THERMADYNE HOLDINGS CORP /DE - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 0-23378

THERMADYNE HOLDINGS CORPORATION
(Exact name of Registrant as Specified in its Charter)

DELAWARE 74-2482571
(State or Other Jurisdiction of Incorporation or
Organization) (I.R.S. Employer Identification No.)

COMMISSION FILE NUMBER 333-57457

THERMADYNE MFG. LLC
(Exact name of Registrant as Specified in its Charter)

DELAWARE 74-2878452
(State or Other Jurisdiction of Incorporation or
Organization) (I.R.S. Employer Identification No.)

COMMISSION FILE NUMBER 333-57457

THERMADYNE CAPITAL CORP.
(Exact name of Registrant as Specified in its Charter)

DELAWARE 74-2878453
(State or Other Jurisdiction of Incorporation or
Organization) (I.R.S. Employer Identification No.)

16052 SWINGLEY RIDGE RD., SUITE 300
CHESTERFIELD, MISSOURI 63017
(Address of Principal Executive Offices) (ZIP Code)

Registrant's telephone number, including area code:
(636) 728-3000

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:
TITLE OF CLASS
Common Stock, par value $0.01 per share

Indicate by checkmark whether the registrants: (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by checkmark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrants are accelerated filers (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X]

State the aggregate market value of the voting and non-voting common equity
held by non-affiliates computed by reference to the price at which the common
equity was last sold, or the average bid and asked price of such common equity,
as of the last business day of the registrant's most recently completed second
fiscal quarter: approximately $80,000 based on the closing sales price of the
Common Stock, on March 1, 2003.

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 3,590,286 shares of
Common Stock, outstanding at March 1, 2003.

Thermadyne Mfg. LLC and Thermadyne Capital Corp. meet the conditions set
forth in General Instruction I 1(a) and (b) of Form 10-K and are therefore
filing this form with the reduced disclosure format.

DOCUMENTS INCORPORATED BY REFERENCE:
NONE
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

The statements in this Annual Report on Form 10-K 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 Annual 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.

PART I

ITEM 1. BUSINESS

GENERAL

Thermadyne Holdings Corporation, a Delaware corporation ("Thermadyne" or
the "Company"), is a leading global manufacturer of cutting and welding products
and accessories. The Company manufactures a broad range of gas (oxy-fuel) and
electric arc cutting and welding products that are ultimately sold to end-user
customers principally engaged in the aerospace, automotive, construction, metal
fabrication, mining, mill and foundry, petroleum and shipbuilding industries.
Thermadyne Mfg. LLC ("Thermadyne LLC") is wholly owned by, and the principal
operating subsidiary of, the Company, and Thermadyne Capital Corp. ("Thermadyne
Capital") is a wholly owned subsidiary of Thermadyne LLC.

BANKRUPTCY FILING

On November 19, 2001, the Company and substantially all of its domestic
subsidiaries, including Thermadyne LLC and Thermadyne Capital (collectively, the
"Debtors"), filed voluntary petitions for relief under Chapter 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for the Eastern
District of Missouri (the "Court"). The filing resulted from insufficient
liquidity, and was determined to be the most efficient and favorable alternative
to restructure the Company's balance sheet. Since 1998, the Company's operating
results have been negatively impacted by a weak industrial economy in the U.S.
as well as difficult economic conditions in most of its foreign markets. The
deterioration of operating results and liquidity made it increasingly difficult
for the Company to meet all of its debt service obligations. Prior to filing
Chapter 11, the Company failed to make the semi-annual interest payments on the
10.75% subordinated notes, due November 1, 2003 (the "Subordinated Notes"),
which were due on May 1 and November 1, 2001, and totaled approximately $4.0
million. In addition, the Company failed to make an interest payment in the
amount of $10.2 million related to the 9.875% senior subordinated notes, due
June 1, 2008 (the "Senior Subordinated Notes"), which was due on June 1, 2001.
The Bankruptcy Code generally prohibits the Company from making payments on
unsecured, pre-petition debt, including the Senior Subordinated Notes and the
Subordinated Notes, except pursuant to a confirmed plan of reorganization. The
Company is in possession of its properties and assets and continues to manage
the business as a debtor-in-possession subject to the supervision of the Court.

On January 8, 2002, the Court entered the final order approving a new $60
million debtor-in-possession credit facility among Thermadyne LLC, as borrower,
the Company and certain U.S. subsidiaries as guarantors, and a syndicate of
lenders with ABN AMRO Bank N.V. as agent (the "DIP Facility".) Prior to the
final order, on November 21, 2001, the Court entered an interim order
authorizing the Debtors to use up to $25 million of the DIP Facility for loans
and letters of credit. On November 19, 2002, the Court entered a final order
amending the DIP Facility. The amendment extended the expiration date to May 23,
2003, and lowered the total capacity from $60 million to $50 million. All other
terms of the DIP Facility remained substantially unchanged. The DIP Facility
expires on the earlier of the consummation of a plan of reorganization or May
23, 2003. If a plan of reorganization is not consummated by May 23, 2003, the
Company will need to seek an extension of the maturity of the DIP Facility. The
DIP Facility is secured by substantially all the assets of the Debtors,
including a pledge of the capital stock of substantially all their subsidiaries,
subject to

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certain limitations with respect to foreign subsidiaries. Actual borrowing
availability is subject to a borrowing base calculation. The amount available to
the Company under the DIP Facility is equal to the sum of approximately 85% of
eligible accounts receivable, 50% of eligible inventory and 72% of eligible
fixed assets. As of December 31, 2002, the Company's eligible accounts
receivable, inventories and fixed assets supported access to the full amount of
the DIP Facility. As of December 31, 2002, the Company had borrowed $10.2
million and issued letters of credit of $9.5 million under the DIP Facility. The
DIP Facility contains financial covenants, including minimum levels of EBITDA
(defined as net income or loss plus depreciation, amortization of goodwill,
amortization of intangibles, net periodic postretirement benefits expense,
income taxes, amortization of deferred financing costs, any net loss realized in
connection with the sale of any asset, any extraordinary loss or the non-cash
portion of non-recurring expenses, and reorganization costs), and other
customary provisions.

As of December 1, 2001, the Company discontinued accruing interest on the
Senior Subordinated Notes, the Subordinated Notes, the 12.5% debentures, due
June 1, 2008 (the "Debentures"), and the 15% junior subordinated notes, due
December 15, 2009 (the "Junior Notes"), and ceased accruing dividends on its
redeemable preferred stock. Contractual interest on the Senior Subordinated
Notes, the Subordinated Notes, the Debentures and the Junior Notes for the year
ended December 31, 2002, was $20.4 million, $4.0 million, $18.9 million and $5.3
million, respectively. No interest was recorded for the Senior Subordinated
Notes, the Subordinated Notes, the Debentures or the Junior Notes during 2002.
For the year ended December 31, 2001, contractual interest on the Senior
Subordinated Notes, the Subordinated Notes, the Debentures and the Junior Notes
totalled $45.8 million, of which $41.9 million was recorded. Contractual
dividends for the redeemable preferred stock were $10.8 million for the year
ended December 31, 2002, of which none was recorded. For the year ended December
31, 2001, contractual dividends for the redeemable preferred stock were $9.5
million, which compares to recorded dividends of $8.7 million. As part of the
Court order approving the DIP Facility, the Company was required to continue
making periodic interest payments on its old syndicated senior secured credit
agreement (the "Old Credit Facility.") This order did not approve the payment of
any principal outstanding under the Old Credit Facility as of the petition date,
or the payment of any future mandatory amortization of the loans. In total,
contractual interest on the Company's obligations was $71.2 million and $80.3
million for the years ended December 31, 2002 and 2001, respectively which was
$48.6 million and $4.0 million in excess of reported interest, respectively.

Pursuant to the provisions of the Bankruptcy Code, substantially all
actions to collect upon any of the Debtors' liabilities as of the petition date
or to enforce pre-petition date contractual obligations were automatically
stayed. Absent approval from the Court, the Debtors are prohibited from paying
pre-petition obligations. However, the Court has approved payment of certain
pre-petition liabilities such as employee wages and benefits and certain other
pre-petition obligations. Additionally, the Court has approved the retention of
legal and financial professionals. Claims against the Debtors had to be filed
with the Court on or before April 19, 2002. As debtor-in-possession, the Debtors
have the right, subject to Court approval and certain other conditions, to
assume or reject any pre-petition executory contracts and unexpired leases.
Parties affected by such rejections may file pre-petition claims with the Court
in accordance with bankruptcy procedures.

On January 17, 2003, the Company filed with the Court its First Amended and
Restated Plan of Reorganization (the "Plan of Reorganization") which provides
for, among other things the restructuring of the Company's balance sheet to
significantly strengthen the Company's financial position.

The Company expects the Court to confirm the Plan of Reorganization early
in the second quarter of 2003. The Plan of Reorganization was filed with the SEC
on Form 8-K February 6, 2003. Once the Court confirms the Plan of Reorganization
and the Company satisfies the conditions precedent to effectiveness of the Plan
of Reorganization, as described in the Plan of Reorganization, the Company will
then consummate the Plan of Reorganization and emerge from Chapter 11.
Management anticipates that the consummation and effectiveness of the Plan of
Reorganization will occur in the second calendar quarter of 2003.

The Plan of Reorganization provides for a substantial reduction of the
Company's long-term debt. Under the plan, the Company's total debt would
aggregate approximately $230 million, versus the nearly $800 mil-

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lion in debt and $79 million in preferred stock when the Company filed for
Chapter 11 protection in November 2001. The Plan of Reorganization provides for
treatment to the various classes of claims and equity interests as follows (as
is more fully described in the Plan of Reorganization):

Administrative Expense Claims, Priority Tax Claims and the Class 1 Other
Priority Claims (as each such class, and all classes described herein, are more
fully described in the Plan or Reorganization) remain unaffected by the Chapter
11 cases and are to be paid in full. The Class 3 Other Secured Claims are also
unimpaired by the Chapter 11 cases and the holders of such claims will continue
to retain their liens.

The pre-petition senior secured lenders (Class 2) will exchange their
approximately $365 million in debt and outstanding letters of credit for up to
approximately 94.5% of the new common stock of the Company (subject to reduction
for shares of the Company's new common stock acquired pursuant to the
subscription offering referenced below), the cash proceeds realized from the
subscription offering, $180 million in Senior Debt Notes, and Series C Warrants
exercisable for additional shares of new common stock of the Company. Under
certain circumstances, up to an additional $23 million in Senior Debt Notes may
be issued to the pre-petition senior secured lenders in substitution for up to
12.3% of the new common stock of the Company. The pre-petition senior lenders
have agreed to transfer the Series C Warrants to certain current Company equity
holders.

General Unsecured Creditors (Class 4) will receive distributions of cash
equal to the lesser of (1) a holder's pro rata share of $7,500,000 and (2) fifty
percent (50%) of such holder's claim (estimated by the Company to provide a
recovery on such claims of 30% to 37% of the amount of such claims.)

The 9 7/8% Senior Subordinated Note Holders (Class 5) will exchange their
approximately $230 million in debt and accrued interest for approximately 5.5%
of the new common stock of the Company, with the opportunity to subscribe for
more shares through the subscription offering held pursuant to the Plan of
Reorganization, and Series A Warrants and Series B Warrants exercisable for
additional shares of new common stock of the Company.

The Junior Subordinated Note Claims, the 10.75% Senior Subordinated Note
Claims and the 12 1/2% Senior Discount Debenture Claims (Class 6, Class 7 and
Class 8, respectively) in the aggregate amount of approximately $220 million
will not receive any distribution under the Plan of Reorganization, but will
have the opportunity to participate in the subscription offering for shares of
new common stock of the reorganized Company.

The Thermadyne Holdings Equity Interests (Class 9), which includes the
existing common and preferred stock of the Company, will be cancelled and the
holders of such interests will not receive any distribution pursuant to the Plan
of Reorganization.

In connection with the proposed Plan of Reorganization, the Company will
issue the following:

- Senior Debt Notes in the aggregate amount of up to $203 million;

- Up to 13,300,000 shares of common stock of the reorganized Company;

- 1,157,000 Series A Warrants;

- 700,000 Series B Warrants; and

- 271,429 Series C Warrants.

Upon effectiveness of the Plan of Reorganization, the Company will use its
proposed senior secured credit facility in the aggregate amount of $50 million
to pay the DIP Facility, for the payment of various pre-petition obligations,
and for general working capital purposes.

Absent a successful restructuring of the Company's balance sheet,
substantial doubt exists about the Company's ability to continue as a going
concern. The accompanying financial statements have been prepared on a going
concern basis. This basis contemplates the continuity of operations, realization
of assets, and discharge of liabilities in the ordinary course of business. The
statements also present the assets of the Company at historical cost and the
current intention that they will be realized as a going concern and in the
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normal course of business. Approval of a Plan of Reorganization could materially
change the amounts currently disclosed in the financial statements.

ACQUISITIONS

In 2000, the Company made the following two acquisitions. On April 13, the
Company, through a 90% owned subsidiary, acquired all the assets of Unique
Welding Alloys ("Unique"), a business that sells industrial gases, welding
equipment and accessories to the retail end-user trade, and on November 9, the
Company, through a 90% owned subsidiary, acquired all the assets of Maxweld &
Braze (Pty) Ltd. ("Maxweld"), a wholesale business that sells welding equipment
and accessories to distributors and the retail end-user trade. Both of these
businesses are located in Boksburg, South Africa. The aggregate consideration
paid for these two acquisitions was approximately $4.4 million and was financed
through existing bank facilities. These transactions were accounted for as
purchases.

PRINCIPAL PRODUCTS AND MARKETS

The Company manufactures a broad range of both gas (oxy-fuel) and arc
cutting and welding equipment (including a line of advanced plasma arc cutting
systems and oxy-fuel apparatus), accessories and consumables, including repair
parts used in the cutting and welding industry. Gas cutting and welding torches
burn a mixture of oxygen and fuel gas, typically acetylene. Arc cutting and
welding systems are powered by electricity. The major arc cutting and welding
systems are plasma, stick and metal inert gas ("MIG"). Arc technology is more
sophisticated than gas technology and can be used on more types of metals. In
addition, arc equipment produces less distortion in the surrounding metal and it
cuts and welds faster, reducing labor costs. However, gas technology is more
portable and generally less expensive than arc technology and therefore remains
important in many industries.

The Company conducts its operations through the following subsidiaries:

Thermal Dynamics -- Plasma Arc Cutting Products. Thermal Dynamics
Corporation ("Thermal Dynamics"), located in West Lebanon, New Hampshire and
founded in 1957, developed many of the early plasma cutting systems and
maintains its position as a leading manufacturer of plasma cutting systems and
replacement parts. Thermal Dynamics' product line ranges from a portable 12-amp
unit to large 1,000-amp units. Thermal Dynamics' end users are engaged primarily
in fabrication and repair of sheet metal and plate products found in fabricated
structural steel and nonferrous metals, automotive products, appliances, sheet
metal, heating, ventilation and air conditioning ("HVAC"), general fabrication,
shipbuilding and general maintenance.

Advantages of the plasma cutting process over other methods include faster
cutting speeds, the ability to cut ferrous and nonferrous alloys and minimum
heat distortion on the material being cut. Plasma cutting also permits metal
cutting using only compressed air and electricity.

Tweco -- Electric Arc Products and Arc Gouging Systems. Tweco Products,
Inc. ("Tweco"), located in Wichita, Kansas and founded in 1936, manufactures a
line of arc welding replacement parts and accessories, including electrode
holders, ground clamps, cable connectors, terminal connectors and lugs and cable
splicers, and a variety of automatic and semiautomatic welding guns and cable
assemblies utilized in the arc welding process. Tweco also manufactures manual
stick electrode holders, ground clamps and accessories. Manual stick welding is
one of the oldest forms of welding and is used primarily by smaller welding
shops which perform general repair, maintenance and fabrication work. Tweco's
end users are primarily engaged in the manufacture or repair and maintenance of
transportation equipment, including automobiles, trucks, aircraft, trains and
ships; the manufacture of a broad range of machinery; and the production of
fabricated metal products, including structural metal, hand tools and general
hardware.

Tweco is a leading domestic manufacturer of MIG welding guns. The MIG
process is an arc welding process utilized in the fabrication of steel,
aluminum, stainless steel and other metal products and structures. In the MIG
process, a small diameter consumable electrode wire is continuously fed into the
arc. The welding arc area is protected from the atmosphere by a "shielding" gas.
The welding guns and cable assemblies

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manufactured by Tweco carry the continuous wire electrode, welding current and
shielding gas to the welding arc. Tweco manufactures a related line of robotic
welding accessory products. This accessory line includes, but is not limited to,
a robotic torch with patented consumables, a robotic deflection mount, a robotic
cleaning station, robotic arms and an anti-splatter misting system.

Through its Arcair product line, Tweco manufactures equipment and related
consumable materials for "gouging," a technique that liquefies metal in a narrow
groove and then removes it using compressed air.

Gouging products are often used in joint preparation prior to a welding
process. Numerous other applications exist for these gouging systems, such as
removal of defective welds, removal of trim in foundries and repair of track,
switches and freight cars in the railroad industry. Tweco also manufactures a
line of underwater welding and gouging equipment.

In addition to gouging products, Tweco produces a patented exothermic
cutting system, SLICE(R). This system generates temperatures in excess of 7000
degrees F and can quickly cut through steel, concrete and other materials.
SLICE(R) has many applications, including opening clogged steel furnaces and
providing rapid entry in fire and rescue operations. Tweco has developed an
underwater version of the SLICE(R) cutting system for use in the marine repair
and salvage industry.

Tweco provides a complete line of chemicals used in the welding industry.
Chemicals are used for weld cleaning and as agents to reduce splatter adherence
on the metal being welded. Chemicals are also used to reduce splatter adherence
in welding nozzles in MIG applications.

Victor -- Oxy-Fuel Gas Products. Victor Equipment Company ("Victor") has
plants in Denton, Texas and Hermosillo, Sonoro, Mexico, and was founded in 1913.
Victor is the leading domestic manufacturer of gas-operated cutting and welding
torches and gas and flow pressure regulation equipment. Victor's torches are
used to cut ferrous metals and to weld, heat, solder and braze a variety of
metals, and its regulation equipment is used to control pressure and flow of
most industrial and specialty gases. In addition, Victor manufactures a variety
of replacement parts, including welding nozzles and cutting tips of various
types and sizes and a line of specialty gas regulators purchased by end users in
the process control, electronics and other industries. Victor also manufactures
a wide range of medical regulation equipment serving the oxygen therapy market,
including home health care and hospitals.

The torches produced by Victor are commonly referred to as oxy-fuel
torches. These torches combine a mixture of oxygen and a fuel gas, typically
acetylene, to produce a high-temperature flame. These torches are designed for
maximum durability, reparability and performance utilizing patented built-in
reverse flow check valves and flash arresters in the majority of models. Victor
also manufactures lighter-duty handheld heating, soldering and brazing torches.
Pressure regulators, which are basically diaphragm valves, serve a broad range
of industrial and specialty gas process control operations.

The principal uses of the Victor torch are cutting steel in metal
fabricating applications such as shipbuilding, construction of oil refineries,
power plants and manufacturing facilities, and welding, heating, brazing and
cutting in connection with maintenance of machinery, equipment and facilities.

Victor sells its lighter-duty products to end-user customers principally
engaged in the plumbing, refrigeration and heating, ventilation and air
conditioning industries. The relative low cost, mobility and ease of use of
Victor torches make them suitable for a wide variety of uses.

Cigweld -- Electric Arc Products, Oxy-Fuel Products, Filler Metals, Gas
Control Products and Safety Products. The business now known as Cigweld,
located in Melbourne, Australia, and founded in 1922, is the leading Australian
manufacturer of gas equipment and welding products.

Cigweld manufactures arc welding equipment products for both the automatic
arc and manual arc welding markets. The Cigweld range of automatic welding
equipment includes packages specifically designed for particular market
segments. End users of this product range include the rural market and the
vehicle repair, metal fabrication, shipbuilding, general maintenance and heavy
industries. Manual arc equipment products range from small welders designed for
the home handyman to units designed for heavy industry.

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Cigweld manufactures a range of consumable products (filler metals) for
manual and automatic arc and gas welding. The range of manual arc electrodes
includes over 50 individual electrodes for different applications. Cigweld
markets its manual arc electrodes under such brand names as Satincraft,
Weldcraft, Ferrocraft(R), Alloycraft(R), Satincrome, Cobalarc(R), Castcraft and
Weldall(R).

For automatic and semiautomatic welding applications, Cigweld manufactures
a significant range of solid and flux-cored wires, principally under the
Autocraft(R), Verti-Cor, Satin-Cor, Metal-Cor and Cobalarc(R) brand names. For
gas welding, Cigweld manufactures and supplies approximately 40 individual types
of wires and solders for use in different applications. Cigweld's filler metals
are manufactured to standards appropriate for their intended use, with the
majority of products approved by agencies such as Lloyd's Register of Shipping,
American Bureau of Shipping, De Norske Veritas and U.S. Naval Ships.

Cigweld manufactures a comprehensive range of equipment for gas welding and
cutting and ancillary products such as gas manifolds, gas regulators and
flowmeters. Gas welding and cutting equipment is sold in kit form or as
individual products. Kits are manufactured for various customer groups and their
components include combinations of oxygen and acetylene regulators, blowpipes,
cutting attachments, mixers, welding and heating tips, cutting nozzles, roller
guides, twin welding hoses, goggles, flint lighters and tip cleaners,
combination spanners and cylinder keys. In addition to its kits, Cigweld
manufactures and/or distributes a complete range of gas equipment, including a
range of blowpipes and attachments, regulators (for oxygen, acetylene, argon and
carbon dioxide), flashback arrestors, cutting nozzles, welding and heating tips,
hoses and fittings, gas manifolds and accessories.

Cigweld also manufactures a range of gas control equipment including
specialty regulators (for use with different gases, including oxygen, acetylene,
liquefied petroleum gas, argon, carbon dioxide, nitrogen, air, helium, hydrogen,
carbon monoxide, ethylene, ethane and nitrous oxide), manifold systems, cylinder
valves and spares and natural gas regulators. Cigweld's gas control items are
primarily sold to gas companies.

Cigweld manufactures and/or distributes a range of safety products for use
in welding and complementary industries. The product range includes welding
helmets and accessories, respirators and masks, breathing apparatus, earmuffs
and earplugs, safety spectacles, safety goggles and gas welding goggles and
faceshields.

Medical products are also manufactured by Cigweld in its manufacturing
plant in Melbourne, Australia. These products are sold through distributors in
the Australian market and exported through third-party distributors and related
entities. The product range includes regulators, flowmeters, suction units,
oxygen therapy and resuscitation and outlet valves for medical gas systems.

C&G Systems -- Cutting Tables. C&G Systems Inc. ("C&G"), located in
Itasca, Illinois, and founded in 1968, manufactures a line of mechanized cutting
tables for fabricating sheet metal and metal plate. The machines utilize either
oxy-fuel or plasma cutting torches produced by other divisions of the Company.
C&G has a wide range of cutting tables from the relatively inexpensive
cantilever type used in general fabrication and job shops to the large precision
gantry type found in steel service centers and specialty cutting applications.
These metal cutting tables can be used in virtually any metal fabrication plant.

Stoody -- Hardfacing Products. Stoody Company ("Stoody"), located in
Bowling Green, Kentucky and with operations founded in 1921, is a recognized
world leader in the development and manufacture of hardfacing welding wires,
electrodes and rods. While Stoody's primary product line is iron-based welding
wires, Stoody also participates in the markets for cobalt-based and nickel-based
electrodes, rods and wires, which are essentially protective overlays, deposited
on softer base materials by various welding processes. This procedure, referred
to as "hardfacing" or "surface treatment," adds a more resistant surface,
thereby increasing the component's useful life. Lower initial costs, the ability
to treat large parts, and ease and speed of repairs in the field are some of the
advantages of hardfacing over solid wear resistant components. A variety of
products have been developed for hardfacing applications in industries utilizing
earth moving equipment, agricultural tools, crushing components, and steel mill
rolls and in virtually all applications where metal is exposed to external wear
factors.

Thermal Arc -- Arc Welders, Plasma Welders and Wire Feeders. In 1997, the
inverter and plasma arc welder business of Thermal Dynamics and the welding
division of Prestolite Power Corporation ("Arcsys")
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were combined to form Thermal Arc, Inc. ("Thermal Arc"). The combined operation
is located in Troy, Ohio and produces a full line of inverter and
transformer-based electric arc welders, plasma welders, engine-driven welders
and wire feeders. Thermal Arc products compete in the marketplace for
construction, industrial and automated applications, and serve a large and
diverse user base.

The inverter arc welding power machines use high-frequency power
transistors to provide welding machines that are extremely portable and
power-efficient when compared to conventional welding power sources. Plasma
welding dramatically improves productivity for the end user. Additionally,
conventional transformer-based machines provide a cost-effective alternative for
markets where low cost and simplicity of maintenance are a high priority.

GenSet -- Engine-Driven Welders and Generators. GenSet S.p.A. ("GenSet"),
which was acquired by the Company in January 1997 and is located in Pavia,
Italy, commenced operations in 1976 with the production of small generating
sets. In 1976, it developed its first engine-driven welder and, in 1977,
obtained its first patent for the synchronous alternator designed for welding
purposes. It now offers a full range of technologically advanced generators and
engine-driven welders that are sold throughout the world.

These products are used both where main power is not available and for
standby power where continuous power supply is a key requirement.

Tec.Mo -- Plasma and Laser Cutting Replacement Consumables. Tec.Mo located
in Bologna, Italy manufactures replacement consumables for both plasma and laser
cutting systems. Tec.Mo has a full line of replacement parts for over 20
different manufacturers' products.

OCIM -- Electric Arc Welding Accessories. OCIM located in Milan, Italy
manufactures a complete line of Mig welding torches, Tig torches, and Robotic
Mig arc welding torches. In addition to its full line of torches, it
manufactures replacement consumable parts for these accessories, as well as a
full line of robotic arc welding accessories.

Victor Brazil -- Oxy-Fuel Products and Cutting Tables. Thermadyne Victor
Ltda. ("Victor Brazil"), with offices and manufacturing facilities located in
Rio de Janeiro, Brazil, was acquired by the Company in 1998. Victor Brazil is
the leading manufacturer of oxy-fuel products for industrial and medical use and
of mechanized cutting tables for shaping and fabricating sheet metal and metal
plate in South America.

Victor Brazil primarily serves the Latin American market. The oxy-fuel
product line is very competitive in the region and offers the customer a broad
range of gas cutting and welding equipment. Metal fabricators of all sizes,
including applications such as shipbuilding, steel construction, machinery
manufacturing, pressure vessel producers, and steel mills, use the industrial
oxy-fuel products. Hospitals, home care, and doctors' offices use the medical
oxy-fuel products.

The cutting table line of products uses either oxy-fuel or plasma cutting
systems produced by Victor Brazil or other divisions of the Company. The line of
products is oriented to the needs of the Latin American market. Inexpensive
cantilever tables and higher-precision, computer numeric-controlled tables are
produced by Victor Brazil. These products are used in all types of metal
fabricating plants.

INTERNATIONAL BUSINESS

The Company had aggregate international sales of approximately $167.9
million, $166.4 million and $193.7 million for the fiscal years ended December
31, 2002, 2001 and 2000, respectively, or approximately 41%, 38% and 38%,
respectively, of the Company's net sales in each such period. The Company's
international sales are influenced by fluctuations in exchange rates of foreign
currencies, foreign economic conditions and other risks associated with foreign
trade. See "Quantitative and Qualitative Disclosures About Market Risk." The
Company's international sales consist of (a) export sales of Thermadyne products
manufactured at domestic manufacturing facilities and, to a limited extent,
products manufactured by third parties, sold through overseas field
representatives of Thermadyne International Corporation ("Thermadyne
International"), a subsidiary of Thermadyne, and (b) sales of Thermadyne
products manufactured at domestic and international manufacturing facilities,
sold by Thermadyne's foreign subsidiaries. For further information

8

concerning the international operations of the Company, see the notes to the
consolidated financial statements of the Company included elsewhere herein.

Thermadyne International was formed in 1980 to coordinate Thermadyne's
efforts to increase international sales and sells cutting and welding products
through independent distributors in more than 80 countries. In support of this
effort, the Company operates distribution centers in Canada, Australia, Italy,
Mexico, Japan, Singapore, Brazil, the Philippines, Malaysia, Indonesia and the
United Kingdom and employs salespeople located in 23 additional countries.

COMPETITION

The Company competes principally with a number of domestic manufacturers of
cutting and welding products, the majority of which compete only in limited
segments of the overall market. Management believes competition is based
primarily on product quality and brand name, breadth and depth of product lines,
effectiveness of distribution channels, a knowledgeable sales force capable of
solving customer application problems, price and quality of customer service. To
date, the Company has experienced little direct foreign competition in its U.S.
markets due to the relatively limited size of such markets, the inability of
foreign manufacturers to establish effective distribution channels and the
relatively non-labor-intensive nature of the cutting and welding product
manufacturing process. The Company also competes in certain international
markets in which it faces substantial competition from foreign manufacturers of
cutting and welding products.

DISTRIBUTION

The Company's cutting and welding products are distributed through a
domestic network of approximately 1,100 independent cutting and welding products
distributors with over 2,800 locations that carry one or more of its product
lines. Relationships with the distributors are maintained by a separate sales
force for each of the Company's principal product lines. In addition, a national
accounts group exists to support the sale of all of the Company's product lines
to its major distributors. The Company's products are distributed
internationally through a direct sales force and independent distributors.

RAW MATERIALS

The Company has not experienced any difficulties in obtaining raw materials
for its operations because its principal raw materials, copper, brass, steel and
plastic, are widely available and need not be specially manufactured for use by
the Company. Certain of the raw materials used in hardfacing products, such as
cobalt and chromium, are available primarily from sources outside the United
States, some of which are located in countries that may be subject to economic
and political conditions which could affect pricing and disrupt supply. Although
the Company has historically been able to obtain adequate supplies of these
materials at acceptable prices and has been able to recover the costs of any
increases in the price of raw materials in the form of higher unit sales prices,
restrictions in supply or significant fluctuations in the prices of cobalt,
chromium and other raw materials could adversely affect the Company's business.

The Company also purchases certain products which it either uses in its
manufacturing processes or resells. These products include, but are not limited
to, electronic components, circuit boards, semiconductors, motors, engines,
pressure gauges, springs, switches, lenses and chemicals. The Company believes
its sources of such products are adequate to meet foreseeable demand.

RESEARCH AND DEVELOPMENT

The Company has research and development groups for each of its product
lines that primarily conduct process and product development to meet market
needs. As of December 31, 2002, the Company employed approximately 110 persons
in its research and development groups, most of whom are engineers.

9

EMPLOYEES

As of December 31, 2002, the Company employed 2,802 people, of whom
approximately 672 were engaged in sales and marketing activities, 223 were
engaged in administrative activities, 1,814 were engaged in manufacturing
activities and 93 were engaged in engineering activities. Labor unions represent
none of the Company's workforce in the United States and virtually all of the
manufacturing employees in its foreign operations. The Company believes that its
employee relations are good. The Company has not experienced any significant
work stoppages.

PATENTS, LICENSES AND TRADEMARKS

The Company's products are sold under a variety of trademarks and trade
names. The Company owns trademark registrations or has filed trademark
applications for all trademarks and has registered all trade names that the
Company believes are material to the operation of its businesses. The Company
also owns various patents and from time to time acquires licenses from owners of
patents to apply such patents to its operations. The Company does not believe
any single patent or license is material to the operation of its businesses
taken as a whole.

ITEM 2. PROPERTIES

The Company operates 16 manufacturing facilities in the United States,
Italy, the Philippines, Brazil, Indonesia, Malaysia, Australia and Mexico. All
domestic manufacturing facilities, leases and leasehold interests are encumbered
by perfected first priority senior priming liens securing the Company's
obligations under the DIP Facility and primed liens securing the Debtors'
obligations under the Old Credit Facility. The Company considers its plants and
equipment to be modern and well-maintained and believes its plants have
sufficient capacity to meet future anticipated expansion needs.

During 2002, the Company leased and maintained an 18,939-square-foot
facility located in St. Louis, Missouri, which houses the executive offices of
the Company and its operating subsidiaries, as well as all centralized services.
During the first quarter of 2003, the Company relocated this office to a
16,109-square-foot facility, also located in St. Louis, Missouri.

The following table describes the location and general character of the
Company's principal properties:

All of the above facilities are leased, except for the facilities located
in Melbourne, Cebu, the larger facility in Pavia and Rio de Janeiro, which are
owned. The initial lease terms for the facilities located in West Lebanon, New
Hampshire, Wichita, Kansas and Denton, Texas expire in May 2003. The Company
exercised its right to extend the leases in Lebanon, New Hampshire and Denton,
Texas until May 2008. The Company has also extended the lease in Wichita, Kansas
until May 2004. The lease in Ontario, Canada will expire in August 2003. The
Company has entered into a new lease with respect to the Ontario property that
will expire in August 2008. The Company also has additional assembly and
warehouse facilities in Canada, the United Kingdom, Italy, Japan, Singapore,
Mexico, Indonesia, Brazil and Australia.

In addition, the Company had subleased 295,000 square feet of its
325,000-square-foot facility in City of Industry, California, which formerly was
the manufacturing facility for certain products now manufactured at the
Company's Bowling Green, Kentucky facility. On February 20, 2002, the Court
approved the Company's motion to reject this lease as of February 16, 2002.

The Company entered into an agreement on February 7, 2002 to lease a 30,880
square-foot portion of a larger facility located in Chino, California. This
location will be used to warehouse and distribute certain products manufactured
at the Company's other domestic facilities.

11

ITEM 3. LEGAL PROCEEDINGS

On November 19, 2001, the Company and substantially all of its domestic
subsidiaries filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code. For further information see Item 1.
"Business -- Bankruptcy Filing."

The Company is a party to ordinary litigation incidental to its businesses,
including a number of product liability cases seeking substantial damages. The
Company maintains insurance against any product liability claims. Coverage for
most years has a $500,000 self insured retention with $500,000 of primary
insurance per claim. In addition, the Company maintains umbrella policies
providing an aggregate of $75,000,000 in coverage for product liability claims.
All litigation against the Company was stayed upon the filing of the Chapter 11.
Although it is difficult to predict the outcome of litigation with any
certainty, the Company believes the liabilities which might reasonably result
from such lawsuits, to the extent not covered by insurance, with the exception
of those matters relating to the Debtors' Chapter 11 proceedings, will not have
a material adverse effect on the Company's financial condition or results of
operations.

The Company's operations are subject to federal, state, local and foreign
laws and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and wastes. The
Company is currently not aware of any citations or claims filed against it by
any local, state, federal and foreign governmental agencies, which, if
successful, would have a material adverse effect on the Company's financial
condition or results of operations.

The Company may be required to incur costs relating to remediation of
properties, including properties at which the Company disposes waste, and
environmental conditions could lead to claims for personal injury, property
damage or damages to natural resources. The Company is aware of environmental
conditions at certain properties which it now owns or leases or previously owned
or leased which are undergoing remediation. The Company does not believe the
cost of such remediation will have a material adverse effect on the Company's
business, financial condition or results of operations.

Certain environmental laws, including, but not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act and the
equivalent state laws, provide for strict, joint and several liability for
investigation and remediation of spills or other releases of hazardous
substances. Such laws may apply to conditions at properties presently or
formerly owned or operated by the Company or its subsidiaries or by their
predecessors or previously owned business entities, as well as to conditions at
properties at which wastes or other contamination attributable to the Company or
its subsidiaries or their predecessors or previously owned business entities
come to be located. The Company has in the past and may in the future be named a
potentially responsible party at off-site disposal sites to which it has sent
waste. The Company does not believe the ultimate cost relating to such sites
will have a material adverse effect on the Company's financial condition or
results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the shareholders during the fourth
quarter of 2002.

12

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

The Company's Common Stock began trading on The NASDAQ Stock Market
("NASDAQ") on May 17, 1994. On October 15, 1998, the NASDAQ delisted the Common
Stock. Following its delisting from NASDAQ, the Common Stock has traded in the
over the counter market. The following table shows, for the periods indicated,
the high and low sale prices of a share of the Common Stock for the fiscal years
2001 and 2002 as reported by published financial sources.

On March 11, 2003, the last reported bid price for the Common Stock as
reported by published financial sources was $.02 per share. As of March 2, 2003
there were approximately 86 holders of record of Common Stock.

The Company has historically not paid any cash dividends on Common Stock
and it does not have any present intention to commence payment of any cash
dividends. The Company intends to retain earnings to provide funds for the
operation and expansion of the Company's business and to repay outstanding
indebtedness. The Company's debt agreements contain certain covenants
restricting the payment of dividends on, or repurchases of, Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."

13

ITEM 6. SELECTED FINANCIAL DATA

The selected financial data for and as of each of the years in the
five-year period ended December 31, 2002 set forth below has been derived from
the audited consolidated financial statements of the Company. The selected
financial data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements and the notes thereto, in each case included
elsewhere herein.

- ---------------

(1) Amounts for 2001 and 2002 include approximately $776.0 million and $778.7
million, respectively, classified as "liabilities subject to compromise" on
the accompanying consolidated balance sheets.

(2) Amounts for 2001 and 2002 exclude liabilities subject to compromise.

(3) "Adjusted EBITDA" is defined as net income or loss plus depreciation,
amortization of goodwill, amortization of intangibles, net periodic
postretirement benefits expense, interest expense, income taxes,

14

amortization of deferred financing costs, any net loss realized in
connection with the sale of any asset, any extraordinary loss or the
non-cash portion of non-recurring expenses, and reorganization costs; minus
any extraordinary gain. Adjusted EBITDA 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 the DIP Facility. The Company believes Adjusted EBITDA is a
useful supplement to net income (loss) and other consolidated statement of
operations 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.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

BANKRUPTCY FILING

Thermadyne, through its subsidiaries, is engaged in the design, manufacture
and distribution of cutting and welding products and accessories. Since 1994,
the Company has embarked on a strategy designed to focus its business
exclusively on the cutting and welding industry and enhance the Company's market
position within that industry.

On November 19, 2001, the Company and substantially all of its domestic
subsidiaries, including Thermadyne LLC and Thermadyne Capital, filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code in
the United States Bankruptcy Court for the Eastern District of Missouri. The
filing resulted from insufficient liquidity, and was determined to be the most
efficient and favorable alternative to restructure the Company's balance sheet.
Since 1998, the Company's operating results have been negatively impacted by a
weak industrial economy in the U.S. as well as difficult economic conditions in
most of its foreign markets. The deterioration of operating results and
liquidity made it increasingly difficult for the Company to meet all of its debt
service obligations. Prior to filing Chapter 11, the Company failed to make the
semi-annual interest payments on the Subordinated Notes, which were due on May 1
and November 1, 2001, and totaled approximately $4.0 million. In addition, the
Company failed to make an interest payment in the amount of $10.2 million
related to the Senior Subordinated Notes, which was due on June 1, 2001. The
Bankruptcy Code generally prohibits the Company from making payments on
unsecured, pre-petition debt, including the Senior Subordinated Notes and the
Subordinated Notes, except pursuant to a confirmed plan of reorganization. The
Company is in possession of its properties and assets and continues to manage
the business as a debtor-in-possession subject to the supervision of the Court.
The Company has a $50 million debtor-in-possession credit facility in place (see
Liquidity and Capital Resources.)

As of December 1, 2001, the Company discontinued accruing interest on the
Senior Subordinated Notes, the Subordinated Notes, the Debentures, and the
Junior Notes, and ceased accruing dividends on its redeemable preferred stock.
Contractual interest on the Senior Subordinated Notes, the Subordinated Notes,
the Debentures and the Junior Notes for the year ended December 31, 2002, was
$20.4 million, $4.0 million, $18.9 million and $5.3 million, respectively. No
interest was recorded for the Senior Subordinated Notes, the Subordinated Notes,
the Debentures or the Junior Notes during 2002. For the year ended December 31,
2001, contractual interest on the Senior Subordinated Notes, the Subordinated
Notes, the Debentures and the Junior Notes totaled $45.8 million, of which $41.9
million was recorded. Contractual dividends for the redeemable preferred stock
were $10.8 million for the year ended December 31, 2002, of which none was
recorded. For the year ended December 31, 2001, contractual dividends for the
redeemable preferred stock were $9.5 million, which compares to recorded
dividends of $8.7 million. As part of the Court order approving the DIP
Facility, the Company was required to continue making periodic interest payments
on the Old Credit Facility. This order did not approve the payment of any
principal outstanding under the Old Credit Facility as of the petition date, or
the payment of any future mandatory amortization of the loans. In total,
contractual interest on the Company's obligations was $71.2 million and $80.3
million for the years ended December 31,

15

2002 and 2001, respectively, which was $48.6 million and $4.0 million in excess
of reported interest, respectively.

Pursuant to the provisions of the Bankruptcy Code, substantially all
actions to collect upon any of the Debtors' liabilities as of the petition date
or to enforce pre-petition date contractual obligations were automatically
stayed. Absent approval from the Court, the Debtors are prohibited from paying
pre-petition obligations. However, the Court has approved payment of certain
pre-petition liabilities such as employee wages and benefits and certain other
pre-petition obligations. Additionally, the Court has approved the retention of
legal and financial professionals. Claims were allowed to be filed against the
Debtors through April 19, 2002. As debtor-in-possession, the Debtors have the
right, subject to Court approval and certain other conditions, to assume or
reject any pre-petition executory contracts and unexpired leases. Parties
affected by such rejections may file pre-petition claims with the Court in
accordance with bankruptcy procedures.

On January 17, 2003, the Company filed with the Court its First Amended and
Restated Plan of Reorganization (the "Plan of Reorganization") which provides
for, among other things the restructuring of the Company's balance sheet to
significantly strengthen the Company's financial position.

The Company expects the Court to confirm the Plan of Reorganization early
in the second quarter of 2003. The Plan of Reorganization was filed with the SEC
on Form 8-K February 6, 2003. Once the Court confirms the Plan of Reorganization
and the Company satisfies the conditions precedent to effectiveness of the Plan
of Reorganization, as described in the Plan of Reorganization, the Company will
then consummate the Plan of Reorganization and emerge from Chapter 11.
Management anticipates that the consummation and effectiveness of the Plan of
Reorganization will occur in the second calendar quarter of 2003.

The Plan of Reorganization provides for a substantial reduction of the
Company's long-term debt. Under the plan, the Company's total debt would
aggregate approximately $230 million, versus the nearly $800 million in debt and
$79 million in preferred stock when the Company filed for Chapter 11 protection
in November 2001. The Plan of Reorganization provides for treatment to the
various classes of claims and equity interests as follows (as is more fully
described in the Plan of Reorganization):

Administrative Expense Claims, Priority Tax Claims and the Class 1 Other
Priority Claims (as each such class, and all classes described herein, are more
fully described in the Plan or Reorganization) remain unaffected by the Chapter
11 cases and are to be paid in full. The Class 3 Other Secured Claims are also
unimpaired by the Chapter 11 cases and the holders of such claims will continue
to retain their liens.

The pre-petition senior secured lenders (Class 2) will exchange their
approximately $360 million in debt and outstanding letters of credit for cash,
up to approximately 94.5% of the new common stock of the Company (subject to
reduction for shares of the Company's new common stock acquired pursuant to the
subscription offering referenced below), the cash proceeds realized from the
subscription offering, $180 million in Senior Debt Notes, and Series C Warrants
exercisable for additional shares of new common stock of the Company. Under
certain circumstances, up to an additional $23 million in Senior Debt Notes may
be issued to the pre-petition senior secured lenders in substitution for up to
12.3% of the new common stock of the Company. The pre-petition senior lenders
have agreed to transfer the Series C Warrants to certain current Company equity
holders.

General Unsecured Creditors (Class 4) will receive distributions of cash
equal to the lesser of (1) a holder's pro rata share of $7,500,000 and (2) fifty
percent (50%) of such holder's claim (estimated by the Company to provide a
recovery on such claims of 30% to 37% of the amount of such claims.)

The 9 7/8% Senior Subordinated Note Holders (Class 5) will exchange their
approximately $230 million in debt and accrued interest for approximately 5.5%
of the new common stock of the Company, with the opportunity to subscribe for
more shares through the subscription offering held pursuant to the Plan of
Reorganization, and Series A Warrants and Series B Warrants exercisable for
additional shares of new common stock of the Company.

16

The Junior Subordinated Note Claims, the 10.75% Senior Subordinated Note
Claims and the 12 1/2% Senior Discount Debenture Claims (Class 6, Class 7 and
Class 8, respectively) in the aggregate amount of approximately $220 million
will not receive any distribution under the plan of Reorganization, but will
have the opportunity to participate in the subscription offering for shares of
new common stock of the reorganized Company.

The Thermadyne Holdings Equity Interests (Class 9), which includes the
existing common and preferred stock of the Company, will be cancelled and the
holders of such interests will not receive any distribution pursuant to the Plan
of Reorganization.

In connection with the proposed Plan of Reorganization, the Company will
issue the following:

- Senior Debt Notes in the aggregate amount of up to $203 million;

- Up to 13,300,000 shares of common stock of the reorganized Company;

- 1,157,000 Series A Warrants;

- 700,000 Series B Warrants; and

- 271,429 Series C Warrants.

Upon effectiveness of the Plan of Reorganization, the Company will use its
proposed senior secured credit facility in the aggregate amount of $50 million
to pay the DIP Facility, for the payment of various pre-petition obligations,
and for general working capital purposes.

Absent a successful restructuring of the Company's balance sheet,
substantial doubt exists about the Company's ability to continue as a going
concern. The accompanying financial statements have been prepared on a going
concern basis. This basis contemplates the continuity of operations, realization
of assets, and discharge of liabilities in the ordinary course of business. The
statements also present the assets of the Company at historical cost and the
current intention that they will be realized as a going concern and in the
normal course of business. Approval of a Plan of Reorganization could materially
change the amounts currently disclosed in the financial statements.

OVERVIEW

The following is a discussion and analysis of the consolidated financial
statements of the Company. The Company conducts its operations through its
wholly owned subsidiary Thermadyne LLC. The accompanying consolidated financial
statements for the Company and Thermadyne LLC are substantially the same except
for certain debt and equity securities issued by the Company, 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 net income or loss plus depreciation, amortization of
goodwill, amortization of intangibles, net periodic postretirement benefits
expense, interest expense, income taxes, amortization of deferred financing
costs, any net loss realized in connection with the sale of any asset, any
extraordinary loss or the non-cash portion of non-recurring expenses, and
reorganization costs; minus any extraordinary gain. Adjusted EBITDA 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 the DIP Facility. The Company believes Adjusted EBITDA is a
useful supplement to net income (loss) and other consolidated statement of
operations 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.

17

RESULTS OF OPERATIONS

The following description of results of operations is presented for the
fiscal years ended December 31, 2002, 2001 and 2000. The results of operations
of the Company include the operations of Unique and Maxweld & Braze from their
respective dates of acquisition.

2002 COMPARED TO 2001

Net Sales

Net sales for the year ended December 31, 2002, were $414.3 million, which
is a decline of 5.5% from net sales of $438.2 million for the year ended
December 31, 2001. Domestic sales for the twelve months ended December 31, 2002,
were $246.3 million compared to $271.8 million for the year ended December 31,
2001, which is a decrease of 9.4%. This decline is attributable primarily to the
weak economic conditions in the U.S., particularly in the industrial sector.
International sales were $167.9 million for the year ended December 31, 2002,
which is a modest increase over the $166.4 million of net sales reported for
2001. Europe and Australia had solid increases of 9.4% and 7.9% over the year
ended December 31, 2001, but were essentially offset by declines of 10.2% and
11.9% in Asia and Latin America, respectively. Changes in the U.S. dollar
against foreign currencies did not have a significant overall impact on the
international sales for 2002, however, certain geographic regions were more
impacted than others. Approximately 60% of the increase in European sales was
attributable to a weaker U.S. dollar, while substantially all of the decrease in
Latin America resulted from local currencies, particularly the Brazilian real,
weakening against the U.S. dollar.

Costs and Expenses

Cost of goods sold as a percentage of sales was 64.6% for 2002 compared to
67.7% for the year ended December 31, 2001. This improvement results primarily
from the Company's efforts to lower costs such as the relocation of production
to locations with lower labor costs and plant consolidation efforts.

Selling, general and administrative expenses were $104.3 million in 2002
compared to $97.2 million for 2001. As a percentage of sales, selling, general
and administrative expenses were 25.2% and 22.2% for the years ended December
31, 2002 and 2001, respectively. The increase in selling, general and
administrative expenses compared to 2001 resulted primarily from higher costs
associated with the Company's information technology infrastructure and
investments made related to certain sales and marketing initiatives. Also
increasing selling, general and administrative expenses in 2002 was
approximately $3.5 million accrued related to the Company's management incentive
plan. No similar expense was recorded in 2001. The increase in selling, general
and administrative expenses as a percentage of sales is due in part to the
decline in revenue as a significant portion of these expenses are fixed and do
not fluctuate with sales.

Special charges for the year ended December 31, 2002, related to an
information technology initiative and related logistics projects. Special
charges incurred during the year ended December 31, 2001, were comprised
primarily of $7.0 million related to business reengineering initiatives, $3.2
million related to an information technology transformation project, and $2.4
million to logistics initiatives. The remainder of special charges for 2001
resulted mostly from the relocation of production to Mexico.

Reorganization items for 2002 were $23.9 million and included $9.8 million
of professional fees and expenses, $1.9 of expenses related to financing fees
associated with the DIP Facility, $13.8 million for the write-off of deferred
financing fees associated with pre-petition long-term debt subject to
compromise, $0.3 million related to payments made under the key employee
retention plan approved by the Court, a benefit of $2.7 million related to the
rejection of certain capital leases, and $0.8 of other reorganization items.
Reorganization items in 2001 include $4.8 million of professional fees and
expenses, a benefit of $12.2 million resulting from the Court's approval of a
Company motion to reject a non-cancelable lease obligation on a substantially
idle facility, and $0.7 million of other reorganization costs.

Interest expense was $22.6 million for the year ended December 31, 2002,
which compares to $76.4 million for 2001. The decline in interest expense
relates mostly to interest on the Senior Subordinated

18

Notes, the Subordinated Notes, the Debentures and the Junior Notes, which the
Company ceased accruing on December 1, 2001.

An income tax provision of $3.0 million was recorded on a pretax loss of
$12.9 million for the year ended December 31, 2002. The income tax provision
differs from that determined by applying the U.S. federal statutory rate
primarily due to nondeductible expenses and the disallowance of foreign losses.
An income tax provision of $2.7 million was recorded on a pretax loss of $48.8
million for the twelve months ended December 31, 2001. The income tax provision
differs from that determined by applying the U.S. federal statutory rate
primarily due to nondeductible expenses and the disallowance of foreign losses.

Adjusted EBITDA was $52.8 million for the year ended December 31, 2002,
compared to $45.5 million for 2001, or an increase of 16.0%.

2001 COMPARED TO 2000

Net Sales

Net sales for the year ended December 31, 2001 were $438.2 million, which
is a decrease of 14.1% compared to 2000 sales of $510.1 million. Domestic sales
declined 14.1% from $316.5 million for the year ended December 31, 2000 to
$271.8 million for 2001. The weak industrial economy in the U.S. was the primary
reason for this decrease. International sales for the year ended December 31,
2001 were $166.4 million, also a 14.1% decrease, compared to sales of $193.7
million for the twelve months ended December 31, 2000. The decline in
international sales was seen in all major geographic areas and was primarily the
result of generally weak economic conditions. Also contributing to the decline
in international sales was a strengthening U.S. dollar as local currency sales
translated to lower amounts compared to last year.

Costs and Expenses

Cost of goods sold as a percentage of sales increased from 64.2% for 2000
to 67.7% for 2001. The decline in sales volume was the primary reason for this
increase as the Company has been unable to reduce fixed costs commensurate with
the drop in sales.

Selling, general and administrative expenses were $97.1 million for the
twelve months ended December 31, 2001 compared to $102.6 million for 2000, a
decrease of 5.3%. The majority of this decrease results from the Company's
efforts to reduce costs. Selling, general and administrative expenses as a
percentage of sales were 22.2% for 2001 compared to 20.1% for the year ended
December 31, 2000. The increase in this percentage results primarily from the
decline in sales as certain costs are fixed and do not fluctuate with sales.

Special charges incurred during the year ended December 31, 2001, were
$14.9 million and were comprised primarily of $7.0 million related to business
reengineering initiatives, $3.2 million related to an information technology
transformation project, and $2.4 million to logistics initiatives. The remainder
resulted mostly from the relocation of production to Mexico.

Reorganization items in 2001, include $4.8 million of professional fees and
expenses, a benefit of $12.2 million resulting from the Court's approval of a
Company motion to reject a non-cancelable lease obligation on a substantially
idle facility, and $0.7 million of other reorganization costs.

Amortization expense for the twelve months ended December 31, 2001, was
$2.2 million compared to $26.9 million for the year ended December 31, 2000,
which included impairment losses of $23.4 million related to goodwill and other
intangible assets associated with the Company's Australian business.

Interest expense recorded for the year ended December 31, 2001, was $76.4
million compared to $81.4 million for 2000. This decline in interest from last
year was primarily the result of lower interest rates in the U.S. as the Company
incurred $3.8 million less interest on its variable rate debt in spite of the
average outstanding balance increasing $36.9 million from $291.3 million for
2000 to $328.2 million for 2001. The Company ceased accruing interest on the
Senior Subordinated Notes, the Subordinated Notes, the Debentures, and the
Junior Notes effective December 1, 2001, which also contributed to the decline
in the interest costs. Contractual interest for 2001, was $80.3 million.
19

An income tax provision of $2.7 million was recorded on a pretax loss of
$48.8 million for the year ended December 31, 2001. The 2001 income tax
provision differs from that determined by applying the U.S. federal statutory
rate primarily due to nondeductible expenses, the disallowance of foreign
losses, and an increase in the valuation allowance for deferred tax assets. An
income tax provision of $31.9 million was recorded on a pretax loss of $74.8
million for the year ended December 31, 2000. The 2000 income tax provision
differs from that determined by applying the U.S. federal statutory rate
primarily due to nondeductible expenses, the disallowance of foreign losses, and
an increase in the valuation allowance for deferred tax assets.

Adjusted EBITDA

Adjusted EBITDA for the year ended December 31, 2001 was $45.5 million
compared to $64.2 million for 2000, a decrease of 29.1%.

Recent Accounting Pronouncements

On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets". SFAS 142
prohibits the amortization of goodwill and intangible assets with indefinite
useful lives. SFAS 142 requires these assets be reviewed for impairment at least
annually. Intangible assets with finite lives will continue to be amortized over
their estimated useful lives. In addition, SFAS 142 requires goodwill included
in the carrying value of equity method investments no longer be amortized.

The Company ceased amortization on January 1, 2002, of its goodwill, which
had a net balance of approximately $11.4 million at January 1, 2002. During 2001
the Company recorded $0.4 million of goodwill amortization. Excluding this
expense the Company's net loss applicable to common shares and basic and diluted
net loss per common share would have been $59.9 million and $16.67,
respectively.

In July 2002, the Financial Accounting Standards Board issued SFAS 146,
"Accounting for Costs Associated with Exit or Disposal Activities." SFAS 146
requires companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a commitment to an
exit or disposal plan. SFAS 146 replaces Emerging Issues Task Force Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." SFAS 146 is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital and Cash Flows. Operating activities provided $11.6
million of cash for the twelve months ended December 31, 2002, which compares to
$6.4 million for the year ended December 31, 2001. Earnings, after adding back
non-cash expenses, were $14.3 million, or $33.3 million more than the comparable
figure for 2001. Operating assets and liabilities used $2.6 million of cash for
the year ended December 31, 2002, which compares to $25.4 million of cash
provided by operating assets and liabilities for the twelve months ended
December 31, 2001. Accounts receivable used $0.9 million of cash in 2002
compared to $9.9 million of cash provided in 2001. This change in receivables
resulted mostly from the decline in revenue during 2002. Inventory used $3.9
million of cash during the year ended December 31, 2002, which compares to cash
provided of $10.8 million for the twelve months ended December 31, 2001. This
increase in inventory results from the initial stocking of two regional
warehouses, higher inventory levels at the Company's Australian unit as a result
of new products sourced from foreign suppliers, and increased safety stock
levels at one of the Company's domestic business units as a result of its
implementation of a new information system. Prepaid assets generated $1.9
million of cash during the twelve months ended December 31 2002, compared to
$9.4 million of cash used during 2001. The use of cash in 2001 resulted from the
Chapter 11 filing as many of the Company's key suppliers only shipped on
cash-in-advance terms. During 2002, the Company was able to obtain payment terms
from some of these suppliers, which resulted in the decline in prepaid assets.
The Company generated $1.2 million of cash from accounts payable during 2002,
which is a $6.6 million improvement over the cash used of $5.4 million during
2001. The change in accounts payable results mainly

20

from the increase in inventory. Accrued interest used $0.5 million of cash
during the year ended December 31, 2002, compared to cash generated of $22.7
million during 2001. The cash generated from interest in 2001 resulted primarily
from the non-payment of interest due on June 1, 2001 and December 1, 2001, for
the Senior Subordinated Notes totaling $20.4 million together with the
non-payment of the interest due on May 1, 2001 and November 1, 2001, for the
Subordinated Notes totaling $4.0 million. Cash used by investing activities was
$10.8 million during 2002, or $5.4 million less than the comparable amount in
2001. The difference results primarily from capital expenditures, which were
$9.4 million in 2002 compared to $15.3 million in 2001. Financing activities
generated $1.8 million of cash for the twelve months ended December 31, 2002,
compared to $14.2 million of cash generated for the year ended December 31,
2001. The difference results primarily from a decline in net, long-term
borrowings, which were $0.3 million during 2002, compared to $36.4 million
during 2001. A portion of the increase in borrowings in 2001 were used to repay
an off-balance sheet accounts receivable securitization program, which was
liquidated as a result of the Chapter 11 filing. The liquidation of the
securitization program used $21.0 million of cash in 2001.

Capital Expenditures. The Company had $9.4 million of capital expenditures
in 2002. The Company's DIP Facility contains restrictions on the Company's
ability to make capital expenditures. Based on present estimates, management
believes the amount of capital expenditures permitted to be made under the DIP
Facility will be adequate to maintain the properties and businesses of the
Company's operations.

Liquidity. The Company's principal uses of cash will be debt service
requirements under the DIP Facility and the Old Credit Facility, capital
expenditures, 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 the DIP Facility.

The DIP Facility provides for total borrowings of $50 million, of which up
to $15 million may be used for letters of credit. Actual borrowing availability
is subject to a borrowing base calculation, which is equal to the sum of
approximately 85% of eligible accounts receivable, 50% of eligible inventory and
72% of eligible fixed assets. As of December 31, 2002, the Company's eligible
accounts receivable, inventories and fixed assets supported access to the full
amount of the DIP Facility. Interest on the DIP Facility accrues at the
administrative agent's adjusted base rate plus 2.25% in the case of alternate
base rates loans, and at an adjusted London Interbank Offered Rate ("LIBOR")
plus 3.5% in the case of LIBOR loans. The DIP Facility is secured by
substantially all the assets of the Debtors, including a pledge of the capital
stock of substantially all their subsidiaries, subject to certain limitations
with respect to foreign subsidiaries. The DIP Facility contains financial
covenants, including minimum levels of EBITDA (defined as net income or loss
plus depreciation, amortization of goodwill, amortization of intangibles, net
periodic postretirement benefits expense, interest expense, income taxes,
amortization of deferred financing costs, any net loss realized in connection
with the sale of any asset, any extraordinary loss or the non-cash portion of
non-recurring expenses, and reorganization costs; minus any extraordinary gain)
and other customary provisions. The DIP Facility expires on the earlier of the
consummation of a plan of reorganization or May 23, 2003. If the Plan of
Reorganization is not consummated by May 23, 2003, the Company will need to seek
an extension of the maturity of the DIP Facility. At December 31, 2002, the
Company had borrowed approximately $10.2 million and issued $9.5 million of
letters of credit under the DIP Facility, resulting in availability of
approximately $30.3 million.

The Old Credit Facility bears interest, at Thermadyne LLC's option, at the
administrative agent's alternative base rate or at the reserve-adjusted LIBOR
plus, in each case, applicable margins of (i) in the case of alternative base
rate loans, (x) 1.50% for revolving and Term A loans, (y) 1.75% for Term B loans
and (z) 2.00% for Term C loans and (ii) in the case of LIBOR loans, (x) 2.75%
for revolving and Term A loans, (y) 3.00% for Term B loans and (z) 3.25% for
Term C loans. At December 31, 2002, the Company had outstanding $80.3 million in
Term A loans, $108.6 million in Term B loans, $108.6 million in Term C loans,
and $58.6 million of loans under the revolver. In addition, there were $1.4
million of letters of credit outstanding under the Old Credit Facility. As part
of the Court order approving the DIP Facility, the Company was required to
continue making periodic interest payments on the Old Credit Facility. This
order did not approve the payment of any principal outstanding under the Old
Credit Facility as of the petition date,

21

or the payment of any future mandatory amortization of the loans. As a result of
the Chapter 11 filing and other ongoing covenant violations, the Company has no
borrowing availability under the Old Credit Facility.

At December 31, 2002, the Company had outstanding $207.0 million of Senior
Subordinated Notes, $37.1 million of Subordinated Notes, $145.1 million of
Debentures and $33.4 million of Junior Notes. On December 1, 2001, the Company
ceased accruing interest on all of these obligations. The Bankruptcy Code
generally prohibits the Company from making payments on unsecured, pre-petition
debt, including the Senior Subordinated Notes and the Subordinated Notes, except
pursuant to a confirmed Plan of Reorganization.

The Company anticipates its operating cash flow, together with borrowings
under the DIP Facility, will be sufficient to meet its anticipated future
operating expenses and capital expenditures and the debt service requirements of
the DIP Facility and Old Credit Facility, as allowed by the Court, as they
become due. However, the Company's ability to generate sufficient cash flow to
meet its operating needs will be affected by general economic, financial,
competitive, legislative, regulatory, business and other factors beyond its
control.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

In the normal course of business, the Company enters into contracts and
commitments that obligate the Company to make payments in the future. The table
below sets forth the Company's significant future obligations by time period.
Excluded from this table are the liabilities subject to compromise. Where
applicable, information included in the Company's consolidated financial
statements and notes are cross-referenced in this table.

The proposed Plan of Reorganization provides for a substantial reduction of
the Company's long-term debt, specifically that portion of the debt subject to
compromise. Subsequent to the consummation of the proposed Plan of
Reorganization, the Company would have approximately $230 million of long-term
debt, which would consist of $180 million of new senior debt notes, $23 million
borrowed under a new $50 million revolving credit facility, and $27 million of
existing long-term obligations that are not subject to compromise. In addition,
the Company will have approximately $10.9 million of letters of credit
outstanding under the new revolving credit facility. Initial borrowings under
the new revolving credit facility will be used to repay the DIP Facility, pay
various pre-petition obligations, and certain closing costs related to the
consummation of the Plan of Reorganization.

MARKET RISK AND RISK MANAGEMENT POLICIES

The Company's earnings and cash flow are subject to fluctuations due to
changes in foreign currency exchange rates. The Company is also exposed to
changes in interest rates from its long-term debt arrangements. See Item 7A
"Quantitative and Qualitative Disclosures About Market Risk" for further
discussion.

EFFECT OF INFLATION; SEASONALITY

Inflation has not been a material factor affecting the Company's business.
In recent years, the cost of electronic components has remained relatively
stable due to competitive pressures within the industry, which has enabled the
Company to contain its service costs. The Company's general operating expenses,
such as salaries, employee benefits, and facilities costs, are subject to normal
inflationary pressures.

22

The operations of the Company are generally not subject to seasonal
fluctuations.

CRITICAL ACCOUNTING POLICIES

BANKRUPTCY ACCOUNTING.

Since the Chapter 11 bankruptcy filing, the Company has applied the
provisions in Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7.") SOP 90-7 does not change
the application of generally accepted accounting principles in the preparation
of financial statements, but it does require that the financial statements for
periods including and subsequent to filing the Chapter 11 petition distinguish
transactions and events that are directly associated with the reorganization
from the ongoing operations of the business.

INVENTORIES

Inventories are the Company's most significant asset, representing 32% of
total assets. They are valued at the lower of cost or market, with the domestic
subsidiaries using the last in, first-out (LIFO) method, which represents 56.2%
of consolidated inventories, and the foreign subsidiaries using the first-in,
first-out (FIFO) method, which represents 43.8% of consolidated inventories.

The Company continually applies its judgment in valuing its inventories by
assessing the net realizable value of its inventories based on current selling
prices. Should the Company not achieve its expectations of the net realizable
value of this inventory, potential future losses may occur.

INCOME TAXES

The Company provides taxes for the effects of timing differences between
financial and tax reporting. These differences relate primarily to net operating
loss carryforwards, fixed assets, deferred interest, and post-employment
benefits. The Company records a valuation allowance when it is more likely than
not that a portion or all of the Company's deferred tax assets will not be
realized.

The Company does not provide deferred taxes on the accumulated unremitted
earnings of its foreign subsidiaries as its intention is to reinvest these
earnings indefinitely. However, upon distribution of those earnings in the form
of dividends or otherwise, the Company would be subject to both U.S. income
taxes (subject to an adjustment for foreign tax credits) and withholding taxes
payable to the various foreign countries.

CONTINGENCIES

On November 19, 2001, the Company and substantially all of its domestic
subsidiaries, including Thermadyne LLC and Thermadyne Capital, filed voluntary
petitions for relief under Chapter 11 of the United States Bankruptcy Code. The
Chapter 11 bankruptcy filing introduces numerous uncertainties which may affect
the Company's business, results of operations, and prospects. Further
information about the financial impact of the Chapter 11 filing is set forth in
Item 1 of the Form 10-K and in the notes to the consolidated financial
statements.

The Company is the defendant in several claims and lawsuits arising in the
normal course of business. The Company does not believe any of these proceedings
will have a material adverse effect on its consolidated financial position. It
is possible, however, future results of operations for any particular quarter or
annual period could be materially affected by changes in assumptions related to
these proceedings. The Company accrues its best estimate of the cost of
resolution of these claims in accordance with SFAS No. 5. Legal defense costs of
such claims are recognized in the period in which they are incurred.

The Company is periodically audited by domestic and foreign tax authorities
regarding the amount of taxes due. In evaluating issues raised in such audits,
reserves are provided for exposures as appropriate. To the extent the Company
were to prevail in matters for which accruals have been established or be
required to pay amounts in excess of reserves, the effective tax rate in a given
financial statement period may be materially impacted.

23

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A substantial portion of the Company's operations consist of manufacturing
and sales activities in foreign regions, particularly Europe, Australia/Asia,
Canada and South America. As a result, the Company's financial results could be
significantly affected by factors such as changes in foreign currency exchange
rates or weak economic conditions in the foreign markets in which the Company
distributes its products. The Company's exposure to foreign currency
transactions is partially mitigated by having manufacturing locations in
Australia, Italy, Indonesia, Malaysia, the Philippines, Mexico and Brazil as
well as in the United States. A substantial portion of the product manufactured
in most of these regions is sold locally and denominated in the local currency.
A significant amount of the export sales from the U.S. are denominated in U.S.
dollars which further limits the Company's exposure to changes in the exchange
rates. The Company is most susceptible to a strengthening U.S. dollar and the
negative effect when local currency financial statements are translated into
U.S. dollars, the Company's reporting currency.

The Company does not believe its exposure to transaction gains or losses
resulting from changes in foreign currency exchange rates is material to its
financial results. As a result, the Company does not actively try to manage its
exposure through foreign currency forward or option contracts.

The Company is also exposed to changes in interest rates primarily from its
long-term financial arrangements which are predominantly denominated in U.S.
dollars. At December 31, 2002, the Company had approximately $343.9 million of
variable rate U.S. debt. At December 31, 2002, the Company also had
approximately $14.7 million and $7.7 million of variable rate debt denominated
in Australian dollars and euros, respectively. A hypothetical 100 basis point
increase in the Company's variable borrowing rates would result in an increase
in interest expense of approximately $3.6 million for the year ended December
31, 2002.

The Debtors' Chapter 11 bankruptcy filings also introduces numerous
uncertainties, which may affect the Company's business, results of operations,
and prospects.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements that are filed as part of this Annual Report on
Form 10-K are set forth in the Index to Consolidated Financial Statements at
page F-1 hereof and are included at pages F-2 to F-62 thereof.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

24

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information concerning the current
directors and executive officers of the Company. Each officer of the Company
serves in the same capacity for Thermadyne LLC and Thermadyne Capital.

Mr. Wyss has been a Director of the Company since April 2000 and was
elected Chairman of the Board and Acting Chief Executive Officer of the Company
in June 2000. He became Chief Executive Officer of the Company on January 12,
2001. Prior to joining the Company, Mr. Wyss was the Managing Director and
Operating Partner with DLJ's Merchant Banking Group since 1993. Before his
position at DLJ, he was Chairman and Chief Executive Officer of Lear Siegler
Inc. Mr. Wyss currently serves on the board of directors of Manufacturers
Services Limited.

Mr. Tate has been a Director of the Company since October 1995 and was
appointed to the Office of the Chairman in June 2000. He was elected Senior Vice
President and Chief Financial Officer of the Company in February 1995, having
previously served as Vice President of the Company and Vice President and Chief
Financial Officer of the Company's subsidiaries since April 1993. Prior to
joining the Company, Mr. Tate was employed by the accounting firm of Ernst &
Young LLP for 18 years, the last six of which he was a partner. Mr. Tate
currently serves on the board of directors of Rowe International, Inc. and Joy
Global, Inc.

Mr. Poling has been a Director of the Company since May 1998. Mr. Poling
retired as Chairman of the Board and Chief Executive Officer of Ford Motor
Company on January 1, 1994, a position he held since 1990. Mr. Poling is a
director of Flint Ink Corporation and a member of the Credit Suisse First Boston
Executive Advisory Board. Mr. Poling is a member of the board of directors and a
trustee of William Beaumont Hospital, and Chairman of the Board of Eclipse
Aviation Corporation. Mr. Poling is a director of the Monmouth (Ill.) College
Senate.

Mr. Wortman has been a Director of the Company since October 2001. Mr.
Wortman is the President of Riverside Capital Partners, LLC, a private equity
investment firm. For the five years prior to joining Riverside Capital Partners
Mr. Wortman was a senior member of DLJ Merchant Banking.

Mr. Mahoney was appointed to the Office of the Chairman in June 2000 and
currently serves as the Executive Vice President of International. Prior to this
position Mr. Mahoney served as Executive Vice President for Tweco, Thermal Arc,
Stoody, and European Operations. He previously served as the Executive Vice
President of Thermal Dynamics, C&G, and the entire International Sales and
Marketing group. Prior to joining Thermadyne in 1989, Mr. Mahoney spent ten
years with Hobart Brothers and six years with British Oxygen Company.

Mr. Maddox was elected Vice President and Corporate Controller of the
Company in April 1996. Prior to that time, Mr. Maddox served as Vice President
and Controller of the Company's operating subsidiaries from

25

April 1995 to April 1996 and Controller from May 1992 to April 1995. Prior to
joining the Company, Mr. Maddox was a senior audit manager with the accounting
firm of Ernst & Young LLP.

Mr. Ricci has been the Vice President of Logistics since May 2001. Prior to
joining the Company, he held the position of Senior Vice President Supply Chain
for S&S Worldwide. He has over 24 years of experience in key executive supply
chain positions in logistics and manufacturing within the consumer goods,
apparel, and furniture industries. More recently he held the position of Vice
President Distribution for Ames Department Stores and Director of Operations for
the Starter Corporation. He worked and lived in Montreal, Quebec prior to 1990.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth information in respect of the compensation
of the Chief Executive Officer and each of the other four most highly
compensated executive officers of the Company, (collectively, the "Named
Executive Officers") for services in all capacities to the Company and its
subsidiaries for the years ended December 31, 2002, 2001 and 2000.

SUMMARY COMPENSATION TABLE

- ---------------

(1) All other compensation includes group life insurance premiums paid by the
Company and contributions made on behalf of the Named Executive Officers to
the Company's 401(k) retirement and profit sharing plan. The amounts of
insurance premiums paid and 401(k) contributions made (respectively) on
behalf of the Named Executive Officers for 2002 are as follows: Mr. Wyss,
$6,732 and $9,693; Mr. Tate, $4,799 and $6,000; Mr. Mahoney, $2,760 and
$6,002; Mr. Maddox, $583 and $6,000; Mr. Ricci, $684 and $4,052.

(2) Mr. Wyss has served as Chairman of the Board since June 1, 2000 and Chief
Executive Officer since January 12, 2001.

26

OPTION GRANTS IN LAST FISCAL YEAR

The Company did not grant stock options to any Named Executive Officer in
2002.

The following table provides information related to the number and value of
options held by the Named Executive Officers at the end of 2002. On December 2,
2002, the last day on which the Common Stock was traded during 2002, the closing
sale price of Common Stock was $.35.

FISCAL YEAR-END OPTION VALUES

All options currently outstanding were granted under the Management
Incentive Plan. For a discussion of the Management Incentive Plan, see
"Employment Arrangements -- Management Incentive Plan."

EMPLOYMENT ARRANGEMENTS

Employment and Severance Agreements. The Company has entered into
employment agreements with Messrs. Wyss, Tate, Mahoney, Maddox, and Ricci.

The employment agreement with Mr. Wyss had an original termination date of
January 13, 2003. The agreement was amended on May 3, 2001, to provide a
termination date of January 13, 2004; however the agreement automatically
extends on each January 13 so a new three-year term begins upon each extension
(unless the agreement is earlier terminated by its terms).

Mr. Wyss is entitled to an annual base salary (subject to increase at the
Board of Directors' discretion) of $700,000. Mr. Wyss is eligible to participate
in an annual bonus plan providing for an annual bonus opportunity of 100% of his
salary. He is also eligible for a special bonus of $7,425,000 if the value of
the DLJMB ownership exceeds $165,000,000. In addition, Mr. Wyss is eligible for
a sale bonus equal to 1% of the amount the value of the Company exceeds
$808,100,000 as of the date the DLJMB entities fully dispose of their investment
in the Company.

Mr. Wyss's employment contract also provides a sale bonus depending on the
amount of the enterprise value set forth in the Plan of Reorganization. Mr. Wyss
would receive no bonus if the enterprise value were below $450,000,000. If the
enterprise value were between $450,000,000 and $474,999,999, then Mr. Wyss would
receive $250,000 plus 1% of the enterprise value in excess of $450,000,000. If
the enterprise value were between $475,000,000 and $499,999,999, then Mr. Wyss
would receive $500,000 plus 2% of the enterprise value in excess of
$475,000,000. If the enterprise value were between $500,000,000 and
$524,999,999, then Mr. Wyss would receive $1,000,000 plus 2% of the enterprise
value in excess of $500,000,000. If the enterprise value were above $525,000,000
then Mr. Wyss would receive $1,500,000 plus 3% of the enterprise value in excess
of $525,000,000. The midpoint enterprise value of the Company set forth in the
current disclosure statement is $406,000,000, and based on such amount, it does
not appear that Mr. Wyss will receive a bonus based on the enterprise value of
the Company.

The employment agreements with Messrs. Tate, Mahoney and Maddox have an
original termination date of June 13, 2002; however, such agreements
automatically renew for an additional year on each June 13 beginning in 2003 so
that a new three-year term begins upon each extension (unless the agreements are
earlier terminated as provided therein).

27

Messrs. Tate, Mahoney and Maddox are entitled to annual base salaries
(subject to increase at the Board of Directors' discretion) of $326,500,
$283,500 and $178,500, respectively. In addition, Messrs. Tate, Mahoney and
Maddox are eligible to participate in a bonus plan providing for an annual bonus
opportunity of not less than 50%, 70% and 55%, respectively, of such executive's
base salary. Each executive is also entitled to such benefits as are customarily
provided to the executives of the Company and its subsidiaries. All three
executives are required to devote all of their business time and attention to
the business of the Company and its subsidiaries.

The employment agreement with Mr. Ricci has no automatic termination date
and was signed on May 21, 2001. It continues until terminated in accordance with
its terms. Mr. Ricci is entitled to an annual base salary of $215,000. In
addition, he is eligible to participate in an annual bonus plan providing for an
annual bonus opportunity of 50% of his base pay.

Each employment agreement with Messrs. Wyss, Tate, Mahoney and Maddox
provides that if the executive's employment ceases as a result of disability or
death, the executive or the executive's estate, heirs or beneficiaries, as the
case may be, will continue to receive the executive's then current salary for 24
months from the date of the executive's disability or death. Mr. Ricci's
agreement provides for 18 months salary continuation in the event of his death
or disability. If the executive's employment is terminated by the Company for
Cause (as defined in each employment agreement) or voluntarily by the executive
for any reason other than death or disability or upon a constructive termination
(as defined in each employment agreement) the executive will not be entitled to
receive compensation or any accrued benefits after the date of termination. If
any of Messrs. Wyss, Tate, Mahoney or Maddox are terminated by the Company
without Cause or is terminated by the executive upon a constructive termination,
the executive will continue to receive his then current salary and other
benefits provided by the agreement for 24 months. If Mr. Ricci is terminated
without Cause or upon constructive termination, he will continue to receive his
then current salary and other benefits for 12 months if terminated without Cause
or for 24 months if he is constructively terminated.

Management Incentive Plan. If the Plan of Reorganization is consummated,
all of the Company's common stock will be cancelled. Nevertheless, the
Management Incentive Plan currently in effect provides for the granting of
options to acquire up to 500,000 shares of Common Stock to certain officers and
employees of the Company. All options are non-qualified stock options granted at
no less than 100% of the fair market value on the grant date. In fiscal 2002, no
options were granted. Pursuant to the terms of the Management Incentive Plan,
options granted to certain members of senior management provide for both a "Time
Vesting Option" and a "Cliff Vesting Option." Under the Time Vesting Option, the
option vests and is exercisable with respect to 20% of the shares subject to the
option on the day it was granted. Then, on each of the first five anniversaries
from the date the Time Vesting Option was granted, an additional 16% of the
shares subject to the option vest and become exercisable as long as the option
recipient is still employed by the Company or its subsidiaries.

With respect to the grants to Messrs. Tate, Mahoney and Maddox, the Cliff
Vesting Option becomes vested and exercisable with respect to 20% of the shares
on the thirtieth day after the availability of the audited financial statements
for each of the fiscal years ended December 31, 1998 through December 31, 2002,
provided that the option recipient is still employed by the Company or its
subsidiaries on such date of determination and further provided that the
targeted implied common