**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

**Form 10-K**

**(Mark One)**

**x**                                 ANNUAL REPORT PURSUANT TO SECTION 13OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe fiscal year ended December 31, 2005**

**OR**

**o**                                   TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 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**                    |   | **63017**                             |
| **Chesterfield,  Missouri**                                      |   | (ZIP Code)                            |
| (Address of  Principal Executive Offices)                        |   | ** **                            |

 

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:

**Titleof Class**

Common Stock, par value$0.01 per share

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Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.    Yes o   No x

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act.    Yes o   No x

Indicate by check markwhether the 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 o   No x

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K isnot contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K.   x

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

| Large Accelerated Filer o |   | Accelerated  Filer x |   | Non-Accelerated  Filer o |
|--------------------------------|--------|---------------------------|--------|-------------------------------|

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).    Yes o   No x

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 $117,851,062 based on the closing sales price of the Common Stockon June 30, 2005.

Indicate by check markwhether 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 a court.   Yes o   No x

Indicate the number ofshares outstanding of each of the registrant’s classes of common stock, as ofthe latest practicable date: 13,329,702 shares of common stock, outstanding at August 1,2006.

 

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**DOCUMENTSINCORPORATED BY REFERENCE**

Item 9A of the Registrant’s Annual Report on Form 10-Kfor the year ended December 31, 2004, filed with the Securities andExchange Commission on March 17, 2005, is incorporated by reference into Part II,Item 9 of this Annual Report on Form 10-K.

Item 4 of the Registrant’s Quarterly Report on Form 10-Qfor the quarter ended March 31, 2005, filed with the Securities andExchange Commission on May 10, 2005, is incorporated by reference into Part II,Item 9 of this Annual Report on Form 10-K.

Item 4 of the Registrant’s Quarterly Report on Form 10-Qfor the quarter ended June 30, 2005, filed with the Securities andExchange Commission on August 9, 2005, is incorporated by reference into Part II,Item 9 of this Annual Report on Form 10-K.

Item 4 of the Registrant’s Quarterly Report on Form 10-Qfor the quarter ended September 30, 2005, filed with the Securities andExchange Commission on October 9, 2005, is incorporated by reference into Part II,Item 9 of this Annual Report on Form 10-K.

Item 4.01 of the Registrant’s Form 8-K datedJuly 13, 2006 filed with the Securities and Exchange Commission onJuly 19, 2006, is incorporated by reference into Part II, Item 9of the Annual Report on Form 10-K.

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**CAUTIONARYSTATEMENT CONCERNING FORWARD-LOOKING STATEMENTS**

The statements inthis Annual Report on Form 10-K that relate to future plans, eventsor performance are forward-looking statements within the meaning of Section 27Aof the Securities Act, Section 21E of the Securities Exchange Act of 1934,or the Exchange Act, and the Private Securities Litigation Reform Act of 1995,including statements regarding our future prospects. These statements may beidentified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,”“expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will”and similar expressions and relate to future events and occurrences. Actualresults could differ materially due to a variety of factors and the other risksdescribed in this Annual Report and the other documents we file from time totime with the Securities and Exchange Commission. Factors that could causeactual results to differ materially from those expressed or implied in suchstatements include, but are not limited to, the following and those discussedunder the Risk Factors section of this annual report on Form 10-K:

(a)          general economic andcapital market conditions, including political and economic uncertainty invarious areas of the world where we do business;

(b)         the cyclicality andmaturity of the cutting and welding market;

(c)          the effects on ourbusiness of economic conditions, such as fluctuations in the cost of rawmaterials and energy, the substitution of plastic and other materials in placeof fabricated metals and the trend towards offshore production of fabricatedmetal products;

(d)         consolidation within ourcustomer base and the resulting increased concentration of our sales;

(e)          actions taken by ourcompetitors that affect our ability to retain our customers;

(f)            customers’ perceptionsof our financial condition relative to that of our competitors, particularly inlight of our emergence from Chapter 11 bankruptcy proceedings in May 2003;

(g)          risks associated withreconfiguration and relocation of manufacturing operations;

(h)         the effectiveness of ourcost reduction initiatives;

(i)            foreign currencyexchange rates;

(j)             changes in U.S. orforeign tax laws or regulations;

(k)         our ability to meetcustomer needs by introducing new products;

(l)            unforeseen liabilitiesarising from litigation, including risk associated with product liability;

(m)     the effectiveness of ourinformation systems and internal controls;

(n)         our ability to attractand retain qualified management personnel; and

(o)         consistent application ofU.S. generally accepted accounting principles at our smaller internationallocations.

Actual results could differ materially due to avariety of factors and the other risks described in this Annual Report,including those described in the “Risk Factors” section, and the otherdocuments we file from time to time with the Securities and ExchangeCommission. Readers are cautioned not to place undue reliance on these forward-lookingstatements, which speak only as of the date hereof and are not guarantees ofperformance or results. We undertake no obligation to publicly release theresult of any revisions to these forward-looking statements that may bemade to reflect events or circumstances after the date hereof or that reflectthe occurrence of unanticipated events.

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**PART I**

**Item1.**                        *Business*

**Introduction**

We are a leading globalsupplier of cutting and welding products. We design, manufacture, market, selland distribute welding and cutting power sources, torches, consumables andaccessories globally. Our products are used by fabricating, manufacturing,construction and foundry operations to cut and weld ferrous and nonferroussteel, aluminum and other metals. Common applications for our products includeshipbuilding, manufacturing of transportation and agricultural equipment, manytypes of construction such as offshore oil and gas rigs, fabrication of metalstructures, and repair and maintenance of processing, and manufacturingequipment and facilities as well as demolition. Welding and cutting productsare critical to the operations of most businesses that fabricate metal. We havevery well established and widely recognized brands. We were incorporated inDelaware in 1987. Our shares are quoted on The Pink Sheets, and as of July 21,2006, we had an equity market capitalization of approximately $154.3 million(based on a closing sale price of $11.60 and 13.3 million sharesoutstanding).

As used in this AnnualReport on Form 10-K, the terms “Thermadyne Holdings Corporation,” “Thermadyne,”“Reorganized Company,” “the Company,” “we,” “our,” or “us,” mean ThermadyneHoldings Corporation and its subsidiaries.

**Restatement of Consolidated Financial Statements**

During 2005, the Companyidentified a series of adjustments that have resulted in the restatement of ourfinancial statements for the year ended December 31, 2004 and the sevenmonths ended December 31, 2003 in this Annual Report on Form 10-K. Theseadjustments also resulted in the restatement of our previously reportedquarterly results for each of the first three quarters of 2005, each quarter of2004, and the second, third and fourth quarters of 2003 as more fully describedin Note 21 —*Quarterly Results of**Operations (Unaudited)*. All financial information containedin these consolidated financial statements gives effect to this restatement.

In summary, therestatement adjustments primarily relate to: a) the income tax provision andrelated income tax liabilities; b) the accounting for foreign currencytransactions/translation within our international subsidiaries; c) accountingby certain of our international subsidiaries, including the timely recognitionof costs, inventory valuations, and customer discounts and the accounting forminority interests; and d) various other balance sheet items relating to theaccounting performed by the Company’s international business units and thegoodwill and deferred tax effect of certain tax matters described in Note 16—*Income Taxes*to the consolidated financial statements. TheCompany’s consolidated net losses for the year ended December 31, 2004 andthe seven months ended December 31, 2003 increased (decreased) by $(10.1)million and $2.8 million, respectively. The adjustments are summarizedbelow.

The Company believes the complexityof fresh-start accounting, weaknesses in its recordkeeping procedures andrelated documentation (primarily related to income taxes, foreign subsidiariesand foreign currency translation), and turnover in key accounting personnel contributedto the adjustments described above. The accompanying consolidated financialstatements and notes thereto set forth herein summarize the nature of theadjustments recorded to the previously issued financial statements.

For information concerningthe background of these matters, the specific adjustments made and management’sdiscussion and analysis of results of operations for periods giving effect tothe restated results, see Item 6—“Selected Financial Data,” Item 7—“Management’sDiscussion and Analysis of Financial Condition and Results of Operations,” Item8—“Financial Statements and Supplementary Data,” Item 9A—“Controls andProcedures” and “Restatement of Consolidated Financial Statements” in the Notesto Consolidated Financial Statements. For additional information regarding thebackground of 

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thesematters, see the Company’s Current Reports on Form 8-K furnished tothe SEC from March 15, 2006 through the date of this Annual Report on Form 10-Kwith respect to this matter.

All amounts referenced inthis Annual Report on Form 10-K for the year ended December 31,2004 and for the seven months ended December 31, 2003 reflect the balancesand amounts on a restated basis.

Thermadyne has not amendedits Annual Reports on Form 10-K for the year ended December 31,2004 and the seven months ended December 31, 2003 or the Quarterly Reportson Form 10-Q for the periods affected by the restatement. Theinformation that has been previously filed or otherwise reported for the otherperiods prior to October 1, 2005 is superseded by the information in thisAnnual Report on Form 10-K and the financial statements and relatedfinancial information contained in such other reports should no longer berelied upon.

**Reorganization and 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’ Statementof Position 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 thesefinancial statements, references to the “Predecessor Company” refer to periodsprior to June 1, 2003 (the first day of the calendar month following themonth in which we emerged from bankruptcy), and references to the “ReorganizedCompany” refer to periods subsequent to May 31, 2003. The ReorganizedCompany’s financial statements are not comparable to the Predecessor Company’sfinancial statements.

**Our Principal Products and Markets**

Although we operate ourbusiness in one reportable segment, we have organized our business into fivemajor product categories within the cutting and welding industry: (1) gasequipment (35% of sales in 2005); (2) plasma power supplies, torches andconsumable parts (16%); (3) welding equipment (11%); (4) arcaccessories including torches, guns, consumable parts and accessories (30%);and (5) filler materials (8%). This percentage mix has been comparable forthe preceding two years.

Our gas equipment productsinclude gas fuel torches, air fuel torches, consumables (tips and nozzles),regulators and flow meters that are used for cutting, heating and welding. Wealso have gas flow and pressure regulation equipment used for a variety ofnoncutting or welding applications. These products are primarily sold under theVictor®, Cigweld®, Turbo Torch® and Firepower®brands and typically range in price from $15 to $300. 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 all the applications noted above, as well as for welding, heating, brazingand cutting in connection with maintenance of machinery, equipment andfacilities. Air fuel torches are used by the plumbing, refrigeration andheating, ventilation and air conditioning industries using similar principleswith Mapp or propane as the fuel. Gas flow and pressure regulation equipment isused to control the pressure and flow of most industrial and specialty gases,including gases used in many industrial process control applications as well asthe medical and electronic industries. We believe we are among the largestsuppliers of gas equipment products in the world, based on annual sales.

Our plasma power supplies,torches and consumable parts are sold under the Thermal Dynamics® brand. Manual plasma systemstypically range in price from $1,000 to $5,000 with manual torch prices 

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rangingfrom $300 to $800. Our automated cutting systems range in price from $500 to$30,000 with torches ranging in price from $1,000 to $2,500. Both manual andautomated plasma systems use front end torch parts that are consumed during thecutting process and range in price from $5 to $50. Plasma cutting useselectricity and gas (typically air) to create a high-temperature plasma arccapable of cutting any type of metal. Electricity is converted by a powersupply and supplied to a torch where the gas and electricity form a plasma arc.The plasma arc is then applied to the metal being cut. Plasma cutting is agrowing technology for cutting metal. Advantages of the plasma cutting processover other methods include faster cutting speeds, cleaner cuts and the abilityto cut ferrous and nonferrous alloys with minimum heat distortion to the metalbeing cut. Plasma cutting systems are used in the construction fabrication andrepair of both steel and nonferrous metal products, including automobiles andrelated assemblies, appliances, ships, railcars and heating, ventilation andair-conditioning products, as well as for general maintenance. We believe weare among the largest suppliers of plasma power supplies, torches andconsumable parts in the United States, based on our annual unit sales.

Our welding equipment lineincludes inverter and transformer-based power sources used for all the mainwelding processes as well as plasma welding power sources. These products areprimarily sold under the Thermal Arc®, Firepower® andCigweld® brands. These productstypically range in price from $800 to $6,000. Arc welding uses an electriccurrent to melt together either wire or electrodes (referred to as fillermetals) and the base materials. The power source is connected to electricityand converts the line power into the appropriate electricity to weld. Thiselectricity is applied to the filler metal using an arc welding accessory, suchas a welding gun for wire welding or an electrode holder for stick electrodewelding. Arc welding is the most common method of welding and is used for awide variety of manufacturing and construction applications, including theproduction of ships, railcars, farm and mining equipment and offshore oil andgas rigs.

Our arc accessoriesinclude automatic and semiautomatic welding guns and related consumable parts,ground clamps, electrode holders, cable connectors and assemblies all soldunder our Tweco®and Firepower® brands. We alsohave a line of carbon arc gouging and exothermic cutting products. Theseproducts include torches and consumable rods that are sold under our Arcair® brand. Our welding accessoryproducts are designed to be used with our arc welding power supplies, as wellas those of our competitors. Our arc welding guns typically range in price from$90 to $350. Arc welding guns are used to apply the current to the filler metalused in welding, are typically handheld and require regular replacement ofconsumable parts as a result of wear and tear, as well as their proximity tointense heat. Our connectors, clamps and electrode holders attach to thewelding cable to connect the power source to the metal to be welded. Ourgouging products are used to cut or gouge material to remove unwanted base orwelded material as well as demolition. We believe we are among the largestmanufacturers of arc welding accessory products in the United States, in eachcase based on our annual unit sales.

Filler metals are consumedin the welding process as the material that is melted to join the materials tobe welded together. There are three basic types of filler metals used, stickelectrodes, solid wire and flux cord wire. Stick electrodes are fixed lengthmetal wires coated with a flux to enhance weld properties. This is used inconjunction with a power source and an electrode holder to weld the basematerial. The main advantage of this process is simplicity, portability andease of use as it can be used to access most areas and no gas is required.Solid wire is sold on spools or in drums and is used in the semi-automatedprocess with a MIG welding gun, power source and shielding gas. The mainadvantage of this process is ease of use and very high deposition rates makingfor higher productivity. Flux cored wires are similar to solid wires; however,they are tubular wires that allow the use of flux and other alloys to improvedeposition rates and weld quality.

We sell most of ourproducts through a network of national and multinational industrial gasdistributors including Airgas, Inc., Praxair, Inc., Linde Gas LLC, aswell as a large number of other independent welding distributors, wholesalersand dealers. In 2005, our sales to customers in the United 

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Statesrepresented 63% of our sales and no individual customer accounted for more than10% of global sales.

We operate our business asfollows:

***Victor—Oxy-Fuel GasProducts.***

Victor Equipment Company (“Victor”)was founded in 1913 and has plants in Denton, Texas and Hermosillo, Mexico.Victor is among the leading U.S. manufacturers of gas-operated cutting andwelding torches and gas flow and pressure regulation equipment. Victor’storches are used to cut ferrous metals and to weld, heat, solder and braze avariety of metals, and its regulation equipment is used to control pressure andflow of most industrial and specialty gases. In addition, Victor manufactures avariety of replacement parts, including welding nozzles and cutting tips ofvarious types and sizes and a line of specialty gas regulators purchased byend-users in the process control, electronics and other industries. Victor alsosupplies a wide range of medical regulation equipment serving the oxygentherapy market, including home healthcare and hospitals.

The torches produced byVictor are commonly referred to as oxy-fuel torches. These torches combine amixture of oxygen and a fuel gas, typically acetylene, to produce ahigh-temperature flame. These torches are designed for maximum durability,safety, repair ability and performance, utilizing reverse flow check valves andpatented built-in flash arrestors in the majority of models. Victor alsomanufactures lighter-duty handheld heating, soldering and brazing torches.Pressure regulators serve a broad range of industrial and specialty gas processcontrol 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 ArcProducts and Arc Gouging Systems.***

The Tweco brand productsare manufactured along with our Victor products in our plants in Denton, Texasand Hermosillo, Mexico. The Tweco brand, founded in 1936, is a line of arcwelding replacement parts and accessories, including electrode holders, groundclamps, cable connectors, terminal connectors and lugs and cable splicers and avariety of automatic and semiautomatic welding guns and cable assembliesutilized in the arc welding process. Tweco’s end users are primarily engaged inthe manufacture or repair and maintenance of transportation equipment includingautomobiles, trucks, aircraft, trains and ships, the manufacture of a broadrange of machinery, and the production of fabricated metal products (includingstructural metal, hand tools and general hardware).

Tweco is a leadingproducer of MIG welding guns. The MIG process is an arc welding processutilized in the fabrication of steel, aluminum, stainless steel and other metalproducts and structures. In the MIG process, a small-diameter consumableelectrode wire is continuously fed into the arc. The welding arc area isprotected from the atmosphere by a “shielding” gas. The welding guns and cableassemblies manufactured under the Tweco Brand carry the continuous wireelectrode, welding current and shielding gas to the welding arc. The Tweco Brandalso includes a line of robotic welding accessory products. This accessory lineincludes a robotic torch, a robotic deflection mount, a robotic cleaningstation, robotic arms and an anti-splatter misting system.

Under the Tweco brand, wemanufacture manual stick electrode holders, ground clamps and accessories usedfor the manual stick welding process. Manual stick welding is one of the oldestforms of welding and is used in construction, out of position and remoteapplications for general repair, maintenance and fabrication work.

Through its Arcair® product line, the Tweco brandsprovide equipment and related consumable materials for “gouging,” a techniquethat liquefies metal in a narrow groove and then removes it using 

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compressedair. 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 foundries and repair of track,switches and freight cars in the railroad industry.

In addition to gougingproducts, the Tweco brands include a patented exothermic cutting system,SLICE®. This system generates temperatures in excess of 7,000 degreesFahrenheit and can quickly cut through steel, concrete and other materials.SLICE® has many applications, including opening clogged steel furnaces andproviding rapid entry in fire and rescue operations. The Tweco Brands alsoinclude an underwater version of the SLICE® cutting system for use in themarine 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—PlasmaArc Cutting Products.***

Thermal DynamicsCorporation (“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—ElectricArc Products, Oxy-Fuel Products, Filler Metals, Gas Control Products and SafetyProducts.***

Cigweld Pty. Ltd. (“Cigweld”)is located in Melbourne, Australia, and has two plants in Kuala Lumpur,Malaysia. Cigweld, founded in 1922, is among the leading Australianmanufacturers of gas equipment and welding products. Cigweld manufactures arcwelding power supplies for both automatic and manual arc welding markets. TheCigweld range of automatic welding equipment includes packages specificallydesigned for particular market segments. End users of these products includethe rural market and automobile repair, metal fabrication, shipbuilding,general maintenance and heavy industries. Manual arc equipment products rangefrom small welders designed for the home handyman to units designed for heavyindustry.

Cigweld manufactures arange of filler metals for manual and automatic arc and gas welding. Its rangeof manual arc electrodes includes over 50 individual electrodes for differentapplications. Cigweld markets its manual arc electrodes under such brand namesas Satincraft®,Weldcraft®, Ferrocraft®,Alloycraft®, SatincromeTM, Cobalarc®, Castcraft® and Weldall®. For automatic and semiautomatic weldingapplications, Cigweld manufactures a significant range of solid and flux-coredwires, sold principally under the Autocraft®, Verti-CorTM, Satin-CorTM,Metal-CorTM and Cobalarc® brand names. For gas welding, Cigweld manufactures andsupplies approximately 40 individual types of wires and solders for use invarious applications. Cigweld manufactures its filler metals to meet standardsappropriate for their intended use, with the majority of products approved byagencies such as Lloyd’s Register of Shipping, American Bureau of Shipping, DeNorske Veritas and U.S. Naval Ships.

Cigweld manufactures a comprehensiverange of equipment for gas welding and cutting and ancillary products such asgas manifolds, gas regulators and flow meters. Gas welding and cuttingequipment is sold in kit form or as individual products. Kits are manufacturedfor various customer groups and their components include combinations of oxygenand acetylene 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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(foroxygen, acetylene, argon and carbon dioxide), flashback arrestors, cuttingnozzles, welding and heating tips, hoses and fittings, gas manifolds andaccessories.

Cigweld also manufacturesa range of gas control equipment including specialty regulators (for use withdifferent gases, including oxygen, acetylene, liquefied petroleum gas, argon,carbon dioxide, nitrogen, air, helium, hydrogen, carbon monoxide, ethylene,ethane and nitrous oxide), manifold systems, cylinder valves and spares andnatural gas regulators. Cigweld’s gas control products are primarily sold togas companies.

Cigweld manufactures anddistributes a range of safety products for use in welding and complementaryindustries. The product range includes welding helmets and accessories,respirators and masks, breathing apparatus, earmuffs and earplugs, safetyspectacles, safety goggles and gas welding 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 and exportedthrough third-party distributors and related entities. The product rangeincludes regulators, flow meters, suction units, oxygen therapy andresuscitation and outlet valves for medical gas systems.

***Stoody—HardfacingProducts.***

Stoody Company (“Stoody”),founded in 1921 and located in Bowling Green, Kentucky, is a well-recognizedworldwide 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-resistantcomponents. Industries utilizing earthmoving equipment, agricultural tools,crushing components and steel mill rolls and industries utilizing virtually anyapplication where metal is exposed to external wear factors are the primaryusers of hardfacing applications.

***Thermal Arc—ArcWelders, Plasma Welders and Wire Feeders.***

In 1997, the inverter andplasma arc welder business of Thermal Dynamics and the welding division ofPrestolite Power Corporation were combined to form Thermal Arc, Inc. (“ThermalArc”). Previously located in Troy, Ohio, Thermal Arc’s production was relocatedto our facility in Malaysia during 2004, and its warehouse and administrativefunctions moved to our Bowling Green, Kentucky location. Thermal Arc designsand sells a full line of inverter and transformer-based electric arcwelders, plasma welders, engine-driven welders and wire feeders. ThermalArc products are sold for construction, industrial and automated applicationsand have a large and 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.

***Victor Brazil—Oxy-FuelProducts and Cutting Tables.***

ThermadyneVictor Ltda., (“Victor Brazil”), was acquired by us in 1998 and hasoffices and manufacturing facilities located in Rio de Janeiro, Brazil. VictorBrazil is among the leading manufacturers of oxy-fuel products for industrialand medical use and of mechanized cutting tables for fabricating sheet metaland metal plate in South America.

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Victor Brazil primarily servesthe Latin American market. The oxy-fuel product line is very competitive in theregion and offers the customer a broad range of gas cutting and weldingequipment items. Metal fabricators of all sizes, including those inshipbuilding, steel construction, machinery manufacturing, pressure vesselproduction and steel mills, use the industrial oxy-fuel products. Hospitals,home healthcare and doctors’ offices also 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—CuttingTables.***

C&G Systems Inc.(“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.

***OCIM—Electric ArcWelding Accessories.***

OCIM Srl. (“OCIM”),located in Milan, Italy manufactures a complete line of MIG welding torches,TIG torches and robotic MIG arc welding torches. In addition to its full lineof torches, it manufactures consumable parts for these accessories, as well asa full line of robotic arc welding accessories.

***Operations in China***

On February 5, 2005,we established a new wholly-owned subsidiary in China as well as a jointventure with a Chinese manufacturer of gas equipment. The formation of theseentities supports our initiatives to expand into China and other keyinternational markets as well as adding local Chinese engineering resources toassist with our global sourcing efforts. Our Chinese partner in the jointventure has a well established distribution network that will help the jointventure sell locally made, Thermadyne branded products. With regard to ourwholly-owned subsidiary, our engineering and sourcing teams are being led byexperienced Thermadyne managers.

**Recent Developments**

On April 11, 2006,the Company completed the disposition of Tec.Mo Srl (“TecMo”), an indirectwholly-owned subsidiary which manufactures generic cutting and welding torchesand consumables to Spiranex, an investment fund in France, and the generalmanager of TecMo. Net cash proceeds from this transaction of approximately $7.5million were used to repay a portion of the Company’s outstanding long-termdebt. The Company expects to record an impairment loss of approximately $0.7million during the quarter ended March 31, 2006. As of December 31,2005, TecMo was included in continuing operations.

On May 9, 2006, theCompany proposed to its note holders a consent solicitation modifying theindenture of its $175 million 91⁄4% Senior Subordinated Notes due 2014. Therequired majority of note holders accepted our proposal. The modification: (1) providestime for the Company to file its Annual Report on Form 10-K for theyear ended December 31, 2005 and the time to file other required reports; (2) providesnote holders a payment of $2.50 for each $1,000 in principal amount; and (3) requiresthe Company to either (i) permanently repay senior debt or (ii) offerto redeem notes at 101% of their principal amount if excess cash flow, asdefined, is generated annually.

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In May 2006, June 2006and July 2006, the Company amended its Credit Agreement and obtained alimited waiver to: (1) allow time for the Company to provide its auditedfinancial statements for the year ended December 31, 2005 and the time toprovide certain unaudited monthly statements; (2) repay the Term Loan; and(3) modify certain financial covenants of the Revolver including(i) deleting the EBITDA covenant from the agreement, (ii) modify themaximum leverage ratio to 5.75 through June 30, 2007, with a .25 reduction perquarter thereafter until the coverage ratio reaches 4.00 which occurs duringthe quarter ending March 31, 2010, (iii) modify the minimum fixedcharge coverage ratio to 1.0 through June 30, 2007, 1.10 atSeptember 30, 2007 and  thereafterand (iv) establish a minimum availability of requirement of $5 million.

On July 21, 2006, theCompany amended the Second-Lien Facility to (i) remove the financial covenantcompliance until the third quarter of 2007, (ii) extend the pre-payment penaltydate to October 31, 2007, and (iii) increase the amount of borrowings from$30 million to $50 million. The proceeds were used to repay the Term Loan infull, with the balance of the proceeds being used to pay a portion of theRevolver.

On July 21, 2006, theCompany commenced a consent solicitation seeking amendments to the indenturegoverning Notes and waiving existing defaults under that indenture related tothe late filing of the Company’s 2005 Form 10-K and first quarter 2006 Form10-Q with the Securities and Exchange Commission. The amendments would extendthe time for filing these reports to August 21, 2006 and for additional feesthat could aggregate to $2 million would also allow the Company to electto extend the time within which the Company must file its second quarter 2006Form 10-Q to no later than December 17, 2006. Under the consentsolicitation, the indenture would be amended to provide for the payment ofadditional Special Interest on the Notes, initially at a rate of 1.25% perannum. The Special Interest is subject to adjustment increasing to 1.75% if theconsolidated leverage ratio exceeds 6.00 with incremental interest increases toa maximum of 2.75% if the consolidated leverage ratio increases to 7.0. TheSpecial Interest declines to .75% if the consolidated leverage ratio declinesbelow 4.0 and declines incrementally to 0% if leverage is less than 3.0 withthe payment of contingent cash consent fees to consenting holders of the Notes.As of July 31, 2006, holders of 100% of the outstanding Notes have consented tothe solicitation.

Until the execution of theamendments to the indenture, the Company has the right to (i) terminate thesolicitation for any reason, (ii) amend the terms of the solicitation, (iii)modify the form or amount of the consideration to be paid pursuant to thesolicitation or (iv) waive any of the conditions to the Solicitation, subjectto applicable law. The Company intends to execute the amendment.

**International Business**

We had international salesfrom continuing operations of approximately $175.9 million, $160.2 million,$80.8 million, and $51.0 million for the years ended December 31,2005 and 2004, the seven months ended December 31, 2003, and the fivemonths ended May 31, 2003, respectively, or approximately 37%, 37%, 36%,and 34%, respectively, of our net sales in each such period. Our internationalsales are influenced by fluctuations in exchange rates of foreign currencies,foreign economic conditions and other risks associated with foreign trade. See “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Quantitativeand Qualitative Disclosures About Market Risk.” Our international sales consistof: (a) export sales of our products manufactured at U.S. manufacturingfacilities and, to a limited extent, products manufactured by third parties,sold through our overseas field representatives and (b) sales of ourproducts manufactured at international manufacturing facilities and sold by ourforeign subsidiaries.

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**Sales and Marketing**

In 2005, our Salesorganization was combined with our Marketing organization. Sales and Marketingnow oversee all sales and marketing activities, including strategic productpricing, promotion, and marketing communications. It is the responsibility ofSales and Marketing to profitably grow the Company’s sales and market share ineach region. This is achieved through new product introductions, programs andpromotions, price management, and the implementation of distribution strategiesto penetrate new markets.

Sales and Marketing isorganized into three regions: Americas, Asia Pacific, and Europe includingother regions. The Americas is comprised of the U.S., Canada, and LatinAmerica. Asia Pacific includes South Pacific (Australia, New Zealand) and Southand North Asia. Europe including other regions is comprised of the U.K.,Europe, Middle East, and the remaining countries not included in the other tworegions. The United States contributes approximately 63% of the Company’srevenues, 80% of which come from the industrial channel. The specialty marketchannels make up the remainder of the U.S. business.

The Sales and Marketingorganization consists of sales, marketing, technical support, and customer carein each region. Sales and Marketing manages the Company’s relationship with ourcustomers and channel partners who include distributors, wholesalers and retailcustomers. They provide feedback from the customers on product and serviceneeds of the end-user customers, take our product lines to market, and providetechnical and after sales service support, including managing the productreturn process. A national accounts team manages our largest accounts globally.

**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.

**Raw Materials**

We have not experiencedany difficulties in obtaining raw materials for our operations because ourprincipal raw materials, which include copper, brass, steel and plastic, arewidely available and need not be specially manufactured for use by us. Certainof the raw materials used in hardfacing products, such as cobalt and chromium,are available primarily from sources outside the United States, some of whichare located in countries that may be subject to economic and politicalconditions that could affect pricing and disrupt supply. Although we havehistorically been able to obtain adequate supplies of these materials atacceptable prices, restrictions in supply or significant increases in theprices of cobalt, chromium and other raw materials could adversely affect ourbusiness. During 2005, we experienced higher than historical average materialinflation on materials such as copper, steel and brass.

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. The development engineeringgroup primarily performs process and product development work to develop newproducts to meet our customer’s needs. The sustaining engineering groupprovides technical support to operations, sales and quality to supportestablished products. As of December 31, 2005, we employed approximately100 people 

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in ourdevelopment and sustaining engineering groups, split between engineers,designers, technicians and graphic service support. Our engineering costsconsist primarily of salaries, project expenses and benefits of engineeringpersonnel. Our development engineering costs are not material to our financialcondition or results of operations.

**Competition**

We view the market assplit into three types of competitors: (1) three full-line weldingequipment and filler metal manufacturers (Lincoln Electric Company, ESAB, asubsidiary 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 tosee price pressure in the segments of the market where little productdifferentiation exists and a continuation of the trends of improved performanceat lower prices in the power source market and further integration of theautomated market. International competitors have been ineffective inpenetrating the U.S. domestic markets due to product specifications, lack ofbrand recognition and their relative inability to access the weldingdistribution market channel.

Internationally, thecompetitive profile is similar, with overall lower market prices, morefragmented competition and a weaker presence of larger U.S. manufacturers.

We believe we competesuccessfully through the strength of our brands, by focusing on technology developmentand offering innovative industry-leading products in our niche productareas. We deliver our products to end-users through welding distributionsupported by a technically proficient field sales force.

**Employees**

As of December 31,2005, we employed approximately 2,728 people, 743 of whom were engaged insales, marketing and administrative activities, and 1,985 of whom were engagedin manufacturing activities. None of our U.S. workforce is represented by laborunions while most 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 Annual Reporton Form 10-K, Quarterly Reports on Form 10-Q, CurrentReports on Form 8-K and amendments to those reports filed orfurnished pursuant to Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934 are available free of charge through our web site (*www.thermadyne.com*) as soon as reasonablypracticable after we electronically file the materials with or furnish them tothe Securities and Exchange Commission.

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**Item 1A.**                *Risk Factors*

*Our business is cyclical and is affected by industrialeconomic 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.

*Our business is highly competitive, and increasedcompetition could reduce our sales, earnings and profitability.*

We offer products in highly competitive markets. We competeprimarily on the performance, functionality, price, brand recognition, customerservice and support and availability of our products. We compete with companiesof various sizes, some of which have greater financial and other resources thanwe do. Increased competition could force us to lower our prices or to offeradditional product features or services at a higher cost to us, which couldreduce our sales and net earnings.

The greater financialresources of certain of our competitors may enable them to commit largeramounts of capital in response to changing market conditions. Certaincompetitors may also have the ability to develop product innovations that couldput us at a disadvantage. In addition, some of our competitors have achievedsubstantially more market penetration in certain of the markets in which weoperate. If we are unable to compete successfully against other manufacturersin our marketplace, we could lose customers, and our sales may decline. Therecan also be no assurance that customers will continue to regard our productsfavorably, that we will be able to develop new products that appeal tocustomers, that we will be able to improve or maintain our profit margins onsales to our customers or that we will be able to continue to competesuccessfully in our core markets.

*Our efforts to improve product availability, on timedelivery and customer satisfaction could increase our costs and be disruptiveto our business.*

We have several ongoinginitiatives, and we are launching a new global logistics system intended tosignificantly reduce delays in providing products to our customers and to easethe administrative complexities of purchasing from our multiple product linesand multiple locations. There is no assurance that these efforts, which areintended to respond to increasing competition and customer expectations, willprovide the intended benefits. Our efforts could increase costs withoutachieving the intended increase in profitability and certain system changescould detrimentally impact product availability and access ability for ourcustomers if improperly implemented.

*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 or othermaterials for metal in many products and the movement of metal fabricationoperations outside the United States. Economic conditions may adversely affectour customers’ business levels, which can have the effect of reducing theamount of our products they purchase. Furthermore, customers encounteringadverse economic conditions may have difficulty paying for our products.Finally, terrorist activities, anti-terrorist efforts, war or other armedconflicts 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.

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*We have identified material weaknesses in our internalcontrol over financial reporting and may not be able to report timely andaccurate financial results.*

We have identified several material weaknesses in ourinternal control over financial reporting and have restated our results for theyear ended December 31, 2004 and the seven months ended December 31,2003 and the quarterly results for the first three quarters of 2005, eachquarter in 2004 and the second, third and fourth quarters of 2003. We cannot beassured that additional material weaknesses, significant deficiencies andcontrol deficiencies in our internal control over financial reporting will notbe identified in the future.

We could incur substantial expenses relating to theremediation of the material weaknesses in our internal control over financialreporting. Our accounting and financial reporting functions have experiencedhigh turnover. Our efforts to improve the knowledge level of our staff andtheir effectiveness may take longer than anticipated, resulting in delays inour remediation and may give rise to future significant deficiencies ormaterial weaknesses in our system of internal control over financial reporting.The effectiveness of our internal control over financial reporting in thefuture could be impacted by a variety of factors, including faulty humanjudgment, simple errors, omissions or mistakes, and the possibility that anyenhancements to disclosure controls and procedures may still not be adequate toassure timely and accurate financial information.

If we fail to achieve andmaintain effective controls and procedures for financial reporting, we could beunable to provide timely and accurate financial information. This may cause usto fail to satisfy the reporting requirements with our lenders and give rise toan event of default or cause investors to lose confidence in our reportedfinancial information. This may also have an adverse effect on the tradingprice of our common stock, give rise to an investigation by the Securities andExchange Commission (“SEC”), civil or criminal sanctions. Additionally,ineffective internal control over financial reporting would place us atincreased risk of fraud or misuse of corporate assets.

*Our international operations pose certain risks thatmay adversely impact sales and earnings.*

We have manufacturing operations and assets locatedoutside of the United States, including Australia, Brazil, Canada, China,England, Italy, Malaysia, South Africa and Mexico. We also sell our products todistributors located in approximately 100 countries. During the year ended December 31,2005, approximately 37% 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.

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 

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costlyor difficult to attain, we may be unable to grow our sales in theseinternational locations, and our future sales and earnings could be lower.

*We are subject to currency fluctuations from ourinternational 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.

*Liabilities relating to litigation alleging manganeseinduced illness could reduce our profitability and impair our financialcondition.*

At December 31, 2005, we were a co-defendant in 1,128cases alleging manganese induced illness. Manganese is an essential element ofsteel and contained in all welding consumables. We are one of a large number ofdefendants. The claimants allege that exposure to manganese contained in thewelding consumables caused the plaintiffs to develop adverse neurologicalconditions, including a condition known as manganism. As of December 31,2005, 707 of these cases had been filed in, or transferred to, federal courtwhere the Judicial Panel on Multidistrict Litigation has consolidated thesecases for pretrial proceedings in the Northern District of Ohio (the “MDL Court”).Between June 1, 2003 and December 31, 2005, we were dismissed from 185other cases with similar allegations.

The aggregate long-termimpact of the manganese loss contingencies on operating cash flows andfinancial condition is difficult to assess, particularly since claims are inmany different stages of development. While we intend to contest these lawsuitsvigorously, there are several risks and uncertainties that may affect ourliability for personal claims relating to exposure to manganese, including thepossibility that our litigation experience changes overall.

*We are subject to risks caused by changes in interestrates.*

Increases in benchmarkinterest rates will likely increase the interest cost associated with ourvariable interest rate debt and will increase the cost of future borrowings,which could harm our financial condition and results of operations.

*We may not be able to successfully implement ourcost-reduction initiatives.*

We have undertaken and maycontinue to undertake cost-reduction initiatives. There can be no assurancethat these initiatives will be completed or beneficial to us or that anyestimated cost savings from such activities will be realized. If ourcost-reduction efforts are unsuccessful, it may have a material adverse effecton our business.

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*Our success depends on our ability to enhance existingproducts 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 products involve risks of personal injury andproperty damage, which expose us to potential 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 establishreserves for the self-insurance amounts based on our liability estimates forsuch claims. We cannot give any assurance that existing or future claims willnot exceed our estimates for self-insurance or the amount of our excessinsurance coverage. In addition, we cannot give any assurance that insurancewill continue to be available to us on economically reasonable terms or thatour insurers would not require us to increase our self-insurance amounts.Claims brought against us that are not covered by insurance or that result inrecoveries in excess of insurance coverage could have a material adverse effecton our results and financial condition. Moreover, any accident or incidentinvolving us, even if we are fully insured or not held to be liable, couldnegatively affect our reputation among customers and the public, thereby makingit more difficult for us to compete effectively, and could significantly affectthe cost and availability of insurance in the future.

*We may not have sufficient financial resources andliquidity to pursue our business plans which could limit our ability to competeand achieve reasonable profitability. If we fail to comply with the financialcovenants in our debt instruments or due to other constraints our ability toobtain financing may be adversely impacted.*

The effects of increasing material costs, increasingcompetition, the need to enhance existing products and our efforts to improveon time delivery of our products may increase expenses and capital expenditureswithout a timely improvement in profitability and we may not have sufficientliquidity to proceed as planned jeopardizing future profitability and our competitiveposition.

In addition, our Amended Credit Agreement and ourSecond-Lien Facility contain certain financial covenants. The financialcovenants have been amended on several occasions, most recently in July 2006,to reflect our actual results and revisions to our business plan. While webelieve that we will be able to comply with the most recently amended financialcovenants in future periods, failure to do so would, unless the covenants werefurther amended or waived, result in defaults under the Credit Agreement andthe Second-Lien Facility. An event of default under the credit facilities, ifnot waived, could result in the acceleration of those debt obligations and,consequently, our debt obligations under our 91⁄4% Senior Subordinated Notes. Suchacceleration could result in exercise of remedies by our creditors and couldforce us to seek the protection of the bankruptcy laws, which could have amaterial adverse impact on our ability to operate our business and to makepayments under our debt instruments. In addition, an event of default under thecredit facilities, such as the failure to maintain the applicable requiredfinancial ratios, would prevent additional borrowing under our creditfacilities, which could have a material adverse effect on our ability tooperate our business and to make payments under our debt instruments.

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For a description of ourCredit Agreement, our Second-Lien Facility and our Senior Subordinated Notes,see “Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Liquidity and Capital Resources.”

*If we are unable to retain and hire key employees, theperformance of our operations could be adversely 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. We have experienced high turnover in the finance function and certainmanufacturing roles and we have been operating without a CFO and without anExecutive Vice President of Global Manufacturing. In addition, our controllerannounced his resignation July 5, 2006. Our success is dependent uponeffectively filling these positions and retaining key personnel.

*We rely in large part on independent distributors forsales 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 which theyare sold, which impacts how accessible our products are to our ultimatecustomers. Almost all of the distributors with whom we transact business offercompeting products and services to our ultimate customers. We do not havewritten agreements with our distributors located in the United States. The lossof a substantial number of these distributors or an increase in thedistributors’ sales of our competitors’ products to our ultimate customerscould materially reduce our sales and earnings.

*Our future operating results may be affected byfluctuations in the prices and availability of 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 relationship with our employees were todeteriorate, 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 our

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relationshipswith key customers and suppliers, which could damage our business, results ofoperations and financial condition.

*We are subject to various environmental laws andregulations and may incur costs that have a material adverse effect on ourfinancial condition as a result of violations of or liabilities underenvironmental laws and regulations.*

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 healthand safety. As an owner and operator of real property and a generator ofhazardous waste, we may also be subject to liability for the remediation ofcontaminated sites. While we are not currently aware of any outstandingmaterial claims or obligations, we could incur substantial costs, includingcleanup costs, fines and civil or criminal sanctions, third-party propertydamage or personal injury claims, as a result of violations of or liabilitiesunder environmental laws or noncompliance with environmental permits requiredat 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, andLiability Act and analogous state laws, can be imposed retroactively andwithout regard to fault. Further, one responsible party could be held liablefor all costs at a site. Thus, we may incur material liabilities under existingenvironmental laws and regulations or environmental laws and regulations thatmay be adopted in the future.

**Item 1B.**               *Unresolved Staff Comments*

None.

**Item 2.**                        *Properties*

We operate eleven manufacturing facilities in theUnited States, Italy, Brazil, Malaysia, Australia and Mexico. All domestic,Canadian, United Kingdom and Australian facilities, leases and leasehold interestsare encumbered by first priority liens securing our obligations under ourAmended Credit Agreement and Second-Lien Facility. We consider our plants andequipment to be modern and well maintained and believe our plants havesufficient 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 of our continuing operations as of December 31, 2005:
| Location of Facility                 | ** ** | ** **                                                                           | ** ** | **Building Space/Number of Buildings** | ** ** |
|--------------------------------------|------------|--------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| West Lebanon, New  Hampshire         |       | 156,200  sq. ft./5 buildings (office, manufacturing, sales training)                 |       |
| Denton, Texas                        |       | 222,403  sq. ft./4 buildings (office, manufacturing, storage, sales training center) |       |
| Rio de Janeiro,  Brazil              |       | 200,000  sq. ft./6 buildings (office, manufacturing, warehouse)                      |       |
| Oakville,  Ontario, Canada           |       | 48,710  sq. ft./1 building (office, warehouse)                                       |       |
| Cigweld  Malaysia/Selangor, Malaysia |       | 127,575  sq. ft./1 building (office, warehouse)                                      |       |
| Melbourne,  Australia                |       | 273,425  sq. ft./2 buildings (office, manufacturing, storage, research)              |       |
| Jakarta,  Indonesia                  |       | 52,500  sq. ft./1 building (office)                                                  |       |
| Kuala Lumpur,  Malaysia              |       | 60,000  sq. ft./1 building (office, manufacturing)                                   |       |
| Itasca, Illinois                     |       | 38,000  sq. ft./1 building (office, manufacturing)                                   |       |
| Bowling Green,  Kentucky             |       | 215,000  sq. ft./2 buildings (office, manufacturing, warehouse)                      |       |
| Milan, Italy                         |       | 24,757  sq. ft./2 buildings (office, manufacturing)                                  |       |
| Sonora, Mexico                       |       | 178,013  sq. ft./1 building (office, manufacturing)                                  |       |
| Chino, California                    |       | 30,880  sq. ft./1 building (warehouse)                                               |       |
| Alliance, Texas                      |       | 278,333  sq. ft./1 building (warehouse, manufacturing)                               |       |
| South Africa                         |       | 34,000  sq. ft./10 buildings (distribution, office, warehouse)                       |       |
| Bologna, Italy                       |       | 27,276  sq. ft. /2 buildings (office, manufacturing)                                 |       |

 

All of the abovefacilities are leased, except for the facilities located in Australia andIndonesia, which are owned. We also have additional assembly and warehousefacilities in the United Kingdom, China, Japan, Singapore, Mexico, andAustralia.

**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 leadto claims for personal injury, property damage or damages to natural resources.We are aware of environmental conditions at certain properties which we now ownor lease 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.

Certain environmental laws, including, but not limitedto, the Comprehensive Environmental Response, Compensation, and Liability Actand analogous 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 have cometo be located. We have in the past and may in the future be named a 

19

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potentially responsibleparty at off-site disposal sites to which we have sent waste. We do not believethe ultimate cost relating to such sites will have a material adverse effect onour financial condition or results of operations.

At December 31, 2005, we were a co-defendant in 1,128cases alleging manganese induced illness. Manganese is an essential element ofsteel and contained in all welding consumables. We are one of a large number ofdefendants. The claimants allege that exposure to manganese contained in thewelding consumables caused the plaintiffs to develop adverse neurologicalconditions, including a condition known as manganism. As of December 31,2005, 707 of these cases had been filed in, or transferred to, federal courtwhere the Judicial Panel on Multidistrict Litigation has consolidated thesecases for pretrial proceedings in the Northern District of Ohio (the “MDL Court”).Between June 1, 2003 and December 31, 2005, we were dismissed from 185other cases with similar allegations.

All other legalproceedings and actions involving us are of an ordinary and routine nature andare incidental to the operations of the Company. Management believes that suchproceedings should not, individually or in the aggregate, have a materialadverse effect on the Company’s business or financial condition or on theresults 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 2005.

20

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**PART II**

**Item5.**                        *Market for the Registrant’s Common Equity, Related Stockholder Mattersand Issuer Purchases ofEquity Securities*

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 due to the limited number of holders at that time. Followingits delisting from NASDAQ, the Common Stock was quoted on The Pink Sheets untilthe Company’s Chapter 11 filing on November 19, 2001. Upon its emergence fromChapter 11 in May of 2003, the Common Stock was quoted on the OTC BulletinBoard until May 5, 2006 when it became available only on The Pink Sheets.Trading was halted briefly for our Common Stock as the common stock of ourPredecessor Company was canceled and the new Common Stock issued pursuant tothe Bankruptcy began trading on May 30, 2003. The new Common Stock wasquoted under the symbol “THMD.” The current trading symbol for the Company is “THMD.PK.”The following table shows, for the periods indicated, the high and low closingsale prices of a share of the new Common Stock for the last three quarters of2003 and for 2004 and 2005, 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 |   |
| 2005                                         |       |                            |       |   |   |
| First Quarter                                |       | 14.34                           |       | 11.95 |   |
| Second Quarter                               |       | 14.00                           |       | 12.10 |   |
| Third Quarter                                |       | 14.75                           |       | 13.25 |   |
| Fourth Quarter                               |       | 13.75                           |       | 12.62 |   |

 

On August 1, 2006, thelast reported sale price for our Common Stock as quoted on The Pink Sheets was$11.50 per share. As of August 1, 2006 there were approximately 310 beneficialowners of our Common Stock, which includes the number of record holdersincluding the number of individual participants in security position listings.

We have historically not paid any cash dividends onour Common Stock, and we do not have any present intention to commence paymentof any cash dividends. We intend to retain earnings, if any, to provide fundsfor the operation and expansion of our business and to repay outstandingindebtedness. Our debt agreements contain certain covenants restricting thepayment of dividends on or repurchases of Common Stock. See “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Overview.”

**Item6.**                        *Selected Financial Data*

The selected financialdata for the years ended December 31, 2005 and 2004 (as restated), theseven months ended December 31, 2003 (as restated), the five months ended May 31,2003 and the years ended December 31, 2002 and 2001 set forth below hasbeen derived from our restated 2003, 2004 and 2005 audited consolidatedfinancial statements. The selected financial data should be read in conjunctionwith “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations” and our consolidated financial statements and the notes thereto,in each case included elsewhere herein.

21

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| ** **                                                              | ** ** | **Reorganized Company**                                      | ** ** | ** **              | ** ** | **Predecessor Company** | ** ** |
|-------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|-------------------------|------------|------------------------------|------------|
| ** **                                                              | ** ** | ** **                                                        | ** ** | **Fiscal**              | ** ** | **Seven**                    | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                              | ** ** | **Fiscal**                                                        | ** ** | **Year**                | ** ** | **Months**                   | ** ** | ** ** | ** ** | **Five** | ** ** | **Fiscal** | ** ** | **Fiscal** | ** ** |
| ** **                                                              | ** ** | **Year**                                                          | ** ** | **Ended**               | ** ** | **Ended**                    | ** ** | ** ** | ** ** | **Months** | ** ** | **Year** | ** ** | **Year** | ** ** |
| ** **                                                              | ** ** | **Ended**                                                         | ** ** | **December 31,**   | ** ** | **December 31,**        | ** ** | ** ** | ** ** | **Ended** | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                                              | ** ** | **December 31,  2005**                                       | ** ** | **2004  (Restated)(1)** | ** ** | **2003  (Restated)(1)**      | ** ** | ** ** | ** ** | **May 31,  2003** | ** ** | **December 31,  2002** | ** ** | **December 31,  2001** | ** ** |
| ** **                                                              | ** ** | **(In millions, except per share data)** | ** ** |
| Operating Results Data:                                                 |       |                                                              |       |                    |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net sales                                                               |       |                                                              | $          | 468.6                   |       |                         |       | $ | 437.5 |   |   |   | $ | 222.0 |   |   |   |   |   | $ | 150.5 |   |   |   | $ | 365.7 |   |   |   | $ | 390.4 |   |   |
| Cost of goods sold                                                      |       |                                                              | 336.8      |                    |       |                         | 310.8      |   |   |   | 156.9 |   |   |   |   |   | 94.9 |   |   |   | 228.2 |   |   |   | 258.9 |   |   |
| Selling, general  and administrative expenses                           |       |                                                              | 114.7      |                    |       |                         | 107.3      |   |   |   | 64.1 |   |   |   |   |   | 41.5 |   |   |   | 104.9 |   |   |   | 104.6 |   |   |
| Amortization of  intangibles                                            |       |                                                              | 3.3        |                    |       |                         | 3.4        |   |   |   | 2.3 |   |   |   |   |   | 0.3 |   |   |   | 0.8 |   |   |   | 1.9 |   |   |
| Net periodic  postretirement benefits                                   |       |                                                              | 1.8        |                    |       |                         | 2.3        |   |   |   | 1.5 |   |   |   |   |   | 0.5 |   |   |   | 1.2 |   |   |   | 1.1 |   |   |
| Restructuring  costs                                                    |       |                                                              | —     |                    |       |                         | 8.8        |   |   |   | 1.9 |   |   |   |   |   | 0.5 |   |   |   | — |   |   |   | 1.5 |   |   |
| Operating income  (loss)                                                |       |                                                              | 12.0       |                    |       |                         | 4.9        |   |   |   | (4.7 | ) |   |   |   |   | 12.8 |   |   |   | 30.6 |   |   |   | 22.4 |   |   |
| Interest expense  (4)                                                   |       |                                                              | 24.1       |                    |       |                         | 21.5       |   |   |   | 9.6 |   |   |   |   |   | 8.7 |   |   |   | 21.9 |   |   |   | 75.7 |   |   |
| Amortization of  deferred financing costs                               |       |                                                              | 1.5        |                    |       |                         | 1.4        |   |   |   | 0.3 |   |   |   |   |   | — |   |   |   | — |   |   |   | 4.4 |   |   |
| Minority interest  expense                                              |       |                                                              | 0.6        |                    |       |                         | 0.3        |   |   |   | — |   |   |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Reorganization  expense (income)                                        |       |                                                              | —     |                    |       |                         | —     |   |   |   | — |   |   |   |   |   | 15.7 |   |   |   | 23.9 |   |   |   | (6.7 | ) |   |
| Gain from  reorganization and fresh-start accounting                    |       |                                                              | —     |                    |       |                         | —     |   |   |   | — |   |   |   |   |   | (582.1 | ) |   |   | — |   |   |   | — |   |   |
| Income tax  provision (credit)                                          |       |                                                              | 4.0        |                    |       |                         | (4.4       | ) |   |   | 5.4 |   |   |   |   |   | 2.2 |   |   |   | 1.8 |   |   |   | 1.7 |   |   |
| Income (loss) from  continuing operations                               |       |                                                              | (18.2      | )                       |       |                         | (13.9      | ) |   |   | (20.0 | ) |   |   |   |   | 568.3 |   |   |   | (17.0 | ) |   |   | (52.7 | ) |   |
| Income (loss) from  discontinued operations, net of tax                 |       |                                                              | (13.2      | )                       |       |                         | —     |   |   |   | (0.3 | ) |   |   |   |   | 0.7 |   |   |   | 1.0 |   |   |   | 1.2 |   |   |
| Net Income (loss)                                                       |       |                                                              | $          | (31.4                   | )          |                         |       | $ | (13.9 | ) |   |   | $ | (20.3 | ) |   |   |   |   | $ | 569.0 |   |   |   | $ | (16.0 | ) |   |   | $ | (51.5 | ) |   |
| Basic and diluted  income (loss) per share applicable to common shares: |       |                                                              |       |                    |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Continuing  operations                                                  |       |                                                              | $          | (1.37                   | )          |                         |       | $ | (1.05 | ) |   |   | $ | (1.50 | ) |   |   |   |   | $ | 158.29 |   |   |   | $ | (4.72 | ) |   |   | $ | (17.06 | ) |   |
| Discontinued  operations                                                |       |                                                              | (0.99      | )                       |       |                         | 0.01       |   |   |   | (0.03 | ) |   |   |   |   | 0.18 |   |   |   | 0.28 |   |   |   | 0.28 |   |   |
| Net Income (loss)                                                       |       |                                                              | $          | (2.36                   | )          |                         |       | $ | (1.04 | ) |   |   | $ | (1.53 | ) |   |   |   |   | $ | 158.47 |   |   |   | $ | (4.44 | ) |   |   | $ | (16.78 | ) |   |
| Consolidated Balance  Sheet Data (Period end):                          |       |                                                              |       |                    |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Working capital(2)                                                      |       |                                                              | $          | 103.1                   |       |                         |       | $ | 130.3 |   |   |   | $ | 124.1 |   |   |   |   |   | $ | 133.5 |   |   |   | $ | 136.3 |   |   |   | $ | 133.0 |   |   |
| Total assets                                                            |       |                                                              | 576.5      |                    |       |                         | 617.4      |   |   |   | 525.0 |   |   |   |   |   | 308.6 |   |   |   | 261.5 |   |   |   | 272.0 |   |   |
| Total debt(3)                                                           |       |                                                              | 260.2      |                    |       |                         | 236.3      |   |   |   | 214.3 |   |   |   |   |   | 812.1 |   |   |   | 799.0 |   |   |   | 798.8 |   |   |
| Total shareholders’  equity (deficit)                              |       |                                                              | 124.0      |                    |       |                         | 161.0      |   |   |   | 169.5 |   |   |   |   |   | (672.6 | ) |   |   | (675.7 | ) |   |   | (662.0 | ) |   |
| Consolidated Cash  Flow Data—Continuing Operations:                |       |                                                              |       |                    |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash provided  by (used in) operating activities                    |       |                                                              | $          | (16.1                   | )          |                         |       | $ | (14.5 | ) |   |   | $ | 11.2 |   |   |   |   |   | $ | (2.3 | ) |   |   | $ | 4.9 |   |   |   | $ | 5.3 |   |   |
| Net cash provided  by (used in) investing activities                    |       |                                                              | (4.4       | )                       |       |                         | (11.4      | ) |   |   | (6.6 | ) |   |   |   |   | (2.2 | ) |   |   | (9.3 | ) |   |   | (14.3 | ) |   |
| **Net  cash provided by financing activities**                          |       |                                                              | 24.6       |                    |       |                         | 21.6       |   |   |   | (1.7 | ) |   |   |   |   | (.6 | ) |   |   | 6.8 |   |   |   | 13.5 |   |   |
| **Effect  of exchange rate on cash and cash equivalents**               |       |                                                              | 2.4        |                    |       |                         | (2.9       | ) |   |   | (0.3 | ) |   |   |   |   | .8 |   |   |   | — |   |   |   | — |   |   |
| Other Data:                                                             |       |                                                              |       |                    |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and  amortization                                          |       |                                                              | $          | 20.7                    |       |                         |       | $ | 22.1 |   |   |   | $ | 13.6 |   |   |   |   |   | $ | 5.6 |   |   |   | $ | 17.8 |   |   |   | $ | 18.9 |   |   |
| Capital  expenditures                                                   |       |                                                              | (9.2       | )                       |       |                         | (12.8      | ) |   |   | (6.6 | ) |   |   |   |   | (2.2 | ) |   |   | (9.3 | ) |   |   | (14.3 | ) |   |

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(1)             Financial data as of December 31,2004 and December 31, 2003 and for the year and seven months then ended,respectively, has been restated to properly reflect changes discussed in “Item7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Restatement of Consolidated Financial Statements.”

(2)             Amounts for 2001 and 2002 and as of May 31,2003 exclude liabilities subject to compromise.

(3)             Amounts for 2001 and 2002 and as of May 31,2003 include approximately $776.0 million, $778.7 million and$782.1 million, respectively, classified as “liabilities subject tocompromise.”

(4)             The Company ceased accruing for interestexpense for certain pre-petition long-term obligations upon filing for reliefunder Chapter 11 of the Bankruptcy Code on November 19, 2001.

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

**Restatement ofConsolidated Financial Statements**

During 2005, the Company identified a series ofadjustments that have resulted in the restatement of our financial statementsfor the year ended December 31, 2004 and the seven months ended December 31,2003 in this Annual Report on Form 10-K. These adjustments also resulted in therestatement of our previously reported quarterly results for each of the firstthree quarters of 2005, each quarter of 2004, and the second, third and fourthquarters of 2003 as more fully described in Note 21—*QuarterlyResults of Operations (Unaudited)*. All financial informationcontained in these consolidated financial statements gives effect to this restatement.

In summary, the restatement adjustments primarilyrelate to: a) the income tax provision and related income tax liabilities; b)the accounting for foreign currency transactions/translation within ourinternational subsidiaries; c) accounting by certain of our internationalsubsidiaries, including the timely recognition of costs, inventory valuations,and customer discounts and the accounting for minority interests; and d)various other balance sheet items relating to the accounting performed by theCompany’s international business units and the goodwill and deferred tax effectof certain tax matters described in Note 16—*Income Taxes* tothe consolidated financial statements. The Company’s consolidated net lossesfor the year ended December 31, 2004 and the seven months ended December 31,2003 increased (decreased) by $(10.1) million and $2.8 million, respectively.The adjustments are summarized below.

The Company believes the complexity of fresh-startaccounting, weaknesses in its recordkeeping procedures and relateddocumentation (primarily related to foreign subsidiaries and foreign currencytranslation), and turnover in key accounting personnel contributed to theadjustments described above. The accompanying consolidated financial statementsand notes thereto set forth herein summarize the nature of the adjustmentsrecorded to the previously issued financial statements.

The restatement ofthe Company’s previously filed financial statements resulted from the followingissues:

(a)   InSeptember 2004, the Company revised its estimate of deferred tax liabilitiesrelated to the book-tax basis difference in the parent Company’s investment inits U.S. subsidiary resulting from the application of fresh-start accounting,but failed to properly reflect changes in the basis difference from thefresh-start date through September 30, 2004.  An adjustment to reduce deferred taxliabilities by $12,252 with a corresponding tax benefit has been recorded inthe statement of operations for the year ended December 31, 2004.  This adjustment includes a cumulativecatch-up adjustment of $9,500 as of September 30, 2004 to properly record thechange in the basis difference from the fresh-start date through September 30,2004.  The remainder of the adjustmentreflects the change in the book-tax basis difference for the fourth quarter of2004.

In addition, accruals forcontingent state income tax liabilities for 2003 and 2004 not properly recordedwere recognized in the amounts of $1,052 and $1,730, respectively. Also,certain foreign tax loss carryover benefits of $1,700 incorrectly recorded inthe 2003 tax provision were reversed in the 2003 financial statements as partof the restatement. Also for 2004, corrections were made to properly recorddeferred tax assets and liabilities of certain foreign subsidiaries resultingin a charge of $2,074.

The net of the corrections described above (reduced)increased the income tax provision for the year ended December 31, 2004, andthe seven months ended December 31, 2003 by $(8,448) and $2,752, respectively.

(b)         Foreigncurrency gains and losses in connection with transactions with ourinternational subsidiaries were corrected, reducing expense and net loss by $1,906for the year ended December 31, 2004.

23

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(c)          Accountingat several of the Company’s international business units has been corrected toadjust the accounting for minority interests in certain foreign subsidiariesand to adjust for the timely and accurate recognition of costs, inventoryvaluations and customer discounts. These corrections increased the net loss forthe year ended December 31, 2004 by $284.

(d)   The restatement had the following impacts on the Company’sconsolidated balance sheet as of December 31, 2004 (as adjusted fordiscontinued operations):

| ** **                                 | ** ** | **December 31, 2004**  | ** ** |
|--------------------------------------------|------------|----------------------------------|------------|
| ** **                                 | ** ** | **As Originally  Reported** | ** ** | **Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| Total assets                               |       |                             | $          | 601,904 |   |   |   | $ | 15,496 |   |   |   | $ | 617,400 |   |   |
| Current  liabilities                       |       |                             | 137,118    |   |   |   | (8,850 | ) |   |   | 128,268 |   |   |
| Non-current liabilities                    |       |                             | 309,150    |   |   |   | 18,934 |   |   |   | 328,084 |   |   |
| Stockholders  equity                       |       |                             | 155,636    |   |   |   | 5,412 |   |   |   | 161,048 |   |   |
| Total liabilities  and stockholders equity |       |                             | $          | 601,904 |   |   |   | $ | 15,496 |   |   |   | $ | 617,400 |   |   |

 

Total assets increasedprimarily due to the $12.7 million increase in goodwill, with anoffsetting increase in deferred tax liabilities, to properly account for thebook-tax basis difference of indefinite life patents which existed as of thefresh-start date.

Current liabilitiesdecreased principally to correct the classification of current maturities oflong-term debt while non-current liabilities increased due to changes in stateincome tax liabilities of $6.0 million to establish accruals for certainstate income tax filing positions and the balance sheet effect of other itemsdescribed above.

As a result of theseissues, the Company has implemented changes and initiated further improvementinitiatives in its financial reporting system. See Part II, Item 9A, “Controlsand Procedures,” of this Annual Report on Form 10-K for furtherinformation on the Company’s actions.

All amounts presentedbelow have been adjusted to reflect the restatement.****The following tables present the impact of the restatementson a summary basis. For further description of the restatement adjustments, see“Restatement of Consolidated Financial Statements” in the Notes to ConsolidatedFinancial Statements.

**ConsolidatedStatements of Operations**

| ** **                                                                               | ** ** | **Reorganized Company**                                      | ** ** |
|------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                                               | ** ** | **Year Ended December 31, 2004**              | ** ** |
| ** **                                                                               | ** ** | **As Originally  Reported***                                 | ** ** | **Adjustment  Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| ** **                                                                               | ** ** | **(in thousands except per share data)** | ** ** |
| Net sales                                                                                |       |                                                              | $          | 437,940 |   |   |   | $ | (411 | ) |   |   | $ | 437,529 |   |   |
| Cost of goods sold                                                                       |       |                                                              | 311,629    |   |   |   | (787 | ) |   |   | 310,842 |   |   |
| Gross margin                                                                             |       |                                                              | 126,311    |   |   |   | 376 |   |   |   | 126,687 |   |   |
| Selling, general and administrative expenses                                             |       |                                                              | 108,890    |   |   |   | (1,568 | ) |   |   | 107,322 |   |   |
| Operating income                                                                         |       |                                                              | 2,963      |   |   |   | 1,944 |   |   |   | 4,907 |   |   |
| Interest expense                                                                         |       |                                                              | 21,540     |   |   |   | 4 |   |   |   | 21,544 |   |   |
| Minority interest                                                                        |       |                                                              | —     |   |   |   | 318 |   |   |   | 318 |   |   |
| Loss from continuing operations before income tax  provision and discontinued operations |       |                                                              | (19,995    | ) |   |   | 1,622 |   |   |   | (18,373 | ) |   |
| Income tax provision (benefit)                                                           |       |                                                              | 3,993      |   |   |   | (8,448 | ) |   |   | (4,455 | ) |   |
| Income (loss) from continuing operations                                                 |       |                                                              | (23,988    | ) |   |   | 10,070 |   |   |   | (13,918 | ) |   |
| Income (loss) applicable to common shares                                                |       |                                                              | (23,977    | ) |   |   | 10,070 |   |   |   | (13,907 | ) |   |
| Basic and diluted  income (loss) per share applicable to common shares:                  |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                                                                    |       |                                                              | $          | (1.80 | ) |   |   | $ | 0.75 |   |   |   | $ | (1.05 | ) |   |
| Net income (loss)                                                                        |       |                                                              | (1.80      | ) |   |   | 0.76 |   |   |   | (1.04 | ) |   |

 

24

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| ** **                                                     | ** ** | **Reorganized Company**                                      | ** ** |
|----------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                     | ** ** | **Seven Months Ended December 31, 2003** | ** ** |
| ** **                                                     | ** ** | **As Originally  Reported***                                 | ** ** | **Adjustment  Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| ** **                                                     | ** ** | **(in thousands except per share data)** | ** ** |
| Income tax provision                                           |       |                                                              | $          | 2,717 |   |   |   | 2,752 |   |   |   | $ | 5,469 |   |   |
| Loss from continuing operations                                |       |                                                              | (17,247    | ) |   |   | (2,752 | ) |   |   | (19,999 | ) |   |
| Net loss applicable to common shares                           |       |                                                              | (17,551    | ) |   |   | (2,752 | ) |   |   | (20,303 | ) |   |
| Basic and diluted  loss per share applicable to common shares: |       |                                                              |       |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                                          |       |                                                              | $          | (1.30 | ) |   |   | $ | (0.20 | ) |   |   | $ | (1.50 | ) |   |
| Net loss                                                       |       |                                                              | (1.32      | ) |   |   | (0.21 | ) |   |   | (1.53 | ) |   |
|                                                                |            |                                                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**ConsolidatedBalance Sheets**

| ** **                                                 | ** ** | **Reorganized Company**                    | ** ** |
|------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                 | ** ** | **As Of December 31, 2004** | ** ** |
| ** **                                                 | ** ** | **(In thousands)**                         | ** ** |
| ** **                                                 | ** ** | **As Originally  Reported***               | ** ** | **Adjustment  Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| Cash and cash  equivalents                                 |       |                                            | $          | 5,927 |   |   |   | $ | 411 |   |   |   | $ | 6,338 |   |   |
| Accounts  receivable, less allowance for doubtful accounts |       |                                            | 71,794     |   |   |   | (1,009 | ) |   |   | 70,785 |   |   |
| Inventories                                                |       |                                            | 105,527    |   |   |   | 1,417 |   |   |   | 106,944 |   |   |
| Assets held for  sale                                      |       |                                            | 64,296     |   |   |   | (44 | ) |   |   | 64,252 |   |   |
| Total current  assets                                      |       |                                            | 257,829    |   |   |   | 775 |   |   |   | 258,604 |   |   |
| Property, plant  and equipment, net                        |       |                                            | 65,379     |   |   |   | (126 | ) |   |   | 65,253 |   |   |
| Goodwill                                                   |       |                                            | 197,368    |   |   |   | 15,683 |   |   |   | 213,051 |   |   |
| Intangibles, net                                           |       |                                            | 73,795     |   |   |   | (819 | ) |   |   | 72,976 |   |   |
| Other assets                                               |       |                                            | 7,533      |   |   |   | (17 | ) |   |   | 7,516 |   |   |
| Total assets                                               |       |                                            | 601,904    |   |   |   | 15,496 |   |   |   | 617,400 |   |   |
| Accounts payable                                           |       |                                            | 24,989     |   |   |   | 458 |   |   |   | 25,447 |   |   |
| Accrued and other  liabilities                             |       |                                            | 33,838     |   |   |   | 140 |   |   |   | 33,978 |   |   |
| Income taxes  payable                                      |       |                                            | 1,599      |   |   |   | 1,302 |   |   |   | 2,901 |   |   |
| Current  maturities of long-term obligations               |       |                                            | 6,734      |   |   |   | 9,250 |   |   |   | 15,984 |   |   |
| Total current  liabilities                                 |       |                                            | 137,118    |   |   |   | (8,850 | ) |   |   | 128,268 |   |   |
| Long-term  obligations, less current maturities            |       |                                            | 198,530    |   |   |   | 10,951 |   |   |   | 209,481 |   |   |
| Deferred tax  liabilities                                  |       |                                            | 71,445     |   |   |   | 558 |   |   |   | 72,003 |   |   |
| Other long-term  liabilities                               |       |                                            | 39,175     |   |   |   | 6,080 |   |   |   | 45,255 |   |   |
| Minority Interest                                          |       |                                            | —     |   |   |   | 1,345 |   |   |   | 1,345 |   |   |
| Accumulated  deficit                                       |       |                                            | 41,528     |   |   |   | (7,318 | ) |   |   | 34,210 |   |   |
| Accumulated other  comprehensive income                    |       |                                            | 13,571     |   |   |   | (1,906 | ) |   |   | 11,665 |   |   |
| Total  shareholders’ equity                           |       |                                            | 155,636    |   |   |   | 5,412 |   |   |   | 161,048 |   |   |
| Total liabilities and  shareholders’ equity           |       |                                            | 601,904    |   |   |   | 15,496 |   |   |   | 617,400 |   |   |

 

**ConsolidatedStatements of Cash Flows—Continuing Operations**

| ** **                                                 | ** ** | **Reorganized Company**                         | ** ** |
|------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                 | ** ** | **Year Ended December 31, 2004** | ** ** |
| ** **                                                 | ** ** | **(In thousands)**                              | ** ** |
| **Continuing Operations**                             | ** ** | ** **                                           | ** ** | **As Originally  Reported*** | ** ** | **Adjustments  Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| Net cash flows provided  by (used in) operating activities |       |                                                 | $          | (15,404 | ) |   |   | $ | 947 |   |   |   | $ | (14,457 | ) |   |
| Net cash flows  used in investing activities               |       |                                                 | (11,444    | ) |   |   | — |   |   |   | (11,444 | ) |   |
| Net cash flows  provided by financing activities           |       |                                                 | 21,315     |   |   |   | 257 |   |   |   | 21,572 |   |   |
|                                                            |            |                                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                                       | ** ** | **Seven Months Ended December 31, 2003** | ** ** |
|--------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **(In thousands)**                                           | ** ** |
| **Continuing Operations**                   | ** ** | ** **                                                        | ** ** | **As Originally  Reported*** | ** ** | **Adjustments  Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| Net cash flows  provided by operating activities |       |                                                              | $          | 11,182 |   |   |   | $ | — |   |   |   | $ | 11,182 |   |   |
| Net cash flows  used in investing activities     |       |                                                              | (6,565     | ) |   |   | — |   |   |   | (6,565 | ) |   |
| Net cash flows used in  financing activities     |       |                                                              | (1,687     | ) |   |   | — |   |   |   | (1,687 | ) |   |
|                                                  |            |                                                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

*                    Representsamounts as originally reported adjusted for the effects of the Company’s discontinuedoperations (See Note 2—*Restatement ofConsolidated Financial Statements* and Note 4—*DiscontinuedOperations*to the notes to the accompanying consolidated financialstatements)

**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 five principal categories: (1) gasequipment; (2) plasma power supplies, torches and consumable parts; (3) weldingequipment; (4) arc accessories, including torches, guns, consumable partsand accessories; and (5) filler metals. We operate our business in onereportable segment.

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.

Our manufacturing costs are one of the keydeterminants in achieving future success in the marketplace and in achievingprofitability. Principal raw materials used are copper, brass, steel andplastic, which are widely available and need not be specifically manufacturedfor use by us. Certain other raw materials used in our hardfacing products,such as cobalt and chromium, are available primarily from sources outside theUnited States. Historically, we have been able to obtain adequate supplies ofraw materials at acceptable prices. In recent years we have taken steps toreduce our overhead and labor costs through relocation of jobs, consolidationof manufacturing operations and outsourcing of certain components and products.During 2005, we experienced higher than historical average inflation onmaterials such as copper, steel and brass which negatively affected margins.

Our operating profit is affected by the mix betweenthe products sold as margins are generally higher on torches and guns ascompared to power supplies and higher on consumables and replacement parts ascompared to torches and 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 31,2005, approximately 63.0% 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.The trends in these industries provide important data 

26

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to us in forecasting ourbusiness. Indicators with a more direct relationship to our business that mightprovide a forward-looking view of market conditions and demand for ourproducts are not available.

Key performance measurements we use to manage thebusiness include orders, sales, operating expenses and efficiencies, inventorylevels and fill-rates. The timing of these measurements varies, but may bedaily, weekly and monthly depending on the need for management information andthe availability 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 expenditures andcontrollable 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.

**BankruptcyReorganization**

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. In the two to threeyears preceding our bankruptcy filing, our operating results were negativelyimpacted by a weak industrial economy in the United States, as well asdifficult economic conditions in most of our foreign markets. The deteriorationin our operating results reduced liquidity, which made it increasinglydifficult for us to meet all of our debt service obligations. During thebankruptcy proceedings, our Predecessor Company operated its businesses as adebtor-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 millionin debt and $79.0 million in preferred stock outstanding onNovember 19, 2001. In connection with our emergence from bankruptcy, weissued $180.0 million of notes under a new senior secured term loanfacility, 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 of Reorganization,General Unsecured Creditors (Class 4) are entitled to distributions ofcash equal to the lesser of (1) a holder’s pro rata share of$7.5 million and (2) 50% of such holder’s claim (estimated by us toprovide a recovery on such claims of 30% to 37% of the amount of such claims).We have made distributions of $7.3 million of such amounts throughDecember 31, 2005.

**Change in SeniorManagement**

In October 2005,Brian Truex, Executive Vice President of Global Manufacturing resigned from theCompany. In December 2005, David L. Dyckman, Executive Vice President andChief Financial Officer, resigned from the Company. Steven W. Fray, Controllerand Principal Accounting Officer, had announced his intention to resign on July20, 2006, as reported on Form 8-K filed by the Company on July 12, 2006.Mr. Fray has since extended his employment until August 3, 2006. On July 31,2006, Paul D. Melnuk was appointed Acting Principal Financial Officer.

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**DiscontinuedOperations**

On December 29, 2005, the Company completed thedisposition of GenSet S.P.A. (“GenSet”), a wholly-owned subsidiary whichmanufactures technologically advanced generators and engine-driven welders, toMase Generators S.P.A (“Mase”). The $4.8 million net cash proceeds from thesale of GenSet were used to repay a portion of the Company’s outstandinglong-term debt during the first quarter of 2006. In addition, the buyer assumedapproximately $7.6 million of debt owed to local, Italian lenders. Related tothe disposition of GenSet, the Company recorded a loss on disposal net of taxof approximately $10.4 million, which is recorded as a component ofdiscontinued operations for the year ended December 31, 2005.

On January 2, 2006, the Company completed thedisposition of Soldaduras Soltec Limitada (“Soltec”) and ComercializadoraMetalservice Limitada (“Metalservice”), both wholly-owned subsidiaries whichdistribute cutting and welding equipment, to Soldaduras PCR Soltec Limitada,and Penta Capital de Riesgo S.A. Net cash proceeds were approximately $6.4 million from the saleof the Soltec and Metalservice interests of which $4.9 million was used torepay a portion of the Company’s outstanding long-term debt during the firstquarter of 2006. Proceeds of $1.5 million from the sale are being held inescrow by the government of Chile until certain customary tax matters andfilings are made. We anticipate that these proceeds will be received in 2007.As a result of this disposition, we recorded an impairment loss ofapproximately $2.7 million, which has been recorded as a component ofdiscontinued operations for the year ended December 31, 2005.

On March 9, 2006, theCompany completed a series of transactions involving its South African subsidiaries.In a simultaneous transaction (effective January 1, 2006), the Companypurchased the shares of its only minority shareholder in Unique Welding AlloysRustenburg (Proprietary) Ltd, d/b/a Thermadyne Plant Rental South Africa (“PlantRental”), and sold 100% of the assets in Plant Rental to the minorityshareholder. Plant Rental is a contracting business that leases cutting,welding and other equipment to large turn-key projects. During the firstquarter of 2006, the $4.0 million net cash proceeds from the transaction wereused by the Company to purchase the shares held by the only minorityshareholder of Thermadyne South Africa (Proprietary) Ltd., d/b/a Unique WeldingAlloys and all of the shares held by the only minority shareholder of Maxweld &Braze (Proprietary) Ltd. As a result, the Company recorded an impairment lossof approximately $1.9 million during the year ended December 31, 2005,which has been recorded as a component of discontinued operations.

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**Results ofOperations**

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 years ended December 31, 2004 and 2005, as presented in theconsolidated financial statements is not comparable to prior periods.

| ** **                                                                                                                     | ** ** | ** **                   | ** ** | ** **            | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-----------------------|------------|
| ** **                                                                                                                     | ** ** | **Reorganized Company** | ** ** | ** **            | ** ** |
| ** **                                                                                                                     | ** ** | **(In thousands)**           | ** ** | **Predecessor**       | ** ** |
| ** **                                                                                                                     | ** ** | ** **                   | ** ** | **Year**              | ** ** | **Seven Months** | ** ** | **Company** | ** ** |
| ** **                                                                                                                     | ** ** | **Year**                     | ** ** | **Ended**             | ** ** | **Ended** | ** ** | **Five Months** | ** ** |
| ** **                                                                                                                     | ** ** | **Ended**                    | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **Ended** | ** ** |
| ** **                                                                                                                     | ** ** | **December 31,**        | ** ** | **2004**              | ** ** | **2003** | ** ** | **May 31,** | ** ** |
| ** **                                                                                                                     | ** ** | **2005**                     | ** ** | **(Restated)**        | ** ** | **(Restated)** | ** ** | **2003** | ** ** |
| Net sales                                                                                                                      |       |                         | $          | 468,616               |       |   |   | $ | 437,529 |   |   |   | $ | 222,004 |   |   |   | $ | 150,465 |   |   |
| Cost of goods  sold                                                                                                            |       |                         | 336,831    |                  |       |   | 310,842 |   |   |   | 156,887 |   |   |   | 94,855 |   |   |
| Gross margin                                                                                                                   |       |                         | 131,785    |                  |       |   | 126,687 |   |   |   | 65,117 |   |   |   | 55,610 |   |   |
| Selling, general  and administrative expenses                                                                                  |       |                         | 114,738    |                  |       |   | 107,322 |   |   |   | 64,125 |   |   |   | 41,485 |   |   |
| Amortization of  intangibles                                                                                                   |       |                         | 3,295      |                  |       |   | 3,388 |   |   |   | 2,345 |   |   |   | 295 |   |   |
| Net periodic  postretirement benefits                                                                                          |       |                         | 1,823      |                  |       |   | 2,250 |   |   |   | 1,488 |   |   |   | 516 |   |   |
| Restructuring  costs                                                                                                           |       |                         | —     |                  |       |   | 8,820 |   |   |   | 1,873 |   |   |   | 516 |   |   |
| Operating income (loss)                                                                                                        |       |                         | 11,929     |                  |       |   | 4,907 |   |   |   | (4,714 | ) |   |   | 12,798 |   |   |
| Other expense:                                                                                                                 |       |                         |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                                                                                                                       |       |                         | (24,102    | )                     |       |   | (21,544 | ) |   |   | (9,550 | ) |   |   | (8,619 | ) |   |
| Amortization of deferred financing costs                                                                                       |       |                         | (1,485     | )                     |       |   | (1,418 | ) |   |   | (266 | ) |   |   | — |   |   |
| Minority interest                                                                                                              |       |                         | (628       | )                     |       |   | (318 | ) |   |   | — |   |   |   | — |   |   |
| Income (loss)  before reorganization items and income tax provision                                                            |       |                         | (14,286    | )                     |       |   | (18,373 | ) |   |   | (14,530 | ) |   |   | 4,179 |   |   |
| Reorganization  items                                                                                                          |       |                         | —     |                  |       |   | — |   |   |   | — |   |   |   | (15,692 | ) |   |
| Gain on  reorganization and fresh-start accounting                                                                             |       |                         | —     |                  |       |   | — |   |   |   | — |   |   |   | 582,109 |   |   |
| Income (loss)  from continuing operations before income tax provision                                                          |       |                         | (14,286    | )                     |       |   | (18,373 | ) |   |   | (14,530 | ) |   |   | 570,596 |   |   |
| Income tax  provision (benefit)                                                                                                |       |                         | 3,936      |                  |       |   | (4,455 | ) |   |   | 5,469 |   |   |   | 2,288 |   |   |
| Income (loss)  from continuing operations                                                                                      |       |                         | (18,222    | )                     |       |   | (13,918 | ) |   |   | (19,999 | ) |   |   | 568,308 |   |   |
| Discontinued operations:                                                                                                       |       |                         |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss)  from discontinued operations, net of tax (2005 includes $10,175 net loss from  sale of discontinued operations) |       |                         | (13,139    | )                     |       |   | 11 |   |   |   | (304 | ) |   |   | 655 |   |   |
| Net income (loss)                                                                                                              |       |                         | $          | (31,361               | )          |   |   | $ | (13,907 | ) |   |   | $ | (20,303 | ) |   |   | $ | 568,963 |   |   |
| Net sales summary:                                                                                                             |       |                         |       |                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Domestic net  sales                                                                                                            |       |                         | $          | 292,765               |       |   |   | $ | 277,344 |   |   |   | $ | 141,230 |   |   |   | $ | 99,460 |   |   |
| International net  sales                                                                                                       |       |                         | 175,851    |                  |       |   | 160,185 |   |   |   | 80,774 |   |   |   | 51,005 |   |   |
| Consolidated net  sales                                                                                                        |       |                         | $          | 468,616               |       |   |   | $ | 437,529 |   |   |   | $ | 222,004 |   |   |   | $ | 150,465 |   |   |

 

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The following descriptionof results of operations is presented for the year ended December 31,2005, the year ended December 31, 2004, the seven months ended December 31,2003 and the five months ended May 31, 2003.

***2005 Compared to 2004***

*Net Sales*

Net sales for the yearended December 31, 2005 were $468.6 million, which compares to $437.5million for the year ended December 31, 2004, which is an increase of7.1%. Domestic sales for 2005 were $292.8 million and increased by 5.6%compared to $277.3 million for 2004. The increase in domestic sales wasseen across all brands and was driven primarily by a stronger industrialeconomy in the U.S. as well as new product initiatives. International sales forthe year ended December 31, 2005 were $175.9 million, which compares to$160.2 million for the year ended December 31, 2004, an increase of 9.8%.Excluding the effects of foreign currency fluctuations of approximately $7.6million, international sales would have been up 4.6% compared to 2004, which isattributable primarily to market share increases in Asia-Pacific, Latin Americaand South Africa. Net sales in 2005 increased approximately $13.6 million as aresult of new product initiatives, $6.0 million as a result of price increases,and $3.9 million as a result of improved demand and market conditions over 2004net sales. We take advantage of pricing opportunities when they are available,and when required by market or competitive conditions, we will make pricingconcessions. As a result of increases in the costs of certain raw materials,principally copper, steel and brass, we implemented price increases in the U.S.in the fourth quarter of 2005 and 2004.

*Gross Margin*

Gross margin for the year ended December 31, 2005was $131.8 million, as compared to $126.7 million for the year ended December 31,2004, an increase of 4.0%. As a percentage of sales, gross margin was 28.1% for2005 as compared to 29.0% for the year ended December 31, 2004. Thedecrease in gross margin percentage is principally a result of higher materialcosts. Material cost increases negatively impacted gross margin byapproximately $30.0 million relative to last year. The overall increase inmaterial costs was attributable to higher prices for key raw materials such ascopper, brass, and steel. In addition, the effect of translating the localcurrency results of the Company’s international business units into U.S.dollars, which did not affect gross margin expressed as a percentage of sales,resulted in an increase in gross margin of $2.0 million for 2005 as comparedwith the prior year.

For the year ended December 31, 2005, new productinitiatives improved gross margin by approximately $4.0 million. The Company’sglobal cost reduction and containment initiatives, net of increased freight andwarranty costs, increased gross margin by approximately $23.0 million.Gross margin improved as a result of an increase in average unit selling pricesof $6.0 million in 2005 as compared with the prior year and primarily reflectthe partial pass through of commodity cost increases.

Rebates under the modifieddistributor incentive plan increased to $14.6 million, 3.1% of net sales forthe year ended December 31, 2005 compared to $14.4 million, 3.3% of netsales for 2004.

*Selling, Generaland Administrative and Other Expenses*

Selling, general and administrative expenses were$114.7 million for the year ended December 31, 2005, which compares to$107.3 million for the year ended December 31, 2004, which is an increaseof 6.9%. As a percentage of sales, selling, general and administrative expenseswere 24.5% for the year ended December 31, 2005, versus 24.5% for the yearended December 31, 2004. Selling, general and administrative expensesincreased $4.0 million in 2005 primarily as a result of additional sales andmarketing initiatives including the expansion and development of internationalmarkets, increased new product development, and other expansion initiatives.Expenses also increased over 2004 by $1.3 million 

30

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related to increasedprofessional fees principally related to compliance with the Sarbanes-Oxley Actof 2002, other governance costs, and legal costs associated with patent andtrademark matters. In addition, costs increased approximately $2.1 millioncompared to 2004 related to management incentive compensation and separationcosts.

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. Also included inrestructuring charges for the year ended December 31, 2004 wasapproximately $2.9 million of severance costs related to reorganizing thedomestic workforce to improve efficiency and productivity. There were no suchcosts incurred during the year ended December 31, 2005.

Amortization of intangibles was $3.3 million for theyear ended December 31, 2005 compared to $3.4 million for the yearended December 31, 2004.

Interest expense was $24.1 million for the year ended December 31,2005, compared to $21.5 million for the year ended December 31, 2004.The increase in interest expense in 2005 resulted from an overall increase inlong-term debt as well as an increase in our average borrowing rate.

Minority interest expense was $0.6 million for theyear ended December 31, 2005 as compared to $0.3 million for 2004. Theincrease is a result of improved earnings at our foreign operations.

An income tax provision of $3.9 million primarilyrelated to the results of our foreign operations, was recorded on a pretax lossfrom continuing operations of $14.3 million for the year ended December 31,2005. An income tax benefit of $4.5 million was recorded on a pretax loss of$18.4 million for the year ended December 31, 2004 reflecting the neteffect of reductions in deferred U.S. income tax liabilities and foreign taxexpense.

The loss from discontinuedoperations of $13.1 million in 2005 primarily resulted from the Company’s saleof the GenSet subsidiary and from the recording of impairment losses related tothe discontinued operations of other subsidiaries sold in the first quarter of2006. See Note 4 *Discontinued Operations*to theconsolidated financial statements.

***2004 Compared to 2003***

*Net Sales*

Net sales for the year ended December 31, 2004were $437.5 million, which compares to $222.0 million for the seven monthsended December 31, 2003 and $150.5 million for the five months ended May 31,2003, respectively, which is an increase of 17.4%. Domestic sales for 2004 were$277.3 million compared to $141.2 million and $99.5 million forthe seven months ended December 31, 2003 and the five months ended May 31,2003, respectively. The increase in domestic sales was seen across all brandsand was driven primarily by a stronger industrial economy in the U.S. as wellas increases in market share. International sales for the year ended December 31,2004 were $160.2 million, which compares to $80.8 million for the seven monthsended December 31, 2003 and $51.0 million for the five months ended May 31,2003, respectively, an increase of 21.9%. 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.

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*Gross Margin*

Gross margin for the year ended December 31, 2004was $126.7 million, as compared to $65.1 million for the seven months ended December 31,2003 and $55.6 million for the five months ended May 31, 2003, an increaseof 5.0%. As a percentage of sales, gross margin was 29.0% for 2004 as comparedto 29.3% for the seven months ended December 31, 2003 and 36.9% for thefive months ended May 31, 2003. Gross margin for the seven months ended December 31,2003 includes a $4.4 million excess inventory write-down reflecting a change inworking capital strategy, a $2.7 million charge resulting from a change inestimate related to our product warranty reserve, and a non-cash charge ofapproximately $2.8 million related to the write-up of foreign inventory in connectionwith fresh-start accounting. These costs had the effect of reducing our grossmargin for the seven months ended December 31, 2003 by 4.5 percentagepoints. 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 rebates, material costs,,increased overhead spending, costs associated with the relocation of productionto our Denton, Texas facility and, to a lesser extent, lower average realizedunit selling prices. Material costs negatively impacted gross margin byapproximately $9.2 million relative to 2003. The overall increase inmaterial costs was attributable to: (1) higher prices for key rawmaterials such as copper, brass and steel, (2) temporary inefficiencycosts related to increased outsourcing in the U.S. of component production andhigher in-bound freight costs, and (3) unfavorable product mix.

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 incremental costs related toestablishing and operating the Roanoke, Texas facility. Additionally, othercosts of sales increased approximately $1.4 million during 2004 due to therelocation of production to the Company’s Denton, Texas facility. Theseincreases occurred primarily in the first three quarters of 2004 and werecompounded by a sharp increase in demand.

Gross margin was also impactedby a net reduction in average unit selling prices of $1.3 million in 2004 ascompared 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$107.3 million for the year ended December 31, 2004, which compares to$64.1 million and $41.5 million for the seven months ended December 31,2003 and the five months ended May 31, 2003, respectively, which is anincrease of 1.6%. As a percentage of sales, selling, general and administrativeexpenses were 24.5% for the year ended December 31, 2004, versus 28.9% forthe seven months ended December 31, 2003 and 27.6% for the five monthsended May 31, 2003. Included in the seven months ended December 31,2003 was a charge of approximately $1.8 million in recognition of thebankruptcy of one of our customers and the deteriorated aging in otherreceivable accounts. Selling, general and administrative expenses increased$4.8 million in 2004 as a result of additional sales and marketing initiativesincluding the expansion and development of international markets, increased newproduct development, and other expansion initiatives. Expenses also increased over2003 by $2.3 million related to compliance with the Sarbanes-Oxley Act of 2002and other governance costs, $1.3 million related to legal costs associated withpatent and trademark matters, $1.8 million associated with improvements made toour domestic information system and organization, and $3.8 million as aresult of changes in foreign currency rates. Partially offsetting theseincreases compared to 2003 was a 

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reduction of $2.5 millionrelated to separation and management incentive compensation. The remainingincrease in selling, general and administrative expenses in 2004 compared to2003 relates primarily to expenses that fluctuate with sales such ascommissions.

During the year ended December 31, 2004 weincurred restructuring costs of $8.8 million related to the relocation andconsolidation of certain U.S. manufacturing facilities, compared to$1.9 million and $0.5 million for the seven months ended December 31,2003 and the five months ended May 31, 2003, respectively. Also includedin restructuring charges for the year ended December 31, 2004 wasapproximately $2.9 million of severance costs related to reorganizing thedomestic workforce to improve efficiency and productivity.

Amortization of intangibles was $3.4 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.

Interest expense was $21.5 million for the year ended December 31,2004, compared to $9.6 million for the seven months ended December 31,2003 and $8.6 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 benefit of$4.5 million was recorded on a pretax loss of $18.4 million for the year ended December 31,2004. An income tax provision of $5.5 million was recorded on a pretaxloss of $14.5 million for the seven months ended December 31, 2003,and a tax provision of $2.3 million was recorded on pretax income of$570.6 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 taxprovision for the 2003 periods primarily relates to income generated in foreignjurisdictions.

**Future Effects ofFresh-Start Accounting**

In accordance with SOP 90-7,we adopted fresh-start accounting whereby our assets, liabilities and newcapital structure were adjusted to reflect estimated fair value at May 31,2003. We determined the reorganization value through consultation with ourfinancial advisors, by developing a range of values using both comparablecompanies and net present value approaches. The reorganization value was basedin part on financial projections prepared by us for the period from 2003through 2012. These projections assume a compound annual growth rate for salesof approximately 3.3% with domestic sales growing at a slightly faster pacethan international. The projections also assume improved profitability fromcontinued efforts to reduce cost. We made an allocation of the reorganizationvalue to our various asset classes which included certain estimates andjudgments. Significant assumptions and estimates used in determining thereorganization value and in the allocation of the reorganization value aredescribed in Note 6—*Plan of Reorganization*tothe consolidated financial statements.

**Restructuring andOther Charges**

During the five months ended May 31, 2003, theseven months ended December 31, 2003, and the year ended December 31,2004, we incurred restructuring and other special charges related toinitiatives that we have undertaken to lower costs and improve our operationalperformance. A description of these 

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initiatives is providedbelow. No restructuring charges were incurred during the year ended December 31,2005.

*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 $0.5 million for the five months ended May 31, 2003,$1.9 million for the seven months ended December 31, 2003, and $8.8million in 2004. No further costs have been incurred related to thisinitiative. Costs related to these projects are included in restructuringcosts.

**ReorganizationItems**

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, consist ofthe following:

| ** **                                            | ** ** | **Five Months**       | ** ** |
|-------------------------------------------------------|------------|----------------------------|------------|
| ** **                                            | ** ** | **Ended**                  | ** ** |
| ** **                                            | ** ** | **May 31, 2003** | ** ** |
| ** **                                            | ** ** | **(In millions)**          | ** ** |
| Professional fees  and expenses                       |       |                       | $          | 14.9 |   |   |
| Costs associated  with debtor-in-possession financing |       |                       | 0.1        |   |   |
| Accrued retention  plan costs                         |       |                       | 0.2        |   |   |
| Other  reorganization items                           |       |                       | 0.5        |   |   |
| Cash outlays for  reorganization items                |       |                       | $          | 15.7 |   |   |

 

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 31,2005, there was no remaining balance in this accrual.

**Liquidity andCapital 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 the Revolver, described below.

The Company and its U.S. Subsidiaries are borrowersunder a Second Amended and Restated Credit Agreement, as amended (the “CreditAgreement”). The Credit Agreement consists of a $9.2 million term loan (the “TermLoan”) and a $2.1 million delayed draw term loan (the “Delayed Draw TermLoan”) and $70.0 million revolving loan commitment (the “Revolver”). See Note11—*Debt and Capital Lease Obligations* tothe consolidated financial statements.

Borrowing under the Revolver may not exceed 85% ofeligible 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 Credit Agreement contains financialcovenants for maintenance of minimum fixed charge and leverage ratios relativeto EBITDA, as defined in the Credit Agreement, and other customary provisionsand requires refinancing of the obligations under the Second-Lien Facility by August 7,2008. In connection with the Credit Agreement, our foreign subsidiaries inAustralia, the United Kingdom and Canada granted second security interests intheir assets to the lenders under our $30 million Second-Lien 

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Facility due November 7,2008 and guaranteed our $175.0 million 91⁄4% Senior Subordinated Notes. Interestrates on the Credit Agreement have been reduced to, at our option, LIBOR (4.39%as of December 31, 2005) plus 2.25% or the prime rate (7.00% at December 31,2005) plus 0.5% on the revolving facility, and LIBOR (4.39% as of December 31,2005) plus 2.50% or the prime rate plus 0.75% on the Term Loan. All of thesepercentages are subject to an interest rate grid and will decline if certainconditions are met. Unused portions of the Revolver bear interest at the rateof 0.5% per annum. Notwithstanding the borrowing base, the Credit Agreementlimits total borrowings (including all amounts under the Term Loan andRevolver) to $75 million until the Second-Lien Facility is paid or refinancedwith long-term debt and requires that the Second-Lien Facility be paid orrefinanced 60 days before maturity. The Amended Credit Agreement does undercertain conditions, allow for the use of the Revolver to repay the Second-LienFacility. As of December 31, 2005, we had outstanding borrowings of $31.8million and issued letters of credit totaling $12.6 million under the Revolver.We had availability of $15.6 million under the Revolver at December 31,2005. The Revolver terminates on November 22, 2009. The Term Loan matureson November 22, 2009 and requires equal quarterly principal payments ofapproximately $0.3 million per quarter beginning December 31, 2004 throughOctober 31, 2009, with the balance of the outstanding principal beingpayable on November 22, 2009. As of December 31, 2005 we did not haveaccess to the Delayed Draw Term loan.

In March 2005, we entered into amendments whichmodified financial covenants in the Credit Agreement and enabled us to extendour Second-Lien Facility. On July 27, 2005, August 8, 2005, October 5,2005 and November 7, 2005, we further amended the Credit Agreement tomodify certain financial and non-financial covenants and enable us to extendand expand our $20.0 million Second-Lien Facility by $10.0 million. On December 29,2005 the Company further amended the Credit Agreement to permit the sale of theStock of GenSet and Soltec, and to decrease both the total loan commitment andthe Revolver loan commitment. The amendment further stipulated that the netproceeds of each of the GenSet sale and Soltec sale be applied to the principalbalance of the Revolver. Both the GenSet and the Soltec sales have beencompleted and the net proceeds applied to the Revolver in the first quarter of2006. In May 2006, the Credit Agreement was amended to (i) delete the EBITDAcovenant from the agreement, (ii) modify the minimum fixed charge coverageratio and (iii) modify the maximum leverage ratio covenants. In July 2006,the Credit Agreement was further amended to (i) modify the maximumleverage ratio to 5.75 through June 30, 2007, with a .25 reduction perquarter thereafter until the coverage ratio reaches 4.00 which occurs duringthe quarter ending March 31, 2010, (ii) modify the minimum fixedcharge ratio to 1.0 through June 30, 2007, 1.10 at September 30, 2007and theafter and (iii) establish a minimum availability requirement of$5 million.

On July 29, 2004, we entered into the $20.0million Second-Lien Facility. Borrowings under the Second-Lien Facility wereused to repay a portion of the amount outstanding under the Revolver. TheSecond-Lien Facility is secured by a second lien on substantially all of theassets of the Company, our domestic subsidiaries and certain of our foreignsubsidiaries. The Second-Lien Facility restricts how much long-term debt we mayhave and 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 a financial covenant and extend its maturity until April 30,2006. On March 31, 2005, August 8, 2005 and October 7, 2005, weamended the Second-Lien Facility to modify certain financial and non-financialcovenants.

On November 7, 2005, we and certain of oursubsidiaries further amended the Second-Lien Facility to increase the amount ofborrowings from $20.0 million to $30.0 million, extend the maturity of thefacility from April 30, 2006 to November 7, 2008, and obtain a moreattractive interest rate. Proceeds were used to repay a portion of theRevolver. In July 2006, we amended the Second-Lien Facility to increasethe amount of borrowings from $30 million to $50 million. The proceeds wereused to repay the Term Loan in full with the balance of the proceeds being usedto pay a portion of the Revolver. The Second-Lien Facility, as 

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amended, accrues interestat our option, at LIBOR (4.39% as of December 31, 2005) plus 4.50%, or analternative base rate of the greater of (i) the Prime Rate or (ii) thefederal funds rate plus one half of 1.00%, plus 3.50%.

In May, 2006, the Credit Agreement and the Second-LienFacility were also amended to permit, under certain conditions, the redemptionof Senior Subordinated Notes with excess cash flow, as defined in the Indentureand to extend the time by which we are required to provide certain financialinformation.

On July 21, 2006, the Company amended theSecond-Lien Facility to (i) remove the financial covenant compliance untilthe third quarter of 2007, (ii) extend the pre-payment penalty date toOctober 31, 2007, and (iii) increase the amount of borrowings from$30 million to $50 million. The proceeds were used to repay the TermLoan in full, with the balance of the proceeds being used to pay a portion ofthe Revolver.

At December 31, 2005, we were in compliance withthe financial covenants, as relaxed in the Amended Credit and Second-LienFacility Agreements. We expect to remain in compliance with the financialcovenants (as amended) during 2006 by achieving our 2006 financial plan, whichincludes realizing sales of new products to be introduced throughout 2006,price increases for existing products, and successfully implementing certaincost reduction initiatives including our global continuous improvement programreferred to as TCP and our program for foreign sourcing of manufacturing. Wealso are actively exploring the sale of one additional non-core business unitto generate additional liquidity. If we are not successful in achieving the2006 financial plan, we could also pursue other alternatives to repay debt andimprove liquidity. These alternatives, as discussed in Part 1, Item 1A, “RiskFactors,” include deferral of certain capital expenditures and reduction ofcosts. If we are not successful in achieving the 2006 financial plan, as wellas the aforementioned alternatives, we may not be in compliance with therevised financial covenants and would seek an amendment to the Credit Agreementand the Second-Lien Facility. There can be no assurance that we could obtainsuch an amendment, failure to obtain an amendment would result in a defaultunder the Credit Agreement and the Second-Lien Facility which could result in amaterial adverse impact on our financial condition.

The Senior Subordinated Notes (the “Notes”) accrueinterest at 9 1/4% per annum, which is payable semiannually in cash. The Notesare guaranteed by our domestic subsidiaries, which are also borrowers orguarantors under the Amended Credit Agreement, and certain of our foreignsubsidiaries. The Notes contain customary covenants and events of default,including covenants that limit our ability and our subsidiaries’ abilities toincur debt, pay dividends and make certain investments. On May 16, 2006,we amended the indenture for the Senior Subordinated Notes to, among otherthings, extend the time by which we must file with the Securities and ExchangeCommission our Annual Report on Form 10-K for the year ended December 31,2005 and any other reports then due, and obtain a waiver for the defaultresulting from our failure to timely file the 2005 Annual Report. Inconsideration for the amendment, we paid noteholders who consented to theamendment a consent fee of $2.50 for each $1,000 in principal amount of Notes.The amendment also requires us, subject to certain conditions, to annually useour excess cash flow (as defined in the Indenture) either to make permanentrepayments of our senior debt or to extend a repurchase offer to the holders ofthe Notes pursuant to which we will offer to repurchase outstanding Notes at apurchase price of 101% of their principal amount.

On July 21, 2006, the Company commenced a consentsolicitation seeking amendments to the indenture governing Notes and waivingexisting defaults under that indenture related to the late filing of theCompany’s 2005 Form 10-K and first quarter 2006 Form 10-Q with theSecurities and Exchange Commission. The amendments would extend the time forfiling these reports to August 21, 2006 and for additional fees that couldaggregate to $2 million would also allow the Company to elect to extendthe time within which the Company must file its second quarter 2006Form 10-Q to no later than December 17, 2006. Under the consentsolicitation, the indenture would be amended to provide for the payment of 

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additional SpecialInterest on the Notes, initially at a rate of 1.25% per annum. The SpecialInterest is subject to adjustment increasing to 1.75% if the consolidated leverageratio exceeds 6.00 with incremental interest increases to a maximum of 2.75% ifthe consolidated leverage ratio increases to 7.0. The Special Interest declinesto .75% if the consolidated leverage ratio declines below 4.0 and declinesincrementally to 0% if leverage is less than 3.0 with the payment of contingentcash consent fees to consenting holders of the Notes. As of July 31, 2006,holders of 100% of the outstanding Notes have consented to the solicitation.

Until the execution of the amendments to theindenture, the Company has the right to (i) terminate the solicitation forany reason, (ii) amend the terms of the solicitation, (iii) modifythe form or amount of the consideration to be paid pursuant to the solicitationor (iv) waive any of the conditions to the Solicitation, subject toapplicable law. The Company intends to execute the amendment.

In 2006, we anticipate our capital expenditures willbe approximately $15.0 million. In addition, we expect that our debt serviceobligations related to capital leases and foreign credit lines, excludinginterest expense, will be approximately $1.6 million and $1.7 million,respectively. We expect our operating cash flow, together with availableborrowings under the Revolver, will be sufficient to meet our anticipatedoperating expenses, capital expenditures and the debt service requirements ofthe Credit Agreement and Second-Lien Facility, the Notes and our otherlong-term obligations for 2006. However, our ability to generate sufficientcash flow to meet our operating needs will be affected by general economic,financial, competitive, legislative, regulatory, business and other factorsbeyond our control.

*Working Capital and CashFlows.*   The operating activities of ourcontinuing operations used $16.1 million of cash during the year ended December 31,2005, compared to cash used of $14.5 million during the year ended December 31,2004. This includes the change in operating assets and liabilities which used $(3.5) millionof cash for the year ended December 31, 2005, compared to $10.7 millionof cash used in the year ended December 31, 2004 and consisted of:

·       Accountsreceivable used $11.4 million of cash in 2005, compared to $7.8 million ofcash used during the year ended December 31, 2004. The increase inaccounts receivable in 2005 resulted primarily from the increased sales in2005.

·       Inventoryused $13.8 million of cash in 2005 compared to $14.5 million of cash usedin the year ended December 31, 2004. The increase in inventory during 2005resulted primarily from the increased material costs in 2005 and higher stocklevels carried as part of the initiative to improve delivery performance.

·       In2005, $18.8 million of cash in flow arose from increased accounts payable,which compares to $3.5 million of cash generated in the year ended December 31,2004.

·       Increasedaccrued interest of $0.2 million in 2005relating primarily to the Notes increased cash.

The sale of discontinuedoperations in December 2005 as discussed in Note 4 *DiscontinuedOperations*to the consolidated financial statements generated $4.8million of positive cash flow which was utilized to pay down debt in the firstquarter of 2006.

Cash used for capital expenditures was $9.2 millionduring the year ended December 31, 2005, compared to $12.8 million inthe year ended December 31, 2004.

Financing activitiesgenerated $24.6 million of cash during 2005, which compares to $21.6 millionof cash generated during the year ended December 31, 2004. Net borrowingswere $23.9 million during the year ended December 31, 2005, but werepartially offset by $0.7 million of deferred financing fees. The increasein borrowings was used primarily to fund working capital requirements.

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**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** | ** ** |
|----------------------------------|------------|------------|-------------------------------------------|------------|
| ** **                       | ** ** | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **2010 and** | ** ** |
| **Contractual Obligations** | ** ** | ** ** | ** **                                | ** ** | **Total** | ** ** | **2006** | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **Beyond** | ** ** |
| ** **                       | ** ** | ** ** |
| Long-term debt                   |       |       | $                                         | 354,105    |   | $ | 22,706 |   | $ | 20,815 |   | $ | 50,703 |   | $ | 20,131 |   | $ | 239,750 |   |
| Capital leases                   |       |       | 23,542                                    |       | 3,144 |   | 2,890 |   | 3,063 |   | 3,306 |   | 11,139 |   |
| Operating leases                 |       |       | 16,932                                    |       | 3,783 |   | 3,471 |   | 3,106 |   | 2,392 |   | 4,180 |   |
| Purchase  obligations            |       |       | 22,235                                    |       | 13,825 |   | 4,208 |   | 4,202 |   | — |   | — |   |
| Total                            |       |       | $                                         | 416,814    |   | $ | 43,458 |   | $ | 31,384 |   | $ | 61,074 |   | $ | 25,829 |   | $ | 255,069 |   |
|                                  |            |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The amounts shown forcapital leases and long-term debt include the effective interest expensecomponent. Our purchase obligations relate primarily to inventory purchasecommitments. At December 31, 2005, we had issued letters of credittotaling $12.6 million under the revolving credit facility.

**Market Risk andRisk Management Policies**

Our earnings and cash flowsare 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, brass and steel. See Item 7A. “Quantitative andQualitative Disclosures About Market Risk,” for a further discussion.

**Effect ofInflation; 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.

**Critical AccountingPolicies**

Our consolidated financialstatements are based on the selection and application of significant accountingpolicies, some of which require management to make estimates and assumptions. Wereview 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 determinedto be reasonable and accurate. No material adjustments to our accountingpolicies have been made in 2005 or 2004. We believe the following are some ofthe more critical judgmental areas in the application of our accountingpolicies that affect our financial condition and results of operations.

***Bankruptcy Accounting***

From the time of ourChapter 11 bankruptcy filing, through our emergence in May 2003, we haveapplied the provisions in SOP 90-7. SOP 90-7 does not change theapplication of generally accepted 

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accountingprinciples in the preparation of financial statements, but it does require thatthe financial statements for periods including and subsequent to filing theChapter 11 petition distinguish transactions and events that are directlyassociated with the reorganization from the ongoing operations of the business.As described in the Plan of Reorganization Note to the financial statements, wehave accounted for the reorganization using the principles of “fresh-start”accounting as required by SOP 90-7.

***Inventories***

Inventories are a significant asset, representing20.5% of total assets at December 31, 2005. They are valued at the lowerof cost or market, with our U.S. subsidiaries using the last in, first-out(LIFO) method, which represents 63.3% of consolidated inventories, and our foreignsubsidiaries using the first-in, first-out (FIFO) method, which represents36.7% 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 and providing valuation allowances asnecessary. Should we not achieve our expectations of the net realizable valueof 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, write-off trends and reservetrends, the financial condition of our customers and other pertinentinformation. If the financial condition of our customers deteriorates or anunfavorable trend in receivable collections is experienced 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, we revaluedour identifiable intangible assets and recorded a fresh-start adjustmentof $75.4 million to write up these assets. Patents and customerrelationships are amortized on a straight-line basis over their estimateduseful lives, which generally range from 10 to 15 years. Trademarks arenot amortized, but are periodically 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 assetgroup might not be recoverable. If impairment indicators exist, we determinewhether the projected undiscounted cash flows will be sufficient to recover 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.

Our trademarks are generally associated with oursignificant and well-established product brands, and cash flows associated withthese products are expected to continue indefinitely. The Company has placed nolimit on the end of our trademarks’ useful lives.

We test goodwill for impairment annually or morefrequently if events occur or circumstances change that would more likely thannot reduce the fair value of the reporting unit below its carrying value. For 

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purposes of applying theprovisions, we perform our impairment analysis on a consolidated enterpriselevel. We use comparable market values, market prices and the present value ofexpected future cash flows to estimate fair value. We must make significantjudgments and estimates about future conditions to estimate future cash flows.Unforeseen events and changes in circumstances and market conditions, includinggeneral economic and competitive conditions, could result in significantchanges in those estimates. Based on an impairment analysis we completed in thefourth quarter of 2005, no adjustment to the carrying value of our goodwill wasdeemed necessary as of December 31, 2005.

Upon emergence from bankruptcy, certain intangibleshad a fair value of $33.4 million and were determined to have an indefinitelife for financial reporting purposes and no tax basis. As a result, deferredtax liabilities of $12.7 million were recorded in 2003 with acorresponding increase in goodwill.

As a result of the 2003bankruptcy restructuring, the Company recognized cancellation of indebtednessincome. Under Internal Revenue Code Section 108, this cancellation ofindebtedness income is not recognized for income tax purposes, provided thatthe Company reduces its basis in its tax attributes. This attribute reductionincludes reducing the tax basis in the stock of the Company’s subsidiaries.This reduction in stock basis creates a difference between the Company’s bookand tax basis in the subsidiary stock for which a deferred income tax liabilitywas recorded. The final determination of the reduction in tax attributes wasmade following the bankruptcy restructuring with the filing of the Company’sfederal income tax return and with positions taken with respect to the mannerin which we would reduce our tax attributes. As a result, the Company revisedcertain estimates and recorded adjustments to increase deferred tax liabilitiesby $60.2 million, made a cumulative catch up adjustment of$9.5 million income tax benefit in the statement of operations to reflectthe reduction in the basis difference in the subsidiary stock from the fresh-startaccounting date through September 30. 2004, with an offsetting increase of$69.7 million in goodwill. Subsequent reductions in the book-tax basisdifference as a result of post 2003 bankruptcy restructuring activity arerecorded in the statement of operations. The Company further reduced itsdeferred tax liability with an increase to income tax benefit in the statementof operations in the fourth quarter of 2004 for $2,752 for a total reduction of$12,252 in 2004 and $3,578 in 2005.

***Revenue Recognition***

The Company sells a majority of its products throughdistributors with standard terms of sale of FOB shipping point or FOBdestination. The Company has certain consignment arrangements whereby revenueis recognized when products are used by the customer from consigned stock. Underall circumstances, revenue is recognized when persuasive evidence of anarrangement exists, delivery has occurred, the seller’s price is fixed anddeterminable and collectibility is reasonably assured.

The Company sponsors a number of incentive programs toaugment distributor sales efforts. Included in the Company’s incentive programsare certain rebate programs and sales and market share growth incentiveprograms. The costs associated with these sales programs are recorded as areduction of revenue.

Terms of sale generally include 60-day paymentterms and standard warranties for which reserves, based upon historicalexperience, have been recorded. Restocking charges will generally be assessedfor product that is returned due to issues outside the scope of the Company’swarranty agreements.

Certain shipping and handling costs totaling $10.9million, $9.6 million, $4.6 million, and $3.3 million for the years ended December 31,2005 and 2004, the seven months ended December 31, 2003, and the fivemonths ended May 31, 2003, were recorded in selling, general andadministrative expenses, respectively.

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***Income Taxes***

We establish provisions for taxes to take into accountthe effects of timing differences between financial and tax reporting. Thesedifferences relate primarily to the excess of the fresh-start accountingvaluation over the tax basis of our primary operating subsidiary, net operatingloss carryforwards, fixed assets, intangible assets and post-employmentbenefits.

We record a valuation allowance when, in ourassessment, it is more likely than not that a portion or all of our deferredtax assets will not be realized. We consider the scheduled reversal of deferredtax liabilities, tax planning strategies and projected future taxable income inmaking this assessment. At December 31, 2005, a valuation allowance hasbeen recorded against our deferred tax assets based upon this assessment. Theamount of the deferred tax assets considered realizable could change in thefuture if our assessment of future taxable income or tax planning strategieschanges.

We have established provisions for deferred taxes onthe majority of the accumulated unremitted earnings of our foreignsubsidiaries. The majority of the earnings of our foreign subsidiaries aredeemed included in our U.S. income tax return under I.R.C. Section 956relating to the earnings of a foreign subsidiary which guarantees theborrowings of its U.S. parent. However, upon actual or deemed distribution ofthose earnings, we may be subject to both U.S. income taxes (subject to anadjustment for foreign tax credits) and withholding taxes payable in amountswhich differ from the estimates we have recorded.

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 impacted.

As a result of the 2003bankruptcy restructuring, the Company recognized cancellation of indebtednessincome. Under Internal Revenue Code Section 108, this cancellation ofindebtedness income is not recognized for income tax purposes, provided thatthe Company reduces its  basis in its taxattributes. This attribute reduction includes reducing the tax basis in thestock of the Company’s subsidiaries. This reduction in stock basis creates adifference between the Company’s book and tax basis in the subsidiary stock forwhich a deferred income tax liability was recorded. The final determination ofthe reduction in tax attributes was made following the bankruptcy restructuringwith the filing of the Company’s federal income tax return and with positionstaken with respect to the manner in which we would reduce our tax attributes.As a result, the Company revised certain estimates and recorded adjustments toincrease deferred tax liabilities by $60.2 million, made a cumulativecatch up adjustment of $9.5 million income tax benefit in the statement ofoperations to reflect the reduction in the basis difference in the subsidiarystock from the fresh-start accounting date through September 30, 2004, with anoffsetting increase of $69.7 million in goodwill. Subsequent reductions inthe book-tax basis difference as a result of post 2003 bankruptcy restructuringactivity are recorded in the statement of operations. The Company furtherreduced its deferred tax liability with an increase to income tax benefit inthe statement of operations in the fourth quarter of 2004 for $2,752 for atotal reduction of $12,252 in 2004, and $3,578 in 2005.

**Factors ThatMay Affect Future Results**

For a discussion offactors that may affect future results see “Risk Factors.”

**Recently IssuedAccounting 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 

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the guidance in ARBNo. 43, Chapter 4, “Inventory Pricing,” to clarify the accounting forabnormal amounts of idle facility expense, freight, handling costs, and wastedmaterial (spoilage). Among other provisions, the new rule requires thatitems such as idle facility expense, excessive spoilage, double freight, andre-handling costs be recognized as current-period charges regardless of whetherthey meet the criterion of “so abnormal” as stated in ARB No. 43.Additionally, SFAS No. 151 requires that the allocation of fixedproduction overheads to the costs of conversion be based on the normal capacityof the production facilities. SFAS No. 151 is effective for fiscal yearsbeginning after June 15, 2005, with early adoption permitted. We adoptedthe provisions of SFAS No. 151 in 2004 without a material impact to ourfinancial statements.

In December 2004, theFASB issued SFAS No. 123 (revised 2004) Share-Based Payment, (“SFASNo. 123(R)”), which is a revision of SFAS No. 123, *Accounting for Stock-Based Compensation*(“SFAS No. 123”). SFASNo. 123(R) supersedes APB Opinion No. 25, *Accounting for Stock Issued to Employees (“*Opinion 25*”)*,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, SFASNo. 123(R) requires all share-based payments to employees, includinggrants of employee stock options, to be recognized in the income statementbased on their fair values. We adopted SFAS No. 123(R) onJanuary 1, 2006, using the modified prospective method. As discussed inthe Stock Options Note to the financial statements, the impact of the adoptionof SFAS No. 123(R) is estimated to result in a charge of $0.9 millionto income before income taxes in 2006 related to unvested options as ofDecember 31, 2005 and stock options expected to be granted in 2006.

**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, Malaysia, Mexico and Brazil aswell 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 totransaction gains or losses resulting from changes in foreign currency exchangerates are material to our financial results. As a result, we do not activelytry to manage our exposure through foreign currency forward or optioncontracts.

Copper, brass and steel constitute a significantportion of our raw material costs. These commodities are subject to pricefluctuations which we may not be able to pass on to our customers. We have notexperienced and do not anticipate constraints on the availability of thesecommodities. A hypothetical 10% adverse change in commodity prices on ourprojected annual purchases of these three commodities would increase annualcosts $5.0 million with brass and copper comprising the majority of thesecommodity purchases.

In order to manage interestcosts, we entered into an interest rate swap arrangement on February 24,2004 to convert $50.0 million of the Senior Subordinated Notes intovariable rate debt. We pay interest on the swap at LIBOR plus a spread of 442basis points. Interest rate risk management agreements are not held or issuedfor speculative or trading purposes. We are also exposed to changes in interestrates 

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primarilyas a result of long-term financial arrangements that have variable interestrates. At December 31, 2005, we had approximately $70.6 million ofvariable rate debt. With this amount of variable rate debt, and including theeffects of the $50.0 million interest rate swap, a hypothetical 100 basis pointincrease in our variable borrowing rates would result in an increase ininterest expense of approximately $1.2 million annually.

**Item 8.**                        *Financial Statements and Supplementary 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.

**Item 9.**                        Changesin and Disagreements with Accountants on Accounting and Financial Disclosure

As reported in the Company’s Current Report onForm 8-K filed on July 19, 2006, the Company received a letter datedJuly 13, 2006 from Ernst & Young LLP (“Ernst & Young”)informing the Company they will resign as the Company’s independent registeredpublic accounting firm effective as of the date of the filing of the Company’sAnnual Report on Form 10-K for the year ended December 31,2005.

The reports of Ernst & Young on the Company’sfinancial statements as of and for the year ended December 31, 2004 and asof and for the seven months ended December 31, 2003 have been withdrawn.The Company has restated its previously filed financial statements for theseven months ended December 31, 2003, the second, third and fourthquarters of 2003, the year ended December 31, 2004, each of the quartersin the year ended December 31, 2004 and each of the first three quartersof 2005 to correct errors in accounting for certain income tax matters, foreigncurreny translation, certain foreign business units and miscellaneous othermatters.

In connection with the audits of the Company’sfinancial statements for the years ended December 31, 2004 and 2005 andsubsequent periods, there have been no disagreements (as described underItem 304(a)(1)(iv) of Regulation S-K) to date between Ernst &Young and the Company on any matter of accounting principles or practices,financial statement disclosure or auditing scope and procedures that, if notresolved to the satisfaction of Ernst & Young, would cause Ernst &Young to make reference to the subject matter of the disagreement in connectionwith considering its report on the Company’s financial statements for suchperiods.

During the yearsended December 31, 2005 and 2004 and through July 13, 2006, there were no“reportable events” as described in Item 304(a)(1)(v) ofRegulation S-K, except as follows:

·  The Company disclosed certain materialweaknesses in its internal controls over financial reporting in its AnnualReport on Form 10-K filed on March 17, 2005 and its Quarterly Reportson Form 10-Q filed on May 10, 2005, August 9, 2005 andOctober 9, 2005. For a discussion of these material weaknesses, SeeItem 9A—“Controls and Procedures” in the Company’s 2004 Annual Report onForm 10-K filed on March 17, 2005 and Item 4—“Controls andProcedures” in each of its Quarterly Reports on Form 10-Q filed in 2005; suchsections are incorporated herein by reference.

·  Material weaknesses existing as of December31, 2005 are discussed in Item 9A—“Controls and Procedures” in this AnnualReport on Form 10-K.

Supplemental information to the Company’s Form 8-Kfiled with the SEC on July 19, 2006 will be provided by August 7,2006.

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**Item9A.**                Controls andProcedures

**Evaluation ofDisclosure Controls and Procedures**

We maintain disclosure controls and procedures thatare designed to ensure that information required to be disclosed in reportsthat we file or submit under the Securities Exchange Act of 1934 is recorded,processed, summarized and reported within the time periods specified by theSEC. Our internal control over financial reporting is designed to providereasonable assurance to our management and Board of Directors regarding thereliability of financial reporting and preparation of published financialstatements.

As of December 31, 2005, our management evaluatedthe effectiveness of our disclosure controls and procedures and concluded thatcertain disclosure controls and procedures were not effective because of thematerial weaknesses described below in Management’s Report on Internal Controlover Financial Reporting. In light of the material weaknesses identified in2005 and the resulting restatement of financial statements for the year endedDecember 31, 2004 and the seven months ended December 31, 2003, ourdiscussion of and disclosures about controls and procedures in earlier periodsmight have included additional matters.

**Management’s Reporton Internal Control Over Financial Reporting**

Our management is responsible for establishing andmaintaining adequate internal control over financial reporting as such term isdefined in Exchange Act Rules 13a–15(f) and 15d–15(f). The Company’ssystem of internal control over financial reporting is designed to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withU.S. generally accepted accounting principles.

Our internal control over financial reporting includespolicies and procedures that (i) pertain to the maintenance of records that inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the Company; (ii) provide reasonable assurancethat transactions are recorded as necessary to permit the preparation of theconsolidated financial statements in accordance with U.S. generally acceptedaccounting principles, and that receipts and expenditures of the Company arebeing made only in accordance with authorizations of management and directorsof the Company; and (iii) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisitions, use or disposition of theCompany’s assets that could have a material effect on the consolidatedfinancial statements.

Because of its inherent limitations, internal controlover financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditionsor that the degree of compliance with the policies or procedures maydeteriorate.

Under the supervision and with the participation ofour management, including our chief executive officer and principal accounting officerand with the assistance of various accounting consultants, we conducted anevaluation of the effectiveness of the Company’s internal control overfinancial reporting as of December 31, 2005, based on the framework in *Internal Control-Integrated Framework,*issued by theCommittee of Sponsoring Organizations of the Treadway Commission (COSO). Basedon that assessment, our management concluded that the Company’s internalcontrol over financial reporting was ineffective as of December 31, 2005because of several material weaknesses discussed below.

A material weakness is a control deficiency orcombination of control deficiencies that result in more than a remotelikelihood that a material misstatement of the annual or interim consolidatedfinancial statements will not be prevented or detected. A description of thematerial weaknesses that existed as of December 31, 2005, as well as theiractual and potential effect on the presentation of the Company’s consolidatedfinancial statements issued during their existence, is discussed below.

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***Financial StatementClose Process:******  ***Internalcontrols over the financial statement close process were not effective andrepresented a material weakness in internal control over financial reporting atDecember 31, 2005. The primary factors contributing to this materialweakness were: (i) the turnover of various accounting personnel during theyear, including the Chief Financial Officer, Corporate Controller, Director ofTax, and the Director of Financial Reporting, (ii) the Company did notmaintain a sufficient complement of personnel with a level of knowledge of theCompany’s accounting records and technical competence to ensure properapplication of U.S. generally accepted accounting principles, (iii) theCompany did not maintain sufficient written policies and procedures, andsupport, particularly with respect to certain elimination entries andfresh-start accounting entries relative to the financial statementconsolidation process, which contributed to the improper determination of theloss on asset dispositions and contributed to the material weakness describedbelow in accounting for foreign currency, (iv) the Company did notmaintain effective controls to provide reasonable assurance that certainbalance sheet accounts were complete, accurate, agreed to detailed support, andwere based on reasonable assumptions and that account reconciliations wereproperly performed, reviewed and approved, including the allowance for doubtfulaccounts, inventory received not vouchered accrual, severance accrual, groupinsurance accrual and pension liability.

***Foreign CurrencyAccounting:***   We concluded that our recordsand Company personnel knowledge of our foreign currency accounting,particularly with regard to inter-company related balances, were inadequate andrepresented a material weakness. The insufficient controls include(i) limited knowledge by foreign personnel in determining the properclassification between income and other comprehensive income and(ii) insufficient review by knowledgeable U.S. personnel responsible forfinancial reporting.

***Income TaxAccounting:*****  **Duringthe year end financial statement close process, adjustments were recorded todeferred income tax liabilities and state income tax liabilities and to adjustthe income tax provision. The reduction of deferred income taxes and relatedreduction of our income tax provision arose from subsequent changes in thebook-tax basis difference of our primary subsidiary since our emergence frombankruptcy. We also recorded state tax liabilities potentially arising fromcertain tax filing positions. We did not maintain effective controls toidentify and properly account for these concepts. We have concluded we have amaterial weakness for insufficient controls related to the determination andreporting of the liabilities for deferred taxes and state income taxes and theprovision for income taxes.

***Oversight andMonitoring of Certain International Locations:***   Duringthe year end financial statement close process, we identified variousadjustments to the amounts reported by two of our smaller internationallocations. We have concluded that a material weakness continued to exist withregard to our accounting procedures at certain foreign subsidiaries and ourcorporate oversight and review of these locations as of December 31, 2005.

***Reconciliation ofInter-company Account Balances:******  ***As of September 30,2005, we identified a control deficiency relating to the reconciliation ofinter-company account balances, which represented a material weakness. Thecontrol deficiency resulted from inadequate procedures to reconcile theinter-company account balances and analyze unmatched items. In evaluating thecontrol deficiency it was determined that certain items pertained to periodsboth prior to and subsequent to our application of fresh-start accounting uponour emergence from bankruptcy. As such, this material weakness resulted inadjustments to inter-company balances, accumulated other comprehensive loss andother income. In addition, as noted above, a material weakness was identifiedas of December 31, 2005 related to foreign currency accounting, primarilywith regard to inter-company related balances. Therefore, we have concludedthis material weakness continued to exist as of December 31, 2005.

Collectively, these material weaknesses resulted inthe Company not being able to file its 2005 financial statements on Form 10-Ktimely as required by the SEC and required the Company to restate itsconsolidated financial statements for the year ended December 31, 2004 andthe seven months ended 

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December 31, 2003 andits quarterly consolidated financial statements for the first three quarters of2005, each quarter in 2004 and the second, third and fourth quarters in 2003.

The Company’s independentregistered public accountant, Ernst & Young LLP, has issued anattestation report on management’s assessment of the Company’s internal controlover financial reporting which appears below.

**Remediation ofMaterial Weaknesses**

As of December 31, 2004, our management concludedthat certain controls and procedures, were not effective because of thematerial weaknesses relative to the oversight and monitoring of our smaller internationallocations; ineffective controls over property, plant and equipment;insufficient procedures for the analysis of inventory variances in connectionwith interim reporting; and insufficient procedures for the determination andreporting of the provision for income taxes and the related deferred income taxbalances for interim financial reporting purposes. Additionally, as ofSeptember 30, 2005, our management identified a control deficiencyrelating to the reconciliation of inter-company account balances, whichrepresented a material weakness. As of December 31, 2005, we haveremediated the material weaknesses related to the analysis of inventoryvariances in connection with interim financial reporting and the ineffectivecontrols over property, plant and equipment.******Variances between our actualmanufacturing costs and our standards are now evaluated on a monthly basis todetermine the amounts which should be capitalized in our inventory valuationsfor financial reporting purposes.******We conducted a comprehensive review of ourproperty, plant and equipment to ensure the proper accounting of all leases andthe adjustments associated with Fresh-Start Accounting. We also initiated newreview procedures and on-site financial reviews at our operating units toensure proper determinations of depreciation expense and treatment ofnon-recurring transactions, such as significant leasing transactions.

As discussed above, as of December 31, 2005,there were material weaknesses in the Company’s internal control over financialreporting. We currently are unable to determine when these material weaknesseswill be fully remediated, however we intend to address these material weaknessesas described below.

We are performing a comprehensive reassessment of ourfinancial statement close process to enhance our analysis and review processthrough refined procedures, more effective use of the capabilities of ourcommercial software package, and realignment of responsibilities among theCompany personnel and contract specialists.

With regard to the turnover of key accountingpersonnel previously described, our Chief Financial Officer and our Director ofTax departed after the third quarter of 2005 and the Controller departed at theend of the third quarter of 2005 contributing to the material weakness in ourability to prepare and disclose on a timely basis the information required inour annual report on Form 10-K. During the second quarter of 2005 wehired a new Controller. This individual resigned in the third quarter of 2006.In early 2006 we engaged several accounting and financial specialists to assistin preparing the information required in Form 10-K. As noted abovein Management’s Report on Internal Control Over Financial Reporting, followingthe departure of the various key personnel, we judged we had insufficientinformation relative to the ongoing maintenance of our fresh-start accountingadjustments and our foreign currency accounting procedures in particular. Inaddition, we determined there was a limited understanding among our personnelrelative to certain liability and valuation allowance determinations. Weperformed extensive reconciliations with respect to each of these aspects ofour records and delayed filing our Form 10-K until such work wascompleted with the assistance of accounting and financial specialists.

We are supplementing our current personnel withseveral outside service providers with specialized expertise. We are currentlyconducting a search for a controller, accounting supervisory and financial 

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reporting and tax personnel.We have extended an employment offer to a candidate (who is currently workingwith us as an independent contractor) for the Chief Financial Officer position.

We have performed extensive reconciliation proceduresand analysis and we have improved the documentation relative to our fresh-startaccounting adjustments as they impact certain inter-company accounts and thefinancial statement consolidation process. We have also performed extensivereconciliation procedures and analysis and we have improved the documentationrelative to our foreign currency accounting for inter-company transactions. Webelieve we have established more comprehensive information in our records forfuture reference and established new reconciliation procedures to provideaccurate financial statement reporting.

With respect to our material weakness in income taxaccounting, we utilize the services of another major accounting firm to assistus in reviewing our income tax provision and deferred tax balances, as well as,provide tax planning and consultative support. We have begun performing a morecomprehensive analysis of components of the income tax provision on a quarterlybasis. Additionally, we have implemented a more formal process to monitor thedifferences between the income tax basis and the financial reporting basis ofassets and liabilities to effectively reconcile the deferred income taxbalances. We now analyze these amounts and reconcile the deferred taxbalances and the underlying book-tax differences on a quarterly basis.

With respect to thecontrol weaknesses at certain foreign locations, we assigned a manager from ourU.S. group to Brazil during 2005 who is on-site on a regular basis to achievegreater oversight of the operations and financial controls. In early 2006, weengaged a new manager for our South African operations. In addition, weenhanced our analytical and review procedures with respect to each of these twolocations. However, due to certain adjustments that were recorded at year endin the preparation of our financial statements, we concluded that a materialweakness continues to exist relative to our oversight and monitoring of thesetwo foreign locations.

**Changes in InternalControl Over Financial Reporting**

Except as otherwisediscussed above, there have been no changes in our internal control overfinancial reporting during the fourth fiscal quarter that have materiallyaffected, or are reasonably likely to materially affect, our internal controlover financial reporting.

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**Report of IndependentRegistered Public Accounting Firm**The Board of DirectorsThermadyne 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, 2005, because of the effect of insufficient controls in thefinancial statement close process, income tax accounting, oversight andmonitoring of certain international locations, reconciliation of inter-companyaccount balances, and foreign currency accounting, based on criteriaestablished in Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (the COSO criteria).Thermadyne Holdings Corporation’s management is responsible for maintainingeffective internal control over financial reporting and for its assessment ofthe effectiveness of internal control over financial reporting. Ourresponsibility is to express an opinion on management’s assessment and anopinion on the effectiveness of the Company’s internal control over financialreporting 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 fairly reflectthe 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:

*Financial statement closeprocess.**  *Internalcontrols over the financial statement close process were not effective andrepresented a material weakness in internal control over financial reporting atDecember 31, 2005. The primary factors contributing to this materialweakness were: (i) the turnover of various accounting personnel during theyear, including the Chief Financial Officer, Corporate Controller, Director ofTax, and the Director of Financial Reporting, (ii) the Company did notmaintain a sufficient complement of personnel with a level of knowledge of theCompany’s accounting records and technical competence to ensure properapplication of U.S. generally accepted accounting principles, (iii) the 

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Company did not maintainsupport for certain elimination entries and fresh-start accounting entriesrelative to the financial statement consolidation process, which contributed tothe improper determination of the loss on asset dispositions and the materialweakness described below related to the accounting for foreign currency, and(iv) the Company did not maintain effective controls to provide reasonableassurance that certain balance sheet accounts were complete, accurate, agreedto detailed support, and were based on reasonable assumptions, and that accountreconciliations were properly performed, reviewed and approved, including theallowance for doubtful accounts, inventory, severance accrual, group insuranceaccrual, pension liability, and received not vouchered accrual. This controldeficiency contributed to the material weakness described below in accountingfor foreign currency translation.

*Oversight and monitoringof certain international locations.**  *The Company determined that internal controls relatedto the oversight and monitoring of certain international locations were noteffective and represented a material weakness in internal control overfinancial reporting as of December 31, 2004. This material weaknesscontinues to exist at December 31, 2005. During the year end financialstatement close process, various adjustments were identified to the amountsreported by the Company’s Brazilian and South African subsidiaries.

*Foreign currencyaccounting.**  *Internalcontrols related to foreign currency accounting were not effective andrepresented a material weakness in internal control over financial reporting atDecember 31, 2005. The Company had insufficient controls to ensure thetranslation of financial statement accounts denominated in foreign currenciesand foreign currency transaction gains or losses were completely and accuratelyrecorded in its financial statements in accordance with U.S. generally acceptedaccounting principles. The insufficient controls include (i) limitedknowledge by foreign personnel in determining the proper classification betweenincome and other comprehensive loss and (ii) insufficient review byknowledgeable U.S. personnel responsible for financial reporting. This materialweakness resulted in adjustments to stockholders’ equity, other income(expense), and loss on discontinued operations.

*Reconciliation of inter-companyaccount balances.*   As of September 30, 2005,the Company identified a control deficiency relating to the reconciliation ofinter-company account balances, which represented a material weakness. Thecontrol deficiency resulted from inadequate procedures to reconcile the inter-companyaccount balances and analyze unmatched items. In evaluating the control deficiencyit was determined that certain items pertained to periods both prior to andsubsequent to the Company’s application of fresh-start accounting upon itsemergence from bankruptcy. As such, this material weakness resulted inadjustments to inter-company balances, accumulated other comprehensive loss andother income. In addition, as noted above, a material weakness was identifiedas of December 31, 2005 related to foreign currency accounting, primarilywith regard to inter-company related balances. Therefore, the material weaknessrelated to the reconciliation of the inter-company account balances continuesto exist as of December 31, 2005.

*Income tax accounting.*   Certainerrors were identified which required correction in the calculation of theCompany’s income tax provision and related deferred tax asset and taxcontingency reserve accounts. Specifically, the errors related to adjusting thedeferred tax liability for subsequent changes in the book-tax basis differenceof the Company’s investment in its primary subsidiary since its emergence frombankruptcy. In addition, the Company failed to properly recognize certain taxcontingencies in the prior period. These errors resulted from insufficientcontrols including (i) limited personnel with adequate knowledge to properlymaintain the income tax records and disclosure arising from fresh-startaccounting and (ii) insufficient records to account for the changes in certainrelated book-tax basis differences that determine the deferred tax liabilities.This condition constitutes a material weakness as of December 31, 2005.

Collectively, thesematerial weakness resulted in the Company not being able to file its 2005financial statements on Form 10-K timely as required by the Securitiesand Exchange Commission and required the 

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Company to restate itsconsolidated financial statements for the year ended December 31, 2004 andthe seven months ended December 31, 2003 and its quarterly consolidatedfinancial statements for the first three quarters of 2005, each quarter in 2004and the second, third and fourth quarters in 2003. These material weaknesseswere considered in determining the nature, timing, and extent of audit testsapplied in our audit of the 2005 financial statements, and this report does notaffect our report dated August 2, 2006 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 31,2005, is fairly stated, in all material respects, based on the COSO criteria.Also, in our opinion, because of the effect of the material weaknesses describedabove on the achievement of the objectives of the control criteria, ThermadyneHoldings Corporation has not maintained effective internal control overfinancial reporting as of December 31, 2005, based on the COSO criteria.

/s/ERNST &YOUNG LLP

St. Louis, MissouriAugust 2, 2006

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**Item 9B.**               *Other Information*

Changes in Management

As we previously disclosedon a Form 8-K filed July 12, 2006, Steven W. Fray notified theCompany of his intention to resign, effective July 20, 2006 from his positionas Vice President Finance, Global Controller and Principal Accounting Officer.Mr. Fray postponed his resignation date until August 3, 2006. On July 31, 2006,the Board appointed Paul D. Melnuk Acting Principal Financial Officer.

**PART III**

**Item10.**                 *Directors and Executive Officers of the Registrant*

Setforth below is the name, age, position and a brief account of the businessexperience of each of our executive officers and directors.

| **Name**                   | ** ** | ** ** | ** ** | **Age** | ** ** | **Position(s)**                                             | ** ** |
|----------------------------|------------|------------|------------|---------|------------|-------------------------------------------------------------|------------|
| Paul D. Melnuk             |       |       | 51         |    |       | Chairman of the Board  and Chief Executive Officer          |       |
| J. Joe Adorjan             |       |       | 66         |    |       | Director                                                    |       |
| Andrew L. Berger           |       |       | 59         |    |       | Director                                                    |       |
| James B. Gamache           |       |       | 51         |    |       | Director                                                    |       |
| Marnie S. Gordon           |       |       | 40         |    |       | Director                                                    |       |
| John G.  Johnson, Jr. |       |       | 65         |    |       | Director                                                    |       |
| Bradley G. Pattelli        |       |       | 39         |    |       | Director                                                    |       |
| John A. Boisvert           |       |       | 44         |    |       | Executive Vice President—Brand  Management             |       |
| Terry Downes               |       |       | 39         |    |       | Executive Vice President—Global  Corporate Development |       |
| Dennis G. Klanjscek        |       |       | 56         |    |       | Executive Vice President—Asia  Pacific                 |       |
| Martin Quinn               |       |       | 49         |    |       | Executive Vice President—Global Sales                  |       |

 

| Paul D. Melnuk |   | Mr. Melnuk has been  a member of our Board of Directors since May 2003, was elected Chairman  of the Board in October 2003, and was appointed Chief Executive Officer  on January 28, 2004. Mr. Melnuk is a director and chairman of the  audit committee at Petro-Canada, a multinational integrated oil and gas  company headquartered in Calgary, Alberta, and a director of several private  companies. Mr. Melnuk has been a managing partner of FTL Capital  Partners, LLC, a private equity firm, since 2001. Prior to 2001,  Mr. Melnuk served as President and Chief Executive Officer of the  predecessor to The Premcor Refining Group Inc., an oil refining company,  Barrick Gold Corporation, a gold mining company, and Bracknell Corporation, a  contracting company. |
|----------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| J. Joe Adorjan |   | Mr. Adorjan has  been a member of our Board of Directors since October 2005. He serves on  our audit committee and compensation committee. Mr. Adorjan is Chairman  of Adven Capital, a private equity firm and is a Partner of Stonington  Partners Inc. He served as Chairman and Chief Executive Officer of  Borg-Warner Security Corporation, a provider of security services, from 1995-2000.  Prior to joining Borg-Warner Security Corporation, Mr. Adorjan was  President of Emerson Electric. Mr. Adorjan served as Chairman and Chief  Executive Officer of ESCO Electronics Corporation from 1990 to 1992.  Mr. Adorjan serves as a director for Goss Graphics Systems Inc. and is  Chairman of Bates Sales Company.                                                            |

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| Andrew L. Berger          |   | Mr. Berger has been  a member of our Board of Directors since May 2003. He is Chairman of our  Board’s nominating and corporate governance committee and a member of the  compensation committee. Since 2003, he has been a Senior Managing Director of  C.E. Unterberg, Towbin and is currently chairman of its asset management  business. From 1998 until 2002, he was a member of executive management of  Union Bancaire Privee in Geneva, Switzerland and was responsible for  coordinating asset management activities and for corporate development. Prior  thereto, he held positions in financial services businesses in New York and  London, and practiced law in New York and Paris.                      |
|---------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| James B. Gamache          |   | Mr. Gamache has  been a member of our Board of Directors since May 2003. He serves on our  board’s audit committee and the nominating and corporate governance  committee. Mr. Gamache was the Vice President of sales, western division  of Roadway Express, Inc. from February 1993 to December 2001.  Thereafter, he took a special assignment as a Director of Roadway Air until  September 2003, when he was named Vice President of special services for  Roadway Express Inc. Since May, 2005, he has held the position of Senior Vice  President of sales for YRC Regional Transportation. Mr. Pattelli, a  member of our Board of Directors, is Mr. Gamache’s nephew. |
| Marnie S. Gordon          |   | Ms. Gordon has been  a member of our Board of Directors since May 2003. She chairs our  board’s audit committee and serves on our board’s nominating and corporate  governance committee. Ms. Gordon was a Director at Angelo,  Gordon & Co., L.P. from 1998 until 2001. Prior to that,  Ms. Gordon was a Vice President at Goldman, Sachs & Co, a  position she held from 1993 until 1998. Ms. Gordon was also a Director  on the board of and chair of the audit committee for Telewest  Global, Inc. until March, 2006 at which time it merged with NTL.  Ms. Gordon is a Chartered Financial Analyst.                                                              |
| John G. Johnson, Jr. |   | Mr. Johnson has  been a member of our Board of Directors since May 2003. He is our lead  director, chairman of our board’s compensation committee and serves on our  board’s audit committee. Mr. Johnson was the President and Chief  Executive Officer of Foamex International, Inc. from April 1999 to  January 2001 and the President and Chief Executive Officer of Safety-Kleen  Corp. from January 1993 to August 1997. Mr. Johnson is  Chairman of the Board of Directors of GenTek Inc.                                                                                                                                                                               |
| Bradley G. Pattelli       |   | Mr. Pattelli has  been a member of our Board of Directors since May 2003. Since 1998,  Mr. Pattelli has been employed by Angelo, Gordon & Co., L.P. as  an investment analyst, where he focuses on the leveraged loan and distressed  securities markets. Previously, he served as a portfolio manager and analyst  at di Silvestri Asset Management LLC. Mr. Pattelli is a Chartered  Financial Analyst. Mr. Gamache is Mr. Pattelli’s uncle.                                                                                                                                                                                                                                            |

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| John A. Boisvert    |   | Mr. Boisvert  was elected Executive Vice President of brand management in  January 2003. Previously, he served as Executive Vice President for our  subsidiaries, Thermal Dynamics Corporation and C&G Systems Inc. Prior to  that time, Mr. Boisvert served as the Vice President, General Operations  Manager for Thermal Dynamics and C&G. He has over 20 years of experience  in various capacities within Thermadyne. |
|---------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Terry Downes        |   | Mr. Downes joined  Thermadyne in June 2003 as the Vice President Global Corporate  Development and in March of 2006 was promoted to Executive Vice  President. He has 12 years of international business development experience  with primary focus in the manufacturing sector. He was previously employed by  Novar PLC and Redland PLC. Terry has lived in the U.S., Latin America,  Southeast Asia and Europe.                 |
| Dennis G. Klanjscek |   | Mr. Klanjscek has  served as Executive Vice President-Asia Pacific since  January 1996. Prior to January 1996, Mr. Klanjscek spent over  20 years with British Oxygen Company and six years leading a management  buyout of a welding company in Australia.                                                                                                                                                                   |
| Martin Quinn        |   | Mr. Quinn was  elected Executive Vice President of global sales effective March 30,  2005. From 1999 to March 30, 2005, Mr. Quinn served as Vice  President marketing and sales—Asia Pacific. Prior to that, he was Managing  Director—Asia.                                                                                                                                                                        |

 

No executive officer ordirector, or any associate of an executive officer or director, is a partyadverse to us or any of our subsidiaries in any material proceeding or has anymaterial interest adverse to us or our subsidiaries. Except as indicated above,no executive officer or director is related by blood, marriage or adoption toany other executive officer or director.

**Section 16(a) Beneficial Ownership ReportingCompliance**

Directors, executiveofficers and beneficial owners of more than ten percent of our common stock arerequired by Section 16(a) of the Securities Exchange Act to filereports with the SEC detailing their beneficial ownership of the Company’scommon stock and reporting changes in such beneficial ownership. The Company isrequired to disclose any late filings of such reports. All Section 16(a) filingrequirements during 2005 were complied with on a timely basis.

**Audit Committee**

The audit committeeassists the Company’s Board of Directors in fulfilling its financial oversightresponsibilities by reviewing all audit processes and fees, the financialinformation that will be provided to the stockholders, and its systems ofinternal financial controls. The audit committee has the sole authority andresponsibility to select, evaluate and, where appropriate, replace our independentpublic accountants. The audit committee held 22 meetings in 2005. The board hasadopted a written charter for the audit committee. The charter was included asan appendix to the 2005 proxy statement and is available on our website atwww.thermadyne.com.

The Company has aseparately-designated audit committee. The audit committee consists of Marnie S.Gordon, J. Joe Adorjan, James B. Gamache and John G. Johnson, Jr. TheBoard of Directors has determined that Ms. Gordon is an “audit committeefinancial expert” as defined in Item 401(h) of Regulation S-K. Eachmember of the audit committee is an independent director, as defined in thelisting standards of The Nasdaq Stock Market. Although our securities are nottraded on The Nasdaq Stock Market, for purposes of assessing directorindependence, the Board of Directors uses the definition of “independence”contained in current Rule 4200(a)(15) of the listing standards of TheNasdaq Stock 

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Market.In addition to being “independent” under this Rule, each member of the auditcommittee meets the heightened criteria for independence applicable to membersof audit committees under Rule 4350(d)(2)(A) of the listing standardsof The Nasdaq Stock Market.

Since the release of ourproxy statement in connection with the 2005 annual meeting of stockholders, wehave not implemented any material changes to the procedures by whichstockholders may recommend nominees to the Company’s Board of Directors.

**Code of Ethics**

We have adopted a Code ofEthics that applies to our principal executive officer, principal financialofficer and principal accounting officer. A copy of our Code of Ethics can befound on our website at www.thermadyne.com. We intend to disclose futureamendments to our Code of Ethics, as well as any waivers thereof, on ourwebsite to the extent permissible by the rules and regulations of the SECand any exchange upon which our stock may be listed.

**Item11.**                 *Executive Compensation*

**Information about Executive Compensation**

SUMMARY COMPENSATION

The following table summarizesthe compensation earned during 2005, 2004 and 2003 by the Company’s chiefexecutive officer and its four other most highly compensated executive officerswho were serving as executive officers on December 31, 2005 (the “namedexecutives”).

**SUMMARYCOMPENSATION TABLE**

| ** **                      | ** ** | ** ** | ** ** | **Annual Compensation** | ** ** | **Long-term Compensation** | ** ** |
|---------------------------------|------------|------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                      | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                      | ** ** | **Other Annual** | ** ** | **Securities** | ** ** | **All Other** | ** ** |
| **Name and**               | ** ** | ** ** | ** ** | ** **                   | ** ** | ** **                      | ** ** | **Compensation** | ** ** | **Underlying** | ** ** | **Compensation** | ** ** |
| **Principal Position**     | ** ** | ** ** | ** ** | **Year**                     | ** ** | **Salary ($)**             | ** ** | **Bonus ($)** | ** ** | **($)** | ** ** | **Options (#)(1)** | ** ** | **($)(2)** | ** ** |
| Paul D. Melnuk                  |       | 2005       |       |                         | 570,193    |                            |       |   | 150,000 | (5) |   |   | — |   |   |   | 6,300 |   |   |   |   |   |   |
| President and Chief             |       | 2004       |       |                         | 428,308    |                            |       |   | — |   |   |   | 32,400 | (3) |   |   | 175,000 |   |   |   |   |   |   |
| Executive Officer               |       | 2003       |       |                         |       |                            |       |   | — |   |   |   | 124,517 | (3) |   |   | 50,000 |   |   |   | — |   |   |
| John Boisvert                   |       | 2005       |       |                         | 266,288    |                            |       |   | 71,000 | (5) |   |   | 21,363 | (2) |   |   | — |   |   |   | — |   |   |
| Executive Vice  President— |       | 2004       |       |                         | 300,850    |                            |       |   | — |   |   |   |   |   |   |   | 50,000 |   |   |   | 3,129 |   |   |
| Brand Management                |       | 2003       |       |                         | 191,262    |                            |       |   | 61,667 |   |   |   |   |   |   |   | — |   |   |   | 1,050 |   |   |
| Terry Downes                    |       | 2005       |       |                         | 165,896    |                            |       |   | 78,100 | (5) |   |   | 6,000 | (2) |   |   | 15,500 |   |   |   | — |   |   |
| Executive Vice President—  |       | 2004       |       |                         | 136,909    |                            |       |   | 5,600 |   |   |   |   |   |   |   | 25,000 |   |   |   | 4,000 |   |   |
| Global Corporate                |       | 2003       |       |                         | 69,231     |                            |       |   | — |   |   |   |   |   |   |   | — |   | ** ** | ** ** | **—** |   |   |
| Development(4)                  |       |       |       |                         |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dennis Klanjscek                |       | 2005       |       |                         | 331,526    |                            |       |   | 65,323 | (5) |   |   | 30,469 | (2) |   |   | 25,000 |   |   |   | 53,160 |   |   |
| Executive Vice  President— |       | 2004       |       |                         | 343,546    |                            |       |   | — |   |   |   |   |   |   |   | — |   |   |   | 38,146 |   |   |
| Asia Pacific                    |       | 2003       |       |                         | 323,280    |                            |       |   | 293,961 |   |   |   |   |   |   |   | — |   |   |   | 34,933 |   |   |
| Martin Quinn                    |       | 2005       |       |                         | 247,807    |                            |       |   | 132,348 | (5)(6) |   |   | 4,478 | (2) |   |   | 50,000 |   |   |   | 23,190 |   |   |
| Executive Vice  President— |       | 2004       |       |                         | 176,056    |                            |       |   | 61,889 |   |   |   |   |   |   |   | — |   |   |   | 42,770 |   |   |
| Global Sales                    |       | 2003       |       |                         | 167,801    |                            |       |   | 71,595 |   |   |   |   |   |   |   | — |   |   |   | 40,836 |   |   |
| David L. Dyckman                |       | 2005       |       |                         | 275,906    |                            |       |   | — |   |   |   | 22,921 | (2) |   |   | — |   |   |   | — |   |   |
| Former Executive  Vice          |       |       |       |                         |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| President                       |       |       |       |                         |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Chief Financial Officer(7)      |       |       |       |                         |       |                            |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                 |            |            |            |                              |            |                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          Mr. Melnukwas granted 25,000 shares as a non-employee director and 175,000 as ChiefExecutive Officer. All other shares held by named executive officers weregranted under the 2004 Stock Incentive Plan.

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(2)          Allother compensation includes as follows: Paul D. Melnuk $6,300 (deferredcompensation to 401(k) plan); Dennis Klanjscek (a citizen of Australia)$83,629 ($30,469 car, $45,187 to superannuation retirement fund, $7,973 to jobfacility); John Boisvert $21,363 ($6,000 car allowance and $15,363 one-timevacation payout); Martin Quinn (a citizen of Australia) $27,668 ($22,293 tosuperannuation retirement fund, $4,478 car allowance, $897 job facility); TerryDownes $6,000 (car allowance). David Dyckman $22,921 ($6,000 car allowance and$16,921 vacation payout).

(3)          Representscompensation earned as a non-employee director, prior to Mr. Melnuk’selection as an officer.

(4)          Priorto March 2006, Mr. Downes served as the Company’s Vice President—GlobalCorporate Development.

(5)          ThermadyneIncentive Plan (2005 bonus).

(6)          Mr.Quinn received a one-time signing bonus of $61,348.

(7)          Mr. Dyckmanresigned from his position on December 22, 2005.

**Option/SAR Grants in Last Fiscal Year**

Thefollowing table provides information with respect to the stock option grantsmade during 2005 to each named executive officer. No stock appreciation rightswere granted to the named executive officers during the fiscal year.

| ** **                                                                                                                                                                  | ** ** | **Individual Grants** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                                                                                                                  | ** ** | **Number of**         | ** ** | **Percent of** | ** ** | ** ** | ** ** | ** ** | ** ** | **Potential Realizable Value** | ** ** |
| ** **                                                                                                                                                                  | ** ** | **Securities**             | ** ** | **Total Options** | ** ** | ** ** | ** ** | ** ** | ** ** | **at Assumed Annual Rates of** | ** ** |
| ** **                                                                                                                                                                  | ** ** | **Underlying**             | ** ** | **Granted to** | ** ** | ** ** | ** ** | ** ** | ** ** | **Stock Price Appreciation for** | ** ** |
| ** **                                                                                                                                                                  | ** ** | **Options**                | ** ** | **Employees in** | ** ** | **Exercise** | ** ** | **Expiration** | ** ** | **Option Term** | ** ** |
| **Name**                                                                                                                                                                    | ** ** | ** **                 | ** ** | **Granted** | ** ** | **Fiscal Year** | ** ** | **Price** | ** ** | **Date** | ** ** | **5%** | ** ** | **10%** | ** ** |
| Dennis Klanjscek(1)                                                                                                                                                         |       |                       | 20,000     |   |   |   | 3.9 | % |   |   | $ | 14.45 |   |   | 7/20/2015 | ** ** | **$** | **134,800** | ** ** | **$** | **372,000** | ** ** |
|                                                                                                                                                                        |       |                       | 5,000      |   |   |   | 1.0 | % |   |   | $ | 13.75 |   |   | 9/12/2015 | ** ** | **$** | **38,000** | ** ** | **$** | **98,850** | ** ** |
| Martin Quinn(1)                                                                                                                                                             |       |                       | 50,000     |   |   |   | 9.7 | % |   |   | $ | 12.15 |   |   | 4/4/2015 | ** ** | **$** | **437,500** | ** ** | **$** | **1,000,000** | ** ** |
| Terry J. Downes(1)                                                                                                                                                          |       |                       | 15,000     |   |   |   | 2.9 | % |   |   | $ | 12.18 |   |   | 4/21/2015 | ** ** | **$** | **131,400** | ** ** | **$** | **301,350** | ** ** |
|                             (2) |       |                       | 500        |   |   |   | 0.1 | % |   |   | $ | 13.95 |   |   | 7/12/2015 | ** ** | **$** | **3,610** | ** ** | **$** | **9,520** | ** ** |
| David L. Dyckman(1)                                                                                                                                                         |       |                       | 50,000     |   |   |   | 9.7 | % |   |   | $ | 12.80 |   |   | 12/22/2005 | (3) | **—**** ** | ** ** | **—** | ** ** |
|                                                                                                                                                                             |            |                            |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          Theoptions shall become exercisable as follows: (i) one-half of the optionsbecame vested and exercisable on December 31, 2005, however, the sale ofshares acquired by an exercise is restricted until the original vesting datesof the options; and (ii) one-half will become vested and exercisable inthree equal annual installments on each of the first three anniversaries of thedate of the grant (“Installment Date”) if the Company achieves its Return onInvested Capital Targets in accordance with its annual budget for theimmediately preceding fiscal year (the “Performance Options”). If thePerformance Options do not vest in any year due to the failure to achieveReturn on Invested Capital Targets for such year, such Performance Optionsshall vest on any subsequent Installment Date if the Company has achieved onsuch date the Return on Invested Capital Targets for the current year, plus theReturn on Invested Capital Targets for the prior years for which such targetswere not achieved (after taking into account any portion of such targetsachieved in prior years). Notwithstanding the above vesting schedule, thePerformance Options shall become exercisable as to 100% of the shares of commonstock subject to the Performance Options seven (7) years after the date ofthe grant (but only to the extent such Performance Options have not otherwiseterminated or become exercisable) whether or not the Return on Invested CapitalTargets are achieved.

(2)          Theoptions became exercisable on December 31, 2005, however, the sale ofshares acquired by an exercise is restricted until the original vesting datesof the options.

(3)          Uponhis resignation on December 22, 2005, all options were cancelled.

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**OPTION EXERCISES AND YEAR-END VALUE OF UNEXERCISEDOPTIONS**

Thefollowing table sets forth information regarding the number and value ofexercised and unexercised options held by each of the named executive officersas of December 31, 2005.

| ** **       | ** ** | ** **   | ** **   | ** **           | ** ** | **Number of Securities**            | ** **   | **Value of Unexercised**    | ** ** |
|------------------|------------|--------------|--------------|----------------------|------------|-----------------------------------------------|--------------|---------------------------------------|------------|
| ** **       | ** ** | **Shares**   | ** **   | ** **           | ** ** | **Underlying Unexercised**               | ** **   | **In-the-Money Options at** | ** ** |
| ** **       | ** ** | **Acquired** | ** **   | **Value**            | ** ** | **Options at Fiscal Year-End** | ** **   | **Fiscal Year-End**              | ** ** |
| **Name**         | ** ** | ** **   | ** **   | **on Exercise** | ** ** | **Realized**                                  | ** **   | **Exercisable**                       | ** ** | **Unexercisable** | ** ** | **Exercisable** | ** ** | **Unexercisable** | ** ** |
| Paul D. Melnuk   |       |         | —       |                 |       |                                          | —       |                                  |       |   | 137,500 |   |   |   | 87,500 |   |   |   | $ | 76,250 |   |   |   | $ | 17,500 |   |   |
| Dennis Klanjscek |       |         | —       |                 |       |                                          | —       |                                  |       |   | 12,500 |   |   |   | 12,500 |   |   |   | — |   |   |   | — |   |   |
| John Boisvert    |       |         | —       |                 |       |                                          | —       |                                  |       |   | 25,000 |   |   |   | 25,000 |   |   |   | $ | 5,000 |   |   |   | $ | 5,000 |   |   |
| Martin Quinn     |       |         | —       |                 |       |                                          | —       |                                  |       |   | 25,000 |   |   |   | 25,000 |   |   |   | $ | 28,750 |   |   |   | $ | 28,750 |   |   |
| Terry J. Downes  |       |         | —       |                 |       |                                          | —       |                                  |       |   | 28,000 |   |   |   | 12,500 |   |   |   | $ | 19,300 |   |   |   | $ | 2,500 |   |   |
| David L. Dyckman |       |         | —  |                 |       |                                          | —  |                                  |       |   | —  |   |   |   | —  |   |   |   | —  |   |   |   | —  |   |   |
|                  |            |              |              |                      |            |                                               |              |                                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Compensation of Directors

Other than Mr. Melnuk, each director is entitledto receive a $75,000 annual fee. Forty percent of this annual fee is depositedinto our Non-Employee Director Deferred Compensation Plan (the “DeferredCompensation Plan’’). Mr. Melnuk does not receive any additionalcompensation or fees by reason of his membership on, or attendance at meetingsof, the Board.

Under the Deferred Compensation Plan, deferral amountsare credited to an account and converted into the amount of shares of ourcommon stock equal to the amount deferred divided by the fair market value ofour common stock on the deferral date. A director’s account is distributedpursuant to the terms of the Deferred Compensation Plan upon his or hertermination or a change in control; otherwise, the account is distributed assoon as administratively feasible after the date specified by the director.Directors may elect to receive the shares in their accounts in either a lumpsum or substantially equal installments over a period not to exceed five years.

We also pay Messrs. Berger and Johnson $5,000 per yearfor their services as chairman of our nominating and corporate governancecommittee and chairman of our compensation committee, respectively.Mr. Johnson also receives $10,000 per year for his service as leaddirector. Ms. Gordon is paid $20,000 for her service as chair of our auditcommittee.

Additionally, we granted to each of Messrs. Berger,Pattelli, Gamache, Melnuk and Johnson and Ms. Gordon non-qualified stockoptions to purchase 25,000 shares of our common stock under Thermadyne HoldingsCorporation Non-Employee Directors Stock Option Agreements in August 2003. Alloptions are non-qualified stock options granted at 100% of the fair marketvalue on the grant date. As of December 31, 2005, the vesting of all ofthese options was accelerated. The options expire ten years from the date ofgrant.

Directors also are reimbursed for all reasonabletravel and other expenses of attending meetings of the board of directors,committee meetings of the board of directors, and such other meetings asrequested by the chairman. They are also reimbursed for the cost of attendingone seminar per year on topics relevant to director education.

Pursuant to an arrangementbetween Mr. Pattelli and his employer, Angelo, Gordon &Co., L.P., all stock and director fees to which Mr. Pattelli isotherwise entitled are paid and distributed to Angelo, Gordon &Co., L.P. and are subsequently remitted to the funds that hold shares ofstock in us on a pro rata basis.

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**Employment Agreements**

*Mr. Melnuk*

Paul Melnuk, the chairman of the Company’s Board ofDirectors, was named chief executive officer on January 28, 2004. Inexchange for his services, the Company entered into an agreement to payMr. Melnuk $550,000 annually and agreed to grant to him stock options topurchase an aggregate of 175,000 shares of common stock. One half of theseoptions are vested. The other half of these options vest ratably over threeyears if the Company meets certain performance objectives and in any case,seven years after the date of the grant if they have not been terminated orbecome otherwise exercisable whether or not the Company has met the performanceobjectives. This is in addition to the stock options to purchase an aggregateof 25,000 shares of the Company’s common stock which were granted to him whilehe assisted the management of the Company prior to being named chief executiveofficer. Mr. Melnuk will also be eligible for a bonus in an amount up tohis annual salary if Mr. Melnuk meets certain mutually agreed uponperformance objectives.

Mr. Melnuk’semployment may be terminated by the Company for cause or permanent disability.If Mr. Melnuk is terminated without cause, he will be entitled to receivepay equal to one year of base pay plus the average bonus for the last twoyears. If Mr. Melnuk’s position is eliminated after a change of control,Mr. Melnuk is entitled to severance pay equal to two years of base payplus the average bonus for the last two years.

*Mr. Boisvert*

The Company entered into a Second Amended and RestatedExecutive Employment Agreement with Mr. Boisvert in January 2004pursuant to which he serves as executive vice president brand management.Additionally, if the Company meets or exceeds a targeted return on investedcapital based on our annual budget, and he meets certain mutually agreed-uponperformance objectives, Mr. Boisvert is entitled to a bonus of not lessthan 60% of his salary.

The Company granted Mr. Boisvert options topurchase up to 50,000 shares of its common stock, with half of the optionsvesting in three equal annual installments on August 1, 2004, 2005 and2006. The other half will vest in three equal annual installments on each ofthe first three anniversaries of the date of grant if the Company meets certainperformance objectives.

The employment agreementis subject to termination with cause (as defined by the agreement), upon deathor disability, without cause, and for constructive termination. No severancepay is due under any agreement terminated with cause. Severance pay equal to 18months of base pay plus the bonus for the year in which the termination occursis due under any other termination event.

*Mr. Klanjscek*

The Company entered into an Amended and RestatedExecutive Employment Agreement with Mr. Klanjscek on June 13, 2002,pursuant to which he serves as Executive Vice President—Asia Pacific. Under theAgreement, Mr. Klanjscek is paid Australian $415,000 per year plus a bonusof up to 60% under the Company’s bonus plan.

*Theemployment agreement is subject to termination with cause, upon death ordisability, without cause, and for constructive termination. Except fortermination for cause, upon termination Mr. Klanjscek would be entitled totwo years pay plus two years of his average annual bonus in the two yearspreceding termination. No severance is due under any agreement if terminatedfor cause.*

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*Mr. Quinn*

The Company entered into an Executive EmploymentAgreement with Mr. Quinn in April 2005 pursuant to which he serves asexecutive vice president global sales. Additionally, if the Company meets orexceeds a targeted return on invested capital based on our annual budget, andhe meets certain mutually agreed upon performance objectives, Mr. Quinn isentitled to a bonus of not less than 75% of his salary.

The Company granted Mr. Quinn options to purchaseup to 50,000 shares of its common stock, with half of the options vesting inthree equal annual installments on April 4, 2006, April 4, 2007 and April 4,2008. The other half will vest in three equal annual installments on each ofthe first three anniversaries of the date of grant if the Company meets certainperformance objectives.

The employment agreementis subject to termination with cause (as defined by the agreement), upon deathor disability, without cause, and for constructive termination. No severancepay is due under any agreement terminated with cause. Severance pay equal to 12months of base pay plus the bonus for the year in which the termination occursis due under any other termination event.

*Mr. Downes*

The Company entered into a Second Amended and RestatedExecutive Employment Agreement with Mr. Downes in January 2004pursuant to which he serves as vice president global corporate development.Additionally, if the Company meets or exceeds a targeted return on investedcapital based on its annual budget, and he meets certain mutually agreed-uponperformance objectives, Mr. Downes is entitled to a bonus of not less than50% of his salary.

The Company granted Mr. Downes options to purchaseup to 25,000 shares of our common stock, with half of the options vesting inthree equal annual installments on August 1, 2004, 2005 and 2006. Theother half will vest in three equal annual installments on each of the firstthree anniversaries of the date of grant if the Company meets certainperformance objectives.

The employment agreementis subject to termination with cause (as defined by the agreement), upon deathor disability, without cause, and for constructive termination. No severancepay is due under any agreement terminated with cause. Severance pay equal to 12months of base pay plus the bonus for the year in which the termination occursis due under any other termination event.

**CompensationCommittee Report**

The compensation committee is responsible for theoversight and administration of the Company’s executive compensation program.The committee operates pursuant to a written charter.

The Company’sexecutive compensation program was based on a philosophy that the totalcompensation package must be competitive with comparable companies with whomthe Company competes for talent in order to attract and retain outstandingexecutives. The program also seeks to emphasize variable compensation that isdependent on the achievement of performance goals set by the committee. The2005 executive compensation program was based on the following principles:

·       Basesalaries

·       Annualincentive awards

·       Optiongrants

The philosophy underlying each element of executivecompensation is discussed below.

Base Salary.   Basesalary reflects the external market value of a particular role as well as theexperiences and qualifications that an individual brings to the role. Basesalary is generally targeted to the 

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median of the base paypaid by comparable companies for a particular role. Base salary is targeted atthe median of other manufacturing companies that participate in compensationsurveys conducted by human resource consulting firms. Where scope data isavailable, companies are of a similar size.

Annual Incentive Plan.   The Incentive Plan for all salaried employees, includingexecutives, provides for cash awards that are determined shortly after the endof the performance year being measured. In 2005, each participant was eligiblefor an annual bonus based on a combination of company and individualperformance. The committee considers key achievements and missed opportunitiesof each executive as well as approving the total bonus amount.

Other Grants.   The committee may also make grantsof stock options to individual executives to hire or retain those individualsor motivate achievement of particular business objectives. Additional stockoption grants may be made to hire or retain certain individuals, reflectincreased responsibility, or motivate the achievement of a particular businessobjective.

**Chief ExecutiveOfficer Compensation**

The committee is responsible for reviewing no lessthan annually the performance of the Company’s chief executive officer anddetermining the compensation of the chief executive officer.

Effective as of January 28,2004, the date of his election as chief executive officer of Thermadyne, Mr. Melnukexecuted an executive employment agreement with the Company pursuant to whichhis annual base pay compensation is $550,000. In addition, Mr. Melnuk is eligiblefor a bonus in an amount up to his annual salary based on the Company’s annualbudget if Mr. Melnuk meets certain mutually agreed-upon performanceobjectives. Mr. Melnuk received a bonus for 2005 of $150,000.

**Section 162(m)**

Section 162(m) of the Internal Revenue Codeof 1986 (“Section 162(m)”), as amended, limits the federal income taxdeductibility of compensation paid to the executive officers named in theSummary Compensation Table. The Company generally may deduct compensation tosuch an officer only if the compensation does not exceed $1,000,000 during anyfiscal year or is “performance-based” as defined in Section 162(m).

The compensation committee believes these executivecompensation policies and programs effectively serve the interests of stockholdersand Thermadyne and are appropriately balanced to provide increased motivationfor executives to contribute to Thermadyne’s future success.

**By theCompensation Committee:**John G. Johnson, Jr., ChairmanJ. Joe AdorjanAndrew L. Berger

**CompensationCommittee Interlocks and Insider Participation**

The members of our compensation committee duringfiscal year 2005 were Andrew L. Berger, J. Joe Adorjan, John G. Johnson, Jr.,and James B. Gamache.

None of our executiveofficers serves as a director or member of the compensation committee, or othercommittee serving an equivalent function, of any other entity that has one ormore of its executive officers serving as a member of our Board of Directors orcompensation committee. None of the current members of our compensationcommittee has ever been an officer or employee of Thermadyne or any of oursubsidiaries.

59

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**Performance Graph**

On May 23, 2003, we emerged from Chapter 11bankruptcy protection. As a result, all shares of common stock outstanding on May 23,2003 were canceled on such date and new common stock was issued. The followinggraph shows a comparison of our cumulative total returns, the Nasdaq StockMarket Index and the Standard & Poor’s Midcap 400 Manufacturing(Specialized Industries) Index (the “S&P Midcap 400 Mfg Index”) for theperiods from May 30, 2003 (the first day of trading after the emergencefrom Chapter 11 bankruptcy) to December 31, 2003, January 1, 2004 to December 31,2004 and January 1, 2005 to December 31, 2005. The comparison assumes$100 was invested on May 30, 2003 in each of our common stock, the NasdaqStock Market Index, and the S&P Midcap 400 Mfg Index, and assumescompounded daily returns with reinvestment of dividends.

** **

**Value of $100 Invested**

| ** **                                | ** ** | **5/30/2003** | ** ** | **12/31/2003** | ** ** | **12/31/2004** | ** ** | **12/31/2005** | ** ** |
|-------------------------------------------|------------|---------------|------------|----------------|------------|----------------|------------|----------------|------------|
| Nasdaq Stock  Market                      |       | $             | 100.00     |           |       | $              | 125.53     |           |       |   | $ | 136.31 |   |   |   | $ | 138.53 |   |   |
| S&P Midcap  (Mfg) (Specialized Index) |       | $             | 100.00     |           |       | $              | 121.38     |           |       |   | $ | 139.78 |   |   |   | $ | 155.53 |   |   |
| Thermadyne Holdings Corporation           |       | $             | 100.00     |           |       | $              | 117.14     |           |       |   | $ | 123.81 |   |   |   | $ | 126.67 |   |   |

 

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

**Information aboutStock Ownership**

Thefollowing table sets forth, as of April 17, 2006, certain informationregarding the ownership of common stock (i) by each person known by theCompany to be the beneficial owner of more than 5% of the outstanding commonstock, (ii) by each director, (iii) by each named executive officer,and (iv) by all directors and executive officers as a group. The Companybelieves that, unless otherwise noted, each person shown in the following tablehas sole voting and sole investment power with respect to the shares indicated.

| ** **                                                                                          | ** ** | **Beneficial Ownership of** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|---------------------------------------|------------|
| ** **                                                                                          | ** ** | **Common Stock**                 | ** ** |
| ** **                                                                                          | ** ** | **Number of**                    | ** ** | **Percent of** | ** ** |
| **Name of Beneficial Owner**                                                         | ** ** | ** **                            | ** ** | **Shares** | ** ** | **Class (1)** | ** ** |
| Angelo,  Gordon & Co., L.P., 245 Park Avenue, New York, NY 10167(2)                        |       | 4,629,695                             |       |   | 34.8 | % |   |
| Yaupon Partners  L.P., 840 Apollo Street, Suite 223, El Segundo, CA 90245(3)                   |       | 1,154,246                             |       |   | 8.7 | % |   |
| Corsair Capital  Management, L.L.C., Jay R. Petschek, Steven Major and certain related  entities(4) |       | 1,032,101                             |       |   | 7.7 | % |   |
| Goldman,  Sachs & Co., The Goldman Sachs Group, Inc.(5)                               |       | 801,800                               |       |   | 6.0 | % |   |
| Delta Partners  LLC and Charles Jobson(6)                                                           |       | 676,000                               |       |   | 5.1 | % |   |
| Paul D. Melnuk(7)                                                                                   |       | 149,961                               |       |   | 1.1 | % |   |
| J. Joe Adorjan(7)                                                                                   |       | 2,500                                 |       |   | * |   |   |
| Andrew L.  Berger(7)                                                                                |       | 25,000                                |       |   | * |   |   |
| James B.  Gamache(7)                                                                                |       | 27,000                                |       |   | * |   |   |
| Marnie S.  Gordon(7)                                                                                |       | 25,000                                |       |   | * |   |   |
| John G.  Johnson, Jr.(7).                                                                      |       | 26,000                                |       |   | * |   |   |
| Bradley G.  Pattelli(7)                                                                             |       | 35,000                                |       |   | * |   |   |
| Dennis  Klanjscek(7)                                                                                |       | 12,500                                |       |   | * |   |   |
| John Boisvert(7)                                                                                    |       | 25,096                                |       |   | * |   |   |
| Terry J.  Downes(7)                                                                                 |       | 28,000                                |       |   | * |   |   |
| Martin Quinn(7)                                                                                     |       | 25,072                                |       |   | * |   |   |
| **All directors and executive  officers as a group (11 persons)(8)**                                | ** ** | **381,129**                           | ** ** | ** ** | **2.8** | **%** | ** ** |
|                                                                                                     |            |                                       |            |  |  |  |  |  |  |

----

*                    Representsless than 1%.

(1)          Based on 13,322,609shares of common stock outstanding and calculated in accordance with Rule 13d-3under the Securities Exchange Act of 1934, as amended.

(2)          Information with respectto the outstanding shares beneficially held by Angelo, Gordon & Co.,L.P. is based on a Schedule 13D/A filed with the SEC on September 19, 2005by such firm.

(3)          Information with respectto the outstanding shares beneficially owned by Yaupon Partners, L.P. is basedon a Schedule 13G filed with the SEC on February 2, 2006 by such firm.

(4)          Information is based ona Schedule 13G/A filed with the SEC on February 15, 2006 by CorsairCapital Partners, L.P., Corsair Long Short International, Ltd., Corsair Select,L.P., Corsair Capital Partners 100, L.P., Corsair Capital Investors, Ltd.,Corsair Capital Management, L.L.C., Jay R. Petschek and Steven Major.

(5)          Information with respectto the outstanding shares beneficially owned by Goldman, Sachs & Co.and The Goldman Sachs Group, Inc. is based on a Schedule 13G/A filed withthe SEC on February 3, 2006 by such firm.

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(6)          Information with respectto the outstanding shares beneficially owned by Delta Partners LLC and CharlesJobson is based on a Schedule 13G filed with the SEC on January 10, 2006.

(7)          Includes thefollowing number of respective options exercisable within 60 days of April 30,2006: Mr. Melnuk – 137,500; Mr. Berger – 25,000; Mr. Gamache – 25,000;Ms. Gordon – 25,000; Mr. Johnson – 25,000; Mr. Pattelli – 25,000;Mr. Klanjscek – 12,500; Mr. Boisvert – 25,000; Mr. Downes – 28,000;Mr. Quinn – 25,000; and all directors and executive officers asa group – 353,000.

(8)          Groupincludes: Mr. Melnuk, Mr. Adorjan, Mr. Berger, Mr. Gamache,Ms. Gordon, Mr. Johnson, Mr. Pattelli, Mr. Klanjscek, Mr. Boisvert,Mr. Downes, and Mr. Quinn.

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

In connection with the amendments of our Second-LienFacility to, among other things, increase our borrowings under such facilityfrom $20.0 million to $50.0 million, three affiliates of Angelo, Gordon &Co., LP (“Angelo Gordon”) became lenders of $36.0 million in the aggregateunder the Second-Lien Facility. Angelo Gordon holds approximately 34.8% of ouroutstanding shares of common stock. The terms of the Second-Lien Facility,including the amendments, were negotiated at arms length and we believe theterms of the facility are as favorable to us as could be obtained from a lenderwith whom we have no affiliation.

For a description of the Second-Lien Facility, see “Management’sDiscussion and Analysis of Financial Condition and Results ofOperations-Liquidity and Capital Resources.”

We are party to employmentagreements with Messrs. Melnuk, Boisvert, Klanjscek, Downes and Quinn. Fora more detailed discussion of these employment agreements, including severanceprovisions, see “Executive Compensation—Employment Agreements.”

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

**IndependentRegistered Public Accountant Fees and Other Matters**

Duringthe fiscal years ended December 31, 2005 and 2004, Ernst & YoungLLP, the Company’s independent registered public accountants, billed theCompany the fees set forth below in connection with services rendered by theindependent registered public accountants to the Company (in thousands):

| **Fee Category** | ** ** | ** ** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------|------------|------------|------------|----------|------------|----------|------------|
| Audit Fees            |       | $          | 3,291      |     | $          | 2,412    |       |
| Audit-Related  Fees   |       | 1          |       | 2        |       |
| Tax Fees              |       | 62         |       | 367      |       |
| Total                 |       | $          | 3,354      |     | $          | 2,781    |       |

 

Audit fees consisted of fees for the audits of theCompany’s annual financial statements and internal controls and review ofquarterly financial statements, as well as services normally provided inconnection with statutory and regulatory filings or engagements, comfortletters, consents and assistance with and review of company documents filedwith the SEC.

Audit-related fees consisted of fees forassurance and related services, including consultation concerning financialaccounting and reporting standards and consultation concerning matters relatingto Section 404 of the Sarbanes-Oxley Act of 2002.

Tax fees consisted of fees for tax compliance, taxadvice and tax planning services.

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The audit committee’spolicy is to pre-approve all audit and permissible non-audit services providedby the Company’s independent registered public accountants. These services mayinclude audit services, audit-related services, tax services and otherservices. Pre-approval is generally provided for up to one year and anypre-approval is detailed as to the particular service or category of services.The independent registered public accountants and management are required toperiodically report to the audit committee regarding the extent of servicesprovided by the independent registered public accountants in accordance withthis pre-approval. All 2005 and 2004 services were pre-approved by the auditcommittee.

**PART IV**

**Item 15.**                 *Exhibits and Financial Statement Schedules*

**Financial StatementSchedules**

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, 2005 and 2004                                                                                                                                                                             |       |     | F-3        |   |   |
| Consolidated Statements of Operations for the year  ended December 31, 2005, the year ended December 31, 2004, the  seven months ended December 31, 2003, and the five months ended  May 31, 2003                          |       |     | F-4        |   |   |
| Consolidated Statements of Shareholders’ Equity  (Deficit) for the year ended December 31, 2005, the year ended  December 31, 2004, the seven months ended December 31, 2003, and  the five months ended May 31, 2003 |       |     | F-5        |   |   |
| Consolidated Statements of Cash Flows for the year  ended December 31, 2005, the year ended December 31, 2004, the  seven months ended December 31, 2003, and the five months ended  May 31, 2003                          |       |     | F-6        |   |   |
| Notes to Consolidated Financial Statements                                                                                                                                                                                                     |       |     | F-7        |   |   |

 

All schedules for which provision is made in theapplicable accounting regulation of the Commission are not required under therelated instructions, are included in the financial statements or areinapplicable and therefore have been omitted.

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**Exhibits**

**THERMADYNEHOLDINGS CORPORATION2005 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |

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|        | 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.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |     |
|   | 3.26 |   | — | * * | Memorandum  and Articles of Association of Duxtech Pty. Ltd., dated March 6, 1989.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | * * |
|   | 3.27 |   | — |     | Memorandum and Articles  of Association of Cigweld Pty Ltd, formerly known as Edinen Pty. Ltd., dated  April 1, 1989, as amended.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                           |     |
|   | 3.28 |   | — |     | Memorandum and Articles  of Association of Quetala Pty. Ltd., dated April 1, 1989.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
|   | 3.29 |   | — |     | Memorandum and Articles  of Association of Quetack Pty. Ltd., dated April 1, 1989.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
|   | 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.(16)                                                                                                                                                                                                                                                                                                                                                                                                 |     |
|   | 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.(16)                                                                                                                                                                                                                                                                                                                                                                                                                   |     |
|   | 3.32 |   | — |     | Memorandum and Articles  of Association of Thermadyne Industries Limited.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |     |
|   | 3.33 |   | — |     | New Articles of  Association of Thermadyne Industries Limited dated June 10, 1992.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |     |
|   | 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) |     |

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|        | 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)                                                                                              |   |

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|        | 4.13 |   | — |   | Third Amendment 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 lender.(16)                                             |   |

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|        | 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.(16) |   |
|--------|------|--------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | 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.(16)     |   |
|   | 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.(16)              |   |
|   | 4.25 |   | — |   | Eighth Amendment to the  Second Amended and Restated Credit Agreement, executed as of October 5,  2005, by and among Thermadyne Holdings Corporation, Thermadyne  Industries, Inc. and certain of its subsidiaries and General Electric  Capital Corporation, as agent and lender and the lenders party thereto.(17)                                                                                                                                                                                           |   |
|   | 4.26 |   | — |   | Amendment No. 9  dated as of October 7, 2005, to the Second- Lien Credit Agreement among  Thermadyne Holdings Corporation, Thermadyne Industries, Inc. and certain  of its subsidiaries and Credit Suisse, as administrative agent and collateral  agent and the lenders party thereto.(17)                                                                                                                                                                                                               |   |
|   | 4.27 |   | — |   | Amendment No. 10  dated as of November 7, 2005, to the Second Lien Credit Agreement among  Thermadyne Holdings Corporation, Thermadyne Industries, Inc. and certain  of its subsidiaries and Credit Suisse, as administrative agent and collateral  agent and the lenders party thereto.(17)                                                                                                                                                                                                              |   |

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|        | 4.28 |   | — |   | Fourth Amendment to  Second Amended and Restated Credit Agreement dated as of March 31, 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.(18)             |   |
|--------|------|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | 4.29 |   | — |   | Amendment No. 6 to  the Second Lien Credit Agreement dated as of March 31, 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 guarantors signatory thereto, the lenders  parties thereto, and Credit Suisse First Boston, as administrative agent and  collateral agent.(18) |   |
|   | 4.30 |   | — |   | Fifth Amendment to  Second Amendment and Restated Credit Agreement dated as of July 1, 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.(18)             |   |
|   | 4.31 |   | — |   | Amendment No. 7 to  the Second Lien Credit Agreement dated as of July 1, 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 guarantors signatory thereto, the  lenders parties thereto, and Credit Suisse, as administrative agent and  collateral agent.(18)                |   |
|   | 4.32 |   | — |   | Sixth Amendment to  Second Amended and Restated Credit Agreement dated as of July 27, 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.(18)              |   |
|   | 4.33 |   | — |   | Seventh Amendment to  Second Amended and Restated Credit Agreement dated as of August 5, 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.(18)           |   |
|   | 4.34 |   | — |   | Amendment No. 8 to  the Second Lien Credit Agreement dated as of August 8, 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 guarantors signatory thereto, the  lenders parties thereto, and Credit Suisse, as administrative agent and  collateral agent.(18)              |   |
|   | 4.35 |   | — |   | Limited Waiver and Tenth  Amendment to the Second Amended and Restated Credit Agreement, dated as of  December 29, 2005, by and among Thermadyne Holdings Corporation,  Thermadyne Industries, Inc. and certain of its subsidiaries and General  Electric Capital Corporation, as agent and lender and the lenders party  thereto.(20)                                                                                                                                                                             |   |

69

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|        | 4.36 |   | — |   | Amendment No. 11  and Agreement dated as of December 29, 2005, to the Second-Lien Credit  Agreement among Thermadyne Holdings Corporation, Thermadyne  Industries, Inc. and certain of its subsidiaries and Credit Suisse, as  administrative agent and collateral agent and the lenders party thereto.(20)              |   |
|--------|------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | 4.37 |   | — |   | Amendment No. 13 to  the Second Lien Credit Agreement dated April 5, 2006 among Thermadyne  Holdings Corporation, Thermadyne Industries, Inc. and certain of their  subsidiaries and Credit Suisse First Boston, as administrative agent and  collateral agent.(21)                                                      |   |
|   | 4.38 |   | — |   | Twelfth Amendment to the  Second Amended and Restated Credit Agreement by and among Thermadyne Holdings  Corporation, Thermadyne Industries, Inc., and certain of its subsidiaries and  General Electric Capital Corporation, as agent and lender.(21)                                                                                  |   |
|   | 4.39 |   | — |   | Limited Consent and  Fourteenth Amendment to the Second Amended and Restated Credit Agreement,  dated as of May 9, 2006, by and among Thermadyne Holdings Corporation,  Thermadyne Industries, Inc. and certain of its subsidiaries and General  Electric Corporation, as agent and lender and the lenders party thereto.(22) |   |
|   | 4.40 |   | — |   | Amendment No. 14  and consent dated as of May 9, 2006 to the Second Lien Credit Agreement  among Thermadyne Holdings Corporation, Thermadyne Industries, Inc. and  certain of its subsidiaries as borrowers, the guarantors signatory thereto,  and Credit Suisse as administrative agent and collateral agent.(22)      |   |
|   | 4.41 |   | — |   | Fifteenth Amendment to  the Second Amended and Restated Credit Agreement, dated as of June 20,  2006, by and among Thermadyne Holdings Corporation, Thermadyne  Industries, Inc. and certain of its subsidiaries and General Electric  Corporation, as agent and lender and the lenders party thereto.(23)                    |   |
|   | 4.42 |   | — |   | Amendment No. 15  and consent dated as of June 20, 2006 to the Second-Lien Credit  Agreement among Thermadyne Industries, Inc. and certain of its  subsidiaries as borrowers, the guarantors signatory thereto, and Credit  Suisse as administrative agent and collateral agent.(23)                                     |   |
|   | 4.43 |   | — |   | Limited Consent and  Ninth Amendment to the Second Amended and Restated Credit Agreement dated as  of November 7, 2005, by and among Thermadyne Holdings Corporation,  Thermadyne Industries, Inc., and certain of its subsidiaries and General Electric  Capital Corporation as agent and lender.(17)                             |   |
|   | 4.44 |   | — |   | Supplemental Indenture  dated as of May 16, 2006 among Thermadyne Holdings Corporation, the  subsidiary guarantors named therein and U.S. Bank National Association as  trustee.(24)                                                                                                                                               |   |
|   | 4.45 | *      | — |   | Sixteenth Amendment and  Limited Waiver to the Second Amended and Restated Credit Agreement, dated as  of July 21, 2006, by and among Thermadyne Holdings Corporation, Thermadyne  Industries, Inc. and certain of its subsidiaries and General Electric Capital  Corporation as agent and lender.(25)                                  |   |
|   | 4.46 |   | — |   | Amendment No. 16, Waiver  and Agreement dated as of July 21, 2006 to the Second-Lien Credit  Agreement among Thermadyne Holdings Corporation, Thermadyne Industries, Inc.  and certain of its subsidiaries as borrowers, the guarantors signatory  thereto, and Credit Suisse as administrative agent and collateral agent.(26)    |   |

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|        | 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 guarantees.(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.(16)                                                                                           |   |
|   | 10.8        |   | — |   | First Amendment to Lease  between Alliance Gateway No. 58 Ltd. and Victor Equipment Company dated  May 1, 2004.(16)                                                                                         |   |
|   | 10.9        |   | — |   | Lease Agreement between  Ningbo Longxing Group Co., Ltd. and Ningbo Fulida Gas Equipment Co. Ltd.  dated January 19, 2005.(16)                                                                                   |   |
|   | 10.10       |   | — |   | Lease Agreement between  Ningbo Longxing Group Co., Ltd. and Thermadyne (Ningbo) Cutting and Welding  Equipment Manufacturing Company, Ltd. dated December 28, 2004.(16)                                         |   |
|   | 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.(16)                            |   |
|   | 10.12† |   | — |   | Amended and Restated  Executive Employment Agreement between Thermadyne Holdings Corporation and  James R. Delaney dated June 13, 2002.(16)                                                                      |   |
|   | 10.13† |   | — |   | Amended and Restated  Executive Employment Agreement between Thermadyne Holdings Corporation and  Dennis Klanjscek dated June 13, 2002.(16)                                                                      |   |
|   | 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.(16)                                                                |   |
|   | 10.17† |   | — |   | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and Terry Downes dated January 1, 2004.(16)                                                                 |   |
|   | 10.18† |   | — |   | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings Corporation  and Jason Huett dated January 1, 2004.(16)                                                                  |   |
|   | 10.19† |   | — |   | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and Robert D. Maddox dated January 1, 2004.(16)                                                             |   |

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|        | 10.20† |   | — |   | Executive Employment  Agreement between Thermadyne Holdings Corporation and Brian Truex dated  June 1, 2004.(16)                                                                                                                               |   |
|--------|-------------|--------|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   | 10.21† |   | — |   | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and Patricia S. Williams dated January 1, 2004.(16)                                                                                       |   |
|   | 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.(16)                                                                                                                              |   |
|   | 10.24† |   | — |   | First Amendment to  Agreement among Thermadyne Holdings Corporation, its subsidiaries, and James  H. Tate dated November 11, 2004.(16)                                                                                                         |   |
|   | 10.25† |   | — |   | Second Amendment to  Agreement among Thermadyne Holdings Corporation, its subsidiaries, and James  H. Tate dated November 24, 2004.(16)                                                                                                        |   |
|   | 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)                                                                                                                                                                                           |   |
|   | 10.31† |   | — |   | Executive Employment  Agreement between Thermadyne Holdings Corporation and Martin Quinn dated  April 1, 2005.*                                                                                                                                |   |
|   | 10.32       |   | — |   | Acquisition Agreement  dated as of December 22, 2005, by and between Thermadyne Italia, S.R.L.,  as Seller, and Mase Generators S.P.A., as buyer.(19)                                                                                          |   |
|   | 10.33       |   | — |   | Purchase Agreement dated  as of December 22, 2005, by and among Thermadyne Chile Holdings, Ltd.  and Thermadyne South America Holdings, Ltd., as Sellers, and Soldaduras PCR  Soltec Limitada and Penta Capital de Riesgo S.A., as buyers.(19) |   |
|   | 14          |   | — |   | Thermadyne Holdings  Corporation Code of Ethics.(16)                                                                                                                                                                                                |   |
|   | 21          |   | — |   | Subsidiaries of  Thermadyne Holdings Corporation.*                                                                                                                                                                                                  |   |
|   | 23          |   | — |   | Consent of Independent  Registered Public Accounting Firm.*                                                                                                                                                                                         |   |
|   | 31.1        |   | — |   | Certification Pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                     |   |
|   | 31.2        |   | — |   | Certification Pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                     |   |
|   | 32.1        |   | — |   | Certification Pursuant  to 18 U.S.C. Section 1350, as Adopted by Section 906 of the  Sarbanes-Oxley Act of 2002.*                                                                                                                         |   |
|   | 32.2        |   | — |   | 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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                 † Indicates a management contract or compensatoryplan or arrangement.

                 * Filed herewith.

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

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

       (3) Incorporated by reference to the Company’sQuarterly Report on Form 10-Q for the quarter ended June 30,2003.

       (4) Incorporated by reference to the Company’sRegistration Statement on Form S-4 (File No. 333-114511)on April 15, 2004.

       (5) Incorporated by reference to the Company’sCurrent Report on Form 8-K (File No. 0-23378) filed underSection 12(g) of the Exchange Act on June 3, 2003.

       (6) Incorporated by reference to the Company’sAnnual Report on Form 10-K for the year ended December 31,2003.

       (7) Incorporated by reference to the Company’sQuarterly Report on Form 10-Q for the quarter ended June 30,2004.

       (8) Incorporated by reference to the Company’sQuarterly Report on Form 10-Q for the quarter ended September 30,2004.

       (9) Incorporated by reference to the Company’sCurrent Report on Form 8-K (File No. 0-23378) filed underSection 12(g) of the Exchange Act on November 24, 2004.

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

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

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

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

(14) Incorporated by reference to the Company’sCurrent Report on Form 8-K (File No. 0-23378) filed underSection 12(g) of the Exchange Act on March 17, 2005.

(15) Incorporated by reference to the Company’sDefinitive Proxy Statement on Schedule 14A filed on March 24, 2004.

(16) Incorporated by reference to the Company’sAnnual Report on Form 10-K (File No. 0-23378) for theyear ended December 31, 2004.

(17) Incorporated by reference to the Company’sQuarterly Report on Form 10-Q for the quarter ended September 30,2005.

(18) Incorporated by reference to the Company’sQuarterly Report on Form 10-Q for the quarter ended June 30,2005.

(19) Incorporated by reference to the Company’sCurrent Report on Form 8-K (File No. 0-23378) filed under Section 12(g) of the ExchangeAct on December 28, 2005.

(20) Incorporated by reference to the Company’sCurrent Report on Form 8-K (File No. 0-23378) filed under Section 12(g) of the ExchangeAct on January 5, 2006.

(21) Incorporated by reference to the Company’sCurrent Report on Form 8-K (File No. 0-23378) filed under Section 12(g) of the ExchangeAct on April 11, 2006.

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 (22) Incorporated by referenceto the Company’s Current Report on Form 8-K (File No. 0-23378)filed under Section 12(g) of the Exchange Act on May 10, 2006.

 (23) Incorporated by referenceto the Company’s Current Report on Form 8-K (File No. 0-23378) filedon June 26, 2006.

 (24) Incorporated by referenceto the Company’s Current Report on Form 8-K (File No. 0-23378) filedon May 23, 2006.

 (25) Corrected from documentfiled as exhibit to the Company’s Current Report on Form 8-K filed on July 21,2006.

 (26) Incorporated by referenceto the Company’s Current Report on Form 8-K (File No. 0-23398) filedon July 21, 2006.

74

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**THERMADYNE HOLDINGSCORPORATION**

**INDEXTO CONSOLIDATED FINANCIAL STATEMENTS**
|                                                                                                                                                                                                                                                                        | ** ** | **Page** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| Report of Independent Registered Public Accounting  Firm                                                                                                                                                                                                               |       | F-2      |       |
| Consolidated  Balance Sheets as of December 31, 2005 and 2004                                                                                                                                                                                                     |       | F-3      |       |
| Consolidated Statements of Operations for the year  ended December 31, 2005, the year ended December 31, 2004, the  seven months ended December 31, 2003, and the five months ended  May 31, 2003                                                  |       | F-4      |       |
| Consolidated Statements of Shareholders’ Equity  (Deficit) for the year ended December 31, 2005, the year ended  December 31, 2004, the seven months ended December 31, 2003, and  the five months ended May 31, 2003     |       | F-5      |       |
| Consolidated Statements of Cash Flows for the year  ended December 31, 2005, the year ended December 31, 2004, the  seven months ended December 31, 2003, and the five months ended  May 31, 2003                                                  |       | F-6      |       |
| Notes to Consolidated Financial Statements                                                                                                                                                                                                                             |       | F-7      |       |

 

F-1

----

**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

Board of DirectorsThermadyne Holdings Corporation

We have audited the accompanying consolidated balancesheets of Thermadyne Holdings Corporation as of December 31, 2005 and 2004and the related consolidated statements of operations, shareholders’ equity(deficit) and cash flows for the years ended December 31, 2005 and 2004 andthe seven month period ended December 31, 2003 (Reorganized Company), andthe five month period ended May 31, 2003 (Predecessor Company). Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour 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 material misstatement.An audit includes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements. An audit also includes assessingthe accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat 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 financial positionof Thermadyne Holdings Corporation at December 31, 2005 and 2004, and theconsolidated results of its operations and its cash flows for the years ended December 31,2005 and 2004, the seven month period ended December 31, 2003, and thefive month period ended May 31, 2003 in conformity with U.S. generallyaccepted accounting principles.

As discussed in Note 2, the Company has restatedthe consolidated financial statements for the year ended December 31, 2004and the seven month period ended December 31, 2003 to correct for certainaccounting errors.

As more fully described in Note 6 of the consolidatedfinancial statements, effective May 23, 2003, the Company emerged fromprotection under Chapter 11 of the U.S. Bankruptcy Code pursuant to aReorganization Plan confirmed by the Bankruptcy Court on April 3, 2003. Inaccordance with AICPA Statement of Position 90-7, the Companyadopted “fresh-start” accounting whereby its assets, liabilities and newcapital 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’spre-reorganization consolidated financial statements.

Wehave also audited, in accordance with the standards of the Public CompanyAccounting Oversight Board (United States), the effectiveness of ThermadyneHoldings Corporation’s internal control over financial reporting as of December 31,2005, based on criteria established in *Internal Control—IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission and our report dated August 2, 2006 expressed anunqualified opinion on management’s assessment and an adverse opinion on theeffectiveness of internal control over financial reporting.
|  | /s/ ERNST & YOUNG LLP |
|--|--------------------------------|

 

St. Louis, MissouriAugust 2, 2006

F-2

----

**THERMADYNE HOLDINGS CORPORATIONCONSOLIDATED BALANCE SHEETS**

| ** **                                                                                                                | ** ** | **Reorganized Company**                          | ** ** |
|---------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                                                | ** ** | **December 31,  2005**                           | ** ** | **December 31,  2004** | ** ** |
| ** **                                                                                                                | ** ** | ** **                                            | ** ** | **(Restated)** | ** ** |
| ** **                                                                                                                | ** ** | **(In thousands,  except share data)** | ** ** |
| **ASSETS**                                                                                                                | ** ** |                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Current assets:                                                                                                           |       |                                                  |       |   |   |   |   |   |   |
| Cash and cash  equivalents                                                                                                |       |                                                  | $          | 12,824 |   |   |   | $ | 6,338 |   |   |
| Accounts receivable,  less allowance for doubtful accounts of $2,843 and $5,489, respectively                             |       |                                                  | 79,828     |   |   |   | 70,785 |   |   |
| Inventories                                                                                                               |       |                                                  | 118,859    |   |   |   | 106,944 |   |   |
| Prepaid expenses and  other                                                                                               |       |                                                  | 7,860      |   |   |   | 7,156 |   |   |
| Assets held for sale                                                                                                      |       |                                                  | 16,677     |   |   |   | 64,252 |   |   |
| Deferred tax assets                                                                                                       |       |                                                  | 1,861      |   |   |   | 3,129 |   |   |
| Total current assets                                                                                                      |       |                                                  | 237,909    |   |   |   | 258,604 |   |   |
| Property, plant and  equipment, net                                                                                       |       |                                                  | 56,630     |   |   |   | 65,253 |   |   |
| Goodwill                                                                                                                  |       |                                                  | 207,509    |   |   |   | 213,051 |   |   |
| Intangibles, net                                                                                                          |       |                                                  | 66,341     |   |   |   | 72,976 |   |   |
| Other assets                                                                                                              |       |                                                  | 8,079      |   |   |   | 7,516 |   |   |
| Total assets                                                                                                              |       |                                                  | $          | 576,468 |   |   |   | $ | 617,400 |   |   |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                             | ** ** |                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Current liabilities:                                                                                                      |       |                                                  |       |   |   |   |   |   |   |
| Accounts payable                                                                                                          |       |                                                  | $          | 43,804 |   |   |   | $ | 25,447 |   |   |
| Accrued and other  liabilities                                                                                            |       |                                                  | 33,320     |   |   |   | 33,978 |   |   |
| Accrued interest                                                                                                          |       |                                                  | 7,317      |   |   |   | 7,129 |   |   |
| Income taxes payable                                                                                                      |       |                                                  | 2,212      |   |   |   | 2,901 |   |   |
| Liabilities related to  assets held for sale                                                                              |       |                                                  | 4,155      |   |   |   | 32,005 |   |   |
| Working capital facility                                                                                                  |       |                                                  | 31,796     |   |   |   | 10,824 |   |   |
| Current maturities of  long-term obligations                                                                              |       |                                                  | 12,195     |   |   |   | 15,984 |   |   |
| Total current  liabilities                                                                                                |       |                                                  | 134,799    |   |   |   | 128,268 |   |   |
| Long-term obligations,  less current maturities                                                                           |       |                                                  | 216,211    |   |   |   | 209,481 |   |   |
| Deferred tax liabilities                                                                                                  |       |                                                  | 56,028     |   |   |   | 72,003 |   |   |
| Other long-term  liabilities                                                                                              |       |                                                  | 43,263     |   |   |   | 45,255 |   |   |
| Minority interest                                                                                                         |       |                                                  | 2,214      |   |   |   | 1,345 |   |   |
| Shareholders’ equity:                                                                                                |       |                                                  |       |   |   |   |   |   |   |
| Common stock, $0.01 par value:                                                                                            |       |                                                  |       |   |   |   |   |   |   |
| Authorized—25,000,000 shares,                                                                                        |       |                                                  |       |   |   |   |   |   |   |
| Issued and Outstanding—13,318,158  shares at December 31, 2005 and 13,313,973 shares at December 31,  2004 |       |                                                  | 133        |   |   |   | 133 |   |   |
| Additional paid-in  capital                                                                                               |       |                                                  | 183,541    |   |   |   | 183,460 |   |   |
| Accumulated deficit                                                                                                       |       |                                                  | (65,571    | ) |   |   | (34,210 | ) |   |
| Accumulated other  comprehensive income                                                                                   |       |                                                  | 5,850      |   |   |   | 11,665 |   |   |
| Total shareholders’  equity                                                                                          |       |                                                  | 123,953    |   |   |   | 161,048 |   |   |
| Total liabilities and shareholders’ equity                                                                           |       |                                                  | $          | 576,468 |   |   |   | $ | 617,400 |   |   |

 

See accompanying notes to consolidated financial statements.

F-3

----

**THERMADYNE HOLDINGS CORPORATIONCONSOLIDATED STATEMENTS OF OPERATIONS**

| ** **                                                                                                               | ** ** | ** **                                                         | ** ** | ** **            | ** **  | ** **            | ** ** | ** ** | **Predecessor**      | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|-----------------------|-------------|-----------------------|------------|------------|----------------------|------------|
| ** **                                                                                                               | ** ** | **Reorganized Company**                                       | ** ** | ** **            | **Company** | ** **            |
| ** **                                                                                                               | ** ** | ** **                                                         | ** ** | ** **            | ** **  | **Seven Months** | ** ** | ** ** | **Five Months** | ** ** |
| ** **                                                                                                               | ** ** | **Year Ended**                                                | ** ** | **Year Ended**   | ** **  | **Ended**             | ** ** | ** ** | **Ended**            | ** ** |
| ** **                                                                                                               | ** ** | **December 31,**                                              | ** ** | **December 31,** | ** **  | **December 31,** | ** ** | ** ** | **May 31,**     | ** ** |
| ** **                                                                                                               | ** ** | **2005**                                                           | ** ** | **2004**              | ** **  | **2003**              | ** ** | ** ** | **2003**             | ** ** |
| ** **                                                                                                               | ** ** | ** **                                                         | ** ** | **(Restated)**        | ** **  | **(Restated)**        | ** ** | ** ** | ** **           | ** ** |
| ** **                                                                                                               | ** ** | **(In thousands, except per share data)** | ** ** |
| Net sales                                                                                                                |       |                                                               | $          | 468,616               |        |                  |       | $          | 437,529              |       |   |   | $ | 222,004 |   |   |   |   | $ | 150,465 |   |   |
| Cost of goods  sold                                                                                                      |       |                                                               | 336,831    |                  |        |                  | 310,842    |       |                 |       | 156,887 |   |   |   |   | 94,855 |   |   |
| Gross margin                                                                                                             |       |                                                               | 131,785    |                  |        |                  | 126,687    |       |                 |       | 65,117 |   |   |   |   | 55,610 |   |   |
| Selling, general  and administrative expenses                                                                            |       |                                                               | 114,738    |                  |        |                  | 107,322    |       |                 |       | 64,125 |   |   |   |   | 41,485 |   |   |
| Amortization of  intangibles                                                                                             |       |                                                               | 3,295      |                  |        |                  | 3,388      |       |                 |       | 2,345 |   |   |   |   | 295 |   |   |
| Net periodic  postretirement benefits                                                                                    |       |                                                               | 1,823      |                  |        |                  | 2,250      |       |                 |       | 1,488 |   |   |   |   | 516 |   |   |
| Restructuring  costs                                                                                                     |       |                                                               | —     |                  |        |                  | 8,820      |       |                 |       | 1,873 |   |   |   |   | 516 |   |   |
| Operating income (loss)                                                                                                  |       |                                                               | 11,929     |                  |        |                  | 4,907      |       |                 |       | (4,714 | ) |   |   |   | 12,798 |   |   |
| Other expense:                                                                                                           |       |                                                               |       |                  |        |                  |       |       |                 |       |   |   |   |   |   |   |   |   |
| Interest (contractual interest of $29,962 for the  five months ended May 31, 2003)                                  |       |                                                               | (24,102    | )                     |        |                  | (21,544    | )          |                 |       | (9,550 | ) |   |   |   | (8,619 | ) |   |
| Amortization of deferred financing costs                                                                                 |       |                                                               | (1,485     | )                     |        |                  | (1,418     | )          |                 |       | (266 | ) |   |   |   | — |   |   |
| Minority interest                                                                                                        |       |                                                               | (628       | )                     |        |                  | (318       | )          |                 |       | — |   |   |   |   | — |   |   |
| Income (loss)  from continuing operations before reorganization items, income tax provision  and discontinued operations |       |                                                               | (14,286    | )                     |        |                  | (18,373    | )          |                 |       | (14,530 | ) |   |   |   | 4,179 |   |   |
| Reorganization  items                                                                                                    |       |                                                               | —     |                  |        |                  | —     |       |                 |       | — |   |   |   |   | (15,692 | ) |   |
| Gain on  reorganization and adoption of fresh-start accounting                                                           |       |                                                               | —     |                  |        |                  | —     |       |                 |       | — |   |   |   |   | 582,109 |   |   |
| Income (loss)  from continuing operations before income tax provision                                                    |       |                                                               | (14,286    | )                     |        |                  | (18,373    | )          |                 |       | (14,530 | ) |   |   |   | 570,596 |   |   |
| Income tax  provision (benefit)                                                                                          |       |                                                               | 3,936      |                  |        |                  | (4,455     | )          |                 |       | 5,469 |   |   |   |   | 2,288 |   |   |
| Income (loss)  from continuing operations                                                                                |       |                                                               | (18,222    | )                     |        |                  | (13,918    | )          |                 |       | (19,999 | ) |   |   |   | 568,308 |   |   |
| Income (loss)  from discontinued operations, net of tax                                                                  |       |                                                               | (13,139    | )                     |        |                  | 11         |       |                 |       | (304 | ) |   |   |   | 655 |   |   |
| Net income (loss)  applicable to common shares                                                                           |       |                                                               | $          | (31,361               | )           |                  |       | $          | (13,907              | )          |   |   | $ | (20,303 | ) |   |   |   | $ | 568,963 |   |   |
| Basic and diluted income  (loss) per share applicable to common shares:                                                  |       |                                                               |       |                  |        |                  |       |       |                 |       |   |   |   |   |   |   |   |   |
| Continuing operations                                                                                                    |       |                                                               | $          | (1.37                 | )           |                  |       | $          | (1.05                | )          |   |   | $ | (1.50 | ) |   |   |   | $ | 158.29 |   |   |
| Discontinued operations                                                                                                  |       |                                                               | (0.99      | )                     |        |                  | 0.01       |       |                 |       | (0.03 | ) |   |   |   | 0.18 |   |   |
| Net inome (loss)                                                                                                         |       |                                                               | $          | (2.36                 | )           |                  |       | $          | (1.04                | )          |   |   | $ | (1.53 | ) |   |   |   | $ | 158.47 |   |   |

 

See accompanying notes to consolidated financial statements**.**

F-4

----

**THERMADYNE HOLDINGS CORPORATIONCONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)**

| ** **                                              | ** ** | ** **              | ** ** | ** **     | ** ** | ** **  | ** ** | ** **      | ** ** | ** **     | ** ** | **Accumulated**        | ** ** | ** **                | ** ** |
|---------------------------------------------------------|------------|-------------------------|------------|----------------|------------|-------------|------------|-----------------|------------|----------------|------------|------------------------|------------|---------------------------|------------|
| ** **                                              | ** ** | **Common Stock**   | ** ** | **Additional** | ** ** | ** **  | ** ** | ** **      | ** ** | **Other**      | ** ** | **Total**              | ** ** |
| ** **                                              | ** ** | **Number of**      | ** ** | **Par**        | ** ** | **Paid-In** | ** ** | **Accumulated** | ** ** | **Management** | ** ** | **Comprehensive**      | ** ** | **Shareholders’**    | ** ** |
| ** **                                              | ** ** | **Shares**              | ** ** | **Value**      | ** ** | **Capital** | ** ** | **Deficit**     | ** ** | **Loans**      | ** ** | **Income (Loss)** | ** ** | **Equity (Deficit)** | ** ** |
| ** **                                              | ** ** | **(In thousands)** | ** ** |
| **Predecessor Company**                                 | ** ** |                    | ** ** | ** **     |       |        | ** ** | ** **      |       | ** **     | ** ** |                   | ** ** | ** **                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| January 1, 2003                                    |       |                    | 3,590      | ** **     |       |        | $          | 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                           |       |                    | 9,710      | ** **     |       |        | 97         | ** **      |       | 311,790        |       |                   | —     |                      |       |   | 1,681 |   |   |   | 38,812 |   |   |   | 352,380 |   |   |
| **Reorganized Company**                                 | ** ** |                    | ** ** | ** **     |       |        | ** ** | ** **      |       | ** **     | ** ** |                   | ** ** | ** **                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| May 31, 2003                                       |       |                    | 13,300     | ** **     |       |        | 133        | ** **      |       | 183,267        |       |                   | —     |                      |       |   | — |   |   |   | — |   |   |   | 183,400 |   |   |
| Comprehensive income  (loss) (Restated):                |       |                    |       | ** **     |       |        |       | ** **      |       |           |       |                   |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss (Restated)                                     |       |                    | —     | ** **     |       |        | —     | ** **      |       | —         |       |                   | (20,303    | )                         |       |   | — |   |   |   | — |   |   |   | (20,303 | ) |   |
| Foreign currency translation (Restated)                 |       |                    | —     | ** **     |       |        | —     | ** **      |       | —         |       |                   | —     |                      |       |   | — |   |   |   | 6,386 |   |   |   | 6,386 |   |   |
| Comprehensive loss (Restated)                           |       |                    |       | ** **     |       |        |       | ** **      |       |           |       |                   |       |                      |       |   |   |   |   |   |   |   |   |   | (13,917 | ) |   |
| December 31, 2003 (Restated)                       |       |                    | 13,300     | ** **     |       |        | 133        | ** **      |       | 183,267        |       |                   | (20,303    | )                         |       |   | — |   |   |   | 6,386 |   |   |   | 169,483 |   |   |
| Comprehensive income  (loss)—(Restated):           |       |                    |       | ** **     |       |        |       | ** **      |       |           |       |                   |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss (Restated)                                     |       |                    | —     | ** **     |       |        | —     | ** **      |       | —         |       |                   | (13,907    | )                         |       |   | — |   |   |   | — |   |   |   | (13,907 | ) |   |
| Foreign currency translation (Restated)                 |       |                    | —     | ** **     |       |        | —     | ** **      |       | —         |       |                   | —     |                      |       |   | — |   |   |   | 5,279 |   |   |   | 5,279 |   |   |
| Comprehensive loss (Restated)                           |       |                    | —     | ** **     |       |        | —     | ** **      |       | —         |       |                   | —     |                      |       |   | — |   |   |   | — |   |   |   | (8,628 | ) |   |
| Exercise of warrants                                    |       |                    | 14         | ** **     |       |        | —     | ** **      |       | 193            |       |                   | —     |                      |       |   | — |   |   |   | — |   |   |   | 193 |   |   |
| December 31, 2004 (Restated)                       |       |                    | 13,314     | ** **     |       |        | 133        | ** **      |       | 183,460        |       |                   | (34,210    | )                         |       |   | — |   |   |   | 11,665 |   |   |   | 161,048 |   |   |
| Comprehensive income  (loss):                           |       |                    |       | ** **     |       |        |       | ** **      |       |           |       |                   |       |                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                |       |                    | —     | ** **     |       |        | —     | ** **      |       | —         |       |                   | (31,361    | )                         |       |   | — |   |   |   | — |   |   |   | (31,361 | ) |   |
| Foreign currency translation                            |       |                    | —     | ** **     |       |        | —     | ** **      |       | —         |       |                   | —     |                      |       |   | — |   |   |   | (5,170 | ) |   |   | (5,170 | ) |   |
| Minimum pension liability                               |       |                    | —     | ** **     |       |        | —     | ** **      |       | —         |       |                   | —     |                      |       |   | — |   |   |   | (645 | ) |   |   | (645 | ) |   |
| Comprehensive loss                                      |       |                    |       | ** **     |       |        |       | ** **      |       |           |       |                   |       |                      |       |   |   |   |   |   |   |   |   |   | (37,176 | ) |   |
| Common stock issuance—Employee stock purchase plan |       |                    | 4          | ** **     |       |        | —     | ** **      |       | 52             |       |                   | —     |                      |       |   | — |   |   |   | — |   |   |   | 52 |   |   |
| Stock option compensation                               |       |                    | —     | ** **     |       |        | —     | ** **      |       | 29             |       |                   | —     |                      |       |   | — |   |   |   | — |   |   |   | 29 |   |   |
| December 31,  2005                                 |       |                    | 13,318     | ** **     |       |        | $          | 133             | ** ** |           | $          | 183,541                |       |                      | $          | (65,571 | ) |   |   | $ | — |   |   |   | $ | 5,850 |   |   |   | $ | 123,953 |   |   |

 

See accompanying notes to consolidated financial statements.

F-5

----

**THERMADYNE HOLDINGS CORPORATIONCONSOLIDATED STATEMENTS OF CASH FLOWS**

| ** **                                                                                          | ** ** | ** **                   | ** ** | ** **              | ** ** | ** **            | ** ** | ** ** | ** ** | **Predecessor**      | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|------------------------------|------------|-------------------------|------------|-----------------------|------------|------------|------------|----------------------|------------|
| ** **                                                                                          | ** ** | **Reorganized Company** | ** ** | ** **              | ** ** | **Company**           | ** ** |
| ** **                                                                                          | ** ** | ** **                   | ** ** | ** **              | ** ** | **Seven Months** | ** ** | ** ** | ** ** | ** **           | ** ** |
| ** **                                                                                          | ** ** | **Year**                     | ** ** | **Year Ended**     | ** ** | **Ended**             | ** ** | ** ** | ** ** | **Five Months** | ** ** |
| ** **                                                                                          | ** ** | **Ended**                    | ** ** | **December 31,**   | ** ** | **December 31,** | ** ** | ** ** | ** ** | **Ended**            | ** ** |
| ** **                                                                                          | ** ** | **December 31,**        | ** ** | **2004**                | ** ** | **2003**              | ** ** | ** ** | ** ** | **May 31,**     | ** ** |
| ** **                                                                                          | ** ** | **2005**                     | ** ** | **(Restated)**          | ** ** | **(Restated)**        | ** ** | ** ** | ** ** | **2003**             | ** ** |
| ** **                                                                                          | ** ** | ** **                   | ** ** | **(in thousands)** | ** ** | ** **            | ** ** | ** ** | ** ** |
| **Cash flows from continuing operations:**                                                          |       |                         |       |                    |       |                  |       |       |       |                 |       |   |   |   |   |   |   |   |   |
| Cash flows from operating  activities:                                                              |       |                         |       |                    |       |                  |       |       |       |                 |       |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                   |       |                         | $          | (31,361                 | )          |                  |       | $          | (13,907    | )                    |       |   | $ | (20,303 | ) |   |   |   |   | $ | 568,963 |   |   |
| Adjustments to reconcile  net income (loss) to net cash provided by (used in) operating activities: |       |                         |       |                    |       |                  |       |       |       |                 |       |   |   |   |   |   |   |   |   |
| (Income) loss from  discontinued operations                                                         |       |                         | 13,139     |                    |       |                  | (11        | )          |       |                 | 304        |   |   |   |   |   | (655 | ) |   |
| Minority interest                                                                                   |       |                         | 628        |                    |       |                  | 318        |       |       |                 | —     |   |   |   |   |   | — |   |   |
| Depreciation and  amortization                                                                      |       |                         | 20,684     |                    |       |                  | 22,053     |       |       |                 | 13,570     |   |   |   |   |   | 5,612 |   |   |
| Deferred income  taxes                                                                              |       |                         | (15,483    | )                       |       |                  | (12,252    | )          |       |                 | —     |   |   |   |   |   |   |   |   |
| Gain on disposal  of assets                                                                         |       |                         | (198       | )                       |       |                  | —     |       |       |                 | —     |   |   |   |   |   | — |   |   |
| Gain on  reorganization and adoption of fresh-start accounting                                      |       |                         | —     |                    |       |                  | —     |       |       |                 | —     |   |   |   |   |   | (582,109 | ) |   |
| Other non-cash  cost of sales                                                                       |       |                         | —     |                    |       |                  | —     |       |       |                 | 2,779      |   |   |   |   |   |   |   |   |
| Changes in operating  assets and liabilities:                                                       |       |                         |       |                    |       |                  |       |       |       |                 |       |   |   |   |   |   |   |   |   |
| Accounts  receivable                                                                                |       |                         | (11,385    | )                       |       |                  | (7,798     | )          |       |                 | 7,063      |   |   |   |   |   | 2,779 |   |   |
| Inventories                                                                                         |       |                         | (13,788    | )                       |       |                  | (14,471    | )          |       |                 | 5,877      |   |   |   |   |   | (3,306 | ) |   |
| Prepaid expenses  and other                                                                         |       |                         | (598       | )                       |       |                  | (112       | )          |       |                 | (1,070     | ) |   |   |   |   | 931 |   |   |
| Accounts payable                                                                                    |       |                         | 18,831     |                    |       |                  | 3,456      |       |       |                 | 3,812      |   |   |   |   |   | 813 |   |   |
| Accrued and other  liabilities                                                                      |       |                         | 467        |                    |       |                  | (655       | )          |       |                 | (4,659     | ) |   |   |   |   | 4,189 |   |   |
| Accrued interest                                                                                    |       |                         | 188        |                    |       |                  | 6,822      |       |       |                 | 307        |   |   |   |   |   | 11 |   |   |
| Income taxes                                                                                        |       |                         | (269       | )                       |       |                  | (1,656     | )          |       |                 | 2,218      |   |   |   |   |   | 1,419 |   |   |
| Other long-term  liabilities                                                                        |       |                         | 3,034      |                    |       |                  | 3,756      |       |       |                 | 1,284      |   |   |   |   |   | (977 | ) |   |
| Net cash provided  by (used in) operating activities                                                |       |                         | (16,111    | )                       |       |                  | (14,457    | )          |       |                 | 11,182     |   |   |   |   |   | (2,330 | ) |   |
| Cash flows from investing  activities:                                                              |       |                         |       |                    |       |                  |       |       |       |                 |       |   |   |   |   |   |   |   |   |
| Capital  expenditures                                                                               |       |                         | (9,161     | )                       |       |                  | (12,768    | )          |       |                 | (6,565     | ) |   |   |   |   | (2,151 | ) |   |
| Proceeds from  sales of assets                                                                      |       |                         | 5,651      |                    |       |                  | 1,324      |       |       |                 | —     |   |   |   |   |   | — |   |   |
| Investment in  joint venture                                                                        |       |                         | (850       | )                       |       |                  | —     |       |       |                 | —     |   |   |   |   |   | — |   |   |
| Net cash provided  by (used in) investing activities                                                |       |                         | (4,360     | )                       |       |                  | (11,444    | )          |       |                 | (6,565     | ) |   |   |   |   | (2,151 | ) |   |
| Cash flows from financing  activities:                                                              |       |                         |       |                    |       |                  |       |       |       |                 |       |   |   |   |   |   |   |   |   |
| Net borrowings  (repayments) under revolving credit facility                                        |       |                         | 20,972     |                    |       |                  | (2,036     | )          |       |                 | (103       | ) |   |   |   |   | 12,963 |   |   |
| Net borrowings  under Second-Lien facility                                                          |       |                         | 10,000     |                    |       |                  | 20,000     |       |       |                 | —     |   |   |   |   |   | — |   |   |
| Net borrowings  (repayments) under other credit facilities                                          |       |                         | (7,059     | )                       |       |                  | 3,707      |       |       |                 | (450       | ) |   |   |   |   | (4,026 | ) |   |
| Financing fees                                                                                      |       |                         | (747       | )                       |       |                  | (7,572     | )          |       |                 | (116       | ) |   |   |   |   | (1,352 | ) |   |
| Exercise of  warrants and employee stock purchases                                                  |       |                         | 81         |                    |       |                  | 193        |       |       |                 | —     |   |   |   |   |   | — |   |   |
| Advances (to) from  discontinued operations                                                         |       |                         | 1,566      |                    |       |                  | 7,280      |       |       |                 | (762       | ) |   |   |   |   | (8,424 | ) |   |
| Other, net                                                                                          |       |                         | (258       | )                       |       |                  | —     |       |       |                 | (256       | ) |   |   |   |   | 210 |   |   |
| Net cash provided  by financing activities                                                          |       |                         | 24,555     |                    |       |                  | 21,572     |       |       |                 | (1,687     | ) |   |   |   |   | (629 | ) |   |
| Effect of exchange  rate changes on cash and cash equivalents                                       |       |                         | 2,402      |                    |       |                  | (2,865     | )          |       |                 | (300       | ) |   |   |   |   | 769 |   |   |
| Net cash provided  by (used in) continuing operations                                               |       |                         | 6,486      |                    |       |                  | (7,194     | )          |       |                 | 2,630      |   |   |   |   |   | (4,341 | ) |   |
| **Cash flows from discontinued operations**                                                         |       |                         |       |                    |       |                  |       |       |       |                 |       |   |   |   |   |   |   |   |   |
| Net cash provided  by operating activities                                                          |       |                         | 7,246      |                    |       |                  | 2,021      |       |       |                 | 2,403      |   |   |   |   |   | (1,061 | ) |   |
| Net cash used in  investing activities                                                              |       |                         | (2,746     | )                       |       |                  | (3,311     | )          |       |                 | (1,557     | ) |   |   |   |   | (1,963 | ) |   |
| Net cash provided  by (used in) financing activities                                                |       |                         | (2,299     | )                       |       |                  | (2,773     | )          |       |                 | 215        |   |   |   |   |   | 2,745 |   |   |
| Effect of exchange  rates on cash and cash equivalents                                              |       |                         | (186       | )                       |       |                  | 1,534      |       |       |                 | 300        |   |   |   |   |   | — |   |   |
| Net cash provided  by (used in) discontinued operation                                              |       |                         | 2,015      |                    |       |                  | (2,529     | )          |       |                 | 1,361      |   |   |   |   |   | (279 | ) |   |
| Total increase  (decrease) in cash and cash equivalents                                             |       |                         | 8,501      |                    |       |                  | (9,723     | )          |       |                 | 3,991      |   |   |   |   |   | (4,620 | ) |   |
| Total cash and  cash equivalents at beginning of period                                             |       |                         | 7,061      |                    |       |                  | 16,784     |       |       |                 | 12,793     |   |   |   |   |   | 17,563 |   |   |
| Total cash and  cash equivalents at end of period                                                   |       |                         | $          | 15,562                  |       |                  |       | $          | 7,061      |                 |       |   | $ | 16,784 |   |   |   |   |   | $ | 12,943 |   |   |
| **Continuing operations**                                                                           |       |                         |       |                    |       |                  |       |       |       |                 |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents at beginning of period                                                   |       |                         | $          | 6,338                   |       |                  |       | $          | 13,532     |                 |       |   | $ | 10,902 |   |   |   |   |   | $ | 15,393 |   |   |
| Net cash provided  by (used in) continuing operations                                               |       |                         | 6,486      |                    |       |                  | (7,194     | )          |       |                 | 2,630      |   |   |   |   |   | (4,341 | ) |   |
| Cash and cash  equivalents at end of period                                                         |       |                         | $          | 12,824                  |       |                  |       | $          | 6,338      |                 |       |   | $ | 13,532 |   |   |   |   |   | $ | 11,052 |   |   |
| **Discontinued operations**                                                                         |       |                         |       |                    |       |                  |       |       |       |                 |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents at beginning of period                                                   |       |                         | $          | 723                     |       |                  |       | $          | 3,252      |                 |       |   | $ | 1,891 |   |   |   |   |   | $ | 2,170 |   |   |
| Net cash provided  by (used in) discontinued operations                                             |       |                         | 2,015      |                    |       |                  | (2,529     | )          |       |                 | 1,361      |   |   |   |   |   | (279 | ) |   |
| Cash and cash  equivalents at end of period                                                         |       |                         | $          | 2,738                   |       |                  |       | $          | 723        |                 |       |   | $ | 3,252 |   |   |   |   |   | $ | 1,891 |   |   |

 

See accompanying notes to consolidated financial statements.

F-6

----

**THERMADYNE HOLDINGSCORPORATION**

**NOTES TOCONSOLIDATED FINANCIAL 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. Restatement ofConsolidated Financial Statements**

During 2005, the Company identified a series ofadjustments that have resulted in the restatement of our financial statementsfor the year ended December 31, 2004 and the seven months ended December 31,2003 in this Annual Report on Form 10-K. These adjustments also resulted in therestatement of our previously reported quarterly results for each of the firstthree quarters of 2005, each quarter of 2004, and the second, third and fourthquarters of 2003 as more fully described in Note 21—*QuarterlyResults of Operations (Unaudited)*. All financial informationcontained in these consolidated financial statements gives effect to thisrestatement.

In summary, the restatement adjustments primarilyrelate to: a) the income tax provision and related income tax liabilities; b)the accounting for foreign currency transactions/translation within ourinternational subsidiaries; c) accounting by certain of our internationalsubsidiaries, including the timely recognition of costs, inventory valuations,and customer discounts and the accounting for minority interests; and d)various other balance sheet items relating to the accounting performed by theCompany’s international business units and the goodwill and deferred tax effectof certain tax matters described in Note 16—*Income Taxes* tothe consolidated financial statements. The Company’s consolidated net lossesfor the year ended December 31, 2004 decreased by $(10.1) million and increased$2.8 million in the seven months ended December 31, 2003.

**Income tax relatedmatters**

In September 2004, the Company revised its estimate ofdeferred tax liabilities related to the book-tax basis difference in the parentCompany’s investment in its U.S. subsidiary resulting from the application offresh-start accounting, but failed to properly reflect changes in the basisdifference from the fresh-start date through September 30, 2004. An adjustmentto reduce deferred tax liabilities by $12,252 with a corresponding tax benefithas been recorded in the statement of operations for the year ended December31, 2004. This adjustment includes a cumulative catch-up adjustment of $9,500as of September 30, 2004 to properly record the change in the basis differencefrom the fresh-start date through September 30, 2004. The remainder of theadjustment reflects the change in the book-tax basis difference for the fourthquarter of 2004.

In addition, accruals for contingent state income taxliabilities for 2003 and 2004 not properly recorded were recognized in theamounts of $1,052 and $1,730, respectively. Also, certain foreign tax losscarryover benefits of $1,700 incorrectly recorded in the 2003 tax provisionwere reversed in the 2003 financial statements as part of the restatement. Alsofor 2004, corrections were made to properly record deferred tax assets andliabilities of certain foreign subsidiaries, resulting in a charge of $2,074.

F-7

----

The net of the corrections described above (reduced)increased the income tax provision for the year ended December 31, 2004,and the seven months ended December 31, 2003 by $(8,448) and $2,752,respectively.

**Foreign currencyaccounting**

Foreign currency gains andlosses determined in connection with transactions with our internationalsubsidiaries were corrected, reducing expense and net loss by $1,906 for theyear ended December 31, 2004.

**Other adjustments related to international businessunits**

Accounting at several ofthe Company’s international business units have been corrected to adjust theaccounting for minority interests in certain foreign subsidiaries and to adjustfor the timely and accurate recognition of costs, inventory valuations andcustomer discounts. These adjustments increased the net loss for the year endedDecember 31, 2004 in the amount of $284.

**Balance SheetEffects**

Thefollowing table sets forth the consolidated balance sheet for the Company,showing the amounts as originally reported (adjusted for discontinuedoperations—See Note 4) and the restated amounts as of December 31, 2004(in thousands):

| ** **                                                 | ** ** | **Reorganized Company**     | ** ** |
|------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                 | ** ** | **December 31, 2004**  | ** ** |
| ** **                                                 | ** ** | **As Originally  Reported** | ** ** | **Adjustment  Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| Cash and cash  equivalents                                 |       |                             | $          | 5,927 |   |   |   | $ | 411 |   |   |   | $ | 6,338 |   |   |
| Accounts  receivable, less allowance for doubtful accounts |       |                             | 71,794     |   |   |   | (1,009 | ) |   |   | 70,785 |   |   |
| Inventories                                                |       |                             | 105,527    |   |   |   | 1,417 |   |   |   | 106,944 |   |   |
| Assets held for  sale                                      |       |                             | 64,296     |   |   |   | (44 | ) |   |   | 64,252 |   |   |
| Total current  assets                                      |       |                             | 257,829    |   |   |   | 775 |   |   |   | 258,604 |   |   |
| Property, plant  and equipment, net                        |       |                             | 65,379     |   |   |   | (126 | ) |   |   | 65,253 |   |   |
| Goodwill                                                   |       |                             | 197,368    |   |   |   | 15,683 |   |   |   | 213,051 |   |   |
| Intangibles, net                                           |       |                             | 73,795     |   |   |   | (819 | ) |   |   | 72,976 |   |   |
| Other assets                                               |       |                             | 7,533      |   |   |   | (17 | ) |   |   | 7,516 |   |   |
| Total assets                                               |       |                             | 601,904    |   |   |   | 15,496 |   |   |   | 617,400 |   |   |
| Accounts payable                                           |       |                             | 24,989     |   |   |   | 458 |   |   |   | 25,447 |   |   |
| Accrued and other  liabilities                             |       |                             | 33,838     |   |   |   | 140 |   |   |   | 33,978 |   |   |
| Income taxes  payable                                      |       |                             | 1,599      |   |   |   | 1,302 |   |   |   | 2,901 |   |   |
| Current  maturities of long-term obligations               |       |                             | 6,734      |   |   |   | 9,250 |   |   |   | 15,984 |   |   |
| Total current  liabilities                                 |       |                             | 137,118    |   |   |   | (8,850 | ) |   |   | 128,268 |   |   |
| Long-term  obligations, less current maturities            |       |                             | 198,530    |   |   |   | 10,951 |   |   |   | 209,481 |   |   |
| Deferred tax  liabilities                                  |       |                             | 71,445     |   |   |   | 558 |   |   |   | 72,003 |   |   |
| Other long-term  liabilities                               |       |                             | 39,175     |   |   |   | 6,080 |   |   |   | 45,255 |   |   |
| Minority Interest                                          |       |                             | —     |   |   |   | 1,345 |   |   |   | 1,345 |   |   |
| Accumulated  deficit                                       |       |                             | 41,528     |   |   |   | (7,318 | ) |   |   | 34,210 |   |   |
| Accumulated other  comprehensive income                    |       |                             | 13,571     |   |   |   | (1,906 | ) |   |   | 11,665 |   |   |
| Total  shareholders’ equity                           |       |                             | 155,636    |   |   |   | 5,412 |   |   |   | 161,048 |   |   |
| Total liabilities  and shareholders’ equity           |       |                             | 601,904    |   |   |   | 15,496 |   |   |   | 617,400 |   |   |

 

F-8

----

Total assets increased primarily due to the$12.7 million increase in goodwill, with an offsetting increase indeferred tax liabilities, to properly account for the book-tax basis differenceof indefinite life patents which existed as of the fresh-start date.

Current liabilities decreased principally to correctthe classification of current maturities of long-term debt while non-currentliabilities increased due to changes in state income tax liabilities of$6.0 million to establish accruals for certain state income tax filingpositions and the balance sheet effect of other items described above.

Thefollowing sets forth the consolidated statement of operations, showing theamounts as originally reported (adjusted for discontinued operations—See Note 4*Discontinued Operations*) and therestated amounts for the year ended December 31, 2004 and the seven monthsended December 31, 2003:

| ** **                                                     | ** ** | **Reorganized Company**                         | ** ** |
|----------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                     | ** ** | **Year Ended December 31, 2004** | ** ** |
| ** **                                                     | ** ** | **As Originally  Reported**                     | ** ** | **Adjustment  Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| Net sales                                                      |       |                                                 | $          | 437,940 |   |   |   | $ | (411 | ) |   |   | $ | 437,529 |   |   |
| Cost of goods  sold                                            |       |                                                 | 311,629    |   |   |   | (787 | ) |   |   | 310,842 |   |   |
| Gross margin                                                   |       |                                                 | 126,311    |   |   |   | 376 |   |   |   | 126,687 |   |   |
| Selling, general  and administrative expenses                  |       |                                                 | 108,890    |   |   |   | (1,568 | ) |   |   | 107,322 |   |   |
| Operating income  (loss)                                       |       |                                                 | 2,963      |   |   |   | 1,944 |   |   |   | 4,907 |   |   |
| Interest expense                                               |       |                                                 | 21,540     |   |   |   | 4 |   |   |   | 21,544 |   |   |
| Minority interest                                              |       |                                                 | —     |   |   |   | 318 |   |   |   | 318 |   |   |
| Loss from  continuing operations before income tax provision   |       |                                                 | (19,995    | ) |   |   | 1,622 |   |   |   | (18,373 | ) |   |
| Income tax  provision (credit)                                 |       |                                                 | 3,993      |   |   |   | (8,448 | ) |   |   | (4,455 | ) |   |
| Loss from  continuing operations                               |       |                                                 | (23,988    | ) |   |   | 10,070 |   |   |   | (13,918 | ) |   |
| Net loss  applicable to common shares                          |       |                                                 | (23,977    | ) |   |   | 10,070 |   |   |   | (13,907 | ) |   |
| Basic and diluted  loss per share applicable to common shares: |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                                          |       |                                                 | $          | (1.80 | ) |   |   | $ | 0.75 |   |   |   | $ | (1.05 | ) |   |
| Net loss                                                       |       |                                                 | (1.80      | ) |   |   | 0.76 |   |   |   | (1.04 | ) |   |

 

| ** **                                                     | ** ** | **Reorganized Company**                                 | ** ** |
|----------------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| ** **                                                     | ** ** | **Seven Months Ended December 31, 2003** | ** ** |
| ** **                                                     | ** ** | **As Originally  Reported**                             | ** ** | **Adjustment  Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| Income tax  provision                                          |       |                                                         | $          | 2,717 |   |   |   | $ | 2,752 |   |   |   | $ | 5,469 |   |   |
| Loss from  continuing operations                               |       |                                                         | (17,247    | ) |   |   | (2,752 | ) |   |   | (19,999 | ) |   |
| Net loss  applicable to common shares                          |       |                                                         | (17,551    | ) |   |   | (2,752 | ) |   |   | (20,303 | ) |   |
| Basic and diluted  loss per share applicable to common shares: |       |                                                         |       |   |   |   |   |   |   |   |   |   |   |
| Continuing operations                                          |       |                                                         | $          | (1.30 | ) |   |   | $ | (0.20 | ) |   |   | $ | (1.50 | ) |   |
| Net loss                                                       |       |                                                         | (1.32      | ) |   |   | (0.21 | ) |   |   | (1.53 | ) |   |

 

F-9

----

Thefollowing table sets forth selected cash flow information from continuingoperations as originally reported adjusted for discontinued operations and asrestated amounts for the year ended December 31, 2004 and the seven monthsended December 31, 2003 (in thousands):

| ** **                                                 | ** ** | **Reorganized Company**                         | ** ** |
|------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                 | ** ** | **Year Ended December 31, 2004** | ** ** |
| **Continuing Operations:**                            | ** ** | ** **                                           | ** ** | **As Originally  Reported** | ** ** | **Adjustments  Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| Net cash flows provided  by (used in) operating activities |       |                                                 | $          | (15,404 | ) |   |   | $ | 947 |   |   |   | $ | (14,457 | ) |   |
| Net cash flows  used in investing activities               |       |                                                 | (11,444    | ) |   |   | — |   |   |   | (11,444 | ) |   |
| Net cash flows  provided by financing activities           |       |                                                 | 21,315     |   |   |   | 257 |   |   |   | 21,572 |   |   |
|                                                            |            |                                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                                       | ** ** | **Reorganized Company**                                      | ** ** |
|--------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                       | ** ** | **Seven Months Ended December 31, 2003** | ** ** |
| **Continuing Operations:**                  | ** ** | ** **                                                        | ** ** | **As Originally  Reported** | ** ** | **Adjustments  Increase  (Decrease)** | ** ** | **As Restated** | ** ** |
| Net cash flows  provided by operating activities |       |                                                              | $          | 11,182 |   |   |   | $ | — |   |   |   | $ | 11,182 |   |   |
| Net cash flows  used in investing activities     |       |                                                              | (6,565     | ) |   |   | — |   |   |   | (6,565 | ) |   |
| Net cash flows  used in financing activities     |       |                                                              | (1,687     | ) |   |   | — |   |   |   | (1,687 | ) |   |
|                                                  |            |                                                                   |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**3. SignificantAccounting 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.Unconsolidated subsidiaries and investments are accounted for under the equitymethod.

*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 the first-in,first-out (“FIFO”) method for the Company’s foreign subsidiaries. Inventoriesat foreign subsidiaries amounted to $43,714 and $44,505 at December 31,2005 and 2004, respectively.

*Property, Plant andEquipment.*   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 the lesser of the lease term or theunderlying asset’s useful life. Impairment losses are recorded on long-livedassets when events and circumstances indicate the assets might be impaired andthe undiscounted cash flows estimated to be generated by those assets are lessthan their carrying amounts. During the fourth quarter of 2005, the Companyrecorded an impairment loss related to the Soltec and Plant Hire businesses.The impairment losses were recorded as the fair value of the businesses havingbeen determined to be below the carrying value of the net assets. See Note 4—DiscontinuedOperations.

*DeferredFinancing Costs.*   Loan origination fees and othercosts incurred arranging long-term financing are capitalized as deferredfinancing costs. The costs are amortized over the respective lives of theobligations using the effective interest method. Deferred financing coststotaled $9,786 and $9,039, less related accumulated amortization of $3,164 and$1,681, at December 31, 2005 and 2004, respectively, and are classified asother assets in the accompanying consolidated balance sheets.

F-10

----

*Intangibles.*   Goodwilland trademarks have indefinite lives. 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 or more frequently if events occur or circumstances change that wouldmore likely than not reduce the fair value of the reporting unit below itscarrying value. The impairment analysis is completed on a consolidatedenterprise level. Comparable market values, market prices and the present valueof expected future cash flows are used to estimate fair value. Significantjudgments and estimates about future conditions are used to estimate futurecash flows. Unforeseen events and changes in circumstances and marketconditions including general economic and competitive conditions could resultin significant changes in those estimates. Based on the annual impairmentanalysis completed in the fourth quarter, no adjustment to the carrying valueof goodwill was deemed necessary as of December 31, 2005. However,adjustments have been made to the December 31, 2005 carrying value ofgoodwill allocated to the Company’s discontinued operations. See Note 4—*Discontinued Operations.*

Trademarks are generally associated with the Company’ssignificant and well established product brands, and cash flows associated withthese products are expected to continue indefinitely. The Company has placed nolimit on the end of the Company’s trademarks’ useful lives.

*ProductWarranty Programs.*   Various products are soldwith product warranty programs. Provisions for warranty programs are made asthe products are sold and adjusted periodically based on current estimates ofanticipated warranty costs. During the years ended December 31, 2005 and 2004,the seven months ended December 31, 2003, and the five months ended May 31,2003, the Company recorded $2,850, $1,939, $5,019, and $1,101 of warrantyexpense, respectively, through cost of goods sold. As of December 31, 2005and 2004, the warranty accrual totaled $3,007 and $3,048, respectively.

*DerivativeInstruments.*   The Company accounts forderivatives and hedging activities in accordance with Statement of FinancialAccounting Standards No. 133, “Accounting for Derivative Instruments andCertain Hedging Activities,” as amended, (“SFAS No. 133”) which requiresthat all derivative instruments be recorded on the balance sheet at theirrespective fair values. The Company does not use derivative instruments fortrading or speculative purposes. The Company designates and documents allrelationships between hedging instruments and hedged items, as well as its riskmanagement objectives and strategies for undertaking hedge transactions. TheCompany also assesses, both at the inception of the hedge and on an on-goingbasis, whether the hedge is effective.

*IncomeTaxes.*   Deferred tax assets and liabilities arerecognized for the estimated future tax consequences attributable to temporarydifferences between the carrying value of assets and liabilities for financialreporting purposes and their tax basis. The measurement of current and deferredtax assets and liabilities is based on provisions of the enacted tax law; theeffects of future changes in tax laws or rates are not anticipated. Themeasurement of deferred tax assets is reduced, if necessary, by the amount ofany tax benefits that, based on available evidence, are not expected to berealized.

As a result of the 2003 bankruptcy restructuring, theCompany recognized cancellation of indebtedness income. Under Internal RevenueCode Section 108, this cancellation of indebtedness income is notrecognized for income tax purposes, provided that the Company reduces its basisin its tax attributes. This attribute reduction includes reducing the tax basisin the stock of the Company’s subsidiaries. This reduction in stock basiscreates a difference between the Company’s book and tax basis in the subsidiarystock for which a deferred income tax liability was recorded. The finaldetermination of the reduction in tax attributes was made following thebankruptcy restructuring with the filing of the Company’s federal income taxreturn and with positions taken with respect to the manner in which we wouldreduce our tax attributes. As a result, the Company revised certain estimatesand recorded adjustments to increase deferred tax liabilities by$60.2 million, made a cumulative catch up adjustment of $9.5 million incometax 

F-11

----

benefit in the statementof operations to reflect the reduction in the basis difference in thesubsidiary stock from the fresh-start accounting date through September 30,2004, with an offsetting increase of $69.7 million in goodwill. Subsequentreductions in the book-tax basis difference as a result of post 2003 bankruptcyrestructuring activity are recorded in the statement of operations. The Companyfurther reduced its deferred tax liability with an increase to income taxbenefit in the statement of operations in the fourth quarter of 2004 for $2,752for a total reduction of $12,252, in 2004 and $3,578 in 2005.

As discussed in Note 16—*Income Taxes*,the Company’s effective tax rate includes the impact of certain of theundistributed foreign earnings for which U.S. taxes have been provided becauseof the applicability of I.R.C. Section 956 for earnings of foreignentities which guarantee the indebtedness of a U.S. parent.

*RevenueRecognition.*   The Company sells a majority of itsproducts through distributors with standard terms of sale of FOB shipping pointor FOB destination. The Company has certain consignment arrangements wherebyrevenue is recognized when products are used by the customer from consignedstock. Under all circumstances, revenue is recognized when persuasive evidenceof an arrangement exists, delivery has occurred, the seller’s price is fixedand determinable and collectibility is reasonably assured.

The Company sponsors a number of incentive programs toaugment distributor sales efforts. Included in the Company’s incentive programsare certain rebate programs and sales and market share growth incentiveprograms. The costs associated with these sales programs are recorded as areduction of revenue.

Terms of sale generally include 60-day paymentterms and standard warranties for which reserves, based upon estimated warrantyliabilities from historical experience, have been recorded. For a product thatis returned due to issues outside the scope of the Company’s warrantyagreements, restocking charges will generally be assessed.

Shipping and handling costs totaling $10,891, $9,593,$4,611 and $3,281 for the years ended December 31, 2005 and 2004, theseven months ended December 31, 2003, and the five months ended May 31,2003, respectively, were recorded in selling, general and administrativeexpenses.

*Earnings (Loss) Per Share.*   Theeffects of options and warrants have not been considered in the determinationof earnings (loss) per share for the years ended December 31, 2005 and2004, the seven months ended December 31, 2003, and the five months ended May 31,2003, because the result would be anti-dilutive. Options and warrants notincluded in the calculation for the years ended December 31, 2005 and 2004and the seven months ended December 31, 2003 were as follows:

| ** **             | ** ** | **Year**              | ** ** | **Year**              | ** ** | **Seven Months** | ** ** |
|------------------------|------------|-----------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **             | ** ** | **Ended**             | ** ** | **Ended**             | ** ** | **Ended**             | ** ** |
| ** **             | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
| ** **             | ** ** | **2005**              | ** ** | **2004**              | ** ** | **2003**              | ** ** |
| Stock Options          |       |                  | 923,266    |                  |       |                  | 675,000    |   |   |   | 300,000 |   |   |
| Class A  Warrants |       |                  | —     |                  |       |                  | —     |   |   |   | 1,157,000 |   |   |
| Class B  Warrants |       |                  | 700,000    |                  |       |                  | 700,000    |   |   |   | 700,000 |   |   |
| Class C Warrants  |       |                  | 271,429    |                  |       |                  | 271,429    |   |   |   | 271,429 |   |   |

 

F-12

----

Thecalculation of income (loss) per share follows: 

| ** **                                                        | ** ** | ** **                               | ** ** | **Predecessor**                          | ** ** |
|-------------------------------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                        | ** ** | **Reorganized Company**             | ** ** | **Company**                              | ** ** |
| ** **                                                        | ** ** | **Year  Ended  December 31,  2005** | ** ** | **Year  Ended  December 31,  2004** | ** ** | **Seven Months  Ended  December 31,  2003** | ** ** | **Five Months  Ended  May 31,  2003** | ** ** |
| ** **                                                        | ** ** | ** **                               | ** ** | **(Restated)**                           | ** ** | **(Restated)** | ** ** | ** ** | ** ** |
| Numerator:                                                        |       |                                     |       |                                     |       |   |   |   |   |
| Income (loss)  applicable to common shares                        |       |                                     |       |                                     |       |   |   |   |   |
| Continuing operations                                             |       | $                                        | (18,222    | )                                        | $          | (13,918 | ) | $ | (19,999 | ) | $ | 568,308 |   |
| Discontinued operations                                           |       | (13,139                                  | )          | 11                                       |       | (304 | ) | 655 |   |
| Net income (loss)                                                 |       | $                                        | (31,361    | )                                        | $          | (13,907 | ) | $ | (20,303 | ) | $ | 568,963 |   |
| Denominator:                                                      |       |                                     |       |                                     |       |   |   |   |   |
| Weighted average shares for basic and diluted earnings  per share |       | 13,315,028                               |       | 13,308,590                               |       | 13,300,000 |   | 3,590,286 |   |
| Basic and diluted income (loss) per share amounts:                |       |                                     |       |                                     |       |   |   |   |   |
| Income (loss)  applicable to common shares                        |       |                                     |       |                                     |       |   |   |   |   |
| Continuing operations                                             |       | $                                        | (1.37      | )                                        | $          | (1.05 | ) | $ | (1.50 | ) | $ | 158.29 |   |
| Discontinued operations                                           |       | (0.99                                    | )          | 0.01                                     |       | (0.03 | ) | 0.18 |   |
| Net income (loss)                                                 |       | $                                        | (2.36      | )                                        | $          | (1.04 | ) | $ | (1.53 | ) | $ | 158.47 |   |

 

*Stock-BasedCompensation.*   Stock options are granted for afixed number of shares to employees and directors with an exercise price equalto or greater than the fair value of the shares at the date of grant. Stockoption grants are recorded under the recognition and measurement principles ofAccounting Principles Board Opinion No. 25, “Accounting for Stock Issuedto Employees” (“APB 25”), and related interpretations. Accordingly, no stock-basedemployee compensation cost is reflected in operating results. SFAS No. 123,“*Accounting for Stock-Based Compensation,”*requires that pro forma net operating results and per share amounts bepresented as if employee stock options were granted under the fair value methodof that statement.

The fair value for options granted in 2005 wasestimated at the date of grant using a Black-Scholes-Merton optionpricing model with the following weighted average assumptions: risk-freeinterest rate of 3.92%, a dividend yield of 0.0%, volatility factors of theexpected market price of the Company’s common stock of 0.41, and a weightedaverage expected life of the options of five years. The fair value for optionsgranted in 2004 was estimated at the date of grant using a Black-Scholes-Mertonoption pricing 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. The fair value for optionsgranted in 2003 was estimated at the date of grant using a Black-Scholes-Mertonoption 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 $5.18 per share, $5.50 per share and $4.32 pershare for the year ended December 31, 2005, the year ended December 31,2004 and the seven months ended December 31, 2003, respectively.

The Black-Scholes-Merton option valuation modelwas developed for use in estimating the fair value of traded options which haveno vesting restrictions and are fully transferable. In addition, optionvaluation models require the input of highly subjective assumptions includingthe expected stock price volatility.

F-13

----

Thefollowing table illustrates the effect on loss and loss per share fromcontinuing operations if the fair value expense recognition requirements ofSFAS No. 123 had been applied to all stock options granted under theplans.

| ** **                                                                                               | ** ** | **Reorganized Company**               | ** ** |
|----------------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                               | ** ** | **Year Ended December 31,** | ** ** | **Seven  Months  Ended  December 31,** | ** ** |
| ** **                                                                                               | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                                                                               | ** ** | ** **                                 | ** ** | **(Restated)** | ** ** | **(Restated)** | ** ** |
| Loss from  continuing operations                                                                         |       | $                                          | (18,222    | ) | $ | (13,918 | ) |   | $ | (19,999 | ) |   |
| Add: Stock-based  compensation costs, net of tax, included in loss as reported                           |       | 29                                         |       |   |   |   |   |   |   |
| Deduct: Total  stock based compensation expense determined under fair value-based method for  all awards |       | (3,587                                     | )          | (991 | ) |   | (420 | ) |   |
| Pro forma loss  from continuing operations                                                               |       | $                                          | (21,780    | ) | $ | (14,909 | ) |   | $ | (20,419 | ) |   |
| Basic and diluted  loss per share from continuing operations                                             |       |                                       |       |   |   |   |   |   |   |
| As reported                                                                                              |       | $                                          | (1.37      | ) | $ | (1.05 | ) |   | $ | (1.50 | ) |   |
| Pro forma                                                                                                |       | $                                          | (1.64      | ) | $ | (1.12 | ) |   | $ | (1.54 | ) |   |

 

***Acceleration of Non-vested Stock Options.******  ***On December 22,2005, the Company’s Board of Directors voted to accelerate the vesting ofcertain stock options previously awarded to executive officers and otheremployees under the Company’s 2004 Stock Incentive Plan. Shares purchased uponexercise of accelerated options before the original vesting date may not besold or transferred until the original vesting date and, if the holder is notan employee of the Company or an officer of the Company on the original vestingdate for any reason other than death or disability, may not be sold orotherwise transferred until the fifth anniversary of the original vesting date.Options to purchase approximately 493,683 shares of common stock wereaccelerated. Exercise prices of the accelerated options range from $10.95 to$14.45 per share. As a result, the Company recognized $29 of compensationexpense during the fourth quarter of 2005. See Note 14 (*StockOptions*) to the consolidated financial statements.

Also, on December 22,2005, the Company’s Board of Directors voted to accelerate the vesting of50,000 stock options previously awarded to non-employee directors under theCompany’s 2004 Non-employee Director Stock Option Plan that were scheduled tovest in August 2006. The exercise price of the accelerated options is$13.79 per share. There was no compensation expense as a result of the acceleration.

The Company’s decision toaccelerate the vesting of these options was primarily to reduce thecompensation expense that would be recorded in future periods following adoptionof Financial Accounting Standards Boards Statement No. 123R, “Share-BasedPayment” on January 1, 2006. As described in Note 14—*StockOptions*, this standard will require the Company to recognizecompensation expense for share-based payment transactions, including unvestedstock options beginning January 1, 2006.

Under the grants awardedpursuant to the Company’s 2004 Stock Incentive Plan, unexercised optionsterminate immediately upon the employee’s resignation or retirement.

*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.

*Foreign CurrencyTranslation.*   Local currencies have beendesignated as the functional currencies for all subsidiaries with the exceptionof the Company’s Hermosillo, Mexico operation whose functional currency hasbeen designated the U.S. dollar. Accordingly, assets and liabilities of foreignsubsidiaries are translated at the rates of exchange at the balance sheet date.Income and expense items of these subsidiaries are translated at averagemonthly rates of exchange. 

F-14

----

*Accumulated OtherComprehensive Income (Loss).**  *Othercomprehensive income (loss) is recorded as a component of shareholders equity(deficit). As of December 31, it consists of:

| ** **                                              | ** ** | **2004 (Restated)** | ** ** | **2005**                 | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| ** **                                              | ** ** | **January 1**       | ** ** | **Increase  (Decrease)** | ** ** | **December 31** | ** ** | **Increase  (Decrease)** | ** ** | **December 31** | ** ** |
| Cumulative  foreign currency translation gains (losses) |       |                     | $          | 6,386                    |       |   |   | $ | 5,279 |   |   |   | $ | 11,665 |   |   |   | $ | (5,170 | ) |   |   | $ | 6,495 |   |   |
| Minimum pension  liability                              |       |                     | —     |                     |       |   | — |   |   |   | — |   |   |   | (645 | ) |   |   | (645 | ) |   |
|                                                    |       |                     | $          | 6,386                    |       |   |   | $ | 5,279 |   |   |   | $ | 11,665 |   |   |   | $ | (5,815 | ) |   |   | $ | 5,850 |   |   |

 

**4. Discontinued Operations**

On December 29,2005, the Company completed the disposition of GenSet S.P.A. (“GenSet”), anindirect wholly-owned subsidiary which manufactures technologically advancedgenerators and engine-driven welders, to Mase Generators S.P.A (“Mase”). Thenet cash proceeds from the sale of GenSet of $4,797 were used to repay aportion of the Company’s outstanding balance of the Working Capital Facilityduring the first quarter of 2006. In addition, the buyer assumed approximately$7,571 of debt owed to local Italian lenders. Related to the disposition ofGenSet, the Company recorded a loss on disposal of approximately $10,383, netof tax of $6,363 which is recorded as a component of discontinued operations.The schedule below sets forth certain information related to GenSet’soperations included in discontinued operations. The assets and liabilities ofGenSet are classified as held for sale at December 31, 2004.

| ** **                                                          | ** ** | **Reorganized**       | ** ** | **Predecessor**       | ** ** |
|---------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                                          | ** ** | **Company**           | ** ** | **Company**           | ** ** |
| ** **                                                          | ** ** | **Year**              | ** ** | **Year**              | ** ** | **Seven Months** | ** ** | **Five Months** | ** ** |
| ** **                                                          | ** ** | **Ended**             | ** ** | **Ended**             | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                                          | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **May 31,** | ** ** |
| ** **                                                          | ** ** | **2005**              | ** ** | **2004**              | ** ** | **2003** | ** ** | **2003** | ** ** |
| Net sales                                                           |       |                  | $          | 33,711                |       |   |   | $ | 31,816 |   |   |   | $ | 20,835 |   |   |   | $ | 14,204 |   |   |
| Operating  expenses                                                 |       |                  | 35,692     |                  |       |   | 31,649 |   |   |   | 20,944 |   |   |   | 13,165 |   |   |
| Other income  (expenses)                                            |       |                  | (426       | )                     |       |   | (201 | ) |   |   | 340 |   |   |   | (531 | ) |   |
| Income tax (provision)  benefit                                     |       |                  | 494        |                  |       |   | (1,022 | ) |   |   | (916 | ) |   |   | (514 | ) |   |
| Loss from operations                                                |       |                  | (1,913     | )                     |       |   | (1,056 | ) |   |   | (685 | ) |   |   | (6 | ) |   |
| Loss on disposal  of discontinued operations , net of tax of $6,363 |       |                  | (10,383    | )                     |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Loss from  discontinued operations                                  |       |                  | $          | (12,296               | )          |   |   | $ | (1,056 | ) |   |   | $ | (685 | ) |   |   | $ | (6 | ) |   |

 

**Select balance sheet items of GenSet are as follows:**

| ** **                              | ** ** | **December 31,  2004** | ** ** |
|-----------------------------------------|------------|-----------------------------|------------|
| Cash                                    |       |                        | $          | 121 |   |   |
| Accounts  receivable                    |       |                        | 17,335     |   |   |
| Inventory                               |       |                        | 11,821     |   |   |
| Property and  equipment, net            |       |                        | 11,445     |   |   |
| Goodwill and  other intangible assets   |       |                        | 7,055      |   |   |
| Other assets                            |       |                        | 814        |   |   |
|                                    |       |                        | $          | 48,591 |   |   |
| Accounts payable  and other liabilities |       |                        | $          | 29,676 |   |   |

 

F-15

----

On January 2,2006, the Company completed the disposition of Soldaduras Soltec Limitada (“Soltec”)and Comercializadora Metalservice Limitada (“Metalservice”), both indirectwholly-owned subsidiaries which distribute cutting and welding equipment, toSoldaduras PCR Soltec Limitada, and Penta Capital de Riesgo S.A. At December 31,2005, Soltec met the criteria of held for sale and, as such, the assets andliabilities of Soltec are classified as held for sale and the results ofoperations have been presented as discontinued operations. As a result, the Company recorded animpairment loss of approximately $2,689 during the year ended December 31,2005 as the carrying value exceeded the fair value. Net cash proceeds ofapproximately $6,420, less amounts held in escrow of $1,536 were used to repaya portion of the Company’s balance of the Working Capital Facility during thefirst quarter of 2006. Of the $6,420 net proceeds, approximately $1,536 isbeing held in escrow by the government of Chile until certain customary taxmatters and filings are made. The Company anticipates receiving this amount in2007. The schedule below sets forth certain information related to Soltec’s andMetalservice’s operations included in discontinued operations.

| ** **                                  | ** ** | **Reorganized**       | ** ** | **Predecessor**       | ** ** |
|---------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
| ** **                                  | ** ** | **Company**           | ** ** | **Company**           | ** ** |
| ** **                                  | ** ** | **Year**              | ** ** | **Year**              | ** ** | **Seven Months** | ** ** | **Five Months** | ** ** |
| ** **                                  | ** ** | **Ended**             | ** ** | **Ended**             | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                  | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **May 31,** | ** ** |
| ** **                                  | ** ** | **2005**              | ** ** | **2004**              | ** ** | **2003** | ** ** | **2003** | ** ** |
| Net sales                                   |       |                  | $          | 8,341                 |       |   |   | $ | 7,213 |   |   |   | $ | 4,103 |   |   |   | $ | 2,563 |   |   |
| Operating expenses                          |       |                  | 7,667      |                  |       |   | 6,314 |   |   |   | 3,476 |   |   |   | 2,212 |   |   |
| Other income  (expenses)                    |       |                  | 425        |                  |       |   | (364 | ) |   |   | (398 | ) |   |   | 38 |   |   |
| Impairment loss                             |       |                  | (2,689     | )                     |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Income tax (provision)  benefit             |       |                  | 929        |                  |       |   | (110 | ) |   |   | (87 | ) |   |   | (14 | ) |   |
| Income (loss)  from discontinued operations |       |                  | $          | (661                  | )          |   |   | $ | 425 |   |   |   | $ | 142 |   |   |   | $ | 375 |   |   |

 

**Select balance sheet items of Soltec are as follows:**

| ** **                              | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Cash                                    |       | $                     | 1,206      |   | $ | 526 |   |
| Accounts  receivable                    |       | 2,887                 |       | 2,470 |   |
| Inventory                               |       | 2,244                 |       | 1,687 |   |
| Property and equipment,  net            |       | 671                   |       | 364 |   |
| Goodwill and  other intangible assets   |       | 2,183                 |       | 4,285 |   |
| Other assets                            |       | 282                   |       | 330 |   |
|                                    |       | $                     | 9,473      |   | $ | 9,662 |   |
| Accounts payable  and other liabilities |       | $                     | 1,441      |   | $ | 808 |   |

 

On March 9, 2006, the Company completed a seriesof transactions involving its South African subsidiaries. In a simultaneoustransaction (effective January 1, 2006), the Company purchased the sharesof its minority shareholder in Unique Welding Alloys Rustenburg (Proprietary)Ltd., d/b/a Thermadyne Plant Rental South Africa (“Plant Rental”), and sold100% of the assets in Plant Rental to the former minority shareholder. The cashproceeds of approximately $4,031 from the transaction were used in the firstquarter of 2006 by the Company to purchase all shares held by the minorityshareholder of Thermadyne South Africa (Proprietary) Ltd., d/b/a Unique WeldingAlloys, and all shares held by the minority shareholder of Maxweld &Braze (Proprietary) Ltd.

At December 31,2005 the Plant Rental operation met the criteria of held for sale and as suchthe assets and liabilities have been classified as held for sale and theresults of operations have been presented as discontinued operations. TheCompany recorded an impairment loss of approximately $1,919 during the 

F-16

----

year ended December 31, 2005 as the carryingvalue exceeded fair value. The schedule below sets forth certain informationrelated to these operations included in discontinued operations.

| ** **                                  | ** ** | ** **                   | ** ** | **Predecessor**       | ** ** |
|---------------------------------------------|------------|------------------------------|------------|-----------------------|------------|
| ** **                                  | ** ** | **Reorganized Company** | ** ** | **Company**           | ** ** |
| ** **                                  | ** ** | **Year**                     | ** ** | **Year**              | ** ** | **Seven Months** | ** ** | **Five Months** | ** ** |
| ** **                                  | ** ** | **Ended**                    | ** ** | **Ended**             | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                  | ** ** | **December 31,**        | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **May 31,** | ** ** |
| ** **                                  | ** ** | **2005**                     | ** ** | **2004**              | ** ** | **2003** | ** ** | **2003** | ** ** |
| Net sales                                   |       |                         | $          | 9,271                 |       |   |   | $ | 5,650 |   |   |   | $ | 3,378 |   |   |   | $ | 2,385 |   |   |
| Operating  expenses                         |       |                         | 6,891      |                  |       |   | 4,656 |   |   |   | 2,973 |   |   |   | 1,946 |   |   |
| Other income  (expenses)                    |       |                         | 3          |                  |       |   | (71 | ) |   |   | (57 | ) |   |   | (30 | ) |   |
| Impairment loss                             |       |                         | (1,919     | )                     |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Income tax (provision)  benefit             |       |                         | (646       | )                     |       |   | (281 | ) |   |   | (109 | ) |   |   | (123 | ) |   |
| Income (loss)  from discontinued operations |       |                         | $          | (182                  | )          |   |   | $ | 642 |   |   |   | $ | 239 |   |   |   | $ | 286 |   |   |

 

**Select balance sheet items of Plant Hire are asfollows:**

| ** **                              | ** ** | **December 31,** | ** ** |
|-----------------------------------------|------------|-----------------------|------------|
| ** **                              | ** ** | **2005**              | ** ** | **2004** | ** ** |
| Cash                                    |       | $                     | 1,532      |   | $ | 76 |   |
| Accounts  receivable                    |       | 2,862                 |       | 1,627 |   |
| Property and  equipment, net            |       | 2,122                 |       | 1,826 |   |
| Goodwill and  other intangible assets   |       | 688                   |       | 2,470 |   |
|                                    |       | $                     | 7,204      |   | $ | 5,999 |   |
| Accounts payable  and other liabilities |       | $                     | 2,714      |   | $ | 1,521 |   |

 

**5. Reclassifications**

Certain reclassificationshave been made to the previously reported financial information for the yearended December 31, 2004, the seven months ended December 31, 2003 andthe five months ended May 31, 2003 to conform to the presentation of suchsimilar financial information for the year ended December 31, 2005.

**6. Plan of Reorganization**

On November 19, 2001,the Company and substantially all of its domestic subsidiaries filed voluntarypetitions for relief under Chapter 11 of the Bankruptcy Code in the UnitedStates Bankruptcy Court for the Eastern District of Missouri (the “Court”).

On January 17, 2003,the Company filed with the Court the First Amended and Restated Joint Plan ofReorganization (the “Plan of Reorganization”) and the First Amended andRestated Disclosure Statement describing the Plan (the “Disclosure Statement”).The Plan of Reorganization and the Disclosure Statement were filed with the SECon Form 8-K on February 6, 2003. On April 3, 2003, theCourt 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 Reorganizationprovided for a substantial reduction of the Company’s long-term debt. Under thePlan of Reorganization, total debt was reduced to approximately $220,000, ascompared to the nearly $800,000 in debt and $79,000 in preferred stockoutstanding at the time the Company filed for Chapter 11 protection in November 2001.The Plan of Reorganization provided for treatment to the various classes ofclaims and equity interest as follows (as is more fully described in the Planof Reorganization):

F-17

----

Administrative ExpenseClaims, Priority Tax Claims and the Class 1 Other Priority Claims (as eachsuch class, and all classes described herein, are more fully described in thePlan of Reorganization) remain unaffected by the Chapter 11 cases and were paidin full. The Class 3 Other Secured Claims are also unimpaired by theChapter 11 cases, and the holders of such claims continue to retain theirliens.

The pre-petition seniorsecured lenders (Class 2) exchanged their approximately $365,000 in debtand outstanding letters of credit for 94.5% of new common stock, $180,000 innew senior debt notes and Series C Warrants exercisable for additionalshares of new common stock. The pre-petition senior lenders transferred the Series CWarrants to certain pre-petition equity holders.

General UnsecuredCreditors (Class 4) will receive distributions of cash equal to the lesserof (1) a holder’s pro rata share of $7.5 million and (2) 50% of suchholder’s claim (estimated to provide a recovery on such claims of 30% to 37% ofthe amount of such claims). The Company has made distributions of $7.317million through December 31, 2005 of such amounts.

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

The Junior SubordinatedNote Claims, the 10.75% Senior Subordinated Note Claims and the 121¤2%Senior Discount Debenture Claims (Class 6, Class 7 and Class 8,respectively) did not receive any distribution under the Plan ofReorganization, but had the opportunity to participate in the subscriptionoffering for shares of new common stock of the reorganized Company. None of theholders elected to subscribe to the offering.

The Thermadyne HoldingsEquity Interests (Class 9), which include the Company’s existing commonand preferred stock, were canceled upon the Effective Date of the Plan ofReorganization and the holders of such interests did not receive anydistributions pursuant to the Plan of Reorganization.

On the Effective Date ofthe Plan of Reorganization, the Company issued 13.3 million shares of newcommon stock, $180,000 in new senior debt notes, 1.157 million Series AWarrants, 0.7 million Series B Warrants and 0.271 million Series CWarrants. The Company concurrently entered into a new senior secured creditfacility providing for revolving loans of up to $50 million. The Companyborrowed $15.3 million under the facility on the Effective Date to repay infull amounts outstanding under the $60 million 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.

In accordance with AICPA Statement of Position 90-7,the Company adopted fresh-start accounting whereby the Company’s assets,liabilities and new capital structure were adjusted to reflect estimated fairvalue at May 31, 2003. The Company determined the reorganization valuethrough consultation with the Company’s financial advisors, by developing arange of values using both comparable companies and net present valueapproaches. The reorganization value was based in part on financial projectionsprepared by us for the period 2003 through 2012. These projections assume acompound annual growth rate for sales of approximately 3.3% with domestic salesgrowing at a slightly faster pace than international. The projections alsoassume improved profitability from continued efforts to reduce cost. TheCompany made an allocation of the reorganization value to the Company’s variousasset classes which included certain estimates and judgments. Significantassumptions and estimates used in determining the reorganization

F-18

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value and in theallocation of the reorganization value to the Company’s various asset classesare as follows:

In determining the $518million reorganization value, the Company applied the income approach. Theincome approach is predicated on developing either cash flow or incomeprojections over the useful lives of the assets, which are then discounted for riskand time value. The Company’s income approach began with the same assumptionsthat were used in the bankruptcy court proceeding regarding Company revenues,earnings before interest, taxes, depreciation and amortization and capitalexpenditures. These forecasts for cash flow and income were for 2003 through2006; for years beyond 2006, the Company assumed a 3% terminal growth rate. Theresulting net cash flows were then discounted to a present value with aweighted average discount rate of approximately 16.5%.

Work-in-process andfinished goods inventories were recorded at their respective selling pricesless costs to complete, costs of disposal and a reasonable profit on theselling effort, as applicable.

Fixed assets were recordedat their estimated fair value based upon management estimates and third-partyappraisals. The Company’s estimates were based upon the market or costapproaches which estimate value based upon market prices in actual transactionsor replacement value, respectively.

Identifiable intangibleassets were recorded at their estimated fair value based upon managementestimates and third-party appraisals. The Company’s estimates were based uponthe income approach. Forecasts for cash flow and income were for 2003 through2006; for years beyond 2006, the Company assumed a 3% terminal growth rate. Theresulting net cash flows were then discounted to a present value with adiscount rate of approximately 16.5%. For the Company’s trademarks and patents,the Company assumed that 80% and 12%, respectively, of the Company’s revenue isderived with the benefit of the trademark and patent portfolios. With regard tothe Company’s customer relationships the Company assumed a 20 year life for thedomestic relationships and a 10 year life for international relationships and astraight-line estimate for customer attrition. The resulting net revenue wasattributed to the customer relationships as of the valuation date.

The excess of thereorganization value over identifiable assets was recorded as goodwill.

Setforth below is selected financial data derived from our audited consolidatedfinancial statements (“Actual”) and selected projected financial data from theDisclosure Statement (“Projected”). The Company has provided additionaldiscussion related to the early years of our turnaround efforts below. Insummary, Actual sales results exceeded the Projected amounts by approximately6% but Actual gross margin was 28% versus Projected of 39%. Gross margin was$40 million less than Projected. Selling, general and administrative costs were8% in excess of Projected resulting in $8 million expense in excess ofProjected. The Company also recognized $2 million of amortization ofintangibles not reflected in the Projected amounts. Other expenses, principallyinterest, exceeded the Projected amount by $10 million. In total, the Actualloss from continuing operations was $46 million more than Projected.

| ** **                                     | ** ** | **Selected Financial Data**                | ** ** |
|------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                     | ** ** | **Year Ended December 31, 2005** | ** ** |
| ** **                                     | ** ** | **Actual**                                           | ** ** | **Projected** | ** ** |
| Net sales                                      |       | $                                                    | 468,616    |   | $ | 440,000 |   |
| Operating income                               |       | $                                                    | 11,929     |   | $ | 67,524 |   |
| Income (loss)  from continuing operations      |       |                                                 |       |   |   |
| before income tax  provision                   |       | $                                                    | (14,286    | ) | $ | 47,422 |   |
| Income tax  provision                          |       | 3,936                                                |       | 19,164 |   |
| Income (loss)  from continuing operations      |       | (18,222                                              | )          | 28,258 |   |
| Loss from  discontinued operations, net of tax |       | (13,139                                              | )          | — |   |
| Net income (loss)                              |       | $                                                    | (31,361    | ) | $ | 28,258 |   |

 

F-19

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In the early years of the Company’s efforts, severalitems adversely influenced our actual results of operations as compared to ourprojections. Most notably, while the Company experienced the sales volumeshigher than forecasted, the associated benefits of this growth were offsetprimarily by higher material costs, increased rebate expense related to adistributor incentive program which extends through 2006, increased short-termspending associated with our subsequent decision to consolidate two of our manufacturingoperations while also establishing a new national distribution center,unplanned incremental investment in sales, general and administrative expenses,funding accelerated new product development, as well as, incremental expansionand development of international markets, increased costs related to financialreporting, compliance costs, legal costs associated with patent and trademarkmatters and information system and organization improvements. Additionally,increased restructuring charges related to severance costs, amortizationexpense related to intangible assets with definite lives and interest expenseas a result of higher debt levels have adversely impacted results.

The Company believes that it can improve gross marginsthrough more effective product pricing along with cost reductions fromefficiency improvements in existing operations and through foreign sourcinginitiatives. In addition, the Company is introducing new product lines withdiffering price points and cost structures to allow the Company to realizebetter margins in serving varying market demands. The Company also believes thebenefits of the consolidated manufacturing operations and a new distributionsystem will provide cost efficiencies and improved customer satisfaction.****The Company believed it was constrained particularly forthe year ended December 31, 2005 in its ability to increase prices due toits inconsistent delivery performance. With improved delivery performance andcustomer satisfaction, the Company has greater ability to pass through materialcost increases such as commodity based price increases.

The Company conducted itsmost recent annual goodwill impairment test during the fourth quarter of 2005with the assistance of an independent, third-party valuation service. In doingso, the Company used comparable market values, market prices and the presentvalue of expected future cash flows to estimate fair value. This required theCompany to make significant judgments and estimates about future conditions inarriving at the estimates of future cash flows. Included in the analysis wereactual results for the nine months ended September 30, 2005 and expectedresults for the years ended December 31, 2005 and 2006. In addition, andas previously discussed, the Company included judgments and estimates regardingchanges and improvements in items and market conditions adversely impacting theearly years of the turnaround efforts. As a result of these procedures, theCompany estimated the fair value of the business enterprise and concluded thatno adjustment to the carrying value of goodwill was necessary based on theannual impairment test. See Note 10 (*Intangible Assets*)for discussion of subsequent adjustments to goodwill.

F-20

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**7. AccountsReceivable**

As of December 31,2005 and 2004, accounts receivable are recorded at the amounts invoiced tocustomers less an allowance for discounts and doubtful accounts. Managementestimates the allowance based on a review of the portfolio taking intoconsideration historical collection patterns, the economic climate and agingstatistics based on contractual due dates. Accounts are written off to theallowance once collection efforts are exhausted.

| **Allowance for Discounts  and Doubtful Accounts** | ** ** | ** ** | ** ** | **Balance at  Beginning  of Period** | ** ** | **Provision** | ** ** | **Net  Write-offs &  Adjustments** | ** ** | **Balance at End  of Period** | ** ** |
|-------------------------------------------------------------------|------------|------------|------------|------------------------------------------------|------------|---------------|------------|---------------------------------------------|------------|----------------------------------------------|------------|
| Year ended  December 31, 2005 (Reorganized Company)          |       |       | $          | 5,489                                          |       |          |       | $                                           | 552        |                                         |       |   | $ | (3,198 | ) |   |   | $ | 2,843 |   |   |   |
| Year ended  December 31, 2004 (Reorganized Company)          |       |       | 5,957      |                                           |       |          | 759        |                                        |       |                                         | (1,227     | ) |   |   | 5,489 |   |   |   |
| Seven months  ended December 31, 2003 (Reorganized Company)  |       |       | 4,089      |                                           |       |          | 2,748      |                                        |       |                                         | (880       | ) |   |   | 5,957 |   |   |   |
| Five months ended  May 31, 2003 (Predecessor Company)        |       |       | 3,875      |                                           |       |          | 455        |                                        |       |                                         | (241       | ) |   |   | 4,089 |   |   |   |
|                                                                   |            |            |            |                                                |            |               |            |                                             |            |                                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**For the year ended December 31,2005, the Company revised its method used to estimate the allowance fordoubtful accounts to more closely correlate with its historical experience ofactual bad debt losses. The effect of this revision resulted in an $860reduction in the allowance for doubtful accounts and is included as a componentof Net Write-offs and Adjustments in the above analysis.**

**8. Inventories**

Thecomposition of inventories at December 31 is as follows:

| ** **      | ** ** | **Reorganized Company** | ** ** |
|-----------------|------------|------------------------------|------------|
| ** **      | ** ** | **2005**                     | ** ** | **2004** | ** ** |
| ** **      | ** ** | ** **                   | ** ** | **(Restated)** | ** ** |
| Raw materials   |       | $                            | 19,524     |   | $ | 18,945 |   |
| Work-in-process |       | 32,788                       |       | 29,759 |   |
| Finished goods  |       | 71,730                       |       | 61,819 |   |
|            |       | 124,042                      |       | 110,523 |   |
| LIFO reserve    |       | (5,183                       | )          | (3,579 | ) |
|            |       | $                            | 118,859    |   | $ | 106,944 |   |

 

The carrying value ofinventories valued by the LIFO method was $75,144 at December 31, 2005 and$62,437 at December 31, 2004.

F-21

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**9. Property, Plant,and Equipment**

Thecomposition of property, plant and equipment at December 31 is as follows:

| ** **                | ** ** | **Reorganized Company** | ** ** |
|---------------------------|------------|------------------------------|------------|
| ** **                | ** ** | **2005**                     | ** ** | **2004** | ** ** |
| ** **                | ** ** | ** **                   | ** ** | **(Restated)** | ** ** |
| Land                      |       | $                            | 8,406      |   | $ | 8,197 |   |
| Building                  |       | 13,369                       |       | 17,313 |   |
| Machinery and  equipment  |       | 68,220                       |       | 65,604 |   |
|                      |       | 89,995                       |       | 91,114 |   |
| Accumulated  depreciation |       | (33,365                      | )          | (25,861 | ) |
|                      |       | $                            | 56,630     |   | $ | 65,253 |   |

 

Assets recorded undercapitalized leases were $12,611 ($9,175 net of accumulated depreciation) and$13,793 ($10,912 net of accumulated depreciation) at December 31, 2005 and2004, respectively.

**10. IntangibleAssets**

Thecomposition of intangible assets at December 31 is as follows: 

| ** **                          | ** ** | **Reorganized Company** | ** ** |
|-------------------------------------|------------|------------------------------|------------|
| ** **                          | ** ** | **2005**                     | ** ** | **2004** | ** ** |
| ** **                          | ** ** | ** **                   | ** ** | **(Restated)** | ** ** |
| Goodwill                            |       | $                            | 207,509    |   | $ | 213,051 |   |
| Patents and  customer relationships |       | 38,251                       |       | 46,612 |   |
| Trademarks                          |       | 33,403                       |       | 33,403 |   |
|                                |       | 279,163                      |       | 293,066 |   |
| Accumulated  amortization           |       | (5,313                       | )          | (7,039 | ) |
|                                |       | $                            | 273,850    |   | $ | 286,027 |   |

 

Thechanges in the carrying amount of goodwill for the years ended December 31,2004 and 2005 are as follows:

| ** **                                       | ** ** | **Carrying Amount** | ** ** |
|--------------------------------------------------|------------|--------------------------|------------|
| ** **                                       | ** ** | **of Goodwill**     | ** ** |
| Balance as of  January 1, 2004 (restated)   |       |                     | $          | 144,174 |   |   |
| Deferred tax  adjustments                        |       |                     | 69,692     |   |   |
| Change in pre  fresh-start valuation allowance   |       |                     | (815       | ) |   |
| Balance as of  December 31, 2004 (restated) |       |                     | 213,051    |   |   |
| Change in  estimated fresh-start liabilities     |       |                     | (5,542     | ) |   |
| Balance as of  December 31, 2005            |       |                     | $          | 207,509 |   |   |

 

The Company conducted its most recent annual goodwillimpairment test during the fourth quarter of 2005 with the assistance of anindependent, third-party valuation service. In doing so, the Company usedcomparable market values, market capitalization and the present value ofexpected future cash flows to estimate fair value. This process requiredsignificant judgments and estimates about future conditions in arriving at theestimates of future cash flows. Included in this analysis were actual resultsfor the nine months ended September 30, 2005 and expected results for theyears ended December 31, 2005 and 2006. In addition, the Company includedjudgments and estimates regarding changes and improvements in items and marketconditions adversely impacting the early years of the Company’s turnaroundefforts. As a result of these procedures and considering the effects of thediscontinued operations, the Company concluded 

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that an adjustment to thecarrying value of goodwill was not necessary. Additionally, as a result of thedisposition of GenSet, the Company conducted an interim goodwill impairmenttest as of December 29, 2005 and concluded that no adjustment to thecarrying value of goodwill was necessary as the fair value of Thermadyne,excluding GenSet, exceeded its carrying value.

As described in the Note 2—*Restatement of Consolidated Financial Statements*, in thethird quarter of 2004, the Company recorded adjustments to deferred taxliabilities  to reflect the determinationof tax attribute reductions made as a result of the Company’s emergence frombankruptcy and goodwill was increased $69,692.

Amortization expenseamounted to $3,295, $3,388, $2,345, and $295 for the years ended December 31,2005 and 2004, the seven months ended December 31, 2003, and the fivemonths ended May 31, 2003, respectively. Amortization expense for patentsand customer relationships is expected to be approximately $3,500 for each ofthe next five fiscal years.

**11. Debt and Capital Lease Obligations**

Thecomposition of debt and capital lease obligations at December 31 is asfollows:

| ** **                                                                                                                            | ** ** | **Reorganized Company** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                            | ** ** | **2005**                     | ** ** | **2004** | ** ** |
| ** **                                                                                                                            | ** ** | ** **                   | ** ** | **(Restated)** | ** ** |
| Working Capital  Facility                                                                                                             |       | $                            | 31,796     |   | $ | 10,824 |   |
| Second-Lien  Facility                                                                                                                 |       | 30,000                       |       | 20,000 |   |
| Term A Loan                                                                                                                           |       | 7,598                        |       | 9,250 |   |
| Senior  Subordinated Notes, due February 1, 2014, 91¤4%  interest payable semiannually on February 1 and August 1 |       | 175,000                      |       | 175,000 |   |
| Capital leases  (Note 15)                                                                                                             |       | 15,079                       |       | 17,161 |   |
| Other                                                                                                                                 |       | 729                          |       | 4,054 |   |
|                                                                                                                                  |       | 260,202                      |       | 236,289 |   |
| Current  maturities, working capital facility and term loan                                                                           |       | (43,991                      | )          | (26,808 | ) |
|                                                                                                                                  |       | $                            | 216,211    |   | $ | 209,481 |   |

 

At December 31,2005 the schedule of principal payments of debt including the term loan asscheduled, excluding capital lease obligations and the working capitalfacility, is as follows:

| 2006       |   | $       | 2,450  |   |
|------------|--------|---------|--------|--------|
| 2007       |   | 1,321   |   |
| 2008       |   | 31,321  |   |
| 2009       |   | 3,635   |   |
| 2010       |   | —  |   |
| Thereafter |   | 173,583 |   |

 

For the years ended December 31,2005 and 2004, the Company’s weighted average interest rate on its short-termborrowings was 6.45% and 7.71%, respectively. Interest paid for each of theyears ended December 31, 2005 and 2004 and for the seven months ended December 31,2003 and the five months ended May 31, 2003 was $22,159, $15,011, $9,290,and $8,787, respectively.

***Credit Agreement***

The Company and its U.S.subsidiaries are borrowers under a Second Amended and Restated CreditAgreement, as amended (the “Credit Agreement”). The Credit Agreement consistsof a $9,250 term loan (the “Term Loan”) (which was repaid in July 2006), a$2,050 delayed draw term loan (the “Delayed Draw 

F-23

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TermLoan”),  and a $70,000 revolving loancommitment (the “Revolver”). Up to $25,000 of the Revolver is available forletters of credit and $12,609 of letters of credit were outstanding as of December 31,2005. Borrowing under the Revolver may not exceed 85% of eligible receivablesplus the lesser of (i) 85% of the net orderly liquidation value ofeligible inventories or (ii) 65% of the book value of inventories lesscustomary reserves. Unused availability was $15,621 as of December 31,2005. The Revolver terminates on November 22, 2009. As ofDecember 31, 2005, we did not have access to the Delayed Draw Term Loan.

Borrowings under the Term Loanand the Revolver accrue interest, at the Company’s option, at LIBOR (4.39% asof December 31, 2005) plus 2.25% or the prime rate (7.25% as ofDecember 31, 2005) plus 0.5% on the Revolver, and LIBOR plus 2.50% or theprime rate plus 0.75% on the Term Loan. All of these percentages are subject toan interest rate grid and will decline if certain conditions are met. Unusedportions of the Revolver are charged 50 basis points as of December 31,2005. The Credit Agreement is secured by substantially all of the assets of theCompany’s subsidiaries in the U.S., Canada, the United Kingdom, and Australia,together with a pledge of the capital stock of substantially all of the Company’ssubsidiaries, subject to certain limitations with respect to non-U.S.subsidiaries. The Credit Agreement contains financial covenants for maintenanceof minimum fixed charge and maximum leverage ratios relative to (“EBITDA”), asdefined by the Credit Agreement.

TheRevolver is referred to as the Working Capital Facility and includes a lockboxagreement which provides all receipts to be swept daily to reduce borrowingsoutstanding under the revolving line of credit. These agreements, combined withthe existence of a subjective Material Adverse Effect (“MAE”) clause, cause theWorking Capital Facility and Term Loan to be classified as a current liability.However, the Company does not expect to repay, or be required to repay, withinone year, the balance of the Working Capital Facility classified as a currentliability. The Company’s intent is to continually use the Working CapitalFacility throughout the life of the agreement to fund working capital needs.The MAE clause, which is a typical requirement in commercial credit agreements,allows the lender to require the loan to become due if it determines there hasbeen a material adverse effect on the Company’s operations, business, assets orprospects. In March  2005, we entered into amendments which modified afinancial covenant and enabled us to extend our Second—Lien Facility. InJuly 2005, August 2005, October 2005 and November 2005, theCredit Agreement was amended to modify certain financial and non-financialcovenants. On December 29, 2005, the Company further amended the CreditAgreement to permit the sale of the stock of GenSet and Soltec, and to decreaseboth the total loan commitment and the revolving loan commitment to $70,000.The amendment further stipulated that the net proceeds of each of the GenSetsale and Soltec sale be applied to the principal balance of the Revolver. Boththe GenSet and the Soltec sales have been completed and the net proceeds appliedto the Revolver in the first quarter of 2006. See Note 4 of the Notes to ConsolidatedFinancial Statements. In May 2006, the Credit Agreement was amended to (i)delete the EBITDA covenant from the agreement, (ii) modify the minimum fixed chargecoverage ratio and (iii) modify the maximum leverage ratio covenants. InJuly 2006, the Credit Agreement was further amended to (i) modify the maximumleverage ratio to 5.75 through June 30, 2007, with a .25 point reductionper quarter thereafter until the coverage ratio reaches 4.00 which occurs duringthe quarter ending March 31, 2010, and (ii) modify the minimum fixedcharge ratio to 1.0 through June 30, 2007, 1.10 at September 30, 2007and thereafter and (iii) establish a minimum availability requirement of$5 million.

***Second-Lien Facility***

The Company and its U.S.subsidiaries became borrowers under a $20,000 Second-Lien Term Loan facility(the “Second-Lien Facility”) which was entered into on July 29, 2004. 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 (4.39% as of December 31, 2005) plus 4.50%, or analternative base rate of the greater of (a) the Prime Rate or (b) thefederal funds rate plus one half of 

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1.00%plus 3.50%. The Second-Lien Facility, which matures on November 7, 2008,restricts the amount of long-term debt the Company may incur and has othercustomary provisions including financial and non-financial covenants. On November 5,2005, the Second-Lien Facility was amended to increase the borrowings to$30,000. Proceeds were used to repay the Revolver. In March 2005, August 2005,October 2005, and in June 2006, the Second-Lien Facility was amendedto modify certain financial and non-financial covenants. On July 21, 2006, theCompany amended the Second-Lien Facility to (i) remove the financialcovenant compliance until the third quarter of 2007, (ii) extend thepre-payment penalty date to October 31, 2007, and (iii) increase theamount of borrowings from $30 million to $50 million. The proceedswere used to repay the Term Loan in full, with the balance of the proceedsbeing used to pay a portion of the Revolver.

***Covenant Compliance***

At December 31, 2005,the Company was in compliance with its financial covenants, as a result ofamendments received in July 2006 which increased the Company’s maximum leverageratio and decreased the minimum fixed charge ratio. The Company expects toremain in compliance with the financial covenants during 2006 by achieving our2006 financial plan, which includes realizing sales of new products to beintroduced throughout 2006, price increases for existing products, andsuccessfully implementing certain cost reduction initiatives including its globalcontinuous improvement program referred to as TCP and its program for foreignsourcing of manufacturing. The Company also is actively exploring the sale ofone additional non-core business unit to generate additional liquidity. If theCompany is not successful in achieving the 2006 financial plan, the Company couldalso pursue other alternatives to repay debt and improve liquidity. Thesealternatives include deferral of certain capital expenditures and reduction ofcosts. If the Company is not successful in achieving the 2006 financial plan,as well as the aforementioned alternatives, the Company may not be incompliance with the revised financial covenants and would seek an amendment tothe Credit Agreement and the Second-Lien Facility. There can be no assurancethat the Company could obtain such amendments, failure to obtain an amendmentwould result in a default under the Credit Agreement and the Second-LienFacility which could result in a material adverse impact on the Company’s financialcondition.

***Senior SubordinatedNotes***

The Company is the issuerof $175,000 in aggregate principal of 91⁄4% Senior Subordinated Notes due in2014, of which more than 99% were exchanged for registered notes (the “SeniorSubordinated Notes”). The Senior Subordinated Notes are unsecured seniorsubordinated obligations and are subordinated in right of payment to allexisting and future Senior Indebtedness (as defined in the indenture). Interestaccrues at the rate of 91⁄4% per annum and is payable semi-annually in arrears onFebruary 1 and August 1 of each year. In an amendment dated May 9,2006, the Company is now required, subject to certain conditions in the CreditAgreement and Second Lien Facility, to use the amount of “Excess Cash Flow,” asdefined in the Indenture, to either purchase notes through an offer of 101% or permanentlyrepay senior debt within 105 days after year end.

On July 21, 2006, the Company commenced a consentsolicitation seeking amendments to the indenture governing Notes and waivingexisting defaults under that indenture related to the late filing of theCompany’s 2005 Form 10-K and first quarter 2006 Form 10-Q with the Securitiesand Exchange Commission. The amendments would extend the time for filing thesereports to August 21, 2006 and for additional fees that could aggregate to$2 million would also allow the Company to elect to extend the time withinwhich the Company must file its second quarter 2006 Form 10-Q to no laterthan December 17, 2006. Under the consent solicitation, the indenturewould be amended to provide for the payment of additional Special Interest onthe Notes, initially at a rate of 1.25% per annum. The Special Interest issubject to adjustment increasing to 1.75% if the consolidated leverage ratioexceeds 6.00 with incremental 

F-25

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interest increases to amaximum of 2.75% if the consolidated leverage ratio increases to 7.0. TheSpecial Interest declines to .75% if the consolidated leverage ratio declinesbelow 4.0 and declines incrementally to 0% if leverage is less than 3.0 withthe payment of contingent cash consent fees to consenting holders of the Notes.As of July 31, 2006, holders of 100% of the outstanding Notes have consented tothe solicitation.

Until the execution of the amendments to theindenture, the Company has the right to (i) terminate the solicitation forany reason, (ii) amend the terms of the solicitation, (iii) modifythe form or amount of the consideration to be paid pursuant to the solicitationor (iv) waive any of the conditions to the Solicitation, subject toapplicable law. The Company intends to execute the amendment.

The notes are redeemableat the Company’s option during the 12 month periods beginning on February 1,2009 at 104.625%, February 1, 2010 at 103.083%, February 1, 2011 at101.542%, and after February 1, 2012 at 100%.

***Parent CompanyFinancial 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 31,2005 and 2004, the only asset carried on the parent-company books of ThermadyneHoldings Corporation was its investment in Industries, and the only liabilitieswere the $175,000 of Senior Subordinated Notes. As a result of the limitedassets and liabilities recorded at the parent company level, separate financialstatements have not been presented for Thermadyne Holdings Corporation.

**12. Derivative Instrument**

In February 2004, theCompany entered into an interest rate swap arrangement to convert a portion ofthe fixed rate exposure on its Senior Subordinated Notes to variable rates.Under the terms of the interest rate swap contract, which has a notional amountof $50,000, the Company receives interest at a fixed rate of 91⁄4% and paysinterest at a variable rate equal to LIBOR plus a spread of 442 basis points.The six-month LIBOR rate on each semi-annual reset date determines the variableportion of the interest rate swap. The six-month LIBOR rate for eachsemi-annual reset date is determined in arrears.

The Company has designatedthe interest rate swap as a fair value hedge of its fixed rate debt. The termsof the interest rate swap contract and hedged item meet the criteria to bemeasured using the short-cut method defined in SFAS No. 133 andtherefore perfect effectiveness is assumed over the term of the swap.

In accordance withSFAS No. 133, as of December 31, 2005, the Company recorded afair value adjustment to the portion of its fixed rate long-term debt that ishedged. A fair value adjustment of $1,417 and $213 at December 31, 2005and 2004, respectively, was recorded as a decrease to long-term obligations,with the related value for the interest rate swap’s non-current portionrecorded in other long-term liabilities. Interest rate differentials associatedwith the interest rate swap are recorded as an adjustment to a current asset orliability, with the offset to interest expense over the life of the interestrate swap. The Company realized a reduction in its interest expense as a resultof the interest rate swap of $244 and $1,002 for the years ended December 31,2005 and 2004, respectively.

**13. Warrants**

Inconnection with the restructuring and the settlement of the various creditorclasses in the Chapter 11 bankruptcy proceeding, three classes of warrantswere issued that allow the holders to purchase 

F-26

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the Company’s common stock in the future at statedexercise prices. The key financial elements of the warrants are as follows:

| ** **             | ** ** | ** **           | ** ** | ** **         | ** ** | ** **     | ** ** | **Warrants**          | ** ** |
|------------------------|------------|----------------------|------------|--------------------|------------|----------------|------------|-----------------------|------------|
| ** **             | ** ** | **Warrants**         | ** ** | ** **         | ** ** | ** **     | ** ** | **Issued and**   | ** ** |
| ** **             | ** ** | **Issued**           | ** ** | ** **         | ** ** | ** **     | ** ** | **Outstanding**       | ** ** |
| ** **             | ** ** | **to Purchase** | ** ** | ** **         | ** ** | ** **     | ** ** | **as of**        | ** ** |
| ** **             | ** ** | **Common**           | ** ** | **Exercise**       | ** ** | ** **     | ** ** | **December 31,** | ** ** |
| ** **             | ** ** | **Stock**            | ** ** | **Price**          | ** ** | **Expiration** | ** ** | **2005**              | ** ** |
| ** **             | ** ** | **(000)**            | ** ** | **Per Share** | ** ** | **Date**       | ** ** | **(000)**             | ** ** |
| Class A  Warrants |       |                 | 1,157      |               |       |           | $          | 13.85                 |       |   | May 23, 2004 |   |   | — |   |   |
| Class B  Warrants |       |                 | 700        |               |       |           | $          | 20.78                 |       |   | May 23, 2006 |   |   | 700 |   |   |
| Class C Warrants  |       |                 | 271        |               |       |           | $          | 27.70                 |       |   | May 23, 2006 |   |   | 271 |   |   |

 

The Class A and B Warrantswere issued, pro rata, to participants in the former 97¤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 CWarrants were issued to the former majority equity holders of the Company. Theformer equity holders received no other significant disbursements orconsideration upon emergence from Chapter 11. These warrants have beentreated as an exchange of old equity securities for new equity securities inconnection with recording the reorganization entries and establishing theopening fresh-start balance sheet. As of the opening fresh-start balance sheetdate, the fair value of the Class A, Class B and Class CWarrants was $2,500, $1,500 and $0, respectively. The fair value of thewarrants was estimated using the Black-Scholes-Merton option pricing methodwith the following significant assumptions:

| Risk-free rate of  return           |   | 5.0%         |            |
|-------------------------------------|--------|--------------|-----------------|
| Volatility                          |   | 35.0%        |            |
| Shares issued on the effective date |   | 13.3 million |            |
| New Common Stock  midpoint value    |   | $            | 13.85 per share |   |
|                                     |        |              |                 |  |

 

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, 2005.

**14. Stock Options**

The stock option plansexisting at December 31, 2002 and all options issued thereunder werecanceled in May 2003 upon emergence from Chapter 11 bankruptcy.

The 2004 Non-EmployeeDirectors Stock Option Plan (the “Directors Plan”) was adopted in May 2004for the Company’s Board of Directors. Up to 200,000 shares of the Company’scommon stock with a maximum contractual term of 10 years may be issued pursuantto awards granted by the Compensation Committee under the Directors Plan.

The 2004 Stock IncentivePlan (the “Stock Incentive Plan”) was adopted in May 2004 for theCompany’s employees. Up to 1.478 million shares of the Company’s common stockwith a maximum contractual term of 10 years 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) performance awards.

F-27

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In 2005, the Company awarded 516,000 options under theStock Incentive Plan, of which 84,000 were canceled or expired and 385,000 arefully vested at December 31, 2005. The remaining 46,000 options will vestwithin three years of the grant date if certain financial goals are met, butwill vest at the end of seven years regardless of whether these financialtargets are achieved.

In 2004, the Company awarded 375,000 stock optionsunder the Stock Incentive Plan, of which 58,000 were canceled or expired and167,000 are fully vested at December 31, 2005. The remaining 150,000options will vest within three years of the grant date if certain financialgoals are met, but will vest at the end of seven years regardless of whetherthese financial targets are achieved.

In 2003, the Company awarded 300,000 stock optiongrants under individual stock option agreements of which 125,000 were canceledor expired and 175,000 are fully vested at December 31, 2005.

***Acceleration ofNon-Vested Stock Options.******  ***On December 22, 2005, the Company’s Board ofDirectors voted to accelerate the vesting of certain stock options previouslyawarded to executive officers and other employees under the Company’s 2004Stock Incentive Plan. Shares purchased upon exercise of accelerated optionsbefore the original vesting date may not be sold or transferred until theoriginal vesting date and, if the holder is not an employee of the Company oran officer of the Company on the original vesting date for any reason otherthan death or disability, may not be sold or otherwise transferred until thefifth anniversary of the original vesting date. Options to purchaseapproximately 494,000 shares of common stock were accelerated. Exercise pricesof the accelerated options range from $10.95 to $14.45 per share. As a result,the Company recognized $29 of compensation expense during the fourth quarter of2005. See Note 24 (“Recently Issued Accounting Standards”).

Asummary of the activity and related information for options issued after emergencefrom Chapter 11 is summarized as follows:

| ** **                                     | ** ** | **Reorganized Company** | ** ** |
|------------------------------------------------|------------|------------------------------|------------|
| ** **                                     | ** ** | ** **                   | ** ** | **Weighted** | ** ** |
| ** **                                     | ** ** | ** **                   | ** ** | **Average** | ** ** |
| ** **                                     | ** ** | **Shares**                   | ** ** | **Exercise Price** | ** ** |
| Options  outstanding at June 1, 2003      |       | —                       |       |   | $ | — |   |   |
| Options granted                                |       | 300,000                      |       |   | 11.81 |   |   |
| Options exercised                              |       | —                       |       |   | — |   |   |
| Options canceled  or expired                   |       | —                       |       |   | — |   |   |
| Options  outstanding at December 31, 2003 |       | 300,000                      |       |   | $ | 11.81 |   |   |
| Options granted                                |       | 375,000                      |       |   | 13.10 |   |   |
| Options exercised                              |       | —                       |       |   | — |   |   |
| Options canceled  or expired                   |       | —                       |       |   | — |   |   |
| Options  outstanding at December 31, 2004 |       | 675,000                      |       |   | $ | 12.53 |   |   |
| Options granted                                |       | 515,875                      |       |   | 12.44 |   |   |
| Options exercised                              |       | —                       |       |   | — |   |   |
| Options canceled  or expired                   |       | (267,609                     | )          |   | — |   |   |
| Options outstanding at  December 31, 2005 |       | 923,266                      |       |   | $ | 12.84 |   |   |

 

Options to purchase: 727,016 shares were exercisableat December 31, 2005 and 245,833 were exercisable at December 31,2004.

F-28

----

Followingis a summary of stock options outstanding as of December 31, 2005:

| ** **                | ** ** | ** **         | ** ** | **Weighted Average** | ** ** | ** **      | ** ** |
|---------------------------|------------|--------------------|------------|---------------------------|------------|-----------------|------------|
| ** **                | ** ** | **Number of** | ** ** | **Remaining Life**   | ** ** | **Shares**      | ** ** |
| ** **                | ** ** | **Options**        | ** ** | **(In Years)**       | ** ** | **Exercisable** | ** ** |
| Options outstanding:      |       |               |       |                      |       |            |       |   |   |   |   |   |   |
| Exercise price of $10.95  |       |               | 25,000     |                      |       |            | 7.9        |   |   |   | 25,000 |   |   |
| Exercise price of  $12.15 |       |               | 50,000     |                      |       |            | 9.3        |   |   |   | 25,000 |   |   |
| Exercise price of  $12.18 |       |               | 313,100    |                      |       |            | 9.3        |   |   |   | 313,100 |   |   |
| Exercise price of  $12.59 |       |               | 8,000      |                      |       |            | 9.4        |   |   |   | 8,000 |   |   |
| Exercise price of  $13.10 |       |               | 316,666    |                      |       |            | 8.5        |   |   |   | 166,666 |   |   |
| Exercise price of  $13.30 |       |               | 23,750     |                      |       |            | 9.4        |   |   |   | 15,000 |   |   |
| Exercise price of  $13.75 |       |               | 5,000      |                      |       |            | 9.7        |   |   |   | 2,500 |   |   |
| Exercise price of  $13.79 |       |               | 150,000    |                      |       |            | 7.6        |   |   |   | 150,000 |   |   |
| Exercise price of  $13.95 |       |               | 5,500      |                      |       |            | 9.5        |   |   |   | 5,500 |   |   |
| Exercise price of  $14.20 |       |               | 6,250      |                      |       |            | 9.1        |   |   |   | 6,250 |   |   |
| Exercise price of  $14.45 |       |               | 20,000     |                      |       |            | 9.6        |   |   |   | 10,000 |   |   |
|                      |       |               | 923,266    |                      |       |            |       |   |   |   | 727,016 |   |   |

 

The Company will adoptSFAS No. 123(R) on January 1, 2006 utilizing the 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) basedon the requirements of SFAS No. 123 for all awards granted toemployees prior to the effective date of SFAS No. 123(R) that remainunvested on the effective date. The impact of the adoption of SFAS No. 123(R) isestimated to result in a charge of $900 to income before income taxes in 2006related to unvested options as of December 31, 2005 and options expectedto be granted in 2006.

**15. Leases**

Futureminimum lease payments under leases with initial or remaining non-cancelablelease terms in excess of one year at December 31, 2005 are as follows:

| ** **                                                                            | ** ** | **Capital** | ** ** | **Operating** | ** ** |
|---------------------------------------------------------------------------------------|------------|-------------|------------|---------------|------------|
| ** **                                                                            | ** ** | **Leases**  | ** ** | **Leases**    | ** ** |
| 2006                                                                                  |       | $           | 3,144      |          |       | $ | 3,783 |   |   |
| 2007                                                                                  |       | 2,890       |       |          | 3,471      |   |   |
| 2008                                                                                  |       | 3,063       |       |          | 3,106      |   |   |
| 2009                                                                                  |       | 3,306       |       |          | 2,392      |   |   |
| 2010                                                                                  |       | 3,241       |       |          | 1,690      |   |   |
| Thereafter                                                                            |       | 7,898       |       |          | 2,490      |   |   |
| Total minimum  lease payments                                                         |       | 23,542      |       |          | $          | 16,932 |   |   |
| Amount  representing interest                                                         |       | (8,445      | )          |          |       |   |   |
| Present value of net  minimum lease payments, including current obligations of $1,633 |       | $           | 15,097     |          |       |   |   |   |

 

Rent expense underoperating leases amounted to $5,927, $7,279, $3,900, and $2,785 for each of theyears ended December 31, 2005, and 2004, and the seven months ended December 31,2003, and the five months ended May 31, 2003, respectively.

F-29

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**16. Income Taxes**

Pretaxincome (loss) from continuing operations was allocated under the followingjurisdictions:

| ** **                                                    | ** ** | ** **                               | ** ** | ** **                               | ** ** | ** **                                            | ** ** | **Predecessor**                                       | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|-------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                    | ** ** | **Reorganized Company**             | ** ** | **Company**                              | ** ** |
| ** **                                                    | ** ** | **Year  Ended  December 31,  2005** | ** ** | **Year  Ended  December 31,  2004** | ** ** | **Seven Months  Ended  December 31,  2003** | ** ** | **Five Months   Ended  May 31,  2003** | ** ** |
| ** **                                                    | ** ** | ** **                               | ** ** | **(Restated)**                           | ** ** | **(Restated)**                                        | ** ** | ** **                                            | ** ** |
| Domestic income  (loss)                                       |       |                                     | $          | (22,796                                  | )          |                                                  |       | $                                                     | (28,605    | ) |   |   | $ | (14,725 | ) |   |   | $ | 515,287 |   |   |
| Foreign income                                                |       |                                     | 8,510      |                                     |       |                                                  | 10,232     |                                                  |       |   | 195 |   |   |   | 55,309 |   |   |
| Income (loss) from  continuing operations before income taxes |       |                                     | $          | (14,286                                  | )          |                                                  |       | $                                                     | (18,373    | ) |   |   | $ | (14,530 | ) |   |   | $ | 570,596 |   |   |

 

Theprovision benefit for income taxes for continuing operations is as follows: 

| ** **                                                 | ** ** | ** **                               | ** ** | **Predecessor**                          | ** ** |
|------------------------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                 | ** ** | **Reorganized Company**             | ** ** | **Company**                              | ** ** |
| ** **                                                 | ** ** | **Year  Ended  December 31,  2005** | ** ** | **Year  Ended  December 31,  2004** | ** ** | **Seven Months  Ended  December 31,  2003** | ** ** | **Five Months  Ended  May 31,  2003** | ** ** |
| ** **                                                 | ** ** | ** **                               | ** ** | **(Restated)**                           | ** ** | **(Restated)** | ** ** | ** ** | ** ** |
| Current:                                                   |       |                                     |       |                                     |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Federal                                                    |       |                                     | $          | —                                   |       |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |   |
| Foreign                                                    |       |                                     | 4,175      |                                     |       |   | 8,674 |   |   |   | 3,187 |   |   |   | 2,138 |   |   |
| State and local                                            |       |                                     | 3,339      |                                     |       |   | 1,730 |   |   |   | 1,052 |   |   |   | 150 |   |   |
| Total current                                              |       |                                     | 7,514      |                                     |       |   | 10,404 |   |   |   | 4,239 |   |   |   | 2,288 |   |   |
| Deferred                                                   |       |                                     | (3,578     | )                                        |       |   | (14,859 | ) |   |   | 1,230 |   |   |   | — |   |   |
| Income tax provision  (benefit)—continuing operations |       |                                     | $          | 3,936                                    |       |   |   | $ | (4,455 | ) |   |   | $ | 5,469 |   |   |   | $ | 2,288 |   |   |

 

Thecomposition of deferred tax assets and liabilities at December 31 is asfollows:

| ** **                                              | ** ** | **Reorganized Company** | ** ** |
|---------------------------------------------------------|------------|------------------------------|------------|
| ** **                                              | ** ** | **December 31,**        | ** ** |
| ** **                                              | ** ** | **2005**                     | ** ** | **2004** | ** ** |
| ** **                                              | ** ** | ** **                   | ** ** | **(Restated)** | ** ** |
| Deferred tax  assets:                                   |       |                         |       |   |   |
| Post-employment  benefits                               |       | $                            | 7,842      |   | $ | 7,729 |   |
| Accrued  liabilities                                    |       | 4,795                        |       | 4,596 |   |
| Other                                                   |       | 2,235                        |       | 5,812 |   |
| Net operating  loss carryforwards—foreign and U.S. |       | 16,473                       |       | 12,363 |   |
| Total deferred  tax assets                              |       | 31,345                       |       | 30,500 |   |
| Valuation  allowance for deferred tax assets            |       | (19,480                      | )          | (16,957 | ) |
| Net deferred tax  assets                                |       | 11,865                       |       | 13,543 |   |
| Deferred tax  liabilities:                              |       |                         |       |   |   |
| Fixed assets                                            |       | (384                         | )          | (1,697 | ) |
| Intangibles                                             |       | (19,606                      | )          | (20,156 | ) |
| Inventories                                             |       | (3,029                       | )          | (3,101 | ) |
| Investment in  subsidiary                               |       | (43,013                      | )          | (57,463 | ) |
| Total deferred  tax liabilities                         |       | (66,032                      | )          | (82,417 | ) |
| Net deferred tax assets  (liabilities)                  |       | $                            | (54,167    | ) | $ | (68,874 | ) |

 

F-30

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Income taxes paid for each of the years ended December 31,2005 and 2004, the seven months ended December 31, 2003 and the fivemonths ended May 31, 2003 were $6,812, $6,980, $3,746, and $640,respectively.

Theprovision for income tax differs from the amount of income taxes determined byapplying the 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:

| ** **                                                                    | ** ** | ** **                               | ** ** | **Predecessor**                          | ** ** |
|-------------------------------------------------------------------------------|------------|------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                                    | ** ** | **Reorganized Company**             | ** ** | **Company**                              | ** ** |
| ** **                                                                    | ** ** | **Year  Ended  December 31,  2005** | ** ** | **Year  Ended  December 31,  2004** | ** ** | **Seven Months  Ended  December 31,  2003** | ** ** | **Five Months  Ended  May 31,  2003** | ** ** |
| ** **                                                                    | ** ** | ** **                               | ** ** | **(Restated)**                           | ** ** | **(Restated)** | ** ** | ** ** | ** ** |
| Tax at U.S. statutory rates                                                   |       |                                     | $          | (5,000                                   | )          |   |   | $ | (6,431 | ) |   |   | $ | (5,086 | ) |   |   | $ | 199,709 |   |   |
| Foreign deemed dividends (Section 956)                                   |       |                                     | 3,524      |                                     |       |   | 1,554 |   |   |   | — |   |   |   | — |   |   |
| Nondeductible expenses and other exclusions                                   |       |                                     | 570        |                                     |       |   | (290 | ) |   |   | 1,565 |   |   |   | 612 |   |   |
| Reorganization fresh-start adjustments                                        |       |                                     | —     |                                     |       |   | — |   |   |   | — |   |   |   | (139,744 | ) |   |
| Valuation allowance for deferred tax benefits                                 |       |                                     | 1,821      |                                     |       |   | 10,008 |   |   |   | 5,382 |   |   |   | (57,979 | ) |   |
| Foreign tax rate differences and nonrecognition of  foreign tax loss benefits |       |                                     | 3,260      |                                     |       |   | 1,226 |   |   |   | 2,556 |   |   |   | (420 | ) |   |
| State income taxes                                                            |       |                                     | 3,339      |                                     |       |   | 1,730 |   |   |   | 1,052 |   |   |   | 110 |   |   |
| Change in basis difference in investment of  subsidiary                       |       |                                     | (3,578     | )                                        |       |   | (12,252 | ) |   |   | — |   |   |   | — |   |   |
| Income tax  provision (benefit)                                               |       |                                     | $          | 3,936                                    |       |   |   | $ | (4,455 | ) |   |   | $ | 5,469 |   |   |   | $ | 2,288 |   |   |

 

During the fourth quarter of 2005, the Companyinitiated a review of the availability of its U.S. net operating losscarryforwards. The Company determined that certain of its net operating losscarryforwards will be lost due to various Internal Revenue Code sections. TheCompany has engaged a tax service provider to perform a comprehensive study todetermine the specific limitations related to the remaining net operating losscarryforwards. The study is expected to be completed during the third quarterof 2006. Based on its current analysis, the Company believes that the netoperating losses generated up to and including December 31, 2003 will be lost.The Company has not recorded a deferred tax asset for these net operating losscarryforwards.

As of December 31, 2005, the Company has netoperating loss carryforwards from the years 2004 and 2005 available to offsetfuture U.S. taxable income of approximately $29 million. The Company hasrecorded a deferred tax asset and a valuation allowance on the utilization ofthese net operating loss carryforwards. The net operating losses in the U.S.will expire in 2024 and 2025.

The Company has established accruals for certain taxcontingencies associated with state income tax return filing positions whichmay be challenged. The tax contingency accruals are adjusted based on changingfacts and circumstances. The Company believes the tax contingency accrualsrecorded are adequate.

The Company’s foreign subsidiaries have undistributedearnings at December 31, 2005. The Company has recognized the estimatedU.S. income tax liability associated with the majority of these foreignearnings because of the applicability of I.R.C. Section 956 for earningsof foreign entities which guarantee the indebtedness of a U.S. parent. Theearnings of the other foreign subsidiaries not covered by I.R.C.Section 956 are considered to be indefinitely reinvested, and accordingly,no provisions for U.S. federal and state income taxes have been providedtherein. Upon distribution of those earnings in the form of dividends orotherwise, the Company may be subject to both U.S. income taxes (subject to anadjustment for foreign tax credits) and withholding taxes payable to thevarious foreign countries. The tax amounts 

F-31

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actually payable maydiffer from these estimates upon the distribution because of the complexitiesassociated with its hypothetical calculation and the uncertainty that theincome levels would have on fresh-start accounting adjustments.

As a result of the 2003bankruptcy restructuring, the Company recognized cancellation of indebtednessincome. Under Internal Revenue Code Section 108, this cancellation ofindebtedness income is not recognized for income tax purposes, provided thatthe Company reduces its basis in its tax attributes. This attribute reductionincludes reducing the tax basis in the stock of the Company’s subsidiaries.This reduction in stock basis creates a difference between the Company’s bookand tax basis in the subsidiary stock for which a deferred income tax liabilitywas recorded. The final determination of the reduction in tax attributes wasmade following the bankruptcy restructuring with the filing of the Company’sfederal income tax return and with positions taken with respect to the mannerin which we would reduce our tax attributes. As a result, the Company revisedcertain estimates and recorded adjustments to increase deferred tax liabilitiesby $60.2 million, made a cumulative catch up adjustment of$9.5 million income tax benefit in the statement of operations to reflectthe reduction in the basis difference in the subsidiary stock from the fresh-startaccounting date through September 30, 2004, with an offsetting increase of$69.7 million in goodwill. Subsequent reductions in the book-tax basisdifference as a result of post 2003 bankruptcy restructuring activity arerecorded in the statement of operations. The Company further reduced itsdeferred tax liability with an increase to income tax benefit in the statementof operations in the fourth quarter of 2004 for $2,752 for a total reduction of$12,252 in 2004 and $3,578 in 2005.

**17. EmployeeBenefit Plans**

*401(k) RetirementPlan.*   The 401(k) RetirementPlan covers the majority of the Company’s domestic employees. At itsdiscretion, the Company can make a base contribution of 1% of each employee’scompensation and an additional contribution equal to as much as 4% of theemployee’s compensation. At the employee’s discretion, an additional 1% to 15%voluntary employee contribution can be made. The plan requires the Company tomake matching contributions of 50% for the first 6% of the voluntary employeecontribution. Total expense for this plan was approximately $1,486, $1,989,$1,281, and $915 for the year ended December 31, 2005, the year ended December 31,2004, the seven months ended December 31, 2003, and the five months ended May 31,2003, respectively.

*DeferredCompensation Plan.*   Each director, other than theCompany’s Chairman and Chief Executive Officer, is entitled to receive a $75annual fee. Forty percent of this annual fee is deposited into the Company’sNon Employee Director Deferred Compensation Plan (the “Deferred CompensationPlan’’). Under the Deferred Compensation Plan, deferral amounts are credited toan account and converted into the amount of shares of our common stock equal tothe amount deferred divided by the fair market value of our common stock on thedeferral date. A director’s account is distributed pursuant to the terms of theDeferred Compensation Plan upon his or her termination or a change in control;otherwise, the account is distributed as soon as administratively feasibleafter the date specified by the director. Directors may elect to receive theshares in their accounts in either a lump sum or substantially equal installmentsover a period not to exceed five years.

*PensionPlans.*   The Company’s subsidiaries have hadvarious noncontributory defined benefit pension plans which coveredsubstantially all U.S. employees. The Company froze and combined its threenoncontributory defined benefit pension plans through amendments to such planseffective December 31, 1989, into one plan (the “Retirement Plan”). Allformer participants of these plans became eligible to participate in the 401(k) RetirementPlan 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 

F-32

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of $588, $632 and $391 forthe years ended December 31, 2005, 2004, and 2003, respectively. Prepaidbenefit cost at December 31, 2005 and 2004 was $8,988 and $9,818,respectively. The prepaid benefit cost is not included in the table below or inthe balance sheet, as the Company has no legal right to amounts included inthis fund. In addition, upon dissolution of the Fund, any excess funds arerequired to be allocated to the participants as determined by the actuary.Accordingly, the Company accounts for this fund as a defined contribution plan.The actuarial assumptions used to determine the Company’s contribution, thefunded status, and the retirement benefits are consistent with previous years.

*OtherPostretirement Benefits.*   The Company has aretirement plan covering both salaried and non-salaried retired employees,which provides postretirement health care benefits (medical and dental) andlife insurance benefits. The postretirement healthcare portion is contributory,with retiree contributions adjusted annually as determined based on claimcosts. The postretirement life insurance portion is noncontributory. TheCompany recognizes the cost of postretirement benefits on the accrual basis asemployees render service to earn the benefit. The Company continues to fund thecost of healthcare and life insurance benefits in the year incurred.

F-33

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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 post-retirement benefit plans asrecognized in the consolidated balance sheets for the years ended December 31,2005 and 2004: 

| ** **                                            | ** ** | ** **                   | ** ** | **Other**                        | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|----------------------------------|------------|
| ** **                                            | ** ** | **Pension Benefits**    | ** ** | **Postretirement Benefits** | ** ** |
| ** **                                            | ** ** | **Reorganized Company** | ** ** | **Reorganized Company**     | ** ** |
| ** **                                            | ** ** | **2005**                     | ** ** | **2004**                         | ** ** | **2005** | ** ** | **2004** | ** ** |
| Change in benefit  obligation:                        |       |                         |       |                             |       |   |   |   |   |
| Benefit obligation at beginning of year               |       | $                            | 19,806     |                             | $          | 18,882 |   | $ | 23,727 |   | $ | 19,200 |   |
| Service cost                                          |       | —                       |       | —                           |       | 1,293 |   | 978 |   |
| Interest cost                                         |       | 1,143                        |       | 1,142                            |       | 1,003 |   | 1,272 |   |
| Actuarial (gain) loss                                 |       | 929                          |       | 678                              |       | (6,425 | ) | 2,979 |   |
| Plan amendments                                       |       | —                       |       | —                           |       | — |   | — |   |
| Benefits paid                                         |       | (930                         | )          | (896                             | )          | (720 | ) | (702 | ) |
| Benefit obligation at end of year                     |       | $                            | 20,948     |                             | $          | 19,806 |   | $ | 18,878 |   | $ | 23,727 |   |
| Change in plan  assets:                               |       |                         |       |                             |       |   |   |   |   |
| Fair value of plan assets at beginning of year        |       | $                            | 14,981     |                             | $          | 13,523 |   |   |   |   |   |
| Actual return on plan assets                          |       | 903                          |       | 1,417                            |       |   |   |   |   |
| Employer contributions                                |       | 1,172                        |       | 998                              |       |   |   |   |   |
| Benefits paid                                         |       | (930                         | )          | (896                             | )          |   |   |   |   |
| Administrative expenses                               |       | (159                         | )          | (61                              | )          |   |   |   |   |
| Fair value of plan assets at end of year              |       | $                            | 15,967     |                             | $          | 14,981 |   |   |   |   |   |
| Funded status of the plan (underfunded)               |       | $                            | (4,981     | )                                | $          | (4,825 | ) | $ | (18,878 | ) | $ | (23,727 | ) |
| Unrecognized net actuarial loss (gain)                |       | 645                          |       | (747                             | )          | (3,315 | ) | 2,790 |   |
| Net amount recognized                                 |       | $                            | (4,336     | )                                | $          | (5,572 | ) | $ | (22,193 | ) | $ | (20,937 | ) |
| Amounts  recognized in the balance sheets:            |       |                         |       |                             |       |   |   |   |   |
| Accrued benefits                                      |       | $                            | (4,981     | )                                | $          | (5,572 | ) |   |   |   |   |
| Accumulated other comprehensive loss                  |       | 645                          |       | —                           |       |   |   |   |   |
| Net amount  recognized                                |       | $                            | (4,336     | )                                | $          | (5,572 | ) |   |   |   |   |
| Weighted-average  assumptions as of December 31: |       |                         |       |                             |       |   |   |   |   |
| Discount rate—net periodic benefit cost          |       | 5.90                         | %          | 6.25                             | %          | 5.90 | % | 6.25 | % |
| Discount rate—benefit obligations                |       | 5.65                         | %          | 5.90                             | %          | 5.65 | % | 5.90 | % |
| 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 |   |

 

F-34

----

Thedefined benefit pension plan’s weighted average asset allocations by assetcategory at December 31, 2005 and 2004, are as follows:

| ** **           | ** ** | **2005** | ** ** | **2004** | ** ** |
|----------------------|------------|----------|------------|----------|------------|
| Equity securities    |       | 56.00    | %          | 59.26    | %          |
| Debt securities      |       | 29.00    | %          | 34.00    | %          |
| Insurance  contracts |       | 6.00     | %          | 6.07     | %          |
| Other                |       | 9.00     | %          | 0.67     | %          |
| Total                |       | 100.00   | %          | 100.00   | %          |

 

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 and (b) alltransactions undertaken on behalf of the Fund must be for the sole benefit ofplan participants and their beneficiaries. The following is a summary of theinvestment guidelines and strategies:

*InvestmentHorizon.*   The investment strategy is based on arolling time horizon of three to five years.

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

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

*Asset Mix.*   Thefollowing represents the midpoint mix of the asset types described:

**Equities**

| Large  capitalization equities |   | 32 | % |
|--------------------------------|--------|----|---|
| Mid capitalization  equities   |   | 7  | % |
| International  equities        |   | 12 | % |
| Small capitalization  equities |   | 6  | % |

 

**Fixed Income**

| Core bonds                      |   | 26  | % |
|---------------------------------|--------|-----|---|
| High yield bonds                |   | 2   | % |
| Insurance and  annuity contract |   | 6   | % |
| Real Estate                     |   | 9   | % |
| Total                           |   | 100 | % |

 

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

*Investment Management.*   Thelimits 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 | % |   |

 

F-35

----

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 $1,300in required payments to the Retirement Plan for the year ending December 31,2006. It is not expected that any discretionary contributions or non-cashcontributions will be made.

Netperiodic pension and other postretirement benefit costs include the followingcomponents:

| ** **                                    | ** ** | **Pension Benefits**    | ** ** |
|-----------------------------------------------|------------|------------------------------|------------|
| ** **                                    | ** ** | ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** | **Predecessor** | ** ** |
| ** **                                    | ** ** | **Reorganized Company** | ** ** | **Company** | ** ** |
| ** **                                    | ** ** | **Year**                     | ** ** | **Year** | ** ** | **Seven Months** | ** ** | **Five Months** | ** ** |
| ** **                                    | ** ** | **Ended**                    | ** ** | **Ended** | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                    | ** ** | **December 31,**        | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **May 31,** | ** ** |
| ** **                                    | ** ** | **2005**                     | ** ** | **2004** | ** ** | **2003** | ** ** | **2003** | ** ** |
| Components of the  net periodic benefit cost: |       |                         |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest cost                                 |       |                         | $          | 1,143 |   |   |   | $ | 1,142 |   |   |   | $ | 665 |   |   |   | $ | 437 |   |   |
| Expected return on plan assets                |       |                         | (1,207     | ) |   |   | (1,091 | ) |   |   | (529 | ) |   |   | (366 | ) |   |
| Recognized loss                               |       |                         | —     |   |   |   | — |   |   |   | — |   |   |   | 116 |   |   |
| Prior service cost recognized                 |       |                         | —     |   |   |   | — |   |   |   | — |   |   |   | 7 |   |   |
| Benefit cost (credit)                         |       |                         | $          | (64 | ) |   |   | $ | 51 |   |   |   | $ | 136 |   |   |   | $ | 194 |   |   |

 

| ** **                                    | ** ** | **Other Postretirement Benefits** | ** ** |
|-----------------------------------------------|------------|---------------------------------------------|------------|
| ** **                                    | ** ** | ** **                                  | ** ** | ** ** | ** ** | ** ** | ** ** | **Predecessor** | ** ** |
| ** **                                    | ** ** | **Reorganized Company**                | ** ** | **Company** | ** ** |
| ** **                                    | ** ** | **Year**                                    | ** ** | **Year** | ** ** | **Seven Months** | ** ** | **Five Months** | ** ** |
| ** **                                    | ** ** | **Ended**                                   | ** ** | **Ended** | ** ** | **Ended** | ** ** | **Ended** | ** ** |
| ** **                                    | ** ** | **December 31,**                       | ** ** | **December 31,** | ** ** | **December 31,** | ** ** | **May 31,** | ** ** |
| ** **                                    | ** ** | **2005**                                    | ** ** | **2004** | ** ** | **2003** | ** ** | **2003** | ** ** |
| Components of the  net periodic benefit cost: |       |                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service cost                                  |       |                                        | $          | 952 |   |   |   | $ | 978 |   |   |   | $ | 597 |   |   |   | $ | 370 |   |   |
| Interest cost                                 |       |                                        | 1,003      |   |   |   | 1,272 |   |   |   | 891 |   |   |   | 421 |   |   |
| Recognized gain                               |       |                                        | (132       | ) |   |   | — |   |   |   | — |   |   |   | (195 | ) |   |
| Prior service cost recognized                 |       |                                        |       |   |   |   | — |   |   |   | — |   |   |   | (80 | ) |   |
| Benefit cost                                  |       |                                        | $          | 1,823 |   |   |   | $ | 2,250 |   |   |   | $ | 1,488 |   |   |   | $ | 516 |   |   |

 

The assumed medical cost trend rate used in measuringthe accumulated postretirement benefit obligation was 11.5%, 7.0%, 7.0%, and7.5% for the year ended December 31, 2005, the year ended December 31,2004, the seven months ended December 31, 2003 and the five months ended May 31,2003, respectively, declining gradually to 5.0% in 2015. 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 12.0%, 7.0%, 7.5%, and 7.5% for the year ended December 31,2005, the year ended December 31, 2004, the seven months ended December 31,2003 and the five months ended May 31, 2003 , respectively, declininggradually to 5.0% in 2015. The assumed dental cost trend rate used in measuringthe net benefit cost was 6.0% for all periods.

F-36

----

Aone-percentage-point change in the assumed healthcare cost trend rate wouldhave the following effects:

| ** **                                                                                          | ** ** | **One-Percentage**      | ** ** | **One-Percentage**      | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                                                                          | ** ** | **Point Increase** | ** ** | **Point Decrease** | ** ** |
| Effect on total  of service and interest cost components for the year ended December 31,  2005 |       |                    | $          | 251                     |       |   |   | $ | (344 | ) |   |
| Effect on postretirement  benefit obligation as of December 31, 2005                           |       |                    | $          | 3,187                   |       |   |   | $ | (2,551 | ) |   |

 

Thefollowing table presents the benefits expected to be paid in the next tenfiscal years:

| ** **        | ** ** | ** **  | ** ** | **Other**          | ** ** |
|-------------------|------------|-------------|------------|--------------------|------------|
| ** **        | ** ** | **Pension** | ** ** | **Postretirement** | ** ** |
| **Year**          | ** ** | ** **  | ** ** | **Benefits**       | ** ** | **Benefits** | ** ** |
| 2006              |       |        | $          | 1,052              |       |   |   | $ | 529 |   |   |
| 2007              |       |        | $          | 1,086              |       |   |   | $ | 613 |   |   |
| 2008              |       |        | $          | 1,152              |       |   |   | $ | 636 |   |   |
| 2009              |       |        | $          | 1,196              |       |   |   | $ | 709 |   |   |
| 2010              |       |        | $          | 1,227              |       |   |   | $ | 782 |   |   |
| 2011 through 2016 |       |        | $          | 6,956              |       |   |   | $ | 5,457 |   |   |
|                   |            |             |            |                    |            |  |  |  |  |  |  |  |  |

 

*Stock Purchase Plan.*   TheCompany adopted an employee stock purchase plan effective during the thirdquarter of 2005 that allows any eligible employee to purchase from the Companyshares of the Company’s common stock at the end of each quarter at 92.5% of themarket price at the end of the quarter. For the year ended December 31,2005, 4.2 thousand shares were purchased under this plan.

**18. SegmentInformation**

Although the Company’s continuing operations arecomprised of several product lines and operating locations, similarity ofproducts, paths to market, end-users and production processes result inperformance evaluation and decisions regarding allocation of resources beingmade on a combined basis, and accordingly, management has concluded the Companyoperates in one segment. Reportable geographic regions are the United States,Europe and Australia/Asia.

Summarizedfinancial information concerning the Company’s geographic segments for itscontinuing operations is shown in the following table:

| ** **              | ** ** | ** **                   | ** ** | ** **            | ** ** | ** **            | ** ** | **Predecessor**      | ** ** |
|-------------------------|------------|------------------------------|------------|-----------------------|------------|-----------------------|------------|----------------------|------------|
| ** **              | ** ** | **Reorganized Company** | ** ** | **Company**           | ** ** |
| ** **              | ** ** | ** **                   | ** ** | **Year Ended**   | ** ** | **Seven Months** | ** ** | **Five Months** | ** ** |
| ** **              | ** ** | **Year Ended**          | ** ** | **December 31,** | ** ** | **Ended**             | ** ** | **Ended**            | ** ** |
| ** **              | ** ** | **December 31,**        | ** ** | **2004**              | ** ** | **December 31,** | ** ** | **May 31,**     | ** ** |
| ** **              | ** ** | **2005**                     | ** ** | **(Restated)**        | ** ** | **2003**              | ** ** | **2003**             | ** ** |
| Net sales:              |       |                         |       |                  |       |                  |       |                 |       |   |   |   |   |   |   |   |   |
| North America           |       |                         | $          | 292,765               |       |                  |       | $                    | 277,344    |   |   |   | $ | 141,230 |   |   |   | $ | 99,460 |   |   |
| Europe                  |       |                         | 34,711     |                  |       |                  | 32,859     |                 |       |   | 16,105 |   |   |   | 12,006 |   |   |
| Australia / Asia        |       |                         | 74,996     |                  |       |                  | 70,046     |                 |       |   | 35,774 |   |   |   | 20,500 |   |   |
| All other international |       |                         | 66,144     |                  |       |                  | 57,280     |                 |       |   | 28,895 |   |   |   | 18,499 |   |   |
|                    |       |                         | $          | 468,616               |       |                  |       | $                    | 437,529    |   |   |   | $ | 222,004 |   |   |   | $ | 150,465 |   |   |

 

F-37

----

 

| ** **              | ** ** | **Reorganized Company** | ** ** |
|-------------------------|------------|------------------------------|------------|
| ** **              | ** ** | **December 31,**        | ** ** | **December 31,** | ** ** |
| ** **              | ** ** | **2005**                     | ** ** | **2004 (restated)** | ** ** |
| Identifiable  assets:   |       |                         |       |   |   |   |   |   |   |
| North America           |       |                         | $          | 37,190 |   |   |   | $ | 48,264 |   |   |
| Europe                  |       |                         | 1,347      |   |   |   | 2,734 |   |   |
| Australia / Asia        |       |                         | 8,714      |   |   |   | 10,769 |   |   |
| All other international |       |                         | 17,458     |   |   |   | 11,002 |   |   |
|                    |       |                         | $          | 64,709 |   |   |   | $72,769 |   |   |
|                         |            |                              |            |  |  |  |  |  |  |  |  |

 

***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’sproducts are engaged in various applications including construction, automobilemanufacturing, repair and maintenance and shipbuilding. The following tableshows sales from continuing operations for each of the Company’s key productlines:

| ** **                                           | ** ** | ** **                   | ** ** | ** **            | ** ** | ** **            | ** ** | **Predecessor**      | ** ** |
|------------------------------------------------------|------------|------------------------------|------------|-----------------------|------------|-----------------------|------------|----------------------|------------|
| ** **                                           | ** ** | **Reorganized Company** | ** ** | **Company**           | ** ** |
| ** **                                           | ** ** | ** **                   | ** ** | **Year Ended**   | ** ** | **Seven Months** | ** ** | **Five Months** | ** ** |
| ** **                                           | ** ** | **Year Ended**          | ** ** | **December 31,** | ** ** | **Ended**             | ** ** | **Ended**            | ** ** |
| ** **                                           | ** ** | **December 31,**        | ** ** | **2004**              | ** ** | **December 31,** | ** ** | **May 31,**     | ** ** |
| ** **                                           | ** ** | **2005**                     | ** ** | **(Restated)**        | ** ** | **2003**              | ** ** | **2003**             | ** ** |
| Gas equipment                                        |       |                         | $          | 165,198               |       |                  |       | $                    | 166,893    |   |   |   | $ | 90,553 |   |   |   | $ | 60,649 |   |   |
| Welding equipment                                    |       |                         | 54,099     |                  |       |                  | 51,374     |                 |       |   | 24,096 |   |   |   | 15,445 |   |   |
| Arc accessories                                      |       |                         | 139,032    |                  |       |                  | 117,084    |                 |       |   | 56,168 |   |   |   | 38,482 |   |   |
| Plasma power  supplies, torches and consumable parts |       |                         | 72,856     |                  |       |                  | 71,635     |                 |       |   | 35,500 |   |   |   | 24,943 |   |   |
| Filler metal                                         |       |                         | 37,431     |                  |       |                  | 30,543     |                 |       |   | 15,687 |   |   |   | 10,946 |   |   |
|                                                 |       |                         | $          | 468,616               |       |                  |       | $                    | 437,529    |   |   |   | $ | 222,004 |   |   |   | $ | 150,465 |   |   |

 

**19. Contingencies**

The Company and certain of its wholly-ownedsubsidiaries are defendants in various legal actions, primarily related toproduct liability. While there is uncertainty relating to any litigation,management is of the opinion that the outcome of such litigation will not havea material adverse effect on the Company’s financial condition or results ofoperations. At December 31, 2005, the Company was co-defendant in 1,128cases alleging manganese-induced illness. Manganese is an essential element ofsteel and is contained in all welding consumables. The Company is one of alarge number of defendants. The claimants allege that exposure to manganesecontained in welding consumables cause the plaintiffs to develop adverseneurological conditions, including a condition known as manganism. As of December 31,2005, 707 of these cases had been filed in, or transferred to, federal courtwhere the Judicial Panel on Multidistrict Litigation has consolidated thesecases for pretrial proceedings in the North District of Ohio. Between June 1,2003 and December 31, 2005, the Company was dismissed from 185 similarcases.

The Company is party to certain environmental matters,although no claims are currently pending. Any related obligations are not expectedto have a material effect on the Company’s business or financial condition orresults of operations.

All other legalproceedings and actions involving the Company are of an ordinary and routinenature and are incidental to the operations of the Company. Management believesthat such proceedings should not, individually or in the aggregate, have amaterial adverse effect on the Company’s business or financial condition or onthe results of operations.

F-38

----

**20. FinancialInstruments**

***Concentrations of Credit Risk***

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

The Company maintains cash and cash equivalents withvarious financial institutions. These financial institutions are located indifferent parts of the world, 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:

*Cashand cash equivalents:*   The carrying amountreported in the balance sheets for cash and cash equivalents approximates fairvalue.

*Accountsreceivable and accounts payable:*   The carryingamounts reported in the balance sheets for accounts receivable and accountspayable approximate their fair value.

*Debt:*   Thecarrying values of the obligations, outstanding under the Working CapitalFacility, the Second-Lien Facility and other long-term obligations, excludingthe Senior Subordinated Notes, approximate fair values since these obligationsare fully secured and have varying interest charges based on current marketrates. The estimated fair value of the Company’s Senior Subordinated Notes of$153,125 and $171,063 at December 31, 2005, and 2004, respectively, 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. A fair valueadjustment of $1,417 and $213 was recorded at December 31, 2005 and 2004,respectively.

**21. QuarterlyResults of Operations (Unaudited)**

During the year end review of the Company’s 2005financial statements, various adjustments were identified that related to thefirst three quarters of 2005, each of the quarters of 2004 and the second,third and fourth quarters of 2003. The adjustments, as more fully described inNote 2—*Restatement of Consolidated Financial Statements,*includedmatters related to income taxes, foreign currency transactions and otheradjustments related to international business units. All amounts presentedbelow have been adjusted for the Company’s discontinued operations as describedin Note 4—*Discontinued Operations*.

F-39

----

Thefollowing is a summary of the quarterly results of operations for the yearended December 31, 2005 as originally reported and as restated.

| ** **                                                                     | ** ** | **Reorganized Company**                                      | ** ** |
|--------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **Three Months Ended March 31, 2005(1)** | ** ** |
| ** **                                                                     | ** ** | ** **                                                        | ** ** | **Adjustments** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **As Originally**                                            | ** ** | **Increase** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **Reported(2)**                                                   | ** ** | **(Decrease)** | ** ** | **As Restated** | ** ** |
| **Continuing  Operations**                                                     | ** ** |                                                              | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net sales                                                                      |       |                                                              | $          | 112,731 | ** ** |   |   | $ | 93 | ** ** |   |   | $ | 112,824 | ** ** |   |
| Gross profit                                                                   |       |                                                              | 34,599     | ** ** |   |   | 227 | ** ** |   |   | 34,826 | ** ** |   |
| Operating income                                                               |       |                                                              | 7,013      | ** ** |   |   | (1,169 | **)** |   |   | 5,844 | ** ** |   |
| **Income (loss) applicable to common shares:**                                 | ** ** |                                                              | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                              | $          | 701 | ** ** |   |   | $ | (1,726 | **)** |   |   | $ | (1,025 | **)** |   |
| Discontinued operations                                                        |       |                                                              | 289        | ** ** |   |   | — | ** ** |   |   | 289 | ** ** |   |
| Net income                                                                     |       |                                                              | $          | 990 | ** ** |   |   | ($1,726 | **)** |   |   | $ | (736 | **)** |   |
| **Basic and diluted income (loss) per share  applicable to common shares(1):** | ** ** |                                                              | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                              | $          | 0.05 | ** ** |   |   | $ | (0.13 | **)** |   |   | $ | (0.08 | **)** |   |
| Discontinued operations                                                        |       |                                                              | 0.02       | ** ** |   |   | — | ** ** |   |   | 0.02 | ** ** |   |
| Net income                                                                     |       |                                                              | $          | 0.07 | ** ** |   |   | $ | (0.13 | **)** |   |   | $ | (0.06 | **)** |   |

 

| ** **                                                                     | ** ** | **Reorganized Company**                                     | ** ** |
|--------------------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **Three Months Ended June 30, 2005(1)** | ** ** |
| ** **                                                                     | ** ** | ** **                                                       | ** ** | **Adjustments** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **As Originally**                                           | ** ** | **Increase** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **Reported(2)**                                                  | ** ** | **(Decrease)** | ** ** | **As Restated** | ** ** |
| **Continuing Operations**                                                      | ** ** |                                                             | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net sales                                                                      |       |                                                             | $          | 121,290 |   |   |   | $ | 92 |   |   |   | $ | 121,382 |   |   |
| Gross profit                                                                   |       |                                                             | 31,565     |   |   |   | 1,101 |   |   |   | 32,666 |   |   |
| Operating income                                                               |       |                                                             | 2,870      |   |   |   | 1,187 |   |   |   | 4,057 |   |   |
| **Income  (loss) applicable to common shares:**                                | ** ** |                                                             | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                             | $          | (2,015 | ) |   |   | $ | 760 |   |   |   | $ | (1,255 | ) |   |
| Discontinued operations                                                        |       |                                                             | 319        |   |   |   | — |   |   |   | 319 |   |   |
| Net loss                                                                       |       |                                                             | $          | (1,696 | ) |   |   | $ | 760 |   |   |   | $ | (936 | ) |   |
| **Basic  and diluted income (loss) per share applicable to common shares(1):** | ** ** |                                                             | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                             | $          | (0.15 | ) |   |   | $ | 0.06 |   |   |   | $ | (0.09 | ) |   |
| Discontinued operations                                                        |       |                                                             | 0.02       |   |   |   | 0.00 |   |   |   | 0.02 |   |   |
| Net loss                                                                       |       |                                                             | $          | (0.13 | ) |   |   | $ | 0.06 |   |   |   | $ | (0.07 | ) |   |

 

F-40

----

| ** **                                                            | ** ** | **Reorganized Company**                                          | ** ** |
|-----------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **Three Months Ended September 30, 2005(1)** | ** ** |
| ** **                                                            | ** ** | ** **                                                            | ** ** | **Adjustments** | ** ** | ** ** | ** ** |
| ** **                                                            | ** ** | **As Originally**                                                | ** ** | **Increase** | ** ** | ** ** | ** ** |
| ** **                                                            | ** ** | **Reported(2)**                                                       | ** ** | **(Decrease)** | ** ** | **As Restated** | ** ** |
| **Continuing Operations**                                             | ** ** |                                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net sales                                                             |       |                                                                  | $          | 120,270 |   |   |   | $ | 93 |   |   |   | $ | 120,363 |   |   |
| Gross profit                                                          |       |                                                                  | 35,002     |   |   |   | (167 | ) |   |   | 34,835 |   |   |
| Operating income  (loss)                                              |       |                                                                  | 5,045      |   |   |   | 1,135 |   |   |   | 6,180 |   |   |
| **Loss  applicable to common shares:**                                | ** ** |                                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                 |       |                                                                  | $          | (7,282 | ) |   |   | $ | 2,469 |   |   |   | $ | (4,813 | ) |   |
| Discontinued operations                                               |       |                                                                  | (93        | ) |   |   | — |   |   |   | (93 | ) |   |
| Net loss                                                              |       |                                                                  | $          | (7,375 | ) |   |   | $ | 2,469 |   |   |   | $ | (4,906 | ) |   |
| **Basic  and diluted loss per share applicable to common shares(1):** | ** ** |                                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                 |       |                                                                  | $          | (0.55 | ) |   |   | $ | 0.18 |   |   |   | $ | (0.37 | ) |   |
| Discontinued operations                                               |       |                                                                  | —     |   |   |   | — |   |   |   | — |   |   |
| Net loss                                                              |       |                                                                  | $          | (0.55 | ) |   |   | $ | 0.18 |   |   |   | $ | (0.37 | ) |   |

 

| ** **                                                            | ** ** | **Reorganized Company**     | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------|------------|
| ** **                                                            | ** ** | **Three Months Ended** | ** ** |
| ** **                                                            | ** ** | **December 31,**            | ** ** |
| ** **                                                            | ** ** | **2005(1)**                      | ** ** |
| **Continuing Operations**                                             | ** ** |                             | ** ** | ** ** |   |
| Net sales                                                             |       |                             | $          | 114,047 |   |   |
| Gross profit                                                          |       |                             | 29,458     |   |   |
| Operating loss                                                        |       |                             | (4,152     | ) |   |
| **Loss  applicable to common shares:**                                |       |                             |       |   |   |
| Continuing operations                                                 |       |                             | $          | (11,129 | ) |   |
| Discontinued operations                                               |       |                             | (13,654    | ) |   |
| Net loss                                                              |       |                             | $          | (24,783 | ) |   |
| **Basic  and diluted loss per share applicable to common shares(1):** |       |                             |       |   |   |
| Continuing operations                                                 |       |                             | $          | (0.84 | ) |   |
| Discontinued operations                                               |       |                             | (1.02      | ) |   |
| Net loss                                                              |       |                             | $          | (1.86 | ) |   |

 

F-41

----

Thefollowing is a summary of the quarterly results of operations for the yearended December 31, 2004 as originally reported and as restated:

| ** **                                                                     | ** ** | **Reorganized Company**                                      | ** ** |
|--------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **Three Months Ended March 31, 2004(1)** | ** ** |
| ** **                                                                     | ** ** | ** **                                                        | ** ** | **Adjustments** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **As Originally**                                            | ** ** | **Increase** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **Reported(2)**                                                   | ** ** | **(Decrease)** | ** ** | **As Restated** | ** ** |
| **Continuing Operations**                                                      | ** ** |                                                              | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net sales                                                                      |       |                                                              | $          | 105,939 |   |   |   | $ | (103 | ) |   |   | $ | 105,836 |   |   |
| Gross profit                                                                   |       |                                                              | 32,596     |   |   |   | 1,327 |   |   |   | 33,923 |   |   |
| Operating income                                                               |       |                                                              | 5,077      |   |   |   | 1,632 |   |   |   | 6,709 |   |   |
| **Income  (loss) applicable to common shares:**                                | ** ** |                                                              | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                              | $          | (778 | ) |   |   | $ | 1,471 |   |   |   | $ | 693 |   |   |
| Discontinued operations                                                        |       |                                                              | (251       | ) |   |   | — |   |   |   | (251 | ) |   |
| Net income (loss)                                                              |       |                                                              | $          | (1,029 | ) |   |   | $ | 1,471 |   |   |   | $ | 442 |   |   |
| **Basic  and diluted income (loss) per share applicable to common shares(1):** | ** ** |                                                              | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                              | $          | (0.06 | ) |   |   | $ | 0.11 |   |   |   | $ | 0.05 |   |   |
| Discontinued operations                                                        |       |                                                              | (0.02      | ) |   |   | — |   |   |   | (0.02 | ) |   |
| Net income (loss)                                                              |       |                                                              | $          | (0.08 | ) |   |   | $ | 0.11 |   |   |   | $ | (0.03 | ) |   |

 

| ** **                                                                     | ** ** | **Reorganized Company**                                     | ** ** |
|--------------------------------------------------------------------------------|------------|------------------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **Three Months Ended June 30, 2004(1)** | ** ** |
| ** **                                                                     | ** ** | ** **                                                       | ** ** | **Adjustments** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **As Originally**                                           | ** ** | **Increase** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **Reported(2)**                                                  | ** ** | **(Decrease)** | ** ** | **As Restated** | ** ** |
| **Continuing  Operations**                                                     | ** ** |                                                             | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net sales                                                                      |       |                                                             | $          | 112,826 |   |   |   | $ | (103 | ) |   |   | $ | 112,723 |   |   |
| Gross profit                                                                   |       |                                                             | 33,900     |   |   |   | (114 | ) |   |   | 33,786 |   |   |
| Operating income                                                               |       |                                                             | 2,571      |   |   |   | (61 | ) |   |   | 2,510 |   |   |
| **Income (loss) applicable to common shares:**                                 | ** ** |                                                             | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                             | $          | (5,598 | ) |   |   | $ | 246 |   |   |   | $ | (5,352 | ) |   |
| Discontinued operations                                                        |       |                                                             | 309        |   |   |   | — |   |   |   | 309 |   |   |
| Net income (loss)                                                              |       |                                                             | $          | (5,289 | ) |   |   | $ | 246 |   |   |   | $ | (5,043 | ) |   |
| **Basic and diluted income (loss) per share  applicable to common shares(1):** | ** ** |                                                             | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                             | $          | (0.42 | ) |   |   | $ | 0.01 |   |   |   | $ | (0.41 | ) |   |
| Discontinued operations                                                        |       |                                                             | 0.02       |   |   |   | — |   |   |   | 0.02 |   |   |
| Net income (loss)                                                              |       |                                                             | $          | (0.40 | ) |   |   | $ | 0.01 |   |   |   | $ | (0.39 | ) |   |

 

F-42

----

 

| ** **                                                                     | ** ** | **Reorganized Company**                                          | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **Three Months Ended September 30, 2004(1)** | ** ** |
| ** **                                                                     | ** ** | ** **                                                            | ** ** | **Adjustments** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **As Originally**                                                | ** ** | **Increase** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **Reported(2)**                                                       | ** ** | **(Decrease)** | ** ** | **As Restated** | ** ** |
| **Continuing Operations**                                                      | ** ** |                                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net sales                                                                      |       |                                                                  | $          | 111,186 |   |   |   | $ | (103 | ) |   |   | $ | 111,083 | ** ** |   |
| Gross profit                                                                   |       |                                                                  | 30,153     |   |   |   | 34 |   |   |   | 30,187 | ** ** |   |
| Operating income  (loss)                                                       |       |                                                                  | (662       | ) |   |   | 681 |   |   |   | 19 | ** ** |   |
| **Income  (loss) applicable to common shares:**                                | ** ** |                                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                                  | $          | (8,666 | ) |   |   | $ | 9,379 |   |   |   | $ | 713 | ** ** |   |
| Discontinued operations                                                        |       |                                                                  | 193        |   |   |   | — |   |   |   | 193 | ** ** |   |
| Net income (loss)                                                              |       |                                                                  | $          | (8,473 | ) |   |   | $ | 9,379 |   |   |   | $ | 906 | ** ** |   |
| **Basic  and diluted income (loss) per share applicable to common shares(1):** | ** ** |                                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                                  | $          | (0.65 | ) |   |   | $ | 0.70 |   |   |   | $ | 0.05 | ** ** |   |
| Discontinued operations                                                        |       |                                                                  | 0.01       |   |   |   | — |   |   |   | 0.02 | ** ** |   |
| Net income (loss)                                                              |       |                                                                  | $          | (0.64 | ) |   |   | $ | 0.70 |   |   |   | $ | 0.07 | ** ** |   |

 

| ** **                                                            | ** ** | **Reorganized Company**                                         | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **Three Months Ended December 31, 2004(1)** | ** ** |
| ** **                                                            | ** ** | ** **                                                           | ** ** | **Adjustments** | ** ** | ** ** | ** ** |
| ** **                                                            | ** ** | **As Originally**                                               | ** ** | **Increase** | ** ** | ** ** | ** ** |
| ** **                                                            | ** ** | **Reported(2)**                                                      | ** ** | **(Decrease)** | ** ** | **As Restated** | ** ** |
| **Continuing Operations**                                             | ** ** |                                                                 | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net sales                                                             |       |                                                                 | $          | 107,989 |   |   |   | $ | (102 | ) |   |   | $ | 107,887 |   |   |
| Gross profit                                                          |       |                                                                 | 29,662     |   |   |   | (871 | ) |   |   | 28,791 |   |   |
| Operating loss                                                        |       |                                                                 | (4,023     | ) |   |   | (306 | ) |   |   | (4,329 | ) |   |
| **Loss  applicable to common shares:**                                | ** ** |                                                                 | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                 |       |                                                                 | $          | (8,946 | ) |   |   | $ | (1,024 | ) |   |   | $ | (9,970 | ) |   |
| Discontinued operations                                               |       |                                                                 | (240       | ) |   |   | — |   |   |   | (240 | ) |   |
| Net loss                                                              |       |                                                                 | $          | (9,186 | ) |   |   | $ | (1,024 | ) |   |   | $ | (10,210 | ) |   |
| **Basic  and diluted loss per share applicable to common shares(1):** | ** ** |                                                                 | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                 |       |                                                                 | $          | (0.67 | ) |   |   | $ | (0.08 | ) |   |   | $ | (0.75 | ) |   |
| Discontinued operations                                               |       |                                                                 | (0.02      | ) |   |   | — |   |   |   | (0.02 | ) |   |
| Net loss                                                              |       |                                                                 | $          | (0.69 | ) |   |   | $ | (0.08 | ) |   |   | $ | (0.77 | ) |   |

 

F-43

----

Thefollowing is a summary of the quarterly results of operations for the sevenmonths ended December 31, 2003 as originally reported and as restated:

| ** **                                                                     | ** ** | **Reorganized Company**                                  | ** ** |
|--------------------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **One Month Ended June 30, 2003(1)** | ** ** |
| ** **                                                                     | ** ** | ** **                                                    | ** ** | **Adjustments** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **As Originally**                                        | ** ** | **Increase** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **Reported(2)**                                               | ** ** | **(Decrease)** | ** ** | **As Restated** | ** ** |
| **Continuing Operations**                                                      | ** ** |                                                          | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net sales                                                                      |       |                                                          | $          | 31,645 |   |   |   | $ | — |   |   |   | $ | 31,645 |   |   |
| Gross profit                                                                   |       |                                                          | 10,954     |   |   |   | — |   |   |   | 10,954 |   |   |
| Operating income                                                               |       |                                                          | 2,404      |   |   |   | — |   |   |   | 2,404 |   |   |
| **Income  (loss) applicable to common shares:**                                | ** ** |                                                          | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                          | $          | 823 |   |   |   | $ | (398 | ) |   |   | $ | 425 |   |   |
| Discontinued operations                                                        |       |                                                          | (17        | ) |   |   | — |   |   |   | (17 | ) |   |
| Net income (loss)                                                              |       |                                                          | $          | 806 |   |   |   | $ | (398 | ) |   |   | $ | 408 |   |   |
| **Basic  and diluted income (loss) per share applicable to common shares(1):** | ** ** |                                                          | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                          | $          | 0.06 |   |   |   | $ | (0.03 | ) |   |   | $ | 0.03 |   |   |
| Discontinued operations                                                        |       |                                                          | —     |   |   |   | — |   |   |   | — |   |   |
| Net income (loss)                                                              |       |                                                          | $          | 0.06 |   |   |   | $ | (0.03 | ) |   |   | $ | 0.03 |   |   |

 

| ** **                                                                     | ** ** | **Reorganized Company**                                          | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                                     | ** ** | **Three Months Ended September 30, 2003(1)** | ** ** |
| ** **                                                                     | ** ** | ** **                                                            | ** ** | **Adjustments** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **As Originally**                                                | ** ** | **Increase** | ** ** | ** ** | ** ** |
| ** **                                                                     | ** ** | **Reported(2)**                                                       | ** ** | **(Decrease)** | ** ** | **As Restated** | ** ** |
| **Continuing Operations**                                                      | ** ** |                                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net sales                                                                      |       |                                                                  | $          | 94,984 |   |   |   | $ | — |   |   |   | $ | 94,984 |   |   |
| Gross profit                                                                   |       |                                                                  | 30,896     |   |   |   | — |   |   |   | 30,896 |   |   |
| Operating income                                                               |       |                                                                  | 1,926      |   |   |   | — |   |   |   | 1,926 |   |   |
| **Income  (loss) applicable to common shares:**                                | ** ** |                                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                                  | $          | (3,789 | ) |   |   | $ | (1,226 | ) |   |   | $ | (5,015 | ) |   |
| Discontinued operations                                                        |       |                                                                  | 433        |   |   |   | — |   |   |   | 433 |   |   |
| Net loss                                                                       |       |                                                                  | $          | (3,356 | ) |   |   | $ | (1,226 | ) |   |   | $ | (4,582 | ) |   |
| **Basic  and diluted income (loss) per share applicable to common shares(1):** | ** ** |                                                                  | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                          |       |                                                                  | $          | (0.28 | ) |   |   | $ | (0.10 | ) |   |   | $ | (0.38 | ) |   |
| Discontinued operations                                                        |       |                                                                  | 0.03       |   |   |   | 0.01 |   |   |   | 0.04 |   |   |
| Net loss                                                                       |       |                                                                  | $          | (0.25 | ) |   |   | $ | (0.09 | ) |   |   | $ | (0.34 | ) |   |

 

F-44

----

 

| ** **                                                            | ** ** | **Reorganized Company**                                         | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **Three Months Ended December 31, 2003(1)** | ** ** |
| ** **                                                            | ** ** | ** **                                                           | ** ** | **Adjustments** | ** ** | ** ** | ** ** |
| ** **                                                            | ** ** | **As Originally**                                               | ** ** | **Increase** | ** ** | ** ** | ** ** |
| ** **                                                            | ** ** | **Reported(2)**                                                      | ** ** | **(Decrease)** | ** ** | **As Restated** | ** ** |
| **Continuing Operations**                                             | ** ** |                                                                 | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net sales                                                             |       |                                                                 | $          | 95,375 |   |   |   | $ | — |   |   |   | $ | 95,375 |   |   |
| Gross profit                                                          |       |                                                                 | 23,267     |   |   |   | — |   |   |   | 23,267 |   |   |
| Operating loss                                                        |       |                                                                 | (9,044     | ) |   |   | — |   |   |   | (9,044 | ) |   |
| **Loss  applicable to common shares:**                                | ** ** |                                                                 | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                 |       |                                                                 | $          | (14,281 | ) |   |   | $ | (1,128 | ) |   |   | $ | (15,409 | ) |   |
| Discontinued operations                                               |       |                                                                 | (720       | ) |   |   | — |   |   |   | (720 | ) |   |
| Net loss                                                              |       |                                                                 | $          | (15,001 | ) |   |   | $ | (1,128 | ) |   |   | $ | (16,129 | ) |   |
| **Basic  and diluted loss per share applicable to common shares(1):** | ** ** |                                                                 | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Continuing operations                                                 |       |                                                                 | $          | (1.07 | ) |   |   | $ | (0.09 | ) |   |   | $ | (1.16 | ) |   |
| Discontinued operations                                               |       |                                                                 | (0.06      | ) |   |   | — |   |   |   | (0.06 | ) |   |
| Net loss                                                              |       |                                                                 | $          | (1.13 | ) |   |   | $ | (0.09 | ) |   |   | $ | (1.22 | ) |   |

----

(1)          Earnings per share arecomputed independently for each of the quarters presented. Therefore, the sumof the quarterly net earnings per share will not necessarily equal the totalfor the year.

(2)          Amounts for “AsOriginally Reported” have been adjusted for the Company’s discontinuedoperations as described in Note 4—*Discontinued Operations*.

**22. CondensedConsolidating 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. In connection with the Amended Credit Agreement, theCompany’s foreign subsidiaries in Australia, the United Kingdom and Canada alsoguaranteed the Company’s $175,000 91⁄4% 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. This information was prepared onthe same basis as the consolidated financial statements.

F-45

----

**THERMADYNE HOLDINGSCORPORATIONCONDENSED CONSOLIDATING BALANCE SHEETDECEMBER 31, 2005**

| ** **                                                 | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|------------------------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                 | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                 | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                 | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| **ASSETS**                                                 | ** ** |            | ** ** | ** **     |       |           | ** ** | ** **       |       |             | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Current assets:                                            |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                                  |       |            | $          | —         |       |           |       | $                | 6,591      |             |       |   | $ | 6,233 |   |   |   | $ | — |   |   |   | $ | 12,824 |   |   |
| Accounts receivable, net                                   |       |            | —     |           |       |           | 64,123     |             |       |             | 15,705     |   |   |   | — |   |   |   | 79,828 |   |   |
| Inventories                                                |       |            | —     |           |       |           | 95,003     |             |       |             | 23,856     |   |   |   | — |   |   |   | 118,859 |   |   |
| Prepaid expenses and other                                 |       |            | —     |           |       |           | 6,533      |             |       |             | 1,327      |   |   |   | — |   |   |   | 7,860 |   |   |
| Assets held for sale                                       |       |            | —     |           |       |           | —     |             |       |             | 16,677     |   |   |   | — |   |   |   | 16,677 |   |   |
| Current deferred tax assets                                |       |            | —     |           |       |           | 1,861      |             |       |             | —     |   |   |   | — |   |   |   | 1,861 |   |   |
| Total current assets                                       |       |            | —     |           |       |           | 174,111    |             |       |             | 63,798     |   |   |   | — |   |   |   | 237,909 |   |   |
| Property, plant  and equipment, net                        |       |            | —     |           |       |           | 40,267     |             |       |             | 16,363     |   |   |   | — |   |   |   | 56,630 |   |   |
| Goodwill                                                   |       |            | —     |           |       |           | 207,509    |             |       |             | —     |   |   |   | — |   |   |   | 207,509 |   |   |
| Intangibles, net                                           |       |            | —     |           |       |           | 58,835     |             |       |             | 7,506      |   |   |   | — |   |   |   | 66,341 |   |   |
| Other assets                                               |       |            | 4,050      |           |       |           | 2,928      |             |       |             | 1,101      |   |   |   | — |   |   |   | 8,079 |   |   |
| Investment in and  advances to subsidiaries                |       |            | 174,021    |           |       |           | —     |             |       |             | —     |   |   |   | (174,021 | ) |   |   | — |   |   |
| Total assets                                               |       |            | $          | 178,071        |       |           |       | $                | 483,650    |             |       |   | $ | 88,768 |   |   |   | $ | (174,021 | ) |   |   | $ | 576,468 |   |   |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY (DEFICIT)**   | ** ** |            | ** ** | ** **     |       |           | ** ** | ** **       |       |             | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Current liabilities:                                       |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Accounts payable                                           |       |            | $          | —         |       |           |       | $                | 33,590     |             |       |   | $ | 10,214 |   |   |   | $ | — |   |   |   | $ | 43,804 |   |   |
| Accrued and other liabilities                              |       |            | —     |           |       |           | 28,653     |             |       |             | 4,667      |   |   |   | — |   |   |   | 33,320 |   |   |
| Accrued interest                                           |       |            | 6,760      |           |       |           | 557        |             |       |             | —     |   |   |   | — |   |   |   | 7,317 |   |   |
| Income taxes payable                                       |       |            | —     |           |       |           | 2,321      |             |       |             | (109       | ) |   |   | — |   |   |   | 2,212 |   |   |
| Liabilities held for sale                                  |       |            | —     |           |       |           | —     |             |       |             | 4,155      |   |   |   | — |   |   |   | 4,155 |   |   |
| Working capital facility                                   |       |            | —     |           |       |           | 31,796     |             |       |             | —     |   |   |   | — |   |   |   | 31,796 |   |   |
| Current maturities of long-term obligations                |       |            | —     |           |       |           | 10,770     |             |       |             | 1,425      |   |   |   | — |   |   |   | 12,195 |   |   |
| Total current liabilities                                  |       |            | 6,760      |           |       |           | 107,687    |             |       |             | 20,352     |   |   |   | — |   |   |   | 134,799 |   |   |
| Long-term  obligations, less current maturities            |       |            | 175,000    |           |       |           | 40,623     |             |       |             | 588        |   |   |   | — |   |   |   | 216,211 |   |   |
| Deferred tax  liabilities                                  |       |            | —     |           |       |           | 56,172     |             |       |             | (144       | ) |   |   | — |   |   |   | 56,028 |   |   |
| Other long-term  liabilities                               |       |            | —     |           |       |           | 42,728     |             |       |             | 535        |   |   |   | — |   |   |   | 43,263 |   |   |
| Minority interest                                          |       |            | —     |           |       |           | —     |             |       |             | 2,214      |   |   |   | — |   |   |   | 2,214 |   |   |
| Shareholders’ equity  (deficit):                      |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Common stock                                               |       |            | 133        |           |       |           | —     |             |       |             | —     |   |   |   | — |   |   |   | 133 |   |   |
| Additional paid-in-capital                                 |       |            | 183,541    |           |       |           | —     |             |       |             | —     |   |   |   | — |   |   |   | 183,541 |   |   |
| Retained earnings (accumulated deficit)                    |       |            | (65,571    | )              |       |           | 5,460      |             |       |             | (32,759    | ) |   |   | 27,299 |   |   |   | (65,571 | ) |   |
| Accumulated other comprehensive income (loss)              |       |            | 5,850      |           |       |           | (50,488    | )                |       |             | 15,401     |   |   |   | 35,087 |   |   |   | 5,850 |   |   |
| Total shareholders’ equity (deficit)                  |       |            | 123,953    |           |       |           | (45,028    | )                |       |             | (17,358    | ) |   |   | 62,386 |   |   |   | 123,953 |   |   |
| Net equity and  advances to / from subsidiaries            |       |            | (127,642   | )              |       |           | 281,468    |             |       |             | 82,581     |   |   |   | (236,407 | ) |   |   | — |   |   |
| Total liabilities  and shareholders’ equity (deficit) |       |            | $          | 178,071        |       |           |       | $                | 483,650    |             |       |   | $ | 88,768 |   |   |   | $ | (174,021 | ) |   |   | $ | 576,468 |   |   |

 

F-46

----

**THERMADYNEHOLDINGS CORPORATIONCONDENSED CONSOLIDATING BALANCE SHEETDECEMBER 31, 2004(Restated)**

| ** **                                                 | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|------------------------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                 | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                 | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                 | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| **ASSETS**                                                 |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |
| Current assets:                                            |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |
| Cash and cash equivalents                                  |       |            | $          | —         |       |           | $          | 5,558            |       |             | $          | 780 |   |   | $ | — |   |   | $ | 6,338 |   |
| Accounts receivable, net                                   |       |            | —     |           |       | 53,601         |       |             | 17,184     |             |       | — |   |   | 70,785 |   |
| Inventories                                                |       |            | —     |           |       | 78,914         |       |             | 28,030     |             |       | — |   |   | 106,944 |   |
| Prepaid expenses and other                                 |       |            | —     |           |       | 5,302          |       |             | 1,854      |             |       | — |   |   | 7,156 |   |
| Assets held for sale                                       |       |            | —     |           |       | —         |       |             | 64,252     |             |       | — |   |   | 64,252 |   |
| Current deferred tax assets                                |       |            | —     |           |       | 3,129          |       |             | —     |             |       | — |   |   | 3,129 |   |
| Total current assets                                       |       |            | —     |           |       | 146,504        |       |             | 112,100    |             |       | — |   |   | 258,604 |   |
| Property, plant  and equipment, net                        |       |            | —     |           |       | 48,791         |       |             | 16,462     |             |       | — |   |   | 65,253 |   |
| Goodwill                                                   |       |            | —     |           |       | 213,051        |       |             | —     |             |       | — |   |   | 213,051 |   |
| Intangibles, net                                           |       |            | —     |           |       | 61,216         |       |             | 11,760     |             |       | — |   |   | 72,976 |   |
| Other assets                                               |       |            | 4,551      |           |       | 2,594          |       |             | 371        |             |       | — |   |   | 7,516 |   |
| Investment in and  advances to subsidiaries                |       |            | 175,724    |           |       | —         |       |             | —     |             |       | (175,724 | ) |   | — |   |
| Total assets                                               |       |            | $          | 180,275        |       |           | $          | 472,156          |       |             | $          | 140,693 |   |   | $ | (175,724 | ) |   | $ | 617,400 |   |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY (DEFICIT)**   |       |            |       |           |       |           |       |             |       |             |       |   |   |
| Current liabilities:                                       |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |
| Accounts payable                                           |       |            | $          | —         |       |           | $          | 19,386           |       |             | $          | 6,061 |   |   | $ | — |   |   | $ | 25,447 |   |
| Accrued and other liabilities                              |       |            | —     |           |       | 31,288         |       |             | 2,690      |             |       | — |   |   | 33,978 |   |
| Accrued interest                                           |       |            | 6,487      |           |       | 642            |       |             | —     |             |       | — |   |   | 7,129 |   |
| Income taxes payable                                       |       |            | —     |           |       | 348            |       |             | 2,553      |             |       | — |   |   | 2,901 |   |
| Liabilities held for sale                                  |       |            | —     |           |       | —         |       |             | 32,005     |             |       | — |   |   | 32,005 |   |
| Working capital facility                                   |       |            | —     |           |       | 10,824         |       |             | —     |             |       | — |   |   | 10,824 |   |
| Current maturities of long-term obligations                |       |            | —     |           |       | 13,881         |       |             | 2,103      |             |       | — |   |   | 15,984 |   |
| Total current liabilities                                  |       |            | 6,487      |           |       | 76,369         |       |             | 45,412     |             |       | — |   |   | 128,268 |   |
| Long-term  obligations, less current maturities            |       |            | 175,000    |           |       | 31,515         |       |             | 2,966      |             |       | — |   |   | 209,481 |   |
| Deferred tax  liabilities                                  |       |            | —     |           |       | 73,023         |       |             | (1,020     | )                |       | — |   |   | 72,003 |   |
| Other long-term  liabilities                               |       |            | —     |           |       | 44,546         |       |             | 709        |             |       | — |   |   | 45,255 |   |
| Minority interest                                          |       |            | —     |           |       | —         |       |             | 1,345      |             |       | — |   |   | 1,345 |   |
| Shareholders’ equity  (deficit):                      |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |
| Common stock                                               |       |            | 133        |           |       | —         |       |             | —     |             |       | — |   |   | 133 |   |
| Additional paid-in-capital                                 |       |            | 183,460    |           |       | —         |       |             | —     |             |       | — |   |   | 183,460 |   |
| Retained earnings (accumulated deficit)                    |       |            | (34,210    | )              |       | (6,047         | )          |             | (5,911     | )                |       | 11,958 |   |   | (34,210 | ) |
| Accumulated other comprehensive income (loss)              |       |            | 11,665     |           |       | 5,421          |       |             | 6,138      |             |       | (11,559 | ) |   | 11,665 |   |
| Total shareholders’ equity (deficit)                  |       |            | 161,048    |           |       | (626           | )          |             | 227        |             |       | 399 |   |   | 161,048 |   |
| Net equity and  advances to / from subsidiaries            |       |            | (162,260   | )              |       | 247,329        |       |             | 91,054     |             |       | (176,123 | ) |   | — |   |
| Total liabilities  and shareholders’ equity (deficit) |       |            | $          | 180,275        |       |           | $          | 472,156          |       |             | $          | 140,693 |   |   | $ | (175,724 | ) |   | $ | 617,400 |   |

 

F-47

----

**THERMADYNEHOLDINGS CORPORATIONCONDENSED CONSOLIDATING STATEMENT OF OPERATIONSYEAR ENDED DECEMBER 31, 2005**

| ** **                                                                                        | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|---------------------------------------------------------------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                                                        | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                                                        | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                                                        | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net sales                                                                                         |       |            | $          | —         |       |           |       | $                | 472,232    |             |       |   | $ | 84,483 |   |   |   | $ | (88,099 | ) |   |   | $ | 468,616 |   |   |
| Cost of goods  sold                                                                               |       |            |       |           |       |           | 353,647    |             |       |             | 71,734     |   |   |   | (88,550 | ) |   |   | 336,831 |   |   |
| Gross margin                                                                                      |       |            | —     |           |       |           | 118,585    |             |       |             | 12,749     |   |   |   | 451 |   |   |   | 131,785 |   |   |
| Selling, general  and administrative expenses                                                     |       |            | 159        |           |       |           | 94,719     |             |       |             | 19,860     |   |   |   | — |   |   |   | 114,738 |   |   |
| Amortization of  intangibles                                                                      |       |            | —     |           |       |           | 3,146      |             |       |             | 149        |   |   |   | — |   |   |   | 3,295 |   |   |
| Net periodic  postretirement benefits                                                             |       |            | —     |           |       |           | 1,823      |             |       |             | —     |   |   |   | — |   |   |   | 1,823 |   |   |
| Operating income (loss)                                                                           |       |            | (159       | )              |       |           | 18,897     |             |       |             | (7,260     | ) |   |   | 451 |   |   |   | 11,929 |   |   |
| Other income (expense):                                                                           |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Interest                                                                                          |       |            | (15,808    | )              |       |           | (6,844     | )                |       |             | (1,450     | ) |   |   | — |   |   |   | (24,102 | ) |   |
| Amortization of deferred financing costs                                                          |       |            | (500       | )              |       |           | (985       | )                |       |             | —     |   |   |   | — |   |   |   | (1,485 | ) |   |
| Equity in net income (loss) of subsidiaries                                                       |       |            | (14,894    | )              |       |           | —     |             |       |             | —     |   |   |   | 14,894 |   |   |   | — |   |   |
| Minority interest                                                                                 |       |            | —     |           |       |           | —     |             |       |             | (628       | ) |   |   | — |   |   |   | (628 | ) |   |
| Income (loss)  from continuing operations before income tax provison and discontinued  operations |       |            | (31,361    | )              |       |           | 11,068     |             |       |             | (9,338     | ) |   |   | 15,345 |   |   |   | (14,286 | ) |   |
| Income tax provision                                                                              |       |            | —     |           |       |           | 2,190      |             |       |             | 1,746      |   |   |   | — |   |   |   | 3,936 |   |   |
| Income (loss)  from continuing operations                                                         |       |            | (31,361    | )              |       |           | 8,878      |             |       |             | (11,084    | ) |   |   | 15,345 |   |   |   | (18,222 | ) |   |
| Discontinued operations:                                                                          |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Loss from  discontinued operations, net of tax                                                    |       |            | —     |           |       |           | —     |             |       |             | (13,139    | ) |   |   |   |   |   |   | (13,139 | ) |   |
| Net income (loss)  applicable to common shares                                                    |       |            | $          | (31,361        | )          |           |       | $                | 8,878      |             |       |   | $ | (24,223 | ) |   |   | $ | 15,345 |   |   |   | $ | (31,361 | ) |   |

 

F-48

----

**THERMADYNE HOLDINGS CORPORATIONCONDENSED CONSOLIDATING STATEMENT OF OPERATIONSYEAR ENDED DECEMBER 31, 2004(Restated)**
|                                                                                                    | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **         | ** ** | ** **       | ** ** | ** **       | ** ** |
|----------------------------------------------------------------------------------------------------|------------|-----------------|------------|----------------|------------|--------------------|------------|------------------|------------|------------------|------------|
| ** **                                                                                         | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **         | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                                                         | ** ** | **Holdings**    | ** ** | ** **     | ** ** | ** **         | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                                                         | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Non-Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Net sales                                                                                          |       |            | $          | —         |       |               |       | $                | 445,173    |             |       |   | $ | 66,659 |   |   |   | $ | (74,303 | ) |   |   | $ | 437,529 |   |   |
| Cost of goods  sold                                                                                |       |            |       |           |       |               | 330,803    |             |       |             | 53,961     |   |   |   | (73,922 | ) |   |   | 310,842 |   |   |
| Gross margin                                                                                       |       |            | —     |           |       |               | 114,370    |             |       |             | 12,698     |   |   |   | (381 | ) |   |   | 126,687 |   |   |
| Selling, general  and administrative expenses                                                      |       |            | —     |           |       |               | 94,002     |             |       |             | 13,320     |   |   |   | — |   |   |   | 107,322 |   |   |
| Amortization of  intangibles                                                                       |       |            | —     |           |       |               | 3,265      |             |       |             | 123        |   |   |   | — |   |   |   | 3,388 |   |   |
| Net periodic  postretirement benefits                                                              |       |            | —     |           |       |               | 2,250      |             |       |             | —     |   |   |   | — |   |   |   | 2,250 |   |   |
| Restructuring  costs                                                                               |       |            | —     |           |       |               | 8,820      |             |       |             | —     |   |   |   | — |   |   |   | 8,820 |   |   |
| Operating income (loss)                                                                            |       |            | —     |           |       |               | 6,033      |             |       |             | (745       | ) |   |   | (381 | ) |   |   | 4,907 |   |   |
| Other income (expense):                                                                            |       |            |       |           |       |               |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Interest                                                                                           |       |            | (14,974    | )              |       |               | (4,577     | )                |       |             | (1,993     | ) |   |   | — |   |   |   | (21,544 | ) |   |
| Amortization of deferred financing costs                                                           |       |            | (429       | )              |       |               | (989       | )                |       |             | —     |   |   |   | — |   |   |   | (1,418 | ) |   |
| Equity in net income (loss) of subsidiaries                                                        |       |            | 1,496      |           |       |               | —     |             |       |             | —     |   |   |   | (1,496 | ) |   |   | — |   |   |
| Minority interest                                                                                  |       |            | —     |           |       |               | —     |             |       |             | (318       | ) |   |   | — |   |   |   | (318 | ) |   |
| Income (loss)  from continuing operations before income tax provision and discontinued  operations |       |            | (13,907    | )              |       |               | 467        |             |       |             | (3,056     | ) |   |   | (1,877 | ) |   |   | (18,373 | ) |   |
| Income tax  provision (benefit)                                                                    |       |            | —     |           |       |               | (6,527     | )                |       |             | 2,072      |   |   |   | — |   |   |   | (4,455 | ) |   |
| Income (loss)  from continuing operations                                                          |       |            | (13,907    | )              |       |               | 6,994      |             |       |             | (5,128     | ) |   |   | (1,877 | ) |   |   | (13,918 | ) |   |
| Income from  discontinued operations, net of tax                                                   |       |            | —     |           |       |               | —     |             |       |             | 11         |   |   |   | — |   |   |   | 11 |   |   |
| Net income (loss)                                                                                  |       |            | $          | (13,907        | )          |               |       | $                | 6,994      |             |       |   | $ | (5,117 | ) |   |   | $ | (1,877 | ) |   |   | $ | (13,907 | ) |   |

 

F-49

----

**THERMADYNEHOLDINGS CORPORATIONCONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSYEAR ENDED DECEMBER 31, 2005**

| ** **                                                    | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|---------------------------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Cash flows from  continuing operations:                       |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Net cash provided  by (used in) operating activities          |       |            | $          | (17,449        | )          |           |       | $                | (3,975     | )                |       |   | $ | 3,107 |   |   |   | $ | 2,206 |   |   |   | $ | (16,111 | ) |   |
| Cash flows from  investing activities:                        |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Capital  expenditures                                         |       |            | —     |           |       |           | (6,162     | )                |       |             | (2,999     | ) |   |   | — |   |   |   | (9,161 | ) |   |
| Proceeds from sales of assets                                 |       |            | —     |           |       |           | 5,651      |             |       |             | —     |   |   |   | — |   |   |   | 5,651 |   |   |
| Investment in joint venture                                   |       |            | —     |           |       |           | (850       | )                |       |             | —     |   |   |   | — |   |   |   | (850 |   |   |
| Net cash used in  investing activities                        |       |            | —     |           |       |           | (1,361     | )                |       |             | (2,999     | ) |   |   | — |   |   |   | (4,360 | ) |   |
| Cash flows from  financing activities:                        |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Net borrowings under revolving credit facility                |       |            | —     |           |       |           | 20,972     |             |       |             | —     |   |   |   | — |   |   |   | 20,972 |   |   |
| Net borrowings (repayments) of other long-term  obligations   |       |            | —     |           |       |           | 8,348      |             |       |             | (5,407     | ) |   |   | — |   |   |   | 2,941 |   |   |
| Changes in net equity and advances to / from  subsidiaries    |       |            | 17,368     |           |       |           | (23,512    | )                |       |             | 8,350      |   |   |   | (2,206 | ) |   |   | — |   |   |
| Financing fees                                                |       |            | —     |           |       |           | (747       | )                |       |             | —     |   |   |   | — |   |   |   | (747 | ) |   |
| Proceeds from issuance of stock                               |       |            | 81         |           |       |           | —     |             |       |             | —     |   |   |   | — |   |   |   | 81 |   |   |
| Advances (to) from discontinued operations                    |       |            | —     |           |       |           | 1,566      |             |       |             | —     |   |   |   | — |   |   |   | 1,566 |   |   |
| Other, net                                                    |       |            | —     |           |       |           | (258       | )                |       |             | —     |   |   |   | — |   |   |   | (258 | ) |   |
| Net cash provided  by (used in) financing activities          |       |            | 17,449     |           |       |           | 6,369      |             |       |             | 2,943      |   |   |   | (2,206 | ) |   |   | 24,555 |   |   |
| Effect of  exchange rate changes on cash and cash equivalents |       |            | —     |           |       |           | —     |             |       |             | 2,402      |   |   |   | — |   |   |   | 2,402 |   |   |
| Net cash provided  by (used in) continuing operations         |       |            | —     |           |       |           | 1,033      |             |       |             | 5,453      |   |   |   | — |   |   |   | 6,486 |   |   |
| Cash flows from  discontinued operations:                     |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Net provided by  operating activities                         |       |            | —     |           |       |           | —     |             |       |             | 7,246      |   |   |   | — |   |   |   | 7,246 |   |   |
| Net cash used in  investing activities                        |       |            | —     |           |       |           | —     |             |       |             | (2,746     | ) |   |   | — |   |   |   | (2,746 | ) |   |
| Net cash used in  financing activities                        |       |            | —     |           |       |           | —     |             |       |             | (2,299     | ) |   |   | — |   |   |   | (2,299 | ) |   |
| Effect of  exchange rate changes on cash and cash equivalents |       |            | —     |           |       |           | —     |             |       |             | (186       | ) |   |   | — |   |   |   | (186 | ) |   |
| Net cash provided  by discontinued operations                 |       |            | —     |           |       |           | —     |             |       |             | 2,015      |   |   |   | — |   |   |   | 2,015 |   |   |
| Total increase in  cash and cash equivalents                  |       |            | —     |           |       |           | 1,033      |             |       |             | 7,468      |   |   |   | — |   |   |   | 8,501 |   |   |
| Total cash and  cash equivalents beginning of period          |       |            | —     |           |       |           | 5,558      |             |       |             | 1,503      |   |   |   | — |   |   |   | 7,061 |   |   |
| Total cash and  cash equivalents end of period                |       |            | $          |           |       |           |       | $                | 6,591      |             |       |   | $ | 8,971 |   |   |   | $ | — |   |   |   | $ | 15,562 |   |   |

** **

F-50

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**THERMADYNEHOLDINGS CORPORATIONCONDENSED CONSOLIDATING STATEMENT OF CASH FLOWSYEAR ENDED DECEMBER 31, 2004(Restated)**

| ** **                                                    | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|---------------------------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| Cash flows from continuing operations:                        |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Net cash provided  by (used in) operating activities          |       |            | $          | (23,548        | )          |           |       | $                | 6,125      |             |       |   | $ | (5,229 | ) |   |   | $ | 8,195 |   |   |   | $ | (14,457 | ) |   |
| Cash flows from investing activities:                         |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                                          |       |            | —     |           |       |           | (11,814    | )                |       |             | (954       | ) |   |   | — |   |   |   | (12,768 | ) |   |
| Proceeds from  sales of assets                                |       |            | —     |           |       |           | —     |             |       |             | 1,324      |   |   |   | — |   |   |   | 1,324 |   |   |
| Net cash used in  investing activities                        |       |            | —     |           |       |           | (11,814    | )                |       |             | 370        |   |   |   | — |   |   |   | (11,444 | ) |   |
| Cash flows from financing activities:                         |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Net repayments  under revolving credit facility               |       |            | —     |           |       |           | (2,036     | )                |       |             | —     |   |   |   | — |   |   |   | (2,036 | ) |   |
| Net (repayments)  borrowings of long-term obligations         |       |            | (5,000     | )              |       |           | 28,645     |             |       |             | 62         |   |   |   | — |   |   |   | 23,707 |   |   |
| Changes in net  equity and advances to / from subsidiaries    |       |            | 28,548     |           |       |           | (25,296    | )                |       |             | 4,943      |   |   |   | (8,195 | ) |   |   | — |   |   |
| Financing fees and  other                                     |       |            | —     |           |       |           | (7,379     | )                |       |             | —     |   |   |   | — |   |   |   | (7,379 | ) |   |
| Advances (to) from  discontinued operations                   |       |            |       |           |       |           | 7,280      |             |       |             |       |   |   |   |   |   |   |   | 7,280 |   |   |
| Net cash provided  by (used in) financing activities          |       |            | (23,548    | )              |       |           | 1,214      |             |       |             | 5,005      |   |   |   | (8,195 | ) |   |   | 21,572 |   |   |
| Effect of exchange  rate changes on cash and cash equivalents |       |            |       |           |       |           | —     |             |       |             | (2,865     | ) |   |   |   |   |   |   | (2,865 | ) |   |
| Net cash provided  by (used in) continuing operations         |       |            | $          | —         |       |           |       | $                | (4,475     | )                |       |   | $ | (2,719 | ) |   |   | $ | — |   |   |   | $ | (7,194 | ) |   |
| Cash flows from discontinued operations:                      |       |            |       |           |       |           |       |             |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Net cash used in  operating activities                        |       |            | $          | —         |       |           |       | $                | —     |             |       |   | $ | 2,021 |   |   |   | $ | — |   |   |   | $ | 2,021 |   |   |
| Net cash used in  investing activities                        |       |            | —     |           |       |           | —     |             |       |             | (3,311     | ) |   |   | — |   |   |   | (3,311 | ) |   |
| Net cash provided  by financing activities                    |       |            | —     |           |       |           | —     |             |       |             | (2,773     | ) |   |   | — |   |   |   | (2,773 | ) |   |
| Effect of exchange  rate changes on cash and cash equivalents |       |            | —     |           |       |           | —     |             |       |             | 1,534      |   |   |   | — |   |   |   | 1,534 |   |   |
| Net cash used in  discontinued operations                     |       |            | $          | —         |       |           |       | $                | —     |             |       |   | $ | (2,529 | ) |   |   | $ | — |   |   |   | $ | (2,529 | ) |   |
| Total decrease in  cash and cash equivalents                  |       |            | $          | —         |       |           |       | $                | (4,475     | )                |       |   | $ | (5,248 | ) |   |   | $ | — |   |   |   | $ | (9,723 | ) |   |
| Total cash and  cash equivalents beginning of period          |       |            | —     |           |       |           | 10,033     |             |       |             | 6,751      |   |   |   | — |   |   |   | 16,784 |   |   |
| Total cash and  cash equivalents end of period                |       |            | $          | —         |       |           |       | $                | 5,558      |             |       |   | $ | 1,503 |   |   |   | $ | — |   |   |   | $ | 7,061 |   |   |

 

**23.**RestructuringCosts

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 

F-51

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these facilities. Through December 31,2004, the Company incurred cumulative costs of approximately $8,253 inconnection with these activities. These activities were completed in the fourthquarter of 2004 and the remaining payments were 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.

Thefollowing table provides the activity in the restructuring accrual during theyears ended December 31, 2005 and 2004:

| ** **                                                         | ** ** | **December 31,** | ** ** | ** ** | ** ** | ** **    | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------|------------|-----------------------|------------|------------|------------|---------------|------------|-----------------------|------------|
| **Restructuring Accrual**                                     | ** ** | ** **            | ** ** | **2004**   | ** ** | **Provision** | ** ** | **Payments**          | ** ** | **2005** | ** ** |
| Plant  Consolidation—employee severance and incentive bonuses |       |                  | $          | 214        |       |          |       | $                     | —     |   |   |   | $ | (214 | ) |   |   | $ | — |   |   |
| Domestic  Workforce Reorganization—employee severance         |       |                  | 1,093      |       |       |          | —     |                  |       |   | (1,093 | ) |   |   | — |   |   |
|                                                               |       |                  | $          | 1,307      |       |          |       | $                     | —     |   |   |   | $ | (1,307 | ) |   |   | $ | — |   |   |
|                                                                    |            |                       |            |            |            |               |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                                                         | ** ** | **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 |   |   |
|                                                                    |            |                       |            |            |            |               |            |                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**24. Recently IssuedAccounting 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, excessivespoilage, double freight, and rehandling costs be recognized as current-periodcharges regardless of whether they meet the criterion of “so abnormal” asstated in ARB No. 43. Additionally, SFAS No. 151 requires that theallocation of fixed production overheads to the costs of conversion be based onthe normal capacity of the production facilities. SFAS No. 151 iseffective for fiscal years beginning after June 15, 2005, with earlyadoption permitted. The Company adopted the provisions of SFAS No. 151 asof the beginning of 2005 without a material impact to the 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 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.The Company will adopt SFAS No. 123(R) on January 1, 2006utilizing the modified prospective method in which compensation cost isrecognized beginning with the effective date, (a) based on therequirements of SFAS No. 123(R) for all share—based payments grantedafter the effective date and (b) based on the requirements of SFAS No. 123for all awards granted to 

F-52

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employeesprior to the effective date of SFAS No. 123(R) that remain unvestedon the effective date. The impact of the adoption of SFAS No. 123(R) isdescribed in the Stock Options Note to the Financial Statements.

**25. MinorityInterests**

Minority shareholders own 10% of certain of theCompany’s South African and Italian subsidiaries. For the years ended December 31,2005 and 2004, the Company has recorded minority interest expenses of approximately$628 and $318, respectively. Total minority interest obligations as of December 31,2005, of approximately $2,214, has been recorded as a component of other long-termliabilities and approximately $1,027 was recorded as goodwill for the portionof minority interest that existed prior to the Company’s emergence frombankruptcy. Management determined that, while these adjustments primarilyrelated to historical periods, the adjustments were immaterial to previouslyreported interim and annual financial information.

The shareholder agreements for certain South Africanand Italian subsidiaries include provisions that allow the minorityshareholders to put their ownership in the entities back to the Company or,conversely, provide the Company a call option to purchase the outstandingminority interests. The exercise period for the put and call options associatedwith the minority interests in the South African subsidiaries is indefinite,while the put and call option for the minority interest in the Italiansubsidiary expires on December 31, 2010. The purchase price of the optionsis determined based on current fair value using a specific formula outlined inthe respective shareholder agreements. As of December 31, 2005, themaximum payment to satisfy the put options is $4,354 based on the formula inthe respective agreements.

During the first quarterof 2006, the Company purchased the 10% minority interests in certain of itsSouth African subsidiaries for approximately $3,954 and recorded goodwill ofapproximately $1,899.

**26. SubsequentEvents**

On April 11, 2006,the Company completed the disposition of Tec.Mo Srl (“TecMo”), an indirectwholly-owned subsidiary which manufactures generic cutting and welding torchesand consumables to Siparex, an investment fund in France, and the generalmanager of TecMo. Net cash proceeds from this transaction of approximately $7,540were used to repay a portion of the Company’s outstanding long-term debt. TheCompany expects to record an impairment loss related to TecMo of approximately$663 during the quarter ended March 31, 2006.

**Select balance sheet items of TecMo are as follows:**

| ** **                             | ** ** | **At December 31,** | ** ** |
|----------------------------------------|------------|-------------------------------|------------|
| ** **                             | ** ** | **2005**                      | ** ** | **2004** | ** ** |
| Cash                                   |       | $                             | 385        |   | $ | 306 |   |
| Accounts  receivable                   |       | 3,379                         |       | 3,184 |   |
| Inventory                              |       | 2,188                         |       | 2,270 |   |
| Property and  equipment, net           |       | 1,188                         |       | 1,580 |   |
| Goodwill and  other intangible assets  |       | 4,158                         |       | 4,158 |   |
| Other assets                           |       | 348                           |       | 375 |   |
|                                   |       | $                             | 11,646     |   | $ | 11,873 |   |
| Accounts payable and other liabilities |       | $                             | 3,813      |   | $ | 4,891 |   |

 

F-53

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**SIGNATURES**

Pursuantto the requirements 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/*STEVEN W. FRAY                                |
|                 |   | Steven W. Fray                                     |
| Date: August 3, 2006 |   | *Vice President Finance,*

*and Global Controller* |
|                 |   |                                               |

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the datesindicated.

|                            | **Name** | ** **                                           | ** ** | ** **     | **Title** | ** ** | ** ** | ** ** | **Date** | ** ** |
|----------------------------|----------|------------------------------------------------------|------------|----------------|-----------|------------|------------|------------|----------|------------|
| /s/ PAUL D. MELNUK         |     |                                                 |       | August 3, 2006 |
| Paul  D. Melnuk            |     | Director, Chairman of  the Board and Chief Executive |       |           |
| /s/ STEVEN W. FRAY         |     | Vice President  Finance and Global Controller,       |       | August 3, 2006 |
| Steven  W. Fray            |     | Principal  Accounting Officer                        |       |           |
| /s/ JAMES B. GAMACHE       |     | Director                                             |       | August 3, 2006 |
| James  B. Gamache          |     |                                                 |       |           |
| /s/ MARNIE S. GORDON       |     | Director                                             |       | August 3, 2006 |
| Marnie  S. Gordon          |     |                                                 |       |           |
| /s/ JOHN G. JOHNSON, JR.   |     | Lead Director                                        |       | August 3, 2006 |
| John  G. Johnson, Jr. |     |                                                 |       |           |
| /s/ BRADLEY G. PATTELLI    |     | Director                                             |       | August 3, 2006 |
| Bradley  G. Pattelli       |     |                                                 |       |           |
| /s/ J. JOE ADORJAN         |     | Director                                             |       | August 3, 2006 |
| J.  Joe Adorjan            |     |                                                 |       |           |
| /s/ ANDREW L. BERGER       |     | Director                                             |       | August 3, 2006 |
| Andrew L. Berger           |     |                                                 |       |           |

 

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**THERMADYNEHOLDINGS CORPORATION****2005 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.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |     |
| 3.26 | — | Memorandum and  Articles of Association of Duxtech Pty. Ltd., dated March 6, 1989.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | * * |
| 3.27 | — | Memorandum and  Articles of Association of Cigweld Pty Ltd, formerly known as Edinen Pty.  Ltd., dated April 1, 1989, as amended.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |     |
| 3.28 | — | Memorandum and  Articles of Association of Quetala Pty. Ltd., dated April 1, 1989.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |     |
| 3.29 | — | Memorandum and  Articles of Association of Quetack Pty. Ltd., dated April 1, 1989.(16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |     |
| 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.(16)                                                                                                                                                                                                                                                                                                                                                                                                                           |     |
| 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. (16)                                                                                                                                                                                                                                                                                                                                                                                                                                      |     |
| 3.32 | — | Memorandum and  Articles of Association of Thermadyne Industries Limited. (16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |     |
| 3.33 | — | New Articles of  Association of Thermadyne Industries Limited dated June 10,  1992. (16)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |     |
| 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)                                                                                                                                                                                                                                                                                                                                                                                                                                  |     |

 

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| 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 Amendment 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)                                                                    |   |

 

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| 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. (16) |       |
|------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| 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. (16)      |       |
| 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. (16)          |       |
| 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. (16)                   |       |
| 4.25       | — | Eighth Amendment  to the Second Amended and Restated Credit Agreement, executed as of  October 5, 2005, by and among Thermadyne Holdings Corporation,  Thermadyne Industries, Inc. and certain of its subsidiaries and General  Electric Capital Corporation, as agent and lender and the lenders party  thereto. (17)                                                                                                                                                                                                     |       |
| 4.26       | — | Amendment  No. 9 dated as of October 7, 2005, to the Second Lien Credit  Agreement among Thermadyne Holdings Corporation, Thermadyne Industries, Inc.  and certain of its subsidiaries and Credit Suisse, as administrative agent  and collateral agent and the lenders party thereto. (17)                                                                                                                                                                                                                           |       |
| 4.27       | — | Amendment  No. 10 dated as of November 7, 2005, to the Second Lien Credit  Agreement among Thermadyne Holdings Corporation, Thermadyne  Industries, Inc. and certain of its subsidiaries and Credit Suisse, as  administrative agent and collateral agent and the lenders party  thereto. (17)                                                                                                                                                                                                                        |       |

 

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| 4.28 | — | Fourth Amendment  to Second Amended and Restated Credit Agreement dated as of March 31,  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. (18)             |   |
|------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 4.29 | — | Amendment  No. 6 to the Second Lien Credit Agreement dated as of March 31,  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 guarantors  signatory thereto, the lenders parties thereto, and Credit Suisse First  Boston, as administrative agent and collateral agent. (18) |   |
| 4.30 | — | Fifth Amendment  to Second Amendment and Restated Credit Agreement dated as of July 1,  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. (18)             |   |
| 4.31 | — | Amendment  No. 7 to the Second Lien Credit Agreement dated as of July 1, 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 guarantors  signatory thereto, the lenders parties thereto, and Credit Suisse, as  administrative agent and collateral agent. (18)                |   |
| 4.32 | — | Sixth Amendment  to Second Amended and Restated Credit Agreement dated as of July 27,  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. (18)              |   |
| 4.33 | — | Seventh Amendment  to Second Amended and Restated Credit Agreement dated as of August 5,  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. (18)           |   |
| 4.34 | — | Amendment No. 8  to the Second Lien Credit Agreement dated as of August 8, 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 guarantors signatory thereto, the  lenders parties thereto, and Credit Suisse, as administrative agent and  collateral agent. (18)              |   |
| 4.35 | — | Limited Waiver  and Tenth Amendment to the Second Amended and Restated Credit Agreement dated  as of December 29, 2005, by and among Thermadyne Holdings Corporation,  Thermadyne Industries, Inc. and certain of its subsidiaries and General  Electric Capital Corporation, as agent and lender and the lenders party  thereto. (20)                                                                                                                                                                              |   |
| 4.36 | — | Amendment  No. 11 and Agreement dated as of December 29, 2005, to the Second  Lien Credit Agreement among Thermadyne Holdings Corporation, Thermadyne  Industries, Inc. and certain of its subsidiaries and Credit Suisse, as  administrative agent and collateral agent and the lenders party  thereto. (20)                                                                                                                                                                                                  |   |
| 4.37 | — | Amendment  No. 13 to the Second Lien Credit Agreement dated April 5, 2006  among Thermadyne Holdings Corporation, Thermadyne Industries, Inc. and  certain of their subsidiaries and Credit Suisse First Boston, as  administrative agent and collateral agent. (21)                                                                                                                                                                                                                                           |   |

 

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| 4.38 | —  | Twelfth Amendment  to the Second Amended and Restated Credit Agreement by and among Thermadyne  Holdings Corporation, Thermadyne Industries, Inc., and General Electric  Capital Corporation, as agent and lender. (21)                                                                                                                  |   |
|------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 4.39 | —  | Limited Consent  and Fourteenth Amendment to the Second Amended and Restated Credit Agreement  dated as of May 9, 2006, by and among Thermadyne Holdings Corporation,  Thermadyne Industries, Inc. and certain of its subsidiaries and General  Electric Corporation, as agent and lender and the lenders party  thereto. (22) |   |
| 4.40 | —  | Amendment  No. 14 and consent dated as of May 9, 2006 to the Second Lien  Credit Agreement among Thermadyne Holdings Corporation, Thermadyne  Industries, Inc. and certain of its subsidiaries as borrowers, the  guarantors signatory thereto, and Credit Suisse, as administrative agent and  collateral agent. (22)    |   |
| 4.41 | —  | Fifteenth Amendment  to the Second Amended and Restated Credit Agreement, dated as of June 20,  2006, by and among Thermadyne Holdings Corporation, Thermadyne  Industries, Inc. and certain of its subsidiaries and General Electric  Corporation, as agent and lender and the lenders party thereto.(23)                          |   |
| 4.42 | —  | Amendment  No. 15 and consent dated as of June 20, 2006 to the Second-Lien  Credit Agreement among Thermadyne Industries, Inc. and certain of its  subsidiaries as borrowers, the guarantors signatory thereto, and Credit Suisse  as administrative agent and collateral agent.(23)                                           |   |
| 4.43 | —  | Limited Consent  and Ninth Amendment to the Second Amended and Restated Credit Agreement dated  as of November 7, 2005, by and among Thermadyne Holdings Corporation,  Thermadyne Industries, Inc., and certain of its subsidiaries and General  Electric Capital Corporation as agent and lender. (17)                                  |   |
| 4.44 | —  | Supplemental  Indenture dated as of May 16, 2006 among Thermadyne Holdings  Corporation, the subsidiary guarantors named therein and U.S. Bank National  Association as trustee.(24)                                                                                                                                                     |   |
| 4.45 | *— | Sixteenth  Amendment and Limited Waiver to the Second Amended and Restated Credit  Agreement, dated as of July 21, 2006, by and among Thermadyne Holdings  Corporation, Thermadyne Industries, Inc. and certain of its subsidiaries and  General Electric Capital Corporation as agent and lender.(25)                                   |   |
| 4.46 | —  | Amendment No. 16,  Waiver and Agreement dated as of July 21, 2006 to the Second-Lien Credit  Agreement among Thermadyne Holdings Corporation, Thermadyne Industries, Inc.  and certain of its subsidiaries as borrowers, the guarantors signatory  thereto, and Credit Suisse as administrative agent and collateral agent.(26)          |   |
| 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 guarantees (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.(16)                                                                                                                                                                                                                  |   |
| 10.8 | —  | First Amendment  to Lease between Alliance Gateway No. 58 Ltd. and Victor Equipment  Company, dated May 1, 2004.(16)                                                                                                                                                                                                                |   |
| 10.9 | —  | Lease Agreement  between Ningbo Longxing Group Co., Ltd. and Ningbo Fulida Gas Equipment Co.  Ltd., dated January 19, 2005.(16)                                                                                                                                                                                                          |   |

 

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| 10.10             | — | Lease Agreement between  Ningbo Longxing Group Co., Ltd. and Thermadyne (Ningbo) Cutting and Welding  Equipment Manufacturing Company, Ltd., dated December 28,  2004. (16)                                                                     |   |
|-------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| 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. (16)                                                         |   |
| 10.12†       | — | Amended and Restated  Executive Employment Agreement between Thermadyne Holdings Corporation and  James R. Delaney, dated June 13, 2002.(16)                                                                                                         |   |
| 10.13†       | — | Amended and Restated  Executive Employment Agreement between Thermadyne Holdings Corporation and  Dennis Klanjscek, dated June 13, 2002.(16)                                                                                                         |   |
| 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. (16)                                                                                             |   |
| 10.17†       | — | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and Terry Downes, dated January 1, 2004. (16)                                                                                              |   |
| 10.18†       | — | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and Jason Huett, dated January 1, 2004. (16)                                                                                               |   |
| 10.19†       | — | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and Robert D. Maddox, dated January 1, 2004.(16)                                                                                                |   |
| 10.20†       | — | Executive Employment  Agreement between Thermadyne Holdings Corporation and Brian Truex, dated  June 1, 2004. (16)                                                                                                                              |   |
| 10.21†       | — | Second Amended and  Restated Executive Employment Agreement between Thermadyne Holdings  Corporation and Patricia S. Williams, dated January 1, 2004. (16)                                                                                      |   |
| 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. (16)                                                                                                                             |   |
| 10.24†       | — | First Amendment to  Agreement among Thermadyne Holdings Corporation, its subsidiaries, and James  H. Tate, dated November 11, 2004. (16)                                                                                                        |   |
| 10.25†       | — | Second Amendment to  Agreement among Thermadyne Holdings Corporation, its subsidiaries, and James  H. Tate, dated November 24, 2004. (16)                                                                                                       |   |
| 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)                                                                                                                                                                                           |   |
| 10.31†       | — | Executive Employment  Agreement between Thermadyne Holdings Corporation and Martin Quinn, dated  April 1, 2005*                                                                                                                                      |   |
| 10.32             | — | Acquisition Agreement  dated as of December 22, 2005, by and between Thermadyne Italia, S.R.L.,  as seller, and Mase Generators S.P.A., as buyer. (19)                                                                                          |   |
| 10.33             | — | Purchase Agreement dated  as of December 22, 2005, by and among Thermadyne Chile Holdings, Ltd.  and Thermadyne South America Holdings, Ltd., as sellers, and Soldaduras PCR  Soltec Limitada and Penta Capital de Riesgo S.A., as buyers. (19) |   |
| 14                | — | Thermadyne Holdings  Corporation Code of Ethics. (16)                                                                                                                                                                                                |   |
| 21                | — | Subsidiaries of  Thermadyne Holdings Corporation. *                                                                                                                                                                                                  |   |
| 23                | — | Consent of Independent  Registered Public Accounting Firm. *                                                                                                                                                                                         |   |
| 31.1              | — | Certification Pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002. *                                                                                                                                                                     |   |
| 31.2              | — | Certification Pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                                                                                                                           |   |

 

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| 32.1 | — | Certification  Pursuant to 18 U.S.C. Section 1350, as Adopted by Section 906 of  the Sarbanes-Oxley Act of 2002. * |   |
|------|--------|-----------------------------------------------------------------------------------------------------------------------------------|--------|
| 32.2 | — | 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.

*                    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)          Incorporated byreference to the Company’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2004.

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

(9)          Incorporated byreference 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.

(16)   Incorporated by reference tothe Company’s Annual Report on Form 10-K (File No. 0-23378)for the year ended December 31, 2004.

(17)   Incorporatedby reference to the Company’s Quarterly Report on Form 10-Q for thequarter ended September 30, 2005.

(18)   Incorporatedby reference to the Company’s Quarterly Report on Form 10-Q for thequarter ended June 30, 2005.

(19)   Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378) filed under Section 12(g) ofthe Exchange Act on December 28, 2005.

(20)   Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378) filed under Section 12(g) ofthe Exchange Act on January 5, 2006.

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(21)   Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-23378) filed under Section 12(g) ofthe Exchange Act on April 11, 2006.

(22)   Incorporatedby reference to the Company’s Current Report on Form 8-K (File No. 0-22378)filed under Section 12(g) of the Exchange Act on May 10, 2006.

(23)   Incorporatedby reference to the Company’s Current Report on Form 8-K (FileNo. 23378) filed on June 26, 2006.

(24)   Incorporatedby reference to the Company’s Current Report on Form 8-K (FileNo. 23378) filed on May 23, 2006.

(25) Corrected from document filed as an exhibit tothe Company’s Current Report on Form 8-K filed on July 21, 2006.

(26) Incorporated by reference to the Company’sCurrent Report on Form 8-K (File No. 0-23398) filed on July 21, 2006.

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