Thermon(US:THR)2019-08-08 20:50Financial Performance - Revenues for YTD 2020 were $91.7 million, a 3% increase from $88.9 million in YTD 2019[131] - Gross profit decreased to $37.1 million in YTD 2020, down from $39.7 million in YTD 2019, resulting in a gross margin of 40.5%, compared to 44.7% in the prior year[133] - Marketing, general and administrative expenses rose to $26.7 million in YTD 2020, an increase of 8% from $24.7 million in YTD 2019[134] - Net income available to the Company was $1.5 million in YTD 2020, a decrease of 50% from $3.0 million in YTD 2019[141] - The US-LAM reportable segment saw an increase of $8.8 million or 28% compared to YTD 2019, while the EMEA segment declined by $7.5 million or 36%[132] Revenue Sources - Approximately 56% of revenues in YTD 2020 were generated from outside the United States, compared to 64% in YTD 2019[118] - Greenfield projects accounted for 49% of total revenue for the three months ended June 30, 2019, up from 45% in the same period of 2018[125] - MRO/UE revenues represented 51% of total revenue for the three months ended June 30, 2019, down from 55% in the same period of 2018[125] - MRO/UE sales comprised approximately 51% of consolidated revenues in YTD 2020, down from 55% in YTD 2019, while Greenfield sales increased to 49% from 45%[131] Cash Flow and Working Capital - Net cash provided by operating activities increased by $7.6 million, totaling $3.4 million in YTD 2020 compared to a net cash used of $(4.2) million in YTD 2019[161] - The company's working capital assets represented a source of cash of $3.1 million in YTD 2020, compared to a use of cash of $6.8 million in YTD 2019, indicating an increase of $9.9 million[162] - Net cash used in investing activities decreased by $0.4 million, totaling $1.6 million in YTD 2020 compared to $2.0 million in YTD 2019[164] - Net cash provided by financing activities decreased by $2.7 million, totaling $1.8 million in YTD 2020 compared to $4.5 million in YTD 2019[165] Debt and Interest - The term loan B facility had an outstanding principal of $205.9 million, requiring quarterly principal payments of $0.6 million until July 31, 2024, with a lump-sum payment of $192.8 million due at maturity in October 2024[153] - Interest expense, net, increased to $3.7 million in YTD 2020 from $3.5 million in YTD 2019, attributed to higher interest rates on variable rate long-term debt[137] - As of June 30, 2019, the interest rate for the term loan B credit facility was 6.19%, with outstanding borrowings of $205.9 million[178][179] - A one percent change in the interest rate on the term loan B would result in a $2.1 million increase or decrease in annual interest expense[179] Foreign Currency Exposure - Approximately 56% of the company's YTD 2020 consolidated revenue was generated by sales from non-U.S. subsidiaries, exposing the company to foreign currency risks[172] - As of June 30, 2019, the company had approximately $11.8 million in notional forward contracts to mitigate foreign currency exchange rate fluctuations[175] - In YTD 2020, sales were negatively impacted by $2.1 million due to foreign exchange translation rates compared to YTD 2019[176] - Foreign currency translation gains increased by $12.7 million in YTD 2020, resulting in a gain of $4.4 million, compared to a loss of $8.3 million in YTD 2019[176] - The company has a cross currency swap to mitigate currency rate fluctuations related to an intercompany note of $77.9 million with its Canadian subsidiary[177] Growth Strategy - The company has acquired four companies since March 2015, enhancing its product and service offerings in thermal solutions[118] - The company actively pursues both organic and inorganic growth initiatives to advance its corporate strategy[118] - The company has executed an acquisition strategy, acquiring four companies since March 2015 to enhance its product offerings in the heat tracing solutions industry[143] Operational Insights - The company has a diverse customer base in the petroleum industry, serving upstream, midstream, and downstream sectors[119] - Key raw material costs have been stable, allowing the company to generally pass along cost increases to customers without significantly affecting gross margins[122] - MRO/UE revenues are typically highest during the second and third fiscal quarters due to seasonal maintenance activities[128] - The company has a global footprint with operations in more than 30 countries and ten manufacturing facilities across three continents[118] Investment and Capital Expenditure - For the fiscal year 2020, the company estimates an investment of approximately $8.1 million in property, plant, and equipment for its thermal solutions business[160] - As of June 30, 2019, the company had $35.3 million in cash and cash equivalents, with approximately $3.0 million (8%) held domestically and $32.3 million (92%) held internationally[151] - The company had outstanding borrowings of $14.6 million under its revolving credit facility, with $41.3 million of available capacity as of June 30, 2019[152] Market Risks - The company does not typically enter into long-term purchase commitments or hedging instruments for commodity price risk, exposing it to market risks[180] - Historically, the costs of primary raw materials have been stable, but there is no assurance that cost increases can be passed on to customers in the future[180]