<PAGE> 1
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, 2000
--------------------------------------------------
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>
<CAPTION>
Delaware 74-2482571
--------------------------------------------------------------------------------------------------------------------
<S> <C>
(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>
<CAPTION>
Delaware 74-2478452
--------------------------------------------------------------------------------------------------------------------
<S> <C>
(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>
<CAPTION>
Delaware 74-2878453
--------------------------------------------------------------------------------------------------------------------
<S> <C>
(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 v 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
--- ---
The number of shares outstanding of the issuer's common stock, par value $0.01
per share, as of April 28, 2000 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> <C> <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........................13-21
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations............................22-25
Item 3. Quantitative and Qualitative Disclosures of Market Risk........................25
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...............................................26
SIGNATURES........................................................................................27-29
</TABLE>
<PAGE> 3
THERMADYNE HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 17,931 $ 13,321
Accounts receivable, less allowanced for doubtful
accounts of $3,278 and $3,275, respectively 72,209 94,731
Inventories 108,424 100,831
Prepaid expenses and other 6,582 5,954
--------- ------------
Total current assets 205,146 214,837
Property, plant and equipment, at cost, net 88,244 93,811
Deferred financing costs, net 19,996 20,459
Intangibles, at cost, net 36,791 40,170
Deferred income taxes 33,420 29,105
Other assets 2,687 2,014
--------- ------------
Total assets $ 386,284 $ 400,396
========= ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 49,423 $ 41,773
Accrued and other liabilities 31,700 27,052
Accrued interest 2,640 3,080
Income taxes payable 11,850 9,575
Current maturities of long-term obligations 13,855 12,080
--------- ------------
Total current liabilities 109,468 93,560
Long-term obligations, less current maturities 712,622 717,322
Other long-term liabilities 62,223 62,172
Redeemable preferred stock (paid in kind), $0.01 par value,
15,000,000 shares authorized and
2,000,000 shares issued and outstanding 65,488 61,430
Shareholders' deficit:
Common stock, $0.01 par value, 30,000,000 shares authorized,
and 3,590,326 shares issued and outstanding at
June 30, 2000 and December 31, 1999 36 36
Additional paid-in capital (112,239) (111,444)
Accumulated deficit (415,459) (394,819)
Management loans (4,075) (3,966)
Accumulated other comprehensive loss (31,780) (23,895)
--------- ------------
Total shareholders' deficit (563,517) (534,088)
--------- ------------
Total liabilities and shareholders' deficit $ 386,284 $ 400,396
========= ============
</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 Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 135,124 $ 133,465 $ 268,281 $ 263,699
Operating expenses:
Cost of goods sold 86,124 85,190 171,312 168,825
Selling, general and administrative expenses 26,697 25,344 52,237 49,890
Amortization of intangibles 970 1,432 1,894 2,469
Net periodic postretirement benefits 207 1,250 707 2,300
Special charges 12,406 1,535 18,413 4,409
------------ ------------ ---------- ----------
Operating income 8,720 18,714 23,718 35,806
Other income (expense):
Interest expense (20,526) (17,572) (40,055) (35,314)
Amortization of deferred financing costs (826) (898) (1,688) (1,786)
Other, net (443) 938 170 1,782
------------ ------------ ---------- ----------
Gain (loss) before income tax provision (13,075) 1,182 (17,855) 488
Income tax provision -- 3,413 2,785 3,055
------------ ------------ ---------- ----------
Net loss (13,075) (2,231) (20,640) (2,567)
Preferred stock dividends (paid in kind) 2,061 1,815 4,058 3,572
------------ ------------ ---------- ----------
Net loss applicable to common shares $ (15,136) $ (4,046) $ (24,698) $ (6,139)
============ ============ ========== ==========
Per share data:
Basic loss per common share $ (4.21) $ (1.13) $ (6.88) $ (1.73)
Diluted loss per common share $ (4.21) $ (1.13) $ (6.88) $ (1.73)
</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>
Six Months Six Months
Ended Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss $ (20,640) $ (2,567)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities:
Net periodic postretirement benefits 707 2,300
Depreciation 8,513 9,455
Amortization of intangibles 1,894 2,469
Amortization of deferred financing costs 1,688 1,786
Recognition of net operating loss carryforwards -- 3,401
Deferred income taxes (1,046) (1,077)
Loss on asset disposal 6,762
Non-cash interest expense 9,223 6,367
Changes in operating assets and liabilities:
Accounts receivable (5,372) 7,952
Inventories (14,915) 4,600
Prepaid expenses and other (850) 2,693
Accounts payable 7,908 (3,332)
Accrued and other liabilities 4,448 (10,879)
Accrued interest (449) 4,282
Income taxes payable 2,280 (1,094)
Other long-term liabilities (1,512) (2,495)
------------- -------------
Total adjustments 19,279 26,428
------------- -------------
Net cash provided by (used in) operating activities (1,361) 23,861
------------- -------------
Cash flows used in investing activities:
Proceeds from sale of assets 4,563
Capital expenditures, net (10,672) (5,182)
Change in other assets (1,355) (1,389)
Acquisitions, net of cash (1,008) (5,884)
------------- -------------
Net cash used in investing activities (8,472) (12,455)
------------- -------------
Cash flows provided by (used in) financing activities:
Change in long-term receivables 42 (101)
Repayment of long-term obligations (12,912) (2,544)
Borrowing of long-term obligations 2,262 3,356
Issuance of common stock -- 4
Change in accounts receivable securitization 26,943 (1,140)
Financing fees (1,245) --
Other (647) (5,218)
------------- -------------
Net cash provided by (used in) financing activities 14,443 (5,643)
------------- -------------
Net increase in cash and cash equivalents 4,610 5,763
Cash and cash equivalents at beginning of period 13,321 1,319
------------- -------------
Cash and cash equivalents at end of period $ 17,931 $ 7,082
============= =============
</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
and six month periods ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ended
December 31, 2000. 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, 1999.
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>
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
---------- ----------
<S> <C> <C>
Interest paid $ 23,004 $ 16,142
Taxes paid 1,605 689
</TABLE>
6
<PAGE> 7
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
LOSS PER SHARE
The following table sets forth the information used in the computation
of basic and diluted loss per share for the periods indicated.
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Numerator:
Net loss applicable to common shares-
basic and diluted $ (15,136) $ (4,046) $ (24,698) $ (6,139)
============ ============ ========== ==========
Denominator:
Weighted average shares-basic and diluted 3,590,326 3,590,326 3,590,326 3,543,463
============ ============ ========== ==========
Basic loss per common share $ (4.22) $ (1.13) $ (6.88) $ (1.73)
============ ============ ========== ==========
Diluted loss per common share $ (4.22) $ (1.13) $ (6.88) $ (1.73)
============ ============ ========== ==========
</TABLE>
2. ACCOUNTS RECEIVABLE
On January 31, 2000, the Company entered into a trade accounts
receivable securitization agreement whereby it sells on an ongoing
basis participation interests in up to $45,000 of designated accounts
receivable. The amount of participation interests sold under this
financing arrangement is subject to change based on the level of
eligible receivables and restrictions on concentrations of receivables,
and was approximately $26,943 at June 30, 2000. The sold accounts
receivable are reflected as a reduction of accounts receivable on the
June 30, 2000, Consolidated Balance Sheet. Interest expense is incurred
on participation interests at the rate of one-month LIBOR plus 65 basis
points, per annum.
3. INVENTORIES
The composition of inventories was as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
<S> <C> <C>
Raw materials $ 29,251 $ 26,707
Work-in-process 20,721 23,718
Finished goods 60,073 51,278
LIFO reserve (1,621) (872)
---------- ------------
Total $ 108,424 $ 100,831
========== ============
</TABLE>
7
<PAGE> 8
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
4. SEGMENT INFORMATION
The Company has adopted the Financial Accounting Standards Board's
Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information," 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>
Six Months Ended June 30, 2000
Revenue from external customers $ 183,486 $ 29,945 $ 28,926 $ 25,924 $ -- $ 268,281
Intersegment revenues 19,500 8,317 1,062 -- (28,879) --
Operating income (loss) 32,030 1,689 (1,473) (276) (8,252) 23,718
Six Months Ended June 30, 1999
Revenue from external customers $ 176,364 $ 27,012 $ 39,551 $ 20,772 $ -- $ 263,699
Intersegment revenues 19,306 7,023 2,136 -- (28,465) --
Operating income (loss) 44,246 1,566 (1,088) (734) (8,184) 35,806
</TABLE>
8
<PAGE> 9
THERMADYNE HOLDINGS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
5. RELOCATION AND REORGANIZATION
Special charges of $12.4 million and $18.4 million were recorded in the
three and six month periods ended June 30, 2000, respectively. Included
in these amounts are a loss of $6.7 million associated with the
decision to exit a portion of the gas management business and $3.0
million related to changes in senior management. The balance of the
special charges for both periods is related primarily to the
relocation of production to Mexico and Asia. As of June 30, 2000, no
significant payments had been made against severance or other accruals
established in connection with these special charges.
Special charges of $4.4 million were recorded for the first half of
1999. These charges were primarily for headcount reductions and other
site rationalization costs in Australia.
6. COMPREHENSIVE LOSS
During the first six months of 2000 and 1999, total comprehensive loss
amounted to $(28,525) and $(6,828), respectively.
9
<PAGE> 10
THERMADYNE MFG. LLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 17,931 $ 13,321
Accounts receivable, less allowance for doubtful
accounts of $3,278 and $3,275, respectively 72,209 94,731
Inventories 108,424 100,831
Prepaid expenses and other 6,582 5,954
---------- ------------
Total current assets 205,146 214,837
Property plant and equipment, at cost, net 88,244 93,811
Deferred financing costs, net 17,015 17,289
Intangibles, at cost, net 36,791 40,170
Deferred income taxes 30,153 25,838
Other assets 2,687 2,014
---------- ------------
Total assets $ 380,036 $ 393,959
========== ============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 49,423 $ 41,773
Accrued and other liabilities 31,700 27,052
Accrued interest 1,976 2,416
Income taxes payable 11,850 9,575
Current maturities of long-term obligations 13,855 12,080
---------- ------------
Total current liabilities 108,804 92,896
Long-term obligations, less current maturities 553,359 565,247
Other long-term liabilities 62,223 62,172
Shareholders' deficit:
Accumulated deficit (396,804) (385,425)
Accumulated other comprehensive loss (31,780) (23,895)
---------- ------------
Total shareholders' deficit (428,584) (409,320)
Net equity and advances to/from parent 84,234 82,964
---------- ------------
Total liabilities and shareholders' deficit $ 380,036 $ 393,959
========== ============
</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 Six Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 135,124 $ 133,465 $ 268,281 $ 263,699
Operating expenses:
Cost of goods sold 86,124 85,190 171,312 168,825
Selling, general and administrative expenses 26,697 25,344 52,237 49,890
Amortization of intangibles 970 1,432 1,894 2,469
Net periodic postretirement benefits 207 1,250 707 2,300
Special charges 12,406 1,535 18,413 4,409
------------ ------------ ---------- ----------
Operating income 8,720 18,714 23,718 35,806
Other income (expense):
Interest expense (15,898) (13,362) (30,872) (26,955)
Amortization of deferred financing costs (733) (804) (1,501) (1,596)
Other, net (498) 886 61 1,678
------------ ------------ ---------- ----------
Income (loss) before income tax provision (8,409) 5,434 (8,594) 8,933
Income tax provision -- 3,413 2,785 3,055
------------ ------------ ---------- ----------
Net income (loss) $ (8,409) $ 2,021 $ (11,379) $ 5,878
============ ============ ========== ==========
</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>
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
---------- ----------
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income (loss) $ (11,379) $ 5,878
Adjustment to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Net periodic postretirement benefits 707 2,300
Depreciation 8,513 9,455
Amortization of intangibles 1,894 2,469
Amortization of deferred financing costs 1,501 1,596
Recognition of net operating loss carryforwards -- 3,401
Deferred income taxes (4,310) (1,077)
Loss on asset disposal 6,762 --
Non-cash interest expense 2,035 --
Changes in operating assets and liabilities:
Accounts receivable (5,372) 7,952
Inventories (14,915) 4,600
Prepaid expenses and other (850) 2,693
Accounts payable 7,908 (3,332)
Accrued and other liabilities 4,448 (10,879)
Accrued interest (449) 6,274
Income taxes payable 2,280 (1,094)
Other long-term liabilities (1,512) (2,495)
---------- ----------
Total adjustments 8,640 21,863
---------- ----------
Net cash provided by (used in) operating activities (2,739) 27,741
---------- ----------
Cash flows used in investing activities:
Proceeds from sale of assets 4,563 --
Capital expenditures, net (10,672) (5,182)
Change in other assets (1,355) (1,389)
Acquisitions, net of cash (1,008) (5,884)
---------- ----------
Net cash used in investing activities (8,472) (12,455)
---------- ----------
Cash flows provided by financing activities:
Change in long-term receivables 42 (101)
Repayment of long-term obligations (12,912) (2,544)
Borrowing of long-term obligations 2,262 3,356
Change in accounts receivable securitization 26,943 (1,140)
Financing fees (1,245) --
Change in net equity of parent 1,270 (3,984)
Other (539) (5,110)
---------- ----------
Net cash provided by (used in) financing activities 15,821 (9,523)
---------- ----------
Net increase in cash and cash equivalents 4,610 5,763
Cash and cash equivalents at beginning of period 13,321 1,319
---------- ----------
Cash and cash equivalents at end of period $ 17,931 $ 7,082
========== ==========
</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 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 six
month period ended June 30, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000. 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, 1999.
CO-ISSUER
Thermadyne Capital, a wholly-owned subsidiary of Thermadyne LLC, was
formed solely for the purpose of serving as a 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 were as follows:
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
---------- ----------
<S> <C> <C>
Interest paid $ 21,090 $ 14,150
Taxes paid 1,605 689
</TABLE>
2. ACCOUNTS RECEIVABLE
On January 31, 2000, the Company entered into a trade accounts
receivable securitization agreement whereby it sells on an ongoing
basis participation interests in up to $45,000 of designated accounts
receivable. The amount of participation interests sold under this
financing arrangement is subject to change based on the level of
eligible receivables and restrictions on concentrations of receivables,
and was approximately $26,943 at June 30, 2000. The sold accounts
receivable are reflected as a reduction of accounts receivable on the
June 30, 2000, Consolidated Balance Sheet. Interest expense is incurred
on participation interests at the rate of one-month LIBOR plus 65 basis
points, per annum.
3. INVENTORIES
The composition of inventories was as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- ------------
<S> <C> <C>
Raw materials $ 29,251 $ 26,707
Work-in-process 20,721 23,718
Finished goods 60,073 51,278
LIFO reserve (1,621) (872)
---------- ------------
Total $ 108,424 $ 100,831
========== ============
</TABLE>
14
<PAGE> 15
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
4. SEGMENT INFORMATION
The Company has adopted the Financial Accounting Standards Board
Statement No. 131, "Disclosures about Segments of an Enterprise and
Related Information," 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>
Six Months Ended June 30, 2000
Revenue from external customers $ 183,486 $ 29,945 $ 28,926 $ 25,924 $ -- $ 268,281
Intersegment revenues 19,500 8,317 1,062 -- (28,879) --
Operating income (loss) 32,030 1,689 (1,473) (276) (8,252) 23,718
Six Months Ended June 30, 1999
Revenue from external customers $ 176,364 $ 27,012 $ 39,551 $ 20,772 $ -- $ 263,699
Intersegment revenues 19,306 7,023 2,136 (28,465) --
Operating income (loss) 44,246 1,566 (1,088) (734) (8,184) 35,806
</TABLE>
5. RELOCATION AND REORGANIZATION
Special charges of $12.4 million and $18.4 million were recorded in the
three and six month periods ended June 30, 2000, respectively. Included
in these amounts are a loss of $6.7 million of costs associated with
the decision to exit a portion of the gas management business and $3.0
million related to changes in senior management The balance of special
charges for both periods is related primarily to the relocation of
production to Mexico and Asia. As of June 30, 2000, no significant
payments had been made against severance or other accruals established
in connection with these special charges.
15
<PAGE> 16
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
Special charges of $4.4 million were recorded for the first half of
1999. These charges were primarily for headcount reductions and other
site rationalization costs in Australia.
6. COMPREHENSIVE INCOME (LOSS)
During the first three months of 2000 and 1999, total comprehensive
income (loss) amounted to $(19,264) and $1,617, respectively.
7. 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
JUNE 30, 2000
<TABLE>
<CAPTION>
Thermadyne Total Total
LLC Guarantors Non-Guarantors Eliminations Total
---------- ---------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ -- $ 5,791 $ 12,140 $ -- $ 17,931
Restricted cash -- -- 17,781 (17,781) --
Accounts receivable -- (322) 98,319 (25,788) 72,209
Inventories -- 60,480 47,944 108,424
Prepaid expenses and other -- 3,678 3,175 (271) 6,582
---------- ---------- -------------- ------------ ---------
Total current assets -- 69,627 179,359 (43,840) 205,146
Property, plant and equipment, at cost, net -- 44,422 43,822 -- 88,244
Deferred financing costs, net 16,861 -- 154 -- 17,015
Intangibles, at cost, net -- 10,351 26,440 -- 36,791
Deferred income taxes -- 29,386 767 -- 30,153
Investment in and advances to/from subsidiaries 191,414 14,141 -- (205,555) --
Other assets -- 1,015 1,672 -- 2,687
---------- ---------- -------------- ------------ ---------
Total assets $ 208,275 $ 168,942 $ 252,214 $ (249,395) $ 380,036
========== ========== ============== ============ =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ -- $ 22,935 $ 26,488 $ -- $ 49,423
Accrued and other liabilities -- 23,967 7,733 -- 31,700
Accrued interest 1,967 3 6 -- 1,976
Income taxes payable -- 13,614 (1,764) -- 11,850
Current maturities of long-term obligations 11,050 279 2,526 -- 13,855
---------- ---------- -------------- ------------ ---------
Total current liabilities 13,017 60,798 34,989 -- 108,804
Long-term obligations, less current maturities 507,828 15,889 74,642 (45,000) 553,359
Other long-term liabilities -- 51,475 10,748 -- 62,223
Shareholders' equity (deficit): --
Retained earnings (accumulated deficit) (396,804) (285,549) (51,432) 336,981 (396,804)
Accumulated other comprehensive loss -- (6,830) (24,950) -- (31,780)
---------- ---------- -------------- ------------ ---------
Total shareholders' equity (deficit) (396,804) (292,379) (76,382) 336,981 (428,584)
Net equity and advances to/from subsidiaries 84,234 333,159 208,217 (541,376) 84,234
---------- ---------- -------------- ------------ ---------
Total liabilities and shareholders' equity (deficit) $ 208,275 $ 168,942 $ 252,214 $ (249,395) $ 380,036
========== ========== ============== ============ =========
</TABLE>
17
<PAGE> 18
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 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 $ -- $ 2,566 $ 10,755 $ -- $ 13,321
Accounts receivable -- 51,895 42,836 -- 94,731
Inventories -- 59,042 41,789 -- 100,831
Prepaid expenses and other -- 2,853 3,101 -- 5,954
---------- ---------- -------------- ------------ ---------
Total current assets -- 116,356 98,481 -- 214,837
Property, plant and equipment, at cost, net -- 43,985 49,826 -- 93,811
Deferred financing costs, net 17,020 -- 269 -- 17,289
Intangibles, at cost, net -- 11,937 28,233 -- 40,170
Deferred income taxes -- 25,046 792 -- 25,838
Investment in and advances to/from subsidiaries 209,719 -- -- (209,719) --
Other assets -- 692 1,322 -- 2,014
---------- ---------- -------------- ------------ ---------
Total assets $ 226,739 $ 198,016 $ 178,923 $ (209,719) $ 393,959
========== ========== ============== ============ =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ -- $ 18,141 $ 23,632 $ -- $ 41,773
Accrued and other liabilities -- 18,060 8,992 -- 27,052
Accrued interest 2,400 -- 16 -- 2,416
Income taxes payable -- 11,725 (2,150) -- 9,575
Current maturities of long-term obligations 9,800 253 2,027 -- 12,080
---------- ---------- -------------- ------------ ---------
Total current liabilities 12,200 48,179 32,517 -- 92,896
Long-term obligations, less current maturities 517,000 16,906 31,341 -- 565,247
Other long-term liabilities -- 51,797 10,375 -- 62,172
Shareholders' equity (deficit):
Retained earnings (accumulated deficit) (385,425) (279,825) (46,716) 326,541 (385,425)
Accumulated other comprehensive loss -- (7,742) (16,153) -- (23,895)
---------- ---------- -------------- ------------ ---------
Total shareholders' equity (deficit) (385,425) (287,567) (62,869) 326,541 (409,320)
Net equity and advances to/from subsidiaries 82,964 368,701 167,559 (536,260) 82,964
---------- ---------- -------------- ------------ ---------
Total liabilities and shareholders' equity (deficit) $ 226,739 $ 198,016 $ 178,923 $ (209,719) $ 393,959
========== ========== ============== ============ =========
</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 JUNE 30, 2000
<TABLE>
<CAPTION>
Thermadyne Total Total
LLC Guarantors Non-Guarantors Eliminations Total
---------- ---------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 110,106 $ 52,601 $ (27,583)(a) $ 135,124
Operating expenses:
Cost of goods sold -- 70,828 43,227 (27,931)(a) 86,124
Selling, general and administrative expenses -- 18,682 8,015 -- 26,697
Amortization of intangibles -- 464 506 -- 970
Net periodic postretirement benefits -- 207 -- -- 207
Special charges -- 12,083 323 -- 12,406
---------- ---------- -------------- ------------ ---------
Operating income -- 7,842 530 348 8,720
Other income (expense):
Interest expense -- (14,240) (2,484) 826 (15,898)
Amortization of deferred financing costs -- (732) (1) -- (733)
Equity in net loss of subsidiaries (8,409) -- -- 8,409 --
Other -- (265) 90 (1,135) (498)
---------- ---------- -------------- ------------ ---------
Income (loss) before income tax provision (8,409) (7,395) (1,053) 8,448 (8,409)
Income tax provision (benefit) -- (873) 873 -- --
---------- ---------- -------------- ------------ ---------
Net income (loss) $ (8,409) $ (6,522) $ (1,926) $ 8,448 $ (8,409)
========== ========== ============== ============ =========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Thermadyne Total Total
LLC Guarantors Non-Guarantors Eliminations Total
---------- ---------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 107,524 $ 53,530 $ (27,589)(a) $ 133,465
Operating expenses:
Cost of goods sold -- 68,470 44,253 (27,533)(a) 85,190
Selling, general and administrative expenses -- 16,939 8,405 -- 25,344
Amortization of intangibles -- 786 646 -- 1,432
Net periodic postretirement benefits -- 1,250 -- -- 1,250
Special charges -- 535 1,000 -- 1,535
---------- ---------- -------------- ------------ ---------
Operating income (loss) -- 19,544 (774) (56) 18,714
Other income (expense):
Interest expense -- (12,221) (1,849) 708 (13,362)
Amortization of deferred financing costs -- (743) (61) -- (804)
Equity in net loss of subsidiaries 2,021 -- -- (2,021) --
Other -- 3,012 (251) (1,875) 886
---------- ---------- -------------- ------------ ---------
Income (loss) before income tax provision 2,021 9,592 (2,935) (3,244) 5,434
Income tax provision -- 577 2,836 -- 3,413
---------- ---------- -------------- ------------ ---------
Net income (loss) $ 2,021 $ 9,015 $ (5,771) $ (3,244) $ 2,021
========== ========== ============== ============ =========
</TABLE>
(a) Reflects the elimination of intercompany sales among all the Company's
subsidiaries
19
<PAGE> 20
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Thermadyne Total Total
LLC Guarantors Non-Guarantors Eliminations Total
---------- ---------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 220,745 $ 99,447 $ (51,911)(a) $ 268,281
Operating expenses:
Cost of goods sold -- 140,614 82,683 (51,985)(a) 171,312
Selling, general and administrative expenses -- 36,385 15,852 -- 52,237
Amortization of intangibles -- 928 966 -- 1,894
Net periodic postretirement benefits -- 707 -- -- 707
Special charges -- 17,636 777 -- 18,413
---------- ---------- -------------- ------------ ---------
Operating income (loss) -- 24,475 (831) 74 23,718
Other income (expense):
Interest expense -- (28,132) (4,398) 1,658 (30,872)
Amortization of deferred financing costs -- (1,465) (36) -- (1,501)
Equity in net loss of subsidiaries (11,379) -- -- 11,379 --
Other -- 841 1,891 (2,671) 61
---------- ---------- -------------- ------------ ---------
Income (loss) before income tax provision (11,379) (4,281) (3,374) 10,440 (8,594)
Income tax provision -- 1,443 1,342 -- 2,785
---------- ---------- -------------- ------------ ---------
Net income (loss) $ (11,379) $ (5,724) $ (4,716) $ 10,440 $ (11,379)
========== ========== ============== ============ =========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Thermadyne Total Total
LLC Guarantors Non-Guarantors Eliminations Total
---------- ---------- -------------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 212,707 $ 100,857 $ (49,865)(a) $ 263,699
Operating expenses:
Cost of goods sold -- 134,838 83,922 (49,935)(a) 168,825
Selling, general and administrative expenses -- 33,883 16,007 -- 49,890
Amortization of intangibles -- 1,284 1,185 -- 2,469
Net periodic postretirement benefits -- 2,300 -- -- 2,300
Special charges -- 1,471 2,938 -- 4,409
---------- ---------- -------------- ------------ ---------
Operating income (loss) -- 38,931 (3,195) 70 35,806
Other income (expense):
Interest expense -- (24,168) (4,267) 1,480 (26,955)
Amortization of deferred financing costs -- (1,484) (112) -- (1,596)
Equity in net loss of subsidiaries 5,878 -- -- (5,878) --
Other -- 5,390 30 (3,742) 1,678
---------- ---------- -------------- ------------ ---------
Income (loss) before income tax provision 5,878 18,669 (7,544) (8,070) 8,933
Income tax provision -- 307 2,748 -- 3,055
---------- ---------- -------------- ------------ ---------
Net income (loss) $ 5,878 $ 18,362 $ (10,292) $ (8,070) $ 5,878
========== ========== ============== ============ =========
</TABLE>
(a) Reflects the elimination of intercompany sales among all the Company's
subsidiaries
20
<PAGE> 21
THERMADYNE MFG. LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS)
(UNAUDITED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
<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 $ (11,812) $ 8,587 $ (9,954) $ 10,440 $ (2,739)
Cash flows provided by (used in) investing activities:
Proceeds from sale of assets -- -- 4,563 -- 4,563
Capital expenditures, net -- (7,461) (3,211) -- (10,672)
Change in other assets -- (421) (934) -- (1,355)
Acquisitions, net of cash -- -- (1,008) -- (1,008)
---------- ---------- -------------- ------------ --------
Net cash used in investing activities -- (7,882) (590) -- (8,472)
Cash flows provided by (used in) financing activities:
Changes in long-term receivables -- 42 -- -- 42
Repayment of long-term obligations (9,957) (125) (2,830) -- (12,912)
Borrowing of long-term obligations -- -- 2,262 -- 2,262
Change in accounts receivable securitization -- 26,943 -- -- 26,943
Financing fees -- (1,245) -- -- (1,245)
Change in net equity and advances to/from
subsidiaries 21,769 (23,174) 13,115 (10,440) 1,270
Other -- 79 (618) -- (539)
---------- ---------- -------------- ------------ --------
Net cash provided by (used in) financing activities 11,812 2,520 11,929 (10,440) 15,821
---------- ---------- -------------- ------------ --------
Net increase in cash and cash equivalents -- 3,225 1,385 -- 4,610
Cash and cash equivalents at beginning of period -- 2,566 10,755 -- 13,321
---------- ---------- -------------- ------------ --------
Cash and cash equivalents at end of period $ -- $ 5,791 $ 12,140 $ -- $ 17,931
========== ========== ============== ============ ========
</TABLE>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 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 $ 12,372 $ 26,004 $ (2,565) $ (8,070) $ 27,741
Cash flows provided by (used in) investing activities: --
Capital expenditures, net -- (2,720) (2,462) -- (5,182)
Change in other assets -- (1,831) 442 -- (1,389)
Acquisitions, net of cash -- (3,000) (2,884) -- (5,884)
---------- ---------- -------------- ------------ --------
Net cash used in investing activities -- (7,551) (4,904) -- (12,455)
Cash flows provided by (used in) financing activities:
Changes in long-term receivables -- (276) 175 -- (101)
Repayment of long-term obligations (575) (119) (1,850) -- (2,544)
Borrowing of long-term obligations 3,013 -- 343 -- 3,356
Change in accounts receivable securitization -- (1,140) -- -- (1,140)
Financing fees -- -- -- -- --
Change in net equity and advances to/from subsidiaries (14,810) (7,283) 10,039 8,070 (3,984)
Other -- (6,935) 1,825 -- (5,110)
---------- ---------- -------------- ------------ --------
Net cash provided by (used in) financing activities (12,372) (15,753) 10,532 8,070 (9,523)
---------- ---------- -------------- ------------ --------
Net increase in cash and cash equivalents -- 2,700 3,063 -- 5,763
Cash and cash equivalents at beginning of period -- (1,051) 2,370 -- 1,319
---------- ---------- -------------- ------------ --------
Cash and cash equivalents at end of period $ -- $ 1,649 $ 5,433 $ -- $ 7,082
========== ========== ============== ============ ========
</TABLE>
21
<PAGE> 22
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 JUNE 30, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
Net sales for the three months ended June 30, 2000 were $135.1 million compared
to $133.5 million for the same period in 1999, an increase of 1.2%. Domestic
sales ended the quarter at $85.3 million, or 3.0% over the comparable period in
1999. The Company experienced a general increase in demand across most of its
product lines during the quarter, which was boosted in some cases by new product
introductions. The international business, with sales of $49.9 million during
the quarter was down a modest 1.6% from the second quarter of 1999. Lackluster
sales in Australia offset sales growth in most other geographic regions. The
European business was up 9.2% for the quarter followed by Latin America and
Canada, which were both up over 1999 by 6.9%. Australia continues to struggle
against low-cost imports, unfavorable exchange rates, and an overall weak
industrial economy. During the second quarter the Australian business had an
8.3% sales decline compared to the same period last year due simply to the
strengthening of the U.S. dollar.
22
<PAGE> 23
Cost of goods sold as a percentage of sales was 63.7% for the second quarter
compared to 63.8% for the same three-month period in 1999. This modest
improvement is the result of the cost containment efforts being made by the
Company.
Selling, general and administrative expenses were $26.7 million during the three
months ended June 30, 2000, or 5.3 % over the comparable period in 1999. A
significant portion of the increase can be attributed to increased spending on
sales and marketing activities. As a percentage of sales selling, general and
administrative costs were 19.8% for the second quarter versus 19.0% for the same
period last year.
Special charges of $12.4 million recorded during the three months ended June 30,
2000, consist of costs related to the relocation of production to Mexico and
Asia, costs incurred in connection with a change in senior management, and a
loss recognized in connection with the Company's decision to discontinue a
portion of its gas management business. Special charges of $1.5 million recorded
in the second quarter of 1999 relate primarily to factory rationalization costs
in Australia and related headcount reductions.
Interest expense was $20.5 million during the second quarter of 2000 compared to
$17.6 million for the same period last year. Higher interest rates and changes
in the Company's long-term debt mix have combined to increase the Company's
average interest cost from 9.8% for the three months ended June 30, 1999 to
11.3% for the same period this year.
No tax benefit or provision was recorded during the second quarter on a pre-tax
loss of $13.1 million. This compares to a tax provision of $3.4 million on
pre-tax income of $1.2 million for the second quarter of 1999.
Adjusted EBITDA was $26.6 million for the three months ended June 30, 2000 or
19.7% of sales. This compares to $28.3 million, or 21.2% of sales, for the same
period in 1999.
SIX MONTHS ENDED JUNE 30, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
Net sales for the first six months of 2000 were $268.3 million which is 1.7%
more than the $263.7 million reported during the same period in 1999. Domestic
sales were 3.8% higher than the first half of 1999, ending the six-month period
at $171.0 million. The Company experienced good demand in all of its core
product lines during the first half of the year. International sales ended the
first half at $97.3 million, a modest 1.7% decline from the same period in 1999.
The performance of the Australian business has been hampered by a soft economy,
unfavorable exchange rates, and low cost imports, and outweighed sales gains of
10.9%, 20.4%, and 8.1% in Europe, Latin America, and Canada, respectively. Less
favorable exchange rates are affecting virtually all international markets and
resulted in a $5.0 million decrease in international sales during the first half
of 2000 compared to the same period in 1999. Absent this negative effect from
exchange rates international sales would have been up 3.4% over the first six
months of 1999.
Cost of goods sold as a percentage of sales declined slightly from 64.0% to
63.9% with this improvement resulting primarily from ongoing cost reduction
initiatives.
Selling, general and administrative expenses were $52.2 million for the quarter
which is 4.7 % over the $49.9 million reported for the same six-month period
last year. Of the $2.3 million increase approximately $1.0 million resulted from
increased expenditures on sales and marketing activities. As a percentage of
sales selling, general and administrative expenses were 19.5% and 18.9% for the
six month periods ended June 30, 2000 and 1999, respectively.
23
<PAGE> 24
Special charges of $18.4 million during the first six months of 2000 are
comprised of costs related to the relocation of production to Mexico and Asia, a
loss recognized as a result of the decision to exit a portion of the gas
management business, and costs incurred related to changes in senior management.
Special charges of $4.4 million were recorded in the first half of 1999 and
resulted primarily from headcount reductions and other site rationalization
costs in Australia.
Interest expense increased to $40.1 million for the six months ended June 30,
2000, from $35.3 million for the same period last year. Higher interest rates
have resulted in a $1.4 million increase in expense related to the Company's
floating rate U.S. bank debt in spite of an average principal balance that was
$24.4 million less in the first half of 2000 compared to the first six months of
1999. In addition, the Company's discount debentures and junior subordinated
notes continue to accrete and had combined interest costs of $9.2 million during
the six months ended June 30, 2000, compared to $6.4 million for the same
six-month period in 1999.
An income tax provision of $2.8 million was recorded on a pre-tax loss of $17.9
million during the first half of 2000 which compares to a provision of $3.1
million on a pre-tax income of $.5 million for the same period last year.
Adjusted EBITDA for the six months ended June 30, 2000 was $53.2 million, or
19.8% of sales, and compares to $54.4 million, 20.6% of sales, for the same
six-month period last year.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL AND CASH FLOWS
Operating activities used cash of $1.4 million during the six month period ended
June 30, 2000, which compares to cash provided of $23.9 million during the same
time period in 1999. Operating assets and liabilities used cash of $8.5 million
during the first half of 2000 compared to cash provided of $1.7 million during
the same period last year. This change relates primarily to increased inventory
levels being maintained as production is relocated to Mexico and Asia. Also
contributing to the difference in cash used or provided by operating activities
was a net loss of $20.6 million for the first half of 2000 compared to a net
loss of $2.6 million during the same six month period in 1999. The increase in
net loss resulted primarily from special charges and higher interest costs.
Investing activities used $8.5 million of cash during the first six months of
2000, a decrease of $4.0 million from the comparable period in 1999. Capital
expenditures used $10.7 million during the first six months of 2000 compared to
$5.2 million in the first half of last year. The Company also received proceeds
of approximately $4.6 million during the six months ended June 30, 2000, from
the sale of property in Australia. Cash used for acquisitions was $1.0 million
in the first six months of 2000, which is $4.8 million less than the same period
last year. Financing activities provided $14.4 million during the six months
ended June 30, 2000, compared to a use of $5.6 million for the first half of
1999. This increase in cash provided resulted mainly from the Company's accounts
receivable securitization program which provided $28.1 million more in cash
during the six months ended June 30, 2000 when compared to the same period in
1999. During the fourth quarter of 1999 the Company's old securitization program
was repaid and the new program did not commence until January 2000.
24
<PAGE> 25
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
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
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 and capital expenditures and to service its debt
requirements as they become due. However, the Company's ability to make
scheduled payments of principal, 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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK
There have been no material changes in the first half of 2000. Refer to the
Company's discussion in its Annual Report on Form 10-K for the year ended
December 31, 1999.
25
<PAGE> 26
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
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 HOLDINGS CORPORATION
By: /s/ Karl R. Wyss
---------------------------------
Karl R. Wyss
Chairman of the Board 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: August 14, 2000
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 MFG. LLC
By: /s/ KARL R. WYSS
---------------------------------
Karl R. Wyss
Chairman of the Board 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: August 14, 2000
28
<PAGE> 29
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/ KARL R. WYSS
---------------------------------
Karl R. Wyss
Chairman of the Board 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: August 14, 2000
29
<PAGE> 30
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>