<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, 1999
-------------------------------------------------
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)
<TABLE>
<S> <C>
Delaware 74-2482571
- ---------------------------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
Commission file number 333-57457
---------
Thermadyne Mfg. LLC
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
Delaware 74-2878452
- ---------------------------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
Commission file number 333-57457
---------
Thermadyne Capital Corp.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C>
Delaware 74-2878453
- ---------------------------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
</TABLE>
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 10, 1999 was 3,590,326.
Thermadyne Mfg. LLC and Thermadyne Capital Corp. meet the conditions set
forth in General Instruction H(1) of Form 10-Q and are therefore filing this
form with the reduced disclosure format.
<PAGE> 2
THERMADYNE HOLDINGS CORPORATION
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements of
Thermadyne Holdings Corporation
Condensed Consolidated Balance Sheets....................................................3
Condensed Consolidated Statements of Operations..........................................4
Condensed Consolidated Statements of Cash Flows..........................................5
Notes to Condensed Consolidated Financial Statements...................................6-9
Condensed Consolidated Financial Statements of Thermadyne Mfg. LLC
Condensed Consolidated Balance Sheets...................................................10
Condensed Consolidated Statements of Operations.........................................11
Condensed Consolidated Statements of Cash Flows.........................................12
Notes to Condensed Consolidated Financial Statements.................................13-20
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations.................................... 21-24
Item 3. Quantitative and Qualitative Disclosures About Market Risk..............................24
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .......................................................25
SIGNATURES ..........................................................................................26-28
</TABLE>
<PAGE> 3
THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,672 $ 1,319
Accounts receivable, less allowance for doubtful
accounts of $2,901 and $2,852, respectively 81,391 87,905
Inventories 121,159 122,733
Prepaid expenses and other 5,980 7,365
---------- ----------
Total current assets 214,202 219,322
Property, plant and equipment, at cost, net 99,118 104,997
Deferred financing costs, net 22,529 23,118
Intangibles, at cost, net 38,954 39,159
Deferred income taxes 32,811 32,402
Other assets 3,648 1,251
---------- ----------
Total assets $ 411,262 $ 420,249
========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 42,093 $ 44,170
Accrued and other liabilities 25,242 36,444
Accrued interest 9,236 3,154
Income taxes payable 4,409 5,211
Current maturities of long-term obligations 10,303 9,180
---------- ----------
Total current liabilities 91,283 98,159
Long-term obligations, less current maturities 707,664 701,529
Other long-term liabilities 61,673 62,834
Redeemable preferred stock (paid in kind), $0.01 par value,
15,000,000 shares authorized and 2,000,000 shares outstanding 55,810 54,053
Shareholders' deficit:
Common stock, $0.01 par value, 30,000,000 shares authorized, and
3,590,326 and 3,236,898 shares issued and outstanding at
March 31, 1999 and December 31, 1998, respectively 36 32
Additional paid-in capital (118,312) (116,551)
Accumulated deficit (360,856) (360,520)
Management loans (3,805) (3,753)
Accumulated other comprehensive loss (22,231) (15,534)
---------- ----------
Total shareholders' deficit (505,168) (496,326)
---------- ----------
Total liabilities and shareholders' deficit $ 411,262 $ 420,249
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Net sales $ 130,234 $ 131,829
Operating expenses:
Cost of goods sold 83,635 81,784
Selling, general and administrative expenses 24,546 27,064
Amortization of intangibles 1,037 900
Net periodic postretirement benefits 1,050 650
Special charges 2,874 --
---------- ----------
Operating income 17,092 21,431
Other expense:
Interest expense (17,742) (10,834)
Amortization of deferred financing costs (888) (370)
Other, net 844 166
---------- ----------
Income (loss) before income taxes (694) 10,393
Income tax provision (benefit) (358) 4,584
---------- ----------
Net income (loss) (336) 5,809
Preferred stock dividends (paid in kind) 1,757 --
---------- ----------
Net income (loss) applicable to common shares $ (2,093) $ 5,809
========== ==========
Net income (loss) per share amounts applicable to common shares:
Basic $ (0.60) $ 0.52
Diluted $ (0.60) $ 0.50
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss) $ (336) $ 5,809
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Net periodic postretirement benefits 1,050 650
Depreciation 4,109 3,556
Amortization of intangibles 1,037 900
Amortization of deferred financing costs 888 370
Deferred income taxes (333) --
Non-cash interest expense 3,153 --
Changes in operating assets and liabilities:
Accounts receivable 3,589 (6,179)
Inventories 422 (13,502)
Prepaid expenses and other 952 (52)
Accounts payable (1,179) (5,347)
Accrued and other liabilities (11,060) (6,246)
Accrued interest 6,095 7,370
Income taxes payable (764) 5,098
Other long-term liabilities (1,164) (1,562)
---------- ----------
Total adjustments 6,795 (14,944)
---------- ----------
Net cash provided by (used in) operating activities 6,459 (9,135)
---------- ----------
Cash flows used in investing activities:
Capital expenditures, net (2,183) (3,756)
Change in other assets (478) (349)
Acquisitions, net of cash (2,250) (640)
---------- ----------
Net cash used in investing activities (4,911) (4,745)
---------- ----------
Cash flows provided by (used in) financing activities:
Change in long-term receivables 21 263
Repayment of long-term obligations (1,144) (10,592)
Borrowing of long-term obligations 5,562 22,370
Issuance of common stock 4 335
Change in accounts receivable securitization 2,288 376
Financing fees (282) --
Other (3,644) (180)
---------- ----------
Net cash provided by financing activities 2,805 12,572
---------- ----------
Net increase (decrease) in cash and cash equivalents 4,353 (1,308)
Cash and cash equivalents at beginning of period 1,319 1,481
---------- ----------
Cash and cash equivalents at end of period $ 5,672 $ 173
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
As used in this report, the term "Mercury" means Mercury Acquisition
Corporation, the term "Issuer" means Mercury before the merger of the
Company in May of 1998 (the "Merger"), and Thermadyne Holdings Corporation
after the Merger, the term "Holdings" means Thermadyne Holdings
Corporation, the terms "Thermadyne" and the "Company" mean Thermadyne
Holdings Corporation, its predecessors and subsidiaries, the term
"Thermadyne LLC" means Thermadyne Mfg. LLC, a wholly owned and the
principal operating subsidiary of Thermadyne Holdings Corporation, and the
term "Thermadyne Capital" means Thermadyne Capital Corp., a wholly owned
subsidiary of Thermadyne LLC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements of
Holdings have been prepared in accordance with generally accepted accounting
principles for interim financial information and with 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 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. Operating results for the three month
period ended March 31, 1999 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1999. 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, 1998.
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 (refunded) were as follows:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Interest $ 8,507 $ 3,538
Taxes 105 (624)
</TABLE>
6
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
EARNINGS (LOSS) PER SHARE
The following table sets forth the information used in the computation of
basic and diluted earnings per share for the periods indicated.
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Net income (loss) per share applicable to common shares:
Basic $ (0.60) $ 0.52
Diluted $ (0.60) $ 0.50
Weighted average shares - basic earnings per share 3,496,079 11,208,536
Effect of dilutive securities:
Employee stock options -- 328,064
------------- -------------
Weighted average shares - diluted earnings per share 3,496,079 11,536,600
============= =============
</TABLE>
2. INVENTORIES
The composition of inventories at March 31, 1999 was as follows:
<TABLE>
<S> <C>
Raw materials $ 27,275
Work-in-process 28,011
Finished goods 66,607
LIFO Reserve (734)
-----------
Total $ 121,159
===========
</TABLE>
7
<PAGE> 8
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
3. SEGMENT INFORMATION
The Company has adopted the Financial Accounting Standards Board
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("FASB 131") which changes the way the Company reports
information about its operating segments.
The Company reports its segment information by geographic region.
Although the Company's domestic operation is comprised of several
individual business units, similarity of products, paths to market, end
users, and production processes results in performance evaluation and
decisions regarding allocation of resources being made on a combined basis.
The Company's reportable geographic regions are the United States, Europe
and Australia/Asia.
The Company evaluates performance and allocates resources based
principally on operating income net of any special charges or significant
one-time charges. The accounting policies of the reportable segments are
the same as those described in the summary of significant accounting
policies. Intersegment sales are based on market prices.
Summarized financial information concerning the Company's reportable
segments is shown in the following table. Export sales from the United
States are included in the United States segment. The "Other" column
includes the elimination of intersegment sales and profits, corporate
related items and other costs not allocated to the reportable segments.
<TABLE>
<CAPTION>
Other
United Australia/ Geographic
States Europe Asia Regions Other Consolidated
------ ------ ---- -------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1999
--------------
Revenue from external customers $ 87,776 $ 13,303 $ 20,233 $ 8,922 $ -- $ 130,234
Intersegment revenues 8,973 3,493 1,094 -- (13,560) --
Operating income (loss) 21,527 746 (631) (599) (3,951) 17,092
March 31, 1998
--------------
Revenue from external customers $ 90,125 $ 13,246 $ 21,078 $ 7,380 $ -- $ 131,829
Intersegment revenues 10,992 1,199 517 -- (12,708) --
Operating income (loss) 24,086 951 (303) 119 (3,422) 21,431
</TABLE>
8
<PAGE> 9
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
4. REORGANIZATION AND REALIGNMENT
In the first quarter of 1999, special charges of $2.9 million were
recorded in connection with the ongoing reorganization and realignment of
the Company which began in the third quarter of 1998. These first quarter
charges, which were recorded in accordance with EITF issue 94-3, are
primarily for headcount reductions and relate to employee severance and
related benefits. Additional charges are expected as the Company continues
its reorganization and realignment including the previously announced
closure of one manufacturing facility and its relocation to an existing
facility.
5. COMPREHENSIVE INCOME (LOSS)
During the first three months of 1999 and 1998, total comprehensive
income (loss) amounted to $(7,033) and $5,735, respectively.
9
<PAGE> 10
THERMADYNE MFG. LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 5,672 $ 1,319
Accounts receivable, less allowance for doubtful
accounts of $2,901 and $2,852, respectively 81,391 87,905
Inventories 121,159 122,733
Prepaid expenses and other 5,980 7,365
---------- ----------
Total current assets 214,202 219,322
Property, plant and equipment, at cost, net 99,118 104,997
Deferred financing costs, net 19,079 19,572
Intangibles, at cost, net 38,954 39,159
Deferred income taxes 29,544 29,135
Other assets 3,648 1,251
---------- ----------
Total assets $ 404,545 $ 413,436
========== ==========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current Liabilities:
Accounts payable $ 42,093 $ 44,170
Accrued and other liabilities 25,242 36,444
Accrued interest 7,576 498
Income taxes payable 4,409 5,211
Current maturities of long-term obligations 10,303 9,180
---------- ----------
Total current liabilities 89,623 95,503
Long-term obligations, less current maturities 565,570 562,588
Other long-term liabilities 61,673 62,834
Shareholder's deficit:
Accumulated deficit (364,551) (368,408)
Accumulated other comprehensive loss (22,231) (15,534)
---------- ----------
Total shareholder's deficit (386,782) (383,942)
Net equity and advances to / from parent 74,461 76,453
---------- ----------
Total liabilities and shareholder's deficit $ 404,545 $ 413,436
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
10
<PAGE> 11
THERMADYNE MFG. LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Net sales $ 130,234 $ 131,829
Operating expenses:
Cost of goods sold 83,635 81,784
Selling, general and administrative expenses 24,546 27,064
Amortization of intangibles 1,037 900
Net periodic postretirement benefits 1,050 650
Special changes 2,874 --
---------- ----------
Operating income 17,092 21,431
Other expense:
Interest expense (13,593) (10,834)
Amortization of deferred financing costs (792) (370)
Other, net 792 166
---------- ----------
Net income before income taxes 3,499 10,393
Income tax provision (benefit) (358) 4,584
---------- ----------
Net income $ 3,857 $ 5,809
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
11
<PAGE> 12
THERMADYNE MFG. LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income $ 3,857 $ 5,809
Adjustments to reconcile net income to
net cash provided by operating activities:
Net periodic postretirement benefits 1,050 650
Depreciation 4,109 3,556
Amortization of intangibles 1,037 900
Amortization of deferred financing costs 792 370
Deferred income taxes (333) --
Changes in operating assets and liabilities:
Accounts receivable 3,589 (6,179)
Inventories 422 (13,502)
Prepaid expenses and other 952 (52)
Accounts payable (1,179) (5,347)
Accrued and other liabilities (11,060) (6,246)
Accrued interest 7,091 7,370
Income taxes payable (764) 5,098
Other long-term liabilities (1,164) (1,562)
---------- ----------
Total adjustments 4,542 (14,944)
---------- ----------
Net cash provided by (used in) operating activities 8,399 (9,135)
---------- ----------
Cash flows used in investing activities:
Capital expenditures, net (2,183) (3,756)
Change in other assets (478) (349)
Acquisitions, net of cash (2,250) (640)
---------- ----------
Net cash used in investing activities (4,911) (4,745)
---------- ----------
Cash flows provided by (used in) financing activities:
Change in long-term receivables 21 263
Repayment of long-term obligations (1,144) (10,592)
Borrowing of long-term obligations 5,562 22,370
Issuance of common stock -- 335
Change in accounts receivable securitization 2,288 376
Financing fees (282) --
Other (5,580) (180)
---------- ----------
Net cash provided by financing activities 865 12,572
---------- ----------
Net increase (decrease) in cash and cash equivalents 4,353 (1,308)
Cash and cash equivalents at beginning of period 1,319 1,481
---------- ----------
Cash and cash equivalents at end of period $ 5,672 $ 173
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
12
<PAGE> 13
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
As used in this report, the term "Mercury" means Mercury Acquisition
Corporation, the term "Issuer" means Mercury before the merger of the
Company in May of 1998 (the "Merger") and Thermadyne Holdings Corporation
after the Merger, the term "Holdings" means Thermadyne Holdings
Corporation, the term "Thermadyne" means Thermadyne Holdings Corporation,
its predecessors and subsidiaries, the terms "Thermadyne LLC" and the
"Company" mean Thermadyne Mfg. LLC, a wholly owned and the principal
operating subsidiary of Thermadyne Holdings Corporation, and the term
"Thermadyne Capital" means Thermadyne Capital Corp., a wholly owned
subsidiary of Thermadyne LLC.
UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements of
Thermadyne LLC and Thermadyne Capital have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with 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 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.
Operating results for the three-month period ended March 31, 1999 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1999. 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, 1998.
CO-ISSUER
Thermadyne Capital, a wholly-owned subsidiary of Thermadyne LLC, was
formed solely for the purpose of serving as co-issuer of the 9-7/8% Senior
Subordinated Notes due 2008 (the "Senior Subordinated Notes"). Thermadyne
Capital has no substantial assets or liabilities and no operations of any kind
and the Indenture pursuant to which the Senior Subordinated Notes were issued
limits Thermadyne Capital's ability to acquire or hold any significant assets,
incur any liabilities or engage in any business activities, other than in
connection with the issuance of the Senior Subordinated Notes.
13
<PAGE> 14
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
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 (refunded) were as follows:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Interest $ 8,507 $ 3,538
Taxes 105 (624)
</TABLE>
2. INVENTORIES
The composition of inventories at March 31, 1999 was as follows:
<TABLE>
<S> <C>
Raw materials $ 27,275
Work-in-process 28,011
Finished goods 66,607
LIFO Reserve (734)
----------
Total $ 121,159
==========
</TABLE>
3. SEGMENT INFORMATION
The Company has adopted the Financial Accounting Standards Board
Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("FASB 131") which changes the way the Company
reports information about its operating segments.
The Company reports its segment information by geographic region.
Although the Company's domestic operation is comprised of several
individual business units, similarity of products, paths to market, end
users, and production processes results in performance evaluation and
decisions regarding allocation of resources being made on a combined
basis. The Company's reportable geographic regions are the United States,
Europe and Australia/Asia.
The Company evaluates performance and allocates resources based
principally on operating income net of any special charges or significant
one-time charges. The accounting policies of the reportable segments are
the same as those described in the summary of significant accounting
policies. Intersegment sales are based on market prices.
14
<PAGE> 15
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
Summarized financial information concerning the Company's reportable
segments is shown in the following table. Export sales from the United States
are included in the United States segment. The "Other" column includes the
elimination of intersegment sales and profits, corporate related items and other
costs not allocated to the reportable segments.
<TABLE>
<CAPTION>
Other
United Australia/ Geographic
States Europe Asia Regions Other Consolidated
------ ------ ---- ------- ----- ------------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1999
- --------------
Revenue from external customers $ 87,776 $ 13,303 $ 20,233 $ 8,922 $ -- $ 130,234
Intersegment revenues 8,973 3,493 1,094 -- (13,560) --
Operating income (loss) 21,527 746 (631) (599) (3,951) 17,092
March 31, 1998
- --------------
Revenue from external customers $ 90,125 $ 13,246 $ 21,078 $ 7,380 $ -- $ 131,829
Intersegment revenues 10,992 1,199 517 -- (12,708) --
Operating income (loss) 24,086 951 (303) 119 (3,422) 21,431
</TABLE>
4. REORGANIZATION AND REALIGNMENT
In the first quarter of 1999, special charges of $2.9 million were
recorded in connection with the ongoing reorganization and realignment of
the Company which began in the third quarter of 1998. These first quarter
charges, which were recorded in accordance with EITF issue 94-3, are
primarily for headcount reductions and relate to employee severance and
related benefits. Additional charges are expected as the Company continues
its reorganization and realignment including the previously announced
closure of one manufacturing facility and its relocation to an existing
facility.
5. COMPREHENSIVE INCOME (LOSS)
During the first three months of 1999 and 1998, total comprehensive
income (loss) amounted to $(2,840) and $5,735, respectively.
15
<PAGE> 16
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
6. GUARANTOR SUBSIDIARIES
In connection with the merger of Holdings and Mercury, Thermadyne LLC
and Thermadyne Capital, both wholly-owned subsidiaries of Holdings, issued
$207 million of Senior Subordinated Notes. Holdings received all of the net
proceeds from the issuance of the Senior Subordinated Notes and Thermadyne
LLC and Thermadyne Capital are jointly and severally liable for all
payments under the Senior Subordinated Notes. Additionally, the Senior
Subordinated Notes are fully and unconditionally (as well as jointly and
severally) guaranteed on an unsecured senior subordinated basis by certain
subsidiaries of the Company (the "Guarantor Subsidiaries"). Each of the
Guarantor Subsidiaries is wholly-owned by Thermadyne LLC.
The following condensed consolidating financial information of
Thermadyne LLC includes the accounts of Thermadyne LLC, 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 that such information is not material in
assessing the Guarantor Subsidiaries.
16
<PAGE> 17
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ -- $ 1,709 $ 3,963 $ -- $ 5,672
Restricted cash -- -- 24,586 (24,586) --
Accounts receivable -- 14,209 92,994 (25,812) 81,391
Inventories -- 67,181 53,978 -- 121,159
Prepaid expenses and other -- 2,164 4,017 (201) 5,980
Net assets of discontinued operations -- -- -- -- --
---------- ---------- ---------- ---------- ----------
Total current assets -- 85,263 179,538 (50,599) 214,202
Property, plant and equipment, at cost, net -- 47,027 52,091 -- 99,118
Deferred financing costs, net 18,260 -- 819 -- 19,079
Intangibles, at cost, net -- 11,419 27,535 -- 38,954
Deferred income taxes -- 26,470 3,074 -- 29,544
Investment in and advances to/from subsidiaries 223,594 10,630 -- (234,224) --
Other assets -- 125 3,523 -- 3,648
---------- ---------- ---------- ---------- ----------
Total assets $ 241,854 $ 180,934 $ 266,580 $ (284,823) $ 404,545
========== ========== ========== ========== ==========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current Liabilities:
Accounts payable $ -- $ 20,439 $ 21,654 $ -- $ 42,093
Accrued and other liabilities -- 17,489 7,753 -- 25,242
Accrued interest 7,369 7 200 -- 7,576
Income taxes payable -- 6,942 (2,533) -- 4,409
Deferred income taxes -- -- -- -- --
Current maturities of long-term obligations 6,250 (26) 4,079 -- 10,303
---------- ---------- ---------- ---------- ----------
Total current liabilities 13,619 44,851 31,153 -- 89,623
Long-term obligations, less current maturities 518,325 16,136 81,109 (50,000) 565,570
Other long-term liabilities -- 50,997 10,676 -- 61,673
Shareholder's equity (deficit):
Retained earnings (Accumulated deficit) (364,551) (286,355) (20,722) 307,077 (364,551)
Accumulated other comprehensive income (loss) -- (1,636) (20,595) -- (22,231)
---------- ---------- ---------- ---------- ----------
Total shareholder's equity (deficit) (364,551) (287,991) (41,317) 307,077 (386,782)
Net equity and advances to/from subsidiaries 74,461 356,941 184,959 (541,900) 74,461
---------- ---------- ---------- ---------- ----------
Total liabilities and shareholder's equity (deficit) $ 241,854 $ 180,934 $ 266,580 $ (284,823) $ 404,545
========== ========== ========== ========== ==========
</TABLE>
17
<PAGE> 18
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ -- $ (1,051) $ 2,370 $ -- $ 1,319
Restricted cash -- -- 26,646 (26,646) --
Accounts receivable -- 13,682 96,606 (22,383) 87,905
Inventories -- 68,742 53,991 -- 122,733
Prepaid expenses and other -- 1,259 6,325 (219) 7,365
---------- ---------- ---------- ---------- ----------
Total current assets -- 82,632 185,938 (49,248) 219,322
Property, plant and equipment, at cost, net -- 48,023 56,974 -- 104,997
Deferred financing costs, net 19,001 -- 571 -- 19,572
Intangibles, at cost, net -- 10,561 28,598 -- 39,159
Deferred income taxes -- 26,470 2,665 -- 29,135
Investment in and advances to/from subsidiaries 209,369 9,969 -- (219,338) --
Other assets -- (55) 1,306 -- 1,251
---------- ---------- ---------- ---------- ----------
Total assets $ 228,370 $ 177,600 $ 276,052 $ (268,586) $ 413,436
========== ========== ========== ========== ==========
LIABILITIES AND SHAREHOLDER'S DEFICIT
Current Liabilities:
Accounts payable $ -- $ 21,003 $ 23,167 $ -- $ 44,170
Accrued and other liabilities -- 26,060 10,384 -- 36,444
Accrued interest 275 6 217 -- 498
Income taxes payable -- 7,927 (2,716) -- 5,211
Current maturities of long-term obligations 5,000 60 4,120 -- 9,180
---------- ---------- ---------- ---------- ----------
Total current liabilities 5,275 55,056 35,172 -- 95,503
Long-term obligations, less current maturities 515,050 16,101 81,437 (50,000) 562,588
Other long-term liabilities -- 52,116 10,718 -- 62,834
Shareholder's equity (deficit):
Retained earnings (accumulated deficit) (368,408) (295,702) (16,201) 311,903 (368,408)
Accumulated other comprehensive income (loss) -- 224 (15,758) -- (15,534)
---------- ---------- ---------- ---------- ----------
Total shareholder's equity (deficit) (368,408) (295,478) (31,959) 311,903 (383,942)
Net equity and advances to/from subsidiaries 76,453 349,805 180,684 (530,489) 76,453
---------- ---------- ---------- ---------- ----------
Total liabilities and shareholders'
equity (deficit) $ 228,370 $ 177,600 $ 276,052 $ (268,586) $ 413,436
========== ========== ========== ========== ==========
</TABLE>
18
<PAGE> 19
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 105,183 $ 47,327 $ (22,276)(a) $ 130,234
Operating expenses:
Cost of goods sold -- 66,368 39,669 (22,402)(a) 83,635
Selling, general and administrative expenses -- 16,944 7,602 -- 24,546
Amortization of intangibles -- 498 539 -- 1,037
Net periodic postretirement benefits -- 1,050 -- -- 1,050
Special charges -- 936 1,938 -- 2,874
---------- ---------- ---------- ---------- ----------
Operating income (loss) -- 19,387 (2,421) 126 17,092
Other income (expense):
Interest expense -- (11,947) (2,418) 772 (13,593)
Amortization of deferred financing costs -- (741) (51) -- (792)
Equity in net loss of subsidiaries 3,857 -- -- (3,857) --
Other -- 2,378 281 (1,867) 792
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations
before income tax provision 3,857 9,077 (4,609) (4,826) 3,499
Income tax provision (benefit) -- (270) (88) -- (358)
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 3,857 $ 9,347 $ (4,521) $ (4,826) $ 3,857
========== ========== ========== ========== ==========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 111,511 $ 47,825 $ (27,507)(a) $ 131,829
Operating expenses:
Cost of goods sold -- 69,710 39,170 (27,096)(a) 81,784
Selling, general and administrative expenses -- 19,720 7,344 -- 27,064
Amortization of intangibles -- 360 540 -- 900
Net periodic postretirement benefits -- 650 -- -- 650
---------- ---------- ---------- ---------- ----------
Operating income (loss) -- 21,071 771 (411) 21,431
Other income (expense):
Interest expense -- (9,534) (2,376) 1,076 (10,834)
Amortization of deferred financing costs -- (316) (54) -- (370)
Equity in net loss of subsidiaries 5,809 -- -- (5,809) --
Other -- 349 1,306 (1,489) 166
---------- ---------- ---------- ---------- ----------
Income (loss) from continuing operations
before income tax provision 5,809 11,570 (353) (6,633) 10,393
Income tax provision -- 3,969 615 -- 4,584
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 5,809 $ 7,601 $ (968) $ (6,633) $ 5,809
========== ========== ========== ========== ==========
</TABLE>
(a) Reflects the elimination of intercompany sales among all of the Company's
subsidiaries.
19
<PAGE> 20
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
-------- ---------- -------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating activities $ 10,951 $ 5,486 $ (3,212) $ (4,826) $ 8,399
Cash flows provided by (used in) investing activities:
Capital expenditures, net -- (1,401) (782) -- (2,183)
Change in other assets -- (1,271) 793 -- (478)
Acquisitions, net of cash -- -- (2,250) -- (2,250)
-------- -------- -------- -------- --------
Net cash used in investing activities -- (2,672) (2,239) -- (4,911)
Cash flows provided by (used in) financing activities:
Change in long-term receivables -- 21 -- -- 21
Repayment of long-term obligations (575) (51) (518) -- (1,144)
Borrowing of long-term obligations 5,100 -- 462 -- 5,562
Change in accounts receivable securitization -- 2,288 -- -- 2,288
Financing fees -- -- (282) -- (282)
Change in net equity and advances to / from
subsidiaries (15,476) (2) 8,660 4,826 (1,992)
Other -- (2,310) (1,278) -- (3,588)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities (10,951) (54) 7,044 4,826 865
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents -- 2,760 1,593 -- 4,353
Cash and cash equivalents at beginning of period -- (1,051) 2,370 -- 1,319
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period $ -- $ 1,709 $ 3,963 $ -- $ 5,672
======== ======== ======== ======== ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
THERMADYNE TOTAL TOTAL
LLC GUARANTORS NON-GUARANTORS ELIMINATIONS TOTAL
---------- ---------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating activities $ 13,049 $ (6,217) $ (9,334) $ (6,633) $ (9,135)
Cash flows provided by (used in) investing activities:
Capital expenditures, net -- (1,689) (2,067) -- (3,756)
Change in other assets -- (192) (157) -- (349)
Acquisitions, net of cash -- (640) -- -- (640)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) investing activities -- (2,521) (2,224) -- (4,745)
Cash flows provided by (used in) financing activities:
Change in long-term receivables -- -- 263 -- 263
Repayment of long-term obligations (26,000) -- 15,408 -- (10,592)
Borrowing of long-term obligations 34,000 63 (11,693) -- 22,370
Change in accounts receivable securitization -- 376 -- -- 376
Issuance of common stock 335 -- -- -- 335
Change in net equity and advances to /from
subsidiaries (21,384) 6,436 8,315 6,633 --
Other -- -- (180) -- (180)
---------- ---------- ---------- ---------- ----------
Net cash provided by (used in) financing activities (13,049) 6,875 12,113 6,633 12,572
---------- ---------- ---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents -- (1,863) 555 -- (1,308)
Cash and cash equivalents at beginning of period -- 308 1,173 -- 1,481
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of period $ -- $ (1,555) $ 1,728 $ -- $ 173
========== ========== ========== ========== ==========
</TABLE>
20
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of the condensed
consolidated financial statements of Holdings. Holdings conducts its operations
through its wholly-owned subsidiary Thermadyne LLC. The accompanying condensed
consolidated financial statements for Holdings and Thermadyne LLC are
substantially the same except for certain debt and equity securities issued by
Holdings, and therefore, a separate discussion of Thermadyne LLC is not
presented.
Included in the following discussions are comparisons of Adjusted EBITDA
which is defined as operating income plus depreciation, amortization of
goodwill, amortization of intangibles, net periodic postretirement benefits
expense and special charges and is a key financial measure 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). Adjusted EBITDA is also one of the financial measures by which the
Company's compliance with its covenants is calculated under its debt
agreements. The Company believes that Adjusted EBITDA is a useful supplement to
net income (loss) and other consolidated income statement data in understanding
cash flows generated from operations that are available for taxes, debt service
and capital expenditures. However, the Company's method of computation may or
may not be comparable to other similarly titled measures of other companies. In
addition, Adjusted EBITDA is not necessarily indicative of amounts that may be
available for discretionary uses and does not reflect any legal or contractual
restrictions on the Company's use of funds.
The statements in this Quarterly Report on Form 10-Q that relate to future
plans, events or performance are forward-looking statements. Actual results
could differ materially due to a variety of factors and the other risks
described in this Quarterly Report and the other documents the Company files
from time to time with the Securities and Exchange Commission. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date hereof. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or
that reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS
Three Months ended March 31, 1999 compared to Three Months ended March 31, 1998
Net sales were $130.2 million for the three months ended March 31, 1999 and
$131.8 million for the three months ended March 31, 1998. In a comparison of
1999 and 1998 first quarters, domestic sales increased 0.4% and international
sales decreased 3.8% (9.8% excluding acquisitions). Excluding acquisitions,
Latin America is down 13.1% which is due in part to weakening economics together
with the devaluation of the Brazil real and Europe is down 6.4% as the economics
in that region slowed sharply in the first quarter of 1999. Australia/Asia sales
are down 2.6%, a region we believe is beginning to show some signs of
improvement.
Cost of goods sold as a percentage of sales for the three months ended
March 31, 1999 and March 31, 1998 was 64.2% and 62.0%, respectively. In an
effort to reduce inventory, factories are being run at less than optimal
levels. This results in a higher cost of goods sold percentage from the lower
unit volume available to absorb fixed overhead costs. In addition, sales of
higher margin components and accessories are lower thus far in 1999 compared to
the first three months of 1998.
Selling, general and administrative expenses were $24.5 million and $27.1
million for the three months ended March 31, 1999 and 1998, respectively. As a
percentage of sales, selling, general and administrative expenses were 18.8%
for the three months ended March 31, 1999 and 20.5% for the
21
<PAGE> 22
three months ended March 31, 1998. Thermadyne is focused on reducing its cost
of doing business, and the decrease in selling, general and administrative
expenses is the result of those efforts.
Special charges of $2.9 million, related primarily to headcount reductions,
were recorded in the first quarter of 1999.
Higher debt levels, as a result of the recapitalization of the Company in
conjunction with the Merger in May 1998, have resulted in a significant
increase in interest expense. Interest expense increased $6.9 million, or
63.8%, to $17.7 million for the quarter ended March 31, 1999 from $10.8 million
for the quarter ended March 31, 1998
An income tax benefit of $0.4 million was reported for the first quarter
of 1999 on a pre-tax loss of $0.7 million. This compares to an income tax
provision of $4.6 million in the first quarter of 1998 on pre-tax income of
$10.4 million. The recapitalization of the Company in conjunction with the
Merger in May 1998 has significantly changed the Company's tax profile.
Adjusted EBITDA was $26.2 million for the three months ended March 31,
1999, or 20.1% of sales. This compares to Adjusted EBITDA of $26.5 million, or
20.1% of sales, for the three months ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Working Capital and Cash Flows
Operating activities provided cash of $6.5 million in the first three
months of 1999, compared to using cash of $9.1 million in the first three months
of 1998. This positive change is largely the result of the Company's focus on
reducing its working capital. The use of cash by operating assets and
liabilities decreased from $20.4 million in the first quarter of 1998 to $3.1
million in the first quarter of 1999. Inventory and accounts receivable
provided much of this cash and were partially offset by a use of cash for the
payment of accrued bonuses and customer rebates. The decrease in cash used by
operating assets and liabilities is partially offset by a decrease in earnings,
adjusted for non-cash expenses, of $1.7 million in the first three months of
1999 compared to the same period of 1998. Cash used in investing activities was
$4.9 million and $4.7 million for the three months ended March 31, 1999 and
1998, respectively. The Company spent $1.6 million less on capital expenditures
and $1.6 million more on acquisitions in a comparison of the two periods.
Financing activities provided $2.8 million in cash in the first quarter of 1999,
compared to providing $12.6 million in cash in the first quarter of 1998. Net
borrowings under long-term obligations were $7.4 million less in the 1999 period
compared to the 1998 period.
Liquidity
The Company's principal sources of liquidity are cash flow from operations
and borrowings under the Company's existing bank facility. The Company's
principal uses of cash will be debt service requirements, capital expenditures,
acquisitions and working capital. The Company expects that ongoing requirements
for debt service, capital expenditures and working capital will be funded from
22
<PAGE> 23
operating cash flow and borrowings under its existing bank facility. In
connection with future acquisitions, the Company may require additional funding
which may be provided in the form of additional debt, equity financing or a
combination thereof. There can be no assurance that any such additional
financing will be available to the Company on acceptable terms.
The Company anticipates that its operating cash flow, together with
borrowings under its existing bank facility, will be sufficient to meet its
anticipated future operating expenses, capital expenditures and to service its
debt requirements as they become due. However, the Company's ability to make
scheduled payments of principal of, to pay interest on or to refinance its
indebtedness and to satisfy its other debt obligations will depend upon its
future operating performance, which will be affected by general economic,
financial, competitive, legislative, regulatory, business and other factors
beyond its control.
Year 2000 Issue
The "Year 2000 Issue" is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The operating subsidiaries of the Company have been assembled through a
series of acquisitions beginning in 1987. As such, the Company consists of over
twenty locations operating on a variety of business computer systems. In late
1997 the Company decided to standardize and upgrade all business computer
systems at all but three locations, and as part of this standardization,
address the Year 2000 Issue. The excluded locations are "Year 2000 Ready" and
will convert to the standardized system in early 2000.
In addressing the Year 2000 Issue, the Company is currently evaluating its
computer-based systems, facilities and products and identifying all steps
necessary to determine they are all Year 2000 Ready. The Company is employing a
combination of internal resources and outside consultants to address this
issue. The Company's information technology department is responsible for its
business computers, PC's and related software. General managers of the
Company's manufacturing facilities oversee the Year 2000 Issue at their
respective plants including all engineering computer systems, PC's and related
software, manufacturing equipment and facilities' systems, such as security,
climate control and telecommunication systems. Detailed checklists have been
developed for all of the aforementioned areas which note the review date,
actions required and completion date. The Company has identified systems which
are not Year 2000 Ready, and is in the process of upgrading or replacing those
systems. The Company is currently on schedule to complete these upgrades and
replacements by the year 2000. The Company has completed its assessment of its
products and has identified no Year 2000 Issues. In addition, the Company has
contacted its vendors to determine whether they are Year 2000 Ready, and is in
the process of accumulating those responses. Initial responses indicate most of
the Company's vendors are addressing their Year 2000 Issues and that all
23
<PAGE> 24
critical vendors are either Year 2000 Ready or will be in the near future. As a
precaution, alternative vendors have been identified.
While the Year 2000 Issue is a top priority of the Company and a
significant amount of resources have been allocated to this issue, there can be
no assurance that all of its systems and equipment or its vendors will be Year
2000 Ready. However, at this time, the Company does not believe that its or its
vendors Year 2000 related issues will have a material adverse effect on the
Company's business. In the unlikely event of a systems failure at one of the
Company's facilities, any one of a number of other facilities' systems could be
utilized as a backup system.
The total cost to standardize and upgrade all business computer systems is
currently estimated to be $6.5 million. Through March 31, 1999, the Company has
spent approximately $5.5 million of this total. Given the nature of this
project and the fact that it addresses many issues in addition to preparing the
Company for the Year 2000, it is impractical to attempt to estimate the total
costs specifically related to the Year 2000 Issue. In compliance with generally
accepted accounting principles, costs incurred by the Company for hardware,
software and consultants are capitalized, while costs incurred in training
employees are expensed as incurred. As the process to become Year 2000 Ready
continues, additional costs may be identified that have not yet been
considered. Consequently, the full cost of all upgrades, replacements and
modifications that may be required to become Year 2000 Ready has not yet been
determined.
Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the first quarter of 1999. Refer to
the Company's discussion in its Annual Report on Form 10-K for the year ended
December 31, 1998.
24
<PAGE> 25
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27 - Financial Data Schedule
b) Reports on Form 8-K
None
25
<PAGE> 26
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 and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: May 12, 1999
------------------------
26
<PAGE> 27
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 MFG. LLC
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 and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: May 12, 1999
------------------------
27
<PAGE> 28
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 CAPITAL CORP.
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 and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: May 12, 1999
------------------------
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH QUARTERLY REPORT.
</LEGEND>
<CIK> 0000850660
<NAME> THERMADYNE HOLDINGS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,672
<SECURITIES> 0
<RECEIVABLES> 81,391
<ALLOWANCES> 2,901
<INVENTORY> 121,159
<CURRENT-ASSETS> 214,202
<PP&E> 99,118
<DEPRECIATION> 0
<TOTAL-ASSETS> 411,262
<CURRENT-LIABILITIES> 91,283
<BONDS> 717,967
55,810
0
<COMMON> 36
<OTHER-SE> (505,204)
<TOTAL-LIABILITY-AND-EQUITY> 411,262
<SALES> 130,234
<TOTAL-REVENUES> 130,234
<CGS> 83,635
<TOTAL-COSTS> 83,635
<OTHER-EXPENSES> 29,507
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,742
<INCOME-PRETAX> (694)
<INCOME-TAX> (358)
<INCOME-CONTINUING> (336)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (336)
<EPS-PRIMARY> (0.60)
<EPS-DILUTED> (0.60)
</TABLE>
