**UnitedStatesSecurities and Exchange Commission**

**Washington,D.C.  20549**

 

**FORM 10-Q**

 
| **(Mark  One)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **ý**                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | ** ** | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   |
| **For the  quarterly period ended September 30, 2005**                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| **OR**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | ** ** | ** ** |
| **o**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | ** ** | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15  (d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | ** ** | ** ** |
| **For the  transition period  from                                    to                                    ** |

 

**Commission file number   0-23378**

 

| **Thermadyne  Holdings Corporation**                                                         |
|----------------------------------------------------------------------------------------------|
| (Exact Name of Registrant as Specified in Its Charter)                                       |
|                                                                                         |   |   |
| **Delaware**                                                                                 | ** ** | **74-2482571** |
| (State or Other Jurisdiction of Incorporation or Organization)                               |   | (I.R.S. Employer Identification No.) |
|                                                                                         |   |   |
| **16052 Swingley Ridge Road, Suite 300,  Chesterfield, MO**                                  | ** ** | **63017** |
| (Address of Principal Executive Offices)                                                     |   | (Zip Code) |
|                                                                                         |   |   |
| Registrant’s Telephone Number, Including Area Code    **(636) 728-3000** |

 

Indicate by ýwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15 (d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.
|   |   |   | Yes  ý | No o |
|--------|--------|--------|------------------|------|

 

Indicate by ýwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).
|   |   |   | Yes  ý | No o |
|--------|--------|--------|------------------|------|

 

Indicate by ýwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).
|   |   |   | Yes  o | No ý |
|--------|--------|--------|-------------|-----------|

 

Indicate by ýwhether the registrant has filed all documents and reports required to be filedby Section 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequentto the distribution of securities under a plan confirmed by a court.
|   |   |   | Yes  ý | No o |
|--------|--------|--------|------------------|------|

 

The number of sharesoutstanding of the issuer’s common stock, par value $0.01 per share, as ofNovember 1, 2005 was 13,318,158.

 

 

----

 

## **THERMADYNE HOLDINGS CORPORATION**

 

## **INDEX**

 
| **PART I – FINANCIAL INFORMATION** | ** **                                                                                  | ** ** |
|-----------------------------------------|---------------------------------------------------------------------------------------------|------------|
| ** **                              | ** **                                                                                  | ** ** | ** ** |
| Item 1.                                 | Condensed  Consolidated Financial Statements of                                             |       |   |
|                                    | Thermadyne Holdings Corporation (Unaudited)                                                 |       |   |
|                                    | Condensed Consolidated  Balance Sheets                                                      |       |   |
|                                    | Condensed Consolidated Statements of  Operations                                            |       |   |
|                                    | Condensed Consolidated Statements of Cash  Flows                                            |       |   |
|                                    | Notes to Condensed  Consolidated Financial Statements                                       |       |   |
|                                    |                                                                                        |       |   |
| Item  2.                                | Management’s Discussion and Analysis  of Financial Condition and Results of Operations |       |   |
|                                    |                                                                                        |       |   |
| Item 3.                                 | Quantitative and Qualitative Disclosures  About Market Risk                                 |       |   |
|                                    |                                                                                        |       |   |
| Item 4.                                 | Controls and Procedures                                                                     |       |   |
|                                    |                                                                                        |       |   |
| **PART II – OTHER  INFORMATION**   | ** **                                                                                  | ** ** |
| ** **                              | ** **                                                                                  | ** ** | ** ** |
| Item 1.                                 | Legal Proceedings                                                                           |       |   |
|                                    |                                                                                        |       |   |
| Item 6.                                 | Exhibits                                                                                    |       |   |
|                                    |                                                                                        |       |   |
| **SIGNATURES**                          | ** **                                                                                  | ** ** |

 

2

----

 

**PART I.  FINANCIAL INFORMATION**

 

**Item 1.**

 

**THERMADYNE HOLDINGS CORPORATION**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(In thousands, except per share data)**

 
| ** **                                                                                                 | ** ** | **September 30,  2005** | ** ** | **December 31,   2004** | ** ** |
|------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                                                                                 | ** ** | **(Unaudited)**         | ** ** | ** **              | ** ** |
| **ASSETS**                                                                                                 |       |                    |       |                    |       |
|                                                                                                       |       |                    |       |                    |       |
| Current  Assets:                                                                                           |       |                    |       |                    |       |
| Cash and cash equivalents                                                                                  |       | $                       | 7,817      |                    | $          | 6,650 |   |
| Accounts receivable, less allowance for  doubtful accounts of $4,719 and $6,109, respectively              |       | 104,781                 |       | 93,555                  |       |
| Inventories                                                                                                |       | 127,095                 |       | 118,707                 |       |
| Prepaid expenses and other                                                                                 |       | 9,993                   |       | 8,299                   |       |
| Current deferred tax assets                                                                                |       | 2,690                   |       | 3,129                   |       |
| Total current assets                                                                                       |       | 252,376                 |       | 230,340                 |       |
| Property,  plant and equipment, net                                                                        |       | 71,733                  |       | 79,014                  |       |
| Goodwill                                                                                                   |       | 207,978                 |       | 208,403                 |       |
| Intangibles,  net                                                                                          |       | 73,992                  |       | 76,614                  |       |
| Other assets                                                                                               |       | 7,509                   |       | 7,533                   |       |
| Total assets                                                                                               |       | $                       | 613,588    |                    | $          | 601,904 |   |
|                                                                                                       |       |                    |       |                    |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                             |       |                    |       |                    |       |
|                                                                                                       |       |                    |       |                    |       |
| Current  Liabilities:                                                                                      |       |                    |       |                    |       |
| Accounts payable                                                                                           |       | $                       | 46,229     |                    | $          | 39,458 |   |
| Accrued and other liabilities                                                                              |       | 36,909                  |       | 35,715                  |       |
| Accrued interest                                                                                           |       | 2,885                   |       | 7,129                   |       |
| Income taxes payable                                                                                       |       | 1,489                   |       | 2,664                   |       |
| Working capital and second-lien facilities                                                                 |       | 54,869                  |       | 30,824                  |       |
| Current maturities of long-term obligations                                                                |       | 10,192                  |       | 11,255                  |       |
| Total current liabilities                                                                                  |       | 152,573                 |       | 127,045                 |       |
| Long-term  obligations, less current maturities                                                            |       | 201,526                 |       | 203,668                 |       |
| Deferred tax  liabilities                                                                                  |       | 70,222                  |       | 71,445                  |       |
| Other  long-term liabilities                                                                               |       | 47,051                  |       | 44,110                  |       |
| Shareholders’  equity:                                                                                |       |                    |       |                    |       |
| Common stock, $0.01 par value, 25,000,000  shares authorized, and 13,313,973 shares issued and outstanding |       | 133                     |       | 133                     |       |
| Additional paid-in capital                                                                                 |       | 183,460                 |       | 183,460                 |       |
| Accumulated deficit                                                                                        |       | (49,609                 | )          | (41,528                 | )          |
| Accumulated other comprehensive income                                                                     |       | 8,232                   |       | 13,571                  |       |
| Total shareholders’ equity                                                                            |       | 142,216                 |       | 155,636                 |       |
| Total liabilities and shareholders’ equity                                                            |       | $                       | 613,588    |                    | $          | 601,904 |   |

 

See accompanying notes to condensedconsolidated financial statements

 

3

----

 

**THERMADYNE HOLDINGS CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**(In thousands, except per share data)**

**(Unaudited)**

 
| ** **                                    | ** ** | **Three Months**        | ** ** | **Three Months**        | ** ** |
|-----------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                    | ** ** | **Ended**               | ** ** | **Ended**               | ** ** |
| ** **                                    | ** ** | **September 30,  2005** | ** ** | **September 30,  2004** | ** ** |
|                                          |       |                    |       |                    |       |
| Net sales                                     |       | $                       | 131,268    |                    | $          | 120,897 |   |
| Cost of  goods sold                           |       | 93,719                  |       | 88,287                  |       |
| Gross Margin                                  |       | 37,549                  |       | 32,610                  |       |
|                                          |       |                    |       |                    |       |
| Selling,  general and administrative expenses |       | 29,709                  |       | 27,307                  |       |
| Amortization  of intangibles                  |       | 817                     |       | 769                     |       |
| Net periodic  postretirement benefits         |       | 666                     |       | 515                     |       |
| (Gain) Loss  on disposal of assets            |       | 700                     |       | (6                      | )          |
| Restructuring  costs                          |       | —                  |       | 4,125                   |       |
| Operating income (loss)                       |       | 5,657                   |       | (100                    | )          |
| Other income  (expense):                      |       |                    |       |                    |       |
| Interest,  net                                |       | (6,415                  | )          | (5,752                  | )          |
| Amortization  of deferred financing costs     |       | (327                    | )          | (375                    | )          |
| Other, net                                    |       | (529                    | )          | 80                      |       |
| Minority  interest                            |       | (207                    | )          | —                  |       |
| Loss before income tax provision (benefit)    |       | (1,821                  | )          | (6,147                  | )          |
| Income tax  provision (benefit)               |       | 5,554                   |       | 2,326                   |       |
| Net loss                                      |       | $                       | (7,375     | )                       | $          | (8,473 | ) |
|                                          |       |                    |       |                    |       |
| Basic and  diluted net loss per share         |       | $                       | (0.55      | )                       | $          | (0.64 | ) |

 

See accompanying notes to condensedconsolidated financial statements

 

4

----

 

**THERMADYNE HOLDINGS CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS**

**(In thousands, except per share data)**

**(Unaudited)**

 
| ** **                                    | ** ** | **Nine Months**         | ** ** | **Nine Months**         | ** ** |
|-----------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                    | ** ** | **Ended**               | ** ** | **Ended**               | ** ** |
| ** **                                    | ** ** | **September 30,  2005** | ** ** | **September 30,  2004** | ** ** |
|                                          |       |                    |       |                    |       |
| Net sales                                     |       | $                       | 392,381    |                    | $          | 360,795 |   |
| Cost of  goods sold                           |       | 283,078                 |       | 256,759                 |       |
| Gross Margin                                  |       | 109,303                 |       | 104,036                 |       |
|                                          |       |                    |       |                    |       |
| Selling,  general and administrative expenses |       | 86,165                  |       | 82,227                  |       |
| Amortization  of intangibles                  |       | 2,548                   |       | 2,630                   |       |
| Net periodic  postretirement benefits         |       | 2,000                   |       | 1,826                   |       |
| Loss on  disposal of assets                   |       | 934                     |       | 38                      |       |
| Restructuring  costs                          |       | —                  |       | 8,394                   |       |
| Operating income                              |       | 17,656                  |       | 8,921                   |       |
| Other income  (expense):                      |       |                    |       |                    |       |
| Interest,  net                                |       | (18,034                 | )          | (15,688                 | )          |
| Amortization  of deferred financing costs     |       | (1,141                  | )          | (906                    | )          |
| Other, net                                    |       | (1,546                  | )          | (715                    | )          |
| Minority  interest                            |       | (862                    | )          | —                  |       |
| Loss before income tax provision (benefit)    |       | (3,927                  | )          | (8,388                  | )          |
| Income tax  provision (benefit)               |       | 4,154                   |       | 6,403                   |       |
| Net loss                                      |       | $                       | (8,081     | )                       | $          | (14,791 | ) |
|                                          |       |                    |       |                    |       |
| Basic and  diluted net loss per share         |       | $                       | (0.61      | )                       | $          | (1.11 | ) |

 

See accompanying notes to condensedconsolidated financial statements

 

5

----

 

**THERMADYNE HOLDINGS CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(In thousands, except per share data)**

**(Unaudited)**

 
| ** **                                                                   | ** ** | **Nine Months**   | ** ** | **Nine Months**   | ** ** |
|------------------------------------------------------------------------------|------------|-------------------|------------|-------------------|------------|
| ** **                                                                   | ** ** | **Ended**         | ** ** | **Ended**         | ** ** |
| ** **                                                                   | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                                                   | ** ** | **2005**          | ** ** | **2004**          | ** ** |
| Cash flows  from operating activities:                                       |       |              |       |              |       |
| Net loss                                                                     |       | $                 | (8,081     | )                 | $          | (14,791 | ) |
| Adjustments  to reconcile net loss to net cash used in operating activities: |       |              |       |              |       |
| Minority interest                                                            |       | 862               |       | —            |       |
| Net periodic postretirement benefits                                         |       | 2,000             |       | 1,826             |       |
| Depreciation                                                                 |       | 14,501            |       | 15,290            |       |
| Loss on disposal of assets                                                   |       | 934               |       | 38                |       |
| Amortization of intangibles                                                  |       | 2,548             |       | 2,630             |       |
| Amortization of deferred financing costs                                     |       | 1,141             |       | 906               |       |
| Changes in  operating assets and liabilities:                                |       |              |       |              |       |
| Accounts receivable                                                          |       | (15,098           | )          | (5,320            | )          |
| Inventories                                                                  |       | (10,689           | )          | (28,848           | )          |
| Prepaid expenses and other                                                   |       | (3,179            | )          | (1,272            | )          |
| Accounts payable                                                             |       | 8,277             |       | 1,827             |       |
| Accrued and other liabilities                                                |       | 1,015             |       | (3,926            | )          |
| Accrued interest                                                             |       | (4,244            | )          | 2,672             |       |
| Income taxes                                                                 |       | (1,171            | )          | 1,649             |       |
| Other long-term liabilities                                                  |       | 229               |       | (2,499            | )          |
| Total adjustments                                                            |       | (2,874            | )          | (15,027           | )          |
| Net cash used in operating activities                                        |       | (10,955           | )          | (29,818           | )          |
| Cash flows  from investing activities:                                       |       |              |       |              |       |
| Capital expenditures                                                         |       | (8,431            | )          | (14,456           | )          |
| Proceeds from sales of assets                                                |       | —            |       | 1,324             |       |
| Investment in joint venture                                                  |       | (700              | )          | —            |       |
| Net cash used in investing activities                                        |       | (9,131            | )          | (13,132           | )          |
| Cash flows  from financing activities:                                       |       |              |       |              |       |
| Net borrowings under revolving credit  facility                              |       | 24,045            |       | 4,539             |       |
| Repayment of long-term obligations                                           |       | (2,117            | )          | (180,000          | )          |
| Borrowing of long-term obligations                                           |       | —            |       | 217,408           |       |
| Financing fees                                                               |       | (620              | )          | (5,935            | )          |
| Exercise of warrants                                                         |       | —            |       | 193               |       |
| Other                                                                        |       | 323               |       | (1,603            | )          |
| Net cash provided by financing activities                                    |       | 21,631            |       | 34,602            |       |
| Effect of  exchange rate changes on cash and cash equivalents                |       | (378              | )          | 79                |       |
| Net increase  (decrease) in cash and cash equivalents                        |       | 1,167             |       | (8,269            | )          |
| Cash and  cash equivalents at beginning of period                            |       | 6,650             |       | 16,784            |       |
| Cash and  cash equivalents at end of period                                  |       | $                 | 7,817      |              | $          | 8,515 |   |
| Supplemental  disclosure of cash flow information                            |       |              |       |              |       |
| Cash paid during the period for:                                             |       |              |       |              |       |
| Interest                                                                     |       | $                 | 22,278     |              | $          | 13,016 |   |
| Income taxes                                                                 |       | 6,070             |       | 4,916             |       |

 

See accompanying notes to condensedconsolidated financial statements

 

6

----

 

**NOTESTO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**$ in thousands**

 

**1.****                                     ****Basis of Presentation**

 

ThermadyneHoldings Corporation (“Thermadyne” or the “Company”), a Delaware corporation,is a leading global designer and manufacturer of cutting and welding products,including equipment, accessories and consumables.

 

The accompanying unauditedcondensed consolidated financial statements of Thermadyne have been prepared inaccordance with U.S. generally accepted accounting principles for interimfinancial information and with the instructions to Form 10-Q and Article 10 ofRegulation S-X.  Accordingly, they do notinclude all of the information and footnotes required by U.S. generallyaccepted accounting principles for complete financial statements.  In the opinion of management, all adjustments(consisting of normal recurring adjustments) considered necessary for a fairpresentation have been included.  Thecombined results of operations of the Company for the three months and ninemonths ended September 30, 2005 are not necessarily indicative of the resultsthat may be expected for the year ended December 31, 2005.  For further information, refer to theconsolidated financial statements and footnotes thereto included in the Company’sAnnual Report on Form 10-K for the year ended December 31, 2004.

 

**2.****                                     ****Significant Accounting Policies**

 

***Revenue Recognition. ***The Company sells a majority of its products through distributors withstandard terms of sale of FOB shipping point or FOB destination.  The Company has certain consignmentarrangements whereby revenue is recognized when products are used by the customerfrom consigned stock.  Under allcircumstances, revenue is recognized when persuasive evidence of an arrangementexists, delivery has occurred, the seller’s price is determinable andcollectibility is reasonably assured.

 

The Company sponsors a number of incentive programs to augmentdistributor sales efforts.  Included inthe Company’s incentive programs are certain rebate programs and sales andmarket share growth incentive programs. The costs associated with these sales programs are recorded as a reductionof revenue.

 

Terms of sale generally include 60-day payment terms and standardwarranties for which reserves, based upon estimated warranty liabilities, havebeen recorded.  For a product that isreturned due to issues outside the scope of the Company’s warranty agreements,restocking charges will generally be assessed.

 

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

 

Goodwill and trademarks aretested for impairment annually and whenever events occur or circumstanceschange that would more likely than not reduce the fair value of the reportingunit below its carrying value.

 

The Company’s trademarks aregenerally associated with its significant and well-established product brands,and cash flows associated with these products are expected to continueindefinitely.  The Company has placed nolimit on the end of its trademarks’ useful lives.

 

***Product Warranty Programs****.* Various productsare sold with product warranty programs. Provisions for warranty programs aremade as the products are sold and are adjusted periodically based on currentestimates of anticipated warranty costs.

 

7

----

 

The following table provides the activity in the warranty accrual forthe nine months ended September 30, 2005 and 2004:

 
| ** **                            | ** ** | **Balance at**   | ** ** | ** **    | ** ** | ** **   | ** ** | **Balance at** | ** ** |
|---------------------------------------|------------|------------------|------------|---------------|------------|--------------|------------|----------------|------------|
| ** **                            | ** ** | **Beginning of** | ** ** | ** **    | ** ** | ** **   | ** ** | **End of**     | ** ** |
| **Product warranty accrual:**         | ** ** | **Period**       | ** ** | **Provision** | ** ** | **Payments** | ** ** | **Period**     | ** ** |
| ** **                            | ** ** | ** **       | ** ** | ** **    | ** ** | ** **   | ** ** | ** **     | ** ** |
| Nine months  ended September 30, 2005 |       | $                | 3,048      |          | $          | 1,899        |       | $              | (2,109     | ) | $ | 2,838 |   |
| Nine months  ended September 30, 2004 |       | 4,005            |       | 1,733         |       | (2,377       | )          | 3,361          |       |
|                                       |            |                  |            |               |            |              |            |                |            |  |  |  |  |

 

***Derivative Instruments****.* The Companyaccounts for derivatives and hedging activities in accordance with Statement ofFinancial Accounting Standards No. 133, *Accounting for DerivativeInstruments and Certain Hedging Activities*, as amended (“SFAS No.133”), which requires that all derivative instruments be recorded on thebalance sheet at their respective fair values. The Company does not usederivative instruments for trading or speculative purposes.

 

The Company designates anddocuments all relationships between hedging instruments and hedged items, aswell as its risk management objectives and strategies for undertaking hedgetransactions. The Company also assesses, both at the inception of the hedge andon an on-going basis, whether the hedge is effective.

 

***Net Loss Per Share****. *The calculation ofnet loss per share follows:

 

| ** **                                | ** ** | **Three Months Ended September 30,** | ** ** |
|-------------------------------------------|------------|--------------------------------------|------------|
| ** **                                | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| Numerator:                                |       |                                 |       |   |   |
| Net loss applicable to common shares      |       | $                                    | (7,375     | ) | $ | (8,473 | ) |
|                                      |       |                                 |       |   |   |
| Denominator:                              |       |                                 |       |   |   |
| Weighted average shares-basic and diluted |       | 13,314                               |       | 13,314 |   |
|                                      |       |                                 |       |   |   |
| Basic and  diluted net loss per share:    |       |                                 |       |   |   |
| Net loss applicable to common shares      |       | $                                    | (0.55      | ) | $ | (0.64 | ) |
|                                      |       |                                 |       |   |   |
|                                      |       | **Nine  Months Ended September 30,** | ** ** |
|                                      |       | **2005**                             | ** ** | **2004** | ** ** |
| Numerator:                                |       |                                 |       |   |   |
| Net loss applicable to common shares      |       | $                                    | (8,081     | ) | $ | (14,791 | ) |
|                                      |       |                                 |       |   |   |
| Denominator:                              |       |                                 |       |   |   |
| Weighted average shares-basic and diluted |       | 13,314                               |       | 13,307 |   |
|                                      |       |                                 |       |   |   |
| Basic and  diluted net loss per share:    |       |                                 |       |   |   |
| Net loss applicable to common shares      |       | $                                    | (0.61      | ) | $ | (1.11 | ) |

 

Theeffects of certain options and warrants have not been considered in thedetermination of net loss per share for the three months and nine months endedSeptember 30, 2005 and 2004, because the result would be antidilutive or out ofthe money.  Options and warrants notincluded in the calculation for the three months and nine months endedSeptember 30, 2005 and 2004 were as follows:

 

8

----

 

| ** **        | ** ** | **Three Months Ended September 30,** | ** ** | **Nine Months Ended September 30,** | ** ** |
|-------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| ** **        | ** ** | **2005**                             | ** ** | **2004**                            | ** ** | **2005** | ** ** | **2004** | ** ** |
|              |       |                                 |       |                                |       |   |   |   |   |
| Stock  Options    |       | 1,045,725                            |       | 675,000                             |       | 1,045,725 |   | 675,000 |   |
| Class A  Warrants |       | —                               |       | —                              |       | — |   | 1,157,000 |   |
| Class B  Warrants |       | 700,000                              |       | 700,000                             |       | 700,000 |   | 700,000 |   |
| Class C  Warrants |       | 271,429                              |       | 271,429                             |       | 271,429 |   | 271,429 |   |

 

***Stock-Based Compensation***. Stock options are granted for a fixed number of shares to employees anddirectors with an exercise price equal to or greater than the fair value of theshares at the date of grant. Stock option grants are recorded under therecognition and measurement principles of Accounting Principles Board OpinionNo. 25, *Accounting for Stock Issued to Employees*(“APB 25”), and related interpretations. Accordingly, no stock-basedemployee compensation cost is reflected in operating results. Pro formainformation regarding net operating results and per share results is requiredby SFAS No. 123,*Accounting forStock-Based Compensation*(“SFAS No. 123”), which also requires thatthe information be determined as if employee stock options were granted underthe fair value method of that statement.

 

In December 2004, theFinancial Accounting Standards Board (“FASB”) issued SFAS No. 123 (revised2004), *Share-Based Payment*, (“SFAS No. 123(R)”),which is a revision of SFAS No. 123. SFAS No. 123(R) supersedes APB 25 andamends SFAS No. 95, *Statement of Cash Flows*.Generally, the approach described in SFAS No. 123(R) is similar to the approachdescribed in SFAS No. 123. However, SFAS No. 123(R) requires all share-basedpayments to employees, including grants of employee stock options, to berecognized in the income statement based on their fair values. Pro formadisclosure is no longer an alternative.

 

The following table illustrates the effect on loss per share if thefair value expense recognition requirements of SFAS No. 123 had beenapplied to all stock options granted under the plans for the three and ninemonth periods ended September 30, 2005 and 2004:

 
| ** **                                                                                              | ** ** | **Three Months Ended September 30,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                                              | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| Net loss, as  reported                                                                                  |       | $                                    | (7,375     | ) | $ | (8,473 | ) |
| Deduct: Total stock-based compensation  expense determined under fair value based method for all awards |       | (441                                 | )          | (222 | ) |
| Pro forma  net loss                                                                                     |       | $                                    | (7,816     | ) | $ | (8,695 | ) |
|                                                                                                    |       |                                 |       |   |   |
| Basic and  diluted net loss per share:                                                                  |       |                                 |       |   |   |
| As reported                                                                                             |       | $                                    | (0.55      | ) | $ | (0.64 | ) |
| Pro forma                                                                                               |       | $                                    | (0.59      | ) | $ | (0.65 | ) |
|                                                                                                    |       |                                 |       |   |   |
|                                                                                                    |       | **Nine  Months Ended September 30,** |       |
|                                                                                                    |       | **2005**                             | ** ** | **2004** |   |
| Net loss, as  reported                                                                                  |       | $                                    | (8,081     | ) | $ | (14,791 | ) |
| Deduct: Total stock-based compensation  expense determined under fair value based method for all awards |       | (1,072                               | )          | (579 | ) |
| Pro forma  net loss                                                                                     |       | $                                    | (9,153     | ) | $ | (15,370 | ) |
|                                                                                                    |       |                                 |       |   |   |
| Basic and  diluted net loss per share:                                                                  |       |                                 |       |   |   |
| As reported                                                                                             |       | $                                    | (0.61      | ) | $ | (1.11 | ) |
| Pro forma                                                                                               |       | $                                    | (0.69      | ) | $ | (1.16 | ) |

 

9

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In April 2005, theSecurities and Exchange Commission delayed the effective date of SFAS No.123(R) to January 1, 2006.  Accordingly,the Company plans to adopt SFAS No. 123(R) on January 1, 2006 using the “modifiedprospective” method in which compensation cost is recognized beginning with theeffective date (i) based on the requirements of SFAS No. 123(R) for allshare-based payments granted or modified after the effective date and (ii)based on the requirements of SFAS No. 123 for all awards granted to employeesprior to the effective date of SFAS No. 123(R) that remain unvested on theeffective date.

 

The impact of SFAS No.123(R) cannot be predicted at this time because it will depend on levels ofshare-based payments granted in the future. However, had the Company adoptedSFAS No. 123(R) in prior periods, the impact of that standard would have approximatedthe impact of SFAS No. 123 as described in the disclosure of pro forma net lossper share in Note 2 included in the Company’s Annual Report on Form 10-K forthe year ended December 31, 2004.

 

**3.****                                     ****Reclassifications**

 

During the fourth quarter of2004, the Company made several reclassifications.

 

Certain prior period amountshave been reclassified to conform to current period presentation.  The more significant categories ofreclassifications are outlined below.

 

***Rebates.***  Rebate costs, which the Company had includedin cost of goods sold, have been reclassified as a reduction in sales.  These reclassifications decreased both netsales and cost of goods sold approximately $3,577 and $9,582 for the threemonths and nine months ended September 30, 2004, respectively.

 

***Brazilian Period Costs.***  Certain period costs previouslyclassified as amortization of intangibles by the Company’s Brazilian operationswere reclassified as cost of goods sold. These reclassifications increased cost of goods sold and decreasedamortization of intangibles approximately $241 and $447 for the three monthsand nine months ended September 30, 2004, respectively.

 

***Restructuring Costs.***  Certain period costs previouslyclassified as restructuring costs were reclassified to cost of goods sold.These reclassifications increased cost of goods sold and decreasedrestructuring costs approximately $669 and $1,421 for the three months and ninemonths ended September 30, 2004, respectively.

 

***Warranty Costs.***  Warranty costs incurred at oneof the Company’s distribution operations were previously classified as otherexpenses. To conform to current presentation of other similar costs, thesewarranty costs were reclassified as cost of goods sold.  These reclassifications increased cost ofgoods sold and decreased other expenses approximately $54 and $254 for thethree months and nine months ended September 30, 2004, respectively.

 

***Shipping and Other Administrative Costs.*** Certain shipping and other administrative costs incurred to manufacturethe Company’s products previously classified as selling, general andadministrative expenses have been reclassified to cost of goods sold.  These reclassifications increased cost ofgoods sold and decreased selling, general and administrative expensesapproximately $3,127 and $9,879 for the three and nine months ended September30, 2004, respectively.

 

These reclassifications had no effect on the Company’s financialposition, cash flows or results of operations. The following table sets forth asummary of these reclassifications showing previously reported and adjustedamounts for the three months and nine months ended September 30, 2004,respectively:

 

10

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| ** **                                    | ** ** | **Three Months Ended**       | ** ** |
|-----------------------------------------------|------------|------------------------------|------------|
| ** **                                    | ** ** | **September 30, 2004**       | ** ** |
| ** **                                    | ** ** | **As Previously  Reported**  | ** ** | **As Adjusted** | ** ** |
|                                          |       |                         |       |   |   |
| Net Sales                                     |       | $                            | 124,474    |   | $ | 120,897 |   |
| Cost of  goods sold                           |       | 87,773                       |       | 88,287 |   |
| Selling,  general and administrative expenses |       | 30,434                       |       | 27,307 |   |
| Amortization  of intangibles                  |       | 1,010                        |       | 769 |   |
| Restructuring  costs                          |       | 4,794                        |       | 4,125 |   |
| Other income                                  |       | 32                           |       | 80 |   |
|                                          |       |                         |       |   |   |
|                                          |       | **Nine  Months Ended**       |       |
|                                          |       | **September  30, 2004**      |       |
|                                          |       | **As  Previously  Reported** | ** ** | **As  Adjusted** |   |
|                                          |       |                         |       |   |   |
| Net Sales                                     |       | $                            | 370,377    |   | $ | 360,795 |   |
| Cost of  goods sold                           |       | 254,332                      |       | 256,751 |   |
| Selling,  general and administrative expenses |       | 92,114                       |       | 82,235 |   |
| Amortization  of intangibles                  |       | 3,077                        |       | 2,630 |   |
| Restructuring  costs                          |       | 9,815                        |       | 8,394 |   |
| Other  expense                                |       | 1,007                        |       | 715 |   |

 

**4.****                                     ****Comprehensive Loss**

 

Comprehensive loss totaled$5,682 and $8,015 for the three months ended September 30, 2005 and 2004, respectively.  For the nine months ended September 30, 2005and 2004, comprehensive loss was $13,420 and $16,510, respectively.

 
| ** **                    | ** ** | **Three Months Ended September 30,** | ** ** |
|-------------------------------|------------|--------------------------------------|------------|
| ** **                    | ** ** | **2005**                             | ** ** | **2004** | ** ** |
| Net loss                      |       | $                                    | (7,375     | ) | $ | (8,473 | ) |
| Foreign  currency translation |       | 1,693                                |       | 458 |   |
| Comprehensive  loss           |       | $                                    | (5,682     | ) | $ | (8,015 | ) |
|                          |       |                                 |       |   |   |
|                          |       | **Nine  Months Ended September 30,** | ** ** |
|                          |       | **2005**                             | ** ** | **2004** | ** ** |
| Net loss                      |       | $                                    | (8,081     | ) | $ | (14,791 | ) |
| Foreign  currency translation |       | (5,339                               | )          | (1,719 | ) |
| Comprehensive  loss           |       | $                                    | (13,420    | ) | $ | (16,510 | ) |

 

11

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**5.****                                     ****Inventories**

 

The composition ofinventories was as follows:

 
| ** **      | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|-----------------|------------|-------------------------|------------|------------------------|------------|
|            |       |                    |       |                   |       |
| Raw  materials  |       | $                       | 31,034     |                   | $          | 25,311 |   |
| Work-in-process |       | 33,887                  |       | 33,095                 |       |
| Finished  goods |       | 67,142                  |       | 64,057                 |       |
|            |       | 132,063                 |       | 122,463                |       |
| LIFO reserve    |       | (4,968                  | )          | (3,756                 | )          |
|            |       | $                       | 127,095    |                   | $          | 118,707 |   |

 

**6.****                                     ****Intangible Assets**

 

The composition ofintangibles was as follows:

 
| ** **                          | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------------------------|------------|-------------------------|------------|------------------------|------------|
|                                |       |                    |       |                   |       |
| Goodwill                            |       | $                       | 207,978    |                   | $          | 208,403 |   |
| Patents and  customer relationships |       | 49,443                  |       | 49,517                 |       |
| Trademarks                          |       | 33,403                  |       | 33,403                 |       |
|                                |       | 290,824                 |       | 291,323                |       |
| Accumulated  amortization           |       | (8,854                  | )          | (6,306                 | )          |
|                                |       | $                       | 281,970    |                   | $          | 285,017 |   |

 

Amortization expenseamounted to $817 and $769 for the three months ended September 30, 2005 and2004, respectively.  For the nine monthsended September 30, 2005 and 2004, amortization expense was $2,548 and $2,630,respectively.  Estimated amortizationexpense for each of the next five fiscal years has not changed significantlyfrom the amounts disclosed in the Company’s Annual Report on Form 10-K for theyear ended December 31, 2004.

 

Goodwill as ofSeptember 30, 2005 reflects the net effect of $425 for adjustments atJune 30, 2005 and September 30, 2005, to record minority interests incertain foreign subsidiaries (see Note 16) and corrections tointer-company balances, respectively, that existed prior to the Company'sapplication of fresh-start accounting upon its emergence from bankruptcy inMay 2003.  The recording of theadjustment for the three and nine months ended September 30, 2005 resultedin a charge of $279, which has been recorded as other expense and, as ofSeptember 30, 2005 an increase to accumulated other comprehensive loss of$1,173.

 

12

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**7.****                                     ****Debt and Capital LeaseObligations**

 

Thecomposition of long-term obligations was as follows:

 
| ** **                                                             | ** ** | **September 30,  2005** | ** ** | **December 31,  2004** | ** ** |
|------------------------------------------------------------------------|------------|-------------------------|------------|------------------------|------------|
|                                                                   |       |                    |       |                   |       |
| Working Capital Facility                                               |       | $                       | 34,869     |                   | $          | 10,824 |   |
| Second-Lien Facility                                                   |       | 20,000                  |       | 20,000                 |       |
| Term A Loan                                                            |       | 7,929                   |       | 9,250                  |       |
| Senior Subordinated Notes                                              |       | 175,000                 |       | 175,000                |       |
| Capital Leases                                                         |       | 17,669                  |       | 19,160                 |       |
| Other                                                                  |       | 11,120                  |       | 11,513                 |       |
|                                                                   |       | $                       | 266,587    |                   | $          | 245,747 |   |
| Current maturities, working capital  facility and second-lien facility |       | (65,061                 | )          | (42,079                | )          |
|                                                                   |       | $                       | 201,526    |                   | $          | 203,668 |   |

 

***Senior Subordinated Notes***

 

On February 5, 2004, theCompany completed a private placement of $175,000 in aggregate principal of 91⁄4%Senior Subordinated Notes due 2014 (the “Senior Subordinated Notes”). The netproceeds from the offering, together with approximately $20,000 of borrowingsunder a new term loan (the “Term Loan”) added through an amendment andrestatement to the General Electric Capital Corporation (“GECC”) creditagreement (the “Amended Credit Agreement”), were used to repay all outstandingborrowings under the $180,000 senior term note facility and to reduce amountsoutstanding under the Company’s revolving credit facility. In May 2004, for thepurpose of an exchange offer, the Company registered notes with terms identicalto the Senior Subordinated Notes under the Securities Act of 1933.  The Company completed the exchange offer inthe second quarter of 2004, and more than 99% of the original notes wereexchanged for the registered notes.

 

The Senior Subordinated Notes are unsecured senior subordinatedobligations and are subordinated in right of payment to all existing and futureSenior Indebtedness (as defined in the indenture). Interest accrues at the rateof 91⁄4% per annum and is payable semiannually in arrears on February 1 andAugust 1.

 

***Amended Credit Agreement***

 

On November 22, 2004, the Company entered into the Amended CreditAgreement. The Amended Credit Agreement that matures on November 22, 2009 addedthe Company’s foreign subsidiaries in Australia, the United Kingdom and Canadaas credit collateral parties, and changed the determination of the borrowingbase from a cash flow-based formula to an asset-based formula.  Under the Amended Credit Agreement, the totalloan commitment was increased from $70,000 to $91,300 (subject to thelimitation described below), with a revolving loan commitment of $80,000 (the “WorkingCapital Facility”) and term loan commitments of $11,300 (subject to thelimitation described below). The term loan commitments consist of a $9,250 TermA Loan and a maximum $2,050 Delayed Draw Term Loan dependent upon the finalevaluation of certain real property located in Australia, which was notcomplete as of September 30, 2005.  Up to$25,000 of the Working Capital Facility is available for letters of credit. TheAmended Credit Agreement is secured by substantially all of the assets of theCompany’s domestic subsidiaries and the Company’s foreign subsidiaries inAustralia, the United Kingdom and Canada, including a pledge of the capitalstock of substantially all of the Company’s subsidiaries, subject to certainlimitations with respect to foreign subsidiaries. Borrowings under therevolving loan commitment may not exceed 85% of eligible receivables plus thelesser of (i) 85% of the net orderly liquidation value of eligible inventoriesor (ii) 65%

 

13

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of the book value of inventories less customary reserves. The AmendedCredit Agreement contains financial covenants, including minimum levels ofEBITDA (as defined in the Amended Credit Agreement and determined on aconsolidated basis) and other customary provisions and requires the Second-LienFacility, as described below, to be paid or refinanced 90 days prior to itsmaturity.  In connection with the AmendedCredit Agreement, the Company’s foreign subsidiaries in Australia, the UnitedKingdom and Canada granted second security interests in their assets to thelenders under the Company’s $20,000 Second-Lien Facility and guaranteed theCompany’s $175,000 91/4% SeniorSubordinated Notes.  Interest rates onthe Amended Credit Agreement are, at the Company’s option, LIBOR (3.86% as ofSeptember 30, 2005) plus 2.25% or the prime rate plus 0.5% on the revolvingfacility, and LIBOR (3.86% as of September 30, 2005) plus 2.50% or the primerate plus 0.75% on the term loan facilities. All of these percentages aresubject to an interest rate grid and will decline if certain conditions aremet. Principal payments on the term loan facilities are equal quarterlypayments based on a seven year amortization schedule, with the remaining amountpaid at maturity. Unused portions of the Working Capital Facility bear interestat the rate of 0.5% per annum.  TheAmended Credit Agreement limits total borrowings under the facility to $75,000 untilthe Second-Lien Facility is paid or refinanced with long-term debt. The AmendedCredit Agreement does under certain conditions allow for the use of the WorkingCapital Facility to repay the Second-Lien Facility.  As of September 30, 2005, the Company hadoutstanding borrowings of $34,869 and issued letters of credit totaling $11,471under the Working Capital Facility.  TheCompany had availability of $16,153 under the Working Capital Facility atSeptember 30, 2005. The Working Capital Facility terminates on November 22,2009.  The Term A Loan requires equalquarterly principal payments of $330 per quarter, which began December 31, 2004and continues through October 31, 2009, with the balance of the outstanding principalbeing payable on November 22, 2009.  Asof September 30, 2005, the Company did not have access to the Delayed Draw TermLoan.

 

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

 

On March 16, 2005 and March30, 2005, the Company amended the Amended Credit Agreement to modify certainfinancial covenants and enable the Company to extend its Second-LienFacility.  On July 27, 2005, August 8,2005, October 5, 2005 and November 7, 2005, the Company further amended theAmended Credit Agreement to modify certain financial and non-financialcovenants and enable the Company to extend and expand its $20,000 second-lienterm loan facility.  The Companyanticipates being in compliance with future covenants.

 

***Second-Lien Facility***

 

OnJuly 29, 2004 the Company entered into a $20,000 second-lien term loan facility(the “Second-Lien Facility”). Borrowings under the facility were used to repaya portion of the amount outstanding under the Working Capital Facility. OnNovember 5, 2004 the Company entered into an amendment to the Second-LienFacility to extend its maturity to July 22, 2005 and modified a financialcovenant.  The Second-Lien Facility issecured by a second lien on substantially all of the assets of the Company. TheSecond-Lien Facility accrues interest at the Company’s option, at LIBOR (3.86%as of September 30, 2005) plus 6.00%, or an alternative base rate of thegreater of (i) the Prime Rate or (ii) the federal funds rate plus one half of1.00% plus 5.00%. The Second-Lien Facility restricts how much long-term debtthe Company may have and has other customary provisions including financial andnon-financial covenants. On March 16, 2005 and March 30, 2005, the Second-LienFacility was amended to modify a financial covenant and extend its

 

14

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maturityuntil April 30, 2006.  On August 8, 2005and October 7, 2005, the Company amended the Second-Lien Facility to modifycertain financial and non-financial covenants.

 

On November 7, 2005 theCompany and certain of its subsidiaries further amended the Second-LienFacility to increase the amount of borrowings from $20,000 to $30,000, extendthe maturity of the facility from April 30, 2006 to November 7, 2008, and obtaina more attractive interest rate (the “$30m Facility”).  The $30m Facility accrues interest at theCompany’s option, at LIBOR (3.86% as of September 30, 2005) plus 4.50%, or analternative base rate of the greater of (i) the Prime Rate or (ii) the federalfunds rate plus one half of 1.00% plus 3.50%. Immediate use of proceeds will be to reduce borrowings under the Company’sWorking Capital Facility.

 

**8.****                                     ****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 pays interestat a variable rate equal to LIBOR (3.86% as of September 30, 2005) plus aspread of 442 basis points. The six-month LIBOR rate on each semi-annual resetdate determines the variable portion of the interest rate swap.  The six-month LIBOR rate for each semi-annualreset 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 and thereforeperfect effectiveness is assumed over the term of the swap.

 

In accordance withSFAS No. 133, as of September 30, 2005, the Company recorded a fair valueadjustment to the portion of its fixed rate long-term debt that is hedged. Thisfair value adjustment of $941 was recorded as a decrease to long-termobligations, with the related value for the interest rate swap’s non-currentportion recorded in other long-term liabilities. Interest rate differentialsassociated with the interest rate swap are recorded as an adjustment to acurrent asset or liability, with the offset to interest expense over the lifeof the interest rate swap.  For the threemonths and nine months ended September 30, 2005, the Company realized areduction in its expense as a result of the interest rate swap of $15 and $269,respectively.

 

**9.****                                     ****Warrants**

 

Inconnection with the Company’s emergence from Chapter 11 bankruptcy protectionon May 23, 2003, three classes of warrants were issued that allow the holdersto purchase the Company’s common stock in the future at stated exercise prices.The key financial elements of the warrants are as follows:

 
| ** **        | ** ** | ** **      | ** ** | ** **    | ** ** | ** **     | ** **   | **Warrants**      | ** ** |
|-------------------|------------|-----------------|------------|---------------|------------|----------------|--------------|-------------------|------------|
| ** **        | ** ** | **Warrants**    | ** ** | ** **    | ** ** | ** **     | ** **   | **Issued and**    | ** ** |
| ** **        | ** ** | **Issued**      | ** ** | ** **    | ** ** | ** **     | ** **   | **Outstanding**   | ** ** |
| ** **        | ** ** | **to Purchase** | ** ** | **Exercise**  | ** ** | ** **     | ** **   | **as of**         | ** ** |
| ** **        | ** ** | **Common**      | ** ** | **Price**     | ** ** | **Expiration** | ** **   | **September 30,** | ** ** |
| ** **        | ** ** | **Stock**       | ** ** | **Per Share** | ** ** | **Date**       | ** **   | **2005**          | ** ** |
|              |       |            |       |          |       |           |         |              |       |
| Class A  Warrants |       | 1,157,000       |       | $             | 13.85      |           | May 23, 2004 |              | —     |   |
| Class B  Warrants |       | 700,000         |       | $             | 20.78      |           | May 23, 2006 |              | 700,000    |   |
| Class C  Warrants |       | 271,429         |       | $             | 27.70      |           | May 23, 2006 |              | 271,429    |   |

 

TheClass A and B Warrants were issued, pro rata, to participants in theformer 9 7/8% Senior Subordinated

 

15

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notes.These former bondholders received approximately 5% of the Company’s commonstock upon emergence from Chapter 11, plus the Class A and Bwarrants. These warrants have been effectively valued and recorded withinshareholders’ equity (additional paid-in capital) in connection withestablishing the opening fresh-start balance sheet.

 

The Class C Warrants were issued to the former majority equityholders of the Company. The former equity holders received no other significantdisbursements or consideration upon emergence from Chapter 11. Thesewarrants have been treated as an exchange of old equity securities for newequity securities in connection with recording the reorganization entries andestablishing the opening fresh-start balance sheet.  As of the opening fresh-start balance sheetdate, the fair value of the Class A, Class B and Class C Warrants was $2,500,$1,500 and $0, respectively.  The fairvalue of the warrants was estimated using the Black Scholes option pricingmethod with the following significant assumptions:

 
| Risk-free  rate of return            |   | 5.0        | %               |
|--------------------------------------|--------|------------|-----------------|
| Volatility                           |   | 35.0       | %               |
| Shares  issued on the effective date |   | 13,300,000 |            |
| New  Common Stock midpoint value     |   | $          | 13.85 per share |   |
|                                      |        |            |                 |  |

 

Duringthe nine months ended September 30, 2004, 13,973 Class A Warrants wereexercised, the proceeds of which were $193. The remaining Class A warrants expired on May 23, 2004.  There were no Class B Warrants or Class CWarrants exercised during the three months and nine months ended September 30,2005 and 2004.

 

**10.****                              ****Stock Options**

 

The 2004 Non-EmployeeDirectors Stock Option Plan (the “Directors Plan”) was adopted effective March8,  2004 for the Company’s non-employeedirectors. Up to 200,000 shares of the Company’s common stock may be issuedpursuant to awards granted by the Compensation Committee under the DirectorsPlan.

 

The 2004 Stock IncentivePlan (the “Stock Incentive Plan”) was adopted effective March 8, 2004 for theCompany’s employees. Up to 1,477,778 shares of the Company’s common stock maybe issued pursuant to awards granted by the Compensation Committee under theStock Incentive Plan. The Stock Incentive Plan provides for the grant of(i) incentive stock options intended to qualify under Section 422 ofthe Internal Revenue Code of 1986, (ii) non-statutory stock options,(iii) stock appreciation rights (“SARs”), (iv) restricted stock, and(v) stock units.  Restricted stockawards and stock units may, as determined by the compensation committee in itsdiscretion, constitute performance-based awards.

 

As of September 30, 2005, 1,045,725 options for shares were issued andoutstanding under the Directors Plan, the Stock Incentive Plan and otherspecific agreements.

 

**11.****                              ****Income Taxes**

 

The Company’s tax provisionrelates primarily to its foreign subsidiaries. The tax benefits of losses incurred in the U.S. are fully reserved witha valuation allowance based on the Company’s current tax position and estimatesof taxable income for the foreseeable future.

 

The Company anticipateshaving an ordinary loss in the U.S. for the current fiscal year for which notax benefit can be recognized.  In thethird quarter of 2005, the Company therefore excluded losses in the U.S. fromthe calculation of its estimated annual effective rate and the calculation ofits tax provision for the nine months ended September 30, 2005.  For the six months ended June 30, 2005, theCompany recorded a $4,260 tax benefit on losses incurred in the U.S.  This $4,260 tax benefit was reversed in thethird quarter of 2005 as the Company excluded losses in the U.S. from itsestimated annual effective tax rate calculation.

 

16

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**12.****                              ****Employee Benefit Plans**

 

***401(k)Retirement Plan****.*The401(k) Retirement Plan covers the majority of the Company’s domestic employees.At its discretion, the Company can make a base contribution of 1% of eachemployee’s compensation and an additional contribution equal to as much as 4%of the employee’s compensation. At the employee’s discretion, an additional 1%to 15% voluntary employee contribution can be made. The plan requires theCompany to make matching contributions of 50% for the first 6% of the voluntaryemployee contribution.

 

***Pension Plans.*****The Company’s subsidiaries have had variousnoncontributory defined benefit pension plans which covered substantially allU.S. employees. The Company froze and combined three noncontributory definedbenefit pension plans through amendments to such plans effective December 31,1989 into one plan (the “Retirement Plan”). All former participants of theseplans became eligible to participate in the 401(k) Retirement Plan effectiveJanuary 1, 1990.

 

The Company’s Australian subsidiary has a Superannuation Fund (the “Fund”)established by a Trust Deed. Pension benefits are actuarially determined andare funded through mandatory participant contributions and the Company’sactuarially determined contributions. The prepaid benefit cost is not included in the table below or in thebalance sheets, as the Company has no legal right to amounts included in thisfund. In addition, upon dissolution of the Fund, any excess funds are requiredto be allocated to the participants as determined by the actuary. Accordingly,the Company accounts for this fund as a defined contribution plan. Theactuarial assumptions used to determine the Company’s contribution, the fundedstatus, and the retirement benefits are consistent with previous years.

 

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

 

17

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Net periodic pension andother postretirement benefit costs include the following components:

 
| ** **                                    | ** ** | **Pension Benefits**                  | ** ** |
|-----------------------------------------------|------------|---------------------------------------|------------|
| ** **                                    | ** ** | **Three Months Ended September 30,**  | ** ** | **Nine Months Ended September 30,** | ** ** |
| ** **                                    | ** ** | **2005**                              | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Components  of the net periodic benefit cost: |       |                                  |       |   |   |   |   |   |   |
| Service Cost                                  |       | $                                     | —     |   | $ | — |   | $ | — |   | $ | — |   |
| Interest  Cost                                |       | 285                                   |       | 286 |   | 1,140 |   | 858 |   |
| Expected  return on plan assets               |       | (302                                  | )          | (273 | ) | (1,191 | ) | (807 | ) |
| Recognized  loss                              |       | —                                |       | — |   | — |   | — |   |
| Net periodic  benefit cost                    |       | $                                     | (17        | ) | $ | 13 |   | $ | (51 | ) | $ | 51 |   |
|                                          |       |                                  |       |   |   |   |   |   |   |
|                                          |       | **Other  Postretirement Benefits**    |       |
| ** **                                    | ** ** | **Three  Months Ended September 30,** | ** ** | **Nine  Months Ended September 30,** | ** ** |
| ** **                                    | ** ** | **2005**                              | ** ** | **2004** | ** ** | **2005** | ** ** | **2004** | ** ** |
| Components  of the net periodic benefit cost: |       |                                  |       |   |   |   |   |   |   |
| Service Cost                                  |       | $                                     | 308        |   | $ | 283 |   | $ | 924 |   | $ | 876 |   |
| Interest  Cost                                |       | 348                                   |       | 232 |   | 1,044 |   | 950 |   |
| Expected  return on plan assets               |       | —                                |       | — |   | — |   | — |   |
| Recognized  loss                              |       | 10                                    |       | — |   | 32 |   | — |   |
| Net periodic  benefit cost                    |       | $                                     |  666  |   | $ |  515 |   | $ |  2,000 |   | $ |  1,826 |   |
|                                               |            |                                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

The Company previouslydisclosed in its financial statements for the year ended December 31, 2004 thatit expected to contribute $1,172 to its Retirement Plan in 2005. As ofSeptember 30, 2005, $907 has been contributed. The Company presently anticipates contributing an additional $265 tofund its Retirement Plan in 2005.

 

***Stock PurchasePlan***.  The Company adopted anemployee stock purchase plan effective during the third quarter of 2005 thatallows any eligible employee to purchase from the Company shares of the Company’scommon stock at the end of each quarter at 92.5% of the market price at the endof the quarter.  Because the employeestock purchase plan was effective July 1, 2005, no shares were purchased underthis plan in the quarter ended September 30, 2005; however, the initialpurchase occurred early in the fourth quarter**.**

 

**13.****                              ****Segment Information**

 

Although the Company’soperations are comprised of several product lines and operating locations,similarity of products, paths to market, end users and production processesresults in performance evaluation and decisions regarding allocation ofresources being made on a combined basis, and accordingly, management hasconcluded the Company operates in one segment. Reportable geographic regionsare the United States, Europe and Australia/Asia.

 

Summarized financial informationconcerning the Company’s geographic regions is shown in the following table:

 
| ** **              | ** ** | **Nine Months Ended September 30,** | ** ** |
|-------------------------|------------|-------------------------------------|------------|
| ** **              | ** ** | **2005**                            | ** ** | **2004** | ** ** |
| Net Sales               |       |                                |       |   |   |
| United States           |       | $                                   | 221,174    |   | $ | 211,831 |   |
| Europe                  |       | 51,822                              |       | 46,235 |   |
| Australia / Asia        |       | 57,476                              |       | 52,081 |   |
| All other international |       | 61,909                              |       | 50,648 |   |
|                    |       | $                                   | 392,381    |   | $ | 360,795 |   |

 

18

----

 
| ** **                    | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------|------------|-------------------|------------|------------------|------------|
| ** **                    | ** ** | **2005**          | ** ** | **2004**         | ** ** |
| Identifiable  tangible assets |       |              |       |             |       |
| United States                 |       | $                 | 30,294     |             | $          | 35,915 |   |
| Europe                        |       | 12,005            |       | 14,472           |       |
| Australia / Asia              |       | 9,463             |       | 10,769           |       |
| All other international       |       | 16,079            |       | 13,025           |       |
| Corporate                     |       | 11,401            |       | 12,366           |       |
|                          |       | $                 | 79,242     |             | $          | 86,547 |   |

 

***Product Line Information***

 

The Company manufactures a variety of products, substantially all ofwhich are used in the cutting, welding or fabrication of metal. End users ofthe Company’s products are engaged in various applications includingconstruction, automobile manufacturing, repair and maintenance andshipbuilding. The following table shows sales for each of the Company’s keyproduct lines:

** **
| ** **                              | ** ** | **Nine Months Ended September 30,** | ** ** |
|-----------------------------------------|------------|-------------------------------------|------------|
| ** **                              | ** ** | **2005**                            | ** ** | **2004** | ** ** |
| ** **                              | ** ** | ** **                          | ** ** | ** ** | ** ** |
| Gas  apparatus                          |       | $                                   | 135,105    |   | $ | 131,539 |   |
| Arc welding  equipment                  |       | 70,544                              |       | 59,981 |   |
| Arc welding  consumables                |       | 125,894                             |       | 111,048 |   |
| Plasma and  automated cutting equipment |       | 55,183                              |       | 54,474 |   |
| All other                               |       | 5,655                               |       | 3,753 |   |
|                                    |       | $                                   | 392,381    |   | $ | 360,795 |   |

 

**14.          Condensed Consolidating Financial Statements**

 

On February 5, 2004, the Company completed a private placement of $175,000 in aggregate principal of 91⁄4% Senior Subordinated Notes due 2014. The Company’s domestic, wholly-owned subsidiaries and the Company’s foreign subsidiaries in Australia, the United Kingdom and Canada (“Guarantor Subsidiaries”) fully and unconditionally guarantee the Senior Subordinated Notes and are jointly and severally liable for all payments under the Senior Subordinated Notes. Each of the Guarantor Subsidiaries is wholly owned by the Company.

 

The following condensedconsolidating financial information includes the accounts of the Company, whichhas no independent assets or operations, the combined accounts of the GuarantorSubsidiaries and the combined accounts of the non-guarantor subsidiaries forthe periods indicated. Separate financial statements of each of the GuarantorSubsidiaries are not presented because management has determined suchinformation is not material in assessing the financial condition, cash flows orresults of operations of the Company and its subsidiaries.  This information was prepared on the samebasis as the consolidated financial statements:

 

19

----

 

**THERMADYNEHOLDINGS CORPORATION**

**CONDENSEDCONSOLIDATING BALANCE SHEET**

**SEPTEMBER 30, 2005**

** **
| ** **                                                 | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|------------------------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                 | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                 | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                 | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
| **ASSETS**                                                 |       |            |       |           |       |           |       |             |       |             |       |
| Current  Assets:                                           |       |            |       |           |       |           |       |             |       |             |       |
| Cash and cash equivalents                                  |       | $               | —     |           | $          | 4,588          |       | $                | 3,229      |             | $          | — |   | $ | 7,817 |   |
| Accounts receivable, net                                   |       | —          |       | 67,876         |       | 36,905         |       | —           |       | 104,781          |       |
| Inventories                                                |       | —          |       | 87,473         |       | 39,622         |       | —           |       | 127,095          |       |
| Prepaid expenses and other                                 |       | —          |       | 6,903          |       | 3,090          |       | —           |       | 9,993            |       |
| Current deferred tax assets                                |       | —          |       | 2,690          |       | —         |       | —           |       | 2,690            |       |
| Total current assets                                       |       | —          |       | 169,530        |       | 82,846         |       | —           |       | 252,376          |       |
| Property, plant and equipment, net                         |       | —          |       | 42,436         |       | 29,297         |       | —           |       | 71,733           |       |
| Goodwill                                                   |       | —          |       | 207,978        |       | —         |       | —           |       | 207,978          |       |
| Intangibles, net                                           |       | —          |       | 61,604         |       | 12,388         |       | —           |       | 73,992           |       |
| Other assets                                               |       | 4,176           |       | 2,920          |       | 413            |       | —           |       | 7,509            |       |
| Investment in and advances to subsidiaries                 |       | 172,011         |       | —         |       | —         |       | (172,011         | )          | —           |       |
| Total assets                                               |       | $               | 176,187    |           | $          | 484,468        |       | $                | 124,944    |             | $          | (172,011 | ) | $ | 613,588 |   |
|                                                       |       |            |       |           |       |           |       |             |       |             |       |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY  (DEFICIT)**   | ** ** | ** **      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| Current Liabilities:                                       |       |            |       |           |       |           |       |             |       |             |       |
| Accounts payable                                           |       | $               | —     |           | $          | 29,434         |       | $                | 16,795     |             | $          | — |   | $ | 46,229 |   |
| Accrued and other liabilities                              |       | —          |       | 31,022         |       | 5,887          |       | —           |       | 36,909           |       |
| Accrued interest                                           |       | 2,689           |       | 196            |       | —         |       | —           |       | 2,885            |       |
| Income taxes payable                                       |       | —          |       | (1,021         | )          | 2,510          |       | —           |       | 1,489            |       |
| Working capital and second-lien facility                   |       | —          |       | 54,869         |       | —         |       | —           |       | 54,869           |       |
| Current maturities of long-term obligations                |       | —          |       | 2,353          |       | 7,839          |       | —           |       | 10,192           |       |
| Total current liabilities                                  |       | 2,689           |       | 116,853        |       | 33,031         |       | —           |       | 152,573          |       |
| Long-term obligations, less current  maturities            |       | 174,059         |       | 21,090         |       | 6,377          |       | —           |       | 201,526          |       |
| Deferred tax liabilities                                   |       | —          |       | 70,222         |       | —         |       | —           |       | 70,222           |       |
| Other long-term liabilities                                |       | 941             |       | 40,143         |       | 5,967          |       | —           |       | 47,051           |       |
| Shareholders’ equity (deficit):                       |       |            |       |           |       |           |       |             |       |             |       |
| Common stock                                               |       | 133             |       | —         |       | —         |       | —           |       | 133              |       |
| Additional paid-in-capital                                 |       | 183,460         |       | —         |       | —         |       | —           |       | 183,460          |       |
| Retained earnings (accumulated deficit)                    |       | (49,609         | )          | (324           | )          | (14,929        | )          | 15,253           |       | (49,609          | )          |
| Accumulated other comprehensive income  (loss)             |       | 8,232           |       | (4,749         | )          | 11,714         |       | (6,965           | )          | 8,232            |       |
| Total shareholders’ equity (deficit)                  |       | 142,216         |       | (5,073         | )          | (3,215         | )          | 8,288            |       | 142,216          |       |
| Net equity and advances to / from  subsidiaries            |       | (143,718        | )          | 241,233        |       | 82,784         |       | (180,299         | )          | —           |       |
|                                                       |       |            |       |           |       |           |       |             |       |             |       |
| Total liabilities and shareholders’ equity  (deficit) |       | $               | 176,187    |           | $          | 484,468        |       | $                | 124,944    |             | $          | (172,011 | ) | $ | 613,588 |   |

 

20

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**THERMADYNEHOLDINGS CORPORATION**

**CONDENSEDCONSOLIDATING BALANCE SHEET**

**DECEMBER 31, 2004**

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

 

21

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**THERMADYNEHOLDINGS CORPORATION**

**CONDENSEDCONSOLIDATING  STATEMENT OF OPERATIONS**

**THREE MONTHSENDED SEPTEMBER 30, 2005**

 
| ** **                                    | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|-----------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                    | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                    | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                    | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|                                          |       |            |       |           |       |           |       |             |       |             |       |
| Net sales                                     |       | $               | —     |           | $          | 122,685        |       | $                | 33,101     |             | $          | (24,518 | ) | $ | 131,268 |   |
| Cost of  goods sold                           |       | —          |       | 91,444         |       | 26,697         |       | (24,422          | )          | 93,719           |       |
| Gross Margin                                  |       | —          |       | 31,241         |       | 6,404          |       | (96              | )          | 37,549           |       |
|                                          |       |            |       |           |       |           |       |             |       |             |       |
| Selling,  general and administrative expenses |       | —          |       | 22,983         |       | 6,726          |       | —           |       | 29,709           |       |
| Amortization  of intangibles                  |       | —          |       | 788            |       | 29             |       | —           |       | 817              |       |
| Net periodic  postretirement benefits         |       | —          |       | 666            |       | —         |       | —           |       | 666              |       |
| Loss on  disposal of assets                   |       | —          |       | 700            |       | —         |       | —           |       | 700              |       |
| Restructuring  costs                          |       | —          |       | —         |       | —         |       | —           |       | —           |       |
| Operating income (loss)                       |       | —          |       | 6,104          |       | (351           | )          | (96              | )          | 5,657            |       |
| Other income  (expense):                      |       |            |       |           |       |           |       |             |       |             |       |
| Interest,  net                                |       | (4,032          | )          | (1,792         | )          | (591           | )          | —           |       | (6,415           | )          |
| Amortization  of deferred financing costs     |       | (125            | )          | (202           | )          | —         |       | —           |       | (327             | )          |
| Equity in  net income (loss) of subsidiaries  |       | (3,339          | )          | —         |       | —         |       | 3,339            |       | —           |       |
| Other, net                                    |       | 121             |       | (922           | )          | 272            |       | —           |       | (529             | )          |
| Minority  interest                            |       | —          |       | (207           | )          | —         |       | —           |       | (207             | )          |
| Income (loss) before income tax provision     |       | (7,375          | )          | 2,981          |       | (670           | )          | 3,243            |       | (1,821           | )          |
| Income tax  provision                         |       | —          |       | 4,761          |       | 793            |       | —           |       | 5,554            |       |
| Net income (loss)                             |       | $               | (7,375     | )              | $          | (1,780         | )          | $                | (1,463     | )                | $          | 3,243 |   | $ | (7,375 | ) |
|                                               |            |                 |            |                |            |                |            |                  |            |                  |            |  |  |  |  |  |  |  |  |  |

** **

**THERMADYNE HOLDINGS CORPORATION**

**CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS**

**THREE MONTHS ENDED SEPTEMBER 30, 2004**

 
| ** **                                    | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|-----------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                    | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                    | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                    | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|                                          |       |            |       |           |       |           |       |             |       |             |       |
| Net sales                                     |       | $               | —     |           | $          | 115,755        |       | $                | 29,041     |             | $          | (23,899 | ) | $ | 120,897 |   |
| Cost of  goods sold                           |       | —          |       | 88,620         |       | 23,661         |       | (23,994          | )          | 88,287           |       |
| Gross Margin                                  |       | —          |       | 27,135         |       | 5,380          |       | 95               |       | 32,610           |       |
|                                          |       |            |       |           |       |           |       |             |       |             |       |
| Selling,  general and administrative expenses |       | —          |       | 23,225         |       | 4,082          |       | —           |       | 27,307           |       |
| Amortization  of intangibles                  |       | —          |       | 769            |       | —         |       | —           |       | 769              |       |
| Net periodic  postretirement benefits         |       | —          |       | 515            |       | —         |       | —           |       | 515              |       |
| Gain on  disposal of assets                   |       | —          |       | (6             | )          | —         |       | —           |       | (6               | )          |
| Restructuring  costs                          |       | —          |       | 4,125          |       | —         |       | —           |       | 4,125            |       |
| Operating income (loss)                       |       | —          |       | (1,493         | )          | 1,298          |       | 95               |       | (100             | )          |
| Other income  (expense):                      |       |            |       |           |       |           |       |             |       |             |       |
| Interest,  net                                |       | (3,845          | )          | (1,500         | )          | (407           | )          | —           |       | (5,752           | )          |
| Amortization  of deferred financing costs     |       | (114            | )          | (261           | )          | —         |       | —           |       | (375             | )          |
| Equity in  net income (loss) of subsidiaries  |       | (4,514          | )          | —         |       | —         |       | 4,514            |       | —           |       |
| Other, net                                    |       | —          |       | (122           | )          | 202            |       | —           |       | 80               |       |
| Income (loss) before income tax provision     |       | (8,473          | )          | (3,376         | )          | 1,093          |       | 4,609            |       | (6,147           | )          |
| Income tax  provision                         |       | —          |       | 938            |       | 1,388          |       | —           |       | 2,326            |       |
| Net income (loss)                             |       | $               | (8,473     | )              | $          | (4,314         | )          | $                | (295       | )                | $          | 4,609 |   | $ | (8,473 | ) |

** **

22

----

 

**THERMADYNEHOLDINGS CORPORATION**

**CONDENSEDCONSOLIDATING  STATEMENT OF OPERATIONS**

**NINE MONTHSENDED SEPTEMBER 30, 2005**

 
| ** **                                    | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|-----------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                    | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                    | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                    | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|                                          |       |            |       |           |       |           |       |             |       |             |       |
| Net sales                                     |       | $               | —     |           | $          | 357,842        |       | $                | 100,947    |             | $          | (66,408 | ) | $ | 392,381 |   |
| Cost of  goods sold                           |       | —          |       | 267,130        |       | 82,169         |       | (66,221          | )          | 283,078          |       |
| Gross Margin                                  |       | —          |       | 90,712         |       | 18,778         |       | (187             | )          | 109,303          |       |
|                                          |       |            |       |           |       |           |       |             |       |             |       |
| Selling, general and administrative  expenses |       | —          |       | 67,580         |       | 18,585         |       | —           |       | 86,165           |       |
| Amortization  of intangibles                  |       | —          |       | 2,358          |       | 190            |       | —           |       | 2,548            |       |
| Net periodic  postretirement benefits         |       | —          |       | 2,000          |       | —         |       | —           |       | 2,000            |       |
| Loss on  disposal of assets                   |       | —          |       | 934            |       | —         |       | —           |       | 934              |       |
| Restructuring  costs                          |       | —          |       | —         |       | —         |       | —           |       | —           |       |
| Operating income (loss)                       |       | —          |       | 17,840         |       | 3              |       | (187             | )          | 17,656           |       |
| Other income  (expense):                      |       |            |       |           |       |           |       |             |       |             |       |
| Interest,  net                                |       | (11,737         | )          | (4,877         | )          | (1,420         | )          | —           |       | (18,034          | )          |
| Amortization  of deferred financing costs     |       | (375            | )          | (766           | )          | —         |       | —           |       | (1,141           | )          |
| Equity in  net income (loss) of subsidiaries  |       | 3,836           |       | —         |       | —         |       | (3,836           | )          | —           |       |
| Other, net                                    |       | 195             |       | 1,375          |       | (3,116         | )          | —           |       | (1,546           | )          |
| Minority  interest                            |       | —          |       | (862           | )          | —         |       | —           |       | (862             | )          |
| Income (loss) before income tax provision     |       | (8,081          | )          | 12,710         |       | (4,533         | )          | (4,023           | )          | (3,927           | )          |
| Income tax  provision (benefit)               |       | —          |       | 1,978          |       | 2,176          |       | —           |       | 4,154            |       |
| Net income (loss)                             |       | $               | (8,081     | )              | $          | 10,732         |       | $                | (6,709     | )                | $          | (4,023 | ) | $ | (8,081 | ) |

 

**THERMADYNEHOLDINGS CORPORATION**

**CONDENSEDCONSOLIDATING  STATEMENT OF OPERATIONS**

**NINE MONTHSENDED SEPTEMBER 30, 2004**

 
| ** **                                    | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|-----------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                    | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                    | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                    | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|                                          |       |            |       |           |       |           |       |             |       |             |       |
| Net sales                                     |       | $               | —     |           | $          | 343,755        |       | $                | 84,525     |             | $          | (67,485 | ) | $ | 360,795 |   |
| Cost of  goods sold                           |       | —          |       | 255,641        |       | 68,444         |       | (67,326          | )          | 256,759          |       |
| Gross Margin                                  |       | —          |       | 88,114         |       | 16,081         |       | (159             | )          | 104,036          |       |
|                                          |       |            |       |           |       |           |       |             |       |             |       |
| Selling,  general and administrative expenses |       | —          |       | 68,091         |       | 14,136         |       | —           |       | 82,227           |       |
| Amortization  of intangibles                  |       | —          |       | 2,568          |       | 62             |       | —           |       | 2,630            |       |
| Net periodic  postretirement benefits         |       | —          |       | 1,826          |       | —         |       | —           |       | 1,826            |       |
| Loss on  disposal of assets                   |       | —          |       | 38             |       | —         |       | —           |       | 38               |       |
| Restructuring  costs                          |       | —          |       | 8,394          |       | —         |       | —           |       | 8,394            |       |
| Operating income (loss)                       |       | —          |       | 7,197          |       | 1,883          |       | (159             | )          | 8,921            |       |
| Other income  (expense):                      |       |            |       |           |       |           |       |             |       |             |       |
| Interest,  net                                |       | (10,983         | )          | (3,715         | )          | (990           | )          | —           |       | (15,688          | )          |
| Amortization  of deferred financing costs     |       | (302            | )          | (604           | )          | —         |       | —           |       | (906             | )          |
| Equity in  net income (loss) of subsidiaries  |       | (3,506          | )          | —         |       | —         |       | 3,506            |       | —           |       |
| Other, net                                    |       | —          |       | (346           | )          | (369           | )          | —           |       | (715             | )          |
| Income (loss) before income tax provision     |       | (14,791         | )          | 2,532          |       | 524            |       | 3,347            |       | (8,388           | )          |
| Income tax  provision                         |       | —          |       | 3,408          |       | 2,995          |       | —           |       | 6,403            |       |
| Net income (loss)                             |       | $               | (14,791    | )              | $          | (876           | )          | $                | (2,471     | )                | $          | 3,347 |   | $ | (14,791 | ) |

** **

23

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**THERMADYNE HOLDINGS CORPORATION**

**CONDENSEDCONSOLIDATING STATEMENT OF CASH FLOWS**

**NINE MONTHS ENDED SEPTEMBER 30, 2005**

 
| ** **                                                    | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|---------------------------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|                                                          |       |            |       |           |       |           |       |             |       |             |       |
| Net cash provided by (used in) operating  activities          |       | $               | (11,504    | )              | $          | 11,103         |       | $                | (6,532     | )                | $          | (4,022 | ) | $ | (10,955 | ) |
| Cash flows from investing activities:                         |       |            |       |           |       |           |       |             |       |             |       |
| Capital expenditures                                          |       | —          |       | (4,194         | )          | (4,237         | )          | —           |       | (8,431           | )          |
| Investment in joint venture                                   |       | —          |       | (700           | )          | —         |       | —           |       | (700             | )          |
| Net cash used in investing activities                         |       | —          |       | (4,894         | )          | (4,237         | )          | —           |       | (9,131           | )          |
| Cash flows from financing activities:                         |       |            |       |           |       |           |       |             |       |             |       |
| Net borrowings under revolving credit  facility               |       | —          |       | 23,077         |       | 968            |       | —           |       | 24,045           |       |
| Net (repayments) borrowings of long-term  obligations         |       | —          |       | (1,321         | )          | (796           | )          | —           |       | (2,117           | )          |
| Changes in net equity and advances to /  from subsidiaries    |       | 11,504          |       | (27,766        | )          | 12,240         |       | 4,022            |       | —           |       |
| Financing fees and other                                      |       | —          |       | (890           | )          | 593            |       | —           |       | (297             | )          |
| Net cash provided (used in) financing  activities             |       | 11,504          |       | (6,900         | )          | 13,005         |       | 4,022            |       | 21,631           |       |
| Effect of exchange rate changes on cash and  cash equivalents |       | —          |       | (279           | )          | (99            | )          | —           |       | (378             | )          |
| Net increase (decrease) in cash and cash  equivalents         |       | —          |       | (970           | )          | 2,137          |       | —           |       | 1,167            |       |
| Cash and cash equivalents at beginning of  period             |       | —          |       | 5,558          |       | 1,092          |       | —           |       | 6,650            |       |
| Cash and cash equivalents at end of period                    |       | $               | —     |           | $          | 4,588          |       | $                | 3,229      |             | $          | — |   | $ | 7,817 |   |
|                                                               |            |                 |            |                |            |                |            |                  |            |                  |            |  |  |  |  |  |  |  |  |  |

 

**THERMADYNE HOLDINGS CORPORATION**

**CONDENSEDCONSOLIDATING STATEMENT OF CASH FLOWS**

**NINE MONTHS ENDED SEPTEMBER 30, 2004**

 
| ** **                                                    | ** ** | **Parent**      | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
|---------------------------------------------------------------|------------|-----------------|------------|----------------|------------|----------------|------------|------------------|------------|------------------|------------|
| ** **                                                    | ** ** | **Thermadyne**  | ** ** | ** **     | ** ** | ** **     | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Holdings**    | ** ** | ** **     | ** ** | **Non-**       | ** ** | ** **       | ** ** | ** **       | ** ** |
| ** **                                                    | ** ** | **Corporation** | ** ** | **Guarantors** | ** ** | **Guarantors** | ** ** | **Eliminations** | ** ** | **Consolidated** | ** ** |
|                                                          |       |            |       |           |       |           |       |             |       |             |       |
| Net cash provided by (used in) operating  activities          |       | $               | (14,489    | )              | $          | (15,952        | )          | $                | (2,724     | )                | $          | 3,347 |   | $ | (29,818 | ) |
| Cash flows from investing activities:                         |       |            |       |           |       |           |       |             |       |             |       |
| Capital expenditures                                          |       | —          |       | (12,098        | )          | (2,358         | )          | —           |       | (14,456          | )          |
| Proceeds from sales of assets                                 |       |            |       |           |       | 1,324          |       |             |       | 1,324            |       |
| Net cash used in investing activities                         |       | —          |       | (12,098        | )          | (1,034         | )          | —           |       | (13,132          | )          |
| Cash flows from financing activities:                         |       |            |       |           |       |           |       |             |       |             |       |
| Net borrowings under revolving credit  facility               |       | —          |       | 4,539          |       | —         |       | —           |       | 4,539            |       |
| Net (repayments) borrowings of long-term  obligations         |       | (5,000          | )          | 39,797         |       | 2,611          |       | —           |       | 37,408           |       |
| Changes in net equity and advances to /  from subsidiaries    |       | 19,489          |       | (11,621        | )          | (4,521         | )          | (3,347           | )          | —           |       |
| Financing fees and other                                      |       | —          |       | (11,518        | )          | 4,173          |       | —           |       | (7,345           | )          |
| Net cash provided (used in) financing  activities             |       | 14,489          |       | 21,197         |       | 2,263          |       | (3,347           | )          | 34,602           |       |
| Effect of exchange rate changes on cash and  cash equivalents |       | —          |       | 1,219          |       | (1,140         | )          | —           |       | 79               |       |
| Net increase (decrease) in cash and cash  equivalents         |       | —          |       | (5,634         | )          | (2,635         | )          | —           |       | (8,269           | )          |
| Cash and cash equivalents at beginning of  period             |       | —          |       | 609            |       | 16,175         |       | —           |       | 16,784           |       |
| Cash and cash equivalents at end of period                    |       | $               | —     |           | $          | (5,025         | )          | $                | 13,540     |             | $          | — |   | $ | 8,515 |   |

 

24

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**15.          Restructuring Costs**

 

In 2003, the Company initiated a plan to relocate and consolidate certain U.S. manufacturing facilities.  These activities were completed in the first quarter of 2005, and the remaining payments will be made in the balance of the year.

 

The following table provides the activity in the restructuring accrualduring the nine months ended September 30, 2005:

 
| ** **                                                      | ** ** | **Nine  months ended September 30, 2005** | ** ** |
|-----------------------------------------------------------------|------------|-------------------------------------------|------------|
| ** **                                                      | ** ** | **December  31,**                         | ** ** | ** ** | ** ** | ** ** | ** ** | **September  30,** | ** ** |
| ** **                                                      | ** ** | **2004**                                  | ** ** | **Provision** | ** ** | **Payments** | ** ** | **2005** | ** ** |
| **Restructuring  accrual:**                                     | ** ** | ** **                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                                            |       |                                      |       |   |   |   |   |   |   |
| Plant Consolidation - Employee Severance  and Incentive Bonuses |       | $                                         | 214        |   | $ | — |   | $ | (214 | ) | $ | — |   |
| Domestic Workforce Reorganization -  Employee Severance         |       | 1,093                                     |       | — |   | (1,093 | ) | — |   |
|                                                            |       | $                                         | 1,307      |   | $ | — |   | $ | (1,307 | ) | $ | — |   |

 

**16.          Minority Interests**

 

Minority shareholders hold10% of certain of the Company’s South African and Italian subsidiaries notaccounted for prior to the second quarter of 2005. For the three months andnine months ended September 30, 2005, the Company has recorded as minorityinterest expense approximately $207, and $862, respectively, including $505 forthe nine months ended September 30, 2005 related to the prior years’ minorityinterest in earnings since the Company’s emergence from bankruptcy in May 2003.Total minority interest obligations as of September 30, 2005, of approximately$2,057 have been recorded as a component of other long-term liabilities andapproximately $1,027 was recorded as goodwill for the portion of minorityinterest that existed prior to the Company’s emergence from bankruptcy.Management determined that, while these adjustments primarily related tohistorical periods, the adjustments were immaterial to previously reportedinterim and annual financial information.

 

The shareholder agreementsfor certain South African and Italian subsidiaries include provisions thatallow the minority shareholders to put their ownership in the entities back tothe Company or, conversely, provide the Company a call option to purchase theoutstanding minority interests.  Theexercise period for the put and call options associated with the minorityinterests in the South African subsidiaries is indefinite, while the put andcall option for the minority interest in the Italian subsidiary expires onDecember 31, 2010.  The purchase price ofthe options is determined based on a specific formula outlined in therespective shareholder agreements.  As ofSeptember 30, 2005, the maximum payment to satisfy the put options is $3,552based on the formula.

 

**17.          Contingencies**

 

AtSeptember 30, 2005, the Company was a co-defendant in 1,169 cases allegingmanganese-induced illness, which is a net increase of 215 cases from June 30,2005. In each instance, the Company is one of a large number of defendants. Theclaimants in cases alleging manganese-induced illness seek compensatory andpunitive damages, in most cases for unspecified sums. The claimants allege thatexposure to manganese contained in welding consumables caused the plaintiffs todevelop adverse neurological conditions, including a condition known asmanganism. Many of the cases are single plaintiff cases but some multi-claimantcases and class actions have been filed. At September 30, 2005, 197 cases werefiled in or transferred to federal court where the Judicial Panel onMultiDistrict Litigation has consolidated these cases for pretrial proceedingsin the Northern District of Ohio (the “MDL Court”).

 

25

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Since January 1, 2003, the Company has been a co-defendant in 31other similar cases that have been dismissed.

 

Plaintiffs have filed class actions seeking medical monitoring in fivestate courts, three of which have been removed to the MDL Court.

 

In fewer than ten of the cases haveplaintiffs produced medical information showing claimed injuries.  In only about 11% of these cases has theplaintiff identified the Company as a manufacturer of the products theplaintiff used.  As such, there isinadequate information available to estimate the possible liability to theCompany and therefore none has been recorded as of September 30, 2005.

 

The Company has notified its insurance carriers of these claims.  The Company anticipates its insurers torespond to and defend these claims.

 

The Company is party to certain environmental matters and has beennamed as a potentially responsible party (“PRP”) in certain of these matters,although no related claims have been filed. Any losses recognized as of September 30, 2005 and expected losses arenot expected to have a material adverse effect on the Company’s business orfinancial condition or results of operations.

 

All other legal proceedings and actions involving the Company are of anordinary and routine nature and are incidental to the operations of theCompany.  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.

 

26

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**Item 2.**

 

**MANAGEMENT’SDISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

#### **Overview**

 

Weare a leading global designer and manufacturer of gas and arc cutting andwelding products, including equipment, accessories and consumables. Ourproducts are used by manufacturing, construction and foundry operations to cut,join and reinforce steel, aluminum and other metals. Common applications forour products include shipbuilding, railcar manufacturing, offshore oil and gasrig construction, 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 we have wellestablished and widely recognized brands.

 

#### **Forward-looking Statements**

 

The statements in this Quarterly Report onForm 10-Q that relate to future plans, events or performance areforward-looking statements.  Actualresults could differ materially due to a variety of factors and the other risksdescribed in this Quarterly Report and the other documents we file fromtime-to-time with the Securities and Exchange Commission (“SEC”).  Readers are cautioned not to place unduereliance on these forward-looking statements, which speak only as of the datehereof.  We undertake no obligation topublicly release the result of any revisions to these forward-lookingstatements that may be made to reflect events or circumstances after the datehereof or that reflect the occurrence of unanticipated events.

 

**FactorsThat Could Affect Future Results**

 

Factors that could affectfuture results also include a potential risk related to compliance with therequirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404Rules”).  Beginning on December 31, 2004,our system of internal control over financial reporting must comply with therequirements of Section 404 Rules. We completed a comprehensive effort todocument and test our internal controls over financial reporting to confirmthat such controls are designed appropriately and operating effectively for theyear ending December 31, 2004. For our report on internal control overfinancial reporting, see Item 9A, *Controls and Procedures*in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2004. Until we have fully remediated the material weaknessesin our internal control over financial reporting summarized in our report,investor confidence in our internal control over financial reporting could bedamaged and cause our stock or publicly traded bond price to decline.

 

Additionalrisk factors are described in our Annual Report on Form 10-K for thefiscal year ended December 31, 2004.

 

###### **RESULTS OF OPERATIONS**

 

***Three Months Ended September30, 2005 Compared to Three Months Ended September 30, 2004***

 

Net sales for the three months endedSeptember 30, 2005 were $131.3 million, which was an 8.6% increase over netsales of $120.9 million for the same three months in 2004.  Domestic sales were $65.0 million for thethird quarter of 2005, compared to $62.1 million for the same period last year,which is an increase of 4.7%. International sales were $66.3 million for the three months endedSeptember 30, 2005, compared to $58.8 million for the third quarter of 2004, oran increase of 12.8%.  A weaker U.S.dollar was a contributing factor to the international sales increase for thequarter.  Excluding the impact offavorable currency translation, international sales and total company net salesincreased 8.7% and 6.6%, respectively, compared to the third quarter of 2004.The increase in international sales was attributable mainly to solid growth inAsia-Pacific, Canada and South Africa.

 

Gross margin for the third quarter of 2005was $37.5 million, or 28.6% of sales, compared to $32.6 million, or 27.0%of sales, for the same period in 2004, which is an increase of 15.1%.  In comparing these periods, favorable

 

27

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pricing and volume, including new productintroductions, contributed $3.5 million, cost reduction initiatives contributed$3.7 million, and more favorable efficiencies primarily in our Dentonoperations contributed $3.0 million. These contributions were offset primarilyby $3.8 million of higher inflation principally related to material cost, $0.3million of non-cash LIFO inventory adjustments, $0.2 million related to ourBrazilian operation, channel mix and $1.0 million of all other items.

 

Selling, general andadministrative expenses were $29.7 million for the three months ended September30, 2005, as compared to $27.3 million for the same three months in 2004.  As a percentage of sales, selling, generaland administrative expenses were 22.6% for the quarters ended September 30,2005 and September 30, 2004.  Included inthe third quarter of 2005 are $0.5 million of unfavorable currencytranslation, $0.4 million related to the ramp up of our China wholly ownedforeign enterprise, $0.6 million associated with additional audit andSarbanes-Oxley work, and $0.2 million associated with evaluating strategicalternatives for certain of our operations.

 

During the three months ended September 30,2004, we incurred restructuring costs of $4.1 million related to therelocation and consolidation of certain U.S. manufacturing facilities.  We did not incur any restructuring costsduring the three months ended September 30, 2005.

 

Interest expense for the third quarter of2005 was $6.4 million, which compares to $5.8 million for the third quarter of2004.  The difference results primarilyfrom an increase in our average interest rate on our LIBOR (3.86% and 1.84% asof September 30, 2005 and 2004, respectively) based floating rate debt as wellas an increase in our debt obligations.

 

Minority interest expense was $0.2 millionfor the three months ended September 30, 2005 as compared to $0 for the samethree months in 2004.  The increase is aresult of recording the minority interest shareholder portion of earnings atcertain of our South African and Italian subsidiaries.

 

An income tax provision of $5.6 million wasrecorded on a pretax loss of $1.8 million for the three months ended September30, 2005.  An income tax provision of$2.3 million was recorded on a pretax loss of $6.1 million for the three monthsended September 30, 2004.  The Company’stax provision relates primarily to its foreign subsidiaries.  The tax benefits of losses incurred in theU.S. are fully reserved with a valuation allowance based on the Company’scurrent tax position and estimates of taxable income for the foreseeablefuture.

 

The Company anticipates having an ordinaryloss in the U.S. for the current fiscal year for which no tax benefit can berecognized.  In the third quarter of2005, the Company therefore excluded losses in the U.S. from the calculation ofits estimated annual effective rate and the calculation of its tax provisionfor the nine months ended September 30, 2005.

 

***Nine Months Ended September 30,2005 Compared to Nine Months Ended September 30, 2004***

 

Net sales for the nine months ended September30, 2005 were $392.4 million, which was an 8.8% increase over net sales of$360.8 million for the same nine months in 2004.  Domestic sales were $197.2 million for thenine months ended September 30, 2005, compared to $192.9 million for the sameperiod last year, which is an increase of 2.2%.  International sales were $195.2 million forthe nine months ended September 30, 2005 compared to $167.9 million for thefirst nine months of 2004, or an increase of 16.3%.  A weaker U.S. dollar was a contributingfactor to the sales increase for the nine months ended September 30, 2005.  Excluding the impact of favorable currencytranslation, international sales and total company net sales increased 10.9%and 6.3%, respectively, compared to the first nine months of 2004. The increasein international sales was attributable mainly to solid growth in Asia-Pacific,Canada and South Africa.

 

Gross margin for the nine months endedSeptember 30, 2005 was $109.3 million, or 27.9% of sales, compared to$104.0 million, or 28.8% of sales, for the same period in 2004.  In comparing these periods, favorable pricingand volume, including new product introductions, contributed $13.8 million andcost reduction initiatives contributed $10.0 million. These contributions weremore than offset by $12.0 million of higher inflation principally related tomaterial cost, $2.2 million of non-

 

28

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cash inventory adjustments (primarily LIFO),$2.1 million of inefficiencies incurred related to expedite charges in the secondquarter, competitive market conditions and delivery issues, partially offset byimproved efficiencies in the third quarter, $0.9 million related to results atour Brazilian operation, $0.2 million of higher depreciation, and all otheritems netting unfavorably to $1.1 million.

 

Selling, general andadministrative expenses were $86.2 million for the nine months ended September30, 2005, a 4.8% increase over $82.2 million for the same nine months in2004.  As a percentage of sales, selling,general and administrative expenses were 22.0% for the nine-month period endedSeptember 30, 2005, versus 22.8% for the nine-month period in 2004.  Included in the nine months of 2005 are$1.6 million of unfavorable currency translation, $0.6 million related tothe ramp up of our China wholly owned foreign enterprise, $0.7 million ofseverance related to changes in senior management, and $1.0 million associatedwith additional audit and Sarbanes-Oxley work.

 

During the nine months ended September 30,2005 and 2004, we incurred restructuring costs of $0.0 million and$8.4 million, respectively, related to finalizing the relocation andconsolidation of certain U.S. manufacturing facilities.

 

Interest expense for the nine months endedSeptember 30, 2005 was $18.0 million, which compares to $15.7 million for thesame nine-month period of 2004.  Thedifference results primarily from an overall increase in debt obligations, aswell as an increase in our average interest rate.

 

Minority interest expense was $0.9 millionfor the nine months ended September 30, 2005 as compared to $0 for the sameperiod in 2004.  The increase is a resultof recording the minority interest shareholder portion of earnings at certainof our South African and Italian subsidiaries, of which $0.5 million is related to prior periods.

 

An income tax provision of $4.2 million wasrecorded on a pretax loss of $3.9 million for the nine months ended September30, 2005.  An income tax provision of$6.4 million was recorded on a pretax loss of $8.4 million for the nine monthsended September 30, 2004.  The Company’stax provision relates primarily to its foreign subsidiaries.  The tax benefits of losses incurred in theU.S. are fully reserved with a valuation allowance based on the Company’scurrent tax position and estimates of taxable income for the foreseeablefuture.

 

The Company anticipates having an ordinaryloss in the U.S. for the current fiscal year for which no tax benefit can berecognized.  In the third quarter of2005, the Company therefore excluded losses in the U.S. from the calculation ofits estimated annual effective rate and the calculation of its tax provisionfor the nine months ended September 30, 2005.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 

***Working Capital and Cash Flows***

 

Operating activities used $11.0 million ofcash during the first nine months of 2005, compared to $29.8 million of cashused during the same time period in 2004. Operating assets and liabilities used$24.9 million of cash during the nine months ended September 30, 2005, comparedto $35.8 million of cash used in the same period last year.

 

•                  Accounts receivable used $15.1 million duringthe nine months ended September 30, 2005, compared to $5.3 million used duringthe same period in 2004.  The increase inaccounts receivable during the nine months ended September 30, 2005 resultsprimarily from higher sales.

•                  Inventory used $10.7 million of cash throughthe first nine months of 2005, as compared to a $28.8 million use of cash inthe same nine-month period last year. Inventory used less cash in 2005 as a result of an increase in safetystock levels during the first nine months of 2004 at two of our U.S. productionfacilities that were in the process of consolidating, and a temporary increasein stock levels as part of an initiative to improve fill-rates.

 

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•                  Accounts payable provided $8.3 million ofcash in the first nine months of 2005, which compares to cash provided of $1.8million in the first nine months of 2004.  The increase in payables results in part fromefforts to obtain more favorable payment terms from vendors.

•                  Accrued liabilitiesprovided $1.0 million of cash in the first nine months of 2005 compared to $3.9million of cash used in the first nine months of 2004.  Cash used by accruals in the first ninemonths of 2005 included $1.2 million of payments made to our unsecuredcreditors under the terms of our plan of reorganization, compared to $3.5million of payments made in the same period last year.

•                  Accrued interest used $4.2million of cash in the nine months ended September 30, 2005, compared to cashprovided of $2.7 million in the nine months ended September 30, 2004.  The decrease relates primarily to the timingof interest payments in connection with our Senior Subordinated Notes.

 

Cash used for capital expenditures was $8.4million during the nine months ended September 30, 2005, compared to$14.5 million in the same period in 2004.

 

Financing activities provided $21.6 millionof cash during the first nine months of 2005 compared to cash provided of $34.6million during the same period in 2004. Net borrowings were $21.9 million for the nine months ended September30, 2005 compared to $41.9 million for the same period in 2004. The currentyear borrowings were used primarily to fund working capital requirements and tofund the semi-annual interest payments on the Senior Subordinated Notes made inFebruary and August totaling approximately $16.2 million.

 

# ***Liquidity***

 

We expect our operating cash flow, together withborrowings under our revolving credit facility, will be sufficient to meet ouranticipated future operating expenses, capital expenditures and the debtservice requirements of the Amended Credit Agreement, Second-Lien Facility andthe Senior Subordinated Notes.  However,our ability to generate sufficient cash flow to meet our operating needs willbe affected by general economic, financial, competitive, legislative,regulatory, business and other factors beyond our control.

 

*Senior Subordinated Notes*

 

On February 5, 2004, we completed a privateplacement of $175.0 million in aggregate principal of 91/4% Senior Subordinated Notes due 2014. The net proceeds from theoffering, together with approximately $20.0 million of borrowings under a termloan (the “Term Loan”) added through an amendment and restatement to our GECCcredit agreement (the “Amended Credit Agreement”), were used to repay alloutstanding borrowings under the $180.0 million Senior Term Note Facility andto reduce amounts outstanding under our revolving credit facility. In May 2004,for the purpose of an exchange offer, we registered notes with terms identicalto the Senior Subordinated Notes under the Securities Act of 1933.  We completed the exchange offer in the secondquarter of 2004 and more than 99% of the original notes were exchanged for theregistered notes.

 

TheSenior Subordinated Notes are unsecured senior subordinated obligations and aresubordinated in right of payment to all existing and future Senior Indebtedness(as defined in the indenture). Interest will accrue at the rate of 91/4% per annum and is payable semiannually in arrears on February 1and August 1.

 

*Amended Credit Agreement*

 

OnNovember 22, 2004, we entered into the Amended Credit Agreement. The AmendedCredit Agreement, which matures on November 22, 2009, added our foreignsubsidiaries in Australia, the United Kingdom and Canada as credit collateralparties, and changed the determination of the borrowing base from a cashflow-based formula to an asset-based formula. Under the Amended Credit Agreement, the total loan commitment wasincreased from $70.0 million to $91.3 million (subject to the limitationdescribed below), with a revolving loan commitment of $80.0 million (the “WorkingCapital Facility”) and term loan commitments of $11.3 million (subject tothe limitation described below). The term loan commitments consist of a $9.3million Term A Loan and a maximum $2.0 million Delayed Draw Term Loan dependentupon the final evaluation of certain real property located in Australia, whichwas not complete as of September 30, 2005. Up to $25.0 million of the WorkingCapital Facility is available for

 

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lettersof credit. The Amended Credit Agreement is secured by substantially all of theassets of our domestic subsidiaries and our foreign subsidiaries in Australia,the United Kingdom and Canada, including a pledge of the capital stock ofsubstantially all of our subsidiaries, subject to certain limitations withrespect to foreign subsidiaries. Borrowings under the revolving loan commitmentmay not exceed 85% of eligible receivables plus the lesser of (i) 85% of thenet orderly liquidation value of eligible inventories or (ii) 65% of the bookvalue of inventories less customary reserves. The Amended Credit Agreementcontains financial covenants, including minimum levels of EBITDA (as defined inthe Amended Credit Agreement and determined on a consolidated basis) and othercustomary provisions and requires the Second-Lien Facility to be paid orrefinanced 90 days prior to its maturity. In connection with the Amended Credit Agreement, our foreignsubsidiaries in Australia, the United Kingdom and Canada granted secondsecurity interests in their assets to the lenders under our $20.0 million Second-LienFacility and guaranteed our $175.0 million 91/4% SeniorSubordinated Notes.  Interest rates onthe Amended Credit Agreement are, at our option, LIBOR (3.86% as of September30, 2005) plus 2.25% or the prime rate plus 0.5% on the revolving facility, andLIBOR (3.86% as of September 30, 2005) plus 2.50% or the prime rate plus 0.75%on the term loan facility. All of these percentages are subject to an interestrate grid and will decline if certain conditions are met. Principal payments onthe term loan facilities are equal quarterly payments based on a seven yearamortization schedule, with the remaining amount paid at maturity. Unusedportions of the Working Capital Facility bear interest at the rate of 0.5% perannum.  The Amended Credit Agreementlimits total borrowings under the facility to $75.0 million until theSecond-Lien Facility is paid or refinanced with long-term debt. The AmendedCredit Agreement does under certain conditions allow for the use of the WorkingCapital Facility to repay the Second-Lien Facility.  As of September 30, 2005, we had outstandingborrowings of $34.9 million and issued letters of credit totaling $11.5 millionunder the Working Capital Facility.  Wehad availability of $16.2 million under the Working Capital Facility atSeptember 30, 2005. The Working Capital Facility terminates on November 22,2009.  The Term A Loan requires equalquarterly principal payments of $0.3 million per quarter, which began December31, 2004 and continues through October 31, 2009, with the balance of theoutstanding principal being payable on November 22, 2009.  As of September 30, 2005, we did not haveaccess to the Delayed Term Loan.

 

On March 16, 2005 and March 30, 2005, weamended the Amended Credit Agreement to modify certain financial covenants andenable us to extend our Second-Lien Facility. On July 27, 2005, August 8, 2005, October 5, 2005 and November 7, 2005we further amended the Amended Credit Agreement to modify certain financial andnon-financial covenants, and to enable us to expand our $20.0 millionSecond-Lien Facility.

 

*Second-Lien Facility*

 

On July 29, 2004 we entered into a new $20.0 million second-lien termloan facility (the “Second-Lien Facility”). Borrowings under the facility wereused to repay a portion of the amount outstanding under the Working CapitalFacility. On November 5, 2004, we entered into an amendment to the Second-LienFacility to extend its maturity to July 22, 2005 and modified a financialcovenant.  The Second-Lien Facility issecured by a second lien on substantially all of our assets. The Second-LienFacility accrues interest at our option, at LIBOR plus 6.00%, or an alternativebase rate of the greater of (i) the Prime Rate or (ii) the federal funds rateplus one half of 1.00% plus 5.00%. The Second-Lien Facility restricts how muchlong-term debt we may have and has other customary provisions includingfinancial and non-financial covenants. On March 16, 2005 and March 30, 2005,the Second-Lien Facility was amended to modify a financial covenant and extendits maturity until April 30, 2006.  OnAugust 8, 2005 and October 7, 2005,  weamended the Second-Lien Facility to modify certain financial and non-financialcovenants.

 

On November 7, 2005 we andcertain of our subsidiaries further amended the Second-Lien Facility toincrease the amount of borrowings from $20.0 million to $30.0 million, extendthe maturity of the facility from April 30, 2006 to November 7, 2008, andobtain a more attractive interest rate (the “$30m Facility”).  The $30m Facility accrues interest at ouroption, at LIBOR plus 4.50%, or an alternative base rate of the greater of (i)the Prime Rate or (ii) the federal funds rate plus one half of 1.00% plus3.50%.  Immediate use of proceeds will beto reduce borrowings under our Working Capital Facility.

 

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# ***Minority Interests***

 

We have minority shareholders that hold 10%interests of certain of our South African and Italian subsidiaries notaccounted for prior to the second quarter of 2005. For the three months andnine months ended September 30, 2005, we have recorded as minority interestexpense approximately $0.2 million, and $0.9 million, respectively, including$0.5 million for the nine months ended September 30, 2005 related to the prioryears’ minority interest in earnings since our emergence from bankruptcy in May2003. Total minority interest obligations as of September 30, 2005, ofapproximately $2.1 million have been recorded as a component of other long-termliabilities and approximately $1.0 million recorded as goodwill for the portionof the minority interest that existed prior to our emergence from bankruptcy.Management determined that, while these adjustments primarily related tohistorical periods, the adjustments were immaterial to previously reportedinterim and annual financial information.

 

The shareholder agreements for certain SouthAfrican and Italian subsidiaries include provisions that allow the minorityshareholders to put their ownership in the entities back to us or, conversely,provide us a call option to purchase the outstanding minority interests.  The exercise period for the put and calloptions associated with the minority interest in the South African subsidiariesis indefinite, while the put and call option for the minority interests in theItalian subsidiary expires on December 31, 2010.  The purchase price of the options isdetermined based on a specific formula outlined in the respective shareholderagreements.  As of September 30, 2005,the maximum payment to satisfy the put options is $3.6 million.

 

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**Item3.  Quantitative and QualitativeDisclosures About Market Risk**

 

Ourprimary financial market risk relates to fluctuations in currency exchangerates, commodity price risk and interest rates.

 

Wedo not believe our exposure to transaction gains or losses resulting fromchanges in foreign currency exchange rates are material to our financialresults. As a result, we do not actively try to manage our exposure throughforeign currency forward or option contracts.

 

In order to manage interest costs, we enteredinto an interest rate swap arrangement on February 24, 2004 to convert $50.0million of the Senior Subordinated Notes into variable rate debt.  We pay interest on the swap at LIBOR (3.86%as of September 30, 2005) plus a spread of 442 basis points.  Interest rate risk management agreements arenot held or issued for speculative or trading purposes.

#### ** **

#### **Item 4. Controls and Procedures**

 

Wemaintain disclosure controls and procedures that are designed to providereasonable assurance to our management and board of directors regarding thepreparation and fair presentation of published financial statements.

 

As of December 31, 2004and September 30, 2005, management evaluated the effectiveness of thedesign and operation of our disclosure controls and procedures and concludedthose controls and procedures were not effective because of the materialweaknesses described in Management's Report on Internal Control Over FinancialReporting in Item 9A. *Controls and Procedures*in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2004 and the additional material weakness identified as ofSeptember 30, 2005, herein described. As of September 30, 2005, we identified a control deficiencyrelating to the reconciliation of inter-company account balances, whichrepresented a material weakness.  Thecontrol deficiency results from inadequate procedures to reconcile the inter-companyaccount balances and analyze unmatched items. During the third quarter of 2005, the Company performed a review of theinter-company account balances and adjusted these balances to represent theappropriate levels of inter-company payables and receivables.  In doing so, it was determined that certainitems pertained to periods prior to our application of fresh-start accountingupon our emergence from bankruptcy.  Assuch, this material weakness resulted in adjustments during the third quarterof 2005 to inter-company balances, goodwill, accumulated other comprehensiveloss and other expense.  The effect onpreviously issued financial information was determined to be immaterial.  The identified material weaknesses, whilecurrently being remediated by management, will remain as such until adequatelytested by management and our independent registered public accountingfirm.  We anticipate the testing, whichbegan during the third quarter of 2005, will be completed with the 2005 AnnualAudit.

 

Toensure that our condensed consolidated financial statements for the nine-monthperiod ended September 30, 2005 are fairly presented and were prepared inaccordance with U.S. generally accepted accounting principles, we conductedin-depth analyses of all our key operations, and obtained quarterly questionnairesfrom all of our functional business units and reporting locations, whichrequested information on significant transactions, contracts and commitments,business trends, changes in internal controls and other items that should beconsidered for disclosure in our financial statements.  In addition, as more fully described below,new processes and procedures were implemented during the first nine months toaddress our material weaknesses in internal control over financialreporting.  Consequently, managementbelieves that the financial statements included in this report fairlyrepresent, in all material respects, our financial condition, results ofoperations and cash flows for the periods presented.

 

**Remediation of Material Weaknesses**

 

As discussed above, as of September 30, 2005, we identified a materialweakness in our internal control over inter-company account reconciliations.  In order to remediate our ineffective controlrelating to the reconciliation of inter-company balances we have began to initiatean extensive, thorough, monthly reconciliation process among all businessunits.  Effective with the next periodclose we will initiate additional oversight and monitoring controls thatinclude on-site reviews and monthly reviews by senior financial management.

 

As discussed above, as ofDecember 31, 2004, we identified material weaknesses in our internalcontrol over financial reporting.  We arecurrently addressing these material weaknesses as described below and expect tohave them remediated by the end of 2005.

 

In order to remediate our ineffectivecontrols relating to the oversight and monitoring of our smaller internationallocations, we are in the early stages of implementing a more extensive internalaudit program for 2005 that we have initiated in both our South Africa andBrazil operations. We have also performed our third quarterly series ofoff-site reviews to better identify significant variances, non-recurringtransactions, significant business trends and other items of importance that couldrequire disclosure in our financial statements or impact the reported financialcondition and results of operations.

 

With respect to our ineffective controls overproperty, plant and equipment, we performed a comprehensive analytical reviewof property, plant and equipment and examined the accounting for all new ormodified leases.

 

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Additionally, we have initiated on-sitefinancial reviews at our operating units which further enable us to identifyand address certain other insufficient controls relating to the accounting forproperty, plant, and equipment, such as depreciation expense, and non-recurringtransactions, such as significant leasing transactions.

 

To address our material weakness for insufficientcontrols relating to the timely review and capitalization of inventoryvariances for interim reporting, during the first quarter of 2005, we began theprocess of analyzing our inventory variances on a monthly basis to determinethe need for capitalization.

 

Regarding our insufficientcontrols relating to the determination and reporting of the provision forincome taxes and related deferred income tax balances, we have begun performinga more comprehensive analysis of components of the income tax provision ofcertain foreign subsidiaries on a quarterly basis. This will include thequarterly off-site and periodic on-site reviews referred to above.Additionally, a more formal process is being established to monitor thedifferences between the income tax basis and the financial reporting basis ofassets and liabilities to effectively reconcile the deferred income taxbalances.  Finally, we have also engagedthe services of PricewaterhouseCoopers LLP to assist in reviewing our quarterlyincome tax provisions, as well as provide tax planning and consultativesupport.

 

**Changes in Internal Control Over Financial Reporting**

 

Exceptas otherwise discussed above, there have been no changes in our internalcontrol over financial reporting during the three months ended September 30,2005 that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

 

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#### **PART II.  OTHER INFORMATION**

 

**Item 1.  Legal Proceedings**

 

At September 30, 2005, theCompany was a co-defendant in 1,169 cases alleging manganese-induced illness,which is a net increase of 215 claims from June 30, 2005. In each instance, theCompany is one of a large number of defendants. The claimants in cases allegingmanganese-induced illness seek compensatory and punitive damages, in most casesfor unspecified sums. The claimants allege that exposure to manganese containedin welding consumables caused the plaintiffs to develop adverse neurologicalconditions, including a condition known as manganism. Many of the cases aresingle plaintiff cases but some multi-claimant cases and class actions havebeen filed. At September 30, 2005, 197 cases were filed in or transferred tofederal court where the Judicial Panel on MultiDistrict Litigation hasconsolidated these cases for pretrial proceedings in the Northern District ofOhio (the “MDL Court”).

 

Since January 1, 2003,the Company has been a co-defendant in 31 other similar cases that have beendismissed.

 

Plaintiffs have filed classactions seeking medical monitoring in five state courts, three of which havebeen removed to the MDL Court.

 

Inless than ten of the cases have plaintiffs produced medical information showingclaimed injuries.  In addition, onlyabout 11% of these cases has the plaintiff identified the Company as amanufacturer of the products the plaintiff used.  As such, there is inadequate informationavailable to estimate the possible liability and therefore none has beenrecorded as of September 30, 2005.

 

The Company has notified itsinsurance carriers of these claims.  TheCompany anticipates its insurers to respond to and defend these claims.

 

The Company is party tocertain environmental matters and has been named as a potentially responsible party(“PRP”) in certain of these matters, although no related claims have beenfiled.  Any losses recognized as ofSeptember 30, 2005 and expected losses are not expected to have a materialadverse effect on the Company’s business or financial condition or results ofoperations.

 

All other legal proceedingsand actions involving the Company are of an ordinary and routine nature and areincidental to the operations of the Company. Management believes that such proceedings should not, individually or inthe aggregate, have a material adverse effect on the Company’s business orfinancial condition or on the results of operations.

 

**Item 6.  Exhibits**

 

4.1                                 Eighth Amendment to the Second Amended andRestated Credit Agreement, executed as of October 5, 2005, by and among Thermadyne Holdings Corporation,Thermadyne Industries, Inc. and certain of its subsidiaries and GeneralElectric Capital Corporation as Agent and Lender and the lenders party thereto

 

4.2                                 Amendment No. 9 datedas of October 7, 2005, to the Second Lien Credit Agreement among ThermadyneHoldings Corporation, Thermadyne Industries, Inc. and certain of itssubsidiaries and Credit Suisse as Administrative Agent and Collateral Agent andthe lenders party thereto

 

4.3                                 Ninth Amendment to the Second Amended andRestated Credit Agreement, executed as of November 7, 2005, by and among Thermadyne Holdings Corporation,Thermadyne Industries, Inc. and certain of its subsidiaries and GeneralElectric Capital Corporation as Agent and Lender and the lenders party thereto

 

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4.4                                 Amendment No. 10 datedas of November 7, 2005, to the Second Lien Credit Agreement among ThermadyneHoldings Corporation, Thermadyne Industries, Inc. and certain of itssubsidiaries and Credit Suisse as Administrative Agent and Collateral Agent andthe lenders party thereto

 

31.1                           Certification Pursuant to Section 302 of theSarbanes-Oxley Act of 2002

31.2                           Certification Pursuant to Section 302 of theSarbanes-Oxley Act of 2002

32.1                           Certification Pursuant to Section 906 of theSarbanes-Oxley Act of 2002

32.2                           Certification Pursuant to Section 906 of theSarbanes-Oxley Act of 2002

 

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**SIGNATURES**

 

Pursuant to the requirements of theSecurities Exchange Act of 1934, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 

 
|                         | **THERMADYNE HOLDINGS CORPORATION** |
|------------------------------|-------------------------------------|
|                         |                                |   |
|                         |                                |   |
|                         | By:                                 | /s/ Paul D. Melnuk |   |
|                         |                                |   |
|                         |                                | Paul D. Melnuk |
|                         |                                | Chief Executive Officer |
|                         |                                | (Principal Executive Officer) |
|                         |                                |   |
|                         |                                |   |
|                         | By:                                 | /s/ David L. Dyckman |   |
|                         |                                |   |
|                         |                                | David L. Dyckman |
|                         |                                | Executive Vice President and |
|                         |                                | Chief Financial Officer |
|                         |                                | (Principal Financial Officer) |
|                         |                                |   |
|                         |                                |   |
|                         | By:                                 | /s/ Steven W. Fray |   |
|                         |                                |   |
|                         |                                | Steven W. Fray |
|                         |                                | Vice President and |
|                         |                                | Global Controller |
|                         |                                | (Principal Accounting Officer) |
|                         |                                |   |
|                         |                                |   |
| Date:  November 9, 2005 |                                |   |

 

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