<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 June 30, 1997
------------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------------- ---------------------
Commission file number 0-23378
-------
Thermadyne Holdings Corporation
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 74-2482571
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
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 July 22, 1997, was 11,091,322.
<PAGE> 2
THERMADYNE HOLDINGS CORPORATION
INDEX
<TABLE>
<S> <C> <C>
PART I - FINANCIAL INFORMATION
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 4. Submission of matters to a vote of security holders . . . 11
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>
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,311 $ 1,420
Accounts receivable, less allowance for
doubtful accounts of $1,677 and
$1,649, respectively 70,941 54,286
Inventories 97,744 79,542
Prepaid expenses and other 10,638 9,763
Net assets of discontinued operations 31,205 29,455
------------ ------------
Total current assets 216,839 174,466
Property, plant and equipment, at cost, net 82,303 75,624
Deferred financing costs, net 6,613 7,508
Intangibles, at cost, net 63,959 62,645
Deferred income taxes 24,377 23,206
Other assets 1,813 9,956
------------ ------------
Total assets $ 395,904 $ 353,405
============ ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 43,868 $ 28,266
Accrued and other liabilities 23,587 29,257
Accrued interest 5,911 6,461
Income taxes payable 6,783 7,948
Deferred income taxes 1,324 1,324
Current maturities of long-term obligations 3,571 4,205
------------ ------------
Total current liabilities 85,044 77,461
Long-term obligations, less current maturities 444,079 417,135
Other long-term liabilities 46,833 44,078
Shareholders' equity ( deficit):
Common stock, $.01 par value, 25,000,000
shares authorized, and 11,086,322 and 11,020,311 shares
issued and outstanding at June 30, 1997 and
December 31, 1996, respectively 111 110
Additional paid-in capital 144,672 143,237
Accumulated deficit (323,505) (333,465)
Foreign currency translation (1,330) 4,849
------------ ------------
Total shareholders' deficit (180,052) (185,269)
------------ ------------
Total liabilities and shareholders' deficit $ 395,904 $ 353,405
============ ============
</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 Six Months Six Months
Ended Ended Ended Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Sales $ 135,175 $ 116,120 $ 252,926 $ 218,353
Operating Expenses:
Cost of goods sold 82,545 68,885 152,887 128,514
Selling, general and administrative expenses 27,308 24,207 53,578 47,375
Amortization of goodwill 405 22,228 762 44,556
Amortization of other intangibles 1,625 2,056 3,317 3,865
Net periodic postretirement benefits 585 611 1,170 1,188
------------ ------------ ------------ ------------
Operating income (loss) 22,707 (1,867) 41,212 (7,145)
Other expense:
Interest expense 11,969 11,766 23,507 22,592
Amortization of deferred financing costs 378 891 838 1,772
Other, net 258 1,082 (148) 1,913
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before income tax provision
and extraordinary item 10,102 (15,606) 17,015 (33,422)
Income tax provision 4,521 5,051 7,502 7,902
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before extraordinary item 5,581 (20,657) 9,513 (41,324)
Discontinued operations:
Gain on disposal of discontinued operations, net of
applicable taxes of $15,242 -- 9,426 -- 9,426
Gain (loss) from discontinued operations,
net of income taxes 1,202 (1,440) 2,238 (2,640)
------------ ------------ ------------ ------------
Income (loss) before extraordinary item 6,783 (12,671) 11,751 (34,538)
Extraordinary item - Loss on early extinguishment of debt,
net of tax benefit of $2,001 -- (3,715) -- (3,715)
------------ ------------ ------------ ------------
Net income (loss) $ 6,783 $ (16,386) $ 11,751 $ (38,253)
============ ============ ============ ============
Per share amounts:
Income (loss) from continuing operations $ 0.49 $ (1.92) $ 0.84 $ (3.85)
Income (loss) before extraordinary item 0.60 (1.18) 1.04 (3.22)
Net income ( loss) 0.60 (1.53) 1.04 (3.57)
Weighted average shares outstanding 11,340,636 10,743,156 11,332,796 10,731,352
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
THERMADYNE HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
------------ ------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss) $ 11,751 $ (38,253)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Net periodic postretirement benefits 1,170 1,188
Depreciation 5,960 5,250
Amortization of goodwill 762 44,556
Amortization of other intangibles 3,317 3,865
Amortization of deferred financing costs 838 1,772
Recognition of net operating loss carryforwards 1,171 --
Deferred income taxes (1,171) --
Net gain on sale of discontinued operations -- (9,426)
Extraordinary item -- 3,715
Noncash charges for discontinued operations 1,121 6,155
Changes in operating assets and liabilities:
Accounts receivable (11,674) (13,165)
Inventories (11,255) (9,417)
Prepaid expenses and other (252) (179)
Accounts payable 8,634 4,312
Accrued and other liabilities (6,572) (3,140)
Accrued interest (276) 172
Income taxes payable (1,521) 4,229
Other long-term liabilities (809) (873)
Discontinued operations 159 (442)
------------ ------------
Total adjustments (10,398) 38,572
------------ ------------
Net cash provided by operating activities 1,353 319
------------ ------------
Cash flows provided by (used in) investing activities:
Capital expenditures, net (6,794) (4,392)
Change in other assets 6,348 (1,803)
Acquisitions, net of cash (27,755) (74,011)
Proceeds from sale of discontinued operations -- 113,815
Investing activities of discontinued operations (1,401) (1,758)
------------ ------------
Net cash provided by (used in) investing activities (29,602) 31,851
------------ ------------
Cash flows used in financing activities:
Change in long-term receivables 6 45
Repayment of long-term obligations (18,953) (127,367)
Borrowing of long-term obligations 47,284 105,972
Issuance of common stock 1,006 553
Change in accounts receivable securitization 7,243 (8,037)
Financing activities of discontinued operations (1,629) (723)
Financing fees -- (3,032)
Other (1,817) 471
------------ ------------
Net cash provided by (used in) financing activities 33,140 (32,118)
------------ ------------
Net increase in cash and cash equivalents 4,891 52
Cash and cash equivalents at beginning of period 1,420 1,838
------------ ------------
Cash and cash equivalents at end of period $ 6,311 $ 1,890
============ ============
</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 and six months ended June
30, 1997 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 six months or less
to be cash equivalents. Interest and taxes paid were as follows:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, 1997 June 30, 1996
------------- -------------
<S> <C> <C>
Interest $ 25,791 $ 28,710
Taxes 8,264 4,740
</TABLE>
EARNINGS (LOSS) PER SHARE
Per share amounts for the three and six months ended June 30, 1997 are
based on the weighted average number of common and common equivalent shares
outstanding. Per share amounts for the three and six months ended June 30,
1996 are based on the weighted average number of shares outstanding. All
exchange arrangements contemplated by the Company's 1994 financial
restructuring are assumed to have been completed.
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact is
expected to result in an
6
<PAGE> 7
increase in primary earnings per share for the three and six months ended June
30, 1997 of $0.01 and $0.02 per share, respectively. No impact is expected for
the corresponding periods in 1996. The impact of Statement 128 on the
calculation of fully diluted earnings per share for these quarters is not
expected to be material.
2. INVENTORIES
The composition of inventories at June 30, 1997 was as follows:
<TABLE>
<S> <C>
Raw materials $ 13,672
Work-in-process 23,651
Finished goods 62,803
LIFO Reserve (2,382)
----------
Total $ 97,744
==========
</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 items ("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.
RESULTS OF OPERATIONS
Three Months ended June 30, 1997 compared to Three Months ended June 30, 1996
Net sales from continuing operations for the three months ended June
30, 1997 increased $19.1 million, or 16.4%, to $135.2 million, from $116.1
million for the three months ended June 30, 1996. EBITDA for the three months
ended June 30, 1997 was $28.4 million, an increase of $2.6 million, or 10.1%,
over the three months ended June 30, 1996. Sales of $10.4 million related to
GenSet, which was acquired effective February 1, 1997, are included in this
quarterly total. Excluding sales related to GenSet, the increase in net sales
from continuing operations was 7.5%, or $8.7 million, over the same quarter of
1996. Domestic sales for the quarter were up 5.9% over the same quarter of
1996 while international sales grew by 32.5%. Domestic sales were aided by
increased demand in substantially all product lines as well as the introduction
of new product categories resulting from the acquisitions of CIGWELD and
GenSet. Excluding the effects of GenSet, international sales increased 9.8%
during the three months ended June 30, 1997 compared to the three months ended
June 30, 1996. International growth was keyed by solid sales increases in Asia
and Latin America which were the results of both good economies and strategic
growth initiatives started shortly after the acquisition of CIGWELD in early
1996.
Cost of goods sold as a percentage of sales from continuing operations
was 61.1% for the three months ended June 30, 1997, up from 59.3% for the three
months ended June 30, 1996. The addition of GenSet increased this percentage
due to the somewhat lower average gross margin on its products compared to the
average gross margin of the Company's existing businesses.
Selling, general and administrative expenses were $27.3 million for
the quarter ended June 30, 1997 compared to $24.2 million for the quarter ended
June 30, 1996, an increase of $3.1 million or 12.8%. The addition of GenSet in
February of 1997 and increased spending on
8
<PAGE> 9
international initiatives account for the majority of this increase. As a
percentage of sales, selling, general and administrative expenses were 20.2%
for the quarter ended June 30, 1997 and 20.8% for the quarter ended June 30,
1996. This decrease is due to the higher sales level as certain costs do not
fluctuate with sales.
Amortization of goodwill decreased $21.8 million in the second quarter
of 1997 compared to the second quarter of 1996, as goodwill recorded in
connection with the Company's 1994 reorganization became fully amortized in
1996.
Income tax expense was $4.5 million for the three months ended June
30, 1997 on pre-tax income from continuing operations of $10.1 million compared
to income tax expense of $5.1 million for the three months ended June 30, 1996
on a pre-tax loss of $15.6 million. The pre-tax loss in 1996 included $22.2
million of non-deductible goodwill amortization.
Six Months ended June 30, 1997 compared to Six Months ended June 30, 1996
Net sales from continuing operations for the six months ended June 30,
1997 were $252.9 million, an increase of $34.6 million, or 15.8%, from $218.4
million for the six months ended June 30, 1996. EBITDA was $52.4 million for
the first half of 1997 compared to $47.7 million for the same period of the
prior year, an increase of $4.7 million, or 9.9%. Included in total sales for
the six months ended June 30, 1997 is $16.7 million related to GenSet, which
was acquired effective February 1, 1997. Excluding GenSet sales, the increase
over the same period of 1996 was 8.2%, or $17.8 million. Domestic sales grew
approximately 3.1% the first six months of 1997 compared to 1996. Domestic
sales grew solidly in the second quarter as a result of increased demand after
the first three months of the year saw fairly modest growth, primarily because
of strong sales towards the end of 1996. International sales were up 37.8% for
the six months ended June 30, 1997 compared to the six months ended June 30,
1996. Excluding the effects of the acquisition of GenSet, this increase was
16.9%. Initiatives in the Asian and Latin American markets, together with
solidly growing economies, have had a significant positive effect on the
Company's results.
Cost of goods sold as a percentage of sales from continuing operations
increased to 60.4% for the first six months of 1997 from 58.9% for the first
six months of 1996. This increase is primarily due to the acquisition of
GenSet in February 1997 as its average gross margin is lower than the blended
gross margin of the Company's other businesses.
Selling, general and administrative expenses increased $6.2 million,
or 13.1%, to $53.6 million for the six months ended June 30, 1997 from $47.4
million for the six months ended June 30, 1996. The acquisition of GenSet
together with spending on international initiatives, particularly in Asia, is
the primary reason for the increase. As a percentage of sales, selling,
general and administrative expenses decreased to 21.2% for the six months ended
June 30, 1997 from 21.7% for the six months ended June 30, 1996, as certain
costs do not vary with sales.
9
<PAGE> 10
Amortization of goodwill was $0.8 million in the first six months of
1997 compared to $44.6 million in the first six months of 1996, a decrease of
$43.8 million. Goodwill recorded in connection with the Company's 1994
reorganization became fully amortized in 1996.
Income tax expense was $7.5 million for the first six months of 1997
on pre-tax income from continuing operations of $17.0 million. The first six
months of 1996 reported a pre-tax loss of $33.4 million, including $44.6
million in non-deductible goodwill amortization, and resulted in income tax
expense of $7.9 million.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Cash Flows. Cash provided by operating activities
was $1.4 million for the six months ended June 30, 1997, compared to $0.3
million for the six months ended June 30, 1996. This increase in cash provided
by operating activities is the net result of an increase in earnings (adjusted
for noncash expenses) in the first half of 1997 over the first half of 1996, of
$6.1 million partially offset by a net increase in operating assets and
liabilities for the first six months of 1997 compared to the first six months
of 1996 of approximately $5.1 million. Net cash used in investing activities
was $29.6 million in the first six months of 1997 compared to $31.9 million of
cash provided by investing activities in the first six months of 1996. The
Company received cash proceeds of $113.8 million from the sale of two
businesses in the first half of 1996, with no similar transactions in the first
half of 1997. This cash inflow was partially offset by $46.3 million more cash
used for acquisitions the first six months of 1996 compared to the same period
of 1997. In addition, cash provided in 1997 by other assets increased $8.2
million over the same period in 1996 but was partially offset by an increase in
capital expenditures of $2.4 million in 1997. Cash provided by financing
activities was $33.1 million in the first six months of 1997 compared to a use
of cash of $32.1 million in the first six months of 1996. This change
primarily relates to long-term obligations which provided cash of $28.3 million
in the first half of 1997 and used cash of $21.4 million in the first half of
1996. The cash provided in 1997 primarily relates to borrowings used to
acquire GenSet while the cash used in 1996 results mainly from the repayment of
long-term obligations from divestiture proceeds offset partially by borrowings
made to acquire CIGWELD. The accounts receivable securitization provided cash
of $7.2 million during the first half of 1997 compared to an $8.0 million use
of cash over the same time period in 1996. The amount in 1996 included
approximately $11.7 million funded to the securitization program resulting from
the divestitures. Financing fees used $3.0 million less in cash the first six
months of 1997 compared to the same period of 1996.
Liquidity. The major uses of cash in the remainder of 1997 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 4. Submission of matters to a vote of security holders.
At the annual meeting of shareholders of the registrant held on April 24,
1997, there were 10,979,172 shares of common stock of the Company issued and
outstanding and entitled to be voted, if represented. The following matters
were presented to the meeting for a vote and the results of such voting are as
follows:
1) Election of Directors.
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Fletcher L. Byrom 7,277,523 8,207
Charles F. Moran 7,277,631 8,099
</TABLE>
2) Proposal to increase the number of shares of the Company's Common
Stock available and reserved for delivery pursuant to the Company's 1996
Employee Stock Option Plan from 300,000 to 800,000.
<TABLE>
<CAPTION>
Broker
For Against Abstain Non-Votes
--- ------- ------- ---------
<S> <C> <C> <C>
7,212,615 37,625 4,864 30,626
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 - Financial Data Schedule
b) Reports on Form 8-K - None.
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: August 31, 1997
------------------------
12
<PAGE> 13
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
Ex-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH QUARTERLY REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,311
<SECURITIES> 0
<RECEIVABLES> 70,941
<ALLOWANCES> 1,677
<INVENTORY> 97,744
<CURRENT-ASSETS> 216,839
<PP&E> 82,303
<DEPRECIATION> 0
<TOTAL-ASSETS> 395,904
<CURRENT-LIABILITIES> 85,044
<BONDS> 447,650
0
0
<COMMON> 111
<OTHER-SE> 180,163
<TOTAL-LIABILITY-AND-EQUITY> 395,904
<SALES> 252,926
<TOTAL-REVENUES> 252,926
<CGS> 152,887
<TOTAL-COSTS> 152,887
<OTHER-EXPENSES> 58,827
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,507
<INCOME-PRETAX> 17,015
<INCOME-TAX> 7,502
<INCOME-CONTINUING> 9,513
<DISCONTINUED> 2,238
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,751
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
