UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, 2013
OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to

Commission file number 001-13023

Victor Technologies Group, Inc.

(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.)

16052 Swingley Ridge Road, Suite 300, Chesterfield, MO		63017
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code (636) 728-3000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer o	Non-accelerated filer x	Smaller reporting company o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares outstanding of the issuer’s common stock, par value $0.01 per share, on November 13, 2013 was 1,000.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands)

(Unaudited)



	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Net sales	$	119,388		$	121,111		$	370,043		$	380,239
Cost of goods sold	73,857			77,718			230,256			245,835
Gross margin	45,531			43,393			139,787			134,404
Selling, general and administrative expenses	25,374			25,384			79,089			79,285
Amortization of intangibles	1,641			1,623			4,929			4,790
Restructuring costs	577			518			6,105			2,177
Operating income	17,939			15,868			49,664			48,152
Other expense:
Interest, net	(8,433		)	(8,490		)	(25,299		)	(23,673		)
Amortization of deferred financing costs	(677		)	(618		)	(1,985		)	(1,718		)
Income before income tax provision	8,829			6,760			22,380			22,761
Income tax (benefit) provision	(1,502		)	1,428			1,585			6,231
Net income	$	10,331		$	5,332		$	20,795		$	16,530

See accompanying notes to condensed consolidated financial statements.

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)



	Three Months Ended					Nine Months Ended
	September 30, 2013		September 30, 2012			September 30, 2013			September 30, 2012
Net income	$	10,331	$	5,332		$	20,795		$	16,530
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments	1,136		1,878			(5,920		)	2,093
Pension and postretirement	161		(14		)	1,554			25
Comprehensive income	$	11,628	$	7,196		$	16,429		$	18,648

See accompanying notes to condensed consolidated financial statements.

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)



	September 30, 2013			December 31, 2012
ASSETS
Current Assets:
Cash and cash equivalents	$	59,291		$	32,379
Accounts receivable, less allowance for doubtful accounts of $785 and $910	71,097			64,986
Inventory	104,977			100,609
Prepaid expenses and other	11,684			12,492
Prepaid income taxes	1,529			—
Deferred tax assets	2,423			2,423
Assets held for sale	11,574			—
Total current assets	262,575			212,889
Property, plant and equipment, net of accumulated depreciation of $32,784 and $26,515	56,783			75,894
Goodwill	183,936			187,123
Intangibles, net	132,225			136,788
Deferred financing fees	13,501			15,486
Other assets	566			559
Total assets	$	649,586		$	628,739

LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of other long-term obligations	$	1,319		$	1,563
Accounts payable	34,417			29,709
Accrued and other liabilities	33,896			36,717
Accrued interest	9,577			1,479
Income taxes payable	794			312
Deferred tax liabilities	4,436			4,436
Total current liabilities	84,439			74,216
Long-term obligations, less current maturities	357,183			357,520
Deferred tax liabilities	77,857			80,767
Other long-term liabilities	15,252			18,801
Total liabilities	534,731			531,304
Stockholder's Equity:
Common stock, $0.01 par value:
Authorized -- 1,000 shares
Issued and outstanding -- 1,000 shares at September 30, 2013, and December 31, 2012	—			—
Additional paid-in capital	86,483			85,492
Retained earnings	34,481			13,686
Accumulated other comprehensive loss	(6,109		)	(1,743		)
Total stockholder's equity	114,855			97,435

Total liabilities and stockholder's equity	$	649,586		$	628,739

See accompanying notes to condensed consolidated financial statements.

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)



	Nine Months Ended
	September 30, 2013			September 30, 2012
Cash flows from operating activities:
Net income	$	20,795		$	16,530
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	16,040			15,384
Deferred income taxes	(169		)	1,795
Stock compensation expense	933			653
Non-cash interest expense	558			386
Restructuring costs, net of payments	(262		)	(854		)
Changes in operating assets and liabilities:
Accounts receivable	(7,637		)	(6,705		)
Inventory	(6,115		)	(6,670		)
Prepaids	694			(247		)
Accounts payable	5,778			6,130
Accrued interest	8,098			8,482
Accrued taxes	(1,373		)	(2,169		)
Accrued and other	(341		)	(4,435		)
Net cash provided by operating activities	36,999			28,280

Cash flows from investing activities:
Capital expenditures	(6,252		)	(8,347		)
Acquisition of business, net of cash acquired	(1,905		)	(3,498		)
Other	(366		)	(498		)
Net cash used in investing activities	(8,523		)	(12,343		)

Cash flows from financing activities:
Issuance of Additional Notes of Senior Secured Notes due 2017	—			100,000
Senior Secured Notes discount	—			(5,200		)
Dividend payment to Parent	—			(93,507		)
Repayments of other long-term obligations	(1,129		)	(1,235		)
Deferred financing fees	—			(4,421		)
Other	501			(87		)
Net cash used in financing activities	(628		)	(4,450		)

Effect of exchange rate changes on cash and cash equivalents	(936		)	273

Total increase in cash and cash equivalents	26,912			11,760

Total cash and cash equivalents beginning of period	32,379			20,856
Total cash and cash equivalents end of period	$	59,291		$	32,616

Income taxes paid	$	3,322		$	6,566
Interest paid	$	16,763		$	16,847

See accompanying notes to condensed consolidated financial statements.

VICTOR TECHNOLOGIES GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(Dollars in thousands, except share data)


1.	The Company

On December 3, 2010 (“Acquisition Date”), pursuant to an Agreement and Plan of Merger dated as of October 5, 2010 (the “Merger Agreement”), Razor Merger Sub Inc. (“Merger Sub”), a newly formed Delaware corporation, merged with and into Thermadyne Holdings Corporation ("Thermadyne"), with Thermadyne surviving as a direct, wholly-owned subsidiary of Razor Holdco Inc., a Delaware corporation (“Acquisition”). (Razor Holdco Inc. was renamed Thermadyne Technologies Holdings, Inc. ("Technologies")).

Effective May 21, 2012, Thermadyne changed its name to Victor Technologies Group, Inc. (“Victor Technologies” or the "Company"). Thermadyne Technologies, the parent company of Victor Technologies, accordingly changed its name to Victor Technologies Holdings, Inc. ("Holdings").

Holdings' sole asset is its 100% ownership of the stock of Victor Technologies. Affiliates of Irving Place Capital (“IPC”), a private equity firm based in New York, along with its co-investors, hold approximately 98.2% of the outstanding equity of Holdings, and certain members of Victor Technologies' management hold the remaining equity capital.

Victor Technologies provides superior branded solutions for cutting, gas control and specialty welding, continuing a heritage of designing innovative products that evolve as a result of carefully listening to end users and anticipating their needs. This singular focus, built upon creating new and better solutions, is reflected in the vision statement, “Innovation to Shape the World^TM”. The Company’s products are used in a wide variety of applications and industries, where steel is cut and welded, including steel fabrication, manufacturing of transportation and mining equipment, many types of construction such as offshore oil and gas rigs, repair and maintenance of manufacturing equipment and facilities, and shipbuilding. The Company designs, manufactures and sells products in six principal categories: (1) gas equipment; (2) plasma power supplies, torches and consumable parts; (3) carbon arc gouging products; (4) welding equipment; (5) arc accessories, including torches, consumable parts and accessories; and (6) filler metals and hardfacing alloys. The Company markets its products under a portfolio of brands, many of which are the leading brand in their industry, including Victor^®, Victor^® Thermal Dynamics^®, Victor^® Arcair^®, Victor^® Turbo Torch^®, Tweco^®, Thermal Arc^®, Stoody^®, Firepower^® and Cigweld^®. We sell our products primarily through over 3,300 industrial distributor accounts, including large industrial gas manufacturers, in over 50 countries.


2.	Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for annual financial statements. These unaudited interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of the Company for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for any other interim period or the year ending December 31, 2013. The quarterly financial data should be read in conjunction with the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

The financial statements include the Company’s accounts and those of its subsidiaries, after the elimination of all significant intercompany balances and transactions.

Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires the use of estimates and assumptions that affect the amounts reported in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ from these estimates. Any significant unanticipated changes in business or market conditions that vary from current expectations could have an impact on the fair value of assets and result in a potential impairment loss.

Deferred Financing Costs

Loan origination fees and other costs incurred in arranging long-term financing are capitalized as deferred financing costs and amortized using an effective interest method over the term of the credit agreement. Deferred financing costs totaled $19,718 at September 30, 2013 and December 31, 2012, less accumulated amortization of $6,217 and $4,232, at September 30, 2013 and December 31, 2012, respectively.

Product Warranty Programs

Various products are sold with product warranty programs. Accruals for warranty programs are made as the products are sold, and are adjusted periodically based on current estimates of anticipated warranty costs with a corresponding charge to cost of sales. The following table provides the activity in the warranty accrual:



($'s in thousands)	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Balance at beginning of period	$	4,752		$	4,760		$	4,500		$	4,600
Charged to expense	951			1,117			3,063			3,344
Warranty payments	(1,046		)	(1,083		)	(2,906		)	(3,150		)
Balance at end of period	$	4,657		$	4,794		$	4,657		$	4,794

Fair Value

The Company estimated the fair value of the Senior Secured Notes due 2017 at $387,900 and $383,400 at September 30, 2013 and December 31, 2012, respectively, based on available market information. The inputs in the fair value determination of these Senior Secured Notes are considered Level 2 in the three-level fair market value hierarchy.

Recent Accounting Pronouncement

In February 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income", that requires an entity to disclose either on the face of or in the notes to the financial statements the effects of reclassifications out of accumulated other comprehensive income ("AOCI"). For items reclassified out of AOCI and into net income in their entirety, an entity must disclose the effect of the reclassification on each affected net income item. For items that are not reclassified in their entirety into net income, an entity must provide a cross reference to the required U.S. GAAP disclosures. This ASU does not change the items currently reported in other comprehensive income and is effective for annual periods beginning after December 15, 2012 and interim periods within those years. The adoption of these provisions does not impact the Company's financial condition or results of operations.


3.	Inventory

The composition of inventory was as follows:



($'s in thousands)	September 30, 2013		December 31, 2012
Raw materials and component parts	$	32,816	$	34,919
Work-in-process	3,401		4,192
Finished goods	67,508		60,911
Subtotal	103,725		100,022
LIFO reserve	1,252		587
Total	$	104,977	$	100,609

The carrying value of inventories accounted for by the last-in, first-out (LIFO) inventory method exclusive of the LIFO reserve was $76,081 at September 30, 2013 and $76,819 at December 31, 2012. The remaining inventory amounts are held in foreign locations and accounted for using the first-in first-out method.

4. Intangible Assets

The composition of intangibles was as follows:



($'s in thousands)	September 30, 2013			December 31, 2012
Amortizable intangible assets:
Customer relationships	$	49,548		$	49,546
Intellectual property bundles	77,476			77,476
Patents	2,108			1,742
Developed technology	1,271			1,277
Trademarks	669			664
Subtotal	131,072			130,705
Accumulated amortization	(18,188		)	(13,258		)
Total amortizable intangible assets	$	112,884		$	117,447

Indefinite-lived intangible assets:
Goodwill	$	183,936		$	187,123
Trademarks	19,341			19,341
Total indefinite-lived intangible assets	$	203,277		$	206,464

The Company recorded amortization expense of $1,641 and $1,623 for the three months ended September 30, 2013 and 2012, respectively, and $4,929 and $4,790 for the nine months ended September 30, 2013 and 2012, respectively.

Goodwill and trademarks are tested for impairment annually, as of December 1st, or more frequently if events occur or circumstances change that would, more likely than not, reduce the fair value of the reporting unit below its carrying value. The impairment analysis is performed on a consolidated enterprise level based on one reporting unit. No impairment adjustment to the carrying value of goodwill was deemed necessary in 2012. As of September 30, 2013, the Company considered possible impairment triggering events since December 1, 2012 based on relevant factors, and concluded that no triggering events or goodwill impairment resulted. Unforeseen events and changes in circumstances and market conditions, including the general economic and competitive conditions, could cause actual results to vary significantly from the estimates.

The change in the carrying amount of goodwill during the nine-month period ending September 30, 2013 was as follows:



($'s in thousands)	Carrying Amount of Goodwill
Balance as of December 31, 2012	$	187,123
Acquisition	1,602
Foreign currency translation	(4,789		)
Balance as of September 30, 2013	$	183,936

The change in goodwill above resulting from 2013 acquisition activity is subject to normal post-closing purchase price allocation adjustments.

In the fourth quarter of 2012 we finalized the allocation of the purchase price to assets acquired and liabilities assumed of Robotronic Oy. As a result, we recorded an additional $40 of amortization expense for the third quarter of 2012. The 2012 amounts reported herein differ from the amounts previously reported for third quarter of 2012 as a result of this change.


5.	Debt and Capital Lease Obligations

The composition of debt and capital lease obligations was as follows:



($'s in thousands)	September 30, 2013			December 31, 2012
Senior Secured Notes due December 15, 2017, 9% interest payable semi-annually on June 15 and December 15	$	360,000		$	360,000
Senior Secured Notes discount	(4,079		)	(4,637		)
Capital leases	2,581			3,720
Long-term obligations	358,502			359,083
Current maturities	(1,319		)	(1,563		)
Long-term obligations, less current maturities	$	357,183		$	357,520

Senior Secured Notes due 2017

On December 3, 2010, Merger Sub issued $260,000 in aggregate principal of 9% Senior Secured Notes due 2017 (the “Senior Secured Notes”). The net proceeds from this issuance, together with funds received from the equity investments made by affiliates of IPC, its co-investors and certain members of Victor Technologies' management, were used to finance the acquisition of Victor Technologies, to redeem the Senior Subordinated Notes due 2014, and to pay the transaction-related expenses.

The Senior Secured Notes are fully and unconditionally guaranteed, jointly and severally, by each of Victor Technologies’ existing and future domestic subsidiaries and by its Australian subsidiaries, Victor Technologies Australia Pty Ltd. and Cigweld Pty Ltd. The Senior Secured Notes and guarantees are secured, subject to permitted liens and except for certain excluded assets, on a first priority basis by substantially all of Victor Technologies’ and the guarantors’ current and future property and assets (other than accounts receivable, inventory and certain other related assets that secure, on a first priority basis, Victor Technologies’ and the guarantors’ obligations under Victor Technologies’ Working Capital Facility (as defined below)), including the capital stock of each subsidiary of Victor Technologies (other than immaterial subsidiaries), which, in the case of non-guarantor foreign subsidiaries, is limited to 65% of the voting stock and 100% of the non-voting stock of each first-tier foreign subsidiary, and on a second priority basis by substantially all the collateral that secures the Working Capital Facility on a first priority basis.

The Senior Secured Notes contain customary covenants and events of default, including covenants that, among other things, limit the Company’s and its restricted subsidiaries’ ability to incur additional indebtedness, pay dividends on, repurchase or make distributions in respect of its capital stock or make other restricted payments, make certain investments, loans or advances, sell, transfer or otherwise convey certain assets, and create liens. The Company was in compliance with the covenants as of September 30, 2013 and December 31, 2012.

Upon a change of control, as defined in the Indenture, each holder of the Senior Secured Notes has the right to require the Company to purchase the Senior Secured Notes at a purchase price in cash equal to 101% of the principal, plus accrued and unpaid interest.

On March 6, 2012, the Company issued $100,000 in aggregate principal amount of 9% Senior Secured Notes due 2017 (the “Additional Notes”) at par plus accrued but unpaid interest since December 15, 2011. The Additional Notes mature on December 15, 2017 and were issued as “additional notes” pursuant to the Indenture. Prior to the issuance of the Additional Notes, $260,000 aggregate principal amount of 9% Senior Secured Notes due 2017 were outstanding (the “Original Notes” and together with the Additional Notes, the “Notes”). The Indenture provides that the Additional Notes are general senior secured obligations of the Company and are fully and unconditionally guaranteed on a senior secured basis by each of our existing and future domestic subsidiaries (other than immaterial subsidiaries) and certain of the Company's Australian subsidiaries. The Original Notes and the Additional Notes are treated as a single series under the Indenture and are therefore subject to the same terms, conditions and rights under the Indenture.

On February 27, 2012, the Company, the guarantors' party to the Indenture and the Trustee entered into the First Supplemental Indenture to amend the terms of the Indenture to modify the restricted payments covenant to increase the restricted payments basket to $100,000 in order to permit the Company to use the proceeds of the Additional Notes to pay a cash dividend of $93,507 to the Company’s parent to be used to redeem a portion of its outstanding Series A preferred stock and to pay fees and expenses related to the offering of the Additional Notes and the related consent solicitation required to amend the Indenture in connection with the offering. The First Supplemental Indenture became operative on March 6, 2012 upon the issuance of the Additional Notes,

at which time the Company made a cash payment of $20 per $1,000 in principal amount of Original Notes, or a total aggregate payment of $5,200, to Holders of such notes in connection with the solicitation of consents to amend the Indenture. This consent fee is accounted for as a debt discount, which is a reduction of the Senior Secured Notes, and is amortized against interest expense over the life of the Senior Secured Notes.

Working Capital Facility

As of September 30, 2013, letters of credit in the amount of $1,142 were outstanding and no borrowings were drawn under the Fourth Amended and Restated Credit Agreement (the “GE Agreement” or "Working Capital Facility"). Unused availability, net of these letters of credit, was $51,165 under the Working Capital Facility at September 30, 2013.

All obligations under the Working Capital Facility are unconditionally guaranteed by Holdings and substantially all of the Company’s existing and future, direct and indirect, wholly-owned domestic subsidiaries and its Australian subsidiaries Victor Technologies Australia Pty Ltd. and Cigweld Pty Ltd. The Working Capital Facility is secured, subject to certain exceptions, by substantially all of the assets of the guarantors and Holdings, including a first priority security interest in substantially all accounts receivable and other rights to payment, inventory, deposit accounts, cash and cash equivalents and a second priority security interest in all assets other than the Working Capital Facility collateral.

The Working Capital Facility has a minimum fixed charge coverage ratio test of 1.10 to 1 if the unused availability under the Facility is less than $9,000 (which minimum amount will be increased or decreased proportionally with any increase or decrease in the commitments thereunder). In addition, the Working Capital Facility includes negative covenants that limit the Company’s ability and the ability of Holdings and certain subsidiaries to, among other things: incur, assume or permit to exist additional indebtedness or guarantees; grant liens; consolidate, merge or sell all or substantially all of the Company’s assets; transfer or sell assets and enter into sale and leaseback transactions; make certain loans and investments; pay dividends, make other distributions or repurchase or redeem the Company’s or Holdings’ capital stock; and prepay or redeem certain indebtedness. The Company was in compliance with the covenants as of September 30, 2013 and December 31, 2012.

In connection with the Additional Notes offering, GE Capital Corporation agreed to amend the credit agreement to allow the Company, among other things, to issue the Additional Notes and use the net proceeds as described above. The amendment became effective concurrently with the consummation of the offering of Additional Notes on March 6, 2012.

See note 15, Subsequent Events.


6.	Restructuring

Program implemented in 2013

In 2013, the Company committed to a restructuring plan that includes exit activities at its Melbourne, Australia manufacturing location. The Company is substantially complete with these activities at September 30, 2013. These exit activities impacted approximately 45 employees and were intended to reduce the Company’s fixed cost structure and better align its Asia-Pacific manufacturing and distribution footprint.

The following provides a summary of restructuring costs incurred during the three and nine months ended September 30, 2013 and total expected restructuring costs:



($'s in thousands)	Employee Termination Benefits		Other Restructuring Costs		Total
Three Months Ended
September 30, 2013	$	258	$	85	$	343

Nine Months Ended
September 30, 2013	$	5,458	$	343	$	5,801

As of September 30, 2013
Total expected restructuring costs	$	5,500	$	350	$	5,850

Employee termination benefits primarily include severance payments to employees impacted by exit activities as well as pension curtailment and settlement losses. Other restructuring costs include expenses to relocate certain individuals and equipment to other manufacturing locations and employee training costs.

The total restructuring expense for these activities is expected to approximate $5,850, which is slightly below the $6,000 to $8,000 range provided in the Form 8-K filed by the Company in January 2013 announcing these exit activities.

The following is a rollforward of the liabilities associated with the restructuring activities since the plan's inception. The liabilities are reported as a component of accrued and other liabilities in the accompanying consolidated balance sheet as of September 30, 2013.



($'s in thousands)	Employee Termination Benefits			Other Restructuring Costs			Total
Charges	$	5,458		$	343		$	5,801
Payments	(5,291		)	(273		)	(5,564		)
Balance as of September 30, 2013	$	167		$	70		$	237

Programs implemented prior to 2013

In 2011, the Company committed to restructuring plans that include exit activities at manufacturing sites in West Lebanon, New Hampshire and Pulau Indah, Selangor, Malaysia. The Company is substantially complete with these activities at September 30, 2013. These exit activities impacted approximately 188 employees and were intended to reduce the Company’s fixed cost structure and better align its global manufacturing and distribution footprint.

The following provides a summary of restructuring costs incurred during the three and nine months ended September 30, 2013 and 2012, restructuring costs incurred to date and total expected restructuring costs:



($'s in thousands)	Employee Termination Benefits		Other Restructuring Costs		Total
Three Months Ended
September 30, 2013	$	102	$	132	$	234
September 30, 2012	176		346		522

Nine Months Ended
September 30, 2013	$	126	$	178	$	304
September 30, 2012	804		1,373		2,177

As of September 30, 2013
Cumulative restructuring costs	$	4,295	$	3,891	$	8,186
Total expected restructuring costs	4,300		4,000		8,300

Employee termination benefits primarily include severance and retention payments to employees impacted by exit activities. Other restructuring costs include changes to the lease terms of the impacted facility, expense to relocate certain individuals and equipment to other manufacturing locations and employee training costs.

The following is a rollforward of the liabilities associated with the restructuring activities since December 31, 2011. The liabilities are reported as a component of accrued and other liabilities in the accompanying consolidated balance sheet as of September 30, 2013.



($'s in thousands)	Employee Termination Benefits			Other Restructuring Costs			Total
Balance as of December 31, 2011	$	1,571		$	295		$	1,866
Charges	972			1,505			2,477
Payments and other adjustments	(1,882		)	(1,609		)	(3,491		)
Balance as of December 31, 2012	661			191			852
Charges	126			178			304
Payments and other adjustments	(481		)	(267		)	(748		)
Balance as of September 30, 2013	$	306		$	102		$	408


7.	Accumulated Other Comprehensive Income

The following table shows the components of AOCI for the three months ended September 30, 2013:



($'s in thousands)	Foreign Currency Translation Adjustment Income (Loss), Net			Pension and Post-retirement Benefit Plans Income (Loss), Net			Total

Beginning Balance	$	(3,401	)	$	(4,005	)	$	(7,406	)
Other comprehensive income (loss) before reclassification	1,136			164			1,300
Less: Amounts reclassified to net income	—			(3		)	(3		)
Net current period other comprehensive income (loss)	1,136			161			1,297
Ending Balance	$	(2,265	)	$	(3,844	)	$	(6,109	)

The following table shows the components of AOCI for the three months ended September 30, 2012:



($'s in thousands)	Foreign Currency Translation Adjustment Income (Loss), Net		Pension and Post-retirement Benefit Plans Income (Loss), Net			Total

Beginning Balance	$	1,590	$	(3,617	)	$	(2,027	)
Other comprehensive income (loss) before reclassification	1,878		—			1,878
Less: Amounts reclassified to net income	—		(14		)	(14		)
Net current period other comprehensive income (loss)	1,878		(14		)	1,864
Ending Balance	$	3,468	$	(3,631	)	$	(163	)

The following table shows the components of AOCI for the nine months ended September 30, 2013:



($'s in thousands)	Foreign Currency Translation Adjustment Income (Loss), Net			Pension and Post-retirement Benefit Plans Income (Loss), Net			Total

Beginning Balance	$	3,655		$	(5,398	)	$	(1,743	)
Other comprehensive income (loss) before reclassification	(5,920		)	1,416			(4,504		)
Less: Amounts reclassified to net income	—			138			138
Net current period other comprehensive income (loss)	(5,920		)	1,554			(4,366		)
Ending Balance	$	(2,265	)	$	(3,844	)	$	(6,109	)

The following table shows the components of AOCI for the nine months ended September 30, 2012:



($'s in thousands)	Foreign Currency Translation Adjustment Income (Loss), Net		Pension and Post-retirement Benefit Plans Income (Loss), Net			Total

Beginning Balance	$	1,375	$	(3,656	)	$	(2,281	)
Other comprehensive income (loss) before reclassification	2,093		—			2,093
Less: Amounts reclassified to net income	—		25			25
Net current period other comprehensive income (loss)	2,093		25			2,118
Ending Balance	$	3,468	$	(3,631	)	$	(163	)

Adjustments to AOCI are recorded net of related tax effects.

The deferred tax provision related to foreign currency translation for the three months ended September 30, 2013 was $696, while the deferred tax benefit for the nine months ended September 30, 2013 was $3,628. The deferred tax provision related to foreign currency translation for the three and nine months ended September 30, 2012 was $1,151 and $1,283, respectively.

The deferred tax provision related to pension and postretirement benefit plans activity for the three and nine months ended September 30, 2013 was $98 and $952, respectively. The deferred tax benefit related to pension and postretirement benefit plans activity for the three months ended September 30, 2012 was $9, while the deferred tax provision for the nine months ended September 30, 2012 was $15.


8.	Income Taxes

At the beginning of 2013, the Company had approximately $112,505 in U.S. net operating loss carry forwards from the years 2001 through 2010. The net operating loss carry forwards in the U.S. will expire between the years 2020 and 2030. Given the uncertainties regarding utilization of a portion of these net operating loss carry forwards, the Company has recorded, as of December 31, 2012, an $8,348 valuation allowance related to the deferred tax benefit of $46,636 associated with the carry forwards. For 2013, the Company’s management estimates that income tax payments will, as in prior years, primarily relate to state and foreign taxes only due to foreign tax credits and the use of net operating loss carryovers to offset U.S. taxable income.

The Company estimates that its 2013 annual effective tax rate, excluding discrete items, will be 15.5%. This rate is lower than the federal statutory rate primarily due to the release of valuation allowances, partially offset by foreign earnings which are currently taxable as "deemed dividends" in the U.S. The deemed dividends are not fully offset by the related foreign tax credits due to limitations of their utilization.

The Company recognized an income tax benefit of $1,502 in the third quarter of 2013 due primarily to foreign tax credits claimed on the tax return filed for the prior year and to adjust the effective tax rate for the year to 15.5% from 22.2% as expected at the end of the second quarter 2013. The expected annual effective tax rate declined during the third quarter due to the deferred tax effect of a tax basis adjustment related to the expected sale of property in Australia. As a result, the Company's effective tax rate for the first nine months of 2013 is 7.1%.


9.	Contingencies

The Company is party to certain environmental matters, although no material claims or obligations are currently pending. All other legal proceedings and actions involving the Company are of an ordinary and routine nature and are incidental to the operations of the Company. Management believes that such proceedings should not, individually or in the aggregate, have a material adverse effect on the Company’s business or financial condition or on the results of operations.

On December 30, 2006, the Company committed to dispose of its Brazilian manufacturing operations. Remaining Brazilian accrued liabilities still held by the Company are primarily associated with tax matters for which the timing of resolution is uncertain. These liabilities are classified within Accrued and Other Liabilities in the amounts of $318 and $392 as of September 30, 2013 and December 31, 2012, respectively.

10. Employee Benefit Plans

Net periodic pension and other postretirement benefit costs include the following components:



($'s in thousands)	U.S. Plan
	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Components of net periodic benefit income:
Service cost	$	—		$	—		$	—		$	—
Interest cost	242			266			727			798
Expected return on plan assets	(339		)	(322		)	(1,016		)	(966		)
Recognized loss	65			40			195			121
Net periodic benefit income	$	(32	)	$	(16	)	$	(94	)	$	(47	)

($'s in thousands)	Australian Plan
	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Components of net periodic benefit cost:
Service cost	$	241		$	242		$	776		$	722
Interest cost	292			418			941			1,248
Expected return on plan assets	(284		)	(381		)	(916		)	(1,137		)
Recognized loss	14			—			46			—
Curtailment (gain)/loss	(52		)	—			978			—
Settlement loss	124			—			759			—
Net periodic benefit cost	$	335		$	279		$	2,584		$	833

($'s in thousands)	Canadian Plan
	Three Months Ended						Nine Months Ended
	September 30, 2013			September 30, 2012			September 30, 2013			September 30, 2012
Components of net periodic benefit cost:
Service cost	$	38		$	49		$	117		$	146
Interest cost	44			50			136			148
Expected return on plan assets	(64		)	(68		)	(197		)	(200		)
Recognized loss	8			2			26			5
Net periodic benefit cost	$	26		$	33		$	82		$	99

As part of the restructuring plan announced in the first quarter of 2013 for its Melbourne, Australia manufacturing location, participation in the Australia Superannuation Fund was significantly reduced. This reduction triggered both a curtailment and a settlement, as defined by Accounting Standards Codification (“ASC”) Topic 715 “Compensation - Retirement Benefits”, requiring the Company to incur additional expense to settle with the impacted employees. The curtailment and settlement losses were included in restructuring costs for the periods ended September 30, 2013 and are shown in the Australia Plan table above.

11. Segment Information

The Company’s operations are comprised of several product lines manufactured and sold in various geographic locations. The market channels and end users for products are similar. The production processes are shared across the majority of the products. Management evaluates performance and allocates resources on a combined basis and not as separate business units or profit centers. Accordingly, management has concluded the Company operates in one reportable segment.

Geographic Information

The reportable geographic regions are the Americas, Asia-Pacific and Europe/Rest of World (ROW). Summarized financial information concerning the Company’s geographic segments for its operations is shown in the following tables:



($'s in thousands)	Three Months Ended				Nine Months Ended
	September 30, 2013		September 30, 2012		September 30, 2013		September 30, 2012
Net Sales:
Americas	$	80,868	$	77,657	$	253,501	$	250,764
Asia-Pacific	28,785		35,029		87,097		101,961
Europe/ROW	9,735		8,425		29,445		27,514
Total	$	119,388	$	121,111	$	370,043	$	380,239

The decrease in net sales in Asia-Pacific period over period is primarily due to a softening in the mining sector of Australia and the effect of changes in foreign currency exchange rates.

U.S. sales as a portion of Americas’ sales comprised approximately 84% for the three months ended September 30, 2013 and September 30, 2012, and approximately 83% and 84% for the nine months ended September 30, 2013 and September 30, 2012, respectively.

Australia sales as a portion of Asia-Pacific sales comprised approximately 70% and 74% for the three months ended September 30, 2013 and September 30, 2012, and approximately 73% and 74% for the nine months ended September 30, 2013 and September 30, 2012, respectively.

The following table shows long-lived assets (excluding goodwill, intangibles and deferred taxes) for each of the Company’s geographic segments:



($'s in thousands)	September 30, 2013		December 31, 2012
Long-lived Assets:
Americas	$	63,706	$	70,596
Asia-Pacific	5,183		19,237
Europe/ROW	1,481		1,625
Total	$	70,370	$	91,458

Product Line Information

The Company sells a variety of products, substantially all of which are used by manufacturing, construction and foundry operations to cut, join and reinforce steel, aluminum and other metals in various applications including construction, oil, gas rig and pipeline construction, repair and maintenance of manufacturing equipment, and shipbuilding. The following table shows sales for each of the Company's key product lines:



($'s in thousands)	Three Months Ended				Nine Months Ended
	September 30, 2013		September 30, 2012		September 30, 2013		September 30, 2012
Product Lines:
Gas equipment	$	42,202	$	41,050	$	132,191	$	131,785
Plasma cutting systems	21,006		19,458		63,782		63,821
Carbon arc gouging products	6,538		6,716		20,227		20,395
Welding equipment	10,550		13,043		33,927		40,004
Arc accessories	17,152		17,271		51,523		52,444
Filler metals and hardfacing alloys	21,940		23,573		68,393		71,790
Total	$	119,388	$	121,111	$	370,043	$	380,239

12. Assets Held for Sale

As of September 30, 2013, the Company has two separate properties that are currently marketed for sale and are expected to sell within a twelve month period. The first property, with a carrying value of $9,428, is a vacant facility and accompanying land in Melbourne, Australia. The second property, with a carrying value of $2,146, is an unused parcel of land in Hermosillo, Mexico. The Company has met the requirements, as defined by Accounting Standards Codification (“ASC”) Topic 360 “Property, Plant and Equipment”, to classify both properties as held for sale and has accordingly reclassified the respective carrying values as current assets as of September 30, 2013.


13.	Relationships and Transactions

Relationship with Irving Place Capital

Victor Technologies is a wholly-owned subsidiary of Holdings. Affiliates of Irving Place Capital, along with its co-investors, held approximately 98.2% of the outstanding equity of Holdings at September 30, 2013 and December 31, 2012. The Board of Directors of the Company and Holdings includes one IPC member.

IPC has the power to designate all of the members of the Board of Directors of the Company and the right to remove any directors whom it appoints.

Management Services Agreement

The Company has entered into a management services agreement with IPC. For advisory and management services, IPC will receive annual advisory fees equal to the greater of (i) $1,500 or (ii) 2.5% of EBITDA (as defined under the management services agreement), payable quarterly. Such fees were $591 and $1,931 for the three and nine months ended September 30, 2013 and $604 and $1,793 for the three and nine months ended September 30, 2012. In the event of a sale of all or substantially all of the Company’s assets to a third party, a change of control, whether by merger, consolidation, sale or otherwise, or, under certain circumstances, a public offering of the Company’s or any of its subsidiaries’ equity securities, the Company will be obligated to pay IPC an amount equal to the sum of the advisory fee that would be payable for the following four fiscal quarters.

In connection with any subsequent material corporate transactions, such as an equity or debt offering, acquisition, asset sale, recapitalization, merger, joint venture formation or other business combination, IPC will receive a fee of 1% of the transaction value. IPC will also receive fees in connection with certain strategic services, as determined by IPC, provided such fees will reduce the annual advisory fee on a dollar-for-dollar basis.

Victor Technologies Holdings Inc. (Holdings)

At September 30, 2013, an aggregate $107,412 in Holdings capital stock was outstanding, which was comprised of 56,988 shares of 8% cumulative preferred stock in the amount of $71,279 and 3,547,595 shares of common stock in the amount of $36,133. On March 6, 2012, the Company paid a cash dividend of $93,507 to Holdings, the sole stockholder of the Company, to allow it to redeem a portion of its outstanding Series A preferred stock, of which payment was funded by the net proceeds from the sale of the Additional Notes and cash on hand. The redemption of Series A preferred stock was completed on March 12, 2012. No dividends have been declared on either the preferred stock or common stock of Holdings at September 30, 2013 or December 31, 2012.

Holdings’ stock based compensation costs relate to Victor Technologies' employees and were incurred for Victor Technologies' benefit, and accordingly recognized in Victor Technologies' consolidated selling, general & administrative expenses.

14. Condensed Consolidating Financial Statements and Victor Technologies Group, Inc. (Parent) Financial Information

The 9% Senior Secured Notes due 2017 are obligations of, and were issued by, Victor Technologies. Each guarantor is wholly-owned by Victor Technologies. The Company’s management has determined the most appropriate presentation is to “push down” the Senior Secured Notes due 2017 to the guarantors in the accompanying condensed financial information, as such entities fully and unconditionally guarantee the Senior Secured Notes due 2017, and these subsidiaries are jointly and severally liable for all payments under these notes. The Senior Secured Notes due 2017 were issued to finance the acquisition of the Company along with new stockholder’s equity. The guarantor subsidiaries’ cash flow will service the debt.

The following financial information presents the guarantors and non-guarantors of the 9% Senior Secured Notes due 2017 and, prior to February 1, 2011, the 9¼% Senior Subordinated Notes due 2014, in accordance with Rule 3-10 of Regulation S-X. The condensed consolidating financial information includes the accounts of Victor Technologies Group, Inc. (parent only), and the combined accounts of guarantor subsidiaries and combined accounts of the non-guarantor subsidiaries for the periods indicated. Separate financial statements of the parent and each of the guarantor subsidiaries are not presented because management has determined such information is not material in assessing the financial condition, cash flows or results of operations of the Company and its subsidiaries. The Company’s Australian subsidiaries are included as guarantors for all years presented. Additionally, approximately 80% of the assets and 70% of the net sales have been pledged by the non-guarantor subsidiaries to the holders of the Senior Secured Notes.

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2013

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.		Guarantors			Non- Guarantors			Eliminations			Consolidated
Net sales	$	—	$	91,820		$	27,568		$	—		$	119,388
Cost of goods sold	—		50,833			23,024			—			73,857
Gross margin	—		40,987			4,544			—			45,531
Selling, general and administrative expenses	—		21,438			3,936			—			25,374
Amortization of intangibles	—		1,633			8			—			1,641
Restructuring (credit)	—		577			—			—			577
Operating income	—		17,339			600			—			17,939
Other income (expense):
Interest, net	—		(8,427		)	(6		)	—			(8,433		)
Amortization of deferred financing costs	—		(677		)	—			—			(677		)
Equity in net income (loss) of subsidiaries	10,331		—			—			(10,331		)	—
Income (loss) before income tax provision	10,331		8,235			594			(10,331		)	8,829
Income tax(benefit) provision	—		(1,606		)	104			—			(1,502		)
Net income (loss)	$	10,331	$	9,841		$	490		$	(10,331	)	$	10,331

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.		Guarantors			Non- Guarantors			Eliminations			Consolidated
Net sales	$	—	$	97,528		$	23,583		$	—		$	121,111
Cost of goods sold	—		58,576			19,142			—			77,718
Gross margin	—		38,952			4,441			—			43,393
Selling, general and administrative expenses	—		20,453			4,931			—			25,384
Amortization of intangibles	—		1,613			10			—			1,623
Restructuring costs	—		518			—			—			518
Operating income (loss)	—		16,368			(500		)	—			15,868
Other income (expense):
Interest, net	—		(8,462		)	(28		)	—			(8,490		)
Amortization of deferred financing costs	—		(618		)	—			—			(618		)
Equity in net income (loss) of subsidiaries	5,332		—			—			(5,332		)	—
Income (loss) before income tax provision	5,332		7,288			(528		)	(5,332		)	6,760
Income tax provision	—		1,379			49			—			1,428
Net income (loss)	$	5,332	$	5,909		$	(577	)	$	(5,332	)	$	5,332

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.		Guarantors			Non- Guarantors			Eliminations			Consolidated
Net sales	$	—	$	290,267		$	79,776		$	—		$	370,043
Cost of goods sold	—		164,698			65,558			—			230,256
Gross margin	—		125,569			14,218			—			139,787
Selling, general and administrative expenses	—		70,270			8,819			—			79,089
Amortization of intangibles	—		4,894			35			—			4,929
Restructuring costs	—		6,105			—			—			6,105
Operating income	—		44,300			5,364			—			49,664
Other income (expense):
Interest, net	—		(25,273		)	(26		)	—			(25,299		)
Amortization of deferred financing costs	—		(1,985		)	—			—			(1,985		)
Equity in net income (loss) of subsidiaries	20,795		—			—			(20,795		)	—
Income (loss) before income tax provision	20,795		17,042			5,338			(20,795		)	22,380
Income tax provision	—		765			820			—			1,585
Net income (loss)	$	20,795	$	16,277		$	4,518		$	(20,795	)	$	20,795

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.		Guarantors			Non- Guarantors			Eliminations			Consolidated
Net sales	$	—	$	308,555		$	71,684		$	—		$	380,239
Cost of goods sold	—		188,008			57,827			—			245,835
Gross margin	—		120,547			13,857			—			134,404
Selling, general and administrative expenses	—		67,286			11,999			—			79,285
Amortization of intangibles	—		4,780			10			—			4,790
Restructuring costs	—		2,177			—			—			2,177
Operating income (loss)	—		46,304			1,848			—			48,152
Other income (expense):
Interest, net	—		(23,599		)	(74		)	—			(23,673		)
Amortization of deferred financing costs	—		(1,718		)	—			—			(1,718		)
Equity in net income (loss) of subsidiaries	16,530		—			—			(16,530		)	—
Income (loss) before income tax provision	16,530		20,987			1,774			(16,530		)	22,761
Income tax provision	—		5,827			404			—			6,231
Net income (loss)	$	16,530	$	15,160		$	1,370		$	(16,530	)	$	16,530

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

THREE MONTHS ENDED SEPTEMBER 30, 2013

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated
Net income (loss)	$	10,331		$	9,841		$	490		$	(10,331	)	$	10,331

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments
Other comprehensive income (loss) before reclassification	1,136			(813		)	260			553			1,136
Less: Amounts reclassified to income	—			—			—			—			—

Pension and postretirement
Other comprehensive income (loss) before reclassification	164			164			—			(164		)	164
Less: Amounts reclassified to income	(3		)	2			(5		)	3			(3		)

Comprehensive income (loss)	$	11,628		$	9,194		$	745		$	(9,939	)	$	11,628

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

THREE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.			Guarantors		Non- Guarantors			Eliminations			Consolidated
Net income (loss)	$	5,332		$	5,909	$	(577	)	$	(5,332	)	$	5,332

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments
Other comprehensive income (loss) before reclassification	1,878			2,105		743			(2,848		)	1,878
Less: Amounts reclassified to income	—			—		—			—			—

Pension and postretirement
Other comprehensive income (loss) before reclassification	—			—		—			—			—
Less: Amounts reclassified to income	(14		)	—		(14		)	14			(14		)

Comprehensive income (loss)	$	7,196		$	8,014	$	152		$	(8,166	)	$	7,196

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

NINE MONTHS ENDED SEPTEMBER 30, 2013

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated
Net income (loss)	$	20,795		$	16,277		$	4,518		$	(20,795	)	$	20,795

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments
Other comprehensive income (loss) before reclassification	(5,920		)	(3,191		)	(800		)	3,991			(5,920		)
Less: Amounts reclassified to income	—			—			—			—			—

Pension and postretirement
Other comprehensive income (loss) before reclassification	1,416			1,416			—			(1,416		)	1,416
Less: Amounts reclassified to income	138			103			35			(138		)	138

Comprehensive income (loss)	$	16,429		$	14,605		$	3,753		$	(18,358	)	$	16,429

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME

NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.		Guarantors		Non- Guarantors			Eliminations			Consolidated
Net income (loss)	$	16,530	$	15,160	$	1,370		$	(16,530	)	$	16,530

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustments
Other comprehensive income (loss) before reclassification	2,093		3,496		693			(4,189		)	2,093
Less: Amounts reclassified to income	—		—		—			—			—

Pension and postretirement
Other comprehensive income (loss) before reclassification	—		—		—			—			—
Less: Amounts reclassified to income	25		38		(13		)	(25		)	25

Comprehensive income (loss)	$	18,648	$	18,694	$	2,050		$	(20,744	)	$	18,648

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

SEPTEMBER 30, 2013

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—		$	51,077		$	8,214		$	—		$	59,291
Accounts receivable, net	—			57,418			13,679			—			71,097
Inventories	—			89,853			15,124			—			104,977
Prepaid expenses and other	—			4,905			6,779			—			11,684
Prepaid income taxes	—			1,178			351			—			1,529
Deferred tax assets	—			2,423			—			—			2,423
Assets held for sale	—			9,428			2,146			—			11,574
Total current assets	—			216,282			46,293			—			262,575
Property, plant and equipment, net	—			45,238			11,545			—			56,783
Goodwill	—			178,924			5,012			—			183,936
Intangibles, net	—			131,986			239			—			132,225
Deferred financing fees	—			13,501			—			—			13,501
Other assets	—			566			—			—			566
Investment in and advances to subsidiaries	170,385			79,232			—			(249,617		)	—
Total assets	$	170,385		$	665,729		$	63,089		$	(249,617	)	$	649,586
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term obligations	$	—		$	1,302		$	17		$	—		$	1,319
Accounts payable	—			24,578			9,839			—			34,417
Accrued and other liabilities	—			27,812			6,084			—			33,896
Accrued interest	—			9,577			—			—			9,577
Income taxes payable	—			15			779			—			794
Deferred tax liability	—			4,436			—			—			4,436
Total current liabilities	—			67,720			16,719			—			84,439
Long-term obligations, less current maturities	—			357,155			28			—			357,183
Deferred tax liabilities	—			77,704			153			—			77,857
Other long-term liabilities	—			13,223			2,029			—			15,252
Net equity (deficit) and advances to / from subsidiaries	55,530			16,433			(34,208		)	(37,755		)	—
Stockholder's equity (deficit):
Common stock	—			2,555			55,782			(58,337		)	—
Additional paid-in-capital	86,483			115,259			15,829			(131,088		)	86,483
Retained Earnings / (Accumulated deficit)	34,481			20,309			6,419			(26,728		)	34,481
Accumulated other comprehensive income (loss)	(6,109		)	(4,629		)	338			4,291			(6,109		)
Total stockholder's equity (deficit)	114,855			133,494			78,368			(211,862		)	114,855
Total liabilities and stockholder's equity (deficit)	$	170,385		$	665,729		$	63,089		$	(249,617	)	$	649,586

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2012

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	—		$	26,952		$	5,427		$	—		$	32,379
Accounts receivable, net	—			52,709			12,277			—			64,986
Inventories	—			89,398			11,211			—			100,609
Prepaid expenses and other	—			5,654			6,838			—			12,492
Deferred tax assets	—			2,423			—			—			2,423
Total current assets	—			177,136			35,753			—			212,889
Property, plant and equipment, net	—			61,819			14,075			—			75,894
Goodwill	—			182,225			4,898			—			187,123
Intangibles, net	—			136,202			586			—			136,788
Deferred financing fees	—			15,486			—			—			15,486
Other assets	—			559			—			—			559
Investment in and advances to subsidiaries	174,751			79,232			—			(253,983		)	—
Total assets	$	174,751		$	652,659		$	55,312		$	(253,983	)	$	628,739
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term obligations	$	—		$	1,248		$	315		$	—		$	1,563
Accounts payable	—			23,308			6,401			—			29,709
Accrued and other liabilities	—			30,495			6,222			—			36,717
Accrued interest	—			1,479			—			—			1,479
Income taxes payable	—			(140		)	452			—			312
Deferred tax liability	—			4,436			—			—			4,436
Total current liabilities	—			60,826			13,390			—			74,216
Long-term obligations, less current maturities	—			357,463			57			—			357,520
Deferred tax liabilities	—			80,618			149			—			80,767
Other long-term liabilities	—			16,596			2,205			—			18,801
Net equity (deficit) and advances to / from subsidiaries	77,316			21,381			(35,341		)	(63,356		)	—
Stockholder's equity (deficit):
Common stock	—			2,555			55,782			(58,337		)	—
Additional paid-in-capital	85,492			113,796			15,597			(129,393		)	85,492
Retained Earnings / (Accumulated deficit)	13,686			4,032			1,901			(5,933		)	13,686
Accumulated other comprehensive income (loss)	(1,743		)	(4,608		)	1,572			3,036			(1,743		)
Total stockholder's equity (deficit)	97,435			115,775			74,852			(190,627		)	97,435
Total liabilities and stockholder's equity (deficit)	$	174,751		$	652,659		$	55,312		$	(253,983	)	$	628,739

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2013

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net cash provided by (used in) operating activities	$	21,728		$	34,077		$	1,989		$	(20,795	)	$	36,999
Cash flows from investing activities:
Capital expenditures	—			(5,169		)	(1,083		)	—			(6,252		)
Acquisition of business, net of cash acquired	—			(1,905		)	—			—			(1,905		)
Other	—			(366		)	—			—			(366		)
Net cash provided by (used in) investing activities	—			(7,440		)	(1,083		)	—			(8,523		)
Cash flows from financing activities:
Repayments of other long-term obligations	—			(806		)	(323		)	—			(1,129		)
Changes in net equity	(21,786		)	(1,211		)	2,202			20,795			—
Other	58			443			—			—			501
Net cash provided by (used in) financing activities	(21,728		)	(1,574		)	1,879			20,795			(628		)
Effect of exchange rate changes on cash and cash equivalents	—			(938		)	2			—			(936		)
Total increase in cash and cash equivalents	—			24,125			2,787			—			26,912
Total cash and cash equivalents beginning of period	—			26,952			5,427			—			32,379
Total cash and cash equivalents end of period	$	—		$	51,077		$	8,214		$	—		$	59,291

VICTOR TECHNOLOGIES GROUP, INC.

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

(Dollars in thousands)



	Parent Victor Technologies Group, Inc.			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash flows from operations:
Net cash provided by (used in) operating activities	$	17,224		$	27,292		$	335		$	(16,571	)	$	28,280
Cash flows from investing activities:
Capital expenditures	—			(6,719		)	(1,628		)	—			(8,347		)
Acquisition of business, net of cash acquired	—			(3,498		)	—			—			(3,498		)
Other	—			1,022			(1,520		)	—			(498		)
Net cash provided by (used in) investing activities	—			(9,195		)	(3,148		)	—			(12,343		)
Cash flows from financing activities:
Issuance of Additional Notes of Senior Secured Notes due 2017	—			100,000			—			—			100,000
Senior Secured Notes discount	—			(5,200		)	—			—			(5,200		)
Repayments of other long-term obligations	—			(933		)	(302		)	—			(1,235		)
Dividend payment to Parent	(93,507		)	—			—			—			(93,507		)
Deferred financing fees	—			(4,421		)	—			—			(4,421		)
Changes in net equity	76,370			(96,303		)	3,362			16,571			—
Other	(87		)	—			—			—			(87		)
Net cash provided by (used in) financing activities	(17,224		)	(6,857		)	3,060			16,571			(4,450		)
Effect of exchange rate changes on cash and cash equivalents	—			214			59			—			273
Total increase (decrease) in cash and cash equivalents	—			11,454

Victor Technologies Group, Inc. 10-Q