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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on April 19, 2011

Registration No. 333-172007

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549



AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933



THERMON GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)



Delaware   3629   27-2228185
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (IRS Employer
Identification Number)

100 Thermon Drive, San Marcos, Texas 78666, (512) 396-5801
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)



Rodney Bingham
President and Chief Executive Officer
Thermon Group Holdings, Inc.
100 Thermon Drive
San Marcos, Texas 78666
(512) 396-5801
(Name, address, including zip code, and telephone number, including area code, of agent for service)



with copies to:

Robert L. Verigan
Michael P. Heinz
Sidley Austin LLP
One South Dearborn Street
Chicago, Illinois 60603
(312) 853-7000

 

Colin J. Diamond
Jin K. Kim
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
(212) 819-8200



Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after this registration statement becomes effective.

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: o

          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. (Check one):

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a smaller
reporting company)
  Smaller reporting company o

          The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission acting pursuant to said Section 8(a), may determine.


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The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and neither we nor the selling stockholders are soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated April 19, 2011

PROSPECTUS


10,000,000 Shares

GRAPHIC

Thermon Group Holdings, Inc.

Common Stock


This is the initial public offering of the common stock of Thermon Group Holdings, Inc. We are offering 4,000,000 shares of the common stock and the selling stockholders identified in this prospectus are offering 6,000,000 shares. We will not receive any proceeds from sale of shares held by the selling stockholders. No public market currently exists for our common stock.

Our common stock has been approved for listing on the New York Stock Exchange under the symbol "THR."

We anticipate that the initial public offering price will be between $12.00 and $14.00 per share.

Investing in our common stock involves risks. See "Risk Factors" beginning on page 17 of this prospectus.

 
  Per Share   Total  

Price to the public

  $             $                       

Underwriting discounts and commissions

  $     $    

Proceeds to us (before expenses)

  $     $    

Proceeds to the selling stockholders (before expenses)

  $     $    

We and certain of the selling stockholders have granted the underwriters the option to purchase up to 1,500,000 additional shares of common stock on the same terms and conditions as set forth above if the underwriters sell more than 10,000,000 shares of common stock in this offering.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares on or about                           , 2011.


Barclays Capital   Jefferies



William Blair & Company   BMO Capital Markets   KeyBanc Capital Markets

Prospectus dated                                        , 2011


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GRAPHIC



TABLE OF CONTENTS

 
 
Page
 

Prospectus Summary

    1  

Risk Factors

    17  

Forward-Looking Statements

    32  

Use of Proceeds

    33  

Dividend Policy

    33  

Capitalization

    34  

Dilution

    36  

Unaudited Pro Forma Condensed Consolidated Financial Statements

    38  

Selected Historical and Pro Forma Consolidated Financial and Operating Data

    49  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    56  

Business

    80  

Management

    95  

Compensation Discussion and Analysis

    103  

Principal and Selling Stockholders

    119  

Certain Relationships and Related Party Transactions

    123  

Description of Capital Stock

    129  

Shares Available for Future Sale

    133  

Material U.S. Federal Income Tax Considerations for Non-U.S. Stockholders

    136  

Underwriting

    139  

Legal Matters

    147  

Experts

    147  

Where You Can Find More Information

    147  

Index to Financial Statements

    F-1  

        You should rely only on information contained in this prospectus, any amendment or supplement to this prospectus or any free writing prospectus prepared by or on behalf of us, or to which we have referred you. Neither we nor any of the selling stockholders has authorized anyone to provide you with information that is different. If anyone provides you with different or inconsistent information, you should not rely on it. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of the shares of common stock offered hereby by any person in any jurisdiction in which it is unlawful for such person to make such an offering or solicitation. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock.

        Unless otherwise indicated, all information contained in this prospectus concerning the industry in general, including information regarding our market position and market share within our industry and expectations regarding future growth of sales in our industry, is based on management's estimates using internal data, data from industry related publications, consumer research and marketing studies and other externally obtained data. Industry and market data involve risks and uncertainties and are subject to change based on various factors, including those discussed under the caption "Risk Factors" in this prospectus.

        Through and including                        , 2011 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.


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PROSPECTUS SUMMARY

        The following summary highlights selected information contained in this prospectus and may not contain all the information that may be important to you. You should read this entire prospectus, including the section entitled "Risk Factors," before making an investment decision. Unless otherwise specified or the context otherwise requires, references to "$" or "dollars" in this prospectus are to United States dollars, and the terms "we," "our," "us" and the "Company," as used in this prospectus, refer to Thermon Group Holdings, Inc. and its directly and indirectly owned subsidiaries as a combined entity.

Our Business

        We are one of the largest providers of highly engineered thermal solutions for process industries. For over 50 years, we have served a diverse base of thousands of customers around the world in attractive and growing markets, including energy, chemical processing and power generation. We are a global leader and one of the few thermal solutions providers with a global footprint and a full suite of products (heating cables, tubing bundles and control systems) and services (design optimization, engineering, installation and maintenance services) required to deliver comprehensive solutions to complex projects. We serve our customers locally through a global network of sales and service professionals and distributors in more than 30 countries and through our four manufacturing facilities on three continents. These capabilities and longstanding relationships with some of the largest multinational energy, chemical processing, power and engineering, procurement and construction, or EPC, companies in the world have enabled us to diversify our revenue streams and opportunistically access high growth markets worldwide.

        Our thermal solutions, also referred to as heat tracing, provide an external heat source to pipes, vessels and instruments for the purposes of freeze protection, temperature and flow maintenance and environmental monitoring. Customers typically purchase our products when constructing a new facility, which we refer to as Greenfield projects, or when performing maintenance, repair and operations on a facility's existing heat-traced pipes or upgrading or expanding a current facility, which we refer to collectively as MRO/UE. Our products are low in cost relative to the total cost of a typical processing facility, but critical to the safe and profitable operation of the facility.

        Our customers' need for MRO/UE solutions provides us with an attractive recurring revenue stream. Customers typically use the incumbent heat tracing provider for MRO/UE projects to avoid complications and compatibility problems associated with switching providers. We typically begin to realize meaningful MRO/UE revenue from new Greenfield installations one to three years after completion of the project as customers begin to remove and replace our products during routine and preventative maintenance on in-line mechanical equipment, such as pipes and valves. As a result, our growth has been driven by new facility construction, as well as by servicing our continually growing base of solutions installed around the world, which we refer to as our installed base.

        Our revenues have grown in 17 of the past 21 fiscal years, and our gross margins have averaged 44% over that period. In addition, we have generated significant growth in both revenue and profitability in recent years. Our revenue grew by 59% to $192.7 million for fiscal 2010 from $121.4 million for fiscal 2007, and gross profit grew by 65% to $91.3 million from $55.3 million over the same period. For the nine months ended December 31, 2010, we achieved revenue of $179.0 million, gross profit of $73.7 million, a net loss of $11.2 million and Adjusted EBITDA of $43.8 million and 71% of our revenues were generated outside of the United States. See note 9 to the "—Summary Historical and Pro Forma Consolidated Financial and Operating Data" table.

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Our Industry

        Alvarez & Marsal Private Equity Performance Improvement Group, LLC, or A&M, estimates that the market for industrial electric heat tracing is approximately $1 billion in annual revenues and estimates that it is growing its share of the overall heat tracing market as end users appear to continue to favor electric heat tracing solutions over steam heat tracing solutions for new installations. When revenues for steam heat tracing parts are included, A&M estimates the overall addressable market for heat tracing is approximately $2 billion in annual revenues. The industrial electric heat tracing industry is fragmented and consists of approximately 40 companies that typically only serve discrete local markets with manufactured products and provide a limited service offering. Large multinational companies drive the majority of spending for the types of major industrial facilities that require heat tracing, and we believe that they prefer providers who have a global footprint and a comprehensive suite of products and services.

        The major end markets that drive demand for heat tracing include energy, petrochemical and power generation. We believe that there are attractive near- to medium-term trends in each of these end markets.

    Energy.  Heat tracing is used to facilitate the processing, transportation and freeze protection of energy products in both upstream and downstream oil and gas applications. In order to meet growing demand and offset natural declines in existing oil and gas production, a significant increase in capital expenditures in upstream infrastructure will be required, with a particular focus on reservoirs that are in harsher climates, are deeper or have other complex characteristics that magnify the need for heat tracing. According to Wood Mackenzie, a leading independent energy research and consulting firm, as of October 2010, global upstream development expenditures are expected to increase 11% to approximately $420 billion in 2013 from approximately $380 billion in 2010. An increase in upstream production coupled with increased demand for refined products will require a corresponding increase in downstream refining capacity.

    Chemical Processing.  Heat tracing is required for temperature maintenance and freeze protection in a variety of chemical processing applications. Factors that may impact heat tracing demand in chemicals end markets include the rapid industrialization of the developing world, a shift in base chemical processing operations to low-cost feedstock regions, a transition of Western chemical processing activities from commodity products to specialty products and environmental compliance. According to the American Institute of Chemical Engineers, global capital spending by the chemical processing industry is estimated to increase to $418.4 billion, representing a compound annual growth rate of 11.1% from 2010 to 2015.

    Power Generation.  Heat tracing is required in high-temperature processes, freeze protection and environmental regulation compliance in coal and gas facilities and for safety injection systems in nuclear facilities. An important driver of demand for heat tracing solutions for power generation is increasing demand for electricity worldwide. According to the EIA, global net electricity generation is projected to increase 87% between 2007 and 2035. We believe capital spending on new and existing power generation infrastructure will be required to meet this demand.

    Continuing selection of electric-based heat tracing solutions over steam-based solutions. Beginning in the 1960s, electric heat tracing products entered the market as an alternative to steam heat tracing products. While steam-based products are still used today for heavy oil, chemical and processing applications, electric-based products generally offer greater cost savings and operating efficiencies. As a consequence, Greenfield projects commissioned in recent years are increasingly designed to incorporate electric heat tracing.

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Our Competitive Strengths

        We believe that the following strengths differentiate us from our competitors:

        We have access to attractive high growth sectors of our global addressable market.    We have a network of sales and service professionals and distributors in more than 30 countries and a manufacturing footprint that includes four facilities on three continents. This footprint allows us to diversify our revenue streams and opportunistically access the most attractive regions and sub-sectors of our markets. For example, growing demand for energy is pushing the search for resources to increasingly harsh cold weather countries, including Canada and Russia, where demand for our products is magnified, and strong petrochemical demand in China and India has led to a shift in chemical production to the Asia-Pacific region. We have a strong, established local presence in each of these markets.

        We are a global market leader.    We believe that we are the second largest industrial electric heat tracing company in the world, significantly larger than our next largest competitor and one of only a few solutions providers with a comprehensive suite of products and services, global capabilities and local on-site presence. Over our 56-year history, we have developed an installed base operated by thousands of customers and long-standing relationships with some of the largest companies in the world that drive the spending decisions for the major facilities that require our products. We believe these multinational companies prefer providers with our scale, global presence and comprehensive product and service offering.

        Our highly engineered solutions are "mission critical" to our customers.    Reliable thermal solutions are critical to the safe and profitable operation of our customers' facilities. These facilities are often complex, with numerous classified areas that are inherently hazardous and where product safety concerns are paramount. Therefore, we believe that our customers consider safety, reliability and customer service to be the most important purchase criteria for our products. We are a leader in the national and international standards setting process for the heat tracing industry and hold leadership positions on numerous industry standards development organizations.

        Our favorable business model positions us to achieve attractive financial results.    The following features of our business model contribute to our attractive financial results:

    Existing installed base generates significant recurring revenue.  On average, annual MRO/UE expenditures generated from an installed heat tracing system are approximately 5 to 10% of the initial cost of the system and expansions may require approximately 10 to 20% of the initial cost of the system. We estimate that approximately 60% of our revenues in fiscal 2010 were generated from MRO/UE sales. We believe that we have the second largest installed base in the industrial electric heat tracing industry and, as we continue to complete new Greenfield installations, we believe that, subject to customers' continuing capital and maintenance expenditures, our growing global installed base of heat tracing solutions will drive increased MRO/UE business.

    Diversified, global customer base and end markets.  Over the past five decades, we have sold our solutions to thousands of customers in more than 90 countries, serving a broad range of end-market applications. The diversity of our customer base and end-markets limits our exposure to any individual industry sector or geographic region and provides us with an opportunity to access the most attractive high growth sectors of our end markets.

    Strong revenue visibility.  We believe that we have strong visibility into our future revenue as a result of recurring demand that we expect will be generated from our global installed base, a growing backlog of signed purchase orders and a robust pipeline of planned projects. Our visibility into the timing of our recognition of revenue out of backlog is not always certain, particularly with larger projects; however, our solutions are ordered and installed toward the end

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      of Greenfield project construction, and therefore, historically, purchase orders have rarely been cancelled.

    Consistent gross margins and cash flow generation.  We have a long history of stable gross margins and positive operating cash flow through a variety of economic cycles. We have consistently had positive income from operations, and gross margins have averaged 44% over the past 21 fiscal years, which we believe reflect our customers' recognition of the value and reliability of our heat tracing solutions, our highly variable cost structure and the limited capital expenditures required to maintain our business.

        Our management team has a proven track record.    Our senior management team averages approximately 22 years of experience with us and is responsible for growing Thermon through a variety of business cycles, building our global platform and developing our reputation for quality and reliability in the heat tracing industry. Our senior management and key employees will continue to have a significant equity stake in Thermon following this offering.

Our Growth Strategy

        Our business strategy is designed to capitalize on our competitive strengths. Key elements of our strategy include:

        Capitalize on our leading market position to continue pursuing organic growth opportunities.    Our primary growth engine has traditionally been organic expansion. We will continue to focus on strategically building the necessary global sales infrastructure to expand our footprint in high growth markets. We believe that this footprint and our local presence are attractive to our customers and differentiate us from other industry participants. We expect to continue to pursue growth opportunities in emerging markets and across industry sectors in the future.

        Leverage our installed base to expand our recurring revenue stream.    Once the MRO/UE cycle begins, we typically realize MRO/UE revenues, which are typically higher margin than Greenfield revenues, over the life of each installation. As we continue to grow our large, global installed base with new Greenfield projects, we expect to generate incremental MRO/UE revenues related to these new projects. Since the beginning of fiscal 2008 through December 31, 2010, we estimate that we have realized approximately $290 million in revenues from Greenfield projects, which represents a meaningful opportunity for us to create MRO/UE revenues in the future.

        Drive growth through alliances with major customers and suppliers.    We have developed strategic alliances with other industry participants in order to enhance our growth opportunities, and we are a "pre-qualified" heat tracing provider for several of our key customers. These relationships provide us with an advantage in identifying and bidding for new Greenfield and MRO/UE projects, and we intend to target additional opportunities with suppliers of complementary products that will allow us to take mutual advantage of our customer relationships and enhance our cross-selling opportunities.

        Continue to offer solutions that support evolving environmental applications.    A portion of our recent growth has been driven by the use of our products in alternative energy initiatives, including carbon capture, thermal solar and coal gasification facilities. In addition, our products help our customers monitor their facilities' environmental or other regulatory compliance. We intend to continue to focus on driving growth by providing solutions that address our customers' evolving environmental application needs.

        Selectively pursue investment opportunities.    

    Given the fragmented nature of the heat tracing industry, we believe that there will be opportunities to pursue value-added acquisitions at attractive valuations in the future, including

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      by augmenting our geographic footprint, broadening our product offerings, expanding our technological capabilities and capitalizing on potential operating synergies.

    We plan to pursue strategic investment opportunities, including the expansion of our principal manufacturing facility in San Marcos, Texas.

Risk Factors

        There are a number of risks related to our business, this offering and our common stock that you should consider before you decide to participate in this offering. You should carefully consider all the information presented in the section entitled "Risk Factors" in this prospectus. Some of the principal risks related to our business include the following:

    The markets we serve are subject to general economic conditions and cyclical demand, which could harm our business and lead to significant shifts in our results of operations from quarter to quarter that make it difficult to project long-term performance.

    A sustained downturn in the energy industry, due to oil and gas prices decreasing or otherwise, could decrease demand for some of our products and services, which could materially and adversely affect our business, financial condition and results of operations.

    As a global business, we are exposed to economic, political and other risks in a number of countries, which could materially reduce our revenues, profitability or cash flows or materially increase our liabilities. If we are unable to continue operating successfully in one or more foreign countries, it may have a material adverse effect on our business and financial condition.

    A failure to deliver our backlog on time could affect our future sales and profitability and our relationships with our customers, and if we were to experience a material amount of modifications or cancellations of orders, our sales could be negatively impacted.

    Our future revenue depends in part on our ability to bid and win new contracts. Our failure to effectively obtain future contracts could adversely affect our profitability.

    We may be unable to compete successfully in the highly competitive markets in which we operate.

    Volatility in currency exchange rates may adversely affect our financial condition, results of operations or cash flows.

    Our business strategy includes acquiring smaller, value-added companies and making investments that complement our existing business. These acquisitions and investments could be unsuccessful or consume significant resources, which could adversely affect our operating results.

    On a pro forma basis after giving effect to this offering and the redemption of a portion of our senior secured notes scheduled to occur on April 29, 2011, as of December 31, 2010, we would have had outstanding indebtedness of $168.0 million. Our debt agreements impose certain operating and financial restrictions, with which failure to comply could result in an event of default that could adversely affect our results of operations.

        These and other risks are more fully described in the section entitled "Risk Factors" in this prospectus. If any of these risks actually occur, they could materially harm our business, prospects, financial condition and results of operations. In this event, you could lose part or all of your investment in our common stock offered hereby.

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Recent Developments

        While we have not finalized our results of operations for the fourth quarter of fiscal 2011 or full fiscal year 2011, the following preliminary and unaudited information reflects our estimates with respect to such results based on currently available information.

        We currently expect sales of between $58 million and $60 million for the fourth quarter of fiscal 2011 and between $237 million and $239 million for full fiscal year 2011, compared to sales of $49.8 million and $192.7 million for the fourth quarter of fiscal 2010 and full fiscal year 2010, respectively. The estimated increase in sales for the fourth quarter of fiscal 2011 was primarily the result of increased demand for our core thermal products and services. We currently expect income before provision for income taxes of between $1.1 million and $3.1 million for the fourth quarter of fiscal 2011 and a loss before provision for income taxes between $(26.7) million and $(24.7) million for full fiscal year 2011, compared to income before provision for income taxes of $5.9 million and $32.9 million for the fourth quarter of fiscal 2010 and full fiscal year 2010, respectively. Income before provision for income taxes for the fourth quarter of fiscal 2011 was positively affected by the estimated increase in sales on comparable operating expenses that reflect some efficiency from fixed costs when compared to the fourth quarter of fiscal 2010, but those effects were largely offset by the factors discussed below.

        Our estimated results of operations for the fourth quarter of fiscal 2011 and full fiscal year 2011 were significantly impacted by the effects of the Acquisition referred to below. See "—Our Principal Stockholder." We estimate that amortization of intangible assets, including cost of sales adjustment will be $2.9 million in the fourth quarter of fiscal 2011 and $25.9 million for the full fiscal year 2011, compared to $0.6 million and $2.4 million for the fourth quarter of fiscal 2010 and full fiscal year 2010, respectively. The increase in intangible amortization expense over prior periods is due to purchase price accounting expense related to the Acquisition. We recognized transaction expenses related to the Acquisition of $0.5 million and $22.1 million in the fourth quarter of fiscal 2011 and full fiscal year 2011, respectively; similar expenses in fiscal 2010 totaled $1.0 million, $0.7 million of which was recognized in the fourth quarter of fiscal 2010. As a result of the issuance of $210.0 million aggregate principal amount of our senior secured notes used to partially finance the Acquisition, our interest expense also increased substantially. We estimate interest expense of $5.7 million and $29.0 million in the fourth quarter of 2011 and full fiscal year 2011, respectively. In fiscal 2010, interest expense totaled $1.8 million and $7.4 million for the fourth quarter and full fiscal year 2010, respectively. Our management fees also increased as a result of the Acquisition to an estimated $0.5 million and $2.0 million for the fourth quarter of 2011 and full fiscal year 2011, respectively, from $0.2 million and $0.9 million for the fourth quarter of 2010 and full fiscal year 2010, respectively. Excluding these items that were significantly affected by the Acquisition, we estimate that our income before provision for income taxes for the fourth quarter of fiscal 2011 would be between $10.7 million and $12.7 million and for full fiscal year 2011 would be between $52.3 million and $54.3 million. For additional discussion regarding factors impacting fiscal year 2011 results of operations prior to the fourth quarter, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Nine Months Ended December 31, 2010 (Combined) Compared to the Nine Months Ended December 31, 2009 (Non-GAAP)."

        Because we have not completed our closing processes, including our analysis of the potential impact of additional taxes arising from our receipt on March 31, 2011 of dividends from certain of our foreign subsidiaries in an aggregate amount of $34.3 million to be used to fund the redemption of $21.0 million aggregate principal amount of our senior secured notes scheduled to occur on April 29, 2011 and to pay certain transaction costs incurred in connection with this offering, we are not currently able to estimate our income tax benefit (expense) or net income (loss) for the fourth quarter of fiscal 2011. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Repatriation considerations." Although we are not able to estimate

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those items at this time, we have not identified any unusual or unique events or trends that occurred during the fourth quarter of fiscal 2011 that might materially affect our results of operations for that quarter, other than those discussed above. We believe that the foregoing information about our sales and income before provision for income taxes, even when unaccompanied by information regarding our net income (loss) that is not yet available, is helpful to an investor's understanding of our performance and is a meaningful indicator for assessing our operating performance because it demonstrates our continued ability to capture organic growth opportunities and achieve attractive operating results.

        We are currently in the process of preparing our audited consolidated financial statements as of and for the year ended March 31, 2011. These financial statements are not currently available and are not expected to be available and filed with the Securities and Exchange Commission until after the consummation of this offering. Estimates of financial results and position are inherently uncertain and subject to change, and adjustments may arise and actual results may differ materially from these estimates. Accordingly, you are cautioned not to place undue reliance on the estimates. This information is a summary of estimated financial data and should be read in conjunction with the "Risk Factors," "Selected Historical and Pro Forma Consolidated Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our unaudited and audited consolidated financial statements and the accompanying notes appearing elsewhere in this prospectus.

Our Principal Stockholder

        Our principal stockholder, CHS Capital LLC, or CHS, acquired its interest in us on April 30, 2010, which we refer to as the Acquisition. CHS beneficially owns 50% of our outstanding shares of common stock on a fully-diluted basis. Two other private equity firms also acquired stakes in us at the time of the Acquisition. We refer to CHS and such other firms collectively in this prospectus as our sponsors.

        CHS is a Chicago-based private equity firm with 23 years of experience investing in the middle market. Targeting well-managed companies with enterprise values between $75 and $500 million, CHS partners with management teams to focus on accelerating growth, enhancing capabilities and resources and positioning companies for attractive exits. CHS has specialized expertise in the consumer and business services; distribution; and industrial, infrastructure and energy sectors and has completed 74 platform investments and 237 add-on investments. Founded in 1988, CHS has formed five private equity funds and has $2.3 billion of committed capital in active investment funds. CHS currently manages 16 portfolio investments with combined annual revenues in excess of $4.5 billion.

Our Corporate Information

        We are incorporated in Delaware and our corporate offices are located at 100 Thermon Drive, San Marcos, TX 78666. Our telephone number is (512) 396-5801. Our website address is www.thermon.com. None of the information on our website or any other website identified herein is part of this prospectus or the registration statement of which it forms a part.

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Our Organizational Chart

        The following chart summarizes our corporate structure:

GRAPHIC

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THE OFFERING

Total common stock offered

  10,000,000 shares

Common stock offered by us

 

4,000,000 shares

Common stock offered by selling stockholders

 

6,000,000 shares

Common stock to be outstanding after this offering

 

28,933,407 shares

Over-allotment option

 

We and certain of the selling stockholders have granted the underwriters a 30-day option to purchase up to 1,425,098 and 74,902, respectively, of additional shares of our common stock to cover over-allotments, if any.

Use of proceeds

 

We estimate that we will receive net proceeds from this offering of approximately $45.9 million (or approximately $63.1 million if the underwriters exercise their option to purchase additional shares of common stock in full), after deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us, based on an assumed offering price of $13.00 per share, the midpoint of the range set forth on the cover page of this prospectus. We expect to use $21.6 million of the net proceeds to prepay a portion of the $189.0 million principal amount of our 9.500% Senior Secured Notes that will be outstanding immediately prior to the consummation of this offering, which mature on May 1, 2017, which we refer to as our senior secured notes, and the balance for general corporate purposes. See "Use of Proceeds."

 

We will not receive any proceeds from the shares sold by the selling stockholders.

Risk factors

 

You should carefully read the "Risk Factors" section of this prospectus for a discussion of factors that you should consider before deciding to invest in shares of our common stock.

New York Stock Exchange symbol

 

THR

        The number of shares of our common stock to be outstanding following this offering is based on 24,933,407 shares of our common stock outstanding as of the date of this prospectus, but excludes 5,660,488 shares of common stock reserved for issuance under our equity incentive plans, of which options to purchase 2,757,524 shares have been granted at a weighted average exercise price of $5.38 per share, all of which will vest and become exercisable upon the consummation of this offering.

        Concurrently with the pricing of this offering, we intend to grant to our executive officers and certain other employees options to purchase 122,000 shares with an exercise price equal to the initial public offering price from the number of shares of common stock reserved for issuance under our equity incentive plans.

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        Unless otherwise expressly stated or the context otherwise requires, all information in this prospectus gives effect to and assumes the following:

    the acceleration and vesting immediately prior to the consummation of this offering of options to purchase 2,757,524 shares of common stock pursuant to the terms of our existing restricted stock and stock option plan;

    no exercise by the underwriters of their option to purchase up to 1,500,000 additional shares of our common stock from us and certain selling stockholders to cover over-allotments, if any;

    the effectiveness of a 192.458681-for-one split of our common stock, which occurred on March 31, 2011;

    the automatic conversion of our common stock into one class of voting common stock, which will occur immediately prior to the consummation of this offering;

    the adoption of our second amended and restated certificate of incorporation, which will occur immediately prior to the consummation of this offering; and

    an initial public offering price of $13.00 per share, the midpoint of the estimated initial public offering price range set forth on the cover of this prospectus.

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SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA

        The following tables set forth certain summary historical and pro forma consolidated financial and operating data for the fiscal years ended March 31, 2008, March 31, 2009 and March 31, 2010, for the nine months ended December 31, 2009 and December 31, 2010, and as of December 31, 2010, and certain pro forma financial information for the fiscal year ended March 31, 2010 and for the nine months ended December 31, 2009 and December 31, 2010. The data set forth below should be read in conjunction with the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Capitalization," "Unaudited Pro Forma Condensed Consolidated Financial Statements," and "Selected Historical and Pro Forma Consolidated Financial and Operating Data," each of which is contained elsewhere in this prospectus, and our consolidated financial statements and the notes thereto for the fiscal years ended March 31, 2008, March 31, 2009 and March 31, 2010 and for the nine months ended December 31, 2009 and December 31, 2010, each of which is contained elsewhere in this prospectus.

        In this prospectus, we have included the condensed consolidated financial statements of Thermon Group Holdings, Inc. as of December 31, 2010 and for the period from May 1, 2010 through December 31, 2010 ("successor") and the condensed consolidated financial statements of Thermon Holdings, LLC for the fiscal years ended March 31, 2010 and March 31, 2009, for the period from August 30, 2007 through March 31, 2008, for the nine months ended December 31, 2009 ("predecessor"), and for the period from April 1, 2007 through August 29, 2007 ("pre-predecessor"). Concurrent with the consummation of the Acquisition on April 30, 2010, Thermon Holdings, LLC no longer owned any interest in us, and, beginning with the period from May 1, 2010 through December 31, 2010, we reported the consolidated financial statements of Thermon Group Holdings, Inc. We do not anticipate that there would have been any material difference in our consolidated financial statements and notes thereto for the fiscal years ended March 31, 2008, March 31, 2009 and March 31, 2010 and for the nine months ended December 31, 2009 had such statements been prepared for Thermon Group Holdings, Inc., except as it relates to purchase accounting in connection with the Acquisition.

        The presentation of fiscal 2008 includes the combined results of the pre-predecessor and predecessor owners for fiscal 2008 and the predecessor and successor owners for the nine months ended December 31, 2010, respectively. We have presented the combination of these respective periods because it provides an easier-to-read discussion of the results of operations and provides the investor with information from which to analyze our financial results in a manner that is consistent with the way management reviews and analyzes our results of operations. In addition, the combined results provide investors with the most meaningful comparison between our results for prior and future periods. Please refer to notes 1 and 2 to the "Selected Historical and Pro Forma Consolidated Financial and Operating Data" table and our historical consolidated financial statements and notes thereto for the year ended March 31, 2008 and the nine months ended December 31, 2010 included elsewhere in this prospectus for a separate presentation of the results for the pre-predecessor and predecessor and predecessor and successor periods.

        The summary unaudited pro forma data have been prepared to give effect to the CHS Transactions (as defined below), this offering and the application of the net proceeds therefrom as if they had occurred on April 1, 2009. Assumptions underlying the pro forma adjustments are described in the section entitled "Unaudited Pro Forma Condensed Consolidated Financial Statements—Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements" contained elsewhere in this prospectus. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. Please see "Unaudited Pro Forma Condensed Consolidated Financial Statements—Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements" for a more detailed discussion of how pro forma adjustments are presented in our unaudited pro forma

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condensed consolidated financial statements. The unaudited pro forma condensed consolidated data is provided for informational purposes only. The summary unaudited pro forma data do not purport to represent what our results of operations actually would have been if the CHS Transactions, this offering and the application of the net proceeds therefrom had occurred at any date, nor do such data purport to project the results of operations for any future period.

        As used in this prospectus, the CHS Transactions refer collectively to the equity investment in us by CHS, our other sponsors and certain members of our management team, the entry into our revolving credit facility, the repayment of amounts owed under, and the termination of, certain then-existing revolving credit and term loan facilities, the issuance of our senior secured notes and the application of the gross proceeds from the offering of our senior secured notes and the equity investment to complete the Acquisition and to pay related fees and expenses of these transactions.

 
  Pre-Predecessor/
Predecessor
Combined
(Non-GAAP)(1)
  Predecessor   Predecessor/
Successor
Combined
(Non-GAAP)(2)
 
 
  Fiscal Year Ended March 31,   Nine Months Ended December 31,  
 
  2008   2009   2010   2009   2010  
 
  (dollars in thousands, except share and per share data)
 

Consolidated Statement of Operations Data:

                               

Sales

  $ 185,811   $ 202,755   $ 192,713   $ 142,905   $ 178,968  

Cost of sales

    102,946     105,456     101,401     73,966     97,723  

Purchase accounting adjustments(3)

    7,146                 7,519  
                       

Gross profit

  $ 75,719   $ 97,299   $ 91,312   $ 68,939   $ 73,726  

Operating expenses:

                               
 

Marketing, general and administrative and engineering expenses

    46,569     48,982     46,481     33,099     40,078  
 

Management fees

    475     825     862     671     1,412  
 

Amortization of intangible assets

    6,716     6,627     2,426     1,803     15,341  
                       

Income from operations

  $ 21,959   $ 40,865   $ 41,543   $ 33,366   $ 16,895  

Interest expense, net

    (8,207 )   (9,531 )   (7,351 )   (5,516 )   (23,323) (4)

Gain/(loss) on disposition of PP&E

    (116 )   (18 )   (1 )        

Miscellaneous income/(expense)(5)

    (12,937 )   (3,120 )   (1,285 )   (881 )   (21,306 )
                       

Income (loss) from continuing operations before taxes

  $ 699   $ 28,196   $ 32,906   $ 26,969   $ (27,734 )

Income tax benefit (expense)

    (21,712 )   (1,795 )   (13,966 )   (12,241 )   16,507  
                       

Net income (loss)(6)

  $ (21,013 ) $ 26,401   $ 18,940   $ 14,728   $ (11,227 )
                       

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  Pre-Predecessor/
Predecessor
Combined
(Non-GAAP)(1)
  Predecessor   Predecessor/
Successor
Combined
(Non-GAAP)(2)
 
 
  Fiscal Year Ended March 31,   Nine Months Ended December 31,  
 
  2008   2009   2010   2009   2010  
 
  (dollars in thousands, except share and per share data)
 

Pro Forma Statement of Operations Data:(7)

                               

Net income (loss)

              $ 18,940   $ 14,728   $ (11,227 )

Pro forma adjustments to net income (loss):

                               
 

Purchase accounting adjustment

                        7,519  
 

Management fees

                750     563     1,396  
 

Amortization of purchase intangibles

                (9,057 )   (6,809 )   6,729  
 

Net interest expense

                (10,984 )   (8,182 )   9,384  
 

CHS Transactions costs

                309         21,605  
 

Tax effect of adjustments

                6,643     5,050     (16,322 )

Pro forma net income (loss)

              $ 6,601   $ 5,350   $ 19,084  
                           

Pro forma net income per share

                               
 

Basic

              $ 0.23   $ 0.19   $ 0.66  
 

Diluted

              $ 0.22   $ 0.18   $ 0.63  

Pro forma weighted average shares outstanding

                               
 

Basic

                28,887,987     28,887,987     28,887,987  
 

Diluted

                30,477,028     30,477,028     30,477,028  

Other Financial Data:

                               

Adjusted gross margin(8)

    44.6 %   48.0 %   47.4 %   48.2 %   45.4 %

Adjusted EBITDA(9)

  $ 38,023   $ 48,322   $ 46,555   $ 36,379   $ 43,772  

Capital expenditures

    5,315     2,708     1,587     976     1,246  

Operating Data:

                               

Backlog at end of period(10)

  $ 77,497   $ 66,779   $ 82,459   $ 79,473   $ 79,749  

 

 
  As of December 31, 2010  
 
  Actual   As Adjusted(11)  
 
  (dollars in thousands)
 

Balance Sheet Data:

             

Cash and cash equivalents

  $ 35,201   $ 30,444  

Accounts receivable, net

    47,073     47,073  

Inventories, net

    27,600     27,600  

Total assets

    434,061     428,568  

Total debt, including current portion

    210,000     168,000  

Total shareholders' equity

    121,062     157,569  

(1)
The closing of the acquisition of a controlling interest in us by affiliates of the Audax Group, which acquisition we refer to as the Audax Transaction, on August 30, 2007, established a new basis of accounting that primarily affected inventory, intangible assets, goodwill, taxes, debt and

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    equity. This resulted in additional amortization expense, interest expense and tax expense for the period from August 30, 2007 through March 31, 2008 ("predecessor") as compared to the period from April 1, 2007 through August 29, 2007 ("pre-predecessor"). Except for purchase accounting adjustments, the results for the two combined periods are comparable. Therefore, we believe that combining the two periods into a single period for comparative purposes gives the most clarity for the users of this financial information. Please refer to note 1 to the "Selected Historical and Pro Forma Consolidated Financial and Operating Data" table and our historical consolidated financial statements and notes thereto for the year ended March 31, 2008 included elsewhere in this prospectus for a separate presentation of the results for the pre-predecessor and predecessor periods in accordance with U.S. generally accepted accounting principles, which we refer to as GAAP.

(2)
The closing of the Acquisition on April 30, 2010 established a new basis of accounting that primarily affected inventory, intangible assets, goodwill, taxes, debt and equity. This resulted in additional amortization expense, interest expense and tax expense for the period from May 1, 2010 through December 31, 2010 ("successor") as compared to the period from April 1, 2010 through April 30, 2010 ("predecessor"). Except for purchase accounting adjustments, the results for the two combined periods are comparable. Therefore, we believe that combining the two periods into a single period for comparative purposes gives the most clarity for the users of this financial information. Please refer to note 2 to the "Selected Historical and Pro Forma Consolidated Financial and Operating Data" table and our historical consolidated financial statements and notes thereto for the nine months ended December 31, 2010 included elsewhere in this prospectus for a separate presentation of the results for the predecessor and successor periods in accordance with GAAP.

(3)
In fiscal 2008, there was a non-cash negative impact of $7.1 million to cost of sales and, consequently, gross profit due to a purchase accounting adjustment related to the Audax Transaction. In the nine months ended December 31, 2010, there was a similar non-cash negative impact of $7.5 million to cost of sales and, consequently, gross profit due to a purchase accounting adjustment related to the Acquisition.

(4)
Interest expense for the nine months ended December 31, 2010 of $23.3 million included increased interest and amortization related to the CHS Transactions, including interest expense on our revolving credit facility and our senior secured notes issued on April 30, 2010 to finance in part the Acquisition, as well as $2.0 million of unused bridge loan fee amortization, $3.1 million of prepayment fees and $2.6 million of accelerated amortization of the deferred debt costs associated with the repaid debt.

(5)
Miscellaneous expense for fiscal 2008 of $(12.9) million consisted primarily of $(8.8) million of non-recurring expenses related to the Audax Transaction, a $(3.9) million employee compensation transaction bonus related to the Audax Transaction, $(0.3) million of foreign exchange transaction losses and $(0.3) million of compliance fees and related costs, partially offset by $0.4 million in net miscellaneous income. Miscellaneous expense for the nine months ended December 31, 2010 of $(21.3) million consisted primarily of $(21.6) million of non-recurring expenses related to the CHS Transactions, and partially offset by $0.6 million of income related to the reversal of our compliance reserve.

(6)
We have not presented net income (loss) per share amounts for the periods presented herein, as the capital structures of the pre-predecessor, predecessor and successor are substantially different, and the net income (loss) per share amounts are therefore not comparable or meaningful. Please refer to our consolidated financial statements and notes thereto for fiscal 2008, fiscal 2009 and fiscal 2010 and for the nine months ended December 31, 2009 and December 31, 2010, which are contained elsewhere in this prospectus, for a presentation of the net income (loss) per share and

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    the weighted average shares outstanding for the pre-predecessor, predecessor and successor periods.

(7)
Pro forma statement of operations data gives effect to the CHS Transactions and this offering, including the issuance by us of 4,000,000 shares of our common stock at a price of $13.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, the use of proceeds as set forth under "Use of Proceeds," the termination of our management fee and other items described in "Unaudited Pro Forma Condensed Consolidated Financial Statements," in each case as if they had occurred as of April 1, 2009. In accordance with Rule 11-02(c)(2) of Regulation S-X, we have only presented the pro forma statement of operations data for the most recent fiscal year (i.e., fiscal 2010) and the period from the most recent fiscal year end to the most recent interim date for which a balance sheet is required and the corresponding interim period of the preceding fiscal year (i.e., the nine months ended December 31, 2010 and December 31, 2009).

(8)
Represents the difference between sales and cost of sales other than purchase accounting adjustments, divided by sales and, accordingly, does not take into account the non-cash impact of purchase accounting adjustments of $7.1 million and $7.5 million in fiscal 2008 and the nine months ended December 31, 2010, respectively.

(9)
Adjusted EBITDA represents net income (loss) from continuing operations before interest expense, income tax expense, depreciation and amortization of intangibles, stock-based compensation expense and before transaction expenses, including those incurred in connection with the Audax Transaction and the Acquisition, non-recurring employee bonuses, and management fees paid to Audax and the sponsors. Disclosure in this prospectus of Adjusted EBITDA, which is a "non-GAAP financial measure", as defined under the rules of the Securities and Exchange Commission, or the SEC, is intended as a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA should not be considered as an alternative to net income, income from continuing operations or any other performance measure derived in accordance with GAAP. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by unusual or non-recurring items.


We believe this measure is meaningful to our investors to enhance their understanding of our financial performance. Although Adjusted EBITDA is not necessarily a measure of our ability to fund our cash needs, we understand that it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance and to compare our performance with the performance of other companies that report Adjusted EBITDA. Adjusted EBITDA should be considered in addition to, not as a substitute for, income from operations, net income (loss) and other measures of financial performance reported in accordance with GAAP. Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. The following table reconciles net income (loss) to Adjusted EBITDA for the periods presented in this table and elsewhere in this prospectus:

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  Pre-Predecessor/
Predecessor
Combined
(Non-GAAP)
  Predecessor   Predecessor/
Successor
Combined
(Non-GAAP)
 
 
  Fiscal Year Ended March 31,   Nine Months Ended December 31,  
 
  2008   2009   2010   2009   2010  
 
  (dollars in thousands)
 

Net income (loss)

  $ (21,013 ) $ 26,401   $ 18,940   $ 14,728   $ (11,227 )
 

Interest expense, net

    8,207     9,531     7,351     5,516     23,323  
 

Income tax expense

    21,712     1,795     13,966     12,241     (16,507 )
 

Depreciation and amortization expense

    15,892     8,497     4,424     3,223     24,432  
 

Stock-based compensation expense

                    734  
 

Audax Transaction expenses(a)

    8,820                  
 

CHS Transactions expenses(b)

            309         21,605  
 

Other sale transaction expenses(c)

        1,273              
 

Other auction transaction expenses(d)

            703          
 

Non-recurring employee bonus(e)

    3,930                  
 

Management fees(f)

    475     825     862     671     1,412  
                       

Adjusted EBITDA

  $ 38,023   $ 48,322   $ 46,555   $ 36,379   $ 43,772  
                       

(a)
Represents expenses related to the sale process that culminated with the successful completion of the Audax Transaction, which were incurred in fiscal 2008.

(b)
Represents expenses related to the sale process that culminated with the successful completion of the Acquisition, which were incurred during fiscal 2010 and the nine months ended December 31, 2010.

(c)
Represents legal, financial and other advisory and consulting fees and expenses incurred during fiscal 2009 when affiliates of the Audax Group, who we collectively refer to as Audax, engaged in negotiations to sell their controlling interest in us. Negotiations were abandoned by the parties in fiscal 2009.

(d)
Represents legal, financial and other advisory and consulting fees and expenses incurred during fiscal 2010 when Audax commenced an auction process to sell their controlling interest in us. The auction process was abandoned by Audax in fiscal 2010.

(e)
Represents non-recurring bonuses paid to employees prior to the Audax Transaction.

(f)
Represents management fees that will terminate in connection with this offering. See "Certain Relationships and Related Party Transactions—Transaction Fee and Management Fee."
(10)
Represents the future revenue attributable to signed, but unperformed, purchase orders that set forth specific revenue amounts at the end of the applicable period.

(11)
As adjusted to reflect (i) the issuance of 4,000,000 shares of common stock by us in this offering, (ii) the redemption of $21.0 million aggregate principal amount of our senior secured notes scheduled to occur on April 29, 2011; (iii) the application of proceeds from this offering as set forth under "Use of Proceeds" and (iv) the payment of the one-time fee in the aggregate amount of $7.4 million to our sponsors in connection with the termination of the management services agreement. Adjustments do not include an increase of $15.0 million in cash and cash equivalents between December 31, 2010 and March 30, 2011.

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RISK FACTORS

        Investing in our common stock involves substantial risks. In addition to the other information in this prospectus, you should carefully consider the following risk factors before investing in our common stock. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also materially adversely affect our business, financial condition or results of operations. We cannot assure you that any of the events discussed in the risk factors below, or other risks, will not occur. If they do, our business, financial condition and results of operations could be materially adversely affected. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. Certain statements in "Risk Factors" are forward-looking statements. See "Forward-Looking Statements" elsewhere in this prospectus.

Risks Related to Our Business and Industry

The markets we serve are subject to general economic conditions and cyclical demand, which could harm our business and lead to significant shifts in our results of operations from quarter to quarter that make it difficult to project long-term performance.

        Our operating results have been and may in the future be adversely affected by general economic conditions and the cyclical pattern of certain industries in which our customers and end users operate. Demand for our products and services depends in large part upon the level of capital and maintenance expenditures by many of our customers and end users, in particular those in the energy, chemical processing and power generation industries, and firms that design and construct facilities for these industries. These customers' expenditures historically have been cyclical in nature and vulnerable to economic downturns. Prolonged periods of little or no economic growth could decrease demand for oil and gas which, in turn, could result in lower demand for our products and a negative impact on our results of operations and cash flows. In addition, this historically cyclical demand may lead to significant shifts in our results of operations from quarter to quarter, which limits our ability to make accurate long-term predictions about our future performance.

A sustained downturn in the energy industry, due to oil and gas prices decreasing or otherwise, could decrease demand for some of our products and services, which could materially and adversely affect our business, financial condition and results of operations.

        A significant portion of our revenue historically has been generated by end-users in the upstream oil and gas markets. The businesses of most of our customers in the energy industry are, to varying degrees, cyclical and historically have experienced periodic downturns. Profitability in the energy industry is highly sensitive to supply and demand cycles and commodity prices, which historically have been volatile, and our customers in this industry historically have tended to delay large capital projects, including expensive maintenance and upgrades, during industry downturns. Customer project delays may limit our ability to realize value from our backlog as expected and cause fluctuations in the timing or the amount of revenue earned and the profitability of our business in a particular period. In addition, such delays may lead to significant fluctuations in results of operations from quarter to quarter, making it difficult to predict our financial performance on a quarterly basis.

        Demand for a significant portion of our products and services depends upon the level of capital expenditure by companies in the energy industry, which depends, in part, on energy prices. Prices of oil and gas have been very volatile over the past three years, with significant increases until achieving historic highs in July 2008, followed immediately by a steep decline through 2009 and a moderate increase throughout 2010. A sustained downturn in the capital expenditures of our customers, whether due to a decrease in the market price of oil and gas or otherwise, may delay projects, decrease demand for our products and services and cause downward pressure on the prices we charge, which, in turn, could have a material adverse effect on our business, financial condition and results of operations. Such

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downturns, including the perception that they might continue, could have a significant negative impact on the market price of our common stock.

As a global business, we are exposed to economic, political and other risks in a number of countries, which could materially reduce our revenues, profitability or cash flows or materially increase our liabilities. If we are unable to continue operating successfully in one or more foreign countries, it may have a material adverse effect on our business and financial condition.

        For fiscal 2010, approximately 66% of our revenues were generated by outside of the United States, and approximately 40% were generated outside North America. In addition, one of our key growth strategies is to continue to expand our global footprint in emerging and high growth markets around the world, although we may not be successful in expanding our international business.

        Conducting business outside the United States is subject to additional risks, including the following:

    changes in a specific country's or region's political, social or economic conditions, particularly in emerging markets;

    trade relations between the United States and those foreign countries in which our customers and suppliers have operations, including protectionist measures such as tariffs and import or export licensing requirements;

    restrictions on our ability to own or operate subsidiaries in, expand in and repatriate cash from, foreign jurisdictions;

    exchange controls and currency restrictions;

    the burden of complying with multiple and potentially conflicting laws;

    potentially negative consequences from changes in U.S. and foreign tax laws;

    difficulty in staffing and managing (including ensuring compliance with internal policies and controls) geographically widespread operations;

    different regulatory regimes controlling the protection of our intellectual property;

    difficulty in the enforcement of contractual obligations in non-U.S. jurisdictions and the collection of accounts receivable from foreign accounts; and

    transportation delays or interruptions.

        One or more of these factors could prevent us from successfully expanding our presence in international markets, could have a material adverse effect on our revenues, profitability or cash flows or cause an increase in our liabilities. We may not succeed in developing and implementing policies and strategies to counter the foregoing factors effectively in each location where we do business.

A failure to deliver our backlog on time could affect our future sales and profitability and our relationships with our customers, and if we were to experience a material amount of modifications or cancellations of orders, our sales could be negatively impacted.

        Our backlog is comprised of the portion of firm signed purchase orders or other written contractual commitments received from customers that we have not recognized as revenue. The dollar amount of backlog as of December 31, 2010 was $79.7 million. The timing of our recognition of revenue out of our backlog is subject to a variety of factors that may cause delays, many of which, including fluctuations in our customers' delivery schedules, are beyond our control. Such delays may lead to significant fluctuations in results of operations from quarter to quarter, making it difficult to predict our financial performance on a quarterly basis. For example, a delay in the completion of a

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large Greenfield project resulted in approximately several million dollars in revenue attributable to such project being realized in the quarter ended September 30, 2010, which was one quarter later than expected. Further, while we have historically experienced few order cancellations and the amount of order cancellations has not been material compared to our total contract volume, if we were to experience a significant amount of cancellations of or reductions in purchase orders, it would reduce our backlog and, consequently, our future sales and results of operations.

        Our ability to meet customer delivery schedules for our backlog is dependent on a number of factors including, but not limited to, access to raw materials, an adequate and capable workforce, engineering expertise for certain projects, sufficient manufacturing capacity and, in some cases, our reliance on subcontractors. For example, we are currently evaluating the expansion of our principal manufacturing facility in San Marcos, Texas, which we expect will serve our production capacity needs at that location for at least five years based on our current business plan. We cannot, however, provide any assurance that such expansion will be undertaken in a timely fashion, or at all, or that we will realize the gain in capacity we expect. The availability of these factors may in some cases be subject to conditions outside of our control. A failure to deliver in accordance with our performance obligations may result in financial penalties and damage to existing customer relationships, our reputation and a loss of future bidding opportunities, which could cause the loss of future business and could negatively impact our financial performance.

Our future revenue depends in part on our ability to bid and win new contracts. Our failure to effectively obtain future contracts could adversely affect our profitability.

        Our future revenue and overall results of operations require us to successfully bid on new contracts and, in particular, contracts for large Greenfield projects, which are frequently subject to competitive bidding processes. For example, for fiscal 2010, approximately 17% of our revenue consisted of designing, engineering, supplying and/or installing equipment for large Greenfield projects pursuant to competitive bids. Our revenue from major projects depends in part on the level of capital expenditures in our principal end markets, including the energy, chemical processing and power generation industries. The number of such projects we win in any year fluctuates, and is dependent upon the number of projects available and our ability to bid successfully for such projects. Contract proposals and negotiations are complex and frequently involve a lengthy bidding and selection process, which is affected by a number of factors, such as competitive position, market conditions, financing arrangements and required governmental approvals. For example, a client may require us to provide a bond or letter of credit to protect the client should we fail to perform under the terms of the contract. If negative market conditions arise, or if we fail to secure adequate financial arrangements or required governmental approvals, we may not be able to pursue particular projects, which could adversely affect our profitability.

We may be unable to compete successfully in the highly competitive markets in which we operate.

        We operate in competitive domestic and international markets and compete with highly competitive domestic and international manufacturers and service providers. The fragmented nature of the industrial electric heat tracing industry, which consists of approximately 40 companies, makes the market for our products and services highly competitive. A number of our direct and indirect competitors are major multinational corporations, some of which have substantially greater technical, financial and marketing resources than us, and additional competitors may enter these markets. Our competitors may develop products that are superior to our products, develop methods of more efficiently and effectively providing products and services, or adapt more quickly than we do to new technologies or evolving customer requirements. Any increase in competition may cause us to lose market share or compel us to reduce prices to remain competitive, which could result in reduced sales and earnings.

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Volatility in currency exchange rates may adversely affect our financial condition, results of operations or cash flows.

        We may not be able to effectively manage our exchange rate and/or currency transaction risks. Volatility in currency exchange rates may decrease our revenues and profitability, adversely affect our liquidity and impair our financial condition. We have not historically entered into hedging instruments to manage our exchange rate risk.

        Our non-U.S. subsidiaries generally sell their products and services in the local currency, but obtain a significant amount of their products from our facilities located in another country, primarily the United States, Canada or Europe. In particular, significant fluctuations in the Canadian Dollar, the Russian Ruble, the Euro or the Pound Sterling against the U.S. Dollar could adversely affect our results of operations. We also bid for certain foreign projects in U.S. Dollars or Euros. If the U.S. Dollar or Euro strengthens relative to the value of the local currency, we may be less competitive in bidding for those projects. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk" for additional information regarding our foreign currency exposure relating to operations.

        In order to meet our global cash management needs, we often transfer cash between the United States and foreign operations and sometimes between foreign entities. In addition, our debt service requirements are primarily in U.S. Dollars and a substantial portion of our cash flow is generated in foreign currencies, and we may need to repatriate cash to the United States in order to meet our U.S. debt service obligations, including on our senior secured notes. These transfers of cash expose us to currency exchange rate risks, and significant changes in the value of the foreign currencies relative to the U.S. Dollar could limit our ability to meet our debt obligations, including under our senior secured notes, and impair our financial condition.

        Because our consolidated financial results are reported in U.S. Dollars, and we generate a substantial amount of our sales and earnings in other currencies, the translation of those results into U.S. Dollars can result in a significant decrease in the amount of those sales and earnings. In addition, fluctuations in currencies relative to the U.S. Dollar may make it more difficult to perform period-to-period comparisons of our reported results of operations.

Due to the nature of our business, we may be liable for damages based on product liability claims. We are also exposed to potential indemnity claims from customers for losses due to our work or if our employees are injured performing services.

        We face a risk of exposure to claims in the event that the failure, use or misuse of our products results, or is alleged to result, in death, bodily injury, property damage or economic loss. Although we maintain quality controls and procedures, we cannot be sure that our products will be free from defects. If any of our products prove to be defective, we may be required to replace the product. In addition, we may be required to recall or redesign such products, which could result in significant unexpected costs. Some of our products contain components manufactured by third parties, which may also have defects. In addition, if we are installing our products, we may be subject to claims that our installation caused damage or loss. Our products are often installed in our customers' or end users' complex and capital intensive facilities in inherently hazardous or dangerous industries, including energy, chemical processing and power generation, where the potential liability from risk of loss could be substantial. Although we currently maintain product liability coverage, which we believe is adequate for the continued operation of our business, we cannot be certain that this insurance coverage will continue to be available to us at a reasonable cost or, if available, will be adequate to cover any potential liabilities. With respect to components manufactured by third-party suppliers, the contractual indemnification that we seek from our third-party suppliers may be insufficient to cover claims made against us. In the event that we do not have adequate insurance or contractual indemnification, product

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liabilities could have a material adverse effect on our business, financial condition or results of operations.

        Under our customer contracts, we often indemnify our customers from damages and losses they incur due to our work or services performed by us, as well as for losses our customers incur due to any injury or loss of life suffered by any of our employees or our subcontractor's personnel occurring on our customer's property. Many, but not all, of our customer contracts include provisions designed to limit our potential liability by excluding consequential damages and lost profits from our indemnity obligations. However, substantial indemnity claims may exceed the amount of insurance we maintain and could have a material adverse affect on our reputation, business, financial condition or results of operations.

A material disruption at any of our manufacturing facilities could adversely affect our results of operations.

        If operations at any of 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, we may be unable to fill customer orders and otherwise meet customer demand for our products, which could adversely affect our financial performance. For example, our marketing and research & development buildings, located on the same campus as our corporate headquarters and primary manufacturing facility in San Marcos, Texas, were destroyed by a tornado in January 2007.

        Interruptions in production, in particular at our manufacturing facilities in San Marcos, Texas, or Calgary, Canada, at which we manufacture the majority of our products, could increase our costs and reduce our sales. Any interruption in production capability could require us to make substantial capital expenditures to fill customer orders, which could negatively affect our profitability and financial condition. We maintain property damage insurance that 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 international operations and non-U.S. subsidiaries are subject to a variety of complex and continually changing laws and regulations and, in particular, export control regulations.

        Due to the international scope of our operations, we are subject to a complex system of laws and regulations, including regulations issued by the U.S. Department of Justice, or the DOJ, the SEC, the Internal Revenue Service, or the IRS, Customs and Border Protection, or CBP, the Bureau of Industry and Security, or BIS, the Office of Antiboycott Compliance, or OAC, and the Office of Foreign Assets Control, or OFAC, as well as the counterparts of these agencies in foreign countries. While we believe we are in material compliance with these regulations and maintain programs intended to achieve compliance, we may currently or may in the future be in violation of these regulations. In 2009, we entered into settlement agreements with BIS and OFAC, and in 2010, we entered into a settlement agreement with OAC, in each case with respect to matters we voluntarily disclosed to such agencies.

        Any alleged or actual violations may subject us to government scrutiny, investigation and civil and criminal penalties and may limit our ability to export our products or provide services outside the United States. Additionally, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.

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        In addition, our geographically widespread operations, coupled with our relatively smaller offices in many countries and our reliance on third party subcontractors, suppliers and manufacturers in the completion of our projects, make it more difficult to oversee and ensure that all our offices and employees comply with our internal policies and control procedures. We have in the past experienced employee theft, although the amounts involved have not been material, and we cannot assure you that we can ensure compliance with our internal control policies and procedures.

We operate in many different jurisdictions and we could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar foreign anti-corruption laws.

        The U.S. Foreign Corrupt Practices Act, which we refer to as the FCPA, and similar foreign anti-corruption laws generally prohibit companies and their intermediaries from making improper payments or providing anything of value to influence foreign government officials for the purpose of obtaining or retaining business or obtaining an unfair advantage. Recent years have seen a substantial increase in the global enforcement of anti-corruption laws, with more frequent voluntary self-disclosures by companies, aggressive investigations and enforcement proceedings by both the DOJ and the SEC resulting in record fines and penalties, increased enforcement activity by non-U.S. regulators, and increases in criminal and civil proceedings brought against companies and individuals. Because many of our customers and end users are involved in infrastructure construction and energy production, they are often subject to increased scrutiny by regulators. Our internal policies mandate compliance with these anti-corruption laws. We operate in many parts of the world that are recognized as having governmental corruption problems to some degree and where strict compliance with anti-corruption laws may conflict with local customs and practices. Our continued operation and expansion outside the United States, including in developing countries, could increase the risk of such violations in the future. Despite our training and compliance programs, we cannot assure you that our internal control policies and procedures always will protect us from unauthorized reckless or criminal acts committed by our employees or agents. In the event that we believe or have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, including the FCPA, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management. Violations of these laws may result in severe criminal or civil sanctions, which could disrupt our business and result in a material adverse effect on our reputation, business, results of operations or financial condition.

Our dependence on subcontractors could adversely affect our results of operations.

        We often rely on third party subcontractors as well as third party suppliers and manufacturers to complete our projects. To the extent that we cannot engage subcontractors or acquire supplies or materials, our ability to complete a project in a timely fashion or at a profit may be impaired. If the amount we are required to pay for these goods and services exceeds the amount we have estimated in bidding for fixed-price contracts, we could experience losses on these contracts. In addition, if a subcontractor or supplier is unable to deliver its services or materials according to the negotiated contract terms for any reason, including the deterioration of its financial condition or over-commitment of its resources, we may be required to purchase the services or materials from another source at a higher price. This may reduce the profit to be realized or result in a loss on a project for which the services or materials were needed.

We may lose money on fixed-price contracts, and we are exposed to liquidated damages risks in many of our customer contracts.

        We often agree to provide products and services under fixed-price contracts, including our turnkey solutions. Under these contracts, we are typically responsible for all cost overruns, other than the amount of any cost overruns resulting from requested changes in order specifications. Our actual costs

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and any gross profit realized on these fixed-price contracts could vary from the estimated costs on which these contracts were originally based. This may occur for various reasons, including errors in estimates or bidding, changes in availability and cost of labor and raw materials and unforeseen technical and logistical challenges, including with managing our geographically widespread operations and use of third party subcontractors, suppliers and manufacturers in many countries. These variations and the risks inherent in our projects may result in reduced profitability or losses on projects. Depending on the size of a project, variations from estimated contract performance could have a material adverse impact on our operating results. In addition, many of our customer contracts, including fixed-price contracts, contain liquidated damages provisions in the event that we fail to perform our obligations thereunder in a timely manner or in accordance with the agreed terms, conditions and standards.

If we lose our senior management or other key employees, our business may be adversely affected.

        Our ability to successfully operate and grow our global business and implement our strategies is largely dependent on the efforts, abilities and services of our senior management and other key employees. If we lose the services of our senior management or other key employees and are unable to find qualified replacements with comparable experience in the industry, our business could be negatively affected. Our future success will also depend on, among other factors, our ability to attract and retain qualified personnel, such as engineers and other skilled labor, and in particular management and skilled employees for our foreign operations.

Our business strategy includes acquiring smaller, value-added companies and making investments that complement our existing business. These acquisitions and investments could be unsuccessful or consume significant resources, which could adversely affect our operating results.

        Acquisitions and investments may involve cash expenditures, debt incurrence, operating losses and expenses that could have a material adverse effect on our financial condition and operating results. Acquisitions involve numerous other risks, including:

    diversion of management time and attention from daily operations;

    difficulties integrating acquired businesses, technologies and personnel into our business;

    potential loss of key employees, key contractual relationships or key customers of acquired companies or of us; and

    assumption of the liabilities and exposure to unforeseen liabilities of acquired companies.

        We have limited experience in acquiring or integrating other businesses or making investments or undertaking joint ventures with others. It may be difficult for us to complete transactions quickly and to integrate acquired operations efficiently into our current business operations. Any acquisitions or investments may ultimately harm our business or financial condition, as such acquisitions may not be successful and may ultimately result in impairment charges.

We are subject to numerous environmental and health and safety laws and regulations, as well as potential environmental liabilities, which may require us to make substantial expenditures.

        Our operations and properties are subject to a variety of federal, state, local and foreign environmental laws and regulations, including those governing the discharge of pollutants into the air or water, the management and disposal of hazardous substances or wastes, the cleanup of contaminated sites and workplace health and safety. As an owner or operator of real property, or generator of waste, we could become subject to liability for environmental contamination, regardless of whether we caused such contamination. Certain environmental laws, including the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, impose joint and several liability for cleanup

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costs, without regard to fault, on persons who have disposed of or released hazardous substances into the environment. In addition, we could become liable to third parties for damages resulting from the disposal or release of hazardous substances into the environment. Some of our operations require environmental permits and controls to prevent and reduce air and water pollution, and these permits are subject to modification, renewal and revocation by issuing authorities. From time to time, we could be subject to requests for information, notices of violation, and/or investigations initiated by environmental regulatory agencies relating to our operations and properties. Violations of environmental and health and safety laws can result in substantial penalties, civil and criminal sanctions, permit revocations, and facility shutdowns. Environmental and health and safety laws may change rapidly and have tended to become more stringent over time. As a result, we could incur costs for past, present, or future failure to comply with all environmental and health and safety laws and regulations. In addition, we could become subject to potential regulations concerning the emission of greenhouse gases, and while the effect of such future regulations cannot be determined at this time, they could require us to incur substantial costs in order to achieve and maintain compliance. In the ordinary course of business, we may be held responsible for any environmental damages we may cause to our customers' premises.

Additional liabilities related to taxes or potential tax adjustments could adversely impact our financial results, financial condition and cash flow.

        We are subject to tax and related obligations in the jurisdictions in which we operate or do business, including state, local, federal and foreign taxes. The taxing rules of the various jurisdictions in which we operate or do business often are complex and subject to varying interpretations. Tax authorities may challenge tax positions that we take or historically have taken, and may assess taxes where we have not made tax filings or may audit the tax filings we have made and assess additional taxes, as they have done from time to time in the past. Some of these assessments may be substantial, and also may involve the imposition of substantial penalties and interest. In particular, in the years eligible for future audit, we consummated certain significant business transactions that we treated or intend to treat as not resulting in immediate gain for income tax purposes. Significant judgment is required in evaluating our tax positions and in establishing appropriate reserves. The resolutions of our tax positions are unpredictable. The payment of substantial additional taxes, penalties or interest resulting from any assessments could materially and adversely impact our results of operations, financial condition and cash flow.

        Even though we have increased and may in the future increase our repatriation of cash earned by our non-U.S. subsidiaries to fund one-time redemptions of our outstanding senior secured notes or other extraordinary corporate events in the United States, we will leave a portion of such cash outside the United States as permanently reinvested earnings and profits. Accordingly, our current estimated annual effective tax rate is based on partial, and not full, repatriation of cash earned by our non-U.S. subsidiaries. If we underestimate our need for repatriated cash, or our needs change, significant tax adjustments may result.

        We have anticipated the need for a valuation reserve against deferred tax assets that are expected to arise this year as we repatriate earnings to fund one-time redemptions of our outstanding senior secured notes in the United States. We expect the deferred tax asset to arise from limitations on our ability to recover the foreign taxes paid on repatriated earnings. This calculation is complex and we may have underestimated or overestimated the need for a valuation reserve and significant tax adjustments may result.

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The obligations associated with being a public company will require significant resources and management attention.

        As a public company with listed equity securities, we will need to comply with new laws, regulations and requirements, including the requirements of the Securities Exchange Act of 1934, as amended, which we refer to the Exchange Act, certain corporate governance provisions of the Sarbanes-Oxley Act of 2002, which we refer to as the Sarbanes-Oxley Act, related regulations of the SEC and requirements of the New York Stock Exchange, which we refer to as the NYSE, with which we were not required to comply as a private company. Complying with these statutes, regulations and requirements will occupy a significant amount of time of our board of directors and management and will significantly increase our legal, accounting and other expenses. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management's attention from implementing our growth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations. In addition, we cannot predict or estimate the amount of additional costs we may incur in order to comply with these requirements.

        Section 404 of the Sarbanes-Oxley Act requires annual management assessments and attestation by our independent registered public accounting firm of the effectiveness of our internal control over financial reporting. Starting with the annual report for the fiscal year ending March 31, 2012, we will be required to file an annual management assessment of the effectiveness of our internal control over financial reporting with the SEC. For the fiscal year ending March 31, 2013, in addition to the management assessment, we will have to file an attestation by our independent registered public accounting firm of the effectiveness of our internal control over financial reporting with the SEC. In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we or our independent registered public accounting firm may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance with the requirements of Section 404. If we fail to comply with Section 404, or if we or our independent registered public accounting firm identify and report a material weakness, it may affect the reliability of our internal control over financial reporting, which could adversely affect the market price of our common stock and subject us to sanctions or investigations by the NYSE, the SEC or other regulatory authorities, which would require additional financial and management resources.

Our current or future indebtedness could impair our financial condition and reduce the funds available to us for other purposes. Our debt agreements impose certain operating and financial restrictions, with which failure to comply could result in an event of default that could adversely affect our results of operations.

        We have substantial indebtedness. On a pro forma basis, after giving effect to this offering, the redemption of $21.0 million aggregate principal amount of our senior secured notes scheduled to occur on April 29, 2011 and the prepayment of $21.0 million of our senior secured notes using proceeds from this offering, as of December 31, 2010, we would have had aggregate indebtedness, net of current portion, of $168.0 million, all of which was secured. In the nine months ended December 31, 2010, our consolidated interest expense on our senior secured notes was approximately $13.3 million (which excludes interest expense resulting from debt costs relating to the CHS Transactions, our revolving credit facility and amortization). Following the redemption of our senior secured notes scheduled to

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occur on April 29, 2011 and the consummation of this offering, we expect annual interest expense on our senior secured notes to be reduced by approximately $4.0 million, assuming net proceeds to us in this offering of approximately $45.9 million, based on an assumed initial public offering price of $13.00 per share, the midpoint of the range on the cover of this prospectus. If our cash flows and capital resources are insufficient to fund these and other debt service obligations and keep us in compliance with the covenants under our debt agreements or to fund our other liquidity needs, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot ensure that we would be able to take any of these actions, that these actions would permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements, which may impose significant operating and financial restrictions on us and could adversely affect our ability to finance our future operations or capital needs; obtain standby letters of credit, bank guarantees or performance bonds required to bid on or secure certain customer contracts; make strategic acquisitions or investments or enter into alliances; withstand a future downturn in our business or the economy in general; engage in business activities, including future opportunities, that may be in our interest; and plan for or react to market conditions or otherwise execute our business strategies.

        If we cannot make scheduled payments on our debt, or if we breach any of the covenants in debt agreements, we will be in default and, as a result, our debt holders could declare all outstanding principal and interest to be due and payable, the lenders under our revolving credit facility could terminate their commitments to lend us money and foreclose against the assets securing our borrowings, and we could be forced into bankruptcy or liquidation.

        In addition, we and certain of our subsidiaries may incur significant additional indebtedness, including additional secured indebtedness. Although the terms of our debt agreements contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred in compliance with these restrictions could be significant. Incurring additional indebtedness could increase the risks associated with our substantial indebtedness, including our ability to service our indebtedness.

A significant portion of our business is conducted through foreign subsidiaries and our failure to generate sufficient cash flow from these subsidiaries, or otherwise repatriate or receive cash from these subsidiaries, could result in our inability to repay our indebtedness.

        For the nine months ended December 31, 2010, 71% of our revenues were generated outside of the United States. While we have been able to meet the regular interest payment obligations on our senior secured notes to date from cash generated through our U.S. operations, we may not be able to do so in the future or may seek to repatriate cash for other uses, and our ability to withdraw cash from foreign subsidiaries will depend upon the results of operations of these subsidiaries and may be subject to legal, contractual or other restrictions and other business considerations. Our foreign subsidiaries may enter into financing arrangements that limit their ability to make loans or other payments to fund payments of our debt. In particular, to the extent our foreign subsidiaries incur additional indebtedness, the ability of our foreign subsidiaries to provide us with cash may be limited. In addition, dividend and interest payments to us from our foreign subsidiaries may be subject to foreign withholding taxes, which could reduce the amount of funds we receive from our foreign subsidiaries. Dividends and other distributions from our foreign subsidiaries may also be subject to fluctuations in currency exchange rates and legal and other restrictions on repatriation, which could further reduce the amount of funds we receive from our foreign subsidiaries.

        In general, when an entity in a foreign jurisdiction repatriates cash to the United States, the amount of such cash is treated as a dividend taxable at current U.S. tax rates. Accordingly, upon the distribution of cash to us from our foreign subsidiaries, we will be subject to U.S. income taxes. Although foreign tax credits may be available to reduce the amount of the additional tax liability, these

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credits may be limited based on our tax attributes. Therefore, to the extent that we must use cash generated in foreign jurisdictions, there may be a cost associated with repatriating cash to the United States.

We rely heavily on trade secrets to gain a competitive advantage in the market and the unenforceability of our nondisclosure agreements may adversely affect our operations.

        The heat tracing industry is highly competitive and subject to the introduction of innovative techniques and services using new technologies. While we have patented some of our products and processes, we historically have not relied upon patents to protect our design or manufacturing processes or products, and our patents are not material to our operations or business. Instead, we rely significantly on maintaining confidential our trade secrets and other information related to our operations. Accordingly, we require all employees to sign a nondisclosure agreement to protect our trade secrets, business strategy and other proprietary information. If the provisions of these agreements are found unenforceable in any jurisdiction within which we operate, the disclosure of our proprietary information may place us at a competitive disadvantage. Even where the provisions are enforceable, the confidentiality clauses may not provide adequate protection of our trade secrets and proprietary information in every jurisdiction.

        We may be unable to prevent third parties from using our intellectual property rights, including trade secrets and know-how, without our authorization or from independently developing intellectual property that is the same as or similar to ours, particularly in those countries where the laws do not protect our intellectual property rights as fully as in the United States. The unauthorized use of our trade secrets or know-how by third parties could reduce or eliminate any competitive advantage we have developed, cause us to lose sales or otherwise harm our business or increase our expenses as we attempt to enforce our rights.

Our intellectual property rights may not be successfully asserted in the future or may be invalidated, circumvented or challenged.

        We have obtained and applied for some U.S. and, to a lesser extent, foreign trademark registrations and will continue to evaluate the registration of additional trademarks. We cannot guarantee that any of our pending applications will be approved. Moreover, even if the applications are approved, third parties may seek to oppose or otherwise challenge them. In addition, we rely on a number of significant unregistered trademarks, primarily abroad, but also in the United States, in the day-to-day operation of our business. Without the protections afforded by registration, our ability to protect and use our trademarks may be limited and could negatively affect our business.

        In addition, while we have not faced intellectual property infringement claims from others in recent years, in the event successful infringement claims are brought against us, particularly claims (under patents or otherwise) against our product design or manufacturing processes, such claims could have a material adverse affect on our business, financial condition or results of operation.

Risks Related to This Offering and Our Common Stock

There is currently no public market for our common stock and an active trading market for our common stock may never develop following this offering.

        Prior to this offering, there has been no public market for our common stock. Although our common stock has been approved for listing on the NYSE, an active public market for our shares may not develop or be sustained after this offering and there can be no assurance as to they liquidity of any market that may develop for our common stock. If an active market does not develop, the market price and liquidity of our common stock may be adversely affected. The initial public offering price will be determined by negotiations between the underwriters, the selling stockholders and our board of

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directors and may not be representative of the market price at which our shares of common stock will trade after this offering. In particular, we cannot assure you that you will be able to resell our shares at or above the initial public offering price.

The price of our common stock could be volatile.

        The overall market and the price of our common stock may fluctuate greatly. The trading price of our common stock may be significantly affected by various factors, including:

    quarterly fluctuations in our operating results;

    changes in investors' and analysts' perception of the business risks and conditions of our business or our competitors;

    our ability to meet the earnings estimates and other performance expectations of financial analysts or investors;

    unfavorable commentary or downgrades of our stock by equity research analysts;

    the emergence of new sales channels in which we are unable to compete effectively;

    disruption to our operations;

    termination of lock-up agreements or other restrictions on the ability of our existing stockholders to sell their shares after this offering;

    fluctuations in the stock prices of our peer companies or in stock markets in general; and

    general economic or political conditions.

Future sales of our common stock may lower our stock price.

        If our existing stockholders sell a large number of shares of our common stock following this offering, the market price of our common stock could decline significantly. In addition, the perception in the public market that our existing stockholders might sell shares of common stock could depress the market price of our common stock, regardless of the actual plans of our existing stockholders. Immediately after this offering, 28,933,407 shares of our common stock will be outstanding. This includes the 10,000,000 shares of common stock that we and the selling stockholders are selling in this offering, which may be resold in the public market immediately after this offering (unless purchased by an "affiliate," as such term is defined in Rule 144 under the Securities Act of 1933, as amended, which we refer to as the Securities Act, in which case such affiliate will be subject to the restrictions imposed by Rule 144).

        We expect that the remaining 18,933,407 shares, representing 65% of our total outstanding shares of common stock following this offering, will become available for resale in the public market as shown in the chart below. Our directors and executive officers, the holders of all of our outstanding shares and vested options and participants in the directed share program, have signed lock-up agreements for a period of 180 days following the date of this prospectus, subject to extension in the case of an earnings release or material news or a material event relating to us. Barclays Capital Inc. and Jefferies & Company, Inc. may, in their sole discretion and without notice, release all or any portion of the shares of common stock subject to lock-up agreements. As restrictions on resale end, the market price of our shares of common stock could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. These factors could also make it

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more difficult for us to raise additional funds through future offerings of our shares of common stock or other securities.

Number of Shares and % of Total Outstanding
  Date Available for Sale Into Public Market
0 shares or 0%   On the date of this prospectus
0 shares or 0%   Up to and including 180 days after the date of this prospectus
18,933,407 shares or 65%   More than 180 days after the date of this prospectus, of which 13,845,384 shares, or 48%, are subject to volume, manner of sale and other limitations under Rule 144, and of which 2,630,412 shares (including 971,918 shares which are also subject to volume, manner of sale and other limitations under Rule 144), or 9%, are subject to the restrictions on open market transfers pursuant to the terms of our Securityholder Agreement (as described below under "Shares Available for Future Sale—Lock-up Agreements")

        In addition, 2,757,524 shares of common stock will be eligible for sale upon exercise of vested options 180 days following the date of this prospectus, subject to extension as described under "Underwriting." Following this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register all of the shares of common stock subject to outstanding options under our existing option plan as well as all shares of our common stock that may be covered by additional options and other awards granted under the our new 2011 Long-Term Incentive Plan. See "Compensation Discussion and Analysis—2011 Long-Term Incentive Plan." Once these shares are registered, they can be sold in the public market upon issuance, subject to restrictions under the securities laws applicable to resales by affiliates.

        In addition, commencing 180 days following this offering, CHS will have the right, subject to certain exceptions and conditions, to require us to register their 9,556,793 shares of common stock under the Securities Act, and holders of an additional 9,376,614 shares of our common stock will have the right to participate in future registrations of securities by us. Registration of any of these outstanding shares of common stock would result in such shares becoming freely tradable without compliance with Rule 144 upon effectiveness of the registration statement. See "Shares Available for Future Sale."

Investors in this offering will suffer immediate and substantial dilution.

        The initial public offering price per share of common stock will be substantially higher than our pro forma net tangible book value per share immediately after this offering. As a result, you will pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. At an offering price of $13.00 per share, the midpoint range set forth on the cover of this prospectus, you will incur immediate and substantial dilution in an amount of $17.19 per share of common stock. See "Dilution."

        Moreover, we issued options in the past to acquire common stock at prices significantly below the assumed initial public offering price. As of the date of this prospectus, 2,757,524 shares of common stock were issuable upon exercise of outstanding stock options. To the extent that these outstanding options are ultimately exercised, you will incur further dilution.

An increase in interest rates may cause the market price of our common stock to decline.

        Like all equity investments, an investment in our common stock is subject to certain risks. In exchange for accepting these risks, investors may expect to receive a higher rate of return than would otherwise be obtainable from lower-risk investments. Accordingly, as interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities

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may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments. Reduced demand for our common stock resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common stock to decline.

Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt that our stockholders may find beneficial.

        Our second amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:

    authorizing our board of directors, without further action by the stockholders, to issue blank check preferred stock;

    limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

    requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;

    authorizing our board of directors, without stockholder approval, to amend our amended and restated bylaws;

    limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on our board of directors to our board of directors then in office; and

    subject to certain exceptions, limiting our ability to engage in certain business combinations with an "interested stockholder" for a three-year period following the time that the stockholder became an interested stockholder.

        These provisions, alone or together, could delay hostile takeovers and changes in control of our company or changes in our management.

        As a Delaware corporation, we are also subject to provisions of Delaware law, which may impair a takeover attempt that our stockholders may find beneficial. Any provision of our second amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.

Our existing stockholders will exert significant influence over us after the consummation of this offering, and their interests may not coincide with yours.

        After this offering, CHS and its affiliates will own, in the aggregate, 33.0% of our outstanding common stock. CHS and its affiliates, together with the investment funds associated with the other sponsors, will own, in the aggregate, 54.4% of our outstanding common stock. These percentages will decrease to 31.5% and 51.8%, respectively, if the underwriters exercise their over-allotment option in full. As a result, these stockholders, acting individually or together, could control substantially all matters requiring stockholder approval for the foreseeable future, including approval of significant corporate transactions. In addition, following this offering, pursuant to the terms of our Securityholder Agreement (as described below in "Certain Relationships and Related Party Transactions—Securityholder Agreement"), CHS will continue to have the ability to designate one member of our board of directors and to require all other parties to the Securityholder Agreement to sell their respective shares of our common stock, on substantially the same terms and conditions as CHS is

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selling its shares, in the event that CHS approves a sale of us. After giving effect to this offering, the parties to the Securityholder Agreement, other than CHS, will own in the aggregate 32.4% of our outstanding common stock (or 30.6% if the underwriters exercise their over-allotment option in full). The interests of these stockholders may not always coincide with our interests as a company or the interest of other stockholders. In addition, this concentration of ownership may delay or prevent a change in control of our company, even if that change in control would benefit our stockholders. This significant concentration of stock ownership and voting power may adversely affect the trading price of our common stock due to investors' perception that conflicts of interest may exist or arise. See "Principal and Selling Stockholders" and "Certain Relationships and Related Party Transactions" for further information about the equity interests held by our sponsors and their respective affiliates.

        Moreover, our second amended and restated certificate of incorporation contains a provision renouncing our interest and expectancy in, or in being offered an opportunity to participate in, any business opportunity that may be presented to the sponsors or any of their respective affiliates (other than us and our subsidiaries), subsidiaries, officers, directors, agents, stockholders, members, partners and employees and that may be a business opportunity for such sponsor, even if the opportunity is one that we might reasonably have pursued or had the ability or desire to pursue if granted the opportunity to do so. None of the sponsors has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business as us or any of our subsidiaries. See "Description of Capital Stock—Anti-Takeover Effects of Provisions of Our Second Amended and Restated Certificate of Incorporation, Our Amended and Restated Bylaws and Delaware Law—Corporate Opportunity."

We may be eligible to take advantage of the NYSE's "controlled company" exemption from certain NYSE corporate governance requirements, and if we elect to do so, our stockholders will not have the same protections afforded to stockholders of companies that are subject to such requirements.

        Under the NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a "controlled company" and may elect not to comply with certain NYSE corporate governance requirements. We may be eligible to take advantage of the "controlled company" exception in light of the collective voting power of our sponsors and their respective affiliates after giving effect to this offering. We currently do not intend to rely on this exception even if we are so eligible, but may elect to do so in the future. If we were to elect to be treated as a "controlled company" in the future, we would be exempt from certain NYSE corporate governance requirements, including the requirements that our board of directors consist of a majority of independent directors and that we have compensation and nominating and corporate governance committees comprised entirely of independent directors, and our stockholders would not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.

If securities or industry analysts do not publish research or reports about our business, if they adversely change their recommendations regarding our common stock or if our operating results do not meet their expectations, our common stock price could decline.

        The market price of our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause the market price of our common stock or its trading volume to decline. Moreover, if one or more of the analysts who cover our company downgrade our common stock or if our operating results or prospects do not meet their expectations, the market price of our common stock could decline.

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FORWARD-LOOKING STATEMENTS

        This prospectus includes forward-looking statements within the meaning of the U.S. federal securities laws in addition to historical information. These forward-looking statements are included throughout this prospectus, including in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" and 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 in this discussion, 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 prospectus.

        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. The statements include but are not limited to statements regarding: (i) our plans to strategically pursue emerging growth opportunities in diverse regions and across industry sectors; (ii) our plans to secure more Greenfield project bids; (iii) our ability to generate more MRO/UE revenue from our existing and future installed base; (iv) our ability to timely deliver backlog; (v) our ability to respond to new market developments and technological advances; (vi) our expectations regarding energy consumption and demand in the future and its impact on our future results of operations; (vii) our plans to develop strategic alliances with major customers and suppliers; (viii) our expectations that our revenues will continue to increase; (ix) our belief in the sufficiency of our cash flows to meet our needs for the next year; (x) our expectations regarding our expansion of our principal manufacturing facility in San Marcos, Texas; and (xi) our intended use of proceeds from this offering.

        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." Any one of these factors or a combination of these factors could materially affect our future results of operations and could influence whether any forward-looking statements contained in this prospectus ultimately prove to be accurate. See also "Risk Factors" included elsewhere in this prospectus regarding the additional factors that have impacted or may impact our business and operations.

        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.

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USE OF PROCEEDS

        Based upon an assumed initial public offering price of $13.00 per share, which is the mid-point of the price range set forth on the cover page of this prospectus, we estimate that we will receive net proceeds from this offering of approximately $45.9 million (or approximately $63.1 million if the underwriters exercise their option to purchase additional shares of common stock in full), after deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us of $2.5 million. See "Underwriting."

        We intend to use $21.6 million of the net proceeds from this offering received by us to prepay $21.0 million of the $189.0 million principal amount of our 9.500% Senior Secured Notes that will be outstanding immediately prior to the consummation of this offering, which mature on May 1, 2017, reflecting a redemption price of 103% of the principal amount thereof, plus accrued and unpaid interest and additional interest, if any, to the redemption date, and the balance for general corporate purposes. The 9.500% Senior Secured Notes were issued in connection with the Acquisition by our wholly owned subsidiary, Thermon Industries, Inc. The proceeds were used to fund a portion of the purchase price for the Acquisition.

        We will not receive any proceeds from the shares sold by the selling stockholders.

        For additional information regarding our liquidity and outstanding indebtedness, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

        A $1.00 increase (decrease) in the assumed initial public offering price per share would increase (decrease) the estimated net proceeds to us by approximately $3.7 million (or approximately $5.0 million if the underwriters exercise their option to purchase additional shares of common stock in full), assuming that the number of shares of common stock sold by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. A 1.0 million share increase (decrease) in the number of shares of common stock sold by us in this offering would increase (decrease) the net proceeds to us from this offering by approximately $12.1 million, assuming an initial public offering price per share equal to the midpoint of the estimated price range set forth on the cover page of this prospectus and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.


DIVIDEND POLICY

        Since the consummation of the CHS Transactions on April 30, 2010, we have not declared or paid any cash dividends on our capital stock, and we do not currently intend to pay any cash dividends on our common stock. We currently intend to retain earnings to finance the growth and development of our business and for working capital and general corporate purposes. Any payment of dividends will be at the discretion of our board of directors and will depend upon earnings, financial condition, capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by applicable law and other factors. In particular, the indenture governing our senior secured notes and our revolving credit facility limit our ability to pay dividends from cash generated from operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

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CAPITALIZATION

        The following table sets forth our total capitalization as of December 31, 2010:

    on an actual basis; and

    on an as adjusted basis to give effect to (i) the adoption of our second amended and restated certificate of incorporation immediately prior to this offering; (ii) the redemption of $21.0 million aggregate principal amount of our senior secured notes at a redemption price of 103% of the principal amount thereof, which is scheduled to occur on April 29, 2011; and (iii) the issuance and sale by us of shares of our common stock in this offering at an assumed initial public offering price of $13.00 per share, the midpoint range set forth on the cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us and the application of the net proceeds to us from this offering as described in "Use of Proceeds."

        The table below should be read in conjunction with "Use of Proceeds," "Unaudited Pro Forma Condensed Consolidated Financial Statements," "Selected Historical and Pro Forma Consolidated Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and accompanying notes included elsewhere in this prospectus.

 
  As of December 31, 2010  
 
  Actual   As Adjusted(1)  
 
  (unaudited)
(in thousands)

 

Total debt:

             
 

U.S. commercial and standby letter of credit facility(2)

  $   $  
 

Revolving credit facility(3)

         
 

Senior secured notes

    210,000     168,000  
           
 

Total debt

  $ 210,000   $ 168,000  
           

Shareholders' equity(4):

             
 

Common stock, $0.001 par value per share; 150,000,000 shares authorized and 24,933,407 shares issued and outstanding, actual; 150,000,000 shares authorized and 28,933,407 shares issued and outstanding, as adjusted

    25     29  
 

Preferred stock, $0.001 par value per share; no shares authorized and no shares issued and outstanding, actual; 10,000,000 shares authorized and no shares issued and outstanding, as adjusted

         
 

Paid in capital

    130,211     176,067  
 

Accumulated comprehensive income

    1,786     1,786  
 

Accumulated deficit(5)

    (10,960 )   (20,313 )
           
   

Total stockholders' equity

    121,062     157,569  
           
   

Total capitalization(6)

  $ 331,062   $ 325,569  
           

(1)
A $1.00 increase or decrease in the assumed initial public offering price per share would increase or decrease additional paid-in capital by $3.7 million (or by $5.0 million if the underwriters exercise their option to purchase additional shares of common stock in full) and would decrease or increase total shareholders' equity and would increase or decrease total capitalization each by $3.7 million (or by $5.0 million if the underwriters exercise their option to purchase additional shares of common stock in full), after deducting the underwriting discounts and commissions and the estimated offering expenses payable by us. An increase or decrease of 1.0 million shares in the number of shares offered by us would decrease or increase additional paid-in capital by

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    $12.1 million, and would decrease or increase total shareholders' equity and would increase or decrease total capitalization each by approximately $12.1 million, assuming the assumed initial public offering price of $13.00 per share, the midpoint of the range set forth on the front cover of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering.

(2)
Our U.S. subsidiaries have an open credit facility with JPMorgan Chase Bank, N.A. secured by cash used to obtain commercial and standby letters of credit and to support foreign exchange contracts. As of December 31, 2010, there was $0.3 million in standby letters of credit outstanding under the facility. In addition, as of December 31, 2010, the U.S. subsidiaries had $3.0 million in performance bonds outstanding with a surety company.

(3)
Consists of a $40.0 million senior secured revolving credit facility of which up to $20.0 million is available to our Canadian subsidiary, subject to borrowing base availability. As of December 31, 2010, we had $34.8 million of capacity available under our revolving credit facility and zero borrowings. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Revolving credit facility and senior secured notes."

(4)
Reflects (i) a $129.2 million equity investment consisting of approximately $112.5 million from our sponsors and approximately $16.7 million of reinvestments from certain members of management and key employees of the Company, together with certain former managers of the Company, who we refer to collectively as the management investors, that were made to the Company (the Company applied the cash contribution towards the financing of the Acquisition and related CHS Transactions), (ii) the elimination of the historical members' equity accounts resulting from the CHS Transactions, (iii) net loss of $(11.0) million for the period from May 1, 2010 through December 31, 2010, (iv) currency translation adjustment that positively impacted shareholders' equity by $1.8 million, and (v) a $0.3 million investment from certain members of our board of directors and $0.7 million in stock-based compensation expense. We refer to our sponsors and the management investors collectively as the equity investors.

(5)
Reflects (i) $1.3 million in premium payments to redeem senior secured notes, (ii) $7.4 million in management services termination fees and (iii) $736,000 in prepaid expenses paid to one of our sponsors.

(6)
As of March 30, 2011, our cash and cash equivalents had increased by $15.0 million from December 31, 2010, which is not reflected in total capitalization.

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DILUTION

        If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of our common stock immediately after this offering. Dilution results from the fact that the per share offering price of the common stock is substantially in excess of the book value per share attributable to the existing stockholders for the presently outstanding stock.

        Our net tangible book value at December 31, 2010 was $(167.2) million, and our net tangible book value per share was $(6.70). Net tangible book value per share before the offering has been determined by dividing net tangible book value (total book value of tangible assets less total liabilities) by the number of shares of common stock outstanding after the automatic conversion of our common stock into one class of voting stock.

        After giving effect to the sale of our common stock in this offering at an assumed initial public offering price of $13.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the underwriting discount and estimated offering expenses payable by us, our pro forma net tangible book value at December 31, 2010 would have been $(121.3) million, or $(4.19) per share. This represents an immediate increase in net tangible book value per share of $2.51 to the existing stockholders and dilution in net tangible book value per share of $17.19 to new investors who purchase shares in the offering. The following table illustrates this per share dilution to new investors:

Assumed initial public offering price per share

  $ 13.00  
 

Net tangible book value per share as of December 31, 2010

    (6.70 )
 

Increase per share attributable to new investors in this offering

    2.51  

Pro forma net tangible book value per share after giving effect to this offering

    (4.19 )
       

Dilution in pro forma net tangible book value per share to new investors in this offering

  $ 17.19  
       

        The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering. If the underwriters exercise their option to purchase additional shares of common stock in full, the pro forma net tangible book value per share after giving effect to this offering would be $(3.43) per share, and the dilution in pro forma net tangible book value per share to new investors in this offering would be $16.43 per share, in each case calculated as described above.

        The following table summarizes, on the same pro forma basis as of December 31, 2010, the total number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by the existing stockholders and by new investors purchasing shares in this offering, before deducting the underwriting discounts and commissions and estimated offering expenses payable by us (amounts in thousands, except percentages and per share data):

 
   
   
  Total Consideration
000s
   
 
 
  Shares Purchased    
 
 
  Average Price
Per Share
 
 
  Number   Percent   Amount   Percent  

Existing stockholders

    24,933,407     86 % $ 129,502     71 % $ 5.19  

New investors

    4,000,000     14     52,000     29     13.00  
                         

Total

    28,933,407     100 % $ 181,502     100 %      
                         

        If the underwriters exercise their option to purchase additional shares of common stock in full, our existing stockholders would own 82% and our new investors would own 18% of the total number of shares of our common stock outstanding immediately after this offering, and our existing stockholders

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would have paid $129.5 million, or 65%, of the total consideration and new investors would have paid $70.5 million, or 35% of the total consideration, in each case calculated as described above.

        The information in the preceding table has been calculated using an assumed public offering price of $13.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus. A $1.00 increase or decrease in the assumed initial public offering price per share would increase or decrease, respectively, the consideration paid to us by new investors and in total by approximately $4.0 million (or by $5.0 million if the underwriters exercise their option to purchase additional shares of common stock in full) and the percentage of total consideration paid by new investors by approximately 1%, and would decrease or increase, respectively, the percentage of total consideration paid by existing stockholders by approximately 1%, in each case calculated as described above and assuming that the number of shares sold by us and the selling stockholders, as set forth on the cover page of this prospectus, remains the same. A 1.0 million share increase or decrease in the number of shares of common stock that we sell in this offering would increase or decrease, respectively, the percentage of shares purchased by new investors by approximately 3%, the amount of consideration paid by new investors and in total by approximately $13.0 million and the percentage of total consideration paid by new investors by approximately 4% and would decrease or increase, respectively, the percentage of shares purchased by existing stockholders by approximately 3% and the percentage of total consideration paid by existing stockholders by approximately 4%, in each case calculated as described above.

        The tables above exclude the following shares:

    2,757,524 shares of our common stock issuable upon the exercise of options outstanding under our existing restricted stock and stock option plan (2,648,402 of which were outstanding as of December 31, 2010); and

    2,893,341 shares of our common stock reserved for issuance under our 2011 Long-Term Incentive Plan, which we refer to as our LTIP, 122,000 of which we intend to grant to our executive officers and certain other employees concurrently with the pricing of this offering with an exercise price equal to the initial public offering price. See "Compensation Discussion and Analysis—2011 Long-Term Incentive Plan."

        To the extent that any of these options are exercised, there will be further dilution to new investors participating in this offering. Assuming the exercise in full of the 2,648,402 stock options outstanding as of December 31, 2010, the pro forma net tangible book value per share after giving effect to this offering would be $(3.41) per share, representing an immediate increase in net tangible book value of $3.30 per share to existing stockholders and an immediate dilution to net tangible book value of $16.41 per share to new investors, and our existing stockholders would own 79% and our new investors would own 21% of the total number of shares of our common stock outstanding immediately after this offering, and our existing stockholders would have paid $129.5 million, or 66%, of the total consideration and new investors would have paid $65.8 million, or 34% of the total consideration, in each case calculated as described above.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

        The following unaudited pro forma condensed consolidated balance sheet as of December 31, 2010 and unaudited pro forma condensed consolidated statements of operations for the year ended March 31, 2010, the period from April 1, through April 30, 2010 ("predecessor"), the period from May 1, through December 31, 2010 ("successor") and the nine months ended December 31, 2009 ("predecessor") are based on our historical consolidated financial statements and give effect to the CHS Transactions and this offering, including the issuance by us of 4,000,000 shares of our common stock at a price of $13.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, the use of proceeds as set forth under "Use of Proceeds" and the termination of our management fee, as if they had occurred as of April 1, 2009.

        The unaudited pro forma condensed consolidated financial data includes unaudited pro forma adjustments that are directly attributable to the CHS Transactions and this offering. In addition, with respect to the unaudited pro forma condensed consolidated financial statements, the unaudited pro forma adjustments are expected to have a continuing impact on the consolidated results.

        Pro forma adjustments were made to reflect the:

    increase in amortization expense for changes in the estimated fair values of the acquired intangible assets of the Company;

    increase in interest expense resulting from additional indebtedness incurred in connection with our senior secured notes and our revolving credit facility, along with the amortization of debt issuance costs on our senior secured notes, net of the reduction in interest expense resulting from the redemption of $21.0 million aggregate principal amount of our senior secured notes scheduled to occur on April 29, 2011 and the repayment of $21.0 million of our outstanding indebtedness using the net proceeds from this offering and assuming an offering price of $13.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus;

    increase in the number of basic shares outstanding by 4,000,000 and the number of diluted shares outstanding by 5,589,041;

    elimination of the transaction expenses related to the Acquisition;

    elimination of the management fee which is being terminated in connection with this offering; and

    the income tax effect of the pro forma adjustments.

        The Acquisition has been accounted for as a purchase in accordance with the applicable Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, guidance. We have allocated the excess of the purchase price over the net assets acquired to intangible assets and goodwill. The preliminary allocation to intangible assets and goodwill is based on management's best estimate of the fair value of the intangible assets (including trademarks, developed technology, customer list, backlog, certifications and non-compete agreements) and is consistent with the methodology applied during 2007 in connection with the Audax Transaction. We have not allocated any of the excess purchase price to the acquired tangible assets or liabilities assumed, except for inventory, but rather utilized their current carrying value as we believe these carrying values approximate fair value, although we have not completed a third party valuation of the acquired assets or liabilities. The pro forma data presented will be revised based upon final calculations and the resolution of purchase price adjustments as additional information becomes available. The final allocation of the purchase price in the Acquisition will be determined at a later date and depends on a number of factors, including the final valuation of the tangible and identifiable intangible assets acquired and liabilities assumed in the Acquisition. An independent third-party appraiser will perform a valuation of these assets as of the

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closing date of the Acquisition, and upon a final valuation the purchase allocation will be adjusted. Such final adjustments, including changes to depreciation and amortization resulting from the allocation of purchase price to amortizable tangible and intangible assets, may be material. This valuation will be based on the net tangible and intangible assets and liabilities as of the closing date of the Acquisition.

        We believe that the assumptions used to derive the unaudited pro forma condensed consolidated financial data are reasonable given the information available; however, such assumptions are subject to change and the effect of any such change could be material. The unaudited pro forma condensed consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the historical consolidated financial statements and related notes of Thermon Holdings, LLC and Thermon Group Holdings, Inc., as applicable, included elsewhere in this prospectus. The unaudited pro forma condensed consolidated financial data is presented for informational purposes only and is not intended to represent or be indicative of the consolidated results of operations or financial position that we would have reported had the CHS Transactions or this offering been completed as of the dates and for the periods presented, and should not be taken as representative of our consolidated results of operations or financial condition following the completion of the CHS Transactions or this offering.

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Thermon Group Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of December 31, 2010

 
  Thermon
Historical(a)
  Offering
Adjustments
  Thermon
Pro
Forma
 
 
  (dollars in thousands)
 

Assets

                   

Current assets:

                   
 

Cash and cash equivalents

  $ 35,201   $ (4,757 )(a) $ 30,444   (b)
 

Accounts receivable, net of allowance for doubtful accounts of $1,331 and $1,835 as of December 31, 2010 and March 31, 2010, respectively

    47,073         47,073  
 

Notes receivable and other

             
 

Inventories, net

    27,600         27,600  
 

Costs and estimated earnings in excess of billings on uncompleted contracts

    1,245         1,245  
 

Income taxes receivable

    1,999         1,999  
 

Prepaid expenses and other current assets

    7,883     (736 )(c)   7,147  
 

Deferred income taxes

    1,421         1,421  
               

Total current assets

    122,422     (5,493 )   116,929  

Property, plant and equipment, net

    23,404         23,404  

Goodwill

    116,626         116,626  

Intangible assets, net

    159,346         159,346  

Debt issuance costs, net

    12,263         12,263  
               

  $ 434,061   $ (5,493 ) $ 428,568  
               

Liabilities and Shareholder's/Members' Equity

                   

Current liabilities:

                   
 

Accounts payable

  $ 16,319   $   $ 16,319  
 

Accrued liabilities

    16,789         16,789  
 

Advance payment

    10,248         10,248  
 

Obligations due to settle the CHS Transaction

    3,754         3,754  
 

Billings in excess of costs and estimated earnings on uncompleted contracts

             
 

Income taxes payable

    129         129  
               

Total current liabilities

    47,239         47,239  

Long-term debt, net of current maturities

    210,000     (42,000 )(a)   168,000  

Deferred income taxes

    53,916         53,916  

Other noncurrent liabilities

    1,844         1,844  

Common stock, 24,933,407 shares issued and outstanding $.001 par value, 150,000,000 authorized

    25     4   (a)   29  

Additional paid-in capital

    130,211     45,856   (a)   176,067  

Foreign currency translation adjustment

    1,786         1,786  

Accumulated deficit

    (10,960 )   (9,353 )(d)   (20,313 )

Shareholder's/Members' equity

    121,062     36,507     157,569  
               

  $ 434,061   $ (5,493 ) $ 428,568  
               

See accompanying notes.

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Thermon Holdings, LLC

Unaudited Pro Forma Condensed Consolidated Statement of Operations

Year Ended March 31, 2010

 
  Thermon
Historical(f)
  CHS
Transaction
Adjustments
  Offering
Adjustments
  Total
Pro Forma
Adjustments
  Thermon
Pro Forma
 
 
  (dollars in thousands, except share and per share data)
   
   
 

Sales

  $ 192,713   $   $   $   $ 192,713  

Cost of sales

    101,401                 101,401  
                       

Gross profit

    91,312                 91,312  

Operating Expenses

                               
 

Management fees

    862     1,250   (g)   (2,000 )(l)   (750 )   112  
 

Other marketing, general and administrative and engineering

    46,481                 46,481   (n)
 

Amortization of other intangible assets

    2,426     9,057   (h)       9,057     11,483  
                       

Income from operations

    41,543     (10,307 )   2,000     (8,307 )   33,236  

Other income/(expense)

                               
 

Interest income

    6                 6  
 

Interest expense

    (7,357 )   (14,974 )(i)   3,990   (m)   (10,984 )   (18,341 )
 

Gain/(loss) on disposition of property, plant and equipment

    (1 )               (1 )
 

Miscellaneous income/(expense) and costs related to the CHS Transactions

    (1,285 )   309   (j)       309     (976 )
                       

    (8,637 )   (14,665 )   3,990     (10,675 )   (19,312 )

Income before provision for income taxes

    32,906     (24,972 )   5,990     (18,982 )   13,924  

Income taxes

    (13,966 )   8,740   (k)   (2,097 )   6,643     (7,323 )
                       

Net income/(loss)

  $ 18,940   $ (16,232 ) $ 3,893   $ 12,339   $ 6,601  
                       

Net income (loss) per share:

                               
 

Basic

  $ 401.23                     $ 0.23  
 

Diluted

  $ 362.47                     $ 0.22  

Weighted-average share outstanding:(e)

                               
 

Basic

    47,205                       28,887,987  
 

Diluted

    52,253                       30,477,028  

See accompanying notes

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Thermon Group Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

Nine Months Ended December 31, 2010

 
 
Successor
  Predecessor    
   
   
   
 
 
  For the Period From
May 1, through
December 31, 2010(a)
  For the Period From
April 1 through
April 30, 2010(a)
  CHS
Transaction
Adjustments
  Offering
Adjustments
  Total
Pro Forma
Adjustments
  Thermon
Pro Forma
 
 
  (dollars in thousands, except
share and per share data)

   
 

Sales

  $ 165,905   $ 13,063   $   $   $   $ 178,968  

Cost of sales

    98,795     6,447     (7,519 )(o)       (7,519 )   97,723  
                           

Gross profit

    67,110     6,616     7,519         7,519     81,245  

Operating Expenses

                                     
 

Management fees

    1,412     79     104   (g)   (1,500 )(h)   (1,396 )   95  
 

Other marketing, general and administrative and engineering

    35,815     4,184                 39,999 (n)
 

Amortization of other intangible assets

    15,126     215     (6,729 )(h)       (6,729 )   8,612  
                           

Income from operations

    14,757     2,138     14,144     1,500     15,644     32,539  

Other income/expense

                                     
 

Interest income

    10     7                 17  
 

Interest expense

    (17,111 )   (6,229 )   6,391   (i)   2,992   (i)   9,384     (13,957 )
 

Miscellaneous income/(expense) and costs related to the CHS Transactions

    (7,689 )   (13,617 )   21,605   (j)       21,605     299  
                           

    (24,790 )   (19,839 )   27,996     2,992     30,989     (13,641 )

Income before provision for income taxes

   
(10,033

)
 
(17,701

)
 
42,140
   
4,493
   
46,633
   
18,899
 

Income taxes

    (927 )   17,434     (14,749 )(k)   (1,573 )   (16,322 )   185  
                           

Net income/(loss)

  $ (10,960 ) $ (267 ) $ 27,391   $ 2,920   $ 30,312   $ 19,084  
                           

Net income (loss) per share:

                                     
 

Basic

  $ (0.44 ) $ (5.11 )                   $ 0.66  
 

Diluted

  $ (0.44 ) $ (5.11 )                   $ 0.63  

Weighted-average shares outstanding (d):

                                     
 

Basic

    24,887,987     52,253                       28,887,987  
 

Diluted

    26,377,570     52,253                       30,477,028  

See accompanying notes

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Thermon Group Holdings, Inc.

Unaudited Pro Forma Condensed Consolidated Statement of Operations

Nine Months Ended December 31, 2009

 
  Thermon
Historical(a)
  CHS
Transaction
Adjustments
  Offering
Adjustments
  Total
Pro Forma
Adjustments
  Thermon
Pro Forma
 
 
  (dollars in thousands, except
share and per share data)

   
 

Sales

  $ 142,905   $   $   $   $ 142,905  

Cost of sales

    73,966                 73,966  
                       

Gross profit

    68,939                 68,939  

Operating Expenses

                               
 

Management fees

    671     937   (d)   (1,500 )(i)   (563 )   (108)   
 

Other marketing, general and administrative and engineering

    33,099                 33,099  
 

Amortization of other intangible assets

    1,803     6,809         6,809     8,612  
                       

Income from operations

    33,366     (7,746 )   1,500     (6,246 )   27,120  

Other income/expense

                               
 

Interest income

    54                 54  
 

Interest expense

    (5,570 )   (11,175 )(i)   2,993   (m)   (8,182 )   (13,752 )
 

Miscellaneous income/(expense)

    (881 )               (881 )
                       

    (6,397 )   (11,175 )   2,993     (8,182 )   (14,579 )

Income before provision for income taxes

    26,969     (18,921 )   4,493     (14,428 )   12,541  

Income taxes

    (12,241 )   6,622   (k)   (1,572 )   5,050     (7,191 )
                       

Net income/(loss)

  $ 14,728   $ (12,299 ) $ 2,921   $ 9,378   $ 5,350  
                       

Net income (loss) per share:

                               
 

Basic

  $ 312.00                     $ 0.19  
 

Diluted

  $ 281.86                     $ 0.18  

Weighted-average shares outstanding (d):

                               
 

Basic

    47,205                       28,887,987  
 

Diluted

    52,253                       30,477,028  

See accompanying notes

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Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements:

Note 1—Basis of Presentation

        On March 26, 2010, Thermon Group, Inc., which we refer to as TGI, entered into a stock purchase agreement with Thermon Holdings, LLC, which we refer to as Seller, and Thermon Holding Corp., which we refer to as THC, Seller's wholly owned subsidiary, providing for the Acquisition. Upon the closing of the Acquisition on April 30, 2010, THC became a wholly owned subsidiary of TGI, which in turn is a wholly owned subsidiary of the Company. The Company is currently owned by the equity investors. The purchase price was $320.9 million (subject to finalization of a post-closing income tax adjustment and restricted cash payment obligations of approximately $1.8 million).

        The following table summarizes the estimated fair value of the assets and liabilities assumed:

Assets acquired:

       
 

Cash and cash equivalents

  $ 2,852  
 

Accounts receivable, net

    40,595  
 

Inventories, net

    32,325  
 

Other current assets

    10,676  
 

Property, plant and equipment

    23,983  
 

Identifiable intangible assets

    173,711  
 

Goodwill

    115,775  
 

Other noncurrent assets

    284  
       

Total assets

    400,201  

Liabilities assumed:

       
 

Current liabilities

    21,281  
 

Other long-term debt

       
   

Noncurrent deferred tax liability

    56,757  
   

Other noncurrent liabilities

    1,263  
       

Total liabilities

    79,301  
       

Purchase price

    320,900  

Less: cash

    (2,852 )
       

Purchase price net of cash

  $ 318,048  
       

        We allocated the purchase price in connection with the Acquisition to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the purchase price over these fair values is recorded as goodwill. We engaged an independent third-party appraisal firm to assist us in determining the fair values of assets acquired and liabilities assumed. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Our management ultimately takes responsibility for valuations assigned to the assets and liabilities assumed in connection with the purchase combination. The significant purchased intangible assets recorded by us include trademarks, customer relationships, backlog and developed technology. See note 6 to our unaudited consolidated financial statements for the nine months ended December 31, 2010 for further detail regarding the adjustments to net tangible and intangible assets and liabilities.

        The accompanying unaudited pro forma condensed consolidated financial statements have been prepared to give effect to the CHS Transactions and this offering and related transactions, including the issuance by us of 4,000,000 shares of our common stock at a price of $13.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, the use of proceeds as set

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Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements:—(continued)

Note 1—Basis of Presentation—(continued)


forth under "Use of Proceeds", the termination of the management fee and the redemption of $21.0 million aggregate principal amount of our senior secured notes scheduled to occur on April 29, 2011, as if they had occurred as of April 1, 2009. Management believes the assumptions used to prepare these unaudited pro forma condensed consolidated financial statements provide a reasonable basis for presenting the significant effects directly attributable to the transaction.

Note 2—Pro Forma Adjustments

(a)
Represents the net decrease in cash resulting from this offering and related transactions, calculated as follows:

Net proceeds from the issuance of shares by us in this offering

  $ 45,860  

Use of cash on hand to redeem senior secured notes, including premiums, scheduled to occur on April 29, 2011

    (21,630 )

Use of net proceeds from this offering to redeem senior secured notes, including premiums

    (21,630 )

Use of cash on hand to pay management services termination fee

    (7,357 )
       

  $ (4,757 )
       
(b)
Pro forma cash is calculated based on the December 31, 2010 balance sheet. Pro forma cash excludes $15.0 million of additional cash generated between December 31, 2010 and March 30, 2011.

(c)
Represents an adjustment in prepaid expenses paid to one of our sponsors due to elimination of management fees.

(d)
Represents an adjustment for $1.3 million in premium payments to redeem senior secured notes, $7.4 million in management services termination fees and $736,000 in prepaid expenses paid to one of our sponsors.

(e)
The weighted-average shares outstanding (basic and diluted) have been presented on a pro forma basis as if the current capital structure, including the effect of the common shares to be issued and the dilutive effect of options issued during the nine months ended December 31, 2010, was in place for all periods presented. The predecessor capital structure was eliminated as a result of the CHS Transaction and therefore has no bearing on the pro forma weighted average shares outstanding. We have applied the weighted average shares outstanding at December 31, 2010 for all periods presented. We believe that this presentation is useful to investors as it provides a comparable pro forma net income per share for all periods presented.

(f)
Represents our historical consolidated results of operations (i) as of December 31, 2010, and (ii) for the year ended March 31, 2010, the period from April 1, through April 30, 2010 ("predecessor"), the period from May 1, through December 31, 2010 ("successor") and the nine months ended December 31, 2009 ("predecessor"), as applicable.

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Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements:—(continued)

Note 2—Pro Forma Adjustments—(continued)

(g)
Represents the net increase in management fees resulting from the CHS Transactions, calculated as follows:

 
   
  Nine Months
Ended
December 31,
 
 
  Year Ended
March 31,
2010
 
 
  2009   2010  
 
  (dollars in thousands)
 

Sponsors Management Fee(i)

  $ 2,000   $ 1,500   $ 167  

Less: Historical Management Fee(ii)

    (750 )   (563 )   (63 )
               

Net adjustment to Management Fee

  $ 1,250   $ 937   $ 104  
               

(i)
Represents an annual management fee of $2.0 million, not including expenses, that we are required to pay CHS for certain financial, strategic, advisory and consulting services (see "Certain Relationships and Related Party Transactions—Transaction Fee and Management Fee").

(ii)
Represents the elimination of historical management fee paid to Audax for the respective time periods.
(h)
Represents the incremental amortization expense for the unaudited pro forma fair value adjustment to the intangible assets of the Company (including trademarks, developed technology, customer list and certifications), amortized on a straight line basis over estimated useful lives ranging from 10 years to 20 years (consistent with the historical useful lives of the intangible assets and consistent with the assigned estimated useful lives from the acquisition of the Company by Audax). The incremental amortization expense does not include additional amortization for backlog related to contracts with estimated useful lives of less than one year as these are not considered recurring in nature due to their short estimated useful lives. For additional information regarding the determination of fair value estimates, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates."

        Other intangible assets at December 31, 2010 consist of the following:

 
  Estimated Life   Net Carrying
Amount
 

Trademarks

      $ 48,280  

Developed technology

    20 years     10,614  

Customer list

    10 years     97,953  

Backlog

    3-9 months      

Certification

        504  

Other

        1,995  
             

Total

        $ 159,346  
             

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Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements:—(continued)

Note 2—Pro Forma Adjustments—(continued)

(i)
Represents the net increase in interest expense from the incurrence of indebtedness in connection with the CHS Transactions, calculated as follows:

 
   
  Nine Months Ended
December 31,
 
 
  Year Ended
March 31,
2010
 
 
  2009   2010  
 
  (dollars in thousands)
 

Interest expense on our senior secured notes(i)

  $ (19,950 ) $ (14,963 ) $ (1,663 )

Interest expense on our revolving credit facility(ii)

    (300 )   (225 )   (25 )

Amortization of debt issuance costs related to our senior secured notes and our revolving credit facility(iii)

    (2,081 )   (1,557 )   (173 )
               

Pro forma additional interest expense

    (22,331 )   (16,745 )   (1,861 )
               

Elimination of historical interest expense(iv)

    7,357     5,570     8,252  
               

Net adjustment to interest expense

  $ (14,974 ) $ (11,175 ) $ 6,391  
               

(i)
Represents the increase in interest expense related to our senior secured notes in the aggregate principal amount of $210.0 million, bearing an interest rate of 9.500% per annum;

(ii)
Represents the increase in interest expense related to the undrawn portion of the $40.0 million revolving credit facility, bearing a commitment fee of 0.75% per annum.

(iii)
Represents the straight-line amortization of debt issuance costs related to our senior secured notes and our revolving credit facility over a seven-year and five-year period, respectively.

(iv)
The adjustment related to the nine months ended December 31, 2010 includes non-recurring debt transaction costs that were recorded as interest expense during the periods.
(j)
Represents an adjustment to miscellaneous expense for non-recurring expenses directly related to the CHS Transactions which currently are reflected in the historical financial statements included elsewhere in this prospectus.

(k)
Represents the adjustment to income taxes to reflect the unaudited pro forma adjustments attributed to the CHS Transactions and this offering at a statutory tax rate of 35.0%.

(l)
Represents the elimination of the management fees, which are being terminated concurrently with the consummation of this offering. In connection with such termination, we will pay a cash termination fee in the aggregate amount of $7.4 million to our sponsors, which will be recorded as a one-time cash charge. See "Certain Relationships and Related Party Transactions—Transaction Fee and Management Fee."

(m)
Represents a $4.0 million net annual decrease in interest expense from the reduction in our outstanding indebtedness by redeeming $21.0 million aggregate principal amount of our senior secured notes, which is scheduled to occur on April 29, 2011, and using the net proceeds to us as set forth under "Use of Proceeds" from the assumed sale by us of 4,000,000 shares of our common stock at a price of $13.0 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus.

(n)
Pursuant to outstanding stock option agreements with employees, all outstanding option awards shall vest and become exercisable immediately prior to the consummation of this offering. We

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Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements:—(continued)

Note 2—Pro Forma Adjustments—(continued)

    estimate that the unrecognized stock-based compensation expense for the remainder of fiscal 2011 will be $1.4 million with quarterly stock-based compensation charges continuing thereafter. Assuming this offering is completed in the first quarter of fiscal 2012, we estimate the stock-based compensation expense will be in the range of $5.5 million to $6.5 million.

(o)
Represents an adjustment to cost of revenues for the non-recurring fair value adjustment to inventory recorded at acquisition, which currently is reflected in the historical financial statements included elsewhere in this prospectus.

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SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED
FINANCIAL AND OPERATING DATA

        The following tables set forth certain selected historical and pro forma consolidated financial and operating data as of and for the fiscal years ended March 31, 2006, March 31, 2007, March 31, 2008, March 31, 2009 and March 31, 2010 and for the nine months ended December 31, 2009 and December 31, 2010, as of December 31, 2010 and certain pro forma financial information for the fiscal year ended March 31, 2010 and for the nine months ended December 31, 2009 and December 31, 2010. The data set forth below should be read in conjunction with the sections entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Capitalization," and "Unaudited Pro Forma Condensed Consolidated Financial Statements," each of which is contained elsewhere in this prospectus, and our consolidated financial statements and the notes thereto for the fiscal years ended March 31, 2008, March 31, 2009 and March 31, 2010 and for the nine months ended December 31, 2009 and December 31, 2010, each of which is contained elsewhere in this prospectus.

        In this prospectus, we have included the condensed consolidated financial statements of Thermon Group Holdings, Inc. as of December 31, 2010 and for the period from May 1, 2010 through December 31, 2010 ("successor") and the condensed consolidated financial statements of Thermon Holdings, LLC for the fiscal years ended March 31, 2010 and March 31, 2009, for the period from August 30, 2007 through March 31, 2008, for the nine months ended December 31, 2009 ("predecessor"), and for the period from April 1, 2007 through August 29, 2007 ("pre-predecessor"). Concurrent with the consummation of the Acquisition on April 30, 2010, Thermon Holdings, LLC no longer owned any interest in us, and, beginning with the period from May 1, 2010 through December 31, 2010, we reported the consolidated financial statements of Thermon Group Holdings, Inc. We do not anticipate that there would have been any material difference in our consolidated financial statements and notes thereto for the fiscal years ended March 31, 2008, March 31, 2009 and March 31, 2010 and for the nine months ended December 31, 2009 had such statements been prepared for Thermon Group Holdings, Inc., except as it relates to purchase accounting in connection with the Acquisition.

        The presentation of fiscal 2008 includes the combined results of the pre-predecessor and predecessor owners for fiscal 2008 and the predecessor and successor owners for the nine months ended December 31, 2010, respectively. We have presented the combination of these respective periods because it provides an easier-to-read discussion of the results of operations and provides the investor with information from which to analyze our financial results in a manner that is consistent with the way management reviews and analyzes our results of operations. In addition, the combined results provide investors with the most meaningful comparison between our results for prior and future periods. Please refer to notes 1 and 2 to the "Selected Historical and Pro Forma Consolidated Financial and Operating Data" table and our historical consolidated financial statements and notes thereto for the year ended March 31, 2008 and the nine months ended December 31, 2010 included elsewhere in this prospectus for a separate presentation of the results for the pre-predecessor and predecessor and predecessor and successor periods.

        The unaudited pro forma data have been prepared to give effect to the CHS Transactions, this offering and the application of the net proceeds therefrom as if they had occurred on April 1, 2009. Assumptions underlying the pro forma adjustments are described in the section entitled "Unaudited Pro Forma Condensed Consolidated Financial Statements—Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements" contained elsewhere in this prospectus. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable. Please see "Unaudited Pro Forma Condensed Consolidated Financial Statements—Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements" for a more detailed discussion of how pro forma adjustments are presented in our unaudited pro forma condensed consolidated financial statements. The unaudited pro forma condensed consolidated data is provided

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Table of Contents


for informational purposes only. The unaudited pro forma data do not purport to represent what our results of operations actually would have been if the CHS Transactions, this offering and the application of the net proceeds therefrom had occurred at any date, nor do such data purport to project the results of operations for any future period.

 
  Pre-Predecessor   Pre-Predecessor/
Predecessor
Combined
(Non-GAAP)(1)
  Predecessor   Predecessor/
Successor
Combined
(Non-GAAP)(2)
 
 
  Year Ended March 31,   Nine Months Ended
December 31,
 
 
  2006   2007   2008   2009   2010   2009   2010  
 
  (dollars in thousands, except share and per share data)
 

Consolidated Statements of Operations Data:

                                           

Sales

  $ 120,362   $ 121,410   $ 185,811   $ 202,755   $ 192,713   $ 142,905   $ 178,968  

Cost of sales

    64,421     66,102     102,946     105,456     101,401     73,966     97,723  

Purchase accounting adjustments(3)

            7,146                 7,519  
                               

Gross profit

  $ 55,941   $ 55,308   $ 75,719   $ 97,299   $ 91,312   $ 68,939   $ 73,726  

Operating expenses:

                                           
   

Marketing, general and administrative and engineering

    38,837     37,361     46,569     48,982     46,481     33,099     40,078  
   

Management fees

            475     825     862     671     1,412  
   

Amortization of intangible assets

            6,716     6,627     2,426     1,803     15,341  
                               

Income from operations

  $ 17,104   $ 17,947   $ 21,959   $ 40,865   $ 41,543   $ 33,366   $ 16,895  

Interest income

    35     64     167     94     6     54     17  

Interest expense

    (935 )   (882 )   (8,374 )   (9,625 )   (7,357 )   (5,570 )   (23,340 )(4)

Gain/(loss) on disposition of property, plant and equipment

    74     428     (116 )   (18 )   (1 )        

Success fees to owners related to the CHS Transactions(5)

                            (7,738 )

Miscellaneous income/(expense)(5)

    79     (1,400 )   (12,937 )   (3,120 )   (1,285 )   (881 )   (13,568 )
                               

Income (loss) from continuing operations before provision for income taxes

  $ 16,357   $ 16,157   $ 699   $ 28,196   $ 32,906   $ 26,969   $ (27,734 )

Income tax benefit (expense)

    (5,148 )   (5,429 )   (21,712 )   (1,795 )   (13,966 )   (12,241 )   16,507  
                               

Income (loss) from continuing operations

  $ 11,209   $ 10,728   $ (21,013 ) $ 26,401   $ 18,940   $ 14,728   $ (11,227 )

Discontinued operations:

                                           
   

Income from operations (less applicable income tax provision (benefit) of ($79) and $229 in 2006 and 2007)

    (153 )   446                      
   

Gain on disposal of discontinued operations (less applicable income tax of $112 in 2007)

        219                      
                               

Net income (loss)(6)

  $ 11,056   $ 11,393   $ (21,013 ) $ 26,401   $ 18,940   $ 14,728   $ (11,227 )
                               

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  Pre-Predecessor   Pre-Predecessor/
Predecessor
Combined
(Non-GAAP)(1)
  Predecessor   Predecessor/
Successor
Combined
(Non-GAAP)(2)
 
 
  Year Ended March 31,   Nine Months Ended
December 31,
 
 
  2006   2007   2008   2009   2010   2009   2010  
 
  (dollars in thousands, except share and per share data)
 

Pro Forma Statement of Operations Data(7):

                                           

Pro forma adjustments to net income (loss):

                                           
 

Net income (loss)

                          $ 18,940   $ 14,728   $ (11,227 )
 

Purchase accounting adjustment

                                    7,519  
 

Management fees

                            750     563     1,396  
 

Amortization of purchase intangibles

                            (9,057 )   (6,809 )   6,729  
 

Net interest expense

                            (10,984 )   (8,182 )   9,384  
 

CHS Transactions costs

                            309         21,605  
 

Tax effect of adjustments

                            6,643     5,050     (16,322 )

Pro forma net income (loss)

                            6,601     5,350     19,084  
                                       

Pro forma net income per share

                                           
   

Basic

                          $ 0.23   $ 0.19   $ 0.66  
   

Diluted

                          $ 0.22   $ 0.18   $ 0.63  

Pro forma weighted average shares outstanding

                                           
   

Basic

                            28,887,987     28,887,987     28,887,987  
   

Diluted

                            30,477,028     30,477,028     30,477,028  

Other Financial Data:

                                           

Adjusted gross margin(8)

    46.5 %   45.5 %   44.6 %   48.0 %   47.4 %   48.2 %   45.4 %

Adjusted EBITDA(9)

  $ 18,608   $ 19,548   $ 38,023   $ 48,322   $ 46,555   $ 36,379   $ 43,772  

Capital expenditures

    1,246     6,432     5,315     2,708     1,587     976     1,246  

Operating Data:

                                           

Backlog at end of period(10)

  $ 34,093   $ 52,229   $ 77,497   $ 66,779   $ 82,459   $ 79,473   $ 79,749  

 

 
  Pre-Predecessor   Pre-Predecessor/
Predecessor
Combined
(Non-GAAP)(1)
  Predecessor   Predecessor/Successor
Combined (Non-GAAP)
 
 
  As of March 31,   As of December 31, 2010  
 
  2006   2007   2008   2009   2010   Actual   As Adjusted(11)  
 
   
  (dollars in thousands)
 

Balance Sheet Data:

                                           

Cash and cash equivalents

  $ 3,142   $ 2,062   $ 6,474   $ 13,402   $ 30,147   $ 35,201   $ 30,444  

Accounts receivable, net

    26,524     27,924     45,016     37,874     41,882     47,073     47,073  

Inventory, net

    14,360     18,766     25,136     25,103     22,835     27,600     27,600  

Total assets

    65,046     72,769     213,301     193,736     221,116     434,061     428,568  

Total debt

    15,081     11,809     120,951     99,032     109,249     210,000     168,000  

Total shareholders' equity

    26,371     30,515     20,345     38,214     55,074     121,062     157,569  

(1)
The closing of the Audax Transaction on August 30, 2007 established a new basis of accounting that primarily affected inventory, intangible assets, goodwill, taxes, debt and equity. This resulted in additional amortization expense, interest expense and tax expense for the period from August 30, 2007 through March 31, 2008 ("predecessor") as compared to the period from April 1, 2007 through August 29, 2007 ("pre-predecessor"). Except for purchase accounting adjustments, the results for the two combined periods are comparable. Therefore, we believe that combining the two periods into a single period for comparative purposes gives the most clarity for the users of this financial information. Please refer to our historical consolidated financial statements and notes thereto for the year ended March 31, 2008 included elsewhere in this prospectus for a

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    separate presentation of the results for the pre-predecessor and predecessor periods in accordance with GAAP.

   
  For the Period
From April 1,
Through
August 29, 2007
(Pre-Predecessor)
  For the Period
From August 30,
2007 Through
March 31, 2008
(Predecessor)
  Year Ended
March 31, 2008
(Pre-Predecessor/
Predecessor
Combined)
 
   
  (dollars in thousands)
 
 

Consolidated Statements of Operations Data:

                   
 

Revenues

  $ 61,615   $ 124,196   $ 185,811  
 

Cost of revenues

    33,801     76,291     110,092  
                 
 

Gross profit

    27,814     47,905     75,719  
 

Marketing, general and administrative and engineering

    17,182     29,862     47,044  
 

Amortization of intangible assets

        6,716     6,716  
                 
 

Income from operations

    10,632     11,327     21,959  
 

Interest income

    13     154     167  
 

Interest expense

    (440 )   (7,934 )   (8,374 )
 

Gain/(loss) on disposition of property, plant and equipment

    (75 )   (41 )   (116 )
 

Miscellaneous income/(expense)

    (9,222 )   (3,715 )   (12,937 )
                 
 

Income (loss) before provision for income taxes

    908     (209 )   699  
 

Income tax expense

    (1,693 )   (20,019 )   (21,712 )
                 
 

Net income (loss)

  $ (785 ) $ (20,228 ) $ (21,013 )
                 
 

Statement of Cash Flows Data:

                   
 

Net cash provided by (used in):

                   
 

Operating activities

  $ (10,573 ) $ 9,328   $ (1,245 )
 

Investing activities

    194     (150,150 )   (149,956 )
 

Financing activities

    10,870     147,280     158,150  
 

Effect of exchange rates on cash and cash equivalents

    1,147     16     1,163  
 

Capital expenditures

    1,085     4,229     5,315  
 

Depreciation and amortization

    654     15,629     16,283  
(2)
The closing of the Acquisition on April 30, 2010 established a new basis of accounting that primarily affected inventory, intangible assets, goodwill, taxes, debt and equity. This resulted in additional amortization expense, interest expense and tax expense for the period from May 1, 2010 through December 31, 2010 ("successor") as compared to the period from April 1, 2010 through April 30, 2010 ("predecessor"). Except for purchase accounting adjustments, the results for the two combined periods are comparable. Therefore, we believe that combining the two periods into a single period for comparative purposes gives the most clarity for the users of this financial information. Please refer to our historical consolidated financial statements and notes thereto for

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    the nine months ended December 31, 2010 included elsewhere in this prospectus for a separate presentation of the results for the predecessor and successor periods in accordance with GAAP.

   
  For the
Period From
April 1,
Through
April 30,
2010
(Predecessor)
  For the
Period From
May 1, 2010
Through
December 31,
2010
(Successor)
  Nine Months
Ended
December 31,
2010
(Predecessor/
Successor
Combined)
 
   
  (dollars in thousands)
 
 

Consolidated Statements of Operations Data:

                   
 

Revenues

  $ 13,063   $ 165,905   $ 178,968  
 

Cost of revenues

    6,447     91,276     97,723  
 

Purchase accounting non-cash adjustment

          7,519     7,519  
                 
 

Gross profit

    6,616     67,110     73,726  
 

Marketing, general and administrative and engineering

    4,263     37,227     41,490  
 

Amortization of intangible assets

    215     15,126     15,341  
                 
 

Income from operations

    2,138     14,757     16,895  
 

Interest income

    7     10     17  
 

Interest expense

    (6,229 )   (17,111 )   (23,340 )
 

Success fees to owners related to the CHS Transactions

    (4,716 )   (3,022 )   (7,738 )
 

Miscellaneous income/(expense)

    (8,901 )   (4,667 )   (13,568 )
                 
 

Income (loss) before provision for income taxes

    (17,701 )   (10,033 )   (27,734 )
 

Income tax benefit

    17,434     (927 )   16,507  
                 
 

Net income (loss)

  $ (267 ) $ (10,960 ) $ (11,227 )
                 
 

Statement of Cash Flows Data:

                   
 

Net cash provided by (used in):

                   
 

Operating activities

  $ (6,402 ) $ 26,072   $ 19,670  
 

Investing activities

    (1,494 )   (319,197 )   (320,691 )
 

Financing activities

    (19,385 )   327,783     308,398  
 

Capital expenditures

    (97 )   (1,149 )   (1,246 )
 

Depreciation and amortization

    392     24,040     24,432  
 

Purchase accounting adjustment to cost of goods sold

        7,519     7,519  
 

Amortization of deferred debt cost to interest expense

    2,586     3,365     5,951  
 

Effect of exchange rates on cash and cash equivalents

    (14 )   543     529  
(3)
In fiscal 2008, there was a non-cash negative impact of $7.1 million to cost of sales and, consequently, gross profit due to a purchase accounting adjustment related to the Audax Transaction. In the nine months ended December 31, 2010, there was a similar non-cash negative impact of $7.5 million to cost of sales and, consequently, gross profit due to a purchase accounting adjustment related to the Acquisition.

(4)
Interest expense for the nine months ended December 31, 2010 of $23.3 million included increased interest and amortization related to the CHS Transactions, including interest expense on our revolving credit facility and our senior secured notes issued on April 30, 2010 to finance in part the Acquisition, as well as $2.0 million of unused bridge loan fee amortization, $3.1 million of prepayment fees and $2.6 million of accelerated amortization of the deferred debt costs associated with the repaid debt.

(5)
Miscellaneous expense for fiscal 2008 of $(12.9) million consisted primarily of $(8.8) million of non-recurring expenses related to the Audax Transaction, a $(3.9) million employee compensation transaction bonus related to the Audax Transaction, $(0.3) million of foreign exchange transaction losses and $(0.3) million of compliance fees and related costs, partially offset by $0.4 million in net miscellaneous income. Miscellaneous expense for the nine months ended December 31, 2010 of $(21.3) million consisted primarily of $(21.6) million of non-recurring expenses related to the CHS Transactions, and partially offset by $0.6 million of income related to the reversal of our compliance reserve.

(6)
We have not presented net income (loss) per share amounts for the periods presented herein, as the capital structures of the pre-predecessor, predecessor and successor are substantially different, and the net income (loss) per share amounts are therefore not comparable or meaningful. Please refer to our consolidated financial statements and notes thereto for fiscal 2008, fiscal 2009 and fiscal 2010 and for the nine months ended December 31, 2009 and December 31, 2010, which are contained elsewhere in this prospectus, for a presentation of the net income (loss) per share and the weighted average shares outstanding for the pre-predecessor, predecessor and successor periods.

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(7)
Pro forma statement of operations data gives effect to the CHS Transactions and this offering, including the issuance by us of 4,000,000 shares of our common stock at a price of $13.00 per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, the use of proceeds as set forth under "Use of Proceeds," and the termination of our management fee and other items described in "Unaudited Pro Forma Condensed Consolidated Financial Statements," in each case as if they had occurred as of April 1, 2009. In accordance with Rule 11-02(c)(2) of Regulation S-X, we have only presented the pro forma statement of operations data for the most recent fiscal year (i.e., fiscal 2010) and the period from the most recent fiscal year end to the most recent interim date for which a balance sheet is required and the corresponding interim period of the preceding fiscal year (i.e., the nine months ended December 31, 2010 and December 31, 2009).

(8)
Represents the difference between sales and cost of sales other than purchase accounting adjustments, divided by sales and, accordingly, does not take into account the non-cash impact of purchase accounting adjustments of $7.1 million and $7.5 million in fiscal 2008 and the nine months ended December 31, 2010, respectively.

(9)
Adjusted EBITDA represents net income (loss) from continuing operations before interest expense, income tax expense, depreciation and amortization of intangibles, stock-based compensation expense and before transaction expenses, including those incurred in connection with the Audax Transaction and the Acquisition, non-recurring employee bonuses, and management fees paid to Audax and the sponsors. Disclosure in this prospectus of Adjusted EBITDA, which is a "non-GAAP financial measure", as defined under the rules of the SEC, is intended as a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP. Adjusted EBITDA should not be considered as an alternative to net income, income from continuing operations or any other performance measure derived in accordance with GAAP. Our presentation of Adjusted EBITDA should not be construed to imply that our future results will be unaffected by unusual or non-recurring items.

We believe this measure is meaningful to our investors to enhance their understanding of our financial performance. Although Adjusted EBITDA is not necessarily a measure of our ability to fund our cash needs, we understand that it is frequently used by securities analysts, investors and other interested parties as a measure of financial performance and to compare our performance with the performance of other companies that report Adjusted EBITDA. Adjusted EBITDA should be considered in addition to, not as a substitute for, income from operations, net income (loss) and other measures of financial performance reported in accordance with GAAP. Our calculation of Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. The following table reconciles net income (loss) to Adjusted EBITDA for the periods presented in this table and elsewhere in this prospectus:

   
  Pre-Predecessor   Pre-Predecessor/
Predecessor
Combined
(Non-GAAP)
  Predecessor   Predecessor/
Successor
Combined
(Non-GAAP)
 
   
  Fiscal Year Ended March 31,   Nine Months Ended
December 31,
 
   
  2006   2007   2008   2009   2010   2009   2010  
   
   
   
  (dollars in thousands)
 
 

Net income (loss)

  $ 11,056   $ 11,393   $ (21,013 ) $ 26,401   $ 18,940   $ 14,728   $ (11,227 )
   

Interest expense, net

    900     818     8,207     9,531     7,351     5,516     23,323  
   

Income tax expense

    5,148     5,429     21,712     1,795     13,966     12,241     (16,507 )
   

Depreciation and amortization expense

    1,504     1,398     15,892     8,497     4,424     3,223     24,432  
   

Stock-based compensation expense

                            734  
   

Audax Transaction expenses(a)

            8,820                  
   

CHS Transactions expenses(b)

                    309         21,605  
   

Other sale transaction expenses

        510(c )       1,273(d )            
   

Other auction transaction expenses(e)

                    703          
   

Non-recurring employee bonus(f)

            3,930                  
   

Management fees(g)

            475     825     862     671     1,412  
                                 
 

Adjusted EBITDA

  $ 18,608   $ 19,548   $ 38,023   $ 48,322   $ 46,555   $ 36,379   $ 43,772  
                                 

    (a)
    Represents expenses related to the sale process that culminated with the successful completion of the Audax Transaction, which were incurred in fiscal 2008.

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    (b)
    Represents expenses related to the sale process that culminated with the successful completion of the Acquisition, which were incurred during fiscal 2010 and the nine months ended December 31, 2010.

    (c)
    Represents legal, financial and other advisory and consulting fees and expenses incurred in fiscal 2007 when our founder and his family, our controlling stockholders at the time, engaged in negotiations to sell their controlling interest in us. This transaction was ultimately abandoned by the parties in fiscal 2007.

    (d)
    Represents legal, financial and other advisory and consulting fees and expenses incurred during fiscal 2009 when Audax engaged in negotiations to sell their controlling interest in us. Negotiations were abandoned by the parties in fiscal 2009.

    (e)
    Represents legal, financial and other advisory and consulting fees and expenses incurred during fiscal 2010 when Audax commenced an auction process to sell their controlling interest in us. The auction process was abandoned by Audax in fiscal 2010.

    (f)
    Represents non-recurring bonuses paid to employees prior to the Audax Transaction.

    (g)
    Represents management fees that will terminate in connection with this offering. See "Certain Relationships and Related Party Transactions—Transaction Fee and Management Fee."
(10)
Represents the future revenue attributable to signed, but unperformed, purchase orders that set forth specific revenue amounts at the end of the applicable period.

(11)
As adjusted to reflect (i) the issuance of 4,000,000 shares of common stock by us in this offering; (ii) the redemption of $21.0 million aggregate principal amount of our senior secured notes scheduled to occur on April 29, 2011; (iii) the application of proceeds from this offering as set forth under "Use of Proceeds" and (iv) the payment of the one-time fee in the aggregate amount of $7.4 million to our sponsors in connection with the termination of the management services agreement. Adjustments do not include an increase of $15.0 million in cash and cash equivalents between December 31, 2010 and March 30, 2011.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        The following discussion should be read in conjunction with, and is qualified in its entirety by reference to our consolidated financial statements and related notes included elsewhere in this prospectus. The discussions in this section contain forward-looking statements that involve risks and uncertainties, including, but not limited to, those described in the "Risk Factors" section of this prospectus. Actual results could differ materially from those discussed below.

Overview

        We are one of the largest providers of highly engineered thermal solutions for process industries. For over 50 years, we have served a diverse base of thousands of customers around the world in attractive and growing markets, including energy, chemical processing and power generation. We are a global leader and one of the few thermal solutions providers with a global footprint and a full suite of products and services required to deliver comprehensive solutions to complex projects. We serve our customers locally through a global network of sales and service professionals and distributors in more than 30 countries and through our four manufacturing facilities on three continents. These global capabilities and longstanding relationships with some of the largest multinational energy, chemical processing, power and EPC companies in the world have enabled us to diversify our revenue streams and opportunistically access high growth markets worldwide. For the nine months ended December 31, 2010, 71% of our revenues were generated outside of the United States.

        Revenue.    Our revenues are derived from providing customers with a full suite of innovative and reliable heat tracing solutions, including electric and steam heat tracing, tubing bundles, control systems, design optimization, engineering services and installation services. Our sales are primarily to industrial customers for petroleum and chemical plants, oil and gas production facilities and power generation facilities. Demand for industrial heat tracing solutions falls into two categories: (i) new facility construction, which we refer to as Greenfield projects, and (ii) recurring maintenance, repair and operations and facility upgrades or expansions, which we refer to as MRO/UE. Greenfield construction projects often require comprehensive heat tracing solutions. We believe that Greenfield revenue consists of sales revenues by customer in excess of $1 million annually (excluding sales to agents, who typically resell our products to multiple customers), and typically includes most orders for projects related to facilities that are new or that are built independent of existing facilities. We refer to sales revenues by customer of less than $1 million annually, which we believe are typically derived from MRO/UE, as MRO/UE revenue. Based on our experience, we believe that $1 million in annual sales is an appropriate threshold for distinguishing between Greenfield revenue and MRO/UE revenue. However, we often sell our products to intermediaries or subcontract our services; accordingly, we have limited visibility into how our products or services may ultimately be used and can provide no assurance that our categorization may accurately reflect the sources of such revenue. Furthermore, our customers do not typically enter into long-term forward maintenance contracts with us. In any given year, certain of our smaller Greenfield projects may generate less than $1 million in annual sales, and certain of our larger plant expansions or upgrades may generate in excess of $1 million in annual sales, though we believe that such exceptions are few in number and insignificant to our overall results of operations.

        We believe that our robust pipeline of planned projects, as evidenced by our growing backlog of signed purchase orders, provides us with strong visibility into our future revenue, as historically we have experienced few order cancellations, and the cancellations that have occurred in the past have not been material compared to our total contract volume or total backlog. The small number of order cancellations is attributable in part to the fact that a large portion of our solutions are ordered and installed toward the end of Greenfield project construction. Our backlog at December 31, 2010 was $79.7 million, an increase of 17%, as compared to $68.4 million at December 31, 2008. The timing of

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recognition of revenue out of backlog is not always certain, as it is subject to a variety of factors that may cause delays, many of which are beyond our control (such as customers' delivery schedules and levels of capital and maintenance expenditures). When delays occur, the recognition of revenue associated with the delayed project is likewise deferred.

        Cost of sales.    Our cost of revenues includes primarily the cost of raw material items used in the manufacture of our products, cost of ancillary products that are sourced from external suppliers and construction labor cost. Additional costs of revenue include contract engineering cost directly associated to projects, direct labor cost, external sales commissions, and other costs associated with our manufacturing/fabrication shops. The other costs associated with our manufacturing/fabrication shops are mainly indirect production costs, including depreciation, indirect labor costs, and the costs of manufacturing support functions such as logistics and quality assurance. Key raw material costs include polymers, copper, stainless steel, insulating material, and other miscellaneous parts related to products manufactured or assembled as part of our heat tracing solutions. Historically, the costs of our primary raw materials have been stable and readily available from multiple suppliers, and we have been generally successful with passing along raw material cost increases to our customers. Therefore, increases in the cost of key raw materials of our products have not generally affected our gross margins. We cannot provide any assurance, however, that we may be able to pass along such cost increases to our customers in the future, and if we are unable to do so, our results of operations may be adversely affected.

        Operating expenses.    Our marketing, general and administrative and engineering expenses are primarily comprised of compensation and related costs for sales, marketing, pre-sales engineering and administrative personnel, as well as other sales related expenses and other costs related to research and development, insurance, professional fees, the global integrated business information system, provisions for bad debts and warranty.

        Key drivers affecting our results of operations.    Our results of operations and financial condition are affected by numerous factors, including those described above under "Risk Factors" and elsewhere in this prospectus and those described below:

    Timing of Greenfield projects.  Our results of operations in recent years have been impacted by the various construction phases of large Greenfield projects. On very large projects, we are typically designated as the heat tracing provider of choice by the project owner. We then engage with multiple contractors to address incorporating various heat tracing solutions throughout the overall project. Our largest Greenfield projects may generate revenue for several quarters. In the early stages of a Greenfield project, our revenues are typically realized from the provision of engineering services. In the middle stages, or the material requirements phase, we typically experience the greatest demand for our heat tracing cable, at which point our revenues tend to accelerate. Revenues tend to decrease gradually in the final stages of a project and are generally derived from installation services and demand for electrical panels and other miscellaneous electronic components used in the final installation of heat tracing cable, which we frequently outsource from third-party manufacturers. We tend to experience higher margins in the middle stages of a Greenfield project, when the demand for our manufactured products is at its highest. By contrast, we tend to experience lower margins in the beginning and final stages of a Greenfield project, when demand is highest for our lower margin engineering and installation services and outsourced electronic components.

    Cyclicality of end-users' markets.  Demand for our products and services depends in large part upon the level of capital and maintenance expenditures of our customers and end users, in particular those in the energy, chemical processing and power generation industries, and firms that design and construct facilities for these industries. These customers' expenditures historically

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      have been cyclical in nature and vulnerable to economic downturns. Greenfield projects, and in particular large Greenfield projects (i.e., new facility construction projects generating in excess of $5 million in annual sales), have been a substantial source of revenue growth in recent years, and Greenfield revenues tend to be more cyclical than MRO/UE revenues. In recent years we have noted particular cyclicality in capital spending for new facilities in Asia, Eastern Europe and the Middle East. Revenues derived from Europe (including the Middle East, which have historically comprised a relatively minor portion of such revenues) accounted for 27% and 25% of our total revenues during fiscal 2010 and fiscal 2009, respectively, and revenues derived from the Asia-Pacific region accounted for 12% and 14% of our total revenues during fiscal 2010 and fiscal 2009, respectively. A sustained decrease in capital and maintenance spending or in new facility construction by our customers could have a material adverse effect on the demand for our products and services and our business, financial condition and results of operations.

    Impact of product mix.  Typically, both Greenfield and MRO/UE customers require our products as well as our engineering and construction services. The level of service and construction needs will affect the profit margin for each type of revenue. We tend to experience lower margins from our design optimization, engineering, installation and maintenance services than we do from sales of our heating cable, tubing bundle and control system products. We also tend to experience lower margins from our outsourced products, such as electrical switch gears and transformers, than we do from our manufactured products. Accordingly, our results of operations are impacted by our mix of products and services.

    We estimate that Greenfield and MRO/UE have each made the following contribution as a percentage of revenue in the periods listed:

 
  Fiscal Year Ended March 31,   Nine Months Ended
December 31,
 
 
  2008   2009   2010   2009   2010  

Greenfield

    31 %   32 %   39 %   38 %   53 %

MRO/UE

    69 %   68 %   61 %   62 %   47 %

We believe that our analysis of Greenfield and MRO/UE is an important measurement to explain the trends in our business to investors. Greenfield revenue is an indicator of both our ability to successfully compete for new contracts as well as the economic health of the industries we serve. Furthermore, Greenfield revenue is an indicator of potential MRO/UE revenue in future years.

For MRO/UE orders, the sale of our manufactured products typically represents a higher proportion of the overall revenues associated with such order than the provision of our services. Greenfield projects, on the other hand, require a higher level of our services than MRO/UE orders. Therefore, we typically realize higher margins from MRO/UE revenues than Greenfield revenues.

    Large and growing installed base.  Customers typically use the incumbent heat tracing provider for MRO/UE projects to avoid complications and compatibility problems associated with switching providers. Therefore, with the significant Greenfield activity we have experienced in recent years, our installed base has continued to grow, and we expect that such installed base will continue to generate ongoing high margin MRO/UE revenues. For fiscal 2010, MRO/UE sales comprised approximately 60% of our consolidated revenues.

    Seasonality of MRO/UE revenues.  Revenues realized from MRO/UE orders tend to be less cyclical than Greenfield projects and more consistent quarter over quarter, although MRO/UE revenues are impacted by seasonal factors. MRO/UE revenues are typically highest during the

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      third fiscal quarter, as most of our customers perform preventative maintenance prior to the winter season.

Results of Operations

        The following table sets forth our statements of operations as a percentage of sales for the periods indicated.

 
  Pre-
Predecessor/
Predecessor
Combined
(Non-GAAP)(1)
  Predecessor   Predecessor/
Successor
Combined
(Non-GAAP)(2)
 
 
  Fiscal Year Ended March 31,   Nine Months Ended
December 31,
 
 
  2008   2009   2010   2009   2010  

Consolidated Statements of Operations Data:

                                                             
 

Sales

  $ 185,811     100 % $ 202,755     100 % $ 192,713     100 % $ 142,905     100 % $ 178,968     100 %
 

Cost of sales

    102,946     55     105,456     52     101,401     53     73,966     52     97,723     55  
 

Purchase accounting adjustments(3)

    7,146     4         0         0         0     7,519     4  
                                           
 

Gross profit

  $ 75,719     41 % $ 97,299     48 % $ 91,312     47 % $ 68,939     48 % $ 73,726     41 %
 

Operating Expenses:

                                                             
   

Marketing, general and administrative and engineering

  $ 46,569     25 % $ 48,982     24 % $ 46,481     24 % $ 33,099     23 % $ 40,078     22 %
   

Management fees

    475     0     825     0     862     0     671     0     1,412     1  
   

Amortization of intangible assets

    6,716     4     6,627     3     2,426     1     1,803     1     15,341     9  
                                           
 

Income from operations

  $ 21,959     12 % $ 40,865     20 % $ 41,543     22 % $ 33,366     23 % $ 16,895     9 %
 

Interest expense, net

    (8,207 )   (4 )   (9,531 )   (5 )   (7,351 )   (4 )   (5,516 )   (4 )   (23,323 )(4)   (13 )
 

Success fees to owners related to the CHS Transactions

        0         0         0         0     (7,738 )(5)   (4 )
 

Miscellaneous income/(expense) net of gain (loss) on disposition of property, plant and equipment

    (13,053 )   (7 )   (3,138 )   (2 )   (1,286 )   (1 )   (881 )   1     (13,568 )(5)   (8 )
                                           
 

Income (loss) from continuing operations before provision for income taxes

 
$

699
   
0

%

$

28,196
   
14

%

$

32,906
   
17

%

$

26,969
   
19

%

$

(27,734

)
 
(16

)%
 

Income tax benefit (expense)

    (21,712 )   (12 )   (1,795 )   (1 )   (13,966 )   (7 )   (12,241 )   (9 )   16,507     (9 )
                                           
 

Income (loss) from continuing operations

 
$

(21,013

)
 
(11

)%

$

26,401
   
13

%

$

18,940
   
10

%

$

14,728
   
10

%

$

(11,227

)
 
(6

)%
 

Net income (loss)

 
$

(21,013

)
 
(11

)%

$

26,401
   
13

%

$

18,940
   
10

%

$

14,728
   
10

%

$

(11,227

)
 
(6

)%

(1)
The closing of the Audax Transaction on August 30, 2007 established a new basis of accounting that primarily affected inventory, intangible assets, goodwill, taxes, debt and equity. This resulted in additional amortization expense, interest expense and tax expense for the period from August 30, 2007 through March 31, 2008 ("predecessor") as compared to the period from April 1, 2007 through August 29, 2007 ("pre-predecessor"). Except for purchase accounting adjustments, the results for the two combined periods are comparable. Therefore, we believe that combining the two periods into a single period for comparative purposes gives the most clarity for the users of this financial information. Please refer to note 1 to the "Selected Historical and Pro Forma Consolidated Financial and Operating Data" table and our historical consolidated financial statements and notes thereto for the year ended March 31, 2008 included elsewhere in this prospectus for a separate presentation of the results for the pre-predecessor and predecessor periods in accordance with GAAP.

(2)
The closing of the Acquisition on April 30, 2010 established a new basis of accounting that primarily affected inventory, intangible assets, goodwill, taxes, debt and equity. This resulted in additional amortization expense, interest expense and tax expense for the period from May 1, 2010 through December 31, 2010 ("successor") as compared to the period from April 1, 2010 through April 30, 2010 ("predecessor"). Except for purchase accounting adjustments, the results for the two combined periods are comparable. Therefore, we believe that combining the two periods into a single period for comparative purposes gives the most clarity for the users of this financial information. Please refer to note 2 to the "Selected Historical and Pro Forma Consolidated Financial and Operating Data" table and our historical consolidated financial statements and notes thereto for the nine months ended December 31, 2010 included elsewhere in this prospectus for a separate presentation of the results for the predecessor and successor periods in accordance with GAAP.

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(3)
In fiscal 2008, there was a non-cash negative impact of $7.1 million to cost of sales and, consequently, gross profit due to a purchase accounting adjustment related to the Audax Transaction. In the nine months ended December 31, 2010, there was a similar non-cash negative impact of $7.5 million to cost of sales and, consequently, gross profit due to a purchase accounting adjustment related to the Acquisition.

(4)
Interest expense for the nine months ended December 31, 2010 of $23.3 million included increased interest and amortization related to the CHS Transactions, including interest expense on our revolving credit facility and our senior secured notes issued on April 30, 2010 to finance in part the Acquisition, as well as $2.0 million of unused bridge loan fee amortization, $3.1 million of prepayment fees and $2.6 million of accelerated amortization of the deferred debt costs associated with the repaid debt.

(5)
Miscellaneous income (expense) for the nine months ended December 31, 2010 of $(21.3) million consisted primarily of $(21.6) million of non-recurring expenses related to the CHS Transactions, and partially offset by $0.6 million of income related to the reversal of our compliance reserve.

Nine Months Ended December 31, 2010 (Combined) Compared to the Nine Months Ended December 31, 2009 (Non-GAAP)

        We have prepared our consolidated and combined financial statements as if Thermon Group Holdings, Inc. ("successor") had been in existence throughout all relevant periods. The historical financial and other data prior to the Acquisition, which occurred on April 30, 2010 and which established a new basis of accounting, have been prepared using the historical results of operations and bases of the assets and liabilities of Thermon Holdings, LLC and its subsidiaries ("predecessor"). Our historical financial data prior to April 30, 2010 may not necessarily be indicative of our future performance. For comparability to the periods discussed herein, please refer to note (2) to the table presented in "Selected Historical and Pro Forma Consolidated Financial and Operating Data."

        Revenues.    Revenues for the nine months ended December 31, 2010 combined, which we refer to as YTD 2011, were $179.0 million, compared to $142.9 million for the nine months ended December 31, 2009, which we refer to as YTD 2010, an increase of $36.1 million, or 25.3%, mostly due to an increase in large Greenfield project activity in YTD 2011, which accounted for $23.1 million of the increase. Separately, revenues increased in all geographies in which we operate during YTD 2011, with revenue in Canada accounting for $18.3 million of the increase.

        Gross profit and margin.    Gross profit totaled $73.7 million in YTD 2011, compared to $68.9 million in YTD 2010, an increase of $4.8 million. As a percentage of revenues, gross profit decreased to 41.2% in YTD 2011 from 48.2% in YTD 2010. In YTD 2011 there was a non-cash $7.5 million negative impact to gross profit due to a purchase accounting adjustment related to the CHS Transactions. Under purchase accounting rules, inventories that were carried at lower of cost or market are stepped up to fair value, which eliminates gross profit in the period in which the units are sold. Excluding the purchase accounting adjustment, gross margin would have been 45.4% in YTD 2011. In addition, YTD 2010 gross margin was positively affected by a $1.8 million favorable adjustment related to the release of contingencies on long-term projects in Russia. After taking into account this adjustment, gross margin would have been 47.0% in YTD 2010. Adjusted gross margin decreased marginally by 1.6% in YTD 2011 as compared to YTD 2010. These adjusted gross margins of 45.4% and 47.0% for YTD 2011 and YTD 2010, respectively, are within our expected range of gross margins based on our historical results. The slightly lower gross margin in YTD 2011 is reflective of a larger proportion of Greenfield sales, which carry an overall lower gross margin than MRO/UE sales.

        Marketing, general and administrative and engineering.    Marketing, general and administrative and engineering costs were $41.5 million in YTD 2011, compared to $33.8 million in YTD 2010, an increase of $7.7 million, or 22.9%. The overall increase is primarily related to an increase in expenses to address personnel needs to meet growing customer demand. The expenses contributing to this increase include $2.9 million in increased incentive compensation as well as an increase in salaries and benefits of $3.8 million. In addition, there is an increase of $0.8 million in professional fees associated with SEC

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reporting and administration requirements. As a percentage of revenues, marketing, general and administrative and engineering expenses decreased to 23.2% in YTD 2011 from 23.6% in YTD 2010.

        Amortization of intangible assets.    Amortization of intangible assets was $15.3 million in YTD 2011, compared to $1.8 million in YTD 2010, an increase of $13.5 million, due to the amortization of certain intangible assets associated with the CHS Transactions.

        Interest expense.    Interest expense was $23.3 million in YTD 2011, compared to $5.6 million in YTD 2010, an increase of $17.7 million. This was partially due to the higher levels of indebtedness incurred in the CHS Transactions and, to a lesser extent, the higher interest rates on our senior secured notes, which increased our monthly interest expense by approximately $1.2 million. The one-time financing costs included $2.0 million in full amortization of our bridge loan fee, $2.6 million in accelerated amortization of deferred debt costs associated with repaid debt and $3.1 million in prepayment penalties.

        Miscellaneous expense.    Miscellaneous expense was $13.6 million in YTD 2011, compared to miscellaneous expense of $0.9 million in YTD 2010, an increase of $12.7 million. Miscellaneous expense in YTD 2011 consisted primarily of $9.5 million of professional fees and expenses related to the CHS Transactions, $0.6 million income related to adjustment of compliance liabilities and foreign exchange transaction gains and other miscellaneous income of $0.9 million. Miscellaneous expense in YTD 2010 consisted primarily of nominal charges for professional fees and expenses related to a proposed sale and other extraordinary corporate transactions and foreign exchange transaction losses offset by a small gain in sales of fixed assets.

        Income taxes.    Income taxes were a benefit of $16.5 million in YTD 2011, compared to a $12.2 million tax expense in YTD 2010, a decrease of $28.7 million from YTD 2010. The effective tax rates were (59.5)% in YTD 2011 and 45.4% in YTD 2010. Our anticipated annual effective tax rate of approximately (3.9)% has been applied to our consolidated pre-tax loss for the period from May 1, 2010 through December 31, 2010. This tax rate is less than the U.S. statutory rate primarily due to the amount of buyer's expenses incurred in connection with the CHS Transactions that is estimated to be nondeductible, valuation reserves taken against our anticipated foreign tax credit and other carryforwards for U.S. taxation purposes, and differences between foreign and U.S. tax rates. See Note 16, Income Taxes, to our unaudited consolidated financial statements for the nine months ended December 31, 2010, included elsewhere in this prospectus, for further detail on income taxes.

        Net income.    Net loss was $11.2 million in YTD 2011 as compared to net income of $14.7 million in YTD 2010, a decrease of $25.9 million. The primary reason for the decrease in net income was as a result of the CHS Transactions. Because of the CHS Transactions in YTD 2011, amortization of intangible assets increased $21.0 million (including $7.5 million in purchase accounting adjustments negatively affecting cost of sales) over the same period in the prior year. In addition, interest expense increased $17.8 million over the prior period. During YTD 2011, we also incurred $21.6 million in transaction costs directly related to the CHS Transactions. These charges to income represent a total of $60.4 million (before tax) offset by a decrease in tax expense of $28.7 million due to the tax benefit of $16.5 million recorded in YTD 2011 and an increase in gross profit of $4.8 million due to higher sales.

Year Ended March 31, 2010 Compared to Year Ended March 31, 2009

        Revenues.    Revenues for fiscal 2010 were $192.7 million, compared to $202.8 million for fiscal 2009, a decrease of $10.1 million or 5.0%. Revenues from large Greenfield projects decreased by $7.6 million in fiscal 2010. Smaller Greenfield projects and MRO/UE combined for a decline of $2.5 million in fiscal 2010. The reduction in large Greenfield projects is primarily related to the completion of several oil and gas projects during fiscal 2010 that were largely realized in fiscal 2009 and

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therefore generated less revenue in fiscal 2010. The reduction of MRO/UE revenue in fiscal 2010 was due to an $11.2 million decrease in the Eastern Hemisphere revenue offset by increased MRO/UE revenue in the Western Hemisphere of $8.7 million.

        Revenues in our Western Hemisphere area decreased to $117.3 million in fiscal 2010 from $124.6 million in fiscal 2009, a decrease of $7.3 million or 5.8%, mainly due to the near completion of a large Greenfield project located in Canada. Specifically, we had one large Greenfield project in Canada that accounted for a $17.2 million decrease in revenue in fiscal 2010 as compared to fiscal 2009. This reduction was offset by increased MRO/UE revenue of $8.7 million and other Canadian projects that began in fiscal 2010 and accelerated in YTD 2011. Revenues from our Eastern Hemisphere area decreased to $75.3 million in fiscal 2010 from $78.1 million in fiscal 2009, a decrease of $2.8 million or 3.5%. Eastern Hemisphere revenues were marked by an overall a decline in MRO/UE revenue offset by an increase in Greenfield revenue. The decrease in Eastern Hemisphere MRO/UE revenue is attributable to a downturn in capital spending in our end markets, which tends to be due to the cyclical nature of capital spending in Asia and in Eastern Europe.

        Gross profit and margin.    As a percentage of revenues, gross profit was 47.4% for fiscal 2010 as compared to 48.0% for fiscal 2009. Gross profit totaled $91.3 million for fiscal 2010, compared to $97.3 million for fiscal 2009, a decrease of $6.0 million, or 6.2%, from fiscal 2009, which is largely attributable to a decrease in revenues over the same period. The gross margins of 47.4% and 48.0% for fiscal 2010 and fiscal 2009, respectively, are in line with our expected range of gross margins based on our historical results. No discernible series of events or factors were responsible for the negligible decline in gross margin over such period.

        Marketing, general and administrative and engineering.    As a percentage of revenues, marketing, general and administrative and engineering expenses totaled 24.6% for both fiscal 2010 and fiscal 2009. Marketing, general and administrative and engineering expenses were $47.3 million for fiscal 2010, compared to $49.8 million for fiscal 2009, a decrease of $2.5 million, or 5.0%, from fiscal 2009. The decrease in operating expense is primarily due to the decrease in incentive expense due to lower business activity in fiscal 2010 from that of fiscal 2009.

        Amortization of intangible assets.    Amortization of intangible assets was $2.4 million in fiscal 2010, compared to $6.6 million in fiscal 2009, a decrease of $4.2 million from fiscal 2009, due to the amortization of certain intangible assets associated with the Audax Transaction. The decrease in amortization expense was due to certain short-term intangible assets that were fully amortized prior to fiscal 2010.

        Interest expense.    Interest expense was $7.4 million in fiscal 2010, compared to $9.6 million in fiscal 2009, a decrease of $2.2 million, or 22.9%, from fiscal 2009. The decrease is a primarily due to higher debt levels during fiscal 2009 and a reduction in interest rates during fiscal 2010.

        Miscellaneous expense.    Miscellaneous expense was $1.3 million in fiscal 2010 compared to $3.1 million in fiscal 2009, a decrease of $1.8 million, or 58.1%, from fiscal 2009. Miscellaneous expense in fiscal 2010 consisted primarily of $1.0 million of professional fees and expenses related to capital transactions and miscellaneous expenses of $0.3 million. Miscellaneous expense in fiscal 2009 consisted primarily of $1.3 million of professional fees and expenses related to capital transactions, $0.8 million of foreign exchange transaction losses and a $1.2 million charge related to self-reported export compliance violations, partially offset by $0.2 million of miscellaneous income.

        Income taxes.    Income taxes were $14.0 million in fiscal 2010 compared to $1.8 million in fiscal 2009, an increase of $12.2 million. The effective tax rate was 42.6% in fiscal 2010 and 6.4% in fiscal 2009. Excluding the effects of the non-cash change in the deferred tax liability related to deemed

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foreign income, the effective tax rates would be approximately 33.4% and 35.0% in fiscal 2010 and fiscal 2009, respectively. The deemed foreign income relates to the debt outstanding of our Canadian subsidiary that originated in the Audax Transaction. The swings in the effective tax rates is primarily due to the deemed foreign income related to debt outstanding of our Canadian subsidiary and the impact of rate differences of international subsidiaries.

        Net income.    Net income was $19.0 million in fiscal 2010 as compared to $26.4 million in fiscal 2009, a decrease of $7.4 million. The decrease in net income was primarily related to a non-cash charge to deferred taxes. The effect of the deferred taxes related to our Canadian debt and represented a decrease in net income of $11.4 million.

Year Ended March 31, 2009 Compared to Year Ended March 31, 2008 (Combined) (Non-GAAP)

        We have prepared our consolidated and combined financial statements as if Thermon Holdings, LLC ("predecessor") had been in existence throughout all relevant periods. The historical financial and other data prior to the Audax Transaction, which established a new basis of accounting, have been prepared using the historical results of operations and bases of the assets and liabilities of Thermon Industries, Inc. and its subsidiaries ("pre-predecessor"). Our historical financial data prior to August 30, 2007 may not necessarily be indicative of our future performance. For comparability to the periods discussed herein, please refer to note (1) to the table presented in "Selected Historical and Pro Forma Consolidated Financial and Operating Data."

        Revenues.    Revenues for fiscal 2009 were $202.8 million, compared to $185.8 million for fiscal 2008, an increase of $17.0 million, or 9.1%. The increase in revenue in fiscal 2009 is mostly attributable to a large Greenfield project in Canada. Sales to several of our customers associated with this project accounted for a $19.7 million increase in revenue in fiscal 2009 as compared to fiscal 2008. This revenue increase was offset by a decrease in other Greenfield projects of $3.2 million. MRO/UE revenue worldwide was comparable at approximately $160 million for both fiscal 2009 and fiscal 2008.

        Revenues in our Western Hemisphere area increased to $124.6 million in fiscal 2009 from $117.0 million in fiscal 2008, an increase of $7.6 million, or 6.5%, mainly due to the aforementioned project in Canada, partially offset by lower Greenfield sales within the United States. The decline in U.S. Greenfield revenue was due to the completion of a large refinery modernization project in fiscal 2008. Revenues from our Eastern Hemisphere area increased to $78.1 million in fiscal 2009 from $68.8 million in fiscal 2008, an increase of $9.3 million, or 13.5%, mainly due to growth in MRO/UE revenue of approximately $11.8 million, which we believe was due to the cyclical nature of capital spending in Asia and in Eastern Europe, which increase was offset in part by a decrease in Eastern Hemisphere Greenfield revenue of $2.5 million.

        Gross profit and margin.    As a percentage of revenues, gross profit improved to 48.0% for fiscal 2009 from 40.8% for fiscal 2008. Gross profit totaled $97.3 million for fiscal 2009, compared to $75.7 million for fiscal 2008, an increase of $21.6 million or 28.5% from fiscal 2008. In fiscal 2008 there was a non-cash charge of $7.1 million that adversely affected gross profit due to a purchase accounting adjustment related to the Audax Transaction. Under purchase accounting rules, inventories that were carried at lower of cost or market are stepped up to fair value which eliminates the gross profit in the period in which the units are sold. Excluding the purchase accounting adjustment, gross margin would have been 44.6% in fiscal 2008, which is in line with our expected range of gross margins based on our historical results. The relative improvement in gross margin during fiscal 2009 was due partly to the number of significant ongoing Greenfield projects in their middle, material requirements phases.

        Marketing, general and administrative and engineering.    As a percentage of revenues, marketing, general and administrative and engineering expenses decreased slightly to 24.6% for fiscal 2009 from

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25.3% for fiscal 2008. Marketing, general and administrative and engineering expenses were $49.8 million for fiscal 2009, compared to $47.0 million for fiscal 2008, an increase of $2.8 million, or 6.0%, for fiscal 2008. The increase is primarily due to higher salaries expense related to headcount additions and additional incentive compensation expense related to the increase in revenues and profits.

        Amortization of intangible assets.    Amortization of intangible assets was $6.6 million in fiscal 2009, compared to $6.7 million in fiscal 2008, a decrease of $0.1 million from fiscal 2008, due to the amortization of certain intangible assets associated with the Audax Transaction.

        Interest expense.    Interest expense was $9.6 million in fiscal 2009, compared to $8.4 million in fiscal 2008, an increase of $1.2 million, or 14.3%, from fiscal 2008. The increase is a result of the outstanding borrowings for the entire year in fiscal 2009 as compared to fiscal 2008 where the borrowings were outstanding for only part of the year.

        Miscellaneous expense.    Miscellaneous expense was $3.1 million in fiscal 2009 compared to $12.9 million in fiscal 2008, a decrease of $9.8 million, or 76.0%, from fiscal 2008. Miscellaneous expense in fiscal 2009 consisted primarily of $1.3 million of professional fees and expenses related to proposed capital transactions, a $1.2 million charge related to self-reported export compliance violations and $0.8 million of foreign exchange transaction losses, partially offset by $0.2 million of miscellaneous income. Miscellaneous expense in fiscal 2008 consisted primarily of $8.8 million of non-recurring expenses related to the Audax Transaction, a $3.9 million employee compensation transaction bonus related to the Audax Transaction, $0.3 million of foreign exchange transaction losses and $0.3 million of compliance fees and related costs, partially offset by $0.4 million net miscellaneous income.

        Income taxes.    Income taxes were $1.8 million in fiscal 2009 compared to $21.7 million in fiscal 2008, a decrease of $19.9 million, or 91.7%, from fiscal 2008. The effective tax rate was 6.4% in fiscal 2009 and was not meaningful in fiscal 2008. Excluding the effects of the non-cash change in the deferred tax liability related to deemed foreign income, the effective tax rates would be approximately 35% in fiscal 2009. The deemed foreign income relates to the debt outstanding of our Canadian subsidiary that originated in the Audax Transaction (see discussion above). The high effective tax rate in fiscal 2008 was primarily due to the deemed foreign income related to debt outstanding of our Canadian subsidiary, the impact of rate differences of international subsidiaries and permanent differences on certain transaction costs expensed for book purposes but not for tax purposes.

        Net income.    Net income for fiscal 2009 was $26.4 million as compared to a net loss in fiscal 2008 of $21.0 million, an increase of $47.4 million. Of the $47.4 million change in net income, $20.0 million was related to the non-cash charge to deferred tax expense related to U.S. tax issues in connection with our Canadian debt issued in fiscal 2008. In addition, during fiscal 2008, the Company incurred $12.7 million (before tax) in transaction expenses (including $3.9 million in employee compensation expense and $7.1 million (before tax) in cost of sale expenses related to purchase accounting entries).

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Quarterly Results of Operations and Seasonality

        The following tables set forth our historical unaudited quarterly condensed consolidated statement of operations data and other financial data and our net sales for the following periods, expressed in dollars and as a percentage of net sales. This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. We have prepared the unaudited information on the same basis as our audited consolidated financial statements and, in the opinion of management, the table includes normal recurring adjustments that we consider necessary for a fair presentation of our financial position and operating results for the quarters presented. The quarterly statement of operations data and other financial data are not indicative of operating results for any future period.

 
  Three Months Ended  
 
  Jun. 30,
2008
  Sep. 30,
2008
  Dec. 31,
2008
  Mar. 31,
2009
  Jun. 30,
2009
  Sep. 30,
2009
  Dec. 31,
2009
  Mar. 31,
2010
  Jun. 30,
2010
  Sep. 30,
2010
  Dec. 31,
2010
 
 
   
   
  (Predecessor)
   
   
   
   
  (Predecessor/
Successor
Combined)
(Non-GAAP)

   
   
 
 
  (dollars in thousands, except for per share data)
 
 
   
   
   
   
   
   
   
   
   
  (Successor)
 

Sales

  $ 53,398   $ 52,060   $ 52,766   $ 44,531   $ 50,812   $ 44,745   $ 47,348   $ 49,808   $ 50,576   $ 63,451   $ 64,941  

Gross profit

    22,875     25,657     26,712     22,055     22,837     22,906     23,196     22,373     18,786 (1)   25,332 (1)   29,608  

Income (loss) from operations

    8,347     10,969     12,122     9,427     11,670     11,665     10,031     8,177     632     5,061     11,203  

Net income (loss)

  $ 4,288   $ 6,341   $ 7,119   $ 8,653   $ 5,243   $ 5,304   $ 4,182   $ 4,212   $ (12,440 )(2) $ (1,797 )(2) $ 3,009 (2)
                                               

Other Financial Data:

                                                                   

Adjusted gross
margin(3)

    42.8 %   49.2 %   50.6 %   49.5 %   44.9 %   51.1 %   48.9 %   44.9 %   47.1 %   43.8 %   45.6 %

Net income (loss) per share(4):

                                                                   
 

Basic

  $ 90.84   $ 134.33   $ 150.81   $ 183.31   $ 111.07   $ 112.36   $ 88.59   $ 89.23   $   $ (0.07 ) $ 0.12  
 

Diluted

  $ 79.65   $ 117.79   $ 132.24   $ 165.60   $ 100.34   $ 101.51   $ 80.03   $ 80.61   $   $ (0.07 ) $ 0.11  

Weighted average shares outstanding(4):

                                                                   
 

Basic

    47,205     47,205     47,205     47,205     47,205     47,205     47,205     47,205         24,875,669     24,908,772  
 

Diluted

    53,835     53,835     53,835     52,253     52,253     52,253     52,253     52,253         24,875,669     27,557,174  

        The following table presents, for the periods given, selected unaudited quarterly financial data as a percentage of our sales.

 
  Three Months Ended  
 
  Jun. 30,
2008
  Sep. 30,
2008
  Dec. 31,
2008
  Mar. 31,
2009
  Jun. 30,
2009
  Sep. 30,
2009
  Dec. 31,
2009
  Mar. 31,
2010
  Jun. 30,
2010
  Sep. 30,
2010
  Dec. 31,
2010
 
 
   
   
  (Predecessor)
   
   
   
  (Predecessor/
Successor
Combined)
(Non-GAAP)

  (Successor)
 

Sales

    100 %   100 %   100 %   100 %   100 %   100 %   100 %   100 %   100 %   100 %   100 %

Gross profit

    43 %   49 %   51 %   50 %   45 %   51 %   49 %   45 %   37 %(1)   40 %(1)   46 %(1)

Income (loss) from operations

    16 %   21 %   23 %   21 %   23 %   26 %   21 %   16 %   1 %   8 %   17 %

Net income (loss)

    8 %   12 %   14 %   19 %   10 %   12 %   9 %   8 %   (25 )%(2)   (3 )%(2)   5 %(2)
                                               

(1)
Includes non-cash purchase accounting adjustments of $(5.0) million and $(2.5) million, or 10% and 4% of sales, respectively, related to the CHS Transactions in the three months ended June 30, 2010 and September 30, 2010, respectively.

(2)
Includes $20.0 million, or 40% of sales, $0.7 million, or 1% of sales, and $0.8 million, or 1% of sales, in transaction-related expenses incurred in the three months ended June 30, 2010, September 30, 2010 and December 31, 2010, respectively, in connection with the CHS Transactions.

(3)
Represents the difference between sales and cost of sales other than purchase accounting adjustments, divided by sales and, accordingly, does not take into account the non-cash impact of purchase accounting adjustments of $7.5 million in the nine months ended December 31, 2010.

(4)
As the capital structures of the predecessor and successor are substantially different, the reported net income (loss) per share amounts for the combined predecessor/successor and successor periods are not comparable to other periods and have not been

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    presented herein. Please refer to our historical consolidated financial statements and notes thereto for the nine months ended December 31, 2010 included elsewhere in this prospectus for a separate presentation of the net loss per share and the weighted average shares outstanding for the predecessor and successor periods.

        Our quarterly revenues are impacted by the level of large Greenfield projects that may be occurring at any given time. Demand for our products depends in large part upon the level of capital and maintenance expenditures by many of our customers and end users, in particular those customers in the oil and gas, refining, and chemical processing markets. These customers' expenditures historically have been cyclical in nature and vulnerable to economic downturns.

        Our operating expenses remain relatively consistent with some variability related to overall headcount of the company which increased slightly in the year ended December 31, 2010. Fluctuations in operating expense are partly due to changes in management's estimates for items such annual bonus attainment and reserves for bad debt.

        Our quarterly operating results may fluctuate based on the cyclical pattern of industries to which we provide heat tracing solutions and the seasonality of MRO/UE demand for our products. Most of our customers perform preventative maintenance prior to the winter season, thus in our experience making the months of October and November typically our largest for MRO/UE revenue. However, revenues from Greenfield projects are not seasonal and tend to be level throughout the year, depending on the capital spending environment. Overall, seasonality has a minor effect on the company's business.

Contractual Obligations and Contingencies

        Contractual Obligations.    The following table summarizes our material contractual payment obligations as of December 31, 2010.

 
   
  Payment Due By Period  
 
  TOTAL   Less than
1 Year
  1 - 3 Years   3 - 5 Years   More than
5 Years
 
 
  (dollars in thousands)
 

Senior secured notes

  $ 210,000   $   $   $   $ 210,000  

Estimated interest payments on above indebtedness(1)

    129,675     19,950     39,900     39,900     29,925  

Operating lease obligations(2)

    3,070     1,490     1,167     413      

Obligations in settlement of the CHS Transactions(3)

    3,754     3,754              

Information technology services agreement(4)

    1,412     804     608          

Management fees payable to sponsors(5)

    17,930     1,535     3,729     4,000     8,666  
                       

Total

  $ 365,841   $ 27,533   $ 45,404   $ 44,313   $ 248,591  
                       

(1)
Consists of the interest on the senior secured notes, which accrues at 9.500%.

(2)
We enter into operating leases in the normal course of business. Our operating leases include the leases on certain of our manufacturing and warehouse facilities.

(3)
Consists of estimated amounts owed to sellers in the CHS Transactions for restricted cash and in satisfaction of the post-closing adjustments for working capital and income taxes.

(4)
Represents the future annual service fees associated with certain information technology service agreements with several vendors.

(5)
Consists of fees payable to our sponsors for the rendering of management, consulting, financial and other advisory services pursuant to the terms of our management services agreement. We have

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    also agreed to reimburse the out-of-pocket expenses incurred by the sponsors in connection with the provision of such services. The amounts reflected in this table do not reflect any potential expense reimbursement obligations, as we are unable to estimate the amount of such obligations with any certainty. The amount reflected in the "More than 5 Years" column is prepared on the basis of the initial ten-year term of the management services agreement, though we note that the agreement automatically extends on a year-to-year basis after the expiration of the initial term.

        There are no contingent gains or losses or litigation settlements that are not provided for in the accounts.

        The following table summarizes our material contractual payment obligations as of December 31, 2010 on a pro forma basis assuming our receipt of the net proceeds from our sale of common stock in this offering, the redemption of $21.0 million aggregate principal amount of our senior secured notes scheduled to occur on April 29, 2011 and the payment of $0.6 million of premiums and accrued interest in connection with such redemption, the redemption of $21.0 million aggregate principal amount of our senior secured notes from the net proceeds of this offering and the payment of $0.6 million of premiums and accrued interest in connection with such redemption and the termination of the management fee payable to the sponsors, as if those transactions had occurred as of December 31, 2010:

 
   
  Payment Due By Period  
 
  TOTAL   Less than
1 Year
  1 - 3 Years   3 - 5 Years   More than
5 Years
 
 
  (dollars in thousands)
 

Senior secured notes

  $ 168,000   $   $   $   $ 168,000  

Estimated interest payments on above indebtedness(1)

    103,656     15,960     31,920     31,920     23,856  

Operating lease obligations(2)

    3,070     1,490     1,167     413      

Obligations in settlement of the CHS Transactions(3)

    3,754     3,754              

Information technology services agreement(4)

    1,412     804     608          

Termination fee payable to sponsors(5)

    7,357     7,357              
                       

Total

  $ 287,249   $ 29,365   $ 33,695   $ 32,333   $ 191,856  
                       

(1)
Consists of the interest on the senior secured notes, which accrues at 9.500%.

(2)
We enter into operating leases in the normal course of business. Our operating leases include the leases on certain of our manufacturing and warehouse facilities.

(3)
Consists of estimated amounts owed to sellers in the CHS Transactions for restricted cash and in satisfaction of the post-closing adjustments for working capital and income taxes.

(4)
Represents the future annual service fees associated with certain information technology service agreements with several vendors.

(5)
Represents the one-time cash fee payable to our sponsors concurrently with this offering in connection with the termination of the management services agreement. See "Certain Relationships and Related Party Transactions—Transaction Fee and Management Fee."

        Contingencies.    We are involved in various legal and administrative proceedings and disputes that arise from time to time in the ordinary course of doing business. Some of these proceedings may result in fines, penalties or judgments being assessed against us, which, from time to time, may adversely affect our financial results. For a discussion of contingencies that may adversely affect our results of operations, see note 11 to our audited consolidated financial statements and note 12 to our unaudited

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consolidated financial statements contained elsewhere in this prospectus. We have considered these proceedings and disputes in determining the necessity of any reserves for losses that are probable and reasonably estimable. Our recorded reserves are based on estimates developed with consideration given to the potential merits of claims or quantification of any performance obligations. In doing so, we take into account our history of claims, the limitations of any insurance coverage, advice from outside counsel, the possible range of outcomes to such claims and obligations and their associated financial impact (if known and reasonably estimable), and management's strategy with regard to the settlement or defense of such claims and obligations. While the ultimate outcome of those claims, lawsuits or performance obligations cannot be predicted with certainty, we believe, based on our understanding of the facts of these claims and performance obligations, that adequate provisions have been recorded in the accounts where required. In addition, we do not believe that the outcome of any of these proceedings would have a significant adverse effect on our financial position, long-term results of operations, or cash flows. It is possible, however, that charges related to these matters could be significant to our results or cash flows in any one accounting period.

        To bid on or secure certain contracts, we are required at times to provide a performance guaranty to our customers in the form of a surety bond, standby letter of credit or foreign bank guaranty. On December 31, 2010, we had in place standby letters of credit and bank guarantees totaling $5.5 million and performance bonds totaling $3.0 million to back performance obligations under customer contracts. As of December 31, 2010, we also had in place a $0.3 million letter of credit as collateral for the revolving facility for our subsidiary in Japan. Our Indian subsidiary also has $2.9 million in customs bonds outstanding.

Liquidity and Capital Resources

        Our primary sources of liquidity are cash flows from operations and funds available under our revolving credit facility and other revolving lines of credit. Our primary liquidity needs are to finance our working capital, capital expenditures and debt service needs.

        Cash and cash equivalents.    At December 31, 2010, we had $35.2 million in cash and cash equivalents. We maintain cash and cash equivalents at various financial institutions located in many countries throughout the world. Approximately $5.2 million, or 15%, of these amounts was held in domestic accounts with various institutions and approximately $29.6 million, or 85%, of these amounts was held in accounts outside of the United States with various financial institutions.

    Revolving credit facility and senior secured notes.

        Revolving credit facility.    Simultaneously with the closing of the Acquisition and the sale of our senior secured notes, our wholly owned subsidiary, Thermon Industries, Inc., entered into a five-year, $40.0 million senior secured revolving credit facility, which we refer to as our revolving credit facility, of which up to $20.0 million is available to our Canadian subsidiary, subject to borrowing base availability. Availability of funds under our revolving credit facility is determined by a borrowing base equal to the sum of 85% of eligible accounts receivable, plus 60% of eligible inventory, plus 85% of the net orderly liquidation value of eligible equipment, plus 50% of the fair market value of eligible owned real property. In no case shall availability under our revolving credit facility exceed the commitments thereunder. As of December 31, 2010, we had $34.8 million of capacity available under our revolving credit facility after taking into account the borrowing base, outstanding loan advances and letters of credit. In addition to our revolving credit facility, we have various short term revolving lines of credit available to us at our foreign affiliates, and no borrowings were outstanding under any such lines of credit at December 31, 2010.

        The revolving credit facility will mature in 2015. Any borrowings on our revolving credit facility will incur interest expense that is variable in relation to the LIBOR rate. Borrowings denominated in

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Canadian Dollars under the Canadian facility bear interest at a variable rate in relation to the bankers' acceptance rate, as set forth in the revolving credit facility. In addition to paying interest on outstanding borrowings under our revolving credit facility, we are required to pay a 0.75% per annum commitment fee to the lenders in respect of the unutilized commitments thereunder and letter of credit fees equal to the LIBOR margin or the bankers' acceptance rate, as applicable, on the undrawn amount of all outstanding letters of credit. At December 31, 2010, we had no outstanding borrowings under our revolving credit facility. Had there been outstanding borrowings, the interest rate on the facility would have been 5.75%.

        Senior secured notes.    We have incurred substantial indebtedness in connection with the senior secured notes. As of December 31, 2010, we had $210.0 million of indebtedness outstanding under the senior secured notes with annual cash interest expense of approximately $20.0 million. Our senior secured notes mature on May 1, 2017 and accrue interest at a fixed rate of 9.500%. We pay interest in cash semi-annually on May and November 1 of each year. Our senior secured notes were issued by our wholly-owned subsidiary Thermon Industries, Inc. in a Rule 144A exempt senior secured note offering to qualified institutional investors. The proceeds were used to fund the purchase price for the Acquisition and related transaction costs. In January 2011, we consummated an offer to exchange the old restricted senior secured notes for new, SEC-registered senior secured notes. On March 30, 2011, we gave notice to the holders of our senior secured notes that, in accordance with the terms of our senior secured note indenture, we will be redeeming $21.0 million aggregate principal amount of the $210.0 million outstanding principal amount at a redemption price equal to 103% of the principal amount redeemed, plus accrued and unpaid interest to the redemption date, on April 29, 2011.

        As described above under "Use of Proceeds," we intend to use $21.6 million of the net proceeds from this offering received by us to prepay $21.0 million of the aggregate outstanding principal amount of the senior secured notes, reflecting a redemption price of 103% of the principal amount thereof, plus accrued and unpaid interest and additional interest, if any, to the redemption date.

        Guarantees; security.    The obligations under our revolving credit facility and our senior secured notes are guaranteed on a senior secured basis by THC and each of its existing and future domestic restricted subsidiaries, other than Thermon Industries, Inc., the issuer of the senior secured notes. The obligations under our revolving credit facility are secured by a first priority perfected security interest in substantially all of our and the guarantors' assets, subject to certain exceptions, permitted liens and encumbrances reasonably acceptable to the agent under our revolving credit facility. Our senior secured notes and guarantees are also secured by liens on substantially all of our and the guarantors' assets, subject to certain exceptions; provided, however, that the liens are contractually subordinated to the liens thereon that secure our revolving credit facility.

        Restrictive covenants.    The revolving credit facility and senior secured notes contain various restrictive covenants that include restrictions or limitations on our ability to: incur additional indebtedness or issue disqualified capital stock unless certain financial tests are satisfied; pay dividends, redeem subordinated debt or make other restricted payments; make certain investments or acquisitions; issue stock of subsidiaries; grant or permit certain liens on our assets; enter into certain transactions with affiliates; merge, consolidate or transfer substantially all of our assets; incur dividend or other payment restrictions affecting certain of our subsidiaries; transfer or sell assets, including capital stock of our subsidiaries; and change the business we conduct. However, all of these covenants are subject to exceptions.