<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
--------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-23378
----------------
Thermadyne Holdings Corporation
- - --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 74-2482571
- - --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
101 S. Hanley, St. Louis, MO 63105
- - --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 314/721-5573
-----------------------------
Indicate by X whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
--- ---
The number of shares outstanding of the issuer's common stock, par
value $0.01 per share, as of May 6, 1996, was 10,738,431.
<PAGE> 2
THERMADYNE HOLDINGS CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . . . . . . . . . . . 8-10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
<PAGE> 3
THERMADYNE HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 10,499 $ 1,838
Accounts receivable, less allowance for
doubtful accounts of $2,557 and
$1,888, respectively 68,599 48,136
Inventories 94,978 66,781
Prepaid expenses and other 8,291 8,247
Net assets of discontinued operations 72,829 72,829
---------- ----------
Total current assets 255,196 197,831
Property, plant and equipment, at cost, net 88,495 58,451
Deferred financing costs, net 11,078 10,600
Intangibles, at cost, net 154,154 148,228
Other assets 2,557 1,256
---------- ----------
Total assets $ 511,480 $ 416,366
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 38,513 $ 25,155
Accrued and other liabilities 27,119 21,685
Accrued interest 14,285 5,705
Income taxes payable 5,354 2,456
Current maturities of long-term obligations 20,213 17,663
---------- ----------
Total current liabilities 105,484 72,664
Long-term obligations, less current maturities 515,090 438,848
Other long-term liabilities 41,964 37,100
Shareholders' deficit:
Common stock, $.01 par value, 25,000,000
shares authorized, and 10,738,431 and 10,705,765 shares
issued and outstanding at March 31, 1996 and
December 31, 1995, respectively 107 107
Additional paid-in capital 138,937 138,583
Accumulated deficit (291,695) (269,828)
Foreign currency translation 1,593 (1,108)
---------- ----------
Total shareholders' deficit (151,058) (132,246)
---------- ----------
Total liabilities and shareholders' deficit $ 511,480 $ 416,366
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
THERMADYNE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Net Sales $ 129,160 $ 102,962
Operating Expenses:
Cost of goods sold 80,242 61,206
Selling, general and administrative expenses 26,291 23,312
Amortization of goodwill 24,842 25,709
Amortization of other intangibles 1,829 3,410
Net periodic postretirement benefits 593 593
---------- ----------
Operating loss (4,637) (11,268)
Other expense:
Interest expense (11,783) (11,447)
Amortization of deferred financing costs (881) (1,138)
Other, net (1,058) (409)
---------- ----------
Loss from continuing operations before income tax provision
and extraordinary item (18,359) (24,262)
Income tax provision 3,508 2,829
---------- ----------
Loss from continuing operations before extraordinary item (21,867) (27,091)
Discontinued operations:
Losses from discontinued operations, net of income taxes --- (6,619)
---------- ----------
Net loss $ (21,867) $ (33,710)
========== ==========
Per share amounts:
From continuing operations $ (2.04) $ (2.71)
Net loss (2.04) (3.37)
Weighted average shares outstanding 10,719,547 10,000,000
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
THERMADYNE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss $ (21,867) $ (33,710)
Adjustments to reconcile net loss to
net cash provided by operating activities:
Net periodic postretirement benefits 593 593
Depreciation 2,986 2,166
Amortization of goodwill 24,842 25,709
Amortization of other intangibles 1,829 3,410
Amortization of deferred financing costs 881 1,138
Noncash charges for discontinued operations --- 7,514
Changes in operating assets and liabilities:
Accounts receivable (11,573) (5,976)
Inventories (6,021) (5,139)
Prepaid expenses and other 951 98
Accounts payable 4,749 1,611
Accrued and other liabilities (2,591) 3,090
Accrued interest 8,467 7,064
Income taxes payable 2,047 2,036
Other long-term liabilities (305) (818)
Discontinued operations --- 1,534
--------- -----------
Total adjustments 26,855 44,030
--------- -----------
Net cash provided by operating activities 4,988 10,320
--------- -----------
Cash flows provided by (used in) investing activities:
Capital expenditures, net (2,836) (1,965)
Change in other assets 51 368
Acquisitions, net of cash (74,011) (3,370)
Investing activities of discontinued operations --- 13
--------- -----------
Net cash used in investing activities (76,796) (4,954)
--------- -----------
Cash flows provided by (used in) financing activities:
Change in long-term receivables 7 (167)
Repayment of long-term obligations (3,498) (4,981)
Borrowing of long-term obligations 79,572 2,014
Financing fees (600) (125)
Issuance of common stock 354 ---
Sale of accounts receivable 4,610 3,260
Other 24 (2,343)
--------- -----------
Net cash provided by (used in) financing activities 80,469 (2,342)
--------- -----------
Net increase in cash and cash equivalents 8,661 3,024
Cash and cash equivalents at beginning of period 1,838 7,286
--------- -----------
Cash and cash equivalents at end of period $ 10,499 $ 10,310
========= ===========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements reflect all
material adjustments (only of a normal recurring nature) which are, in the
opinion of management, necessary for a fair presentation of financial position
and results of operations. The results for the three months ended March 31,
1996 are not necessarily indicative of the results that may be expected for a
full fiscal year.
STATEMENTS OF CASH FLOWS
For purposes of the Statements of Cash Flows, the Company considers
all highly liquid investments purchased with a maturity of three months or less
to be cash equivalents. Interest and taxes paid were as follows:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Interest $ 3,203 $ 4,383
Taxes 610 672
</TABLE>
EARNINGS (LOSS) PER SHARE
Net loss per share is based on the weighted average number of shares
outstanding assuming all exchange arrangements contemplated by the Company's
1994 financial restructuring have been completed.
2. INVENTORIES
The composition of inventories at March 31, 1996 was as follows:
<TABLE>
<S> <C>
Raw materials $ 18,450
Work-in-process 23,501
Finished goods 56,511
LIFO Reserve (3,484)
---------
Total $ 94,978
=========
</TABLE>
6
<PAGE> 7
3. ACQUISITION OF DUXTECH PTY. LTD.
On January 18, 1996, the Company acquired all of the issued and
outstanding capital stock of Duxtech Pty. Ltd., an Australian holding company
that operates CIGWELD, the leading manufacturer of welding products in
Australia and New Zealand. The acquisition was consummated pursuant to the
terms of a Share Sale Agreement dated November 18, 1995. The aggregate
consideration paid was approximately $74,000 of which approximately $21,500 was
the assumption of existing debt. The remaining balance was paid in cash which
was financed through cash on hand and borrowings under the Company's revised
credit agreement.
The operating results of CIGWELD have been included in the
Consolidated Statements of Operations from February 1, 1996. The pro forma
unaudited results of operations for the three months ended March 31, 1996 and
1995, respectively, assuming consummation of the purchase as of January 1,
1995, are as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1996 1995
---- ----
<S> <C> <C>
Net sales $ 135,323 $ 126,289
Loss from continuing operations (22,501) (27,100)
Net loss (22,501) (33,719)
Per share amounts:
From continuing operations (2.10) (2.71)
Net loss (2.10) (3.37)
</TABLE>
Such pro forma amounts are not necessarily indicative of what the
actual consolidated results of operations might have been if the acquisition
had been effective at the beginning of fiscal 1995.
The transaction was accounted for as a purchase. The excess of cost
over fair value of net assets purchased is being amortized over a period of 40
years. The purchase price has been allocated to the underlying assets and
liabilities based on fair values at the date of acquisition. A summary of the
purchase price allocation is as follows:
<TABLE>
<S> <C>
Net working capital $ 21,220
Excess of cost over fair value of net assets acquired 31,002
Net property, plant and equipment 29,083
Other non-current liabilities, net (7,294)
---------
$ 74,011
=========
</TABLE>
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Included in the following discussions are comparisons of earnings
before interest, taxes, depreciation, amortization, reorganization and
restructuring costs, and extraordinary gain ("EBITDA"). The Company believes
that EBITDA is a useful supplement to net earnings (loss) and other
consolidated income statement data in understanding cash flows generated from
operations that is available for taxes, debt service and capital expenditures,
but should not be construed as an alternative to operating income or cash flows
from operating activities (as determined in accordance with generally accepted
accounting principles). EBITDA is also one of the financial measures by which
the Company's covenants are calculated under its debt agreements.
The Company conducts its continuing operations through two segments:
cutting and welding products ("Cutting and Welding") and wear-resistant
products ("Wear Resistance"). The following table presents net sales
information by segment for the periods indicated:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1996 March 31, 1995
-------------- ---------------
<S> <C> <C>
Net sales:
Cutting and Welding $ 93,928 $ 73,312
Wear Resistance 35,232 29,650
--------- ----------
Total $ 129,160 $ 102,962
========= ==========
</TABLE>
RESULTS OF OPERATIONS
Three Months ended March 31, 1996 compared to Three Months ended March 31, 1995
Net sales for the three months ended March 31, 1996 were $129.2 million.
This represents a 25.4%, or $26.2 million, increase over net sales for the
three months ended March 31, 1995 of $103.0 million. EBITDA increased $5.0
million, or 24.2%, to $25.6 million for the three months ended March 31, 1996
from $20.6 million for the three months ended March 31, 1995. EBITDA for
Duxtech Pty. Ltd. (a/k/a CIGWELD) which was acquired effective February 1,
1996, was $2.5 million for the two-month period ended March 31, 1996. Cutting
and Welding sales increased $20.6 million, or 28.1%, to $93.9 million in the
first three months of 1996 from $73.3 million in the first three months of
1995. Excluding CIGWELD, the increase in Cutting and Welding sales was $2.0
million, or 2.8%. Wear Resistance sales increased $5.6 million, or 18.8%, to
$35.2 million in the first quarter of 1996 from $29.6 million in the first
quarter of 1995. The international business for Wear Resistance increased
25.4% over 1995 as foreign economies remain strong and investments made in
existing and new product lines returned positive results. Wear Resistance's
domestic business also had a strong year-over-year increase of 14.2%.
8
<PAGE> 9
Cost of goods sold as a percentage of sales increased from 59.4% for the
three months ended March 31, 1995 to 62.1% for the three months ended March 31,
1996. The major reason for this increase is the acquisition of CIGWELD , which
has a gross margin lower than the Company's existing businesses blended margin.
In addition, sales mix between the two segments has lowered gross margins, as
Wear Resistance's sales have grown at a higher rate than Cutting and Welding
sales in 1996, but carry a lower margin.
Selling, general and administrative expenses increased $3.0 million for
the quarter ended March 31, 1996, a 12.8% increase over the quarter ended March
31, 1995. As a percentage of sales, selling, general and administrative
expenses decreased to 20.4% for the first quarter of 1996 from 22.6% for the
first quarter of 1995. CIGWELD's selling, general and administrative expenses
for the two-month period ended March 31, 1996 were $3.2 million, or 17.3% of
sales. Excluding CIGWELD, selling, general and administrative expenses
decreased $0.2 million in the first three months of 1996.
Amortization of other intangibles has decreased from 1995 due to the
early adoption of Financial Accounting Standards Board Statement No. 121 -
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" during the fourth quarter of 1995 which resulted in a
write-down of these assets of approximately $33.2 million.
Interest expense increased $0.4 million to $11.8 million for the quarter
ended March 31, 1996 from $11.4 million for the quarter ended March 31, 1995.
Overall debt levels are higher at March 31, 1996 due primarily to approximately
$74.0 million of borrowings related to the acquisition of CIGWELD.
Income tax expense increased $0.7 million to $3.5 million for the first
quarter of 1996 from $2.8 million for the first quarter of 1995. This increase
is due largely to the acquisition of CIGWELD which had income tax expense of
$0.4 million for the period ended March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Cash Flows. Cash provided by operating activities
was $5.0 million for the quarter ended March 31, 1996 compared to $10.3 million
for the same period in 1995. This difference results primarily from a net
increase in the operating assets and liabilities of the Company of $4.3 million
for the three months ended March 31, 1996 compared to a net decrease of $2.0
million for the first quarter last year, partially offset by an increase in
earnings from continuing operations (adjusted for noncash expenses) over the
three months ended March 31, 1995 of $3.3 million. Cash used in investing
activities was $76.8 million for the three months ended March 31, 1996 compared
to $5.0 million for the first quarter last year. The difference results
principally from cash used for acquisitions which totaled $74.0 million for the
first three months of 1996 compared to $3.4 million for the first quarter last
year. Financing activities
9
<PAGE> 10
provided $80.5 million for the three months ended March 31, 1996, compared to
using $2.3 million during the same quarter in 1995. This difference results
mostly from net long-term borrowings during the first quarter 1996 of $76.1
million versus net payments of $3.0 million during the same period last year.
Borrowings in the three-month period ended March 31, 1996 included
approximately $74.0 million related to the CIGWELD acquisition.
Liquidity. The major uses of cash in the remainder of 1996 are expected
to be for debt service requirements, capital expenditures and tax payments.
Management believes that cash from operating activities, together with
available borrowings under its revolving credit facility, if necessary, will be
sufficient to permit the Company to meet these financial obligations.
The Company will continue from time to time to explore additional
auxiliary financing methods and other means to lower its cost of capital which
could include stock issuances or debt financing and the application of the
proceeds therefrom to the payment of bank debt, or the purchase of senior or
senior subordinated notes.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None.
b) Reports on Form 8-K.
A Current Report on Form 8-K dated January 30, 1996 was filed by the
Company regarding the purchase of Duxtech Pty. Ltd.
A Current Report on Form 8-K/A-1 dated February 6, 1996 was filed by the
Company to amend information originally filed regarding the purchase of Duxtech
Pty. Ltd.
A Current Report on Form 8-K/A-2 dated March 21, 1996 was filed by the
Company to include financial statements of Duxtech Pty. Ltd. and pro forma
financial information.
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THERMADYNE HOLDINGS CORPORATION
By: /s/ Randall E. Curran
-------------------------------------------
Randall E. Curran
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ James H. Tate
--------------------------------------------
James H. Tate
Senior Vice President &
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: May 13, 1996
12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------------------------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH QUARTERLY REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,499
<SECURITIES> 0
<RECEIVABLES> 68,599
<ALLOWANCES> 2,557
<INVENTORY> 94,978
<CURRENT-ASSETS> 255,196
<PP&E> 88,495
<DEPRECIATION> 0
<TOTAL-ASSETS> 511,480
<CURRENT-LIABILITIES> 105,484
<BONDS> 535,303
<COMMON> 107
0
0
<OTHER-SE> (151,165)
<TOTAL-LIABILITY-AND-EQUITY> 511,480
<SALES> 129,160
<TOTAL-REVENUES> 129,160
<CGS> 80,242
<TOTAL-COSTS> 80,242
<OTHER-EXPENSES> 53,555
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,783
<INCOME-PRETAX> (18,359)
<INCOME-TAX> 3,508
<INCOME-CONTINUING> (21,867)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (21,867)
<EPS-PRIMARY> (2.04)
<EPS-DILUTED> (2.04)
</TABLE>
