##### 



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 March 31, 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
    
    6-21Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    22-26Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    26-27Item 4. Controls and Procedures
    
    27PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    28Item 6. Exhibits
    
    28SIGNATURES
    
    29
  2




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##### 



PART I. FINANCIAL INFORMATION
 
 Item 1.
 THERMADYNE HOLDINGS CORPORATION
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 March 31,
    
    
    December 31,2008
    
    
    2007(unaudited)Current Assets:Cash and cash equivalents
    
    $
    19,066
    
    
    $
    16,159Accounts receivable, less allowance for doubtful accounts of
$1,100 and $1,000, respectively
    
    
    90,869
    
    
    
    83,852Inventories
    
    
    90,231
    
    
    
    90,961Prepaid expenses and other
    
    
    6,325
    
    
    
    6,147Assets held for sale
    
    
    745
    
    
    
    2,023Deferred tax assets
    
    
    2,721
    
    
    
    2,721Total current assets
    
    
    209,957
    
    
    
    201,863Property, plant and equipment, net of accumulated depreciation
of $47,650 and $44,631, respectively
    
    
    44,175
    
    
    
    44,356Goodwill
    
    
    182,528
    
    
    
    182,163Intangibles, net
    
    
    62,585
    
    
    
    63,204Other assets
    
    
    7,931
    
    
    
    5,841Total assets
    
    $
    507,176
    
    
    $
    497,427Current Liabilities:Working capital facility
    
    $
    22,124
    
    
    $
    12,658Current maturities of long-term obligations
    
    
    1,877
    
    
    
    8,778Accounts payable
    
    
    36,080
    
    
    
    31,577Accrued and other liabilities
    
    
    26,513
    
    
    
    28,826Accrued interest
    
    
    3,272
    
    
    
    8,032Income taxes payable
    
    
    5,872
    
    
    
    4,664Deferred tax liability
    
    
    2,667
    
    
    
    2,667Liabilities related to assets held for sale
    
    
    5,788
    
    
    
    7,417Total current liabilities
    
    
    104,193
    
    
    
    104,619Long-term obligations, less current maturities
    
    
    214,281
    
    
    
    213,142Deferred tax liabilities
    
    
    45,931
    
    
    
    44,306Other long-term liabilities
    
    
    12,861
    
    
    
    12,989Minority interest
    
    
    410
    
    
    
    287Stockholders equity:Common stock, $0.01 par value:Authorized25,000,000 shares
Issued and outstanding13,371,435 shares at March 31, 2008 and  13,368,190 shares at December 31, 2007
    
    
    134
    
    
    
    134Additional paid-in capital
    
    
    187,074
    
    
    
    186,830Accumulated deficit
    
    
    (75,428
    )
    
    
    (79,953
    )Accumulated other comprehensive income
    
    
    17,720
    
    
    
    15,073Total stockholders equity
    
    
    129,500
    
    
    
    122,084Total liabilities and stockholders equity
    
    $
    507,176
    
    
    $
    497,427
  3




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##### 



THERMADYNE HOLDINGS CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 Three Months Ended March 31,2008
    
    
    2007Net sales
    
    $
    130,767
    
    
    $
    116,107Cost of goods sold
    
    
    88,488
    
    
    
    78,307Gross margin
    
    
    42,279
    
    
    
    37,800Selling, general and administrative expenses
    
    
    27,451
    
    
    
    25,953Amortization of intangibles
    
    
    667
    
    
    
    726Net periodic postretirement benefits
    
    
    52
    
    
    
    138Operating income
    
    
    14,109
    
    
    
    10,983Other expenses:Interest
    
    
    (5,334
    )
    
    
    (7,062
    )Amortization of deferred financing costs
    
    
    (234
    )
    
    
    (353
    )Minority interest
    
    
    (52
    )
    
    
    (22
    )Income from continuing operations before
income tax provision and discontinued operations
    
    
    8,489
    
    
    
    3,546Income tax provision
    
    
    3,772
    
    
    
    2,283Income from continuing operations
    
    
    4,717
    
    
    
    1,263Income (loss) from discontinued operations, net of tax
    
    
    (192
    )
    
    
    141Net income
    
    $
    4,525
    
    
    $
    1,404Basic and diluted income (loss) per share:Continuing operations
    
    $
    0.35
    
    
    $
    0.10Discontinued operations
    
    
    (0.01
    )
    
    
    0.01Net income
    
    $
    0.34
    
    
    $
    0.11
  4




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##### 



THERMADYNE HOLDINGS CORPORATION
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months Ended March 31,2008
    
    
    2007Cash flows from continuing operations:Cash flows from operating activities:Net income
    
    $
    4,525
    
    
    $
    1,404Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Loss from discontinued operations
    
    
    192
    
    
    
    (141
    )Minority interest
    
    
    52
    
    
    
    22Depreciation and amortization
    
    
    3,118
    
    
    
    3,287Deferred income taxes
    
    
    1,851
    
    
    
    1,239Net periodic post-retirement benefits
    
    
    52
    
    
    
    71Changes in operating assets and liabilities:Accounts receivable
    
    
    (6,133
    )
    
    
    (5,348
    )Inventories
    
    
    1,808
    
    
    
    (3,570
    )Prepaids
    
    
    (64
    )
    
    
    (680
    )Accounts payable
    
    
    4,154
    
    
    
    (2,537
    )Accrued and other liabilities
    
    
    (2,611
    )
    
    
    (9,103
    )Accrued interest
    
    
    (4,760
    )
    
    
    (4,805
    )Other long-term liabilities
    
    
    (189
    )
    
    
    Other, net
    
    
    882
    
    
    
    (184
    )Net cash provided by (used in) operating activities
    
    
    2,877
    
    
    
    (20,345
    )Cash flows from investing activities:Capital expenditures
    
    
    (1,497
    )
    
    
    (1,306
    )Proceeds from sales of discontinued operations
    
    
    500
    
    
    
    Purchase of outside interest in joint venture
    
    
    (844
    )
    
    
    Other
    
    
    (48
    )
    
    
    (84
    )Net cash used in investing activities
    
    
    (1,889
    )
    
    
    (1,390
    )Cash flows from financing activities:Borrowings under Working Capital Facility
    
    
    14,181
    
    
    
    17,073Repayments of Working Capital Facility
    
    
    (4,715
    )
    
    
    (650
    )Repayments of other debt
    
    
    (7,233
    )
    
    
    (88
    )Stock compensation expense
    
    
    208
    
    
    
    300Exercise of employee stock purchases
    
    
    36
    
    
    
    Advances from (to) discontinued operations
    
    
    (1,126
    )
    
    
    (554
    )Other, net
    
    
    
    
    
    
    35Net cash provided by financing activities
    
    
    1,351
    
    
    
    16,116Effect of exchange rate changes on cash and cash equivalents
    
    
    568
    
    
    
    139Net cash provided by (used in) continuing operations
    
    
    2,907
    
    
    
    (5,480
    )Cash flows from discontinued operationsNet cash provided by (used in) operating activities
    
    
    (894
    )
    
    
    628Net cash used in investing activities
    
    
    500
    
    
    
    (91
    )Net cash provided by financing activities
    
    
    130
    
    
    
    55Effect of exchange rates on cash and cash equivalents
    
    
    15
    
    
    
    (4
    )Net cash provided by (used in) discontinued operations
    
    
    (249
    )
    
    
    588Total increase (decrease) in cash and cash equivalents
    
    
    2,658
    
    
    
    (4,892
    )Total cash and cash equivalents beginning of period
    
    
    16,435
    
    
    
    11,310Total cash and cash equivalents end of period
    
    $
    19,093
    
    
    $
    6,418Continuing operationsCash and cash equivalents beginning of period
    
    $
    16,159
    
    
    $
    11,310Net cash provided by (used in) continuing operations
    
    
    2,907
    
    
    
    (5,480
    )Cash and cash equivalents end of period
    
    $
    19,066
    
    
    $
    5,830Discontinued operationsCash and cash equivalents beginning of period
    
    $
    276
    
    
    $
    Net cash provided by (used in) discontinued operations
    
    
    (249
    )
    
    
    588Cash and cash equivalents end of period
    
    $
    27
    
    
    $
    588Income taxes paid
    
    $
    1,092
    
    
    $
    965Interest paid
    
    $
    10,286
    
    
    $
    9,759
  5




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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 three months
ended March 31, 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 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 adjusted periodically
based on current estimates of anticipated warranty costs. The following table provides the
activity in the warranty accrual for the three months ended March 31, 2008 and 2007:
 Three Months EndedMarch 31,2008
    
    
    2007Balance at beginning of period
    
    $
    3,072
    
    
    $
    2,978Charged to costs and expenses
    
    
    1,729
    
    
    
    1,161Deductions
    
    
    (1,509
    )
    
    
    (977
    )Balance at end of period
    
    $
    3,292
    
    
    $
    3,162
 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.
 6




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##### 



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 $155,969 and $162,750 at March 31, 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 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 adoption of SFAS No. 141R on its
consolidated financial statements. However, the Company does not expect the adoption of SFAS
No. 141R to have a material effect on its consolidated financial statements.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 adoption of SFAS No. 160 on its
consolidated financial statements. However, the Company does not expect the adoption of SFAS
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 adoption of SFAS No. 161 on its consolidated financial statement
disclosures.Also see Note 2  Fair Value
 3.
    
    Discontinued OperationsOn December 21, 2007, the Company committed to a plan to dispose of its cutting
table business, C&G Systems. 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 also 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
 7




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##### 



with the sale of the building
are continuing. Remaining 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 in South African Rand in May 2010 which had a U.S. conversion value of $3.7
million as of March 31, 2008.
 The tables below set forth certain information related to the C&G, Brazil, South Africa, and
Genset operations included in discontinued operations for the three months ended March 31,
2008 and 2007:
 Three Months Ended March 31, 2008SouthC&G
    
    Brazil
    
    Africa
    
    Genset
    
    TotalNet sales
    
    $
    68
    
    
    $
    278
    
    
    
    
    
    
    
    
    
    
    $
    346Operating expenses
    
    
    (218
    )
    
    
    (443
    )
    
    
    
    
    
    
    
    
    
    
    (661
    )Other expenses
    
    
    
    
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    (17
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjustment in carrying value of related assets
and reserves, net of tax
    
    
    (52
    )
    
    
    194
    
    
    
    
    
    
    
    (2
    )
    
    
    140Net income (loss) from discontinued operations
    
    $
    (202
    )
    
    $
    12
    
    
    $
    
    
    
    $
    (2
    )
    
    $
    (192
    )
 Three Months Ended March 31, 2007SouthC&G
    
    Brazil
    
    Africa
    
    Genset
    
    TotalNet sales
    
    $
    1,108
    
    
    $
    2,813
    
    
    $
    12,186
    
    
    $
    
    
    
    $
    16,107Operating expenses
    
    
    (1,154
    )
    
    
    (3,276
    )
    
    
    (10,933
    )
    
    
    
    
    
    
    (15,363
    )Other expenses
    
    
    
    
    
    
    (94
    )
    
    
    (222
    )
    
    
    
    
    
    
    (316
    )Income tax provision
    
    
    
    
    
    
    
    
    
    
    (287
    )
    
    
    
    
    
    
    (287
    )Net income (loss) from discontinued operations
    
    $
    (46
    )
    
    $
    (557
    )
    
    $
    744
    
    
    $
    
    
    
    $
    141
 Selected balance sheet items for the discontinued operations classified as held for sale as
of March 31, 2008 and December 31, 2007 are as follows:
 At March 31, 2008C&G
    
    Brazil
    
    TotalCash
    
    $
    
    
    
    $
    27
    
    
    $
    27Accounts receivable
    
    
    
    
    
    
    427
    
    
    
    427Inventories
    
    
    
    
    
    
    28
    
    
    
    28Other assets
    
    
    
    
    
    
    263
    
    
    
    263$
    
    
    
    $
    745
    
    
    $
    745Accounts payable and other liabilities
    
    $
    
    
    
    $
    5,788
    
    
    $
    5,788
 At December 31, 2007C&G
    
    Brazil
    
    TotalCash
    
    $
    
    
    
    $
    276
    
    
    $
    276Accounts receivable
    
    
    264
    
    
    
    750
    
    
    
    1,014Inventories
    
    
    437
    
    
    
    93
    
    
    
    530Property and equipment, net
    
    
    
    
    
    
    
    
    
    
    Other assets
    
    
    17
    
    
    
    186
    
    
    
    203$
    718
    
    
    $
    1,305
    
    
    $
    2,023Accounts payable and other liabilities
    
    $
    534
    
    
    $
    6,883
    
    
    $
    7,417
 8




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##### 



4.
    
    InventoriesThe composition of inventories was as follows:
 March 31,
    
    
    December 31,2008
    
    
    2007Raw materials and component parts
    
    $
    34,126
    
    
    $
    32,675Work-in-process
    
    
    12,600
    
    
    
    11,374Finished goods
    
    
    54,403
    
    
    
    57,337101,129
    
    
    
    101,386LIFO reserve
    
    
    (10,898
    )
    
    
    (10,425
    )$
    90,231
    
    
    $
    90,961
 5.
    
    Intangible AssetsThe composition of intangibles was as follows:
 March 31,
    
    
    December 31,2008
    
    
    2007Goodwill
    
    $
    182,527
    
    
    $
    182,163Patents and customer relationships
    
    
    42,175
    
    
    
    42,126Trademarks
    
    
    33,403
    
    
    
    33,403258,105
    
    
    
    257,692Accumulated amortization of patents and customer relationships
    
    
    (12,992
    )
    
    
    (12,325
    )$
    245,113
    
    
    $
    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, which as of October 1, 2007 an impairment
adjustment was not necessary.The change in the carrying amount of goodwill was as follows:
 Carrying Amountof GoodwillBalance as of December 31, 2007
    
    $
    182,163Foreign currency translation
    
    
    364Balance as of March 31, 2008
    
    $
    182,527
 Amortization of patents and customer relationships amounted to $667 and $726 for the three
months ended March 31, 2008 and March 31, 2007, respectively.
 9




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##### 



6.
    
    Debt and Capital Lease ObligationsThe composition of debt and capital lease obligations was as follows:
 March 31,
    
    
    December 31,2008
    
    
    2007Working Capital Facility
    
    $
    22,124
    
    
    $
    12,658Second-Lien Facility
    
    
    29,000
    
    
    
    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
    
    
    10,382
    
    
    
    10,625Other
    
    
    1,776
    
    
    
    295238,282
    
    
    
    234,578Current maturities and working capital facility
    
    
    (24,001
    )
    
    
    (21,436
    )$
    214,281
    
    
    $
    213,142
 At March 31, 2008, $7,982 of letters of credit were outstanding and unused availability was
$48,428 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 March 31, 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. As of March 31, 2008, the Company recorded a fair value
adjustment to the portion of its fixed rate long-term debt that is hedged increasing this
amount by $1,481. At March 31, 2008, the corresponding fair value of the interest rate swap
of $1,776 has been recorded as a component of other long-term assets. For the three months
ended March 31, 2008, the Company realized a decrease in its interest expense as a result of
the interest rate swap of $514. For the three months ended March 31, 2007, the Company
realized an increase in its interest expense as a result of the interest rate swap of $59.8.
    
    Fair Value MeasurementsIn 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 No. 157 to exclude
SFAS No. 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.
 10




---



##### 



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 footnote 7. At March 31, 2008, the fair value of this asset
is $1,776 measured at Level 2 fair value on a recurring basis.
 9.
    
    Comprehensive IncomeComprehensive income for the three months ended March 31, 2008 and 2007 was as follows:
 Three Months Ended March 31,2008
    
    
    2007Net income
    
    $
    4,525
    
    
    $
    1,404Foreign currency translation
    
    
    2,647
    
    
    
    223Comprehensive income
    
    $
    7,172
    
    
    $
    1,627
 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 48% of the
2008 income tax provision.For 2008, the Companys management estimates that actual cash income tax payments will
primarily relate to state and foreign taxes as in prior years due to the use of net
operating loss carryovers to offset U.S. taxable income. At the beginning of 2008, the
Company had approximately $122,200 in U.S. net operating loss carryovers, including
$61,400 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 has $2,426 of accrued liabilities for uncertain tax positions as of March 31,
2008, including interest of $327. The Company does not expect any significant increases or
decreases to its unrecognized tax benefits within 12 months of this reporting date.
 11




---



##### 



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
material 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
March 31, 2008, the Company was a co-defendant in approximately 401 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 March 31, 2008, 173 of the
401 cases naming the Company are pending in the multidistrict proceeding. Between June 1,
2003 and March 31, 2008, the Company was dismissed from approximately 1,064 other cases with
similar allegations. Through March 31, 2008, the Company has made no payments or settlements
to plaintiffs for these 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 $391 for the
three months ended March 31, 2008 and $300 for the three months ended March 31, 2007.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 and
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. The following table presents the
assumptions used in valuing options granted during the three months ended March 31, 2008 and
2007:
 March 31,
    
    March 31,2008
    
    2007Weighted average fair value
    
    $
    3.85
    
    
    $
    5.22Assumptions used:Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility
    
    
    40.25
    %
    
    
    38.28
    %Risk-free interest rate
    
    
    2.88
    %
    
    
    4.53
    %Expected life
    
    6.5
    years
    
    6
    years
 12




---



##### 



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
    
    
    3,000
    
    
    $
    10.30Exercised
    
    
    
    
    
    $
    Forfeited or expired
    
    
    (42,926
    )
    
    $
    13.22Options outstanding at March 31, 2008
    
    
    1,487,904
    
    
    $
    13.56
    
    
    
    7.4
    
    
    $
    2Options exercisable at March 31, 2008
    
    
    814,187
    
    
    $
    13.37
    
    
    
    6.8
    
    
    $
    1
 No options were exercised in the three-month periods ended March 31, 2008 and 2007,
respectively. The fair value of options vested during the three-month periods ended March
31, 2008 was $626.At March 31, 2008, the total stock-based compensation cost related to non-vested awards not
yet recognized was approximately $3,330 and the weighted average period over which this
amount is expected to be recognized was approximately 2.68 years.13.
    
    Earnings (Loss) Per ShareThe calculation of net income (loss) per share follows:
 Three Months Ended March 31,2008
    
    
    2007Numerator:Income (loss) applicable to common sharesContinuing operations
    
    $
    4,717
    
    
    $
    1,263Discontinued operations
    
    
    (192
    )
    
    
    141Net income
    
    $
    4,525
    
    
    $
    1,404Denominator:Weighted average shares for basic earnings per share
    
    
    13,434,226
    
    
    
    13,338,285Dilutive effect of stock options
    
    
    90
    
    
    
    6,453Weighted average shares for diluted earnings per share
    
    
    13,434,316
    
    
    
    13,344,738Basic & diluted income (loss) per share amounts:Continuing operations
    
    $
    0.35
    
    
    $
    0.10Discontinued operations
    
    $
    (0.01
    )
    
    $
    0.01Net income
    
    $
    0.34
    
    
    $
    0.11
 13




---



##### 



14.
    
    Employee Benefit PlansNet periodic pension and other postretirement benefit costs include the following
components:
 Pension Benefits
    
    
    Other Postretirement BenefitsThree Months Ended March 31,
    
    
    Three Months Ended March 31,2008
    
    
    2007
    
    
    2008
    
    
    2007Components of the net periodic benefit cost:Service Cost
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Interest Cost
    
    
    311
    
    
    
    312
    
    
    
    52
    
    
    
    138Expected return on plan assets
    
    
    (311
    )
    
    
    (312
    )
    
    
    
    
    
    
    Recognized (gain) loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    
    
    
    $
    
    
    
    $
    52
    
    
    $
    138
 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 and Mexico),
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 March 31,2008
    
    
    2007Net Sales:Americas
    
    $
    95,501
    
    
    $
    87,688Europe/Middle East
    
    
    10,162
    
    
    
    8,741Asia-Pacific
    
    
    25,104
    
    
    
    19,678$
    130,767
    
    
    $
    116,107
 March 31,
    
    
    December 31,2008
    
    
    2007Identifiable Assets (excluding working capital and intangibles):Americas
    
    $
    40,861
    
    
    $
    39,955Europe/Middle East
    
    
    2,168
    
    
    
    1,860Asia-Pacific
    
    
    8,928
    
    
    
    8,831$
    51,957
    
    
    $
    50,646
 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
shareholder to put its 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
 14




---



##### 



shareholder agreement. At March 31, 2008, the maximum payment to satisfy the put option is
approximately $1,000 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 March
31, 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:
 15




---



##### 



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 2008
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent Assets:Cash and cash equivalents
    
    $
    
    
    
    $
    16,218
    
    
    $
    2,848
    
    
    $
    
    
    
    $
    19,066Accounts receivable, net
    
    
    
    
    
    
    81,097
    
    
    
    9,772
    
    
    
    
    
    
    
    90,869Inventories
    
    
    (68
    )
    
    
    78,609
    
    
    
    11,690
    
    
    
    
    
    
    
    90,231Prepaid expenses and other
    
    
    
    
    
    
    6,752
    
    
    
    (427
    )
    
    
    
    
    
    
    6,325Assets held for sale
    
    
    
    
    
    
    
    
    
    
    745
    
    
    
    
    
    
    
    745Current deferred tax assets
    
    
    
    
    
    
    2,721
    
    
    
    
    
    
    
    
    
    
    
    2,721Total current assets
    
    
    (68
    )
    
    
    185,397
    
    
    
    24,628
    
    
    
    
    
    
    
    209,957Property, plant and equipment, net
    
    
    
    
    
    
    36,067
    
    
    
    8,108
    
    
    
    
    
    
    
    44,175Goodwill
    
    
    
    
    
    
    182,528
    
    
    
    
    
    
    
    
    
    
    
    182,528Intangibles, net
    
    
    
    
    
    
    57,212
    
    
    
    5,373
    
    
    
    
    
    
    
    62,585Other assets
    
    
    6,370
    
    
    
    1,561
    
    
    
    
    
    
    
    
    
    
    
    7,931Investment in and advances to subsidiaries
    
    
    192,538
    
    
    
    
    
    
    
    
    
    
    
    (192,538
    )
    
    
    Total assets
    
    $
    198,840
    
    
    $
    462,765
    
    
    $
    38,109
    
    
    $
    (192,538
    )
    
    $
    507,176LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)Current Liabilities:Working capital and second-lien facility
    
    $
    
    
    
    $
    22,124
    
    
    $
    
    
    
    $
    
    
    
    $
    22,124Current maturities of long-term obligations
    
    
    
    
    
    
    1,603
    
    
    
    274
    
    
    
    
    
    
    
    1,877Accounts payable
    
    
    
    
    
    
    31,357
    
    
    
    4,723
    
    
    
    
    
    
    
    36,080Accrued and other liabilities
    
    
    
    
    
    
    24,501
    
    
    
    2,012
    
    
    
    
    
    
    
    26,513Accrued interest
    
    
    2,836
    
    
    
    436
    
    
    
    
    
    
    
    
    
    
    
    3,272Income taxes payable
    
    
    
    
    
    
    5,102
    
    
    
    770
    
    
    
    
    
    
    
    5,872Deferred tax liability
    
    
    
    
    
    
    2,667
    
    
    
    
    
    
    
    
    
    
    
    2,667Liabilities applicable to assets held for sale
    
    
    
    
    
    
    
    
    
    
    5,788
    
    
    
    
    
    
    
    5,788Total current liabilities
    
    
    2,836
    
    
    
    87,790
    
    
    
    13,567
    
    
    
    
    
    
    
    104,193Long-term obligations, less current maturities
    
    
    175,000
    
    
    
    38,681
    
    
    
    600
    
    
    
    
    
    
    
    214,281Deferred tax liabilities
    
    
    
    
    
    
    45,931
    
    
    
    
    
    
    
    
    
    
    
    45,931Other long-term liabilities
    
    
    1,776
    
    
    
    10,473
    
    
    
    612
    
    
    
    
    
    
    
    12,861Minority interest
    
    
    
    
    
    
    
    
    
    
    410
    
    
    
    
    
    
    
    410Shareholders equity (deficit):Common stock
    
    
    134
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    134Additional paid-in-capital
    
    
    187,074
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    187,074Retained earnings (accumulated deficit)
    
    
    (75,428
    )
    
    
    19,777
    
    
    
    (73,054
    )
    
    
    53,277
    
    
    
    (75,428
    )Accumulated other comprehensive income (loss)
    
    
    17,720
    
    
    
    (21,278
    )
    
    
    25,384
    
    
    
    (4,106
    )
    
    
    17,720Total shareholders equity (deficit)
    
    
    129,500
    
    
    
    (1,501
    )
    
    
    (47,670
    )
    
    
    49,171
    
    
    
    129,500Net equity (deficit) and advances to / from subsidiaries
    
    
    (110,272
    )
    
    
    281,391
    
    
    
    70,590
    
    
    
    (241,709
    )
    
    
    Total liabilities and shareholders equity (deficit)
    
    $
    198,840
    
    
    $
    462,765
    
    
    $
    38,109
    
    
    $
    (192,538
    )
    
    $
    507,176
 16




---



##### 



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 and second-lien facility
    
    $
    
    
    
    $
    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
 17




---



##### 



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2008
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    146,001
    
    
    $
    8,322
    
    
    $
    (23,556
    )
    
    $
    130,767Cost of goods sold
    
    
    
    
    
    
    106,908
    
    
    
    5,574
    
    
    
    (23,994
    )
    
    
    88,488Gross margin
    
    
    
    
    
    
    39,093
    
    
    
    2,748
    
    
    
    438
    
    
    
    42,279Selling, general and administrative expenses
    
    
    (90
    )
    
    
    26,273
    
    
    
    1,268
    
    
    
    
    
    
    
    27,451Amortization of intangibles
    
    
    
    
    
    
    667
    
    
    
    
    
    
    
    
    
    
    
    667Net periodic postretirement benefits
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    52Operating income (loss)
    
    
    90
    
    
    
    12,101
    
    
    
    1,480
    
    
    
    438
    
    
    
    14,109Other income (expense):Interest, net
    
    
    (4,060
    )
    
    
    (1,257
    )
    
    
    (17
    )
    
    
    
    
    
    
    (5,334
    )Amortization of deferred financing costs
    
    
    (125
    )
    
    
    (109
    )
    
    
    
    
    
    
    
    
    
    
    (234
    )Equity in net income (loss) of subsidiaries
    
    
    8,620
    
    
    
    
    
    
    
    
    
    
    
    (8,620
    )
    
    
    Minority interest
    
    
    
    
    
    
    (52
    )
    
    
    
    
    
    
    
    
    
    
    (52
    )Income (loss) from continuing operations before income
tax provision and discontinued operations
    
    
    4,525
    
    
    
    10,683
    
    
    
    1,463
    
    
    
    (8,182
    )
    
    
    8,489Income tax provision
    
    
    
    
    
    
    3,301
    
    
    
    471
    
    
    
    
    
    
    
    3,772Income (loss) from continuing operations
    
    
    4,525
    
    
    
    7,382
    
    
    
    992
    
    
    
    (8,182
    )
    
    
    4,717Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    (192
    )
    
    
    
    
    
    
    (192
    )Net income (loss)
    
    $
    4,525
    
    
    $
    7,382
    
    
    $
    800
    
    
    $
    (8,182
    )
    
    $
    4,525
 18




---



##### 



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2007
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet sales
    
    $
    
    
    
    $
    138,635
    
    
    $
    7,575
    
    
    $
    (30,103
    )
    
    $
    116,107Cost of goods sold
    
    
    
    
    
    
    102,642
    
    
    
    5,486
    
    
    
    (29,821
    )
    
    
    78,307Gross margin
    
    
    
    
    
    
    35,993
    
    
    
    2,089
    
    
    
    (282
    )
    
    
    37,800Selling, general and administrative expenses
    
    
    378
    
    
    
    25,104
    
    
    
    471
    
    
    
    
    
    
    
    25,953Amortization of intangibles
    
    
    
    
    
    
    726
    
    
    
    
    
    
    
    
    
    
    
    726Net periodic postretirement benefits
    
    
    
    
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    138Operating income (loss)
    
    
    (378
    )
    
    
    10,025
    
    
    
    1,618
    
    
    
    (282
    )
    
    
    10,983Other income (expense):Interest, net
    
    
    (4,645
    )
    
    
    (2,388
    )
    
    
    (29
    )
    
    
    
    
    
    
    (7,062
    )Amortization of deferred financing costs
    
    
    (125
    )
    
    
    (228
    )
    
    
    
    
    
    
    
    
    
    
    (353
    )Equity in net income (loss) of subsidiaries
    
    
    6,552
    
    
    
    
    
    
    
    
    
    
    
    (6,552
    )
    
    
    Minority interest
    
    
    
    
    
    
    (22
    )
    
    
    
    
    
    
    
    
    
    
    (22
    )Income (loss) from continuing operations before income
tax provision and discontinued operations
    
    
    1,404
    
    
    
    7,387
    
    
    
    1,589
    
    
    
    (6,834
    )
    
    
    3,546Income tax provision
    
    
    
    
    
    
    2,065
    
    
    
    218
    
    
    
    
    
    
    
    2,283Income (loss) from continuing operations
    
    
    1,404
    
    
    
    5,322
    
    
    
    1,371
    
    
    
    (6,834
    )
    
    
    1,263Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    
    
    
    
    141Net income (loss)
    
    $
    1,404
    
    
    $
    5,322
    
    
    $
    1,512
    
    
    $
    (6,834
    )
    
    $
    1,404
 19




---



##### 



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2008
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from continuing operations:Net cash provided by (used in) operating activities
    
    $
    (303
    )
    
    $
    10,110
    
    
    $
    155
    
    
    $
    (7,085
    )
    
    $
    2,877Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (1,242
    )
    
    
    (255
    )
    
    
    
    
    
    
    (1,497
    )Proceeds from sales of assets
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    
    
    
    
    500Purchase of outside interest in joint venture
    
    
    (844
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (844
    )Other
    
    
    
    
    
    
    (48
    )
    
    
    
    
    
    
    
    
    
    
    (48
    )Net cash provided by (used in) investing activities
    
    
    (844
    )
    
    
    (790
    )
    
    
    (255
    )
    
    
    
    
    
    
    (1,889
    )Cash flows from financing activities:Borrowings under revolving credit facility
    
    
    
    
    
    
    14,181
    
    
    
    
    
    
    
    
    
    
    
    14,181Repayments under revolving credit facility
    
    
    
    
    
    
    (4,715
    )
    
    
    
    
    
    
    
    
    
    
    (4,715
    )Borrowings of other credit facilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repayments of other credit facilities
    
    
    
    
    
    
    (7,366
    )
    
    
    133
    
    
    
    
    
    
    
    (7,233
    )Changes in net equity and advances to / from discontinued operations
    
    
    903
    
    
    
    (10,292
    )
    
    
    1,178
    
    
    
    7,085
    
    
    
    (1,126
    )Other
    
    
    244
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    244Net cash provided by (used in) financing activities
    
    
    1,147
    
    
    
    (8,192
    )
    
    
    1,311
    
    
    
    7,085
    
    
    
    1,351Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    454
    
    
    
    114
    
    
    
    
    
    
    
    568Net cash provided by continuing operations
    
    
    
    
    
    
    1,582
    
    
    
    1,325
    
    
    
    
    
    
    
    2,907Cash flows from discontinued operations:Net cash
used in operating activities
    
    
    
    
    
    
    
    
    
    
    (894
    )
    
    
    
    
    
    
    (894
    )Net cash
provided by investing activities
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    500Net cash provided by financing activities
    
    
    
    
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    130Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    15
    
    
    
    
    
    
    
    15Net cash
used in discontinued operations
    
    
    
    
    
    
    
    
    
    
    (249
    )
    
    
    
    
    
    
    (249
    )Total increase in cash and cash equivalents
    
    
    
    
    
    
    1,582
    
    
    
    1,076
    
    
    
    
    
    
    
    2,658Total cash and cash equivalents beginning of period
    
    
    
    
    
    
    14,637
    
    
    
    1,798
    
    
    
    
    
    
    
    16,435Total cash and cash equivalents end of period
    
    $
    
    
    
    $
    16,219
    
    
    $
    2,874
    
    
    $
    
    
    
    $
    19,093
 20




---



##### 



THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2007
(unaudited)
(In thousands)
 ParentThermadyneHoldings
    
    
    
    
    
    
    Non-Corporation
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from continuing operations:Net cash provided by (used in) operating activities
    
    $
    (3,136
    )
    
    $
    (23,780
    )
    
    $
    (1,596
    )
    
    $
    8,167
    
    
    $
    (20,345
    )Cash flows from investing activities:Capital expenditures
    
    
    
    
    
    
    (1,212
    )
    
    
    (94
    )
    
    
    
    
    
    
    (1,306
    )Proceeds from sales of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Acquisition of minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    (84
    )Net cash used in investing activities
    
    
    
    
    
    
    (1,296
    )
    
    
    (94
    )
    
    
    
    
    
    
    (1,390
    )Cash flows from financing activities:Borrowings under revolving credit facility
    
    
    
    
    
    
    16,916
    
    
    
    157
    
    
    
    
    
    
    
    17,073Repayments under revolving credit facility
    
    
    
    
    
    
    (650
    )
    
    
    
    
    
    
    
    
    
    
    (650
    )Borrowings of other credit facilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Repayments of other credit facilities
    
    
    
    
    
    
    (88
    )
    
    
    
    
    
    
    
    
    
    
    (88
    )Changes in net equity and advances to / from subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Changes in net equity and advances to / from discontinued
operations
    
    
    2,801
    
    
    
    3,282
    
    
    
    1,530
    
    
    
    (8,167
    )
    
    
    (554
    )Other
    
    
    335
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    335Net cash provided by (used in) financing activities
    
    
    3,136
    
    
    
    19,460
    
    
    
    1,687
    
    
    
    (8,167
    )
    
    
    16,116Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    63
    
    
    
    76
    
    
    
    
    
    
    
    139Net cash provided by (used in) continuing operations
    
    
    
    
    
    
    (5,553
    )
    
    
    73
    
    
    
    
    
    
    
    (5,480
    )Cash flows from discontinued operations:Net cash provided by operating activities
    
    
    
    
    
    
    
    
    
    
    628
    
    
    
    
    
    
    
    628Net cash used in investing activities
    
    
    
    
    
    
    
    
    
    
    (91
    )
    
    
    
    
    
    
    (91
    )Net cash
provided by financing activities
    
    
    
    
    
    
    
    
    
    
    55
    
    
    
    
    
    
    
    55Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (4
    )
    
    
    
    
    
    
    (4
    )Net cash
provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    588
    
    
    
    
    
    
    
    588Total increase (decrease) in cash and cash equivalents
    
    
    
    
    
    
    (5,553
    )
    
    
    661
    
    
    
    
    
    
    
    (4,892
    )Total cash and cash equivalents beginning of period
    
    
    
    
    
    
    9,207
    
    
    
    2,103
    
    
    
    
    
    
    
    11,310Total cash and cash equivalents end of period
    
    $
    
    
    
    $
    3,654
    
    
    $
    2,764
    
    
    $
    
    
    
    $
    6,418
 21




---



##### 



Item 2.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Overview
      Cautionary Statement Concerning Forward-looking Statements
  22




---



##### 



Key Indicators
    RESULTS OF OPERATIONS
 Discontinued Operations
 Net Sales
 Three Months Ended March 31,(Dollars in thousands)
    
    2008
    
    
    2007
    
    
    % ChangeNet sales summary:U.S. net sales
    
    $
    76,494
    
    
    $
    72,194
    
    
    
    6.0
    %International net sales
    
    
    54,273
    
    
    
    43,913
    
    
    
    23.6
    %Consolidated net sales
    
    $
    130,767
    
    
    $
    116,107
    
    
    
    12.6
    %
  Gross Margin
 Three Months Ended March 31,(Dollars in thousands)
    
    2008
    
    2007
    
    % ChangeGross margin
    
    $
    42,279
    
    
    $
    37,800
    
    
    
    11.8
    %
  23




---



##### 



Selling, general and administrative expenses
 Three Months Ended March 31,(Dollars in thousands)
    
    2008
    
    2007
    
    % ChangeSelling, general and
administrative expenses
    
    $
    27,451
    
    
    $
    25,953
    
    
    
    5.8
    %
  Interest expense
 Three Months Ended March 31,(Dollars in thousands)
    
    2008
    
    2007
    
    % ChangeInterest expense
    
    $
    5,334
    
    
    $
    7,062
    
    
    
    (24.5
    %)
   Three Months Ended March 31,(Dollars in thousands)
    
    2008
    
    2007
    
    % ChangeIncome tax provision
    
    $
    3,772
    
    
    $
    2,283
    
    
    
    65.2
    %
   Three Months Ended March 31,(Dollars in thousands)
    
    2008
    
    2007
    
    % ChangeIncome (loss) from discontinued operations
    
    $
    (192
    )
    
    $
    141
    
    
    
    (236.2
    %)
  24




---



##### 



RECENT ACCOUNTING PRONOUNCEMENTS
 Business Combinations
 Noncontrolling Interests
 Disclosures about Derivative Instruments and Hedging Activities.
 LIQUIDITY AND CAPITAL RESOURCES
   Three months endedMarch 31,(Dollars in thousands)
    
    2008
    
    
    2007Net cash provided by (used in) continuing operations :Operating activities
    
    $
    2,877
    
    
    $
    (20,345
    )Investing activities
    
    
    (1,889
    )
    
    
    (1,390
    )Financing activities
    
    
    1,351
    
    
    
    16,116Effect of exchange rates
    
    
    568
    
    
    
    139Cash provided by (used in) continuing operations
    
    $
    2,907
    
    
    $
    (5,480
    )
 Operating Activities
  25




---



##### 



Investing Activities
  Financing Activities
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
    Derivative Instruments
 26




---



##### 



Item 4. Controls and Procedures
   27




---



##### 



Item 1. Legal Proceedings
 Contingencies
 
 Item 6. Exhibits
 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))
 28




---



##### 



SIGNATURES
  THERMADYNE HOLDINGS CORPORATIONBy:
    /s/ Steven A. SchummSteven A. SchummChief Financial and Administrative Officer
(Principal Financial and Accounting Officer)  29