UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

R ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, ~~2012~~2013



£	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	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

16052 Swingley Ridge Road, 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: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes £ No R

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes £ No R

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 R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes R No £

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. R

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

Large Accelerated Filer £ Accelerated Filer £ Non-Accelerated Filer R Smaller Reporting Company £

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes £ No R

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: Zero. The registrant is a privately held corporation.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: 1,000 shares of common stock, outstanding at March 27, ~~2013~~2014.

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 within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995, including statements regarding our future prospects. These statements may be identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will” and similar expressions and relate to future events and occurrences. Actual results could differ materially due to a variety of factors and the other risks described in this Annual Report and the other documents we file from time to time with the Securities and Exchange Commission. Factors that could cause actual results to differ materially from those expressed or implied in such statements include, but are not limited to, the following and those discussed under the “Risk Factors” section of this Annual Report on Form 10-K:


a)	the impact of uncertain global economic conditions on our business and those of our customers;


b)	the cost and availability of raw materials;


c)	our ability to implement cost-reduction initiatives timely and successfully;


d)	operational and financial developments and restrictions affecting our international sales and operations;


e)	the impact of currency fluctuations, exchange controls, and devaluations;


f)	the impact of a change of control under our debt instruments and potential limits on our ability to use net operating loss carryforwards;


g)	fluctuations in labor costs;


h)	consolidation within our customer base and the resulting increased concentration of our sales;


i)	actions taken by our competitors that affect our ability to retain our customers;


j)	our ability to meet customer needs by introducing new and enhanced products;


k)	our ability to adequately enforce or protect our intellectual property rights;


l)	the detrimental cash flow impact of increasing interest rates and our ability to comply with financial covenants in our debt instruments;


m)	disruptions in the credit markets;


n)	our relationships with our employees and our ability to retain and attract qualified personnel;


o)	the identification, completion and integration of strategic acquisitions;


p)	our ability to implement our business strategy;


q)	the impact of a material disruption of our operations on our ability to meet customer demand and on our capital expenditure requirements;

r) liabilities arising from litigation, including product liability risks,; and


s)	the costs of compliance with and liabilities arising under environmental laws and regulations.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof and are not guarantees of performance or results. There can be no assurance that forward looking statements will prove to be accurate. We undertake 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.

		Page
PART I
	Item 1. Business	4
	Item 1A. Risk Factors	98
	Item 1B. Unresolved Staff Comments	1413
	Item 2. Properties	1513
	Item 3. Legal Proceedings	1614
	Item 4. Mine Safety Disclosures	1615
PART II
	Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	1716
	Item 6. Selected Financial Data	1816
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1917
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk	3527
	Item 8. Financial Statements and Supplementary Data	3628
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	3628
	Item 9A. Controls and Procedures	3628
	Item 9B. Other Information	3629
PART III
	Item 10. Directors, Executive Officers, and Corporate Governance	3730
	Item 11. Executive Compensation	4134
	Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	5850
	Item 13. Certain Relationships, Related Transactions, and Director Independence	60
	Item 13. Certain Relationships and Related Transactions, and Director Independence	51
	Item 14. Principal Accounting Fees and Services	6153
PART IV
	Item 15. Exhibits, Financial Statement Schedules	6354
SIGNATURES		~~112~~96

PART I

Item 1. Business

Introduction

Victor Technologies Group, Inc. (together with its subsidiaries, "Victor Technologies" or the "Company") 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 WorldTM.” Our 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, construction projects, such as offshore oil and gas rigs, repair and maintenance of manufacturing equipment and facilities, and shipbuilding. We market our products under a widely recognized portfolio of brands, many of which are the leading brand in their segment, 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.

~~Effective~~On ~~May~~October 2131, ~~2012~~2013, wethe ~~changed~~Company ~~our~~acquired ~~name~~all ~~from~~of ~~Thermadyne~~the ~~Holdings~~outstanding ~~Corporation~~capital ~~("Thermadyne")~~stock toof ~~Victor~~Gas ~~Technologies~~Arc Group, ~~Inc~~Ltd. (~~“Victor~~"Gas-Arc"), ~~Technologies”~~a orprivately ~~the~~held ~~"Company"). Thermadyne~~manufacturer ~~Technologies~~of ~~Holdings,~~gas ~~Inc.~~control ~~(“Technologies”),~~equipment ~~the~~based ~~parent~~in ~~company~~the ofUnited ~~Victor~~Kingdom. ~~Technologies,~~Gas-Arc's ~~accordingly~~portfolio ~~changed~~includes ~~its~~branded ~~name~~gas tocontrol ~~Victor~~products ~~Technologies~~that ~~Holdings,~~meet ~~Inc.~~specialty ~~("Holdings"). We~~gas ~~announced~~application ~~the~~requirements ~~name~~as ~~change~~well toas ~~Victor~~cutting ~~Technologies~~and towelding ~~leverage~~equipment for the ~~company's~~industrial, ~~strongest~~laboratory and ~~most~~medical ~~established~~gas ~~brand,~~control ~~Victor®~~markets.

On ~~December~~February 312, ~~2010 (“Acquisition Date”)~~2014, ~~pursuant~~Victor toTechnologies anHoldings, ~~Agreement~~Inc., ~~and~~the ~~Plan~~parent ofcompany ~~Merger dated as~~ of ~~October~~Victor 5,Technologies ~~2010 (the “Merger Agreement”)~~Group, ~~Razor Merger Sub~~ Inc. ~~(“Merger Sub”)~~, aentered ~~newly formed Delaware corporation, merged with and~~ into ~~Thermadyne, with Thermadyne surviving as~~ a ~~direct,~~definitive ~~wholly-owned~~agreement ~~subsidiary~~to ofsell ~~Razor~~the ~~Holdco~~Company ~~Inc.,~~to aColfax ~~Delaware~~Corporation ~~corporation~~ (~~the "Merger" or the~~ “~~Acquisition~~Colfax”)~~. (Razor Holdco Inc. was renamed Thermadyne Technologies Holdings~~, ~~Inc.) As~~a ~~used~~global inmanufacturer ~~this~~of ~~Report,~~gas- ~~the~~and ~~term~~fluid-handling ~~“Successor” refers to the Company following the Merger~~ and ~~the~~fabrication ~~term~~technology ~~“Predecessor” refers to the Company prior to the Merger~~products. ~~For~~ aThe ~~discussion~~all ofcash ~~the~~transaction ~~basis~~values ofVictor ~~presentation~~Technologies ofat ~~our~~approximately ~~financial~~$947 ~~information in this Annual Report on Form 10-K~~million, ~~see~~including ~~“Management’s~~the ~~Discussion~~assumption ~~and Analysis~~ of ~~Financial~~debt, ~~Condition~~ and ~~Results~~is ofsubject ~~Operations”~~to ~~included~~customary inclosing ~~Item 7 of this Report~~conditions.

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 98.2% of the outstanding equity of Holdings, and certain members of Victor Technologies' management hold the remaining equity capital.

As used in this Annual Report on Form 10-K, the terms “Victor Technologies Group, Inc.,” “Victor Technologies,” “the Company,” “we,” “our,” or “us,” mean Victor Technologies Group, Inc. and its subsidiaries.

Our Industry

We believe that steel production is the leading indicator for market demand in the cutting and welding products industry. We estimate that the global cutting and welding industry is an approximately $15.59 billion market consisting of three main product categories and several subcategories: (1) cutting products consisting of gas cutting equipment, gas control regulators, plasma cutting systems, and carbon arc gouging products; (2) welding products consisting of welding equipment and arc accessories; and (3) filler metals and hardfacing alloys. We primarily target the gas equipment, plasma cutting systems and arc accessories product segments, which we believe account for approximately 86%, 56% and 67% of the global cutting and welding market, respectively. We also participate as a specialty player in certain geographic areas in filler metals and hardfacing alloys, which we estimate constitutes approximately 57% of the market, and welding equipment, which comprises approximately 24% of the market. We believe that approximately 4442% of the global market is located in the Asia-Pacific region, approximately 3031% is located in the Americas and the remaining approximately 2627% represents sales in Europe, the United Kingdom, the Middle East, Russia and Africa.

Our Company

Our portfolio includes some of the most globally recognized and well-established brands in the cutting and welding industry. Many of our brands have a long history dating back several decades. Victor is a leading brand of gas cutting and welding torches and gas control equipment and iscelebrated ~~celebrating~~ its 100th anniversary in 2013. Tweco brand arc accessories are well-known for technical innovation, reliability and excellent product performance over their 70-year history. As one of the original two plasma brands, Victor Thermal Dynamics has been synonymous with plasma cutting since systems of this type were first developed in 1957. Cigweld, which was established in 1922, is the leading brand of cutting and welding equipment in Australia. Stoody, the leading brand of hardfacing wires and electrodes in the United States, was established in 1921. We believe our well established brand names and reputation for product quality have fostered strong brand loyalty among our customers, which generates repeat business and improves our ability to win new business as well as expand market share. ~~In November 2012, we announced the~~

In November 2012, we announced the realignment of our brand portfolio unifying all our cutting and gas control products under the Victor brand. In September 2013, we continued our brand consolidation initiative unifying all our specialty welding products and arc accessories under the Tweco brand. As a result of these changes we now have the most innovative array of advanced gas control, cutting and welding solutions in the market.

During 2013, we generated approximately 83% of our net sales from products either consumed in the everyday cutting and welding process or from torches and related accessories, which are frequently replaced due to the high level of wear and tear experienced during use. These items generally have low prices and are not considered capital expenditures by our customers, providing us with a consistent recurring sales base. We also benefit from a well-balanced mix of sales by end-market and geography. In 2013,

~~realignment~~approximately 57% of our ~~brand~~net ~~portfolio~~sales ~~unifying~~came ~~all~~from ~~our~~the ~~cutting~~United States and ~~gas~~approximately ~~control~~43% ~~products~~came ~~under~~from ~~the~~international ~~Victor~~markets, ~~brand~~including toapproximately ~~represent~~23% from the ~~most~~Asia ~~comprehensive~~Pacific ~~array~~region, ofprimarily ~~advanced~~Australia ~~cutting~~and ~~solutions in the market~~China.

~~During~~The ~~2012,~~acquisition ~~we generated approximately 81%~~ of ~~our~~Gas-Arc, ~~net~~a ~~sales~~leader ~~from products either consumed~~ in the ~~everyday~~design ~~cutting~~ and ~~welding~~manufacturing ~~process~~of orspecialty ~~from~~gas ~~torches~~ and ~~related~~industrial ~~accessories,~~gas ~~which~~control ~~are~~products ~~frequently~~based ~~replaced~~in ~~due to~~ the ~~high~~United ~~level of wear and tear experienced during use. These items generally have low prices and are not considered capital expenditures by our customers~~Kingdom, ~~providing~~enables us ~~with~~to aexpand ~~consistent~~our ~~recurring~~presence ~~sales~~in ~~base. We~~Europe ~~also benefit from a well-balanced mix of sales by end-market~~ and ~~geography. In~~leverage ~~2012,~~strengths ~~approximately~~in ~~55% of our net sales came from~~ the ~~United~~high ~~States~~purity and ~~approximately~~medical ~~45%~~gas ~~came~~control ~~from international~~ markets, ~~including approximately 27% from the Asia Pacific region, primarily Australia and China~~globally.

In July 2012, we acquired all of the capital stock of Robotronic Oy, the parent company of ProMotion Controls Inc., a leading maker of advanced, intelligent CNC controllers used in shape cutting machines. ProMotion Controls, with operations in Medina, Ohio, is the U.S. subsidiary of Robotronic Oy, with operations in Tampere, Finland. The company's products were integrated with the Victor® Thermal Dynamics® brand and have allowed us to provide end users with fully-integrated automated plasma cutting solutions that improve productivity.

Our Products

We offer products in each of the main categories and subcategories of the cutting and welding industry. Our diverse product base ensures that we are not dependent on any one category or subcategory.

Cutting & Gas Control Products

Gas Cutting & Gas Control Equipment (Approximately 3435% of ~~2012~~2013 net sales). The advantage of gas equipment over other types of cutting equipment is that it does not require an external electrical power supply to operate, thereby providing the user with a versatile and portable source for cutting and heating in both workshop and outdoor locations. Our gas cutting equipment products include cutting torches, tips and nozzles. Gas control products regulate and control the flow of gases to the cutting torch and are also used in stand-alone applications beyond cutting, and include products such as regulators, manifolds, flow meters and flashback arrestors. All of the above are sold under the Victor, Cigweld and Victor Turbo Torch brand names. We believe Victor is the most recognized brand name in the gas equipment market and is viewed as an innovation and quality leader. Strong recognition of the Victor brand drives customer loyalty and repeat product purchases. The typical price range of these products is approximately $40 to $400. The design of gas equipment varies among manufacturers leading to a strong preference for “product styles.” Gas equipment products are used frequently in harsh environments, which necessitate a high rate of replacement as well as a high quality product.

Plasma Cutting Systems (Approximately 1718% of ~~2012~~2013 net sales). Plasma cutting is a process whereby electricity from a power source and gas delivered through a plasma torch are used to cut steel and other metals. Plasma cutting is used in the fabrication, construction and repair of both steel and nonferrous metal products, including automobiles and related assemblies, manufactured appliances, ships, railcars and heating, ventilation and air-conditioning products, as well as for general maintenance. Advantages of the plasma cutting process over other methods include faster cutting speeds, cleaner cuts and the ability to cut ferrous and nonferrous alloys with minimum heat distortion to the metal being cut. Our high technology products associated with automated cutting have gained market share, and we expect these share gains to continue as we continue to introduce innovative new products.

Our plasma cutting products include power supplies, torches and related consumable parts that are sold under the Victor Thermal Dynamics brand name. On average, manual and automated plasma torches sell for approximately $350 and $1,000, respectively, while manual and automated power supplies sell for approximately $1,800 and $25,000, respectively. Both our manual and automated plasma systems utilize patented consumable parts, which ~~provides~~provide a significant source of ongoing revenue.

Carbon Arc Gouging Products (Approximately 6% of ~~2012~~2013 net sales). The gouging process physically removes metal utilizing the intense heat of an electric arc between an electrode and the work piece and using compressed air to blow away the molten material. It is used for cutting metals and more typically to prepare an area for welding. The product category is sold under the Victor Arcair brand and consists of manual gouging torches, automated gouging systems and consumable parts named “carbons” which are rapidly consumed during the process. On average, the typical price range of torches and consumable products is approximately $25 to $1,800, while automated gouging systems sell in a range of price from $4,500 to $16,000.

Welding Products

Specialty Welding Equipment (Approximately 109% of ~~2012~~2013 net sales). The traditional arc welding process uses a welding power supply to deliver an electric arc through a welding torch, gun or electrode holder that melts filler metals to the parent material to form a weld. We offer a wide range of welding equipment, including electric power sources, wire feeders, engine drives and plasma welding equipment. These products are sold under the Tweco, Thermal Arc and Cigweld brand names and use Tweco accessories and Victor regulators. Our inverter and transformer-based electric arc power supplies typically range in price from approximately $100 to $5,000. Our plasma welding and engine-driven power supplies typically range in price from approximately $5,000 to $10,000 and from approximately $1,200 to $10,000, respectively.

Arc Accessories (Approximately 14% of 2013 net sales). Our arc accessories include manual and robotic semiautomatic welding guns and related consumables, ground clamps, electrode holders, cable connectors and assemblies that are sold under the Tweco brand name. Our arc welding guns typically range in price from approximately $90 to $400. Arc welding is the most common method of welding and is used for a wide variety of manufacturing and construction applications, including the production of ships, railcars, farm and mining equipment and offshore oil and gas rigs. Customers tend to select arc accessories based on a preference for a certain look and feel that develops as a result of repeated usage over an extended period of time. This preference drives brand loyalty which, in turn, drives recurring sales of arc accessory products.

Arc Accessories (Approximately 14% of 2012 net sales). Our arc accessories include manual and robotic semiautomatic welding guns and related consumables, ground clamps, electrode holders, cable connectors and assemblies that are sold under the Tweco brand name. Our arc welding guns typically range in price from approximately $90 to $400. Arc welding is the most common method of welding and is used for a wide variety of manufacturing and construction applications, including the production of ships, railcars, farm and mining equipment and offshore oil and gas rigs. Customers tend to select arc accessories based on a preference for a certain look and feel that develops as a result of repeated usage over an extended period of time. This preference drives brand loyalty which, in turn, drives recurring sales of arc accessory products.

Filler Metals and Hardfacing Alloys

Filler Metals and Hardfacing Alloys (Approximately 1918% of ~~2012~~2013 net sales). Filler metals are used to join metals during electric arc welding or brazing processes. Hardfacing alloys are welding consumables applied to impart wear and corrosion resistance by applying a protective coating either during the manufacturing or construction process or as maintenance to extend the life of an existing metal surface, such as a bulldozer blade. Our filler metals and hardfacing alloys include structural wires, hardfacing wires and electrodes that are sold under the Cigweld and Stoody brand names. Our filler metals and hardfacing alloys typically range in price from approximately $0.90 to $30.00 per pound. There are three basic types of filler metals and hardfacing alloys: stick electrodes, solid wire and flux cored wire. We believe that the filler metal and hardfacing alloys market is mature and that products sold in this product segment generally generate lower profit margins than products sold in the gas equipment, arc accessories and plasma equipment markets.

Customers

We sell most of our products through a network of national and multinational industrial gas distributors including Airgas, Inc. and Praxair, Inc., as well as a large number of other independent cutting and welding distributors, wholesalers and dealers. For the year ended December 31, ~~2012~~2013, our sales to customers in the United States represented 5557% of our sales. Our largest distributor, Airgas, Inc., accounted for approximately 1011%, 1210% and 1112% of our net sales in ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, respectively. Furthermore, our top five distributors represented 27%, 2927% and 2729% of our net sales in ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, respectively.

International Business

We had international sales, which included exports from the U.S. and ~~foreign~~ sales by our non-U.S. operations, of $~~222~~210.31 million, $~~217~~222.63 million and $~~192~~217.56 million ~~and~~ for the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, respectively, which represented approximately 4543% of our net sales in ~~2012~~2013 and ~~2011, respectively, and~~ approximately 4645% of our net sales in ~~2010~~2012 and 2011. Our international sales are affected by fluctuations in foreign currency exchange rates as well as economic conditions and other risks associated with ~~foreign~~international trade. See “Management's Discussion and Analysis of Financial Condition and Results of Operations - Quantitative and Qualitative Disclosures about Market Risk.” Approximately 1315% of our international sales for the year ended December 31, ~~2012~~2013 were sales of products manufactured at our U.S. facilities and exported to ~~foreign~~international customers in transactions primarily denominated in U.S. dollars. Our remaining international sales consisted of products manufactured at our international manufacturing facilities and sold by our ~~foreign~~international subsidiaries.

Sales and Brand Management

The sales and brand management organization oversees all sales and marketing activities, including strategic product pricing, promotion, and marketing communications. It is the responsibility of sales and brand management to profitably grow our sales, market share and margins in each region. The organization pursues these objectives through new product introductions, programs and promotions, price management and the implementation of distribution strategies to penetrate new markets.

Sales and brand management is organized into three regions: Americas, Asia Pacific and Europe/Rest of World (“RoW”). The Americas is comprised of the United States, Canada, Mexico and Latin and South America; Asia Pacific includes South Pacific (primarily Australia and New Zealand) and South and North Asia. Europe/RoW is comprised of the United Kingdom, Europe, the Middle East, Russia and Africa. In ~~2012~~2013, the Americas comprised approximately 6669% of our net sales; Asia Pacific comprised approximately 2723%; and Europe/RoW comprised approximately 78%. All product lines are sold throughout these regions although there is some variance in the mix among the regions.

The sales and brand management organizations ~~consists~~consist of sales, brand management, marketing services and customer care personnel in each region. Members of the sales and brand management teams manage our relationships with our customers and channel partners who include distributors, wholesalers and retail customers. They provide feedback from the customers on product and service needs of the end-user customers, take our product lines to market, and provide technical and after sales service support. A national accounts team manages our largest accounts globally.

Raw Materials

Our principal raw materials, which include copper, brass, steel and plastic, are widely available and need not be specially manufactured for our use. Certain of the raw materials used in the hardfacing alloy 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 that could affect pricing and disrupt supply. Although we have historically been able to obtain adequate supplies of these materials at acceptable prices, restrictions in supply or significant increases in the prices of copper and other raw materials could adversely affect our business. The price of copper and steel fluctuate widely.

We also purchase certain manufactured products that we either use in our manufacturing processes or resell. These products include electronic components, circuit boards, semiconductors, motors, engines, pressure gauges, springs, switches, lenses, forgings, filler metals and chemicals. Some of these products are purchased from international sources and thus our cost can be affected by foreign currency fluctuations. We believe our sources of such products are adequate to meet foreseeable demand at acceptable prices.

Research, Development and Technical Support

We have development and sustaining engineering groups for each of our product lines. The development engineering group primarily performs process and product development work to develop new products to meet our customer needs. The sustaining engineering group provides technical support to the operations and sales groups for established products. As of December 31, ~~2012~~2013, we employed approximately ~~100~~95 people in our development and sustaining engineering groups, including engineers, designers, technicians and graphic service support. Our engineering costs consist primarily of salaries and benefits for engineering personnel and materials,. Expenditures ~~with~~related ~~$4.6~~to ~~and~~research ~~$4.2~~for ~~million~~new ofproduct ~~expenditures~~development infor the years ended 2013, 2012 and 2011, ~~respectively,~~were ~~related~~$4.5 tomillion, ~~research~~$4.6 ~~for~~million ~~new~~and ~~product~~$4.2 ~~development~~million, respectively.

Patents, Licenses and Trademarks

Our products are sold under a variety of trademarks and trade names. We own trademark registrations or have filed trademark applications for all of our trade names that we believe are material to the operation of our businesses. WeAs ~~also~~of ~~have~~December 31, ~~approximately~~2013, ~~240~~we had 263 issued patents and ~~approximately140~~199 pending patents and from time to time we acquire licenses from owners of patents to apply such patents to our operations. We do not believe any single patent or license is material to the operation of our businesses taken as a whole.

Competition

We believe we have three types of competitors: (1) three full-line welding equipment and filler metal manufacturers (Lincoln Electric Company; ESAB, a subsidiary of ~~the~~ Colfax ~~Corp.;~~ and several divisions of Illinois Tool Works, Inc., including the ITW Miller and ITW Hobart Brothers divisions); (2) many single-line, brand-specific competitors; and (3) a number of low-priced, small, specialty competitors. Our large competitors offer a wide portfolio of product lines with an emphasis on filler metals and welding power supplies and lines of specialty products. Their position as full-line suppliers and their ability to offer complete product solutions, filler metal volume, sales force relationships and fast delivery are their primary competitive strengths. Our single-line, brand-specific competitors emphasize product expertise, a specialized focused sales force, quick customer response time and flexibility to special needs as their primary competitive strengths. The low-priced manufacturers primarily use low overhead, low market prices and direct selling to capture a portion of price-sensitive customers’ discretionary purchases. International competitors have been less effective in penetrating the U.S. domestic markets due to product specifications, lack of brand recognition and their relative inability to access the welding distribution market channel.

We expect to continue to see price pressure in the segments of the market where little product differentiation exists. The trends of improved performance at lower prices in the power source market and further penetration of the automated market are also expected to continue. Internationally, the competitive profile is similar, with overall lower market prices, more fragmented competition and a weaker presence of larger U.S. manufacturers.

We compete on the performance, functionality, price, brand recognition, customer service and support and availability of our products. We believe we compete successfully through the strength of our brands, by focusing on technology development and offering innovative industry-leading products in our specialty product areas.

Employees

As of December 31, ~~2012~~2013, we employed 1,~~980~~941 people, ~~approximately~~511 ~~530~~ of whom were engaged in sales, marketing and administrative activities, and ~~approximately~~ 1,~~450~~430 of whom were engaged in manufacturing or other operating activities. None of our U.S. workforce is represented by labor unions, while most of the manufacturing employees in our ~~foreign~~international operations are represented by labor unions. We believe that our employee relations are satisfactory. We have not experienced any significant work stoppages.

Available Information

Copies of our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through our web site (www.victortechnologies.com) as soon as reasonably practicable after we electronically file the materials with or furnish them to the Securities and Exchange Commission.

Item 1A. Risk Factors

You should carefully consider each of the risks and uncertainties we describe below and all of the other information in this report. The risks and uncertainties we describe below are not the only ones we face. Additional risks and uncertainties of which we are currently unaware or that we currently believe to be immaterial may also adversely affect our business.

Risks Relating to Our Business

Our business is cyclical and is affected by global economic conditions, particularly those affecting steel-related construction and fabrication activities, as well as other factors that are outside of our control, any of which may have a material adverse effect on our business, results of operations and financial condition.

The success of our business is directly affected by general economic conditions and other factors beyond our control. The end users of our products are engaged in commercial construction, oil and gas industry related construction and maintenance, general manufacturing and steel shipbuilding. The demand for our products, and therefore the results of our operations, are related to the level of production in these end-user industries. Specifically, our sales volumes are closely tied to the levels of steel related construction and fabrication activities. Steel production and shipments declined precipitously in late 2008 and into early 2009. In the fourth quarter of 2008, global economic conditions, particularly in the United States, began to deteriorate and severely deteriorated throughout much of 2009. In the United States, steel production declined 36.3% during 2009 from 2008 levels according to the World Steel Association, and global steel production excluding China declined 20.5%. Our net sales were adversely impacted by such conditions. Our business has been and continues to be adversely impacted by such conditions. According to the World Steel Association, world steel production grew 1.4.8% in ~~2012~~2013 as compared to ~~2011~~2012, 61.84% in ~~2011~~2012 compared to ~~2010~~2011, and 156.78% in ~~2010~~2011 compared to ~~2009~~2010, and demand for our products has varied during these periods. The duration and extent of any reduced demand, along with further potential declines in demand for our products, is uncertain. We believe the volatility in these global economic factors could have further adverse impacts on our operating results and financial condition.

Europe has continued to experience economic difficulties and economic conditions continue to be negatively affected by the European sovereign debt crisis. If economic or credit market conditions worsen, the global economic recovery slows further, the economic downturn in Europe expands beyond Europe or we are unable to successfully anticipate and respond to changing economic and credit market conditions, our business, financial condition and results of operations could be materially and adversely affected.

Our future operating results may be adversely affected by fluctuations in the prices and availability of raw materials.

We purchase a large amount of commodity raw materials, particularly copper, brass and steel. At times, pricing and supply can be volatile due to a number of factors beyond our control, including global demand, general economic and political conditions, mine closures and labor unrest in various countries, activities in the financial commodity markets, labor costs, competition, import duties and tariffs and currency exchange rates. This volatility can significantly affect our raw material costs. An environment of volatile raw material prices, competitive conditions and declining economic conditions can adversely affect our profitability if we fail to, or are unable to, adjust our sales prices appropriately to recover the change in the costs of materials.

The timing of and the extent to which we will realize changes in material costs and the impact on our profits are uncertain. We typically enter into fixed-price purchase commitments with respect to a portion of our material purchases for purchase volumes of three to six months. To the extent that our arrangements to lock in supplier costs do not adequately keep in check cost increases and we are unable to pass on any price increases to our customers, our profitability could be adversely affected. Certain of the raw materials used in our hardfacing alloy products, such as cobalt and chromium, are available primarily from sources outside the United States. Restrictions in the supply of cobalt, chromium and other raw materials could adversely affect our operating results. In addition, certain of our customers rely heavily on raw materials, and fluctuations in prices of raw materials for these customers could negatively affect their operations and orders for our products and, as a result, our financial performance. Dramatic declines in global economic conditions may also create hardships for our suppliers and potentially disrupt their supply of raw materials to us.

We may not be able to implement our cost-reduction initiatives on the anticipated timetable or successfully, which may adversely affect us.

We have undertaken and will continue to undertake cost-reduction initiatives in response to global competitive conditions. These include our ongoing continuous improvement initiatives, redesigning products and manufacturing processes, re-evaluating the location of certain manufacturing operations and the sourcing of vendor purchased components. There can be no assurance that these initiatives will provide the anticipated cost savings from such activities or that we will realize such cost savings on the anticipated timetable. The failure of our cost-reduction efforts to yield sufficient cost reductions or delay in realization may have an adverse effect on our business.

anticipated timetable. The failure of our cost-reduction efforts to yield sufficient cost reductions or delay in realization may have an adverse effect on our business.

Our international sales and operations face special risks.

Approximately 4543% of our consolidated net sales for ~~2012~~2013 were derived from outside of the United States. We have international operations located in Australia, Canada, China, England, Italy, Malaysia and Mexico. International sales and operations are subject to a number of special risks, including:


•	currency exchange rate fluctuations;


•	differing protections of intellectual property;


•	trade barriers;


•	regional economic uncertainty;


•	labor unrest;


•	governmental currency exchange controls;


•	differing (and possibly more stringent) labor regulation;


•	governmental expropriation;


•	domestic and foreign customs, tariffs and taxes;


•	current and changing regulatory environments;


•	difficulty in obtaining distribution support;


•	difficulty in staffing and managing widespread operations;


•	terrorist activities and the U.S. and international response thereto;


•	restrictions on the transfer of funds into or out of a country;


•	export duties and quotas;


•	differences in the availability and terms of financing;


•	violations by non-US contractors of labor and wage standards and resulting adverse publicity;


•	violations of the Foreign Corrupt Practices Act, the U.K. Bribery Act, economic sanctions regimes (including those administered by the Office of Foreign Asset Control of the Department of the U.S. Treasury) and other international laws and regulations; and


•	political instability and unrest.

Our products are used in metal fabrication operations to cut and join metal parts. Certain metal fabrication operations, as well as manufacturing operations generally, are moving from the United States to international locations where labor costs are lower. Selling products into international markets and maintaining and expanding international operations require significant coordination, capital and resources. If we fail to adequately address these developments, we may be unable to grow or maintain our sales and profitability. Also, in some foreign jurisdictions, we may be subject to laws that limit the right and ability of entities organized or operating in those jurisdictions to pay dividends or remit earnings to affiliated companies unless specified conditions are met. These factors may adversely affect our financial condition. In 2010, we initiated a comprehensive review of our compliance with foreign and U.S. duties requirements. While the ultimate resolution of the compliance review did not have a material effect on our business or financial condition, we cannot assure that future assessments will not adversely affect our business or financial condition.

We are subject to currency fluctuations and face risks arising from the imposition of exchange controls and currency devaluations.

We sell our products to distributors located in over 50 countries. During the years ended December 31, ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, approximately 4543%, 45% and 4645%, respectively, of our consolidated net sales were derived from markets outside the United States. Strengthening of the U.S. dollar exchange rate against other currencies increases the cost of our products to ~~foreign~~international purchasers and may adversely affect our sales.

For our operations conducted in foreign countries, transactions are typically denominated in various foreign currencies. The costs of our operations in these ~~foreign~~international locations are also denominated in those local currencies. Because our financial statements are stated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our reported financial results. In addition, some sale transactions pose foreign currency exchange settlement risks. For ~~2012~~2013 and ~~2011~~2012, the Australian dollar represented approximately 1916% and 2019%, respectively, of our total net sales and approximately 4337% and 4543%, respectively, of our international net sales. Our Australian operations typically maintain 60 to 90 day forward purchase commitments for U.S. dollars to reduce the risk of an adverse currency exchange movement in connection with U.S. denominated materials purchases. ~~Currency fluctuations have affected our reported financial performance in the past and will affect our reported financial performance in the future.~~

10We also face risks arising from the imposition of currency exchange controls and currency devaluations. Exchange controls may limit our ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by our international subsidiaries or operations located or doing business in a country imposing controls. Currency devaluations result in a diminished value of funds denominated in the currency of the country instituting the devaluation. Actions of this nature, if they occur or continue for significant periods of time, could have an adverse effect on our financial condition.

We also face risks arising from the imposition of currency exchange controls and currency devaluations. Exchange controls may limit our ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by our foreign subsidiaries or operations located or doing business in a country imposing controls. Currency devaluations result in a diminished value of funds denominated in the currency of the country instituting the devaluation. Actions of this nature, if they occur or continue for significant periods of time, could have an adverse effect on our financial condition.9

Our ability to use net operating loss carryforwards could be limited in the future.

As of December 31, ~~2012~~2013, we had U.S. net operating loss carryforwards of approximately $~~113~~95.45 million from the years ~~2001~~2003 through 2010 available to offset future federal taxable income. Similarly, we had net operating loss carryforwards to offset state taxable income in varying amounts. Our federal net operating loss carryforwards will expire between the years ~~2020~~2022 and 2030. As a result of changes in our stock ownership in 2010, we estimate that the use of our federal net operating loss carryforwards will be limited to $17.70 million per year with unused limitation amounts available for use in subsequent years. In addition, this limitation is increased by any gains realized that were inherent on assets owned atwhen ~~the~~we ~~time~~were ofacquired ~~the~~by ~~Merger~~Irving ~~and~~Place ~~related~~Capital ~~transactions~~in December 2010, See Note 1 to the audited financial statements. However, future change of control transactions or other transactions could further limit our use of net operating loss carryforwards. There is also no assurance that the Internal Revenue Service (“IRS”) or other taxing authorities will not challenge our determination of net operating loss carryforwards and limit them. Limitations on our ability to use net operating loss carryforwards to offset future taxable income could reduce the benefit of our net operating loss carryforwards by requiring us to pay federal and state income taxes earlier than we otherwise would be required, and causing part of our net operating loss carryforwards to expire without our having fully utilized them. An ownership change could also limit our use of other credits, such as foreign tax credits, in future years. These various limitations resulting from an ownership change could have a material adverse effect on our cash flow and results of operations. We cannot predict the extent to which our net operating loss carryforwards will be limited or the ultimate impact of other limitations that may be caused by an ownership change, which will depend on various factors.

Fluctuations in labor costs may adversely affect our business and our profitability

Labor costs can be volatile due to a number of factors beyond our control, including inflation, general economic and political conditions and labor unrest in various countries. This volatility can significantly affect our labor costs. Continuing increases in inflation and material increases in the cost of labor would diminish our competitive advantage and, unless we are able pass on these increased labor costs to our customers by increasing prices, our profitability and results of operations could be materially and adversely affected.

We rely in large part on independent distributors for sales of our products and the continued consolidation of distributors, loss of key distributors or the increased purchases by our distributors from our competitors could materially harm our business.

We depend on more than 3,300 independent distributors to sell our products and provide service and after-market support to our ultimate customers. Distributors play a significant role in determining which of our products are stocked at their branch locations and the prices at which they are sold, which impacts how accessible our products are to end users of our products. Almost all of the distributors with whom we do business offer competing products and services to end users. There is a trend toward consolidation of these distributors, which has been escalating in recent years. Our largest distributor — Airgas, Inc. — accounted for 1011%, 1210% and 1112% of our net sales in ~~2012~~2013, ~~2011~~2012 and ~~2010~~2011, respectively. Recent economic events or future similar events could undermine the economic viability of some of our distributors. These events could also cause our competitors to introduce new economic inducements and pricing arrangements that may cause our distributors to increase purchases from our competitors and reduce purchases from us. The continued consolidation of these distributors, the loss of certain key distributors or an increase in the distributors’ purchase of our competitors’ products for sale to end users could adversely affect our results of operations.

Our business is highly competitive, and increased competition could reduce our sales, earnings or profitability.

We offer products in highly competitive markets. We compete on the performance, functionality, price, brand recognition, customer service and support and availability of our products. We compete with companies of various sizes, some of which have greater financial and other resources than we do. Increased competition could force us to lower our prices or to offer additional product features or services at a higher cost to us, which could reduce our net sales or net earnings or adversely affect our profitability.

The greater financial resources of certain of our competitors may enable them to commit larger amounts of capital in response to changing market conditions. Certain competitors may also have the ability to develop product innovations that could put us at a disadvantage. In addition, some of our competitors have achieved substantially more market penetration in certain segments of those markets in which we operate. If we are unable to compete successfully against other manufacturers in our marketplace, we could lose customers, and our sales may decline. There can also be no assurance that customers will continue to regard our products favorably, that we will be able to develop new products that appeal to customers, that we will be able to improve or maintain our profit margins or that we will be able to continue to compete successfully in maintaining or increasing our market share.

1110

Failure to enhance existing products and develop new products may adversely impact our financial results.

Our financial and strategic performance depends partially on providing new and enhanced products to the global marketplace. We may not be able to develop or acquire innovative products or otherwise obtain intellectual property in a timely and effective manner in order to maintain and grow our position in global markets. Furthermore, we cannot be sure that new products or product improvements will be met with customer acceptance or contribute positively to our financial results. We may not be able to continue to support the levels of research and development activities and expenditures necessary to improve and expand our products. Competitors may be able to direct more capital and other resources to new or emerging technologies to respond to changes in customer requirements.

If we cannot adequately enforce or protect our intellectual property rights, our competitive position will suffer, and we may incur significant additional costs in defending our use of intellectual property rights.

We own a number of patents, trademarks and licenses related to our products and rights under patents owned by others. While no single patent, trademark or license is material to the operation of our business as a whole, our ability to enforce our intellectual property rights in the United States and in ~~foreign~~other countries is critical to our competitive position and our ability to continue to bring new and enhanced products to the marketplace. We rely upon patent, trademark and trade secret laws in the United States and similar laws in ~~foreign~~other countries, as well as agreements with our employees, customers, suppliers and other third parties, to establish and maintain our intellectual property rights. Third parties may challenge, infringe upon or otherwise circumvent our intellectual property rights, which could adversely impact our competitive position. Further, the enforceability of our intellectual property rights in various foreign countries is uncertain. Accordingly, in certain countries, we may be unable to protect our intellectual property rights against unauthorized third-party copying or use, which could harm our competitive position and could adversely affect our results of operations.

Third parties also may claim that we or our customers are infringing upon their intellectual property rights. Defending those claims and contesting the validity of third parties’ asserted intellectual property rights can be time consuming and costly. Claims of intellectual property infringement also might require us to redesign affected products, enter into costly settlement or license agreements or pay costly damage awards, or face a temporary or permanent injunction prohibiting us from manufacturing, marketing or selling certain of our products.

We are subject to risks caused by changes in interest rates.

Changes in benchmark interest rates (e.g., the London Interbank Offered Rate (“LIBOR”)) will impact the interest cost component associated with our variable interest rate debt. Our variable rate debt includes any borrowings under our asset-backed credit facility with General Electric Capital Corporation (the "Working Capital Facility"). Changes in interest rates would affect our cost of future borrowings and potentially increase our interest expense. Significant increases in interest rates would adversely affect our financial condition and results of operations if we have balances outstanding on our Working Capital Facility during the year.

We are subject to risks caused by disruptions in the credit markets.

The Working Capital Facility is provided under an agreement with General Electric Capital Corporation, which will ~~mature~~expire in ~~2015~~2016. Our operations may be funded through daily borrowings and repayments from and to our lender under the Working Capital Facility. Our ability to access this facility will be affected by the amount and value of our assets which are used to determine the borrowing base under the facility. The temporary or permanent loss of the use of the Working Capital Facility or the inability to replace this facility when it expires could have a material adverse effect on our business and results of operations.

Credit availability for our suppliers and customers has been reduced due to the disruptions in the credit markets and the general global economic environment. This decreased availability for our customers and suppliers may have an adverse effect on the demand for our products, the collection of our accounts receivable and our ability to timely fulfill our commitments.

If our relationships with our employees were to deteriorate, we could be adversely affected.

Currently, in our U.S. operations (where none of our employees are represented by a labor union) and in our ~~foreign~~international operations (where the majority of our employees ~~are~~is represented by labor unions), we believe we have maintained a positive working environment. Although we focus on maintaining a productive relationship with our employees, we cannot ensure that unions, particularly in the United States, will not attempt to organize our employees or that we will not be subject to work stoppages, strikes or other types of conflicts with our employees or organized labor in the future. Any such event could have a material adverse effect on our ability to operate our business and serve our customers and could materially impair our relationships with key customers and suppliers, which could damage our business, results of operations and financial condition.

If we are unable to retain and hire key employees, we could be adversely affected.

Our ability to provide high-quality products and services for our customers and to manage the complexity of our business is dependent on our ability to retain and to attract skilled personnel in the areas of product engineering, manufacturing, sales, brand management and finance. Our businesses rely heavily on key personnel in the engineering, design, formulation and manufacturing of our products. Our success is also dependent on the management and leadership skills of our senior management team. As with all of our employees, we focus on maintaining a productive relationship with our key personnel. However, we cannot ensure that our employees will remain with us indefinitely. The loss of a key employee and the inability to find an adequate replacement could materially impair our relationship with key customers and suppliers, which could damage our business, results of operations and financial condition.

all of our employees, we focus on maintaining a productive relationship with our key personnel. However, we cannot ensure that our employees will remain with us indefinitely. The loss of a key employee and the inability to find an adequate replacement could materially impair our relationship with key customers and suppliers, which could damage our business, results of operations and financial condition.

If we are unable to successfully identify and integrate acquisitions, our results of operations could be adversely affected.

As part of our growth strategy, we may seek to identify and complete acquisitions that meet our strategic and financial return criteria. However, there can be no assurance that we will be able to locate suitable candidates or acquire them on acceptable terms or, because of limitations imposed by the agreements governing our indebtedness, including the Indenture and the credit agreement governing the Working Capital Facility, that we will be able to finance future acquisitions. Acquisitions involve special risks, including, without limitation, the potential assumption of unanticipated liabilities and contingencies, difficulty in assimilating the operations and personnel of the acquired businesses, disruption of our existing business, dissipation of our limited management resources, and impairment of relationships with employees and customers of the acquired business as a result of changes in ownership and management. While we believe that strategic acquisitions can improve our competitiveness and profitability, these activities could have a material adverse effect on our business, financial condition and operating results.

If we fail to implement our business strategy, our business, financial condition and results of operations could be materially and adversely affected.

Our future financial performance and success are dependent in large part upon our ability to implement our business strategy successfully. Our business strategy envisions several initiatives, including diversifying our business into new channels and markets, focusing on new product development, implementing productivity and cost reduction programs and pursuing strategic acquisitions. We may not be able to implement our business strategy successfully or achieve the anticipated benefits of our business plan. If we are unable to do so, our long-term growth and profitability may be adversely affected. Even if we are able to implement some or all of the initiatives of our business plan successfully, our operating results may not improve to the extent we anticipate, or at all.

A material disruption at any of our manufacturing facilities could adversely affect our ability to generate sales and meet customer demand.

If operations at our manufacturing facilities were to be disrupted as a result of significant equipment failures, natural disasters, power outages, fires, explosions, terrorism, adverse weather conditions, labor disputes or other reasons, our financial performance could be adversely affected as a result of our inability to meet customer demand for our products. Interruptions in production could increase our costs and reduce our sales. Any interruption in production capability could require us to make substantial capital expenditures to remedy the situation, which could negatively affect our profitability and financial condition. We maintain property damage insurance which we believe to be adequate to provide for reconstruction of facilities and equipment, as well as business interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss. However, any recovery under our insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations, which could adversely affect our financial performance.

Our products involve risks of personal injury and property damage, which expose us to potential liability.

Our business exposes us to possible claims for personal injury or death and property damage resulting from the products that we sell. We maintain insurance for loss (excluding attorneys’ fees and expenses) through a combination of self-insurance retentions and excess insurance coverage. We are not insured against punitive damage awards, and we are not currently insured for liability from manganese-induced illness. We monitor claims and potential claims of which we become aware and establish reserves for the self- insurance amounts based on our liability estimates for such claims. We cannot give any assurance that existing or future claims will not exceed our estimates for self-insurance or the amount of our excess insurance coverage. In addition, we cannot give any assurance that insurance will continue to be available to us on economically reasonable terms or that our insurers would not require us to increase our self-insurance amounts. Claims brought against us that are not covered by insurance or that result in recoveries in excess of insurance coverage could have a material adverse effect on our results of operations and financial condition. Moreover, despite any insurance coverage, any accident or incident involving our products could negatively affect our reputation among customers, suppliers, lenders, investors and the public. This may make it more difficult for us to operate our business and compete effectively.

We are subject to various environmental laws and regulations and may incur costs that have a material adverse effect on our financial condition as a result of violations of or liabilities under environmental laws and regulations.

Our operations are subject to federal, state, local and ~~foreign~~international laws and regulations relating to the protection of the environment, including those governing the discharge of pollutants into the air and water, the generation, handling, storage, use, management, transportation and disposal of, or exposure to, hazardous materials resulting from the manufacturing process and employee health and safety. Permits are required for our operations and these permits are subject to renewal, modification and, in certain circumstances, revocation. As an owner and operator of real property and a generator of hazardous waste, we may also be subject to liability for the remediation of contaminated sites. Environmental, health and safety laws and regulations, and the interpretation and enforcement thereof are subject to change and have tended to become stricter over time. While we are not currently aware of any outstanding material claims or obligations, we could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, and third-party property damage or personal injury claims, as a result of violations of or liabilities under environmental laws or noncompliance with environmental permits required at our facilities, which, as a result, could have a material adverse effect on our business, financial condition and operating results.

Contaminants have been detected at some of our present and former sites. In the past, we have been named as a potentially responsible party at certain Superfund sites to which we may have sent hazardous waste materials. While we are not currently aware of any contaminated or Superfund sites as to which material outstanding claims or obligations exist, the discovery of additional contaminants or the imposition of additional cleanup obligations at these or other sites could result in significant liability. In addition, the ultimate costs under environmental laws and the timing of these costs are difficult to predict. Liability under some environmental laws relating to contaminated sites, including the Comprehensive Environmental Response, Compensation, and Liability Act and analogous state laws, can be imposed retroactively and without regard to fault. Further, one responsible party could be held liable for all costs at a site. Thus, we may incur material liabilities related to the investigation and remediation of contaminated sites under existing environmental laws and regulations or environmental laws and regulations that may be adopted in the future, which, as a result, could have a material adverse effect on our business, financial condition and operating results.12

to liability for the remediation of contaminated sites. Environmental, health and safety laws and regulations, and the interpretation and enforcement thereof are subject to change and have tended to become stricter over time. While we are not currently aware of any outstanding material claims or obligations, we could incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, and third-party property damage or personal injury claims, as a result of violations of or liabilities under environmental laws or noncompliance with environmental permits required at our facilities, which, as a result, could have a material adverse effect on our business, financial condition and operating results.

Contaminants have been detected at some of our present and former sites, and we have been named as a potentially responsible party at certain Superfund sites to which we may have sent hazardous waste materials. See Item 3, Legal Proceedings. While we are not currently aware of any contaminated or Superfund sites as to which material outstanding claims or obligations exist, the discovery of additional contaminants or the imposition of additional cleanup obligations at these or other sites could result in significant liability. In addition, the ultimate costs under environmental laws and the timing of these costs are difficult to predict. Liability under some environmental laws relating to contaminated sites, including the Comprehensive Environmental Response, Compensation, and Liability Act and analogous state laws, can be imposed retroactively and without regard to fault. Further, one responsible party could be held liable for all costs at a site. Thus, we may incur material liabilities related to the investigation and remediation of contaminated sites under existing environmental laws and regulations or environmental laws and regulations that may be adopted in the future, which, as a result, could have a material adverse effect on our business, financial condition and operating results.

Our information technology infrastructure could be subject to service interruptions, data corruption, cyber-based attacks or network security breaches, which could result in the disruption of operations or the loss of data confidentiality.

We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities, including procurement, manufacturing, distribution, invoicing and collection. These technology networks and systems may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures or computer viruses. In addition, our efforts to avoid or mitigate the impact of cyber-based attacks and security breaches may not be successful in avoiding a material breach, which could result in unauthorized disclosure of confidential information or damage to our information technology networks and systems. If these information technology systems suffer severe damage, disruption or shutdown and business continuity plans do not effectively resolve the issues in a timely manner, our business, financial condition and results of operations could be materially adversely affected.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We operate manufacturing facilities in the United States, ~~Italy~~Mexico, ~~Malaysia~~China, ~~Australia~~Malaysia, ~~China~~the United Kingdom and ~~Mexico~~Italy, and our principal distribution facilities are located in the United States, ~~England~~the United Kingdom, Australia and Canada. We consider our plants and equipment to be modern and well maintained and believe our plants have sufficient capacity to meet future anticipated expansion needs.

We lease a 19,500 square-foot facility located in St. Louis, Missouri, that houses our executive offices, as well as some of our centralized services.

The following table describes the location and general character of our principal properties as of December 31, ~~2012~~2013:

Location of Facility*	Building Space (sq. ft)	Number of Buildings
Denton, Texas	235,420	4 buildings (office, manufacturing, storage, sales training)
Bowling Green, Kentucky	188,108	1 building (office, manufacturing, warehouse)
Roanoke, Texas	176,029	1 building (manufacturing, warehouse)
West Lebanon, New Hampshire (1)	51,520	2 buildings (office, manufacturing)
Hermosillo, Sonora, Mexico	242,800	1 building (office, manufacturing)
Oakville, Ontario, Canada	43,680	1 building (office, warehouse)
Melbourne, Australia (2)	273,425	2 buildings (office, manufacturing, warehouse)
Ningbo, China (3)	202,243	2 buildings (office, manufacturing, warehouse)
Rawang, Malaysia	59,320	1 building (office, warehouse)
Milan, Italy	32,000	3 buildings (office, manufacturing, warehouse)

* All of the above facilities are leased, except for the manufacturing facility located in Melbourne, Australia, which is owned. We also have additional assembly and warehouse facilities located in the United Kingdom, Australia and Indonesia.



Location of Facility*	Building Space (sq. ft)	Number of Buildings
Hermosillo, Sonora, Mexico	242,800	1 building (office, manufacturing)
Denton, Texas	235,420	4 buildings (office, manufacturing, storage, sales training)
Ningbo, China (1)	202,243	2 buildings (office, manufacturing, warehouse)
Bowling Green, Kentucky	188,108	1 building (office, manufacturing, warehouse)
Roanoke, Texas	176,029	1 building (manufacturing, warehouse)
Melbourne, Australia (2)	88,461	1 buildings (office, warehouse, assembly)
Rawang, Malaysia	59,320	1 building (office, manufacturing, warehouse)
West Lebanon, New Hampshire (3)	51,520	2 buildings (office, manufacturing)
Oakville, Ontario, Canada	43,680	1 building (office, warehouse)
Milan, Italy	32,000	3 buildings (office, manufacturing, warehouse)
Diss, United Kingdom	21,093	2 buildings (office, manufacturing, warehouse)

~~(1)~~* InAll ~~connection with the relocation~~ of ~~manufacturing operations formerly located at our West Lebanon facility, we exercised our option under~~ the ~~lease~~above ~~agreement~~facilities toare ~~reduce the~~ leased, ~~space~~except atfor the ~~facility from approximately 160~~Diss,~~000~~ ~~square~~United ~~feet~~Kingdom toproperties ~~51,520~~which ~~square~~are ~~feet, effective December 1, 2012~~owned. We ~~currently~~also ~~maintain~~have ~~engineering,~~additional ~~technical~~assembly ~~services~~ and ~~returned~~warehouse ~~goods~~facilities ~~functions~~located ~~and~~in aAustralia, ~~small~~Indonesia ~~assembly~~and ~~operation~~the atUnited ~~this~~Kingdom, ~~facility~~.

(21) In ~~January~~October ~~2013~~2012, we ~~announced~~moved ~~that~~our ~~we will be ceasing manufacturing~~ operations atfrom our ~~owned~~former ~~manufacturing~~ facility in ~~Melbourne. Certain assembly activities~~Ningbo, aswhich ~~well~~covered ~~as the corporate offices of our Cigweld subsidiary~~114,716 ~~will~~square ~~remain at the current lease facility in Melbourne~~feet. We are evaluating lease or sale opportunities with respect to the owned manufacturing facility in Melbourne. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations - Recent Developments."

(32) In ~~October 2012~~2013, we ~~moved~~sold our owned manufacturing facility in Melbourne and ceased manufacturing operations. ~~from~~Certain assembly activities, as well as the corporate offices of our ~~former~~Cigweld subsidiary remain at the leased facility in ~~Ningbo,~~Melbourne. ~~which~~See ~~covered~~Item ~~114~~7,~~716~~ ~~square~~"Management's ~~feet~~Discussion and Analysis of Financial Condition and Results of Operations - Recent Developments."

15(3) In connection with the relocation of manufacturing operations formerly located at our West Lebanon facility, we exercised our option under the lease agreement to reduce the leased space at the facility from approximately 160,000 square feet to 51,520 square feet, effective December 1, 2012. We currently maintain engineering, technical services and returned goods functions and a small assembly operation at this facility.

Item 3. Legal Proceedings

As an owner or operator of real property, we may be required to incur costs relating to the investigation and remediation of contamination at properties, including properties at which we dispose waste, and environmental conditions could lead to claims for personal injury, property damage or damages to natural resources. We are aware of environmental conditions at ~~certain~~a ~~properties~~property ~~which~~that we ~~now~~previously ~~own~~owned, orwhich ~~lease~~is orundergoing ~~previously~~remediation. ~~owned~~Based oron ~~leased,~~continuing ~~which~~due ~~are~~diligence ~~undergoing~~and ~~remediation;~~monitoring ~~however~~of this property, we do not believe the cost of such remediation would be reasonably likely to have a material adverse effect on our business, financial ~~condition~~conditions or results of operations.

Certain environmental laws, including, but not limited to, the Comprehensive Environmental Response, Compensation, and Liability Act and analogous state laws, provide for liability without regard to fault for investigation and remediation of spills or other releases of hazardous materials. Under such laws, liability for the entire cleanup can be imposed upon any of a number of responsible parties. Such laws may apply to conditions at properties presently or formerly owned or operated by us or our subsidiaries or by their predecessors or previously owned or operated by unaffiliated business entities. We have in the past and may in the future be named a potentially responsible party at off-site disposal sites to which we have sent waste. In January 2014, the U.S. Environmental Protection Agency (the "EPA") issued Special Notice Letters to over 400 entities, including the Company, alleging that they, along with over 100 potentially responsible parties ("PRPs") who received General Notice Letters in November 2011, are PRPs at the Chemetco Superfund site in Hartford, Illinois. WeAs doa ~~not~~PRP, ~~believe~~we may be responsible to pay a portion of the costs of developing a Remedial Investigation and Feasibility Study ("RI/FS") for this site and the ultimate ~~cost~~cleanup of hazardous materials located at this site. Based on currently known facts and circumstances relating to ~~such~~this ~~properties~~site, orincluding ~~sites~~the ~~will~~amount beof ~~reasonably~~materials contributed by the Company, the number of other PRPs who will likely share in any RI/FS and cleanup costs and their respective contributions, and the ongoing investigation into other potential PRPs who contributed materials to this site, the Company does not have sufficient facts on which it may estimate its liability related to this site. The Company believes this matter will not have a material adverse effect on ~~our~~its results of operations, financial ~~condition~~position or ~~results~~cash flows. It is possible that additional information may be determined and other future developments may arise that expand the scope and cost of ~~operations~~remediation at this site and that, as a result, the Company could incur obligations that may be material.

All other legal proceedings and actions involving us are of an ordinary and routine nature and are incidental to our operations. Management believes that such proceedings are not, individually or in the aggregate, reasonably likely to have a material adverse effect on our business or financial condition or on the results of operations.

Item 4. Mine Safety Disclosures

Not applicable.

1615

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

There is no established public trading market for our common stock. As of December 31, ~~2012~~2013, we had 1,000 shares of common stock outstanding, all of which were held by Holdings, our parent company. Except as discussed below, during ~~2012~~2013 and ~~2011~~2012, we did not declare or pay a dividend on our common stock. On March 6, 2012, we declared a cash dividend in the amount of $93,507,863, or $93,507.863 per share of common stock, and we paid such dividend to Holdings on March 12, 2012. See "Selected Financial Data - Acquisition Leading to Fresh Start Accounting" and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Long-Term Debt” included in Item 6 and Item 7 of this Report, respectively.

Our ability to pay dividends is limited by the terms of our Senior Secured Notes indenture and our Working Capital Facility, which restrict our ability to pay dividends and the ability of certain of our subsidiaries to pay dividends. Under our debt instruments, we may pay a cash dividend up to a specified amount, provided we have satisfied certain financial covenants in, and are not in default under, our debt instruments. The declaration of future dividends will be at the discretion of our Board of Directors and will depend upon many factors, including our results of operations, financial condition, earnings, capital requirements, limitations in our debt agreements and legal requirements. We do not expect to pay cash dividends in the foreseeable future. For information regarding our Senior Secured Notes and Working Capital Facility, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Long-Term Debt” in Item 7 of this Report.

We did not sell or repurchase any of our equity securities during 2012.

Item 6. Selected Financial Data

~~The~~Acquisition ~~selected~~Leading ~~financial~~to ~~data~~Fresh ~~for~~Start the years ended December 31, 2012 and 2011, the period from December 3, 2010 through December 31, 2010, the period from January 1, 2010 through December 2, 2010, and the years ended December 31, 2009 and 2008, respectively, set forth below has been derived from our audited consolidated financial statements for such years. The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto, in each case included elsewhere herein.Accounting

	Successor									Predecessor
							December 3, 2010			January 1, 2010
($ in millions)	Fiscal Year Ended December 31,						through December 31,			through December 2,			Fiscal Year Ended December 31,
	2012			2011			2010			2010			2009			2008
Consolidated Statement of Operations Data:
Net Sales	$	496.1		$	487.4		$	28.7		$	387.2		$	347.7		$	516.9
Operating income (loss)	64.2			40.8			(12.8		)	37.6			19.7			43.9
Income (loss) from continuing operations	21.6			6.7			(14.7		)	6.1			1.1			10.5
Income (loss) from discontinued operations, net of tax	—			—			—			—			3.1			0.2
Net income (loss)	$	21.6		$	6.7		$	(14.7	)	$	6.1		$	4.2		$	10.7
Consolidated Statements of Cash Flows Data:
Net cash provided by (used in) operating activities (1)	$	33.1		$	7.1		$	(7.7	)	$	45.1		$	21.5		$	18.4
Net cash provided by (used in) investing activities	(16.7		)	(15.7		)	(2.0		)	(6.8		)	(8.1		)	(16.9		)
Net cash provided by (used in) financing activities (1)	(5.2		)	7.3			10.9			(32.8		)	(12.2		)	(4.5		)
Depreciation and amortization	20.6			22.5			2.0			12.4			13.0			12.4
Capital expenditures	(12.6		)	(14.8		)	(1.8		)	(6.5		)	(7.7		)	(12.8		)
	Successor									Predecessor
($ in millions)	As of December 31,									As of December 31,
	2012			2011			2010			2009			2008			2007
Consolidated Balance Sheets Data:
Cash and cash equivalents	$	32.4		$	20.9		$	22.4		$	14.9		$	11.9		$	16.2
Trusteed assets	—			—			183.7			—			—			—
Accounts receivable, less allowance for doubtful accounts	65.0			68.6			62.9			56.6			72.0			83.9
Inventory	100.6			96.0			85.4			74.4			102.5			91.0
Total assets	628.7			610.7			788.0			454.9			494.4			497.4
Total debt (2)	359.1			265.3			442.9			217.0			234.0			234.6
Total shareholders' equity	97.4			167.6			164.8			127.8			118.3			122.1

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, with Thermadyne surviving as a direct, wholly-owned subsidiary of Razor Holdco Inc., a Delaware corporation (the "Merger" or the “Acquisition”). Razor Holdco Inc. was renamed Thermadyne Technologies Holdings, Inc. (“Technologies”).

~~(1)~~Effective ~~Stock~~May ~~compensation~~21, ~~expenses~~2012, ~~(gains)~~Thermadyne ~~previously~~changed ~~classified~~its asname ~~a financing activity in the statements of cash flows have been reclassified~~ to ~~operating~~Victor ~~activities~~Technologies ~~for~~Group, ~~all~~Inc. ~~periods~~(“Victor ~~presented~~Technologies” inor the ~~amounts~~"Company"). Thermadyne ofTechnologies, ~~$25 for~~ the ~~period~~parent ~~from~~company ~~December~~of 3,Victor ~~2010 through December 31~~Technologies, ~~2010,~~accordingly ~~$682~~changed ~~for~~its ~~the~~name ~~period~~to ~~from~~Victor ~~January~~Technologies 1Holdings, ~~2010~~Inc. ~~through December 2, 2010, and $~~(~~579~~"Holdings")~~, $1,362, and $1,609 for the years ended December 31, 2009, and 2008 respectively~~.

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 84.1% of the outstanding common stock on a fully diluted basis of Holdings, and certain members of Victor Technologies' management hold the remaining equity capital.

Acquisition and Fair Value Adjustments

The Acquisition resulted in a 100% change in ownership of Victor Technologies and is accounted for in accordance with United States accounting guidance for business combinations. Accordingly, the assets acquired and liabilities assumed were recorded at fair value as of December 3, 2010. The provisional amounts recognized for assets acquired and liabilities assumed as of December 3, 2010 was determined by management with the assistance of an externally prepared valuation study of inventories, property, plant and equipment, intangible assets, goodwill, and capital and operating leases. The Company finalized purchase accounting in 2011 and, given the impact to the Balance Sheet, has retrospectively adjusted the 2010 amounts. The adjustments arising out of the finalization of the amounts recognized for assets acquired and liabilities assumed do not impact cash flows. However, such adjustments resulted in decreases to amortization of intangibles totaling $0.5 million in 2011.

The selected financial data for the years ended December 31, 2013, 2012 and 2011, the period from December 3, 2010 through December 31, 2010, the period from January 1, 2010 through December 2, 2010, and the year ended December 31, 2009, respectively, set forth below has been derived from our audited consolidated financial statements for such years. The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the notes thereto, in each case included elsewhere herein.



	Successor												Predecessor
										December 3, 2010			January 1, 2010			Fiscal Year
($ in millions)	Fiscal Year Ended December 31,									through December 31,			through December 2,			Ended December 31,
	2013			2012			2011			2010			2010			2009
Consolidated Statement of Operations Data:
Net Sales	$	486.8		$	496.1		$	487.4		$	28.7		$	387.2		$	347.7
Operating income (loss)	64.0			64.2			40.8			(12.8		)	37.6			19.7
Income (loss) from continuing operations	22.3			21.6			6.7			(14.7		)	6.1			1.1
Income loss from discontinued operations, net of tax	—			—			—			—			—			3.1
Net income (loss)	$	22.3		$	21.6		$	6.7		$	(14.7	)	$	6.1		$	4.2
Consolidated Statement of Cash Flows Data:
Net cash provided by (used in) operating activities (1)	$	46.8		$	33.1		$	7.1		$	(7.7	)	$	45.1		$	21.5
Net cash provided by (used in) investing activities	(34.5		)	(16.7		)	(15.7		)	(2.0		)	(6.8		)	(8.1		)
Net cash provided by (used in) financing activities (1)	(12.8		)	(5.2		)	7.3			10.9			(32.8		)	(12.2		)
Depreciation and amortization	21.7			20.6			22.5			2.0			12.4			13.0
Capital expenditures	(9.1		)	(12.6		)	(14.8		)	(1.8		)	(6.5		)	(7.7		)

	Successor												Predecessor
($ in millions)	As of December 31,												As of December 31,
	2013			2012			2011			2010			2009			2008
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	30.6		$	32.4		$	20.9		$	22.4		$	14.9		$	11.9
Trusteed assets	—			—			—			183.7			—			—
Accounts receivable, less allowance for doubtful accounts	68.9			65.0			68.6			62.9			56.6			72.0
Inventory	97.0			100.6			96.0			85.4			74.4			102.5
Total assets	636.2			628.7			610.7			788.0			454.9			494.4
Total debt (2)	348.0			359.1			265.3			442.9			217.0			234.0
Total shareholders' equity	118.9			97.4			167.6			164.8			127.8			118.3


(1)	Prior to 2011, stock compensation expense (gain) had been classified as a financing activity in the statement of cash flows and have been reclassified to operating activities in the amounts of $25 for the period from December 3, 2010 through December 31, 2010, $682 for the period from January 1, 2010 through December 2, 2010, and $(579) for the fiscal year ended December 31, 2009.


(2)	Total debt at December 31, 2010 includes the Senior Subordinated Notes due 2014, which were redeemed with the use of the trusteed assets on February 1, 2011.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We provide 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.” Our 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, construction projects, such as offshore oil and gas rigs, repair and maintenance of manufacturing equipment and facilities, and shipbuilding. We design, manufacture and sell products in six principal categories: (1) gas equipment; (2) plasma power supplies, torches and consumable parts; (3) carbon arc gouging projects and consumable parts; (4) welding equipment; (5) arc accessories, including torches, consumable parts and accessories; and (6) filler metals and hardfacing alloys. We operate our business in one reportable segment.

Historically, demand for our products has been cyclical because many of the end users of our products are themselves in highly cyclical industries, such as commercial construction, steel shipbuilding, petrochemical construction and general manufacturing. ~~The demand for our products and, therefore, our results of operations are related to the level of production in these end-user industries.~~

The demand for our products and, therefore, our results of operations are related to the level of production in these end-user industries.

The availability and the cost of the components of our manufacturing processes, and particularly raw materials, are key determinants in achieving future success in the marketplace as well as profitability. The principal raw materials we use in manufacturing our products are copper, brass, steel and plastic, which are widely available. Certain other raw materials used in our hardfacing alloy products, such as cobalt and chromium, are available primarily from sources outside the United States. Historically, we have been able to obtain adequate supplies of raw materials at acceptable prices, but with increasing volatility.

Our operating profit is also affected by the mix of the products we sell, as margins are generally higher on torches and their replacement parts, as compared to power supplies and filler metals.

For the year ended December 31, ~~2012~~2013, approximately 5557% of our sales were made to customers in the U.S. Approximately 1315% of our international sales are U.S. export sales and are denominated in U.S. dollars. The U.S. dollar exchange rate remained relatively stable in ~~2012~~2013 as compared to the major currencies in which we conduct business. ~~In general the U. S. dollar weakened during the first nine months of 2011, as well during 2010, but strengthened in the last three months of 2011, relative to these foreign currencies.~~ A weakening of the U.S. dollar increases our international sales and certain of our international manufacturing costs as translated into U.S. dollars and also may serve to increase our export sales. Similarly, the strengthening of the U.S. dollar against other currencies is expected to have the opposite effects on our international sales and certain of our manufacturing costs.

Acquisition Leading to Fresh Start Accounting

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, with Thermadyne surviving as a direct, wholly-owned subsidiary of Razor Holdco Inc., a Delaware corporation (the "Merger" or the “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").

The Acquisition was accounted for in accordance with United States accounting guidance for business combinations and, accordingly, the assets acquired and liabilities assumed were recorded at fair value as of December 3, 2010.

Although Victor Technologies continued as the same legal entity after the Acquisition, the application of push down accounting represents the termination of the old accounting entity and the creation of a new one. In addition, the basis of presentation is not consistent between the successor and predecessor entities and the financial statements are not presented on a comparable basis. As a result, the accompanying consolidated statements of operations, cash flows, and stockholders’ equity are presented for two periods: Predecessor and Successor, which relate to the period preceding the Acquisition (prior to December 3, 2010), and the period succeeding the Acquisition, respectively.

For purposes of management’s discussion and analysis of the financial condition and results of operations, we believe that a presentation of our results of operations and liquidity based on our pro forma 2010 Combined Period provides investors and other readers with a more meaningful perspective of our ongoing financial and operational performance and trends, and facilitates more

meaningful comparisons of our annual financial performance than a presentation of such information for two separate historical periods for 2010. We believe that the results of operations of the Predecessor and Successor are not comparable due to the change in basis resulting from the Acquisition, reflecting adjustments to fair values of assets and liabilities at the Acquisition Date. While we believe that the pro forma presentation is more helpful to investors than separate discussions of results of operations and liquidity of the Predecessor and the Successor, we also present a discussion of results of operations and sources and uses of cash on a historical (non-combined) basis.

2010 Unaudited Pro Forma Condensed Consolidated Statement of Operations

All references to “Predecessor” relate to Victor Technologies for periods prior to the Merger. All references to “Successor” relate to Victor Technologies for periods subsequent to the Merger. References to “we,” “us,” “our,” and the “Company” relate to Predecessor for the periods prior to the Merger and to Successor for periods subsequent to the Merger.

On the closing date of the Merger, the following events occurred (all numbers are in thousands):

• Each share of Predecessor’s common stock, including restricted shares, outstanding immediately prior to the Merger were cancelled and converted into the right to receive $15 in cash per share, without interest.

• Each outstanding option to acquire Predecessor’s common stock outstanding immediately prior to the Merger vested (if unvested) and was cancelled in exchange for the right to receive cash for the excess of $15 per share over the per share exercise price of the option.

• Successor received $176.0 million in equity contributions and became a wholly-owned subsidiary of Holdings.

• Successor entered into an amended asset-backed credit facility (the “Working Capital Facility”) to provide for borrowings not to exceed $60.0 million (including up to $.01 million for letters of credit) of borrowings, subject to the borrowing base capacity of certain customer receivables and inventories.

• Successor issued $260.0 million aggregate principal amount of 9% Senior Secured Notes due 2017. The Senior Secured Notes are guaranteed on a secured basis by substantially all of the Company’s current and future assets.

• A notice of redemption was issued on December 3, 2010 for the $172.3 million outstanding aggregate principal amount of 9 1⁄4% Senior Subordinated Notes due 2014, and the Company irrevocably deposited $183.7 million with the Trustee to redeem the Senior Subordinated Notes at 101.542% and pay the related accrued interest due on February 1, 2011.

The following unaudited pro forma condensed consolidated statements of operations have been developed by applying pro forma adjustments to the historical audited consolidated financial statements of the Company appearing elsewhere in this document. The unaudited pro forma condensed consolidated statements of operations give effect to the Transactions as if they occurred on January 1, 2010. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed consolidated statements of operations.

The unaudited pro forma adjustments and determination of the excess acquisition purchase price over the net assets acquired to intangible assets, goodwill and other assets are based on management’s best estimate of the fair value of intangible and other assets acquired. The provisional amounts recognized for assets acquired and liabilities assumed as of December 3, 2010 were determined by management with the assistance of an externally prepared valuation study of inventories, property, plant and equipment, intangible assets, goodwill, and capital and operating leases, and is presented below. These provisional amounts were updated in 2011 upon the completion of such study and the determination of other facts impacting fair value estimates. The adjustments arising out of the finalization of the amounts recognized for assets acquired and liabilities assumed are reflected in the below table in the column titled “Pro Forma Transaction Adjustments” and do not impact cash flows. However, such adjustments resulted in a decrease of $0.04 million to amortization, and to earnings before interest expense, income taxes and net income in the Successor period of 2010, which was accounted for in the first quarter of 2011.

The unaudited pro forma transaction adjustments are based upon available information and certain assumptions that are factually supportable and that we believe are reasonable under the circumstances. The unaudited pro forma condensed consolidated statement of operations is presented for informational purposes only. The unaudited pro forma condensed consolidated statement of operations does not purport to represent what our actual consolidated results of operations would have been had the Transactions actually occurred on the dates indicated, nor are they necessarily indicative of future consolidated results of operations. The unaudited pro forma condensed consolidated statement of operations should be read in conjunction with the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited and unaudited consolidated financial statements and the related notes thereto appearing elsewhere in this Form 10-K. All pro forma transaction adjustments and their underlying assumptions are described more fully in the notes to our unaudited pro forma condensed consolidated statement of operations.

Unaudited Pro Forma Condensed Statements of Operations
For the Combined Period (Twelve Months) Ended December 31, 2010
(dollars in thousands)
	Predecessor			Successor
	January 1			December 3							Pro Forma 2010
	through			through			Pro Forma				Combined
	December 2, 2010			December 31, 2010			Adjustments				Period
Net sales	$	387,238		$	28,663		$	—			$	415,901
							4,548			(a)
							(1,672		)	(b)
Cost of goods sold	256,948			21,910			615			(c)	282,349
Gross margin	130,290			6,753			(3,491		)		133,552
							(16,753		)	(d)
							1,330			(a)
Selling, general and administrative expenses	90,142			19,044			1,379			(e)	95,142
Amortization of intangibles	2,515			531			3,287			(f)	6,333
Operating income (loss)	37,633			(12,822		)	7,266				32,077
Other income (expense):
Interest, net	(20,525		)	(2,273		)	(3,034		)	(g)	(25,832		)
Amortization of deferred financing costs	(918		)	(170		)	(789		)	(h)	(1,877		)
Gain (loss) on debt extinguishment	(1,867		)	—			1,867			(i)	—
Net income (loss) before income tax provision (benefit)	14,323			(15,265		)	5,310				4,368
Income tax provision (benefit)	8,187			(585		)	(225		)	(j)	7,377
Net income (loss)	$	6,136		$	(14,680	)	$	5,535			$	(3,009	)

Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations

For the Combined Period (Twelve Months) Ended December 31, 2010

(dollars in thousands)

(a) Depreciation expense increase resulted from the $27,672 step-up of property, plant and equipment to their estimated fair values at the Merger date, and estimated useful lives assigned to property, plant and equipment at the closing date of the Merger. Depreciation expense was calculated for the Pro Forma period based on the property, plant and equipment at fair value (as of the Merger date) being depreciated on a straight-line basis over periods of ten to twenty-five years for buildings and improvements, three to ten years for machinery and equipment, and capital leases over the lesser of the lease term or the underlying asset’s useful life.

(b) Inventories were adjusted to their estimated fair values at the closing date of the Merger. During the Successor Period of December 3, 2010 to December 31, 2010, a portion of these foreign based inventories accounted for using the FIFO method were sold and, accordingly, the excess of appraised values of these inventories over cost was expensed. (The U.S. locations record their inventories on the LIFO basis and accordingly there was no adjustment for these locations.)

(c) The Predecessor experienced changes in inventory levels that resulted in adjustments to the recorded LIFO reserve and cost of goods sold which are eliminated.

(d) Eliminates transaction related costs recognized in our historical operating results due to their non-recurring nature. This adjustment does not include the IPC advisory fee of $121. See Note 3 - Acquisition to the audited financial statements.

(e) The Successor pays an advisory fee to Irving Place Capital for certain financial, strategic, advisory and consulting services pursuant to an agreement with IPC. The annual advisory fee is the greater of $1,500 or 2.5% of EBITDA (as defined). The adjustment reflects the annual advisory fee less $121 of advisory fee recorded from December 3, 2010 through December 31, 2010. See Note 19 - Certain Relationships and Transactions, to the audited financial statements.

(f) Intellectual property bundles (which include patents) and customer relationship intangible assets were adjusted to fair value at the closing date of the Merger and useful lives were estimated. Amortization expense is adjusted to reflect the amortization of intellectual property bundles ($77,476 at the Merger date) and customer relationship intangible assets ($49,188 at the Merger date) using the straight-line method over their estimated useful lives of 20 years for the Pro Forma period, less Predecessor amortization expense for intangible assets of $3,046 for the period January 1, 2010 through December 2, 2010.

(g) Reflects pro forma interest expense resulting from the new indebtedness calculated as follows:

Interest expense on the outstanding $260,000 Senior Secured Notes at 9% interest less $1,820 accrued for the period

December 3, 2010 to December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $21,580

Less net interest expense on Senior Subordinated Notes due 2014, at 91⁄4% plus Special Interest . . . . . . . . . . . . . . (17,833)

Less amortization of terminated interest rate swap agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428

Less interest expense on Second Lien Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,347)

Plus interest expense on portion of Second Lien Facility balance assumed to be refinanced through the new Working

Capital Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .206

Net adjustment to interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 3,034

The pro forma calculations above reflect that proceeds from the $260,000 Senior Secured Notes due 2017 issued as part of the Transactions were used to redeem the Senior Subordinated Notes due 2014. In addition, $5,829 of principal on the Second Lien Facility was assumed to be retired for the six month period ended June 30, 2010 based on the Company’s cash flows analysis, with the remaining balance refinanced through the new Working Capital Facility for the period January 1, 2010 to June 30, 2010. Accordingly, the above analysis eliminates the entire amount of interest costs related to the Senior Subordinated Notes due 2014 for the twelve month period, as well as the interest related to the Second Lien Facility debt for six months. The Second Lien was paid off on June 30, 2010. The above adjustment also eliminates the amortization of the terminated swap. The terminated swap deferred credit was eliminated in Acquisition accounting. Based on the new Working Capital Facility agreement, the interest rate for the six month period ended June 30, 2010 was approximately 3.25%, and the interest expense was $206. The audited financial statements included in this Form 10-K discuss the interest rates on the above debt instruments, including the Special Interest on the Senior Subordinated Notes due 2014, and also provide further information on the terminated swap arrangement. See Note 8—Debt and Capital Lease Obligations to the audited financial statements.

(h) Amortization of deferred financing costs increased as follows:

Amortization of deferred financing costs related to the Senior Secured Notes due 2017 . . . . . . . . . . . . . . . . . . . . . . .$1,574

Less amortization of deferred financing costs related to the Senior Subordinated Notes due 2014. . . . . . . . . . . . . . . . . (604)

Amortization of deferred financing costs related to the Working Capital Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 303

Less amortization of the prior working capital facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(443)

Less amortization expense related to the Second Lien Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41)

Net adjustment to amortization of deferred financing costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..789

The above adjustment eliminates all of the amortization of deferred financing costs on the Senior Subordinated Notes due 2014, the prior working capital facility, and the Second Lien facility. The deferred financing costs on the Senior Secured Notes due 2017 and the new Working Capital Facility are being amortized on an effective interest method over the term of the respective agreement.

(i) Eliminates the loss on debt extinguishment recorded in June 2010 upon voluntary repayment of Second Lien Facility.

(j) To the extent the previously detailed adjustments to the statement of operations affected “Income (loss) from continuing operations before income tax provision,” the provision for income tax for the period also needed to be adjusted. The Company prepares a tax provision model which calculates a tax provision expense for its financial statements by breaking down pretax income by country and taxing jurisdiction, projecting tax/book differences, applying the relevant tax rates and credits for each jurisdiction, and adding discrete adjustments as necessary. For the Predecessor Period (January 1 to December 2, 2010), based on the mix of factors and tax rates for each taxing jurisdiction, the effective tax rate for the Company was approximately 57%. For the Pro Forma 2010 Combined Period, the Company modified its tax provision model for the adjustments listed above, which produced a newly calculated Tax Provision based on the pro forma amounts. The effective tax rate for the Pro Forma 2010 Combined Period was approximately 169%. The increase in the effective tax rate for the Pro Forma 2010 Combined Period is due mainly to the effect of tax and book differences resulting from the Merger.

At December 3, 2010:
Purchase price of outstanding equity			$	213,926
Acquisition related costs:
Included in selling, general and administrative expenses:
December 3 through December 31, 2010			$	12,111	(a)
January 1 through December 2, 2010			4,763		(a)
Deferred bond issuance fees			15,297
Total acquisition related costs			$	32,171
Allocation of purchase price:
Total current assets, including cash of $20,772 and deferred tax assets of $2,863			$	187,147	(b)
Property, plant and equipment			73,792
Intangible assets:
Corporate trademarks	$	19,341
Intellectual property bundles	77,476
Customer relationships	49,188
Total intangibles			146,005
Goodwill			180,596		(c)
Other assets including deferred tax asset of $414			1,273
Total assets acquired			$	588,813
Total current liabilities excluding current portion of debt and deferred tax liability			87,433		(d)
Senior subordinated notes due 2014, including call premium			177,066
Working capital facility due 2012			3,347
Capital leases			8,345
Deferred tax liability			84,231
Other long-term liabilities			15,039
Total liabilities assumed			375,461
Net assets acquired			$	213,352

(a) Transaction related expenditures for legal and professional services were reported as selling, general and administrative expenses with $12,111 recorded in the Successor Period ended December 31, 2010 and $4,763 in the selling general and administrative expenses in the Predecessor Period ended December 2, 2010. The summation of Acquisition related costs from December 3 through December 31, 2010 including $121 of IPC advisory fees ($12,111) and from January 1 through December 2, 2010 ($4,763) is $16,874. The summation of these two amounts excluding the IPC advisory fee of $121 is $16,753 and is referenced in note (d) in the “Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Combined Period (Twelve Months) Ended December 31, 2010” above.

(b) Total current assets includes cash of $20,772, accounts receivable of $67,756, inventories of $88,869, and deferred tax assets of $2,863.

(c) Goodwill of $180,596 arising from the Acquisition represents the excess of the purchase price over specifically identified tangible and intangible assets, and is primarily attributable to the growth potential of the Company. The Company has one operating segment and thus one unit of reporting for goodwill. Approximately $2,124 of the amounts recorded for intangibles are deductible for tax purposes.

(d) Total current liabilities excluding current portion of debt and deferred tax liability includes accounts payable of $30,962 and accrued liabilities of $46,746.

Acquisition and Fair Value Adjustments

in 2011 and, given the impact to the Balance Sheet (see Note 3 - Acquisitions for the final valuation adjustment), has retrospectively adjusted the 2010 amounts. The adjustments arising out of the finalization of the amounts recognized for assets acquired and liabilities assumed do not impact cash flows. However, such adjustments resulted in decreases to amortization of intangibles totaling $0.5 million in 2011.

The following table summarizes the final valuation adjustments made in 2011 to the assets acquired and liabilities assumed based on their estimated fair values (amounts included in the table are based in thousands):

	December 3, 2010 Valuation
	Original		Revised		Adjustment
Assets acquired:
Property, plant and equipment
Land	$	15,352	$	13,894	$	(1,458	)
Goodwill	164,678		180,596		15,918
Intangible assets
Customer relationships	54,920		49,188		(5,732		)
Intellectual property bundles	81,380		77,476		(3,904		)
Trademarks	19,079		19,341		262
Deferred financing fees	14,723		15,297		574
Liabilities assumed:
Total current liabilities, excluding current portion of debt and deferred tax liability	84,831		87,433		2,602
Deferred tax liability	81,173		84,231		3,058

Recent Developments

~~Robotronic Oy acquisition.~~ On ~~July~~February 1312, ~~2012~~2014, ~~the~~Victor ~~Company~~Technologies ~~acquired~~entered ~~all~~into ofa ~~the~~definitive ~~capital~~agreement ~~stock~~to ofsell ~~Robotronic Oy,~~ the ~~parent~~Company ~~company~~to ~~of ProMotion Controls~~Colfax, ~~Inc.,~~ a ~~leading~~global ~~maker~~manufacturer of ~~advanced,~~gas- ~~intelligent~~and ~~CNC~~fluid-handling ~~controllers~~and ~~used~~fabrication intechnology ~~shape-cutting machines~~products. ~~Cash~~The ~~paid~~all atcash ~~the~~transaction ~~time~~values ofVictor ~~purchase~~Technologies ~~was~~at approximately $~~3.5~~947 million~~. The total purchase price~~, ~~net of cash acquired and~~ including the ~~outstanding~~assumption ~~debt~~ of ~~the companies acquired~~debt, asand ~~well~~is assubject anto ~~earn-out~~customary ~~provision~~closing ~~based on specified sales targets, was $4~~conditions.~~5 million.~~

Australia Restructuring. On January 16, 2013, the Company announced that it will be ceasing manufacturing operations at its owned manufacturing facility in Melbourne, Australia. The Company expects to have substantially completed the discontinuation of such manufacturing activities by June 30, 2013. The Company expects to record a pre-tax charge in the first quarter of 2013 in connection with the termination of these manufacturing operations of approximately $6.0 to $8.0 million, including approximately $5.5 to $6.5 million in payments for severance and other contractual employment obligations to affected employees and approximately $0.5 to $1.5 million in non-cash charges in connection with the abandonment of certain assets. The Company expects to incur substantially all of these cash expenditures during the first six months of 2013.

Results of Operations

2013 Compared to 2012

The following is a discussion of the results of operations for the years ended December 31, 2013 and 2012, respectively (amounts included in tables are based in thousands).

Net sales



	Year Ended December 31, 2013		Year Ended December 31, 2012		% Change
Net sales summary:
Americas	$	334,027	$	328,041	1.8%
Asia-Pacific	113,393		131,807		(14.0)%
Europe/ROW	39,376		36,282		8.5%
Consolidated	$	486,796	$	496,130	(1.9)%

Net sales for the year ended December 31, 2013 decreased $9.3 million as compared to the prior year, with approximately $9.8 million related to decreased volumes and a $6.1 million decrease attributable to foreign currency translation, partially offset by a $6.6 million increase in net sales associated with price increases.

Gross margin



	Year Ended December 31, 2013			Year Ended December 31, 2012			% Change
Gross margin	$	185,107		$	179,896		2.9%
% of sales	38.0		%	36.3		%

For the year ended December 31, 2013, gross margin increased 2.9% or, as a percentage of net sales, 1.6 percentage points as compared to prior year. In 2013, the Company recorded a $1.4 million credit to cost of sales related to the last-in first-out (“LIFO”) inventory method. Additionally in 2013, related to the Gas-Arc acquisition, the Company expensed $0.6 million related to the roll-out of a portion of the fair value adjustments of inventories recorded under the first-in-first-out inventory method. Also in 2013, the Company recorded a $0.2 million inventory charge for stranded inventory due to restructuring and recorded $0.1 million in severance expense. In 2012, the Company recorded a $3.3 million credit to cost of sales for LIFO partially offset by $1.7 million in severance expense. Excluding these items, adjusted gross margin as a percentage of net sales was 37.9% in 2013 as compared to 35.9% in 2012. The remaining increase is due to the beneficial impact of manufacturing efficiencies arising from our Victor

Continuous Improvement ("VCI") program to lower costs and improve efficiency, as well as the impact of higher sales price increases.

Selling, general and administrative expenses



	Year Ended December 31, 2013			Year Ended December 31, 2012			% Change
Selling, general and administrative expenses	$	108,048		$	106,790		1.2%
% of sales	22.2		%	21.5		%

For the year ended December 31, 2013, selling, general and administrative costs increased $1.3 million over the prior year. This increase is primarily a result of increased pension plan expense and incentive compensation expense.

Interest, net



	Year Ended December 31, 2013		Year Ended December 31, 2012		% Change
Interest, net	$	33,621	$	32,136	4.6%

Interest expense for the years ended December 31, 2013 and 2012 were $33.6 million and $32.1 million, respectively. The increase in interest expense reflects the effect of $15.5 million of incremental average debt in 2013 of $359.1 million as compared to 2012 of $343.6 million. The increase in incremental average debt for the year 2013 was the result of borrowings under the Working Capital Facility of $22.3 million in December 2013 and the addition of $100.0 million of Senior Secured Notes issued in March 2012, which was partially offset by paying down $33.0 million of the Notes in December 2013.

Income tax provision



	Year Ended December 31, 2013			Year Ended December 31, 2012			% Change
Income tax provision	$	2,916		$	8,086		(63.9)%
% of income before tax	11.6		%	27.2		%

An income tax provision of $2.9 million was recorded on pretax income of $25.2 million for 2013 versus an income tax provision of $8.1 million on pretax income of $29.7 million for 2012. The tax provisions for 2013 and 2012 included deferred U.S. income tax expenses recorded on certain foreign earnings in addition to the foreign taxes payable currently on those earnings. Operating loss carryovers utilized in 2013 again offset a major portion of U.S. income taxes currently payable, allowing the Company to release a portion of its valuation allowances. In addition, for the first time in several years, the Company was able to claim Foreign Tax Credits.

2012 Compared to 2011

The following is a discussion of the results of operations for the years ended December 31, 2012 and 2011, respectively (amounts included in tables are based in thousands).

Net sales

	Year Ended December 31, 2012		Year Ended December 31, 2011		% Change
Net sales summary:
Americas	$	328,041	$	315,858	3.9%
Asia-Pacific	131,807		133,539		(1.3)%
Europe/ROW	36,282		38,~~032~~031		(4.6)%
Consolidated	$	496,130	$	487,~~429~~428	1.8%

Net sales for the year ended December 31, 2012 increased $8.7 million as compared to the prior year, with approximately $9.7 million associated with price increases and $0.1 million attributable to favorable foreign currency translation, partially offset by lower sales volumes of $1.1 million.

Gross margin



	Year Ended December 31, 2012			Year Ended December 31, 2011			% Change
Gross margin	$	179,896		$	157,799		14.0%
% of sales	36.3		%	32.4		%	3.9%

For the year ended December 31, 2012, gross margin as a percentage of net sales increased 3.9% as compared to prior year. In 2012, the Company recorded a $3.3 million credit to cost of sales related to the last-in first-out (“LIFO”) inventory method as compared to a $2.8 million charge to costs of sales in 2011. Also in 2012, the Company recorded $1.7 million in severance expense primarily related to one-time cost reduction efforts. Additionally, in 2011 related to the Acquisition, the Company expensed $3.3 million related to the roll-out of a portion of the fair value adjustments of inventories recorded under the first-in first-out inventory method. Additional items that impacted 2011 activity included $1.9 million of restructuring-related inventory write-offs and idle facilities costs and a $0.5 million charge providing for a legal settlement related to prior year exposures. Excluding these items, adjusted gross margin as a percentage of net sales was 35.9% in 2012 as compared to 34.1% in 2011. This remaining increase in adjusted gross margin is primarily due to lower depreciation expense in 2012 as certain fixed assets became fully depreciated and the beneficial impact of manufacturing efficiencies arising from our Victor Continuous Improvement ("VCI") program to lower costs and improve efficiency.

Selling, general and administrative expenses



	Year Ended December 31, 2012			Year Ended December 31, 2011			% Change
Selling, general and administrative expenses	$	106,790		$	105,286		1.4%
% of sales	21.5		%	21.6		%

For the year ended December 31, 2012, ~~SG&A~~selling, general and administrative costs increased $1.5 million over the prior year. This increase is primarily a result of planned headcount additions and related expenses, mostly in the sales and marketing areas, and one-time costs associated with the Company's name change. These increases are partially offset by a reduction in incentive compensation.

Restructuring

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 has substantially completed these activities at December 31, 2012. These exit activities impacted approximately 175 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 years ended December 31, 2012 and 2011, respectively, and the total expected restructuring costs associated with these activities by major type of cost:

					As of December 31, 2012
	Year EndedDecember 31, 2012		Year EndedDecember 31, 2011		CumulativeRestructuringCosts		Total ExpectedRestructuringCosts
Employee termination benefits	$	972	$	3,197	$	4,169	$	4,169
Other restructuring costs	1,505		2,207		3,712		3,712
Total restructuring costs	$	2,477	$	5,404	$	7,881	$	7,881

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.

Interest, net



	Year Ended December 31, 2012		Year Ended December 31, 2011		% Change
Interest, net	$	32,136	$	24,535	31.0%

Interest expense for the years ended December 31, 2012 and 2011 were $32.1 million and $24.5 million, respectively. The increase in interest expense reflects the effect of $69 million of incremental average debt in 2012 as compared to 2011 and a higher effective interest rate of 9.0% in 2012 as compared to 8.6% in 2011. The increase in the average debt resulted from the issuance of $100 million in Senior Secured Notes in March 2012.

Income tax provision



	Year Ended December 31, 2012			Year Ended December 31, 2011			% Change
Income tax provision	$	8,086		$	7,826		3.3%
% of income before tax	27.2		%	53.7		%

An income tax provision of $8.1 million was recorded on pretax income of $29.7 million for 2012 versus an income tax provision of $7.8 million on pretax income of $14.6 million for 2011. The tax provisions for 2012 and 2011 included deferred U.S. income tax expenses recorded on certain foreign earnings in addition to the foreign taxes payable currently on those earnings. Increased U.S. taxable income in 2012 led to a higher utilization of tax loss carryforwards. As a result, the Company had a larger release of valuation allowances than last year thereby reducing the consolidated effective tax rate. The currently payable income tax provision for 2012 and 2011 relates primarily to earnings in foreign countries. Operating loss carryovers offset substantially all U.S. income taxes currently payable.

~~2011 Compared to Pro Forma 2010 Combined Period~~Restructuring

~~Our~~Program ~~accounting~~implemented for the Acquisition follows the requirements of SAB No. 54 and Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations,” which require that the purchase accounting treatment of the Acquisition be “pushed down,” resulting in the adjustment of all of our net assets to their respective fair values as of the Acquisition date of December 3, 2010. Although we continued as the same legal entity after the Acquisition, the application of push down accounting represents the termination of the old reporting entity and the creation of a new reporting entity. Accordingly, the two entities are not presented on a consistent basis of accounting. As a result, our consolidated financial statements for 2010 are presented for the period and the entity succeeding the Acquisition (“Successor”) and the period and entity preceding the Acquisition (“Predecessor”). In addition to presenting our results of operations on a historical basis for the Predecessor and Successor periods in 2010, we have presented a supplemental discussion of the results of our operations based upon pro forma information derived from our Unaudited Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 2010 as if the Merger and related transactions occurred on January 1, 2010, to which we refer as the “Pro Forma 2010 Combined Period” or the “2010 Combined Period.” We provide this supplemental presentation based on our pro forma results to assist in understanding and assessing the trends and significant changes in our results of operations on a comparable basis. We believe this supplemental pro forma presentation is appropriate because it provides a more meaningful comparison and more relevant analysis of our results of operations in 2011, as compared to 2010, than a presentation of separate historical results for the Predecessor and Successor Periods, because 2013

26During 2013, the Company committed to a restructuring plan that included exit activities at its Melbourne, Australia manufacturing location. These exit activities, which were completed in 2013, 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.

it allows us to highlight operational changes as well as purchase accounting related items over the combined period. The pro forma results may not reflect the actual results we would have achieved had the Acquisition not occurred and may not be predictive of future results of operations.20

The following isprovides a ~~discussion~~summary of the ~~results~~total ofrestructuring ~~operations~~costs ~~for~~incurred ~~the~~during ~~years ended December 31, 2011 and the Pro Forma 2010 Combined Period (amounts included in tables are based in thousands).~~2013:

Net sales



($'s in thousands)	Year Ended December 31, 2013
Employee termination benefits	$	5,502
Other restructuring costs	404
Total restructuring costs	$	5,906

	Year Ended December 31, 2011		Pro Forma2010 CombinedPeriod		% Change
Net sales summary:
Americas	$	315,858	$	265,264	19.1%
Asia-Pacific	133,539		116,742		14.4%
Europe/ROW	38,032		33,895		12.2%
Consolidated	$	487,429	$	415,901	17.2%

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.

~~Net~~Programs ~~sales~~implemented ~~for~~prior ~~the year ended December 31, 2011 increased $71.5 million as compared~~ to the Pro Forma 2010 Combined Period, with approximately $45.0 million related to increased volumes, $11.9 million associated with price increases and $14.6 million attributable to foreign currency translation.2013

~~Gross~~In ~~margin~~2011, the Company committed to restructuring plans that include exit activities at manufacturing sites in West Lebanon, New Hampshire and Pulau Indah, Selangor, Malaysia. 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.

	Year Ended December 31, 2011			Pro Forma2010 CombinedPeriod			% Change
Gross margin	$	157,799		$	133,552		18.2%
% of sales	32.4		%	32.1		%	0.3%

The following provides a summary of restructuring costs incurred during the years ended December 31, 2013, 2012 and 2011, respectively, and the total expected restructuring costs associated with these activities by major type of cost:

For the year ended December 31, 2011, gross margin as a percentage of net sales increased 0.3% as compared to the Pro Forma 2010 Combined Period. In 2011 related to the Acquisition, the Company expensed $3.3 million related to the roll-out of a portion of the fair value adjustments of inventories recorded under the first-in first-out inventory method. Additionally, the Company recorded a $2.8 million and $0.1 million charge to cost of sales related to the last-in first-out (“LIFO”) inventory method for the year ended December 31, 2011 and the Pro Forma Combined Period, respectively. Additional items that impacted 2011 activity included $1.9 million of restructuring-related inventory write-offs and idle facilities costs and a $0.5 million charge providing for a legal settlement related to prior year exposures recorded in 2011. Excluding these items, adjusted gross margin as a percentage of net sales was 34.1% in 2011 as compared to 32.1% in the Pro Forma 2010 Combined Period. The increase in adjusted gross margin is primarily due to the beneficial impact of continuous improvement programs, manufacturing efficiencies arising from increased volumes of activity in 2011 and price increases enacted in the first half of 2011.



	Year Ended December 31,						As of December 31, 2013
	2013		2012		2011		Cumulative Restructuring Costs		Total Expected Restructuring Costs
Employee termination benefits	$	116	$	972	$	3,197	$	4,285	$	4,300
Other restructuring costs	241		1,505		2,207		3,953		4,000
Total restructuring costs	$	357	$	2,477	$	5,404	$	8,238	$	8,300

~~Selling~~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, ~~general~~expense to relocate certain individuals and ~~administrative~~equipment ~~expenses~~to other manufacturing locations and employee training costs.

	Year Ended December 31, 2011			Pro Forma2010 CombinedPeriod			% Change
Selling, general and administrative expenses	$	105,286		$	95,142		10.7%
% of sales	21.6		%	22.9		%

For the year ended December 31, 2011, SG&A costs increased $10.1 million over the Pro Forma 2010 Combined Period. This increased dollar investment is primarily a result of increased commission expenses on higher sales volumes, increased headcount and headcount-related expenses primarily in the sales, marketing and engineering disciplines, promotional expenses and increased incentive compensation related to strongly improved financial performance, as well as foreign currency impacts due to a weaker U.S. dollar. The 130 point basis improvement during the year ended December 31, 2011 as compared to the Pro Forma 2010 Combined Period is a result of higher sales volumes.

Interest, net

	Year Ended December 31, 2011				Pro Forma2010 CombinedPeriod				% Change
Interest, net	$	24,535			$	25,832			(5.0)%

Interest expense for the year ended December 31, 2011 and the Pro Forma 2010 Combined Period were $24.5 million and $22.3 million, respectively. The increase in interest expense reflects the effect of $65 million of incremental average debt in 2011 as compared to the Pro Forma 2010 Combined Period, partially offset by a reduced effective interest rate of 8.6% in 2011 as compared to 10.3% in the Pro Forma 2010 Combined Period.

Income tax provision

	Year Ended December 31, 2011			Pro Forma2010 CombinedPeriod			% Change
Income tax provision	$	7,826		$	7,377		6.1%
% of income before tax	53.7		%	168.9		%

An income tax provision of $7.8 million was recorded on pretax income of $14.6 million for the 2011 versus an income tax provision of $7.6 million on pretax loss of $0.9 million for the Pro Forma 2010 Combined Period. The tax provisions for 2011 and the Pro Forma 2010 Combined Period are increased by deferred U.S. income tax expenses recorded on certain foreign earnings in addition to the foreign taxes payable currently on those earnings. The 2010 tax provision was also adversely impacted by certain non-deductible Acquisition expenses. The currently payable income tax provision for 2011 and the Pro Forma 2010 Combined Period relates primarily to earnings in foreign countries. Operating loss carryovers offset substantially all U.S. income taxes currently payable.

Liquidity and Capital Resources

The Company’s cash flows from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows, are summarized in the following table (amounts included in the table are based in thousands):

			Successor											Predecessor
		Year Ended December 31,
			Year EndedDecember 31,				Year EndedDecember 31,				December 3, 2010through			January 1, 2010through
		2013				2012				2011
			2012				2011				December 31, 2010			December 2, 2010
Net cash provided by (used in):
Net cash provided by (used in):
	Operating activities	$	46,781			$	33,145			$	7,091
	Operating activities		$	33,145			$	7,091			$	(7,657	)	$	45,128
	Investing activities	(34,454		)		(16,704		)		(15,723		)
	Investing activities		(16,704		)		(15,723		)		(2,037		)	(6,840		)
	Financing activities	(12,846		)		(5,229		)		7,332
	Financing activities		(5,229		)		7,332				10,852			(32,836		)

Principal uses of cash have been and will continue to be for working capital, debt service obligations and capital expenditures. The Company expects to fund ongoing requirements for working capital from operating cash flow and borrowings under the Working Capital Facility.

2013 Cash Flows versus 2012 Cash Flows

Operating Activities. Net cash provided by operating activities was $46.8 million for the year ended December 31, 2013, compared to net cash provided by operating activities of $33.1 million for the year ended December 31, 2012. This increase in the 2013 period resulted primarily from efforts to reduce inventory levels at year-end and higher accruals for incentive compensation and rebates in 2013 compared to 2012, which was partially offset by slower collections of accounts receivable in the 2013 period than in the 2012 period, due to deteriorating economic conditions in Europe.

Investing Activities. Net cash used in investing activities was $34.5 million for the year ended December 31, 2013, compared to $16.7 million for the year ended December 31, 2012. This increase primarily resulted from cash paid in October 2013 of $32.8 million related to the acquisition of Gas-Arc, which was partially offset by proceeds from the sale of property, plant and equipment related to assets held for sale in Australia.

Financing Activities. During 2013, the Company prepaid $33.0 million of Senior Secured Notes due 2017, including a bond redemption premium of $1.0 million. Borrowings outstanding under the Working Capital Facility were $22.3 million and financing fees paid in connection with amending the Working Capital Facility were $0.2 million.

2012 Cash Flows versus 2011 Cash Flows

Operating Activities. Net cash provided by operating activities for 2012 was $33.1 million as compared to $7.1 million in 2011. This increase in cash was driven largely by higher net income, lower uses of cash for working capital and an $8.7 million payment of interest on the Senior Subordinated Notes in 2011 related to the defeasance of the Notes.

Investing Activities. Investing activities used $16.7 million and $15.7 million of cash for the years ended December 31, 2012 and 2011, respectively. The acquisition of Robotronic Oy in 2012 used cash of $3.5 million. Capital spending, primarily for manufacturing equipment purchases, comprised the majority of the remaining amount of cash used for investing activities in 2012 and 2011.

Financing Activities. During 2012, the Company issued an additional $100.0 million of Senior Secured Notes due 2017, and paid $5.2 million of consent fees to bondholders as well as $4.4 million of financing fees in conjunction with the Notes offering. The Company used the proceeds to pay a cash dividend of $93.5 million to its parent company to allow it to redeem a portion of its outstanding Series A preferred stock. In the same period in 2011, the Company used Trusteed Assets of $183.7 million to retire $176.1 million of Senior Subordinated Notes outstanding.

outstanding Series A preferred stock. In the same period in 2011, the Company used Trusteed Assets of $183.7 million to retire $176.1 million of Senior Subordinated Notes outstanding.

2011 Cash Flows

Operating Activities. Cash provided by operating activities during 2011 was $7.1 million compared to $37.5 million during the 2010 Combined Period. The decrease was largely driven by lower net income combined with the impact of approximately $16.0 million of early payment of supplier invoices during the fourth quarter of 2009, which correspondingly reduced cash usage requirements for 2010. Additionally, the Company made an $8.7 million payment of interest on the Senior Subordinated Notes in 2011 related to the defeasance of the Notes.

Investing Activities. Cash used for capital expenditures was $14.8 million for the year ended December 31, 2011, compared to $8.3 million used for capital expenditures for the 2010 Combined Period. Capital expenditures in 2011 included an expansion to our manufacturing facility in Hermosillo, Mexico and additional machinery and equipment at our Denton, Texas facility.

Financing Activities. In 2011, the Company used Trusteed Assets of $183.7 million to retire $176.1 million of Senior Subordinated Notes outstanding. During the 2010 Combined Period, the Company voluntarily repaid all $25 million of the second lien indebtedness due November 30, 2012. The prepayment was funded primarily with borrowings under the then existing Working Capital Facility.

Long-Term Debt

Senior Secured Notes due 2017

On December 3, 2010, we issued $260.0 million in aggregate principal of the existing 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 our management, were used to finance the Acquisition, to redeem the Senior Subordinated Notes due 2014 and to pay the transaction related expenses. On March 6, 2012, we issued $100 million in aggregate principal amount of Additional Notes at par plus accrued but unpaid interest since December 15, 2011. 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. We used the net proceeds from the sale of the Additional Notes and cash on hand to pay a cash dividend of $93.5 million to Holdings, our parent company, to allow it to redeem a portion of its outstanding Series A preferred stock and to pay fees and expenses related to this offering and the related Consent Solicitation required to amend the Indenture in connection with this offering. We made a cash payment of $20 per $1,000 in principal amount of Original Notes, or a total aggregate payment of $5.2 million, to Holders of such notes in connection with the solicitation of consents to amend the Indenture and the issuance of the Additional Notes.

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

The notes and the guarantees rank equal in right of payment with any of our and the guarantors’ senior indebtedness, including indebtedness under the Working Capital Facility. The notes and the guarantees rank senior in right of payment to any of our and the guarantors’ existing and future indebtedness that is expressly subordinated to the notes and the guarantees and are effectively senior to any unsecured indebtedness to the extent of the value of the collateral for the notes and the guarantees. The notes and the guarantees are effectively junior to our and the guarantors’ obligations under the Working Capital Facility to the extent our and the guarantors’ assets secure such obligation on a first priority basis and are effectively junior to any secured indebtedness that is either secured by assets that are not collateral for the notes and the guarantees or secured by a prior lien in the collateral for the notes and the guarantees, in each case, to the extent of the value of the assets securing such indebtedness.

On or after December 15, 2013, we may redeem the notes, in whole or part, at redemption prices set forth in the Indenture (expressed as a percentage of principal amount of notes to be redeemed) ranging from 106.75% to 100%, depending on the date of redemption. At any time prior to December 15, 2013, wethe ~~may~~Company could redeem, subject to applicable notice and other requirements:


•	during each twelve-month period commencing with the issue date, up to 10% of the original aggregate principal amount of notes issued under the Indenture (including additional notes) at a redemption price of 103%;


•	all or a part of the notes at a redemption price equal to 100% of the principal amount of notes to be redeemed plus a “make-whole” premium, as determined in accordance with the Indenture; and

2922

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on one or more occasions, at our option, up to 35% of the original aggregate principal amount of notes issued under the Indenture (including additional notes), at a redemption price of 109% of the aggregate principal amount thereof, with the net cash proceeds of one or more equity offerings of the Company or any of its direct or indirect parents to the extent such proceeds are received by or contributed to the Company.

In addition to the applicable redemption prices, for each redemption the Company must also pay accrued and unpaid interest and special interest, if any, to, but excluding, the applicable redemption date. If we sell certain assets or experiences specific kinds of changes of control, we must offer to repurchase the notes.

~~The~~On ~~notes~~December ~~contain customary covenants and events of default~~12, ~~including covenants that~~2013, ~~among other things, limit~~ the ~~our~~Company ~~and~~redeemed ~~our~~$33.0 ~~restricted subsidiaries’ ability to incur additional indebtedness; pay dividends on~~million, ~~repurchase~~ or ~~make~~9.17%, ~~distributions in respect~~ of ~~its~~outstanding ~~capital~~principal ~~stock~~amount orof ~~make~~Senior ~~other~~Secured ~~restricted~~Notes ~~payments;~~at ~~make~~a ~~certain~~price ~~investments;~~of ~~sell~~103%, ~~transfer~~plus oraccrued ~~otherwise~~and ~~convey~~unpaid ~~certain assets; create liens; designate our future subsidiaries as unrestricted subsidiaries; consolidate~~interest, ~~merge,~~recognizing ~~sell~~a orloss ~~otherwise dispose~~ of ~~all~~$2.5 ~~or substantially all of our assets; and enter into certain transactions with our affiliates~~million.

The 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; sell, transfer or otherwise convey certain assets; create liens; designate our future subsidiaries as unrestricted subsidiaries; consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and enter into certain transactions with our affiliates.

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

The Indenture contains certain covenants of us and the guarantors that limit the payments of dividends, incurrence of additional indebtedness and guarantees, issuance of disqualified stock and preferred stock, transactions with affiliates and a merger, consolidation or sale of all or substantially all of our assets. As of December 31, ~~2012~~2013, we were in compliance with all applicable covenants.

Senior Subordinated Notes due 2014

On ~~December 3~~February 1, ~~2010~~2011, wethe ~~called~~Company ~~for~~utilized ~~the~~$183.7 ~~redemption~~million of Trusteed Assets to redeem in full $~~172~~176.31 million ~~aggregate~~of ~~outstanding~~the ~~9 1/4%~~ Senior Subordinated Notes due 2014 onplus ~~February 1, 2011 at~~ a ~~price~~call ofpremium ~~101.542%~~and ~~plus~~ accrued ~~and unpaid~~ interest. The WeTrust ~~irrevocably~~to ~~deposited,~~fund ~~with~~ the ~~Trustee,~~redemption ~~funds~~was ~~sufficient~~established toat ~~pay~~ the ~~Redemption~~time ~~Price~~ of the ~~Senior Subordinated Notes~~Acquisition.

We remained the primary obligor of the Senior Subordinated Notes through February 1, 2011. Accordingly, the Senior Subordinated Notes and related assets placed with the Trustee remained on our balance sheet through the redemption date, and were classified as current at December 31, 2010. Successor’s opening balance sheet at December 3, 2010 includes the fair value of the Senior Subordinated Notes due 2014 at that date of $177.1 million.

The Trustee acknowledged the satisfaction and discharge of the indenture relating to the Senior Subordinated Notes as of December 3, 2010 and informed us the Senior Subordinated Notes were paid on February 1, 2011.

The Senior Subordinated Notes accrued interest at the rate of 9 1/4% per annum payable semi-annually in arrears on February 1 and August 1 of each year.

The indenture provided for the payment of an additional special interest adjustment based on the Company’s consolidated leverage ratio. During the period from January 1, 2011 until the debt’s redemption on February 1, 2011, the quarterly special interest adjustment resulted in additional interest expense of $36 thousand. The quarterly special interest adjustment resulted in additional interest expense of $101 thousand for the period from December 3, 2010 through December 31, 2010 and $2.7 million for the period from January 1, 2010 through December 2, 2010.

Interest on the Senior Subordinated Notes due 2014, excluding the special interest adjustment, totaled $1.3 million for the period from January 1, 2011 until the debt’s redemption on February 1, 2011. Interest on the Senior Subordinated Notes due 2014 totaled $1.3 million from December 3, 2010 through December 31, 2010. During the period from January 1, 2011 until the debt’s redemption on February 1, 2011, $1.1 million of the fair value premium recorded for the Senior Subordinated Notes was amortized as a reduction of interest expense. During the period December 3, 2010 through December 31, 2010, $1.0 million of the fair value premium recorded for the Senior Subordinated Notes was amortized as a reduction of interest expense.

Working Capital Facility

On December 3, 2010, weVictor Technologies entered into a Fourth Amended and Restated Credit Agreement (the “GE Agreement”) with General Electric Capital Corporation as lender, ~~swingline lender~~ and administrative agent (the “Working Capital Facility”). The Working Capital Facility provides for borrowings not to exceed $60.0 million, including up to $10.0 million for letters of credit and ~~$10.0 million for~~ swingline loans, subject to borrowing base capacity. Provided Wethat ~~have~~no default is then existing or would arise therefrom, Victor Technologies has the option to increase commitments under the Working Capital Facility by up to $25.0 million. ~~The Working Capital Facility matures on December 3, 2015.~~

~~The~~On ~~Indenture~~October ~~limits~~30, 2013, the ~~aggregate~~Company ~~principal~~entered ~~amount~~into ~~outstanding~~an atamendment ~~any~~(the ~~one~~"Amendment") ~~time~~to ~~under~~the Fourth Amended and Restated Credit Agreement, dated as of December 3, 2010 (the ~~Working~~"Credit Agreement") with General Electric Capital ~~Facility~~Corporation. Pursuant to the terms of the Amendment, (i) the Gas-Arc acquisition was specifically designed as a "Permitted Acquisition" (as defined in the Credit Agreement), (ii) the Company modified certain covenants applicable to it, including those relating the investments and prepayments or redemptions of other indebtedness, to provide for greater flexibility going forward and (iii) the maturity date with respect to the Credit Agreement was extended by one year. Transaction related costs of $~~60.~~0 .2 million orwere ~~the~~incurred ~~borrowing~~in ~~under~~connection with the ~~borrowing~~Amendment. ~~base~~The ~~capacity~~Company ~~determined~~remains ~~as:~~in compliance with all debt covenants. The Working Capital Facility expires on December 2016.

•The ~~85%~~Indenture ofgoverning the Senior Secured Notes limits the aggregate ~~book~~principal ~~value~~amount ofoutstanding ~~eligible~~at ~~accounts~~any ~~receivable~~one ~~consisting~~time ofunder the ~~receivables~~Working ~~from~~Capital UFacility to the greater of $60.~~S.,~~0 ~~Canadian,~~million ~~and~~or ~~Australian~~the ~~customers~~borrowing asunder ofthe ~~such~~borrowing ~~date;~~base ~~plus~~capacity determined as:

30• 85% of the aggregate book value of eligible accounts receivable consisting of the receivables from U.S., Canadian, and Australian-based customers; plus

• the lesser of (a) 85% of the aggregate net orderly liquidation value of eligible inventory consisting of the U.S. and Australian-based inventories (subject to certain reserves and adjustments) multiplied by a percentage representing the net orderly liquidation value of the book value of such inventory and (b) 65% of the aggregate book value of the sum of the eligible inventory ~~valued at the lower of cost or market; less~~.

•For ~~reserves~~the ~~established~~first six months following the closing date of the Acquisition, borrowings under the Working Capital Facility bore interest at ~~Agent’s~~a ~~permitted~~rate ~~discretion~~per annum of LIBOR, plus 2.75%. Thereafter, the applicable margins under the Working Capital Facility will adjust based on average excess borrowing availability under the Working Capital Facility. If the average excess borrowing availability is greater than or equal to $25.0 million, the applicable interest rate will be LIBOR plus 2.75%. If the average excess borrowing availability is less than $25.0 million, the applicable margin will be LIBOR plus 3.0%. Victor Technologies has the option to have borrowings bear interest at a base rate plus applicable margins as set forth in the GE Agreement.

Borrowings under the Working Capital Facility adjust based on average excess borrowing availability under the Working Capital Facility. If the average excess borrowing availability is greater than or equal to $25.0 million, the applicable interest rate will be LIBOR plus 2.75%. If the average excess borrowing availability is less than $25.0 million, the applicable margin will be LIBOR plus 3.0%. We have the option to have borrowings bear interest at a base rate plus applicable margins as set forth in the GE Agreement.23

Commitment fees are payable in respect of unutilized commitments at (i) 0.75% per annum if outstanding loans ~~(including swingline loans)~~ and letters of credit are less than ~~or equal to~~ 50% of the aggregate amount of such commitments or (ii) 0.50% if the outstanding loans ~~(including swingline loans)~~ and letters of credit are greater than 50% of the aggregate amount of such commitments.

If at any time the aggregate ~~principle~~ amount of outstanding loans (including swingline loans), unreimbursed letter of credit drawings and undrawn letters of credit under the Working Capital Facility ~~exceed~~exceeds the lesser of (i) the aggregate commitments under the Working Capital Facility and (ii) the borrowing base, wethe Company will be required to repay outstanding loans and then ~~use~~ cash to collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount.

All obligations under the Working Capital Facility are unconditionally guaranteed by ~~our parent~~ Holdings and substantially all of ~~our~~the Company’s existing and future, direct and indirect, wholly-owned domestic subsidiaries and ~~our~~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.

~~There~~The ~~were~~Working noCapital ~~borrowings~~Facility ~~under~~has a minimum fixed charge coverage ratio test of 1.10 to 1 if the ~~Working~~excess ~~Capital~~availability under the Facility ~~during~~is less than $9.0 million (which minimum amount will be increased or decreased proportionally with any increase or decrease in the ~~year~~commitments ~~ended~~thereunder). ~~December~~In 31addition, ~~2012. The~~the Working Capital Facility includes negative covenants that limit the Company’s ~~weighted~~ability ~~average~~and ~~interest~~the ~~rate~~ability onof ~~its~~Holdings ~~short-term~~and ~~borrowings~~certain ~~was~~subsidiaries ~~4.78%~~to, ~~for~~among ~~the~~other ~~year~~things: ~~ended~~incur, ~~December~~assume 31or permit to exist additional indebtedness or guarantees; grant liens; consolidate, ~~2011~~merge ~~and~~or ~~5.71%~~sell ~~for~~all or substantially all of the ~~period~~Company’s ~~from~~assets; ~~January~~transfer 1,or ~~2010~~sell ~~through~~assets ~~December~~and 2,enter ~~2010. There~~into ~~were~~sale noand ~~borrowings~~leaseback ~~under~~transactions; ~~the~~make ~~Working~~certain ~~Capital~~loans ~~Facility~~and ~~during~~investments; pay dividends, make other distributions or repurchase or redeem the ~~period~~Company’s ~~from~~or ~~December~~Holdings’ 3,capital ~~2010~~stock; ~~through~~and ~~December~~prepay ~~31,~~or ~~2010~~redeem certain indebtedness.

At December 31, ~~2012~~2013, ~~the~~borrowings ~~unused~~outstanding ~~availability~~ under the Working Capital Facility were $22.3 million and the unused availability, net of $1.41 million in outstanding letters of credit, was $4922.17 million.

The Working Capital Facility includes negative covenants that limit our ability and the ability of our parent, 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 our 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 our or our parent’Company's ~~capital~~weighted ~~stock;~~average ~~prepay~~interest orrate ~~redeem~~on ~~certain~~its ~~indebtedness;~~short-term ~~amend~~borrowings orwas ~~otherwise~~4.00% ~~alter~~for ~~terms of subordinated debt or~~ the ~~notes; enter into transactions with affiliates; change our fiscal~~ year; ~~and~~ended ~~change~~December 31, ~~the status of our parent as a passive holding company~~2013. There ~~The~~were ~~Working~~no ~~Capital~~borrowings ~~Facility has a minimum fixed charge coverage ratio test of 1.1 to 1 if the excess availability~~ under the Working Capital Facility isduring ~~less~~the ~~than~~year ~~$9.0~~ended December ~~million~~31, ~~(which~~2012. The ~~minimum~~Company’s ~~amount~~weighted ~~will~~average beinterest ~~increased~~rate oron ~~decreased~~its ~~proportionally~~short-term ~~with~~borrowings ~~any~~was ~~increase~~4.78% orfor ~~decrease in~~ the ~~commitments~~year ~~thereunder). As~~ended of December 31, ~~2012, we were in compliance with all applicable covenants~~2011.

~~Concurrently~~In connection with the ~~closing of 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 ~~in “Senior Secured Notes due 2017”~~ above. As ~~amended,~~The ~~the~~amendment ~~credit~~became ~~agreement~~effective ~~permits~~concurrently uswith tothe ~~incur~~consummation ~~an unlimited amount~~ of ~~additional indebtedness under~~ the ~~Indenture~~offering ~~provided that no event~~ of ~~default~~Additional ~~thereunder~~Notes ~~has occurred and is continuing and such additional indebtedness is~~ on ~~terms~~March and conditions substantially similar to those governing the existing notes. We also must meet various use of proceeds restrictions and an availability requirement and demonstrate that before and after giving effect to the incurrence of such additional indebtedness6, ~~we are in compliance with certain fixed charge and leverage ratios~~2012.

Second Lien Facility

In June 2010, Predecessor voluntarily repaid all of the second lien indebtedness due November 30, 2012 and terminated the related credit agreement. The prepayment was funded primarily with borrowings under our Working Capital Facility.

Contractual Obligations and Commercial Commitments

In the normal course of business, we enter into contracts and commitments that obligate us to make payments in the future. The table below sets forth our significant future obligations by time period as of December 31, ~~2012~~2013 (amounts included in the table are based in thousands).

	Payments Due by Period
			Less than		1 - 3		3 - 5		More than
Contractual Obligations ($ in 000's)	Total		1 year		years		years		5 years
Long-term debt	$	~~360~~327,000	$	—	$	—	$	~~360~~327,000	$	—
Interest payments related to long-term debt and capital leases	~~161~~116,~~003~~630		3229,~~619~~540		6458,~~930~~886		6328,~~454~~204		—
Capital leases	3,720		1,563		1,964		193		—
Revolver borrowings	22,336		22,336		—		—		—
Operating leases	44,544		9,532		15,987		10,682		8,343
Capital leases	2,227		1,284		909		34		—
Total	$	569,267	$	43,714	$	82,881	$	434,329	$	8,343
Operating leases	39,039		8,658		12,602		8,697		9,082
Total	$	507,232	$	61,818	$	72,397	$	363,935	$	9,082

At December 31, ~~2012~~2013, we had outstanding letters of credit totaling $1.41 million under the Working Capital Facility. See Note 18 – Employee Benefit Plans to the consolidated financial statements for the Company’s obligation with respect to its pension and post-retirement benefit plans and Note 14 – Income Taxes regarding amounts potentially payable for uncertain tax positions.

Liquidity

Our ability to make scheduled payments on our indebtedness, including the notes, and to fund our operations will depend on our ability to generate cash in the future. Our historical financial results have been, and our future financial results are expected to be, subject to substantial fluctuations, and will depend upon general economic conditions and financial, competitive, legislative, regulatory and other factors that are beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on the notes or our other indebtedness.

If our cash flows and capital resources are insufficient to meet our indebtedness service obligations or fund our other liquidity needs, we may need to refinance all or a portion of our debt, seek additional equity capital, reduce or delay scheduled expansions and capital expenditures or sell material assets or operations. We may be unable to pay our indebtedness or refinance it on commercially reasonable terms, or at all, or to fund our liquidity needs. Any refinancing of any of our indebtedness could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments, including the indenture governing the notes, may limit or prevent us from taking any of these actions.

If for any reason we are unable to meet our debt service obligations under any of our debt, we would be in default under the terms of the agreements governing such outstanding indebtedness. If such a default were to occur, the lenders under such debt could elect to declare such amounts outstanding immediately due and payable, and in the case of the Working Capital Facility, the lenders would not be obligated to continue to advance funds under the Working Capital Facility. If the amounts outstanding under our debt were accelerated, it could cause an event of default under other indebtedness or allow other indebtedness to be accelerated. We cannot assure that our assets will be sufficient to repay in full the funds owed to the banks or to holders of notes if any indebtedness were accelerated.

We may from time to time repurchase or otherwise retire our debt or take other steps to reduce our debt or otherwise improve our balance sheet. These actions may include open market repurchases of any notes outstanding, prepayments of our term loans or other retirements or refinancing of outstanding debt. The amount of debt that may be repurchased or otherwise retired, if any, would be decided upon at the sole discretion of our Board of Directors and will depend on market conditions, trading levels of our debt from time to time, our cash position and other considerations.

Market Risk and Risk Management Policies

Our earnings and cash flows are subject to exposure to changes in the prices of certain commodities, particularly copper, brass and steel. Our earnings and cash flows are also impacted by fluctuations in foreign currency exchange rates as well as changes in the interest rates on our debt arrangements. Our Working Capital Facility related interest costs are subject to change with changes in LIBOR. See “Quantitative and Qualitative Disclosures About Market Risk” below for further discussion.

Effect of Inflation and Deflation; Seasonality

In an environment of increasing raw materials costs wherein we are increasing prices, we may not be able to increase prices quickly enough. Our agreements with customers require 60 to 90 days notice and various administrative procedures are necessary to implement the changes. To the extent we are unable to maintain our sales prices to our customers, or to react as quickly as the market may change, our profitability could be adversely affected. Conversely, in an environment of decreasing raw materials prices and recessionary economic pressures, competitive conditions can cause sales price discounting before we can recover the higher costs of previously purchased materials.

prices and recessionary economic pressures, competitive conditions can cause sales price discounting before we can recover the higher costs of previously purchased materials.

In an environment of increasing raw material prices, competitive conditions can affect how much of the price increases we can recover in the form of higher unit sales prices. To the extent we are unable to pass on any price increases to our customers, our profitability could be adversely affected. Furthermore, restrictions in the supply of cobalt, chromium and other raw materials could adversely affect our operating results. In addition, some of our customers rely heavily on raw materials, and to the extent there are fluctuations in prices, it could affect orders for our products and our financial performance. Our general operating expenses, such as salaries, employee benefits and facilities costs, are subject to normal inflationary pressures.

Our operations are generally subject to mild seasonal increases in the second and third calendar quarters and decreases in the fourth calendar quarter.

Critical Accounting Policies

Our consolidated financial statements are based on the selection and application of significant accounting policies, some of which require management to make estimates and assumptions. We review these estimates and assumptions periodically to assess their reasonableness. If necessary, these estimates and assumptions may be changed and updated. The Successor accounting entity formed on December 3, 2010 adopted accounting policies consistent with the Predecessor. We believe the following are the more critical judgmental areas in the application of our accounting policies that affect our financial condition and results of operations.

Basis of Presentation

The Acquisition is being accounted for in accordance with United States accounting guidance for business combinations and, accordingly, the assets acquired and liabilities assumed were recorded at fair value as of December 3, 2010.

Although Victor Technologies continued as the same legal entity after the Acquisition, the application of push down accounting represents the termination of the old reporting entity and the creation of a new one. In addition, the basis of presentation is not consistent between the successor and predecessor entities and the financial statements are not presented on a comparable basis. As a result, the accompanying consolidated statements of operations, cash flows, and stockholders’ equity are presented for two different reporting entities for the year ended December 31, 2010: Predecessor, which relates to the period preceding the Acquisition (prior to December 3, 2010), and Successor, the period succeeding the Acquisition, respectively.

Accounts Receivable and Allowances

We maintain an allowance for doubtful accounts for estimated collection losses and adjustments. We estimate this allowance based on our knowledge and review of historical receivables, write-off trends and reserve trends, the financial condition of our customers and other pertinent information. If the financial condition of our customers deteriorates or an unfavorable trend in receivable collections is experienced in the future, additional allowances may be required.

Inventory

Inventories are a significant asset, representing 1615% of total assets at December 31, ~~2012~~2013. They are valued at the lower of cost or market, with our U.S. subsidiaries using the last-in, first-out (LIFO) method, which represents 7668% of consolidated inventories, and our ~~foreign~~international subsidiaries using the first-in, first-out (FIFO) method, which represents 2432% of consolidated inventories.

We regularly apply judgment in valuing our inventories by assessing the net realizable value of our inventories based on current expected selling prices, as well as factors such as obsolescence and excess stock. We provide write-downs as judged necessary. If we do not achieve our expectations of the net realizable value of our inventory, future losses may occur.

Property, Plant and Equipment

Prior to the date of the Acquisition on December 3, 2010, property, plant and equipment were carried at historical cost and depreciated using the straight-line method. At December 3, 2010, property, plant and equipment were adjusted to fair value based on the premise of continued use. Management, with assistance from an asset appraisal firm, estimated the fair value of equipment by determining new reproduction cost, utilizing the historical original cost of each equipment asset and adjusting cost to such date using industry trend factors and consumer price indices. Once new reproduction cost was established, considerations were made for depreciation, which reflected the estimated economic life of the asset, remaining economic useful life and used equipment trends. The average estimated lives utilized in calculating depreciation are as follows: buildings—25 years, and machinery and equipment—3 to 10 years. Property, plant and equipment recorded under capital leases are depreciated based on the lesser of the lease term or the underlying asset’s useful life. Impairment losses are recorded on long-lived assets when events and circumstances indicate the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. Land was valued based on comparable sales.

Intangible Assets

Goodwill and trademarks have indefinite lives, with the exception of trademarks obtained asin ~~part of~~ the ~~Robotronic~~2013 Oyand ~~acquisition in~~ 2012~~. Other~~ ~~intangibles~~acquisitions ~~assets,~~of ~~including~~Gas-Arc ~~intangibles~~and ~~obtained~~Robotronic asOy, ~~part~~respectively. ofOther ~~the~~intangibles ~~Robotronic~~assets ~~Oy acquisition,~~ are amortized on a straight-line basis over their estimated useful lives, which range from 83 to 20 years. See Note 7 – Intangible Assets.

For ~~both the Acquisition for the Successor and the acquisition of Robotronic Oy~~acquisitions, goodwill ~~was~~is calculated as of the date of the acquisition, measured as the excess of the consideration transferred over the ~~net~~fair ofvalue ~~the Acquisition date amounts~~ of the net identifiable assets (including intangible assets) acquired and the liabilities assumed.

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. The Company has determined that no impairment of goodwill or ~~intangibles~~trademarks existed at December 1, ~~2012 and 2011, respectively~~2013.

Unforeseen events and changes in circumstances and market conditions, including general economic and competitive conditions, could cause actual results to vary significantly from management’s estimates.

Revenue Recognition

We sell a majority of our products through distributors with standard terms of sale of FOB shipping point or FOB destination. Under all circumstances, revenue is recognized when persuasive evidence of an arrangement exists, the seller’s price is fixed and determinable, and collectability is reasonably assured.

We sponsor a number of annual incentive programs to augment distributor sales efforts including certain rebate programs and sales and market share growth incentive programs. Rebate programs established by the Company are communicated to distributors at the beginning of the year and are earned by qualifying distributors based on increases in purchases of identified product categories and based on relative market share of the Company’s products in the distributor’s service area. We accrue the estimated costs throughout the year and the costs associated with these sales programs are recorded as a reduction of revenue. Rebates are paid periodically during the year.

Terms of sale generally include 30-day payment terms, return provisions and standard warranties for which reserves, based upon estimated warranty liabilities from historical experience, are recorded. For a product that is returned due to issues outside the scope of the Company’s warranty agreements, restocking charges will generally be assessed.

Research and Development Costs

Research and development is conducted in connection with new product development with costs of approximately $4.65 million and $4.26 million in ~~2012~~2013 and ~~2011~~2012, respectively. The costs relate to materials used in the development process and allocated engineering personnel costs and are reflected in SG&A expenses as incurred.

Income Taxes

We establish provisions for taxes to take into account the effects of timing differences between financial and tax reporting. These differences relate primarily to the excess of the Acquisition accounting valuation over the tax basis of our primary operating subsidiary, net operating loss carryforwards, fixed assets, intangible assets and post-employment benefits.

We record a valuation allowance when, in our assessment, it is more likely than not that a portion or all of our deferred tax assets will not be realized. In making this assessment we consider the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income. At December 31, 2012, a valuation allowance has been recorded against a portion of our deferred tax assets which consist primarily of U.S. net operating loss carryovers. The amount of the deferred tax assets considered realizable could change in the future if our assessment of future taxable income or tax planning strategies changes.26

We record a valuation allowance when, in our assessment, it is more likely than not that a portion or all of our deferred tax assets will not be realized. In making this assessment we consider the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income. At December 31, 2013, a valuation allowance has been recorded against a portion of our deferred tax assets which consist primarily of U.S. net operating loss carryovers. The amount of the deferred tax assets considered realizable could change in the future if our assessment of future taxable income or tax planning strategies changes.

A substantial portion of the earnings of our foreign subsidiaries are included in our U.S. income tax return under I.R.C. Section 956. This requires the earnings of a foreign subsidiary which guarantees the borrowings of its U.S. parent to be included in U.S. income. Upon actual distribution of those earnings previously taxed under I.R.C. Section 956, we are not subject to U.S. income taxes but may be subject to withholding taxes payable in the foreign jurisdiction. See Note 14 – Income Taxes to the consolidated financial statements.

For the undistributed earnings of non-U.S. subsidiaries not subject to I.R.C. Section 956, no provision is made for U.S. income taxes. These earnings are permanently invested or otherwise indefinitely retained for continuing international operations. Determination of the amount of taxes that might be paid on these undistributed earnings is not practicable.

As of December 31, ~~2012~~2013, we had U. S. federal net operating loss carryforwards of approximately $~~113~~95.45 million from the years ~~2001~~2003 through 2010 available to offset future federal taxable income. Similarly, we had state net operating loss carryforwards to offset state taxable income in varying amounts. While such net operating loss carryforwards are subject to expiration and limitations as discussed under “Risk Factors—Risks Relating to Our Business—, future change of control transactions or other transactions could further limit our use of net operating loss carryforwards," we currently expect to utilize net operating loss carryforwards to offset a substantial portion of our federal and state taxable income over the next few years.

as discussed under “Risk Factors—Risks Relating to our Business—The acquisition transactions and future transactions could limit our use of net operating loss carryforwards,” we currently expect to utilize net operating loss carryforwards to offset a substantial portion of our federal and state taxable income over the next few years.

We are periodically audited by U.S. 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 we 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 impacted.

Factors That May Affect Future Results

For a discussion of factors that may affect future results see the “Risk Factors” section.

Recently Issued Accounting Standards

~~Intangible Assets.~~ In July ~~2012~~2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. ~~2012~~2013-0211, ~~Testing~~"Income ~~Indefinite-Lived~~Taxes ~~Intangible~~(Topic ~~Assets~~740)" ~~for~~("ASU ~~Impairment,~~2013-11"). ASU 2013-11 is intended to ~~permit~~clarify the presentation of an ~~entity~~unrecognized totax ~~make~~benefit when a ~~qualitative~~net ~~assessment~~operating ofloss ~~whether~~carryforward, ita issimilar ~~more~~tax ~~likely~~loss, ~~than~~or ~~not~~a ~~that~~tax credit carryforward exists. An unrecognized tax benefit, or a portion of an ~~indefinite-lived~~unrecognized ~~intangible~~tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset's ~~fair~~for ~~value~~a isnet ~~less~~operating ~~than~~loss ~~its~~carryforward, ~~carrying~~a ~~amount~~similar ~~before~~tax ~~applying~~loss, or a ~~quantitative~~tax ~~impairment~~credit ~~test~~carryforward, except in certain circumstances. ~~ASU~~To ~~2012-02~~the extent a carryforward is ~~intended~~not available at the reporting date or the tax law of the applicable jurisdiction does not require the entity to ~~simplify~~use, ~~how~~and anthe entity ~~tests~~does ~~for~~not ~~indefinite-lived~~intend ~~intangible~~to use, the deferred tax asset ~~impairment~~for ~~and~~such topurpose, ~~improve~~the ~~consistency~~unrecognized tax benefit should be presented in ~~impairment~~the ~~testing~~financial ~~guidance~~statements as a liability. ~~This~~ ~~standard~~ASU No. 2013-11 is effective ~~for~~prospectively ~~annual~~to ~~and~~all ~~interim~~unrecognized ~~impairment~~tax ~~tests~~benefits ~~performed~~that exists at the effective date for fiscal years beginning after ~~September~~December 15, ~~2012~~2013, with early adoption permitted. ~~For~~The ~~the~~adoption ~~indefinite-lived intangibles assets impairment performed as~~ of ~~December~~ASU 1,2013-11 ~~2012,~~is ~~the~~not ~~Company~~expected ~~opted~~ to ~~use~~have a ~~quantitative~~material ~~impairment~~impact ~~test~~on ~~instead of~~ the ~~qualitative~~Company's ~~assessment~~consolidated ~~alternative~~financial statements.

In February 2013, the FASB issued ASU No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." ASU 2013-02 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.

The Company has determined that all other recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Our primary financial market risks relate to fluctuations in commodity prices, currency exchange rates and interest rates.

Copper, brass and steel constitute a significant portion of our raw material costs. These commodities are subject to price fluctuations which we may not be able to recover and maintain historical margins depending upon competitive pricing conditions at the time. When feasible, we attempt to establish fixed price purchase commitments with suppliers to provide stability in our materials component costs for periods of three to six months. We have not experienced and do not anticipate constraints on the availability of these commodities.

Approximately 69% of total net sales are denominated in U.S. dollars. The balance of the remaining sales are conducted in foreign currencies consisting primarily of Australian dollars and Euros. Our exposure to foreign currency transactions is partially mitigated through our manufacturing locations in Australia, Italy and Malaysia for sales into those regions. However, we recently announced that we will be discontinuing manufacturing operations at our Australia facility during the first half of 2013. Additionally, we enter into forward foreign exchange rate contracts with two major commercial banks as counterparties for periods extending from four to six months principally to offset a portion of the currency fluctuations in transactions denominated in the Australian Dollar and the Euro. We also engage in forward foreign exchange rate contracts with respect to the Mexican Peso to limit foreign exchange risks relative to our Mexican manufacturing costs. However, our financial results could still be significantly affected by changes in foreign currency exchange rates in the foreign markets. We are most susceptible to a strengthening U.S. dollar, which would have a negative effect on our export sales and a negative effect on the translation of local currency financial statements into U.S. dollars, our reporting currency. 27

WeWhen ~~are~~feasible, ~~exposed~~we attempt to ~~changes~~establish infixed ~~interest~~price ~~rates~~purchase ~~through~~commitments ~~our~~with ~~Working~~suppliers ~~Capital~~to ~~Facility,~~provide ~~which~~stability ~~has~~in ~~LIBOR~~our ~~based~~materials ~~variable~~component ~~interest~~costs ~~rates. At~~for ~~December~~periods ~~31,~~of ~~2012,~~three ~~there~~to ~~were~~six ~~no outstanding borrowings under this Facility~~months. A We ~~hypothetical~~have ~~100~~not ~~basis~~experienced ~~point~~and ~~change~~do innot ~~LIBOR~~anticipate ~~would~~constraints ~~result~~on inthe aavailability ~~change in interest expense~~ of ~~approximately~~these ~~$10 thousand annually for each $1 million of outstanding indebtedness under the Facility~~commodities.

35Approximately 72% of total net sales are denominated in U.S. dollars. The balance of the remaining sales are conducted in foreign currencies consisting primarily of Australian dollars and Euros. Our exposure to foreign currency transactions is partially mitigated through our manufacturing locations in Australia, Italy and Malaysia for sales into those regions. However, we recently sold our manufacturing facility in Australia and discontinued the operations. Additionally, we enter into forward foreign exchange rate contracts with two major commercial banks as counterparties for periods extending from four to six months principally to offset a portion of the currency fluctuations in transactions denominated in the Australian Dollar and the Euro. We also engage in forward foreign exchange rate contracts with respect to the Mexican Peso to limit foreign exchange risks relative to our Mexican manufacturing costs. However, our financial results could still be significantly affected by changes in foreign currency exchange rates in the international markets. We are most susceptible to a strengthening U.S. dollar, which would have a negative effect on our export sales and a negative effect on the translation of local currency financial statements into U.S. dollars, our reporting currency.

We are exposed to changes in interest rates through our Working Capital Facility, which has LIBOR based variable interest rates. At December 31, 2013, borrowings outstanding under this Facility were $22.3 million. A hypothetical 100 basis point change in LIBOR would result in a change in interest expense of approximately $10 thousand annually for each $1 million of outstanding indebtedness under the Facility.

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 in Item 15 of this Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

The Company's management maintains disclosure controls and procedures that are designed to provide reasonable assurances that information required to be disclosed in the reports we file or submit, or otherwise would be required to file or submit, under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. These controls and procedures are also designed to ensure that such information is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating disclosure controls and procedures, we have recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective. Management is required to apply judgment in evaluating its controls and procedures.

Under the supervision of and with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of December 31, ~~2012~~2013. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, ~~2012~~2013.

(b) Management’s Assessment of Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, the Company conducted an evaluation of the effectiveness of internal control over financial reporting as of December 31, ~~2012~~2013 based on the ~~framework~~1992 Framework in “Internal Control — Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on the Company’s evaluation under such framework, management concluded that the Company’s internal control over financial reporting was effective as of December 31, ~~2012~~2013.

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm ~~pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.~~

pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report on Form 10-K.

There have been no changes in the Company’s internal control over financial reporting that occurred during the fourth quarter of ~~2012~~2013 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information

None.

3629

PART III

Item 10. Directors, Executive Officers and Corporate Governance

Executive Officers and Directors

The following table sets forth information with respect to the individuals who are currently serving as the members of our Board of Directors (the “Board of Directors” or the “Board”) as well as information relating to our executive officers:

Name	Age	Position(s)
Michael A. McLain	6263	Chairman and Director
Martin Quinn	5657	Chief Executive Officer and Director
Jeff Ertel	50	Executive Vice President – Human Resources
Jeffrey S. Kulka	57	Executive Vice President and Chief Financial Officer
Jeffrey S. Kulka	56	Executive Vice President and Chief Financial Officer
Terry A. Moody	51	Executive Vice President – Global Operations
Terry A. Moody	49	Executive Vice President – Global Operations
Jeff J. Ertel	51	Executive Vice President – Human Resources
E. Lee Qualls	5153	Executive Vice President and Chief Marketing Officer
Nick H. Varsam	5152	Senior Vice President, General Counsel and Corporate Secretary
James O. Egan	6465	Director
Douglas R. Korn	5051	Director
C. Thomas O’Grady	61	Director
Eric K. Schwalm	54	Director
Eric K. Schwalm	53	Director

Set forth below is biographical information regarding our directors and executive officers:

Michael A. McLain became a director and Chairman of the Board immediately upon completion of the Merger on December 3, 2010. In March 2012, Mr. McLain was appointed as a Senior Advisor for IPC’s industrial practice. He has been an advisor to IPC since October 2008 and has had extensive experience working with private equity-backed companies. Mr. McLain was formerly President, Chief Executive Officer and Director of Aearo Technologies Inc., a leading industrial and consumer safety company, from 1998 through April 2008 when Aearo was purchased by 3M Corporation. IPC was the primary shareholder of Aearo Technologies from 2004 to 2006. Prior to this he served as President and Chief Executive Officer of DowBrands, Inc., a large manufacturer of household consumer products that was sold to S. C. Johnson and Son, Inc. in 1998. He is currently a ~~director~~Chairman of Chromalox, Inc. and a Director of PlayCore Holdings, Inc., which are IPC portfolio companies, as well as Timex Corporation ~~and Porex Corporation~~. Mr. McLain’s extensive experience in the industrial products and consumer products industries, together with his previous experience with IPC portfolio companies, make him a valuable member of the Board of Directors in providing strategic and operational counsel to management as well as critical guidance on working collaboratively with our principal stockholder to grow the value of our business and enhance our products’ brand strength and technologies.

Martin Quinn has been with us for over 2829 years, since joining a predecessor company in 1984. He was appointed President in August 2009, Chief Executive Officer in April 2011 and became one of our directors immediately upon completion of the Merger on December 3, 2010. From April 2005 to August 2009, he served as our Executive Vice President of Global Sales. From 1999 to March 2005, Mr. Quinn served as Vice President Marketing and Sales—Asia Pacific. Prior to that, he was Managing Director—Asia. He was previously employed by Newsteel Pty. Ltd and Readymix Concrete Pty Ltd. He currently serves on the finance committee of the American Welding Society. Mr. Quinn’s in-depth knowledge of all elements of our business, developed over his more than 2829 years’ experience in every aspect of managing the Company, from running manufacturing facilities to building businesses from scratch in Asia, and leadership of the Company bring the knowledge and successful hands-on experience critical to helping the Board of Directors establish and oversee the execution of the Company’s strategic business plans and priorities.

Jeff Ertel joined us in August 2012 as Executive Vice President - Human Resources. During 2011 and 2012, Mr. Ertel was Vice President Human Resources for Treasury Winery Estates, a $2 billion global winery, overseeing human resources in the Americas. From 1998 until 2011, Mr. Ertel served as Vice President of Human Resources of Nestlé USA, where, as the leader of human resources for Nestle's largest division, he established organization development and human capital strategies, was part of multiple acquisition integrations, and managed internal communications. Prior to his promotion to that position, over a 10-year period he held multiple roles in marketing, sales and purchasing for Nestlé. Prior to Nestlé, Mr. Ertel was in sales at Gallo Wines and Hershey Chocolate.

Jeffrey S. Kulka joined us in October 2011 as Executive Vice President and Chief Financial Officer. Mr. Kulka most recently served as Senior Vice President and Chief Financial Officer of Harlan Laboratories, Inc., a private equity backed, $400 million global provider of preclinical research tools and services to the pharmaceutical, biotechnology, agrochemical, industrial chemical and food industries. Prior to joining Harlan in 2009, Mr. Kulka served as Senior Vice President, Chief Financial Officer and Treasurer of Aearo Technologies Inc., until it was acquired by 3M in 2008. Prior to joining Aearo, Mr. Kulka spent 10 years with Augat Inc., a global designer and manufacturer of electromechanical components for the electronics industry, in a variety of assignments in domestic and international settings.

Terry A. Moody joined us in July 2007 as Executive Vice President - Global Operations. He was formerly employed for over two years by Videocon Industries, a privately held manufacturer of high end digital products, where he served as the Chief Operating Officer and Senior Vice President of Americas and Europe. Prior to Videocon, he was employed for 11 years with Thomson S.A., the French consumer electronics company, where he served the last three years of his employment as General Manager and Vice ~~President of Americas Displays.~~

E. Lee Qualls joined us as Executive Vice President and Chief Marketing Officer in July 2012. From July 2007 to April 2012, Mr Qualls was with Exide Technologies, one of the world's largest producers and recyclers of lead-acid batteries with operations in more than 80 countries. In his most recent position with Exide, he served as Vice President of Marketing and Application Engineering and was responsible for Exide's transportation and industrial businesses in the Americas. Prior to joining Exide Technologies, he served as Vice President of Global Brand Strategy for Shell Lubricants. He began his marketing career in consumer products with The Coca Cola Company where he held positions of increasing responsibility domestically and internationally.30

~~Nick H. Varsam joined us in July 2009 as Vice~~ President, ~~General~~of ~~Counsel~~Americas ~~and Corporate Secretary~~Displays. ~~He has been an attorney specializing in securities transactions and compliance, mergers and acquisitions and corporate governance for over 20 years.~~ Prior to ~~joining us~~Thomson, ~~he was a partner with the St~~Mr. ~~Louis-based~~ ~~law~~Moody ~~firms~~spent ~~Armstrong~~10 ~~Teasdale~~years ~~LLP~~with ~~from January 2007 to February 2009 and Blackwell Sanders LLP from July 2006 to December 2006~~N. ~~From 2001 to 2005, he was Vice President, General Counsel and Secretary of Huttig Building Products, Inc~~V., aPhilips ~~publicly~~in ~~traded~~their ~~distributor~~consumer ofelectronics ~~residential~~division ~~building~~where ~~products. Prior to joining Huttig,~~ he ~~was~~completed amany ~~partner~~domestic ~~with~~and ~~the~~international ~~law~~program ~~firm Bryan Cave LLP~~assignments.

~~James~~Jeff O.Ertel ~~Egan~~joined ~~was~~us ~~appointed~~in toAugust ~~our~~2012 ~~Board of Directors and~~ as ~~Chairman~~Executive ofVice ~~our~~President ~~Audit~~- ~~Committee~~Human ~~in March 2011~~Resources. ~~Mr. Egan~~During ~~served~~2011 asand ~~a Managing Director of Investcorp International~~2012, ~~Inc~~Mr., anErtel ~~alternative~~was ~~asset~~Vice ~~management~~President ~~firm~~Human ~~specializing~~Resources infor ~~private~~Treasury ~~equity~~Winery Estates, ~~hedge~~a ~~fund~~$2 ~~offerings~~billion ~~and~~global ~~real~~winery, ~~estate~~overseeing ~~and~~human ~~technology~~resources ~~investments,~~in ~~from~~the ~~1998 through 2008~~Americas. ~~Mr. Egan~~From ~~was~~1998 ~~the~~until ~~partner-in-charge~~2011, ~~M&A Practice, U~~Mr.~~S. Northeast~~ ~~Region~~Ertel ~~for KPMG LLP from 1997 to 1998 and~~ served as ~~the Senior~~ Vice President ~~and~~of ~~Chief~~Human ~~Financial~~Resources ~~Officer~~ of ~~Riverwood~~Nestlé ~~International~~USA, ~~Inc.~~where, ~~from 1996 to 1997. Mr. Egan began his career with PricewaterhouseCoopers (formerly Coopers & Lybrand) in 1971 and served~~ as ~~partner from 1982 to 1996 and a member of~~ the ~~Board~~leader of ~~Partners~~human ~~from~~resources ~~1995~~for toNestle ~~1996. He~~USA's ~~currently~~largest ~~serves as a director of PHH Corporation~~division, ~~where~~ he isestablished ~~non-executive~~organization ~~chairman~~development ~~of the board~~ and ~~chairman~~human ofcapital ~~the audit committee~~strategies, ~~and~~was ~~New~~part ~~York & Company, Inc., where he also serves as a member~~ of ~~the audit committee.~~ Hemultiple ~~also~~acquisition ~~currently~~integrations, ~~serves as a director~~ and ~~the~~managed internal ~~chair of the audit committee of Dots, LLC, an IPC portfolio company~~communications. ~~Mr. Egan’s~~Prior ~~more~~to ~~than~~his 40promotion ~~years~~to ofthat ~~business experience across numerous industries and public and private companies~~position, ~~including~~over ~~25 years~~a ~~of public accounting experience and~~ 10-year ~~years~~period ofhe ~~private~~held ~~equity~~multiple ~~experience~~roles ~~and~~in ~~service~~marketing, onsales ~~the Board of Directors~~ and ~~board~~purchasing ~~committees~~for ofNestlé. Prior ~~other~~to ~~public and private companies~~Nestlé, ~~bring~~Mr. toErtel ~~the~~was ~~Board~~in ofsales ~~Directors~~at aGallo ~~wide~~Wines ~~range of strategic, operational, financial~~ and ~~governance~~Hershey ~~qualifications and skills to contribute as a director~~Chocolate.

E. Lee Qualls joined us as Executive Vice President and Chief Marketing Officer in July 2012. From July 2007 to April 2012, Mr. Qualls was with Exide Technologies, one of the world's largest producers and recyclers of lead-acid batteries with operations in more than 80 countries. In his most recent position with Exide, he served as Vice President of Marketing and Application Engineering for Exide's transportation and industrial businesses in the Americas. Prior to joining Exide Technologies, he served as Vice President of Global Brand Strategy for Shell Lubricants. He began his marketing career in consumer products with The Coca-Cola Company where he held positions of increasing responsibility domestically and internationally.

Nick H. Varsam joined us in July 2009 as Vice President, General Counsel and Corporate Secretary and became Senior Vice President in April 2013. Prior to joining the Company, he was an attorney specializing in securities transactions and compliance, mergers and acquisitions, and corporate governance for over 20 years. He was a partner with the St. Louis-based law firms Armstrong Teasdale LLP from January 2007 to February 2009 and Blackwell Sanders LLP from July 2006 to December 2006. From 2001 to 2005, he was Vice President, General Counsel and Secretary of Huttig Building Products, Inc., a publicly traded distributor of residential building products. Prior to joining Huttig, he was a partner with the law firm Bryan Cave LLP.

James O. Egan was appointed to our Board of Directors and as Chairman of our Audit Committee in March 2011. Mr. Egan served as a Managing Director of Investcorp International, Inc., an alternative asset management firm specializing in private equity, hedge fund offerings and real estate and technology investments, from 1998 through 2008. Mr. Egan was the partner-in-charge, M&A Practice, U.S. Northeast Region for KPMG LLP from 1997 to 1998 and served as the Senior Vice President and Chief Financial Officer of Riverwood International, Inc. from 1996 to 1997. Mr. Egan began his career with PricewaterhouseCoopers (formerly Coopers & Lybrand) in 1971 and served as partner from 1982 to 1996 and a member of the Board of Partners from 1995 to 1996. He currently serves as a director of PHH Corporation, where he is non-executive chairman of the board and member of the compensation committee, and New York & Company, Inc., where he serves as chairman of the audit committee. Mr. Egan’s more than 40 years of business experience across numerous industries and public and private companies, including 25 years of public accounting experience and 10 years of private equity experience and service on the Board of Directors and board committees of other public and private companies, bring to the Board of Directors a wide range of strategic, operational, financial and governance qualifications and skills to contribute as a director.

Douglas R. Korn became one of our directors immediately upon completion of the Merger on December 3, 2010. Mr. Korn is a Senior Managing Director of IPC, a position he has held since 2008. His areas of investment focus include general industrial businesses and consumer products. From 1999 to 2008, he was a Senior Managing Director of Bear, Stearns & Co. Inc. and a Partner and Executive Vice President of Bear Stearns Merchant Banking, an affiliate of Bear, Stearns & Co. Inc. and the predecessor to IPC. Prior to joining Bear Stearns in January 1999, he was a Managing Director of Eos Partners, L.P., an investment partnership. He has previously worked in private equity with Blackstone Group and in investment banking with Morgan Stanley. He currently serves on the Board of Directors of Chromalox, Inc., CH4 Energy II, LLC and Ironshore, Inc. and is Chairman of the Board of Directors of PlayCore Holdings, Inc., all of which companies are privately held. As a result of these roles and other professional experiences, Mr. Korn possesses particular knowledge and experience in business strategy and corporate oversight, finance and capital structure and design and oversight of management compensation plans, each of which strengthens the Board’s collective qualifications, skills and experience.

C. Thomas O’Grady was appointed to our Board of Directors in May 2011. From 2005 until his retirement in February 2012, Mr. O’Grady served as Senior Vice President, Business Development of Cooper Industries plc. He joined Cooper from Roper Industries, where he served as Vice President, Mergers and Acquisitions, since 2001. Previously, Mr. O’Grady worked for FMC Corporation as Corporate Director of Acquisitions. Mr. O’Grady’s extensive experience in corporate development, including mergers and acquisitions, brings to the Board of Directors the critical insight needed to develop and execute an acquisition growth strategy and identify and evaluate new market opportunities.

Eric K. Schwalm was appointed to our Board of Directors in May 2011. Mr. Schwalm is Vice President and a director and partner of Bain & Company. He joined Bain in 1987 and was promoted to partner in 1993. Mr. Schwalm leads the North American Industrial Practice Group and is an active member of the Consumer Products and Organizational Effectiveness Practice Groups of Bain. Prior to joining Bain, Mr. Schwalm worked in business planning for Ford Motor Company and at Dravo Engineering Company. Mr. Schwalm brings to the Board many years of experience in the development of global industrial end markets and product platforms, and with global organizational development and management systems, which enhances the Board’s strategic oversight capabilities and effectiveness.

The Board of Directors and Committees of the Board

Our Board of Directors is composed of ~~six~~five directors. Each director serves for an annual term and until his successor is elected and qualified. As a result of Irving Place Capital’s control of our parent company, Irving Place Capital has the ability to designate all of our directors and to remove any or all of our directors that it appoints.

Although not formally considered by our Board because our securities are not registered or traded on any national securities exchange, we believe that three of our directors, Mr. Egan, Mr. O’Grady, and Mr. Schwalm, would be considered “independent” for either Board or Audit or Compensation Committee purposes based upon the listing standards of NASDAQ, the exchange on which our common stock was listed prior to the Merger. We believe our other three directors would not be considered independent because of their relationships with affiliates of Irving Place Capital, which own approximately 98.6% of our outstanding common stock on a fully diluted basis, and employment and other relationships with us, all as described more fully under Item 13 (“Certain Relationships and Related Party Transactions”) of this Annual Report on Form 10-K. Our Board has considered that there are no transactions, relationships or arrangements between the Company and Mr. Egan, Mr. O’Grady or Mr. Schwalm and affirmatively determined that Mr. Egan meets the heightened criteria for independence applicable to members of audit committees under SEC rules and NASDAQ listing standards.31

Although not formally considered by our Board because our securities are not registered or traded on any national securities exchange, we believe that two of our directors, Mr. Egan and Mr. Schwalm, would be considered “independent” for either Board or Audit or Compensation Committee purposes based upon the listing standards of NASDAQ, the exchange on which our common stock was listed prior to the Merger. We believe our other three directors would not be considered independent because of their relationships with affiliates of Irving Place Capital, which hold 84.1% of the outstanding common stock on a fully diluted basis of Holdings, and employment and other relationships with us, all as described more fully under Item 13 (“Certain Relationships and Related Party Transactions”) of this Annual Report on Form 10-K. Our Board has considered that there are no transactions, relationships or arrangements between the Company and Mr. Egan or Mr. Schwalm and affirmatively determined that Mr. Egan meets the heightened criteria for independence applicable to members of audit committees under SEC rules and NASDAQ listing standards.

Since April 25, 2012, when a former director of the Company and member of the Audit Committee resigned, Mr. Egan has served as the sole member and Chairman of the Audit Committee. The Board of Directors has determined that Mr. Egan qualifies as an “audit committee financial expert” as defined under SEC rules. We also have a Compensation Committee whose sole member and Chairman is Douglas R. Korn. We do not have a Nominating and Corporate Governance Committee. Mr. Korn, along with Michael A. McLain and Martin Quinn, are not considered independent.

Code of Ethics

The Company has adopted a code of ethics applicable to certain members of Company management, including its principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions. The code of ethics is available on the Company’s website at www.victortechnologies.com. The Company will provide to any person without charge, upon request, a copy of the code of ethics. A request for the code of ethics should be made by writing to the Company’s Secretary, c/o Victor Technologies Group, Inc., 16052 Swingley Ridge Road, Suite 300, Chesterfield, Missouri 63017. The Company intends to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding the amendment to, or a waiver from, a provision of this code of ethics by posting such information on its website at www.victortechnologies.com.

Audit Committee Report

The information contained in this report shall not be deemed to be “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference in such filing.

Management is responsible for internal control over financial reporting, the financial reporting process and compliance with laws and regulations. Our independent registered public accounting firm is responsible for performing an independent audit of our consolidated financial statements in accordance with standards of the Public Company Accounting Oversight Board (United States) and issuing reports thereon. The Audit Committee’s responsibility is to monitor and oversee this process. Each fiscal year, the Audit Committee devotes the attention it deems necessary and appropriate to each of the matters assigned to it under its charter. The Audit Committee’s duties and responsibilities do not include conducting audits or accounting reviews. Therefore, the Audit Committee has relied on management’s representation that the financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States and on the representations of the independent registered public accountants, which are included in its report on the consolidated financial statements. The Audit Committee’s oversight does not provide it with an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or policies, or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations.

39In connection with the preparation of the Company’s consolidated financial statements for the year ended December 31, 2013, the Audit Committee:

In connection with the preparation of the Company’s consolidated financial statements for the year ended December 31, 2012, the Audit Committee:


•	Reviewed and discussed the Company’s audited consolidated financial statements with management;


•	Discussed with the Company’s independent registered public accounting firm, KPMG LLP, the matters required to be discussed by Statement on Auditing Standards (“SAS”) No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T; and


•	Received the written disclosures and the letter from KPMG LLP required by the applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP’s communications with the Audit Committee concerning independence, and has discussed with KPMG LLP their independence.

Based upon these reviews and discussions, the Audit Committee recommended to the Board of Directors that the Company’s audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2012~~2013, for filing with the Securities and Exchange Commission.

Audit Committee of the Board of Directors

James O. Egan (Chair and Sole Member)

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Item 11. Executive Compensation

Compensation Discussion and Analysis

Introduction

The following Compensation Discussion and Analysis describes our executive compensation program for ~~2012~~2013 and, where we indicate specifically, certain elements of our ~~2013~~2014 program. The Compensation Committee of the Board of Directors, which for purposes of this discussion we refer to as the “Committee,” is responsible for administering, establishing and recommending to the Board of Directors the total compensation package of the named executive officers. Our “named executive officers” for ~~2012~~2013 include Messrs. Quinn, Kulka, Moody, ~~Qualls~~Ertel and ~~Varsam~~Qualls.

Philosophy and Goals of Executive Compensation Program

We recognize that our ability to grow profitably and exceed our customers’ expectations depends on the integrity, knowledge, skill, creativity and work ethic of our employees, and these are core values on which we place the highest value. To that end, we strive to create a work environment that rewards results and commitment, provides meaningful work and advancement opportunities to our employees, and takes into account the changing demands and challenges that our employees face during uncertain economic times.

The primary purposes of the total compensation package we provide to our named executive officers are (i) to attract, retain and motivate highly talented individuals to achieve business success without compromising our core values in a highly competitive marketplace and (ii) to establish a strong link between pay and performance at both the Company and the individual level. Particularly during a time of economic challenges, we believe that hiring and retaining executives with the skill and knowledge necessary to meet the demands that we face is especially important. Because such talent is critical to our future, we must be competitive in attracting and retaining our key executives. As a private company, our compensation decisions with respect to our named executive officers are also based on the goal of achieving performance at levels necessary to provide meaningful returns to the primary stockholder of our parent, Victor Technologies Holdings, Inc. ("Holdings").

The Committee believes our executive compensation program is designed to provide competitive opportunities to our executives, as well as motivate them to achieve the performance goals that our Board of Directors establishes as part of our annual business plan and the strategic initiatives under our long-term strategic plan. We strive to align our compensation program with our business and strategic plans so that we may accomplish the following additional objectives:

• support our position as an industry leader in the cutting, gas control and specialty welding industry;


•	motivate and inspire employee behavior that creates a culture of top performance and exceeding customer expectations;


•	achieve our operational and strategic business initiatives; and


•	increase stockholder value.

With these goals in mind, we measure the success of our compensation program by:


•	the Company’s overall business performance, including whether we achieve or surpass our business performance goals;


•	the level of active engagement and initiative of our employees;


•	the retention and, as the circumstances merit, addition of key employees who are best positioned to help us achieve our business success; and


•	our ability to generate greater rewards commensurate with greater individual contributions toward both short-term and long-term performance.

Elements of Executive Compensation Program

For ~~2012~~2013, the key elements are base salary, annual cash incentive awards and one-time grants of options to purchase common stock of our parent company, Victor Technologies Holdings, Inc.

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Compensation Element		Key Features
Base salary		Rewards short-term performance by providing fixed amount of compensation for performance of day-to-day executive responsibilities commensurate with level of experience and respective executive position; set at a level that is competitive with external opportunities — but not necessarily based on market or peer group benchmarks or midpoints — and adjusted based on consideration of individual performance, internal pay equity, changes in the ~~executive’s~~executives' role or the nature and scope of his or her responsibilities, and approved increases in compensation across the organization as contemplated in the Company’'s annual business plan.
Annual cash incentive award		Rewards short-term performance by providing short-term, incentive-based cash payment for achieving financial targets and other business objectives established at start of each year.
Long-term incentive award		Designed to reward long-term performance, build executive stock ownership and retain executives. Long-term incentives are designed primarily as one-time grants of stock options that vest over time and have increasing exercise prices to incentivize employees to increase stockholder value.
Other compensation		Perquisites and matching contributions to the 401(k) plan.

We have designed our executive compensation program and practices so as not to encourage unnecessary or excessive risk-taking. Specifically, we believe that our executive compensation program reflects an appropriate mix of compensation elements and carefully balances current and long-term performance objectives, cash and equity compensation, and risks and rewards associated with executive responsibilities. The following features of our incentive-based compensation program illustrate this point:


•	our performance goals and objectives and their associated performance periods reflect a balanced mix of performance measures designed to avoid excessive weight on a certain goal or performance measure or incentives for excessive risk taking;


•	our annual incentives provide a defined range of payout opportunities based on percentages of target payouts and do not rely on a single performance metric;

• equity incentive awards are granted in the form of stock options, primarily as one-time grants and in certain limited circumstances, such as a significant increase in responsibilities, as additional compensation with escalating exercise prices and five-year vesting terms, which means that executives have continuing incentives to increase stockholder value and that their awards could decrease significantly in value if our business is not managed successfully for the long term; and


•	the Committee retains discretion to adjust compensation based on the quality of Company and individual performance, execution of the Company’s strategic initiatives and adherence to the Company’s Code of Conduct, Code of Ethics and other key policies, among other considerations.

Based on the above combination of program features, we believe that our incentive-based compensation motivates our executives to manage the Company in a manner that does not involve taking risks that are inconsistent with the Company’s best interests.

Base Salary

The base salary for each named executive officer is intended to reflect the external market value of his particular position and responsibilities, adjusted as appropriate to reflect his individual experience, qualifications and contributions, our economic and business environment, and the level of base salary as a percentage of total target and actual compensation. In the past, the Committee generally targeted base salaries at the median base salary level (50th percentile) of the market data it obtained with the assistance of an executive compensation consultant. However, in ~~2011~~2013, 2012 and ~~2012~~2011, the Committee did not believe it was appropriate to establish compensation levels solely or primarily based on benchmarking and instead placed greater emphasis on other factors, particularly the Company’s annual budget and long-term business projections, ~~compensation received in connection with the Merger~~ and the CEO’s recommendations (except with respect to the CEO’s own base salary), in determining base salary adjustments. The CEO did not have the authority to determine the other named executive officers’ compensation. However, the Committee gave significant weight to his recommendations, along with the other factors mentioned above, to assist in determining the compensation of the named executive officers, other than the CEO. ~~While~~The ~~the~~ CEO’s base salary and other elements of compensation were subject to a separate evaluation and decision by the Board of Directors~~, the Committee also considered the CEO’s recommendations as to his own base salary adjustment~~.

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Annual Cash Incentive Awards

The Committee believes that, to meet the objectives of the executive compensation program, a significant portion of the total compensation of the named executive officers should be tied to the achievement of established performance goals for the Company and the individual officer. The Committee uses annual cash incentive awards as a component of compensation to encourage effective performance relative to the Company’s annual business plan priorities and to the overall financial performance of the Company.

The annual performance-based incentive compensation component is offered through the Annual Incentive Plan, in which ~~all~~most salaried employees, including the named executive officers, are eligible to participate. The plan provides our executive officers and other salaried employees an opportunity to earn annual cash awards based on the Company’s financial performance and the employees’ achievement of individual goals. Our named executive officers can earn incentive awards that are based on a percentage of base salary, with the percentage for each officer set at a level the Committee has determined is consistent with his level of accountability and impact on the Company’s operations and with the officer’s employment agreement. At the beginning of each year and after the Board of Directors has approved the Company's annual budget, the Committee establishes the levels of awards and the associated performance goals under the plan. During the first quarter of the following year, the Committee determines whether the goals were met for the recently completed fiscal year, and approves or recommends to the Board for approval the annual incentive awards for the performance year.

For purposes of determining bonus pool funding and allocation of bonus pool funds under the Annual Incentive Plan, in ~~2011~~2013, 2012 and ~~2012~~2011, the Committee established minimum, target and maximum levels of Adjusted EBITDA, based in part on the budget approved by the Board of Directors for the respective year and also on recommendations of the CEO. The Committee believes that Adjusted EBITDA represents an effective and appropriate measure of the Company’s operational and financial performance that best aligns with the Company’s annual budget and long-term strategy and offers an effective, understandable incentive for employees under the plan. “Adjusted EBITDA” is defined as net income (loss) plus interest, net, income tax provision (benefit) and depreciation and amortization, further adjusted to eliminate the expense (income) of certain other noteworthy events that we do not consider to relate to the operating performance of the period presented. These adjustments include, but are not limited to, LIFO adjustments, restructuring and other severance expenses, management fees paid to our sponsor, non-cash stock compensation expense, one-time expenses associated with the Company's name change, due diligence costs related to acquisitions, idle facilities costs in conjunction with restructuring activities, a reserve taken in connection with non-recurring litigation matters, and adjustments designed to present the actual financial performance on a constant currency basis with that of the annual performance target.

EBITDA and Adjusted EBITDA as used for purposes of the Annual Incentive Plan are not necessarily the same as "EBITDA" or "Adjusted EBITDA" as reported in our public disclosures of financial results. All of such measures (together, our “EBITDA Measures”) are supplemental measures of our performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). They are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, income from continuing operations or any other performance measures derived in accordance with GAAP or as alternatives to cash flow from operating activities as measures of our liquidity. While our EBITDA Measures may not be comparable to similarly titled measures of other companies, these measures are frequently used by securities analysts, investors and other interested parties as measures of financial performance and to compare our performance with the performance of other companies that report EBITDA and Adjusted EBITDA. Adjusted EBITDA, as defined for purposes of the Annual Incentive Plan, reflects management measurements, which focus on operating spending levels and efficiencies; and focus less on non-cash and certain periodic noteworthy items. For these reasons, the Committee believes that Adjusted EBITDA is a measure of our financial performance that more effectively incentivizes our employees for purposes of our annual incentive compensation program.

Historically, there have been no material differences in the Company’s annual incentive award goals among the individual named executive officers. Each named executive officer, along with all other members of our management team, had ~~pre-determined~~predetermined annual incentive plan target bonuses and was eligible for a target bonus opportunity based on a percentage of the officer’s base salary. As in ~~2011~~prior years, the Board of Directors, with input from the Committee, determined that the level of achievement of the target bonus opportunities for all of the named executive officers in ~~2012~~2013 would be based on the same critical business performance goals, in addition to the Adjusted EBITDA targets, established in connection with the annual business plan for ~~2012~~2013. See “— Executive Compensation for 2012 — Annual Cash Incentive Awards — Decisions and Analysis.”

Long-Term Incentive Awards

In December 2010, Holdings adopted its 2010 Equity Incentive Plan and granted to the named executive officers, along with other key management employees, options (subject to certain vesting requirements) to purchase shares of Holdings common stock on terms and conditions as further set forth in their option award agreements and the 2010 Equity Incentive Plan. See “— Holdings 2010 Equity Incentive Plan” below. In ~~2010~~2012 and ~~also~~2011, with respect to certain officers, inthe ~~2011~~Board ~~and~~of ~~2012~~Directors of Holdings, whose sole asset is 100% of the outstanding capital stock of the Company, granted each of the named executive officers, along with other key management employees, options to purchase shares of common stock as long-term incentive awards and offered each of these

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~~Board of Directors of Holdings, whose sole asset is 100% of the outstanding capital stock of the Company, granted each of the named executive officers, along with other key management~~ employees, ~~options to purchase shares of common stock as long-term incentive awards and offered each of these employees~~ the opportunity to invest in the equity of Holdings to align their interests with Holdings’ stockholders. We currently consider these primarily as one-time option grants. There are no current plans for approving long-term equity grants to our named executive officers or other employees on an annual basis. See “— Long-Term Incentive Awards.”

Other Compensation

Perquisites. Historically, we have provided limited perquisites to our named executive officers. During ~~2012~~2013, the only perquisites we provided to named executive officers was a car allowance in the amount of $6,000 for Mr. Quinn.

Company Contributions to 401(k) Plan. Substantially all of our U.S. employees are eligible to participate in the Victor Technologies 401(k) Retirement Plan (the “401(k) Plan”), and we consider this to be a basic benefit. In the past, the Company has made discretionary cash contributions to the 401(k) Plan matching a percentage of the participating employee’s eligible compensation. Matching contributions are subject to service-based vesting requirements. In ~~2012~~2013, the Company provided a matching contribution of 50% of the employee’s contribution (not to exceed 3.0% of eligible compensation).

Key Considerations and Process in Reaching Executive Compensation Decisions

With the objectives and goals referenced above in mind, the Committee considered a number of factors and followed certain processes and policies when determining the key elements of executive compensation each year, as we discuss below.

Analytic Tools and Other Compensation-Related Factors

Use of Market Survey and Peer Group Data. When making compensation decisions, the Committee also considered the compensation of our chief executive officer and the other named executive officers relative to the compensation paid to similarly situated executives at companies that we considered a representative peer group. The Committee was aware of the potential flaws and biases of benchmarking and the use of survey data as an analytic tool in setting compensation for our named executive officers. However, while the Committee did not establish compensation levels solely or primarily based on benchmarking, it believed that information regarding pay practices and levels of compensation at other comparable companies was useful in two respects. First, it recognized that our total compensation package must be competitive in the marketplace to attract and retain our executive officers. Second, it considered this information a useful point of reference to assess the reasonableness of our compensation programs and decisions.

In ~~2011 and 2012~~2013, the Committee did not retain an external compensation consultant to assist with the executive compensation program and, except in connection with the appointment of Mr. Quinn as the chief executive officer in April 2011, ~~as discussed in last year's Annual Report on Form 10-K,~~ did not obtain or consider data from any group of companies comprising a representative “peer group.”

~~The~~Internal ~~Committee~~Equity. Internal ~~considered~~equity ~~market~~deals ~~survey~~with ~~data~~the inperceived ~~establishing~~worth ~~target~~of ~~compensation~~a ~~levels~~job ~~for~~relative to other jobs within the Company. For the purpose of determining base salaries, ~~annual~~the ~~incentive~~Company ~~compensation~~has ~~and~~placed ~~long-term~~a ~~incentive~~“worth” ~~compensation~~or “value” on jobs in relation to other jobs through a series of ~~our~~numeric ~~senior~~grades ~~management~~that ~~employees,~~have ~~including~~been ~~our~~created ~~named~~within ~~executive~~the ~~officers~~Company. ~~For~~The ~~2012~~CEO ~~compensation~~has ~~decisions~~a target bonus opportunity, ~~the~~as ~~Company’s~~a ~~human~~percentage ~~resources~~of ~~department~~his ~~provided~~base tosalary, ~~the~~of ~~Committee~~60%, ~~for~~as ~~its~~specified ~~review~~in ~~market~~his ~~data~~employment ~~across~~agreement. aThe ~~large~~other ~~number~~named executive officers have a title of ~~general~~executive ~~industrial~~vice president and, ~~manufacturing~~for ~~companies~~2013, ~~from~~had ~~the~~a ~~following~~target ~~compensation~~bonus ~~surveys:~~opportunity of 40% of base salary.

•Compensation ~~Towers~~Planning ~~Watson~~Work ~~Executive~~Sheets. In ~~Compensation~~2013, ~~Database~~the Committee did not use compensation planning work sheets, ~~comprised~~or “tally sheets,” to assist in the evaluation of ~~general~~the ~~industry~~compensation ~~data~~of ~~from~~the ~~435~~named ~~companies;~~executive ~~and~~officers.

• Mercer Executive Compensation Survey, comprised of durable goods manufacturing industry data from 345 companies.

The Committee used this data as the basis for comparing the Company’s compensation for the CEO and the other named executive officers against general market trends in light of the performance of the Company and the manufacturing industry in general. The Committee assessed comparative data on a position by position basis and took into account the relative responsibilities and level of experience of each named executive officer. The Committee also considered whether a particular executive officer’s total compensation opportunity should be higher or lower than the market 50th percentile based on individual performance, experience, past leadership roles and Company performance.

The Committee did not establish compensation levels solely based on the compensation data from the market surveys . Instead, it used this information to confirm that the total compensation package we offered to our named executive officers was reasonable and competitive. Because the market survey data was only one of several tools that the Committee used in setting executive compensation, the Committee used its discretion in determining the nature and extent of its use and whether any

component of compensation or the total compensation of our named executive officers should be adjusted to fall at or within a range of any market percentiles.

Internal Equity. Internal equity deals with the perceived worth of a job relative to other jobs within the Company. For the purpose of determining base salaries, the Company has placed a “worth” or “value” on jobs in relation to other jobs through a series of numeric grades that have been created within the Company. The CEO has a target bonus opportunity, as a percentage of his base salary, of 60%, as specified in his employment agreement. The other named executive officers are in the same numeric grade, have a management title of executive vice president or vice president and, for 2012, had a target bonus opportunity of 40% of base salary.

Compensation Planning Work Sheets. In 2012, the Committee did not use compensation planning work sheets, or “tally sheets,” to assist in the evaluation of the compensation of the named executive officers.

Equity Grant Practices. The Committee does not permit backdating or re-pricing of stock options. Grant dates and exercise prices historically were set either on the date the Committee approved the awards or at a future date, e.g., the end of the quarter during which the grants were approved, as determined by the Committee or the Chief Executive Officer with authority that the Committee or the Board delegated to him. The Committee does not time its equity grants in coordination with the release of material nonpublic information.

Employment Agreements. Each of the named executive officers has an employment agreement with the Company pursuant to which his initial base salary was established. The Committee reviews the base salary of all named executive officers at least once a year to determine if an increase or decrease is warranted. These agreements also contain certain other compensation-related provisions, including bonus opportunities expressed as a percentage of their base salaries, payments in the event of certain types of termination of employment, and other benefits. The Committee believes that these agreements encourage the continued attention and dedication of the named executive officers to the Company and motivate them to make decisions and provide insights as to the best interests of the Company and its stockholders without the distractions, uncertainties and risks created by the possible termination of their employment as a result of a change in control or without cause. A description of the material terms of each of these employment agreements, including amendments to certain of these agreements, appear in the section “— Employment Agreements” below.

Accounting and Tax Treatment. The Committee considers the impact of accounting and tax treatment of various forms of compensation, including but not limited to such factors as: (i) the associated compensation expense relating to the grants of long-term equity incentive awards determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation — Stock Compensation (ASC Topic 718); (ii) the applicability of the requirements of Section 409A of the Internal Revenue Code (regarding nonqualified deferred compensation) to awards under the Company's incentive plans and to the named executive officers’ employment agreements; and (iii) the treatment of equity incentive or other awards as excess parachute payments under Section 280G of the Internal Revenue Code, particularly if the exercisability or vesting of any such award is accelerated as a result of a change in control.

Section 409A of the Internal Revenue Code (regarding nonqualified deferred compensation) to awards under the Company's incentive plans and to the named executive officers’ employment agreements; and (iii) the treatment of equity incentive or other awards as excess parachute payments under Section 280G of the Internal Revenue Code, particularly if the exercisability or vesting of any such award is accelerated as a result of a change in control.

Process of Establishing Key Elements of Compensation

Timing. The Committee sets, or recommends to the Board of Directors, annual levels of the key compensation elements for our named executive officers early in the fiscal year, ~~typically in March,~~ when prior year financial results become known. Also, throughout the year, the Committee monitors management’s performance against the compensation program objectives and targets and, as appropriate, identifies possible future changes to the overall structure and individual elements.

Annual Performance Evaluations of Named Executive Officers Other Than the Chief Executive Officer. InThe ~~addition to evaluating market data, the~~ Committee reviews the CEO’s assessment of each of the named executive officers in determining any base salary adjustments for the named executive officers. The Committee also bases a portion of the annual bonuses on the achievement of performance goals, which determinations are made when financial and operating results for the year are reported to the Board of Directors. Each named executive officer also prepares an annual self-evaluation, which is designed to elicit information about financial and management performance. The CEO is primarily responsible for reviewing the self-evaluations of the named executive officers (other than his own), providing input and recommending to the Committee compensation adjustments based on this analysis. While the chief executive officer does not have the authority to determine the other named executive officers’ compensation, the Committee typically gives significant weight to his recommendations, along with the other factors discussed above, in determining the compensation of the named executive officers other than the CEO.

Annual Performance Evaluation of Chief Executive Officer. The process for determining the CEO’s total compensation package is similar to the process for determining base salaries of the other named executive officers. As part of this process, the Committee also reviews information prepared by the Company’s human resources department~~, including market survey data~~. However, with respect to the chief executive officer only, each member of the Board provides his individual input on the CEO’s performance during the most recently completed year, which the Committee then evaluates in light of the Company’s overall financial performance and achievement of business plan objectives established at the beginning of the year. Based on feedback from each of the directors, the Committee (i) recommends to the Board adjustments to the CEO’s compensation and (ii) provides feedback to the CEO. The Committee uses all of the above information to develop and recommend to the Board for approval the base salary for the chief executive officer.

45Use of Discretion. For 2013, individual bonus amounts for the named executive officers were determined strictly by the level of achievement of pre-established financial and business performance goals. As such, the Committee did not exercise discretion to adjust the amount of individual awards under the Annual Incentive Plan.

~~from~~Executive ~~each~~Compensation of the directors, the Committee (i) recommends to the Board adjustments to the CEO’s compensation and (ii) provides feedback to the CEO. The Committee uses all of the above information to develop and recommend to the Board for ~~approval the base salary for the chief executive officer.~~2013

Use of Discretion. For 2012, individual bonus amounts for the named executive officers were determined strictly by the level of achievement of pre-established financial and business performance goals. As such, the Committee did not exercise discretion to adjust the amount of individual awards under the Annual Incentive Plan.

Executive Compensation for 2012

Base Salary — Decisions and Analysis

In determining base salary adjustments for the named executive officers for ~~2012~~2013, the Committee considered the recommendations of the CEO with respect to the other named executive officers and the proposed wage and salary increases for all employees as contemplated in the Company’s business plan for ~~2012~~2013 that was submitted to the Board of Directors. In March ~~2012~~2013, the Compensation Committee recommended to the Board, and the Board approved, 32.5% increases in the base salaries of Messrs. Quinn, Kulka, Ertel and ~~Varsam,~~Qualls consistent with the budget and business plan approved by the Board of Directors for Company employees generally, and a 4% increase in the base salary of Mr. Moody. The Committee recommended a higher increase for Mr. Moody based on the CEO's recommendation in recognition of Mr. Moody’s leadership of the Company’s successful execution of its North American manufacturing consolidation strategy. In June 2012, the Committee approved a 12.3% increase in the base salary of Mr. Varsam to bring his overall compensation more in line with applicable market survey data and ~~after~~Asia ~~considering~~Pacific ~~his~~manufacturing ~~contributions~~consolidation ~~and responsibilities as General Counsel~~strategy.

In connection with the hiring of Mr. Qualls as the Company’s chief marketing officer in July 2012, the Board of Directors determined Mr. Qualls’ base salary in the context of the review of all of his terms of employment and proposed employment agreement, including his target bonus opportunity, equity awards and payments in the event of termination of employment, as well as the employment agreements of the other named executive officers.

Annual Cash Incentive Awards — Decisions and Analysis

In March ~~2012~~2013, the Committee recommended to the Board of Directors, and the Board approved, the funding of the Annual Incentive Plan bonus pool for ~~2011~~2012 in the amount of $65.91 million, or ~~135~~94% of the target pool, based on the achievement of Adjusted EBITDA of $7989.959 million, and the payment of bonuses to the named executive officers based upon the ~~200~~87.1% payout of the financial performance target and 96100% payout of the individual performance targets, which are set forth in the table below, along with actual 2012 results.

2011 Business Goal	Target	Actual	Weight	Score
Organic Growth in Global Sales	$470 million	$488.4 million	30%	30%
Total Cost Productivity Savings	$6.9 million	$9.4 million	30%	30%
Working Capital Management:			20%	16%
Days Sales Outstanding	< 56.5	56.1
Days Payables Outstanding	>42.3	32.5
Cash Flow Usage	≤ ($6.5 million)	($1.5 million)
Inventory Turns	≥ 3.4	3.8
Capital Expenditures	≤ $16.8 million	$14.8 million
Business Process Re-Engineering Savings	$1.0 million	$1.0 million	20%	20%

As a result, the Committee recommended, and the Board approved, the incentive bonuses earned and awarded for 2011 as set forth in the “Non-Equity Incentive Plan” column of the Summary Compensation Table appearing under “— Summary Compensation” below. Such awards were paid in March 2012.



2012 Business Goal	Target	Actual	Weight	Score
Organic Growth in Global Sales^¹	$513.6 million	$495.4 million	25%	25.2%
Improve Gross Margin/Productivity	$11.1 million	$12.8 million	25%	33.4%
Working Capital Management²			30%	30.7%
Days Sales Outstanding	< 53.4	52.0
Days Payables Outstanding	> 35.0	38.1
Cash Flow	≥ $20.8 million	$19.7 million
Inventory Turns	≥ 3.6	2.8
Capital Expenditures	≤ $16.0 million	$12.5 million
Strategy Implementation³			20%	18.9%
¹Target also requires achievement of approximate 2% price increase.
²Components of Business Goal are weighted equally.
³Target constitutes achievement of specific strategic initiatives (new product introductions, infrastructure investment and geographic expansion, and brand strategy) on time and on budget.

InAs ~~March~~a ~~2012~~result, the Committee ~~also~~recommended, ~~approved the Company’s financial performance targets~~ and ~~individual performance goals for~~ the ~~named~~Board ~~executive~~approved, ~~officers for~~ the ~~funding and payout of annual~~ incentive bonuses ~~under~~earned ~~the~~and ~~Annual~~awarded ~~Incentive~~for ~~Plan with respect to our~~ 2012 ~~fiscal~~as ~~year. As~~set itforth ~~did~~ in ~~2011,~~ the ~~Committee~~“Non-Equity ~~set~~Incentive ~~minimum,~~Plan” ~~target~~column ~~and maximum levels~~ of ~~Adjusted EBITDA as targets for~~ the ~~2012~~Summary ~~plan~~Compensation ~~awards,~~Table ~~after~~appearing ~~considering~~under ~~the~~“— Summary ~~recommendations~~Compensation” ~~of our chief executive officer and the 2012 budget approved by the Board of Directors~~below. ~~The~~ Such ~~Adjusted~~awards ~~EBITDA~~were ~~levels~~paid ~~(and the bonus pool funding associated with each level) for 2012 are set forth~~ in ~~the~~March ~~following table :~~ 2013.

46In March 2013, the Committee also approved the Company’s financial performance targets and individual performance goals for the named executive officers for the funding and payout of annual incentive bonuses under the Annual Incentive Plan with respect to our 2013 fiscal year. As it did in 2012, the Committee set minimum, target and maximum levels of Adjusted EBITDA as targets for the 2013 plan awards, after considering the recommendations of our chief executive officer and the 2013 budget approved by the Board of Directors. The Adjusted EBITDA levels (and the bonus pool funding associated with each level) for 2013 are set forth in the following table:

	Threshold Payout	Target Payout	Maximum Payout
Adjusted EBITDA	$8289.75 million	$8995.71 million	$9498.70 million
Adjusted EBITDA Component Payout	50%	100%	150% / 200%*
Business Goals Component Payout	5075%	100%	100%
Total 2012 Bonus Pool	$3.4 million	$5.4 million	$7.4 million
Total 2013 Bonus Pool	$3.8 million	$6.1 million	$8.4 million

*Maximum payout percentage for the named executive officers and certain other key management employees.

No bonus pool will be funded and no bonuses will be paid if Adjusted EBITDA falls below the threshold payout level, which is 9294.21% of the target payout level. The actual funding of the bonus pool between minimum and target levels and between target and maximum levels is prorated based on the level of Adjusted EBITDA generated.

The Committee approved the following strategic business goals for ~~2012~~2013, which account for up to 20% of the named executive officer’s bonus opportunity (15% in the case of Mr. Quinn) and are identical for each of the named executive officers:

2012 Business Goal	Target	Weight
2013 Business Goal	Target	Weight
Organic Growth in Global Sales:1	$513.6 million	25%
Organic Growth in Global Sales:	$505.2 million	30%
Improve Gross Margin/Productivity	$119.12 million	2530%
Working Capital Management:2		30%
Working Capital Management:
Days Sales Outstanding	< 53.4
Cash Flow	≥ $30.8 million	15%
Days Payables Outstanding	> 35.0
Working Capital as a % of Net Sales	≤ $27.1 million	5%
Cash Flow	≥ $20.8 million
Strategy Implementation1		20%
Inventory Turns	≥ 3.6
1Category sales goals, new products introductions and brand strategy on time and on budget.
Capital Expenditures	≤ $16.0 million
Strategy Implementation3		20%
1Target also requires achievement of approximate 2% price increase.
2Components of Business Goal are weighted equally.
3Target constitutes achievement of specific strategic initiatives (new product introductions, infrastructure investment and geographic expansion, and brand strategy) on time and on budget.

Consistent with plan awards in ~~2011~~2012, allocation to the named executive officers of the funded bonus pool for ~~2012~~2013 is based on a combination of the level of the Company’s financial performance as established by Adjusted EBITDA generation and the above strategic business goals, each expressed as a percentage of their target bonus opportunity (which itself is a percentage of their respective base salaries), as follows:

		Performance Weighting
Name	Target %	Financial	Business Goals
Martin Quinn.............................................................................................................	60%	85%	15%
Jeffrey S. Kulka.........................................................................................................	40%	80%	20%
Terry A. Moody.........................................................................................................	40%	80%	20%
E. Lee Qualls*...........................................................................................................	40%	80%	20%
Nick H. Varsam..........................................................................................................	40%	80%	20%

* Mr. Qualls joined the Company on July 9, 2012, as our new chief marketing officer, and his target and performance weighting percentages were set at the same levels set for the other named executive officers, other than the CEO.



		Performance Weighting
Name	Target %	Financial	Business Goals
Martin Quinn........................................................	60%	85%	15%
Jeffrey S. Kulka....................................................	40%	80%	20%
Terry A. Moody.....................................................	40%	80%	20%
Jeff J. Ertel...........................................................	40%	80%	20%
E. Lee Qualls.......................................................	40%	80%	20%

Named executive officers receive a payment ranging from 40% (42.5% for the CEO) to 100% of the officer's target award opportunity if the Company achieves a financial performance level ranging from 92.2% to 100% of target, and a payment ranging from 100% up to 180% (185% for the CEO) of the target award opportunity if the Company achieves a performance level ranging from 100% to 106.1% of target.

Long-Term Incentive Awards — Decisions and Analysis

InNo connection with the hiring of E. Lee Qualls as the Company's chief marketing officer, in June 2012, the Committee approved an award to Mr. Qualls of options to purchase an aggregate of 35,000 shares of common stock of Holdings under the Holdings 2010 Equity Incentive Plan. These awards are set forth in the Grants of Plan-Based Awards table in included in “—Summary Compensation” below. Other than this award, no long-term incentive awards were granted to any named executive officer in ~~2012~~2013.

Post Fiscal Year Compensation Actions

Base Salary Adjustments

In March ~~2013~~2014, the Compensation Committee approved ~~2.5% increases in the~~ base ~~salaries~~salary increases of ~~Messrs~~2.5% ~~Quinn,~~for ~~Kulka,~~Mr. ~~Qualls~~Ertel and ~~Varsam~~Mr. ~~consistent~~Qualls, ~~with~~3.0% ~~the budget and business plan approved by the Board of Directors~~ for ~~Company~~Mr. ~~employees generally~~Quinn, ~~and a 4~~3.25% ~~increase~~for ~~in the base salary of~~ Mr. ~~Moody. The~~Kulka ~~Committee~~and ~~approved~~4.0% ~~a higher increase~~ for Mr. Moody, ~~based~~consistent onwith the ~~recommendation~~budget ofand ~~the~~business ~~CEO~~plan inapproved ~~recognition~~by ~~of Mr. Moody’s leadership of~~ the ~~Company’s~~Board ~~successful completion~~ of ~~its North American manufacturing consolidation strategy~~Directors. The adjusted base salary for each of the named executive officers is as set forth below in “—Employment Agreements.”

Annual Incentive Plan — ~~2013~~2014 Performance Targets, Bonus Funding and Allocation

In March ~~2013~~2014, the Compensation Committee approved the financial performance targets for determining the funding and payout of annual incentive bonuses under our Annual Incentive Plan for the named executive officers with respect to our ~~2013~~2014 fiscal year. Similar to ~~2012~~2013, the annual bonus pool will be funded based on the achievement of threshold, target and maximum levels of Adjusted EBITDA generated in ~~2013~~2014. The actual funding of the bonus pool between the minimum and target and the target and maximum funding levels will be prorated based on the level of Adjusted EBITDA generated. The Adjusted EBITDA levels (and the bonus pool funding associated with each level) for 2014 are set forth in the following table:

Consistent with 2012, allocation to the named executive officers (and to other eligible participants) of the funded bonus pool, if any, generated for 2013 will be based on a combination of the level of the Company’s financial performance as established by Adjusted EBITDA generation and four strategic business goals substantially similar to such goals set for 2012. As of the date of this Report, the quantified strategic business goals have not yet been finalized or approved.



	Threshold Payout	Target Payout	Maximum Payout
Adjusted EBITDA	$101.2 million	$111.0 million	$116.0 million
Adjusted EBITDA Component Payout	50%	100%	150% / 200%*
Business Goals Component Payout	75%	100%	100%
Total 2013 Bonus Pool	$3.7 million	$6.0 million	$8.1 million

*Maximum payout percentage for the named executive officers and certain other key management employees.

Consistent with 2013, allocation to the named executive officers (and to other eligible participants) of the funded bonus pool, if any, generated for 2014 will be based on a combination of the level of the Company’s financial performance as established by Adjusted EBITDA generation and four strategic business goals substantially similar to such goals set for 2013. The quantified strategic business goals for 2014 are set forth in the table below.



2014 Business Goal	Target	Weight
Organic Growth in Global Sales:	$518.7 million	30%
Improve Gross Margin/Productivity	$11.5 million	30%
Working Capital Management:
Cash Flow	≥ $43.2 million	15%
Working Capital as a % of Net Sales	≤ $28.1 million	5%
Business Objectives^:		20%
Achieve a 4.1% increase in sales of gas equipment (on an annualized basis).
Achieve a 9.6% increase in sales of automated plasma focusing on OEM customers.
Increase global vitality index to 18.8%.
Continue to build brand equity and brand rationalization by implementing brand changes.
Successfully implement 2014 budgeted pricing actions and achieve a $10.7 million net price retention.
Successfully integrate 2013 acquisitions.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on this review and discussions, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

Compensation Committee of the Board of Directors

Douglas R. Korn (Chair and Sole Member)

Summary Compensation

The following summary compensation table sets forth the compensation earned during fiscal 2013, 2012 and 2011 by our Chief Executive Officer and the other four most highly compensated executive officers who were serving in such capacity as of December 31, 2013. The Company has entered into agreements with each of the named executive officers, which provide for payments under certain termination events. These agreements and the potential and payments thereunder are described in the narratives captioned “ — Employment Agreements” and “ — Potential Payments Upon Termination or Change in Control” below.

The following summary compensation table sets forth the compensation earned during fiscal 2012, 2011 and 2010 by our Chief Executive Officer, the individual serving as our Chief Financial Officer during 2012 and the other three most highly compensated executive officers who were serving in such capacity as of December 31, 2012. The Company has entered into agreements with each of the named executive officers, which provide for payments under certain termination events. These agreements and the potential and payments thereunder are described in the narratives captioned “ — Employment Agreements” and “ — Potential Payments Upon Termination or Change in Control” below.



Name and Principal Position	Year	Salary		Bonus (1)		Option Awards (2)		Non- Equity Incentive Plan Compensation (3)		All Other Compensation (4)		Total
Martin Quinn	2013	$	524,904	$	—	$	—	$	390,269	$	6,000	$	921,173
President and Chief Executive Officer	2012	511,538		—		—		275,118		6,000		792,656
President and Chief Executive Officer	2011	470,179		100,000		134,009		553,200		6,000		1,263,388
Jeffrey S. Kulka (5)	2013	341,213		—		—		165,465		7,504		514,182
Executive Vice President and Chief Financial Officer	2012	332,525		—		—		120,082		93,166		545,773
Executive Vice President and Chief Financial Officer	2011	50,026		—		871,417		43,800		—		965,243
Terry A. Moody	2013	347,859		—		—		169,241		—		517,100
Executive Vice President, Global Operations	2012	334,475		—		—		121,050		—		455,525
Executive Vice President, Global Operations	2011	322,295		100,000		—		232,566		—		654,861
Jeff J. Ertel (6)	2013	280,314		—		—		135,931		18,580		434,825
Executive Vice President, Human Resources	2012	89,929		—		529,727		35,897		145,249		800,802
Executive Vice President, Human Resources	2011	—		—		—		—		—		—
E. Lee Qualls (7)	2013	331,276		—		—		160,646		3,825		495,747
Executive Vice President and Chief Marketing Officer	2012	143,775		—		1,056,506		55,701		100,025		1,356,007
Executive Vice President and Chief Marketing Officer	2011	—		—		—		—		—		—

Name and Principal Position	Year	Salary($)		Bonus(1)($)		StockAwards(2)($)		OptionAwards(3)($)		Non- EquityIncentive PlanCompensation($)(4)		All OtherCompensation($)(5)		Total($)
Martin Quinn	2012	$	511,538	$	—	$	—	$	—	$	275,118	$	6,000	$	792,656
President and Chief Executive Officer	2011	470,179		100,000		—		134,009		553,200		6,000		1,263,388
	2010	400,000		—		144,563		547,213		285,000		6,000		1,382,776
Jeffrey S. Kulka(6)	2012	332,525		—		—		—		120,082		93,166		545,773
Executive Vice President and Chief Financial Officer	2011	50,026		—		—		871,417		43,800		—		965,243
	2010	—		—		—		—		—		—		—
Terry A. Moody	2012	334,475		—		—		—		121,050		—		455,525
Executive Vice President - Global Operations	2011	322,295		100,000		—		—		232,566		—		654,861
	2010	314,385		—		29,730		222,086		149,000		—		715,201
E. Lee Qualls(7)	2012	143,775		—		—		1,056,506		55,701		100,025		1,356,007
Executive Vice President and Chief Marketing Officer	2011	—		—		—		—		—		—		—
	2010	—		—		—		—		—		—		—
Nick H. Varsam	2012	232,143		—		—		—		87,886		11,515		331,544
Vice President, General Counsel and Corporate Secretary	2011	210,268		100,000		—		16,751		151,721		11,557		490,297
	2010	203,808		—		14,865		67,697		75,000		4,046		365,416


(1)	Amounts in this column represent retention bonuses of $100,000 paid to Mr. Quinn and Mr. Moody in connection with the merger.

~~____________~~(2) The amounts shown in this column represent the aggregate grant date fair values of the stock option awards granted to each of the named executive officers in the years specified computed in accordance with FASB ASC Topic 718. These option awards include options to purchase shares of common stock of Holdings, the Company’s parent, granted under the 2010 Equity Incentive Plan. See “— Grants of Plan-Based Awards” and “— Holdings 2010 Equity Incentive Plan” below. The grant date values assumed that the highest level of performance conditions would be achieved. No stock options were forfeited by any of the named executive officers in fiscal year 2013. The grant date fair values have been determined based on the assumptions and methodologies set forth in Note 16 of the notes to our consolidated financial statements set forth herein. These amounts reflect the value determined by the Company for accounting purposes for these awards and do not reflect whether the recipient has actually realized a financial benefit from the awards. Further information regarding the 2011 awards is included in the “Grants of Plan-Based Awards” table below and the “Outstanding Equity Awards at Fiscal Year End” table below.

(13) ~~Amounts~~The inamounts under this column ~~represent~~are ~~retention~~annual ~~bonuses~~cash ofincentive ~~$100,000~~awards ~~paid~~earned toupon ~~each~~the achievement of ~~Messrs~~performance objectives under the Annual Incentive Plan and, with respect to Mr. Quinn, ~~Moody~~one-time ~~and~~incentive ~~Varsam~~awards granted pursuant to his employment agreement in connection with his promotion to the ~~merger~~office of President.

(24) The amounts shown inas ~~this~~“All ~~column~~Other ~~represent~~Compensation” ~~the~~for ~~aggregate~~2013 ~~grant~~consist ~~date fair values~~ of the restricted stock awards granted to each of the named executive officers in the years specified computed in accordance with FASB ASC Topic 718. Special incentive awards of restricted stock to Mr. Quinn in 2010 and awards to the named executive officers in 2009 had performance-based vesting conditions and were valued at the grant date based upon the probable outcome of such conditions, excluding the effect of estimated forfeitures. The grant date values assumed that the highest level of performance conditions would be achieved. No restricted stock awards were forfeited by any of the named executive officers in fiscal year 2010. This column does not include the value of restricted stock that was cashed out in connection with the Merger, which value was determined based on the Merger consideration of $15 per share. In connection with the Merger, the following ~~cash payments were made in 2010 for restricted stock awarded to the named executive officers~~: Mr. Quinn, $667,350; Mr. Moody, $393,840; and Mr. Varsam, $79,725. The grant date fair values were determined based on the assumptions and methodologies set forth in Note 16 of the notes to our consolidated financial statements set forth herein. These amounts reflect the value determined by the Company for accounting purposes for these awards and do not reflect whether the recipient has actually realized a financial benefit from the awards.

(3) The amounts shown in this column represent the aggregate grant date fair values of the stock option awards granted to each of the named executive officers in the years specified computed in accordance with FASB ASC Topic 718. These option awards include options to purchase shares of common stock of Holdings, the Company’s parent, granted under the 2010 Equity Incentive Plan. See “— Grants of Plan-Based Awards” and “— Holdings 2010 Equity Incentive Plan” below. Awards in 2009 had performance-based vesting conditions and were valued at the grant date based upon the probable outcome of such conditions, excluding the effect of estimated forfeitures. The grant date values assumed that the highest level of performance conditions would be achieved. No stock options were forfeited by any of the named executive officers in fiscal year 2010. This column does not include the value of options that were cashed out based on the Merger consideration of $15 per share. In connection with the Merger, the following cash payments were made for options awarded to the named executive officers: Mr. Quinn, $367,966; Mr. Moody, $133,332; and Mr. Varsam, $68,274. The grant date fair values have been determined based on the assumptions and methodologies set forth in Note 16 of the notes to our consolidated financial statements set forth herein. These amounts reflect the value determined by the Company for accounting purposes for these awards and do not reflect whether the recipient has actually realized a financial benefit from the awards. Further information regarding the 2011 awards is included in the “Grants of Plan-Based Awards” table below and the “Outstanding Equity Awards at Fiscal Year End” table below.41

(4) The amounts under this column are annual cash incentive awards earned upon the achievement of performance objectives under the Annual Incentive Plan and, with respect to Mr. Quinn, one-time incentive awards granted pursuant to his employment agreement in connection with his promotion to the office of President. This column does not include the long-term incentive performance cash awards that were paid out in accordance with the terms of the Merger Agreement. None of the long-term performance cash awards that had been granted and remained outstanding prior to the Merger had been earned. In connection with the Merger, cash payments for these awards were made as follows: Mr. Quinn, $217,233; Mr. Moody, $119,937; and Mr. Varsam, $28,640.



Name	Auto Allowance		401(k) Plan Matching Contribution (a)		Relocation		Total
Martin Quinn	$	6,000	$	—	$	—	$	6,000
Jeffrey S. Kulka	—		7,504		—		7,504
Terry A. Moody	—		—		—		—
Jeff J. Ertel	—		7,534		11,046		18,580
E. Lee Qualls	—		3,825		—		3,825

49(a) Represents our matching contributions to the accounts of the named executive officers pursuant to the Company's 401(k) Retirement Plan.

(5) ~~The~~Mr. ~~amounts~~Kulka ~~shown~~joined asthe ~~“All~~Company ~~Other~~in ~~Compensation”~~October ~~for 2012 consist of the following:~~2011.

Name	AutoAllowance ($)		401(k) PlanMatchingContribution ($)(a)		Relocation ($)		Signing Bonus ($)(b)		Total ($)
Martin Quinn	$	6,000	$	—	$	—	$	—	$	6,000
Jeffrey S. Kulka	—		22,500		70,666		—		93,166
Terry A. Moody	—		—		—		—		—
E. Lee Qualls	—		5,700		29,325		65,000		100,025
Nick H. Varsam	—		11,515		—		—		11,515


(6)	Mr. Ertel joined the Company in August 2012.

(a) Represents our matching contributions to the accounts of the named executive officers pursuant to the Thermadyne 401(k) Retirement Plan.

(b) Represents one-time bonus award as provided in Mr. Qualls' employment agreement.

(6) Mr. Kulka joined the Company in October 2011.


(7)	Mr. Qualls joined the Company in July 2012.

Holdings 2010 Equity Incentive Plan

The following is a summary of the material terms and conditions of the ~~Thermadyne~~Victor Technologies Holdings, Inc. 2010 Equity Incentive Plan (the “2010 Equity Plan”). This summary is qualified in its entirety by reference to the terms of the 2010 Equity Plan, a copy of which is incorporated by reference as Exhibit 10.40 to this Annual Report on Form 10-K.

The Board of Directors of the Company’s parent, Holdings, adopted the 2010 Equity Plan on December 2, 2010, and the 2010 Equity Plan was approved by the stockholders on the same date. The purpose of the 2010 Equity Plan is to attract, retain and motivate the officers, directors, and employees of Holdings and its subsidiaries and affiliates, and to promote the success of Holdings’ business by providing them with appropriate incentives and rewards through a proprietary interest in the long-term success of Holdings.

The Board of Directors of Holdings, or any committee designated by the Board of Directors of Holdings, administers the 2010 Equity Plan (the board or any such committee, the “Administering Committee”). The Administering Committee has the ability to: select the directors and employees to whom awards will be granted; determine the type and amount of awards to be granted; determine the terms and conditions of awards granted; determine the terms of award agreements to be entered into with participants to whom awards are granted; accelerate or waive vesting of awards and exercisability of awards; extend the term or period of exercisability of any awards; modify the purchase price under any award; or waive any terms or conditions applicable to any awards, subject to the limitations set forth in the 2010 Equity Plan.

Awards under the 2010 Equity Plan are in the form of stock options for shares of common stock of Holdings, par value $0.01 per share, or such other class or kind of shares or other securities resulting from application of the 2010 Equity Plan. Options are designated as either incentive stock options or nonqualified stock options; provided, however, that options granted to directors of Holdings shall be nonqualified stock options. Incentive stock options may be granted only to employees of Holdings or of a “parent corporation” or “subsidiary corporation” (as such terms are defined in Section 424 of the Internal Revenue Code) at the date of grant. The aggregate Fair Market Value (as such term is defined in the Stockholders’ Agreement dated December 3, 2010 among Holdings and the other parties thereto (the “Stockholders’ Agreement”)) (generally determined as of the time the option is granted) of the shares with respect to which incentive stock options are exercisable for the first time by a participant in the 2010 Equity Plan during any calendar year under all plans of Holdings and of any “parent corporation” or “subsidiary corporation” shall not exceed $100,000, or the option shall be treated as a nonqualified stock option. All outstanding options awarded under the 2010 Equity Plan are nonqualified stock options.

The option price is determined by the Administering Committee at the time of grant, but shall not be less than one hundred percent (100%) of the Fair Market Value of a share on the date of grant. In the case of any incentive stock option granted to a Ten Percent Shareholder, the option price shall not be less than one hundred and ten percent (110%) of the Fair Market Value of a share on the date of grant. A “Ten Percent Shareholder” is a person who on any given date owns, either directly or indirectly (taking into account the attribution rules contained in Section 424(d) of the Internal Revenue Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of Holdings or a subsidiary or affiliate of Holdings.

The term of each option is determined by the Administering Committee at the time of grant, but in no event shall such term be greater than ten years (or, in the case of an incentive stock option granted to a Ten Percent Shareholder, five years). Awards are generally non-transferable other than by will or by the laws of descent and distribution.

Subject to adjustment pursuant to the terms of the 2010 Equity Plan, the maximum number of shares available to participants pursuant to awards under the 2010 Equity Plan is 619,959 shares and the maximum number of shares available for issuance pursuant to (i) Tranche A Options is 251,393.37; (ii) Tranche B Options is 125,696.69; Tranche C Options is 125,696.69; and (iv) options granted after December 2, 2010 is 117,172.25 (which may include Tranche A Options, Tranche B Options or Tranche C Options). In the event that any outstanding award expires, is forfeited, canceled or otherwise terminated without consideration (i.e., shares or cash) therefore, the shares subject to such award, to the extent of any such forfeiture, cancellation, expiration,

5042

(iv) options granted after December 2, 2010 is 117,172.25 (which may include Tranche A Options, Tranche B Options or Tranche C Options). In the event that any outstanding award expires, is forfeited, cancelled or otherwise terminated without consideration (i.e., shares or cash) therefor, the shares subject to such award, to the extent of any such forfeiture, cancellation, expiration, termination or settlement for cash shall again be available for awards under the 2010 Equity Plan. If the Administering Committee authorizes the assumption under the 2010 Equity Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, of awards granted under another plan, such assumption will not reduce the maximum number of shares available for issuance under the 2010 Equity Plan.

If a Realization Event (as such term is defined in the Stockholders’ Agreement) occurs after December 2, 2010, unless prohibited by law or unless otherwise provided in the award agreement, the Administering Committee is authorized to make any of the following adjustments in the terms and conditions of outstanding awards: (a) continuation or assumption of outstanding awards under the 2010 Equity Plan by Holdings, the surviving company or its parent; (b) substitution of awards with substantially the same terms for outstanding awards (excluding the consideration payable upon settlement of the awards); (c) accelerated exercisability, vesting and/or lapse of restrictions under outstanding awards immediately prior to the occurrence of a Realization Event; (d) provision that any outstanding awards must be exercised, if exercisable, during a reasonable period of time immediately prior to the Realization Event or such other period as determined by the Administering Committee, and at the end of such period, such awards shall terminate if not exercised; and (e) cancellation of all or any portion of outstanding awards for fair value (in the form of cash, shares, other property or any combination thereof) as determined by the Administering Committee. The fair value of outstanding awards being ~~cancelled~~canceled may equal the excess of the value of the consideration to be paid as part of the Realization Event to holders of the same number of shares subject to the outstanding awards (or, if consideration is not paid, Fair Market Value of the shares subject to the outstanding awards being ~~cancelled~~canceledcanceled) over the aggregate option price or grant price, as applicable, with respect to the awards being ~~cancelled~~canceled.

The Administering Committee may amend, alter, suspend, discontinue or terminate the 2010 Equity Plan or any portion thereof or any award or award agreement thereunder at any time, in its sole discretion, provided, that no action taken by the Administering Committee shall adversely affect the rights granted to any participant under any outstanding awards (other than pursuant to certain terms of the 2010 Equity Plan) without the participant’s written consent. The 2010 Equity Plan, unless sooner terminated by the Administering Committee, will terminate on the tenth anniversary of its adoption.

Grants of Plan-Based Awards

In ~~2012~~2013, the Board of Directors of Holdings granted to ~~the named executive officers, along with other~~ key management employees, options to purchase an aggregate of 9326,~~419~~450 shares of common stock of Holdings as long-term incentive awards under the 2010 Equity Incentive Plan. The options vest in equal annual increments during the first five anniversaries from the date of original grant, with vesting accelerated as to all unvested options upon a “Realization Event” (as defined in the Stockholders’ Agreement, discussed below under “Certain Relationships and Related Party Transactions” included in Item 13 of this Report.

~~The option awards to the named executive officers in 2012 are included in the Grants of Plan-Based Awards table below.~~43

		Estimated Future Payouts UnderEquity Incentive Plan Awards			Exercise orBase Priceof Option Awarded ($/Sh)		Grant DateFair Valueof Stock and Option Awards ($)(1)
Name	Grant Date	Threshold(#)	Target(#)	Maximum(#)
Martin Quinn	—	—	—	—	$	—	$	—
Jeffrey S. Kulka	—	—	—	—	—		—
Terry A. Moody	—	—	—	—	—		—
E. Lee Qualls	07/09/2012(2)	—	17,500	—	49.23		513,734
	07/09/2012(3)	—	8,750	—	49.23		256,867
	07/09/2012(4)	—	8,750	—	50.00		285,904
Nick H. Varsam	—	—	—	—	—		—

Outstanding Equity Awards to the Named Executive Officers at Fiscal Year-End

__________



	Option Awards(1)
Name	Number of Securities Underlying Unexercised Options Exercisable	Number of Securities Underlying Unexercised Options Unexercisable	Option Exercise Price		Option Expiration Date
Martin Quinn.......................................	24,178	16,119	$	10.00	12/3/2020
	12,089	8,059	30.00		12/3/2020
	12,089	8,059	50.00		12/3/2020
	4,960	7,440	10.00		4/25/2021
	2,480	3,720	30.00		4/25/2021
	2,480	3,720	50.00		4/25/2021
Jeffrey S. Kulka..................................	9,299	13,949	31.10		11/18/2021
	4,650	6,975	31.10		11/18/2021
	4,650	6,975	50.00		11/18/2021
Terry A. Moody.................................	15,809	10,539	10.00		12/3/2020
	7,904	5,270	30.00		12/3/2020
	7,904	5,270	50.00		12/3/2020
Jeff J. Ertel.......................................	1,860	7,440	46.18		8/21/2022
	930	3,720	46.18		8/21/2022
	930	3,720	50.00		8/21/2022
E. Lee Qualls....................................	3,500	14,000	49.23		7/9/2022
	1,750	7,000	49.23		7/9/2022
	1,750	7,000	50.00		7/9/2022

(1) ~~Represents~~No ~~the~~options ~~aggregate~~were ~~grant~~exercised ~~date~~by ~~fair value under FASB ASC Topic 718. Fair value was determined using~~ the ~~Black-Scholes~~named ~~option-pricing~~executive ~~model,~~officers ~~based~~during ~~upon~~ the ~~terms~~year ofended ~~the~~December ~~option~~31, ~~grants~~2013. ~~and~~All ~~the~~stock ~~assumptions~~options ~~and~~listed ~~methodologies set forth~~ in the ~~notes~~table tohave ~~our~~a ~~consolidated~~term ~~financial~~expiring ~~statements~~ten ~~set~~years ~~forth~~after ~~herein.~~the ~~These~~grant ~~amounts~~date ~~reflect~~and ~~the~~vest ~~value~~based ~~determined~~on byservice. ~~the~~All ~~Company~~options ~~for~~vest ~~accounting~~at ~~purposes~~a ~~for~~rate ~~these~~of ~~awards~~20% ~~and~~on doeach ~~not~~anniversary ~~reflect~~of ~~whether~~ the ~~recipient~~grant ~~has~~date ~~actually~~over ~~realized~~five ~~a financial benefit from the awards~~years.

(2) Represents “Tranche A” options to purchase shares of common stock of Holdings granted pursuant to the 2010 Equity Incentive Plan, with an exercise price that equaled the value of the equity as determined by the Board of Directors of Holdings in accordance with the Stockholders Agreement.

(3) Represents “Tranche B” options to purchase shares of common stock of Holdings granted pursuant to the 2010 Equity Incentive Plan, with an exercise price that equaled the value of the equity as determined by the Board of Directors of Holdings in accordance with the Stockholders Agreement.

(4) Represents “Tranche C” options to purchase shares of common stock of Holdings granted pursuant to the 2010 Equity Incentive Plan, with an exercise price that exceeded the value of the equity as determined by the Board of Directors of Holdings in accordance with the Stockholders Agreement.

Outstanding Equity Awards at Fiscal Year-End

	Option Awards(1)
Name	Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable	Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable	OptionExercisePrice ($)	OptionExpirationDate
Martin Quinn.................................................................	16,119	24,178	$10.00	12/3/2020
	8,059	12,089	30.00	12/3/2020
	8,059	12,089	50.00	12/3/2020
	2,480	9,919	10.00	4/25/2021
	1,240	4,960	30.00	4/25/2021
	1,240	4,960	50.00	4/25/2021
Jeffrey S. Kulka..............................................................	4,650	18,599	31.10	11/18/2021
	2,325	9,299	31.10	11/18/2021
	2,325	9,299	50.00	11/18/2021
E. Lee Qualls..................................................................	—	17,500	49.23	7/9/2022
	—	8,750	49.23	7/9/2022
	—	8,750	50.00	7/9/2022
Terry A. Moody...............................................................	10,539	15,809	10.00	12/3/2020
	5,270	7,904	30.00	12/3/2020
	5,270	7,904	50.00	12/3/2020
Nick H. Varsam...............................................................	2,480	3,720	10.00	12/3/2020
	1,240	1,860	30.00	12/3/2020
	1,240	1,860	50.00	12/3/2020
	310	1,240	10.00	4/25/2021
	155	620	30.00	4/25/2021
	155	620	50.00	4/25/2021

__________

(1) No options were exercised during the year ended December 31, 2012. All stock options listed in the table have a term expiring ten years after the grant date and vest based on service. All options vest at a rate of 20% on each anniversary of the grant date over five years.

Employment Agreements

We have employment agreements with each of Messrs. Quinn, Kulka, Moody, ~~Qualls~~Ertel and ~~Varsam~~Qualls, each of which agreements is described below.

Under the employment agreements with Messrs. Quinn, Kulka, Moody, Ertel and Qualls, “cause” is defined as the following conduct by such executive: (i) an act of (A) willful misconduct, (B) fraud, (C) embezzlement, (D) theft or (E) any other act constituting a felony, in each case causing or that is reasonably likely to cause, material harm, financial or otherwise, to us; (ii) a willful and intentional act or failure to act, which is committed by the executive and which causes or can be expected to imminently cause material injury to us that is not cured by him within 15 days after written notice from the Board of Directors specifying such act or failure to act and requesting a cure; (iii) a willful and material breach of the employment agreement that is not cured by the executive within 15 days after written notice from the Board of Directors specifying the breach and requesting a cure; or (iv) habitual abuse of alcohol, narcotics or other controlled substances which materially impairs the executive’s ability to perform his duties under the employment agreement that is not cured by him within 15 days after written notice from the Board of Directors specifying such circumstances and requesting a cure. No act, or failure to act, will be deemed “willful” unless done, or omitted to be done, by the executive not in good faith and without a reasonable belief that his act, or failure to act, was in our best interest.

We have agreed to indemnify each of the executive officers with which we have an employment agreement to the fullest extent permitted by law.

Martin Quinn. Mr. Quinn’s current base salary is $~~527~~543,~~875~~711 per year. Mr. Quinn is eligible to receive an annual incentive award at a target bonus of 60% of base salary (up to a maximum opportunity of 120% of base salary). The actual amount of any annual incentive award is determined by the compensation committee based on the achievement of financial goals and on other critical initiatives in accordance our annual incentive plan. The agreement provides for a car allowance of $500 per month. Mr. Quinn is also entitled to participate in the benefit and health programs, including profit sharing and retirement plans, as well as long-term incentive programs available to our executives.

52Mr. Quinn’s employment agreement has an initial term of one year and will renew for one-year periods on each anniversary of the date of the agreement unless terminated earlier. Employment can be terminated for cause, without cause or as a result of non-renewal by us, voluntarily by Mr. Quinn (including by constructive termination) and automatically upon his death or disability. If his employment is terminated, then Mr. Quinn (or his estate) is entitled to payments under his employment agreement. If his employment is terminated because we do not renew the employment period, Mr. Quinn will be entitled to continue to receive his

Mr. Quinn’s employment agreement has an initial term of one year and will renew for one-year periods on each anniversary of the date of the agreement unless terminated earlier. Employment can be terminated for cause, without cause or as a result of non-renewal by us, voluntarily by Mr. Quinn (including by constructive termination) and automatically upon his death or disability. If his employment is terminated, then Mr. Quinn (or his estate) is entitled to payments under his employment agreement. If his employment is terminated because we do not renew the employment period, Mr. Quinn will be entitled to continue to receive his current base salary for a period of 12 months following the expiration of the employment period. Any payments under his employment agreement that constitute a parachute payment which exceed 2.99 times his base amount will be reduced to 2.99 times the base amount.44

current base salary for a period of 24 months following the expiration of the employment period. Any payments under his employment agreement that constitute a parachute payment which exceed 2.99 times his base amount will be reduced to 2.99 times the base amount.

Any long-term incentive awards, such as stock options and restricted shares, outstanding at the time of termination of Mr. Quinn’s employment will survive termination in accordance with their applicable terms.

The agreement provides that Mr. Quinn cannot solicit any of our customers or prospective customers or induce any person to terminate employment with us for a period of two years after termination for any reason. In addition, Mr. Quinn cannot engage in, invest in or render services to any entity engaged in the businesses in which we are engaged in any country for a period of one year after termination due to non-renewal, cause or voluntary termination (other than by constructive termination).

Disability is deemed to have occurred if Mr. Quinn is unable to perform the duties of his employment due to mental or physical incapacity for a period of six consecutive months.

Constructive termination is defined in the agreement as the occurrence of any of the following without Mr. Quinn’s consent: (i) our failure to comply with the material terms of the agreement; (ii) a reduction in salary or bonus percentage (that does not apply to similarly situated executives) or a material reduction in his duties; (iii) any purported termination by us of his employment other than for cause; or (iv) if we assign the agreement to a successor of all or substantially all of our business or assets, and the successor fails to assume our obligations under the agreement.

Jeffrey S. Kulka. Mr. Kulka’s current base salary is $~~343~~354,~~119~~269 per year. Mr. Kulka is eligible to receive an annual incentive award at a target bonus of 40% of base salary. The actual amount of any annual incentive award is determined by the compensation committee based on the achievement of financial goals and on other critical initiatives in accordance with our annual incentive plan. Mr. Kulka is also entitled to participate in the benefit and health programs, including profit sharing and retirement plans, as well as long-term incentive programs available to our executives.

Mr. Kulka’s employment agreement has an initial term of one year and will renew for one-year periods on each anniversary of the date of the agreement unless terminated earlier. Employment can be terminated for cause, without cause or as a result of non-renewal by us, voluntarily by Mr. Kulka (including by constructive termination) and automatically upon his death or disability. If his employment is terminated, then Mr. Kulka (or his estate) is entitled to payments under his employment agreement. If his employment is terminated because we do not renew the employment period, Mr. Kulka will be entitled to continue to receive his current base salary for a period of 12 months following the expiration of the employment period. Any payments under his employment agreement that constitute a parachute payment which exceed 2.99 times his base amount will be reduced to 2.99 times the base amount.

Any long-term incentive awards, such as stock options and restricted shares, outstanding at the time of termination of Mr. Kulka's employment will survive termination in accordance with their applicable terms.

The agreement provides that Mr. Kulka cannot solicit any of our customers or prospective customers or induce any person to terminate employment with us for a period of one year after termination for any reason. In addition, Mr. Kulka cannot engage in, invest in or render services to any entity engaged in the businesses in which we are engaged in any country for a period of one year after termination due to non-renewal, cause or voluntary termination (other than by constructive termination).

Disability is deemed to have occurred if Mr. Kulka is unable to perform the duties of his employment due to mental or physical incapacity for a period of six consecutive months.

Constructive termination is defined in the agreement as the occurrence of any of the following without Mr. Kulka’s consent: (i) our failure to comply with the material terms of the agreement; (ii) a reduction in salary or bonus percentage (that does not apply to similarly situated executives) or a material reduction in his duties; (iii) any purported termination by us of his employment other than for cause; or (iv) if we assign the agreement to a successor of all or substantially all of our business or assets, and the successor fails to assume our obligations under the agreement.

Terry A. Moody. Mr. Moody’s current base salary is $~~350~~364,~~948~~986. Mr. Moody is eligible to receive an annual incentive award at a target bonus of 40% of his base salary. The actual amount of any annual incentive award is determined by the compensation committee based on the achievement of financial goals and on other critical initiatives in accordance with our annual incentive plan. Mr. Moody is also entitled to participate in the benefit and health programs, including profit sharing and retirement plans, available to our executives.

Mr. Moody’s employment agreement had an initial term of two years and now renews for one-year periods on each anniversary of the date of the agreement unless terminated earlier. Employment can be terminated for cause, without cause or as a result of non-renewal by us, voluntarily by Mr. Moody (including by constructive termination) and automatically upon his death or disability. If Mr. Moody’s employment is terminated, then Mr. Moody (or his estate) is entitled to payments under his employment agreement. Any payments under his employment agreement that constitute a parachute payment which exceed 2.99 times his base amount will be reduced to 2.99 times the base amount.

5345

non-renewal by us, voluntarily by Mr. Moody (including by constructive termination) and automatically upon his death or disability. If Mr. Moody’s employment is terminated, then Mr. Moody (or his estate) is entitled to payments under his employment agreement. Any payments under his employment agreement that constitute a parachute payment which exceed 2.99 times his base amount will be reduced to 2.99 times the base amount.

Disability is deemed to have occurred under the agreement if Mr. Moody is disabled within the meaning of Internal Revenue Code Section 409A(a)(2)(C).

Constructive termination is defined under the agreement as the occurrence of any of the following without Mr. Moody’s consent: (i) our failure to substantially comply with the agreement; (ii) reduction in salary or bonus percentage, or a material reduction in his duties; (iii) any purported termination by us of his employment other than for cause; (iv) if we assign the agreement to a successor of all or substantially all of our business or assets, and the successor fails to assume expressly and perform the agreement; or (v) if we relocate our principal offices, or require Mr. Moody to relocate his principal work location, more than 45 miles.

The agreement provides that Mr. Moody cannot induce any person to terminate employment with us for a period of 12 months after termination for any reason. In addition, Mr. Moody cannot engage in, invest in or render services to any entity engaged in the businesses in which we are engaged in any country (i) for a period of 12 months after termination for cause or voluntary termination (other than by constructive termination), or (ii) during the period of time we would be required to make severance payments or payments under a disability plan as a result of termination due to disability, termination without cause or constructive termination.

E.Jeff ~~Lee Qualls~~J. Ertel, Mr. ~~Qualls~~Ertel's current base salary is $~~333~~288,~~125~~922 per year. Mr. ~~Qualls~~Ertel is eligible to receive an annual incentive award at a target bonus of 40% of base salary. The actual amount of any annual incentive award is determined by the compensation committee based on the achievement of financial goals and on other critical initiatives in accordance with our annual incentive plan. Mr. ~~Qualls~~Ertel is also entitled to participate in the benefit and health programs, including profit sharing and retirement plans, as well as long-term incentive programs available to our executives.

Mr. Ertel's employment agreement has an initial term of one year and will renew for one-year periods on each anniversary of the date of the agreement unless terminated earlier. Employment can be terminated for cause, without cause or as a result of non-renewal by us, voluntarily by Mr. Ertel (including by constructive termination) and automatically upon his death or disability. If his employment is terminated, then Mr. Ertel (or his estate) is entitled to payments under his employment agreement. If his employment is terminated because we do not renew the employment period, Mr. Ertel will be entitled to continue to receive his current base salary for a period of nine months following the expiration of the employment period. Any payments under his employment agreement that constitute a parachute payment which exceed 2.99 times his base amount will be reduced to 2.99 times the base amount.

Any long-term incentive awards, such as stock options and restricted shares, outstanding at the time of termination of Mr. Ertel's employment will survive termination in accordance with their applicable terms.

The agreement provides that Mr. Ertel cannot solicit any of our customers or prospective customers or induce any person to terminate employment with us for a period of two years after termination for any reason. In addition, Mr. Ertel cannot engage in, invest in or render services to any entity engaged in the businesses in which we are engaged in any country for a period of one year after termination due to non-renewal, cause or voluntary termination (other than by constructive termination).

Disability is deemed to have occurred if Mr. Ertel is unable to perform the duties of his employment due to mental or physical incapacity for a period of six consecutive months.

Constructive termination is defined in the agreement as the occurrence of any of the following without Mr. Ertel's consent: (i) our failure to comply with the material terms of the agreement; (ii) a reduction in salary or bonus percentage (that does not apply to similarly situated executives) or a material reduction in his duties; (iii) any purported termination by us of his employment other than for cause; or (iv) if we assign the agreement to a successor of all or substantially all of our business or assets, and the successor fails to assume our obligations under the agreement.

E. Lee Qualls. Mr. Qualls' current base salary is $341,453 per year. Mr. Qualls is eligible to receive an annual incentive award at a target bonus of 40% of base salary. The actual amount of any annual incentive award is determined by the compensation committee based on the achievement of financial goals and on other critical initiatives in accordance with our annual incentive plan. Mr. Qualls is also entitled to participate in the benefit and health programs, including profit sharing and retirement plans, as well as long-term incentive programs available to our executives.

Mr. Qualls’ employment agreement has an initial term of one year and will renew for one-year periods on each anniversary of the date of the agreement unless terminated earlier. Employment can be terminated for cause, without cause or as a result of non-renewal by us, voluntarily by Mr. Qualls (including by constructive termination) and automatically upon his death or disability. If his employment is terminated, then Mr. Qualls (or his estate) is entitled to payments under his employment agreement. If his employment is terminated because we do not renew the employment period, Mr. Qualls will be entitled to continue to receive his current base salary for a period of nine months following the expiration of the employment period. Any payments under his employment agreement that constitute a parachute payment which exceed 2.99 times his base amount will be reduced to 2.99 times the base amount.

Any long-term incentive awards, such as stock options and restricted shares, outstanding at the time of termination of Mr. Qualls' employment will survive termination in accordance with their applicable terms.

The agreement provides that Mr. Qualls cannot solicit any of our customers or prospective customers or induce any person to terminate employment with us for a period of two years after termination for any reason. In addition, Mr. Qualls cannot engage in, invest in or render services to any entity engaged in the businesses in which we are engaged in any country for a period of one year after termination due to non-renewal, cause or voluntary termination (other than by constructive termination).

Disability is deemed to have occurred if Mr. Qualls is unable to perform the duties of his employment due to mental or physical incapacity for a period of six consecutive months.

Constructive termination is defined in the agreement as the occurrence of any of the following without Mr. Qualls' consent: (i) our failure to comply with the material terms of the agreement; (ii) a reduction in salary or bonus percentage (that does not apply to similarly situated executives) or a material reduction in his duties; (iii) any purported termination by us of his employment other than for cause; or (iv) if we assign the agreement to a successor of all or substantially all of our business or assets, and the successor fails to assume our obligations under the agreement.

Nick H. Varsam. Mr. Varsam’s current base salary is $251,125. Mr. Varsam is eligible to receive an annual incentive award at a target bonus of 40% of his base salary. The actual amount of any annual incentive award is determined by the compensation committee based on the achievement of financial goals and on other critical initiatives in accordance with our annual incentive plan. Mr. Varsam is also entitled to participate in the benefit and health programs, including profit sharing and retirement plans, as well as stock option programs available to our executives.

Mr. Varsam’s employment agreement had an initial term of one year and now renews for one-year periods on each anniversary of the date of the agreement unless terminated earlier. Employment can be terminated for cause, without cause or as a result of non-renewal by us, voluntarily by Mr. Varsam (including by constructive termination) and automatically upon his death or disability. If Mr. Varsam’s employment is terminated, then Mr. Varsam (or his estate) is entitled to payments under his employment agreement.

“Cause” is defined under the agreement as the following conduct by Mr. Varsam: (i) an act of willful misconduct, fraud, embezzlement, theft, or any other act constituting a felony, involving moral turpitude or causing material harm, financial or

otherwise, to us; (ii) an intentional act or failure to act that causes or can be expected to imminently cause material injury to us; (iii) a material breach of the agreement that he does not cure within 15 days after written notice from the Chief Executive Officer specifying the breach and requesting a cure; or (iv) habitual abuse of alcohol, narcotics or other controlled substances which impairs his ability to perform his duties under the agreement.

Constructive termination is defined under the agreement as the occurrence of any of the following without Mr. Varsam’s consent: (i) our failure to substantially comply with the agreement; (ii) a reduction in salary or bonus percentage or a material reduction in his duties; (iii) any purported termination by us of his employment other than for cause; (iv) if we assign the agreement to a successor of all or substantially all of our business or assets, and the successor fails to assume our obligations under the agreement; or (v) if we relocate our principal offices, or require Mr. Varsam to relocate his principal work location, more than 45 miles.

The agreement provides that Mr. Varsam cannot induce any person to terminate employment with us for a period of 12 months after termination for any reason. In addition, Mr. Varsam cannot engage in, invest in or render services to any entity engaged in the businesses in which we are engaged in any country (i) for a period of 12 months after termination for cause or voluntary termination (other than by constructive termination), or (ii) during the period of time we would be required to make severance payments or payments under a disability plan as a result of termination due to disability, termination without cause or constructive termination.

Potential Payments Upon Termination or Change in Control

As noted above, our employment agreements with each of Messrs. Quinn, Kulka, Moody, ~~Qualls~~Ertel and ~~Varsam~~Qualls provide for payments to the officer in the event of termination of employment. The employment agreements of the named executive officers do not contain specific provisions for compensating the officers upon a change in control of the Company. If the Company’s successor following a change of control does not assume the Company’s obligations under the employment agreements or makes certain changes in an officer’s compensation or duties that would be deemed to be a constructive termination, then the officer would be compensated in accordance with the constructive termination provisions of his employment agreement.

The table below sets forth information describing and quantifying certain compensation that would become payable under each named executive officer’s employment agreement if the officer’s employment had terminated on December 31, ~~2012~~2013. The information is based on the officer’s compensation and benefits as of that date. These benefits are in addition to benefits available generally to salaried employees, such as distributions under the 401(k) plan, disability benefits and accrued vacation pay.

Estimated Payments Upon Termination of Employment

Reason for termination of employment:	Salary$			Bonus$			Perquisites andOther Benefits$				Total$
							Perquisites and
Death
Reason for termination of employment:	Salary			Bonus			Other Benefits		Total
Martin Quinn..........................................................................	$	—	(1)	$	275,118	(2)	$	—			$	275,118
Death
Jeffrey S. Kulka.....................................................................	—		(1)	120,082		(2)	—				120,082
Martin Quinn................................................................	$	—	(1)	$	390,269	(2)	$—		$	390,269
Terry A. Moody......................................................................	—		(3)	121,050		(2)	—				121,050
Jeffrey S. Kulka............................................................	—		(1)	165,465		(2)	—		165,465
E. Lee Qualls..........................................................................	—		(1)	55,701		(2)	—				55,701
Terry A. Moody.............................................................	—		(3)	169,241		(2)	—		169,241
Nick H. Varsam......................................................................	—		(3)	87,886		(2)	—				87,886
Jeff J. Ertel...................................................................	—		(1)	135,931		(2)	—		135,931
Disability
E. Lee Qualls................................................................	—		(1)	160,646		(2)	—		160,646
Martin Quinn..........................................................................	—		(1)	275,118		(2)	23,106			(4)	298,224
Disability
Jeffrey S. Kulka.....................................................................	—		(1)	120,082		(2)	46,528			(5)	166,610
Martin Quinn..............................................................	—		(1)	390,269		(2)	26,910	(4)	417,179
Terry A. Moody......................................................................	168,725		(6)	121,050		(2)	—				289,775
Jeffrey S. Kulka..........................................................	—		(1)	165,465		(2)	54,200	(5)	219,665
E. Lee Qualls..........................................................................	162,500		(6)	55,701		(2)	21,347			(5)	239,548
Terry A. Moody...........................................................	175,474		(6)	169,241		(2)	—		344,715
Nick H. Varsam......................................................................	122,500		(6)	87,886		(2)	—				210,386
Jeff J. Ertel.................................................................			(1)	135,931		(2)	39,022	(4)	174,953
Without cause/constructive termination(7)
E. Lee Qualls.............................................................	—		(1)	160,646		(2)	26,139	(4)	186,785
Martin Quinn..........................................................................	515,000		(8)	275,118		(2)	11,553			(9)	801,671
Without cause/constructive termination
Jeffrey S. Kulka.....................................................................	334,750		(8)	120,082		(2)	23,264			(10)	478,096
Martin Quinn..............................................................	1,055,750		(7)	316,725		(8)	14,397	(9)	1,386,872
Terry A. Moody......................................................................	337,450		(8)	121,050		(2)	16,617			(9)	475,117		(12)
Jeffrey S. Kulka..........................................................	343,118		(10)	165,465		(2)	27,100	(11)	535,683
E. Lee Qualls..........................................................................	325,000		(8)	55,701		(2)	5,145			(9)	385,846
Terry A. Moody...........................................................	350,948		(10)	169,241		(2)	14,147	(9)	534,336			(12)
Nick H. Varsam......................................................................	204,167		(13)	87,886		(2)	16,617			(14)	308,670
Jeff J. Ertel (13)..........................................................	281,875		(10)	135,931		(2)	20,087	(9)	437,893
Non-renewal/expiration of employment agreement
E. Lee Qualls (13).......................................................	333,125		(10)	160,646		(2)	13,733	(9)	507,504
Martin Quinn..........................................................................	515,000		(8)	—			8,665			(15)	523,665
Non-renewal/expiration of employment agreement
Jeffrey S. Kulka.....................................................................	334,750		(8)	—			—				334,750
Martin Quinn..............................................................	1,055,750		(7)	316,725		(8)	14,397	(9)	1,386,872
Terry A. Moody......................................................................	337,450		(8)	—			—				337,450
Jeffrey S. Kulka..........................................................	343,118		(14)	—			—		343,118
E. Lee Qualls..........................................................................	325,000		(8)	—			—				325,000
Terry A. Moody...........................................................	350,948		(14)	—			—		350,948
Nick H. Varsam......................................................................	204,167		(13)	—			—				204,167
Jeff J. Ertel.................................................................	211,406		(15)	—			15,065	(16)	226,471
For cause/voluntary termination by employee
E. Lee Qualls..............................................................	249,844		(15)	—			10,300	(16)	260,144
Martin Quinn..........................................................................	—			—			—				—
For cause/voluntary termination by employee
Jeffrey S. Kulka.....................................................................	—			—			—				—
Martin Quinn..............................................................	—			—			—		—
Terry A. Moody......................................................................	—			—			—				—
Jeffrey S. Kulka..........................................................	—			—			—		—
E. Lee Qualls..........................................................................	—			—			—				—
Terry A. Moody...........................................................	—			—			—		—
Nick H. Varsam......................................................................	—			—			—				—
Jeff J. Ertel.................................................................	—			—			—		—
E. Lee Qualls..............................................................	—			—			—		—

__________


(1)	Base salary is paid in accordance with current payroll practices through the end of the pay period in which termination occurs.


(2)	Represents the bonus the officer would have been entitled to receive for the year in which termination occurs, prorated based on the number of days the officer was employed during such year.


(3)	Base salary is paid in accordance with current payroll practices through the end of the month in which termination occurs.


(4)	Represents contributions made by the Company on behalf of the officer under health insurance plans for two years following termination.


(5)	Represents contributions made by the Company on behalf of the officer under health insurance plans for two years following termination, plus a tax gross-up at an assumed tax rate of 40%.


(6)	Base salary is paid in accordance with current payroll practices until the earlier of 180 days and the commencement of any benefits under the Company’s long-term disability insurance.

(7) InBase ~~the~~salary ~~event~~is ofpaid ~~termination~~in ~~without~~accordance ~~cause~~with orcurrent ~~constructive~~payroll ~~termination~~practices offor ~~Mr.~~two ~~Quinn,~~years ~~compensation~~following ~~will~~termination. beNon-renewal ~~reduced~~or byexpiration ~~the amount~~ of ~~compensation~~ the ~~officer~~employment ~~receives~~agreement ifof heMr. ~~obtains~~Quinn ~~other~~is ~~employment~~deemed ~~during~~to ~~the~~be a termination ~~pay~~without ~~period~~Cause.

(8) ~~Base~~Represents a bonus of 60% of base salary isin ~~paid~~effect as of the date of termination, in ~~accordance~~lieu ~~with~~of ~~current~~any ~~payroll~~bonus ~~practices~~or portion of any bonus that the Company may have accrued or Mr. Quinn may have earned under the Annual Incentive Plan for ~~one~~the year ~~following~~in which termination occurred.


(9)	Represents contributions made by the Company on behalf of the officer under certain benefit plans, including health, life and disability insurance, for one year following termination.

(10) ~~Represents~~Base ~~contributions~~salary ~~made~~is bypaid ~~the~~in ~~Company~~accordance onwith ~~behalf~~current ofpayroll ~~the~~practices ~~officer under health insurance plans~~ for one year following termination~~, plus a tax gross-up at an assumed tax rate of 40%~~.

(11) ~~Base~~Represents ~~salary~~contributions ismade ~~paid~~by inthe ~~accordance~~Company ~~with~~on ~~current~~behalf ~~payroll~~of ~~practices~~the ~~until~~officer ~~the~~under ~~end~~health ofinsurance ~~the~~plans ~~calendar~~for one year infollowing ~~which~~ termination, ofplus ~~employment~~a ~~occurs~~tax gross-up at an assumed tax rate of 40%.

(12) In certain circumstances, in lieu of the payments shown, the officer may elect to receive a lump sum payment, ~~which~~of ~~would~~the bepresent ~~the~~value ~~total~~of ~~amount~~such ~~shown~~benefits, ~~less~~at a 12% discount.

(13) ~~Base~~In ~~salary~~the isevent ~~paid~~of intermination ~~accordance~~without ~~with~~cause ~~current~~or ~~payroll~~constructive ~~practices~~termination, ~~for~~compensation ~~ten~~will ~~months~~be ~~following~~reduced by the amount of compensation the officer receives if he obtains other employment during the termination pay period.

(14) ~~Represents~~Base ~~contributions~~salary ~~made~~is bypaid ~~the~~in ~~Company~~accordance onwith ~~behalf~~current ofpayroll ~~the~~practices ~~officer~~for ~~under~~one ~~certain~~year ~~benefit~~following ~~plans,~~non-renewal/expiration ~~including~~of ~~health,~~the ~~life~~employment ~~and disability insurance, 401(k), profit sharing, and retirement plants, for ten months following termination~~agreement.

(15) ~~Represents~~Base ~~contributions~~salary ~~made~~is bypaid ~~the~~in ~~Company~~accordance onwith ~~behalf~~current ofpayroll ~~the~~practices ~~officer under certain benefit plans, including health, life and disability insurance,~~ for nine months following ~~termination~~non-renewal/expiration of the employment agreement.

~~The~~(16) ~~employment~~Represents ~~agreement~~contributions ~~for~~made ~~each~~by of the ~~above-named~~Company ~~executive~~on ~~officers~~behalf ~~contains a provision for complying with Section 409A~~ of the ~~Internal~~officer ~~Revenue~~under ~~Code~~certain ~~relating~~benefit ~~to deferred payments~~plans, including ~~the payment of severance. In addition~~health, ~~the~~life ~~agreements for Messrs. Quinn, Kulka, Moody~~ and ~~Qualls~~disability ~~limit severance payments~~insurance, tofor ~~the~~nine ~~extent~~months ~~they~~following ~~are considered “parachute payments” under Section 280G of the Internal Revenue Code, to 299% of the employee’s “base amount” of compensation as defined in Section 280G~~termination. ~~See “— Employment Agreements” above.~~

Each of our named executive officers has been granted stock options in our parent, Holdings, under the 2010 Equity Plan, described above in “Executive Compensation — Holdings 2010 Equity Incentive Plan.” Pursuant to the terms of the 2010 Equity Plan and each named executive officer’s non-qualified stock option award agreement, if a Realization Event occurs, including a change of control of Holdings, all outstanding options not vested or forfeited will become immediately and fully vested, subject to such named executive officer’s continued service to Holdings or its subsidiaries or affiliates. The intrinsic value of equity awards outstanding at December 31, 2012, which consist solely of Tranche A and Tranche B options to purchase stock of Holdings, that would become exercisable or vested in the event a change of control of Holdings occurred as of December 31, 2012, for each of the named executive officers is set forth in the table below. Tranche C options have a per share exercise price of $50 and, therefore, have no intrinsic value. See “— Holdings 2010 Equity Incentive Plan” and the Outstanding Equity Awards at Fiscal Year-End table, above.48

The employment agreement for each of the above-named executive officers contains a provision for complying with Section 409A of the Internal Revenue Code relating to deferred payments, including the payment of severance. In addition, the agreements for Messrs. Quinn, Kulka, Moody, Ertel and Qualls limit severance payments, to the extent they are considered “parachute payments” under Section 280G of the Internal Revenue Code, to 299% of the employee’s “base amount” of compensation as defined in Section 280G. See “— Employment Agreements” above.

Each of our named executive officers has been granted stock options in our parent, Holdings, under the 2010 Equity Plan, described above in “Executive Compensation — Holdings 2010 Equity Incentive Plan.” Pursuant to the terms of the 2010 Equity Plan and each named executive officer’s non-qualified stock option award agreement, if a Realization Event occurs, including a change of control of Holdings, all outstanding options not vested or forfeited will become immediately and fully vested, subject to such named executive officer’s continued service to Holdings or its subsidiaries or affiliates. The intrinsic value of equity awards outstanding at December 31, 2013, that would become exercisable or vested in the event a change of control of Holdings occurred as of December 31, 2013, for each of the named executive officers is set forth in the table below. See “— Holdings 2010 Equity Incentive Plan” and the Outstanding Equity Awards at Fiscal Year-End table, above.

Estimated Payments Upon Change in Control

Name	~~UnvestedOptions (#)~~	UnvestedOptions	~~ExercisePrice ($)~~	ExercisePrice		~~Value ofOptions ($)(1)~~	Value ofOptions (1)
Martin Quinn..............................................................................	34,098		$	10.00		$	1,592,705
Martin Quinn..............................................................		23,558		$	10.00		$	1,236,112
	17,049		30.00			455,375
		11,779		30.00			382,471
	17,049		50.00			114,398
		11,779		50.00			146,887
Jeffrey S. Kulka..........................................................................	18,599		31.10			476,315
Jeffrey S. Kulka..........................................................		13,949		31.10			437,583
	9,299		31.10			238,157
		6,975		31.10			218,791
	9,299		50.00			62,399
		6,975		50.00			86,973
Terry A. Moody..........................................................................	15,809		10.00			984,582
Terry A. Moody...........................................................		10,539		10.00			552,997
	7,904		30.00			281,505
		5,270		30.00			171,106
	7,904		50.00			70,719
		5,270		50.00			65,713
E. Lee Qualls.............................................................................	17,500		49.23			130,900
Jeff J. Ertel...............................................................		7,440		46.18			121,198
	8,750		49.23			65,450
		3,720		46.18			60,599
	8,750		50.00			58,713
		3,720		50.00			46,388
Nick H. Varsam..........................................................................	4,960		10.00			231,666
E. Lee Qualls...........................................................		14,000		49.23			185,360
	2,480		30.00			66,237
		7,000		49.23			92,680
	2,480		50.00			16,640
		7,000		50.00			87,290

~~__________~~(1) Based on the fair market value of a share of common stock of Holdings on December 31, 2013 of $62.47, as determined by the Board of Directors of Holdings in accordance with the Stockholders Agreement.

(1) Based on the fair market value of a share of common stock of Holdings on December 31, 2012 of $56.71, as determined by the Board of Directors of Holdings in accordance with the Stockholders Agreement.

Director Compensation

Each of our non-employee directors, other than Mr. Korn, receives an annual fee of $25,000 and a fee of $3,000 per meeting. For his role as Chairman of the Audit Committee, Mr. Egan also receives an annual fee of $7,500. In connection with his appointment as director in 2011, each of these non-employee directors also received a grant of options to purchase 10,000 shares of common stock of Holdings, comprised of 5,000 Tranche A Options, 2,500 Tranche B Options and 2,500 Tranche C Options, with vesting and other terms identical to those options granted to the named executive officers.

The following table provides information on all cash and equity-based compensation earned, paid or awarded to non-employee directors during 2013, 2012 and 2011.

Non-Employee Director Compensation Table

Name(1)	~~Year~~	~~Fees Earnedor Paid inCash($)(2)~~Year		Fees Earnedor Paid inCash (2)		~~OptionAwards($)(3)~~		OptionAwards (3)		~~Total($)~~		Total
James O. Egan(4)............................................................................................	2012	$	44,500			$	—			$	44,500
James O. Egan(4).....................................................		2013		$	41,500			$	—			$	41,500
	2011	40,889				54,491				95,380
		2012		44,500				—				44,500
Douglas R. Korn.............................................................................................	2012	—				—				—
		2011		40,889				54,491				95,380
	2011	—				—				—
Eric K. Schwalm(5)....................................................		2013		37,000				—				37,000
C. Thomas O’Grady(5)...................................................................................	2012	37,000				—				37,000
		2012		37,000				—				37,000
	~~2011~~	~~25,346~~2011		23,973		~~53,641~~		53,641		~~78,987~~		77,614
Eric K. Schwalm(5)........................................................................................	2012	37,000				—				37,000
	2011	23,973				53,641				77,614

____________


(1)	Only members of our Board who are neither employees of the Company nor affiliates of Irving Place Capital receive compensation for their service as a director.

(2) This column reflects the aggregate dollar amount of the annual base fee and annual fees for service on the Board of Directors and, in the case of Mr. Egan, acting as chairperson of the Audit Committee for the years ended December 31, 2013, 2012 and ~~December 31,~~ 2011.

(3)

Represents the aggregate grant date fair value under FASB ASC Topic 718. Fair value was determined using the Black-Scholes option-pricing model, based upon the terms of the option grants and the assumptions and methodologies set forth in the notes to our consolidated financial statements set forth herein. These amounts reflect the value determined by the Company for accounting purposes for these awards and do not reflect whether the recipient has actually realized a financial benefit from the awards.


(4)	Appointed to the Board of Directors and as Audit Committee chairperson in March 2011.


(5)	Appointed to the Board of Directors in May 2011.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a director or as a member of the compensation committee or other committee serving an equivalent function, of any other entity that has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee. None of the current members of our Compensation Committee has ever been an officer or employee of Holdings or any of our subsidiaries. Mr. Korn is a managing director of Irving Place Capital, affiliates of which, along with its co-investors, ~~control~~hold ~~approximately 98~~84.31% ~~and 94.2%~~ of the outstanding ~~preferred~~common stock ~~and~~on ~~common~~a ~~stock,~~fully ~~respectively,~~ diluted basis of Holdings. See “Certain Relationships and Related Party Transactions” included in Item 13 of this Report.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We are a wholly-owned subsidiary of Victor Technologies Holdings, Inc., a company whose common stock is owned by IPC/Razor LLC (“Topco”), a holding company and affiliate of Irving Place Capital, and certain members of our management. Upon consummation of the Merger in December 2010, Holdings issued common stock and preferred stock, representing 80% and 20%, respectively, of its equity value to Topco and certain of our executive officers. Following the Merger, Holdings issued additional shares of common stock and preferred stock to other members of our management.

The following table sets forth the percentages of shares of preferred stock and common stock of Holdings that are beneficially owned as of March 1528, ~~2013~~2014 by (1) each person who is known to us to be the beneficial owner of more than 5% of such shares, (2) each of our directors and named executive officers and (3) all of our directors and executive officers as a group.

5850

Name and Address of Beneficial Owner	Amount andNature of BeneficialOwnership ofPreferredStock (#)	PercentofClass (1)		Amount andNature ofBeneficial Ownership of CommonStock (#)	PercentofClass (1)
IPC / Razor LLC (including its co-investors),c/o Irving Place Capital,745 Fifth Avenue, 7th FloorNew York, NY 10151 (2)	55,~~995~~996	98.3	%	3,484,000	9498.21	%
Martin Quinn (3)	113	*		4970,~~157~~236	1.49	%
Jeffrey Kulka (4)	236	*		23,971	*
Terry A. Moody (4)	48	*		34,618	*
Terry A. Moody (5)	48	*		24,078	*
Jeffrey Kulka (5)	236	*		33,271	*
Michael A. McLain (2)(6)	—	—		2030,~~458~~688	*
James O. Egan (7)	64	*		810,000	*
Nick H. Varsam (8)	8	*		6,699	*
Nick Varsam (8)	8	*		9,799	*
Jeff Ertel	62	*		3,853	*
Jeff J. Ertel (9)	62	*		7,573	*
C. Thomas O’Grady (9)	32	*		4,000	*
Lee Qualls (10)	35	*		7,000	*
Eric K. Schwalm (9)	32	*		4,000	*
Eric K. Schwalm (11)	32	*		6,000	*
Douglas R. Korn,c/o Irving Place Capital,745 Fifth Avenue, 7th FloorNew York, NY 10151 (2)(10)	—	—		—	—
Douglas R. Korn,c/o Irving Place Capital,745 Fifth Avenue, 7th FloorNew York, NY 10151 (2)(12)	—	—		—	—
All directors and executive officers as a group (11 persons)	595	1.0	%	144,219	4.0	%
All directors and executive officers as a group (10 persons)	598	1.0	%	209,185	6.0	%

* Represents less than 1%.

(1) Based on 56,~~987~~981 shares of preferred stock and 3,~~547~~552,~~595~~435 shares of common stock outstanding as of March 1528, ~~2013~~2014, and calculated in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended.

(2)

Irving Place Capital Partners III, L.P. may be deemed a beneficial owner of the shares held by IPC/Razor LLC due to its status as Managing Member of IPC/Razor LLC. Irving Place Capital Partners III, L.P. disclaims beneficial ownership of any such shares of which it is not the holder of record. IPC Advisors III, L.P. may be deemed a beneficial owner of the shares held by Irving Place Capital Partners III, L.P. due to its status as General Partner of Irving Place Capital Partners III, L.P. IPC Advisors III, L.P. disclaims beneficial ownership of any such shares of which it is not the holder of record. JDH Management LLC may be deemed a beneficial owner of the shares held by IPC Advisors III, L.P. due to its status as General Partner of IPC Advisors III L.P. JDH Management LLC disclaims beneficial ownership of any such shares of which it is not the holder of record.

(3) Includes options to purchase 4263,~~157~~236 shares of common stock exercisable within 60 days.

(4) Includes options to purchase 931,~~299~~618 shares of common stock exercisable within 60 days.

(5) Includes options to purchase 2118,~~078~~599 shares of common stock exercisable within 60 days.

(6) Mr. McLain owns less than one percent of the outstanding equity of IPC/Razor LLC. Mr. McLain disclaims beneficial ownership of the shares of Holdings that are owned by IPC/Razor LLC, except to the extent of his pecuniary interest therein. Includes options to purchase 2030,~~458~~688 shares of common stock exercisable within 60 days.

(7) Includes options to purchase 46,000 shares of common stock exercisable within 60 days.

(8) Includes options to purchase 69,~~199~~299 shares of common stock exercisable within 60 days.

(9) Includes options to purchase 23,~~000~~720 shares of common stock exercisable within 60 days.

(10) ~~Mr.~~Includes ~~Korn~~options ~~is a Senior Managing Director of Irving Place Capital and the President of IPC / Razor LLC. Mr. Korn, by virtue of such positions, may be deemed~~ to ~~share~~purchase ~~beneficial ownership of shares owned of record by IPC / Razor LLC. However~~7,000 ~~Mr. Korn does not have investment or voting power with respect to~~ shares ~~owned by IPC / Razor LLC, and he disclaims beneficial ownership~~ of ~~such~~common ~~shares~~stock ~~except~~exercisable towithin ~~the~~60 ~~extent of his pecuniary interest therein~~days.

59(11) Includes options to purchase 4,000 shares of common stock exercisable within 60 days.

(12)

Mr. Korn is a Senior Managing Director of Irving Place Capital and the President of IPC / Razor LLC. Mr. Korn, by virtue of such positions, may be deemed to share beneficial ownership of shares owned of record by IPC / Razor LLC. However, Mr. Korn does not have investment or voting power with respect to shares owned by IPC / Razor LLC, and he disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Relationship with Irving Place Capital

Affiliates of Irving Place Capital, along with its co-investors, hold approximately 9884.21% of the outstanding ~~equity~~common stock on a fully diluted basis of Holdings, which holds 100% of our outstanding equity. Our director Douglas R. Korn is a Senior Managing Director of Irving Place Capital.

Stockholders’ Agreement

Upon consummation of the Merger, Holdings entered into a Stockholders’ Agreement with Topco and our management investors that generally contains the following provisions:

Board of Directors. The Stockholders’ Agreement requires that all holders of securities in Holdings who are parties to the Stockholders’ Agreement shall vote all of the shares of common stock of Holdings owned by them or their affiliates for, or consent in writing with respect to such shares in favor of, the election of the directors designated by Topco. Such directors may only be removed by Topco. Our management investors further agreed to execute any documents necessary in order to effectuate the foregoing, including the ability for Holdings or its nominees to vote our management investors’ shares of common stock directly.

Other rights and restrictions. The Stockholders’ Agreement also includes rights and restrictions relating to the issuance or transfer of shares, including tag-along rights and drag-along rights, preemptive rights, registration rights, repurchase rights after the termination of employment of a management investor, and certain governance provisions.

Management Services Agreement

Upon consummation of the Merger, we entered into a management services agreement with Irving Place Capital Management, L.P., an affiliate of Irving Place Capital, pursuant to which Irving Place Capital Management, L.P. agreed to provide certain advisory and management services to us. Pursuant to the management services agreement, Irving Place Capital Management, L.P. is entitled to receive an aggregate annual advisory fee equal to the greater of (i) $1.5 million or (ii) 2.5% of EBITDA (as defined in the management services agreement) of us and our subsidiaries, paid on a quarterly basis, and reimbursement for reasonable out-of-pocket expenses incurred in the ordinary course by Irving Place Capital Management, L.P. or its affiliates in connection with Irving Place Capital Management, L.P.’s obligations under the management services agreement and the services rendered prior to or subsequent to the date of the management services agreement, including fees and expenses paid to consultants, subcontractors and other third parties in connection with such obligations. In the event of a sale of all or substantially all of our assets to a third party, a change of control, whether by merger, consolidation, sale or otherwise, or, under certain circumstances, a public offering of our or any of our subsidiaries’ equity securities, we will be obligated to pay Irving Place Capital Management, L.P. an amount equal to the sum of the advisory fee that would be payable for the following four fiscal quarters.

In addition, pursuant to the management services agreement, Irving Place Capital Management, L.P. received a transaction fee of $6.5 million in connection with services provided related to the Merger and will receive in connection with any subsequent material corporate transactions we or our subsidiaries enter into, such as an equity or debt offering, acquisition, asset sale, recapitalization, merger, joint venture formation or other business combination, transaction fees equal to (A) with respect to an equity or debt offering, 1% of the gross proceeds of such offering and (B) with respect to such other material corporate transactions, 1% of the transaction value of such transaction. Furthermore, pursuant to the management services agreement, Irving Place Capital Management, L.P. will also receive fees in connection with certain strategic services, which such fees will be determined by Irving Place Capital Management, L.P., provided such fees will reduce the annual advisory fee on a dollar-for-dollar basis. The management services agreement also provides for customary exculpation, indemnification, contribution and expense reimbursement provisions in favor of Irving Place Capital Management, L.P. and its affiliates.

Consulting Agreement

In exchange for strategic advisory assistance in 2010, Holdings entered into a consulting agreement with Michael McLain, our chairman, and other consultants. The aggregate amount paid pursuant to the consulting agreement for services rendered in ~~2012~~2013 was $~~760~~883,000, of which $150,000 was paid to entities controlled by Mr. McLain. We also paid certain expenses incurred by the consultants. We reduced the fees paid to Irving Place Capital pursuant to the management services agreement by $150,000 for the fees paid to entities controlled by Mr. McLain for services rendered pursuant to the consulting agreement through December ~~2012~~2013, and, as a result, we did not incur any additional cost for such services provided by the entities controlled by Mr. McLain.

Employment Agreements

See “Executive Compensation — Employment Agreements” included in Item 11 of this Report for a description of the employment agreements with our named executive officers.

Procedures with Respect to Review and Approval of Related Person Transactions

The charter of the Audit Committee provides that the Audit Committee is responsible for, among other things, to review and approve all transactions with related persons, including executive officers and directors, as described in Item 404(a) of Regulation S-K. In furtherance of its responsibility under the charter, the Audit Committee reviews, discusses and approves any transactions or courses of dealing with related parties that are significant in size or involve terms or other aspects that differ from those that would likely be negotiated with independent parties. Our Board of Directors continues to review and approve all transactions required to be reported pursuant to Item 404(a) of Regulation S-K. Our Audit Committee considers information presented by our President and Chief Executive Officer, our Executive Vice President and Chief Financial Officer and other officers, as appropriate, regarding the proposed transaction, including whether the terms of the transaction are fair to and in the best interests of the Company, as well as in accordance with applicable law and restrictions under our equity and debt agreements.

Pursuant to the terms of our Stockholders’ Agreement, except for transactions contemplated by such agreement, Holdings will not, nor will it permit any of its subsidiaries (including the Company) to, directly or indirectly, enter into any transaction or agreement, including without limitation the purchase, sale or exchange of property or the rendering of any services, with Topco or any of its affiliates (other than Holdings and its subsidiaries and employees of Holdings and its subsidiaries), except (i) pursuant to the Management Services Agreement described above, (ii) any agreement evidencing investments to be made by Topco or its affiliates in respect of which stockholders who are employees or directors of Holdings or any of its subsidiaries are given preemptive or other participation rights, (iii) the issuance of pro-rata dividends, distributions and redemptions, (iv) transactions with portfolio companies of Topco that are in the ordinary course of business and on arm’s length terms, and if material, have been approved by a majority of disinterested directors of Holdings’ Board of Directors, (v) the payment of reasonable directors’ fees and expenses and the provision of customary indemnification to directors and officers of Holdings and its subsidiaries, (vi) transactions between Holdings and its subsidiaries and Topco and its affiliates contemplated by the Merger Agreement or (vii) any other transaction approved by a majority of disinterested directors of Holdings’ Board of Directors.

The indenture governing our Senior Secured Notes and the credit agreement governing our Working Capital Facility also contain restrictions on our ability to enter into transactions with affiliated persons.

Director Independence

The information called for by this Item 13 with respect to director independence is set forth above under the caption “The Board of Directors and Committees of the Board” included in Item 10 of this Report.

Item 14. Principal Accountant Fees and Services

During ~~2012~~2013 and ~~2011~~2012, KPMG LLP rendered services to us as our independent registered public accounting firm and charged fees for their services as follows:

Service Fees ($'s in thousands)	~~2012 Fees~~	2013 Fees		~~2011 Fees~~	2012 Fees
Audit Fees	$	~~1,009~~$	957	$	~~1,094~~$	1,009
Tax Fees	25	11		19	25
Other Fees	~~217~~	243		—	217
Total	$	~~1,251~~$	1,211	$	~~1,113~~$	1,251

Audit fees consisted of fees for the audit of our annual consolidated financial statements and review of our quarterly financial statements, as well as services normally provided in connection with statutory and regulatory filings or engagements, comfort letters, consents and assistance with and review of company documents filed with the SEC. Tax fees consisted of fees for tax compliance, tax advice and tax planning services. Other fees consisted of fees related to due diligence services related to acquisitions of businesses.

Our Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accountants. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services. The independent registered public accountants and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accountants in accordance with this pre-approval. All 2013 and 2012 services were pre-approved by the Audit Committee.

6153

the extent of services provided by the independent registered public accountants in accordance with this pre-approval. All 2012 and 2011 services were pre-approved by the Audit Committee.

PART IV

Item 15. Exhibits and Financial Statement Schedules

Financial Statements and Schedules

The following documents are filed as part of this report:

	Page
Report of Independent Registered Public Accounting Firm — KPMG LLP	6455
Consolidated Statements of Operations for years ended December 31, 2012 and 2011, December 3, 2010 through December 31, 2010, and January 1, 2010 through December 2, 2010	65
Consolidated Statements of Operations for years ended December 31, 2013, 2012 and 2011	56
Consolidated Statements of Comprehensive Income for years ended December 31, 2012 and 2011, December 3, 2010 through December 31, 2010, and January 1, 2010 through December 2, 2010	66
Consolidated Statements of Comprehensive Income for years ended December 31, 2013, 2012 and 2011	57
Consolidated Balance Sheets as of December 31, 2012 and 2011	67
Consolidated Balance Sheets as of December 31, 2013 and 2012	58
Consolidated Statements of Stockholders’ Equity for years ended December 31, 2012 and 2011, December 3, 2010 through December 31, 2010, and January 1, 2010 through December 2, 2010	68
Consolidated Statements of Stockholders’ Equity for years ended December 31, 2013, 2012 and 2011	59
Consolidated Statements of Cash Flows for the years ended December 31, 2012 and 2011, December 3, 2010 through December 31, 2010, and January 1, 2010 through December 2, 2010	69
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011	60
Notes to Consolidated Financial Statements	7061

All schedules for which provision is made in the applicable accounting regulation of the Commission are not required under the related instructions, are included in the financial statements or are inapplicable and therefore have been omitted.

Exhibits

See “Exhibit Index” immediately following “Signatures,” below, which is hereby incorporated by reference thereto.

6354

Report of Independent Registered Public Accounting Firm

~~The~~To the Board of Directors and Stockholders of Victor Technologies Group, Inc.

We have audited the accompanying consolidated balance sheets of Victor Technologies Group, Inc.: and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of operations, comprehensive income, stockholder’s equity, and cash flows for each of the years in the three‑year period ended December 31, 2013. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We have audited the accompanying consolidated balance sheets of Victor Technologies Group, Inc. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, stockholders' equity, and cash flows for the years ended December 31, 2012 and December 31, 2011 (Successor Company), the period from December 3, 2010 through December 31, 2010 (Successor Company), and the period from January 1, 2010 through December 2, 2010 (Predecessor Company). These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Victor Technologies Group, Inc., and subsidiaries as of December 31, ~~2012~~2013 and ~~2011~~2012, and the results of their operations and their cash flows for each of the years ~~ended~~in ~~December 31, 2012 and December 31, 2011 (Successor Company),~~ the three‑year period ~~from~~ended December ~~3 through December~~ 31, ~~2010 (Successor Company)~~2013, ~~and the period from January 1, 2010 through December 2, 2010 (Predecessor Company),~~ in conformity with U.S. generally accepted accounting principles.

~~(signed)~~/s/ KPMG LLP

St. Louis, Missouri

March 2731, ~~2013~~2014

6455

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)

	Successor									Predecessor
	Year Ended December 31,
	Year Ended			Year Ended			December 3, 2010throughDecember 31, 2010			January 1, 2010throughDecember 2, 2010
	2013			2012			2011
	December 31, 2012			December 31, 2011
Net sales	$	486,796		$	496,130		$	487,428
Net sales	$	496,130		$	487,428		$	28,663		$	387,238
Cost of goods sold	301,689			316,234			329,629
Cost of goods sold	316,234			329,629			21,910			256,948
Gross margin	185,107			179,896			157,799
Gross margin	179,896			157,799			6,753			130,290
Selling, general and administrative expenses	108,048			106,790			105,286
Selling, general and administrative expenses	106,790			105,286			19,044			90,142
Amortization of intangibles	6,805			6,431			6,296
Amortization of intangibles	6,431			6,296			531			2,515
Restructuring	6,263			2,477			5,404
Restructuring	2,477			5,404			—			—
Operating income	63,991			64,198			40,813
Operating income (loss)	64,198			40,813			(12,822		)	37,633
Other expense:
Other expense:
Interest, net	(33,621		)	(32,136		)	(24,535		)
Interest, net	(32,136		)	(24,535		)	(2,273		)	(20,525		)
Amortization of deferred financing costs	(2,664		)	(2,351		)	(1,711		)
Amortization of deferred financing costs	(2,351		)	(1,711		)	(170		)	(918		)
Loss on debt extinguishment	(2,463		)	—			—
Loss on debt extinguishment	—			—			—			(1,867		)
Income before income tax provision	25,243			29,711			14,567
Income (loss) before income tax provision (benefit)	29,711			14,567			(15,265		)	14,323
Income tax provision	2,916			8,086			7,826
Income tax provision (benefit)	8,086			7,826			(585		)	8,187
Net income	$	22,327		$	21,625		$	6,741
Net income (loss)	$	21,625		$	6,741		$	(14,680	)	$	6,136

See accompanying notes to consolidated financial statements.

6556

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

	Successor									Predecessor
	Year Ended December 31,
	Year Ended			Year Ended			December 3, 2010throughDecember 31, 2010			January 1, 2010throughDecember 2, 2010
	2013			2012			2011
	December 31, 2012			December 31, 2011
Net income	$	22,327		$	21,625		$	6,741
Net income (loss)	$	21,625		$	6,741		$	(14,680	)	$	6,136
Other comprehensive income (loss), net of tax:
Other comprehensive income, net of tax:
Foreign currency translation adjustments	(7,578		)	2,280			(1,385		)
Foreign currency translation adjustments	2,280			(1,385		)	2,760			1,981
Pension and post-retirement	5,472			(1,742		)	(4,337		)
Pension and post-retirement	(1,742		)	(4,337		)	681			(1,015		)
Comprehensive income	$	20,221		$	22,163		$	1,019
Comprehensive income (loss)	$	22,163		$	1,019		$	(11,239	)	$	7,102

See accompanying notes to consolidated financial statements.

6657

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	Successor
	December 31, 2013			December 31, 2012
	December 31,2012			December 31,2011
ASSETS
Current Assets:
Cash and cash equivalents	$	3230,~~379~~610		$	2032,~~856~~379
Accounts receivable, less allowance for doubtful accounts of $910 and $750	64,986			68,570
Accounts receivable, less allowance for doubtful accounts of $823 and $910	68,904			64,986
Inventory	~~100~~96,~~609~~983			96100,~~011~~609
Prepaid expenses	1213,~~492~~029			1112,~~972~~492
Deferred tax assets	2,~~423~~011			2,~~823~~423
Total current assets	212,889			200,232
Assets held for sale	1,500			—
Property, plant and equipment, net of accumulated depreciation of $26,515 and $15,073	75,894			73,861
Total current assets	213,037			212,889
Goodwill	187,123			182,429
Property, plant and equipment, net of accumulated depreciation of $35,232 and $26,515	61,627			75,894
Intangibles, net	136,788			140,265
Goodwill	195,743			187,123
Deferred financing fees	15,486			13,416
Intangibles, net	152,633			136,788
Other assets	559			502
Deferred financing fees, net	11,844			15,486
Total assets	$	628,739		$	610,705
Other assets	1,362			559
LIABILITIES AND STOCKHOLDERS' EQUITY
Total assets	$	636,246		$	628,739
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Current maturities of long-term obligations	$	1,563		$	1,715
Working Capital Facility	$	22,336		$	—
Accounts payable	29,709			29,705
Current maturities of long-term obligations	1,284			1,563
Accrued and other liabilities	36,717			43,560
Accounts payable	28,115			29,709
Accrued interest	1,479			1,081
Accrued and other liabilities	39,763			36,717
Income taxes payable	312			2,875
Accrued interest	1,389			1,479
Deferred tax liabilities	4,436			3,584
Income taxes payable	2,977			312
Total current liabilities	74,216			82,520
Deferred tax liabilities	7,115			4,436
Long-term obligations, less current maturities	357,520			263,607
Total current liabilities	102,979			74,216
Deferred tax liabilities	80,767			78,927
Long-term obligations, less current maturities	324,416			357,520
Other long-term liabilities	18,801			18,081
Deferred tax liabilities	80,718			80,767
Total liabilities	531,304			443,135
Other long-term liabilities	9,206			18,801
Stockholders' equity:
Total liabilities	517,319			531,304
Stockholder's equity:
Common stock, $0.01 par value:
Authorized -- 1,000 shares
Issued and outstanding -- 1,000 shares at December 31, 2012 and 2011	—			—
Issued and outstanding -- 1,000 shares at December 31, 2013 and 2012	—			—
Additional paid-in capital	8586,~~492~~763			~~177~~85,~~790~~492
Retained earnings (Accumulated deficit)	13,686			(7,939		)
Retained earnings	36,013			13,686
Accumulated other comprehensive income (loss)	(1,743		)	(2,281		)
Accumulated other comprehensive loss	(3,849		)	(1,743		)
Total stockholders' equity	97,435			167,570
Total stockholder's equity	118,927			97,435
Total liabilities and stockholders' equity	$	628,739		$	610,705
Total liabilities and stockholder's equity	$	636,246		$	628,739

See accompanying notes to consolidated financial statements.

6758

CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’~~STOCKHOLDER'S EQUITY

(In thousands, except per share data)

	Common Stock			Additional Paid-InCapital			Retained Earnings (Accumulated Deficit)			Accumulated Other ComprehensiveIncome (Loss)			Total Stockholder'sEquity
	Number ofShares	ParValue											~~Total Stockholders'Equity~~
Predecessor
December 31, 2009	13,540	$	135	$	188,791		$	(65,063	)	$	3,929		$	127,792
Comprehensive income	—	—		—			6,136			966			7,102
Common stock issuance-employee stock purchase plan	12	—		96			—			—			96
Exercise of stock options	969	1		70			—			—			71
Stock compensation	—	—		682			—			—			682
December 2, 2010	14,521	$	136	$	189,639		$	(58,927	)	$	4,895		$	135,743
Successor
December 3, 2010
Comprehensive income	—	$	—	$	—		$	(14,680	)	$	3,441		$	(11,239	)
Initial investment by purchasers	1,000	—		176,010			—			—			176,010
Stock compensation	—	—		25			—			—			25
December 31, 2010	1,000	$	—	$	176,035		$	(14,680	)	$	3,441		$	164,796
Comprehensive income	—	—		—			6,741			(5,722		)	1,019
Capital contribution from Holdings	—	—		1,185			—			—			1,185
Stock compensation	—	—		570			—			—			570
December 31, 2011	1,000	$	—	$	177,790		$	(7,939	)	$	(2,281	)	$	167,570
Comprehensive income	—	—		—			21,625			538			22,163
Dividend payment to Parent	—	—		(93,507		)	—			—			(93,507		)
Exercise of stock options	—	—		(39		)	—			—			(39		)
Capital contribution from Holdings	—	—		285			—			—			285
Stock compensation	—	—		963			—			—			963
December 31, 2012	1,000	$	—	$	85,492		$	13,686		$	(1,743	)	$	97,435
Comprehensive income (loss)	—	—		—			22,327			(2,106		)	20,221
Exercise of stock options	—	—		(18		)	—			—			(18		)
Stock compensation	—	—		1,289			—			—			1,289
December 31, 2013	1,000	$	—	$	86,763		$	36,013		$	(3,849	)	$	118,927

See accompanying notes to consolidated financial statements.

6859

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Successor									Predecessor
	Year Ended December 31,
	Year Ended			Year Ended			December 3, 2010throughDecember 31, 2010			January 1, 2010throughDecember 2, 2010
	2013			2012			2011
	December 31, 2012			December 31, 2011
Cash flows from operating activities:
Cash flows from operating activities:
Net income	$	22,327		$	21,625		$	6,741
Net income (loss)	$	21,625		$	6,741		$	(14,680	)	$	6,136
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	21,749			20,640			22,519
Depreciation and amortization	20,640			22,519			1,986			12,445
Deferred income taxes	(1,382		)	1,787			522
Deferred income taxes	1,787			522			(941		)	1,656
Stock compensation expense	1,289			963			570
Stock compensation expense	963			570			25			1,213
Non-cash interest expense	750			563			—
Non-cash interest expense	563			—			—			—
Gain on disposal of assets	(908		)	—			—
Restructuring costs, net of payments	(1,014		)	1,866			—			—
Loss on debt extinguishment	2,463			—			—
Loss on debt extinguishment	—			—			—			1,867
Restructuring costs, net of payments	772			(1,014		)	1,866
Changes in operating assets and liabilities:
Accounts receivable, net	4(3,~~463~~789		)	(54,~~977~~463		)	2(5,~~938~~977		)	~~(9,847~~		)
Inventory	(36,~~633~~220		)	(103,~~942~~633		)	4(10,~~223~~942		)	~~(2,875~~		)
Prepaid expenses	~~(49~~753		)	(~~895~~49		)	(~~879~~895		)	~~3,073~~
Accounts payable	(~~404~~1,485		)	~~2,929~~(404		)	(32,~~825~~929		)	~~19,344~~
Accrued interest	~~293~~(90		)	~~(8,103~~293		)	3(8,~~200~~103		)	~~(1,624~~		)
Accrued taxes	(21,~~644~~172		)	(12,~~010~~644		)	~~272~~(1,010		)	~~2,844~~
Accrued and other	(93,~~445~~060		)	(19,~~129~~445		)	24(1,129		)	~~10,896~~
Net cash provided by (used in) operating activities	33,145			7,091			(7,657		)	45,128
Net cash provided by operating activities	46,781			33,145			7,091
Cash flows from investing activities:
Capital expenditures	(129,~~551~~123		)	(1412,~~824~~551		)	(114,~~849~~824		)	~~(6,499~~		)
Acquisition of business, net of cash acquired	(3,498		)	—			—			—
Proceeds from sale of assets	9,887			—			—
Other	(655		)	(899		)	(188		)	(341		)
Acquisition of business, net of cash acquired	(34,737		)	(3,498		)	—
Net cash used in investing activities	(16,704		)	(15,723		)	(2,037		)	(6,840		)
Other	(481		)	(655		)	(899		)
Cash flows from financing activities:
Net cash used in investing activities	(34,454		)	(16,704		)	(15,723		)
Issuance of Senior Secured Notes due 2017	—			—			260,000			—
Cash flows from financing activities:
Issuance of Additional Notes of Senior Secured Notes due 2017	100,000			—			—			—
Issuance (Repayment) of Senior Secured Notes due 2017	(33,000		)	100,000			—
Senior Secured Notes discount	(~~5,200~~990		)	—(5,200		)	—			—
Dividend payment to Parent	~~(93,507~~—		)	—(93,507		)	—			—
Use of Trusteed Assets for redemption of Senior Subordinated Notes	—			~~183,685~~—			—183,685			—
Repayment of Senior Subordinated Notes	—			(176,095		)	—			—
Working Capital Facility borrowings	22,336			—			—
Net repayments of Working Capital Facility	—			—			(3,347		)	(6,296		)
Repayment of Senior Subordinated Notes				—			(176,095		)
Repayments of other long-term obligations	(21,~~347~~462		)	(12,~~443~~347		)	—(1,443		)	—
Repayment under Second Lien Facility and other	—			—			(1,240		)	(26,707		)
Deferred financing fees	(155		)	(4,421		)	—
Initial investment by purchases (excluding subscription receivables)	—			—			175,285			—
Other	425			246			1,185
Purchase of Predecessor common stock	—			—			(213,926		)	—
Net cash provided by (used in) financing activities	(12,846		)	(5,229		)	7,332
Trusteed assets	—			—			(183,672		)	—
Effect of exchange rate changes on cash and cash equivalents	(1,250		)	311			(243		)
Payment of Predecessor change in control expenditures	—			—			(7,525		)	—
Total increase (decrease) in cash and cash equivalents	(1,769		)	11,523			(1,543		)
Deferred financing fees	(4,421		)	—			(14,723		)	—
Total cash and cash equivalents beginning of period	32,379			20,856			22,399
Other	246			1,185			—			167
Total cash and cash equivalents end of period	$	30,610		$	32,379		$	20,856
Net cash provided by (used in) financing activities	(5,229		)	7,332			10,852			(32,836		)
Income taxes paid	$	4,107		$	8,975		$	8,329
Effect of exchange rate changes on cash and cash equivalents	311			(243		)	469			434
Interest paid, including $8,688 for defeased Sr. Subordinated Notes in 2011	$	33,151		$	31,230		$	33,980
Total increase (decrease) in cash and cash equivalents	11,523			(1,543		)	1,627			5,886
Total cash and cash equivalents beginning of period	20,856			22,399			20,772			14,886
Total cash and cash equivalents end of period	$	32,379		$	20,856		$	22,399		$	20,772
Income taxes paid	$	8,975		$	8,329		$	92		$	3,673
Interest paid, including $8,688 for defeased Sr Subordinated Notes in 2011	$	31,230		$	33,980		$	70		$	21,134

See accompanying notes to consolidated financial statements.

6960

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per 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, with Thermadyne surviving as a direct, wholly-owned subsidiary of Razor Holdco Inc., a Delaware corporation (“Acquisition”). (Razor Holdco Inc. was then renamed Thermadyne Technologies Holdings, Inc. (“Technologies”).)

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 9884.21% of the outstanding ~~equity~~common stock on a fully diluted basis of Holdings, and certain members of Victor Technologies' management hold the remaining equity capital.

AsVictor ~~more~~Technologies, ~~fully~~a ~~described~~Delaware incorporation, ~~Note~~is 3a ~~- Acquisitions~~designer, ~~the~~manufacturer ~~Acquisition~~and issupplier ~~being~~of ~~accounted~~cutting, ~~for~~welding inand ~~accordance~~gas ~~with~~control ~~United~~equipment ~~States~~used ~~accounting~~in ~~guidance~~various ~~for~~fabrication, ~~business~~construction ~~combinations~~ and, ~~accordingly,~~manufacturing ~~the~~operations ~~assets~~around ~~acquired~~the ~~and~~world. The ~~liabilities~~Company’s ~~assumed~~products ~~were~~are ~~recorded~~used atin ~~fair~~a ~~value~~wide asvariety of ~~December~~applications 3and industries, ~~2010. Although~~where ~~Victor~~steel ~~Technologies~~is ~~continued~~cut asand ~~the~~welded, ~~same~~including ~~legal~~steel ~~entity~~fabrication, manufacturing ~~after~~of ~~the~~transportation ~~Acquisition~~and mining equipment, ~~the~~many ~~application~~types of ~~push~~construction ~~down~~such ~~accounting~~as ~~represents~~offshore ~~the~~oil ~~termination~~and ofgas ~~the~~rigs, ~~old~~repair ~~reporting entity~~ and ~~the~~maintenance ~~creation~~ of amanufacturing ~~new~~equipment ~~one~~and facilities, and shipbuilding. InThe ~~addition~~Company designs, ~~the~~manufactures ~~basis~~and ofsells ~~presentation~~products isin ~~not~~six ~~consistent~~principal ~~between~~categories: ~~the~~(1) gas ~~successor~~equipment; ~~and~~(2) plasma ~~predecessor~~power ~~entities~~supplies, torches and ~~the~~consumable ~~financial~~parts; ~~statements~~(3) carbon ~~are~~arc ~~not~~gouging ~~presented~~products; on(4) awelding ~~comparable~~equipment; ~~basis. As~~(5) arc aaccessories, ~~result~~including torches, ~~the~~consumable ~~accompanying~~parts ~~consolidated~~and ~~statements~~accessories; ofand ~~operations,~~(6) filler ~~comprehensive~~metals ~~income,~~and ~~cash~~hardfacing ~~flows~~alloys. The Company markets its products under a portfolio of brands, ~~and~~many ~~stockholders’~~of ~~equity~~which are ~~presented~~the ~~for~~leading ~~two~~brand ~~different~~in ~~reporting~~their ~~entities~~industry, ~~for~~including ~~the~~Victor®, ~~year~~Victor® ~~ended~~Thermal ~~December~~Dynamics®, 31Victor® Arcair®, ~~2010: Predecessor~~Victor® Turbo Torch®, ~~which~~Tweco®, ~~relates~~Thermal toArc®, ~~the~~Stoody®, ~~period~~Firepower® ~~preceding~~and ~~the~~Cigweld®. We ~~Acquisition~~primarily ~~(prior~~sell toour ~~December~~products through over 3,300 ~~2010),~~industrial ~~and~~distributor ~~Successor~~accounts, ~~the~~including ~~period~~large ~~succeeding~~industrial ~~the~~gas ~~Acquisition~~manufacturers, ~~respectively~~in over 50 countries.

Victor Technologies, a Delaware corporation, is a designer, manufacturer and supplier of cutting, welding and gas control equipment used in various fabrication, construction and manufacturing operations around the world. 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 projects and consumable parts; (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®.

2. Significant Accounting Policies

Principles of Consolidation. The consolidated financial statements include the Company’s accounts and those of its subsidiaries. ~~All~~Intercompany ~~material intercompany~~ balances and transactions have been eliminated in consolidation.

Reclassifications. The costs of certain purchasing functions previously included in selling, general, and administrative expenses have been reclassified to cost of goods sold in the amounts of $93 for the Successor period from December 3, 2010 through December 31, 2010 and $1,566 for the Predecessor period from January 1, 2010 through December 2, 2010 to conform to current year presentation.

Estimates. Preparation of financial statements in conformity with U.S. generally accepted accounting principles requires certain estimates and assumptions to be made that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Any significant unanticipated changes in business or market conditions that vary from current expectations could have an impact on the fair market value of assets and result in a potential impairment loss.

Cash Equivalents. All highly liquid investments purchased with a maturity of three months or less are considered to be cash equivalents.

Accounts Receivable. Accounts receivable are recorded at the amounts invoiced to customers, less an allowance for doubtful accounts. Management estimates the allowance based on a review of the portfolio taking into consideration historical collection patterns, the economic climate and aging statistics based on contractual due dates. Accounts are written off to the allowance once collection efforts are exhausted.

70Inventories. Inventories in our domestic subsidiaries are valued at the lower of cost, using the last-in, first-out (“LIFO”) method, or current estimated market. Inventories in our international subsidiaries are valued at the lower of cost, using the first-in, first-out ("FIFO") method, or current estimated market.

~~Inventories~~Property, Plant and Equipment. ~~Inventories~~Property, plant and equipment acquired in connection with acquisitions are ~~valued~~initially recorded at ~~the~~fair ~~lower~~market ofvalue; ~~cost~~all orother ~~market.~~additions ~~Cost~~are recorded at cost. Depreciation is ~~determined~~calculated using the ~~last~~straight-line method. The average estimated lives utilized in calculating depreciation are as follows: buildings and improvements— 10 to 25 years; and machinery and equipment— 3 to 10 years. Property, ~~first~~plant and equipment recorded under capital leases are depreciated based on the lesser of the lease term or the underlying asset’s useful life. Impairment losses are recorded on long-~~out~~lived ~~(“LIFO”)~~assets ~~method~~when ~~for~~events ~~domestic~~and ~~subsidiaries~~circumstances indicate the assets might be impaired and the ~~first-in,~~undiscounted ~~first-out~~cash ~~(“FIFO”)~~flows ~~method~~estimated ~~for~~to ~~foreign~~be ~~subsidiaries~~generated by those assets are less than their carrying amounts. Depreciation ~~Inventories~~expense ~~were~~was ~~recorded~~$12,280, at$11,858 ~~fair~~and ~~value~~$14,512 atfor the ~~Acquisition~~years ~~Date~~ended December 31, 2013, 2012 and 2011, respectively.

~~Property,~~Deferred ~~Plant~~Financing ~~and Equipment~~Costs. ~~Prior~~Loan toorigination ~~the~~fees ~~Acquisition Date, property, plant~~ and ~~equipment~~other ~~were~~costs ~~historically~~incurred ~~carried~~arranging ~~at cost and depreciated using the straight~~long-~~line~~term ~~method.~~financing Atare ~~the~~capitalized ~~Acquisition~~as ~~Date,~~deferred ~~property,~~financing ~~plant~~costs and ~~equipment~~amortized ~~were adjusted to fair value based~~ on ~~the premise of continued use. Management, with assistance from~~ an ~~asset~~effective ~~appraisal~~interest ~~firm,~~method ~~estimated~~over the ~~fair~~term ~~value~~ of ~~equipment by determining new reproduction cost by utilizing~~ the ~~historical~~credit ~~original cost of each equipment asset and adjusting cost to the Acquisition Date using industry trend factors and consumer price indices~~agreement. Once new reproduction cost was established, considerations were made for all forms of depreciation, which reflected the estimated economic life of the asset, remaining economic useful life and used equipment trends. Land was valued based on comparable sales. ~~The~~Deferred ~~average~~financing ~~estimated~~costs lives utilized in calculating depreciation are as follows: buildings and improvements— 10 to 25 years; and machinery and equipment— 3 to 10 years. Property, plant and equipment recorded under capital leases are depreciated based on the lesser of the lease term or the underlying asset’s useful life. Impairment losses are recorded on long-lived assets when events and circumstances indicate the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. Depreciation expense was $11,858 and $14,512 for the years ended December 31, 2012 and 2011, respectively, $1,285 for the period of December 3, 2010 to December 31, 2010, and $9,245 for the period of January 1, 2010 through December 2, 2010.

Deferred Financing Costs. Loan origination fees and other costs incurred arranging long-term financing are capitalized as deferred financing costs and amortized on an effective interest method over the term of the credit agreement. Deferred financing costs totaled $19,718 and $15,297 at December 31, 2012 and 2011, respectively, less related accumulated amortization of $4,232 and $1,881.61

~~Goodwill~~totaled ~~and~~$18,205 ~~Intangibles. Goodwill~~ and ~~trademarks~~$19,718 ~~have~~at ~~indefinite~~December ~~lives~~31, ~~with~~2013 ~~the~~and ~~exception of trademarks obtained in the Robotronic Oy acquisition in~~ 2012~~. Other~~, ~~intangibles assets~~respectively, ~~including~~less ~~intangibles~~related ~~obtained~~accumulated asamortization ~~part~~ of ~~the Robotronic Oy acquisition~~$6,361 ~~are~~and ~~amortized on a straight-line basis over their estimated useful lives~~$4, ~~which range from 8 to 20 years~~232.

~~For~~Goodwill ~~both~~and ~~the~~Intangibles. Goodwill ~~Acquisition~~and ~~for~~trademarks ~~the~~have ~~Successor~~indefinite ~~and~~lives, with the ~~acquisition~~exception of ~~Robotronic~~trademarks ~~Oy,~~obtained ~~goodwill~~in ~~was~~the ~~calculated~~2013 asand of2012 ~~the~~acquisitions ~~date~~ of ~~the~~Gas-Arc ~~acquisition,~~and ~~measured~~Robotronic asOy, ~~the~~respectively. ~~excess~~Other ofintangibles ~~the~~assets ~~consideration~~are ~~transferred~~amortized ~~over~~on ~~the~~a ~~net~~straight-line ofbasis ~~the~~over ~~Acquisition~~their ~~date~~estimated ~~amounts~~useful oflives, ~~the~~which ~~identifiable~~range ~~assets~~from ~~(including~~3 ~~intangible~~to ~~assets)~~20 ~~acquired~~years. See ~~and~~Note ~~the~~7 ~~liabilities~~– ~~assumed~~Intangible Assets.

~~Goodwill~~For ~~and~~acquisitions, ~~trademarks~~goodwill ~~are~~is ~~tested~~calculated ~~for~~as ~~impairment~~of ~~annually,~~the asdate of ~~December~~the ~~1st~~acquisition, ormeasured ~~more~~as ~~frequently~~the ifexcess ~~events~~of ~~occur~~the orconsideration ~~circumstances~~transferred ~~change~~over ~~that would, more likely than not, reduce~~ the fair value of the ~~reporting~~net ~~unit~~identifiable ~~below~~assets ~~its~~(including ~~carrying~~intangible ~~value. The~~assets) ~~impairment~~acquired ~~analysis~~and isthe ~~performed~~liabilities ~~on a consolidated enterprise level based on one reporting unit~~assumed. ~~The Company has determined that no impairment of goodwill existed at December 1, 2012.~~

~~Trademarks~~Goodwill ~~calculated~~and trademarks are tested for impairment annually, as of ~~the~~December ~~Acquisition~~1st, ~~Date~~or ~~are~~more ~~generally~~frequently ~~associated~~if ~~with~~events ~~the~~occur ~~Company’s~~or ~~product~~circumstances ~~brands~~change that would, ~~and~~more ~~cash~~likely ~~flows~~than ~~associated~~not, ~~with~~reduce ~~these~~the ~~products~~fair ~~are~~value ~~expected~~of tothe ~~continue~~reporting ~~indefinitely~~unit below its carrying value. The ~~Company~~impairment ~~has~~analysis ~~placed~~is noperformed ~~limit~~ on ~~the~~a ~~end~~consolidated ofenterprise ~~these~~level ~~trademarks’~~based ~~useful~~on ~~lives~~one reporting unit. The Company has determined that no impairment of ~~these~~goodwill or trademarks existed at December 1, ~~2012~~2013. ~~See Note 7 – Intangible Assets.~~

Derivatives and Hedging Activities. The Company uses foreign exchange rate derivative instruments in order to reduce exposure to inherent foreign currency fluctuations. While management believes each of these instruments help mitigate various market risks, they are not designated and accounted for as hedges under ASC 815, Derivatives & Hedging, as a result of the extensive recordkeeping requirements of this statement. Accordingly, the gains and losses associated with the change in fair value of similar currency instruments are recorded to selling, general and administrative expense in the period of change. The derivatives are subject to a master netting agreement whereby each currency group of derivatives is netted and the remaining balance, or fair value, is placed on the Consolidated Balance Sheet. The fair value of a derivative asset is recognized within prepaid expenses and other assets, while the fair value of derivative liabilities is recognized within accrued and other liabilities.

Debt. The carrying values of the obligations outstanding under the Working Capital Facility and other long-term obligations, excluding the Senior Secured Notes, approximate fair values since these obligations are fully secured and have varying interest charges based on current market rates. The fair value of the Company’s Senior Secured Notes was ~~106~~107.50% and ~~103~~106.5% of face value at December 31, ~~2012~~2013 and ~~2011~~2012, respectively. The fair value of the Senior Secured Notes is measured using the last available trade in each respective year.

Income Taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the carrying value of assets and liabilities for financial reporting purposes and their tax basis. The measurement of current and deferred tax assets and liabilities is based on provisions of the enacted tax law. The effects of future changes in tax laws or rates are not anticipated. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that are not expected to be realized. The Company’s effective tax rate includes the impact of providing U.S. taxes for most of the undistributed foreign earnings because of the applicability of I.R.C. Section 956 for earnings of foreign entities which guarantee the indebtedness of a U.S. parent. See Note 14 – Income Taxes to the consolidated financial statements.

71Stock Option Accounting. All share-based payments to employees, including grants of employee stock options, are recognized in the Statements of Operations based on their fair values. See Note 16 – Stock Options and Stock-Based Compensation to the consolidated financial statements.

Stock Option Accounting. All share-based payments to employees, including grants of employee stock options, are recognized in the Statements of Operations based on their fair values. The Company utilizes the modified prospective method in which compensation cost is recognized beginning with the effective date (a) based on the requirements for all share-based payments granted after the effective date and (b) based on the requirements for all awards granted to employees prior to the effective date that remain unvested on the effective date. See Note 16 – Stock Options and Stock-Based Compensation to the consolidated financial statements.

Revenue Recognition. The Company sells its products with standard terms of sale of FOB shipping point or FOB destination. Revenue is recognized when persuasive evidence of an arrangement exists, the seller’s price is fixed and determinable, and collectability is reasonably assured.

The Company sponsors a number of annual incentive programs to augment distributor sales efforts including certain rebate programs and sales and market share growth incentive programs. Rebate programs established by the Company are communicated to distributors at the beginning of the year and are earned by qualifying distributors based on increases in purchases of identified product categories and based on relative market share of the Company’s products in the distributor’s service area. The estimated rebate costs are accrued throughout the year and recorded as a reduction of revenue. Rebates are paid periodically during the year.

Terms of sale generally include 30-day payment terms, return provisions and standard warranties for which reserves, based upon estimated warranty liabilities from historical experience, have been recorded. For a product that is returned due to issues outside the scope of the Company’s warranty agreements, restocking charges will generally be assessed.

One customer comprised 11%, 10% and 12% of the Company’s global sales for the years ended December 31, 2013, 2012 and 2011, respectively~~, and 11% of the Company’s global sales for the period from December 3, 2010 through December 31, 2010 and the period from January 1, 2010 through December 2, 2010, respectively~~. The Company’s top five distributors comprised 27% , 27% and 29% of its global net sales for the years ended December 31, 2013, 2012 and 2011, respectively~~, and 26% and 28% for the period from December 3, 2010 through December 31, 2010 and the period from January 1, 2010 through December 2, 2010, respectively~~.

Product Warranty Programs. Various products are sold with product warranty programs. Provisions for warranty programs are made as the products are sold and adjusted periodically based on current estimates of anticipated warranty costs. The following table provides the activity in the warranty accrual:

	Successor								Predecessor
	Year EndedDecember 31, 2012			Year EndedDecember 31, 2011			December 3, 2010throughDecember 31, 2010		January 1, 2010throughDecember 2, 2010
Balance at beginning of period	$	4,600		$	3,200		$	3,000	$	2,300
Charged to expense	4,018			5,370			200		4,267
Warranty payments	(4,118		)	(3,970		)	—		(3,567		)
Balance at end of period	$	4,500		$	4,600		$	3,200	$	3,000

Research and Development. Research and development is conducted in connection with new product development and includes costs of materials used in the development process and allocated engineering personnel costs. Research and development costs were approximately $4,600 and $4,200 for the years ended December 31, 2012 and 2011, respectively, approximately $300 for the period from December 3, 2010 through December 31, 2010, and approximately $3,700 for the period from January 1, 2010 through December 2, 2010. These costs are reflected in selling, general & administrative expenses as incurred.



	Year Ended December 31,
	2013			2012			2011
Balance at beginning of period	$	4,500		$	4,600		$	3,200
Charged to expense	4,058			4,018			5,370
Warranty payments	(3,966		)	(4,118		)	(3,970		)
Balance at end of period	$	4,592		$	4,500		$	4,600

~~Foreign~~Research ~~Currency~~and ~~Translation~~Development. ~~Local~~Research ~~currencies~~and ~~have~~development ~~been~~is ~~designated~~conducted asin ~~the~~connection ~~functional~~with ~~currencies~~new ~~for~~product ~~all~~development ~~subsidiaries.~~and ~~Accordingly,~~includes ~~assets~~costs ~~and~~of ~~liabilities~~materials ofused in the ~~foreign~~development ~~subsidiaries~~process ~~are~~and ~~translated~~allocated atengineering ~~the~~personnel ~~rates~~costs. Research ofand ~~exchange~~development atcosts were approximately $4,500, $4,600 and $4,200 for the ~~balance~~years ~~sheet~~ended ~~dates.~~December ~~Income~~31, ~~and~~2013, ~~expense~~2012 ~~items~~and of2011, ~~these~~respectively. These ~~subsidiaries~~costs are ~~translated~~reflected atin ~~average~~selling, ~~monthly~~general & ~~rates~~administrative ofexpenses ~~exchange~~as incurred.

~~Accumulated~~Foreign ~~Other~~Currency ~~Comprehensive Income~~Translation. ~~Accumulated~~Local ~~other~~currencies ~~comprehensive~~have ~~income~~been ~~refers~~designated toas ~~net~~the ~~income~~functional ~~adjusted~~currencies byfor ~~gains~~all ~~and~~operating ~~losses~~subsidiaries. ~~that~~Accordingly, ~~according~~assets toand ~~GAAP,~~liabilities ~~are~~of ~~excluded~~the ~~from~~international ~~net~~subsidiaries ~~income and~~ are ~~instead~~translated ~~included~~at ~~in stockholders’ equity in~~ the ~~consolidated~~rates ~~balance~~of ~~sheets. As~~exchange ~~shown~~at in the ~~Statement~~balance ofsheet ~~Comprehensive~~dates. Income, ~~these items include foreign currency translation adjustments~~ and ~~pension~~expense ~~and~~items ~~post-retirement~~of ~~benefit plan adjustments. For the year ended December 31, 2012,~~ these ~~amounts~~subsidiaries are ~~net~~translated ofat ~~deferred~~average ~~income~~monthly ~~taxes~~rates of ~~$1,397 for cumulative foreign currency translation gains and $1,068 for pension and post-retirement benefit plan loss~~exchange.

Accumulated Other Comprehensive Income. Accumulated other comprehensive income refers to net income adjusted by gains and losses that, according to GAAP, are excluded from net income and are instead included in stockholders’ equity in the consolidated balance sheets. As shown in the Statement of Comprehensive Income, these items include foreign currency translation adjustments and pension and post-retirement benefit plan adjustments. For the year ended December 31, 2013, these amounts are net of deferred income taxes of $4,646 for cumulative foreign currency translation loss and $3,354 for pension and post-retirement benefit plan gain.

Effect of New Accounting Standards

~~Indefinite-Lived Intangible Assets.~~ In July ~~2012~~2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. ~~2012~~2013-0211, ~~Testing~~"Income ~~Indefinite~~Taxes (Topic 740)" ("ASU 2013-~~Lived~~11"). ASU ~~Intangible~~2013-11 ~~Assets~~is ~~for~~intended ~~Impairment~~to clarify the presentation of an unrecognized tax benefit when a net operating loss carryforward, toa ~~permit~~similar tax loss, or a tax credit carryforward exists. An unrecognized tax benefit, or a portion of an ~~entity~~unrecognized tax benefit, should be presented in the financial statements as a reduction to ~~make~~a deferred tax asset for a ~~qualitative~~net ~~assessment~~operating ofloss ~~whether~~carryforward, ita similar tax loss, or a tax credit carryforward, except in certain circumstances. To the extent a carryforward is ~~more~~not ~~likely~~available ~~than~~at the reporting date or the tax law of the applicable jurisdiction does not ~~that~~require anthe ~~indefinite-lived~~entity ~~intangible~~to use, and the entity does not intend to use, the deferred tax asset's ~~fair~~for ~~value~~such ispurpose, ~~less~~the ~~than~~unrecognized ~~its~~tax ~~carrying~~benefit ~~amount~~should ~~before~~be ~~applying~~presented ain ~~quantitative~~the ~~impairment~~financial ~~test~~statements as a liability. ASU ~~2012~~No. 2013-0211 is ~~intended~~effective prospectively to ~~simplify~~all ~~how~~unrecognized antax ~~entity~~benefits ~~tests~~that exists at the effective date for ~~indefinite-lived~~fiscal ~~intangible~~years ~~asset~~beginning ~~impairment~~after ~~and~~December 15, 2013, with early adoption permitted. The adoption of ASU 2013-11 is not expected to ~~improve~~have ~~consistency~~a material impact on the Company's consolidated financial statements.

72In February 2013, the FASB issued ASU No. 2013-02, "Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." ASU 2013-02 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.

in impairment testing guidance. This standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 with early adoption permitted. For the indefinite-lived intangibles assets impairment performed as of December 1, 2012, the Company opted to use a quantitative impairment test instead of the qualitative assessment alternative.

The Company has determined that all recently issued accounting pronouncements will not have a material impact on its consolidated financial position, results of operations and cash flows, or do not apply to its operations.

3. Acquisitions

~~2010~~Gas-Arc ~~Activity~~Group Limited. On October 31, 2013, the Company acquired all of the outstanding share capital of Gas Arc Group Ltd., ("Gas-Arc"), a leader in the design and manufacturing of specialty gas and industrial gas control products based in the United Kingdom. The acquisition price was $39,015, of which $32,831 was paid in October 2013, and the remainder paid in January 2014, of $6,184. The acquisition of Gas-Arc enables us to expand our presence in Europe and leverage strengths in the high purity and medical gas control markets globally.

OnThe acquisition is accounted for in accordance with United States accounting guidance for business combinations. Accordingly, the ~~closing~~assets ~~date~~acquired and liabilities assumed were recorded at fair value as of October 31, 2013. Transaction related fees and expenditures of $1,871, incurred for advisory, legal, valuation and other professional services were recorded in selling, general and administrative expenses in the ~~Merger~~Consolidated Financial Statements for the year ended December 31, 2013. The preliminary allocation of purchase price to the ~~following~~assets ~~events~~and ~~occurred:~~liabilities, as of December 31, 2013 has been determined by management with the assistance of externally prepared valuations and studies that have yet to be finalized. Accordingly, the assets acquired and liabilities assumed, as detailed below, are subject to adjustment once the detailed analysis are completed. The adjustments, if any, arising out of the finalization of the allocation of the purchase price will not impact cash flow.



	October 31, 2013
Accounts receivable	$	2,258
Inventory	4,814
Prepaid expenses and other	342
Property, plant and equipment	4,767
Goodwill	13,504
Intangibles	21,506
Accounts payable	(797		)
Accrued and other liabilities	(7,379		)
Net consideration	$	39,015

•The ~~Successor~~Company ~~received~~recognized $~~176~~13,~~010~~504 inof ~~equity~~goodwill ~~contributions~~ and ~~became~~$21,506 aof ~~wholly-owned~~other ~~subsidiary~~intangible ofassets ~~Holdings~~associated with the acquisition. The goodwill is not expected to be deductible for tax purposes. The following table summarizes Intangible assets acquired, excluding Goodwill, as of October 31, 2013:

• Successor entered into an amended asset-backed credit facility (the “Working Capital Facility”) to provide for borrowings not to exceed $60,000 (including up to $10,000 for letters of credit) of borrowings, subject to the borrowing base capacity of certain customer receivables and inventories.



	October 31, 2013
Customer relationships	$	20,544
Tradenames	481
Non-compete agreement	481
Total amortizable intangible assets	$	21,506

~~• Successor issued $260,000 aggregate principal amount of 9% Senior Secured Notes due 2017.~~ The ~~Senior~~Company ~~Secured~~estimated ~~Notes~~that ~~are~~the ~~guaranteed~~customer onrelationships, atradenames ~~secured~~and ~~basis~~non-compete byagreement ~~substantially~~have ~~all~~useful lives of ~~the~~twenty-years, ~~Company’s~~four-years ~~current~~ and ~~future~~three-years, ~~assets~~respectively.

•Unaudited APro ~~notice~~Forma ofFinancial redemption was issued on December 3, 2010 for the $172,327 outstanding aggregate principal amount of 9¼% Senior Subordinated Notes due 2014, and the Company irrevocably deposited $183,672 with the Trustee to redeem the Senior Subordinated Notes at 101.542% and pay the related accrued interest due on February 1, 2011.Information

The ~~$15~~acquisition ~~per~~of ~~share~~Gas-Arc ~~fair~~was ~~value~~accounted for using the acquisition method of accounting and accordingly, the ~~consideration~~Consolidated ~~given~~Financial ~~for~~Statements include the ~~outstanding~~financial ~~equity~~position onand results of operations from the date of acquisition. The following unaudited proforma financial information presents the ~~Acquisition~~Company's ~~represents~~consolidated financial information assuming the ~~per~~acquisition ~~share~~of ~~purchase~~Gas-Arc ~~price~~had ~~agreed~~taken ~~upon~~place byon ~~Victor~~January ~~Technologies~~1, ~~and~~2012. For ~~affiliates~~the of12-months ~~Irving~~ended ~~Place~~December ~~Capital~~31, as2012, ~~set~~Gas-Arc ~~forth~~had innet sales of $13,557 and net income of $1,483. For the ~~Merger~~10-months ~~Agreement~~ended, and ~~paid~~preceding inthe ~~cash~~October by31, ~~IPC~~2013 ~~solely~~date ~~for~~of ~~purposes~~acquisition, Gas-Arc had net sales of $11,534 and net income of $3,941. These amounts are presented in accordance with GAAP, consistent with the ~~business~~Company's ~~combination~~accounting policies.

The Acquisition resulted in a 100% change in ownership of Victor Technologies and is accounted for in accordance with United States accounting guidance for business combinations. Accordingly, the assets acquired and liabilities assumed were recorded at fair value as of December 3, 2010. The provisional amounts recognized for assets acquired and liabilities assumed as of December 3, 2010 was determined by management with the assistance of an externally prepared valuation study of inventories, property, plant and equipment, intangible assets, goodwill, and capital and operating leases. These provisional amounts were updated in 2011 upon the completion of such study and the determination of other facts impacting fair value estimates. The adjustments arising out of the finalization of the amounts recognized for assets acquired and liabilities assumed do not impact cash flows. However, such adjustments resulted in immaterial decreases to amortization and increases to income (loss) from continuing operations before income tax provision (benefit) and discontinued operations, income tax provision (benefit) and net income (loss) in 2011.



	Year Ended December 31,
	2013		2012
Net sales	$	498,330	$	509,687
Net income	26,268		23,108

The following table summarizes the acquisition costs, including professional fees and other related costs, and the assets acquired and liabilities assumed, based on their fair values:

At December 3, 2010:

Purchase price of outstanding equity			$	213,926
Acquisition related costs:
Included in selling, general and administrative expenses:
December 3 through December 31, 2010			$	12,111	(a)
January 1 through December 2, 2010			4,763		(a)
Deferred bond issuance fees			15,297
Total acquisition related costs			$	32,171
Allocation of purchase price:
Total current assets, including cash of $20,772 and deferred tax assets of $2,863			$	187,147	(b)
Property, plant and equipment			73,792
Intangible assets:
Corporate trademarks	$	19,341
Intellectual property bundles	77,476
Customer relationships	49,188
Total intangibles			146,005
Goodwill			180,596		(c)
Other assets including deferred tax asset of $414			1,273
Total assets acquired			$	588,813
Total current liabilities excluding current portion of debt and deferred tax liability			87,433		(d)
Senior Subordinated Notes due 2014, including call premium			177,066
Working capital facility due 2012			3,347
Capital leases			8,345
Deferred tax liability			84,231
Other long-term liabilities			15,039
Total liabilities assumed			375,461
Net assets acquired			$	213,352

(b) Total current assets includes cash of $20,772, accounts receivable of $67,756, inventories of $88,869, and deferred tax assets of $2,863.

(d) Total current liabilities excluding current portion of debt and deferred tax liability includes accounts payable of $30,962 and accrued liabilities of $46,746.

In 2011, the Company received a revised version of the externally prepared valuation study of inventories, property, plant and equipment, intangible assets, goodwill, and capital and operating leases. As a result, the provisional amounts of assets acquired and liabilities assumed at the acquisition date were updated in 2011 and, accordingly, the 2010 amounts in the Balance Sheet were retrospectively adjusted. The adjustments arising out of the finalization of the amounts recognized for assets acquired and liabilities assumed do not impact cash flows. The following table summarizes the final valuation adjustments made in 2011 to the assets acquired and liabilities assumed based on their fair values:

	December 3, 2010 Valuation
	Original		Revised		Adjustment
Assets acquired:
Property, plant and equipment
Land	$	15,352	$	13,894	$	(1,458	)
Goodwill	164,678		180,596		15,918
Intangible assets
Customer relationships	54,920		49,188		(5,732		)
Intellectual property bundles	81,380		77,476		(3,904		)
Trademarks	19,079		19,341		262
Deferred financing fees	14,723		15,297		574
Liabilities assumed:
Total current liabilities excluding current portion of debt and deferred tax liability	84,831		87,433		2,602
Deferred tax liability	81,173		84,231		3,058

Supplemental pro forma financial information – The following supplemental unaudited pro forma results of operations assumes the Acquisition and the related financing transactions described above (the “Transactions”) occurred on January 1, 2010 for each period presented. This unaudited pro forma information should not be relied upon as indicative of the historical results that would have been obtained if the Transactions had occurred on that date. Pro forma amounts reflect the adjusted results had the Transactions occurred at January 1, 2010 with adjustments primarily to interest, depreciation, amortization of certain intangible assets and deferred financing fees, to eliminate the last-in first-out (“LIFO”) adjustments, the turnaround impact of the fair value adjustments to foreign inventories, and the related adjustments of income tax expenses. Additionally, the 2010 pro forma information also excludes the acquisition related costs incurred in 2010 but includes the full year impact of the new IPC management fees.

Combined Period twelve months ended December 31, 2010 (Unaudited):	Pro Forma
Net sales	$	415,901
Net loss	(3,009		)

2012 Activity

Robotronic Oy. On July 13, 2012, the Company acquired all of the capital stock of Robotronic Oy, the parent company of ProMotion Controls, Inc., a leading maker of advanced, intelligent CNC controllers used in shape-cutting machines. Cash paid at the time of purchase was $3,498. The total purchase price, net of cash acquired and including the outstanding debt of the companies acquired, as well as an earn-out provision based on specified sales targets, was $4,493. The acquisition was financed with cash on hand. The process of assigning fair value to the assets acquired and liabilities assumed was complete as of December 31, 2012. The Company recognized $3,211 of goodwill associated with the acquisition. The goodwill is not expected to be deductible for tax purposes.

4. Allowance for Doubtful Accounts

The composition of allowance for doubtful accounts at December 31 is as follows:

	Successor								Predecessor
	Year EndedDecember 31, 2012			Year EndedDecember 31, 2011		December 3, 2010throughDecember 31, 2010			January 1, 2010throughDecember 2, 2010
Balance, beginning of period	$	750		$	400	$	400		$	400
Provision (Recovery)	297			266		(20		)	(105		)
Net Write-offs and Adjustments	(137		)	84		20			105
Balance, end of period	$	910		$	750	$	400		$	400

Due to the current economic situation in Europe, the Company has increased its allowance for doubtful accounts as the collection of a portion of the receivables balance in this region has been determined to be at risk. The Company, however, is not aware of any material European-based customer balances that will not be collected.



	Year Ended December 31, 2013			Year Ended December 31, 2012			Year Ended December 31, 2011
Balance, beginning of period	$	910		$	750		$	400
Provision (Recovery)	206			297			266
Net Write-offs and Adjustments	(293		)	(137		)	84
Balance, end of period	$	823		$	910		$	750

In 2009, the Company wrote off a receivable from a Venezuelan-based customer in the amount of $1,287. The Company received $63, $649 and $200 recovery of this receivable in 2012, 2011 and 2010, respectively.

5. Inventories

The composition of inventories at December 31 is as follows:

	December 31,2012		December 31,2011
	December 31, 2013		December 31, 2012
Raw materials and component parts	$	3430,~~919~~004	$	3234,~~009~~919
Work-in-process	4,~~192~~248		4,~~916~~192
Finished goods	60,~~911~~699		6160,~~795~~911
Subtotal	~~100~~94,~~022~~951		98100,~~720~~022
LIFO credit (reserve)	587		(2,709		)
LIFO credit	2,032		587
Total	$	~~100~~96,~~609~~983	$	96100,~~011~~609

The Company uses the Dollar-Value LIFO method to calculate the LIFO ~~reserve~~adjustment. Under this method, the current year calculation recognized an inventory balance greater than the FIFO method primarily due to a decline in raw material prices below base year (December 2010) values. The Company used the Inventory Price Index Computation (IPIC) method for tax purposes as required by IRS regulations. The base year for tax purposes ranges from 1988 to 1990, resulting in a tax LIFO reserve of $18,~~698~~495.

The carrying value of inventories accounted for by the last-in, first-out (LIFO) inventory method exclusive of the LIFO reserve ~~was $76,819~~ at December 31, ~~2012~~2013 and 2012 was $7470,~~885~~109 atand ~~December 31~~$76,819, ~~2011~~respectively. The remaining inventory amounts are held in ~~foreign~~international locations and accounted for using the first-in first-out method.

6. Property, Plant, and Equipment

The composition of property, plant and equipment is as follows:

	December 31,2012			December 31,2011
	December 31, 2013			December 31, 2012
Land	$	~~14,580~~616		$	14,~~091~~580
Building	167,~~787~~064			1116,~~638~~787
Machinery and equipment	6686,~~242~~094			5366,~~473~~242
Construction in progress	43,~~800~~085			94,~~732~~800
Subtotal	~~102~~96,~~409~~859			88102,~~934~~409
Accumulated depreciation	(2635,~~515~~232		)	(1526,~~073~~515		)
Total	$	7561,~~894~~627		$	7375,~~861~~894

Assets recorded under capitalized leases were $64,~~769~~703 ($31,~~337~~639 net of accumulated depreciation) and $6,~~651~~769 ($43,~~653~~337 net of accumulated depreciation) at December 31, ~~2012~~2013 and ~~2011~~2012, respectively.

76In the fourth quarter of 2013, we sold a facility in Australia. The net proceeds from the sale were $9,887, resulting in a pre-tax gain of $908.

7. Intangible Assets

The composition of intangible assets is as follows:

	December 31,2012			December 31,2011
Amortizable intangible assets:
Customer relationships	$	49,546		$	49,188
Intellectual property bundles	77,476			77,476
Patents	1,742			1,087
Developed technology	1,277			—
Trademarks	664			—
Subtotal	130,705			127,751
Accumulated amortization	(13,258		)	(6,827		)
Total amortizable intangible assets	$	117,447		$	120,924
Indefinite-lived intangible assets:
Goodwill	$	187,123		$	182,429
Trademarks	19,341			19,341
Total indefinite-lived intangible assets	$	206,464		$	201,770

During the year ended December 31, 2012, the Company added $2,253 of acquired intangibles assets, including customer relationships, developed technology and trademarks, related to the Robotronic Oy acquisition. All of these intangibles were determined to have a useful life of 20 years.



	December 31, 2013			December 31, 2012
Amortizable intangible assets:
Customer relationships	$	70,708		$	49,546
Intellectual property bundles	77,476			77,476
Patents	2,223			1,742
Non-compete agreement	495			—
Developed technology	1,271			1,277
Trademarks	1,187			664
Subtotal	153,360			130,705
Accumulated amortization	(20,068		)	(13,258		)
Total amortizable intangible assets	$	133,292		$	117,447

Indefinite-lived intangible assets:
Goodwill	$	195,743		$	187,123
Trademarks	19,341			19,341
Total indefinite-lived intangible assets	$	215,084		$	206,464

InDuring the ~~fourth~~years ~~quarter~~ended ofDecember ~~2011~~31, ~~the~~2013 ~~provisional amounts of assets acquired~~ and ~~liabilities~~2012, ~~assumed at~~ the ~~Acquisition~~Company ~~Date~~added ~~were~~intangibles ~~updated~~assets asrelated ~~the~~to ~~Company~~acquisitions ~~received a revised version~~ of ~~the~~$21,576 ~~externally~~and ~~prepared~~$2,253, ~~valuation study~~respectively. As The aintangibles ~~result,~~acquired ~~the~~consist ~~intangible~~of ~~assets~~customer ~~values~~relationships, ~~were~~developed ~~amended~~technology, astrademarks ~~shown~~and ina ~~Note~~covenant 3not –to ~~Acquisitions~~compete.

The Company recorded amortization expense for intangibles of $6,805, $6,431 and $6,296 for the years ended December 31, 2013, 2012 and 2011, respectively. Amortization expense for each of the next five fiscal years is expected to approximate $7,812.

Customer Relationships

The Company sells primarily to distributors, who sell the products to end users. Management determined the value of customer relationships with the assistance of an asset appraisal firm, using a multi-period excess earnings approach, which estimates fair value based on earnings and the application of a discounted cash flow methodology. In the application of this method, the nature of the customer relationship, historical attrition rates and the estimated future cash flows of existing customers at the ~~Acquisition~~appraisal ~~Date~~date were considered.

Intellectual Property Bundles (Including Patents)

The fair value of Victor Technologies' patents, underlying trade secrets and product methodology were determined based on a bundled approach utilizing the Relief from Royalty (“RFR”) Method with the assistance of an asset appraisal firm. Under RFR, the value of the intangible assets reflects the savings realized by owning the intangible assets. The premise associated with this valuation technique is that if the intangible assets were licensed to an unrelated party, the unrelated party would pay a percentage of revenue for the use of the assets. The present value of the future cost savings, or relief from royalty, represents the value of the intangible assets.

Victor Technologies’ intellectual property (IP) bundles were grouped into two main product categories: (1) gas equipment, arc accessories, and plasma cutting and (2) welding, filler metals, and hard facing.

The Company recorded amortization expense of $6,431 for the year ended December 31, 2012, $6,296 for the year ended December 31, 2011, $531 for the period of December 3, 2010 to December 31, 2010, and $2,515 for the period of January 1, 2010 through December 2, 2010. Amortization expense for each of the next five fiscal years patents is expected to approximate $6,600.

Goodwill

For ~~both the Acquisition for the Successor and the acquisition of Robotronic Oy~~acquisitions, goodwill is measured as the excess of the consideration transferred over the net amounts of the identifiable assets acquired and the liabilities assumed, all measured in accordance with ASC Topic 805.

77The change in the carrying amount of goodwill for the years ended December 31, 2013 and 2012 are as follows:

As discussed in Note 3 - Acquisitions related to the Acquisition, certain financial information for 2010 for Victor Technologies, including goodwill, has been retrospectively adjusted as a result of the completion of the purchase price allocation for the acquisition that occurred on December 3, 2010. The Company also increased goodwill by $2,000 to correct an error in the accounting for the foreign currency translation of goodwill as of December 31, 2010. Comprehensive loss for the period ended December 31, 2010 was decreased by $1,240 due to the goodwill adjustment, net of taxes. The adjustments to correct the error were not material to the financial statements.66

The change in the carrying amount of goodwill for the years ended December 31, 2012 and 2011 are as follows:



	Carrying Amount of Goodwill
Balance as of December 31, 2011	$	182,429
Acquisition of business	3,211
Foreign currency translation	1,483
Balance as of December 31, 2012	187,123
Acquisition of business	15,037
Foreign currency translation	(6,417		)
Balance as of December 31, 2013	$	195,743

	Carrying Amount
	of Goodwill
Balance as of December 31, 2010	$	182,841
Foreign currency translation	(412		)
Balance as of December 31, 2011	182,429
Acquisition of Robotronic Oy	3,211
Foreign currency translation	1,483
Balance as of December 31, 2012	$	187,123

8. Debt and Capital Lease Obligations

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

	December 31,2012			December 31,2011
	December 31, 2013			December 31, 2012
Senior Secured Notes due December 15, 2017, 9% interest payable semi-annually on June 15 and December 15	$	360,000		$	260,000
Working Capital Facility	$	22,336		$	—
Senior Secured Notes discount	(4,637		)	—
Senior Secured Notes due December 15, 2017, 9% interest payable semi-annually on June 15 and December 15	327,000			360,000
Capital leases	3,720			5,322
Senior Secured Notes discount	(3,527		)	(4,637		)
Long-term debt	359,083			265,322
Capital leases	2,227			3,720
Current maturities	(1,563		)	(1,715		)
Long-term debt	348,036			359,083
Long-term debt, less current maturities	$	357,520		$	263,607
Current maturities	(23,620		)	(1,563		)
At December 31, 2012, the schedule of principal payments of debt is as follows:
Long-term debt, less current maturities	$	324,416		$	357,520
2013				$	1,563
At December 31, 2013, the schedule of principal payments of debt is as follows:
2014				~~1,291~~$	23,620
2015				~~673~~736
2016				~~168~~183
2017				~~360~~327,~~025~~032
2018				2
Thereafter				—

Interest of $33,151, $31,230 and $33,980 was paid for years ended ~~December 31~~2013, 2012 and 2011, respectively~~, $70 for the period from December 3, 2010 through December 31, 2010, and $21,134 for the period from January 1, 2010 through December 2, 2010~~.

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” or the “Notes”) under an indenture by and among Victor Technologies, the guarantors of the Senior Secured Notes and U.S. Bank National Association, as trustee and collateral trustee (the “Indenture”). 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 Notes bear interest at a rate of 9% per annum, which is payable semi-annually in arrears on June 15 and December 15, commencing on June 15, 2011. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. The Notes will mature on December 15, 2017.

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 international subsidiaries, is limited to 65% of the voting stock and 100% of the non-voting stock of each first-tier international subsidiary, and on a second priority basis, by substantially all the collateral that secures the Working Capital Facility on a first priority basis.

7867

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 and the guarantees rank equal in right of payment with any of Victor Technologies' and the guarantors’ senior indebtedness, including indebtedness under the Working Capital Facility. The Notes and the guarantees rank senior in right of payment to any of the Company’s and the guarantors’ existing and future indebtedness that is expressly subordinated to the Notes and the guarantees and are effectively senior to any unsecured indebtedness to the extent of the value of the collateral for the Notes and the guarantees. The Notes and the guarantees will be effectively junior to the Company’s and the guarantors’ obligations under the Working Capital Facility to the extent the Company’s and the guarantors’ assets secure such obligation on a first priority basis and are effectively junior to any secured indebtedness that is either secured by assets that are not collateral for the Notes and the guarantees or secured by a prior lien in the collateral for the Notes and the guarantees, in each case, to the extent of the value of the assets securing such indebtedness.

On or after December 15, 2013, Victor Technologies may redeem all or a part of the Senior Secured Notes at redemption prices set forth in the Indenture (expressed as a percentage of principal amount of Notes to be redeemed) ranging from 106.75% to 100%, depending on the date of redemption. At any time prior to December 15, 2013, the Company ~~may~~could redeem, subject to applicable notice and other requirements:


•	during each twelve-month period commencing with the issue date, up to 10% of the original aggregate principal amount of Notes at a redemption price of 103%;


•	all or a part of the Notes at a redemption price equal to 100% of the principal amount of Notes to be redeemed plus a “make-whole” premium, as determined in accordance with the Indenture; and

•

on one or more occasions, at its option, up to 35% of the original aggregate principal amount of Notes issued, at a redemption price of 109% of the aggregate principal amount of the Notes to be redeemed, with the net cash proceeds of one or more equity offerings of Victor Technologies or any of its direct or indirect parents to the extent such proceeds are received by or contributed to Victor Technologies.

In addition to the applicable redemption prices, for each redemption the Company must also pay accrued and unpaid interest and special interest, if any, to but excluding the applicable redemption date. If the Company sells certain assets or experiences specific kinds of changes of control, it must offer to repurchase the Notes.

On December 12, 2013, the Company redeemed $33,000, or 9.17%, of outstanding principal amount of Senior Secured Notes at a price of 103%, plus accrued and unpaid interest, recognizing a loss of $2,463.

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.

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 our 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 company to allow it 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 cash payment, or consent fee, is included as a debt discount in the carrying value of the Notes and is amortized using the effective interest method over the life of the debt.

Working Capital Facility

On December 3, 2010, Victor Technologies entered into a Fourth Amended and Restated Credit Agreement (the “GE Agreement”) with General Electric Capital Corporation as lender and administrative agent (the “Working Capital Facility”). The Working Capital Facility provides for borrowings not to exceed $60,000, including up to $10,000 for letters of credit and swingline loans, subject to borrowing base capacity. Provided that no default is then existing or would arise therefrom, Victor Technologies has the option to increase commitments under the Working Capital Facility by up to $25,000. The Working Capital Facility matures on December 2015.

Facility provides for borrowings not to exceed $60,000, including up to $10,000 for letters of credit and swingline loans, subject to borrowing base capacity. Provided that no default is then existing or would arise therefrom, Victor Technologies has the option to increase commitments under the Working Capital Facility by up to $25,000.

On October 30, 2013, the Company entered into an amendment (the "Amendment") to the Fourth Amended and Restated Credit Agreement, dated as of December 3, 2010 (the "Credit Agreement") with General Electric Capital Corporation. Pursuant to the terms of the Amendment, (i) the Gas-Arc acquisition was specifically designed as a "Permitted Acquisition" (as defined in the Credit Agreement), (ii) the Company modified certain covenants applicable to it, including those relating the investments and prepayments or redemptions of other indebtedness, to provide for greater flexibility going forward and (iii) the maturity date with respect to the Credit Agreement was extended by one year. Transaction related costs of $152 were incurred in connection with the Amendment. The Company remains in compliance with all debt covenants. The Working Capital Facility expires on December 2016.

The Indenture governing the Senior Secured Notes limits the aggregate principal amount outstanding at any one time under the Working Capital Facility to the greater of $60,000 or the borrowing under the borrowing base capacity determined as:


•	85% of the aggregate book value of eligible accounts receivable consisting of the receivables from U.S., Canadian, and Australian-based customers; plus


•	the lesser of (a) 85% of the aggregate net orderly liquidation value of eligible inventory consisting of the U.S. and Australian-based inventories (subject to certain reserves and adjustments) multiplied by a percentage representing the net orderly liquidation value of the book value of such inventory and (b) 65% of the aggregate book value of the sum of the eligible inventory.

For the first six months following the closing date of the Acquisition, borrowings under the Working Capital Facility bore interest at a rate per annum of LIBOR, plus 2.75%. Thereafter, the applicable margins under the Working Capital Facility will adjust based on average excess borrowing availability under the Working Capital Facility. If the average excess borrowing availability is greater than or equal to $25,000, the applicable interest rate will be LIBOR plus 2.75%. If the average excess borrowing availability is less than $25,000, the applicable margin will be LIBOR plus 3.0%. Victor Technologies has the option to have borrowings bear interest at a base rate plus applicable margins as set forth in the GE Agreement.

Commitment fees are payable in respect of unutilized commitments at (i) 0.75% per annum if outstanding loans and letters of credit are less than 50% of the aggregate amount of such commitments or (ii) 0.50% if the outstanding loans and letters of credit are greater than 50% of the aggregate amount of such commitments.

If at any time the aggregate amount of outstanding loans (including swingline loans), unreimbursed letter of credit drawings and undrawn letters of credit under the Working Capital Facility exceeds the lesser of (i) the aggregate commitments under the Working Capital Facility and (ii) the borrowing base, the Company will be required to repay outstanding loans and then cash collateralize letters of credit in an aggregate amount equal to such excess, with no reduction of the commitment amount.

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 excess 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.

At December 31, ~~2012~~2013, ~~the~~borrowings ~~unused~~outstanding ~~availability~~ under the Working Capital Facility were $22,336 and the unused availability, net of $1,~~416~~142 in outstanding letters of credit, was $4922,~~084~~748.

The Company's weighted average interest rate on its short-term borrowings was 4.00% for the year ended December 31, 2013. There were no borrowings under the Working Capital Facility during the year ended December 31, 2012. The Company’s weighted average interest rate on its short-term borrowings was 4.78% for the year ended December 31, 2011 ~~and 5~~.~~71% for the period from January 1, 2010 through December 2, 2010. There were no borrowings under the Working Capital Facility during the period from December 3, 2010 through December 31, 2010.~~

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.

8069

Covenant Compliance

Failure to comply with the Company’s financial covenants in future periods would result in defaults under the Company’s credit agreements unless covenants are amended or defaults are waived. The most restrictive financial covenant is the “fixed charge coverage” covenant under the Working Capital Facility, which requires cash flow, as defined, to be at least 1.10 of fixed charges, as defined. Compliance is measured quarterly based on the trailing four quarters. A default under the Working Capital Facility would constitute a default under the Senior Secured Notes.

At December 31, ~~2012~~2013, the Company was in compliance with its financial covenants and expects to remain in compliance.

Second Lien Facility

On August 14, 2009, the Company entered into the 2009 Amended and Restated Second Lien Facility Agreement with the agent and the lenders party thereto (the “Amended Second Lien Facility Agreement”). The Amended Second Lien Facility Agreement refinanced the loans outstanding under the Second Lien Facility Agreement dated July 29, 2004. Under the Amended Second Lien Facility Agreement, the Company issued a new $25,000 Second Lien Facility at 92.346% of the face amount, repaid the $14,000 balance of the Second Lien Facility and realized $9,000 of net proceeds. The maturity date was extended from November 7, 2010 to November 30, 2012. The applicable interest rate was changed to, at the Company’s option, (a) the greater of LIBOR or 6%, plus 6% or (b) the greater of the prime rate, the federal funds rate plus one half of 1.00% or 6%, plus 6%. At issuance and through its retirement in 2010, the interest rate payable was 12%, and the effective interest rate, including amortization of the issuance discount, was 15%. Prior to this amendment, the interest rate on this Facility during the period of 2008 through August 14, 2009 was LIBOR plus 2.75%. The lender for the Second Lien Facility was an affiliate of the holder of approximately 33% of the Predecessor Company’s outstanding shares of common stock. The lenders under the previous Second Lien Facility Agreement and additional entities each became lenders under the Amended Second Lien Facility Agreement.

In June 2010, Predecessor Victor Technologies voluntarily repaid all of the remaining second lien indebtedness due November 30, 2012 and terminated the related credit agreement. The prepayment was funded primarily with borrowings under the Company’s Working Capital Facility.

Senior Subordinated Notes Due 2014

On ~~December~~February 31, ~~2010~~2011, ~~Victor~~the ~~Technologies~~Company ~~called~~utilized ~~for~~$183,685 ~~redemption~~ of ~~the~~Trusteed Assets to redeem in full $~~172~~176,~~327~~095 ~~aggregate~~of ~~outstanding~~the ~~9¼%~~ Senior Subordinated Notes due 2014 onplus ~~February 1, 2011 at~~ a ~~price~~call ofpremium ~~101.542%~~and ~~plus~~ accrued ~~and unpaid~~ interest. The ~~Victor~~Trust ~~Technologies~~to ~~irrevocably~~fund ~~deposited with~~ the ~~trustee~~redemption ~~funds~~was ~~sufficient~~established toat ~~pay~~ the ~~Redemption~~time ~~Price~~ of the ~~Senior Subordinated Notes~~Acquisition.

~~Victor Technologies remained the primary obligor of the Senior Subordinated Notes through February 1, 2011~~9. ~~Accordingly,~~ ~~the~~Derivative Senior Subordinated Notes and related assets placed with the trustee remain on Victor Technologies’ balance sheet, and are classified as current at December 31, 2010. Successor Victor Technologies’ opening balance sheet at December 3, 2010 includes the fair value of the Senior Subordinated Notes due 2014 at that date of $177,066.Instruments

The trustee acknowledged the satisfaction and discharge of the indenture as of December 3, 2010 and has informed the Company the Senior Subordinated Notes were paid on February 1, 2011. The Senior Subordinated Notes due 2014 were adjusted to estimated fair value as of the Acquisition Date. On February 1, 2011, the outstanding principal of $172,327 and a call premium of $2,657, along with $8,688 of accrued interest, was paid from assets placed and irrevocably held in trust at December 3 and December 31, 2010 for this redemption.

The Senior Subordinated Notes accrued interest at the rate of 9¼% per annum payable semi-annually in arrears on February 1 and August 1 of each year.

The indenture provided for the payment of an additional special interest adjustment based on the Company’s consolidated leverage ratio. During the period from January 1, 2011 until the debt’s redemption on February 1, 2011, the quarterly special interest adjustment resulted in additional interest expense of $36. The quarterly special interest adjustment resulted in additional interest expense of $101 for the period from December 3, 2010 through December 31, 2010 and $2,711 for the period from January 1, 2010 through December 2, 2010.

Interest on the Senior Subordinated Notes due 2014, excluding the special interest adjustment, totaled $1,328 for the period from January 1, 2011 until the debt’s redemption on February 1, 2011. Interest on the Senior Subordinated Notes due 2014 totaled $1,364 from December 3, 2010 through December 31, 2010. During the period from January 1, 2011 until the debt’s redemption on February 1, 2011, $1,110 of the fair value premium recorded for the Senior Subordinated Notes was amortized as a reduction of interest expense. During the period December 3, 2010 through December 31, 2010, $971 of the fair value premium recorded for the Senior Subordinated Notes was amortized as a reduction of interest expense.

9. Terminated Interest Rate Swap Arrangement

In February 2004, the Company entered into an interest rate swap arrangement to convert a portion of the fixed rate exposure on its Senior Subordinated Notes to variable rates. On February 1, 2009, the swap arrangement was terminated by the counterparty pursuant to terms of the arrangement and a $3,000 payment was received by the Company in conjunction with this termination. The Company recorded a fair value adjustment to the portion of its Senior Subordinated Notes that was hedged and this effect was amortized as a reduction of interest expense over the remaining term of the Senior Subordinated Notes through December 2, 2010. As part of the Acquisition accounting on December 3, 2010, the Senior Subordinated Notes were recorded at fair value. The unamortized balances from the settlement of the interest rate swap arrangement of $1,461 were eliminated as of the Acquisition Date.

10. Derivative Instruments

As part of the Company’s ongoing operations, the Company is exposed to foreign exchange currency rates. To manage these risks, the Company enters into certain foreign exchange rate derivative instruments pursuant to established policies. The Company enters into these instruments with two major commercial banks as counterparties. The Company does not enter into derivatives for trading or speculative purposes.

All derivatives are recognized at fair value on the Company’s Consolidated Balance Sheets. The cash flows from settled derivative contracts are recognized in operating activities in the Company’s Consolidated Statements of Cash Flows. The gains and losses associated with the change in fair value of the instruments are recorded to selling, general and administrative expense in the period of change.

The notional amount of open foreign exchange derivative instruments at December 31, ~~2012~~2013 and ~~2011~~2012 was $1521,~~313~~607 and $1215,~~491~~313, respectively. The fair values of these contracts were not material to the consolidated financial statements as of and for the years ended December 31, ~~2012~~2013 and ~~2011~~2012, respectively.

As of December 31, ~~2012~~2013, the maximum length of time of the foreign exchange rate derivative instruments the Company has entered into is six months.

The maximum amount of loss due to the credit risk of the counterparties, should the counterparties fail to perform according to the terms of the contracts, includes an immaterial collateral deposit and the forfeiture of any unrealized gains. The Company does not expect the counterparties to fail to meet their obligations.

1110. Fair Value Measurements

The Company determines fair value utilizing a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. The fair value hierarchy gives the highest priority to quoted market prices (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of inputs used to measure fair value are as follows:


•	Level 1 – quoted prices in active markets for identical assets or liabilities accessible by the reporting entity.


•	Level 2 – observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.


•	Level 3 – unobservable inputs for an asset or liability. Unobservable inputs should only be used to the extent observable inputs are not available.

There were no transfers between Levels 1, 2, or 3 fair value measurements during the years ended December 31, 2013, 2012 and 2011~~, respectively, the period from December 3, 2010 through December 31, 2010, or the period from January 1, 2010 through December 2, 2010~~. The Company has various financial instruments, including cash and cash equivalents, short and long-term debt and forward contracts. While these financial instruments are subject to concentrations of credit risk, the Company has minimized this risk by entering into these arrangements with a diversified group of highly-rated counterparties. The Company does not expect any counterparties to fail to meet their obligations.

The fair value of cash and cash equivalents, accounts receivable and accounts payable approximated fair value due to the short-term nature of these instruments at both December 31, ~~2012~~2013 and ~~2011~~2012. See Note 2 - Significant Accounting Policies for the fair value estimate of debt and Note 10 – Derivative Instruments for the fair value of the derivative instruments, which are both considered Level 1 inputs. Also, see Note 18 - Employee Benefits Plans for the fair value of the pension plans' assets.

8211. Leases

~~12. Leases~~70

Future minimum lease payments under leases with initial or remaining non-cancelable lease terms in excess of one year at December 31, ~~2012~~2013 are as follows:

	CapitalLeases			OperatingLeases
2013	$	1,782		$	9,532
2014	$	1,388		$	8,658
2014	1,400			8,820
2015	754			6,867
2015	694			7,167
2016	187			5,735
2016	172			5,721
2017	32			5,059
2017	25			4,961
2018	2			3,638
Thereafter	—			89,~~343~~082
Total minimum lease payments	42,~~073~~363			$	4439,~~544~~039
Amount representing interest	(~~353~~136		)
Present value of net minimum lease payments, including current obligations of $1,563	$	3,720
Present value of net minimum lease payments, including current obligations of $1,284	$	2,227

Rent expense under operating leases amounted to $108,~~344 for the year ended December 31~~985, ~~2012~~$10,344 and $9,561 for the ~~year~~years ended December 31, ~~2011~~2013, ~~$662~~2012 ~~for the period from December 3, 2010 through December 31, 2010~~ and $82011,~~465~~ ~~for the period from January 1, 2010 through December 2, 2010~~respectively.

1312. Restructuring

InProgram ~~2011,~~implemented ~~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 has substantially completed these activities at December 31, 2012. These exit activities impacted approximately 175 employees and were intended to reduce the Company’s fixed cost structure and better align its global manufacturing and distribution footprint. 2013

~~The~~During ~~following~~2013, ~~provides~~the aCompany ~~summary~~committed ofto a restructuring ~~costs~~plan ~~incurred~~that ~~during~~included ~~the~~exit ~~years~~activities ~~ended~~at ~~December~~its 31Melbourne, ~~2012~~Australia ~~and~~manufacturing ~~2011~~location. These exit activities, ~~respectively~~which were completed in 2013, impacted approximately 45 employees and were intended to reduce the ~~total~~Company’s ~~expected~~fixed ~~restructuring~~cost ~~costs~~structure ~~associated~~and ~~with~~better ~~these~~align ~~activities~~its byAsia-Pacific ~~major~~manufacturing ~~type~~and ofdistribution ~~cost:~~footprint.

					As of December 31, 2012
	Year EndedDecember 31, 2012		Year EndedDecember 31, 2011		CumulativeRestructuringCosts		Total ExpectedRestructuringCosts
Employee termination benefits	$	972	$	3,197	$	4,169	$	4,169
Other restructuring costs	1,505		2,207		3,712		3,712
Total restructuring costs	$	2,477	$	5,404	$	7,881	$	7,881

The following provides a summary of the total restructuring costs incurred during 2013:



($'s in thousands)	Year Ended December 31, 2013
Employee termination benefits	$	5,502
Other restructuring costs	404
Total restructuring costs	$	5,906

The following is a detail of the liabilities associated with the restructuring activities during 2013, which are reported as a component of accrued and other liabilities in the accompanying consolidated balance sheet as of December 31, 2013:



($'s in thousands)	Employee Termination Benefits			Other Restructuring Costs			Total
Charges	$	5,502		$	404		$	5,906
Payments and other adjustments	(5,477		)	(404		)	(5,881		)
Balance as of December 31, 2013	$	25		$	—		$	25

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. 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 for the years ended December 31, 2013, 2012 and 2011, respectively, and the total expected restructuring costs associated with these activities by major type of cost:



Year Ended December 31,		As of December 31, 2013
2013	2012

Filing Compare · Victor Technologies Group, Inc.