Thermon Group Holdings, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Acquisitions

Acquisitions

12 Months Ended

Mar. 31, 2018

THS acquisition

On October 30, 2017, we, through a wholly-owned subsidiary, acquired 100% of the equity interests of CCI Thermal Technologies Inc. and certain related real estate assets for $261,950 CAD (approximately $204,235 USD at the exchange rate as of October 30, 2017) in cash. Such subsidiary and CCI Thermal Technologies Inc. amalgamated immediately after the closing of the acquisition to form Thermon Heating Systems, Inc. ("THS"), an indirect, wholly-owned subsidiary of the Company. THS is engaged in industrial process heating, focused on the development and production of advanced heating and filtration solutions for industrial and hazardous area applications and is headquartered in Edmonton, Alberta, Canada. THS markets its products through several diverse brands known for high quality, safety and reliability, and serves clients in the energy, petrochemical, electrical distribution, power, transit and industrial end markets globally. We believe we will be able to leverage our existing global sales force to further expand the reach of THS's product offerings. We recognized $85,156 of goodwill in connection with the THS transaction. THS has contributed $41,011 and $7,266 of revenue and operating income, respectively, to our Condensed Consolidated Statements of Operations and Comprehensive Income for the twelve months ended March 31, 2018.

Pro forma financial information- The following table presents selected unaudited pro forma information for the Company assuming the acquisition of THS had occurred as of April 1, 2016. This pro forma financial information is presented for informational and illustrative purposes and does not purport to represent what the Company’s actual results would have been if the acquisition had occurred as of the date indicated or what such results would be for any future periods. In addition, the unaudited pro forma results do not include any anticipated synergies or other expected benefits of the acquisition or costs necessary to obtain the anticipated synergies and benefits. The pro forma financial information includes the amortization associated with the acquired intangible assets, interest expense associated with debt used to fund the acquisition, amortization of the inventory step-up, removal of aircraft and rent expense for assets not assumed in the transaction, acquisition related expenses, and the income tax affected for the pro forma results.



	Pro Forma Financial Information (Unaudited)
	Twelve months ended March 31,
	2018		2017
Revenues	$	348,557	$	331,007
Net income available to Thermon Group Holdings, Inc.	5,303		3,318
Earnings per share:
Basic	$	0.16	$	0.10
Diluted	$	0.16	$	0.10

The following table details the purchase price of the THS transaction:



Consideration to or on behalf of sellers at close	$	204,235
Fair value of total consideration transferred	$	204,235

The Company is in the process of obtaining all necessary information required to complete the THS acquisition accounting. Principal pending matters include receipt of final valuation estimates on acquired intangible and tangible assets, and final review of tax related matters. The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed:



Assets acquired:
Cash	$	1,534
Accounts receivable	14,351
Costs and estimated earning in excess of billing on uncompleted contracts	450
Inventories	20,085
Other current assets	731
Property, plant and equipment	29,464
Identifiable intangible assets	79,002
Goodwill	85,156
Total assets	230,773
Liabilities assumed:
Current liabilities	6,712
Other non-current liabilities	500
Non-current deferred tax liability	19,326
Total liabilities	26,538
Total consideration	$	204,235

In total, $4,093 of transaction costs were incurred related to the THS transaction, all of which were incurred during the twelve months ended March 31, 2018. As of March 31, 2018 the final working capital adjustment for the THS transaction has not been finalized, however, the such working capital adjustment is not expected to be material.

Our provisional estimate of identifiable intangible assets at March 31, 2018 that were related to the THS transaction, inclusive of currency translation adjustments for the period, consisted of the following:



	Amortization period	Gross Carrying Amount at March 31, 2018		Accumulated Amortization		Net Carrying Amount at March 31, 2018

Products	10 years	$	64,611	$	2,692	$	61,919
Customer relationships	17 years	11,155		273		10,882
Backlog	1 year	3,230		1,346		1,884
Total		$	78,996	$	4,311	$	74,685

The weighted average useful life of acquired finite lived intangible assets related to THS transaction is 10.6 years.