##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 For the quarterly period ended September 30, 2008
 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
  Delaware
    
    74-2482571(State or Other Jurisdiction of Incorporation or
    
    (I.R.S. Employer Identification No.)Organization)16052 Swingley Ridge Road,
Suite 300, Chesterfield,MO
    
    63017(Address of Principal Executive Offices)
    
    (Zip Code)
 (636) 728-3000
  þ o
  Large accelerated filer    o
    
    Accelerated filer    þ
    
    Non-accelerated filer    o
    
    Smaller reporting company    o(Do not check if a smaller reporting company)
  o þ
  þ o




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##### 



THERMADYNE HOLDINGS CORPORATION
 INDEX
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets
    
    3Condensed Consolidated Statements of Operations
    
    4Condensed Consolidated Statements of Cash Flows
    
    5Notes to Condensed Consolidated Financial Statements
    
    6-24Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    25-30Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    30Item 4. Controls and Procedures
    
    31PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    32Item 1a. Risk Factors
    
    32-38Item 6. Exhibits
    
    38SIGNATURES
    
    39EX-4.1EX-31.1EX-31.2EX-32.1EX-32.2
  
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
 THERMADYNE HOLDINGS CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (In thousands, except share data)
 September 30,
    
    
    December 31,2008
    
    
    2007(unaudited)Current Assets:Cash and cash equivalents
    
    $
    13,731
    
    
    $
    16,159Accounts receivable, less allowance for doubtful accounts of
$1,000 and $1,000, respectively
    
    
    93,842
    
    
    
    83,852Inventories
    
    
    109,539
    
    
    
    90,961Prepaid expenses and other
    
    
    7,773
    
    
    
    6,147Assets held for sale
    
    
    871
    
    
    
    2,023Deferred tax assets
    
    
    2,721
    
    
    
    2,721Total current assets
    
    
    228,477
    
    
    
    201,863Property, plant and equipment, net of accumulated depreciation
of $49,236 and $44,631, respectively
    
    
    46,262
    
    
    
    44,356Goodwill
    
    
    187,253
    
    
    
    182,163Intangibles, net
    
    
    61,338
    
    
    
    63,204Other assets
    
    
    4,194
    
    
    
    5,841Total assets
    
    $
    527,524
    
    
    $
    497,427Current Liabilities:Working capital facility
    
    $
    28,369
    
    
    $
    12,658Current maturities of long-term obligations
    
    
    1,944
    
    
    
    8,778Accounts payable
    
    
    47,857
    
    
    
    31,577Accrued and other liabilities
    
    
    34,470
    
    
    
    28,826Accrued interest
    
    
    3,043
    
    
    
    8,032Income taxes payable
    
    
    4,820
    
    
    
    4,664Deferred tax liability
    
    
    2,667
    
    
    
    2,667Liabilities related to assets held for sale
    
    
    4,524
    
    
    
    7,417Total current liabilities
    
    
    127,694
    
    
    
    104,619Long-term obligations, less current maturities
    
    
    196,923
    
    
    
    213,142Deferred tax liabilities
    
    
    56,123
    
    
    
    44,306Other long-term liabilities
    
    
    12,242
    
    
    
    12,989Minority interest
    
    
    412
    
    
    
    287Stockholders equity:Common stock, $0.01 par value:Authorized
 25,000,000 sharesIssued and outstanding  13,508,851 shares at September 30, 2008 and
13,368,190 shares at December 31, 2007
    
    
    135
    
    
    
    134Additional paid-in capital
    
    
    190,335
    
    
    
    186,830Accumulated deficit
    
    
    (66,748
    )
    
    
    (79,953
    )Accumulated other comprehensive income
    
    
    10,408
    
    
    
    15,073Total stockholders equity
    
    
    134,130
    
    
    
    122,084Total liabilities and stockholders equity
    
    $
    527,524
    
    
    $
    497,427
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##### Table of Contents



THERMADYNE HOLDINGS CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except per share data)
 (Unaudited)
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net sales
    
    $
    139,373
    
    
    $
    125,686
    
    
    $
    412,275
    
    
    $
    368,974Cost of goods sold
    
    
    95,477
    
    
    
    87,738
    
    
    
    278,933
    
    
    
    255,490Gross margin
    
    
    43,896
    
    
    
    37,948
    
    
    
    133,342
    
    
    
    113,484Selling, general and administrative expenses
    
    
    30,294
    
    
    
    26,850
    
    
    
    87,419
    
    
    
    79,217Amortization of intangibles
    
    
    669
    
    
    
    735
    
    
    
    2,005
    
    
    
    2,187Net periodic postretirement benefits
    
    
    52
    
    
    
    138
    
    
    
    156
    
    
    
    414Operating income
    
    
    12,881
    
    
    
    10,225
    
    
    
    43,762
    
    
    
    31,666Other income (expenses):Interest
    
    
    (5,137
    )
    
    
    (6,656
    )
    
    
    (15,794
    )
    
    
    (20,987
    )Amortization of deferred financing costs
    
    
    (235
    )
    
    
    (369
    )
    
    
    (703
    )
    
    
    (1,075
    )Minority interest
    
    
    (28
    )
    
    
    59
    
    
    
    (149
    )
    
    
    6Income from continuing operations before
income tax provision and discontinued operations
    
    
    7,481
    
    
    
    3,259
    
    
    
    27,116
    
    
    
    9,610Income tax provision
    
    
    4,443
    
    
    
    1,728
    
    
    
    13,116
    
    
    
    5,344Income from continuing operations
    
    
    3,038
    
    
    
    1,531
    
    
    
    14,000
    
    
    
    4,266Loss from discontinued operations, net of tax
    
    
    (320
    )
    
    
    (485
    )
    
    
    (795
    )
    
    
    (168
    )Net income
    
    $
    2,718
    
    
    $
    1,046
    
    
    $
    13,205
    
    
    $
    4,098Basic and diluted income (loss) per share:Continuing operations
    
    $
    0.22
    
    
    $
    0.11
    
    
    $
    1.04
    
    
    $
    0.32Discontinued operations
    
    
    (0.02
    )
    
    
    (0.04
    )
    
    
    (0.06
    )
    
    
    (0.02
    )Net income
    
    $
    0.20
    
    
    $
    0.07
    
    
    $
    0.98
    
    
    $
    0.30
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THERMADYNE HOLDINGS CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Nine Months Ended September 30,2008
    
    
    2007Cash flows from continuing operations:Cash flows from operating activities:Net income
    
    $
    13,205
    
    
    $
    4,098Adjustments to reconcile net income to net cash provided by (used in) operating activities:Loss from discontinued operations
    
    
    795
    
    
    
    168Minority interest
    
    
    149
    
    
    
    (6
    )Depreciation and amortization
    
    
    9,346
    
    
    
    9,808Deferred income taxes
    
    
    7,898
    
    
    
    553Net periodic post-retirement benefits
    
    
    156
    
    
    
    414Changes in operating assets and liabilities:Accounts receivable
    
    
    (9,969
    )
    
    
    (9,055
    )Inventories
    
    
    (18,699
    )
    
    
    47Prepaids
    
    
    (1,235
    )
    
    
    (75
    )Accounts payable
    
    
    13,785
    
    
    
    1,770Accrued and other liabilities
    
    
    6,250
    
    
    
    (1,367
    )Accrued interest
    
    
    (4,989
    )
    
    
    (4,399
    )Other long-term liabilities
    
    
    (1,017
    )
    
    
    Other, net
    
    
    (248
    )
    
    
    (1,894
    )Net cash provided by operating activities
    
    
    15,427
    
    
    
    62Cash flows from investing activities:Capital expenditures
    
    
    (8,125
    )
    
    
    (8,628
    )Proceeds from sales of discontinued operations
    
    
    500
    
    
    
    13,783Purchase of outside interest in joint venture
    
    
    (3,013
    )
    
    
    Other
    
    
    (391
    )
    
    
    (983
    )Net cash provided by (used in) investing activities
    
    
    (11,029
    )
    
    
    4,172Cash flows from financing activities:Borrowings under Working Capital Facility
    
    
    24,461
    
    
    
    20,041Repayments of Working Capital Facility
    
    
    (8,750
    )
    
    
    (10,046
    )Repayments of other debt
    
    
    (22,829
    )
    
    
    (14,940
    )Stock compensation expense
    
    
    1,831
    
    
    
    Exercise of employee stock purchases
    
    
    1,920
    
    
    
    Advances from (to) discontinued operations
    
    
    (3,322
    )
    
    
    (2,058
    )Other, net
    
    
    (253
    )
    
    
    1,588Net cash used in financing activities
    
    
    (6,942
    )
    
    
    (5,415
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    116
    
    
    
    869Net cash used in continuing operations
    
    
    (2,428
    )
    
    
    (312
    )Cash flows from discontinued operationsNet cash used in operating activities
    
    
    (2,711
    )
    
    
    (22
    )Net cash provided by (used in) investing activities
    
    
    500
    
    
    
    (969
    )Net cash provided by financing activities
    
    
    2,204
    
    
    
    1,104Effect of exchange rates on cash and cash equivalents
    
    
    (42
    )
    
    
    10Net cash provided by (used in) discontinued operations
    
    
    (49
    )
    
    
    123Total decrease in cash and cash equivalents
    
    
    (2,477
    )
    
    
    (189
    )Total cash and cash equivalents beginning of period
    
    
    16,435
    
    
    
    11,310Total cash and cash equivalents end of period
    
    $
    13,958
    
    
    $
    11,121Continuing operationsCash and cash equivalents beginning of period
    
    $
    16,159
    
    
    $
    11,310Net cash used in continuing operations
    
    
    (2,428
    )
    
    
    (312
    )Cash and cash equivalents end of period
    
    $
    13,731
    
    
    $
    10,998Discontinued operationsCash and cash equivalents beginning of period
    
    $
    276
    
    
    $
    Net cash provided by (used in) discontinued operations
    
    
    (49
    )
    
    
    123Cash and cash equivalents end of period
    
    $
    227
    
    
    $
    123Income taxes paid
    
    $
    5,409
    
    
    $
    2,337Interest paid
    
    $
    21,046
    
    
    $
    23,698
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THERMADYNE HOLDINGS CORPORATION
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 (Dollars in thousands, except per share data)
 1.
    
    Organization and Basis of PresentationThermadyne Holdings Corporation (Thermadyne or the Company), a Delaware corporation, is
a global designer and manufacturer of cutting and welding products, including equipment,
accessories and consumables.The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by U.S.
generally accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments, consisting of normal recurring accruals, considered
necessary for a fair presentation have been included in these condensed consolidated
financial statements. The combined results of operations of the Company for the nine months
ended September 30, 2008 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2008. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Companys annual report on Form
10-K for the year ended December 31, 2007.The preparation of financial statements requires the use of estimates and assumptions that
affect the amounts reported in Thermadynes condensed consolidated financial statements and
accompanying notes. Actual results could differ from these estimates.Certain information for 2007, primarily accounts related to discontinued operations, has
been reclassified to conform to the 2008 presentation.2.
    
    Significant Accounting PoliciesProduct Warranty ProgramsVarious products are sold with product warranty programs. Provisions for warranty programs
are made based on historical experience as the products are sold and are adjusted periodically
based on current estimates of anticipated warranty costs. The following table provides the
activity in the warranty accrual for the three months and nine months ended September 30,
2008 and 2007:
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Balance at beginning of period
    
    $
    3,452
    
    
    $
    3,306
    
    
    $
    3,072
    
    
    $
    2,978Charged to costs and expenses
    
    
    715
    
    
    
    596
    
    
    
    2,667
    
    
    
    3,055Deductions
    
    
    (1,043
    )
    
    
    (781
    )
    
    
    (2,615
    )
    
    
    (2,912
    )Balance at end of period
    
    $
    3,124
    
    
    $
    3,121
    
    
    $
    3,124
    
    
    $
    3,121
 Foreign CurrencyDuring the second quarter of 2008, the Company recorded an adjustment related to foreign
currency translation. The effect of this adjustment would have increased goodwill by $4,558
and increased accumulated other comprehensive income by $2,072 net of $6,630 of deferred
income taxes at December 31, 2007, a portion of which related to prior periods. The current
year impact of foreign currency in these items included an increase to goodwill of $1,174
and an increase to accumulated other comprehensive income of $920 net of $2,094 of deferred
taxes at June 30, 2008. This adjustment did not impact the Companys net income or cash
flows from operating, financing or investing activities for the periods.
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Fair ValueIn February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of SFAS 115, which permits entities to
choose to measure many financial instruments and certain other items at fair value that are
not currently required to be measured at fair value. Unrealized gains and losses arising
subsequent to adoption are reported in earnings. SFAS 159 is effective for fiscal years
beginning after November 15, 2007. The Company adopted this statement as of January 1, 2008
and elected not to apply the fair value option to any of its financial instruments.
Thermadynes $50 million notional amount interest rate swap agreement is its only
significant financial instrument for which hedge accounting is a consideration. This
financial instrument is accounted for and reported as a fair value hedge under the
requirements of FAS 133 Accounting for Derivatives and Hedging Activities.In September 2006, the FASB issued SFAS 157 Fair Value Measurements. SFAS 157 defines fair
value, establishes a framework for measuring fair value in generally accepted accounting
principles, and expands disclosures about fair value measurements. SFAS 157 does not require
any new fair value measurements. In February 2008, the FASB amended SFAS 157 to exclude
SFAS 13, Accounting for Leases. In addition, the FASB delayed the effective date of SFAS
157 for non-financial assets and liabilities to fiscal years beginning after November 15,
2008. The Company adopted the provisions of SFAS 157 related to its financial assets and
liabilities on January 1, 2008. See footnote 8.The carrying values of the obligations outstanding under the Working Capital Facility, the
Second-Lien Facility and other long-term obligations, excluding the Senior Subordinated
Notes, approximate fair values since these obligations are fully secured and have varying
interest charges based on current market rates. The estimated fair value of the Companys
Senior Subordinated Notes of $162,750 and $162,750 at September 30, 2008 and December 31,
2007, respectively, is based on available market information.Recent Accounting PronouncementsBusiness Combinations. In December 2007, the FASB issued SFAS No. 141 (revised 2007),
Business Combinations (SFAS No. 141R). SFAS No. 141R establishes principles and
requirements for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the
acquiree and the goodwill acquired. SFAS No. 141R also establishes disclosure requirements to
enable the evaluation of the nature and financial effects of the business combination. SFAS
No. 141R is effective for financial statements issued for fiscal years beginning after
December 15, 2008. The Company is currently evaluating the potential impact of the adoption
of SFAS No. 141R on its consolidated financial statements. Under SFAS No. 141R, the benefit
of net operating loss carryovers will reduce income tax expense as the carryovers are utilized.
Accordingly, the Company expects the adoption of SFAS No. 141R to reduce its reported income
tax expense in future periods as the carryovers are utilized. By contrast, we currently
record the benefits of net operating loss carryovers as a reduction of goodwill when recognized.
However due to the tax law complexities and the unpredictability of future income there can be no
assurance as to the amount or timing of the income tax savings from use of the tax loss carryovers.
This change will not affect cash payments of income taxes.Noncontrolling Interests. In December 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statements-an Amendment of ARB No. 51 (SFAS No. 160).
SFAS No. 160 establishes accounting and reporting standards pertaining to ownership interests
in subsidiaries held by parties other than the parent, the amount of net income attributable
to the parent and to the noncontrolling interest, changes in a parents ownership interest,
and the valuation of any retained noncontrolling equity investment when a subsidiary is
deconsolidated. This statement also establishes disclosure requirements that clearly identify
and distinguish between the interests of the parent and the interests of the noncontrolling
owners. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008.
The Company is currently evaluating the potential impact of the adoption of SFAS No. 160 on
its consolidated financial statements. However, the Company does not expect the adoption of
SFAS No. 160 to have a material effect on its consolidated financial statements.Disclosures about Derivative Instruments and Hedging Activities.In March 2008, the FASB
issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. SFAS
No. 161 requires enhanced disclosures about an entitys derivative and hedging activities and
thereby improves the transparency of financial reporting. SFAS No. 161 is effective for
fiscal years beginning on or after November 15, 2008. The Company is currently evaluating the
potential impact of the adoption of SFAS No. 161 on its consolidated financial statement
disclosures. However, the Company does not expect the adoption of SFAS No. 161 to have a
material effect on its consolidated financial statements.
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3.
    
    Discontinued OperationsOn  December 21, 2007, the Company committed to a plan to dispose of its cutting
table business, C&G Systems (C&G). A definitive sales agreement was signed with
closing occurring on January 18, 2008. Based on the sales price of $500, a loss of $570
(net of $350 of tax) was recorded in 2007 as a component of discontinued operations. The
assets and liabilities were classified as held for sale at December 31, 2007.On  December 30, 2006, the Company committed to a plan to sell its Brazilian
manufacturing operations. A loss of approximately $15,200 (net of $1,200 of tax) was
recorded as a component of discontinued operations in the fourth quarter of 2006 based
on the estimated net realizable value of the assets related to the operation. The
Company closed the Brazilian manufacturing operations in the fourth quarter of 2007
disposing of its cutting table business and auctioning various remaining inventory and
equipment. Final negotiations and collections associated with the sale of the building
and land are expected to be completed during the fourth quarter of 2008. It is
estimated the sale will provide approximately $3,000 of net cash proceeds which will be
utilized to partially satisfy the $4,500 of accrued liabilities. These accrued
liabilities include potential tax liabilities asserted by Brazilian authorities.On December 30, 2006, the Company committed to a plan to sell its South Africa
operations. On February 5, 2007, the Company entered into an agreement to sell the
South African subsidiaries. A loss of $9,200 (net of $6,300 of tax) was recorded in
2006 as a component of discontinued operations. The sale closed on May 25, 2007 with
receipt of $13,800 net cash received at closing and a note payable bearing 14% interest
payable. The note is denominated in South African Rand, is due  in May 2010, and had a U.S.
conversion value of $3.7 million as of September 30, 2008.
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The tables below set forth certain information related to the C&G, Brazil, and South Africa,
operations included in discontinued operations for the three months and nine months ended
September 30, 2008 and 2007:
 Three Months Ended September 30, 2008SouthC&G
    
    Brazil
    
    Africa
    
    Soltec
    
    TotalNet sales
    
    $
    
    
    
    $
    5
    
    
    
    
    
    
    
    
    
    
    $
    5Operating expenses
    
    
    
    
    
    
    (616
    )
    
    
    
    
    
    
    
    
    
    
    (616
    )Other expenses
    
    
    
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    (8
    )Income tax provision
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    
    
    
    
    196Adjustment in carrying value of related assets
and reserves, net of tax
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    
    
    
    
    103Net income (loss) from discontinued operations
    
    $
    
    
    
    $
    (320
    )
    
    $
    
    
    
    $
    
    
    
    $
    (320
    )
 Nine Months Ended September 30, 2008SouthC&G
    
    Brazil
    
    Africa
    
    Soltec
    
    TotalNet sales
    
    $
    68
    
    
    $
    457
    
    
    $
    
    
    
    $
    
    
    
    $
    525Operating expenses
    
    
    (218
    )
    
    
    (1,153
    )
    
    
    
    
    
    
    
    
    
    
    (1,371
    )Other expenses
    
    
    
    
    
    
    (115
    )
    
    
    
    
    
    
    
    
    
    
    (115
    )Income tax provision
    
    
    
    
    
    
    196
    
    
    
    
    
    
    
    
    
    
    
    196Adjustment in carrying value of related assetsand reserves, net of tax
    
    
    (44
    )
    
    
    22
    
    
    
    (1
    )
    
    
    (7
    )
    
    
    (30
    )Net income (loss) from discontinued operations
    
    $
    (194
    )
    
    $
    (593
    )
    
    $
    (1
    )
    
    $
    (7
    )
    
    $
    (795
    )
 Three Months Ended September 30, 2007SouthC&G
    
    Brazil
    
    Africa
    
    Soltec
    
    TotalNet sales
    
    $
    923
    
    
    $
    3,779
    
    
    $
    
    
    
    $
    
    
    
    $
    4,702Operating expenses
    
    
    (1,143
    )
    
    
    (3,813
    )
    
    
    
    
    
    
    
    
    
    
    (4,956
    )Other expenses
    
    
    
    
    
    
    (163
    )
    
    
    
    
    
    
    
    
    
    
    (163
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjustment in carrying value of related assetsand reserves, net of tax
    
    
    
    
    
    
    
    
    
    
    (37
    )
    
    
    (31
    )
    
    
    (68
    )Net income (loss) from discontinued operations
    
    $
    (220
    )
    
    $
    (197
    )
    
    $
    (37
    )
    
    $
    (31
    )
    
    $
    (485
    )
 Nine Months Ended September 30, 2007SouthC&G
    
    Brazil
    
    Africa
    
    Soltec
    
    TotalNet sales
    
    $
    3,284
    
    
    $
    10,386
    
    
    $
    16,230
    
    
    $
    
    
    
    $
    29,900Operating expenses
    
    
    (3,315
    )
    
    
    (10,986
    )
    
    
    (14,378
    )
    
    
    
    
    
    
    (28,679
    )Other expenses
    
    
    
    
    
    
    (272
    )
    
    
    (229
    )
    
    
    
    
    
    
    (501
    )Income tax (provision) benefit
    
    
    
    
    
    
    
    
    
    
    (515
    )
    
    
    
    
    
    
    (515
    )Adjustment in carrying value of related assets
and reserves, net of tax
    
    
    
    
    
    
    (400
    )
    
    
    357
    
    
    
    (330
    )
    
    
    (373
    )Net income (loss) from discontinued operations
    
    $
    (31
    )
    
    $
    (1,272
    )
    
    $
    1,465
    
    
    $
    (330
    )
    
    $
    (168
    )
 9




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##### Table of Contents



Selected balance sheet items for the discontinued operations classified as held for sale as
of September 30, 2008 and December 31, 2007 are as follows:
 At September 30, 2008C&G
    
    Brazil
    
    TotalCash
    
    $
    
    
    
    $
    227
    
    
    $
    227Accounts receivable
    
    
    
    
    
    
    279
    
    
    
    279Other assets
    
    
    
    
    
    
    365
    
    
    
    365$
    
    
    
    $
    871
    
    
    $
    871Accounts payable and other liabilities
    
    $
    
    
    
    $
    4,524
    
    
    $
    4,524
 At December 31, 2007C&G
    
    Brazil
    
    TotalCash
    
    $
    
    
    
    $
    276
    
    
    $
    276Accounts receivable
    
    
    264
    
    
    
    750
    
    
    
    1,014Inventories
    
    
    437
    
    
    
    93
    
    
    
    530Other assets
    
    
    17
    
    
    
    186
    
    
    
    203$
    718
    
    
    $
    1,305
    
    
    $
    2,023Accounts payable and other liabilities
    
    $
    534
    
    
    $
    6,883
    
    
    $
    7,417
 4.
    
    InventoriesThe composition of inventories was as follows:
 September 30,
    
    
    December 31,2008
    
    
    2007Raw materials and component parts
    
    $
    42,713
    
    
    $
    32,675Work-in-process
    
    
    13,983
    
    
    
    11,374Finished goods
    
    
    65,169
    
    
    
    57,337121,865
    
    
    
    101,386LIFO reserve
    
    
    (12,326
    )
    
    
    (10,425
    )$
    109,539
    
    
    $
    90,961
 5.
    
    Intangible AssetsThe composition of intangibles was as follows:
 September 30,
    
    
    December 31,2008
    
    
    2007Goodwill (See Note 2)
    
    $
    187,253
    
    
    $
    182,163Patents and customer relationships
    
    
    42,265
    
    
    
    42,126Trademarks
    
    
    33,403
    
    
    
    33,403262,921
    
    
    
    257,692Accumulated amortization of patents and customer relationships
    
    
    (14,330
    )
    
    
    (12,325
    )$
    248,591
    
    
    $
    245,367
 Goodwill and trademarks are tested for impairment annually or more frequently if events
occur or circumstances change that would more likely than not reduce the fair value of the
reporting unit below its carrying value. The impairment analysis is completed on a
consolidated enterprise level. Comparable market value, market capitalization and the
present value of expected future cash flows are used to estimate fair value. Significant
judgments and estimates about future conditions are used to estimate future cash flows.
Unforeseen events and changes in circumstances and market conditions, including general
economic and competitive conditions could result in significant changes in those estimates.
Impairment is tested annually as of October 1 and more frequently if circumstances warrant.
The most recent test performed as of October 2007 found an impairment adjustment was not
necessary.
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The change in the carrying amount of goodwill was as follows (See Note 2):
 Carrying Amountof GoodwillBalance as of December 31, 2007
    
    $
    182,163Increase in balance due to acquisition
    
    
    1,794Foreign currency translation
    
    
    3,296Balance as of September 30, 2008
    
    $
    187,253
 Amortization of patents and customer relationships amounted to $669 and $2,005 for the three
month and nine month periods ended September 30, 2008, respectively, and to $735 and $2,187
of expense for the three month and nine month periods ended September 30, 2007.6.
    
    Debt and Capital Lease ObligationsThe composition of debt and capital lease obligations was as follows:
 September 30,
    
    
    December 31,2008
    
    
    2007Working Capital Facility
    
    $
    28,369
    
    
    $
    12,658Second-Lien Facility
    
    
    14,000
    
    
    
    36,000Senior Subordinated Notes, due February 1, 2014, 9 1/4% interest
payable semiannually on February 1 and August 1
    
    
    175,000
    
    
    
    175,000Capital leases
    
    
    9,700
    
    
    
    10,625Other
    
    
    167
    
    
    
    295227,236
    
    
    
    234,578Current maturities and working capital facility
    
    
    (30,313
    )
    
    
    (21,436
    )$
    196,923
    
    
    $
    213,142
 At September 30, 2008, $7,295 of letters of credit were outstanding and unused availability,
net of these letters of credit, was $57,893 under the Companys borrowing agreements.Parent Company Financial InformationBorrowings under the Companys financing agreements are the obligations of Thermadyne
Industries, Inc. (Industries), the Companys principal operating subsidiary and certain of
Industries subsidiaries. Certain borrowing agreements contain restrictions on the ability
for the subsidiaries to dividend cash and other assets to the parent company, Thermadyne
Holdings Corporation. At September 30, 2008 and December 31, 2007, the only asset carried
on the parent company books of Thermadyne Holdings Corporation was its investment in its
operating subsidiaries and the only liabilities were the $175,000 of Senior Subordinated
Notes. As a result of the limited assets and liabilities at the parent company level,
separate financial statements have not been presented for Thermadyne Holdings Corporation.7.
    
    Derivative InstrumentsInterest rate differentials associated with the interest rate swap are recorded as an
adjustment to a current asset or liability, with the offset to interest expense over the
life of the interest rate swap. The interest rate swap converts fixed rate exposure to
variable for a notional value of $50,000. As of September 30, 2008, the Company recorded a
fair value adjustment to the portion of its fixed rate long-term debt that is hedged
decreasing this amount by $127. At September 30, 2008, the fair value of the interest rate
swap was $168 and has been recorded as a component of
other long-term assets. For the three months and nine months ended September 30, 2008, the
Company realized a decrease in its interest expense as a result of the interest rate swap of
$184 and $813, respectively. For the three months and nine months ended September 30, 2007,
the Company realized an increase in its interest expense as a result of the interest rate
swap of $16 and $189, respectively.
 11




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8.
    
    Fair Value MeasurementsIn September 2006, the FASB issued SFAS No. 157 Fair Value Measurements. SFAS No. 157
defines fair value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements. SFAS No. 157
does not require any new fair value measurements. In February 2008, the FASB amended SFAS
No. 157 to exclude SFAS No. 13, Accounting for Leases. In addition, the FASB delayed the
effective date of SFAS No. 157 for non-financial assets and liabilities to fiscal years
beginning after November 15, 2008. The Company adopted the provisions of SFAS 157 related to
its financial assets and liabilities on January 1, 2008.SFAS 157 classifies the inputs used to measure fair value into the following hierarchy:
    The Company has one asset that is within the provisions of SFAS 157, the interest
rate swap derivative asset discussed in Note 7. At September 30, 2008, the fair value
of this asset is $168 measured at Level 2 fair value on a recurring basis.9.
    
    Comprehensive IncomeComprehensive income for the three months and nine months ended September 30, 2008 and 2007
was as follows (See Note 2):
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    2,718
    
    
    $
    1,046
    
    
    $
    13,205
    
    
    $
    4,098Foreign currency translation
    
    
    (9,421
    )
    
    
    1,420
    
    
    
    649
    
    
    
    5,037Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minimum post-retirement liability
    
    
    (56
    )
    
    
    
    
    
    
    (169
    )
    
    
    Deferred income tax effects
    
    
    3,579
    
    
    
    
    
    
    
    (5,145
    )
    
    
    Comprehensive income
    
    $
    (3,180
    )
    
    $
    2,466
    
    
    $
    8,540
    
    
    $
    9,135
 10.
    
    Income TaxesThe Company accounts for income taxes in accordance with SFAS No. 109, Accounting for Income
Taxes(SFAS No. 109), which requires that deferred tax assets and liabilities be
recognized using enacted tax rates for the effect of temporary differences between the
financial reporting and tax bases of recorded assets and liabilities. SFAS No. 109 also
requires that deferred tax assets be reduced by a valuation allowance if it is more likely
than not that some portion of or all of the deferred tax asset will not be realized.The deferred tax benefit from the reduction in the valuation allowances related to
pre-emergence bankruptcy net operating loss carryovers must be recognized as an adjustment
to entries recorded in connection with fresh start accounting. Therefore, any reduction in
those valuation allowances will not reduce the Companys current year provision for taxes,
but must instead adjust the balance sheet. The Companys 2008 income tax provision reflects
the inclusion of the foreign source income of the foreign subsidiaries without a
corresponding benefit for the related
foreign tax credits. These matters combined to create a higher than expected effective tax
rate which the Company anticipates will continue for the foreseeable future. The income
taxes currently payable are estimated as 23-25% of income from continuing operations before
income tax provision and discontinued operations.For 2008, the Companys management estimates that actual cash income tax payments will, as
in prior years, primarily relate to state and foreign taxes due to the use of net operating
loss carryovers to offset U.S. taxable
 12




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##### Table of Contents



income.  At the beginning of 2008, the Company had
approximately $121,100 in U.S. net operating loss carryovers, including $60,400 of
pre-emergence NOL carryovers for which the related income tax benefit, if realized, will
adjust the balance sheet.The Company adopted, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (FIN 48) as of January 1, 2007. FIN 48 prescribes the income tax amounts to be
recorded in the financial statements as the amount most likely to be realized assuming a
review by tax authorities having all relevant information and applying current conventions.
FIN 48 also clarifies the financial statement classification of potential tax-related
penalties and interest and sets forth new disclosures regarding unrecognized tax benefits.
The Company had $2,500 of accrued liabilities for uncertain tax positions as of September
30, 2008, including interest of $400. The Company does not expect any significant increases
or decreases to its unrecognized tax benefits within 12 months of this reporting date. The
Company expects its accrued liabilities for uncertain tax positions as of September 30, 2008
will decrease approximately $700 in the fourth quarter of 2008 as the statute of limitations
passes on certain issues which have not been asserted by certain taxing authorities.In normal course the Companys tax return filings are subject to examination. The Companys
U.S. federal income tax returns for tax years 2004 and beyond remain subject to examination
by the Internal Revenue Service. The Companys state income tax returns for 2003 through
2007 remain subject to examination by various state taxing authorities. The Companys
significant foreign subsidiaries local country tax returns remain open to examination as
follows: Australia (2003-2007), Canada (2002-2007), United Kingdom (2001-2007) and Italy
(2000-2007).11.
    
    ContingenciesThe Company and certain of its wholly owned subsidiaries are defendants in various legal
actions, primarily related to product liability. While there is uncertainty relating to any
litigation, management is of the opinion that the outcome of such litigation will not have a
material adverse effect on the Companys financial condition or results of operations. At
September 30, 2008, the Company was a co-defendant in 349 cases alleging manganese induced
illness. Manganese is an essential element of steel and contained in all welding filler
metals. The Company is one of a large number of defendants. The claimants allege that
exposure to manganese contained in the welding filler metals caused the plaintiffs to
develop adverse neurological conditions, including a condition known as manganism. The
Judicial Panel on Multidistrict Litigation has consolidated a large number of these cases
for pretrial proceedings in the Northern District of Ohio. As of September 30, 2008, 132 of
the 349 cases naming the Company are pending in the multidistrict proceeding. Between
September 1, 2003 and September 30, 2008, the Company was dismissed from 1,114 other cases
with similar allegations.The Company is party to certain environmental matters. Any related obligations are not
expected to have a material effect on the Companys business or financial condition or
results of operations.All other legal proceedings and actions involving the Company are of an ordinary and routine
nature and are incidental to the operations of the Company. Management believes that such
proceedings should not, individually or in the aggregate, have a material adverse effect on
the Companys business or financial condition or on the results of operations.12.
    
    Stock Options and Stock-Based CompensationThe Company utilizes the modified prospective method of SFAS No. 123(R), Share-Based
Payment, and accordingly recognized compensation cost for all share-based payments, which
consist of stock options and restricted stock, granted after January 1, 2006. Stock
compensation cost included in selling, general and administrative expense was $738 and
$1,831 for the three months and nine months ended September 30, 2008, respectively, and $483
and $1,203 for the three months and nine months ended September 30, 2007, respectively.The estimated fair value of the restricted stock awards is determined as the closing price
of the stock as of the date of the awards. The estimated fair value of stock option grants
is computed using the Black-Scholes-Merton option-pricing model. Expected volatility is
based on historical periods generally commensurate with the expected life of options; the
expected life is based on historical experience. Stock option expense is recognized in the
consolidated condensed statements of operations ratably over the vesting period based on the
number of options that are expected to ultimately vest.
 13




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##### Table of Contents



As of September 30, 2008, options to purchase 1,355,506 shares were outstanding under the
2004 Stock Incentive Plan and other specific agreements. Changes in stock options during the
nine months ended September 30, 2008, are as follows:
 Weighted-Weighted
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    IntrinsicEmployee and Director Stock Options
    
    Shares
    
    Price
    
    Term
    
    ValueOptions outstanding at December 31, 2007
    
    
    1,527,830
    
    
    $
    13.56Granted
    
    
    29,575
    
    
    $
    14.39Exercised
    
    
    (131,931
    )
    
    $
    13.01Forfeited or expired
    
    
    (69,968
    )
    
    $
    13.17Options outstanding at September 30, 2008
    
    
    1,355,506
    
    
    $
    13.65
    
    
    
    7.0
    
    
    $
    4,091Options exercisable at September 30, 2008
    
    
    740,212
    
    
    $
    13.22
    
    
    
    6.5
    
    
    $
    2,556
 There were 69,580 options exercised in the three-month period ended September 30, 2008, and
131,931 options were exercised in the nine-month period ended September 30, 2008. In the
prior year, 21,856 options were exercised in the nine months ended September 30, 2007, with
10,274 options exercised in the three months ended September 30, 2007. The value of the
options exercised in the three-month period ended September 30, 2008 and 2007 was $916 and
$133, respectively. The value of the options exercised in the nine-month period ended
September 30, 2008 and 2007 was $1,717 and $279, respectively. The fair value of options
vested during the three-month and nine month periods ended September 30, 2008 was $122 and
$791, respectively.The Company also granted 1,015 restricted shares in March 2008, 190,680 restricted shares in
May 2008 and 3,344 restricted shares in June 2008 to various employees which vest if
established performance targets related to return on invested operating capital are achieved
for the 3 year period ending December 31, 2010.At September 30, 2008, the total stock-based compensation cost related to non-vested awards
not yet recognized was approximately $4,663 and the weighted average period over which this
amount is expected to be recognized was approximately 2.21 years.13.
    
    Earnings (Loss) Per ShareThe calculation of net income (loss) per share follows:
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Income
(loss) applicable to common sharesContinuing operations
    
    $
    3,038
    
    
    $
    1,531
    
    
    $
    14,000
    
    
    $
    4,266Discontinued operations
    
    
    (320
    )
    
    
    (485
    )
    
    
    (795
    )
    
    
    (168
    )Net income
    
    $
    2,718
    
    
    $
    1,046
    
    
    $
    13,205
    
    
    $
    4,098Denominator:Weighted average shares for basic
earnings per share
    
    
    13,469,821
    
    
    
    13,364,414
    
    
    
    13,409,491
    
    
    
    13,348,950Dilutive effect of stock options
    
    
    396,699
    
    
    
    193,151
    
    
    
    101,388
    
    
    
    93,813Weighted average shares for diluted
earnings per share
    
    
    13,866,520
    
    
    
    13,557,564
    
    
    
    13,510,879
    
    
    
    13,442,763Basic and diluted income (loss) per
share amounts:Continuing operations
    
    $
    0.22
    
    
    $
    0.11
    
    
    $
    1.04
    
    
    $
    0.32Discontinued operations
    
    $
    (0.02
    )
    
    $
    (0.04
    )
    
    $
    (0.06
    )
    
    $
    (0.02
    )Net income
    
    $
    0.20
    
    
    $
    0.07
    
    
    $
    0.98
    
    
    $
    0.30
 14




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##### Table of Contents



14.
    
    Employee Benefit PlansNet periodic pension and other postretirement benefit costs include the following
components:
 Pension Benefits
    
    
    Other Postretirement BenefitsThree Months Ended September 30,
    
    
    Three Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Components of the net periodic benefit cost:Service Cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest Cost
    
    
    311
    
    
    
    312
    
    
    
    52
    
    
    
    138Expected return on plan assets
    
    
    (365
    )
    
    
    (312
    )
    
    
    
    
    
    
    Recognized (gain) loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    (54
    )
    
    $
    
    
    
    $
    52
    
    
    $
    138
 Pension Benefits
    
    
    Other Postretirement BenefitsNine Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Components of the net periodic benefit cost:Service Cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest Cost
    
    
    933
    
    
    
    936
    
    
    
    156
    
    
    
    414Expected return on plan assets
    
    
    (1,095
    )
    
    
    (936
    )
    
    
    
    
    
    
    Recognized (gain) loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    (162
    )
    
    $
    
    
    
    $
    156
    
    
    $
    414
 The required contributions to the pension benefit plan for 2008 of $874 were made as of
September 30, 2008. Other postretirement benefit payments are incurred throughout 2008 and
are projected to be approximately $700.15.
    
    Segment InformationThe Companys continuing operations are comprised of several product lines and operating
locations. The similarity of products, paths to market, end users, and production processes
result in performance evaluation and decisions regarding allocation of resources being made
on a combined basis. Accordingly, management has concluded the Company operates in one
segment. Reportable geographic regions are the Americas (United States, Canada, Mexico,
Latin America and South America), Europe/Middle East and Asia-Pacific.Summarized financial information concerning the Companys geographic regions for its
continuing operations is shown in the following table:
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net Sales:Americas
    
    $
    99,402
    
    
    $
    91,741
    
    
    $
    292,480
    
    
    $
    273,466Europe/Middle East
    
    
    9,033
    
    
    
    8,283
    
    
    
    29,740
    
    
    
    25,857Asia-Pacific
    
    
    30,938
    
    
    
    25,662
    
    
    
    90,055
    
    
    
    69,651$
    139,373
    
    
    $
    125,686
    
    
    $
    412,275
    
    
    $
    368,974
 September 30,
    
    
    December 31,2008
    
    
    2007Identifiable Assets (excluding working capital and intangibles):Americas
    
    $
    39,619
    
    
    $
    39,955Europe/Middle East
    
    
    1,887
    
    
    
    1,860Asia-Pacific
    
    
    8,800
    
    
    
    8,831$
    50,306
    
    
    $
    50,646
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##### Table of Contents



16.
    
    Minority InterestsMinority shareholders hold 10% of one of the Companys Italian subsidiaries. The shareholder
agreement with this Italian subsidiary includes provisions that allow the minority
shareholders to put their ownership in the entity back to the Company and, conversely,
provide the Company a call option to purchase the outstanding minority interest. The
exercise period for the put and call options associated with the minority interest in the
Italian subsidiary expires on December 31, 2010. The purchase price of the option is
determined based on a specific formula outlined in the shareholder agreement. At September
30, 2008, the maximum payment to satisfy the option is approximately $900 based on the
formula in the agreement.17.
    
    Condensed Consolidating Financial StatementsCertain of the Companys wholly owned subsidiaries (Guarantor Subsidiaries) fully and
unconditionally provided guarantees under the Companys various borrowing arrangements and
are jointly and severally liable for certain payments under these agreements. Each of the
Guarantor Subsidiaries is wholly owned by the Company.The following financial information presents the guarantors and non-guarantors as of
September 30, 2008 and December 31, 2007, in accordance with Rule 3-10 of Regulation S-X.
The condensed consolidating financial information includes the accounts of the Company,
which has no independent assets or operations, the combined accounts of the Guarantor
Subsidiaries and the combined accounts of the non-guarantor subsidiaries for the periods
indicated. Separate financial statements of each of the Guarantor Subsidiaries are not
presented because management has determined such information is not material in assessing
the financial condition, cash flows or results of operations of the Company and its
subsidiaries. This information was prepared on the same basis as the consolidated financial
statements:
 16




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##### Table of Contents



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2008
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    9,411
    
    
    $
    4,320
    
    
    $
    
    
    
    $
    13,731Accounts receivable, net
    
    
    
    
    
    
    83,273
    
    
    
    10,569
    
    
    
    
    
    
    
    93,842Inventories
    
    
    
    
    
    
    95,975
    
    
    
    13,564
    
    
    
    
    
    
    
    109,539Prepaid expenses and other
    
    
    
    
    
    
    7,337
    
    
    
    436
    
    
    
    
    
    
    
    7,773Assets held for sale
    
    
    
    
    
    
    
    
    
    
    871
    
    
    
    
    
    
    
    871Current deferred tax assets
    
    
    
    
    
    
    2,721
    
    
    
    
    
    
    
    
    
    
    
    2,721Total current assets
    
    
    
    
    
    
    198,717
    
    
    
    29,760
    
    
    
    
    
    
    
    228,477Property, plant and equipment, net
    
    
    
    
    
    
    37,515
    
    
    
    8,747
    
    
    
    
    
    
    
    46,262Goodwill
    
    
    
    
    
    
    187,253
    
    
    
    
    
    
    
    
    
    
    
    187,253Intangibles, net
    
    
    
    
    
    
    54,587
    
    
    
    6,751
    
    
    
    
    
    
    
    61,338Other assets
    
    
    2,844
    
    
    
    1,350
    
    
    
    
    
    
    
    
    
    
    
    4,194Investment in and advances to subsidiaries
    
    
    212,709
    
    
    
    
    
    
    
    
    
    
    
    (212,709
    )
    
    
    Total assets
    
    $
    215,553
    
    
    $
    479,422
    
    
    $
    45,258
    
    
    $
    (212,709
    )
    
    $
    527,524LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current Liabilities:Working capital
    
    $
    
    
    
    $
    28,369
    
    
    $
    
    
    
    $
    
    
    
    $
    28,369Current maturities of long-term obligations
    
    
    
    
    
    
    1,694
    
    
    
    250
    
    
    
    
    
    
    
    1,944Accounts payable
    
    
    
    
    
    
    40,608
    
    
    
    7,249
    
    
    
    
    
    
    
    47,857Accrued and other liabilities
    
    
    
    
    
    
    31,797
    
    
    
    2,673
    
    
    
    
    
    
    
    34,470Accrued interest
    
    
    2,797
    
    
    
    246
    
    
    
    
    
    
    
    
    
    
    
    3,043Income taxes payable
    
    
    
    
    
    
    4,163
    
    
    
    657
    
    
    
    
    
    
    
    4,820Deferred tax liability
    
    
    
    
    
    
    2,667
    
    
    
    
    
    
    
    
    
    
    
    2,667Liabilities applicable to assets held for sale
    
    
    
    
    
    
    
    
    
    
    4,524
    
    
    
    
    
    
    
    4,524Total current liabilities
    
    
    2,797
    
    
    
    109,544
    
    
    
    15,353
    
    
    
    
    
    
    
    127,694Long-term obligations, less current maturities
    
    
    175,000
    
    
    
    21,517
    
    
    
    406
    
    
    
    
    
    
    
    196,923Deferred tax liabilities
    
    
    
    
    
    
    56,123
    
    
    
    
    
    
    
    
    
    
    
    56,123Other long-term liabilities
    
    
    168
    
    
    
    11,501
    
    
    
    573
    
    
    
    
    
    
    
    12,242Minority interest
    
    
    
    
    
    
    
    
    
    
    412
    
    
    
    
    
    
    
    412Shareholders equity (deficit):Common stock
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135Additional paid-in-capital
    
    
    190,335
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190,335Retained earnings (accumulated deficit)
    
    
    (66,748
    )
    
    
    34,317
    
    
    
    (67,866
    )
    
    
    33,549
    
    
    
    (66,748
    )Accumulated other comprehensive income (loss)
    
    
    10,408
    
    
    
    (45,891
    )
    
    
    37,987
    
    
    
    7,904
    
    
    
    10,408Total shareholders equity (deficit)
    
    
    134,130
    
    
    
    (11,574
    )
    
    
    (29,879
    )
    
    
    41,453
    
    
    
    134,130Net equity (deficit) and advances to / from subsidiaries
    
    
    (96,542
    )
    
    
    292,311
    
    
    
    58,393
    
    
    
    (254,162
    )
    
    
    Total liabilities and shareholders equity (deficit)
    
    $
    215,553
    
    
    $
    479,422
    
    
    $
    45,258
    
    
    $
    (212,709
    )
    
    $
    527,524
 17




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##### Table of Contents



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 2007
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    14,636
    
    
    $
    1,523
    
    
    $
    
    
    
    $
    16,159Accounts receivable, net
    
    
    
    
    
    
    75,163
    
    
    
    8,689
    
    
    
    
    
    
    
    83,852Inventories
    
    
    (115
    )
    
    
    80,449
    
    
    
    10,627
    
    
    
    
    
    
    
    90,961Prepaid expenses and other
    
    
    
    
    
    
    5,271
    
    
    
    876
    
    
    
    
    
    
    
    6,147Assets held for sale
    
    
    
    
    
    
    
    
    
    
    2,023
    
    
    
    
    
    
    
    2,023Current deferred tax assets
    
    
    
    
    
    
    2,721
    
    
    
    
    
    
    
    
    
    
    
    2,721Total current assets
    
    
    (115
    )
    
    
    178,240
    
    
    
    23,738
    
    
    
    
    
    
    
    201,863Property, plant and equipment, net
    
    
    
    
    
    
    36,464
    
    
    
    7,892
    
    
    
    
    
    
    
    44,356Goodwill
    
    
    
    
    
    
    182,163
    
    
    
    
    
    
    
    
    
    
    
    182,163Intangibles, net
    
    
    
    
    
    
    58,195
    
    
    
    5,009
    
    
    
    
    
    
    
    63,204Other assets
    
    
    4,170
    
    
    
    1,671
    
    
    
    
    
    
    
    
    
    
    
    5,841Investment in and advances to subsidiaries
    
    
    181,271
    
    
    
    
    
    
    
    
    
    
    
    (181,271
    )
    
    
    Total assets
    
    $
    185,326
    
    
    $
    456,733
    
    
    $
    36,639
    
    
    $
    (181,271
    )
    
    $
    497,427LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current Liabilities:Working capital
    
    $
    
    
    
    $
    12,658
    
    
    $
    
    
    
    $
    
    
    
    $
    12,658Current maturities of long-term obligations
    
    
    
    
    
    
    8,578
    
    
    
    200
    
    
    
    
    
    
    
    8,778Accounts payable
    
    
    
    
    
    
    27,636
    
    
    
    3,941
    
    
    
    
    
    
    
    31,577Accrued and other liabilities
    
    
    
    
    
    
    26,736
    
    
    
    2,090
    
    
    
    
    
    
    
    28,826Accrued interest
    
    
    7,741
    
    
    
    291
    
    
    
    
    
    
    
    
    
    
    
    8,032Income taxes payable
    
    
    
    
    
    
    4,178
    
    
    
    486
    
    
    
    
    
    
    
    4,664Deferred tax liability
    
    
    
    
    
    
    2,667
    
    
    
    
    
    
    
    
    
    
    
    2,667Liabilities applicable to assets held for sale
    
    
    
    
    
    
    
    
    
    
    7,417
    
    
    
    
    
    
    
    7,417Total current liabilities
    
    
    7,741
    
    
    
    82,744
    
    
    
    14,134
    
    
    
    
    
    
    
    104,619Long-term obligations, less current maturities
    
    
    175,000
    
    
    
    37,650
    
    
    
    492
    
    
    
    
    
    
    
    213,142Deferred tax liabilities
    
    
    
    
    
    
    44,306
    
    
    
    
    
    
    
    
    
    
    
    44,306Other long-term liabilities
    
    
    296
    
    
    
    12,136
    
    
    
    557
    
    
    
    
    
    
    
    12,989Minority interest
    
    
    
    
    
    
    
    
    
    
    287
    
    
    
    
    
    
    
    287Shareholders equity (deficit):Common stock
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134Additional paid-in-capital
    
    
    186,830
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    186,830Retained earnings (accumulated deficit)
    
    
    (79,953
    )
    
    
    11,306
    
    
    
    (71,860
    )
    
    
    60,554
    
    
    
    (79,953
    )Accumulated other comprehensive income (loss)
    
    
    15,073
    
    
    
    (12,296
    )
    
    
    20,937
    
    
    
    (8,641
    )
    
    
    15,073Total shareholders equity (deficit)
    
    
    122,084
    
    
    
    (990
    )
    
    
    (50,923
    )
    
    
    51,913
    
    
    
    122,084Net equity (deficit) and advances to / from subsidiaries
    
    
    (119,795
    )
    
    
    280,887
    
    
    
    72,092
    
    
    
    (233,184
    )
    
    
    Total liabilities and shareholders equity (deficit)
    
    $
    185,326
    
    
    $
    456,733
    
    
    $
    36,639
    
    
    $
    (181,271
    )
    
    $
    497,427
 18




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##### Table of Contents



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2008
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    468,534
    
    
    $
    38,360
    
    
    $
    (94,619
    )
    
    $
    412,275Cost of goods sold
    
    
    
    
    
    
    345,765
    
    
    
    28,161
    
    
    
    (94,993
    )
    
    
    278,933Gross margin
    
    
    
    
    
    
    122,769
    
    
    
    10,199
    
    
    
    374
    
    
    
    133,342Selling, general and administrative expenses
    
    
    1,288
    
    
    
    82,024
    
    
    
    4,107
    
    
    
    
    
    
    
    87,419Amortization of intangibles
    
    
    
    
    
    
    2,004
    
    
    
    1
    
    
    
    
    
    
    
    2,005Net periodic postretirement benefits
    
    
    
    
    
    
    156
    
    
    
    
    
    
    
    
    
    
    
    156Operating income (loss)
    
    
    (1,288
    )
    
    
    38,585
    
    
    
    6,091
    
    
    
    374
    
    
    
    43,762Other income (expense):Interest, net
    
    
    (12,511
    )
    
    
    (3,236
    )
    
    
    (47
    )
    
    
    
    
    
    
    (15,794
    )Amortization of deferred financing costs
    
    
    (375
    )
    
    
    (328
    )
    
    
    
    
    
    
    
    
    
    
    (703
    )Equity in net income (loss) of subsidiaries
    
    
    27,379
    
    
    
    
    
    
    
    
    
    
    
    (27,379
    )
    
    
    Minority interest
    
    
    
    
    
    
    (149
    )
    
    
    
    
    
    
    
    
    
    
    (149
    )Income (loss) from continuing operations before income
tax provision and discontinued operations
    
    
    13,205
    
    
    
    34,872
    
    
    
    6,044
    
    
    
    (27,005
    )
    
    
    27,116Income tax provision
    
    
    
    
    
    
    11,861
    
    
    
    1,255
    
    
    
    
    
    
    
    13,116Income (loss) from continuing operations
    
    
    13,205
    
    
    
    23,011
    
    
    
    4,789
    
    
    
    (27,005
    )
    
    
    14,000Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (795
    )
    
    
    
    
    
    
    (795
    )Net income (loss)
    
    $
    13,205
    
    
    $
    23,011
    
    
    $
    3,994
    
    
    $
    (27,005
    )
    
    $
    13,205
 19




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##### Table of Contents



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2008
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    162,430
    
    
    $
    15,179
    
    
    $
    (38,236
    )
    
    $
    139,373Cost of goods sold
    
    
    
    
    
    
    122,251
    
    
    
    11,403
    
    
    
    (38,177
    )
    
    
    95,477Gross margin
    
    
    
    
    
    
    40,179
    
    
    
    3,776
    
    
    
    (59
    )
    
    
    43,896Selling, general and administrative expenses
    
    
    738
    
    
    
    28,142
    
    
    
    1,414
    
    
    
    
    
    
    
    30,294Amortization of intangibles
    
    
    
    
    
    
    669
    
    
    
    
    
    
    
    
    
    
    
    669Net periodic postretirement benefits
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    52Operating income (loss)
    
    
    (738
    )
    
    
    11,316
    
    
    
    2,362
    
    
    
    (59
    )
    
    
    12,881Other income (expense):Interest, net
    
    
    (4,191
    )
    
    
    (935
    )
    
    
    (11
    )
    
    
    
    
    
    
    (5,137
    )Amortization of deferred financing costs
    
    
    (125
    )
    
    
    (110
    )
    
    
    
    
    
    
    
    
    
    
    (235
    )Equity in net income (loss) of subsidiaries
    
    
    7,772
    
    
    
    
    
    
    
    
    
    
    
    (7,772
    )
    
    
    Minority interest
    
    
    
    
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    (28
    )Income (loss) from continuing operations before income
tax provision and discontinued operations
    
    
    2,718
    
    
    
    10,243
    
    
    
    2,351
    
    
    
    (7,831
    )
    
    
    7,481Income tax provision
    
    
    
    
    
    
    3,917
    
    
    
    526
    
    
    
    
    
    
    
    4,443Income (loss) from continuing operations
    
    
    2,718
    
    
    
    6,326
    
    
    
    1,825
    
    
    
    (7,831
    )
    
    
    3,038Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (320
    )
    
    
    
    
    
    
    (320
    )Net income (loss)
    
    $
    2,718
    
    
    $
    6,326
    
    
    $
    1,505
    
    
    $
    (7,831
    )
    
    $
    2,718
 20




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##### Table of Contents



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2007
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    418,012
    
    
    $
    22,821
    
    
    $
    (71,859
    )
    
    $
    368,974Cost of goods sold
    
    
    
    
    
    
    310,733
    
    
    
    16,410
    
    
    
    (71,653
    )
    
    
    255,490Gross margin
    
    
    
    
    
    
    107,279
    
    
    
    6,411
    
    
    
    (206
    )
    
    
    113,484Selling, general and administrative expenses
    
    
    1,046
    
    
    
    75,963
    
    
    
    2,208
    
    
    
    
    
    
    
    79,217Amortization of intangibles
    
    
    
    
    
    
    2,187
    
    
    
    
    
    
    
    
    
    
    
    2,187Net periodic postretirement benefits
    
    
    
    
    
    
    414
    
    
    
    
    
    
    
    
    
    
    
    414Operating income (loss)
    
    
    (1,046
    )
    
    
    28,715
    
    
    
    4,203
    
    
    
    (206
    )
    
    
    31,666Other income (expense):Interest, net
    
    
    (14,199
    )
    
    
    (6,690
    )
    
    
    (98
    )
    
    
    
    
    
    
    (20,987
    )Amortization of deferred financing costs
    
    
    (375
    )
    
    
    (700
    )
    
    
    
    
    
    
    
    
    
    
    (1,075
    )Equity in net income (loss) of subsidiaries
    
    
    23,206
    
    
    
    
    
    
    
    
    
    
    
    (23,206
    )
    
    
    Minority interest
    
    
    
    
    
    
    6
    
    
    
    
    
    
    
    
    
    
    
    6Income (loss) from continuing operations before income
tax provision and discontinued operations
    
    
    7,586
    
    
    
    21,331
    
    
    
    4,105
    
    
    
    (23,412
    )
    
    
    9,610Income tax provision
    
    
    
    
    
    
    3,686
    
    
    
    1,658
    
    
    
    
    
    
    
    5,344Income (loss) from continuing operations
    
    
    7,586
    
    
    
    17,645
    
    
    
    2,447
    
    
    
    (23,412
    )
    
    
    4,266Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (168
    )
    
    
    
    
    
    
    (168
    )Net income (loss)
    
    $
    7,586
    
    
    $
    17,645
    
    
    $
    2,279
    
    
    $
    (23,412
    )
    
    $
    4,098
 21




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##### Table of Contents



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2007
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    142,161
    
    
    $
    7,267
    
    
    $
    (23,742
    )
    
    $
    125,686Cost of goods sold
    
    
    
    
    
    
    106,153
    
    
    
    5,157
    
    
    
    (23,572
    )
    
    
    87,738Gross margin
    
    
    
    
    
    
    36,008
    
    
    
    2,110
    
    
    
    (170
    )
    
    
    37,948Selling, general and administrative expenses
    
    
    333
    
    
    
    25,254
    
    
    
    1,263
    
    
    
    
    
    
    
    26,850Amortization of intangibles
    
    
    
    
    
    
    735
    
    
    
    
    
    
    
    
    
    
    
    735Net periodic postretirement benefits
    
    
    
    
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    138Operating income (loss)
    
    
    (333
    )
    
    
    9,881
    
    
    
    847
    
    
    
    (170
    )
    
    
    10,225Other income (expense):Interest, net
    
    
    (4,847
    )
    
    
    (1,788
    )
    
    
    (21
    )
    
    
    
    
    
    
    (6,656
    )Amortization of deferred financing costs
    
    
    (125
    )
    
    
    (244
    )
    
    
    
    
    
    
    
    
    
    
    (369
    )Equity in net income (loss) of subsidiaries
    
    
    6,351
    
    
    
    
    
    
    
    
    
    
    
    (6,351
    )
    
    
    Minority interest
    
    
    
    
    
    
    59
    
    
    
    
    
    
    
    
    
    
    
    59Income (loss) from continuing operations before income
tax provision and discontinued operations
    
    
    1,046
    
    
    
    7,908
    
    
    
    826
    
    
    
    (6,521
    )
    
    
    3,259Income tax provision
    
    
    
    
    
    
    1,264
    
    
    
    464
    
    
    
    
    
    
    
    1,728Income (loss) from continuing operations
    
    
    1,046
    
    
    
    6,644
    
    
    
    362
    
    
    
    (6,521
    )
    
    
    1,531Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (485
    )
    
    
    
    
    
    
    (485
    )Net income (loss)
    
    $
    1,046
    
    
    $
    6,644
    
    
    $
    (123
    )
    
    $
    (6,521
    )
    
    $
    1,046
 22




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##### Table of Contents



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2008
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from continuing operations:Net cash provided by (used in) operating activities
    
    $
    8,520
    
    
    $
    31,599
    
    
    $
    (1,101
    )
    
    $
    (23,591
    )
    
    $
    15,427Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (7,148
    )
    
    
    (977
    )
    
    
    
    
    
    
    (8,125
    )Proceeds from sales of assets
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    500Purchase of outside interest in joint venture
    
    
    824
    
    
    
    
    
    
    
    (3,837
    )
    
    
    
    
    
    
    (3,013
    )Other
    
    
    
    
    
    
    (138
    )
    
    
    (253
    )
    
    
    
    
    
    
    (391
    )Net cash provided by (used in) investing activities
    
    
    824
    
    
    
    (6,786
    )
    
    
    (5,067
    )
    
    
    
    
    
    
    (11,029
    )Cash flows from financing activities:Borrowings under revolving credit facility
    
    
    
    
    
    
    24,461
    
    
    
    
    
    
    
    
    
    
    
    24,461Repayments under revolving credit facility
    
    
    
    
    
    
    (8,750
    )
    
    
    
    
    
    
    
    
    
    
    (8,750
    )Borrowings of other credit facilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repayments of other credit facilities
    
    
    
    
    
    
    (22,810
    )
    
    
    (19
    )
    
    
    
    
    
    
    (22,829
    )Advances to / from discontinued operations
    
    
    (12,849
    )
    
    
    (23,103
    )
    
    
    9,039
    
    
    
    23,591
    
    
    
    (3,322
    )Other
    
    
    3,505
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    3,498Net cash provided by (used in) financing activities
    
    
    (9,344
    )
    
    
    (30,209
    )
    
    
    9,020
    
    
    
    23,591
    
    
    
    (6,942
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    172
    
    
    
    (56
    )
    
    
    
    
    
    
    116Net cash provided by (used in) continuing operations
    
    
    
    
    
    
    (5,224
    )
    
    
    2,796
    
    
    
    
    
    
    
    (2,428
    )Cash flows from discontinued operations:Net cash used in operating activities
    
    
    
    
    
    
    
    
    
    
    (2,712
    )
    
    
    
    
    
    
    (2,712
    )Net cash provided by investing activities
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    500Net cash provided by financing activities
    
    
    
    
    
    
    
    
    
    
    2,205
    
    
    
    
    
    
    
    2,205Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    (42
    )Net cash used in discontinued operations
    
    
    
    
    
    
    
    
    
    
    (49
    )
    
    
    
    
    
    
    (49
    )Total increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (5,224
    )
    
    
    2,747
    
    
    
    
    
    
    
    (2,477
    )Total cash and cash equivalents beginning of period
    
    
    
    
    
    
    14,637
    
    
    
    1,798
    
    
    
    
    
    
    
    16,435Total cash and cash equivalents end of period
    
    $
    
    
    
    $
    9,413
    
    
    $
    4,545
    
    
    $
    
    
    
    $
    13,958
 23




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##### Table of Contents



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2007
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from continuing operations:Net cash provided by (used in) operating activities
    
    $
    (60
    )
    
    $
    9,040
    
    
    $
    (1,975
    )
    
    $
    (6,943
    )
    
    $
    62Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (7,905
    )
    
    
    (723
    )
    
    
    
    
    
    
    (8,628
    )Proceeds from sales of assets
    
    
    
    
    
    
    13,783
    
    
    
    
    
    
    
    
    
    
    
    13,783Acquisition of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    (205
    )
    
    
    (763
    )
    
    
    (15
    )
    
    
    
    
    
    
    (983
    )Net cash provided by (used in) investing activities
    
    
    (205
    )
    
    
    5,115
    
    
    
    (738
    )
    
    
    
    
    
    
    4,172Cash flows from financing activities:Borrowings under revolving credit facility
    
    
    
    
    
    
    19,884
    
    
    
    157
    
    
    
    
    
    
    
    20,041Repayments under revolving credit facility
    
    
    
    
    
    
    (10,046
    )
    
    
    
    
    
    
    
    
    
    
    (10,046
    )Borrowings of other credit facilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repayments of other credit facilities
    
    
    
    
    
    
    (14,875
    )
    
    
    (65
    )
    
    
    
    
    
    
    (14,940
    )Changes in net equity and advances to / from discontinued
operations
    
    
    (1,323
    )
    
    
    (10,466
    )
    
    
    2,788
    
    
    
    6,943
    
    
    
    (2,058
    )Other
    
    
    1,588
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,588Net cash provided by (used in) financing activities
    
    
    265
    
    
    
    (15,503
    )
    
    
    2,880
    
    
    
    6,943
    
    
    
    (5,415
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    582
    
    
    
    287
    
    
    
    
    
    
    
    869Net cash provided by (used in) continuing operations
    
    
    
    
    
    
    (766
    )
    
    
    454
    
    
    
    
    
    
    
    (312
    )Cash flows from discontinued operations:Net cash used in operating activities
    
    
    
    
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    (22
    )Net cash used in investing activities
    
    
    
    
    
    
    
    
    
    
    (969
    )
    
    
    
    
    
    
    (969
    )Net cash provided by financing activities
    
    
    
    
    
    
    
    
    
    
    1,104
    
    
    
    
    
    
    
    1,104Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10Net cash provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    123
    
    
    
    
    
    
    
    123Total increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (766
    )
    
    
    577
    
    
    
    
    
    
    
    (189
    )Total cash and cash equivalents beginning of period
    
    
    
    
    
    
    9,207
    
    
    
    2,103
    
    
    
    
    
    
    
    11,310Total cash and cash equivalents end of period
    
    $
    
    
    
    $
    8,441
    
    
    $
    2,680
    
    
    $
    
    
    
    $
    11,121
 24




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##### Table of Contents



Item 2.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
      Cautionary Statement Concerning Forward-looking Statements
  25




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##### Table of Contents



Key Indicators
    RESULTS OF OPERATIONS
 Discontinued Operations
 Net sales
 Three Months Ended September 30,
    
    
    
    
    
    
    Nine Months Ended September 30,(Dollars in thousands)
    
    2008
    
    
    2007
    
    
    % Change
    
    
    2008
    
    
    2007
    
    
    % ChangeNet sales summary:U.S. net sales
    
    $
    74,223
    
    
    $
    72,237
    

    
    2.7%
    
    
    $
    225,121
    
    
    $
    219,170
    

    
    2.7%International net sales
    
    
    65,150
    
    
    
    53,449
    
    

    21.9%
    
    
    
    187,154
    
    
    
    149,804
    
    

    24.9%Consolidated net sales
    
    $
    139,373
    
    
    $
    125,686
    
    

    10.9%
    
    
    $
    412,275
    
    
    $
    368,974
    
    

    11.7%
   26




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##### Table of Contents



Gross margin
 Three Months Ended September 30,
    
    
    
    
    
    Nine Months Ended September 30,(Dollars in thousands)
    
    2008
    
    2007
    
    % Change
    
    2008
    
    2007
    
    % ChangeGross margin
    
    $
    43,896
    
    
    $
    37,948
    
    

    15.7%

    
    $
    133,342
    
    
    $
    113,484
    
    

    17.5%
   Selling, general and administrative expenses
 Three Months Ended September 30,
    
    
    
    
    
    Nine Months Ended September 30,(Dollars in thousands)
    
    2008
    
    2007
    
    % Change
    
    2008
    
    2007
    
    % ChangeSelling, general and
administrative
expenses
    
    $
    30,294
    
    
    $
    26,850
    
    

    12.8%

    
    $
    87,419
    
    
    $
    79,217
    

    
    10.4%
   Interest expense
 Three Months Ended September 30,
    
    
    
    
    
    Nine Months Ended September 30,(Dollars in thousands)
    
    2008
    
    2007
    
    % Change
    
    2008
    
    2007
    
    % ChangeInterest expense
    
    $
    5,137
    
    
    $
    6,656
    
    

    (22.8%)

    
    $
    15,794
    
    
    $
    20,987
    
    

    (24.7%)
  27




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##### Table of Contents



Income tax provision
 Three Months Ended September 30,
    
    
    
    
    
    Nine Months Ended September 30,(Dollars in thousands)
    
    2008
    
    2007
    
    % Change
    
    2008
    
    2007
    
    % ChangeIncome tax provision
    
    $
    4,443
    
    
    $
    1,728
    
    
    
    157.1
    %
    
    $
    13,116
    
    
    $
    5,344
    
    
    
    145.4
    %
   Income (loss) from discontinued operations
 Three Months Ended September 30,
    
    
    
    
    
    Nine Months Ended September 30,(Dollars in thousands)
    
    2008
    
    2007
    
    % Change
    
    2008
    
    2007
    
    % ChangeIncome (loss) from
discontinued
operations
    
    $
    (320
    )
    
    $
    (485
    )
    
    
    (34.0
    %)
    
    $
    (795
    )
    
    $
    (168
    )
    
    
    373.2
    %
   RECENT ACCOUNTING PRONOUNCEMENTS
 Business Combinations
 28




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##### Table of Contents



Noncontrolling Interests
 Disclosures about Derivative Instruments and Hedging Activities.
 LIQUIDITY AND CAPITAL RESOURCES
   Nine Months EndedSeptember 30,(Dollars in thousands)
    
    2008
    
    
    2007Net cash provided by (used in) continuing operations :Operating activities
    
    $
    15,427
    
    
    $
    62Investing activities
    
    
    (11,029
    )
    
    
    4,172Financing activities
    
    
    (6,942
    )
    
    
    (5,415
    )Effect of exchange rates
    
    
    116
    
    
    
    869Cash used in continuing operations
    
    $
    (2,428
    )
    
    $
    (312
    )
 Operating Activities
  29




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##### Table of Contents



Investing Activities
   Financing Activities
     
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
    Derivative Instruments
  30




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##### Table of Contents



Item 4. Controls and Procedures
   31




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##### Table of Contents



Item 1. Legal Proceedings
 Contingencies
 
 Item 1a. Risk Factors
   Our business is cyclical and is affected by general economic conditions, particularly those
affecting steel construction and fabrication related activities, as well as other factors that are
outside of our control and may have a material adverse effect on our business, results of
operations and financial condition.
  Our business is highly competitive, and increased competition could reduce our sales, earnings and
profitability.
   32




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##### Table of Contents



Our international sales and operations pose certain risks that may adversely impact sales and
earnings.
   
    
    currency exchange rate fluctuations;
    
    differing protections of intellectual property;
    
    trade barriers;
    
    regional economic uncertainty;
    
    labor unrest;
    
    currency exchange controls;
    
    differing (and possibly more stringent) labor regulation;
    
    governmental expropriation;
    
    domestic and foreign customs, tariffs and taxes;
    
    current and changing regulatory environments;
    
    difficulty in obtaining distribution support;
    
    difficulty in staffing and managing widespread operations;
    
    differences in the availability and terms of financing; and
    
    political instability and unrest.
  We are subject to currency fluctuations from our operations within non-U.S. markets and face risks
arising from the imposition of exchange controls and currency devaluations.
   Our future operating results may be affected by fluctuations in the prices and availability of raw
materials.
  33




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##### Table of Contents



We may not be able to successfully implement our cost-reduction initiatives.
  We rely in large part on independent distributors for sales of our products.
  Our success depends on our ability to enhance existing products and develop new products.
  If we fail to comply with the financial covenants in our debt instruments, our ability to obtain
financing and make payments under our debt instruments may be adversely impacted.
  We are subject to risks caused by disruptions in the credit markets.
  34




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##### Table of Contents



We are subject to risks caused by changes in interest rates.
  If our consolidated indebtedness increases, our interest cost under our Senior Subordinated Notes
may increase, which would negatively impact our results.
  Liabilities relating to litigation alleging manganese induced illness could reduce our
profitability and impair our financial condition.
   Our products involve risks of personal injury and property damage, which expose us to potential
liability.
  If our relationship with our employees were to deteriorate, we could be adversely affected.
  If we are unable to retain and hire key employees, the performance of our operations could be
adversely affected.
  35




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##### Table of Contents



We are subject to various environmental laws and regulations and may incur costs that have a
material adverse effect on our financial condition as a result of violations of or liabilities
under environmental laws and regulations.
   On September 29, 2008, the registration of 5,996,555 shares of our common stock became effective
following SEC approval of the Form S-3. We registered 4,496,555 shares at the request of a major
shareholder, Angelo Gordon, and we registered an additional 1,500,000 shares to be held by the
Company for future use. The actual or anticipated sale of shares of our common stock may cause the
market price of our common stock to decline.
  Sales of our common stock may result in a change of control under our credit facility agreements,
which constitutes an event of default under the agreements and could result in the acceleration of
our debt obligations under those agreements. The failure to obtain a waiver of this default would
have a material adverse effect on the Company.
  
    
    any person or group of persons, within the meaning of the Securities Exchange Act
of 1934, other than the selling stockholder or the holders of our Senior
Subordinated Notes acquires beneficial ownership of 30% or more of our issued and
outstanding shares of stock;
    
    during any period of 12 consecutive calendar months, individuals who at the
beginning of the period constituted our board of directors, together with any new
directors elected or nominated for election by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason other than death or disability to constitute a majority of the
directors then in office; or
    
    a change of control as defined in the indenture for our Senior Subordinated
Notes.
  36




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##### Table of Contents



If the sale of our common stock results in the ownership of 35% or more of our common stock by
another person, we may be required to repurchase the Senior Subordinated Notes, which would have a
material adverse effect on the Company.
  
    
    any person, as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, other than Angelo, Gordon & Co., L.P. and its affiliates, is
or becomes the direct or indirect beneficial owner of more than 35% of the total
voting power of our capital stock then outstanding and entitled to vote in the
election of our directors, and
    
    Angelo, Gordon & Co., L.P. beneficially owns a lesser percentage of the total
voting power of our voting capital stock than the acquiring person and does not have
the right or ability by voting power, contract or otherwise, to elect or designate
for election a majority of our board of directors.
   The sale of shares by our primary stockholder or a combination of other stockholders may limit our
ability to use net operating loss carryforwards to offset future taxable income for federal and
state income tax purposes, which could have a material adverse effect on our cash flow and results
of operations.
   
    
    sales of our common stock by other owners of five percent (5%) or more of the
shares of our common stock, or
    
    the acquisition of five percent (5%) or more of the shares of our common stock by
other persons (or groups of persons).
 37




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##### Table of Contents




    
    the identity of any stockholders who buy or sell our common stock,
    
    the timing of these transactions,
    
    the number of shares they buy or sell, and
    
    our future taxable income.
  
    
    requiring us to pay federal and state income taxes earlier than we otherwise
would have had such a change not occurred, and
    
    causing part of our net operating loss carryforwards to expire without our
having fully utilized them.
  
 Item 6. Exhibits
 4.1
    
    First Amendment to Third Amended and Restated Credit Agreement
dated as of October 7, 2008 by and among Thermadyne Industries, Inc., Thermal
Dynamics Corporation, Victor Equipment Company, C&G Systems, Inc., Stoody
Company, and Thermadyne International Corp., as borrowers, the credit parties
signatory thereto, the lenders signatory thereto, and General Electric Capital
Corporation, as agent.31.1
    
    CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (Exchange Act Rule 13a-14(a))31.2
    
    CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 (Exchange Act Rule 13a-14(a))32.1
    
    CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350 and Exchange Act Rule 13a-14(b))32.2
    
    CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. Section 1350 and Exchange Act Rule 13a-14(b))
 38




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SIGNATURES
  THERMADYNE HOLDINGS CORPORATIONBy:
    /s/ Steven A. SchummSteven A. Schumm
Chief Financial and Administrative Officer
(Principal Financial and Accounting Officer)  39