Thermon Reports Second Quarter Results

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