Quarterly report pursuant to Section 13 or 15(d)

Basis of Presentation and Accounting Policy Information

v2.4.0.8
Basis of Presentation and Accounting Policy Information
 3 Months Ended
Jun. 30, 2013
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation and Accounting Policy Information
Basis of Presentation and Accounting Policy Information
On April 30, 2010, a group of investors led by entities affiliated with CHS Capital LLC  (“CHS”) and two other private equity firms (together with CHS, our “former private equity sponsors”) acquired a controlling interest in Thermon Holding Corp. and its subsidiaries from Thermon Holdings, LLC (“Predecessor”) for approximately $321,500 in a transaction that was financed by approximately $129,252 of equity investments by our former private equity sponsors and certain members of our current and former management team (collectively, the “management investors”) and $210,000 of debt raised in an exempt Rule 144A senior secured note offering to qualified institutional investors (collectively, the “CHS Transactions”). The proceeds from the equity investments and debt financing were used both to finance the acquisition and pay related transaction costs. As a result of the CHS Transactions, Thermon Group Holdings, Inc. became the ultimate parent of Thermon Holding Corp. Thermon Group Holdings, Inc. (“TGH”) and its direct and indirect subsidiaries are referred to collectively as “we”, “our”, the “Company” or “Successor” herein.  
The CHS Transactions were accounted for as a purchase combination. The purchase price was allocated to the assets and liabilities acquired based on their estimated fair values, and liabilities assumed were recorded based upon their actual value. While the Company takes responsibility for the allocation of assets acquired and liabilities assumed, it consulted with an independent third party to assist with the appraisal process. 
Pushdown accounting was employed to reflect the purchase price paid in the CHS Transactions. 
The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto of TGH for the year ended March 31, 2013. In our opinion, the accompanying consolidated financial statements reflect all adjustments (consisting only of normal recurring items) considered necessary to present fairly our financial position at June 30, 2013 and March 31, 2013, and the results of our operations for the three months ended June 30, 2013 and 2012.  Certain reclassifications have been made to the prior period presentation of cash flows to conform to the current period presentation.
Use of Estimates
Generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. While our management has based their assumptions and estimates on the facts and circumstances existing at June 30, 2013, actual results could differ from those estimates and affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities and the corresponding revenues and expenses as of the date of the financial statements.  The operating results for the three months ended June 30, 2013 are not necessarily indicative of the results that may be achieved for the fiscal year ending March 31, 2014. 

Corrections of classification errors in previously reported Condensed Consolidated Statement of Comprehensive Income (Loss)

During the third quarter of fiscal 2013, we identified a classification error in our condensed consolidated statements of operations and comprehensive income (loss) for all previously reported periods. We determined that charges that were invoiced to customers had been recorded as a reduction to cost of sales instead of as additional sales. The result of this error was an understatement of sales and cost of sales of $477 for the three months ended June 30, 2012. The classification errors had no effect on the reported gross profit, income from operations or net income and also had no effect on the condensed consolidated balance sheet, or the condensed consolidated statement of cash flows.

Though the correction of the classification errors had no effect on our gross profit, it did result in a slight reduction to our previously reported gross margin as a percentage of revenue as follows below:
 
 
Three Months Ended June 30, 2012
As reported:
 
 
Sales
 
$
67,213

Cost of sales
 
33,874

Gross profit
 
33,339

Gross profit as a percentage of revenue
 
49.6
%


 
 
 Three Months Ended June 30, 2012
As corrected:
 
 
Sales
 
$
67,690

Cost of sales
 
34,351

Gross profit
 
33,339

Gross profit as a percentage of revenue
 
49.3
%



Corrections of classification errors in previously reported Condensed Consolidated Statement of Cash Flows

During the second quarter of fiscal 2013, the Company identified a classification error in its condensed consolidated statement of cash flows for the three months ended June 30, 2012 related to the classification of excess income tax benefits associated with stock option exercises. Such benefits were improperly classified as a cash inflow from operating activities rather than a cash inflow from financing activities in the first quarter of fiscal year 2013. The result of this error was an overstatement of cash flows from operating activities of $1,243 in the first quarter of fiscal 2013 and an understatement of cash flows from financing activities of $1,243 in the same quarter. The classification errors had no effect on the reported changes in cash and cash equivalents, and also had no effect on the condensed consolidated balance sheet, or the condensed consolidated statement of comprehensive income (loss).

The reduction to cash flows from operating activities for the excess tax deduction has been properly reflected in the condensed consolidated statement of cash flows for the three months ended June 30, 2013. Based on our evaluation of relevant quantitative and qualitative factors, we determined that the classification errors are immaterial to our prior period financial statements and did not warrant an amendment of our financial statements for the first quarter of fiscal 2013. The Company corrected the comparative presentation of the prior period as follows:

 
Three Months Ended
 
June 30, 2012

Cash flows from operating activities:
 
As reported
$1,600
Error correction
(1,243
)
As adjusted
357

 
 
Cash flows from financing activities:
 
As reported
$(6,949)
Error correction
1,243

As adjusted
(5,706
)


Recent Accounting Pronouncements

Presentation of Comprehensive Income - In February 2013, the Accounting Standards Codification (ASC) ASC Topic 220, "Comprehensive Income," was amended to require an entity to disclose information about the amounts reclassified out of accumulated other comprehensive income by component. For amounts required to be reclassified out of accumulated other comprehensive income in their entirety in the same reporting period, the guidance requires entities to present significant amounts by their respective line items of net income, either on the face of the income statement or in the notes to the financial statements. For other amounts that are not required to be reclassified to net income in their entirety, a cross-reference is required to other disclosures that provide additional details about those amounts. These provisions are effective for interim and annual reporting periods beginning after December 15, 2012. The adoption of this guidance effective April 1, 2013 did not have a material impact on our condensed consolidated financial statements.

Fair Value Measurements and Disclosures - The FASB issued an ASU in December 2011, which requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of these arrangements on its financial position. The guidance requires entities to disclose both gross and net information about both instruments and transactions eligible for offset in the balance sheet and instruments and transactions subject to an agreement similar to a master netting arrangement. In January 2013, the FASB amended and clarified the scope of the disclosures to include only derivative instruments, repurchase agreements and securities lending transactions. The provisions for this ASU are effective for annual periods and interim periods within those years beginning on or after January 1, 2013. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.