0001489096-21-000162.txt : 20210805 0001489096-21-000162.hdr.sgml : 20210805 20210805130219 ACCESSION NUMBER: 0001489096-21-000162 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 70 CONFORMED PERIOD OF REPORT: 20210630 FILED AS OF DATE: 20210805 DATE AS OF CHANGE: 20210805 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Thermon Group Holdings, Inc. CENTRAL INDEX KEY: 0001489096 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 272228185 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-35159 FILM NUMBER: 211147295 BUSINESS ADDRESS: STREET 1: 7171 SOUTHWEST PARKWAY STREET 2: BUILDING 300, SUITE 200 CITY: AUSTIN STATE: TX ZIP: 78735 BUSINESS PHONE: 5126900600 MAIL ADDRESS: STREET 1: 7171 SOUTHWEST PARKWAY STREET 2: BUILDING 300, SUITE 200 CITY: AUSTIN STATE: TX ZIP: 78735 10-Q 1 thr-20210630.htm 10-Q thr-20210630
00014890963/312022Q1false1,9412,07453,82143,5503,7194,44700014890962021-04-012021-06-30xbrli:shares00014890962021-08-04iso4217:USD00014890962021-06-3000014890962021-03-310001489096srt:SubsidiariesMember2021-06-300001489096srt:SubsidiariesMember2021-03-31iso4217:USDxbrli:shares00014890962020-04-012020-06-300001489096us-gaap:CommonStockMember2021-03-310001489096us-gaap:AdditionalPaidInCapitalMember2021-03-310001489096us-gaap:RetainedEarningsMember2021-03-310001489096us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-310001489096us-gaap:CommonStockMember2021-04-012021-06-300001489096us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001489096thr:EmployeesMemberus-gaap:CommonStockMember2021-04-012021-06-300001489096srt:ExecutiveOfficerMemberus-gaap:CommonStockMember2021-04-012021-06-300001489096srt:DirectorMemberus-gaap:CommonStockMember2021-04-012021-06-300001489096us-gaap:RetainedEarningsMember2021-04-012021-06-300001489096us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001489096us-gaap:CommonStockMember2021-06-300001489096us-gaap:AdditionalPaidInCapitalMember2021-06-300001489096us-gaap:RetainedEarningsMember2021-06-300001489096us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001489096us-gaap:CommonStockMember2020-03-310001489096us-gaap:AdditionalPaidInCapitalMember2020-03-310001489096us-gaap:RetainedEarningsMember2020-03-310001489096us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-3100014890962020-03-310001489096us-gaap:CommonStockMember2020-04-012020-06-300001489096us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001489096thr:EmployeesMemberus-gaap:CommonStockMember2020-04-012020-06-300001489096srt:ExecutiveOfficerMemberus-gaap:CommonStockMember2020-04-012020-06-300001489096srt:DirectorMemberus-gaap:CommonStockMember2020-04-012020-06-300001489096us-gaap:RetainedEarningsMember2020-04-012020-06-300001489096us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300001489096us-gaap:CommonStockMember2020-06-300001489096us-gaap:AdditionalPaidInCapitalMember2020-06-300001489096us-gaap:RetainedEarningsMember2020-06-300001489096us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-3000014890962020-06-300001489096thr:COVID19Member2021-04-012021-06-300001489096thr:COVID19Member2020-04-012020-06-300001489096us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2021-06-300001489096us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember2020-06-300001489096us-gaap:OtherAssetsMember2021-06-300001489096us-gaap:OtherAssetsMember2020-06-300001489096us-gaap:FairValueInputsLevel2Memberus-gaap:LoansPayableMember2021-06-300001489096us-gaap:FairValueInputsLevel2Memberus-gaap:LoansPayableMember2021-03-310001489096us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:CurrencySwapMember2021-04-012021-06-300001489096us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:CurrencySwapMember2020-04-012020-06-300001489096us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:CurrencySwapMember2021-06-300001489096us-gaap:DesignatedAsHedgingInstrumentMemberus-gaap:CurrencySwapMember2021-03-310001489096us-gaap:DesignatedAsHedgingInstrumentMember2021-04-012021-06-300001489096us-gaap:DesignatedAsHedgingInstrumentMember2020-04-012020-06-300001489096us-gaap:ForeignExchangeForwardMembercurrency:RUB2021-06-300001489096us-gaap:ForeignExchangeForwardMembercurrency:RUB2021-03-310001489096us-gaap:ForeignExchangeForwardMembercurrency:CAD2021-06-300001489096us-gaap:ForeignExchangeForwardMembercurrency:CAD2021-03-310001489096us-gaap:ForeignExchangeForwardMembercurrency:KRW2021-06-300001489096us-gaap:ForeignExchangeForwardMembercurrency:KRW2021-03-310001489096us-gaap:ForeignExchangeForwardMembercurrency:MXN2021-06-300001489096us-gaap:ForeignExchangeForwardMembercurrency:MXN2021-03-310001489096currency:AUDus-gaap:ForeignExchangeForwardMember2021-06-300001489096currency:AUDus-gaap:ForeignExchangeForwardMember2021-03-310001489096currency:GBPus-gaap:ForeignExchangeForwardMember2021-06-300001489096currency:GBPus-gaap:ForeignExchangeForwardMember2021-03-310001489096us-gaap:ForeignExchangeForwardMember2021-06-300001489096us-gaap:ForeignExchangeForwardMember2021-03-310001489096us-gaap:ForeignExchangeForwardMember2021-04-012021-06-300001489096us-gaap:ForeignExchangeForwardMember2020-04-012020-06-300001489096thr:ThermonSouthAfricaPropriearyLimitedMember2020-04-012021-03-31thr:positions00014890962020-04-012021-03-310001489096thr:UnitedStatesAndLatinAmericaSegmentMember2021-04-012021-06-300001489096thr:UnitedStatesAndLatinAmericaSegmentMember2020-04-012020-06-300001489096thr:CanadaSegmentMember2021-04-012021-06-300001489096thr:CanadaSegmentMember2020-04-012020-06-300001489096thr:EuropeMiddleEastAndAfricaSegmentMember2021-04-012021-06-300001489096thr:EuropeMiddleEastAndAfricaSegmentMember2020-04-012020-06-300001489096thr:AsiaPacificSegmentMember2021-04-012021-06-300001489096thr:AsiaPacificSegmentMember2020-04-012020-06-300001489096us-gaap:EmployeeSeveranceMember2021-03-310001489096us-gaap:EmployeeSeveranceMember2020-03-310001489096us-gaap:EmployeeSeveranceMember2021-04-012021-06-300001489096us-gaap:EmployeeSeveranceMember2020-04-012020-06-300001489096us-gaap:EmployeeSeveranceMember2021-06-300001489096us-gaap:EmployeeSeveranceMember2020-06-300001489096us-gaap:StockOptionMember2021-04-012021-06-300001489096us-gaap:StockOptionMember2020-04-012020-06-300001489096us-gaap:RestrictedStockUnitsRSUMember2021-04-012021-06-300001489096us-gaap:RestrictedStockUnitsRSUMember2020-04-012020-06-300001489096us-gaap:OperatingSegmentsMemberthr:UnitedStatesSegmentMember2021-03-310001489096us-gaap:OperatingSegmentsMemberthr:CanadaSegmentMember2021-03-310001489096us-gaap:OperatingSegmentsMemberthr:EuropeSegmentMember2021-03-310001489096us-gaap:OperatingSegmentsMemberthr:AsiaSegmentMember2021-03-310001489096us-gaap:OperatingSegmentsMember2021-03-310001489096us-gaap:OperatingSegmentsMemberthr:UnitedStatesSegmentMember2021-04-012021-06-300001489096us-gaap:OperatingSegmentsMemberthr:CanadaSegmentMember2021-04-012021-06-300001489096us-gaap:OperatingSegmentsMemberthr:EuropeSegmentMember2021-04-012021-06-300001489096us-gaap:OperatingSegmentsMemberthr:AsiaSegmentMember2021-04-012021-06-300001489096us-gaap:OperatingSegmentsMember2021-04-012021-06-300001489096us-gaap:OperatingSegmentsMemberthr:UnitedStatesSegmentMember2021-06-300001489096us-gaap:OperatingSegmentsMemberthr:CanadaSegmentMember2021-06-300001489096us-gaap:OperatingSegmentsMemberthr:EuropeSegmentMember2021-06-300001489096us-gaap:OperatingSegmentsMemberthr:AsiaSegmentMember2021-06-300001489096us-gaap:OperatingSegmentsMember2021-06-300001489096us-gaap:ProductMember2021-06-300001489096us-gaap:ProductMember2021-03-310001489096us-gaap:TrademarksMember2021-06-300001489096us-gaap:TrademarksMember2021-03-310001489096us-gaap:DevelopedTechnologyRightsMember2021-06-300001489096us-gaap:DevelopedTechnologyRightsMember2021-03-310001489096us-gaap:CustomerRelationshipsMember2021-06-300001489096us-gaap:CustomerRelationshipsMember2021-03-310001489096us-gaap:CertificationMarksMember2021-06-300001489096us-gaap:CertificationMarksMember2021-03-310001489096thr:VariableRateTermLoandueOctober2024Memberus-gaap:LoansPayableMember2021-06-300001489096thr:VariableRateTermLoandueOctober2024Memberus-gaap:LoansPayableMember2021-03-310001489096us-gaap:SecuredDebtMemberthr:VariableRateSeniorSecuredTermLoanBMember2017-10-300001489096us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2017-10-300001489096thr:TermLoanAdueApril2019Member2017-10-302017-10-300001489096us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2017-10-302017-10-30iso4217:CAD0001489096thr:ThermonHeatingSystemsInc.Member2017-10-302017-10-30xbrli:pure0001489096us-gaap:SecuredDebtMemberus-gaap:BaseRateMemberthr:VariableRateSeniorSecuredTermLoanBMember2017-10-302017-10-300001489096us-gaap:SecuredDebtMemberus-gaap:LondonInterbankOfferedRateLIBORMemberthr:VariableRateSeniorSecuredTermLoanBMember2017-10-302017-10-300001489096us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:BaseRateMember2017-10-302017-10-300001489096us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberus-gaap:LondonInterbankOfferedRateLIBORMember2017-10-302017-10-300001489096us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberthr:CanadianBaseRateMember2017-10-302017-10-300001489096us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMemberthr:CDORMember2017-10-302017-10-300001489096us-gaap:SecuredDebtMemberthr:VariableRateSeniorSecuredTermLoanBMember2018-04-010001489096us-gaap:LoansPayableMemberthr:PeriodOneMember2021-04-012021-06-300001489096us-gaap:SecuredDebtMemberthr:VariableRateSeniorSecuredTermLoanBMember2021-04-012021-06-3000014890962017-10-302017-10-300001489096us-gaap:RevolvingCreditFacilityMember2021-06-302021-06-300001489096us-gaap:RevolvingCreditFacilityMember2021-04-012021-06-300001489096us-gaap:RevolvingCreditFacilityMember2021-06-300001489096thr:VariableRateTermLoandueOctober2024Member2021-06-300001489096us-gaap:SecuredDebtMemberthr:VariableRateSeniorSecuredTermLoanBMemberthr:SubsidiaryEquityMember2017-10-302017-10-300001489096thr:StockofFirstTierMaterialForeignSubsidiariesDomesticBorrowerandDomesticSubsidiaryMemberus-gaap:SecuredDebtMemberthr:VariableRateSeniorSecuredTermLoanBMember2017-10-302017-10-300001489096us-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2020-12-312020-12-310001489096country:USus-gaap:TransferredAtPointInTimeMember2021-04-012021-06-300001489096country:USus-gaap:TransferredOverTimeMember2021-04-012021-06-300001489096country:US2021-04-012021-06-300001489096country:USus-gaap:TransferredAtPointInTimeMember2020-04-012020-06-300001489096country:USus-gaap:TransferredOverTimeMember2020-04-012020-06-300001489096country:US2020-04-012020-06-300001489096us-gaap:TransferredAtPointInTimeMembercountry:CA2021-04-012021-06-300001489096us-gaap:TransferredOverTimeMembercountry:CA2021-04-012021-06-300001489096country:CA2021-04-012021-06-300001489096us-gaap:TransferredAtPointInTimeMembercountry:CA2020-04-012020-06-300001489096us-gaap:TransferredOverTimeMembercountry:CA2020-04-012020-06-300001489096country:CA2020-04-012020-06-300001489096us-gaap:TransferredAtPointInTimeMembersrt:EuropeMember2021-04-012021-06-300001489096us-gaap:TransferredOverTimeMembersrt:EuropeMember2021-04-012021-06-300001489096srt:EuropeMember2021-04-012021-06-300001489096us-gaap:TransferredAtPointInTimeMembersrt:EuropeMember2020-04-012020-06-300001489096us-gaap:TransferredOverTimeMembersrt:EuropeMember2020-04-012020-06-300001489096srt:EuropeMember2020-04-012020-06-300001489096srt:AsiaMemberus-gaap:TransferredAtPointInTimeMember2021-04-012021-06-300001489096srt:AsiaMemberus-gaap:TransferredOverTimeMember2021-04-012021-06-300001489096srt:AsiaMember2021-04-012021-06-300001489096srt:AsiaMemberus-gaap:TransferredAtPointInTimeMember2020-04-012020-06-300001489096srt:AsiaMemberus-gaap:TransferredOverTimeMember2020-04-012020-06-300001489096srt:AsiaMember2020-04-012020-06-300001489096us-gaap:TransferredAtPointInTimeMember2021-04-012021-06-300001489096us-gaap:TransferredOverTimeMember2021-04-012021-06-300001489096us-gaap:TransferredAtPointInTimeMember2020-04-012020-06-300001489096us-gaap:TransferredOverTimeMember2020-04-012020-06-3000014890962022-07-012021-06-300001489096srt:ScenarioForecastMember2021-04-012021-12-31thr:segmentthr:Geographic_Region0001489096us-gaap:OperatingSegmentsMemberthr:UnitedStatesSegmentMember2021-04-012021-06-300001489096us-gaap:OperatingSegmentsMemberthr:UnitedStatesSegmentMember2020-04-012020-06-300001489096us-gaap:OperatingSegmentsMemberthr:CanadaSegmentMember2021-04-012021-06-300001489096us-gaap:OperatingSegmentsMemberthr:CanadaSegmentMember2020-04-012020-06-300001489096us-gaap:OperatingSegmentsMemberthr:EuropeSegmentMember2021-04-012021-06-300001489096us-gaap:OperatingSegmentsMemberthr:EuropeSegmentMember2020-04-012020-06-300001489096us-gaap:OperatingSegmentsMemberthr:AsiaSegmentMember2021-04-012021-06-300001489096us-gaap:OperatingSegmentsMemberthr:AsiaSegmentMember2020-04-012020-06-300001489096us-gaap:OperatingSegmentsMember2020-04-012020-06-300001489096us-gaap:IntersegmentEliminationMemberthr:UnitedStatesSegmentMember2021-04-012021-06-300001489096us-gaap:IntersegmentEliminationMemberthr:UnitedStatesSegmentMember2020-04-012020-06-300001489096thr:CanadaSegmentMemberus-gaap:IntersegmentEliminationMember2021-04-012021-06-300001489096thr:CanadaSegmentMemberus-gaap:IntersegmentEliminationMember2020-04-012020-06-300001489096us-gaap:IntersegmentEliminationMemberthr:EuropeSegmentMember2021-04-012021-06-300001489096us-gaap:IntersegmentEliminationMemberthr:EuropeSegmentMember2020-04-012020-06-300001489096thr:AsiaSegmentMemberus-gaap:IntersegmentEliminationMember2021-04-012021-06-300001489096thr:AsiaSegmentMemberus-gaap:IntersegmentEliminationMember2020-04-012020-06-300001489096us-gaap:IntersegmentEliminationMember2021-04-012021-06-300001489096us-gaap:IntersegmentEliminationMember2020-04-012020-06-300001489096thr:UnitedStatesSegmentMember2021-04-012021-06-300001489096thr:UnitedStatesSegmentMember2020-04-012020-06-300001489096thr:CanadaSegmentMember2021-04-012021-06-300001489096thr:CanadaSegmentMember2020-04-012020-06-300001489096thr:EuropeSegmentMember2021-04-012021-06-300001489096thr:EuropeSegmentMember2020-04-012020-06-300001489096thr:AsiaSegmentMember2021-04-012021-06-300001489096thr:AsiaSegmentMember2020-04-012020-06-300001489096us-gaap:MaterialReconcilingItemsMember2021-04-012021-06-300001489096us-gaap:MaterialReconcilingItemsMember2020-04-012020-06-300001489096thr:UnitedStatesSegmentMember2021-06-300001489096thr:UnitedStatesSegmentMember2021-03-310001489096thr:CanadaSegmentMember2021-06-300001489096thr:CanadaSegmentMember2021-03-310001489096thr:EuropeSegmentMember2021-06-300001489096thr:EuropeSegmentMember2021-03-310001489096thr:AsiaSegmentMember2021-06-300001489096thr:AsiaSegmentMember2021-03-310001489096thr:UnitedStatesSegmentMember2021-04-012021-06-300001489096thr:UnitedStatesSegmentMember2020-04-012020-06-300001489096thr:EuropeSegmentMember2021-04-012021-06-300001489096thr:EuropeSegmentMember2020-04-012020-06-300001489096thr:AsiaSegmentMember2021-04-012021-06-300001489096thr:AsiaSegmentMember2020-04-012020-06-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2021
 
OR
 
       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
 
Commission File Number: 001-35159
 
 
THERMON GROUP HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
 
Delaware27-2228185
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
 
7171 Southwest Parkway, Building 300, Suite 200, Austin, Texas 78735
(Address of principal executive offices) (zip code)
 
(512690-0600
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareTHRNew York Stock Exchange


        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of August 4, 2021, the registrant had 33,331,372 shares of common stock, par value $0.001 per share, outstanding.
 



THERMON GROUP HOLDINGS, INC.
 
QUARTERLY REPORT
FOR THE QUARTER ENDED June 30, 2021
 
TABLE OF CONTENTS
 Page
PART I — FINANCIAL INFORMATION 
 
PART II — OTHER INFORMATION 
EX-10.1
EX-10.2
EX-31.1 
EX-31.2 
EX-32.1 
EX-32.2 
 
i


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
1


Thermon Group Holdings, Inc.
Condensed Consolidated Balance Sheets
(Dollars in Thousands, except share and per share data)
 June 30, 2021March 31, 2021
(Unaudited)
Assets  
Current assets:  
Cash and cash equivalents$41,052 $40,124 
Accounts receivable, net of allowances of $1,941 and $2,074 as of June 30, 2021 and March 31, 2021, respectively74,133 74,501 
Inventories, net64,395 63,790 
Contract assets16,089 11,379 
Prepaid expenses and other current assets9,322 8,784 
Income tax receivable9,533 8,231 
Total current assets$214,524 $206,809 
Property, plant and equipment, net of depreciation and amortization of $58,787 and $55,555 as of June 30, 2021 and March 31, 2021, respectively70,951 72,630 
Goodwill215,072 213,038 
Intangible assets, net102,672 103,784 
Operating lease right-of-use assets12,265 12,619 
Deferred income taxes2,615 2,586 
Other long-term assets6,726 6,412 
Total assets$624,825 $617,878 
Liabilities  
Current liabilities:  
Accounts payable$22,483 $19,722 
Accrued liabilities20,046 23,517 
Current portion of long-term debt2,500 2,500 
Contract liabilities4,059 2,959 
Lease liabilities3,658 3,511 
Income taxes payable678 219 
Total current liabilities$53,424 $52,428 
Long-term debt, net142,601 143,017 
Deferred income taxes21,880 21,088 
Non-current lease liabilities11,770 12,373 
Other non-current liabilities10,264 9,811 
Total liabilities$239,939 $238,717 
Commitments and contingencies (Note 9)
 Equity
Common stock: $0.001 par value; 150,000,000 authorized; 33,307,460 and 33,225,808 shares issued and outstanding at June 30, 2021 and March 31, 2021, respectively$33 $33 
Preferred stock: $0.001 par value; 10,000,000 authorized; no shares issued and outstanding  
Additional paid in capital232,049 231,322 
Accumulated other comprehensive loss(31,787)(35,919)
Retained earnings 184,591 183,725 
Total equity$384,886 $379,161 
Total liabilities and equity$624,825 $617,878 
The accompanying notes are an integral part of these condensed consolidated financial statements
2


Thermon Group Holdings, Inc.
 
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)
(Dollars in Thousands, except share and per share data)
 
Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Sales$71,155 $56,848 
Cost of sales42,986 32,729 
Gross profit28,169 24,119 
Operating expenses:
Selling, general and administrative expenses21,401 24,390 
Deferred compensation plan expense332 530 
Amortization of intangible assets2,236 3,033 
Restructuring and other charges/(income)(414)2,921 
Income/(loss) from operations4,614 (6,755)
Other income/(expenses):
Interest expense, net(2,165)(2,555)
Other income/(expense)66 732 
Income/(loss) before provision for income taxes2,515 (8,578)
Income tax expense/(benefit)1,648 (2,493)
Net income/(loss)$867 $(6,085)
Comprehensive income/(loss):
Net income/(loss)$867 $(6,085)
Foreign currency translation adjustment4,195 9,475 
Other miscellaneous income/(loss)(64)(380)
Comprehensive income/(loss)$4,998 $3,010 
Net income/(loss) per common share:
Basic$0.03 $(0.18)
Diluted0.03 (0.18)
Weighted-average shares used in computing net income per common share:
Basic33,259,804 32,986,451 
Diluted33,461,635 32,986,451 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3


Thermon Group Holdings, Inc.

Condensed Consolidated Statements of Equity (Unaudited)
(Dollars in Thousands)
Common Stock OutstandingCommon StockAdditional Paid-in CapitalRetained Earnings/ (Loss)Accumulated Other Comprehensive Income/(Loss)Total
Balances at March 31, 202133,225,808 $33 $231,322 $183,725 $(35,919)$379,161 
Issuance of common stock in exercise of stock options8,100 — 97 — — 97 
Issuance of common stock as deferred compensation to employees23,858 — — — — — 
Issuance of common stock as deferred compensation to executive officers42,326 — — — — — 
Issuance of common stock as deferred compensation to directors7,368 — — — — — 
Stock compensation expense— — 1,178 — — 1,178 
Repurchase of employee stock units on vesting— — (548)— — (548)
Net income/(loss)— — — 867 — 867 
Foreign currency translation adjustment— — —  4,195 4,195 
Other— — — (1)(63)(64)
Balances at June 30, 202133,307,460 $33 $232,049 $184,591 $(31,787)$384,886 


Common Stock OutstandingCommon StockAdditional Paid-in CapitalRetained Earnings/ (Loss)Accumulated Other Comprehensive Income/(Loss)Total
Balances at March 31, 202032,916,818 $33 $227,741 $182,559 $(63,894)$346,439 
Issuance of common stock in exercise of stock options81,995  437 — — 437 
Issuance of common stock as deferred compensation to employees39,458 — — — — — 
Issuance of common stock as deferred compensation to executive officers63,477 — — — — — 
Issuance of common stock as deferred compensation to directors13,520 — — — — — 
Stock compensation expense— — 1,133 — — 1,133 
Repurchase of employee stock units on vesting— — (557)— — (557)
Net income/(loss)— — — (6,085)— (6,085)
Foreign currency translation adjustment— — — — 9,475 9,475 
Other— — — — (380)(380)
Balances at June 30, 202033,115,268 $33 $228,754 $176,474 $(54,799)$350,462 

The accompanying notes are an integral part of these consolidated financial statements

4


Thermon Group Holdings, Inc.
 
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands) 
 Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Operating activities  
Net income/(loss)$867 $(6,085)
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:  
Depreciation and amortization5,291 5,762 
Amortization of deferred debt issuance costs223 258 
Stock compensation expense1,178 1,133 
Deferred income taxes491 (654)
Release of reserve for uncertain tax positions, net19  
(Gain)/Loss on long-term cross currency swap61 1,805 
Remeasurement gain on intercompany balances(1,493)(3,153)
Loss on sale of business, net of cash surrendered311  
Changes in operating assets and liabilities:  
Accounts receivable1,209 21,248 
Inventories39 (7,914)
Contract assets(3,456)1,794 
Other current and non-current assets(691)(903)
Accounts payable2,501 (4,341)
Accrued liabilities and non-current liabilities(3,259)(1,801)
Income taxes payable and receivable(814)(3,797)
Net cash provided by/(used in) operating activities$2,477 $3,352 
Investing activities  
Purchases of property, plant and equipment(873)(2,059)
Sale of rental equipment21 6 
Net cash provided by/(used in) in investing activities$(852)$(2,053)
Financing activities  
Proceeds from revolving credit facility7,959 37,189 
Payments on long-term debt and revolving credit facility(8,759)(34,294)
Proceeds from exercise of stock options97 437 
Repurchase of employee stock units on vesting(548)(557)
Payments on finance leases(40)(74)
Net cash provided by/(used in) financing activities$(1,291)$2,701 
Effect of exchange rate changes on cash, cash equivalents and restricted cash604 1,009 
Change in cash, cash equivalents and restricted cash938 5,009 
Cash, cash equivalents and restricted cash at beginning of period42,450 46,007 
Cash, cash equivalents and restricted cash at end of period$43,388 $51,016 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5


Thermon Group Holdings, Inc.
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollars in Thousands, Except Share and Per Share Data)
 
1. Basis of Presentation and Accounting Policy Information
Thermon Group Holdings, Inc. and its direct and indirect subsidiaries are referred to collectively as “we,” “our,” or the “Company” herein. We are a provider of highly engineered industrial process heating solutions for process industries. Our core thermal solutions product - also referred to as heat tracing - provides an external heat source to pipes, vessels and instruments for the purposes of freeze protection, temperature and flow maintenance, environmental monitoring, and surface snow and ice melting. In addition to our heat tracing products, we also provide (i) industrial process heating solutions focused on advanced heating and filtration for industrial and hazardous area applications, which are sold under our Thermon Heating Solutions (or “THS”) brand, and (ii) temporary power products that are designed to provide a safe and efficient means of supplying temporary electrical power distribution and lighting at energy infrastructure facilities for new construction and during maintenance and turnaround projects at operating facilities, which are sold under our Thermon Power Solutions (or “TPS”) brand. As a manufacturer, we offer a full suite of products (such as heating units, heating cables, tubing bundles and control systems) and services (such as design optimization, engineering, installation and maintenance services) required to deliver comprehensive solutions to complex projects.
    Our condensed consolidated financial statements are prepared in conformity with generally accepted accounting principles in the United States ("GAAP"). The accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2021 ("fiscal 2021"). In our opinion, the accompanying condensed consolidated financial statements reflect all adjustments considered necessary to present fairly our financial position at June 30, 2021 and March 31, 2021, and the results of our operations for the three months ended June 30, 2021 and 2020. Certain prior year amounts have been reclassified to conform with the current year's presentation.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic and the measures being taken to address and limit the spread of the virus have adversely affected the economies and financial markets of many countries, resulting in an economic downturn that negatively impacted, and may continue to negatively impact, global demand for our products and services. Although we believe the general economic environment in which we operate has improved since the onset of the COVID-19 pandemic, we may experience a decline in the demand of our products and services that could materially and negatively impact our business, financial condition, results of operation and overall financial performance in future periods.
On April 11, 2020, the Canadian government officially enacted the Canadian Emergency Wage Subsidy (the “CEWS”) for the purposes of assisting employers in financial hardship due to the COVID-19 pandemic and of reducing potential lay-offs of employees. The CEWS, which was made retroactive to March 15, 2020, generally provides “eligible entities” with a wage subsidy of up to 75% of “eligible remuneration” paid to an eligible employee per week, limited to a certain weekly maximum. On September 23, 2020, the Canadian government announced that the CEWS program would be extended through the summer of 2021 and announced certain modifications to the subsidy calculation. Our Canadian operations have benefited from such wage subsidies and have received distributions from the Canadian government during the three month period ended June 30, 2021. During the three months ended June 30, 2021 and 2020, we recorded subsidies for which we qualify in the amount of $939 and $2,417, respectively, as an offset or reduction to the related underlying expenses and assets, accordingly. We anticipate our benefit from the CEWS program to decline in fiscal 2022 as we become less qualified for the subsidy.
Use of Estimates
Generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. While our management has based their assumptions and estimates on the facts and circumstances existing at June 30, 2021, actual results could differ from those estimates and affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities and the corresponding revenues and expenses as of the date of the financial statements. The operating results for the three months ended June 30, 2021 are not necessarily indicative of the results that may be achieved for the fiscal year ending March 31, 2022 ("fiscal 2022"). 
Restricted Cash and Cash Equivalents
6



    The Company maintains restricted cash related to certain letter of credit guarantees and performance bonds securing performance obligations. The following table provides a reconciliation of cash, cash equivalents, and restricted cash included in prepaid expenses and other current assets and restricted cash included in other long-term assets reported within the condensed consolidated balance sheets that sum to the total of the same such amounts shown in the statements of cash flows.
June 30,
20212020
Cash and cash equivalents$41,052 $48,229 
Restricted cash included in prepaid expenses and other current assets1,968 2,438 
Restricted cash included in other long-term assets368 349 
Total cash, cash equivalents, and restricted cash shown in the statements of cash flows$43,388 $51,016 

    Amounts shown in restricted cash included in prepaid expenses and other current assets and other long-term assets represent those required to be set aside by a contractual agreement, which contain cash deposits pledged as collateral on performance bonds and letters of credit. Amounts shown in restricted cash in other long-term assets represent such agreements that require a commitment term longer than one year.

Recent Accounting Pronouncements

Reference Rate Reform - In March 2020, the FASB issued Accounting Standards Update 2020-04 - Reference Rate Reform ("ASC 848"). The update is intended to provide temporary optional expedients and exceptions to the GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. As of June 30, 2021, we have not yet elected any optional expedients provided in the standard. We will apply the accounting relief, if necessary, as relevant contract and hedge accounting relationship modifications are made during the reference rate reform transition period.

Income Taxes - In December 2019, the FASB issued Accounting Standards Update 2019-12 - Income Taxes ("ASC 740"): Simplifying the Accounting for Income Taxes." This ASU amends ASC 740 to simplify certain requirements related to income taxes, specifically as it relates to interim period accounting for changes in tax law and year-to-date loss limitation in interim period accounting. The new standard is effective for fiscal years beginning after December 15, 2020. We adopted this standard effective April 1, 2021, and such adoption did not have a material impact on our consolidated financial statements.
2. Fair Value Measurements
Fair Value
We measure fair value based on authoritative accounting guidance, which defines fair value, establishes a framework for measuring fair value, and expands on required disclosures regarding fair value measurements.
Inputs are referred to as assumptions that market participants would use in pricing the asset or liability. The use of inputs in the valuation process are categorized into a three-level fair value hierarchy.
Level 1 — uses quoted prices in active markets for identical assets or liabilities we have the ability to access.
Level 2 — uses observable inputs other than quoted prices in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3 — uses one or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. 
Financial assets and liabilities with carrying amounts approximating fair value include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities. The carrying amount of these financial assets and liabilities approximates fair value because of their short maturities. At June 30, 2021 and March 31, 2021, no assets or liabilities were valued using Level 3 criteria. 
Information about our long-term debt that is not measured at fair value is as follows:
7


 June 30, 2021March 31, 2021 
 Carrying
Value
Fair ValueCarrying
Value
Fair ValueValuation Technique
Financial Liabilities     
Outstanding principal amount of senior secured credit facility$147,875 $147,967 $148,500 $148,871 Level 2 - Market Approach
 
At June 30, 2021 and March 31, 2021, the fair value of our long-term debt is based on market quotes available for issuance of debt with similar terms. As the quoted price is only available for similar financial assets, the Company concluded the pricing is indirectly observable through dealers and has been classified as Level 2.
Cross Currency Swap
    The Company has entered into a long-term cross currency swap to hedge the currency rate fluctuations related to a $31,313 intercompany receivable at June 30, 2021 from our wholly-owned Canadian subsidiary, Thermon Canada Inc., maturing on October 30, 2022. Periodic principal payments are to be settled twice annually with interest payments settled quarterly through the cross currency derivative contract. We do not designate the cross currency swap as a cash flow hedge under ASC 815, Derivatives and Hedging ("ASC 815"). We recorded $410 and $1,942 of unrealized mark-to-market losses on the cross currency swap, which is reported as "Other income and expense" in the condensed consolidated statements of operations and comprehensive income for the three months ended June 30, 2021 and 2020, respectively. Cross currency swap contracts are measured on a recurring basis at fair value and are classified as Level 2 measurements. Hedge liabilities in the amount of $1,344 were included in "Other non-current liabilities" in the condensed consolidated balance sheets as of June 30, 2021, and hedge assets of $1,265 were included in "Other long-term assets" as of March 31, 2021. For the three months ended June 30, 2021, the loss on the long-term cross currency swap derivative contract was offset by unrealized gain on the intercompany note of $461 for a net gain of $51. For the three months ended June 30, 2020, the loss on the long-term cross currency swap derivative contract was offset by unrealized gain on the intercompany note of $2,208 for a net gain of $266.
Deferred Compensation Plan
    The Company provides a non-qualified deferred compensation plan for certain highly compensated employees where payroll contributions are made by the employees on a pre-tax basis. Included in “Other long-term assets” in the condensed consolidated balance sheets at June 30, 2021 and March 31, 2021 were $5,387 and $5,047, respectively, of deferred compensation plan assets held by the Company. Deferred compensation plan assets (mutual funds) are measured at fair value on a recurring basis based on quoted market prices in active markets (Level 1). The Company has a corresponding liability to participants of $4,954 and $4,608 included in “Other long-term liabilities” in the condensed consolidated balance sheets at June 30, 2021 and March 31, 2021, respectively. In fiscal 2022, deferred compensation plan expense is included as such in the condensed consolidated statement of operations, and therefore is excluded from "Selling, general and administrative expenses." All amounts related to deferred compensation plan expense have been reclassified to the appropriate line for the periods reflected in this filing. Deferred compensation expense was $332 and $530 for the three months ended June 30, 2021 and 2020, respectively. Expenses and income from our deferred compensation plan were offset by unrealized gains and losses for the deferred compensation plan included in "Other income and expense" on our condensed consolidated statements of operations and comprehensive income. Our unrealized gains on investments were $326 and $522 for the three months ended June 30, 2021 and 2020, respectively.
    
Trade Related Foreign Currency Forward Contracts
We transact business in various foreign currencies and have established a program that primarily utilizes foreign currency forward contracts to offset the risk associated with the effects of certain foreign currency exposures. Under this program, increases or decreases in our foreign currency exposures are offset by gains or losses on the forward contracts to mitigate foreign currency transaction gains or losses. These foreign currency exposures arise from intercompany transactions as well as third party accounts receivable or payable that are denominated in foreign currencies. Our forward contracts generally have terms of 30 days. We do not use forward contracts for trading purposes or designate these forward contracts as hedging instruments pursuant to ASC 815. We adjust the carrying amount of all contracts to their fair value at the end of each reporting period and unrealized gains and losses are included in "Other income and expense" on our condensed consolidated statements of operations and comprehensive income. These gains and losses are designed to offset gains and losses resulting from settlement of receivables or payables by our foreign operations which are settled in currency other than the local transactional currency. The fair value is determined by quoted prices from active foreign currency markets (Level 2). Fair value amounts for such forward contracts on our condensed consolidated balance sheets are either classified as accounts receivable, net or accrued
8


liabilities depending on whether the forward contract is in a gain (accounts receivable, net) or loss (accrued liabilities) position. Our ultimate realized gain or loss with respect to currency fluctuations will depend on the currency exchange rates and other factors in effect as the contracts mature. As of June 30, 2021 and March 31, 2021, the notional amounts of forward contracts were as follows:
Notional amount of foreign currency forward contracts by currency
June 30, 2021March 31, 2021
Russian Ruble$2,650 $3,000 
Canadian Dollar6,500 5,500 
South Korean Won1,700 5,000 
Mexican Peso2,000 1,500 
Australian Dollar1,100 900 
Great Britain Pound325 500 
Total notional amounts$14,275 $16,400 

The following table represents the fair value of our foreign currency forward contracts:
June 30, 2021March 31, 2021
Fair ValueFair Value
AssetsLiabilitiesAssetsLiabilities
Foreign currency forward contracts$76 $18 $61 $32 
Foreign currency gains or losses related to our forward contracts in the accompanying condensed consolidated statements of operations and comprehensive income were losses of $(294) and gains of $91 for the three months ended June 30, 2021 and 2020, respectively. Gains and losses from our forward contracts were offset by transaction gains or losses incurred with the settlement of transactions denominated in foreign currencies. For the three months ended June 30, 2021 and 2020, our net foreign currency transactions resulted in losses of $(284) and gains of $182, respectively.

3. Restructuring and Other Charges/(Income)
In fiscal 2021, we enacted certain restructuring initiatives to align our current cost structure with the decline in demand for our products and services primarily due to COVID-19 and supply/demand fluctuations in commodity prices. Although we are substantially complete with these initiatives, we recorded the following charges/(income) as it relates to restructuring.
Fiscal 2022 charges/(income)
We recorded $(103) for severance-related activity in our Canadian segment, which was recorded to "Restructuring and other charges/(income)" in our condensed consolidated statements of operations and comprehensive income. Additionally, we recorded $(311) in cash receipts related to receivables existing prior to the sale of our South Africa business, which was completed in fiscal 2021.
Fiscal 2021 charges/(income)
The Company eliminated approximately 111 hourly and salaried positions and incurred $2,921 in one-time severance costs during the three months ended June 30, 2020, which was recorded to "Restructuring and other charges/(income)" in our condensed consolidated statements of operations and comprehensive income.
Restructuring and other charges/(income) by reportable segment were as follows:
9


 Three Months Ended June 30, 2021Three Months Ended June 30, 2020
United States and Latin America$(46)$2,063 
Canada(186)858 
Europe, Middle East and Africa(182) 
Asia-Pacific  
 $(414)$2,921 

Restructuring activity related to severance activity described above recorded in "Accrued liabilities" on the condensed consolidated balance sheets is summarized as follows for the three months ended June 30, 2021:
Three Months Ended
June 30, 2021
Three Months Ended June 30, 2020
Beginning balance$657 $ 
Costs incurred/(income)(103)2,921 
Less cash payments(170)(2,301)
Ending balance$384 $620 

4. Net Income/(Loss) per Common Share
Basic net income/(loss) per common share is computed by dividing net income/(loss) by the weighted average number of common shares outstanding during each period. Diluted net income per common share is computed by dividing net income by the weighted average number of common shares and common share equivalents outstanding (if dilutive) during each period. The number of common share equivalents, which includes options and both restricted and performance stock units, is computed using the treasury stock method. With regard to the performance stock units, we assume that the associated performance targets will be met at the target level of performance for purposes of calculating diluted net income per common share until such time that it is probable that the performance target will not be met.
The reconciliations of the denominators used to calculate basic and diluted net income/(loss) per common share for the three months ended June 30, 2021 and 2020, respectively, are as follows:
 Three Months Ended June 30, 2021 Three Months Ended June 30, 2020
Basic net income/(loss) per common share  
Net income/(loss) $867 $(6,085)
Weighted-average common shares outstanding33,259,804 32,986,451 
Basic net income/(loss) per common share$0.03 $(0.18)

Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Diluted net income (loss) per common share
Net income/(loss)$867 $(6,085)
Weighted-average common shares outstanding33,259,804 32,986,451 
Common share equivalents:
Stock options2,308  
Restricted and performance stock units199,523  
Weighted average shares outstanding – dilutive (1)
33,461,635 32,986,451 
Diluted net income/(loss) per common share(2)
$0.03 $(0.18)
10


(1) For the three months ended June 30, 2021 and 2020, 65,854 and 283,612 equity awards, respectively, were not included in the calculation of diluted net income per common share, as they would have had an anti-dilutive effect.
(2) As the Company incurred a net loss for the three months ended June 30, 2020, there was no dilutive effect on net loss per common share as common share equivalents are antidilutive. Therefore, both basic and diluted net loss per common share were $(0.18) for the three months ended June 30, 2020.


5. Inventories
Inventories consisted of the following:
June 30, 2021March 31, 2021
Raw materials$34,727 $33,485 
Work in process3,451 4,071 
Finished goods28,175 28,008 
66,353 65,564 
Valuation reserves(1,958)(1,774)
Inventories, net$64,395 $63,790 

6. Goodwill and Other Intangible Assets
The carrying amount of goodwill by operating segment as of June 30, 2021 is as follows:
 United States and Latin AmericaCanadaEurope, Middle East and AfricaAsia-PacificTotal
Balance as of March 31, 2021$62,725 $121,550 $20,139 $8,624 $213,038 
Foreign currency translation impact 1,775 259  2,034 
Balance as of June 30, 2021$62,725 $123,325 $20,398 $8,624 $215,072 

Goodwill is tested for impairment on an annual basis and between annual tests if indicators of potential impairment exist. We perform a qualitative analysis to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If required, we also perform a quantitative analysis using the income approach, based on discounted future cash flows, which are derived from internal forecasts and economic expectations, and the market approach, which is based on market multiples of guideline public companies. The most significant inputs in the Company's quantitative goodwill impairment tests are projected financial information, the weighted average cost of capital and market multiples for similar transactions. Our annual impairment test is performed during the fourth quarter of our fiscal year.
In the fourth quarter of fiscal 2021, we identified the prolonged economic effects of the COVID-19 pandemic to be an indicator of potential asset impairments in our reporting units. We performed our annual goodwill and tangible impairment assessments including our indefinite life trademarks. We analyzed our reporting units utilizing the income approach, based on discounted future cash flows, which are derived from internal forecasts and economic expectations, and the market approach, based on market multiples of guideline public companies. The impairment test for indefinite life trademarks utilized a relief from royalty analysis based on the cash flow streams attributable to the Thermon trademark. Based on the goodwill and assets impairment assessment, the estimated fair value of our reporting units exceeded the carrying value. As such, there was no impairment of goodwill, assets or our indefinite life trademarks as of the respective reporting periods. The most significant inputs in the Company's impairment test are the projected financial information, the weighted average cost of capital and market multiples for similar transactions. If overall economic conditions, the energy market or factors specific to the Company deteriorate significantly, it could negatively impact the Company's future impairment tests. We will continue to monitor our reporting units' goodwill and asset valuations and test for potential impairments.
No triggering events were identified during the three month period ended June 30, 2021 which would indicate that the fair value of any of our reporting units was less than its carrying amount.

11


Our total intangible assets consisted of the following:
Gross Carrying Amount at June 30, 2021Accumulated AmortizationNet Carrying Amount at June 30, 2021Gross Carrying Amount at March 31, 2021Accumulated AmortizationNet Carrying Amount at March 31, 2021
Products$67,217 $(24,646)$42,571 $66,250 $(22,635)$43,615 
Trademarks45,883 (1,346)44,537 45,581 (1,289)44,292 
Developed technology10,098 (5,648)4,450 10,028 (5,486)4,542 
Customer relationships114,553 (103,899)10,654 113,789 (102,911)10,878 
Certifications460 — 460 457 — 457 
Total$238,211 $(135,539)$102,672 $236,105 $(132,321)$103,784 

7. Accrued Liabilities
Accrued current liabilities consisted of the following:
 June 30, 2021March 31, 2021
Accrued employee compensation and related expenses$10,714 $11,765 
Accrued interest585 648 
Customer prepayments530 283 
Warranty reserves275 250 
Professional fees2,236 2,361 
Sales taxes payable2,286 2,404 
Other3,420 5,806 
Total accrued current liabilities$20,046 $23,517 

8. Long-Term Debt
Long-term debt consisted of the following:
 June 30, 2021March 31, 2021
Variable Rate Term Loan, due October 2024, net of deferred debt issuance costs and debt discounts of $2,774 and $2,983 as of June, 2021 and March 31, 2021, respectively$145,101 $145,517 
Less current portion(2,500)(2,500)
 Total long-term debt$142,601 $143,017 

Senior Secured Credit Facility
On October 30, 2017, the Company, as a credit party and a guarantor, Thermon Holding Corp. (the “U.S. Borrower”) and Thermon Canada Inc. (the “Canadian Borrower”), as borrowers, entered into a credit agreement with several banks and other financial institutions or entities from time to time party thereto (the “Lenders”) and JPMorgan Chase Bank, N.A. as administrative agent (the “Agent”), which provides for a $250,000 seven-year term loan B facility (the “term loan B facility”) made available to the U.S. Borrower and a $60,000 five-year senior secured revolving credit facility made available to the U.S. Borrower and the Canadian Borrower (the “revolving credit facility” and, together with the term loan B facility, the “credit facility”). The proceeds of the term loan B facility were used to (1) pay in full $70,875 principal and interest on a previously issued term loan due April 2019; (2) repay $6,000 in unpaid principal and interest on the U.S. Borrower's revolving line of credit; (3) fund approximately $201,900 CAD of the purchase price of our acquisition (the “CCI acquisition”) of 100% of the equity interests of CCI Thermal Technologies Inc. (“CCI”) and certain related real estate assets for approximately $164,900; and (4) pay certain transaction fees and expenses in connection with the CCI acquisition and the credit facility.
12


    Interest rates and fees. The U.S. Borrower will have the option to pay interest on the term loan B facility at a base rate, plus an applicable margin, or at a rate based on LIBOR (subject to a floor of 1.00%), plus an applicable margin. The applicable margin for base rate loans is 275 basis points and the applicable margin for LIBOR loans is 375 basis points. The U.S. Borrower may borrow revolving loans in U.S. dollars and the Canadian Borrower may borrow revolving loans in Canadian dollars. Borrowings under the revolving credit facility (a) made in U.S. dollars will bear interest at a rate equal to a base rate, plus an applicable margin of 225 basis points or at a rate based on LIBOR, plus an applicable margin of 325 basis points, and (b) made in Canadian dollars will bear interest at a rate equal to a Canadian base rate, plus an applicable margin of 225 basis points, or at a rate based on Canadian Dollar Offered Rate, plus an applicable margin of 325 basis points; provided, that since the completion of the fiscal quarter ended March 31, 2018, the applicable margins in each case have been determined based on a leverage-based performance grid, as set forth in the credit agreement. In addition to paying interest on outstanding principal under the revolving credit facility, the U.S. Borrower is required to pay a commitment fee in respect of unutilized revolving commitments of 0.50% per annum based on a leverage-based performance grid.
    Maturity and repayment. The revolving credit facility terminates on October 28, 2022. The scheduled maturity date of the term loan facility is October 30, 2024. Commencing on April 1, 2018, the term loan B facility began amortizing in equal quarterly installments of 0.25% or $625 of the $250,000 term loan B facility, with the payment of the balance at maturity. The quarterly principal payment has been presented as payments on long-term debt in the condensed consolidated statement of cash flows. The U.S. Borrower may voluntarily prepay the principal of the term loan B facility without penalty or premium (subject to breakage fees) at any time in whole or in part. The U.S. Borrower is required to repay the term loan B facility with certain asset sale and insurance proceeds, certain debt proceeds and, commencing with the fiscal year ended March 31, 2019, 50% of excess cash flow (reducing to 25% if the Company’s leverage ratio is less than 4.0 to 1.0 but greater than or equal to 3.5 to 1.0, and reducing to 0% if the Company’s leverage ratio is less than 3.5 to 1.0). As of June 30, 2021, the Company's leverage ratio was less than 3.5 to 1.0.
    Accordion. The credit facility allows for incremental term loans and incremental revolving commitments in an amount not to exceed $30,000 and an unlimited additional amount that would not cause the consolidated secured leverage ratio to exceed 4.0 to 1.0 (or, if less, the maximum consolidated leverage ratio permitted by the revolving credit facility on such date).
    At June 30, 2021, we had no outstanding borrowings under our revolving credit facility for the Canadian Borrower line of credit or for the U.S. Borrower line of credit. We did, however, draw down $7,959 and subsequently repaid $8,134 during the three months ended June 30, 2021 from our Canadian Borrower line of credit. This has been presented as such on our condensed consolidated statement of cash flows. As of June 30, 2021, we had $56,213 of available borrowing capacity under our revolving credit facility after taking into account the borrowing base and $3,787 of outstanding letters of credit. The variable rate term loan bears interest at the LIBOR rate plus an applicable margin dictated by our leverage ratio (as described above). The interest rate on the variable rate term loan on June 30, 2021 was 4.75%. Interest expense has been presented net of interest income on our condensed consolidated statements of operations and comprehensive income.
    Guarantees and security. The term loan is guaranteed by Thermon Group Holdings, Inc. and all of its current and future wholly-owned domestic material subsidiaries (the “U.S. Subsidiary Guarantors”), subject to certain exceptions. Obligations of the U.S. Borrower under the revolving credit facility are guaranteed by Thermon Group Holdings, Inc. and the U.S. Subsidiary Guarantors. The obligations of the Canadian Borrower under the revolving credit facility are guaranteed by Thermon Group Holdings, Inc., the U.S. Borrower, the U.S. Subsidiary Guarantors and each of the wholly-owned Canadian material subsidiaries of the Canadian Borrower, subject to certain exceptions. The term loan B facility and the obligations of the U.S. Borrower under the revolving credit facility are secured by a first lien on all of Thermon Group Holdings, Inc.’s assets and the assets of the U.S. Subsidiary Guarantors, including 100% of the capital stock of the U.S. Subsidiary Guarantors and 65% of the capital stock of the first tier material foreign subsidiaries of Thermon Group Holdings, Inc., the U.S. Borrower and the U.S. Subsidiary Guarantors, subject to certain exceptions. The obligations of the Canadian Borrower under the revolving credit facility are secured by a first lien on all of Thermon Group Holdings, Inc.'s assets, the U.S. Subsidiary Guarantors' assets, the Canadian Borrower’s assets and the assets of the material Canadian subsidiaries of the Canadian Borrower, including 100% of the capital stock of the Canadian Borrower’s material Canadian subsidiaries.
Financial covenants. The term loan is not subject to any financial covenants. The revolving credit facility requires the Company, on a consolidated basis, to maintain certain financial covenant ratios. The Company must maintain a consolidated leverage ratio of 3.75:1.0 for June 30, 2021 and each fiscal quarter thereafter. In addition, on the last day of any period of four fiscal quarters, the Company must maintain a consolidated fixed charge coverage ratio of not less than 1.25:1.0. As of June 30, 2021, we were in compliance with all financial covenants of the credit facility.
Restrictive covenants. The credit agreement governing our facility contains various restrictive covenants that, among other things, restrict or limit our ability to (subject to certain negotiated exceptions): incur additional indebtedness; grant liens; make fundamental changes; sell assets; make restricted payments including cash dividends to shareholders; enter into sales and
13


leaseback transactions; make investments; prepay certain indebtedness; enter into transactions with affiliates; and enter into restrictive agreements.

9. Commitments and Contingencies
At June 30, 2021, the Company had in place letter of credit guarantees and performance bonds securing certain performance obligations of the Company. These arrangements totaled approximately $8,845. Of this amount, $1,088 is secured by cash deposits at the Company’s financial institutions and an additional $3,787 represents a reduction of the available amount of the Company's short-term and long-term revolving lines of credit. Our Indian subsidiary also has $4,891 in customs bonds outstanding to secure the Company's customs and duties obligations in India.
We are involved in various legal and administrative proceedings 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 may adversely affect our financial results. In addition, from time to time, we are involved in various disputes, which may or may not be settled prior to legal proceedings being instituted and which may result in losses in excess of accrued liabilities, if any, relating to such unresolved disputes. Expenses related to litigation and other such proceedings or disputes reduce operating income as period expenses when incurred. As of June 30, 2021, management believes that adequate reserves have been established for any probable and reasonably estimable losses. We do not believe that the outcome of any of these proceedings or disputes 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 of operations or cash flows in any one accounting period. 
In addition to the legal proceedings described above, in January 2020, the Company received service of process in a class action application in the Superior Court of Quebec, Montreal, Canada related to certain heating elements previously manufactured by THS and incorporated into certain portable construction heaters sold by certain manufacturers. The Company believes this claim is without merit and intends to vigorously defend itself against the claim. While the Company continues to dispute the allegations, in March 2021, it reached an agreement in principle with the plaintiff and other defendants to resolve this matter without admitting to any liability; such agreement remains subject to the agreement of the parties on the terms of a definitive settlement agreement. Settlement of this matter on the agreed terms will require the Company to contribute an amount that would not have a material impact on the Company’s consolidated financial position, results of operations or cash flows. The settlement is subject to, among other things, approval by the Superior Court.
As of June 30, 2021, the Company has accrued $2,156 as estimated additional cost related to the operational execution of a project in our US-LAM segment.
10. Revenue
Disaggregation of Revenue
    We disaggregate our revenue from contracts with customers by geographic location, revenues recognized at point in time and revenues recognized over time, as we believe these best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.
    Disaggregation of revenues from contracts with customers for the three months ended June 30, 2021 and 2020 is as follows:
Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Revenues recognized at point in timeRevenues recognized over timeTotalRevenues recognized at point in timeRevenues recognized over timeTotal
United States and Latin America$13,755 $8,901 $22,656 $8,275 $10,368 $18,643 
Canada19,096 6,335 25,431 13,647 5,666 19,313 
Europe, Middle East and Africa6,446 8,488 14,934 6,814 2,653 9,467 
Asia-Pacific4,708 3,426 8,134 4,085 5,340 9,425 
Total revenues$44,005 $27,150 $71,155 $32,821 $24,027 $56,848 
14


Performance Obligations
    
    At June 30, 2021, revenues associated with our open performance obligations totaled $115,753, representing our backlog. Within this amount, approximately $25,435 will be earned as revenue in excess of one year. We expect to recognize the remaining revenues associated with unsatisfied or partially satisfied performance obligations within 12 months.
    
Contract Assets and Liabilities

    As of June 30, 2021 and March 31, 2021, contract assets were $16,089 and $11,379, respectively. There were no losses recognized on our contract assets for the three months ended June 30, 2021 and 2020. As of June 30, 2021 and March 31, 2021, contract liabilities were $4,059 and $2,959, respectively. The majority of contract liabilities at March 31, 2021 were recognized as revenue as of June 30, 2021. We typically recognize revenue associated with our contract liabilities within 12 months.
11. Income Taxes
Our effective income tax rate, after discrete tax events, was 65.5% before provision for taxes for the three months ended June 30, 2021 and a benefit of 29.1% for the three months ended June 30, 2020. During the three months ended June 30, 2021, the Company recorded a discrete tax expense of $945 related to an increase in withholding tax rates in its Russian subsidiary. Excluding the impact of the increase in withholding tax in Russia, the Company estimates that the effective tax rate will be 26.0% for fiscal year 2022. The estimated effective income tax rate represents the weighted average of the estimated tax expense over our global income before tax.
    As of June 30, 2021, we have established a long-term liability for uncertain tax positions in the amount of $827. As of June 30, 2021, the tax years for the fiscal years ended March 31, 2016 through March 31, 2021 remain open to examination by the major taxing jurisdictions to which we are subject.
12. Segment Information
    We maintain four reportable segments based on four geographic countries or regions in which we operate: (i) United States and Latin America ("US-LAM"), (ii) Canada, (iii) Europe, Middle East and Africa ("EMEA") and (iv) Asia-Pacific ("APAC"). Within our four reportable segments, our core products and services are focused on thermal solutions primarily related to the electrical heat tracing industry. We report the results of our THS product line in all four reportable segments, and the results of our TPS product line in the US-LAM and Canada reportable segments. Each of our reportable segments serves a similar class of customers, including engineering, procurement and construction companies, international and regional oil and gas companies, commercial sub-contractors, electrical component distributors and direct sales to existing plant or industrial applications. Profitability within our segments is measured by operating income. Profitability can vary in each of our reportable segments based on the competitive environment within the region, the level of corporate overhead, such as the salaries of our senior executives, and the level of research and development and marketing activities in the region, as well as the mix of products and services. For purposes of this note, revenue is attributed to individual countries or regions on the basis of the physical location and jurisdiction of organization of the subsidiary that invoices the material and services.
    Total sales to external customers, inter-segment sales, depreciation expense, amortization expense, income from operations, property, plant and equipment, net and total assets for each of our four reportable segments are as follows:
15


Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Sales to External Customers:  
United States and Latin America$22,656 $18,643 
Canada25,431 19,313 
Europe, Middle East and Africa14,934 9,467 
Asia-Pacific8,134 9,425 
 $71,155 $56,848 
Inter-Segment Sales:
United States and Latin America$10,697 $11,273 
Canada2,769 1,492 
Europe, Middle East and Africa412 695 
Asia-Pacific304 173 
$14,182 $13,633 
Depreciation Expense:
United States and Latin America$1,484 $1,538 
Canada1,420 1,032 
Europe, Middle East and Africa105 112 
Asia-Pacific46 47 
$3,055 $2,729 
Amortization Expense:
United States and Latin America$295 $676 
Canada1,906 1,897 
Europe, Middle East and Africa24 364 
Asia-Pacific11 96 
$2,236 $3,033 
Income/(Loss) from Operations:  
United States and Latin America$(1,014)$(8,728)
Canada4,031 2,159 
Europe, Middle East and Africa2,170 352 
Asia-Pacific1,108 997 
Unallocated:
Stock compensation(1,178)(1,133)
Public company costs(503)(402)
 $4,614 $(6,755)
16


June 30, 2021March 31, 2021
Property, Plant and Equipment, Net:
United States and Latin America$34,990 $36,155 
Canada32,156 32,583 
Europe, Middle East and Africa3,110 3,141 
Asia-Pacific695 751 
$70,951 $72,630 
Total Assets:
United States and Latin America$220,066 $218,699 
Canada287,125 287,907 
Europe, Middle East and Africa82,301 77,798 
Asia-Pacific35,333 33,474 
$624,825 $617,878 

Capital expenditures for our reportable segments were as follows:
Three Months Ended June 30, 2021Three Months Ended June 30, 2020
Capital Expenditures:
United States and Latin America$318 $1,793 
Canada528 233 
Europe, Middle East and Africa25 20 
Asia-Pacific2 13 
 $873 $2,059 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Introduction and Special Note Regarding Forward-Looking Statements
Management’s discussion and analysis of our financial condition and results of operations is provided as a supplement to the unaudited interim condensed consolidated financial statements and accompanying notes thereto for the three months ended June 30, 2021 and 2020 to help provide an understanding of our financial condition, changes in our financial condition and results of our operations. In this quarterly report, we refer to the three month periods ended June 30, 2021 and 2020 as “YTD 2022” and “YTD 2021,” respectively. The following discussion should be read in conjunction with, and is qualified in its entirety by reference to, our unaudited condensed consolidated financial statements and related notes included in Item 1 above.
This quarterly report includes forward-looking statements within the meaning of the U.S. federal securities laws in addition to historical information. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, without limitation, statements regarding our industry, business strategy, plans, goals and expectations concerning our market position, future operations, margins, profitability, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words "anticipate," "assume," "believe," "budget," "continue," "contemplate," "could," "should," "estimate," "expect," "intend," "may," "plan," "possible," "potential," "predict," "project," "will," "would," "future," and similar terms and phrases are intended to identify forward-looking statements in this quarterly report. 
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. These forward-looking statements include, but are not limited to, statements regarding: (i) our plans to strategically pursue emerging growth opportunities, including strategic acquisitions, in diverse
17


regions and across industry sectors; (ii) our plans to secure more new facility (or Greenfield) project bids; (iii) our ability to generate more facility maintenance, repair and operations or upgrades or expansions, or (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 increase; (ix) our belief in the sufficiency of our cash flows to meet our needs for the next year; (x) our ability to integrate acquired companies; (xi) our ability to successfully achieve synergies from acquisitions; and (xii) our ability to make required debt repayments.
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) the outbreak of the novel strain of coronavirus (COVID-19); (ii) general economic conditions and cyclicality in the markets we serve; (iii) future growth of energy, chemical processing and power generation capital investments; (iv) our ability to operate successfully in foreign countries; (v) our ability to deliver existing orders within our backlog; (vi) our ability to bid and win new contracts; (vii) the imposition of certain operating and financial restrictions contained in our debt agreements; (viii) tax liabilities and changes to tax policy; (ix) our ability to successfully develop and improve our products and successfully implement new technologies; (x) competition from various other sources providing similar heat tracing and process heating products and services, or alternative technologies, to customers; (xi) our revenue mix; (xii) our ability to grow through strategic acquisitions; (xiii) changes in relevant currency exchange rates; (xiv) impairment of goodwill and other intangible assets; (xv) our ability to attract and retain qualified management and employees, particularly in our overseas markets; (xvi) our ability to protect our trade secrets; (xvii) our ability to protect our intellectual property; (xiii) our ability to protect data and thwart potential cyber-attacks; (xix) a material disruption at any of our manufacturing facilities; (xx) our dependence on subcontractors and third-party suppliers; (xxi) our ability to profit on fixed-price contracts; (xxii) the credit risk associated to our extension of credit to customers; (xxiii) our ability to achieve our operational initiatives; (xxiv) unforeseen difficulties with expansions, relocations, or consolidations of existing facilities; (xxv) potential liability related to our products as well as the delivery of products and services; (xxvi) our ability to comply with foreign anti-corruption laws; (xxvii) export control regulations or sanctions; (xxviii) changes in government administrative policy; (xxix) geopolitical instability in Russia and Ukraine and related sanctions by the U.S. government; (xxx) environmental and health and safety laws and regulations as well as environmental liabilities; and (xxxi) climate change and related regulation of greenhouse gases and those factors listed under Item 1A, “Risk Factors” included in our Annual Report on Form 10-K/A for the fiscal year ended March 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on May 27, 2021 and in any subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K or other filings that we have filed or may file with the SEC. 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 or incorporated by reference in this quarterly report ultimately prove to be accurate.
    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.
Business Overview and Company History

We are one of the largest providers of highly engineered industrial process heating solutions for process industries. For over 65 years, we have served a diverse base of thousands of customers around the world in attractive and growing markets, including chemical and petrochemical, oil and gas, power generation, commercial, rail and transit, and other, which we refer to as our "key end markets." We offer a full suite of products (heating units, heating cables, temporary power solutions and tubing bundles), services (engineering, installation and maintenance services) and software (design optimization and wireless and network control systems) required to deliver comprehensive solutions to some of the world's largest and most complex projects. With a legacy of innovation and continued investment in research and development, Thermon has established itself as a technology leader in hazardous or classified areas, and we are committed to developing sustainable solutions for our customers. We serve our customers through a global network of sales and service professionals and distributors in more than 30 countries and through our eight manufacturing facilities on three continents. These global capabilities and longstanding relationships with some of the largest multinational oil and gas, chemical processing, power and engineering, procurement and construction ("EPC") companies in the world have enabled us to diversify our revenue streams and opportunistically access high growth markets worldwide. During YTD 2022 and YTD 2021, approximately 68% and 67%, respectively, of our revenues were generated from outside of the United States. We actively pursue both organic and inorganic growth initiatives that serve to advance our corporate strategy.

    Revenue.  Our revenues are derived from providing customers with a full suite of innovative and reliable process heating solutions, including electric and steam heat tracing, tubing bundles, control systems, design optimization, engineering
18


services, installation services and portable power solutions. Additionally, our Thermon Heating Systems (“THS”) product line offers a suite of advanced heating and filtration solutions for industrial and hazardous area applications. Historically, our sales are primarily to industrial customers for petroleum and chemical plants, oil and gas production facilities and power generation facilities. Our petroleum customers represent a significant portion of our business. We serve all three major categories of customers in the petroleum industry, including in upstream exploration/production, midstream transportation and downstream refining. Overall, 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 a customer in excess of $1 million annually (excluding sales to resellers), 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 a customer of less than $1 million annually as MRO/UE revenue, as we believe such revenues are typically derived from MRO/UE. Based on our experience, we believe that $1 million in annual sales is an appropriate t