**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**Form 10-K**

**(Mark One)**

**x**                              ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Forthe fiscal year ended December 31, 2004**

**o**                                 TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934

**Commissionfile number 0-23378**

**Thermadyne Holdings Corporation**

(Exact name of Registrantas Specified in its Charter)

| **Delaware**                                                          | **74-2482571**                        |
|-----------------------------------------------------------------------|---------------------------------------|
| (State or Other  Jurisdiction of  Incorporation or Organization)      | (I.R.S. Employer  Identification No.) |
| **16052 Swingley Ridge Road, Suite 300  Chesterfield, Missouri** | **63017**                             |
| (Address of  Principal Executive Offices)                             | (ZIP Code)                            |

 

Registrant’s telephone number, including area code:

**(636) 728-3000**

Securities registeredpursuant to Section 12(b) of the Act: **None**

Securities registeredpursuant to Section 12(g) of the Act:

**Title of Class**

Common Stock, par value$0.01 per share

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Indicate by checkmark whetherthe registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required tofile such reports) and (2) has been subject to such filing requirementsfor the past 90 days. Yes x  No o

Indicate by checkmark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K isnot contained herein, and will not be contained, to the best of registrants’knowledge, in definitive proxy or information statements incorporated byreference in Part III of the Form 10-K or any amendment to thisForm 10-K. o

Indicate by checkmarkwhether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x  No o

State the aggregate marketvalue of the voting and non-voting common equity held by non-affiliatescomputed by reference to the price at which the common equity was last sold, orthe average bid and asked price of such common equity, as of the last businessday of the registrant’s most recently completed second fiscal quarter:approximately $186,992,000 based on the closing sales price of the Common Stockon June 30, 2004.

Indicate by checkmarkwhether the registrant has filed all documents and reports required to be filedby Section 12, 13 or 15(d) of the Securities Exchange Act of 1934subsequent to the distribution of securities under a plan confirmed by acourt. Yes x  No o

Indicate the number ofshares outstanding of each of the registrant’s classes of common stock, as ofthe latest practicable date: 13,313,973 shares of Common Stock, outstanding at March 1,2005.

**DOCUMENTS INCORPORATED BYREFERENCE:**

Portionsof the Proxy Statement for the registrant’s 2005 annual meeting of stockholdersare incorporated by reference in Part III, Items 10, 11, 12, 13 and 14.

 

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**CAUTIONARYSTATEMENT CONCERNING FORWARD-LOOKING STATEMENTS**

Thestatements in this Annual Report on Form 10-K that relate to futureplans, events or performance are forward-looking statements within themeaning of Section 27A of the Securities Act, Section 21E of theSecurities Exchange Act of 1934, or the Exchange Act, and the PrivateSecurities Litigation Reform Act of 1995, including statements regarding ourfuture prospects. These statements may be identified by terms and phrases suchas “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,”“could,” “may,” “plan,” “project,” “predict,” “will” and similar expressionsand relate to future events and occurrences. Actual results could differmaterially due to a variety of factors and the other risks described in thisAnnual Report and the other documents we file from time to time with theSecurities and Exchange Commission. Factors that could cause actual results todiffer materially from those expressed or implied in such statements include,but are not limited to, the following:

(a)          generaleconomic and capital market conditions, including political and economicuncertainty in various areas of the world where we do business;

(b)         thecyclicality and maturity of the cutting and welding market;

(c)          theeffects to our business of economic conditions, such as fluctuations in thecost of raw materials and energy, the substitution of plastic and othermaterials in place of fabricated metals and the trend towards offshoreproduction of fabricated metal products;

(d)         consolidationwithin our customer base and the resulting increased concentration of oursales;

(e)          pricingand product actions taken by our competitors;

(f)            abilityto retain our significant customers;

(g)          customers’perceptions of our financial condition relative to that of our competitors,particularly in light of our emergence from Chapter 11 bankruptcy proceedingsin May 2003;

(h)         risksassociated with reconfiguration and relocation of manufacturing operations;

(i)            theeffectiveness of our cost reduction initiatives;

(j)             interestand foreign currency exchange rates;

(k)         changesin U.S. or foreign tax laws or regulations;

(l)            ourability to meet customer needs by introducing new products that will contributepositively to our operating results; risks associated with product liability;

(m)     unforeseenliabilities arising from patent or other litigation;

(n)         theeffectiveness of our information systems;

(o)         theeffects of possible increased costs of employee health benefits and professionaland general liability insurance;

(p)         ourability to attract and retain qualified management personnel, and;

(q)         theneed to refinance a portion of our outstanding indebtedness.

(r)           consistentapplication of U.S. generally accepted accounting principles at our smallerinternational locations.

Actual results coulddiffer materially due to a variety of factors and the other risks described inthis Annual Report and the other documents we file from time to time with theSecurities and Exchange Commission. Readers are cautioned not to place unduereliance on these forward-looking statements, which speak only as of thedate hereof and are not guarantees of performance or results. We undertake noobligation to publicly release the result of any revisions to these forward-lookingstatements that may be made to reflect events or circumstances after the datehereof or that reflect the occurrence of unanticipated events.

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**PART I**

**Item 1.**   *Business*

**General**

We are a leading globaldesigner and manufacturer of cutting and welding products, including equipment,accessories and consumables. Our products are used by manufacturing,construction and foundry operations to cut, join and reinforce steel, aluminumand other metals. Common applications for our products include shipbuilding,railcar manufacturing, offshore oil and gas rig construction, fabrication, andthe repair and maintenance of manufacturing equipment and facilities. Weldingand cutting products are critical to the operations of most businesses thatfabricate metal, and we have well established and widely recognized brands. Wewere incorporated in Delaware in 1987. Our shares are traded on The OTCBulletin Board, and as of March 1, 2005, we had an equity marketcapitalization of approximately $190.9 million (based on a closing shareprice of $14.34 and 13.3 million shares outstanding).

**Reorganizationand Basis of Presentation**

On May 23, 2003 (the “EffectiveDate”), we consummated our plan of reorganization under Chapter 11 of theUnited States Bankruptcy Code (the “Bankruptcy Code”) and completed acomprehensive financial restructuring (the “Restructuring”). We have accountedfor the Restructuring using the principles of “fresh-start” accounting asrequired by the American Institute of Certified Public Accountants’ Statement ofPosition No. 90-7, entitled “Financial Reporting by Entities inReorganization under the Bankruptcy Code” (“SOP 90-7”). As a result ofthe application of SOP 90-7, our financial results for periods endingprior to June 1, 2003 and ending after May 31, 2003 include twodifferent bases of accounting, and accordingly, the operating results and cashflows of the Reorganized Company (as defined below) and the Predecessor Company(as defined below) have been separately disclosed. For the purposes of these financialstatements, references to the “Predecessor Company” refer to periods prior to June 1,2003 (the first day of the calendar month following the month in which weemerged from bankruptcy), and references to the “Reorganized Company” refer toperiods subsequent to May 31, 2003. The Reorganized Company’s financialstatements are not comparable to the Predecessor Company’s financialstatements.

**Our Principal Products and Markets**

We design, manufacture and sell products in fivecategories: (1) gas apparatus and related consumables (34.9% of sales in2004); (2) arc welding equipment (17.8%); (3) arc welding accessoriesand consumables (30.4%); (4) plasma and automated cutting equipment andrelated consumables (15.0%); and (5) other (1.9%).

Our gas apparatus products include gas-operatedcutting and welding torches and gas flow and pressure regulation equipment soldunder the Victor, Cigweld, Turbo Torch and Firepower brands and typically rangein price from $50 to $300. We also sell consumables, including tips, nozzlesand replacement parts for our gas apparatus products. Gas torches use a mixtureof oxygen and fuel gas (typically acetylene) to produce a high-temperatureflame that is used to cut, heat or weld steel. Gas torches are typically usedin steel fabrication operations such as shipbuilding and the construction ofoil refineries, power plants and manufacturing facilities, as well as forwelding, heating, brazing and cutting in connection with maintenance ofmachinery, equipment and facilities. Lighter-duty gas torches are also used bythe plumbing, refrigeration and heating, ventilation and air conditioningindustries. Gas flow and pressure regulation equipment is used to control thepressure and flow of most industrial and specialty gases, including gases usedin the welding, process control and electronics industries. We believe we areamong the largest manufacturers of gas apparatus products in the United Statesbased on our annual unit sales.

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Our arc welding equipment includes inverter andtransformer-based electric arc, plasma and engine-driven powersupplies sold under the Thermal Arc, Firepower, Cigweld and GenSet brands. Ourinverter and transformer-based electric arc power supplies typicallyrange in price from $1,000 to $3,000. Our plasma welding and engine-drivenpower supplies typically range in price from $4,000 to $6,000 and from $1,500to $5,000, respectively. Arc welding uses an electric current to melt eitherwire or electrodes (referred to as filler metals) to join two pieces of metal.The electric current is generated by the power supply and applied to the fillermetal using an arc welding accessory, such as a welding gun. Arc welding is themost common method of welding and is used for a wide variety of manufacturingand construction applications, including the production of ships, railcars,farm and mining equipment and offshore oil and gas rigs.

Our arc welding accessories and consumables includeautomatic and semiautomatic welding guns and related consumable parts, groundclamps, electrode holders, cable assemblies and various wires and electrodesused primarily in welding and hardfacing applications. Our arc welding guns aresold under the Tweco, Arcair and Cigweld brands and are designed to be usedwith our arc welding power supplies, as well as those of our competitors. Ourarc welding guns typically range in price from $90 to $350. Arc welding gunsare used to apply the current to the filler metal used in welding, aretypically handheld and require regular replacement of consumable parts as aresult of wear and tear, as well as their proximity to intense heat. Ourhardfacing products are sold under the Stoody brand and include iron-based,cobalt-based and nickel-based wire and electrodes that aredeposited as protective overlays on softer metals by various welding processes.This “hardfacing” or “surface” treatment creates a more resistant surface forthe component, thereby increasing its useful life. Our hardfacing productstypically range in price from $0.75 to $3.00 per pound and are used bybusinesses that manufacture or operate earth moving equipment, agriculturaltools, crushing components and steel mill rolls, as well as in otherapplications where metal is exposed to external wear factors. We believe we areamong the largest manufacturers of arc welding guns and hardfacing products inthe United States, in each case based on our annual unit sales.

Our plasma and automated cutting equipment includespower supplies, torches and related consumable parts sold under the ThermalDynamics brand, consumable parts sold primarily to original equipmentmanufacturers under private-label programs and cutting tables sold under theC&G Systems brand. Our plasma torches typically range in price from $300 to$600. Our power supplies and cutting tables typically range in price from$1,200 to $15,000 and from $16,000 to $60,000, respectively. Plasma cuttinguses an electric current to create a high-temperature plasma arc capable ofcutting metal. The current is generated by a power supply, and the plasma arcis applied to the metal being cut using a torch. We believe plasma cutting isone of the fastest-growing technologies for cutting metal. Advantages of theplasma cutting process over other methods include faster cutting speeds,cleaner cuts and the ability to cut ferrous and nonferrous alloys with minimumheat distortion to the metal being cut. Plasma cutting also permits metalcutting using only compressed air and electricity. Plasma cutting systems areused in the fabrication and repair of both steel and nonferrous metal products,including automobiles and related assemblies, appliances, ships, railcars andheating, ventilation and air-conditioning products, as well as for generalmaintenance. We believe we are among the largest producers of plasma cuttingequipment in the United States, based on our annual unit sales.

We sell most of our products through a network ofnational and multinational industrial gas distributors including Airgas, Inc.,Praxair, Inc., Linde Gas, a division of Linde AG and The BOC Group plc, aswell as a large number of other distributors. In 2004, our sales to customersin the United States represented 52.4% of our sales and no individual customeraccounted for more than 10% of sales.

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We conduct ouroperations through the following subsidiaries:

***Victor—Oxy-Fuel Gas Products.***

Victor Equipment Company, or Victor, was founded in1913 and has plants in Denton, Texas and Hermosillo, Mexico. Victor is amongthe leading U.S. manufacturers of gas-operated cutting and welding torches andgas flow and pressure regulation equipment. Victor’s torches are used to cutferrous metals and to weld, heat, solder and braze a variety of metals, and itsregulation equipment is used to control pressure and flow of most industrialand specialty gases. In addition, Victor manufactures a variety of replacementparts, including welding nozzles and cutting tips of various types and sizesand a line of specialty gas regulators purchased by end users in the processcontrol, electronics and other industries. Victor also supplies a wide range ofmedical regulation equipment serving the oxygen therapy market, including homehealth care and hospitals.

The torches produced by Victor are commonly referredto as oxy-fuel torches. These torches combine a mixture of oxygen and a fuelgas, typically acetylene, to produce a high-temperature flame. These torchesare designed for maximum durability, safety, reparability and performance,utilizing patented built-in reverse flow check valves and flash arresters inthe majority of models. Victor also manufactures lighter-duty handheld heating,soldering and brazing torches. Pressure regulators serve a broad range ofindustrial and specialty gas process control operations.

Victor sells itslighter-duty products to end-user customers principally engaged in theplumbing, refrigeration and heating, ventilation and air-conditioningindustries. The relative mobility, ease of use and low price of Victor torchesmake them suitable for a wide variety of uses.

***Tweco—Electric Arc Products and Arc Gouging Systems.***

Tweco Products, Inc., or Tweco, currently hasplants in Denton, Texas and Hermosillo, Mexico. Tweco, founded in 1936,manufactures a line of arc welding replacement parts and accessories, includingelectrode holders, ground clamps, cable connectors, terminal connectors andlugs and cable splicers and a variety of automatic and semiautomatic weldingguns and cable assemblies utilized in the arc welding process. Tweco’s endusers are primarily engaged in the manufacture or repair and maintenance oftransportation equipment, including automobiles, trucks, aircraft, trains andships; the manufacture of a broad range of machinery; and the production offabricated metal products, including structural metal, hand tools and general hardware.

Tweco is among the leading domestic manufacturers ofMIG welding guns. The MIG process is an arc welding process utilized in thefabrication of steel, aluminum, stainless steel and other metal products andstructures. In the MIG process, a small- diameter consumable electrode wire iscontinuously fed into the arc. The welding arc area is protected from theatmosphere by a “shielding” gas. The welding guns and cable assembliesmanufactured by Tweco carry the continuous wire electrode, welding current andshielding gas to the welding arc. Tweco manufactures a line of robotic weldingaccessory products. This accessory line includes a robotic torch, a roboticdeflection mount, a robotic cleaning station, robotic arms and an anti-splattermisting system.

Tweco manufactures manual stick electrode holders,ground clamps and accessories used for the manual stick welding process. Manualstick welding is one of the oldest forms of welding and is used inconstruction, out of position and remote applications for general repair,maintenance and fabrication work.

Through its Arcair product line, Tweco manufacturesequipment and related consumable materials for “gouging,” a technique thatliquefies metal in a narrow groove and then removes it using compressed air.Gouging products are often used in joint preparation prior to a weldingprocess. Numerous other applications exist for these gouging systems, such asremoval of defective welds, removal of trim in 

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foundries and repair oftrack, switches and freight cars in the railroad industry. Tweco alsomanufactures a line of underwater welding and gouging equipment.

In addition to gouging products, Tweco produces apatented exothermic cutting system, SLICE®. This system generates temperaturesin excess of 7,000 degrees Fahrenheit and can quickly cut through steel,concrete and other materials. SLICE® has many applications, including openingclogged steel furnaces and providing rapid entry in fire and rescue operations.Tweco has developed an underwater version of the SLICE® cutting system for usein the marine repair and salvage industry.

Tweco provides a completeline of chemicals used in the welding industry. Chemicals are used for weldcleaning and as agents to reduce splatter adherence on the metal being welded.Chemicals are also used to reduce splatter adherence in welding nozzles in MIGapplications.

***Thermal Dynamics—Plasma Arc Cutting Products.***

Thermal DynamicsCorporation, or Thermal Dynamics, founded in 1957 and located in West Lebanon,New Hampshire, developed many of the early plasma cutting systems and maintainsits position as a major manufacturer of plasma cutting systems and replacementparts. Thermal Dynamics’ product line ranges from portable 12-amp unitsto large 1,000-amp units. Thermal Dynamics’ end users are engagedprimarily in fabrication and repair of sheet metal and plate products found infabricated structural steel and nonferrous metals, automotive products,appliances, sheet metal, heating, ventilation and air conditioning, generalfabrication, shipbuilding and general maintenance.

***Cigweld—Electric Arc Products, Oxy-Fuel Products,Filler Metals, Gas Control Products and Safety Products.***

Cigweld is located in Melbourne, Australia, and hastwo plants in Kuala Lumpur, Malaysia. Cigweld, founded in 1922, is among theleading Australian manufacturers of gas equipment and welding products. Cigweldmanufactures arc welding power supplies for both automatic and manual arcwelding markets. The Cigweld range of automatic welding equipment includespackages specifically designed for particular market segments. End users ofthese products include the rural market and automobile repair, metalfabrication, shipbuilding, general maintenance and heavy industries. Manual arcequipment products range from small welders designed for the home handyman tounits designed for heavy industry.

Cigweld manufactures a range of consumable products(filler metals) for manual and automatic arc and gas welding. Our range ofmanual arc electrodes includes over 50 individual electrodes for differentapplications. Cigweld markets its manual arc electrodes under such brand namesas Satincraft, Weldcraft, Ferrocraft®, Alloycraft®, Satincrome, Cobalarc®,Castcraft and Weldall®. For automatic and semiautomatic welding applications,Cigweld manufactures a significant range of solid and flux-cored wires, soldprincipally under the Autocraft®, Verti-Cor, Satin-Cor, Metal-Cor and Cobalarc®brand names. For gas welding, Cigweld manufactures and supplies approximately40 individual types of wires and solders for use in various applications.Cigweld manufactures its filler metals to meet standards appropriate for theirintended use, with the majority of products approved by agencies such as Lloyd’sRegister of Shipping, American Bureau of Shipping, De Norske Veritas and U.S.Naval Ships.

Cigweld manufactures a comprehensive range ofequipment for gas welding and cutting and ancillary products such as gasmanifolds, gas regulators and flow meters. Gas welding and cutting equipment issold in kit form or as individual products. Kits are manufactured for variouscustomer groups and their components include combinations of oxygen andacetylene regulators, blowpipes, cutting attachments, mixers, welding andheating tips, cutting nozzles, roller guides, twin welding hoses, goggles,flint lighters and tip cleaners, combination spanners and cylinder keys. Inaddition to its kits, Cigweld manufactures and distributes a complete range ofgas equipment, including a range of blowpipes and attachments, regulators 

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(for oxygen, acetylene,argon and carbon dioxide), flashback arrestors, cutting nozzles, welding andheating tips, hoses and fittings, gas manifolds and accessories.

Cigweld also manufactures a range of gas controlequipment including specialty regulators (for use with different gases,including oxygen, acetylene, liquefied petroleum gas, argon, carbon dioxide,nitrogen, air, helium, hydrogen, carbon monoxide, ethylene, ethane and nitrousoxide), manifold systems, cylinder valves and spares and natural gas regulators.Cigweld’s gas control products are primarily sold to gas companies.

Cigweld manufactures and distributes a range of safetyproducts for use in welding and complementary industries. The product rangeincludes welding helmets and accessories, respirators and masks, breathingapparatus, earmuffs and earplugs, safety spectacles, safety goggles and gaswelding goggles and face shields.

Medical products are alsomanufactured by Cigweld in its manufacturing plant in Melbourne, Australia.These products are sold through distributors in the Australian market andexported through third-party distributors and related entities. Theproduct range includes regulators, flow meters, suction units, oxygen therapyand resuscitation and outlet valves for medical gas systems.

***Stoody—Hardfacing Products.***

Stoody Company, or Stoody,founded in 1921 and located in Bowling Green, Kentucky, is a well-recognizedworld-wide name in the development and manufacture of hardfacing welding wires,electrodes and rods. While Stoody’s primary product line is iron-based weldingwires, Stoody also participates in the markets for cobalt-based andnickel-based electrodes, rods and wires, which are essentially protectiveoverlays deposited on softer base materials by various welding processes. Thisprocedure, referred to as “hardfacing” or “surface treatment,” adds a moreresistant surface, thereby increasing the component’s useful life. Lowerinitial costs, the ability to treat large parts and ease and speed of repairsin the field are some of the advantages of hardfacing over solid wear-resistant components. Industries utilizing earthmoving equipment, agriculturaltools, crushing components and steel mill rolls and industries utilizingvirtually any application where metal is exposed to external wear factors arethe primary users of hardfacing applications.

***Thermal Arc—Arc Welders, Plasma Welders and WireFeeders.***

In 1997, the inverter and plasma arc welder businessof Thermal Dynamics and the welding division of Prestolite Power Corporationwere combined to form Thermal Arc, Inc., or Thermal Arc. Previouslylocated in Troy, Ohio, Thermal Arc’s production was relocated to our facilityin Malaysia during 2004, and its warehouse and administrative functions movedto our Bowling Green, Kentucky location. Thermal Arc designs and sells a fullline of inverter and transformer-based electric arc welders, plasmawelders, engine-driven welders and wire feeders. Thermal Arc products aresold for construction, industrial and automated applications and have a largeand diverse user base.

Inverter arc welding powermachines are extremely portable and power-efficient when compared toconventional welding power sources. Plasma welding dramatically improvesproductivity for the end user. Additionally, conventional transformer-basedmachines provide a cost-effective alternative for applications where low costand simplicity of maintenance are a high priority.

***GenSet—Engine-Driven Welders and Generators.***

GenSet S.p.A., or GenSet,acquired in January 1997 and located in Pavia, Italy, commenced operationsin 1976 with the production of small generator sets. In 1976, GenSet developedits first engine-driven welder and in 1977 obtained its first patent forthe synchronous alternator designed for 

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weldingpurposes. GenSet now offers a full range of technologically advanced generatorsand engine-driven welders that are sold throughout the world. Theseproducts are used both where main power is not available and for standby powerwhere continuous power supply is a key requirement.

***Victor Brazil—Oxy-Fuel Products and Cutting Tables.***

Thermadyne Victor Ltda., or Victor Brazil, wasacquired by us in 1998 and has offices and manufacturing facilities located inRio de Janeiro, Brazil. Victor Brazil is among the leading manufacturers ofoxy-fuel products for industrial and medical use and of mechanized cuttingtables for fabricating sheet metal and metal plate in South America.

Victor Brazil primarily serves the Latin Americanmarket. The oxy-fuel product line is very competitive in the region and offersthe customer a broad range of gas cutting and welding equipment items. Metalfabricators of all sizes, including those in shipbuilding, steel construction,machinery manufacturing, pressure vessel production and steel mills, use theindustrial oxy-fuel products. Hospitals, home health care and doctors’ officesalso use the medical oxy-fuel products.

The cutting table line ofproducts uses either oxy-fuel or plasma cutting systems produced by VictorBrazil or other of our divisions. The line of products is oriented to the needsof the Latin American market. Victor Brazil produces inexpensive cantilevertables, as well as higher-precision, computer numeric-controlledtables. These products are used in all types of metal fabricating plants.

***C&G Systems—Cutting Tables.***

C&G Systems Inc.,or C&G, founded in 1968 and located in Itasca, Illinois, manufactures aline of mechanized cutting tables for fabricating sheet metal and metal plate.The machines utilize either oxy-fuel or plasma cutting torches produced byother Thermadyne divisions. C&G has a wide range of cutting tables from therelatively inexpensive cantilever type used in general fabrication and jobshops to the large, precision-gantry type found in steel service centersand specialty cutting applications. These metal cutting tables can be used invirtually any metal fabrication plant.

***Tec.Mo—Plasma and Laser Cutting ReplacementConsumables.***

Tec.Mo, located inBologna, Italy, manufactures consumable parts for both plasma and laser cuttingsystems. Tec.Mo has a full line of replacement parts for over 20 differentmanufacturers’ products.

***OCIM—Electric Arc Welding Accessories.***

OCIM, located in Milan,Italy manufactures a complete line of MIG welding torches, TIG torches androbotic MIG arc welding torches. In addition to its full line of torches, itmanufactures consumable parts for these accessories, as well as a full line ofrobotic arc welding accessories.

**Recent Developments**

On February 5, 2005,we received approvals to establish a new wholly-owned subsidiary in China aswell as a joint venture with a Chinese manufacturer of gas equipment. Theformation of these entities supports our initiatives to expand into China andother key international markets as well as adding local Chinese engineeringresources to assist with our global sourcing efforts. Our Chinese partner inthe joint venture has a well established distribution network that will helpthe joint venture sell locally-made, Thermadyne branded products. With regardsto our wholly-owned subsidiary, we are in the process of building ourengineering and sourcing teams, which will be led by experienced Thermadynemanagers.

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**International Business**

We had aggregateinternational sales of approximately $229.7 million, $122.1 million,$77.6 million, and $166.2 million for the year ended December 31,2004, the seven months ended December 31, 2003, the five months ended May 31,2003, and the year ended December 31, 2002, respectively, or approximately48%, 49%, 46%, and 41%, respectively, of our net sales in each such period. Ourinternational sales are influenced by fluctuations in exchange rates of foreigncurrencies, foreign economic conditions and other risks associated with foreigntrade. See “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Quantitative and Qualitative Disclosures About MarketRisk.” Our international sales consist of (a) export sales of our productsmanufactured at U.S. manufacturing facilities and, to a limited extent,products manufactured by third parties, sold through our overseas fieldrepresentatives, and (b) sales of our products manufactured atinternational manufacturing facilities and sold by our foreign subsidiaries.

**Sales and Marketing**

In 2004, our BrandManagement Group, which was formed in 2003, added to its U.S. responsibilitiesthe role to lead our product and marketing globalization efforts bycoordinating resources within our international businesses. Brand Managementnow oversees all marketing activities, including brand and product management,strategic product pricing, promotion and marketing communications. BrandManagement is also responsible for research and development, technical service,application support and product training for all of our brands.

U.S. sales are organized based upon our two primarychannels, the industrial channel, which includes national, regional and localwelding distributors and wholesalers, and the specialty markets channel, whichincludes mass merchandisers, automotive after-market, catalogs, farm andfleet, heating, ventilation and air conditioning, plumbing and medical homehealth care distributors. The industrial channel comprises approximately 87% ofU.S. sales, while specialty markets account for approximately 13%.

Prior to 2003, the industrial channel was serviced bya separate sales force for each of our principal brands. In 2003, weconsolidated these separate groups into one industrial sales force with twoareas and ten regions. In 2004, a second consolidation merged the salesorganizations of the U.S. and Canada, creating nine industrial region and 55industrial districts. One Vice President of Industrial Sales now manages allindustrial sales in the U.S. and Canada. Each region has a Regional Manager,who is responsible for the entire region’s sales. Within each region, DistrictManagers manage sales and distribution in the multiple districts. Each districtalso has a Technical and Training Manager, who is responsible for supportingthe region with training and technical expertise. In addition, we have aNational Accounts group that supports the sale of all of our products to majordistributors and wholesalers.

Our own salesrepresentatives, as well as independent manufacturing representatives thatcarry various product lines, such as heating, ventilation and air conditioningand medical products, service the specialty markets channel.

**Distribution**

We distribute our cuttingand welding products in the United States through approximately 1,100independent cutting and welding products distributors with over 2,800 locationsthat carry one or more of our product lines. We maintain relationships withthese distributors through our sales force, which represents all domesticproduct lines. We distribute our products internationally through our salesforce, independent distributors and wholesalers.

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**Raw Materials**

We have not experienced any difficulties in obtainingraw materials for our operations because our principal raw materials, whichinclude copper, brass, steel and plastic, are widely available and need not bespecially manufactured for use by us. Certain of the raw materials used inhardfacing products, such as cobalt and chromium, are available primarily fromsources outside the United States, some of which are located in countries thatmay be subject to economic and political conditions that could affect pricingand disrupt supply. Although we have historically been able to obtain adequatesupplies of these materials at acceptable prices and have been able to recoverthe costs of any increases in the price of raw materials in the form of higherunit sales prices, restrictions in supply or significant increases in the pricesof cobalt, chromium and other raw materials could adversely affect ourbusiness.

We also purchase certainproducts that we either use in our manufacturing processes or resell. Theseproducts include electronic components, circuit boards, semiconductors, motors,engines, pressure gauges, springs, switches, lenses, forgings and chemicals.Certain of our products are purchased from international sources and thus ourcost can be affected by foreign currency fluctuations. We believe our sourcesof such products are adequate to meet foreseeable demand at acceptable prices.

**Research and Development**

We have developmentengineering groups for each of our product lines that primarily conduct processand product development to meet market needs. As of December 31, 2004, weemployed 75 people in our development engineering groups, most of whom areengineers. Development engineering costs consist primarily of salaries, projectexpenses and benefits of engineering personnel. Our development engineeringcosts are not material to our financial condition or results of operations.

**Competition**

We compete in a competitive market with ourcompetition split into three types of competitors: (1) three full-linewelding equipment and filler metal manufacturers (Lincoln Electric Company,ESAB, a subsidiary of Charter PLC, and several divisions of Illinois Tool Works, Inc.,including the ITW Miller and ITW Hobart Brothers divisions); (2) manysingle-line brand-specific competitors; and (3) a number of low-pricedsmall niche competitors. Our large competitors offer a wide portfolio ofproduct lines with a heavy emphasis on filler metals and welding power suppliesand a core line of niche products. Their position as full-line suppliersand their ability to offer complete product solutions, filler metal volume,sales force relationships and fast delivery are their primary competitivestrengths. Our single-line, brand-specific competitors emphasizeproduct expertise, a specialized focused sales force, quick customer responsetime and flexibility to special needs as their primary competitive strengths.The low-priced manufacturers primarily use low overhead, low marketprices and direct selling to capture a portion of price-sensitivecustomers’ discretionary purchases.

We expect to continue to see price pressure in thesegments of the market where little product differentiation exists and acontinuation of the trends of improved performance at lower prices in the powersource market and further integration of the automated market. International competitorshave been ineffective in penetrating the U.S. domestic markets due to productspecifications, lack of brand recognition and their relative inability toaccess the welding distribution market channel.

Internationally, the competitive profile is similar,with overall lower market prices, more fragmented competition and a weakerpresence of larger U.S. manufacturers.

We believe we competesuccessfully through the strength of our brands, by focusing on technologydevelopment and offering industry-leading products in our niche productareas. We deliver our products 

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througha technically specialized sales force that focuses on meeting end users’ needsand through a generalist sales force focused on program selling to meet ourdistributors’ needs.

**Employees**

As of December 31,2004, we employed 3,036 people, 1,016 of whom were engaged in sales, marketingand administrative activities, and 2,020 were engaged in manufacturingactivities. None of our U.S. workforce is represented by labor unions whileapproximately 82% of the manufacturing employees in our foreign operations arerepresented by labor unions. We believe that our employee relations aresatisfactory. We have not experienced any significant work stoppages.

**Patents, Licenses and Trademarks**

Our products are soldunder a variety of trademarks and trade names. We own trademark registrationsor have filed trademark applications for all our trademarks and have registeredall of our trade names that we believe are material to the operation of ourbusinesses. We also own various patents and from time to time acquire licensesfrom owners of patents to apply such patents to our operations. We do notbelieve any single patent or license is material to the operation of ourbusinesses taken as a whole.

**Internet Information**

Copies of our AnnualReport on Form 10-K, Quarterly Reports on Form 10-Q, Current Reportson Form 8-K and amendments to those reports filed or furnished pursuant toSection 13(a) or 15(d) of the Securities Exchange Act of 1934are available free of charge through our web site (*www.thermadyne.com*) as soon as reasonably practicable afterwe electronically file the materials with or furnish them to the Securities andExchange Commission.

**Item 2.**   *Properties*

We operate 13 manufacturing facilities in the UnitedStates, Italy, Brazil, Malaysia, Australia and Mexico. All domestic facilities,leases and leasehold interests are encumbered by first priority liens securingour obligations under our Amended Credit Agreement and Second-Lien Facility. Weconsider our plants and equipment to be modern and well maintained and believeour plants have sufficient capacity to meet future anticipated expansion needs.

We lease a 16,109 square-foot facility located in St.Louis, Missouri that houses our executive offices, as well as most of ourcentralized services.

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Thefollowing table describes the location and general character of our principalproperties:
| **Subsidiary/Location  of Facility**                | ** ** | ** **                                                                           | ** ** | **Building Space/Number of Buildings** |
|-----------------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|----------------------------------------|
| Thermal Dynamics/West Lebanon, New Hampshire        |       | 156,200 sq. ft./5  buildings (office, manufacturing, sales training)                 |       |
| Victor and Tweco/Denton, Texas                      |       | 222,403 sq. ft./4  buildings (office, manufacturing, storage, sales training center) |       |
| Victor Brazil/Rio de Janeiro, Brazil                |       | 200,000 sq. ft./6  buildings (office, manufacturing, warehouse)                      |       |
| Thermadyne Canada/Oakville, Ontario, Canada         |       | 48,710 sq. ft./1  building (office, warehouse)                                       |       |
| Cigweld Malaysia/Selangor, Malaysia                 |       | 127,575 sq. ft./1  building (office, warehouse)                                      |       |
| Thermadyne Australia/Melbourne, Australia           |       | 273,425 sq. ft./2  buildings (office, manufacturing, storage, research)              |       |
| Cigweld Indonesia/Jakarta, Indonesia                |       | 52,500 sq. ft./1  building (office)                                                  |       |
| Cigweld Malaysia/Kuala Lumpur, Malaysia             |       | 60,000 sq. ft./1  building (office, manufacturing)                                   |       |
| C&G Systems/Itasca, Illinois                    |       | 38,000 sq. ft./1  building (office, manufacturing)                                   |       |
| Stoody and Thermal Arc/Bowling Green, Kentucky      |       | 215,000 sq. ft./2  buildings (office, manufacturing, warehouse)                      |       |
| GenSet/Pavia, Italy                                 |       | 211,651 sq. ft./2  buildings (office, manufacturing, warehouse)                      |       |
| GenSet/Pavia, Italy                                 |       | 44,326 sq. ft./1 building (manufacturing)                                            |       |
| OCIM/Milan, Italy                                   |       | 24,757 sq. ft./2 buildings (office, manufacturing)                                   |       |
| Tec.Mo/Bologna, Italy                               |       | 27,276 sq. ft./2 buildings (office, manufacturing)                                   |       |
| Victor De Mexico and Tweco de Mexico/Sonora, Mexico |       | 178,013 sq. ft./1 building (office, manufacturing)                                   |       |
| Thermadyne Industries/Chino, California             |       | 30,880 sq. ft./1 building (warehouse)                                                |       |
| Victor and Tweco/Alliance, Texas                    |       | 278,333 sq. ft./1  building (warehouse, manufacturing)                               |       |
| Thermadyne S.A. Pty. Ltd./South Africa              |       | 26,000 sq. ft./9  buildings (distribution, office, warehouse)                        |       |
| Maxweld & Braze/South Africa               |       | 8,000 sq. ft./1 building (office, warehouse)                                         |       |
| Thermadyne Plant  Rental/South Africa               |       | 9,135  sq. ft./6 buildings (office, warehouse)                                       |       |

 

All of the abovefacilities are leased, except for the facilities located in Melbourne, thelarger facility in Pavia and the facility in Rio de Janeiro, which are owned.We also have additional assembly and warehouse facilities in the UnitedKingdom, Italy, Japan, Singapore, Mexico, Brazil, South Africa and Australia.

**Item 3.**   *Legal Proceedings*

Our operations are subject to federal, state, localand foreign laws and regulations relating to the protection of the environment,including those governing the discharge of pollutants into the air and water,the use, management and disposal of hazardous materials and employee health andsafety. We are currently not aware of any citations or claims filed against usby any local, state, federal and foreign governmental agencies, which, ifsuccessful, would have a material adverse effect on our financial condition orresults of operations.

As an owner or operator of real property, we may berequired to incur costs relating to remediation of properties, includingproperties at which we dispose waste, and environmental conditions could lead toclaims for personal injury, property damage or damages to natural resources. Weare aware of environmental conditions at certain properties which we now own orlease or previously owned or leased, which are undergoing remediation. We donot believe the cost of such remediation will have a material adverse effect onour business, financial condition or results of operations.

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Certain environmental laws, including, but not limitedto, the Comprehensive Environmental Response, Compensation, and Liability Act andanalogous state laws provide for liability without regard to fault forinvestigation and remediation of spills or other releases of hazardousmaterials, and liability for the entire cleanup can be imposed upon any of anumber of responsible parties. Such laws may apply to conditions at propertiespresently or formerly owned or operated by us or our subsidiaries or by theirpredecessors or previously owned business entities, as well as to conditions atproperties at which wastes or other contamination attributable to us or oursubsidiaries or their predecessors or previously owned business entities havecome to be located. We have in the past and may in the future be named apotentially responsible party at off-site disposal sites to which we have sent waste.We do not believe the ultimate cost relating to such sites will have a materialadverse effect on our financial condition or results of operations.

We and certain of ourwholly owned subsidiaries are defendants in various legal actions, primarilyrelated to product liability. While there is uncertainty relating to anylitigation, management is of the opinion that the outcome of such litigationwill not have a material adverse effect on our financial condition or resultsof operations. At December 31, 2004,we and certain of our wholly owned subsidiaries are co-defendants and have beenserved in 84 cases alleging manganese-induced illness. Most of these casesinvolve claims by multiple plaintiffs. In each instance, a large number ofdefendants were sued. The claimants allege manganese-induced illness and seekcompensatory and, in most instances, punitive damages, of usually unspecifiedamounts. The claimants allege that exposure to manganese contained in weldingconsumables caused adverse neurological conditions. While there is uncertaintyrelating to any litigation, after considering recorded liabilities, we do notbelieve that the outcome of such litigation will have a material adverse effecton our financial condition or results of operations.

**Item 4.**   *Submission of Matters to a Vote of Security Holders*

No matters were submitted to a vote of theshareholders during the fourth quarter of 2004.

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**PART II**

**Item5.**   *Market for the Registrant’sCommon Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities*

OurPredecessor Company’s Common Stock began trading on The Nasdaq National Market(“NASDAQ”) on May 17, 1994. On October 15, 1998, the NASDAQ delistedthe Common Stock. Following its delisting from NASDAQ, the Common Stock tradedon The OTC Bulletin Board. Trading was halted briefly for our Common Stock onThe OTC Bulletin Board as the Common stock of our Predecessor Company was cancelledand the new Common Stock issued pursuant to the Bankruptcy began trading on May 30,2003 under the symbol “THMD.” The following table shows, for the periodsindicated, the high and low closing sale prices of a share of the new CommonStock for the last three quarters of fiscal year 2003 and for fiscal year 2004,as reported by published financial sources.
| ** **                                   | ** ** | **Closing Sale  Price($)** | ** ** |
|----------------------------------------------|------------|---------------------------------|------------|
| ** **                                   | ** ** | **High**                        | ** ** | **Low** | ** ** |
| 2003                                         |       |                            |       |   |   |
| Second Quarter  (May 30 - June 30) |       | 14.00                           |       | 10.50 |   |
| Third Quarter                                |       | 12.50                           |       | 9.68 |   |
| Fourth Quarter                               |       | 13.10                           |       | 9.50 |   |
| 2004                                         |       |                            |       |   |   |
| First Quarter                                |       | 16.40                           |       | 12.35 |   |
| Second Quarter                               |       | 15.05                           |       | 12.39 |   |
| Third Quarter                                |       | 15.05                           |       | 11.00 |   |
| Fourth Quarter                               |       | 13.00                           |       | 10.50 |   |

 

On March 1, 2005, the last reported sale pricefor our Common Stock as reported by published financial sources was $14.34 pershare. As of March 1, 2005 there were approximately 207 holders ofrecord of our Common Stock.

We have historically notpaid any cash dividends on our Common Stock, and we do not have any presentintention to commence payment of any cash dividends. We intend to retainearnings to provide funds for the operation and expansion of our business andto repay outstanding indebtedness. Our debt agreements contain certaincovenants restricting the payment of dividends on or repurchases of CommonStock. See “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Overview.”

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**Item 6.**   *Selected Financial Data*

Theselected financial data as of and for the year ended December 31, 2004,the seven months ended December 31, 2003, the five months ended May 31,2003 and each of the years in the three-year period ended December 31,2002 set forth below has been derived from our audited consolidated financialstatements. The selected financial data should be read in conjunction with “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” andour consolidated financial statements and the notes thereto, in each caseincluded elsewhere herein.
| ** **                                                  | ** ** | **Reorganized Company**                            | ** ** | **Predecessor Company** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                  | ** ** | **Fiscal**                                              | ** ** | **Seven**                    | ** ** | **Five** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                  | ** ** | **Year**                                                | ** ** | **Months**                   | ** ** | **Months** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                  | ** ** | **Ended  December 31,**                            | ** ** | **Ended  December 31,** | ** ** | **Ended  May 31,** | ** ** | **Fiscal Year Ended  December 31,** | ** ** |
| ** **                                                  | ** ** | **2004**                                                | ** ** | **2003**                     | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** | **2000** | ** ** |
| ** **                                                  | ** ** | **(In millions, except per share data)** | ** ** |
| Operating Results Data:                                     |       |                                                    |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                                                   |       |                                                    | $          | 482.6                        |       |   |   | $ | 250.3 |   |   | $ | 169.6 |   | $ | 407.7 |   | $ | 431.5 |   | $ | 500.9 |   |
| Cost of goods sold                                          |       |                                                    | 335.8      |                         |       |   | 179.8 |   |   | 109.1 |   | 261.6 |   | 290.3 |   | 318.8 |   |
| Selling, general and  administrative expenses          |       |                                                    | 124.2      |                         |       |   | 68.6 |   |   | 43.8 |   | 106.7 |   | 110.5 |   | 114.7 |   |
| Amortization of  intangibles                                |       |                                                    | 3.4        |                         |       |   | 2.4 |   |   | 0.3 |   | 0.8 |   | 2.0 |   | 26.4 |   |
| Net periodic  postretirement benefits                       |       |                                                    | 2.3        |                         |       |   | 1.5 |   |   | 0.5 |   | 1.2 |   | 1.1 |   | 1.1 |   |
| Restructuring costs                                         |       |                                                    | 8.8        |                         |       |   | 1.9 |   |   | 0.5 |   | — |   | 1.5 |   | 30.3 |   |
| Operating income (loss)                                     |       |                                                    | 8.1        |                         |       |   | (3.8 | ) |   | 15.3 |   | 37.4 |   | 26.1 |   | 9.6 |   |
| Interest expense(3)                                         |       |                                                    | 21.8       |                         |       |   | 9.6 |   |   | 8.8 |   | 22.6 |   | 76.4 |   | 81.4 |   |
| Amortization of deferred  financing costs                   |       |                                                    | 1.4        |                         |       |   | 0.3 |   |   | — |   | — |   | 4.4 |   | 3.3 |   |
| Other expense (income),  net                                |       |                                                    | 3.5        |                         |       |   | 0.1 |   |   | 1.0 |   | 3.8 |   | 0.9 |   | (0.3 | ) |
| Reorganization items                                        |       |                                                    | —     |                         |       |   | — |   |   | 15.7 |   | 23.9 |   | (6.7 | ) | — |   |
| Gain from reorganization  and fresh-start accounting        |       |                                                    | —     |                         |       |   | — |   |   | (582.1 | ) | — |   | — |   | — |   |
| Net Income (loss)                                           |       |                                                    | (24.0      | )                            |       |   | (17.6 | ) |   | 569.0 |   | (16.0 | ) | (51.5 | ) | (106.6 | ) |
| Income (loss) per share  applicable to common  shares: |       |                                                    |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                       |       |                                                    | (1.80      | )                            |       |   | (1.32 | ) |   | 158.47 |   | (4.44 | ) | (16.78 | ) | (32.04 | ) |
| Diluted                                                     |       |                                                    | (1.80      | )                            |       |   | (1.32 | ) |   | 158.47 |   | (4.44 | ) | (16.78 | ) | (32.04 | ) |
| Consolidated Balance  Sheet Data (Period end):              |       |                                                    |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Working capital(1)                                          |       |                                                    | $          | 103.3                        |       |   |   | $ | 107.2 |   |   | $ | 133.5 |   | $ | 139.3 |   | $ | 137.4 |   | $ | 83.4 |   |
| Total assets                                                |       |                                                    | 601.9      |                         |       |   | 509.5 |   |   | 308.6 |   | 297.6 |   | 310.4 |   | 317.9 |   |
| Total debt(2)                                               |       |                                                    | 245.7      |                         |       |   | 218.4 |   |   | 815.8 |   | 809.3 |   | 808.7 |   | 753.9 |   |
| Total shareholders’  equity (deficit)                  |       |                                                    | 155.6      |                         |       |   | 172.2 |   |   | (751.1 | ) | (743.7 | ) | (725.1 | ) | (658.4 | ) |
| Consolidated Cash Flow  Data:                               |       |                                                    |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash provided by  (used in) operating activities   |       |                                                    | $          | (13.4                        | )          |   |   | $ | 13.6 |   |   | $ | (3.4 | ) | $ | 10.7 |   | $ | 5.1 |   | $ | (4.9 | ) |
| Net cash used in  investing activities                 |       |                                                    | (14.8      | )                            |       |   | (8.1 | ) |   | (4.1 | ) | (9.4 | ) | (15.3 | ) | (16.5 | ) |
| Net cash provided by (used  in) financing activities   |       |                                                    | 18.0       |                         |       |   | (1.5 | ) |   | 2.9 |   | 1.3 |   | 14.6 |   | 18.5 |   |
| Other Data:                                                 |       |                                                    |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and  amortization                              |       |                                                    | 25.4       |                         |       |   | 16.3 |   |   | 6.4 |   | 17.8 |   | 19.0 |   | 41.7 |   |
| Capital expenditures                                        |       |                                                    | 16.1       |                         |       |   | 8.1 |   |   | 4.1 |   | 9.4 |   | 15.3 |   | 18.7 |   |

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(1)          Amounts for 2001 and2002 and as of May 31, 2003 exclude liabilities subject to compromise.

(2)          Amounts for 2001 and2002 and as of May 31, 2003 include approximately $776.0 million,$778.7 million and $782.1 million, respectively, classified as “liabilitiessubject to compromise.”

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(3)          TheCompany ceased accruing for interest expense for certain pre-petition long-termobligations upon filing for relief under Chapter 11 of the Bankruptcy Code on November 19,2001.

**Item 7.**   *Management’s Discussion and Analysis of Financial Condition and Resultsof Operations*

**Overview**

We are a leading global designer and manufacturer ofgas and arc cutting and welding products, including equipment, accessories andconsumables. Our products are used by manufacturing, construction, fabricationand foundry operations to cut, join and reinforce steel, aluminum and othermetals. We design, manufacture and sell products in four principal categories: (1) gasapparatus and related consumables; (2) arc welding equipment; (3) arcwelding accessories and consumables; and (4) plasma and automated cuttingequipment and related consumables.

Demand for our products is highly cyclical becausemany of the end users of our products are themselves in highly cyclicalindustries, such as commercial construction, steel shipbuilding, petrochemicalconstruction and general manufacturing. The demand for our products and,therefore, our results of operations are directly related to the level ofproduction in these end user industries.

The major components of our cost of goods sold arematerial, labor and overhead. Principal raw materials used are copper, brass,steel and plastic, which are widely available and need not be specificallymanufactured for use by us. Certain other raw materials used in our hardfacingproducts, such as cobalt and chromium, are available primarily from sourcesoutside the United States. Historically, we have been able to obtain adequatesupplies of raw materials at acceptable prices. In recent years we have takensteps to reduce our overhead and labor costs through relocation of jobs,consolidation of manufacturing operations and outsourcing of certain componentsand products. Our operating profit is affected by the mix between the productssold as margins are generally higher on torches and guns as compared to powersupplies and higher on consumables and replacement parts as compared to torchesand guns.

Our products are sold domestically primarily throughindustrial welding distributors, retailers and wholesalers. Internationally, wesell our products through our sales force, independent distributors andwholesalers.

For the year ended December 31,2004, approximately 52.4% of our sales were made to customers in the UnitedStates. The majority of our international sales are denominated in the localcurrency of the country of origin of the sale.

**Key Indicators**

Key economic measures relevant to us include steelconsumption, industrial production trends and purchasing manager indices.Industries that we believe provide a reasonable indication of demand for ourproducts include shipbuilding, construction and transportation, railcarmanufacturing, oil and gas exploration, metal fabrication and farm machinery.Although these measures provide important data on trends relevant to us,indicators with a more direct relationship to our business that might provide aforward-looking view of market conditions and demand for our products arenot available.

Key performance measurements we use to manage thebusiness include orders, sales, operating expenses and efficiencies, inventory,fill-rates and other working capital components which provide key indicators ofbusiness trends. The timing of these measurements varies, but may be daily,weekly and monthly depending on the need for management information and theavailability of data.

Key financial measurementswe use to evaluate the results of our business as well as the operations of ourindividual units include sales, gross profit, selling, general andadministrative expenses, operating income, earnings before interest, taxes, anddepreciation and amortization, operating cash flows, capital 

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expendituresand controllable working capital, which we define as accounts receivable,inventory, and accounts payable. These measurements are reviewed monthly,quarterly and annually and are compared with historical periods, as well asobjectives established by our Board of Directors.

**Bankruptcy Reorganization**

On November 19, 2001, our Predecessor Company andsubstantially all of its domestic subsidiaries filed voluntary petitions forrelief under Chapter 11 of the U.S. Bankruptcy Code. The filing resulted frominsufficient liquidity and was determined to be the most efficient andfavorable alternative to restructure our balance sheet. Since 1998, ouroperating results have been negatively impacted by a weak industrial economy inthe United States, as well as difficult economic conditions in most of ourforeign markets. The deterioration in our operating results reduced liquidity,which made it increasingly difficult for us to meet all of our debt serviceobligations. During the bankruptcy proceedings, our Predecessor Companyoperated its businesses as a debtor-in-possession.

We emerged from bankruptcy on May 23, 2003. As aresult of the U.S. Bankruptcy Court’s confirmation order of April 3, 2003,which approved our plan of reorganization, our total debt was reduced toapproximately $220.0 million, as compared to approximately$800.0 million in debt and $79.0 million in preferred stockoutstanding on November 19, 2001. In connection with our emergence frombankruptcy, we issued $180.0 million of notes under a new senior securedterm loan facility, 13.3 million shares of new common stock, 1,157,000 Series AWarrants, 700,000 Series B Warrants and 271,429 Series C Warrants inconsideration for the cancellation of certain pre-petition claims andconcurrently entered into a new $50.0 million senior secured revolvingcredit facility.

Under the Plan ofReorganization, General Unsecured Creditors (Class 4) are entitled todistributions of cash equal to the lesser of (1) a holder’s pro rata shareof $7.5 million and (2) 50 percent of such holder’s claim (estimatedby us to provide a recovery on such claims of 30% to 37% of the amount of suchclaims). We have made distributions of $4.9 million of such amounts through December 31,2004.

**Refinancing**

On February 5, 2004,we completed the placement of $175.0 million aggregate principal amount of91¤4%senior subordinated notes due 2014. We refer to these notes as the SeniorSubordinated Notes. Also on February 5, 2004, we finalized an amendmentand restatement to our existing credit facility to modify certain financialcovenants and other restrictions to provide us with additional financialflexibility and to provide a $20.0 million term loan, which we refer to asthe Term Loan. The amended and restated credit facility is referred to as theCredit Agreement. We refer to these two transactions as the Refinancing. Theproceeds from the Refinancing were used to repay the $180.0 million ofterm loans issued in connection with the Plan of Reorganization, reduce amountsoutstanding under our revolving credit facility and pay fees and expensesrelated to the Refinancing.  For adescription of our existing credit facility, see “Liquidity and CapitalResources”. In May 2004, for the purpose of an exchange offer, weregistered notes with terms identical to the Senior Subordinated Notes underthe Securities Act of 1933. We completed the exchange offer in the secondquarter of 2004, and over 99% of the original notes were exchanged for theregistered notes.

On July 29, 2004, weentered into a new $20.0 million second-lien term loan facility (the “Second-LienFacility”). Borrowings under the Second-Lien Facility were used to repay aportion of the amount outstanding under the existing credit facility. On November 22,2004, the Credit Agreement was further amended to provide for increasedfinancial flexibility by changing the determination of the borrowing base froma cash flow-based formula to an asset-based formula, adding certain foreignsubsidiaries as guarantors and extending the maturity of the Second-LienFacility. On March 30, 2005, the maturity of the Second-Lien Facility wasextended to April 30, 2006, and certain financial covenants were modified. See“Liquidity and Capital Resources”.

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**Change in Senior Management**

On October 6, 2003,Paul D. Melnuk was named Chairman of the Board and on January 28,2004 was named Chief Executive Officer. On January 18, 2005, David L. Dyckmanwas named our Executive Vice-President—ChiefFinancial Officer.

**Results of Operations**

EffectiveJune 1, 2003, we adopted the principles of “fresh-start” accountingpursuant to which our assets were recorded at their reorganization value, whichis defined as the fair value of the assets of the Reorganized Company. As partof our fresh-start revaluation, we also recorded significant goodwill(reorganization value in excess of identifiable assets). In addition, as partof the reorganization, we significantly reduced our long-term debt andeliminated our preferred stock. As a result of the foregoing, our financialdata as of and for the seven months ended December 31, 2003 and as of andfor the year ended December 31, 2004 as presented in the consolidatedfinancial statements is not comparable to prior periods.
| ** **                                                               | ** ** | **Reorganized Company** | ** ** | **Predecessor Company**    | ** ** |
|--------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                                               | ** ** | **Year**                     | ** ** | **Seven Months**           | ** ** | **Five Months** | ** ** | **Year** | ** ** |
| ** **                                                               | ** ** | **Ended**                    | ** ** | **Ended**                       | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                                               | ** ** | **December 31,2004**    | ** ** | **December 31, 2003** | ** ** | **May 31,2003** | ** ** | **December 31, 2002** | ** ** |
| Net sales                                                                |       |                         | $          | 482,619                         |       |   |   | $ | 250,320 |   |   |   | $ | 169,617 |   |   |   | $ | 407,715 |   |   |
| Operating expenses:                                                      |       |                         |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of goods sold                                                       |       |                         | 335,791    |                            |       |   | 179,765 |   |   |   | 109,122 |   |   |   | 261,638 |   |   |
| Selling, general and administrative expenses                             |       |                         | 124,171    |                            |       |   | 68,603 |   |   |   | 43,824 |   |   |   | 106,695 |   |   |
| Amortization of intangibles                                              |       |                         | 3,453      |                            |       |   | 2,370 |   |   |   | 309 |   |   |   | 846 |   |   |
| Net periodic postretirement benefits                                     |       |                         | 2,250      |                            |       |   | 1,488 |   |   |   | 516 |   |   |   | 1,152 |   |   |
| Restructuring costs                                                      |       |                         | 8,820      |                            |       |   | 1,873 |   |   |   | 516 |   |   |   | — |   |   |
| Operating income (loss)                                                  |       |                         | 8,134      |                            |       |   | (3,779 | ) |   |   | 15,330 |   |   |   | 37,384 |   |   |
| Other income (expense):                                                  |       |                         |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                                                                 |       |                         | (21,833    | )                               |       |   | (9,597 | ) |   |   | (8,798 | ) |   |   | (22,599 | ) |   |
| Amortization of deferred financing costs                                 |       |                         | (1,418     | )                               |       |   | (266 | ) |   |   | — |   |   |   | — |   |   |
| Other, net                                                               |       |                         | (3,453     | )                               |       |   | (80 | ) |   |   | (1,047 | ) |   |   | (3,786 | ) |   |
| Income (loss)  before reorganization items and income tax provision |       |                         | (18,570)   |                            |       |   | (13,722 | ) |   |   | 5,485 |   |   |   | 10,999 |   |   |
| Reorganization  items                                                    |       |                         | —     |                            |       |   | — |   |   |   | (15,692 | ) |   |   | (23,908 | ) |   |
| Gain on  reorganization and fresh-start accounting                       |       |                         | —     |                            |       |   | — |   |   |   | 582,109 |   |   |   | — |   |   |
| Income (loss)  before income tax provision                               |       |                         | (18,570    | )                               |       |   | (13,722 | ) |   |   | 571,902 |   |   |   | (12,909 | ) |   |
| Income tax  provision                                                    |       |                         | 5,407      |                            |       |   | 3,829 |   |   |   | 2,939 |   |   |   | 3,046 |   |   |
| Net income (loss)                                                        |       |                         | $          | (23,977                         | )          |   |   | $ | (17,551 | ) |   |   | $ | 568,963 |   |   |   | $ | (15,955 | ) |   |
| Net sales summary:                                                       |       |                         |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Domestic net  sales                                                      |       |                         | $          | 252,948                         |       |   |   | $ | 128,227 |   |   |   | $ | 92,035 |   |   |   | $ | 241,500 |   |   |
| International net  sales                                                 |       |                         | 229,671    |                            |       |   | 122,093 |   |   |   | 77,582 |   |   |   | 166,215 |   |   |
| Consolidated net  sales                                                  |       |                         | $          | 482,619                         |       |   |   | $ | 250,320 |   |   |   | $ | 169,617 |   |   |   | $ | 407,715 |   |   |

 

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The following descriptionof results of operations is presented for the fiscal year ended December 31,2004, the seven months ended December 31, 2003, the five months ended May 31,2003 and the fiscal year ended December 31, 2002.

***2004 Compared to 2003***

*Net Sales*

In the fourth quarter of 2004, we began including therebates attributable to our distributor incentive plans as a reduction in netsales. Distributor rebates for the year ended December 31, 2004, the sevenmonths ended December 31, 2003 and the five months ended May 31, 2003were $14.4 million, $4.1 million and $2.4 million, respectively. Rebates forperiods prior to 2004 have been reclassified to conform to the currentpresentation. Previously, rebates were included in cost of sales.

Net sales for the yearended December 31, 2004 were $482.6 million, which compares to$250.3 million for the seven months ended December 31, 2003 and$169.6 million for the five months ended May 31, 2003, respectively, whichis an increase of 14.9%. Domestic sales for 2004 were $252.9 millioncompared to $128.2 million and $92.0 million for the seven monthsended December 31, 2003 and the five months ended May 31, 2003,respectively. The increase in domestic sales was seen across all brands and wasdriven primarily by a stronger industrial economy in the U.S. as well asincreases in market share. International sales for the year ended December 31,2004 were $229.7 million, which compares to $122.1 million for the seven monthsended December 31, 2003 and $77.6 million for the five months ended May 31,2003, respectively, an increase of 15.0%. Excluding the effects of foreigncurrency fluctuations, international sales would have been up 4.7% compared to2003, which is attributable primarily to increases in Asia-Pacific, LatinAmerica and South Africa. We take advantage of pricing opportunities when theyare available, and when required by market or competitive conditions, we willmake pricing concessions. As a result of sharp increases in the prices ofcertain raw materials, in particular metal prices, we implemented a limitedprice increase in the U.S. in July 2004 and a more comprehensive priceincrease in the U.S. in the fourth quarter of 2004. The timing of theseincreases was such that the impact on our sales for 2004 was not material.

*Gross Margin*

Gross margin for the year ended December 31, 2004was $146.8 million, as compared to $70.6 million for the seven months ended December 31,2003 and $60.5 million for the five months ended May 31, 2003, an increaseof 12.0%.  As a percentage of sales,gross margin was 30.4% for 2004 as compared to 28.2% for the seven months endedDecember 31, 2003 and 35.7% for the five months ended May 31, 2003. Grossmargin for the seven months ended December 31, 2003 includes a $4.4million excess inventory write-down reflecting a change in working capitalstrategy, a $2.7 million charge resulting from a change in estimate related toour product warranty reserve, and a non-cash charge of approximately $2.8million related to the write-up of foreign inventory in connection withfresh-start accounting. These costs had the effect of reducing our gross marginfor the seven months ended December 31, 2003 by 4.0 percentage points. Grossmargin in 2004 excluding the impact of a $2.2 million charge with respectto our Brazilian and South African operations, as discussed at****Item9A. “Controls and Procedures”,was 30.9%. The effect of translating the local currency results of the Company’sinternational business units into U.S. dollars, which did not affect grossmargin expressed as a percentage of sales, resulted in an increase in grossmargin of $6.3 million for 2004 as compared with the prior year.

For the year ended December 31, 2004, the benefitof higher sales volume was largely offset by higher material costs, increasedrebates under distributor incentive plans, increased overhead spending, costsassociated with the relocation of production to our Denton, Texas facility and,to a lesser extent, lower average realized unit selling prices. Material costsnegatively impacted gross margin by approximately 

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$9.2 million relativeto last year. The overall increase in material costs was attributable to:  1) higher prices for key raw materials suchas copper, brass, steel and freight costs 2) temporary inefficiency costsrelated to increased outsourcing in the U.S. of component production and higherin-bound freight costs, and 3) unfavorable product mix.

Rebates under the modified distributor incentive planincreased to $14.4 million for the twelve months ended December 31, 2004compared to $6.5 million for 2003.

For the year ended December 31, 2004, overheadspending, primarily for the U.S. operations, increased approximately $4.0million more than would have been expected as a result of increased productionlevels. This is largely attributable to approximately $3.8 million ofincremental costs related to establishing and operating the Roanoke, Texasfacility. Additionally, other costs of sales increased approximately $1.4million during 2004 due to the relocation of production to the Company’sDenton, Texas facility. These increases occurred primarily in the first threequarters of 2004 and were compounded by a sharp increase in demand.

Gross margin was alsoimpacted by a net reduction in average unit selling prices of $1.3 million in2004 as compared with the prior year. Lower prices resulted from actions taken,principally during the first half of the year, to address competitive marketconditions and gain additional business. These actions were followed, but notoffset, by our price increases in the second half of the year which primarilyreflected the pass through of commodity cost increases impacting our results.

*Selling, Generaland Administrative and Other Expenses*

Selling, general and administrative expenses were $124.2million for the year ended December 31, 2004, which compares to $68.6million and $43.8 million for the seven months ended December 31, 2003 andthe five months ended May 31, 2003, respectively, which is an increase of10.4%. As a percentage of sales, selling, general and administrative expenseswere 25.7% for the year ended December 31, 2004, versus 27.4% for theseven months ended December 31, 2003 and 25.8% for the five months ended May 31,2003. Included in the seven months ended December 31, 2003 was a charge ofapproximately $1.8 million in recognition of the bankruptcy of one of ourcustomers and the deteriorated aging in other accounts. Selling, general andadministrative expenses increased $4.8 million in 2004 as a result ofadditional sales and marketing initiatives including the expansion anddevelopment of international markets, increased new product development, andother expansion initiatives. Expenses also increased over 2003 by $2.3 millionrelated to compliance with the Sarbanes-Oxley Act of 2002 and other governancecosts, $1.3 million related to legal costs associated with patent and trademarkmatters, $1.8 million associated with improvements made to our domesticinformation system and organization, and $3.8 million as a result ofchanges in foreign currency rates. Partially offsetting these increasescompared to 2003 was a reduction of $2.5 million related to separation andmanagement incentive compensation. The remaining increase in selling, generaland administrative expenses in 2004 compared to 2003 relates primarily toexpenses that fluctuate with sales such as commissions.

During the year ended December 31, 2004 weincurred restructuring costs of $5.9 million related to the relocation andconsolidation of certain U.S. manufacturing facilities, compared to $1.9 millionand $0.5 million for the seven months ended December 31, 2003 and the fivemonths ended May 31, 2003, respectively. Also included in restructuringcharges for the year ended December 31, 2004 was approximately $2.9million of severance costs related to reorganizing the domestic workforce toimprove efficiency and productivity.

Amortization of intangibles was $3.5 million for theyear ended December 31, 2004 compared to $2.4 million and$0.3 million for the seven months ended December 31, 2003 and thefive months ended May 31, 2003, respectively. The increase in expenseduring 2004 results from a full year of amortization expense related to therevaluation of our intangible assets in connection with fresh-startaccounting.

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Interest expense was $21.8 million for the year ended December 31,2004, compared to $9.6 million for the seven months ended December 31,2003 and $8.8 million for the five months ended May 31, 2003,respectively. The increase in interest expense in 2004 resulted from an overallincrease in long-term debt as well as an increase in our average borrowingrate.

Reorganization items for the five months ended May 31,2003 were $15.7 million and included $14.9 million of professionalfees, $0.2 million paid under the key employee retention program and$0.6 million of other reorganization costs.

An income tax provision of$5.4 million was recorded on a pretax loss of $18.2 million for the year ended December 31,2004. An income tax provision of $3.8 million was recorded on a pretaxloss of $13.7 million for the seven months ended December 31, 2003,and a tax provision of $2.9 million was recorded on pretax income of$571.9 million for the five months ended May 31, 2003. The income taxprovision for these periods differs from that determined by applying the U.S.federal statutory rate primarily due to the gain from reorganization andadoption of fresh-start accounting, nondeductible expenses and thevaluation allowance established for deferred tax assets.  The income tax provision for each periodprimarily relates to income generated in foreign jurisdictions.

***2003 Compared to 2002***

*Net Sales*

In the fourth quarter of 2004, we began including therebates attributable to our distributor incentive plans as a reduction in netsales. Distributor rebates for the seven months ended December 31, 2003,the five months ended May 31, 2003 and the year ended December 31,2002 were $4.1 million, $2.4 million and $5.9 million respectively, and havebeen reclassified to conform to the current presentation. Rebates werepreviously included in cost of sales.

Net sales for the sevenmonths ended December 31, 2003 and the five months ended May 31, 2003were $250.3 million and $169.6 million, respectively, which compares to$407.7 million for the year ended December 31, 2002. Domestic salesfor the seven months ended December 31, 2003 were $128.2 million andwere $92.0 million for the five months ended May 31, 2003. Domesticsales for 2002 were $241.5 million. Generally weak economic conditions inthe U.S., particularly in the industrial sector, together with a highlycompetitive market are the main reasons for the decline in domestic sales. Alsohaving a negative effect on our domestic sales in 2003 was a drop in ourfill-rates, particularly in the fourth quarter, which was attributable in partto complications encountered in connection with our relocation andconsolidation of certain U.S. manufacturing facilities. International sales forthe seven months ended December 31, 2003 and the five months ended May 31,2003 were $122.1 million and $77.6 million, respectively, whichcompares to $166.2 million for the year ended December 31, 2002. Wesaw growth in all of our key international markets in 2003 with the mostsignificant sales increases in South Africa, Europe and Asia-Pacific. A weakerU.S. dollar contributed to the growth in international sales in 2003 with anincrease of approximately $17.8 million for the seven-month period ended December 31,2003 and an increase of approximately $8.5 million in the five-monthperiod ended May 31, 2003 attributable to the effects of currency.Excluding the effect of currency, substantially all of our key internationalmarkets showed sales growth in 2003 compared to 2002. We take advantage ofpricing opportunities when they are available, and when required by market orcompetitive conditions, we will make pricing concessions. However, pricingchanges did not have a material impact on our 2003 sales in comparison to 2002.

*Costs and Expenses*

Cost of goods sold as a percentage of sales was 71.8%for the seven months ended December 31, 2003 and was 64.3% for the fivemonths ended May 31, 2003, which compares to 64.2% for the year ended December 31,2002. The increase in cost of goods sold as a percentage of sales in 2003results partly from 

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the mix between domesticand international sales and also from a decline in production volume in thedomestic manufacturing facilities which has resulted in less absorption offixed factory costs. The effect of translating the local currency results ofour international business units into U.S. dollars, which doesn’t affect costof goods sold expressed as a percentage of sales, resulted in an increase incost of goods sold of approximately $12.8 million and $5.5 millionfor the seven months ended December 31, 2003 and the five months ended May 31,2003, respectively. As a result of implementing fresh-start accounting,cost of goods sold for the seven months ended December 31, 2003 includes a$2.8 million non-cash charge related to the required write-up of foreigninventory and approximately $2.0 million of incremental depreciation expenserelated to the revaluation of our fixed assets. Our foreign business unitsaccount for their inventory using the first-in, first-out method and therevalued inventory was sold prior to December 31, 2003. Cost of goods soldin the seven months ended December 31, 2003 also includes a$4.4 million write-down of excess inventory reflecting our change inmanagement during the fourth quarter and our new strategy to reduce workingcapital requirements and liquidate inventory at a more rapid pace. In addition,cost of goods sold for the seven months ended December 31, 2003 includes anon-cash $2.7 million charge to increase our product warranty reservereflecting the change in our estimate of the total warranty costs that may beincurred related to products sold prior to December 31, 2003.

Selling, general and administrative expenses were$68.6 million for the seven-month period ended December 31, 2003 andwere $43.8 million for the five-month period ended May 31,2003, which compares to $106.7 million for the year ended December 31,2002. As a percentage of sales, selling, general and administrative expenseswere 27.4% and 25.8% of net sales for the seven months ended December 31,2003 and the five months ended May 31, 2003, respectively, and were 26.2%for the year ended December 31, 2002. Selling, general and administrativeexpenses were negatively impacted in 2003 as a result of changes in foreign currency.The seven-month period ended December 31, 2003 and the five-monthperiod ended May 31, 2003 included increases in selling, general andadministrative expenses of $2.9 million and $1.3 million,respectively, as a result of changes in foreign currency rates. Also negativelyimpacting selling, general and administrative expenses during the seven-monthperiod ended December 31, 2003 were $0.9 million of separation costsincurred related to a change in senior management, and an incremental$1.8 million of expense as we increased our allowance for doubtfulaccounts in recognition of the bankruptcy of one of our customers anddeteriorated aging in other accounts. Selling, general and administrativeexpenses include $1.8 million of expense related to the 2003 managementincentive plan, which was recorded during the seven-month period ended December 31,2003, which compares to $3.5 million of expense included in 2002 relatedto the 2002 incentive plan.

Restructuring costs for the seven months ended December 31,2003 and the five months ended May 31, 2003 were $1.9 million and$0.5 million, consisting primarily of spending associated with ourreorganization of certain domestic manufacturing facilities. There were no suchcosts incurred in 2002.

Amortization of intangibles was $2.4 million and$0.3 million for the seven months ended December 31, 2003 and thefive months ended May 31, 2003, respectively, compared to$0.8 million for the year ended December 31, 2002. The increase inexpense during the seven months ended December 31, 2003 results from therevaluation of our intangible assets in connection with fresh-startaccounting.

Interest expense was $9.6 million for the sevenmonths ended December 31, 2003 and was $8.8 million for the fivemonths ended May 31, 2003. For the year ended December 31, 2002interest expense was $22.6 million. The decrease in interest expense in2003 resulted from a reduction in variable interest rates together with thebenefit realized from the overall reduction in long-term debt that resultedfrom the consummation of the Plan of Reorganization.

Reorganization items for the five months ended May 31,2003 were $15.7 million and included $14.9 million of professionalfees, $0.2 million paid under the key employee retention program and$0.6 million of other reorganization costs. Reorganization costs for 2002were $23.9 million and included 

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$9.8 million ofprofessional fees, $1.9 million of expenses related to financing feesassociated with the DIP facility, $13.8 million for the write-off ofdeferred financing fees associated with pre-petition long-term debt subject tocompromise, $0.3 million related to payments made under the key employeeretention plan approved by the Court, a benefit of $2.7 million related tothe rejection of certain capital leases and $0.8 million of otherreorganization costs.

An income tax provision of$3.8 million was recorded on a pretax loss of $13.7 million for theseven months ended December 31, 2003, and a tax provision of$2.9 million was recorded on pretax income of $571.9 million for thefive months ended May 31, 2003. The income tax provision for these periodsdiffers from that determined by applying the U.S. federal statutory rateprimarily due to the gain from reorganization and adoption of fresh-startaccounting, nondeductible expenses and the valuation allowance established fordeferred tax assets. An income tax provision of $3.0 million was recordedon a pretax loss of $12.9 million for the 12 months ended December 31,2002. The income tax provision for 2002 differs from that determined byapplying the U.S. federal statutory rate primarily due to nondeductibleexpenses and the valuation allowance established for deferred tax assets. Theincome tax provision for each period primarily relates to income generated inforeign jurisdictions.

**FutureEffects of Fresh-Start Accounting**

The charges reflected inour statement of operations for the year ended December 31, 2004 includecertain non-cash adjustments related to the adoption of fresh-startaccounting in accordance with SOP 90-7 as follows: approximately$4.0 million of additional depreciation related to the revaluation ofproperty, plant and equipment and approximately $3.1 million of additionalamortization related to the revaluation of identifiable intangible assets. Thecharges reflected in our statement of operations for the seven months ended December 31,2003 include non-cash adjustments as follows: a $2.8 million chargerelated to the revaluation of our foreign inventory, $2.0 million ofadditional depreciation related to the revaluation of property, plant andequipment and $1.8 million of additional amortization related to therevaluation of identifiable intangible assets.

**Restructuring and Other Charges**

During the years ended December 31, 2000, 2001,and 2002, the five months ended May 31, 2003, the seven months ended December 31,2003, and the year ended December 31, 2004, we have incurred restructuringand other special charges related to initiatives that we have undertaken tolower costs and improve our operational performance. A description of theseinitiatives is provided below.

*Plant Restructurings.  *Overthe past several years, we have undertaken a number of projects to relocateproduction and consolidate manufacturing operations. These include therelocation of substantially all of our Asia-Pacific production from Australiato Malaysia the relocation of our high-volume assembly operations for our U.S.gas apparatus and arc welding gun and accessory products to Mexico, therelocation of our U.S. arc welding power supply manufacturing to Malaysia andthe consolidation of the remaining U.S. manufacturing for arc welding guns andaccessories with our facility in Denton, Texas. Costs related to theseinitiatives were $30.3 million in 2000, $1.5 million in 2001, $0 in2002, $0.5 million for the five months ended May 31, 2003, $1.9 millionfor the seven months ended December 31, 2003, and $5.9 million in 2004.  Costs related to these projects are includedin restructuring costs.

*Information Systems.  *Inmid-2000, we began a project to standardize our information systems in theUnited States. Prior to this initiative, most of our U.S. business units usedsimilar hardware and software, but had tailored their systems to fit theirparticular business needs. Our efforts to standardize our information systemscentered on establishing one common hardware and software platform andstandardizing the functionality of the system so that similar transactions andprocesses are executed the 

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same across all U.S.business units. Costs related to this project were $2.4 million in 2000,$3.2 million in 2001, $2.5 million in 2002, and $0.2 million forthe five months ended May 31, 2003. No further costs have been incurredrelated to this initiative. These costs are included in selling, general andadministrative expenses.

*OperationalImprovements.  *Over the past several years, we havecompleted a number of initiatives to improve our overall performance. Theseinitiatives included evaluations of our manufacturing operations andperformance, sales and marketing projects and efforts to evaluate and improvethe distribution of our products and customer service performance. Costsrelated to our operational improvements consisted primarily of outsideconsultants and totaled $2.3 million in 2000, $9.4 million in 2001,$3.4 million in 2002, $1.4 million for the five months ended May 31,2003, and $1.2 million for the seven months ended December 31, 2003.No further costs related to these initiatives were incurred in 2004. Thesecosts are included in selling, general and administrative expenses.

**Reorganization Items**

Reorganization items are items of income, expense andloss that were realized or incurred by the Predecessor Company as a result ofour decision to reorganize under Chapter 11 of the Bankruptcy Code.

Netreorganization items for the five months ended May 31, 2003 and the yearsended December 31, 2002 and 2001, consisted of the following:
| ** **                                            | ** ** | **Five months  Ended** | ** ** | **Year Ended**

**December 31,** | ** ** |
|-------------------------------------------------------|------------|-----------------------------|------------|--------------------------------------------|------------|
| ** **                                            | ** ** | **May 31, 2003**  | ** ** | **2002**                                   | ** ** | **2001** | ** ** |
| Professional fees  and expenses                       |       |                        | $          | 14.9                                       |       |   | $ | 9.8 |   | $ | 4.8 |   |
| Costs associated  with debtor-in-possession financing |       |                        | 0.1        |                                       |       | 1.9 |   | 0.6 |   |
| Accrued retention  plan costs                         |       |                        | 0.2        |                                       |       | 0.3 |   | — |   |
| Rejected leases                                       |       |                        | —     |                                       |       | (2.7 | ) | (12.2 | ) |
| Write-off  deferred fees related to pre-petition debt |       |                        | —     |                                       |       | 13.8 |   | — |   |
| Other  reorganization items                           |       |                        | 0.5        |                                       |       | 0.8 |   | 0.1 |   |
| Total                                                 |       |                        | 15.7       |                                       |       | 23.9 |   | (6.7 | ) |
| Non-cash items                                        |       |                        | —     |                                       |       | 12.0 |   | (11.3 | ) |
| Cash outlays for  reorganization items                |       |                        | $          | 15.7                                       |       |   | $ | 11.9 |   | $ | 4.6 |   |

 

Reorganization itemsaccrued at May 31, 2003 were approximately $9.3 million for paymentsexpected to be made during the winding-down period of the reorganization. At December 31,2004, we had a remaining accrual of approximately $1.0 million foranticipated future expenditures related to the reorganization, which areexpected to be paid in 2005.

**Liquidity and Capital Resources**

*Liquidity.  *Ourprincipal uses of cash will be capital expenditures, working capital and debtservice obligations. We expect that ongoing requirements for debt service,capital expenditures and working capital will be funded from operating cashflow and borrowings under our revolving credit facility.

The Credit Agreement entered into on May 23, 2003consisted of a revolving credit facility and the Term Loan. The revolvingcredit facility provided for total borrowings of up to $50.0 million, ofwhich up to $20.0 million was available for letters of credit. Actualborrowing availability was subject to a borrowing base calculation, whichequaled 1.5 times Adjusted EBITDA (as defined in the Credit Agreement).Availability under the revolving credit facility was also limited if we failedto meet certain levels of Adjusted EBITDA. The Credit Agreement was secured bysubstantially all the assets of our domestic 

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subsidiaries, including apledge of the capital stock of substantially all of our subsidiaries, subjectto certain limitations with respect to foreign subsidiaries.

On November 22, 2004, we entered into the AmendedCredit Agreement. The Amended Credit Agreement, which matures on November 22,2009, adds the Company’s foreign subsidiaries in Australia, the United Kingdomand Canada, which we refer to as the Foreign Subsidiary Parties, as creditcollateral parties and changes the determination of the borrowing base from acash flow-based formula to an asset-based formula. Under the Amended CreditAgreement, the total loan commitment was increased from $70.0 million to$91.3 million (subject to the limitation described below), with an increase inthe revolving loan commitment to $80.0 million from $50.0 million and adecrease in term loan commitments from $20.0 million to $11.3 million. Theamended term loan commitments consist of a $9.3 million Term A loan and amaximum $2.0 million Delayed Draw Term Loan dependent upon the final evaluationof certain real property located in Australia. The Amended Credit Agreementalso increases the amount of letters of credit that can be issued from $20.0million to $25.0 million. The Amended Credit Agreement is secured bysubstantially all of the assets of our domestic subsidiaries and our foreignsubsidiaries in Australia, the United Kingdom and Canada, including a pledge ofthe capital stock of substantially all of our subsidiaries, subject to certainlimitations with respect to foreign subsidiaries. Borrowing under the revolvingloan commitment may not exceed 85% of eligible receivables plus the lesser of (i) 85%of the net orderly liquidation value of eligible inventories or (ii) 65%of the book value of inventories less customary reserves. The Amended CreditAgreement contains financial covenants, including minimum levels of EBITDA (asdefined in the Amended Credit Agreement and determined on a consolidated basis)and other customary provisions and requires refinancing of the obligationsunder the Second-Lien Facility by May 22, 2005. In connection with theAmended Credit Agreement, our foreign subsidiaries in Australia, the UnitedKingdom and Canada granted second security interests in their assets to thelenders under our $20 million Second-Lien Facility due July 22, 2005 andguaranteed our $175.0 million 91¤4% of SeniorSubordinated Notes. Interest rates on the Amended Credit Agreement have beenreduced to, at our option, LIBOR plus 2.25% or the prime rate plus 0.5% on therevolving facility, and LIBOR plus 2.50% or the prime rate plus 0.75% on theterm loan facilities. All of these percentages are subject to an interest rategrid and will decline if certain conditions are met. Unused portions of therevolving credit facility bear interest at the rate of 0.5% per annum. TheAmended Credit Agreement limits total borrowings under the facility to$75.0 million until the Second-Lien Facility is paid or refinanced withlong-term debt and requires that the Second-Lien Facility be paid or refinanced60 days before maturity. The Amended Credit Agreement does under certainconditions, allow for the use of the revolving facility to repay the Second-LienFacility. As of December 31, 2004, we had outstanding borrowings of $10.8million and issued letters of credit totaling $10.9 million under the revolvingcredit facility. We had availability of $27.2 million under the revolvingfacility at December 31, 2004. The revolving facility terminates on November 22,2009. The Term A Loan matures on November 22, 2009 and requires equalquarterly principal payments of approximately $0.3 million per quarterbeginning December 31, 2004 through October 31, 2009, with thebalance of the outstanding principal being payable on November 22, 2009. Asof December 31, 2004 we did not have access to the Delayed Draw Term loan.

On March 16, 2005, we entered into an amendmentto the Amended Credit Agreement which modified certain financial covenants. TheAmended Credit Agreement was further amended on March 30, 2005 to modifycertain financial covenants and enable us to extend our Second-Lien Facility.The Amended Credit Agreement requires the Second-Lien Facility to be paid orrefinanced 60 days prior to its maturity.

On July 29, 2004 weentered into the $20.0 million Second-Lien Facility. Borrowings under theSecond-Lien Facility were used to repay a portion of the amount outstandingunder the Working Capital Facility. On November 5, 2004, we entered intoan amendment to the Second-Lien Facility to extend its maturity to July 22,2005 and that modified a financial covenant. The Second-Lien Facility issecured by a 

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secondlien on substantially all of the assets of the Company, our domesticsubsidiaries and certain of our foreign subsidiaries. The Second-Lien Facilityaccrues interest at our option, at LIBOR plus 6.00% or an alternative base rate(the greater of a) the Prime Rate or b) the federal funds rate plus one half of1.00%) plus 5.00%. The Second-Lien Facility restricts how much long-term debtwe may have and has other customary provisions including financial and non-financialcovenants. On December 31, 2004, $20.0 million was outstanding under theSecond-Lien Facility. On March 16, 2005, the Second-Lien Facility wasamended to modify a financial covenant. The Second-Lien Facility was furtheramended on March 30, 2005 to modify a financial covenant and extend itsmaturity until April 30, 2006.

The Senior SubordinatedNotes accrue interest at 91¤4% per annum,which is payable semiannually in cash. The notes are guaranteed by our currentdomestic subsidiaries, which are also borrowers or guarantors under the AmendedCredit Agreement, and certain of our foreign subsidiaries. The notes containcustomary covenants and events of default, including covenants that limit ourability and our subsidiaries’ abilities to incur debt, pay dividends and makecertain investments.

In 2005, we anticipate ourcapital expenditures will be approximately $15.0 million. In addition, weexpect that our debt service obligations related to capital leases and foreigncredit lines, excluding interest, will be approximately $2.4 million and $7.5 million,respectively. We expect our operating cash flow, together with availableborrowings under the revolving credit facility, will be sufficient to meet ouranticipated future operating expenses, capital expenditures and the debtservice requirements of the Amended Credit Agreement and Second-Lien Facility,the Senior Subordinated Notes and our other long-term obligations. However, ourability to generate sufficient cash flow to meet our operating needs will beaffected by general economic, financial, competitive, legislative, regulatory,business and other factors beyond our control.

*WorkingCapital and Cash Flows.  *Operating activities used $13.4million of cash during the year ended December 31, 2004, compared to cashprovided of $13.6 million during the seven-month period ended December 31,2003 and cash used of $3.4 million during the five-month periodended May 31, 2003.

Operatingassets and liabilities used $19.3 million of cash for the year ended December 31,2004, compared to $10.6 million of cash provided in the seven-month periodended December 31, 2003 and $2.9 million provided in the five-monthperiod ended May 31, 2003.

·       Accountsreceivable used $5.0 million of cash in 2004, compared to $5.7 million ofcash provided during the seven months ended December 31, 2003 and $1.5million of cash used during the five months ended May 31, 2003. Theincrease in accounts receivable in 2004 results primarily from the higher salesvolume in 2004.

·       Inventoryused $17.8 million of cash in 2004 compared to $6.5 million of cashprovided in the seven-month period ended December 31, 2003 and$5.7 million of cash used in the five-month period ended May 31,2003. The increase in inventory during 2004 results primarily from the sharpincrease in demand in 2004 and higher stock levels carried as part of theinitiative to improve delivery performance.

·       Duringthe year ended December 31, 2004, we generated $1.2 million of cash fromaccounts payable, which compares to $5.0 million and $3.3 million of cashgenerated in the seven months ended December 31, 2003 and the five monthsended May 31, 2003, respectively.

·       Accruedand other liabilities used cash of $1.4 million in the year ended December 31,2004, which compares to cash used of $4.9 million in the seven-monthperiod ended December 31, 2003 and cash provided of $5.1 million inthe five-month period ended May 31, 2003. Included in the $1.8 million of cash used in 2004 was approximately$3.5 million paid to our unsecured creditors. Our reorganization plan calledfor a total of $7.5 million to be paid to the unsecured creditors, of which$4.9 million has been paid from the Effective Date through December 31,2004. We 

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anticipate the remaining amount owed to the unsecured creditors will bepaid over the next 12 months.

·       Accrued interest increased $6.8 million in 2004relating primarily to our senior subordinated notes.

Cash used for capital expenditures was $16.1 millionduring the year ended December 31, 2004, compared to $8.1 million inthe seven-month period ended December 31, 2003 and $4.1 millionduring the five-month period ended May 31, 2003.

Financing activities generated$18.0 million of cash during 2004, which compares to $1.5 million of cashused during the seven months ended December 31, 2003 and $2.9 millionof cash generated in the five months ended May 31, 2003. Net borrowingswere $26.2 million during the year ended December 31, 2004, but werepartially offset by $7.6 million of deferred financing fees. The increasein borrowings was used primarily to fund working capital requirements.

**ContractualObligations and Commercial Commitments**

In thenormal course of business, we enter into contracts and commitments thatobligate us to make payments in the future. The table below sets forth oursignificant future obligations by time period. Where applicable, informationincluded in our consolidated financial statements and notes are cross-referencedin this table.
| ** **                       | ** ** | **Payments Due by Period** | ** ** |
|----------------------------------|------------|-------------------------------------------|------------|
| **Contractual Obligations** | ** ** | ** **                                | ** ** | **Note  Reference** | ** ** | **Total** | ** ** | **2005** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009 and  Beyond** | ** ** |
| ** **                       | ** ** | ** **                                | ** ** | ** ** | ** ** | **(Amounts in thousands)** | ** ** |
| Long-term debt                   |       | Note  9                                   |       | $ | 226,587 |   | $ | 39,666 |   | $ | 1,706 |   | $ | 1,708 |   | $ | 1,656 |   | $ | 181,851 |   |
| Capital leases                   |       | Note  13                                  |       | 29,575 |   | 4,367 |   | 3,496 |   | 2,999 |   | 3,158 |   | 15,555 |   |
| Operating leases                 |       | Note  13                                  |       | 22,846 |   | 4,704 |   | 3,928 |   | 3,186 |   | 2,928 |   | 8,100 |   |
| Purchase  obligations            |       |                                      |       | 22,285 |   | 13,846 |   | 4,218 |   | 4,201 |   | 2 |   | 18 |   |
| Total                            |       |                                      |       | $ | 301,293 |   | $ | 62,583 |   | $ | 13,348 |   | $ | 12,094 |   | $ | 7,744 |   | $ | 205,524 |   |

 

The amounts shown forcapital leases include the effective interest expense component. Our purchaseobligations relate primarily to inventory purchase commitments. At December 31,2004, we had issued letters of credit totaling $10.9 million under therevolving credit facility.

**MarketRisk and Risk Management Policies**

Our earnings and cash floware subject to fluctuations due to changes in foreign currency exchange ratesas well as changes in interest rates on our long-term debt arrangements. Inaddition, we have exposure to changes in the prices of certain commodities,particularly copper. See Item 7A. “Quantitative and Qualitative DisclosuresAbout Market Risk,” for a further discussion.

**Effect of Inflation; Seasonality**

In an environment ofincreasing raw material prices, competitive conditions can affect how much ofthe price increases we can recover in the form of higher unit sales prices. Tothe extent we are unable to pass on any price increases to our customers, ourprofitability could be adversely affected. Furthermore, restrictions in thesupply of cobalt, chromium and other raw materials could adversely affect ouroperating results. In addition, certain of our customers rely heavily on rawmaterials, and to the extent there are fluctuations in prices, it could affectorders for our products and our financial performance. Our general operatingexpenses, such as salaries, employee benefits and facilities costs, are subjectto normal inflationary pressures. Our operations are generally not subject toseasonal fluctuations.

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**Critical Accounting Policies**

Our consolidated financialstatements are based on the selection and application of significant accountingpolicies, some of which require management to make estimates and assumptions.We review these estimates and assumptions periodically to assess theirreasonableness. If necessary, these estimates and assumptions may be changedand updated. Historically, our estimates and assumptions have been determined tobe reasonable and accurate. No material adjustments to our accounting policieshave been made in 2004 or 2003. We believe the following are some of the morecritical judgment areas in the application of our accounting policies thataffect our financial condition and results of operations.

***Bankruptcy Accounting***

Since the Chapter 11bankruptcy filing, we have applied the provisions in Statement of Position 90-7,“Financial Reporting by Entities in Reorganization Under the Bankruptcy Code” (“SOP90-7”). SOP 90-7 does not change the application of generallyaccepted accounting principles in the preparation of financial statements, butit does require that the financial statements for periods including andsubsequent to filing the Chapter 11 petition distinguish transactions andevents that are directly associated with the reorganization from the ongoingoperations of the business. We have accounted for the reorganization using theprinciples of “fresh-start” accounting as required by SOP 90-7.

***Inventories***

Inventories are a significant asset, representing19.8% of total assets at December 31, 2004. They are valued at the lowerof cost or market, with our U.S. and one of our Italian subsidiaries using thelast in, first-out (LIFO) method, which represents 62.6% of consolidatedinventories, and the rest of our foreign subsidiaries using the first-in,first-out (FIFO) method, which represents 37.4% of consolidated inventories.

We continually applyjudgment in valuing our inventories by assessing the net realizable value ofour inventories based on current expected selling prices, as well as factorssuch as obsolescence and excess stock. In the seven-month period ended December 31,2003, we wrote down excess inventory by $4.4 million reflecting our changein management in the fourth quarter and our new strategy to reduce our workingcapital requirements and liquidate inventory at a more rapid pace. Should wenot achieve our expectations of the net realizable value of our inventory,future losses may occur.

***Accounts Receivable and Allowances***

We maintain an allowancefor doubtful accounts for estimated losses from the failure of our customers tomake required payments for amounts owed. We estimate this allowance based onknowledge and review of historical receivables and reserve trends, thefinancial condition of our customers and other pertinent information. In thefourth quarter of 2003, we increased our allowance for doubtful accounts by$1.8 million in recognition of the bankruptcy of one of our customers andthe deteriorated aging in other accounts. If the financial condition of ourcustomers deteriorates or an unfavorable trend in receivable collections isexperienced in the future, additional allowances may be required.

***Intangible Assets***

In accordance with Statement of Financial AccountingStandards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” weceased amortization of our goodwill on January 1, 2002. Effective June 1,2003, we made an adjustment of $122.8 million to write up goodwillpursuant to the principles of “fresh-start” accounting as required by SOP90-7. We have other identifiable intangible assets such as patents,trademarks and customer relationships. In accordance with SOP 90-7, werevalued our identifiable intangible assets and recorded a fresh-startadjustment of $75.4 million to write up these assets. Patents 

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and customer relationshipsare amortized on a straight-line basis over their estimated useful lives, whichgenerally range from 10 to 15 years. Trademarks are not amortized, but areperiodically evaluated for impairment.

We account for our intangible assets excludinggoodwill and trade names in accordance with SFAS No. 144, which requiresus to assess the recoverability of these assets when events or changes incircumstances indicate that the carrying amount of the long-lived asset(group) might not be recoverable. If impairment indicators exist, we determinewhether the projected undiscounted cash flows will be sufficient to cover thecarrying value of such assets. This requires us to make significant judgmentsabout the expected future cash flows of the asset group. The future cash flowsare dependent on general and economic conditions and are subject to change.

We account for our goodwill and trade names inaccordance with SFAS No. 142, which requires us to test goodwill forimpairment annually and whenever events occur or circumstances change thatwould more likely than not reduce the fair value of the reporting unit belowits carrying value. For purposes of applying the provisions, we perform ourimpairment analysis on a consolidated enterprise level. We use comparablemarket values, market prices and the present value of expected future cashflows to estimate fair value. We must make significant judgments and estimatesabout future conditions to estimate future cash flows. Unforeseen events andchanges in circumstances and market conditions, including general economic andcompetitive conditions, could result in significant changes in those estimates.Based on an impairment analysis we completed in the fourth quarter, noadjustment to the carrying value of our goodwill was necessary as of December 31,2004.

As a result of thebankruptcy restructuring in 2003, we recognized cancellation of indebtednessincome, which is not subject to tax provided we reduce certain tax attributeswe hold. The final determination of the reduction in tax attributes is made inthe year following the bankruptcy restructuring, and was finalized with thefiling of our federal income tax return, which was prepared and filed duringthe third quarter of 2004. At that time, final decisions were made as tocertain elections and positions taken with respect to the manner in which wewould reduce our tax attributes.  As aresult, we have made a change in estimate and recorded a deferred tax liabilityof $69.7 million with an offsetting increase in goodwill to record the finalattribute reduction amounts.

***Revenue Recognition***

Revenue from the sale ofcutting and welding products is typically recognized upon shipment to the customer.Cost and related expenses to manufacture and to ship cutting and weldingproducts are recorded as cost of sales when the related revenue is recognized.Certain handling costs totaling $9,593, $4,611, $3,281 and $7,423 for the yearended December 31, 2004, the seven months ended December 31, 2003,the five months ended May 31, 2003, and the year ended December 31,2002 were recorded in selling, general and administrative expenses.

***Income Taxes***

We establish provisions for taxes to take into accountthe effects of timing differences between financial and tax reporting. Thesedifferences relate primarily to net operating loss carry forwards, fixedassets, intangible assets and post-employment benefits. We record a valuationallowance when, in our assessment, it is more likely than not that a portion orall of our deferred tax assets will not be realized. We consider the scheduledreversal of deferred tax liabilities, tax planning strategies and projectedfuture taxable income in making this assessment. At December 31, 2004, avaluation allowance of $49.0 million has been recorded against ourdeferred tax assets based upon this assessment. The amount of the deferred taxassets considered realizable could change in the future if our assessment offuture taxable income or tax planning strategies changes.

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We do not establish provisions for deferred taxes onthe accumulated unremitted earnings of our foreign subsidiaries, as ourintention is to reinvest these earnings indefinitely. However, upondistribution of those earnings in the form of dividends or otherwise, we wouldbe subject to both U.S. income taxes (subject to an adjustment for foreign taxcredits) and withholding taxes payable to the various foreign countries.

We are periodically audited by U.S. and foreign taxauthorities regarding the amount of taxes due. In evaluating issues raised insuch audits, reserves are provided for exposures as appropriate. To the extentwe were to prevail in matters for which accruals have been established or berequired to pay amounts in excess of reserves, the effective tax rate in agiven financial statement period may be materially impacted.

As a result of the bankruptcy restructuring in 2003,we recognized cancellation of indebtedness income, which is not subject to taxprovided we reduce certain tax attributes we hold. The final determination ofthe reduction in tax attributes is made in the year following the bankruptcyrestructuring, and was finalized with the filing of our federal income taxreturn, which was prepared and filed during the third quarter of 2004. At thattime, final decisions were made as to certain elections and positions takenwith respect to the manner in which we would reduce our tax attributes.  As a result, we have made a change in estimateand recorded a deferred tax liability of $69.7 million with an offsettingincrease in goodwill to record the final attribute reduction amounts.

Our effective tax rateincludes the impact of certain undistributed foreign earnings for which no U.S.taxes have been provided because such earnings are planned to be reinvestedindefinitely outside the United States. As described in Note 14 to theConsolidated Financial Statements, our fiscal year 2004 results were notimpacted by the American Jobs Creation Act of 2004 (the “Jobs Act”). We do notanticipate making an election to repatriate foreign earnings with respect tothe repatriation provisions contained in the Jobs Act.

***Contingencies***

We are the defendant inseveral claims and lawsuits arising in the normal course of business. We do notbelieve any of these proceedings will have a material adverse effect on ourconsolidated financial position. Future results of operations for anyparticular quarter or annual period could be materially affected by changes inassumptions related to these proceedings. We accrue our best estimate of thecost of resolution of these claims in accordance with SFAS No. 5. Legaldefense costs of such claims are recognized in the period in which they areincurred.

**FactorsThat May Affect Future Results**

Fromtime to time, information we provide, statements by our employees orinformation included in our filings with the Securities and Exchange Commission(including those portions of this Management’s Discussion and Analysis thatrefer to the future) may contain forward-looking statements that are nothistorical facts. Those statements are “forward-looking” within themeaning of the Private Securities Litigation Reform Act of 1995. All suchforward-looking statements involve risks and uncertainties. Such forward-lookingstatements and our future performance, operating results, financial positionand liquidity are subject to a variety of factors that could materially affectfuture results, including:

*Our business iscyclical and is affected by industrial economic conditions.*

Our business is highlycyclical because many of the end users of our products are themselves in highlycyclical industries, such as commercial construction, steel shipbuilding,petrochemical construction and general manufacturing. The demand for ourproducts and therefore our results of operations are directly related to thelevel of production in these end-user industries. Accordingly, our business isto a large extent determined by general economic conditions and other factorsbeyond our control.

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*Ourbusiness is highly competitive, and increased competition could reduce oursales, earnings and profitability.*

Our products compete inhighly competitive markets. We compete primarily on the performance,functionality, price, brand recognition, customer service and support andavailability of our products. We compete with companies of various sizes, someof which have greater financial and other resources than we do. Increasedcompetition could force us to lower our prices or to offer additional product featuresor services at a higher cost to us, which could reduce our sales and netearnings.

The greater financialresources or the lower amount of debt of certain of our competitors may enablethem to commit larger amounts of capital in response to changing marketconditions. Certain competitors may also have the ability to develop productinnovations that could put us at a disadvantage. In addition, some of ourcompetitors have achieved substantially more market penetration in certain ofthe markets in which we operate. If we are unable to compete successfullyagainst other manufacturers in our marketplace, we could lose customers, andour sales may decline. There can also be no assurance that customers willcontinue to regard our products favorably, that we will be able to develop newproducts that appeal to customers, that we will be able to improve or maintainour profit margins on sales to our customers or that we will be able tocontinue to compete successfully in our core markets.

*We are subject to general economic factors that arelargely out of our control, any of which could have a material adverse effecton our business, results of operations and financial condition*.

Our business is subject toa number of general economic factors, many of which are out of our control,which may have a material adverse effect on our business, results of operationsand financial condition. These include recessionary economic cycles andcyclical downturns in our customers’ businesses, particularly customers in themanufacturing and construction industries, fluctuations in the cost of rawmaterials, such as copper, brass and steel, the substitution of plastic orother materials for metal in many products and the movement of metalfabrication operations outside the United States. Economic conditions mayadversely affect our customers’ business levels, which can have the effect ofreducing the amount of our products that they purchase. Furthermore, customersencountering adverse economic conditions may have difficulty paying for ourproducts. Finally, terrorist activities, anti-terrorist efforts, war or otherarmed conflicts involving the United States or its interests abroad may have amaterial adverse effect on the U.S. and global economies and on our business,results of operations or financial condition.

*Our internationaloperations pose certain risks that may adversely impact sales and earnings.*

We have manufacturing operations and assets locatedoutside of the United States, including in Australia, Brazil, Canada, Italy,Malaysia and Mexico. We also sell our products to distributors located inapproximately 100 countries. During the year ended December 31, 2004,approximately 47.6% of our consolidated sales were derived from non-U.S.markets. A key part of our long-term strategy is to increase our manufacturing,distribution and sales presence in international markets. These internationaloperations are subject to a number of special risks, in addition to the risksof our domestic business, including currency exchange rate fluctuations,differing protections of intellectual property, trade barriers, labor unrest,exchange controls, regional economic uncertainty, differing (and possibly morestringent) labor regulation, risk of governmental expropriation, domestic andforeign customs and tariffs, current and changing regulatory environments,difficulty in obtaining distribution support, difficulty in staffing andmanaging widespread operations, differences in the availability and terms offinancing, political instability and unrest and risks of increases in taxes.Also, in some foreign jurisdictions, we may be subject to laws limiting theright and ability of entities organized or operating therein to pay dividendsor remit earnings to affiliated companies unless specified conditions are met.These factors may adversely affect our future profits.

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Our products are usedprimarily in metal fabrication operations to cut and join metal parts. Metalfabrication operations are growing faster outside of the United States thanthey are in the United States, and certain metal fabrication, as well asmanufacturing operations generally, is moving from the United States tointernational locations where labor costs are lower. Maintaining and expandinginternational operations require significant coordination, capital andresources. If these resources were to prove too costly or difficult to attain,we may be unable to grow our sales in these international locations, and ourfuture sales and earnings could be lower.

*We are subject tocurrency fluctuations from our international sales.*

Our products are sold in many countries around theworld. A portion of our international sales is denominated in foreigncurrencies, including the Australian dollar, Brazilian real, Canadian dollar,euro, pound sterling and South African rand, while a portion of the costsincurred to generate those revenues is incurred in other currencies. Becauseour financial statements are denominated in U.S. dollars, changes in currencyexchange rates between the U.S. dollar and other currencies have had, and willcontinue to have, an impact on our earnings. We currently do not have exchangerate hedges in place to reduce the risk of an adverse currency exchangemovement. Currency fluctuations have affected our financial performance in thepast and will likely affect our financial performance in the future.

We also face risks arisingfrom the imposition of exchange controls and currency devaluations. Exchangecontrols may limit our ability to convert foreign currencies into U.S. dollarsor to remit dividends and other payments by our foreign subsidiaries orbusinesses located in or conducted within a country imposing controls. Currencydevaluations result in a diminished value of funds denominated in the currencyof the country instituting the devaluation. Actions of this nature, if theyoccur or continue for significant periods of time, could have an adverse effecton our results of operations and financial condition in any given period.

*Our success dependson our ability to enhance existing products and develop new products.*

Our financial andstrategic performance depends partially on our ability to meet customer demandfor new and enhanced products. We may not be able to sustain or expand existinglevels of research and development expenditures. We also may not be able todevelop or acquire innovative products or otherwise obtain intellectualproperty in a timely and effective manner. Furthermore, we cannot be sure thatnew products or product improvements will be met with customer acceptance orcontribute positively to our results. In addition, competitors may be able todirect more capital and more resources to new or emerging technologies andchanges in customer requirements.

*Our productsinvolve risks of personal injury and property damage, which expose us topotential liability.*

Our business exposes us topossible claims for personal injury or death and property damage resulting fromthe products that we sell. We maintain insurance for loss (excluding attorneys’fees and expenses) through a combination of self-insurance retentions andexcess insurance coverage. We are not insured against punitive damage awards.We monitor claims and potential claims of which we become aware and establishaccrued liability reserves for the self-insurance amounts based on ourliability estimates for such claims. We cannot give any assurance that existingor future claims will not exceed our estimates for self-insurance or the amountof our excess insurance coverage. In addition, we cannot give any assurancethat insurance will continue to be available to us on economically reasonableterms or that our insurers would not require us to increase our self-insuranceamounts. Claims brought against us that are not covered by insurance or thatresult in recoveries in excess of insurance coverage could have a materialadverse effect on our results and financial condition. Moreover, any accidentor incident involving us, even if we are fully insured or not held to beliable, could negatively affect our reputation among customers and the public,thereby making it more difficult for us to compete effectively, and couldsignificantly affect the cost and availability of insurance in the future.

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*If we are unable toretain and hire key employees, the performance of our operations could beadversely affected.*

Our ability to providehigh-quality products and services depends in part on our ability to retain ourskilled personnel in the areas of product engineering, manufacturing and sales.Certain of our businesses rely heavily on key personnel in the engineering,design, formulation and manufacturing of our products. Our success is alsodependent on the management and leadership skills of our senior managementteam. The loss of any of these individuals or an inability to attract, retainand maintain additional personnel could have an adverse effect on the business.

*We rely in largepart on independent distributors for sales of our products.*

We depend on independentdistributors to sell our products and provide service and after-market supportto our ultimate customers. Distributors play a significant role in determiningwhich of our products are stocked at branch locations and the price at whichthey are sold, which impacts how accessible our products are to our ultimate customers.Almost all of the distributors with whom we transact business offer competingproducts and services to our ultimate customers. We do not have writtenagreements with our distributors located in the United States. The loss of asubstantial number of these distributors or an increase in the distributors’sales of our competitors’ products to our ultimate customers could materiallyreduce our sales and earnings.

*Our futureoperating results may be affected by fluctuations in the prices and availabilityof raw materials.*

We purchase a large amountof commodity raw materials, and certain of the raw materials used in ourhardfacing products, such as cobalt and chromium, are available primarily fromsources outside the United States. The raw materials industry as a whole ishighly cyclical, and at times pricing and supply can be volatile due to anumber of factors beyond our control, including general economic and politicalconditions, labor costs, competition, import duties, tariffs and currencyexchange rates. This volatility can significantly affect our raw materialcosts. In an environment of increasing raw material prices, competitiveconditions can affect how much of the price increases we can recover in theform of higher unit sales prices. To the extent we are unable to pass on anyprice increases to our customers, our profitability could be adverselyaffected. Furthermore, restrictions in the supply of cobalt, chromium and otherraw materials could adversely affect our operating results. In addition,certain of our customers rely heavily on raw materials, and to the extent thereare fluctuations in prices, it could affect orders for our products and ourfinancial performance.

*If our relationshipwith our employees were to deteriorate, we could be adversely affected.*

Currently, in our U.S.operations (where none of our employees are represented by labor unions) and inour foreign operations (where the majority of our employees are represented bylabor unions), we have maintained a positive working environment. Although wefocus on maintaining a productive relationship with our employees, we cannotensure that unions, particularly in the United States, will not attempt toorganize our employees or that we will not be subject to work stoppages,strikes or other types of conflicts with our employees or organized labor inthe future. Any such event could have a material adverse effect on our abilityto operate our business and serve our customers and could materially impair ourrelationships with key customers and suppliers, which could damage ourbusiness, results of operations and financial condition.

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*We are subject tovarious environmental laws and regulations and may incur costs that have amaterial adverse effect on our financial condition as a result of violations ofor liabilities under environmental laws and regulations.*

Our operations are subjectto federal, state, local and foreign laws and regulations relating to theprotection of the environment, including those governing the discharge ofpollutants into the air and water, the use, management and disposal ofhazardous materials, and employee health and safety. As an owner and operatorof real property and a generator of hazardous waste, we may also be subject toliability for the remediation of contaminated sites. We could incur substantialcosts, including cleanup costs, fines and civil or criminal sanctions,third-party property damage or personal injury claims, as a result ofviolations of or liabilities under environmental laws or noncompliance withenvironmental permits required at our facilities.

Contaminants have beendetected at some of our present and former sites. In addition, we have beennamed as a potentially responsible party at certain Superfund sites. While weare not currently aware of any contaminated or Superfund sites as to whichmaterial outstanding claims or obligations exist, the discovery of additionalcontaminants or the imposition of additional cleanup obligations at these orother sites could result in significant liability. In addition, the ultimatecosts under environmental laws and the timing of these costs are difficult topredict. Liability under some environmental laws relating to contaminatedsites, including the Comprehensive Environmental Response, Compensation, and LiabilityAct and analogous state laws, can be imposed retroactively and without regardto fault. Further, one responsible party could be held liable for all costs ata site. Thus, we may incur material liabilities under existing environmentallaws and regulations or environmental laws and regulations that may be adoptedin the future.

**RecentlyIssued Accounting Standards**

In November 2004, theFinancial Accounting Standards Board (FASB) issued SFAS No. 151, “InventoryCosts—An Amendment of ARB No. 43, Chapter 4” (“SFAS No. 151”).SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, “InventoryPricing,” to clarify the accounting for abnormal amounts of idle facilityexpense, freight, handling costs, and wasted material (spoilage). Among otherprovisions, the new rule requires that items such as idle facilityexpense, excessive spoilage, double freight, and rehandling costs be recognizedas current-period charges regardless of whether they meet the criterion of “soabnormal” as stated in ARB No. 43. Additionally, SFAS No. 151requires that the allocation of fixed production overheads to the costs ofconversion be based on the normal capacity of the production facilities. SFAS No. 151is effective for fiscal years beginning after June 15, 2005, with early adoptionpermitted. We adopted the provisions of SFAS No. 151 in the current periodwithout a material impact to our financial statements.

In December 2004, theFASB issued SFAS No. 123 (revised 2004) Share-Based Payment, (“SFAS No. 123(R)”),which is a revision of SFAS No. 123, *Accountingfor Stock-Based Compensation*(“SFASNo. 123”). SFAS No. 123(R) supersedes APB Opinion No. 25,*Accounting for Stock Issued to Employees*(“Opinion 25”), and amends SFAS No. 95,*Statement of Cash Flows*.Generally, the approach in SFAS No. 123(R) is similar to the approachdescribed in SFAS No. 123. However, SFAS No. 123(R) requires allshare-based payments to employees, including grants of employee stock options,to be recognized in the income statement based on their fair values. Pro formadisclosure is no longer an alternative. SFAS No. 123(R) must beadopted no later than July 1, 2005. Early adoption will be permitted inperiods in which financial statements have not yet been issued. We expect toadopt SFAS No. 123(R) on July 1, 2005.

SFAS No. 123(R) permitspublic companies to adopt its requirements using one of two methods: (1) A“modified prospective” method in which compensation cost is recognizedbeginning with the effective date (a) based on the requirements of SFAS No. 123(R) forall share-based payments granted after the effective date and (b) based onthe requirements of SFAS No. 123 for all awards granted to employees priorto the effective date of SFAS No. 123(R) that remain unvested on theeffective date, and 

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(2) A“modified retrospective” method which includes the requirements of the modifiedprospective method described above, but also permits entities to restate basedon the amounts previously recognized under SFAS No. 123 for purposes ofpro forma disclosures either (a) all prior periods presented or (b) priorinterim periods of the year of adoption. We plan to adopt SFAS No. 123using the modified-prospective method.

As permitted by SFAS No. 123, we currentlyaccount for share-based payments to employees using Opinion 25’s intrinsicvalue method and, as such, generally recognize no compensation cost foremployee stock options. The impact of adoption of SFAS No. 123(R) cannotbe predicted at this time because it will depend on levels of share-basedpayments granted in the future. However, had we adopted SFAS No. 123(R) inprior periods, the impact of that standard would have approximated the impactof SFAS No. 123 as described in the disclosure of pro forma net income andearnings per share in Note 2 to our consolidated financial statements.

In December 2004, theFASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets—An Amendment ofAPB Opinion No. 29, Accounting for Nonmonetary Transactions” (“SFAS No. 153”).SFAS No. 153 eliminates the exception from fair value measurement fornonmonetary exchanges of similar productive assets in paragraph 21(b) ofAPB Opinion No. 29, “Accounting for Nonmonetary Transactions,” andreplaces it with an exception for exchanges that do not have commercialsubstance. SFAS No. 153 specifies that a nonmonetary exchange hascommercial substance if the future cash flows of the entity are expected tochange significantly as a result of the exchange. SFAS No. 153 iseffective for the fiscal periods beginning after June 15, 2005 and is requiredto be adopted by us on January 1, 2006. We are currently evaluating theeffect that the adoption of SFAS No. 153 will have on our consolidatedresults of operations and financial condition, but do not expect it to have amaterial impact.

**Item 7A.**   *Quantitative and Qualitative Disclosures About Market Risk*

Our primary financial market risk relates tofluctuations in currency exchange rates, commodity price risk and interestrates.

A substantial portion of our operations consist ofmanufacturing and sales activities in foreign regions, particularly Europe,Australia/Asia, Canada and South America. As a result, our financial resultscould be significantly affected by factors such as changes in foreign currencyexchange rates in the foreign markets in which we distribute our products. Ourexposure to foreign currency transactions is partially mitigated by havingmanufacturing locations in Australia, Italy, Indonesia, Malaysia, Mexico andBrazil as well as in the United States. A substantial portion of the productsmanufactured in most of these regions is sold locally and denominated in thelocal currency. A significant amount of the export sales from the United Statesare denominated in U.S. dollars, which further limits our exposure to changesin the exchange rates. We are most susceptible to a strengthening U.S. dollarand the negative effect when local currency financial statements are translatedinto U.S. dollars, our reporting currency.

We do not believe our exposure to transaction gains orlosses resulting from changes in foreign currency exchange rates are materialto our financial results. As a result, we do not actively try to manage ourexposure through foreign currency forward or option contracts.

Periodically, we enter into purchase commitments to manageour exposure to price risk from commodity purchases, primarily copper. Thesearrangements have the effect of locking in for specified periods (atpredetermined prices) the prices we will pay for the volume to which thecommitment relates. The potential loss from a hypothetical 10% adverse changein commodity prices on our open commitments at December 31, 2004 would nothave a material affect on our financial condition or results of operations.

In order to manage interest costs, we entered into aninterest rate swap arrangement on February 24, 2004 to convert$50.0 million of the Senior Subordinated Notes into variable rate debt. Wepay interest on 

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the swap at LIBOR plus aspread of 442 basis points. Interest rate risk management agreements are notheld or issued for speculative or trading purposes.

We are also exposed tochanges in interest rates primarily as a result of long-term financialarrangements that have variable interest rates. At December 31, 2004, wehad approximately $51.6 million of variable rate debt. With this amount ofvariable rate debt, and including the effects of the $50.0 million interestrate swap, a hypothetical 100 basis point increase in our variable borrowingrates would result in an increase in interest expense of approximately $1.0 millionannually.

**Item8.**   *Financial Statements andSupplementary Data*

The financial statementsthat are filed as part of this Annual Report on Form 10-K are setforth in the Index to Consolidated Financial Statements at page F-1hereof and are included at pages F-2 to F-40 thereof.

**Item9.**   *Changes in andDisagreements With Accountants on Accounting and Financial Disclosure*

None.

**Item 9A.**   *Controls and Procedures*

**Evaluationof Disclosure Controls and Procedures**

The Company maintainsdisclosure controls and procedures that are designed to provide reasonableassurance to the Company’s management and board of directors regarding thepreparation and fair presentation of published financial statements.

As of December 31,2004, management evaluated the effectiveness of the design and operation of ourdisclosure controls and procedures and concluded that certain controls andprocedures were not effective because of the material weaknesses discussedbelow.

To address these materialweaknesses, the Company conducted more in-depth analysis and additional auditwork at its affected operations to ensure that our consolidated financialstatements were prepared in accordance with generally accepted accountingprinciples. Consequently, management believes that the financial statementsincluded in this report fairly represent, in all material respects, ourfinancial condition, results of operations and cash flows for the periodspresented.

**Management’sReport on Internal Control Over Financial Reporting**

The management ofThermadyne is responsible for establishing and maintaining adequate internalcontrol over financial reporting. The Company’s system of internal control overfinancial reporting is designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accountingprinciples.

All internal controlsystems, no matter how well designed, have inherent limitations. Therefore,even those systems determined to be effective can provide only reasonableassurance with respect to financial statement preparation and presentation.

Management assessed theeffectiveness of the Company’s internal control over financial reporting as of December 31,2004. In making this assessment, management used the criteria described in *Internal Control-Integrated Framework* issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO).

An internal control material weakness is a significantdeficiency, or combination of them, that results in more than a remotelikelihood that a material misstatement of the annual or interim financialstatements will not be prevented or detected.

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During the year end financialstatement close process, we identified unexpected variations in the balancesheet data provided from our Brazilian subsidiary. After a rigorous internalaudit at this subsidiary, it was concluded that certain period costs wereimproperly capitalized and included in inventory and intangibles. In addition,certain contingent tax refunds were improperly recognized prior to beingreceived. In response to the errors identified at our Brazilian subsidiary, weperformed internal audit procedures at our South African subsidiaries anddetermined that key account reconciliations were not being performed inaccounts receivable, inventory, and accounts payable. The internal audits atthese locations resulted in adjustments recorded during the fourth quarter of2004 to accounts receivable, inventory, prepaid expenses, intangibles, goodwill,and cost of sales. The effect on previously issued financial information wasdetermined to be immaterial. We have concluded that a material weakness exists dueto insufficient controls relating to the oversight and monitoring of our smallerinternational locations.

During the fourth quarterof 2004, we performed an extensive review of certain variances between thestandard and actual costs of inventory and capitalized the appropriate amountof variances as of December 31, 2004 to represent the inventory balance atactual costs. Although the impact on previously issued financial information wasdetermined to be immaterial, by not performing a review of the inventoryvariances on a quarterly basis, a material misstatement of the inventorybalance and cost of goods sold could occur in the interim consolidatedfinancial statements that would not be prevented or detected. We have concludedthat we have a material weakness for insufficient controls relating to thetimely review and capitalization of inventory variances for interim reporting.

During the fourth quarterof 2004, adjustments were recorded to net deferred income tax assets and incometax benefit. The effect on previously issued financial information wasdetermined to be immaterial, however we did not maintain effective controls toreview and monitor the accuracy of the components of the income tax provisionand related deferred income taxes of certain foreign subsidiaries and tomonitor the differences between the income tax basis and the financialreporting basis of assets and liabilities to effectively reconcile the deferredincome tax balances. We have concluded that we have a material weakness forinsufficient controls relating to the determination and reporting of theprovision for income taxes and related deferred income tax balances.

We have identified insufficientcontrols relating to the accounting for property, plant, and equipment which representeda material weakness. The insufficient controls include inadequateprocedures: (i) to calculate depreciation expense on the new basis ofthe fixed assets determined as part of the Company’s emergence from bankruptcy,and (ii) to calculate the appropriate gain on the sale/leasebacktransaction of one of our buildings. This material weakness resulted inadjustments recorded during the fourth quarter of 2004 to property, plant, andequipment, other income, and depreciation expense however the effect onpreviously issued financial information was determined to be immaterial.

Because of the materialweaknesses described above, management concluded that, as of December 31, 2004, the Company’s internal control over financial reporting wasnot effective based on the COSO criteria. For additional discussion and quantificationof these items, please see Note 19 to the consolidated financial statementsincluded herein.

The Company’s independent registeredpublic accountants have audited and issued their report on management’sassessment of the Company’s internal control over financial reporting, whichappears below.

**Remediationof Material Weaknesses**

As discussed above, as of December 31,2004, there were material weaknesses in the Company’s internal control overfinancial reporting. We currently are unable to determine when these materialweaknesses will be fully remediated, however we intend to address thesematerial weaknesses as described below.

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In order to remediate ourinsufficient controls relating to the oversight and monitoring of our smallerinternational locations, we will augment internal audit work already performedwith a more extensive internal audit program for 2005 that will include workperformed at our smaller foreign locations and additional audit resources. Weare also planning quarterly off-site and periodic on-site financial reviews tobetter identify significant variances and non-recurring transactions. Thesequarterly reviews will enable us to address certain other insufficient controlsrelating to the accounting for property, plant, and equipment, such asdepreciation expense, and non-recurring transactions, such as significantleasing transactions. 

To address our materialweakness for insufficient controls relating to the timely review andcapitalization of inventory variances for interim reporting, we have begun theprocess of analyzing our inventory variances on a monthly basis to determinethe need for capitalization.

Regarding our insufficentcontrols relating to the determination and reporting of the provision forincome taxes and related deferred income tax balances, we have begun performinga more comprehensive analysis of components of the income tax provision ofcertain foreign subsidiaries on a quarterly basis. This will include thequarterly off-site and periodic on-site reviews referred to above.Additionally, a more formal process is being established to monitor thedifferences between the income tax basis and the financial reporting basis ofassets and liabilities to effectively reconcile the deferred income taxbalances.

**Changesin Internal Control Over Financial Reporting**

Except as otherwisediscussed above, there have been no changes in the Company’s internal controlover financial reporting during the fourth fiscal quarter that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

37

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**Reportof Independent Registered Public Accounting Firm**

***The Board ofDirectorsThermadyne Holdings Corporation***

We have auditedmanagement’s assessment, included in the accompanying Management’s Report onInternal Control Over Financial Reporting, that Thermadyne Holdings Corporationdid not maintain effective internal control over financial reporting as ofDecember 31, 2004, because of the effect of insufficient controls in theoversight and monitoring of smaller international locations, the capitalizationof inventory variances for interim reporting, the determination and reportingof the provision for income taxes and related deferred income tax balances, andthe accounting for property, plant, and equipment, based on criteriaestablished in Internal Control—IntegratedFramework issued by the Committee of Sponsoring Organizations of the TreadwayCommission (the COSO criteria). Thermadyne Holdings Corporation’s management isresponsible for maintaining effective internal control over financial reportingand for its assessment of the effectiveness of internal control over financialreporting. Our responsibility is to express an opinion on management’sassessment and an opinion on the effectiveness of the Company’s internalcontrol over financial reporting based on our audit.

We conducted our audit inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether effective internal control overfinancial reporting was maintained in all material respects. Our audit includedobtaining an understanding of internal control over financial reporting,evaluating management’s assessment, testing and evaluating the design andoperating effectiveness of internal control, and performing such otherprocedures as we considered necessary in the circumstances. We believe that ouraudit provides a reasonable basis for our opinion.

A company’s internalcontrol over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparationof financial statements for external purposes in accordance with generallyaccepted accounting principles. A company’s internal control over financialreporting includes those policies and procedures that (1) pertain to themaintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company;(2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures ofthe company are being made only in accordance with authorizations of managementand directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, ordisposition of the company’s assets that could have a material effect on thefinancial statements.

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

A material weakness is acontrol deficiency, or combination of control deficiencies, that results inmore than a remote likelihood that a material misstatement of the annual orinterim financial statements will not be prevented or detected. The followingmaterial weaknesses have been identified and included in management’sassessment:

The Company has identifieda material weakness for insufficient controls relating to the oversight andmonitoring of its smaller international locations. During the financialstatement close process, the Company identified unexpected variations in thebalance sheet data provided from its Brazilian subsidiary. After a rigorousinternal audit at this subsidiary, it was concluded that certain period costswere improperly capitalized and included in inventory and intangibles. Inaddition, certain contingent tax refunds were improperly recognized prior tobeing received. In response to the errors identified at the Braziliansubsidiary, the Company performed internal audit procedures at its SouthAfrican 

38

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subsidiariesand determined that key account reconciliations were not being performed inaccounts receivable, inventory, and accounts payable. This material weaknessresulted in adjustments recorded during the fourth quarter of 2004 to accountsreceivable, inventory, prepaid expenses, intangibles, goodwill, and cost ofsales. The effect on previously issued financial information was determined tobe immaterial.

The Company has identifieda material weakness for insufficient controls relating to the capitalization ofinventory variances for interim reporting. During the fourth quarter of 2004,the Company performed an extensive review of certain variances between thestandard and actual costs of inventory and capitalized the appropriate amountof variances as of December 31, 2004 to represent the inventory balance atactual costs. Although the impact on previously issued financial informationwas determined to be immaterial, by not performing a review of the inventoryvariances on a quarterly basis, a material misstatement of the inventorybalance and cost of goods sold could occur in the interim consolidatedfinancial statements that would not be prevented or detected. Accordingly,management has determined that this deficiency constitutes a material weakness.

The Company has identifieda material weakness for insufficient controls relating to the determination andreporting of the provision for income taxes and related deferred income taxbalances. Specifically, the Company did not maintain effective controls toreview and monitor the accuracy of the components of the income tax provisioncalculations and related deferred income taxes of certain foreign subsidiariesand to monitor the differences between the income tax basis and the financialreporting basis of assets and liabilities to effectively reconcile the deferredincome tax balances. This material weakness resulted in adjustments recordedduring the fourth quarter of 2004 to net deferred income tax assets and incometax benefit. The effect on previously issued financial information wasdetermined to be immaterial.

The Company has identifiedinsufficient controls relating to the accounting for property, plant, andequipment which represented a material weakness. The insufficient controlsinclude inadequate procedures: (i) to calculate depreciation expenseon the new basis of the fixed assets determined as part of the Company’semergence from bankruptcy, and (ii) to calculate the appropriate gain onthe sale/leaseback transaction of one of the Company’s buildings. This materialweakness resulted in adjustments recorded during the fourth quarter of 2004 toproperty, plant, and equipment, other income, and depreciation expense. Theeffect on previously issued financial information was determined to beimmaterial.

These material weaknesseswere considered in determining the nature, timing, and extent of audit testsapplied in our audit of the 2004 financial statements, and this report does notaffect our report dated March 30, 2005 on those financial statements.

In our opinion,management’s assessment that Thermadyne Holdings Corporation did not maintaineffective internal control over financial reporting as of December 31,2004, is fairly stated, in all material respects, based on the COSO controlcriteria. Also, in our opinion, because of the effect of the materialweaknesses described above on the achievement of the objectives of the controlcriteria, Thermadyne Holdings Corporation has not maintained effective internalcontrol over financial reporting as of December 31, 2004, based on theCOSO control criteria.

/s/ Ernst & Young LLP

St. Louis, MissouriMarch 30, 2005

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**PART III**

**Item 10.**   *Directors and Executive Officers of the Registrant*

Information concerning our directors will appear inour Proxy Statement for our 2005 annual meeting of stockholders under “Electionof Directors.” This portion of the Proxy Statement is incorporated herein byreference.

Information concerning our executive officers’ andtheir compliance with Section 16(a) of the Securities Exchange Actwill appear in our Proxy Statement for our 2005 annual meeting of stockholdersunder “Information About Executive Officers” and “Section 16(a) BeneficialOwnership Reporting Compliance.” These portions of the Proxy Statement areincorporated herein by reference.

Information regarding ourAudit Committee and Audit Committee financial expert will appear in our ProxyStatement for our 2005 annual meeting of stockholders under “Board andCommittee Meetings.” This portion of the Proxy Statement is incorporated hereinby reference.

**Code of Ethics**

We have adopted a code ofethics that applies to our chief executive officer, chief financial officer,chief legal officer, chief accounting officer or controller of each division orsubsidiary and all persons reporting directly to the chief executive officer.We have posted our code of ethics on our Internet web site atwww.thermadyne.com. We will provide our code of ethics free of charge torequesting parties.

**Item 11.**   *Executive Compensation*

Information concerningexecutive compensation will appear in our Proxy Statement for our 2005 annualmeeting of stockholders under “Information About Executive Compensation” and “EmploymentAgreements.” These portions of the Proxy Statement are incorporated herein byreference.

**Item 12.**   *Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters*

Information concerning thesecurity ownership of certain beneficial owners and management and our equity compensationplans will appear in our Proxy Statement for our 2005 annual meeting ofstockholders under “Information About Stock Ownership” and “Equity CompensationPlan Information.” These portions of the Proxy Statement are incorporatedherein by reference.

**Item 13.**   *Certain Relationships and Related Transactions*

Information concerningcertain relationships and related transactions will appear in our ProxyStatement for our 2005 annual meeting of stockholders under “CertainRelationships and Related Party Transactions.” This portion of our ProxyStatement is incorporated herein by reference.

**Item 14.**   *Principal Accountant Fees and Services*

Information concerning audit fees and services willappear in our Proxy Statement for our 2005 annual meeting of stockholders under“Independent Auditor Fees and Other Matters.” This portion of our ProxyStatement is incorporated herein by reference.

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**PART IV**

**Item 15.**   *Exhibits, Financial Statement Schedules and Reports on Form 8-K*

**Financial Statement Schedules**

Thefollowing documents are filed as part of this report:
|                                                                                                                                                                                                                                                 | ** ** | **Page** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| Report  of Independent Registered Public Accounting Firm                                                                                                                                                                                        |       | F-2      |
| Consolidated Balance Sheets  as of December 31, 2004 and 2003                                                                                                                                                                              |       | F-3      |
| Consolidated  Statements of Operations for the year ended December 31, 2004, the seven  months ended December 31, 2003, the five months ended May 31, 2003,  and the year ended December 31, 2002                           |       | F-4      |
| Consolidated  Statements of Shareholders’ Equity (Deficit) for the year ended  December 31, 2004, the seven months ended December 31, 2003, the  five months ended May 31, 2003, and the year ended December 31,  2002 |       | F-5      |
| Consolidated  Statements of Cash Flows for the year ended December 31, 2004, the seven  months ended December 31, 2003, the five months ended May 31, 2003,  and the year ended December 31, 2002                           |       | F-6      |
| Notes to  Consolidated Financial Statements                                                                                                                                                                                                     |       | F-7      |

 

All schedules for whichprovision is made in the applicable accounting regulation of the Commission arenot required under the related instructions, are included in the financialstatements or are inapplicable and therefore have been omitted.

**Exhibits**
| Exhibit No. | ** ** | ** ** | ** ** | **Exhibit**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|------------------|------------|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1              |       | —     |       | First Amended and  Restated Disclosure Statement, dated January 17, 2003, Solicitation of  Votes on the Debtors’ First Amended and Restated Join Plan of Reorganization  Under Chapter 11 of the Bankruptcy Code of Thermadyne Holdings Corporation  and its wholly owned direct and indirect subsidiaries, Thermadyne Mfg. LLC,  Thermadyne Capital Corp., Thermadyne Industries, Inc., Victor Equipment  Company, Thermadyne International Corp., Thermadyne Cylinder Co., Thermal  Dynamics Corporation, C&G Systems Holding, Inc., MECO Holding  Company, Tweco Products, Inc., Tag Realty, Inc., Victor-Coyne  International, Inc., Victor Gas Systems, Inc., Stoody Company,  Thermal Arc, Inc., C & G Systems, Inc., Marison Cylinder  Company, Wichita Warehouse Corporation, Coyne Natural Gas Systems, Inc.,  and Modern Engineering Company, Inc.(1) |
| 2.2              |       | —     |       | First Amended and  Restated Plan of Reorganization dated January 17, 2003.(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.3              |       | —     |       | Confirmation Order dated  April 3, 2003 and signed by the Bankruptcy Court.(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.1              |       | —     |       | Amended and Restated  Certificate of Incorporation of the Company dated as of May 23, 2003.  (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 3.2              |       | —     |       | Amended and Restated  Bylaws of the Company dated as of May 23, 2003.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.3              | ** ** | —     |       | Amended and Restated  Articles of Incorporation of C&G Systems, Inc. dated as of  May 19, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

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| 3.4  |   | — |   | Amended and Restated Bylaws of C&G  Systems, Inc. dated as of May 23, 2003.(4)                                |
|------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------|
| 3.5  |   | — |   | Amended and Restated  Certificate of Incorporation of C&G Systems Holding, Inc. dated as  of May 19, 2003.(4) |
| 3.6  |   | — |   | Amended and Restated  Bylaws of C&G Systems Holding, Inc. dated as of May 23, 2003.(4)                        |
| 3.7  |   | — |   | Amended and Restated  Certificate of Incorporation of MECO Holding Company dated as of May 19,  2003.(4)               |
| 3.8  |   | — |   | Amended and Restated  Bylaws of MECO Holding Company dated as of May 23, 2003.(4)                                      |
| 3.9  |   | — |   | Amended and Restated  Articles of Incorporation of ProTip Corporation dated as of March 31,  2004.(4)                  |
| 3.10 |   | — |   | Amended and Restated  Bylaws of ProTip Corporation dated as of May 23, 2003.(4)                                        |
| 3.11 |   | — |   | Amended and Restated  Certificate of Incorporation of Stoody Company dated as of May 19, 2003.(4)                      |
| 3.12 |   | — |   | Amended and Restated  Bylaws of Stoody Company dated as of May 23, 2003.(4)                                            |
| 3.13 |   | — |   | Amended and Restated  Certificate of Incorporation of Thermadyne Industries, Inc. dated as of  May 19, 2003.(4)   |
| 3.14 |   | — |   | Amended and Restated  Bylaws of Thermadyne Industries, Inc. dated as of May 23, 2003.(4)                          |
| 3.15 |   | — |   | Amended and Restated  Certificate of Incorporation of Thermadyne International Corp. dated as of  May 19, 2003.(4)     |
| 3.16 |   | — |   | Amended and Restated  Bylaws of Thermadyne International Corp. dated as of May 23, 2003.(4)                            |
| 3.17 |   | — |   | Amended and Restated  Certificate of Incorporation of Thermal Arc, Inc. dated as of  May 19, 2003.(4)             |
| 3.18 |   | — |   | Amended and Restated  Bylaws of Thermal Arc, Inc. dated as of May 23, 2003.(4)                                    |
| 3.19 |   | — |   | Amended and Restated  Certificate of Incorporation of Thermal Dynamics Corporation dated as of  May 19, 2003.(4)       |
| 3.20 |   | — |   | Amended and Restated  Bylaws of Thermal Dynamics Corporation dated as of May 23, 2003.(4)                              |
| 3.21 |   | — |   | Amended and Restated  Certificate of Incorporation of Tweco Products, Inc. dated as of  May 19, 2003.(4)          |
| 3.22 |   | — |   | Amended and Restated  Bylaws of Tweco Products, Inc. dated as of May 23, 2003.(4)                                 |
| 3.23 |   | — |   | Amended and Restated  Certificate of Incorporation of Victor Equipment Company dated as of  May 19, 2003.(4)           |
| 3.24 |   | — |   | Amended and Restated  Bylaws of Victor Equipment Company dated as of May 23, 2003.(4)                                  |
| 3.25 |   | — |   | Memorandum and Articles  of Association of Thermadyne Australia Party Ltd., dated November 17,  1995.*                 |
| 3.26 |   | — |   | Memorandum and Articles  of Association of Duxtech Pty. Ltd., dated March 6, 1989.*                                    |

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| 3.27 |   | — |   | Memorandum and Articles  of Association of Cigweld Pty Ltd, formerly known as Edinen Pty. Ltd., dated  April 1, 1989, as amended.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.28 |   | — |   | Memorandum and Articles  of Association of Quetala Pty. Ltd., dated April 1, 1989.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.29 |   | — |   | Memorandum and Articles  of Association of Quetack Pty. Ltd., dated April 1, 1989.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.30 |   | — |   | Articles of Amalgamation  of Thermadyne Welding Products Canada Limited, formerly known as Victor  Equipment Company of Canada Ltd., dated September 26, 1980, as amended.*                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 3.31 |   | — |   | By-laws of Thermadyne  Welding Products Canada Limited, formerly known as Victor Equipment Company  of Canada Ltd, dated September 26, 1980, as amended.*                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.32 |   | — |   | Memorandum and Articles  of Association of Thermadyne Industries Limited.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.33 |   | — |   | New Articles of  Association of Thermadyne Industries Limited dated June 10, 1992.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 4.1  |   | — |   | Credit Agreement dated  as of May 23, 2003 among the Company, as a guarantor thereunder,  Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C & G  Systems, Inc., Stoody Company, Thermal Arc, Inc., ProTip Corporation  and Thermadyne International Corp., as borrowers, the credit parties  signatory thereto, the lenders signatory thereto from time to time, General  Electric Capital Corporation, as Agent and Lender, and GECC Capital Markets  Group, Inc., as Lead Arranger.(5)               |
| 4.2  |   | — |   | Credit and Guaranty  Agreement dated as of May 23, 2003 among the Company, as Borrower, the  guarantors referred to therein, the New Term Lenders referred to therein and  Deutsche Bank Trust Company Americas, as Administrative Agent and Collateral Agent.(5)                                                                                                                                                                                                                                                                                                                                    |
| 4.3  |   | — |   | Registration Rights  Agreement dated as of May 23, 2003 by and between the Company and Angelo  Gordon & Co., L.P., on behalf of certain managed funds and accounts.(3)                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 4.4  |   | — |   | Class A Warrant  Agreement dated as of May 23, 2003 by and between the Company and  Equiserve Trust Company, N.A.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.5  |   | — |   | Class B Warrant  Agreement dated as of May 23, 2003 by and between the Company and  Equiserve Trust Company, N.A.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.6  |   | — |   | Class C Warrant  Agreement dated as of May 23, 2003 by and between the Company and  Equiserve Trust Company, N.A.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.7  |   | — |   | Amended and Restated  Credit Agreement dated as of February 5, 2004 among Thermadyne  Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C & G  Systems, Inc., Stoody Company, Thermal Arc, Inc., PROtip  Corporation and Thermadyne International Corp., as borrowers, the Company and  other parties referred to therein as credit parties, the lenders signatory  thereto from time to time, and General Electric Capital Corporation, as agent  and lender, and GECC Capital Markets Group, Inc, as lead arranger.(6) |
| 4.8  |   | — |   | Purchase Agreement dated  as of February 5, 2004 among the Company, the parties referred to  therein as the guarantors and Credit Suisse First Boston LLC, as representative  of the several purchasers referred to therein.(6)                                                                                                                                                                                                                                                                                                                                                                      |
| 4.9  |   | — |   | Registration Rights  Agreement dated as of February 5, 2004 among the Company, the parties  referred to therein as the guarantors and Credit Suisse First Boston LLC, as  representative of the initial purchasers referred to therein.(6)                                                                                                                                                                                                                                                                                                                                                           |

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| 4.10 |   | — |   | Indenture dated as of  February 5, 2004 among the Company, as issuer, the subsidiary guarantors  named therein and U.S. Bank National Association, as trustee.(6)                                                                                                                                                                                                                                                                                                                                                                                                    |
|------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.11 |   | — |   | First Amendment to  Amended and Restated Credit Agreement dated as of March 5, 2004 by and  among Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the credit parties signatory thereto, the  lenders signatory thereto, and General Electric Capital Corporation, as agent  and lender.(7)                                                               |
| 4.12 |   | — |   | Second Amendment to  Amended and Restated Credit Agreement dated as of May 19, 2004 by and  among Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the credit parties signatory thereto, the  lenders signatory thereto, and General Electric Capital Corporation, as agent  and lender.(7)                                                               |
| 4.13 |   | — |   | Third Amended and  Limited Waiver to Amended and Restated Credit Agreement dated as of  July 29, 2004 by and among Thermadyne Industries, Inc., Thermal  Dynamics Corporation, Tweco Products, Inc., Victor Equipment Company,  C&G Systems, Inc., Stoody Company, Thermal Arc Inc., ProTip  Corporation, and Thermadyne International Corp., as borrowers, the credit  parties signatory thereto, the lenders signatory thereto, and General  Electric Capital Corporation, as agent and lender.(7)                                              |
| 4.14 |   | — |   | Second Lien Credit  Agreement dated as of July 29, 2004 by and among Thermadyne  Industries, Inc., Thermal Dynamics Corporation, Tweco Products, Inc.,  Victor Equipment Company, C&G Systems, Inc., Stoody Company, Thermal  Arc Inc., ProTip Corporation, and Thermadyne International Corp., as  borrowers, the guarantors party thereto, the lenders parties thereto, and  Credit Suisse First Boston, as administrative agent and collateral agent, and  Credit Suisse First Boston, as sole lead arranger and sole bookrunning  manager.(7) |
| 4.15 |   | — |   | Fourth Amendment to  Amended and Restated Credit Agreement dated as of September 30, 2004 by  and among Thermadyne Industries, Inc., Thermal Dynamics Corporation,  Tweco Products, Inc., Victor Equipment Company, C&G  Systems, Inc., Stoody Company, Thermal Arc Inc., ProTip Corporation, and  Thermadyne International Corp., as borrowers, the credit parties signatory  thereto, the lenders signatory thereto, and General Electric Capital  Corporation, as agent and lender.(8)                                                         |
| 4.16 |   | — |   | Amendment No. 1 and  Agreement dated as of September 30, 2004 to the Second Lien Credit  Agreement by and among Thermadyne Industries, Inc., Thermal Dynamics  Corporation, Tweco Products, Inc., Victor Equipment Company, C&G  Systems, Inc., Stoody Company, Thermal Arc Inc., ProTip Corporation, and  Thermadyne International Corp., as borrowers, the guarantors party thereto,  the lenders parties thereto, and Credit Suisse First Boston, as  administrative agent and collateral agent.(8)                                       |
| 4.17 |   | — |   | Second Amended and  Restated Credit Agreement dated as of November 22, 2004 by and among  Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the credit parties signatory thereto, the  lenders signatory thereto, and General Electric Capital Corporation, as agent  and lender, and GECC Capital Markets Group, Inc., as lead arranger.(9)          |

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| 4.18 |   | — |   | Amendment No. 2 and  Joinder Agreement dated as of November 22, 2004 by and among Thermadyne  Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the guarantors party thereto, the lenders  parties thereto, and Credit Suisse First Boston, as administrative agent and  collateral agent.(9)                     |
|------|--------|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.19 |   | — |   | First Amendment and  Consent to Second Amended and Restated Credit Agreement dated  December 21, 2004 by and among Thermadyne Industries, Inc., Thermal  Dynamics Corporation, Tweco Products, Inc., Victor Equipment Company,  C&G Systems, Inc., Stoody Company, Thermal Arc Inc., ProTip  Corporation, and Thermadyne International Corp., as borrowers, the credit  parties signatory thereto, the lenders signatory thereto, and General  Electric Capital Corporation, as agent and lender.* |
| 4.20 |   | — |   | Amendment No. 3 and  Consent to the Second Lien Credit Agreement dated as of January 3, 2005  among Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc., Stoody  Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne International  Corp., as borrowers, the guarantors party thereto, the lenders parties  thereto, and Credit Suisse First Boston, as administrative agent and  collateral agent.*      |
| 4.21 |   | — |   | Second Amendment to Second  Amended and Restated Credit Agreement dated as of March 16, 2005 by and  among Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the credit parties signatory thereto, the  lenders signatory thereto, and General Electric Capital Corporation, as agent  and lender.(14)      |
| 4.22 |   | — |   | Amendment No. 4 to  the Second Lien Credit Agreement dated as of March 16, 2005 among  Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the guarantors party thereto, the lenders  parties thereto, and Credit Suisse First Boston, as administrative agent and  collateral agent.(14)                |
| 4.23 |   | — |   | Third Amendment to  Second Amended and Restated Credit Agreement dated as of March 30, 2005  by and among Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc., Stoody  Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne International  Corp., as borrowers, the credit parties signatory thereto, the lenders  signatory thereto, and General Electric Capital Corporation, as agent and  lender.*                         |
| 4.24 |   | — |   | Amendment No. 5 to  the Second Lien Credit Agreement dated as of March 30, 2005 among  Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco Products,  Inc., Victor Equipment Company, C&G Systems, Inc., Stoody Company,  Thermal Arc Inc., ProTip Corporation, and Thermadyne International Corp., as  borrowers, the guarantors party thereto, the lenders parties thereto, and Credit  Suisse First Boston, as administrative agent and collateral agent.*                                   |
| 10.1 |   | — |   | Omnibus Agreement, dated  as of June 3, 1988, among Palco Acquisition Company(now Thermadyne  Holdings Corporation) and its subsidiaries and National Warehouse Investment  Company.(10)                                                                                                                                                                                                                                                                                                                              |

45

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| 10.2        |       | — |   | Escrow Agreement, dated  as of August 11, 1988, among National Warehouse Investment Company,  Palco Acquisition Company (now Thermadyne Holdings Corporation) and Title  Guaranty Escrow Services, Inc.(10) |
|-------------|------------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.3        |       | — |   | Schedule of  substantially identical lease agreements.(10)                                                                                                                                                            |
| 10.4        |       | — |   | Amended and Restated  Continuing Lease Guaranty, made as of August 11, 1988, by Palco Acquisition  Company (now Thermadyne Holdings Corporation) for the benefit of National  Warehouse Investment Company.(10)  |
| 10.5        |       | — |   | Schedule of  substantially identical lease guaranties(10)                                                                                                                                                             |
| 10.6        |       | — |   | Lease Agreement, dated  as of October 10, 1990, between Stoody Deloro Stellite and Bowling Green-Warren  County Industrial Park Authority, Inc.(10)                                                         |
| 10.7        |       | — |   | Lease Agreement between  Alliance Gateway No. 58 Ltd. And Victor Equipment Company dated  September 22, 2003.*                                                                                              |
| 10.8        | ** ** | — |   | First Amendment to Lease  between Alliance Gateway No. 58 Ltd. and Victor Equipment Company dated  May 1, 2004.*                                                                                            |
| 10.9        | ** ** | — |   | Lease Agreement between  Ningbo Longxing Group Co., Ltd. and Ningbo Fulida Gas Equipment Co. Ltd dated  January 19, 2005.*                                                                                       |
| 10.10       | ** ** | — |   | Lease Agreement between  Ningbo Longxing Group Co., Ltd. and Thermadyne (Ningbo) Cutting and Welding  Equipment Manufacturing Company, Ltd dated December 28, 2004.*                                             |
| 10.11       | ** ** | — |   | Contract to Establish an  Equity Joint Venture Enterprise by and between Ningbo Longxing Group  Corporation Limited and Thermadyne Holdings Corporation dated  December 28, 2004.*                               |
| 10.12† |       | — |   | Amended and Restated  Executive Employment Agreement between Thermadyne Holdings Corporation and  James R. Delaney dated June 13, 2002.*                                                                         |
| 10.13† |       | — |   | Amended and Restated  Executive Employment Agreement between Thermadyne Holdings Corporation and  Dennis Klanjscek dated June 13, 2002.*                                                                         |
| 10.14† |       | — |   | Amended and Restated  Executive Employment Agreement between Thermadyne Holdings Corporation and  Michael E. Mahoney dated June 13, 2002.(11).                                                                   |
| 10.15† |       | — |   | Separation Agreement and  Mutual General Release between Thermadyne Holdings Corporation and Karl R.  Wyss dated October 1, 2003.(4)                                                                             |
| 10.16† |       | — |   | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and John Boisvert dated January 1, 2004.*                                                                   |
| 10.17† |       | — |   | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and Terry Downes dated January 1, 2004.*                                                                    |
| 10.18† |       | — |   | Second Amended and Restated  Executive Employment Agreement between Thermadyne Holdings Corporation and  Jason Huett dated January 1, 2004.*                                                                     |
| 10.19† |       | — |   | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and Robert D. Maddox dated January 1, 2004.*                                                                |
| 10.20† |       | — |   | Executive Employment  Agreement between Thermadyne Holdings Corporation and Brian Truex dated  June 1, 2004.*                                                                                                    |
| 10.21† |       | — |   | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and Patricia S. Williams dated January 1, 2004.*                                                            |

46

----

 
| 10.22† |       | — |   | Executive Employment  Agreement between Thermadyne Holdings Corporation and Paul D. Melnuk dated  January 28, 2004.(4)                                 |
|-------------|------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.23† | ** ** | — |   | Agreement among  Thermadyne Holdings Corporation, its subsidiaries, and James H. Tate dated  August 27, 2004.*                                         |
| 10.24† |       | — |   | First Amendment to  Agreement among Thermadyne Holdings Corporation, its subsidiaries, and James  H. Tate dated November 11, 2004.*                    |
| 10.25† |       | — |   | Second Amendment to  Agreement among Thermadyne Holdings Corporation, its subsidiaries, and James  H. Tate dated November 24, 2004.*                   |
| 10.26† | ** ** | — |   | Executive Employment  Agreement between Thermadyne Holdings Corporation and David L. Dyckman dated  December 15, 2004.(12)                             |
| 10.27       |       | — |   | Thermadyne Holdings  Corporation Non-Employee Director’s Stock Option Agreement.(13)                                                                   |
| 10.28       |       | — |   | Thermadyne Holdings  Corporation Non-Employee Directors’ Deferred Stock Compensation Plan.(6)                                                          |
| 10.29       | ** ** | — |   | Thermadyne Holdings  Corporation 2004 Stock Incentive Plan.(15)                                                                                             |
| 10.30       | ** ** | — |   | 2004 Non-Employee  Director’s Stock Option Plan.(15)                                                                                                   |
| 14          | ** ** | — |   | Thermadyne Holdings  Corporation Code of Ethics.*                                                                                                           |
| 21          |       | — |   | Subsidiaries of  Thermadyne Holdings Corporation.*                                                                                                          |
| 23          |       | — |   | Consent of Independent  Registered Public Accounting Firm*                                                                                                  |
| 31.1        |       | — |   | Thermadyne Holdings  Corporation Certification Pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.*                                            |
| 31.2        |       | — |   | Thermadyne Holdings  Corporation Certification Pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.*                                            |
| 32.1        |       | — |   | Thermadyne Holdings  Corporation Certification Pursuant to 18 U.S.C. Section 1350, as Adopted  by Section 906 of the Sarbanes-Oxley Act of 2002.* |
| 32.2        |       | — |   | Thermadyne Holdings  Corporation Certification Pursuant to 18 U.S.C. Section 1350, as Adopted  by Section 906 of the Sarbanes-Oxley Act of 2002.* |

----

** **†              Indicatesa management contract or compensatory plan or arrangement.

** ***             Filedherewith.

** **(1)   Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on February 6,2003.

** **(2)   Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on April 11, 2003.

** **(3)   Incorporatedby reference to the Company’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2003.

** **(4)   Incorporatedby reference to the Company’s Registration Statement on Form S-4(File No. 333-114511) on April 15, 2004.

** **(5)   Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on June 3, 2003.

47

----

** **(6)   Incorporatedby reference to the Company’s Annual Report on Form 10-K for theyear ended December 31, 2003.

** **(7)   Incorporatedby reference to the Company’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2004.

** **(8)   Incorporatedby reference to the Company’s Quarterly Report on Form 10-Q for thequarter ended September 30, 2004.

** **(9)   Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on November 24,2004.

(10)   Incorporated by reference tothe Company’s Registration Statement on Form 10/A, Amendment No. 2(File No. 0-23378) filed under Section 12(g) of theExchange Act, on April 28, 1994.

(11)   Incorporated by reference tothe Company’s Annual Report on Form 10-K for the year ended December 31,2002.

(12)   Incorporated by reference tothe Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on December 17,2004.

(13)   Incorporated by reference tothe Company’s Quarterly Report on Form 10-Q for the quarter ended September 30,2003.

(14)   Incorporated by reference tothe Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on March 17, 2005.

(15)   Incorporated by reference tothe Company’s Definitive Proxy Statement on Schedule 14A filed on March 24,2004.

48

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**THERMADYNE HOLDINGS CORPORATION**

**INDEX TO CONSOLIDATED FINANCIALSTATEMENTS**
|                                                                                                                                                                                                                                                 | ** ** | **Page** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| Report  of Independent Registered Public Accounting Firm                                                                                                                                                                                        |       | F-2      |
| Consolidated Balance Sheets  as of December 31, 2004 and 2003                                                                                                                                                                              |       | F-3      |
| Consolidated  Statements of Operations for the year ended December 31, 2004, the seven  months ended December 31, 2003, the five months ended May 31, 2003,  and the year ended December 31, 2002                           |       | F-4      |
| Consolidated  Statements of Shareholders’ Equity (Deficit) for the year ended  December 31, 2004, the seven months ended December 31, 2003, the  five months ended May 31, 2003, and the year ended December 31,  2002 |       | F-5      |
| Consolidated  Statements of Cash Flows for the year ended December 31, 2004, the seven  months ended December 31, 2003, the five months ended May 31, 2003,  and the year ended December 31, 2002                           |       | F-6      |
| Notes to  Consolidated Financial Statements                                                                                                                                                                                                     |       | F-7      |

 

F-1

----

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTINGFIRM**

**Board of DirectorsThermadyne Holdings Corporation**

We have audited the accompanying consolidated balancesheets of Thermadyne Holdings Corporation as of December 31, 2004 and 2003(Reorganized Company), and the related consolidated statements of operations,shareholders’ equity (deficit) and cash flows for the year ended December 31,2004 (Reorganized Company), the seven month period ended December 31, 2003(Reorganized Company), the five month period ended May 31, 2003(Predecessor Company), and the year ended December 31, 2002 (PredecessorCompany). These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements and schedule based on our audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred toabove present fairly, in all material respects, the consolidated financialposition of Thermadyne Holdings Corporation at December 31, 2004 and 2003,and the consolidated results of its operations and its cash flows for the yearended December 31, 2004, the seven month period ended December 31,2003, the five month period ended May 31, 2003, and the year ended December 31,2002 in conformity with U.S. generally accepted accounting principles.

As more fully described in Note 4 of theconsolidated financial statements, effective May 23, 2003, the Companyemerged from protection under Chapter 11 of the U.S. Bankruptcy Codepursuant to a Reorganization Plan confirmed by the Bankruptcy Court on April 3,2003. In accordance with AICPA Statement of Position 90-7, theCompany adopted “fresh start” accounting whereby its assets, liabilities andnew capital structure were adjusted to reflect estimated fair value at May 31,2003. As a result, the consolidated financial statements for the periodssubsequent to May 31, 2003, reflect the Reorganized Company’s new basis ofaccounting and are not comparable to the Predecessor Company’s pre-reorganizationconsolidated financial statements.

We have also audited, in accordance with the standardsof the Public Company Accounting Oversight Board (United States), theeffectiveness of Thermadyne Holdings Corporation’s internal control overfinancial reporting as of December 31, 2004, based on criteria establishedin Internal Control—IntegratedFramework issued by the Committee of Sponsoring Organizations of the TreadwayCommission and our report dated March 30, 2005 expressed an unqualifiedopinion on management’s assessment and an adverse opinion on the effectivenessof internal control over financial reporting.

/s/ Ernst & Young LLP

St. Louis, MissouriMarch 30, 2005

 

F-2

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**THERMADYNE HOLDINGS CORPORATIONCONSOLIDATED BALANCE SHEETS**
| ** **                                                                                                                                                                                     | ** ** | **Reorganized Company**                          | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                                                                                                                     | ** ** | **December 31,**                                 | ** ** | **December 31,** | ** ** |
| ** **                                                                                                                                                                                     | ** ** | **2004**                                              | ** ** | **2003** | ** ** |
| ** **                                                                                                                                                                                     | ** ** | **(In thousands,  except share data)** | ** ** |
| **ASSETS**                                                                                                                                                                                     |       |                                                  |       |   |   |   |   |   |   |
| Current Assets:                                                                                                                                                                                |       |                                                  |       |   |   |   |   |   |   |
| Cash and cash equivalents                                                                                                                                                                      |       |                                                  | $          | 6,650 |   |   |   | $ | 16,784 |   |   |
| Accounts receivable, less allowance for doubtful accounts  of $6,109  and $6,443, respectively                                                                                                 |       |                                                  | 93,555     |   |   |   | 84,079 |   |   |
| Inventories                                                                                                                                                                                    |       |                                                  | 118,707    |   |   |   | 100,070 |   |   |
| Prepaid expenses and other                                                                                                                                                                     |       |                                                  | 8,299      |   |   |   | 10,846 |   |   |
| Current deferred tax assets                                                                                                                                                                    |       |                                                  | 3,129      |   |   |   | — |   |   |
| Total current assets                                                                                                                                                                           |       |                                                  | 230,340    |   |   |   | 211,779 |   |   |
| Property, plant  and equipment, net                                                                                                                                                            |       |                                                  | 79,014     |   |   |   | 82,520 |   |   |
| Goodwill                                                                                                                                                                                       |       |                                                  | 208,403    |   |   |   | 135,868 |   |   |
| Intangibles, net                                                                                                                                                                               |       |                                                  | 76,614     |   |   |   | 77,904 |   |   |
| Other assets                                                                                                                                                                                   |       |                                                  | 7,533      |   |   |   | 1,406 |   |   |
| Total assets                                                                                                                                                                                   |       |                                                  | $          | 601,904 |   |   |   | $ | 509,477 |   |   |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                                                                                 |       |                                                  |       |   |   |   |   |   |   |
| Current  Liabilities:                                                                                                                                                                          |       |                                                  |       |   |   |   |   |   |   |
| Accounts payable                                                                                                                                                                               |       |                                                  | $          | 39,458 |   |   |   | $ | 36,182 |   |   |
| Accrued and other liabilities                                                                                                                                                                  |       |                                                  | 35,715     |   |   |   | 36,465 |   |   |
| Accrued interest                                                                                                                                                                               |       |                                                  | 7,129      |   |   |   | 307 |   |   |
| Income taxes payable                                                                                                                                                                           |       |                                                  | 2,664      |   |   |   | 3,623 |   |   |
| Working capital and second-lien facilities                                                                                                                                                     |       |                                                  | 30,824     |   |   |   | 12,860 |   |   |
| Current maturities of long-term obligations                                                                                                                                                    |       |                                                  | 11,255     |   |   |   | 15,114 |   |   |
| Total current liabilities                                                                                                                                                                      |       |                                                  | 127,045    |   |   |   | 104,551 |   |   |
| Long-term  obligations, less current maturities                                                                                                                                                |       |                                                  | 203,668    |   |   |   | 190,404 |   |   |
| Deferred tax  liabilities                                                                                                                                                                      |       |                                                  | 71,445     |   |   |   | 1,230 |   |   |
| Other long-term  liabilities                                                                                                                                                                   |       |                                                  | 44,110     |   |   |   | 41,057 |   |   |
| Shareholders’ equity:                                                                                                                                                                     |       |                                                  |       |   |   |   |   |   |   |
| Common stock, $0.01 par value:  Authorized—25,000,000  shares,  Issued and Outstanding—13,313,973  shares at December 31, 2004  and 13,300,000 shares at December 31, 2003 |       |                                                  | 133        |   |   |   | 133 |   |   |
| Additional paid-in capital                                                                                                                                                                     |       |                                                  | 183,460    |   |   |   | 183,267 |   |   |
| Accumulated deficit                                                                                                                                                                            |       |                                                  | (41,528    | ) |   |   | (17,551 | ) |   |
| Accumulated other comprehensive income                                                                                                                                                         |       |                                                  | 13,571     |   |   |   | 6,386 |   |   |
| Total shareholders’ equity                                                                                                                                                                |       |                                                  | 155,636    |   |   |   | 172,235 |   |   |
| Total liabilities  and shareholders’ equity                                                                                                                                               |       |                                                  | $          | 601,904 |   |   |   | $ | 509,477 |   |   |

 

See accompanying notes to consolidated financial statements.

F-3

----

**THERMADYNE HOLDINGS CORPORATIONCONSOLIDATED STATEMENTS OFOPERATIONS**
| ** **                                                                                                                                                   | ** ** | **Reorganized Company**                                       | ** ** | ** **            | **Predecessor Company** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|-----------------------|------------------------------|------------|
| ** **                                                                                                                                                   | ** ** | **Year**                                                           | ** ** | **Seven Months** | ** **                   | ** ** | **Five Months** | ** ** | **Year** | ** ** |
| ** **                                                                                                                                                   | ** ** | **Ended**                                                          | ** ** | **Ended**             | ** **                   | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                                                                                                                                   | ** ** | **December 31,**                                              | ** ** | **December 31,** | ** **                   | ** ** | **May 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                                                                   | ** ** | **2004**                                                           | ** ** | **2003**              | ** **                   | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                                                                                                                   | ** ** | **(In thousands, except per share data)** | ** ** |
| Net sales                                                                                                                                                    |       |                                                               | $          | 482,619               |                         |       |   | $ | 250,320 |   |   |   |   | $ | 169,617 |   |   |   | $ | 407,715 |   |   |
| Operating expenses:                                                                                                                                          |       |                                                               |       |                  |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of goods sold                                                                                                                                           |       |                                                               | 335,791    |                  |                         |       | 179,765 |   |   |   |   | 109,122 |   |   |   | 261,638 |   |   |
| Selling, general and administrative  expenses                                                                                                                |       |                                                               | 124,171    |                  |                         |       | 68,603 |   |   |   |   | 43,824 |   |   |   | 106,695 |   |   |
| Amortization of intangibles                                                                                                                                  |       |                                                               | 3,453      |                  |                         |       | 2,370 |   |   |   |   | 309 |   |   |   | 846 |   |   |
| Net periodic postretirement benefits                                                                                                                         |       |                                                               | 2,250      |                  |                         |       | 1,488 |   |   |   |   | 516 |   |   |   | 1,152 |   |   |
| Restructuring costs                                                                                                                                          |       |                                                               | 8,820      |                  |                         |       | 1,873 |   |   |   |   | 516 |   |   |   | — |   |   |
| Operating income (loss)                                                                                                                                      |       |                                                               | 8,134      |                  |                         |       | (3,779 | ) |   |   |   | 15,330 |   |   |   | 37,384 |   |   |
| Other income (expense):                                                                                                                                      |       |                                                               |       |                  |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest (contractual interest of $29,962 and  $71,219 for the five months ended May 31, 2003 and the year ended December 31,  2002, respectively) |       |                                                               | (21,833    | )                     |                         |       | (9,597 | ) |   |   |   | (8,798 | ) |   |   | (22,599 | ) |   |
| Amortization of deferred financing costs                                                                                                                     |       |                                                               | (1,418     | )                     |                         |       | (266 | ) |   |   |   | — |   |   |   | — |   |   |
| Other, net                                                                                                                                                   |       |                                                               | (3,453     | )                     |                         |       | (80 | ) |   |   |   | (1,047 | ) |   |   | (3,786 | ) |   |
| Income (loss)  before reorganization items and income tax provision                                                                                          |       |                                                               | (18,570    | )                     |                         |       | (13,722 | ) |   |   |   | 5,485 |   |   |   | 10,999 |   |   |
| Reorganization  items                                                                                                                                        |       |                                                               | —     |                  |                         |       | — |   |   |   |   | (15,692 | ) |   |   | (23,908 | ) |   |
| Gain on  reorganization and adoption of fresh-start accounting                                                                                               |       |                                                               | —     |                  |                         |       | — |   |   |   |   | 582,109 |   |   |   | — |   |   |
| Income (loss)  before income tax provision                                                                                                                   |       |                                                               | (18,570    | )                     |                         |       | (13,722 | ) |   |   |   | 571,902 |   |   |   | (12,909 | ) |   |
| Income tax  provision                                                                                                                                        |       |                                                               | 5,407      |                  |                         |       | 3,829 |   |   |   |   | 2,939 |   |   |   | 3,046 |   |   |
| Net income (loss)  applicable to common  shares                                                                                                              |       |                                                               | $          | (23,977               | )                            |       |   | $ | (17,551 | ) |   |   |   | $ | 568,963 |   |   |   | $ | (15,955 | ) |   |
| Basic and diluted income  (loss) per share applicable to common shares                                                                                       |       |                                                               | $          | (1.80                 | )                            |       |   | $ | (1.32 | ) |   |   |   | $ | 158.47 |   |   |   | $ | (4.44 | ) |   |

 

See accompanying notes to consolidated financial statements.

F-4

----

**THERMADYNE HOLDINGS CORPORATIONCONSOLIDATED STATEMENTS OFSHAREHOLDERS’ EQUITY (DEFICIT)**
| ** **                    | ** ** | ** **         | ** ** | ** **     | ** ** | ** **      | ** ** | ** **     | ** ** | **Accumulated**        | ** ** | ** **                | ** ** |
|-------------------------------|------------|--------------------|------------|----------------|------------|-----------------|------------|----------------|------------|------------------------|------------|---------------------------|------------|
| ** **                    | ** ** | ** **         | ** ** | **Additional** | ** ** | ** **      | ** ** | ** **     | ** ** | **Other**              | ** ** | **Total**                 | ** ** |
| ** **                    | ** ** | **Common**         | ** ** | **Paid-In**    | ** ** | **Accumulated** | ** ** | **Management** | ** ** | **Comprehensive**      | ** ** | **Shareholders’**    | ** ** |
| ** **                    | ** ** | **Stock**          | ** ** | **Capital**    | ** ** | **Deficit**     | ** ** | **Loans**      | ** ** | **Income (Loss)** | ** ** | **Equity (Deficit)** | ** ** |
| ** **                    | ** ** | **(In thousands)** | ** ** |
| **Predecessor Company**       | ** ** |               | ** ** | ** **     |       | ** **      | ** ** |           | ** ** | ** **             |       |                      | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| January 1, 2002          |       |               | $          | 36             | ** ** |            | $          | (128,523       | )          |                   | $          | (553,008                  | **)**      |   |   | $ | (1,344 | ) |   |   | $ | (42,222 | ) |   |   | $ | (725,061 | ) |   |
| Comprehensive income  (loss): |       |               |       | ** **     |       |            |       |           |       | ** **             |       |                      |       |   |   |   |   |   |   |   |   |   |   |
| Net loss                      |       |               | —     | ** **     |       | —          |       |           | (15,955    | **)**                  |       |                      | —     |   |   |   | — |   |   |   | (15,955 | ) |   |
| Foreign currency  translation |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | —     |   |   |   | 2,783 |   |   |   | 2,783 |   |   |
| Pension                       |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | —     |   |   |   | (5,167 | ) |   |   | (5,167 | ) |   |
| Comprehensive loss            |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | —     |   |   |   | — |   |   |   | (18,339 | ) |   |
| Interest on management loans  |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | (252       | ) |   |   | — |   |   |   | (252 | ) |   |
| December 31, 2002        |       |               | 36         | ** **     |       | (128,523        | )          |           | (568,963   | **)**                  |       |                      | (1,596     | ) |   |   | (44,606 | ) |   |   | (743,652 | ) |   |
| Comprehensive income:         |       |               |       | ** **     |       |            |       |           |       | ** **             |       |                      |       |   |   |   |   |   |   |   |   |   |   |
| Net income                    |       |               | —     | ** **     |       | —          |       |           | 568,963    | ** **             |       |                      | —     |   |   |   | — |   |   |   | 568,963 |   |   |
| Foreign currency translation  |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | —     |   |   |   | 5,794 |   |   |   | 5,794 |   |   |
| Comprehensive income          |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | —     |   |   |   | — |   |   |   | 574,757 |   |   |
| Interest on management loans  |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | (85        | ) |   |   | — |   |   |   | (85 | ) |   |
| Restructuring and Fresh Start |       |               | 97         | ** **     |       | 311,790         |       |           | —     | ** **             |       |                      | 1,681      |   |   |   | 38,812 |   |   |   | 352,380 |   |   |
| **Reorganized Company**       |       |               |       | ** **     |       |            |       |           |       | ** **             |       |                      |       | ** ** |   |   |   | ** ** |   |   |   |   |   |
| May 31, 2003             |       |               | 133        | ** **     |       | 183,267         |       |           | —     | ** **             |       |                      | —     | ** ** |   |   | — | ** ** |   |   | 183,400 |   |   |
| Comprehensive income  (loss): |       |               |       | ** **     |       |            |       |           |       | ** **             |       |                      |       | ** ** |   |   |   | ** ** |   |   |   |   |   |
| Net loss                      |       |               | —     | ** **     |       | —          |       |           | (17,551    | **)**                  |       |                      | —     | ** ** |   |   | — | ** ** |   |   | (17,551 | ) |   |
| Foreign currency translation  |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | —     | ** ** |   |   | 6,386 | ** ** |   |   | 6,386 |   |   |
| Comprehensive loss            |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | —     | ** ** |   |   | — | ** ** |   |   | (11,165 | ) |   |
| December 31, 2003        |       |               | 133        | ** **     |       | 183,267         |       |           | (17,551    | **)**                  |       |                      | —     | ** ** |   |   | 6,386 | ** ** |   |   | 172,235 |   |   |
| Comprehensive income  (loss): |       |               |       | ** **     |       |            |       |           |       | ** **             |       |                      |       | ** ** |   |   |   | ** ** |   |   |   |   |   |
| Net loss                      |       |               | —     | ** **     |       | —          |       |           | (23,977    | **)**                  |       |                      | —     | ** ** |   |   | — | ** ** |   |   | (23,977 | ) |   |
| Foreign currency translation  |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | —     | ** ** |   |   | 7,185 | ** ** |   |   | 7,185 |   |   |
| Comprehensive loss            |       |               | —     | ** **     |       | —          |       |           | —     | ** **             |       |                      | —     | ** ** |   |   | — | ** ** |   |   | (16,792 | ) |   |
| Exercise of warrants          |       |               | —     | ** **     |       | 193             |       |           | —     | ** **             |       |                      | —     | ** ** |   |   | — | ** ** |   |   | 193 |   |   |
| December 31,  2004       |       |               | $          | 133            | ** ** |            | $          | 183,460        |       |                   | $          | (41,528                   | **)**      |   |   | $ | — | ** ** |   |   | $ | 13,571 | ** ** |   |   | $ | 155,636 |   |   |

 

See accompanying notes to consolidated financial statements.

F-5

----

**THERMADYNE HOLDINGS CORPORATIONCONSOLIDATED STATEMENTS OFCASH FLOWS**
| ** **                                                                                           | ** ** | **Reorganized Company** | ** ** | **Predecessor Company** | ** ** |
|------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                                                                           | ** ** | **Year**                     | ** ** | **Seven Months**        | ** ** | **Five Months** | ** ** | **Year** | ** ** |
| ** **                                                                                           | ** ** | **Ended**                    | ** ** | **Ended**                    | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                                                                           | ** ** | **December 31,**        | ** ** | **December 31,**        | ** ** | **May 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                           | ** ** | **2004**                     | ** ** | **2003**                     | ** ** | **2003** | ** ** | **2002** | ** ** |
| ** **                                                                                           | ** ** | **(In thousands)**      | ** ** |
| Cash flows  provided by (used in) operating activities:                                              |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                    |       |                         | $          | (23,977                      | )          |   |   | $ | (17,551 | ) |   |   | $ | 568,963 |   |   |   | $ | (15,955 | ) |   |
| Adjustments to  reconcile net income (loss) to net cash provided by (used in) operating  activities: |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net periodic postretirement benefits                                                                 |       |                         | 2,250      |                         |       |   | 1,488 |   |   |   | 516 |   |   |   | 1,152 |   |   |
| Depreciation                                                                                         |       |                         | 20,576     |                         |       |   | 13,630 |   |   |   | 6,071 |   |   |   | 16,995 |   |   |
| Amortization of intangibles                                                                          |       |                         | 3,453      |                         |       |   | 2,370 |   |   |   | 309 |   |   |   | 846 |   |   |
| Non-cash interest expense                                                                            |       |                         | —     |                         |       |   | — |   |   |   | — |   |   |   | 13,826 |   |   |
| Amortization of deferred financing costs                                                             |       |                         | 1,418      |                         |       |   | 266 |   |   |   | — |   |   |   | — |   |   |
| Benefit from rejection of executory contracts                                                        |       |                         | —     |                         |       |   | — |   |   |   | — |   |   |   | (3,382 | ) |   |
| Gain on reorganization and adoption of fresh-start  accounting                                       |       |                         | —     |                         |       |   | — |   |   |   | (582,109 | ) |   |   | — |   |   |
| Non-cash cost of sales                                                                               |       |                         | 2,164      |                         |       |   | 2,779 |   |   |   | — |   |   |   | — |   |   |
| Changes in  operating assets and liabilities:                                                        |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts receivable                                                                                  |       |                         | (4,979     | )                            |       |   | 5,728 |   |   |   | (1,521 | ) |   |   | (905 | ) |   |
| Inventories                                                                                          |       |                         | (17,767    | )                            |       |   | 6,537 |   |   |   | (5,703 | ) |   |   | (3,923 | ) |   |
| Prepaid expenses and other                                                                           |       |                         | 1,062      |                         |       |   | (893 | ) |   |   | 694 |   |   |   | 1,551 |   |   |
| Accounts payable                                                                                     |       |                         | 1,200      |                         |       |   | 4,993 |   |   |   | 3,326 |   |   |   | 1,206 |   |   |
| Accrued and other liabilities                                                                        |       |                         | (1,388     | )                            |       |   | (4,914 | ) |   |   | 5,059 |   |   |   | 912 |   |   |
| Accrued interest                                                                                     |       |                         | 6,822      |                         |       |   | 307 |   |   |   | 11 |   |   |   | (481 | ) |   |
| Income taxes payable                                                                                 |       |                         | (1,561     | )                            |       |   | 248 |   |   |   | 2,028 |   |   |   | 975 |   |   |
| Other long-term liabilities                                                                          |       |                         | (2,656     | )                            |       |   | (1,403 | ) |   |   | (1,035 | ) |   |   | (2,110 | ) |   |
| Total adjustments                                                                                    |       |                         | 10,594     |                         |       |   | 31,136 |   |   |   | (572,354 | ) |   |   | 26,662 |   |   |
| Net cash provided by (used in) operating  activities                                                 |       |                         | (13,383    | )                            |       |   | 13,585 |   |   |   | (3,391 | ) |   |   | 10,707 |   |   |
| Cash flows used in  investing activities:                                                            |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                                                                                 |       |                         | (16,079    | )                            |       |   | (8,122 | ) |   |   | (4,114 | ) |   |   | (9,387 | ) |   |
| Proceeds from sales of assets                                                                        |       |                         | 1,324      |                         |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Net cash used in investing activities                                                                |       |                         | (14,755    | )                            |       |   | (8,122 | ) |   |   | (4,114 | ) |   |   | (9,387 | ) |   |
| Cash flows  provided by (used in) financing activities:                                              |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (repayments) borrowings under revolving credit  facility                                         |       |                         | (2,036     | )                            |       |   | (103 | ) |   |   | 12,963 |   |   |   | 1,500 |   |   |
| Repayment of long-term obligations                                                                   |       |                         | (190,750   | )                            |       |   | (997 | ) |   |   | (12,780 | ) |   |   | (4,791 | ) |   |
| Borrowing of long-term obligations                                                                   |       |                         | 218,983    |                         |       |   | — |   |   |   | 3,075 |   |   |   | 3,618 |   |   |
| Financing fees                                                                                       |       |                         | (7,572     | )                            |       |   | (116 | ) |   |   | (1,352 | ) |   |   | — |   |   |
| Exercise of warrants                                                                                 |       |                         | 193        |                         |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Other                                                                                                |       |                         | (814       | )                            |       |   | (256 | ) |   |   | 979 |   |   |   | 966 |   |   |
| Net cash provided by (used in) financing   activities                                                |       |                         | 18,004     |                         |       |   | (1,472 | ) |   |   | 2,885 |   |   |   | 1,293 |   |   |
| Net increase (decrease) in cash and cash equivalents                                                 |       |                         | (10,134    | )                            |       |   | 3,991 |   |   |   | (4,620 | ) |   |   | 2,613 |   |   |
| Cash and cash equivalents at beginning of period                                                     |       |                         | 16,784     |                         |       |   | 12,793 |   |   |   | 17,413 |   |   |   | 14,800 |   |   |
| Cash and cash equivalents at end of period                                                           |       |                         | $          | 6,650                        |       |   |   | $ | 16,784 |   |   |   | $ | 12,793 |   |   |   | $ | 17,413 |   |   |
| Supplemental  disclosure of cash flow information  Cash paid during the period for:                  |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                                                                                             |       |                         | $          | 15,011                       |       |   |   | $ | 9,290 |   |   |   | $ | 8,787 |   |   |   | $ | 23,080 |   |   |
| Income Taxes                                                                                         |       |                         | $          | 6,980                        |       |   |   | $ | 3,746 |   |   |   | $ | 640 |   |   |   | $ | 1,419 |   |   |

 

See accompanying notes to consolidated financial statements.

F-6

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**THERMADYNE HOLDINGS CORPORATIONNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS(In thousands, except share data)**

**1. The Company**

Thermadyne HoldingsCorporation (“Thermadyne” or the “Company”), a Delaware corporation, is aleading global designer and manufacturer of cutting and welding products,including equipment, accessories and consumables. The Company’s products areused by manufacturing, construction and foundry operations to cut, join andreinforce steel, aluminum and other metals. Common applications for the Company’sproducts include shipbuilding, railcar manufacturing, offshore oil and gas rigconstruction, fabrication and the repair and maintenance of manufacturingequipment and facilities. Welding and cutting products are critical to theoperations of most businesses that fabricate metal, and the Company has wellestablished and widely recognized brands.

**2. Significant Accounting Policies**

The consolidated financial statements include theCompany’s accounts and those of the majority-owned subsidiaries. All materialintercompany balances and transactions have been eliminated in consolidation.

*Estimates.  *Preparationof financial statements in conformity with U.S. generally accepted accountingprinciples requires certain estimates and assumptions to be made that affectthe reported amounts of assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

*Inventories.  *Inventoriesare valued at the lower of cost or market. Cost is determined using thelast-in, first-out (“LIFO”) method for domestic subsidiaries and one Italiansubsidiary and primarily the first-in, first-out (“FIFO”) method for theCompany’s other foreign subsidiaries. Inventories at foreign subsidiariesamounted to approximately $56,269 and $47,150 at December 31, 2004 and2003, respectively.

*Property, Plant and Equipment.  *Property,plant and equipment are carried at cost and are depreciated using thestraight-line method. The average estimated lives utilized in calculatingdepreciation are as follows: buildings—25 years and machinery andequipment—two to ten years. Property, plant and equipment recorded undercapital leases are depreciated based on either the lease term or the underlyingasset’s useful life. Impairment losses are recorded on long-lived assets whenevents and circumstances indicate the assets might be impaired and theundiscounted cash flows estimated to be generated by those assets are less thantheir carrying amounts.

*Deferred Financing Costs.  *Loanorigination fees and other costs incurred arranging long-term financing arecapitalized as deferred financing costs. The costs are amortized over therespective lives of the obligations using the effective interest method.Deferred financing costs totaled $9,039 and $1,467, less related accumulatedamortization of $1,681 and $263, at December 31, 2004 and 2003,respectively, and are classified as other assets in the accompanyingconsolidated balance sheets.

*Intangibles.  *Goodwilland trademarks have an indefinite life. Patents and customer relationships areamortized on a straight-line basis over their estimated useful lives, whichgenerally range from 10 to 15 years.

Goodwill and trademarks are tested for impairmentannually and whenever events occur or circumstances change that would morelikely than not reduce the fair value of the reporting unit below its carryingvalue. The impairment analysis is completed on a consolidated enterprise level.Comparable 

F-7

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market values, marketprices and the present value of expected future cash flows are used to estimatefair value. Significant judgments and estimates about future conditions areused to estimate future cash flows. Unforeseen events and changes incircumstances and market conditions including general economic and competitiveconditions could result in significant changes in those estimates. Based on animpairment analysis the Company completed in the fourth quarter, no adjustmentto the carrying value of its goodwill was necessary as of December 31,2004.

As a result of the bankruptcy restructuring in 2003,the Company recognized cancellation of indebtedness income, which is notsubject to tax provided the Company reduces certain tax attributes it holds. Thefinal determination of the reduction in tax attributes is made in the yearfollowing the bankruptcy restructuring, and was finalized with the filing ofthe Company’s federal income tax return, which was prepared and filed duringthe third quarter of 2004. At that time, final decisions were made as tocertain elections and positions taken with respect to the manner in which theCompany would reduce its tax attributes. As a result, the Company has made achange in estimate and recorded a deferred tax liability of $69,692 with anoffsetting increase in goodwill to record the final attribute reductionamounts.

*Product Warranty Programs.  *Variousproducts are sold with product warranty programs. Provisions for warrantyprograms are made as the products are sold and adjusted periodically based oncurrent estimates of anticipated warranty costs. During the year ended December 31,2004, the seven months ended December 31, 2003, the five months ended May 31,2003, and the year ended December 31, 2002, the Company recorded $2,020,$5,176, $1,151, and $2,568 of warranty expense, respectively, through cost ofgoods sold. As of December 31, 2004 and 2003, the warranty accrual totaled$3,048 and $4,005, respectively.

*Derivative Instruments.  *TheCompany accounts for derivatives and hedging activities in accordance withStatement of Financial Accounting Standards No. 133, “Accounting forDerivative Instruments and Certain Hedging Activities,” as amended, (“SFAS No. 133”)which requires that all derivative instruments be recorded on the balance sheetat their respective fair values. The Company does not use derivativeinstruments for trading or speculative purposes. The Company designates anddocuments all relationships between hedging instruments and hedged items, aswell as its risk management objectives and strategies for undertaking hedgetransactions. The Company also assesses, both at the inception of the hedge andon an on-going basis, whether the hedge is effective.

*Income Taxes.  *Deferredtax assets and liabilities are recognized for the estimated future taxconsequences attributable to temporary differences between the carrying valueof assets and liabilities for financial reporting purposes and their tax basis.The measurement of current and deferred tax assets and liabilities is based onprovisions of the enacted tax law; the effects of future changes in tax laws orrates are not anticipated. The measurement of deferred tax assets is reduced,if necessary, by the amount of any tax benefits that, based on availableevidence, are not expected to be realized.

As a result of the bankruptcy restructuring in 2003,the Company recognized cancellation of indebtedness income, which is notsubject to tax provided the Company reduces certain tax attributes it holds. Thefinal determination of the reduction in tax attributes is made in the yearfollowing the bankruptcy restructuring, and was finalized with the filing ofthe Company’s federal income tax return, which was prepared and filed duringthe third quarter of 2004. At that time, final decisions were made as tocertain elections and positions taken with respect to the manner in which theCompany would reduce its tax attributes. As a result, the Company has made achange in estimate and recorded a deferred tax liability of $69,692 with anoffsetting increase in goodwill to record the final attribute reductionamounts.

The Company’s effective tax rate includes the impactof certain undistributed foreign earnings for which no U.S. taxes have beenprovided because such earnings are planned to be reinvested indefinitelyoutside the United States. As described in Note 14, fiscal year 2004 resultswere not impacted by the 

F-8

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American Jobs Creation Actof 2004 (the “Jobs Act”). The Company does not anticipate making an election torepatriate foreign earnings with respect to the repatriation provisionscontained in the Jobs Act.

*Revenue Recognition.  *Revenuefrom the sale of cutting and welding products is typically recognized uponshipment to the customer. Cost and related expenses to manufacture and shipcutting and welding products are recorded as cost of sales when the relatedrevenue is recognized. Certain handling costs totaling $9,593, $4,611, $3,281,and $7,423 for the year ended December 31, 2004, the seven months endedDecember 31, 2003, the five months ended May 31, 2003, and the yearended December 31, 2002 were recorded in selling, general andadministrative expenses.

*Earnings(Loss) Per Share.  *The effects of options and warrantshave not been considered in the determination of earnings (loss) per share forthe year ended December 31, 2004, the seven months ended December 31,2003, the five months ended May 31, 2003 and the year ended December 31,2002, because the result would be antidilutive. Options and warrants notincluded in the calculation for the year ended December 31, 2004 and theseven months ended December 31, 2003 were as follows:
| ** **             | ** ** | **Year**              | ** ** | **Seven Months** | ** ** |
|------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **             | ** ** | **Ended**             | ** ** | **Ended**             | ** ** |
| ** **             | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **             | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Stock Options          |       |                  | 675,000    |                  |       |   | 300,000 |   |   |
| Class A  Warrants |       |                  | —     |                  |       |   | 1,157,000 |   |   |
| Class B  Warrants |       |                  | 700,000    |                  |       |   | 700,000 |   |   |
| Class C Warrants  |       |                  | 271,429    |                  |       |   | 271,429 |   |   |

 

Thecalculation of earnings (loss) per share follows:
| ** **                                                        | ** ** | **Reorganized Company** | ** ** | **Predecessor Company** | ** ** |
|-------------------------------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                                        | ** ** | **Year**                     | ** ** | **Seven Months**        | ** ** | **Five Months** | ** ** | **Year** | ** ** |
| ** **                                                        | ** ** | **Ended**                    | ** ** | **Ended**                    | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                                        | ** ** | **December 31,**        | ** ** | **December 31,**        | ** ** | **May 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                        | ** ** | **2004**                     | ** ** | **2003**                     | ** ** | **2003** | ** ** | **2002** | ** ** |
| Numerator:                                                        |       |                         |       |                         |       |   |   |   |   |
| Net income (loss) applicable to common shares                     |       | $                            | (23,977    | )                            | $          | (17,551 | ) | $ | 568,963 |   | $ | (15,955 | ) |
| Denominator:                                                      |       |                         |       |                         |       |   |   |   |   |
| Weighted average shares for basic and diluted earnings  per share |       | 13,308,590                   |       | 13,300,000                   |       | 3,590,286 |   | 3,590,286 |   |
| Basic and diluted income  (loss) per share amounts:               |       |                         |       |                         |       |   |   |   |   |
| Net income (loss)  applicable to common shares                    |       | $                            | (1.80      | )                            | $          | (1.32 | ) | $ | 158.47 |   | $ | (4.44 | ) |

 

*Stock-Based Compensation.  *Stockoptions are granted for a fixed number of shares to employees and directorswith an exercise price equal to or greater than the fair value of the shares atthe date of grant. Stock option grants are recorded under the recognition andmeasurement principles of Accounting Principles Board Opinion No. 25—”Accountingfor Stock Issued to Employees” (“APB 25”), and related interpretations.Accordingly, no stock-based employee compensation cost is reflected inoperating results. Pro forma information regarding net operating results andper share results is required by SFAS No. 123, which also requires thatthe information be determined as if employee stock options were granted underthe fair value method of that statement. The fair value for options granted in2004 was estimated at the date of grant using a Black-Scholes optionpricing model with the following weighted average assumptions: risk-freeinterest rate of 4.1%, a dividend yield of 0.0%, volatility factors of theexpected market price of the Company’s common stock of 0.48, and a weightedaverage expected life of the options of five years. 

F-9

----

The fair value for optionsgranted in 2003 was estimated at the date of grant using a Black-Scholesoption pricing model with the following weighted average assumptions: risk-freeinterest rate of 2.7%, a dividend yield of 0.0%, volatility factors of theexpected market price of the Company’s common stock of 0.54, and a weightedaverage expected life of the options of four years. The weighted average fairvalue of options granted was $5.50 per share and $4.32 per share for the yearended December 31, 2004 and the seven months ended December 31, 2003,respectively.

The Black-Scholes option valuation model wasdeveloped for use in estimating the fair value of traded options which have novesting restrictions and are fully transferable. In addition, option valuationmodels require the input of highly subjective assumptions including theexpected stock price volatility.

Thefollowing table illustrates the effect on net loss and loss per share if thefair value expense recognition requirements of SFAS No. 123 had beenapplied to all stock options granted under the plans.
| ** **                                                                                                     | ** ** | **Reorganized**       | ** ** | **Reorganized**       | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                                                                     | ** ** | **Company**           | ** ** | **Company**           | ** ** |
| ** **                                                                                                     | ** ** | **Year**              | ** ** | **Seven Months** | ** ** |
| ** **                                                                                                     | ** ** | **Ended**             | ** ** | **Ended**             | ** ** |
| ** **                                                                                                     | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **                                                                                                     | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Net loss, as  reported                                                                                         |       |                  | $          | (23,977               | )          |   |   | $ | (17,551 | ) |   |
| Deduct: Total  stock-based compensation expense determined under fair value-based method for  all awards  |       |                  | (991       | )                     |       |   | (420 | ) |   |
| Pro forma net  loss                                                                                            |       |                  | $          | (24,968               | )          |   |   | $ | (17,971 | ) |   |
| Basic and diluted  loss per share                                                                              |       |                  |       |                  |       |   |   |   |   |
| As reported                                                                                                    |       |                  | $          | (1.80                 | )          |   |   | $ | (1.32 | ) |   |
| Pro forma                                                                                                      |       |                  | $          | (1.88                 | )          |   |   | $ | (1.35 | ) |   |

 

*Statements of Cash Flows.  *Forpurposes of the statements of cash flows, all highly liquid investmentspurchased with a maturity of three months or less are considered to be cashequivalents.

*ForeignCurrency Translation.  *Local currencies have beendesignated as the functional currencies for all subsidiaries. Accordingly,assets and liabilities of foreign subsidiaries are translated at the rates ofexchange at the balance sheet date. Income and expense items of thesesubsidiaries are translated at average monthly rates of exchange. The resultanttranslation gains or losses are included in other comprehensive income in thecomponent of shareholders’ equity (deficit) designated “Accumulated othercomprehensive income (loss).” The effect on the consolidated statements ofoperations of transaction gains and losses is insignificant for all periodspresented.

**3. Reclassifications**

Certain prior period amounts have been reclassified toconform to current period presentation. The more significant categories ofreclassifications are outlined below.

*Rebates.  *Rebatecosts, which the Company has previously included in cost of goods sold, havebeen reclassified as a reduction in sales during the fourth quarter of 2004.**These reclassifications decreased bothrevenue and cost of good sold approximately $9,582, $4,099, $2,393, and $5,907for the nine months ended September 30, 2004, the seven months ended December 31,2003, the five months ended May 31, 2003 and the year ended December 31,2002, respectively.

*Brazilian Period Costs.  *Certainperiod costs previously classified as amortization of intangibles by theCompany’s Brazilian operations were reclassified as cost of goods sold duringthe fourth quarter of 2004. These reclassifications increased cost of goodssold and decreased amortization of intangibles 

F-10

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approximately $447, $483,$54, and $187 for the nine months ended September 30, 2004, the sevenmonths ended December 31, 2003, the five months ended May 31, 2003and the year ended December 31, 2002, respectively.

*Restructuring Costs.  *Certainperiod costs previously classified as restructuring costs were reclassified tocost of goods sold during the fourth quarter of 2004. These reclassificationsincreased cost of goods sold and decreased restructuring costs approximately$1,421 for the nine months ended September 30, 2004. Additionally, certaincosts previously recorded as selling, general and administrative costs werereclassified to restructuring costs. These reclassifications decreased selling,general and administrative costs and increased restructuring costsapproximately $1,873 and $516 for the seven months ended December 31, 2003and the five months ended May 31, 2003.

*Warranty Costs.  *Warrantycosts incurred at one of the Company’s distribution operations were previouslyclassified as other expenses. To conform to current presentation of othersimilar costs, these warranty costs were reclassified as cost of goods soldduring the fourth quarter of 2004. These reclassifications increased cost ofgoods sold and decreased other expenses approximately $254, $210, $127, and$427 for the nine months ended September 30, 2004, the seven months ended December 31,2003, the five months ended May 31, 2003 and the year ended December 31,2002, respectively.

These reclassificationshad no effect on the Company’s financial position, cash flows or net income(loss). The following table sets forth a summary of these reclassificationsshowing as reported and adjusted amounts for the nine months ended September 30,2004, the seven months ended December 31, 2003, the five months ended May 31,2003 and the year ended December 31, 2002.
| ** **                                    | ** ** | **Reorganized Company**     | ** ** |
|-----------------------------------------------|------------|----------------------------------|------------|
| ** **                                    | ** ** | **Nine Months Ended**  | ** ** | **Seven Months Ended** | ** ** |
| ** **                                    | ** ** | **September 30, 2004** | ** ** | **December 31, 2003** | ** ** |
| ** **                                    | ** ** | **as reported**             | ** ** | **as adjusted** | ** ** | **as reported** | ** ** | **as adjusted** | ** ** |
| Net sales                                     |       | $                                | 370,377    |   | $ | 360,795 |   | $ | 254,419 |   | $ | 250,320 |   |
| Cost of goods  sold                           |       | 254,332                          |       | 246,872 |   | 182,957 |   | 179,765 |   |
| Selling, general  and administrative expenses |       | 92,114                           |       | 92,114 |   | 70,690 |   | 68,603 |   |
| Amortization of  intangibles                  |       | 3,077                            |       | 2,630 |   | 2,853 |   | 2,370 |   |
| Restructuring  costs                          |       | 9,815                            |       | 8,394 |   | — |   | 1,873 |   |
| Other, net                                    |       | (1,007                           | )          | (753 | ) | (290 | ) | (80 | ) |
|                                               |            |                                  |            |  |  |  |  |  |  |  |  |  |  |

 
| ** **                                    | ** ** | **Predecessor Company**    | ** ** |
|-----------------------------------------------|------------|---------------------------------|------------|
| ** **                                    | ** ** | **Five Months Ended** | ** ** | **Year Ended** | ** ** |
| ** **                                    | ** ** | **May 31, 2003**      | ** ** | **December 31, 2002** | ** ** |
| ** **                                    | ** ** | **as reported**            | ** ** | **as adjusted** | ** ** | **as reported** | ** ** | **as adjusted** | ** ** |
| Net sales                                     |       | $                               | 172,010    |   | $ | 169,617 |   | $ | 413,622 |   | $ | 407,715 |   |
| Cost of goods  sold                           |       | 111,334                         |       | 109,122 |   | 266,931 |   | 261,638 |   |
| Selling, general  and administrative expenses |       | 44,340                          |       | 43,824 |   | 106,695 |   | 106,695 |   |
| Amortization of  intangibles                  |       | 363                             |       | 309 |   | 1,033 |   | 846 |   |
| Restructuring  costs                          |       | —                          |       | 516 |   | — |   | — |   |
| Other, net                                    |       | (1,174                          | )          | (1,047 | ) | (4,213 | ) | (3,786 | ) |
|                                               |            |                                 |            |  |  |  |  |  |  |  |  |  |  |

 

**4. Plan of Reorganization**

On November 19, 2001, the Company andsubstantially all of its domestic subsidiaries filed voluntary petitions forrelief under Chapter 11 of the Bankruptcy Code in the United States BankruptcyCourt for the Eastern District of Missouri (the “Court”).

On January 17, 2003, the Company filed with theCourt the First Amended and Restated Joint Plan of Reorganization (the “Plan ofReorganization”) and the First Amended and Restated Disclosure Statementdescribing the Plan (the “Disclosure Statement”). The Plan of Reorganizationand the Disclosure 

F-11

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Statement were filed withthe SEC on Form 8-K on February 6, 2003. On April 3, 2003,the Court confirmed the Plan of Reorganization. The Plan of Reorganization wasconsummated on May 23, 2003 (the “Effective Date”), and the Companyemerged from Chapter 11 bankruptcy protection.

The Plan of Reorganization provided for a substantialreduction of the Company’s long-term debt. Under the Plan of Reorganization,total debt was reduced to approximately $220,000, as compared to the nearly$800,000 in debt and $79,000 in preferred stock outstanding at the time theCompany filed for Chapter 11 protection in November 2001. The Plan ofReorganization provided for treatment to the various classes of claims andequity interest as follows (as is more fully described in the Plan ofReorganization):

Administrative Expense Claims, Priority Tax Claims andthe Class 1 Other Priority Claims (as each such class, and all classesdescribed herein, are more fully described in the Plan of Reorganization)remain unaffected by the Chapter 11 cases and are to be paid in full. TheClass 3 Other Secured Claims are also unimpaired by the Chapter 11 cases,and the holders of such claims continue to retain their liens.

The pre-petition senior secured lenders (Class 2)exchanged their approximately $365,000 in debt and outstanding letters ofcredit for 94.5% of new common stock, $180,000 in new senior debt notes andSeries C Warrants exercisable for additional shares of new common stock.The pre-petition senior lenders transferred the Series C Warrants to certainpre-petition equity holders.

General Unsecured Creditors (Class 4) willreceive distributions of cash equal to the lesser of (1) a holder’s prorata share of $7,500 and (2) 50% of such holder’s claim (estimated toprovide a recovery on such claims of 30% to 37% of the amount of such claims).The Company has made distributions of $4,890 through December 31, 2004 ofsuch amounts.

The 97¤8% SeniorSubordinated Note Holders (Class 5) exchanged their approximately $230,000in debt and accrued interest for 5.5% of new common stock and Series AWarrants and Series B Warrants exercisable for additional shares of  new common stock. The 97¤8% SeniorSubordinated Note Holders had the opportunity to subscribe for additionalshares through a subscription offering held pursuant to the Plan ofReorganization, but no holders subscribed to the offering of new common stock.

The Junior Subordinated Note Claims, the 10.75% SeniorSubordinated Note Claims and the 121¤2% SeniorDiscount Debenture Claims (Class 6, Class 7 and Class 8, respectively)did not receive any distribution under the Plan of Reorganization, but had theopportunity to participate in the subscription offering for shares of newcommon stock of the reorganized company. None of the holders elected tosubscribe to the offering.

The Thermadyne Holdings Equity Interests(Class 9), which include the Company’s existing common and preferredstock, were cancelled upon the Effective Date of the Plan of Reorganization andthe holders of such interests did not receive any distributions pursuant to thePlan of Reorganization.

On the Effective Date of the Plan of Reorganization,the Company issued 13,300,000 shares of new common stock, $180,000 in newsenior debt notes, 1,157,000 Series A Warrants, 700,000 Series BWarrants and 271,429 Series C Warrants. The Company concurrently enteredinto a new senior secured credit facility providing for revolving loans of upto $50,000. The Company borrowed $15,349 under the facility 

on the Effective Date torepay in full amounts outstanding under the $60,000 debtor-in-possession creditfacility among Thermadyne Mfg. LLC, as borrower, the Company and certain of itsU.S. subsidiaries as guarantors and a syndicate of lenders with ABN AMRO BankN.V. as agent (the “DIP Facility”), for the payment of various pre-petitionobligations and for general working capital purposes.

The Company has accounted for the consummation of thePlan of Reorganization (the “Restructuring”) using the principles of “fresh-start”accounting as required by SOP 90-7. Pursuant to such principles, the Company’sassets and liabilities were revalued as of the month-end closest to theEffective 

F-12

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Date. The assets werestated at their reorganization value (the “Reorganization Value”), which isdefined as the fair value of assets before considering liabilities.

The Company determined the Reorganization Valuethrough consultation with its financial advisors, by developing a range ofvalues using both comparable companies and net present value approaches. TheReorganization Value was based in part on financial projections prepared by theCompany for the period 2002 through 2006. These projections assume a compoundannual growth rate for sales of approximately 3.3% with domestic sales growingat a slightly faster pace than international. This growth rate compares to anegative compounded rate of 4.5% the Company experienced for the years 1997 to2002. The projections also assume improved profitability from continued effortsto reduce cost. The determination of the Reorganization Value is more fullydescribed in the Plan of Reorganization. Based on the analyses prepared by theCompany and its financial advisors, the Company estimated the ReorganizationValue at approximately $518,000. The Company made an allocation of theReorganization Value to its various asset classes which includes certainestimates and judgments.

 

F-13

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The following unaudited consolidated balance sheet asof June 1, 2003 illustrates the effect of the Restructuring and the effectof fresh-start accounting adjustments to record the preliminaryallocation of the Reorganization Value to the Company’s assets. The totalamount of debt forgiveness was $782,100 and was included as a gain onreorganization in the accompanying statements for the five month period ended May 31,2003. The consolidated balance sheet at June 1, 2003 has been prepared ona different basis of accounting and is not comparable in material respects toany balance sheet as of any prior date.
| ** **                                               | ** ** | **June 1, 2003  Historical  Basis of  Accounting** | ** ** | **Debt  Discharge and  Restructuring** | ** ** | **Fresh-Start  Adjustments** | ** ** | **June 1, 2003  New Basis of  Accounting** | ** ** |
|----------------------------------------------------------|------------|-------------------------------------------------------------------|------------|---------------------------------------------|------------|------------------------------|------------|----------------------------------------------------------------|------------|
| **ASSETS**                                               |       |                                                              |       |                                        |       |                         |       |                                                           |       |   |   |   |   |   |   |
| Current Assets:                                          |       |                                                              |       |                                        |       |                         |       |                                                           |       |   |   |   |   |   |   |
| Cash and cash  equivalents                               |       | $                                                                 | 12,793     |                                        |       | $                            | —     |                                                           |       |   | $ | — |   |   |   | $ | 12,793 |   |   |
| Accounts receivable, net                                 |       | 86,089                                                            |       |                                        | —     |                         |       |                                                           | —     |   |   |   | 86,089 |   |   |
| Inventories                                              |       | 105,804                                                           |       |                                        | —     |                         |       |                                                           | —     | (j) |   |   | 105,804 |   |   |
| Prepaid expenses and  other                              |       | 11,103                                                            |       |                                        | —     |                         |       |                                                           | (933       | )(k) |   |   | 10,170 |   |   |
| Total current assets                                     |       | 215,789                                                           |       |                                        | —     |                         |       |                                                           | (933       | ) |   |   | 214,856 |   |   |
| Property, plant and  equipment                           |       | 73,934                                                            |       |                                        | —     |                         |       |                                                           | 11,933     | (l) |   |   | 85,867 |   |   |
| Deferred financing costs                                 |       | 675                                                               |       |                                        | 677        | (a)                          |       |                                                           | —     |   |   |   | 1,352 |   |   |
| Goodwill                                                 |       | 13,089                                                            |       |                                        | —     |                         |       |                                                           | 122,779    | (m) |   |   | 135,868 |   |   |
| Intangibles                                              |       | 4,046                                                             |       |                                        | —     |                         |       |                                                           | 75,382     | (n) |   |   | 79,428 |   |   |
| Other assets                                             |       | 1,113                                                             |       |                                        | —     |                         |       |                                                           | —     |   |   |   | 1,113 |   |   |
| Total assets                                             |       | $                                                                 | 308,646    |                                        |       | $                            | 677        |                                                           |       |   | $ | 209,161 |   |   |   | $ | 518,484 |   |   |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY (DEFICIT)** |       |                                                              |       |                                        |       |                         |       |                                                           |       |   |   |   |   |   |   |
| Current Liabilities:                                     |       |                                                              |       |                                        |       |                         |       |                                                           |       |   |   |   |   |   |   |
| Accounts payable                                         |       | $                                                                 | 29,649     |                                        |       | $                            | —     |                                                           |       |   | $ | — |   |   |   | $ | 29,649 |   |   |
| Accrued and other  liabilities                           |       | 31,963                                                            |       |                                        | 8,639      | (b)                          |       |                                                           | —     |   |   |   | 40,602 |   |   |
| Accrued interest                                         |       | 1,348                                                             |       |                                        | (1,348     | )(c)                         |       |                                                           | —     |   |   |   | — |   |   |
| Income taxes payable                                     |       | 3,841                                                             |       |                                        | 488        | (d)                          |       |                                                           | —     |   |   |   | 4,329 |   |   |
| Current maturities of  long-term obligations             |       | 15,511                                                            |       |                                        | (11,650    | )(e)                         |       |                                                           | —     |   |   |   | 3,861 |   |   |
| Total current  liabilities                               |       | 82,312                                                            |       |                                        | (3,871     | )                            |       |                                                           | —     |   |   |   | 78,441 |   |   |
| Liabilities subject to  compromise                       |       | 835,969                                                           |       |                                        | (835,969   | )(f)                         |       |                                                           | —     |   |   |   | — |   |   |
| Long-term obligations,  less current maturities          |       | 15,742                                                            |       |                                        | 195,349    | (g)                          |       |                                                           | 3,856      | (o) |   |   | 214,947 |   |   |
| Other long-term  liabilities                             |       | 47,203                                                            |       |                                        | 9,648      | (d)                          |       |                                                           | (15,155    | )(o) |   |   | 41,696 |   |   |
| Total liabilities                                        |       | 981,226                                                           |       |                                        | (634,843   | )                            |       |                                                           | (11,299    | ) |   |   | 335,084 |   |   |
| Redeemable preferred  stock                              |       | 78,509                                                            |       |                                        | (78,509    | )(h)                         |       |                                                           | —     |   |   |   | — |   |   |
| Stockholders’ equity  (deficit):                    |       |                                                              |       |                                        |       |                         |       |                                                           |       |   |   |   |   |   |   |
| Common stock                                             |       | 36                                                                |       |                                        | 97         | (i)                          |       |                                                           | —     |   |   |   | 133 |   |   |
| Additional paid-in  capital                              |       | (130,204                                                          | )          |                                        | 313,471    | (i)                          |       |                                                           | —     |   |   |   | 183,267 |   |   |
| Accumulated other  comprehensive loss                    |       | (38,812                                                           | )          |                                        | (2,488     | )(i)                         |       |                                                           | 41,300     | (p) |   |   | — |   |   |
| Accumulated deficit                                      |       | (582,109                                                          | )          |                                        | 402,949    | (i)                          |       |                                                           | 179,160    | (p) |   |   | — |   |   |
| Total stockholders’  equity (deficit)               |       | (751,089                                                          | )          |                                        | 714,029    |                         |       |                                                           | 220,460    |   |   |   | 183,400 |   |   |
| Total liabilities and shareholders’ equity          |       | $                                                                 | 308,646    |                                        |       | $                            | 677        |                                                           |       |   | $ | 209,161 |   |   |   | $ | 518,484 |   |   |

----

Debt discharge and restructuringadjustments:

(a)    To recordfinancing costs related to the new credit agreement and the new term notesissued as part of the Plan of Reorganization.

(b)   To recordamounts expected to be paid in accordance with the Plan of Reorganization.Amount includes $7,500 to be paid to unsecured creditors with the remainderrelated to other secured and priority claims.

F-14

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(c)    To recordpayment of accrued interest on the DIP Facility and the pre-petition creditagreement.

(d)   Toreestablish obligations expected to be paid in the normal course of business.Amounts were previously included in liabilities subject to compromise.

(e)    To recordrepayment of principal outstanding under the DIP Facility.

(f)    Toeliminate liabilities subject to compromise.

(g)    To recordinitial borrowings of $15,349 under the new credit agreement and to record$180,000 of new term notes in accordance with the Plan of Reorganization.Initial borrowings under the new credit agreement were used to repay the DIPFacility and to pay certain amounts due at closing including interest on theDIP Facility and the Company’s pre-petition credit facility.

(h)   Toeliminate preferred stock in accordance with the Plan of Reorganization.

(i)    To adjustequity for adjustments contemplated in the Plan of Reorganization and to recordnew common stock.

**Fresh-Start Adjustments:**

(j)     To recordwork-in-process and finished goods at their respective selling prices less (i) coststo complete, (ii) costs of disposal and (iii) a reasonable profit onthe selling effort, as applicable. The write-up in inventory resulting fromthis revaluation was essentially offset by an adjustment to eliminate theexisting LIFO inventory layers, the LIFO reserve and previously capitalizedinventory costs.

(k)   Toeliminate the prepaid pension asset and record the liability related to thedefined benefit pension plans at the projected benefit obligation in excess ofplan assets and eliminate other amounts recorded on the balance sheet. Inaddition to the prepaid pension asset, the Company eliminated $4,459 recordedin accumulated other comprehensive loss.

(l)    To writeup fixed assets to their estimated fair value. The adjustment includes areduction of approximately $1,860 of land, buildings and leasehold improvementsrelated to a facility that will be exited in mid-2004. The write-up wasbased on management estimates and an appraisal prepared for the Company by athird party.

(m)  To recordthe excess of the Reorganization Value over identifiable assets (“goodwill”).

(n)   To record theincremental allocation of the Reorganization Value to identifiable intangibleassets. Intangibles consist of the following as of June 1, 2003:
| Patents                 |   | $      | 7,436  |   |
|-------------------------|--------|--------|--------|--------|
| Trademarks              |   | 33,600 |   |
| Customer  relationships |   | 38,392 |   |
|                    |   | $      | 79,428 |   |

 

The value assigned to patents, trademarks and customerrelationships was based on management’s estimates and an appraisal prepared forthe Company by a third party.

F-15

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(o)   Adjustmentsconsist of the following:
| ** **                                                                                   | ** ** | **Long-Term  Obligations** | ** ** | **Other  Long-Term  Liabilities** | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------------|------------|-----------------------------------|------------|
| Properly classify  capital lease obligations                                                 |       |                       | $          | 8,744                             |       |   | $ | (8,769 | ) |
| Reduction in  capital lease obligation related to a facility that will be exited in mid-2004 |       |                       | (4,888     | )                                 |       | — |   |
| Adjust pension  obligation                                                                   |       |                       | —     |                              |       | 1,787 |   |
| Adjust post-retirement  benefit obligation                                                   |       |                       | —     |                              |       | (8,173 | ) |
|                                                                                         |       |                       | $          | 3,856                             |       |   | $ | (15,155 | ) |

 

Similar to the adjustmentmade related to the defined benefit pension plans, the liability related to thepostretirement benefit plan was adjusted to the accumulated postretirementbenefit obligation.

(p)   To eliminate remaining balances of accumulated other comprehensiveloss and retained deficit.

***Liabilities Subjectto Compromise***

UnderChapter 11, certain claims against the debtor in existence prior to the filingof the petition for relief under federal bankruptcy laws are stayed while thedebtor continues business operations as a debtor-in-possession. These claimsare shown in the December 31, 2002 balance sheet as “liabilities subjectto compromise.” Additional claims (liabilities subject to compromise) may arisesubsequent to the filing date resulting from rejection of executory contracts,including leases, and from the determination by the Court (or agreed to byparties in interest) of allowed claims for contingencies and other disputedamounts. Claims secured against the debtor’s assets also are stayed, althoughthe holders of such claims have the right to move the Court for relief from thestay. The principal categories of liabilities subject to compromise at May 31,2003 and at December 31, 2002 prior to the reorganization consisted of thefollowing:
| ** **                     | ** ** | **May 31, 2003** | ** ** | **December 31, 2002** | ** ** |
|--------------------------------|------------|----------------------------|------------|---------------------------------|------------|
| Trade accounts  payable        |       |                       | $          | 15,949                          |       |   |   | $ | 15,949 |   |   |
| Accrued and other  liabilities |       |                       | 3,007      |                            |       |   | 3,023 |   |   |
| Accrued interest               |       |                       | 24,809     |                            |       |   | 24,809 |   |   |
| Accrued income  taxes          |       |                       | 9,088      |                            |       |   | 9,086 |   |   |
| Old Credit  Facility           |       |                       | 359,522    |                            |       |   | 356,172 |   |   |
| Senior  Subordinated Notes     |       |                       | 207,000    |                            |       |   | 207,000 |   |   |
| Debentures                     |       |                       | 145,066    |                            |       |   | 145,066 |   |   |
| Subordinated  Notes            |       |                       | 37,060     |                            |       |   | 37,060 |   |   |
| Junior Notes                   |       |                       | 33,427     |                            |       |   | 33,427 |   |   |
| Other long-term  liabilities   |       |                       | 1,041      |                            |       |   | 1,327 |   |   |
| Total                          |       |                       | $          | 835,969                         |       |   |   | $ | 832,919 |   |   |

 

***ReorganizationItems***

Reorganization costs forthe five months ended May 31, 2003 were $15,692 consisting of $14,959 ofprofessional fees, $285 paid under the key employee retention plan and $448 ofother reorganization costs. Reorganization costs for 2002 were $23,908 andincluded $9,764 of professional fees and expenses, $1,933 of expenses relatedto financing fees associated with the DIP Facility, $13,826 for the write-offof deferred financing fees associated with pre-petition long-term debt subjectto compromise, $290 related to payments 

madeunder the key employee retention plan approved by the Court, a benefit of$2,664 related to the rejection of certain capital leases and $759 of otherreorganization items.

F-16

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**5. Accounts Receivable**

As of December 31,2004 and 2003, accounts receivable are recorded at the amounts invoiced tocustomers less an allowance for doubtful accounts. Management estimates theallowance based on a review of the portfolio taking into considerationhistorical collection patterns, the economic climate and aging statistics basedon contractual due dates. Accounts are written off to the allowance oncecollection efforts are exhausted.
| ** **                                                       | ** ** | **Balance at  Beginning of** | ** ** | ** ** | ** ** | **Net ** | ** ** | **Balance at  End of** | ** ** |
|------------------------------------------------------------------|------------|----------------------------------------|------------|------------|------------|---------------|------------|----------------------------------|------------|
| **Allowance for Doubtful Accounts**               | ** ** | ** **                             | ** ** | **Period** | ** ** | **Provision** | ** ** | **Write- offs**             | ** ** | **Period** | ** ** |
| Year ended  December 31, 2004 (Reorganized Company)         |       |                                   | $          | 6,443      |       |          |       | $                                | 932        |   |   |   | $ | (1,266 | ) |   |   | $ | 6,109 |   |   |
| Seven months  ended December 31, 2003 (Reorganized Company) |       |                                   | 4,489      |       |       |          | 2,834      |                             |       |   | (880 | ) |   |   | 6,443 |   |   |
| Five months ended  May 31, 2003 (Predecessor Company)       |       |                                   | 4,275      |       |       |          | 455        |                             |       |   | (241 | ) |   |   | 4,489 |   |   |
| Year ended  December 31, 2002 (Predecessor Company)         |       |                                   | 3,376      |       |       |          | 1,542      |                             |       |   | (643 | ) |   |   | 4,275 |   |   |
|                                                                  |            |                                        |            |            |            |               |            |                                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**6. Inventories**

Thecomposition of inventories at December 31 is as follows:
| ** **      | ** ** | **Reorganized** | ** ** | **Reorganized** | ** ** |
|-----------------|------------|-----------------|------------|-----------------|------------|
| ** **      | ** ** | **Company**     | ** ** | **Company**     | ** ** |
| ** **      | ** ** | **2004**        | ** ** | **2003**        | ** ** |
| Raw materials   |       |            | $          | 25,311          |       |   |   | $ | 21,218 |   |   |
| Work-in-process |       |            | 33,095     |            |       |   | 28,906 |   |   |
| Finished goods  |       |            | 64,370     |            |       |   | 50,390 |   |   |
|            |       |            | 122,776    |            |       |   | 100,514 |   |   |
| LIFO reserve    |       |            | (4,069     | )               |       |   | (444 | ) |   |
|            |       |            | $          | 118,707         |       |   |   | $ | 100,070 |   |   |

 

The carrying value ofinventories valued by the LIFO method was $74,260 at December 31, 2004 and$62,666 at December 31, 2003.

**7. Property, Plant, and Equipment**

Thecomposition of property, plant and equipment at December 31 is as follows:
| ** **                | ** ** | **Reorganized** | ** ** | **Reorganized** | ** ** |
|---------------------------|------------|-----------------|------------|-----------------|------------|
| ** **                | ** ** | **Company**     | ** ** | **Company**     | ** ** |
| ** **                | ** ** | **2004**        | ** ** | **2003**        | ** ** |
| Land                      |       |            | $          | 8,197           |       |   |   | $ | 7,368 |   |   |
| Building                  |       |            | 23,747     |            |       |   | 19,578 |   |   |
| Machinery and  equipment  |       |            | 78,815     |            |       |   | 69,204 |   |   |
|                      |       |            | 110,759    |            |       |   | 96,150 |   |   |
| Accumulated  depreciation |       |            | (31,745    | )               |       |   | (13,630 | ) |   |
|                      |       |            | $          | 79,014          |       |   |   | $ | 82,520 |   |   |

 

Assets recorded under capitalized leases were $17,599($13,775 net of accumulated depreciation) and $14,955 ($12,634 net ofaccumulated depreciation) at December 31, 2004 and 2003, respectively.

 

F-17

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**8. Intangible Assets**

Thecomposition of intangibles at December 31 is as follows:
| ** **                          | ** ** | **Reorganized** | ** ** | **Reorganized** | ** ** |
|-------------------------------------|------------|-----------------|------------|-----------------|------------|
| ** **                          | ** ** | **Company**     | ** ** | **Company**     | ** ** |
| ** **                          | ** ** | **2004**        | ** ** | **2003**        | ** ** |
| Goodwill                            |       |            | $          | 208,403         |       |   |   | $ | 135,868 |   |   |
| Patents and  customer relationships |       |            | 49,517     |            |       |   | 47,404 |   |   |
| Trademarks                          |       |            | 33,403     |            |       |   | 33,353 |   |   |
|                                |       |            | 291,323    |            |       |   | 216,625 |   |   |
| Accumulated  amortization           |       |            | (6,306     | )               |       |   | (2,853 | ) |   |
|                                |       |            | $          | 285,017         |       |   |   | $ | 213,772 |   |   |

 

As described in Note 14, upon filing of the Company’s2003 federal income tax return during the third quarter of 2004, deferred taxliabilities increased by $69,692, and goodwill was correspondingly increased by$69,692 to reflect the final determination of tax attribute reductions made asa result of the Company’s emergence from bankruptcy.

As described in Note 19, during the year end review ofthe Company’s financial statements, management identified an unexpectedvariation in the balance sheet data for the Company’s Brazilian subsidiary.After performing detailed analytical and internal audit procedures, the Companyidentified errors related to current and historical periods. Accordingly,during the fourth quarter of 2004, the Company recorded a $2,843 increase togoodwill.

Amortization expenseamounted to $3,453, $2,370, $309, and $846 for the year ended December 31,2004, the seven months ended December 31, 2003, the five months ended May 31,2003 and the year ended December 31, 2002, respectively. Amortizationexpense for patents and customer relationships is expected to be approximately$3,500 for each of the next five fiscal years.

**9.Debt and Capital Lease Obligations**

Thecomposition of debt and capital lease obligations at December 31 is asfollows:
| ** **                                                                                                                                  | ** ** | **Reorganized** | ** ** | **Reorganized** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|------------|-----------------|------------|
| ** **                                                                                                                                  | ** ** | **Company**     | ** ** | **Company**     | ** ** |
| ** **                                                                                                                                  | ** ** | **2004**        | ** ** | **2003**        | ** ** |
| Working Capital  Facility                                                                                                                   |       |            | $          | 10,824          |       |   |   | $ | 12,860 |   |   |
| Second-Lien  Facility                                                                                                                       |       |            | 20,000     |            |       |   | — |   |   |
| Term A Loan                                                                                                                                 |       |            | 9,250      |            |       |   | — |   |   |
| Senior Term Notes                                                                                                                           |       |            | —     |            |       |   | 180,000 |   |   |
| Senior  Subordinated Notes, due February 1, 2014, 91¤4%  interest payable semiannually on February 1 and August 1  |       |            | 175,000    |            |       |   | — |   |   |
| Capital leases  (Note 13)                                                                                                                   |       |            | 19,160     |            |       |   | 20,435 |   |   |
| Other                                                                                                                                       |       |            | 11,513     |            |       |   | 5,083 |   |   |
|                                                                                                                                        |       |            | 245,747    |            |       |   | 218,378 |   |   |
| Current  maturities, working capital facility and second-lien facility                                                                      |       |            | (42,079    | )               |       |   | (27,974 | ) |   |
|                                                                                                                                        |       |            | $          | 203,668         |       |   |   | $ | 190,404 |   |   |

 

F-18

----

At December 31, 2004 the schedule of principalpayments on debt, excluding capital lease obligations, is as follows:
| 2005       |   | $       | 39,666 |   |
|------------|--------|---------|--------|--------|
| 2006       |   | 1,706   |   |
| 2007       |   | 1,708   |   |
| 2008       |   | 1,656   |   |
| 2009       |   | 4,248   |   |
| Thereafter |   | 177,603 |   |

 

For the year ended December 31,2004, the Company’s weighted average interest rate on its short-term borrowingswas 7.71%.

***Senior Subordinated Notes***

On February 5, 2004, the Company completed aprivate placement of $175,000 in aggregate principal of 91⁄4% Senior SubordinatedNotes due 2014 (the “Senior Subordinated Notes”). The net proceeds from theoffering, together with approximately $20,000 of borrowings under a new termloan (the “Term Loan”) added through an amendment and restatement to theCompany’s GECC credit agreement (the “Credit Agreement”), were used to repayall outstanding borrowings under the existing $180,000 senior term notes and toreduce amounts outstanding under the Company’s revolving credit facility. In May 2004,for the purpose of an exchange offer, the Company registered notes with termsidentical to the Senior Subordinated Notes under the Securities Act of 1933. TheCompany completed the exchange offer in the second quarter and more than 99% ofthe original notes were exchanged for the registered notes.

The Senior SubordinatedNotes are unsecured senior subordinated obligations and are subordinated inright of payment to all existing and future Senior Indebtedness (as defined inthe indenture). Interest accrues at the rate of 91⁄4% per annum and is payablesemiannually in arrears on February 1 and August 1.

***Credit Agreement***

The Credit Agreement consistedof the Term Loan and a $50,000 revolving credit facility (the “Working CapitalFacility”). Up to $20,000 of the Working Capital Facility was available forletters of credit. Actual borrowing availability was subject to a borrowingbase calculation, which equaled 1.5 times Adjusted EBITDA. The Credit Agreementdefines Adjusted EBITDA as 100% of the EBITDA for the Company and its domesticsubsidiaries plus 65% of the EBITDA of the Company’s Canadian subsidiaries. EBITDAis defined in the Credit Agreement as net income less income tax credits,interest income, gains from extraordinary items, any aggregate net gain on thesale of tangible assets, and any other non-cash gains added in determining netincome; plus, provision for income taxes, interest expense, depreciation,amortization of intangibles, amortization of deferred financing costs, anyamount deducted from net income as a result of stock or stock option grants,the accrual net of any payments in cash related to net periodic post-retirementbenefit costs, losses from extraordinary items, reorganization costs related tothe Chapter 11 cases, and any non-recurring employee severance expenses andnon-recurring cash expenses related to plant reorganizations, not to exceed$10,000 in the aggregate, the non-cash portion of any expense or lossattributable to any interest rate agreement or arrangement permitted under the Credit Agreement prior to the terminationor expiration of such agreement or arrangement, and $8,900 of non-cash reservesrecorded at December 31, 2003 related to the implementation of a revisedreserve methodology for inventory and accounts receivable and recognition of anadditional accrual for warranty obligations. Availability under the WorkingCapital Facility was also limited if the Company failed to meet certain levelsof Adjusted EBITDA. Borrowings under the Term Loan and the Working CapitalFacility accrued interest, at the Company’s option, at the prime lending rateplus 2.25%, in the case of index rate 

F-19

----

loans, or at the London Interbank Offered Rate (“LIBOR”) plus3.25%, in the case of LIBOR loans. Unusedportions of the Working Capital Facility were charged 75 basis points as of December 31,2004. 

TheCredit Agreement was secured by substantially all of the assets of the Company’sdomestic subsidiaries, including a pledge of the capital stock of substantiallyall of the Company’s subsidiaries, subject to certain limitations with respectto foreign subsidiaries. The Credit Agreement contained financial covenants,including minimum levels of EBITDA (determined on a consolidated basis) andother customary provisions.

On November 22, 2004, the Company entered intothe Amended Credit Agreement. The Amended Credit Agreement has a five yearmaturity, adds the Company’s foreign subsidiaries in Australia, the UnitedKingdom and Canada, which are referred to as the Foreign Subsidiary Parties, ascredit collateral parties and changes the determination of the borrowing basefrom a cash flow-based formula to an asset-based formula. Under the AmendedCredit Agreement, the total loan commitment was increased from $70,000 to$91,300 (subject to the limitation described below), with an increase in therevolving loan commitment to $80,000 from $50,000 and a decrease in term loancommitments from $20,000 to $11,300. The amended term loan commitments consistof a $9,250 Term A loan and a maximum $2,050 Delayed Draw Term Loan dependentupon the final evaluation of certain real property located in Australia. TheAmended Credit Agreement also increases the amount of letters of credit thatcan be issued from $20,000 to $25,000. The Amended Credit Agreement is securedby substantially all of the assets of the Company’s domestic subsidiaries andthe Company’s foreign subsidiaries in Australia, the United Kingdom and Canada,including a pledge of the capital stock of substantially all of the Company’ssubsidiaries, subject to certain limitations with respect to foreignsubsidiaries. Borrowing under the revolving loan commitment may not exceed 85%of eligible receivables plus the lesser of (i) 85% of the net orderlyliquidation value of eligible inventories or (ii) 65% of the book value ofinventories less customary reserves. The Amended Credit Agreement containsfinancial covenants, including minimum levels of EBITDA (as defined in theAmended Credit Agreement and determined on a consolidated basis) and othercustomary provisions and requires refinancing of the obligations under theSecond-Lien Facility by May 22, 2005. In connection with the AmendedCredit Agreement, the Company’s foreign subsidiaries in Australia, the UnitedKingdom and Canada granted second security interests in their assets to thelenders under the Company’s $20,000 Second-Lien Facility due July 22, 2005and guaranteed the Company’s $175,000 9 1/4% of Senior Subordinated Notes. Interestrates on the Amended Credit Agreement have been reduced to, at the Company’soption, LIBOR plus 2.25% or the prime rate plus 0.5% on the revolving facility,and LIBOR plus 2.50% or the prime rate plus 0.75% on the term loan facilities.All of these percentages are subject to an interest rate grid and will declineif certain conditions are met. Principal payments on the term loan facilitiesare equal quarterly payments based on seven-year amortization, with theremaining amount paid at maturity. Unused portions of the revolving creditfacility bear interest at the rate of 0.5% per annum. The Amended CreditAgreement limits total borrowings under the facility to $75,000 until theSecond-Lien Facility is paid or refinanced with long-term debt and requiresthat the Second-Lien Facility be paid or refinanced 60 days before maturity.The Amended Credit Agreement does under certain conditions, allow for the useof the revolving facility to repay the Second-Lien Facility. As of December 31,2004, the Company had outstanding borrowings of $10,824 and issued letters ofcredit totaling $10,857 under the revolving facilities. The Company hadavailability of $27,182 under the revolving facility at December 31, 2004.The revolving facility terminates on November 22, 2009. The Term A Loanmatures on November 22, 2009 and requires equal quarterly principalpayments of $330 per quarter beginning December 31, 2004 through October 31,2009, with the balance of the outstanding principal being payable on November 22,2009. As of December 31, 2004 the Company did not have access to theDelayed Term Loan.

The Working Capital Facility requires lockboxagreements which provide for all receipts to be swept daily to reduceborrowings outstanding under the revolving line of credit. These agreements,combined 

F-20

----

with the existence of asubjective Material Adverse Effect (“MAE”) clause, cause the Working CapitalFacility to be classified as a current liability. However, the Company does notexpect to repay, or be required to repay, within one year, the balance of theWorking Capital Facility classified as a current liability. The Company’sintent is to continually use the Working Capital Facility throughout the lifeof the agreement to fund working capital needs. The MAE clause, which is atypical requirement in commercial credit agreements, allows the lender torequire the loan to become due if it determines there has been a materialadverse effect on the Company’s operations, business, assets or prospects.

On March 16, 2005,the Company entered into an amendment to the Amended Credit Agreement whichmodified certain financial covenants. The Amended Credit Agreement was furtheramended on March 30, 2005 to modify certain financial covenants and enablethe Company to extend its Second-Lien Facility. The Amended Credit Agreementrequires the Second-Lien Facility to be paid or refinanced 60 days priorto its maturity.

***Second-Lien Facility***

On July 29, 2004 theCompany entered into a new $20,000 second-lien term loan facility (the “Second-LienFacility”). Borrowings under the facility were used to repay a portion of theamount outstanding under the Working Capital Facility. On November 5, 2004the Company entered into an amendment to the Second-Lien Facility to extend itsmaturity to July 22, 2005 and modified a financial covenant. TheSecond-Lien Facility is secured by a second lien on substantially all of theassets of the Company. The Second-Lien Facility accrues interest at the Company’soption, at LIBOR plus 6.00%, or an alternative base rate of (the greater of a)the Prime Rate or b) the federal funds rate plus one half of 1.00%) plus 5.00%.The Second-Lien Facility restricts how much long-term debt the Company may haveand has other customary provisions including financial and non-financialcovenants. On March 16, 2005, the Second-Lien Facility was amended tomodify a financial covenant. The Second-Lien Facility was further amended on March 30,2005 to modify certain other financial covenants and extend its maturity until April30, 2006.

***Senior Term Notes***

The Senior Term Notesaccrued interest, in the case of Eurodollar loans at LIBOR plus a marginranging from 3.0% to 7.5%, and in the case of base rate loans at the prime rateplus a margin ranging from 2.0% to 6.5%. The interest margin applicable to theEurodollar and base rate loans varied depending on the level of indebtednessand the time elapsed from the Effective Date. The Senior Term Notes were repaidin February 2004.

***Parent Company Financial Information***

Borrowings under theAmended Credit Agreement are the obligations of Thermadyne Industries, Inc.(“Industries”), the Company’s principal operating subsidiary, certain ofIndustries’ other domestic subsidiaries and the Company’s foreign subsidiariesin Australia, the United Kingdom and Canada. The Amended Credit Agreementcontains restrictions that limit Industries’ ability to dividend cash and otherassets to its parent company, Thermadyne Holdings Corporation. At December 31,2003 and 2004 the only asset carried on the parent-company books ofThermadyne Holdings Corporation was its investment in Industries, and the onlyliabilities were the $175,000 of Senior Subordinated Notes. As a result of thelimited assets and liabilities recorded at the parent company level, separatefinancial statements have not been presented for Thermadyne Holdings Corporation.

**10. Derivative Instrument**

In February 2004, the Company entered into aninterest rate swap arrangement to convert a portion of the fixed rate exposureon its Senior Subordinated Notes to variable rates. Under the terms of the 

F-21

----

interest rate swap contract,which has a notional amount of $50,000, the Company receives interest at afixed rate of 91⁄4% and pays interest at a variable rate equal to LIBOR plus aspread of 442 basis points. The six-month LIBOR rate on each semi-annual resetdate determines the variable portion of the interest rate swap. The six-monthLIBOR rate for each semi-annual reset date is determined in arrears.

The Company has designated the interest rate swap as afair value hedge of its fixed rate debt. The terms of the interest rate swapcontract and hedged item meet the criteria to be measured using the short-cutmethod defined in SFAS No. 133 and therefore perfect effectiveness isassumed over the term of the swap.

In accordance withSFAS No. 133, as of December 31, 2004 the Company recorded afair value adjustment to the portion of its fixed rate long-term debt that ishedged. This fair value adjustment of $213 was recorded as a decrease tolong-term obligations, with the related value for the interest rate swap’snon-current portion recorded in other long-term liabilities. Interest ratedifferentials associated with the interest rate swap are recorded as anadjustment to a current asset or liability, with the offset to interest expenseover the life of the interest rate swap. For the year ended December 31,2004, the Company realized a reduction in its interest expense as a result ofthe interest rate swap of $1,002.

**11. Warrants**

Inconnection with the Restructuring and the settlement of the various creditorclasses in the Chapter 11 bankruptcy proceeding, three classes of warrants wereissued that allow the holders to purchase the Company’s common stock in thefuture at stated exercise prices. The key financial elements of the warrantsare as follows:
|                   |       | ** **           | ** ** | ** **         | ** ** | ** **     | ** ** | **Warrants**          | ** **        |
|------------------------|------------|----------------------|------------|--------------------|------------|----------------|------------|-----------------------|-------------------|
| ** **             | ** ** | **Warrants**         | ** ** | ** **         | ** ** | ** **     | ** ** | **Issued and**   | ** **        |
| ** **             | ** ** | **Issued**           | ** ** | ** **         | ** ** | ** **     | ** ** | **Outstanding**       | ** **        |
| ** **             | ** ** | **to Purchase** | ** ** | **Exercise**       | ** ** | ** **     | ** ** | **as of**        | ** **        |
| ** **             | ** ** | **Common**           | ** ** | **Price**          | ** ** | **Expiration** | ** ** | **December 31,** | ** **        |
| ** **             | ** ** | **Stock**            | ** ** | **Per Share** | ** ** | **Date**       | ** ** | **2004**              | ** **        |
| Class A  Warrants |       | 1,157,000            |       |               | $          | 13.85          |       |                  | May 23, 2004 |   |   | — |   |   |
| Class B  Warrants |       | 700,000              |       |               | $          | 20.78          |       |                  | May 23, 2006 |   |   | 700,000 |   |   |
| Class C Warrants  |       | 271,429              |       |               | $          | 27.70          |       |                  | May 23, 2006 |   |   | 271,429 |   |   |

 

The Class A and BWarrants were issued, pro rata, to participants in the former 9 7/8%senior subordinated notes. These former bondholders received approximately 5%of the Company’s common stock upon emergence from Chapter 11, plus the Class Aand B warrants. These warrants have been effectively valued and recorded withinshareholders’ equity (additional paid-in capital) in connection withestablishing the opening fresh-start balance sheet.

The Class C Warrantswere issued to the former majority equity holders of the Company. The formerequity holders received no other significant disbursements or considerationupon emergence from Chapter 11. These warrants have been treated as anexchange of old equity securities for new equity securities in connection withrecording the reorganization entries and establishing the opening fresh-startbalance sheet.

During the year ended December 31,2004, 13,973 Class A Warrants were exercised, the proceeds of which were$193. The remaining Class A Warrants expired on May 23, 2004. Therewere no Class B Warrants or Class C Warrants exercised during theyear ended December 31, 2004.

F-22

----

**12. Stock Options**

The stock option plans existing at December 31,2002 and all options issued there under were cancelled in May 2003 uponemergence from Chapter 11 bankruptcy.

The 2004 Non-Employee Directors Stock Option Plan (the“Directors Plan”) was adopted in May 2004 for the Company’s board ofdirectors. Up to 200,000 shares of the Company’s common stock may be issuedpursuant to awards granted by the Compensation Committee under the DirectorsPlan.

The 2004 Stock Incentive Plan (the “Stock IncentivePlan”) was adopted in May 2004 for the Company’s employees. Up to1,477,778 shares of the Company’s common stock may be issued pursuant to awardsgranted by the Compensation Committee under the Stock Incentive Plan. The StockIncentive Plan provides for the grant of (a) incentive stock optionsintended to qualify under Section 422 of the Internal Revenue Code of1986, (b) non-statutory stock options, (c) stock appreciation rights(“SARs”), (d) restricted stock, (e) stock units and (f) performanceawards. In 2004 the Company awarded 375,000 stock options under the StockIncentive Plan, of which, 187,500 vest ratably over three years following thegrant date. The remaining 187,500 options will vest within three years of thegrant date if certain financial goals are met, but will vest at the end ofseven years regardless of whether these financial targets are achieved.

In August 2003, the Company awarded stock optiongrants to non-employee directors under specific grant agreements. Eachnon-employee director was granted an option to acquire up to 25,000shares of common stock. Each grant vests ratably over a three year period.

A summary of the activityand related information for options issued after emergence from Chapter 11 issummarized as follows:
| ** **                                     | ** ** | **Reorganized Company** | ** ** |
|------------------------------------------------|------------|------------------------------|------------|
| ** **                                     | ** ** | ** **                   | ** ** | **Weighted** | ** ** |
| ** **                                     | ** ** | ** **                   | ** ** | **Average** | ** ** |
| ** **                                     | ** ** | **Shares**                   | ** ** | **Exercise Price** | ** ** |
| Options outstanding at  June 1, 2003      |       | —                       |       |   | $ | — |   |   |
| Options granted                                |       | 300,000                      |       |   | 11.81 |   |   |
| Options exercised                              |       | —                       |       |   |   |   |   |
| Options cancelled or  expired                  |       | —                       |       |   |   |   |   |
| Options outstanding at  December 31, 2003 |       | 300,000                      |       |   | 11.81 |   |   |
| Options granted                                |       | 375,000                      |       |   | 13.10 |   |   |
| Options exercised                              |       |                         |       |   |   |   |   |
| Options cancelled or  expired                  |       |                         |       |   |   |   |   |
| Options outstanding at  December 31, 2004 |       | 675,000                      |       |   | $ | 12.53 |   |   |
| Options exercisable at December 31, 2004  |       | 245,833                      |       |   | $ | 11.39 |   |   |

 

Followingis a summary of stock options outstanding as of December 31, 2004:
| ** **                | ** ** | ** **         | ** ** | **Weighted Average** | ** ** | ** **      | ** ** |
|---------------------------|------------|--------------------|------------|---------------------------|------------|-----------------|------------|
| ** **                | ** ** | **Number of** | ** ** | **Remaining Life**   | ** ** | **Shares**      | ** ** |
| ** **                | ** ** | **Options**        | ** ** | **(In Years)**       | ** ** | **Exercisable** | ** ** |
| Options outstanding:      |       |               |       |                      |       |            |       |   |   |   |   |
| Exercise price of  $9.60  |       | 125,000            |       |                      | 3.8        |            |       |   | 125,000 |   |   |
| Exercise price of  $10.95 |       | 25,000             |       |                      | 8.9        |            |       |   | 8,333 |   |   |
| Exercise price of  $13.10 |       | 375,000            |       |                      | 9.5        |            |       |   | 62,500 |   |   |
| Exercise price of  $13.79 |       | 150,000            |       |                      | 8.6        |            |       |   | 50,000 |   |   |
|                      |       | 675,000            |       |                      |       |            |       |   | 245,833 |   |   |

 

F-23

----

**13. Leases**

Futureminimum lease payments under leases with initial or remaining noncancelablelease terms in excess of one year at December 31, 2004 are as follows:
| ** **                                                                            | ** ** | **Capital** | ** ** | **Operating** | ** ** |
|---------------------------------------------------------------------------------------|------------|-------------|------------|---------------|------------|
| ** **                                                                            | ** ** | **Leases**  | ** ** | **Leases**    | ** ** |
| 2005                                                                                  |       | $           | 4,367      |          | $          | 4,704 |   |
| 2006                                                                                  |       | 3,496       |       | 3,928         |       |
| 2007                                                                                  |       | 2,999       |       | 3,186         |       |
| 2008                                                                                  |       | 3,158       |       | 2,928         |       |
| 2009                                                                                  |       | 3,420       |       | 2,820         |       |
| Thereafter                                                                            |       | 12,135      |       | 5,280         |       |
| Total minimum  lease payments                                                         |       | 29,575      |       | $             | 22,846     |   |
| Amount  representing interest                                                         |       | (10,415     | )          |          |       |
| Present value of net  minimum lease payments, including current obligations of $2,413 |       | $           | 19,160     |          |       |   |

 

Rent expense under operating leases amounted to$7,345, $3,979, $2,842, and $5,882 for the year ended December 31, 2004,the seven months ended December 31, 2003, the five months ended May 31,2003 and the year ended December 31, 2002, respectively.

During the fourth quarterof 2002, the Court approved the rejection of two leases, both of which wereaccounted for as capital leases. A net gain of $3,100 was recognized as aresult of these lease rejections, which has been included in reorganizationitems on the accompanying statement of operations.

**14. Income Taxes**

Pretaxincome (loss) was allocated under the following jurisdictions:
| ** **                         | ** ** | **Reorganized Company** | ** ** | **Predecessor Company** | ** ** |
|------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                         | ** ** | **Year**                     | ** ** | **Seven Months**        | ** ** | **Five Months** | ** ** | **Year** | ** ** |
| ** **                         | ** ** | **Ended**                    | ** ** | **Ended**                    | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                         | ** ** | **December 31,**        | ** ** | **December 31,**        | ** ** | **May 31,** | ** ** | **December 31,** | ** ** |
| ** **                         | ** ** | **2004**                     | ** ** | **2003**                     | ** ** | **2003** | ** ** | **2002** | ** ** |
| Domestic income  (loss)            |       |                         | $          | (28,505                      | )          |   |   | $ | (14,725 | ) |   |   | $ | 515,287 |   |   |   | $ | (17,415 | ) |   |
| Foreign income                     |       |                         | 9,935      |                         |       |   | 1,003 |   |   |   | 56,615 |   |   |   | 4,506 |   |   |
| Income (loss) before  income taxes |       |                         | $          | (18,570                      | )          |   |   | $ | (13,722 | ) |   |   | $ | 571,902 |   |   |   | $ | (12,909 | ) |   |

 

 

F-24

----

The provision for income taxes is as follows:
| ** **            | ** ** | **Reorganized Company** | ** ** | **Predecessor Company** | ** ** |
|-----------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **            | ** ** | **Year**                     | ** ** | **Seven Months**        | ** ** | **Five Months** | ** ** | **Year** | ** ** |
| ** **            | ** ** | **Ended**                    | ** ** | **Ended**                    | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **            | ** ** | **December 31,**        | ** ** | **December 31,**        | ** ** | **May 31,** | ** ** | **December 31,** | ** ** |
| ** **            | ** ** | **2004**                     | ** ** | **2003**                     | ** ** | **2003** | ** ** | **2002** | ** ** |
| Current:              |       |                         |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal               |       |                         | $          | —                       |       |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |   |
| Foreign               |       |                         | 8,013      |                         |       |   | 2,599 |   |   |   | 2,789 |   |   |   | 2,648 |   |   |
| State and local       |       |                         | —     |                         |       |   | — |   |   |   | 150 |   |   |   | 150 |   |   |
| Total current         |       |                         | 8,013      |                         |       |   | 2,599 |   |   |   | 2,939 |   |   |   | 2,798 |   |   |
| Deferred—Foreign |       |                         | (2,606     | )                            |       |   | 1,230 |   |   |   | — |   |   |   | 248 |   |   |
|                  |       |                         | $          | 5,407                        |       |   |   | $ | 3,829 |   |   |   | $ | 2,939 |   |   |   | $ | 3,046 |   |   |

The composition ofdeferred tax assets and liabilities at December 31 is as follows:
| ** **                                  | ** ** | **Reorganized** | ** ** | **Reorganized** | ** ** |
|---------------------------------------------|------------|-----------------|------------|-----------------|------------|
| ** **                                  | ** ** | **Company**     | ** ** | **Company**     | ** ** |
| ** **                                  | ** ** | **2004**        | ** ** | **2003**        | ** ** |
| Deferred tax assets:                        |       |            |       |            |       |   |   |   |   |
| Post-employment benefits                    |       |            | $          | 7,729           |       |   |   | $ | 6,899 |   |   |
| Accrued liabilities                         |       |            | 4,596      |            |       |   | 4,342 |   |   |
| Other                                       |       |            | 5,812      |            |       |   | 5,666 |   |   |
| Net operating loss carryforwards            |       |            | 57,173     |            |       |   | 65,081 |   |   |
| Total deferred tax assets                   |       |            | 75,310     |            |       |   | 81,988 |   |   |
| Valuation allowance for deferred tax assets |       |            | (48,980    | )               |       |   | (56,737 | ) |   |
| Net deferred tax assets                     |       |            | 26,330     |            |       |   | 25,251 |   |   |
| Deferred tax  liabilities:                  |       |            |       |            |       |   |   |   |   |
| Fixed assets                                |       |            | (1,697     | )               |       |   | (3,874 | ) |   |
| Intangibles                                 |       |            | (20,156    | )               |       |   | (19,346 | ) |   |
| Inventories                                 |       |            | (3,101     | )               |       |   | (3,261 | ) |   |
| Investment in subsidiary                    |       |            | (69,692    | )               |       |   | — |   |   |
| Total deferred tax liabilities              |       |            | (94,646    | )               |       |   | (26,481 | ) |   |
| Net deferred tax  assets (liabilities)      |       |            | $          | (68,316         | )          |   |   | $ | (1,230 | ) |   |

 

The income tax provisions for the year ended December 31,2004, the seven months ended December 31, 2003, the five months ended May 31,2003, and the year ended December 31, 2002 include a charge of $10,008,$5,382, $5,454, and $3,962, respectively, to adjust the valuation allowance onthe net deferred tax amount, as management does not believe this asset will befully realized. The valuation allowance for the five month period ended May 31,2003 also includes a credit in the amount of $63,433 to include the effects ofreorganization and fresh-start accounting adjustments.

Upon filing of the Company’s 2003 federal income taxreturn during the third quarter of 2004, deferred tax liabilities increased by$69,692, and goodwill was correspondingly increased by $69,692 to reflect thefinal determination of tax attribute reductions made as a result of the Company’semergence from bankruptcy.  During 2004,the valuation allowance was reduced by $17,765 to reflect the reduction of tax losscarryovers and other adjustments related to the Company’s emergence frombankruptcy.

F-25

----

The provisionfor income taxes differs from the amount of income tax determined by applyingthe applicable U.S. statutory federal income tax rate to pretax incomeexcluding the gain on reorganization and adoption of fresh-start accounting asa result of the following differences:
| ** **                                                                         | ** ** | **Year**              | ** ** | **Seven Months** | ** ** | **Five Months** | ** ** | **Year**              | ** ** |
|------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|----------------------|------------|-----------------------|------------|
| ** **                                                                         | ** ** | **Ended**             | ** ** | **Ended**             | ** ** | **Ended**            | ** ** | **Ended**             | ** ** |
| ** **                                                                         | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **May 31,**     | ** ** | **December 31,** | ** ** |
| ** **                                                                         | ** ** | **2004**              | ** ** | **2003**              | ** ** | **2003**             | ** ** | **2002**              | ** ** |
| Tax at U.S.  statutory rates                                                       |       |                  | $          | (6,500                | )          |                 |       | $                     | (4,803     | ) |   | $ | 200,166 |   |   | $ | (4,518 | ) |   |
| Foreign deemed  dividends (Section 956)                                       |       |                  | 1,876      |                  |       |                 | —     |                  |       | — |   |   | — |   |   |
| Nondeductible  goodwill amortization , nondeductible expenses and other exclusions |       |                  | (290       | )                     |       |                 | 1,565      |                  |       | 612 |   |   | 2,449 |   |   |
| Reorganization  gain and fresh-start adjustments                                   |       |                  | —     |                  |       |                 | —     |                  |       | (139,744 | ) |   | — |   |   |
| Change in  valuation allowance                                                     |       |                  | 10,008     |                  |       |                 | 5,382      |                  |       | (57,979 | ) |   | 3,962 |   |   |
| Foreign tax rate  differences and nonrecognition of foreign tax loss benefits      |       |                  | 316        |                  |       |                 | 1,685      |                  |       | (226 | ) |   | 1,055 |   |   |
| State income  taxes, net of federal tax benefits                                   |       |                  | (3         | )                     |       |                 | —     |                  |       | 110 |   |   | 98 |   |   |
|                                                                               |       |                  | $          | 5,407                 |       |                 |       | $                     | 3,829      |   |   | $ | 2,939 |   |   | $ | 3,046 |   |   |

 

At December 31, 2004, the Company had netoperating loss carry forwards of approximately $136,809 available forU.S. federal income tax purposes which expire between 2005 and 2024.Utilization of the majority of these net operating loss carry forwards issubject to various limitations due to previous changes in control of ownership(as defined in the Internal Revenue Code).

The Company’s foreign subsidiaries have undistributedearnings at December 31, 2004. Those earnings are considered to beindefinitely reinvested, and accordingly, no provision for U.S. federal andstate income taxes has been provided thereon. Upon distribution of thoseearnings in the form of dividends or otherwise, the Company would be subject toboth U.S. income taxes (subject to an adjustment for foreign tax credits) andwithholding taxes payable to the various foreign countries. Determination ofthe amount of unrecognized deferred U.S. income tax liability is notpracticable because of the complexities associated with its hypotheticalcalculation.

The American Jobs CreationAct of 2004 (the “Jobs Act”), enacted on October 22, 2004, provides for atemporary 85% dividends received deduction on certain foreign earningsrepatriated during a one-year period. The deduction would result in anapproximate 5.25% federal tax rate on the repatriated earnings. To qualify forthe deduction, the earnings must be reinvested in the United States pursuant toa domestic reinvestment plan established by a company’s chief executive officerand approved by the company’s board of directors. Certain other criteria in theJobs Act must be satisfied as well. The maximum amount of the Company’s foreignearnings that qualify for the temporary deduction is $22,343. For the Company,the one-year period during which the qualifying distributions can be made isfiscal 2005. Due to the Company’s net operating loss carry forward position inthe U.S., the Company is currently not planning to repatriate foreign earningsunder the repatriation provisions of the Jobs Act.

**15.   Employee Benefit Plans**

*401(k) Retirement Plan.  *The401(k) Retirement Plan covers the majority of the Company’s domesticemployees. At its discretion the Company can make a base contribution of 1% ofeach employee’s compensation and an additional contribution equal to as much as4% of the employee’s compensation. At the employee’s discretion, an additional1% to 15% voluntary employee contribution can be made. The plan requires theCompany to make matching contributions of 50% for the first 6% of the voluntaryemployee contribution. Total expense for this plan was approximately $1,989,$1,281, $915, and $2,029 for 

F-26

----

the year ended December 31,2004, the seven months ended December 31, 2003, the five months ended May 31,2003 and the year ended December 31, 2002, respectively.

*Pension Plans.  *TheCompany’s subsidiaries have had various noncontributory defined benefit pensionplans which covered substantially all U.S. employees. The Company froze andcombined three noncontributory defined benefit pension plans through amendmentsto such plans effective December 31, 1989 into one plan (the “RetirementPlan”). All former participants of these plans became eligible to participatein the 401(k) Retirement Plan effective January 1, 1990.

The Company’s Australian subsidiary has aSuperannuation Fund (the “Fund”) established by a Trust Deed. Pension benefitsare actuarially determined and are funded through mandatory participantcontributions and the Company’s actuarially determined contributions. TheCompany made contributions of $632 and $391 for the years ended December 31,2004 and 2003, respectively. Prepaid benefit cost at December 31, 2004 and2003 was $9,818 and $9,388, respectively. The prepaid benefit cost is notincluded in the table below or in the balance sheet, as the Company has nolegal right to amounts included in this fund. In addition, upon dissolution ofthe Fund, any excess funds are required to be allocated to the participants asdetermined by the actuary. Accordingly, the Company accounts for this fund as adefined contribution plan. The actuarial assumptions used to determine theCompany’s contribution, the funded status, and the retirement benefits areconsistent with previous years.

*Other Postretirement Benefits.  *TheCompany has a retirement plan covering both salaried and nonsalaried retiredemployees, which provides postretirement health care benefits (medical anddental) and life insurance benefits. The postretirement health care portion iscontributory, with retiree contributions adjusted annually as determined basedon claim costs. The postretirement life insurance portion is noncontributory.The Company recognizes the cost of postretirement benefits on the accrual basisas employees render service to earn the benefit. The Company continues to fundthe cost of health care and life insurance benefits in the year incurred.

F-27

----

Themeasurement date used to determine pension and other postretirementmeasurements for the plan assets and benefit obligations is December 31.The following table provides a reconciliation of benefit obligations, planassets and status of the pension and other postretirement benefit plans asrecognized in the consolidated balance sheets for the years ended December 31,2004 and 2003:
| ** **                                            | ** ** | **Pension Benefits** | ** ** | **Other  Postretirement Benefits** | ** ** |
|-------------------------------------------------------|------------|----------------------|------------|------------------------------------|------------|
| ** **                                            | ** ** | **Reorganized**      | ** ** | **Reorganized**                    | ** ** | **Reorganized** | ** ** | **Reorganized** | ** ** |
| ** **                                            | ** ** | **Company**          | ** ** | **Company**                        | ** ** | **Company** | ** ** | **Company** | ** ** |
| ** **                                            | ** ** | **2004**             | ** ** | **2003**                           | ** ** | **2004** | ** ** | **2003** | ** ** |
| Change in benefit  obligation:                        |       |                 |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Benefit obligation at beginning of year               |       |                 | $          | 18,882                             |       |   |   | $ | 15,484 |   |   |   | $ | 19,200 |   |   |   | $ | 15,805 |   |   |
| Service cost                                          |       |                 | —     |                               |       |   | — |   |   |   | 978 |   |   |   | 966 |   |   |
| Interest cost                                         |       |                 | 1,142      |                               |       |   | 1,102 |   |   |   | 1,272 |   |   |   | 1,113 |   |   |
| Actuarial loss                                        |       |                 | 678        |                               |       |   | 3,218 |   |   |   | 2,979 |   |   |   | 2,107 |   |   |
| Plan amendments                                       |       |                 | —     |                               |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Benefits paid                                         |       |                 | (896       | )                                  |       |   | (922 | ) |   |   | (702 | ) |   |   | (791 | ) |   |
| Benefit obligation at end of year                     |       |                 | $          | 19,806                             |       |   |   | $ | 18,882 |   |   |   | $ | 23,727 |   |   |   | $ | 19,200 |   |   |
| Change in plan assets:                                |       |                 |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair value of plan assets at  beginning of year       |       |                 | $          | 13,523                             |       |   |   | $ | 11,422 |   |   |   |   |   |   |   |   |   |   |
| Actual return on plan assets                          |       |                 | 1,417      |                               |       |   | 2,594 |   |   |   |   |   |   |   |   |   |   |
| Employer contributions                                |       |                 | 998        |                               |       |   | 534 |   |   |   |   |   |   |   |   |   |   |
| Benefits paid                                         |       |                 | (896       | )                                  |       |   | (922 | ) |   |   |   |   |   |   |   |   |   |
| Administrative expenses                               |       |                 | (61        | )                                  |       |   | (105 | ) |   |   |   |   |   |   |   |   |   |
| Fair value of plan assets at end of year              |       |                 | $          | 14,981                             |       |   |   | $ | 13,523 |   |   |   |   |   |   |   |   |   |   |
| Funded status of  the plan (underfunded)              |       |                 | $          | (4,825                             | )          |   |   | $ | (5,359 | ) |   |   | $ | (23,727 | ) |   |   | $ | (19,200 | ) |   |
| Unrecognized net actuarial loss (gain)                |       |                 | (747       | )                                  |       |   | (1,161 | ) |   |   | 2,790 |   |   |   | — |   |   |
| Unrecognized prior service cost                       |       |                 | —     |                               |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Net amount recognized                                 |       |                 | $          | (5,572                             | )          |   |   | $ | (6,520 | ) |   |   | $ | (20,937 | ) |   |   | $ | (19,200 | ) |   |
| Amounts recognized in  the balance sheets:            |       |                 |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Accrued benefits                                      |       |                 | $          | (5,572                             | )          |   |   | $ | (6,520 | ) |   |   |   |   |   |   |   |   |   |
| Intangible asset                                      |       |                 | —     |                               |       |   | — |   |   |   |   |   |   |   |   |   |   |
| Accumulated other comprehensive loss                  |       |                 | —     |                               |       |   | — |   |   |   |   |   |   |   |   |   |   |
| Net amount  recognized                                |       |                 | $          | (5,572                             | )          |   |   | $ | (6,520 | ) |   |   |   |   |   |   |   |   |   |
| Weighted-average  assumptions as of December 31: |       |                 |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount rate—net  periodic benefit cost         |       |                 | 6.25       | %                                  |       |   | 6.25 | % |   |   | 6.25 | % |   |   | 6.25 | % |   |
| Discount rate—benefit  obligations               |       |                 | 5.90       | %                                  |       |   | 6.25 | % |   |   | 5.90 | % |   |   | 6.25 | % |   |
| Expected return on plan assets                        |       |                 | 8.00       | %                                  |       |   | 8.00 | % |   |   | N/A |   |   |   | N/A |   |   |
| Rate of  compensation increase                        |       |                 | N/A        |                               |       |   | N/A |   |   |   | N/A |   |   |   | N/A |   |   |

 

The definedbenefit pension plan’s weighted average asset allocations at December 31,2004 and 2003, by asset category are as follows:
| ** **           | ** ** | **2004** | ** ** | **2003** | ** ** |
|----------------------|------------|----------|------------|----------|------------|
| Equity securities    |       | 59.26    | %          | 68.72    | %          |
| Debt securities      |       | 34.00    | %          | 24.40    | %          |
| Insurance  contracts |       | 6.07     | %          | 6.73     | %          |
| Other                |       | 0.67     | %          | 0.15     | %          |
| Total                |       | 100.00   | %          | 100.00   | %          |

 

F-28

----

The assets of the defined benefit pension plan areinvested in a manner consistent with the fiduciary standards of the EmployeeRetirement Income Security Act of 1974 (ERISA); namely, a) the safeguardsand diversity to which a prudent investor would adhere must be present andb) all transactions undertaken on behalf of the fund must be for the solebenefit of plan participants and their beneficiaries. The following is asummary of the investment guidelines and strategies:

*Investment Horizon  *Theinvestment strategy is based on a rolling time horizon of three to five years.

*Objective  *Theinvestment objective is to obtain the highest possible return commensurate withthe level of assumed risk.

*Asset Types  *Thepension fund is managed utilizing the following classes of assets: equities andtheir equivalents, fixed income securities and cash and equivalents.

*AssetMix  *The following represents the midpoint mix of theasset types described:
| **Equities**                      | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------------|------------|------------|------------|------------|------------|
| Large capitalization equities     |       | 33         | %          |
| Mid  capitalization equities      |       | 15         | %          |
| International  equities           |       | 10         | %          |
| Emerging markets  (international) |       | 5          | %          |
| **Fixed Income**                  | ** ** | ** ** | ** ** | ** ** | ** ** |
| Core bonds                        |       | 27         | %          |
| High yield bonds                  |       | 10         | %          |
| Total                             |       | 100        | %          |
|                                   |            |            |            |            |            |  |  |

 

Cash and cash equivalents are used as appropriate forplan liquidity needs.

*InvestmentManagement  *The limits for equity/fixed income emphasis(at market value) are:
| ** **                        | ** ** | **Minimum** | ** ** | **Midpoint** | ** ** | **Maximum** | ** ** |
|-----------------------------------|------------|-------------|------------|--------------|------------|-------------|------------|
| Large  capitalization equities    |       |        | 23         | %            |       |        | 33         | % |   |   | 43 | % |   |
| Mid  capitalization equities      |       |        | 10         | %            |       |        | 15         | % |   |   | 20 | % |   |
| International  equities           |       |        | 10         | %            |       |        | 10         | % |   |   | 10 | % |   |
| Emerging markets  (international) |       |        | 5          | %            |       |        | 5          | % |   |   | 5 | % |   |
| Fixed income                      |       |        | 22         | %            |       |        | 37         | % |   |   | 52 | % |   |

 

The expected long-term rate of return on plan assetsis 8%. In setting this rate, the Company considered the historical returns ofthe plan’s fund, anticipated future market conditions including inflation andthe target asset allocation of the plan’s portfolio.

The Company expects to contribute approximately $1,172in required payments to the Retirement Plan for the year ending December 31,2005. It is not expected that any discretionary contributions or non-cashcontributions will be made.

F-29

----

Netperiodic pension and other postretirement benefit costs include the followingcomponents:
| ** **                                    | ** ** | **Pension Benefits**    | ** ** |
|-----------------------------------------------|------------|-------------------------|------------|
| ** **                                    | ** ** | **Reorganized Company** | ** ** | **Predecessor Company** | ** ** |
| ** **                                    | ** ** | **Year**                | ** ** | **Seven Months** | ** ** | **Five Months** | ** ** | **Year** | ** ** |
| ** **                                    | ** ** | **Ended**               | ** ** | **Ended** | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                    | ** ** | **December 31,**   | ** ** | **December 31,** | ** ** | **May 31,** | ** ** | **December 31,** | ** ** |
| ** **                                    | ** ** | **2004**                | ** ** | **2003** | ** ** | **2003** | ** ** | **2002** | ** ** |
| Components of the net  periodic benefit cost: |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest cost                                 |       |                    | $          | 1,142 |   |   |   | $ | 665 |   |   |   | $ | 437 |   |   |   | $ | 1,040 |   |   |
| Expected return on plan assets                |       |                    | (1,091     | ) |   |   | (529 | ) |   |   | (366 | ) |   |   | (1,108 | ) |   |
| Recognized loss                               |       |                    | —     |   |   |   | — |   |   |   | 116 |   |   |   | — |   |   |
| Prior service cost recognized                 |       |                    | —     |   |   |   | — |   |   |   | 7 |   |   |   | 23 |   |   |
| Benefit cost (credit)                         |       |                    | $          | 51 |   |   |   | $ | 136 |   |   |   | $ | 194 |   |   |   | $ | (45 | ) |   |

 
| ** **                                    | ** ** | **Other  Postretirement Benefits** | ** ** |
|-----------------------------------------------|------------|------------------------------------|------------|
| ** **                                    | ** ** | **Reorganized Company**            | ** ** | **Predecessor Company** | ** ** |
| ** **                                    | ** ** | **Year**                           | ** ** | **Seven Months** | ** ** | **Five Months** | ** ** | **Year** | ** ** |
| ** **                                    | ** ** | **Ended**                          | ** ** | **Ended** | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                    | ** ** | **December 31,**              | ** ** | **December 31,** | ** ** | **May 31,** | ** ** | **December 31,** | ** ** |
| ** **                                    | ** ** | **2004**                           | ** ** | **2003** | ** ** | **2003** | ** ** | **2002** | ** ** |
| Components of the net  periodic benefit cost: |       |                               |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                                  |       |                               | $          | 978 |   |   |   | $ | 597 |   |   |   | $ | 370 |   |   |   | $ | 789 |   |   |
| Interest cost                                 |       |                               | 1,272      |   |   |   | 891 |   |   |   | 421 |   |   |   | 1,077 |   |   |
| Recognized gain                               |       |                               | —     |   |   |   | — |   |   |   | (195 | ) |   |   | (521 | ) |   |
| Prior service cost recognized                 |       |                               | —     |   |   |   | — |   |   |   | (80 | ) |   |   | (193 | ) |   |
| Benefit cost                                  |       |                               | $          | 2,250 |   |   |   | $ | 1,488 |   |   |   | $ | 516 |   |   |   | $ | 1,152 |   |   |

 

The assumed medical cost trend rate used in measuringthe accumulated postretirement benefit obligation was 7.0%, 7.0%, 7.5% and 7.5%for the year ended December 31, 2004, the seven months ended December 31,2003, the five months ended May 31, 2003 and the year ended December 31,2002, respectively, declining gradually to 6.0% in 2014. The assumed dentalcost trend rate used in measuring the accumulated postretirement benefitobligation was 6.0% for all periods.

The assumed medical cost trend rate used in measuringthe net benefit cost was 7.0%, 7.5%, 7.5% and 8.0% for the year ended December 31,2004, the seven months ended December 31, 2003, the five months ended May 31,2003 and the year ended December 31, 2002, respectively, declininggradually to 6.0% in 2014. The assumed dental cost trend rate used in measuringthe net benefit cost was 6.0% for all periods.

Aone-percentage-point change in the assumed health care cost trend rate wouldhave the following effects:
| ** **                                                                                    | ** ** | **1-Percentage-  Point Increase** | ** ** | **1-Percentage-  Point Decrease** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|----------------------------------------|------------|
| Effect on total  of service and interest cost components for the year ended December 31, 2004 |       |                                   | $          | 461                                    |       |   |   | $ | (366 | ) |   |
| Effect on postretirement  benefit obligation as of December 31, 2004                     |       |                                   | $          | 3,888                                  |       |   |   | $ | (3,130 | ) |   |

 

F-30

----

Thefollowing table presents the benefits expected to be paid in the next tenfiscal years:
| ** **        | ** ** | **Other**   | ** ** | **Other**          | ** ** |
|-------------------|------------|-------------|------------|--------------------|------------|
| ** **        | ** ** | **Pension** | ** ** | **Postretirement** | ** ** |
| **Year**          | ** ** | ** **  | ** ** | **Benefits**       | ** ** | **Benefits** | ** ** |
| 2005              |       | $           | 962        |               |       | $ | 655 |   |   |
| 2006              |       | $           | 995        |               |       | $ | 717 |   |   |
| 2007              |       | $           | 1,023      |               |       | $ | 823 |   |   |
| 2008              |       | $           | 1,066      |               |       | $ | 902 |   |   |
| 2009              |       | $           | 1,141      |               |       | $ | 1,010 |   |   |
| 2010 through 2014 |       | $           | 6,334      |               |       | $ | 6,796 |   |   |
|                   |            |             |            |                    |            |  |  |  |  |  |  |

 

In December 2003, the Medicare Prescription Drug,Improvement and Modernization Act of 2003, (the “Act”) was enacted. The Actintroduced a prescription drug benefit under Medicare Part D as well as afederal subsidy to sponsors of retiree health care benefit plans that provide abenefit that is at least actuarially equivalent to Medicare Part D. UnderFASB Staff Position (“FSP”) 106-1, issued in January 2004, related to theAct, the Company elected to defer recognizing the effects of the Act on itsaccumulated postretirement benefit obligation (“APBO”) and net periodicpostretirement benefit costs until pending authoritative guidance on theaccounting for the federal subsidy is issued.

In May 2004, the FASBissued FSP No. FAS 106-2, which provides guidance on the accounting forthe effects of the Act and also requires employers to provide certaindisclosures provided by the Act. The provisions of FSP No. FAS 106-2 wereeffective for the Company’s interim period beginning July 1, 2004. Sincethe Company’s plans are actuarially equivalent to Medicare Part D, theCompany must reflect the value of the subsidy in the APBO, service cost andamortization of gains and losses, retroactive to January 1, 2004. Thereduction in the APBO for the subsidy related to benefits attributed to pastservice is $1,600. The effect of the subsidy on the measurement of net periodicpost retirement benefit cost for 2004 is to reduce the service cost by $21, reducethe interest cost by $99, and eliminate the $67 amortization of theunrecognized loss, for a total reduction in 2004 benefit cost of $187.

**16. Segment Information**

Although the Company’s operations are comprised ofseveral product lines and operating locations, similarity of products, paths tomarket, end users and production processes results in performance evaluationand decisions regarding allocation of resources being made on a combined basis,and accordingly, management has concluded the Company operates in one segment.Reportable geographic regions are the United States, Europe and Australia/Asia.

Summarizedfinancial information concerning the Company’s geographic segments is shown inthe following table.
| ** **              | ** ** | **Reorganized Company** | ** ** | **Predecessor Company** | ** ** |
|-------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **              | ** ** | **Year**                | ** ** | **Seven Months**   | ** ** | **Five Months** | ** ** | **Year** | ** ** |
| ** **              | ** ** | **Ended**               | ** ** | **Ended**               | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **              | ** ** | **December 31,**   | ** ** | **December 31,**   | ** ** | **May 31,** | ** ** | **December 31,** | ** ** |
| ** **              | ** ** | **2004**                | ** ** | **2003**                | ** ** | **2003** | ** ** | **2002** | ** ** |
| Net sales               |       |                    |       |                    |       |   |   |   |   |   |   |   |   |   |   |   |   |
| United States           |       |                    | $          | 277,344                 |       |   |   | $ | 141,230 |   |   |   | $ | 99,460 |   |   |   | $ | 259,572 |   |   |
| Europe                  |       |                    | 64,676     |                    |       |   | 36,940 |   |   |   | 26,210 |   |   |   | 50,134 |   |   |
| Australia / Asia        |       |                    | 70,046     |                    |       |   | 35,774 |   |   |   | 20,500 |   |   |   | 44,731 |   |   |
| All other international |       |                    | 70,553     |                    |       |   | 36,376 |   |   |   | 23,447 |   |   |   | 53,278 |   |   |
|                    |       |                    | $482,619   |                    |       |   | $ | 250,320 |   |   |   | $ | 169,617 |   |   |   | $ | 407,715 |   |   |
|                         |            |                         |            |                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

F-31

----

 
| ** **              | ** ** | **Reorganized**       | ** ** | **Reorganized**       | ** ** |
|-------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **              | ** ** | **Company**           | ** ** | **Company**           | ** ** |
| ** **              | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **              | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Identifiable  assets    |       |                  |       |                  |       |   |   |   |   |
| United States           |       |                  | $          | 35,915                |       |   |   | $ | 36,899 |   |   |
| Europe                  |       |                  | 14,472     |                  |       |   | 16,159 |   |   |
| Australia / Asia        |       |                  | 10,769     |                  |       |   | 11,837 |   |   |
| All other international |       |                  | 13,025     |                  |       |   | 11,300 |   |   |
| Corporate               |       |                  | 297,383    |                  |       |   | 221,503 |   |   |
|                    |       |                  | $          | 371,564               |       |   |   | $ | 297,698 |   |   |

 

***Product Line Information***

TheCompany manufactures a variety of products, substantially all of which are usedin the cutting, welding or fabrication of metal. End users of the Company’s productsare engaged in various applications including construction, automobilemanufacturing, repair and maintenance and shipbuilding. The following tableshows sales for each of the Company’s key product lines:
| ** **                              | ** ** | **Reorganized Company** | ** ** | **Predecessor Company** | ** ** |
|-----------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                              | ** ** | **Year**                | ** ** | **Seven Months**   | ** ** | **Five Months** | ** ** | **Year** | ** ** |
| ** **                              | ** ** | **Ended**               | ** ** | **Ended**               | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                              | ** ** | **December 31,**   | ** ** | **December 31,**   | ** ** | **May 31,** | ** ** | **December 31,** | ** ** |
| ** **                              | ** ** | **2004**                | ** ** | **2003**                | ** ** | **2003** | ** ** | **2002** | ** ** |
| Gas apparatus                           |       |                    | $          | 168,409                 |       |   |   | $ | 91,193 |   |   |   | $ | 61,511 |   |   |   | $ | 154,617 |   |   |
| Arc welding  equipment                  |       |                    | 85,897     |                    |       |   | 46,340 |   |   |   | 30,067 |   |   |   | 67,520 |   |   |
| Arc welding  consumables                |       |                    | 146,584    |                    |       |   | 73,530 |   |   |   | 50,886 |   |   |   | 121,411 |   |   |
| Plasma and  automated cutting equipment |       |                    | 72,496     |                    |       |   | 35,649 |   |   |   | 25,104 |   |   |   | 59,544 |   |   |
| All other                               |       |                    | 9,233      |                    |       |   | 3,608 |   |   |   | 2,049 |   |   |   | 4,623 |   |   |
|                                    |       |                    | $482,619   |                    |       |   | $ | 250,320 |   |   |   | $ | 169,617 |   |   |   | $ | 407,715 |   |   |

 

**17. Contingencies**

The Company and certain ofits wholly owned subsidiaries are defendants in various legal actions,primarily in the product liability area. While there is uncertainty relating toany litigation, management is of the opinion that the outcome of suchlitigation will not have a material adverse effect on the Company’s financialcondition or results of operations. At December 31,2004, the Company and certain of its wholly owned subsidiaries areco-defendants have been served in 84 cases alleging manganese-induced illness. Mostof these cases involve claims by multiple plaintiffs. In each instance, a largenumber of defendants were sued. The claimants allege manganese-induced illnessand seek compensatory and, in most instances, punitive damages, of usuallyunspecified amounts. The claimants allege that exposure to manganese containedin welding consumables caused adverse neurological conditions. While there isuncertainty relating to any litigation, after considering recorded liabilities,the Company does not believe that the outcome of such litigation will have amaterial adverse effect on the Company’s financial condition or results ofoperations.

**18. Financial Instruments**

***Concentrations of Credit Risk***

Financial instruments that potentially subject theCompany to significant concentrations of credit risk consist principally ofcash and trade accounts receivable.

F-32

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The Company maintains cash and cash equivalents withvarious financial institutions. These financial institutions are located indifferent parts of the country, and the Company’s policy is designed to limitexposure to any one institution. The Company performs periodic evaluations ofthe relative credit standing of these financial institutions. The Company doesnot require collateral on these financial instruments.

Concentrations of creditrisk with respect to trade accounts receivable are limited due to the largenumber of entities comprising the Company’s customer base. The Company does notrequire collateral for trade accounts receivable.

***Fair Value***

The following methods and assumptions were used inestimating fair value disclosures for financial instruments:

*Cash and cash equivalents:  *Thecarrying amount reported in the balance sheet for cash and cash equivalentsapproximates fair value.

*Accounts receivable and accountspayable:  *The carrying amounts reported in the balancesheet for accounts receivable and accounts payable approximate their fairvalue.

*Debt:  *The carryingvalues of the obligations outstanding under the Working Capital Facility, the Second-LienFacility and long-term obligations, excluding the Senior Subordinated Notes, estimatefair values since these obligations are fully secured and have varying interestcharges based on current market rates. The estimated fair value of theCompany’s Senior Subordinated Notes of $171,063 at December 31, 2004 isbased on available market information.

*Interest rate swap:  *Thefair value of the interest rate swap represents the estimated amount theCompany would receive or pay upon termination of the agreement.

**19. Quarterly Results of Operations (Unaudited)**

Thefollowing is a summary of the quarterly results of operations for the yearsended December 31, 2004 and 2003.
| ** **                                                        | ** ** | **Reorganized Company  2004** | ** ** |
|-------------------------------------------------------------------|------------|------------------------------------|------------|
| ** **                                                        | ** ** | **Three Months Ended**   | ** ** |
| ** **                                                        | ** ** | **March 31**                  | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** | ** ** |
| Net sales(2)                                                      |       | $                                  | 116,688    |   | $ | 123,210 |   |   | $ | 120,897 |   |   |   | $ | 121,824 |   |   |
| Gross profit(2)                                                   |       | 38,009                             |       | 40,177 |   |   | 35,737 |   |   |   | 32,905 |   |   |
| Operating income  (loss)(2)                                       |       | 4,521                              |       | 4,544 |   |   | (106 | ) |   |   | (825 | ) |   |
| Net loss applicable to  common shares                             |       | (1,029                             | )          | (5,289 | ) |   | (8,473 | ) |   |   | (9,186 | )(1) |   |
| Basic and diluted net  loss per share applicable to common shares |       | (0.08                              | )          | (0.40 | ) |   | (0.64 | ) |   |   | (0.69 | ) |   |
|                                                                   |            |                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

F-33

----

 
| ** **                                                                    | ** ** | **Predecessor Company** | ** ** | **Reorganized Company** | ** ** |
|-------------------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                                                    | ** ** | **2003**                | ** ** |
| ** **                                                                    | ** ** | **Three Months**   | ** ** | **Two Months**     | ** ** | **One Month** | ** ** | **Three Months** | ** ** | **Three Months** | ** ** |
| ** **                                                                    | ** ** | **Ended**               | ** ** | **Ended**               | ** ** | **Ended** | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                                                    | ** ** | **March 31**       | ** ** | **May 31**         | ** ** | **June 30** | ** ** | **September 30** | ** ** | **December 31** | ** ** |
| Net sales(2)                                                                  |       |                    | $          | 99,125                  |       |   |   | $ | 70,492 |   |   |   | $ | 35,519 |   |   |   | $ | 105,016 |   |   |   | $ | 109,785 |   |   |
| Gross profi (2)                                                               |       |                    | 35,800     |                    |       |   | 24,695 |   |   |   | 11,818 |   |   |   | 33,239 |   |   |   | 25,498 |   |   |
| Operating income  (loss)(2)                                                   |       |                    | 9,405      |                    |       |   | 5,925 |   |   |   | 2,583 |   |   |   | 3,282 |   |   |   | (9,644 | ) |   |
| Net income (loss)  applicable to common shares                                |       |                    | 1,190      |                    |       |   | 567,773 |   |   |   | 806 |   |   |   | (3,356 | ) |   |   | (15,001 | )(3) |   |
| Basic and diluted net  income (loss) per share applicable to common shares(4) |       |                    | 0.33       |                    |       |   | 158.14 |   |   |   | 0.06 |   |   |   | (0.25 | ) |   |   | (1.13 | ) |   |

 

----

(1)          During the year endreview of the Company’s financial statements, management identified anunexpected variation in the balance sheet data for the Company’s Braziliansubsidiary. Further inquiry revealed that certain period costs had beenimproperly capitalized and included in inventory. These initial findings ledthe Audit Committee of the Company’s Board of Directors, as well as the newlyappointed Executive Vice President and CFO and the Company’s internal counselto conduct an independent investigation into the accounting and financial reportingmatters at the Company’s Brazilian operations. Special counsel and anindependent accounting firm were engaged to assist in an investigation andreport on this matter. After performing detailed analytical review procedureson the Company’s other smaller foreign locations, this internal audit processwas extended to include the Company’s South African subsidiaries. As a resultof these internal audits, the Company recorded a fourth quarter charge ofapproximately $1,745, net of tax, and approximately $2,843 to increase goodwillas a result of errors that existed prior to the Company’s emergence frombankruptcy.

In addition, the Company identified a number of issuesduring the year end close and audit process which resulted in adjustments tothe financial statements. A summary of the adjustments affecting prior quartersare as follows: (1) an adjustment of $1,285 to increase income tax benefitand deferred tax asset, (2) a pretax adjustment of $1,068 to reduce otherincome and record a deferred gain (3) a pretax adjustment of $2,713 tocapitalize manufacturing variances by increasing inventory and reducing cost ofsales, and (4) a pretax adjustment of $526 to increase depreciationexpense.

The Company determined that, while these adjustmentsrelated to historical periods, the adjustments were immaterial to previouslyreported interim and annual financial information.

(2)          Amounts shown for netsales, gross profit and operating income (loss) include the reclassificationsas described in Note 3.

(3)          Thenet loss for the fourth quarter of 2003 includes the following items:

·       A$4.4 million write-down of excess inventory reflecting the Company’schange in management during the fourth quarter and the decision to reduceworking capital requirements and liquidate inventory at a more rapid pace.

·       A$2.7 million charge to increase the product warranty reserve reflectingthe change in the Company’s estimate of the total warranty costs that may beincurred related to products sold prior to December 31, 2003.

·       A$1.8 million charge to increase the allowance for doubtful accounts inrecognition of the bankruptcy of one of the Company’s customers anddeteriorated aging in other accounts.

F-34

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·       A charge of $0.9 millionrelated to a change in senior management in the fourth quarter and costs of$1.5 million related to the relocation and consolidation of certain U.S.manufacturing facilities.

(4)          Earningsper share are computed independently for each of the quarters presented. Therefore,the sum of the quarterly net earnings per share will not necessarily equal thetotal for the year.

**20. Condensed Consolidating Financial Statements**

On February 5, 2004, the Company completed aprivate placement of $175,000 in aggregate principal of 91⁄4% Senior SubordinatedNotes due 2014. The Company’s domestic, wholly-owned subsidiaries (“GuarantorSubsidiaries”) fully and unconditionally guarantee the Senior SubordinatedNotes and are jointly and severally liable for all payments under the SeniorSubordinated Notes. Each of the Guarantor Subsidiaries is wholly owned by theCompany. In connection with the Amended Credit Agreement, the Company’s foreignsubsidiaries in Australia, the United Kingdom and Canada also guaranteed theCompany’s $175,000 9 1⁄4% Senior Subordinated Notes.

The following condensed consolidating financialinformation includes the accounts of the Company, which has no independentassets or operations, the combined accounts of the Guarantor Subsidiaries andthe combined accounts of the non-guarantor subsidiaries for the periodsindicated. Separate financial statements of each of the Guarantor Subsidiariesare not presented because management has determined such information is notmaterial in assessing the financial condition, cash flows or results ofoperations of the Company and its subsidiaries. Additionally, consolidatingfinancial statement information prior to the reorganization date was omittedbecause management has determined such information is not comparable to theReorganized Company. This information was prepared on the same basis as theconsolidated financial statements.

F-35

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**THERMADYNE HOLDINGS CORPORATIONCONDENSED CONSOLIDATING BALANCE SHEETDECEMBER 31, 2004**
| ** **                                                | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|-----------------------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| **ASSETS**                                                |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Current Assets:                                           |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                 |       |            | $          | —         |       |           |       | $                | 5,558      |             |       |   | $ | 1,092 |   |   |   | $ | — |   |   |   | $ | 6,650 |   |   |
| Accounts receivable, net                                  |       |            | —     |           |       |           | 54,544     |             |       |             | 39,011     |   |   |   | — |   |   |   | 93,555 |   |   |
| Inventories                                               |       |            | —     |           |       |           | 78,914     |             |       |             | 39,793     |   |   |   | — |   |   |   | 118,707 |   |   |
| Prepaid expenses and other                                |       |            | —     |           |       |           | 5,302      |             |       |             | 2,997      |   |   |   | — |   |   |   | 8,299 |   |   |
| Current deferred  tax assets                              |       |            | —     |           |       |           | 3,129      |             |       |             | —     |   |   |   | — |   |   |   | 3,129 |   |   |
| Total current assets                                      |       |            | —     |           |       |           | 147,447    |             |       |             | 82,893     |   |   |   | — |   |   |   | 230,340 |   |   |
| Property, plant and  equipment, net                       |       |            | —     |           |       |           | 48,791     |             |       |             | 30,223     |   |   |   | — |   |   |   | 79,014 |   |   |
| Goodwill                                                  |       |            | —     |           |       |           | 208,403    |             |       |             | —     |   |   |   | — |   |   |   | 208,403 |   |   |
| Intangibles, net                                          |       |            | —     |           |       |           | 63,714     |             |       |             | 12,900     |   |   |   | — |   |   |   | 76,614 |   |   |
| Other assets                                              |       |            | 4,551      |           |       |           | 2,594      |             |       |             | 388        |   |   |   | — |   |   |   | 7,533 |   |   |
| Investment in and  advances to subsidiaries               |       |            | 177,630    |           |       |           | —     |             |       |             | —     |   |   |   | (177,630 | ) |   |   | — |   |   |
| Total assets                                              |       |            | $          | 182,181        |       |           |       | $                | 470,949    |             |       |   | $ | 126,404 |   |   |   | $ | (177,630 | ) |   |   | $601,904 |   |   |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY (DEFICIT)**  |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Current Liabilities:                                      |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Accounts payable                                          |       |            | $          | —         |       |           |       | $                | 19,386     |             |       |   | $ | 20,072 |   |   |   | $ | — |   |   |   | $ | 39,458 |   |   |
| Accrued and other  liabilities                            |       |            | —     |           |       |           | 31,288     |             |       |             | 4,427      |   |   |   | — |   |   |   | 35,715 |   |   |
| Accrued interest                                          |       |            | 6,487      |           |       |           | 642        |             |       |             | —     |   |   |   | — |   |   |   | 7,129 |   |   |
| Income taxes payable                                      |       |            | —     |           |       |           | (676       | )                |       |             | 3,340      |   |   |   | — |   |   |   | 2,664 |   |   |
| Working capital and  second-lien facilities               |       |            | —     |           |       |           | 30,824     |             |       |             | —     |   |   |   | — |   |   |   | 30,824 |   |   |
| Current maturities of  long-term obligations              |       |            | —     |           |       |           | 4,631      |             |       |             | 6,624      |   |   |   | — |   |   |   | 11,255 |   |   |
| Total current liabilities                                 |       |            | 6,487      |           |       |           | 86,095     |             |       |             | 34,463     |   |   |   | — |   |   |   | 127,045 |   |   |
| Long-term obligations,  less current maturities           |       |            | 174,787    |           |       |           | 20,978     |             |       |             | 7,903      |   |   |   | — |   |   |   | 203,668 |   |   |
| Deferred tax liabilities                                  |       |            | —     |           |       |           | 71,445     |             |       |             | —     |   |   |   | — |   |   |   | 71,445 |   |   |
| Other long-term  liabilities                              |       |            | 213        |           |       |           | 37,278     |             |       |             | 6,619      |   |   |   | — |   |   |   | 44,110 |   |   |
| Shareholders’ equity  (deficit):                     |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Common stock                                              |       |            | 133        |           |       |           | —     |             |       |             | —     |   |   |   | — |   |   |   | 133 |   |   |
| Additional  paid-in-capital                               |       |            | 183,460    |           |       |           | —     |             |       |             | —     |   |   |   | — |   |   |   | 183,460 |   |   |
| Retained earnings (accumulated  deficit)                  |       |            | (41,528    | )              |       |           | (11,055    | )                |       |             | (8,221     | ) |   |   | 19,276 |   |   |   | (41,528 | ) |   |
| Accumulated other  comprehensive income (loss)            |       |            | 13,571     |           |       |           | 5,758      |             |       |             | 7,707      |   |   |   | (13,465 | ) |   |   | 13,571 |   |   |
| Total shareholders’  equity (deficit)                |       |            | 155,636    |           |       |           | (5,297     | )                |       |             | (514       | ) |   |   | 5,811 |   |   |   | 155,636 |   |   |
| Net equity and advances  to / from subsidiaries           |       |            | (154,942   | )              |       |           | 260,450    |             |       |             | 77,933     |   |   |   | (183,441 | ) |   |   | — |   |   |
| Total liabilities and shareholders’ equity (deficit) |       |            | $          | 182,181        |       |           |       | $                | 470,949    |             |       |   | $ | 126,404 |   |   |   | $ | (177,630 | ) |   |   | $ | 601,904 |   |   |

 

F-36

----

**THERMADYNE HOLDINGS CORPORATIONCONDENSED CONSOLIDATING  STATEMENT OF OPERATIONSYEAR ENDED DECEMBER 31, 2004**
| ** **                                   | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                   | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                   | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                   | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net sales                                    |       |            | $          | —         |       |           |       | $                | 445,173    |             |       |   | $ | 122,320 |   |   |   | $ | (84,874 | ) |   |   | $ | 482,619 |   |   |
| Operating expenses:                          |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Cost of goods sold                           |       |            | —     |           |       |           | 320,412    |             |       |             | 99,872     |   |   |   | (84,493 | ) |   |   | 335,791 |   |   |
| Selling, general and administrative expenses |       |            | —     |           |       |           | 101,540    |             |       |             | 22,631     |   |   |   | — |   |   |   | 124,171 |   |   |
| Amortization of intangibles                  |       |            | —     |           |       |           | 3,265      |             |       |             | 188        |   |   |   | — |   |   |   | 3,453 |   |   |
| Net periodic postretirement benefits         |       |            | —     |           |       |           | 2,250      |             |       |             | —     |   |   |   | — |   |   |   | 2,250 |   |   |
| Restructuring costs                          |       |            | —     |           |       |           | 8,820      |             |       |             | —     |   |   |   | — |   |   |   | 8,820 |   |   |
| Operating income (loss)                      |       |            | —     |           |       |           | 8,886      |             |       |             | (371       | ) |   |   | (381 | ) |   |   | 8,134 |   |   |
| Other income (expense):                      |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Interest                                     |       |            | (14,974    | )              |       |           | (4,577     | )                |       |             | (2,282     | ) |   |   | — |   |   |   | (21,833 | ) |   |
| Amortization of deferred financing costs     |       |            | (429       | )              |       |           | (989       | )                |       |             | —     |   |   |   | — |   |   |   | (1,418 | ) |   |
| Equity in net income (loss) of subsidiaries  |       |            | (8,574     | )              |       |           | —     |             |       |             | —     |   |   |   | 8,574 |   |   |   | — |   |   |
| Other , net                                  |       |            | —     |           |       |           | (2,778     | )                |       |             | (675       | ) |   |   | — |   |   |   | (3,453 | ) |   |
| Income (loss)  before income tax provision   |       |            | (23,977    | )              |       |           | 542        |             |       |             | (3,328     | ) |   |   | 8,193 |   |   |   | (18,570 | ) |   |
| Income tax  provision                        |       |            | —     |           |       |           | 1,308      |             |       |             | 4,099      |   |   |   | — |   |   |   | 5,407 |   |   |
| Net income (loss)                            |       |            | $          | (23,977        | )          |           |       | $                | (766       | )                |       |   | $ | (7,427 | ) |   |   | $ | 8,193 |   |   |   | $ | (23,977 | ) |   |

 

F-37

----

**THERMADYNE HOLDINGSCORPORATIONCONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSYEAR ENDED DECEMBER 31, 2004**
| ** **                                                 | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|------------------------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                 | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                 | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                 | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net cash provided  by (used in) operating activities       |       |            | $(23,548   | )              |       | $              | 4,140      |             |       | $                | (2,168     | ) |   |   | $ | 8,193 |   |   |   | $ | (13,383 | ) |   |
| Cash flows from  investing activities:                     |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |
| Capital expenditures                                       |       |            | —     |           |       | (11,814        | )          |             | (4,265     | )                |       |   | — |   |   |   | (16,079 | ) |   |
| Proceeds from sales of assets                              |       |            | —     |           |       | —         |       |             | 1,324      |             |       |   | — |   |   |   | 1,324 |   |   |
| Net cash used in  investing activities                     |       |            | —     |           |       | (11,814        | )          |             | (2,941     | )                |       |   | — |   |   |   | (14,755 | ) |   |
| Cash flows from  financing activities:                     |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |
| Net borrowings under revolving credit facility             |       |            | —     |           |       | (2,036         | )          |             | —     |             |       |   | — |   |   |   | (2,036 | ) |   |
| Net (repayments) borrowings of long-term obligations       |       |            | (5,000     | )              |       | 28,645         |       |             | 4,588      |             |       |   | — |   |   |   | 28,233 |   |   |
| Changes in net equity and advances to / from  subsidiaries |       |            | 28,548     |           |       | (20,571        | )          |             | 216        |             |       |   | (8,193 | ) |   |   | — |   |   |
| Financing fees and other                                   |       |            | —     |           |       | (2,839         | )          |             | (5,354     | )                |       |   | — |   |   |   | (8,193 | ) |   |
| Net cash provided  (used in) financing activities          |       |            | 23,548     |           |       | 3,199          |       |             | (550       | )                |       |   | (8,193 | ) |   |   | 18,004 |   |   |
| Net decrease in  cash and cash equivalents                 |       |            | —     |           |       | (4,475         | )          |             | (5,659     | )                |       |   | — |   |   |   | (10,134 | ) |   |
| Cash and cash  equivalents at beginning of period          |       |            | —     |           |       | 10,033         |       |             | 6,751      |             |       |   | — |   |   |   | 16,784 |   |   |
| Cash and cash  equivalents at end of period                |       |            | $          | —         |       |           | $          | 5,558            |       |             | $          | 1,092 |   |   |   | $ | — |   |   |   | $ | 6,650 |   |   |
|                                                            |            |                 |            |                |            |                |            |                  |            |                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**21.**Restructuring Costs

In 2003, the Company initiated a plan to relocate andconsolidate certain U.S. manufacturing facilities. During the year ended December 31,2004, the seven months ended December 31, 2003 and the five months ended May 31,2003, the Company recognized expenses of $8,820, $1,873 and $516, respectively,which were included in restructuring costs on the accompanying consolidatedstatements of operations. Of the amount recorded in 2004, $456 related toseverance costs for approximately 50 employees. The Company also recorded$5,408 in 2004 related to incentive bonuses, employee relocation costs, coststo relocate equipment, and other expenses associated with the relocation andconsolidation of these facilities. Through December 31, 2004, the Companyhas incurred cumulative costs of approximately $8,253 in connection with theseactivities. These activities were completed in the fourth quarter of 2004 andthe remaining payments will be made in 2005.

Also included in restructuring charges for the yearended December 31, 2004, was approximately $2,956 of severance costsrelated to reorganizing the domestic workforce initiated in 2004 to improveefficiency and productivity.

F-38

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Thefollowing table provides the activity in the restructuring accrual during theyear ended December 31, 2004.
| ** **                                                          | ** ** | **December 31,** | ** ** | ** ** | ** ** | ** **    | ** ** | **December 31,** | ** ** |
|---------------------------------------------------------------------|------------|-----------------------|------------|------------|------------|---------------|------------|-----------------------|------------|
| **Restructuring Accrual**                                      | ** ** | ** **            | ** ** | **2003**   | ** ** | **Provision** | ** ** | **Payments**          | ** ** | **2004** | ** ** |
| Plant  Consolidation—Employee  Severance and Incentive Bonuses |       |                  | $          | —     |       |          |       | $                     | 3,353      |   |   | $ | (3,139 | ) |   | $ | 214 |   |   |
| Plant  Consolidation—Other relocation costs                    |       |                  | —     |       |       |          | 2,511      |                  |       | (2,511 | ) |   | — |   |   |
| Domestic  Workforce Reorganization—Employee  Severance         |       |                  | —     |       |       |          | 2,956      |                  |       | (1,863 | ) |   | 1,093 |   |   |
|                                                                |       |                  | $          | —     |       |          |       | $                     | 8,820      |   |   | $ | (7,513 | ) |   | $ | 1,307 |   |   |
|                                                                     |            |                       |            |            |            |               |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |

 

**22. RecentlyIssued Accounting Standards**

In November 2004, the Financial AccountingStandards Board (FASB) issued SFAS No. 151, “Inventory Costs—An Amendmentof ARB No. 43, Chapter 4” (“SFAS No. 151”). SFAS No. 151amends the guidance in ARB No. 43, Chapter 4, “Inventory Pricing,” toclarify the accounting for abnormal amounts of idle facility expense, freight,handling costs, and wasted material (spoilage). Among other provisions, the newrule requires that items such as idle facility expense, excessive spoilage,double freight, and rehandling costs be recognized as current-period chargesregardless of whether they meet the criterion of “so abnormal” as stated in ARBNo. 43. Additionally, SFAS No. 151 requires that the allocation offixed production overheads to the costs of conversion be based on the normalcapacity of the production facilities. SFAS No. 151 is effective forfiscal years beginning after June 15, 2005, with early adoption permitted.The Company adopted the provisions of SFAS No. 151 in the current periodwithout a material impact to the financial statements.

In December 2004, the FASB issued SFAS No. 123(revised 2004), Share-Based Payment, (“SFAS No. 123(R)”), which is arevision of SFAS No. 123, *Accountingfor Stock-Based Compensation*(“SFAS No. 123”). SFAS No. 123(R) supersedesAPB Opinion No. 25 (“Opinion 25”),*Accounting for Stock Issued to Employees*,and amends SFAS No. 95, *Statement ofCash Flows*. Generally, the approach in SFAS No. 123(R) issimilar to the approach described in SFAS No. 123. However, SFAS No. 123(R) requiresall share-based payments to employees, including grants of employee stockoptions, to be recognized in the income statement based on their fair values.Pro forma disclosure is no longer an alternative. SFAS No. 123(R) mustbe adopted no later than July 1, 2005. Early adoption will be permitted inperiods in which financial statements have not yet been issued. The Companyexpects to adopt SFAS No. 123(R) on July 1, 2005.

SFAS No. 123(R) permits public companies toadopt its requirements using one of two methods: (1) A “modifiedprospective” method in which compensation cost is recognized beginning with theeffective date (a) based on the requirements of SFAS No. 123(R) forall share-based payments granted after the effective date and (b) based onthe requirements of SFAS No. 123 for all awards granted to employees priorto the effective date of SFAS No. 123(R) that remain unvested on theeffective date. (2) A “modified retrospective” method which includes therequirements of the modified prospective method described above, but alsopermits entities to restate based on the amounts previously recognized underSFAS No. 123 for purposes of pro forma disclosures either (a) allprior periods presented or (b) prior interim periods of the year ofadoption. The Company plans to adopt SFAS No. 123 using themodified-prospective method.

As permitted by SFAS No. 123, the Companycurrently accounts for share-based payments to employees using Opinion 25’sintrinsic value method and, as such, generally recognizes no compensation costfor employee stock options. The impact of adoption of SFAS No. 123(R) cannotbe predicted at this time because it will depend on levels of share-basedpayments granted in the future. However, had the 

F-39

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Company adopted SFAS No. 123(R) inprior periods, the impact of that standard would have approximated the impactof SFAS No. 123 as described in the disclosure of pro forma net income andearnings per share in Note 2 to the Company’s consolidated financialstatements.

In December 2004, the FASB issued SFAS No. 153,“Exchanges of Nonmonetary Assets—An Amendment of APB Opinion No. 29,Accounting for Nonmonetary Transactions” (“SFAS No. 153”). SFAS No. 153eliminates the exception from fair value measurement for nonmonetary exchangesof similar productive assets in paragraph 21(b) of APB Opinion No. 29,“Accounting for Nonmonetary Transactions,” and replaces it with an exceptionfor exchanges that do not have commercial substance. SFAS No. 153specifies that a nonmonetary exchange has commercial substance if the futurecash flows of the entity are expected to change significantly as a result ofthe exchange. SFAS No. 153 is effective for the fiscal periods beginningafter June 15, 2005 and is required to be adopted by the Company on January 1,2006. The Company is currently evaluating the effect that the adoption of SFAS No. 153will have on its consolidated results of operations and financial condition,but does not expect it to have a material impact.

F-40

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**SIGNATURES**

Pursuantto the requirement of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned thereunto duly authorized.
|                      |   | THERMADYNE HOLDINGS CORPORATION |
|---------------------------|--------|---------------------------------|
|                      |   | By:                             |   | /s/ DAVID  L. DYCKMAN |
|                      |   |                            |   | David L. Dyckman*Executive Vice President and  Chief Financial Officer* |
| Date: March 31, 2005 |   |                            |   |   |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.
|                                | **Name** | ** **                                         | ** ** | ** **          | **Title** | ** ** | ** ** | ** ** | **Date** | ** ** |
|--------------------------------|----------|----------------------------------------------------|------------|---------------------|-----------|------------|------------|------------|----------|------------|
| /s/  PAUL D. MELNUK            |     | Director, Chairman of  the Board, and Chief        |       |                |
| Paul D. Melnuk                 |     | Executive Officer (Principal Executive Officer)    |       | March 31, 2005 |
| /s/  DAVID L. DYCKMAN          |     | Executive Vice  President, Chief Financial Officer |       |                |
| David L. Dyckman               |     | (Principal Financial and Accounting Officer)       |       | March 31, 2005 |
| /s/  ANDREW L. BERGER          |     | Director                                           |       |                |
| Andrew L. Berger               |     |                                               |       | March 31, 2005 |
| /s/  JAMES B. GAMACHE          |     | Director                                           |       |                |
| James B. Gamache               |     |                                               |       | March 31, 2005 |
| /s/  MARNIE S. GORDON          |     | Director                                           |       |                |
| Marnie S. Gordon               |     |                                               |       | March 31, 2005 |
| /s/  JOHN G. JOHNSON, JR. |     | Director                                           |       |                |
| John G.  Johnson, Jr.     |     |                                               |       | March 31, 2005 |
| /s/  BRADLEY G. PATTELLI       |     | Director                                           |       |                |
| Bradley G.  Pattelli           |     |                                               |       | March 31, 2005 |

 

 

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**THERMADYNE HOLDINGS CORPORATION2004 10-K EXHIBIT INDEX**
| Exhibit No. | ** ** | ** ** | ** ** | **Exhibit**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|------------------|------------|------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1              |       | —     |       | First Amended and  Restated Disclosure Statement, dated January 17, 2003, Solicitation of  Votes on the Debtors’ First Amended and Restated Join Plan of Reorganization  Under Chapter 11 of the Bankruptcy Code of Thermadyne Holdings Corporation  and its wholly owned direct and indirect subsidiaries, Thermadyne Mfg. LLC,  Thermadyne Capital Corp., Thermadyne Industries, Inc., Victor Equipment  Company, Thermadyne International Corp., Thermadyne Cylinder Co., Thermal  Dynamics Corporation, C&G Systems Holding, Inc., MECO Holding  Company, Tweco Products, Inc., Tag Realty, Inc., Victor-Coyne  International, Inc., Victor Gas Systems, Inc., Stoody Company,  Thermal Arc, Inc., C & G Systems, Inc., Marison Cylinder  Company, Wichita Warehouse Corporation, Coyne Natural Gas Systems, Inc.,  and Modern Engineering Company, Inc.(1) |
| 2.2              |       | —     |       | First Amended and  Restated Plan of Reorganization dated January 17, 2003.(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 2.3              |       | —     |       | Confirmation Order dated  April 3, 2003 and signed by the Bankruptcy Court.(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.1              |       | —     |       | Amended and Restated  Certificate of Incorporation of the Company dated as of May 23, 2003.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| 3.2              |       | —     |       | Amended and Restated  Bylaws of the Company dated as of May 23, 2003.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.3              |       | —     |       | Amended and Restated  Articles of Incorporation of C&G Systems, Inc. dated as of  May 19, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3.4              |       | —     |       | Amended and Restated  Bylaws of C&G Systems, Inc. dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| 3.5              |       | —     |       | Amended and Restated  Certificate of Incorporation of C&G Systems Holding, Inc. dated as  of May 19, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 3.6              |       | —     |       | Amended and Restated  Bylaws of C&G Systems Holding, Inc. dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3.7              |       | —     |       | Amended and Restated  Certificate of Incorporation of MECO Holding Company dated as of May 19,  2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.8              |       | —     |       | Amended and Restated  Bylaws of MECO Holding Company dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.9              |       | —     |       | Amended and Restated  Articles of Incorporation of ProTip Corporation dated as of March 31,  2004.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 3.10             |       | —     |       | Amended and Restated  Bylaws of ProTip Corporation dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3.11             |       | —     |       | Amended and Restated  Certificate of Incorporation of Stoody Company dated as of May 19, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.12             |       | —     |       | Amended and Restated  Bylaws of Stoody Company dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 3.13             |       | —     |       | Amended and Restated  Certificate of Incorporation of Thermadyne Industries, Inc. dated as of  May 19, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.14             |       | —     |       | Amended and Restated  Bylaws of Thermadyne Industries, Inc. dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.15             |       | —     |       | Amended and Restated  Certificate of Incorporation of Thermadyne International Corp. dated as of  May 19, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.16             |       | —     |       | Amended and Restated  Bylaws of Thermadyne International Corp. dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

----

 
| 3.17 |   | — |   | Amended and Restated  Certificate of Incorporation of Thermal Arc, Inc. dated as of  May 19, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|------|--------|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.18 |   | — |   | Amended and Restated  Bylaws of Thermal Arc, Inc. dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 3.19 |   | — |   | Amended and Restated  Certificate of Incorporation of Thermal Dynamics Corporation dated as of  May 19, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 3.20 |   | — |   | Amended and Restated  Bylaws of Thermal Dynamics Corporation dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 3.21 |   | — |   | Amended and Restated  Certificate of Incorporation of Tweco Products, Inc. dated as of  May 19, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| 3.22 |   | — |   | Amended and Restated  Bylaws of Tweco Products, Inc. dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 3.23 |   | — |   | Amended and Restated  Certificate of Incorporation of Victor Equipment Company dated as of  May 19, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.24 |   | — |   | Amended and Restated  Bylaws of Victor Equipment Company dated as of May 23, 2003.(4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.25 |   | — |   | Memorandum and Articles  of Association of Thermadyne Australia Party Ltd., dated November 17,  1995.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| 3.26 |   | — |   | Memorandum  and Articles of Association of Duxtech Pty. Ltd., dated March 6, 1989.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 3.27 |   | — |   | Memorandum and Articles  of Association of Cigweld Pty Ltd, formerly known as Edinen Pty. Ltd., dated  April 1, 1989, as amended.*                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| 3.28 |   | — |   | Memorandum and Articles  of Association of Quetala Pty. Ltd., dated April 1, 1989.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 3.29 |   | — |   | Memorandum and Articles  of Association of Quetack Pty. Ltd., dated April 1, 1989.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 3.30 |   | — |   | Articles of Amalgamation  of Thermadyne Welding Products Canada Limited, formerly known as Victor  Equipment Company of Canada Ltd., dated September 26, 1980, as amended.*                                                                                                                                                                                                                                                                                                                                                                                                            |
| 3.31 |   | — |   | By-laws of Thermadyne  Welding Products Canada Limited, formerly known as Victor Equipment Company  of Canada Ltd, dated September 26, 1980, as amended.*                                                                                                                                                                                                                                                                                                                                                                                                                              |
| 3.32 |   | — |   | Memorandum and Articles  of Association of Thermadyne Industries Limited.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 3.33 |   | — |   | New Articles of  Association of Thermadyne Industries Limited dated June 10, 1992.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.1  |   | — |   | Credit Agreement dated  as of May 23, 2003 among the Company, as a guarantor thereunder,  Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C & G  Systems, Inc., Stoody Company, Thermal Arc, Inc., ProTip  Corporation and Thermadyne International Corp., as borrowers, the credit  parties signatory thereto, the lenders signatory thereto from time to time,  General Electric Capital Corporation, as Agent and Lender, and GECC Capital  Markets Group, Inc., as Lead Arranger.(5) |
| 4.2  |   | — |   | Credit and Guaranty  Agreement dated as of May 23, 2003 among the Company, as Borrower, the  guarantors referred to therein, the New Term Lenders referred to therein and  Deutsche Bank Trust Company Americas, as Administrative Agent and Collateral  Agent.(5)                                                                                                                                                                                                                                                                                                                     |
| 4.3  |   | — |   | Registration Rights  Agreement dated as of May 23, 2003 by and between the Company and Angelo  Gordon & Co., L.P., on behalf of certain managed funds and accounts.(3)                                                                                                                                                                                                                                                                                                                                                                                                        |
| 4.4  |   | — |   | Class A Warrant  Agreement dated as of May 23, 2003 by and between the Company and  Equiserve Trust Company, N.A.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

----

 
| 4.5  |   | — |   | Class B Warrant  Agreement dated as of May 23, 2003 by and between the Company and  Equiserve Trust Company, N.A.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.6  |   | — |   | Class C Warrant  Agreement dated as of May 23, 2003 by and between the Company and  Equiserve Trust Company, N.A.(3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| 4.7  |   | — |   | Amended and Restated  Credit Agreement dated as of February 5, 2004 among Thermadyne  Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C & G  Systems, Inc., Stoody Company, Thermal Arc, Inc., PROtip  Corporation and Thermadyne International Corp., as borrowers, the Company and  other parties referred to therein as credit parties, the lenders signatory  thereto from time to time, and General Electric Capital Corporation, as agent  and lender, and GECC Capital Markets Group, Inc, as lead arranger.(6) |
| 4.8  |   | — |   | Purchase Agreement dated  as of February 5, 2004 among the Company, the parties referred to  therein as the guarantors and Credit Suisse First Boston LLC, as  representative of the several purchasers referred to therein.(6)                                                                                                                                                                                                                                                                                                                                                                      |
| 4.9  |   | — |   | Registration Rights  Agreement dated as of February 5, 2004 among the Company, the parties  referred to therein as the guarantors and Credit Suisse First Boston LLC, as  representative of the initial purchasers referred to therein.(6)                                                                                                                                                                                                                                                                                                                                                           |
| 4.10 |   | — |   | Indenture dated as of  February 5, 2004 among the Company, as issuer, the subsidiary guarantors  named therein and U.S. Bank National Association, as trustee.(6)                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| 4.11 |   | — |   | First Amendment to  Amended and Restated Credit Agreement dated as of March 5, 2004 by and  among Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the credit parties signatory thereto, the  lenders signatory thereto, and General Electric Capital Corporation, as agent  and lender.(7)                                                                                               |
| 4.12 |   | — |   | Second Amendment to  Amended and Restated Credit Agreement dated as of May 19, 2004 by and  among Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the credit parties signatory thereto, the  lenders signatory thereto, and General Electric Capital Corporation, as agent  and lender.(7)                                                                                               |
| 4.13 |   | — |   | Third Amended and  Limited Waiver to Amended and Restated Credit Agreement dated as of  July 29, 2004 by and among Thermadyne Industries, Inc., Thermal  Dynamics Corporation, Tweco Products, Inc., Victor Equipment Company,  C&G Systems, Inc., Stoody Company, Thermal Arc Inc., ProTip  Corporation, and Thermadyne International Corp., as borrowers, the credit  parties signatory thereto, the lenders signatory thereto, and General  Electric Capital Corporation, as agent and lender.(7)                                                                              |
| 4.14 |   | — |   | Second Lien Credit  Agreement dated as of July 29, 2004 by and among Thermadyne Industries, Inc.,  Thermal Dynamics Corporation, Tweco Products, Inc., Victor Equipment  Company, C&G Systems, Inc., Stoody Company, Thermal Arc Inc., ProTip  Corporation, and Thermadyne International Corp., as borrowers, the guarantors  party thereto, the lenders parties thereto, and Credit Suisse First Boston,  as administrative agent and collateral agent, and Credit Suisse First Boston,  as sole lead arranger and sole bookrunning manager.(7)                                  |

----

 
| 4.15 |   | — |   | Fourth Amendment to  Amended and Restated Credit Agreement dated as of September 30, 2004 by  and among Thermadyne Industries, Inc., Thermal Dynamics Corporation,  Tweco Products, Inc., Victor Equipment Company, C&G  Systems, Inc., Stoody Company, Thermal Arc Inc., ProTip Corporation, and  Thermadyne International Corp., as borrowers, the credit parties signatory  thereto, the lenders signatory thereto, and General Electric Capital  Corporation, as agent and lender.(8)                                                                   |
|------|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.16 |   | — |   | Amendment No. 1 and  Agreement dated as of September 30, 2004 to the Second Lien Credit  Agreement by and among Thermadyne Industries, Inc., Thermal Dynamics  Corporation, Tweco Products, Inc., Victor Equipment Company, C&G  Systems, Inc., Stoody Company, Thermal Arc Inc., ProTip Corporation, and  Thermadyne International Corp., as borrowers, the guarantors party thereto,  the lenders parties thereto, and Credit Suisse First Boston, as  administrative agent and collateral agent.(8)                                                 |
| 4.17 |   | — |   | Second Amended and  Restated Credit Agreement dated as of November 22, 2004 by and among  Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the credit parties signatory thereto, the  lenders signatory thereto, and General Electric Capital Corporation, as agent  and lender, and GECC Capital Markets Group, Inc., as lead arranger.(9)                    |
| 4.18 |   | — |   | Amendment No. 2 and  Joinder Agreement dated as of November 22, 2004 by and among Thermadyne  Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the guarantors party thereto, the lenders  parties thereto, and Credit Suisse First Boston, as administrative agent and  collateral agent.(9)                                                                              |
| 4.19 |   | — |   | First Amendment and  Consent to Second Amended and Restated Credit Agreement dated  December 21, 2004 by and among Thermadyne Industries, Inc., Thermal  Dynamics Corporation, Tweco Products, Inc., Victor Equipment Company,  C&G Systems, Inc., Stoody Company, Thermal Arc Inc., ProTip  Corporation, and Thermadyne International Corp., as borrowers, the credit  parties signatory thereto, the lenders signatory thereto, and General Electric  Capital Corporation, as agent and leader.*                                                          |
| 4.20 |   | — |   | Amendment No. 3 and  Consent to the Second Lien Credit Agreement dated as of January 3, 2005  among Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the guarantors party thereto, the lenders  parties thereto, and Credit Suisse First Boston, as administrative agent and  collateral agent.*                                                               |
| 4.21 |   | — |   | Second Amendment to  Second Amended and Restated Credit Agreement dated as of March 16, 2005  by and among Thermadyne Industries, Inc., Thermal Dynamics Corporation,  Tweco Products, Inc., Victor Equipment Company, C&G  Systems, Inc., Stoody Company, Thermal Arc Inc., ProTip Corporation, and  Thermadyne International Corp., as borrowers, the credit parties signatory  thereto, the lenders signatory thereto, and General Electric Capital  Corporation, as agent and lender, and GECC Capital Markets Group, Inc.,  as lead arranger.(14) |

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| 4.22        |   | — |   | Amendment No. 4 to  the Second Lien Credit Agreement dated as of March 16, 2005 among  Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc.,  Stoody Company, Thermal Arc Inc., ProTip Corporation, and Thermadyne  International Corp., as borrowers, the guarantors party thereto, the lenders  parties thereto, and Credit Suisse First Boston, as administrative agent and  collateral agent.(14) |
|-------------|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.23        |   | — |   | Third Amendment to  Second Amended and Restated Credit Agreement dated as of March 30, 2005  by and among Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco  Products, Inc., Victor Equipment Company, C&G Systems, Inc., Stoody Company,  Thermal Arc Inc., ProTip Corporation, and Thermadyne International Corp., as  borrowers, the credit parties signatory thereto, the lenders signatory  thereto, and General Electric Capital Corporation, as agent and lender.*           |
| 4.24        |   | — |   | Amendment No. 5 to  the Second Lien Credit Agreement dated as of March 30, 2005 among  Thermadyne Industries, Inc., Thermal Dynamics Corporation, Tweco Products,  Inc., Victor Equipment Company, C&G Systems, Inc., Stoody Company, Thermal  Arc Inc., ProTip Corporation, and Thermadyne International Corp., as  borrowers, the guarantors party thereto, the lenders parties thereto, and  Credit Suisse First Boston, as administrative agent and collateral agent.*                    |
| 10.1        |   | — |   | Omnibus Agreement, dated  as of June 3, 1988, among Palco Acquisition Company (now Thermadyne  Holdings Corporation) and its subsidiaries and National Warehouse Investment  Company.(10)                                                                                                                                                                                                                                                                                                              |
| 10.2        |   | — |   | Escrow Agreement, dated  as of August 11, 1988, among National Warehouse Investment Company,  Palco Acquisition Company (now Thermadyne Holdings Corporation) and Title  Guaranty Escrow Services, Inc.(10)                                                                                                                                                                                                                                                                                       |
| 10.3        |   | — |   | Schedule of  substantially identical lease agreements.(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.4        |   | — |   | Amended and Restated  Continuing Lease Guaranty, made as of August 11, 1988, by Palco  Acquisition Company (now Thermadyne Holdings Corporation) for the benefit of  National Warehouse Investment Company.(10)                                                                                                                                                                                                                                                                                        |
| 10.5        |   | — |   | Schedule of  substantially identical lease guaranties(10)                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.6        |   | — |   | Lease Agreement, dated  as of October 10, 1990, between Stoody Deloro Stellite and Bowling Green-Warren  County Industrial Park Authority, Inc.(10)                                                                                                                                                                                                                                                                                                                                               |
| 10.7        |   | — |   | Lease Agreement between  Alliance Gateway No. 58 Ltd. And Victor Equipment Company dated  September 22, 2003.*                                                                                                                                                                                                                                                                                                                                                                                    |
| 10.8        |   | — |   | First Amendment to Lease  between Alliance Gateway No. 58 Ltd. and Victor Equipment Company dated  May 1, 2004.*                                                                                                                                                                                                                                                                                                                                                                                  |
| 10.9        |   | — |   | Lease Agreement between  Ningbo Longxing Group Co., Ltd. and Ningbo Fulida Gas Equipment Co. Ltd dated  January 19, 2005.*                                                                                                                                                                                                                                                                                                                                                                             |
| 10.10       |   | — |   | Lease Agreement between  Ningbo Longxing Group Co., Ltd. and Thermadyne (Ningbo) Cutting and Welding  Equipment Manufacturing Company, Ltd dated December 28, 2004.*                                                                                                                                                                                                                                                                                                                                   |
| 10.11       |   | — |   | Contract to Establish an  Equity Joint Venture Enterprise by and between Ningbo Longxing Group  Corporation Limited and Thermadyne Holdings Corporation dated  December 28, 2004.*                                                                                                                                                                                                                                                                                                                     |
| 10.12† |   | — |   | Amended and Restated  Executive Employment Agreement between Thermadyne Holdings Corporation and  James R. Delaney dated June 13, 2002.*                                                                                                                                                                                                                                                                                                                                                               |
| 10.13† |   | — |   | Amended and Restated  Executive Employment Agreement between Thermadyne Holdings Corporation and  Dennis Klanjscek dated June 13, 2002.*                                                                                                                                                                                                                                                                                                                                                               |

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| 10.14† |   | — |   | Amended and Restated Executive Employment Agreement  between Thermadyne Holdings Corporation and Michael E. Mahoney dated  June 13, 2002.(11).         |
|-------------|--------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.15† |   | — |   | Separation Agreement and Mutual General Release  between Thermadyne Holdings Corporation and Karl R. Wyss dated  October 1, 2003.(4)                   |
| 10.16† |   | — |   | Second Amended and Restated Executive Employment  Agreement between Thermadyne Holdings Corporation and John Boisvert dated  January 1, 2004.*         |
| 10.17† |   | — |   | Second Amended and Restated Executive Employment  Agreement between Thermadyne Holdings Corporation and Terry Downes dated  January 1, 2004.*          |
| 10.18† |   | — |   | Second Amended and Restated Executive Employment  Agreement between Thermadyne Holdings Corporation and Jason Huett dated  January 1, 2004.*           |
| 10.19† |   | — |   | Second Amended and Restated Executive Employment  Agreement between Thermadyne Holdings Corporation and Robert D. Maddox dated  January 1, 2004.*      |
| 10.20† |   | — |   | Executive Employment Agreement between Thermadyne  Holdings Corporation and Brian Truex dated June 1, 2004.*                                           |
| 10.21† |   | — |   | Second Amended and Restated Executive Employment  Agreement between Thermadyne Holdings Corporation and Patricia S. Williams  dated January 1, 2004.*  |
| 10.22† |   | — |   | Executive Employment Agreement between Thermadyne  Holdings Corporation and Paul D. Melnuk dated January 28, 2004.(4)                                  |
| 10.23† |   | — |   | Agreement among Thermadyne Holdings Corporation, its  subsidiaries, and James H. Tate dated August 27, 2004.*                                          |
| 10.24† |   | — |   | First Amendment to Agreement among Thermadyne  Holdings Corporation, its subsidiaries, and James H. Tate dated  November 11, 2004.*                    |
| 10.25† |   | — |   | Second Amendment to Agreement among Thermadyne  Holdings Corporation, its subsidiaries, and James H. Tate dated  November 24, 2004.*                   |
| 10.26† |   | — |   | Executive Employment Agreement between Thermadyne  Holdings Corporation and David L. Dyckman dated December 15, 2004.(12)                              |
| 10.27       |   | — |   | Thermadyne Holdings Corporation Non-Employee  Director’s Stock Option Agreement.(13)                                                                   |
| 10.28       |   | — |   | Thermadyne Holdings Corporation Non-Employee  Directors’ Deferred Stock Compensation Plan.(6)                                                          |
| 10.29       |   | — |   | Thermadyne Holdings Corporation 2004 Stock Incentive  Plan.(15)                                                                                             |
| 10.30       |   | — |   | 2004 Non-Employee Director’s Stock Option Plan.(15)                                                                                                    |
| 14          |   | — |   | Thermadyne Holdings Corporation Code of Ethics.*                                                                                                            |
| 21          |   | — |   | Subsidiaries  of Thermadyne Holdings Corporation.*                                                                                                          |
| 23          |   | — |   | Consent of Independent Registered Public Accounting  Firm.*                                                                                                 |
| 31.1        |   | — |   | Thermadyne Holdings Corporation Certification  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                             |
| 31.2        |   | — |   | Thermadyne Holdings Corporation Certification  Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                             |
| 32.1        |   | — |   | Thermadyne Holdings Corporation Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 906 of  the Sarbanes-Oxley Act of 2002.* |
| 32.2        |   | — |   | Thermadyne Holdings Corporation Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 906 of  the Sarbanes-Oxley Act of 2002.* |

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†       Indicatesa management contract or compensatory plan or arrangement.

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*       Filedherewith.

 (1)  Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on February 6,2003.

 (2)  Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on April 11, 2003.

 (3)  Incorporatedby reference to the Company’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2003.

 (4)  Incorporatedby reference to the Company’s Registration Statement on Form S-4(File No. 333-114511) on April 15, 2004.

 (5)  Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on June 3, 2003.

 (6)  Incorporatedby reference to the Company’s Annual Report on Form 10-K for theyear ended December 31, 2003.

 (7)  Incorporatedby reference to the Company’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2004.

 (8)  Incorporatedby reference to the Company’s Quarterly Report on Form 10-Q for thequarter ended September 30, 2004.

 (9)  Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on November 24,2004.

(10) Incorporatedby reference to the Company’s Registration Statement on Form 10/A,Amendment No. 2 (File No. 0-23378) filed under Section 12(g) ofthe Exchange Act, on April 28, 1994.

(11) Incorporatedby reference to the Company’s Annual Report on Form 10-K for theyear ended December 31, 2002.

(12) Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on December 17,2004.

(13) Incorporatedby reference to the Company’s Quarterly Report on Form 10-Q for thequarter ended September 30, 2003.

(14) Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on March 17, 2005.

(15) Incorporated by reference to the Company’s Definitive ProxyStatement on Schedule 14A filed on March 24, 2004.

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