November 8, 2012

Thermon Reports Second Quarter Results

Company Announces Revenue of $67.4 Million, Gross Margin of 48.5%, Record Earnings, Backlog Growth of 29% and Return on Equity of 38%

SAN MARCOS, TX -- (Marketwire) -- 11/08/12 -- Thermon Group Holdings, Inc. (NYSE: THR) ("Thermon" or the "Company") today announced consolidated financial results for the second quarter ended September 30, 2012. The Company posted second quarter revenue of $67.4 million, record EPS of $0.23 and record Adjusted EPS of $0.26 which excludes expenses associated with our secondary offering of common stock and refinance of our corporate revolving line of credit.

Highlights for the quarter and comparisons versus the prior year quarter include:

  • Revenue of $67.4 million, approximately flat
  • Gross margin percentage of 48.5% versus 47.0%
  • Record Earnings with GAAP EPS of $0.23 and Adjusted EPS of $0.26 on a fully diluted basis
  • Adjusted EBITDA as a percentage of revenue of 29.1% versus 24.5%
  • Backlog at Q2 was $112.9 million an increase of $25.6 million or 29%
  • Return on equity of 38% measured by annualized Q2 Adjusted EBITDA

"Thermon demonstrated another solid quarter in Q2. While revenue came in flat we delivered strong gross margin performance, increased earnings and continue to report a healthy backlog. Despite significant foreign currency headwinds Thermon also posted all time record earnings per share, thus continuing to demonstrate our strong operating leverage," said Rodney Bingham, President and Chief Executive Officer.

Q2 2013 revenue of $67.4 million reflects a decrease of approximately 1% compared to revenue of $68.0 million in Q2 2012. Foreign currency negatively impacted revenue by approximately $3.3 million versus Q2 2012, primarily due to weakening of the Euro and the Canadian Dollar which were responsible for impacts of $2.0 and $0.7 million, respectively.

Gross margin percentage was 48.5% of revenue in Q2 2013 versus 47.0% in Q2 2012. The increase was due to margin improvement within Greenfield projects as well as within MRO/UE (maintenance, repair, overhaul/upgrade and expansion) business. Record Adjusted EBITDA excluding management fees was $19.6 million, an increase of $2.9 million or 17% from $16.7 million generated in Q2 2012, reflecting continuation of our strong business model.

Q2 2013 net income of $7.0 million reflected an improvement of $3.2 million versus the net income of $3.8 million in Q2 2012. Excluding transaction expenses the Company generated adjusted net income of $8.2 million and $0.26 per fully diluted common share in the current quarter. This performance reflects growth of $0.07 per diluted share, versus Q2 2012, or 37%. Foreign currency headwinds reduced current earnings by $0.01 per fully diluted share versus Q2 2012.

On a year to date basis the Company generated record revenue of $134.6 million reflecting 2% growth versus revenue of $132.6 million in fiscal 2012. Foreign currency negatively impacted revenue by approximately $7.0 million versus the 2012 first half, an impact of approximately 5%. Similar to Q2, US Dollar strength versus the Euro and Canadian Dollar were the primary causes at $4.1 and $1.8 million, respectively. Gross margin percentage of 49.0% year to date 2013 compared to 48.2% in fiscal 2012. Adjusted EBITDA excluding management fees was $37.9 million year to date, an increase of $3.4 million or 10% versus fiscal 2012.

Net income year to date was $13.6 million, a record $0.43 per share, versus net loss of $1.2 million in fiscal 2012. After excluding transaction expenses, the Company generated year to date record adjusted net income of $15.5 million and $0.49 per fully diluted common share in fiscal 2013 versus fiscal 2012 adjusted net income of $12.0 million and $0.38 per fully diluted common share, growth of 29%. Foreign currency headwinds reduced year to date earnings by $0.02 per fully diluted share versus 2012.

Adjustments to GAAP net income in Q2 2012 and Q2 2013 are due to capital market transactions, primarily the effects of optional redemptions of long-term debt in fiscal 2012 and expenses associated with a refinancing of the Company's revolving line of credit and secondary offering of common stock in fiscal 2013. See the tables titled "Reconciliation of Net Income (Loss) to Adjusted EBITDA excluding management fees and Return on Equity" and "Reconciliation of Net Income (Loss) to Adjusted Net Income and EPS" for additional details.

Conference Call and Webcast Information

Thermon's senior management team, including Rodney Bingham, President and Chief Executive Officer, and Jay Peterson, Chief Financial Officer, will discuss Q2 2013 results during a conference call today at 10:00 a.m. (Central Standard Time), which will be simultaneously webcast on Thermon's Investor Relations website located at http://ir.thermon.com. Investment community professionals interested in participating in the question-and-answer session may access the call by dialing (877) 312-5421 from within the United States/Canada and (253) 237-1121 from outside of the United States/Canada. A replay of the webcast will be available on Thermon's Investor Relations website beginning two hours after the conclusion of the call.

About Thermon

Through its global network, Thermon provides highly engineered thermal solutions, known as heat tracing, for process industries, including energy, chemical processing and power generation. Thermon's products provide an external heat source to pipes, vessels and instruments for the purposes of freeze protection, temperature maintenance, environmental monitoring and surface snow and ice melting. Thermon is headquartered in San Marcos, Texas. For more information, please visit www.thermon.com.

Non-GAAP Financial Measures

Disclosure in this release to "Adjusted EPS," "Adjusted EBITDA excluding management fees," "Adjusted net income" and "Return on equity" which are "non-GAAP financial measures" as defined under the rules of the Securities and Exchange Commission (the "SEC"), are intended as supplemental measures of our financial performance that are not required by, or presented in accordance with, U.S. generally accepted accounting principles ("GAAP"). "Adjusted net income" and "Adjusted earnings per share (or EPS)" represents net income before certain transaction expenses and expenses related with debt redemptions, per fully-diluted common share. "Adjusted EBITDA excluding management fees" represents net income (loss) before interest expense (net of interest income), income tax expense, depreciation and amortization expense and other non-cash charges such as stock-based compensation expense, transaction expenses incurred in connection with the CHS Transactions and our initial public offering, and other transactions not associated with our ongoing operations, such as the loss on retirement of debt, as adjusted to further exclude management and termination fees paid to our private equity sponsors. "Return on equity" represents "Adjusted EBITDA excluding management fees" for the three month period ended September 30, 2012 that is multiplied times four to represent a full year's results, divided by the average of total shareholders' equity at September 30, 2012 and March 31, 2012. We believe that the average equity properly accounts for net income that occurred during the three months ended September 30, 2012.

We believe these non-GAAP financial measures are meaningful to our investors to enhance their understanding of our financial performance and are frequently used by securities analysts, investors and other interested parties to compare our performance with the performance of other companies that report Adjusted EPS, Adjusted EBITDA, Adjusted net income or Return on equity. Adjusted EPS, Adjusted EBITDA excluding management fees, Adjusted net income and Return on equity should be considered in addition to, not as substitutes for, income from operations, net income (loss), net income (loss) per share and other measures of financial performance reported in accordance with GAAP. Our calculation of Adjusted EPS, Adjusted EBITDA excluding management fees, Adjusted net income and Return on equity may not be comparable to similarly titled measures reported by other companies. For a description of how Adjusted EPS, Adjusted EBITDA excluding management fees, Adjusted net income and Return on equity are calculated from our net income (loss) and a reconciliation of our Adjusted EPS, Adjusted EBITDA excluding management fees, Adjusted net income and Return on equity to net income (loss) per share and net income, as applicable, see the sections of this release titled "Reconciliation of Net Income (Loss) to Adjusted EBITDA excluding management fees and Return on Equity" and "Reconciliation of Net Income (Loss) to Adjusted Net Income and EPS."

Forward-Looking Statements

This release may include forward-looking statements within the meaning of the U.S. federal securities laws in addition to historical information. These forward-looking statements include, without limitation, statements regarding our industry, business strategy, plans, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. When used, the words "anticipate," "assume," "believe," "budget," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "will," "future" and similar terms and phrases are intended to identify forward-looking statements in this release. Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our financial condition, results of operations and cash flows.

Actual events, results and outcomes may differ materially from our expectations due to a variety of factors. Although it is not possible to identify all of these factors, they include, among others, (i) general economic conditions and cyclicality in the markets we serve; (ii) future growth of energy and chemical processing capital investments; (iii) changes in relevant currency exchange rates; (iv) our ability to comply with the complex and dynamic system of laws and regulations applicable to international operations; (v) a material disruption at any of our manufacturing facilities; (vi) our dependence on subcontractors and suppliers; (vii) our ability to obtain standby letters of credit, bank guarantees or performance bonds required to bid on or secure certain customer contracts; (viii) competition from various other sources providing similar heat tracing products and services, or other alternative technologies, to customers; (ix) our ability to attract and retain qualified management and employees, particularly in our overseas markets; (x) our ability to continue to generate sufficient cash flow to satisfy our liquidity needs; (xi) the extent to which federal, state, local and foreign governmental regulation of energy, chemical processing and power generation products and services limits or prohibits the operation of our business; and (xii) other factors discussed in more detail under the caption "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended March 31, 2012, as filed with the Securities and Exchange Commission on June 8, 2012.

Our forward-looking statements are not guarantees of future performance, and actual results and future performance may differ materially from those suggested in any forward-looking statements. We do not intend to update these statements unless we are required to do so under applicable securities laws.






               Thermon Group Holdings, Inc. and Subsidiaries

                    Condensed Consolidated Balance Sheet

                               (in Thousands)



                                               September 30,

                                                   2012         March 31,

                                                (Unaudited)        2012

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

Assets

Current assets:

Cash and cash equivalents                     $       16,410 $       21,468

Accounts receivable, net of allowance for

 doubtful accounts of $934 and $1,434 as of

 Sept. 30, 2012 and March 31, 2012,

 respectively                                         53,673         50,037

Inventories, net                                      41,574         38,453

Costs and estimated earnings in excess of

 billings on uncompleted contracts                     2,164          1,996

Income taxes receivable                                5,070          5,193

Prepaid expenses and other current assets              7,967          6,853

Deferred income taxes                                  3,266          3,664

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

Total current assets                                 130,124        127,664



Property, plant and equipment, net                    29,190         27,661

Goodwill                                             117,935        118,007

Intangible assets, net                               139,086        144,801

Debt issuance costs, net                               4,542          7,446

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

Total assets                                  $      420,877 $      425,579

                                              ============== ==============



Liabilities and shareholders' equity

Current liabilities:

Accounts payable                              $       22,366 $       15,728

Accrued liabilities                                   15,754         22,442

Current portion of long term debt                         --         21,000

Obligations due to settle the CHS

 Transactions                                          3,391          3,528



Billings in excess of costs and estimated

 earnings on uncompleted contracts                     1,594          2,446

Income taxes payable                                   1,951          1,374

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

Total current liabilities                             45,056         66,518



Long-term debt, net of current maturities            118,145        118,145

Deferred income taxes                                 42,937         45,999

Other noncurrent liabilities                           2,477          2,437

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

Total liabilities                                    208,615        233,099



Common Stock                                              31             30

Additional paid in capital                           198,228        191,998

Foreign currency translation adjustment                3,326          3,362

Retained earnings accumulated deficit                 10,677         (2,910)

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

Total shareholders' equity                           212,262        192,480

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

Total liabilities and shareholders' equity    $      420,877 $      425,579

                                              ============== ==============









               Thermon Group Holdings, Inc. and Subsidiaries

               Condensed Consolidated Statement of Operations

             (Unaudited, in Thousands except per share amounts)



                                   Three      Three       Six        Six

                                   Months     Months     Months     Months

                                   Ended      Ended      Ended      Ended

                                 Sept. 30,  Sept. 30,   Sept 30,  Sept. 30,

                                    2012       2011       2012       2011



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

Sales                            $  67,358  $  68,023  $ 134,571  $ 132,641

Cost of sales                       34,719     36,072     68,593     68,701

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

Gross profit                        32,639     31,951     65,978     63,940

Operating expenses:

Marketing, general and

 administrative and engineering     14,158     14,615     30,115     29,785

  Stock compensation expense           336         57        394      6,398

  Management fees (a)                   --         15         --      8,120

Amortization of other intangible

 assets                              2,798      2,878      5,592      5,763

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

Income from operations              15,347     14,386     29,877     13,874



Interest expense, net               (2,939)    (3,505)    (6,099)    (7,890)

Acceleration of unamortized debt

 cost                               (1,447)    (1,051)    (2,318)    (2,922)

  Debt cost amortization              (277)      (398)      (586)      (841)

  Loss on retirement of debt            --     (2,336)        --     (2,966)

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

Interest expense, net               (4,663)    (7,290)    (9,003)   (14,619)



Other income (expense)                  93     (1,173)       137     (1,187)

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

Income (loss) before provision

 for taxes                          10,777      5,923     21,011     (1,932)

Income tax expense (benefit)         3,790      2,109      7,424       (780)

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

Net income (loss)                $   6,987  $   3,814  $  13,587  $  (1,152)

                                 =========  =========  =========  =========



Net income (loss) per common

 share



Basic income (loss) per share    $    0.23  $    0.13  $    0.44  $   (0.04)

Diluted income (loss) per share  $    0.22  $    0.12  $    0.43  $   (0.04)

Weighted-average shares used in

 computing net income (loss) per

 common share:

Basic common shares                 30,726     29,524     30,535     28,641

Fully-diluted common shares         31,641     31,262     31,419     28,641



(a) Management fees for the six month period ended September 30, 2011

 includes $7.8 million in termination fees paid to our private equity

 sponsors at the completion of the IPO in Q1 2012. The fees were paid in

 settlement of the remaining term of the management services agreement that

 was in place prior to the IPO.










                Thermon Group Holdings, Inc. and Subsidiaries

 Reconciliation of Net Income (Loss) to Adjusted EBITDA excluding management

                          fees and Return on Equity

                          (Unaudited, in Thousands)



                                      Three      Three      Six       Six

                                      Months     Months    Months    Months

Adjusted EBITDA excluding             Ended      Ended     Ended     Ended

 management fees and Return on      Sept. 30,  Sept. 30, Sept. 30, Sept. 30,

 Equity                                2012       2011      2012      2011

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

Net income (loss)                   $   6,987  $   3,814 $  13,587 $ (1,152)

Interest expense, net                   4,663      7,290     9,003   14,619

Income tax expense (benefit)            3,790      2,109     7,424     (780)

Depreciation and amortization

 expense                                3,439      3,392     6,856    7,338

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

EBITDA-non-GAAP basis               $  18,879  $  16,605 $  36,870 $ 20,025

                                    =========  ========= ========= =========

Stock compensation expense                336         57       394    6,398

Refinance revolving line of credit

 expense included in operating

 expense                                   94         --        94       --

Fiscal 2013 Shelf Registration and

 secondary offering expenses              263         --       536       --

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

Adjusted EBITDA-non-GAAP basis      $  19,572  $  16,662 $  37,894 $ 26,423

                                    =========  ========= ========= =========

Termination of management fee

 agreement with private equity

 sponsor                                   --         --        --    8,105

Adjusted EBITDA excluding

 management fees - non-GAAP basis   $  19,572  $  16,662 $  37,894 $ 34,528

                                    =========  ========= ========= =========





Adjusted EBITDA Q2 - Annualized

 for a full fiscal year             $  78,288

                                    ---------

Average total shareholders' equity

 for the three month period ended

 September 30, 2012                 $ 204,554

                                    ---------

Return on Equity - non-GAAP basis          38%

                                    =========







                Thermon Group Holdings, Inc. and Subsidiaries

     Reconciliation of Net Income (Loss) to Adjusted Net Income and EPS

             (Unaudited, in Thousands except per share amounts)



                          Three     Three      Six       Six

                          Months    Months    Months    Months

                          Ended     Ended     Ended     Ended

Adjusted Net Income     Sept. 30, Sept. 30, Sept. 30, Sept. 30, Adjustment

 and EPS                   2012      2011      2012      2011   to:

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



GAAP Net income (loss)  $  6,987  $  3,814  $ 13,587  $ (1,152)



Acceleration of stock

 compensation in

 connection with the                                            Operating

 IPO                          --        --        --     6,341  expense

Management fees which                                           Operating

 terminated at the IPO        --        --        --     8,105  expense

Fiscal 2013 Shelf

 Registration and

 secondary offering                                             Operating

 expenses                    263        --       536        --  expense

Refinance revolving

 line of credit

 expense - operating                                            Operating

 expense                      94        --        94        --  expense

Premium paid on                                                 Loss on

 redemption of long                                             retirement

 term debt                    --     2,336        --     2,966  of debt

Acceleration of

 unamortized debt                                               Loss on

 costs - optional bond                                          retirement

 redemptions                  --     1,051       871     2,922  of debt

Acceleration of                                                 Acceleration

 unamortized debt cost                                          of

 - refinance revolving                                          unamortized

 line of credit            1,447        --     1,447        --  debt

                                                                Income tax

Tax effect of                                                   expense

 financial adjustments  $   (634) $ (1,205) $ (1,042) $ (7,187) (benefit)

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

Adjusted Net Income -

 non-GAAP basis         $  8,157  $  5,996  $ 15,493  $ 11,995



Adjusted fully-diluted

 earnings per common

 share - non-GAAP

 basis                  $   0.26  $   0.19  $   0.49  $   0.38



Fully-diluted common

 shares                   31,641    31,262    31,419    31,262





CONTACT:

Sarah Alexander

(512) 396-5801

Investor.Relations@thermon.com



Source: Thermon Group Holdings, Inc.

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