Accounting Changes Note  3 -- Special Charges Note  4 -- Segment Information Note  5 -- Leases Note  6 -- Supplementary Income Statement Information Note  7 -- Provision for Income Taxes Note  8 -- Earnings Per Share Note  9 -- Supplementary Balance Sheet Information Note 10 -- Property, Plant and Equipment - Net Note 11 -- Deferred Income Taxes Note 12 -- Goodwill Note 13 -- Other Intangible Assets Note 14 -- Debt Note 15 -- Financial Instruments Note 16 -- Shareholder's Equity Note 17 -- Preferred Stock Note 18 -- Incentive Plans and Stock Options Note 19 -- Retirement Programs Note 20 -- Commitments and Contingencies Note 21 -- Quarterly Data (Unaudited)
 

NOTE 20. COMMITMENTS AND CONTINGENCIES
The company accrues liabilities for contingencies when management believes that it is probable that a liability has been incurred and its amount is reasonably estimable. In the event any losses are sustained in excess of these accruals, they will be charged to income at that time. Commitments represent obligations, such as those for future purchases of goods or services, that are not yet recorded on the company’s balance sheet as liabilities. The company records liabilities for commitments when incurred (e.g. when the goods or services are received).

In the normal course of business, Praxair is involved in legal proceedings and claims with both private and governmental parties. These cover a variety of items, including commercial, patent, product liability, tax and environmental matters. In some of these cases, the remedies that may be sought or damages claimed are substantial.

Among such matters are claims brought by welders alleging that exposure to manganese contained in welding fumes caused neurological injury. Praxair has never manufactured welding consumables, however such products were manufactured prior to 1985 by a predecessor company of Praxair. As of December 31, 2003, Praxair was a co-defendant with many other companies in 170 lawsuits alleging personal injury caused by manganese contained in welding fumes. The cases were pending in state and federal courts in Illinois, Mississippi, Missouri, Texas, Louisiana, Georgia, West Virginia, Ohio, Arkansas, Indiana and Utah. There were a total of 9,796 individual claimants in these cases. As a result of a number of voluntary dismissals, as of February 5, 2004, there were 190 cases and a total of 8,517 claimants. Ten of the cases are class actions. None of the class actions have been certified. Plaintiffs’ counsel have advised the court in which the class actions are pending that the class action allegations will be dismissed. All of the cases that have been filed in the federal courts have been transferred, under the Multidistrict Litigation procedure, to U.S. District Court for the Northern District of Ohio for coordinated or consolidated pretrial proceedings. The plaintiffs seek unspecified compensatory and, in most instances, punitive damages. In the past, Praxair has either been dismissed from the cases with no payment or has settled a few cases for nominal amounts. Praxair believes that it has meritorious defenses to these cases and intends to defend itself vigorously.

While the outcome of litigation is uncertain, Praxair believes that the resolution of these cases will not have a material adverse effect on its consolidated financial position or on its consolidated results of operations or cash flows in any given year.

The following table sets forth Praxair’s material commitments and contractual obligations as of December 31, 2003 excluding debt, leases, OPEB and long-term pension obligations (see Notes 5, 14, and 19):

(Millions of dollars)
EXPIRING	UNCONDITIONAL
THROUGH	PURCHASE	CONSTRUCTION	GUARANTEES
DECEMBER 31,	OBLIGATIONS	COMMITMENTS	AND OTHER
2004	$108	$197	$121
2005	67	25	4
2006	49	—	—
2007	41	—	—
2008	33	—	4
Thereafter	118	—	—
	$416	$222	$129

Unconditional purchase obligations of $416 million represent contractual commitments under various long- and short-term, take-or-pay arrangements with suppliers and are not included on Praxair’s balance sheet. These obligations are primarily minimum purchase commitments for electricity, natural gas and feedstock used to produce atmospheric gases, carbon dioxide and hydrogen. During 2003, payments under these contracts totaled $341 million, including $194 million for electricity and $83 million for natural gas. A significant portion of these risks is passed on to customers through similar take-or-pay contractual arrangements. Purchase obligations which are not passed along to customers do not represent a significant risk to Praxair. In addition, Praxair enters into contracts to purchase products and services that do not have minimum purchase provisions.

Construction commitments of $222 million represent outstanding commitments to customers or suppliers to complete authorized construction projects as of December 31, 2003. 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.

Guarantees and Other of $129 million include $80 million related to minimum pension contributions and $49 million related to Praxair’s off-balance sheet contingent obligations under guarantees of certain debt of unconsolidated affiliates. Unconsolidated equity investees had total debt of approximately $145 million at December 31, 2003, which was non-recourse to Praxair with the exception of the guaranteed portions described above. Praxair has no financing arrangements with closely-held related parties.